Case Law: Disclosure – Bermuda International Securities Ltd v KPMG

The cases of Bermuda International Securities Ltd v KPMG in February 2001 relates to pre-action disclosure, under 31.16, of the Civil Procedure Rules, and is often quoted along side Black V Sumitomo.

Bermuda International Securities Ltd, owned by Bank of Bermuda, which in turn is owned by HSBC was in litigation against KPMG .

BIS Ltd had applied to obtain information from KPMG and in the original case the court found against KPMG, and therefore KPMG appealed.  The case hinged on 31.6 of the Civil Procedure Rules and tested each of the points.

  • (1)This rule applies where an application is made to the court under any Act for disclosure before proceedings have started.
  • (2)The application must be supported by evidence.
  • (3)The court may make an order under this rule only where –
    • (a)the respondent is likely to be a party to subsequent proceedings;
    • (b)the applicant is also likely to be a party to those proceedings;
    • (c)if proceedings had started, the respondent’s duty by way of standard disclosure, set out in rule 31.6, would extend to the documents or classes of documents of which the applicant seeks disclosure; and
    • (d)disclosure before proceedings have started is desirable in order to –
      • (i)dispose fairly of the anticipated proceedings;
      • (ii)assist the dispute to be resolved without proceedings; or
      • (iii)save costs.
  • (4)An order under this rule must –
    • (a)specify the documents or the classes of documents which the respondent must disclose; and
    • (b)require him, when making disclosure, to specify any of those documents –
      • (i)which are no longer in his control; or
      • (ii)in respect of which he claims a right or duty to withhold inspection.
  • (5)Such an order may –
    • (a)require the respondent to indicate what has happened to any documents which are no longer in his control; and
    • (b)specify the time and place for disclosure and inspection.

Therefore the judges had to asses the following tests.

  1. Were BIS Ltd likely to become a party to proceedings, and were KPMG likely also to be a party to those proceedings i.e. in this case were BISL likely to sue KPMG?;
  2. If so, were KPMG. likely to have in their possession custody or power documents relevant to an issue “arising or likely to arise out of that claim”?;
  3. If so, did the circumstances as specified in the rules exist to provide the jurisdiction to order “those documents” to be disclosed and produced to the applicant’s legal advisers, and/or any other professional adviser? [It is noteworthy that under the section it is not particular documents, but the documents that would otherwise ultimately have been produced on discovery under the old rule O.24 with which the section appears to have been concerned].
  4. Under CPR 31.16 the circumstances additional to those already made a requirement by the section, are that an order should “only” be made where
    1. if the proceedings had started the respondent’s duty by way of standard disclosure would extend to “the documents or classes of document of which the applicant seeks disclosure”;
    2. disclosure of the documents before proceedings have started is desirable to dispose fairly of the proceedings; assist the dispute to be resolved without proceedings; or to save costs.
  5. An order must specify the documents or classes of documents and must require the respondent to comply with 4(b). The order may require compliance with 5. The details of 4(b) and 5 are not relevant to this appeal, but the compulsion to specify may be of relevance.

The court held that that the appropriate test was that the applicant has enough evidence to plead a prima facie case but seeks pre-action disclosure in order to particularize it.

The Court stated that it was appropriate to order pre-action disclosure of documents in a wide range of cases. The court also stated that it was for the judge, exercising his/her case management powers, to determine the circumstances in which such an order would assist in resolving the dispute and, if so, whether the order would be desirable. The Court of Appeal upheld the first instance decision of Walker J, which required KPMG to give pre-action disclosure of audit files, correspondence and other documents relating to Bermuda International’s negligence claim against KPMG. The Court of Appeal also confirmed that it had been open to Walker J not to order Bermuda International to pay the costs of the application or the costs of providing the documents despite the presumption in CPR 48.1 that these costs should be paid by the party seeking pre-action disclosure, as KPMG was refusing to produce documents ‘root-and-branch’.

The court found, again, in favour of Bermuda International Securities Ltd and KPMG was compelled to produce the documents.

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3 Responses to “Case Law: Disclosure – Bermuda International Securities Ltd v KPMG”

  1. Civil Procedure Rules : 31.16 « Data - Where is it? Says:

    […] Bermuda International Securities Ltd v KPMG […]

  2. ruleswatch Says:

    Folks: I came across your blog by accident and found your comments on disclosure along with a series of other posts on electronic discovery.

    Based on this post, I have used these UK authorities as the basis for comments on new Nova Scotia rules and, to some extent on the idea of pre-action discovery at a new blog I am trying to get going, on the other side of the North Altantic, at “Ruleswatch.”

    As a consumer, many thanks for your hard work and efforts and best wishes.

  3. Case Law: Civil Procedure Rules Examples « Data - Where is it? Says:

    […] Bermuda International Securities Ltd v KPMG  […]


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