KPMG fails in disclosure appeal

At an Appeal Court hearing, a Judge ruled KPMG must comply with the order for pre-action disclosure of documents in a case brought against it by Bermuda International Securities Ltd.

As a manager of investment trusts, BIS runs Siam Selective Growth Trust, a fund set up in early 1990. KPMG is alleged, by BIS, to have acted negligently in auditing the fund, or conducting the tax affairs of the fund, for the accounting periods ending 31 March 1991 to 31 March 1995.

Robin Knowles QC, counsel for KPMG, had argued it would be ‘most unfortunate’ if it became the norm in actions for professional negligence that pre-action disclosure should be sought before the issues between the parties had been properly identified.

He claimed the judge who made the order erred in principle in ordering pre-action disclosure. The Court of Appeal should provide guidance as to the exercise of such power so that accountants and other professionals were not harried by applications for pre-action disclosure, he argued.

However, dismissing the appeal against the disclosure order, Lord Justice Waller, who was sitting with Lords Justices Clarke and Rix, said he did not think it appropriate in the early stage in the life of new rules on pre-action disclosure to lay down guidelines.

He said the Judge had indeed identified the issues between the parties. The exercise of the Judge’s discretion to make an order in this case ‘cannot be impugned,’ he added.

  • Bermuda International Securities v KPMG. Court of Appeal, 27 February, 2001.

Waller, Clarke & Rix LJJ – Robin Knowles QC (instructed by Stephenson Harwood) appeared for the appellant; Michael Brindle QC & Philippa Hamilton (instructed by Cameron McKenna ) appeared for the respondent.

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