Patisserie Valerie's application under the Disclosure Pilot proves to be far from a cakewalk

In a judgment given in November last year in the case of Patisserie Holdings PLC (in liquidation) and others v Grant Thornton UK LLP [2021] EWHC 3022 (Comm), the High Court refused an application made under the Disclosure Pilot for copies of audit files in an auditors’ negligence case. In addition to containing useful judicial interpretation of the application of certain parts of the Disclosure Pilot, the judgment was notable in dealing with a request for documents that the applicant already had but which the applicant said it would be easier for their opponent to find.

Background

The companies which own Patisserie Valerie (now in liquidation) (the Claimants) allege negligence on the part of their former auditors, Grant Thornton UK LLP (the Defendants). The Claimants say the Defendants made mistakes in the course of auditing the Claimants’ financial statements for the years 2014 to 2017 and as a result the Claimants seek losses totalling over £200m.

The application

The Claimants applied for copies of the Defendant’s audit files for certain financial years, or alternatively copies of the working papers from those files. The Claimants argued that whilst the Defendant’s audit files were based on documents which had themselves been provided by the Claimants, given the number of documents held by the liquidators, it would be easier for the Defendant to find the documents than the Claimants.

The application relied on:

• paragraph 9.4 of Practice Direction 51U to the Civil Procedure Rules 1998, which allows the Court to order Extended Disclosure in stages
• paragraph 5.11 of the same Practice Direction, which states: “In an appropriate case the court may…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…”
• the court’s inherent case management jurisdiction in CPR 3.1

The Claimants argued that they needed the documents to respond to issues raised in the Defendant’s defence and they would also enable the Claimants to formulate certain aspects of their case. The parties agreed the documents were disclosable, so the issue was simply one of timing. Expense would be saved and delay avoided if the documents were provided now, rather than the Claimant having to search for them.

The Defendants, in contrast, argued that the application did not fall within the scope of the Disclosure Pilot. The audit files were requested to help the Claimants make their own case. The Claimants did not say the information was “necessary” to allow them to understand the Defendant’s defence, but rather that they would be “materially assisted" by it. Further, the audit files could only have come from the Claimants’ own records, and the Claimants had the documents sought by this application in any event.

Decision

Mrs Justice Moulder found that the Court did not have jurisdiction to order disclosure of the documents:

• Under paragraph 5.11 of PD 51U - whilst the Court can require disclosure to be given where necessary to formulate a defence or reply, the paragraph should be interpreted narrowly and with the purpose of the Disclosure Pilot in mind. That purpose was to provide a more proportionate approach to disclosure. To give paragraph 5.11 a broader interpretation would “cut across the structure of the Disclosure Pilot”. The disclosure sought would not actually allow the Claimants to respond to a new issue raised in the defence, but would rather be for the purposes of allowing them properly particularise their original case. Accordingly, it did not fall within paragraph 5.11.
• Under paragraph 9.4 of PD51U - ordering disclosure at this stage would be premature, would undermine the purpose of the Disclosure Pilot, and would not create a more proportionate approach to disclosure. Additionally, given that ordering disclosure at this stage would contradict the disclosure procedure set out in the Practice Direction, she also refused to make the Order under the more general jurisdiction of the Court set out at CPR 3.1(2)(m).

Having found that she did not have jurisdiction to make the order sought, Mrs Justice Moulder then considered the Claimants’ application on its merits. She did not accept that the Claimants needed the disclosure sought to formulate their reply. It was not the case that the Claimants did not have the documents they sought, but rather that they simply wished to avoid the cost of searching. The Judge concluded that, even if she were wrong in her findings on jurisdiction, the Claimants had not made out their case for disclosure in any event.

Comment

The Claimants’ application was curious in a number of respects. Not only was it an application for documents that they would have received by way of disclosure in due course (to the extent that they were properly disclosable), but the application was for documentation and information that was apparently available within their own files. Obtaining an Order for disclosure in those circumstances was always likely to be difficult.

The decision does, however, serve as a reminder to litigants to keep the aims and purpose of the Disclosure Pilot firmly in mind when considering whether to make an application for disclosure under its provisions. The Disclosure Pilot was introduced to allow for a more proportionate approach to disclosure and allow it to be adapted to the circumstances of each case. Seeking premature provision of documents that a party already has is unlikely to be seen by a Court as being proportionate, and applications under the Disclosure Protocol seeking orders that are inconsistent with its objectives are unlikely to succeed.