Many recall how one of the largest construction companies in the UK, Carillion, collapsed in 2018 and quickly fell into liquidation. There was, and continues to be, concerns surrounding how the external auditing processes failed to identify much earlier on that the company was facing such apparent and substantial financial difficulty.
The liquidators of the company recently sought pre-action disclosure of certain documents from Carillion’s former auditors, KPMG, against whom a professional negligence claim has been intimated for failing to identify that the financial statements were unreliable. Pre-action disclosure is, essentially, seeking that the Court require that specific documents be produced by a party before the time and expense of instigating formal proceedings is incurred; at which time those documents would then have to be disclosed in any event. This can be very desirable, especially if there is particular evidence which could be fatal to the claim, as it means that the proposed Claimant can avoid an expensive adverse costs order if the case is ultimately lost or, conversely, it could strengthen the claim to the point that an early settlement may be achieved.
The application for pre-action disclosure on this occasion failed. Firstly, because the particular Court where the application was made is generally reluctant to grant pre-action disclosure orders and on the facts of this case it was not appropriate. Secondly, the Judge commented that, despite the apparent need to see the documentation which had been requested, in fact the liquidators had managed to set out a fairly detailed and well explained case in negligence thus far, indicating that the documents already in their possession were sufficient, which in turn somewhat undermined the asserted need to see KPMG’s documentation. And thirdly, it was determined that a formal letter setting out the basis of the claim had not been sent, which meant that KPMG’s responsibility to consider the request for documentation had not yet been triggered.
Depending on your position, if you are Claimant, you need to be mindful that a request is adequately focused on seeking only relevant documents and is sent at an appropriate stage in the case. On the other hand, it may be in the interests of a Defendant to deny the request for documentation in order to place the Claimant under greater pressure and tactically gain an advantage. Our Litigation Department is extremely experienced in such matters and capable of advising either Claimants or Defendants with regards to pre-action disclosure, the risks and benefits involved, and the most appropriate course of action to take given the circumstances.
If you want advice on litigation strategy and tactics to safeguard your position in relation to a dispute, then contact our Litigation Department on 020 7935 3522 or by email at CivilLitigation@freemanssolicitors.net
Whatever your personal circumstances the above is only a guide and we would advise you to contact us to obtain definitive advice as you will appreciate that each person’s circumstances are unique to them.