Law Society v KPMG Peat Marwick and Others

JurisdictionEngland & Wales
Judgment Date28 October 1999
Date28 October 1999
CourtChancery Division

Chancery Division

Before Sir Richard Scott, Vice-Chancellor

Law Society
KPMG Peat Marwick and Others

Negligence - accountants' negligent reporting on solicitors' accounts - liable for loss to Law Society compensation fund

Accountants liable for loss to fund

It was fair, just and reasonable that if a reporting accountant negligently prepared a report intended to assist the Law Society in deciding whether and when to exercise its powers of intervention in order, among other things, to protect the compensation fund, the reporting accountant should be held responsible for loss to the fund caused by that negligence.

Sir Richard Scott, Vice Chancellor, so held in a reserved judgment in the Chancery Division hearing a preliminary issue as to whether KPMG Peat Marwick, the defendants, in preparing reports required to be submitted by solicitors to the Law Society, the claimant, in order to assist in supervising compliance by the solicitor with the Law Society's accounts rules, owed to the Law Society a duty of care.

Lord Goldsmith, QC and Mr Matthew Collings for the Law Society; Mr Gordon Pollock, QC and Mr Rhodri Davies, QC, for KPMG.

THE VICE -CHANCELLOR said that the Law Society, under statutory provisions contained in the Solicitors Act 1974, was the regulator of the solicitors' profession. The statutory scheme included provisions requiring the Law Society to maintain and administer the compensation fund.

That fund was held by the Law Society as trustee and was applied for the purposes of compensating defrauded clients and was funded by practising solicitors.

There was no doubt that the Law Society relied on accountants' annual reports as providing some assurance that solicitors' accounts were being conducted with propriety in accordance with the accounts rules.

Three criteria had to be met to establish liability. There must be reasonable foreseeability of damage, a relationship of sufficient proximity between the party owing the duty and the party to whom it was owed, and the imposition of the duty of care should be just and reasonable in all the circumstances: see Caparo plc v DickmanELR ((1990) 2 AC 605, 617-619.)

Loss to the compensation fund was reasonably foreseeable as a consequence of the want of due care in preparing an accountant's annual report.

As to proximity, there was, in his Lordship's judgment, a relationship between the Law Society and the reporting accountant sufficient to justify the imposition of a tortious duty of...

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15 cases
  • Moore Stephens v. Stone Rolls Ltd., (2009) 396 N.R. 203 (HL)
    • Canada
    • 30 July 2009
    ...[para. 254]. Pendleburys Ltd. v. Green (Ellis) and Co. (1936), 181 L.T. 410, refd to. [para. 257]. Law Society v. KPMG Peat Marwick, [2000] 1 All E.R. 515; [2000] 1 W.L.R. 1921 (C.A.), refd to. [para. Federal Deposit Insurance Corp. v. Ernst & Young (1992), 967 F.2d 166, refd to. [para.......
  • Re Ahmed & Company
    • United Kingdom
    • Chancery Division
    • 14 March 2006 solicitor, which would, otherwise, result in further claims on the Compensation Fund from the victims of that dishonesty: Law Society v KPMG Peat Marwick [2000] 1 All ER 515, affd [2000] 1 WLR 1921. A consequence of the Law Society's exercise of its two basic powers of intervention (do......
  • Moore Stephens (A Firm) v Stone Rolls Ltd ((in Liquidation))
    • United Kingdom
    • House of Lords
    • 30 July 2009
    ...[1954] 2 QB 459. Lancashire County Council v Municipal Mutual Insurance LtdELR [1997] QB 897. Law Society v KPMG Peat MarwickUNK [2000] 1 All ER 515; [2000] 1 WLR 1921 (CA). Lennard's Carrying Co Ltd v Asiastic Petroleum Co LtdELR [1915] AC 705. London and General Bank, ReELR [1895] 2 Ch 16......
  • Law Society v Sephton & Company (A Firm)
    • United Kingdom
    • House of Lords
    • 10 May 2006
    ...Yet for various reasons (including the case of Law Society v KPMG Peat Marwick, decided by the Vice-Chancellor in October 1999, [2000] 1 All ER 515, and by the Court of Appeal in June 2000, [2000] 1 WLR 1921) the Law Society's claim form against Sephton was not issued until 16 May 2002 (t......
  • Request a trial to view additional results
1 books & journal articles
  • Australia and Canada: The Role of Policy in Professional Liability
    • United Kingdom
    • Emerald Journal of Financial Crime No. 9-2, April 2001
    • 1 April 2001
    ...QB 653 at pp. 696-698 (CA); [1990] 2 AC 605; [1990] IAllER 568 (HZ). (10) (1976) 11 ALR 227 (HC). (11) [1979] 3 All ER 580 (ChD). (12) [2000] 1 All ER 515 (ChD). (13) [1990] 2 AC 605; [1990] 1 All ER 568; [1989] QB 653. (14) 70 DLR (4th) at p. 618. (15) Wiener, H. B. (1983) 'Common Law Liab......

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