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Early Applications for Pre-Action Disclosure: Assetco Plc v Grant Thornton UK LLP

At the heart of an application for pre-action disclosure (“PAD”) in a prospective case where there is no issue as to the correct parties being implicated, is a bifurcated test. The first element consists of a jurisdictional test: would the documents sought fall within standard disclosure? The second element consists of a discretional element: is early disclosure desirable, and should disclosure be ordered in the circumstances, looking at the facts of the case?
 
The Commercial Court has recently clarified the correct approach for a court upon assessing this first limb of the test as to whether to order PAD, in the (as yet) unreported case of Assetco Plc v Grant Thornton UK LLP (unreported, January 25, 2013) QBD (Commercial Court). This case provides useful guidance for defendant professional negligence practitioners facing applications for PAD at very early stages in litigation, and/or in cases where such applications are suspected to be largely speculative.
 
A company (“S”) applied for pre-action disclosure pursuant to CPR 31.16 as against a firm of auditors (“G”) whom had acted for S in the financial years ending in 2009 and 2010. S instructed new auditors in 2011, who said that there were errors in the 2009 and 2010 financial accounts. S wrote to G in July 2012 stating that their new auditors had produced revised accounts for 2009 and 2010, and set out the differences between P's restated and G's original accounts. The letter referred to the Professional Negligence Pre-Action Protocol, and expressed doubts that G had exercised reasonable care and skill when preparing the accounts.
 
G wrote to S saying that the basis of its proposed claim was unclear and not understood. S replied saying that they would provide draft particulars of claim, but wrote subsequently to say that it was unable to prepare such draft particulars of claim without PAD.
 
Upon hearing of S’s application for PAD,  the Court had to consider whether CPR 31.16(3)(c) and (d) (which set out the two-stage test outlined above) were satisfied so that PAD should be granted.

Mr Justice Blair refused the application. The relevant issue was whether the documents sought fell within the scope of standard disclosure that G would have to give if S pursued the action. In order to determine whether the documents would fall within the scope of standard disclosure, clarity was required as to what the issues in the potential case would be (Bermuda International Securities Ltd v KMPG [2001] EWCA 269 applied).
 
The Court held that S's letter merely stated the background facts and did not amount to a proper identification of the issues that would arise if S pursued the action. Whilst draft pleadings were held not to be a pre-requisite to an application for PAD, S had not explained why it had changed its mind about it being possible to provide draft particulars. Further, it was held that S had its own documents, and therefore it should have been able to suggest why their new auditors had restated the figures and how G had allegedly acted negligently.
 
Accordingly, Blair J held that CPR 31.16(3)(c) – the jurisdictional element – was not satisfied. S’s application thus failed. However the court went on to consider CPR 31.16(3)(d) –the discretional element.
 
It was held that the Pre-Action Protocol was particularly relevant. It said that a claimant should first send a defendant a preliminary notice of claim, and that when the claimant decided that there were grounds for a claim, they should send the defendant a detailed letter of claim.
 
Under the Protocol, the receipt of the letter of claim gave rise to the obligation to exchange relevant information and documentation. In the instant case, S had provided a preliminary notice of claim, but then went straight to requesting PAD without providing a detailed letter of claim. Accordingly, it was held that if PAD was allowed, disclosure would have had to be done twice, as it would have to be revisited in light of S's exact pleadings. Granting PAD would thus mean unnecessary costs would be incurred, and the scope of disclosure sought was disproportionate.
 
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