Expert determination is a form of alternative dispute resolution. In an expert determination an independent expert is jointly appointed to resolve a disputed matter, giving an opinion on a specific issue(s) within their technical expertise. The dispute is resolved without going through the courts.
If possible it is best to anticipate the future need for an expert determination and incorporate the expert determination dispute resolution process when drafting an agreement or contract. Once a dispute has arisen, it becomes increasingly difficult for the parties to agree any way forward with mutual suspicion surrounding every suggestion made. However, if expert determination has been agreed as the means of dispute resolution it can be invoked in accordance with the terms of the contract. Instances where a forensic accountant is likely to be appointed as an expert determiner include:
- Completion accounts and earn out disputes (sale and purchase agreement);
- Private company share valuations (shareholder agreement/articles of association).
Shareholder agreements often include clauses referring disputes to the company auditors. Before signing up to such a clause it is important to consider whether the company actually has auditors or accountants with the relevant expertise and ability to demonstrate impartiality. It may be better to agree to appoint an independent firm of accountants.
Appointed as the expert under the terms of the articles of association to determine the valuation of a 30% interest in the holding company of a trading company operating in digital media consultancy. The valuation was made more complex by the significant fluctuation in income which was generated by one-off projects and the existence of various share option schemes.
Appointed as joint expert to determine the lost profits and replacement cost in respect of damage to a graphic designer’s portfolio. The case was referred by the Financial Ombudsman Service as there was no dispute over liability but the parties could not agree on the quantum. The case involved a number of contested areas and was difficult due to the poor quality of information provided by the claimant. We worked with legal counsel to clarify some of the legal aspects of the case and analysed the designer’s past profits and the future order book in order to quantify the true value of the loss.
Appointed as an expert under the terms of a sale and purchase agreement to conclude on a number of contested items within the completion accounts of a manufacturing company. Our work required the interpretation of the relevant (and contradicting) terms of the sale and purchase agreement and the assessment of conflicting information provided by the parties. Our determination was final and binding and was issued within three months of our initial instruction.