4 February 2016
Litigation and arbitration teams operate as well oiled machines. The diversity of cases they encounter requires effective project management, including on issues relating to quantum.
Knowing at what point to bring an expert witness into the picture is not an exact science and will depend on the circumstances of the particular case, the procedural timetable and often, the client’s view on costs. However, early consultation with your expert can have a significant effect on the outcome of a case. In this short article I set out my thoughts on the benefits to getting your accounting expert involved early, based on my 15 years of experience working in this field.
1. Early consultation can help inform strategy
Quantum can have considerable impact on the overall strategy taken in a case, and can even determine whether a claim is worth pursuing at all.
Take a case we worked on, where our client’s customer had terminated a long term contract which resulted in them owing our client a termination fee. Our client had calculated the amount due and asked the customer for it, but they had refused to pay. The client contacted us believing that it had a strong case, but not wanting to start an action against a customer (who could bring more business in the future), unless it was worthwhile doing so.
We were asked for our independent view on the size of the termination fee. We calculated that the client was actually owed twice what had been estimated and helped the client prepare calculations that showed what the true loss was. When these were shared with the customer, it resulted in them agreeing to pay our client the original estimated amount. This was a great result as the company avoided commencing expensive litigation, it was paid the amount that it originally thought was due to it and did not irreparably damage its relationship with the customer.
In contrast to this, we have worked on cases where proceedings have already been issued before we were engaged and when we looked at the claim we valued the loss at considerably less than (on one occasion less than half of) the claim amount. An earlier independent view on quantum may have changed the whole strategy of the case.
2. Early consultation can ensure that expert evidence is properly prepared and will stand up to cross examination
It takes time to produce a robust expert opinion on quantum, where all the issues have been fully considered and the calculations verified. Instructing your expert with only a few weeks before a report needs to be produced is risky and is unlikely to save the client money in the long run.
3. Early consultation can ensure that the relevant documentary evidence to support quantum is available
Disclosure is just as important for quantum issues as it is for any other part of the case, as experts need to have access to the relevant financial information to be able to form their opinions. By involving your expert in the disclosure process, you can make sure that the right documents are requested and provided.
Experts can also help clients think about what financial documents might be relevant in responding to disclosure requests.
4. Early consultation can ensure relevant factual evidence is available
Your accounting expert is likely to need to rely on witnesses of fact in respect of factual matters. By involving your expert before witness statements are produced, you can help to ensure that all relevant matters are included in those witness statements, so the expert has the facts available when preparing their expert evidence.
5. Early consultation can realise cost benefits when building a loss model
Often, accounting experts are instructed to provide an expert opinion on quantum based on a loss model prepared by the client; the thinking presumably being that this will be quicker and cheaper. However, this may not be the case.
An example of such a situation arose when, during a long running arbitration, we received a copy of the client’s loss model only three weeks before we needed to serve our expert report. Since the model had been prepared by the client’s sophisticated financial team, the client and lawyers assumed that we would only need to review and test the model and then we’d use it as the basis for our quantum calculations. However, the financial team did not appreciate the approach or discipline required in preparing a model in the context of an arbitration and the model was not suitable for assessing loss. This meant that we had to carry out extensive re-modelling under tight timescales, which was both inefficient and meant the risk of something going wrong was high.
If your client is preparing a model to calculate loss and the expectation is that your expert will rely on it at a later stage, by getting your expert involved upfront in agreeing the approach, valuation date, the basis and support for the inputs and assumptions with the client, it is more likely that the resulting model will be appropriate and stand up to the scrutiny required during the expert process. It is also more likely that the client will see the cost savings it anticipates.
Overall, the quality of expert evidence that we are able to give and the value we can add for our clients may be impacted by the point at which we become involved in a case. Having your expert involved at the earliest opportunity gives them the best chance to add maximum value to your case.
By: Liz Perks, partner