The High Court has provided some helpful guidance on the disclosure pilot in the Business and Property Courts (PD 51U) (the Disclosure Pilot) following an application in the high profile negligence claim by the liquidators of Patisserie Valerie against the group’s former auditors Grant Thornton[1].

The Claimants (PV) applied for disclosure of the Defendant’s (GT’s) audit files for the financial years ending 30 September 2010 to 30 September 2013 (or alternatively copies of certain working papers).

The Honourable Mrs Justice Moulder DBE refused PV’s application because, in short, it cut across the structure and the intention of the Disclosure Pilot, to introduce a more proportionate approach to disclosure.

PV sought to rely on:

  1. Paragraph 5.11 of PD 51U 

    “In an appropriate case the court may, on application, and whether or not Initial Disclosure has been given, require a party to disclose documents to another party where that is necessary to enable the other party to understand the claim or defence they have to meet or to formulate a defence or a reply”
    ;

  2. Paragraph 9.4 of PD 51U: 

    “The court may make an order for Extended Disclosure in stages”
    ; and

  3. CPR r.3.1(2)(m): 

    “take any other step or make any other order for the purpose of managing the case and furthering the overriding objective, including hearing an Early Neutral Evaluation with the aim of helping the parties settle the case”.

The Court’s decision

The Court held that it wouldn’t be appropriate to order the disclosure PV were seeking on any of these 3 grounds.

Disclosure necessary to formulate defence or reply (Paragraph 5.11)

  • Although the judge acknowledged this clearly envisages disclosure beyond the scope of Initial Disclosure, she found that it has to be interpreted narrowly bearing in mind the context of paragraph 5 (in relation to Initial Disclosure generally) and the structure and intention of the Disclosure Pilot as a whole.A broad interpretation would be inconsistent with the ordinary prescribed process, where following Initial Disclosure the Court considers whether/to what extent Extended Disclosure would be reasonable and proportionate.
  • PV had argued that the disclosure was necessary to formulate its Reply, because GT’s Defence had asserted that there was insufficient particularisation in PV’s Particulars of Claim. However, the judge accepted GT’s position that that assertion was not a new substantive issue. Any further particularisation PV might provide as a result (whether in a Reply, or amended Particulars of Claim) would essentially form part of their original case, rather than respond to a new substantive issue raised in GT’s Defence. On that basis the application didn’t fall within paragraph 5.11.

Extended disclosure in stages (Paragraph 9.4)

  • The parties had already completed a draft Disclosure Review Document (DRD) which included an Issue for Disclosure to which the disclosure PV sought would (at least in part) be relevant. The parties had agreed the Issue in question and the proposed model for Extended Disclosure. PV argued that the Court could therefore order the disclosure sought now, as a first stage of Extended Disclosure.

     

  • The judge found that this aspect of the application was premature. While the parties had agreed the draft DRD and the Court would have regard to that agreement, the Court has its own important role to play in deciding what if any Order to make for Extended Disclosure in due course. No such Order had yet been made. There’s also no presumption that any party is entitled to Extended Disclosure at all, and no particular model of Extended Disclosure will apply without the approval of the Court. The judge therefore found the Court would be failing in its obligations to manage the disclosure process generally in the manner envisaged by the Disclosure Pilot if it granted the application on this basis.

Court’s general case management powers (CPR r.3.1(2)(m))

  • The judge (and GT) accepted that the Court has an inherent jurisdiction to order disclosure, but the judge also accepted GT’s counter-submission that that power shouldn’t be exercised in a way that’s inconsistent with the Disclosure Pilot – noting similar comments in other authorities[1].

    The judge went on to consider whether, even if she could make an order under paragraph 5.11, PV had shown that the disclosure was “necessary” to formulate its case.  She found that they hadn’t:

  • PV argued the disclosure was necessary to quantify the impact of alleged misstatements in the 2014-2017 accounts. While the judge accepted that PV wanted to ascertain whether those misstatements were also present in 2010-2013 and how they came to be made, she didn’t agree that the quantum of the claims arising from them was reliant on the earlier years.

  • The judge also struggled to reconcile PV’s assertion in support of the application that they would be able, by looking at what GT had done, to obtain reliable information, with the underlying allegations in the claim that GT had been negligent in carrying out its audit duties.

  • PV (or rather the liquidators) already had the information but were arguing that “given their unfamiliarity with parts of it”, it would be a “costly and time-consuming exercise” for them to locate all the relevant records, “whereas the information should be more readily available on GT’s audit files”. The judge noted PV had not provided any details of the time and cost said to be involved, and in any event that the information on GT’s files was derived from PV’s own records and was therefore unlikely to be any more accurate.

Comment

This decision provides helpful guidance for any party either considering or responding to an application for ‘early’ disclosure, whether on any of these 3 grounds or otherwise.  The overarching point is that, to succeed, such an application has to be consistent with both the wording and purpose of the Disclosure Pilot. 

The Court gave relatively short shrift to PV’s reliance on paragraph 9.4 and r.3.1(2)(m) largely as a matter of principle.  The position under paragraph 5.11 however was slightly more nuanced and required a relatively close look at how the disclosure sought actually interacted with the pleadings – much like a Part 18 Request for Further Information (which, incidentally, GT had already made and PV responded to). 

Of course there’s nothing novel about parties looking to obtain early disclosure and this is not the only example of the (relatively) new provisions of the Disclosure Pilot being tested in this respect.  Last year we saw the Disclosure Working Group issue clarification on the timing of disclosure of “known adverse documents”, which was proving a source of contention between parties (the Castle Water[3] case has also provided further guidance around the “continuing duty” in this regard).  Again however the issue with the proposition – enthusiastically pursued by some – that known adverse documents should be disclosed immediately following issue of proceedings, was that it was irreconcilable with the basic structure and purpose of the Disclosure Pilot.

While it’s inevitable there will be further differing interpretations of various aspects of the Disclosure Pilot, before incurring the potentially very significant costs of pursuing (or indeed defending) any application, parties must ensure they take a step back and ask whether their position is truly in line with the overall aim to bring a more proportionate approach to disclosure.  Given how complex some of the processes around the Disclosure Process can prove to be, it can be easy to forget the underlying intention is actually very simple. 

  • [1] Patisserie Holdings PLC (in liquidation) & others -v- Grant Thornton UK LLP [2021] EWHC 3022 (Comm)
  • [2] Raja -v- Van Hoogstraten (no p) [2008] EWCA Civ 1444 and Mehmet Arkin -v- Marshall [2020] EWCA Civ 620
  • [3] Castle Water Limited -v- Thames Water Utilities Limited [2020] EWHC 1374 (TCC)

Date published

02 December 2021

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