Arrowhead Capital Finance Ltd (In Liquidation) v
KPMG LLP
In July KPMG was successful in its application for summary
dismissal of a claim worth more than USD$52 million.
Background
KPMG had been instructed by Dragon Futures Limited
("Dragon") to advise on creating/implementing due
diligence procedures to enable Dragon to make VAT input tax claims
on the sale and purchase of mobile telephones. In January 2004 the
claimant, Arrowhead, agreed to make loans to Dragon on the strength
of Arrowhead's business model which required these VAT input
claims to be successful.
It transpired that the VAT input tax claims were connected to
fraud, something Dragon should have been aware of, and accordingly
HMRC rejected its claims for input tax. Dragon subsequently
defaulted on the loan repayments, leaving a balance of some $52
million due to Arrowhead.
