Case No. IP-2021-000073

60.Pixdene’s position is that the auditor is entitled to copies, including electronic copies, of all documents inspected as part of an audit under Clause 5. It submits:i)The taking of copies is a standard and conventional incident of audit. It is necessary to give business efficacy to Clause 5, otherwise it could delay the audit; andii)Copies would make an audit more efficient and reduce disruption to Paddington’s business as the auditor could review copies and liaise with Pixdene and its advisors at their convenience rather than having to visit Paddington’s offices each time the auditor wanted to work on the audit.61.Paddington’s position is that: i)Clause 5 means what it says. It simply provides that the third party auditor may inspect the agreements and other business records of Paddington;ii)This right of inspection does not require it to provide the auditor with copies of the relevant documents either during or in advance of an inspection. Paddington provides the dictionary definition of ‘inspection’ from the Shorter Oxford English Dictionary which it submits cannot be read as encompassing anything relating to the taking or provision of copies; andiii)If the right to copies was intended by the parties they would have made provision for matters such as who would be responsible for making the copies and bearing the costs of such copies, but they have not.62.Paddington softened this position in its trial skeleton, Mr Caddick KC submitting that there is nothing in the RDA to prevent the auditor making such notes as he/she wishes “or even using a smartphone to take a photograph of relevant materials with a view to preparing his report on the issue of Paddington’s compliance”, subject to the usual issues of privilege and confidentiality. However, he was more equivocal in closing, saying that he would need to take further instructions.Discussion and determination63.Paddington appears to concede by its second submission that, as Pixdene submits, it is usual for an auditor to take copies of documents inspected which are relevant to his compilation of the audit report, and it is difficult to see much difference between taking a photocopy of a document and photographing it or scanning it onto a smartphone. I agree with Pixdene that without the right to take copies, the auditor would be forced to write his auditor’s report from Paddington’s data room. Nor would the auditor have any records of the documents it has audited and relied upon in the making of his audit report, to which professional obligations attach. Accordingly, although clause 5 is silent on the point, I think if the parties at the time they agreed clause 5 had been asked “Can the third party auditor take such copies as he considers necessary to enable efficient and timely production of his audit report, and for the purposes of maintaining appropriate records of his work?”, they would have considered the third party auditor’s professional duties, including his duty of confidentiality, and said “Of course, that goes without saying.” For that reason, I am satisfied that such a term should be implied into clause 5 as it is obvious that it should be. In addition it appears to me to be necessary to give commercial and practical efficacy to clause 5, for the reasons I have given above.64. As to the point of who should be responsible for taking and paying for such copies, it also seems obvious that any request by the auditor for Paddington to produce copies should be reasonable (i.e. not unduly onerous), and that Paddington should be indemnified of the costs of that by Pixdene as part of the costs of the audit; alternatively that the auditor should be permitted by Paddington to take copies himself with his own portable equipment brought into the data room, again at Pixdene’s expense.