UK & Europe
A recent judgment has provided welcome confirmation of the position that pre-action disclosure orders are not the norm in the Commercial Court and pre-action disclosure applications should only succeed if there are grounds for distinguishing a case from the "usual run".
In Carillion Plc (in liquidation) v KPMG LLP & Anor  EWHC 1416 (Comm), the court dismissed an application for pre-action disclosure under CPR 31.16. Carillion sought the production of documents in certain categories contained on KPMG's electronic audit files for three year end audits, which KPMG had declined to disclose voluntarily.
The legal principles
CPR 31.16 sets out that the court can only make an order for pre-action disclosure where:
If these jurisdictional thresholds are met, the court will then consider whether it would be appropriate to exercise its discretion to make an order. If a request is too broad, the court has discretion to modify the order appropriately, rather than dismiss the application.
In the present case, the Judge noted that applications for pre-action disclosure in the Commercial Court are relatively rare and that the authorities he was referred to contained no recent examples of successful applications. Moreover, following Hutchinson 3G UK Ltd v O2 (UK) Ltd  EWHC 55 (Comm), in order for a pre-action disclosure application to succeed, the circumstances must be outside the "usual run"; and following Assetco plc v Grant Thornton UK LLP  EWHC 1215, in the commercial context, a pre-action disclosure order is, if not exceptional, unusual.
The issues for the court were: whether the requirements of CPR 31.16(c) and (d) were satisfied and if so, whether it should exercise its discretion to grant the order sought.
CPR 31.16(c) – were the documents sought within the scope of standard disclosure?
The Judge considered that it was more likely than not that the documents sought by Carillion's "focused" request were within the scope of standard disclosure in relation to the issues that were likely to arise (leaving aside a paragraph requesting general documents on the audit file). He held that the Court of Appeal decision in Bermuda International Securities Ltd v KPMG  Lloyd's Rep PN 392 (where an appeal against an order for pre-action disclosure was dismissed) shows that a focused application for specific audit working papers, in the context of a potential audit negligence claim, will likely fall within the scope of standard disclosure, although this will depend on the nature of each case and the wording of the order sought.
CPR 31.16(d) –was pre-action disclosure desirable to: dispose of the anticipated proceedings fairly, assist the dispute to be resolved without proceedings, or save costs?
Turning to CPR 31.16(d), the Judge identified that the courts have often held that this requirement is satisfied because pre-action disclosure will enable the pleadings to be more focused, thus avoiding the costs and complexities caused by later amendments. The Judge concluded, "with some hesitation" that the threshold was crossed in the present case, because if the documents were provided, Carillion would be able to prepare a more focused pleading, at least in relation to the contracts in respect of which it did not presently have access to any relevant audit working papers.
The exercise of the court's discretion
However, overall, the Judge held that it would not be appropriate for the court to exercise its discretion in favour of ordering pre-action disclosure, for the following reasons:
The Judge also made some welcome comments about the Protocol. He emphasised that, as set out in the Protocol itself, the court should be concerned with compliance with the spirit of the Protocol, rather than the exact letter. However, he considered that the approach taken by the Claimant, of purportedly sending multiple 'partial' Letters of Claim and reserving its rights in relation to claims not described therein, was not consistent with the overriding objective or the spirit of the Protocol, which envisages one Letter of Claim, setting out the "full scope" of the intended allegations.
The Judge also expressed the view that it would be surprising if, in most cases, the key documents required to be provided by the Protocol (which may well include specific working papers) could not fit very comfortably within one lever-arch file. The Judge stated that, whilst the Protocol does contemplate that a reasonable request for documents can be made "at any time", the usual course is that the request will be made when the claimant has formulated a Protocol-compliant Letter of Claim. He did not, therefore, consider that KPMG had breached the Protocol by failing to engage with the Claimant's request for extensive documents before such a letter had been provided.
This judgment provides a helpful indication that, although audit working papers will often be key documents for disclosure after proceedings have been commenced, claimants should not assume that they will be entitled to obtain them at a pre-action stage. The key documents to be provided with a Letter of Response will not usually be extensive and no party is obliged under the Protocol to disclose a document that the court could not order them to disclose under CPR 31.16. However, pre-action disclosure orders should continue to be viewed as unusual and reserved for unique circumstances by the Commercial Court. Whilst each case will turn on its own facts, if a claimant has sufficient documentation to plead their claim and a large disclosure exercise is likely to take place in due course in any event, they should be wary of expecting the court to exercise its decision in their favour, particularly if extensive pre-action disclosure is being sought.
 Black v Sumitomo Corp  1 WLR 1562
 The Judge in the present case noted that it follows that, at the time of the application, the issues must be sufficiently clear to enable this requirement to be properly addressed.