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21 July 2020
Although parties are expected to exchange key documents before starting proceedings in the English courts, a recent Commercial Court decision highlights the limited nature of those obligations, particularly in a commercial context.
The case(1) arose out of the well-publicised collapse of Carillion plc in 2018. Up until 2017, KPMG LLP and KPMG Audit plc (collectively KPMG) had been Carillion plc's auditors.
By late 2019, Carillion's office holders had formed a settled intention to commence proceedings against KPMG alleging negligence. The pre-action protocol for professional negligence (the protocol) would therefore apply to the intended claim. The protocol's aim is for the case against the professional on breach, causation and loss to be set out in writing at an early stage, including information about the expert instructed to investigate and key documents. This would allow the professional to understand the potential claim and provide relevant documents, which, in turn, should lead to a narrowing of the issues in dispute.
That is the theory. The reality in this case is that Carillion's first correspondence with KPMG was a request for voluntary disclosure of a vast array of documents, but without Carillion disclosing its key documents or formulating its intended claim against KPMG in any detail. KPMG asserted that Carillion had not complied with the protocol in its approach, and that the document request went beyond what was envisaged by the protocol. KPMG declined to make the voluntary disclosure requested.
Extensive, protracted and ultimately unsuccessful correspondence followed, leading to Carillion's office holders applying for an order for pre-action disclosure under Civil Procedure Rule (CPR) 31.16.
Pre-action disclosure will be ordered only where:
Even if all of these jurisdictional requirements are met, the judge has a discretion, bearing in mind the over-riding objective. A factor to consider is whether the claimant can articulate its case without the benefit of pre-action disclosure. In addition, a request for pre-action disclosure must be highly focused and confined to what is strictly necessary.(2)
While the judge was willing to accept that the jurisdictional requirements in CPR 31.16 had been met, he refused to exercise his discretion to make the order for the following reasons:
Instead, the judge invited Carillion to proceed with the case in the usual way by setting out its case in a pleading.
Even though the judge was prepared to accept, albeit with some hesitation, that the jurisdictional threshold for making an order had been met, the application was unsuccessful. This does suggest that it would be a very unusual case, potentially an exceptional case, before pre-action disclosure is ordered in a commercial setting.
There also appears to be a tension between, on the one hand, requiring the claimant to articulate the issues sufficiently clearly so that an assessment of whether the documents would fall within standard disclosure can be made and, on the other hand, declining to order pre-action disclosure if the claimant can plead its case without it.
Either way, claimants would be well advised to focus any request for pre-action disclosure only on those documents that are strictly necessary to enable them to plead their case and give careful thought as to why disclosure in advance of issuing proceedings is in the interests of efficient case management and consistent with the overriding interest. The court will expect to be satisfied that there are compelling and cogent reasons to justify deviation from the usual course.
For further information on this topic please contact Suzan Kurdi or Davina Given at RPC by telephone (+44 20 3060 6000) or email (firstname.lastname@example.org or email@example.com). The RPC website can be accessed at www.rpc.co.uk.
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