Forensic cases by Roffe Swayne

Provision of negligent advice by solicitors

Appointed in a class action to comment on the financial status of an insurance company backing a property transaction. The claimants had invested in the insurance company following advice from its solicitors.

Accountants’ professional negligence

Advising a company in relation to a professional negligence claim against two sets of accountants for failing to identify a fraud being perpetrated by the company’s bookkeeper. A total of £1.5 million was extracted from the company over a four year period. We used the information available to assess at what point the accountants should have identified the fraud and quantified the losses that could have been saved had they not been negligent.

Solicitors’ professional negligence

Appointed as the expert to quantify loss in respect of a professional negligence claim made against former solicitors of the client. The claim concerned two partnerships which owned and let residential and commercial property. We were instructed to quantify losses arising in respect of the client's share of the proceeds arising on dissolution of the partnerships.

Loss of dependency / fatal accident

Instructed by the claimant to review and comment on an expert report assessing the loss of dependency arising from the death of his wife, with whom the claimant ran a photography business. Our work was used in negotiations with the defendant, following which the claimant achieved a settlement significantly better than that initially proposed.

Loss following professional negligence

Preparing calculations of the losses suffered by the owners and operators of a dry cleaning business as a result of the alleged professional negligence of a hospital in relation to the care of the husband, which left him unable to work.

Losses of earnings following RTA

Instructed to review and comment on an expert report assessing the claimant's loss of earnings following a car accident. In order to assist with negotiations with the defendant's insurance company, we prepared alternative calculations of the claimant's loss of earnings. The case was complicated by the fact that the claimant provided services exclusively to a family business which had recently ceased a previous trade and was in the middle of a three-year development project to open a children's adventure farm. Following our work the claimant accepted an offer made by the insurer.

Single joint expert

Appointed as a single joint expert to conclude on the date upon which a company was insolvent, the extent to which the actions of the director may have contributed to the financial downturn of the company and the position of the director's loan account at the date of insolvency. We confirmed that, while the director had not misused company funds, he had prejudiced the creditors of the company by extracting funds to repay director’s loans after the point at which the company was insolvent. The case settled after our report was issued.

Transactions with shareholders

Appointed to comment on the value of transactions between the company (which had gone into liquidation) and one of two shareholders. Drawing our conclusions was made more complex due to the quality of accounting records held by the company and numerous accounting inconsistencies found.

Advising liquidator in a potential claim

Advising the liquidator acting for a group of language schools on the merits of 12 potential claims against the group's former director. The claims involved the sale of a subsidiary at undervalue, making poor and uncommercial investment decisions, acting with a clear conflict of interest with regard to sums paid to family members and acting in breach of the director's contract of employment.

Investigation in claim for misuse of company funds

Appointed by a minority shareholder to investigate and quantify the alleged misuse of company funds by the director and majority shareholder of a café. Our work involved the review and comparison of Xero accounting and EPOS records with a view to the quantification of potential undeclared cash sales.

Trust accounts dispute

Appointed by the beneficiary of a family trust which owned a country estate to undertake a review of the estate accounts over a 20 year period and advise on how the estate’s income, costs and capital had been apportioned between the beneficiaries. Areas of particular focus included consideration of whether income from events held on the estate had been properly recognised in the accounts and whether personal expenditure had been accounted for as estate expenditure rather than allocated wholly to the appropriate beneficiary’s current account.

Employee fraud

Data analysis in relation to an alleged employee fraud at an owner managed restaurant business to determine whether explanations provided in the employee’s defence were consistent with the underlying business records. It was alleged that the employee misappropriated funds over a 2.5 year period by processing regular illegitimate cash refunds. We were engaged by the Metropolitan Police to determine whether the business records could be used by the Crown Prosecution Service to prove that the cash refunds were fraudulent rather than used to correct genuine errors made by members of staff managed by the defendant.

Unpaid remuneration

Appointed by the claimant as expert in a claim in the High Court brought against a high profile defendant. Instructed to quantify the value of allegedly unpaid remuneration and unreimbursed expenses under the terms of two unwritten contracts for services provided. The investigation uncovered a complex web of
financial relationships resulting in the analysis of some 22,000 transactions arising in more than 20 bank accounts held by the claimant and the defendant over a period of 17 years.

