Carillion Plc v KPMG LLP & Anor [2020] EWHC 1416 (Comm)

Andrew Fenn is acting for Carillion Plc in relation to anticipated proceedings against KPMG LLP and KPMG Audit Plc (together, “KPMG”) following the collapse of the Carillion Group in 2018, one of the biggest and most notorious corporate failures of recent years.

KPMG were Carillion’s auditors and the basis of the intended action is that, as auditors, KPMG did not detect that the financial statements of Carillion and the consolidated financial statements of the Carillion Group failed to reflect their true position. Carillion has intimated an intention to bring a claim running into hundreds of millions of pounds against KPMG.

Today’s judgment concerns an application by Carillion for pre-action disclosure in relation to certain aspects of the financial reporting of Carillion Plc and its subsidiaries in relation to which Carillion intends to allege that KPMG’s auditing was negligent. The application focused on KPMG’s working papers, held on KPMG’s “eAudIT” electronic audit files.

Jacobs J dismissed Carillion’s application, following a remote hearing.

The Court accepted that the threshold jurisdictional requirements of CPR 31.16 were satisfied (i.e., that the documents were likely to be within the scope of standard disclosure and that there was a sufficient prospect that disclosure might advance one of the purposes in CPR 31.16(3)(d)). But the Court decided that the application was not one that merited the exercise of its discretion to order pre-action disclosure, for reasons including that: Carillion could plead its case satisfactorily without the disclosure; pre-action disclosure was not warranted to enable a party or its expert to reach a fully informed or concluded view; the disclosure sought was excessively burdensome; amendments and their associated costs were inevitable in any event; and Carillion’s requests were not consistent with the Protocol.

The judgment notes that applications for pre-action disclosure in the Commercial Court are relatively rare and as such the judgment provides valuable guidance on pre-action disclosure in the professional negligence context.

The case is likely to develop into a complex and high-profile piece of commercial litigation. The action is being keenly followed by both the financial and the construction media given its reported value, the issues it raises for auditors and by virtue of Carillion’s market position in the construction industry.

Andrew Fenn is acting for Carillion plc, together with Rebecca Sabben-Clare QC and Timothy Kenefick of 7KBW, instructed by Quinn Emanuel Urquhart & Sullivan UK LLP.

To read the full judgment please click here: Carillion Plc v KPMG LLP & Anor [2020] EWHC 1416 (Comm) (03 June 2020)

3 June 2020