Case 1: Prince Jefri Bolkiah V KPMG London

Case 1: Prince Jefri Bolkiah V KPMG London (1999)In 1983, Brunei Investment Agency (BIA) was established to hold and manage the general reserve fund of the Government of Brunei and all external assets and to provide the Government with money management services. KPMG act as an auditor of a substance of a BIA’s asset and investment portfolios. In the meantime, they carried out certain associated advisory and consultancy work. On February 1997, Prince Jefri Bolkiah resigned from Minister of Finance of Brunei and on 16 July 1998, he had removed by Sultan of Brunei as Chairman of BIA.July 1996, Bolkiah propose KPMG to provides services on a personal matter and to act as an expert witness for a ‘Project Lucy’ require a very detailed inquiry into the financial affairs and dealings with Bolkiah. The project had a settlement by 14 March 1998 of the litigation the Inland Revenue served notices under Section 20B(1) of the Taxes Management Act 1970.In June 1998, KPMG was command by The House to investigate ‘Project Gemma’ the whereabouts of assets suggested to have been utilized by Prince Jefri for his own benefit on behalf of BIA. KPMG had installed the Chinese Wall for both Project Lucy and Project Gemma by isolating the projects indifference team members and places to avoid the possession from the previous project.The issue arises in this proceeding is related to conflict of interest and confidentiality. In confidentiality, even though KPMG did not use or disclose any information that had been pledge about Bolkiah’s matters related to Project Lucy to the third party, physical segregation would probably insufficient where the wall was erected within a single department. Meanwhile, conflicts of interest also may arise towards KPMG due to bound by the same duties for both projects. This such action put both of the clients in a risk and threaten their confidential information. Hence, an injunction had been granted by The House towards KPMG’s actions.

Case 2: Moore Stephens v. Stone & Rolls Limited (2009) Moore Stephens (The Auditor) was brought to a lawsuit in the Commercial Court in December 2006 against Stone & Rolls Limited (The Company) indict for been negligent in conducting The Company’s audit in the year 1996, 1997 and 1998. The Auditor was alleged for breach of duty to act with reasonable skills and care in failing to detect and report to regulators a fraudulent scheme that is perpetuated by Mr. Zvonko Stojevic who is sole directing mind and will and the beneficial owner of The Company use The Company as his vehicle of defrauding Komercni Bank SA.A fraud discover leads The Company to fall into liquidation. The Company obtaining payment under letters of credit sum of USD100million by presenting to bank false document. The bank successfully sued The Company and Mr. Stojevic but they do not manage to pay back and fall into liquidation. The liquidator turned the attention towards The Auditor. They representing The Company and brought up professional negligence against them for just under USD174million. The Auditor uses the doctrine of ‘ex turpi causa non oritur actio’ which an action may not be founded on illegality but the application was failed and then he appeals to the Court of Appeal. The Company strike-out to the House of Lord but The Auditor application’s accepted. The Company had to accept that Mr. Stojevic perpetrated the fraud.   The Company liability for the fraudulent fraud was only secondary not primarily on the basis and according to previous legal authority, The Company argue that The Auditor could not rely on ‘ex turpi causa’ to strike-out its claim. In a decision to dismiss the appeal, the House of Lords acknowledges The Company and Mr. Stojevic were in the same circumstances because there is no other party related to The Company. Hence, both of the parties were liable primarily and The Auditor entitled to use the doctrine of ‘ex turpi causa’. House of Lords confirms The Auditor was not liable for the fraudulent act of Mr. Stojevic.  

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