On the subject of going without…
Earlier this year, Rishi Sunak made headlines for his childhood hardships, specifically going without Sky TV. Granted, for most of the British public, this would likely be considered a minor inconvenience at worst.
As forensic accountants, it is not uncommon that we have to ‘go without’ key pieces of information. This is especially true where we are acting as expert witnesses in arbitration matters, where the discovery process is often less extensive than in litigation.
The consequences of being provided with limited information
The impact of being provided with limited information or going without key information is that, as expert accountants, we will have to make broader assumptions than would be ideal and our conclusions will often need to be caveated. Broad assumptions will invariably be open to a greater degree of challenge by the Tribunal and Counsel.
As is the case for all our instructions, we reserve the right to revise our conclusions should further information come to light. Should further information be disclosed once expert reports have been prepared which contradicts assertions made by the involved parties, it may well undermine the credibility of the party involved. It may also materially impact upon the conclusions we as forensic accountants have previously reached, with such instances tending to lead to greater costs for the clients.
Below are a couple of examples where a lack of information affected the outcome of a case.
Example One – Contractual dispute
One of our expert witnesses was instructed on a case by solicitors acting for Party A. A breakdown in relations had led to a contract between Party A (the customer in the contract) and Party B (the supplier in the contract) being terminated. This had major implications for Party A, who claimed they were unable to continue operating a relatively new but major part of their business.
Party A was unable to provide a breakdown of revenue by income stream so that we could independently assess if any mitigation of losses had occurred. However, we were instructed by Party A that only an extremely limited number of customer contracts had been able to be fulfilled since the termination of the contract. Therefore, our report was prepared on the assumption Party A’s losses had largely been unable to be mitigated.
Documents were later entered into discovery which contradicted Party A’s earlier claims and which showed that a much greater number of customer contracts had been able to be fulfilled since the termination of the contract. Indeed, it appeared possible that Party A had been able to mitigate at least part of their losses, meaning that the previous calculation of losses may well have been overstated. It was also possible that Party A’s credibility could have been undermined.
Had such documentation been provided earlier in the process, we would have been able to discuss Party A’s assertions in light of this and prepare a more accurate report in the first instance, which would in turn have allowed the solicitors to manage Party A’s expectations more effectively.
Example Two – Loss of profits
A further example of the importance of such information being unavailable is where one of our expert witnesses was instructed by Party C, the respondent in a claim for loss of profits. Party C had been a subcontractor in the provision of services to the end customer (Party D). The primary contractor Party C was engaged by was Party E.
Various delays and issues in the delivery of the services caused the contract (and other unrelated contracts between Party D and Party E) to be lost or cancelled. This caused Party E to pursue Party C for damages in the form of loss of profits.
However, the claim was quantified by Party E’s expert, based largely upon Party E’s instructions, with limited underlying financial information provided to support these assertions. Additionally, there was a notable absence of financial information available on request, which would ordinarily be expected to have been prepared and maintained by Party E in the course of their business. This led to Party E’s calculations being open to significant challenge. It also resulted in our expert’s report on behalf of Party C being more lengthy (and therefore more costly) than it would otherwise have needed to be. This was necessary to highlight such shortcomings in available information, the material uncertainties present within Party E’s claim and to set-out various alternative scenarios based upon the limited information available which contradicted the assertions made by Party E.
In summary
Both examples above were settled prior to being heard by the Tribunal. It is likely that the material uncertainties present, owing to the lack of information available, were key causes of a pre-hearing settlement.
Ultimately, there is zero sympathy for Rishi Sunak going without Sky TV. There is similarly a lack of sympathy for expert witnesses having to ‘go without’ information they would ideally need to prepare a report. However, not disclosing key information can have a significant impact upon experts’ views and, consequently, outcome of a case.
