The High Court has refused an application by the administrators of café chain Patisserie Valerie for disclosure of mid-tier auditor Grant Thornton’s audit files, holding that doing so would ‘cut across and undermine the purpose’ of the disclosure pilot in the Business and Property Courts.
The administrators are bringing a £209m audit negligence claim against Grant Thornton in relation to the firm’s audit reports for the years ending 30 September 2014 to 2017, alleging that – from at least March 2015 – the Patisserie Valerie group’s financial statements had been falsely manipulated and misrepresented its financial position and performance.
Grant Thornton, which was fined £2.34m by the Financial Reporting Council in September in relation to its audit of Patisserie Holdings for the financial years ending 30 September 2015 to 2017, has previously said it will ‘rigorously defend the claim’.
In Patisserie Holdings PLC and others v Grant Thornton UK LLP, Mrs Justice Moulder was asked to order Grant Thornton to disclose copies of its audit files for the financial years ending 30 September 2010 to 2013. The claimants argued the court had jurisdiction to order disclosure under paragraphs 5.11 or paragraph 9.4 of Practice Direction 51U, but this argument was rejected by the court.
Moulder held that paragraph 5.11 of PD51U must be ‘interpreted narrowly having regard both to the context of paragraph 5 itself and the overall purpose of the practice direction, which is to introduce a more proportionate approach to disclosure’.
‘A broad interpretation of paragraph 5.11 would, in my view, cut across the structure of the practice direction where, having made limited focused initial disclosure, the court then determines whether extended disclosure is to be ordered,’ she added.
The application, ‘were it to be premised on [paragraph] 9.4, would be premature’, Moulder said, as the court ‘would be failing in its obligations to manage the disclosure process in the way contemplated by the practice direction to make an order now’.
The judge also declined to make an order under the court’s general case management powers under CPR 3.1(2)(m) as it would ‘cut across and undermine the purpose’ of PD51U.