PracticeConsultingAccountants face fresh liability fears

Accountants face fresh liability fears

KPMG Peat Marwick has had its efforts to ward off a negligence action launched by the Law Society scuppered in the House of Lords.

The firm lost a challenge to High and Appeal Court rulings over its duty of care owing to the Law Society in respect of a law practice’s accounts being monitored for fraud by the legal body.

Accountants could now face a new area of liability with multimillion pound compensation claims from regulatory bodies as a result of the decision.

The case centred on the south coast solicitors firm of Durnford Ford, which was involved in one of the legal profession’s biggest fraud scandals. Ultimately around 300 clients of the firm made claims against the Law Society’s compensation fund in respect of what had taken place.

The Law Society intervened in the practice and closed the firm down in 1992 but KPMG had prepared a report on the firm’s accounts which was submitted to the Law Society and which did not reveal any dishonest practice. Had it known, the Law Society claims, it could have intervened in the solicitors’ firm’s affairs and payments of Pounds 8.5m to Durnford Ford clients may have been avoided.

In October 1999 the High Court ruled that the accountants did owe the Society a duty of care in respect of the accounts on Durnford Ford and that decision was upheld by the Appeal Court in June last year.

Now it has been backed by Lords Nicholls, Steyn and Hoffman, who after a private hearing, have refused KPMG leave to appeal. No reasons were given publicly for their decision.

Links

Landmark ruling could open new era of liability.

KPMG faces negligence action over solicitor fraud scandal

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