The need to quantify a loss of profits can arise in a wide range of situations including contractual disputes, shareholder disputes, business interruption claims and personal injury claims. Consequential losses are frequently claimed against financial institutions, for example mis-selling.
The calculation of loss of profits is rarely straight forward due to the large number of variables that can be involved. These can include changes in market conditions, business growth rates, variation in margins, capacity constraints, regulatory and commercial limitations on new projects and different methods of mitigation. Claims also frequently involve an element in respect of wasted costs.
Our aim is always to provide objective, independent advice that adds value to our clients at a time where they have either suffered a loss or are defending a claim for loss of profits. We provide timely and well explained reports and robust calculations in order to assist the legal or settlement process so our clients can get back to business as soon as possible. Where necessary we give expert evidence on our opinion of the loss.
Our team of forensic accountants work closely with our clients and their legal advisers to gain a detailed understanding of the nature and basis of the claim and the claimant’s business. We focus on understanding the circumstances that caused the loss to ensure that the losses being claimed flow directly from the actions of the defendant.
We analyse the available data in relation to past and expected future performance as well as the market in which the claimant operates. Where gaps in information exist we will identify and conclude on reasonable assumptions to enable us to quantify losses or provide a range of potential outcomes.
We use our extensive experience of quantifying loss of profits in order to model financial losses as accurately as possible, building financial models that can cope with a range of facts and assumptions as necessary. Our clients have found this approach to be extremely valuable as part of the settlement process.
In some cases a lost opportunity may result in a permanent reduction in business valuation. In such cases we can quantify the difference between the current business value and the value that the business would have had had the opportunity not been lost.
Early stage settlement for breach of contract
Appointed as an expert to quantify the losses suffered by a multinational wine company over a five year period in respect of a production and packaging contract. The client initially estimated losses at around £1 million but we considered they were significantly greater. We were engaged in the early stages of dispute, before proceedings had been issued by the claimant, to prepare a report quantifying various stock losses. Our report helped the client to negotiate a settlement well in excess of their initial estimation of loss.
Swap consequential loss
Calculating the losses suffered by a number of different property investors and developers due to the inability to invest sums paid under interest rate hedging products into new property opportunities. Some claims settled through the FCA review process, others developed into court proceedings and we produced expert reports quantifying consequential losses for use in those proceedings.
Arbitration – breach of distribution agreement
Acting as the expert for an international pharmaceutical company to quantify losses suffered as a result of a contractual dispute in relation to a distribution agreement. We prepared an expert report, working closely with a market expert, to quantify the losses suffered by the claimant and assessed a counterclaim by the defendant. Kate Hart gave evidence in the final arbitration hearing.
Assessing merits of a claim for mediation
Acting as the expert adviser to assess the merits of a claim for loss of profits brought by an online dog trading website as a result of the scraping of data by an online media business. Our work was undertaken for the purposes of mediation, following which the claim settled for around 10% of the amount claimed.
Losses arising from breach of concession agreement
Appointed by the claimant to prepare calculation of losses arising for a company operating a hair and beauty concession in a department store following the opening of a competing concession against the terms of the concession agreement. The claimant was funded by insurers so it was important to obtain a rapid assessment of the claim’s quantum. Whilst we identified that no direct loss could be proven in respect of the product line allegedly impacted by the new concession, the claimant did have a potential claim in respect of other actions taken by the department store in earlier years.