News / General

Chinese Walls - Bolkiah v KPMG

By SLAS Spokesperson

On 18th December (reported TLR 20th April) the House of Lords held that a solicitor owed a strict and unqualified duty to a former client to keep his business confidential and not to expose the client to any avoidable risk that the information might unwittingly or inadvertently be communicated to another client with an opposing interest. In this case, a firm of accountants had provided litigation services for a former client and this firm had to be treated in the same way as a solicitor in respect of confidential information. KPMG were advising Prince Jefri, the youngest brother of the Sultan of Brunei, but another part of the firm was advising Brunei Investigation Agency, of which the Prince had been Chairman at one time, but had been removed from office by the Sultan. KPMG found itself in the position of having sensitive material collected by its "forensic accounting" division which could be prejudicial to the Prince.

Instructions were issued to the effect that an information barrier or "Chinese wall" would have to be erected between the forensic accounting department and the other part of KPMG to protect the confidential information. The House of Lords considered that this was not enough KPMG argued that the use of Chinese walls was normal in many large city firms. The court accepted that they might work if the departments involved were in different premises and where the personnel was different and did not mix with one another, but not otherwise. In this case the walls were ad hoc and their Lordships thought that effective Chinese walls needed to be part of the organisational structure of the firm.

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