Orders for pre-action disclosure – exceptional in a commercial context?
Although parties are expected to exchange key documents before starting proceedings in the English court, a recent decision in the Commercial Court highlights the limited nature of those obligations, particularly in a commercial context.
The case 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 aim of the Protocol is for the case against the professional on breach, causation and loss to be set out in writing at an early stage, with information about the expert instructed to investigate, and key documents. This would allow the professional to understand the potential claim and to 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 CPR 31.16.
Pre-action disclosure under CPR 31.16
Pre-action disclosure will be ordered only where:
- both parties are likely to be parties to subsequent proceedings;
- the documents sought fall within the scope of the standard disclosure the respondent would need to give if proceedings were issued; and
- pre-action disclosure is desirable either because it could dispose fairly of the anticipated proceedings, or would assist in the resolution of the dispute without proceedings being issued or would save costs (CPR 31.16(3)).
Even if all these jurisdictional requirements are met, the judge has a discretion, bearing in mind the over-riding objective. A factor to take into account is whether the claimant is able to articulate its case without the benefit of pre-action disclosure. In addition, the request for pre-action disclosure must be highly focussed and confined to what is strictly necessary.
While the judge was willing to accept that the jurisdictional requirements in CPR 31.16 had been met, he refused exercise his discretion to make the order, for the following reasons:
- Carillion could plead its case without pre-action disclosure on the basis of its own records.
- Carillion wanted a level of assurance and certainty in respect of its experts' views even before proceedings had been issued; this was inappropriate. The exchange of information and expert evidence should take place in the normal way in the course of the litigation.
- As Carillion had confirmed that proceedings would be brought against KPMG in any event, in which extended disclosure far beyond the disclosure sought pre-action is likely to be ordered, the proper course is for disclosure to be given in the usual way, once proceedings have been issued.
- Given the high profile nature of the case, the sums involved and the complexity of the issues, it is likely that the case will develop further, with amendments to pleadings almost inevitable.That being the case, pre-action disclosure would not eliminate the need for further amendment, particularly as Carillion had yet to confirm that the scope of the intended claim was confined to the matters addressed in its existing correspondence with KPMG.
- Carillion had tried to suggest that KPMG had failed to comply with the Protocol and this took the case outside the usual run. The judge disagreed, partly on the basis that Carillion had issued a number of partial letters of claim, had not confirmed that the intended claim was confined to that articulated in the partial letters of claim, and had made document requests that extended far beyond the key documents envisaged by the Protocol. These were not minor or technical breaches of the Protocol by Carillion. In those circumstances, KPMG's refusal to provide the disclosure sought by Carillion's document requests was not a breach by KPMG of the Protocol.
- The over-riding objective or efficient case management would not be furthered by granting the application.
Instead, the judge invited Carillion to get on 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 does also appear 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 declining to order pre-action disclosure if the claimant is able to plead its case without it.
Either way, a claimant would be well advised to focus any request for pre-action disclosure on only those documents that are strictly necessary to enable the claimant to plead its case, and to give careful thought as to why disclosure in advance of issuing proceedings is in the interests of efficient case management and consistent with the over-riding interest. The court will expect to be satisfied that there are compelling and cogent reasons to justify deviation from the usual course.
 Carillion plc (in liquidation) v KPMG LLP and KPMG Audit plc  EWHC 1416 (Comm)
 Hutchinson 3G UK Limited v O2 (UK) Limited  EWHC 55 (Comm); Snowstar Shipping v Graig Shipping  EWHC 367 (Comm)
 Assetco plc v Grant Thornton UK LLP  EWHC 1215