A useful summary of Arrowhead Capital Finance Ltd (In Liquidation) v KPMG LLP by Wragges here:
“The recent High Court decision in Arrowhead Capital Finance Ltd (In Liquidation) v KPMG LLP will have accountants breathing a sigh of relief. The case is of particular interest to professional services firms because the claimant was not KPMG’s client; it was a third party investor, who claimed that KPMG owed it a duty of care.”
The court applied the “threefold test from the House of Lords decision in Caparo v Dickman of forseeability, proximity, and ‘fairness, justice and reasonableness'” and found for KPMG.
Wragges comment that this “decision is a welcome one for accountants because it confirms that, unless there are special circumstances, they will not be held liable for the impact of their advice on third parties. The terms of KPMG’s retainer letter were also a significant factor in the court’s judgment, so this decision underlines the importance of robust and carefully drafted terms of engagement. Such letters should contain appropriate limitations and exclusions of liability to third parties”.
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