The Commercial Court has refused to give the liquidator of failed construction giant, Carillion, access to audit working papers. The liquidator had demanded the papers, held on KPMG’s “eAudIT” electronic audit file system, as part of his pre-action preparations.
Carillion went into liquidation in 2018 with reported debts of £1.5 trillion. Questions were quickly asked why the auditor KPMG had approved the company’s accounts in previous years. Soon after, the liquidator announced that he is planning to sue KPMG for professional negligence.
The liquidator requested access to the audit working papers, but KPMG refused to hand them over, leaving the Commercial Court to decide whether to order their release.
Pre-action disclosure of documents in the Commercial Court is relatively rare and in this case the judge ruled that KPMG did not need to disclose its audit working papers on a number of grounds, including:
- KPMG had already met its obligations under the Pre-Action Protocol for Professional Negligence.
- The liquidator already held sufficient information to plead his initial claim as he had Carillion’s own documents in relation to the audits.
- The amount of work required to produce over 8,500 documents was not justified pre-action.
James Burgoyne of Brunel Professions explains that claimants sometimes want to see some of the other side’s papers to decide whether there are clear cut grounds for making a negligence claim – but this is very different to a claimant engaging in a “fishing expedition”. “This ruling will be welcomed by professional firms and their insurers as it reinforces the existing position and confirms that they are entitled to refuse to hand over inappropriate amounts of documentation before a court case starts,” he said. Mr Burgoyne believes that this could help firms to dismiss speculative claims at an early stage, before they go to court.
Categorised in: Construction/Property News
This post was written by James Burgoyne