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Carillion v KPMG: 7KBW teams act in pre-action disclosure application

3rd Jun 2020

Carillion plc (in liquidation) v KPMG LLP and KPMG Audit plc [2020] EWHC 1416 (Comm)

7KBW teams acted on both sides of Carillion plc’s application against KPMG for pre-action disclosure, in which the Commercial Court has handed down judgment in KPMG’s favour. KPMG (represented by Jonathan Gaisman QC, James Brocklebank QC, and Ralph Morley) successfully resisted the application brought by Carillion (represented by Rebecca Sabben-Clare QC and Timothy Kenefick, together with Andrew Fenn of Atkin Chambers).

The Carillion Group went into liquidation in 2018 in one of the biggest and most notorious corporate failures of recent years.

Carillion has intimated an intention to bring a claim running into hundreds of millions of pounds against KPMG, its former auditors. It sought pre-action disclosure under CPR 31.16 from KPMG in relation to certain aspects of the financial statements where it alleged KPMG’s audit work had been negligent, arguing that it needed early disclosure in order to come to a properly informed or concluded view on these issues and to produce a more focused pleading, saving the cost of subsequent amendments. KPMG resisted the requests on the bases that they went beyond what was required by the Pre-Action Protocol for Professional Negligence (“the Protocol”) and were not consistent with ordinary pre-action procedure in the Commercial Court; that Carillion did not need those documents at the pre-action stage in order to plead its case; and that the proposed exercise would not save costs.

Jacobs J dismissed Carillion’s application, following a remote hearing.

The Court accepted that the threshold jurisdictional requirements of CPR 31.16 were satisfied (i.e., that the documents were likely to be within the scope of standard disclosure and that there was a sufficient prospect that disclosure might advance one of the purposes in CPR 31.16(3)(d)). But the Court decided that the application was not one that merited the exercise of its discretion to order pre-action disclosure, for reasons including that: Carillion could plead its case satisfactorily without the disclosure; pre-action disclosure was not warranted to enable a party or its expert to reach a fully informed or concluded view; the disclosure sought was excessively burdensome; amendments and their associated costs were inevitable in any event; and Carillion’s requests were not consistent with the Protocol.

The judgment confirms that pre-action disclosure in the Commercial Court is unusual. It offers valuable guidance on pre-action disclosure in the professional negligence context and, in particular, on what compliance with the Protocol is likely to require.

The case is likely to develop into a complex and high-profile piece of commercial litigation. It has already been the subject of considerable media interest, including reports in the Financial Times and The Lawyer.

Rebecca Sabben-Clare QC and Timothy Kenefick, together with Andrew Fenn of Atkin Chambers, act for Carillion plc, instructed by Quinn Emanuel Urquhart and Sullivan.

Jonathan Gaisman QC, James Brocklebank QC and Ralph Morley act for KPMG, instructed by Orrick, Herrington & Sutcliffe.

Please view the judgment here.