Indecision remains over Chinese walls

A final decision on the safety of Chinese walls rests with the House of Lords.

KPMG won an inconclusive two-to-one Appeal Court ruling on Monday overturning a High Court injunction last month. The injunction banned the firm from investigating the financial affairs of former client Prince Jefri on behalf of the Brunei Investment Agency.

The firm greeted the decision as a ‘victory for common sense’, and said its handling of the case was vindicated.

But Prince Jefri, the former BIA chairman, will take his claim to the Law Lords after Lord Justice Waller remained unconvinced by the effectiveness of KPMG’s internal secrecy barriers.

Disagreeing with Lord Woolf, Master of the Rolls, and Lord Justice Otton, Lord Justice Waller also said forensic accountants should owe a ‘solicitor-style’ duty of care to former clients.

But in a 61-page ruling, Lord Woolf, who backed KPMG’s appeal, said to continue the injunction ‘would be to set an unrealistic standard for the protection of confidential information which would create impediments in the way large international firms conduct their practice’.

Lord Justice Otton, who was impressed by KPMG’s measures to maintain client confidentiality which included sending all its information on Jefri to its solicitors, agreed with Lord Woolf that the BIA would be ‘severely disadvantaged’ if it had to employ a new firm to conduct its investigation.

KPMG acted as its auditor for 15 years. Lord Waller, though, noted the BIA – which controls Brunei’s overseas assets – had employed Arthur Andersen to manage Amadeo, another company once controlled by the prince.


KPMG is disputing the right of its former French consultancy arm to use the name Peat Marwick after it defected to the Computer Sciences Corporation (CSC) this week, writes Chris Quick.

The IT giant announced on Monday it had bought 51% of Paris-based KPMG Peat Marwick SA, which employs 450 people and has fee income of $60m a year.

CSC will merge its acquisition with existing French operations to form CSC Peat Marwick SA.

KPMG said the practice had decided to join CSC as a result of European restructuring, and was challenging the use of Peat Marwick by the defectors.

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