KPMG case go-ahead

The House of Lords last week refused a petition for leave to appeal which, if successful, would have seen accountancy firms released from owing the...The House of Lords last week refused a petition for leave to appeal which, if successful, would have seen accountancy firms released from owing the Law Society any duty of care when preparing law firm accounts.

The decision clears the way for the Law Society to pursue a claim for damages against big five accountancy firm KPMG.

The application for leave arose following an action by the Law Society against KPMG, which alleges that audits of the Sussex-based law firm Durnford Ford carried out by the accountants between 1989 and 1991 were negligent.

The Law Society has alleged that the accountants had failed to spot anomalous financial transactions, which would have led the Society to intervene in the firm more promptly.

Durnford Ford stopped trading in 1992, and two of its partners were subsequently convicted of fraud, after approximately 7.4 million went missing from accounts.

The Court of Appeal concluded that there was no good reason put forward to suggest that the imposition of a duty of care contended for would not be fair, just and reasonable.

A Law Society spokesman said: The decision has firmly established that a duty of care is owed to the Law Society.

This is a landmark decision and we intend to pursue our claim for damages as a result of that duty.

A KPMG spokesman stressed that the judgment was in principle only, and no negligence action had been filed against KPMG at this stage.

Victoria MacCallum