Tracing funds in divorce

Tracing funds received into and paid out of 19 different bank and 9 credit card accounts over a two year period in order to understand the overall income generated and expenditure incurred by the wife involved in divorce proceedings. The work involved analysing 12 lever arch files of documentation and determining the financial outcome of investments made through a Swiss bank account for which statements had not been provided. We consolidated the data into two sides of A4 – one showing expenditure and one showing income. Our work was used by Counsel to produce a schedule of add backs to be addressed in the divorce proceedings.

Bank statement analysis

Appointed by the husband’s solicitors in divorce proceedings to undertake analysis of his bank statements to quantify and categorise expenditure incurred by the wife over a two year period and over multiple bank and credit card accounts. We used software to convert the bank statement data into electronic format, making the analysis task more efficient and accurate.

Tax efficient method of sharing business assets

Appointed as single joint expert in matrimonial proceedings to value a high end restaurant business jointly owned by the couple and a gastropub owned by the parties in conjunction with another couple. The companies also owned property used for staff accommodation. We were also instructed to consider the taxation implications of a sale or transfer of shares and to advise on the most tax efficient method of sharing the business assets between the parties.

Tax on the disposal of property

Appointed as single joint expert to value a property development company owned jointly by the couple. Also instructed to comment on the taxation implications of a sale or transfer of shares and of the disposal of the redeveloped matrimonial home.

Tax on the sale or transfer of shares

Appointed as single joint expert to value a facilities management company owned largely as a joint shareholding by the husband and wife. Instructed to comment on the taxation implications of a sale or transfer of shares and of funds withdrawn by the husband to finance a house purchase as well as the most tax efficient means of extracting value from the companies.

Sustainability of pension income

Appointed as single joint expert in matrimonial proceedings to value the husband’s interest in a family owned haulage business. Also instructed to comment on the taxation implications of a sale or transfer of shares, the liquidity of the business and the status and sustainability of pension income receivable by the husband from the company.

Current sustainable income of husband and impact if company was liquidated

Appointed as single joint expert to opine on the turnover and net sustainable income of a company operating in the plastic surgery market in the context of a matrimonial dispute. We were also instructed to comment on the level of capital that should be retained by the company and therefore the capital available for
extraction, as well as the net capital and income position of the husband if the company was liquidated.

Where income was unsustainable

Appointed by the wife’s solicitors to comment on the expected future income of the husband who operated a retailer of car parts. The wife was accustomed to the husband drawing high levels of cash from the business and expected future earnings to remain consistent. We identified that the husband’s drawings were unsustainable and that his future income would be significantly lower as a result.

Sustainable income following loss of contract

Appointed by the husband to assess the sustainable income that he could expect to draw from his business in the context of divorce proceedings. The company had recently lost its largest contract and replacement sources of income were yet to be identified.

Comments on financial disclosure

Appointed by the wife in divorce proceedings to comment on the financial disclosure of the husband in respect of his interests in three companies involved in the trading of commodities. The financial disclosure was very limited in respect of two of the companies whilst that in respect of the third supported a lower valuation than was being attributed by the husband.

Review funds extracted

Appointed by the wife to advise on the value of funds her husband had extracted from their companies over a period of three years. As a result of this review we were also able to present evidence indicating potentially undisclosed bank and credit card accounts.

Valuation of husband’s interest in haulage company

Appointed by the wife to raise questions on the single joint expert report commenting on the valuation of the husband's interest in a company providing road haulage services. Also instructed to prepare a draft valuation report for the purposes of making a Daniels and Walker application.

Shadow expert

Appointed to review and comment on a valuation of the husband's interest in a limited liability partnership prepared by husband's accountant in conjunction with the partnership agreement. Kate identified that the husband's accountant had significantly discounted the value of the husband's interest on the assumption that it could not be obtained now whereas the partnership agreement stated that it could.

Single joint expert valuation plus cross examination

Appointed as single joint expert in matrimonial proceedings to value a company operating delivery vehicles for the construction industry. The valuation was made more complex due to upcoming legislative changes in the industry and actions taken by the company in responding. Also instructed to comment on the liquidity of the company, the level of the husband’s sustainable remuneration and the most tax efficient means of extracting funds from the company without impacting its ability to continue to operate.

We spent time understanding the business and the market in which it operated in order to conclude on its budgeting acumen and the extent on which we could rely on forecasts. Numerous forecasts were prepared for the purposes of divorce and Kate was required to give evidence at the final hearing as to how she had used the forecasts and their impact on the valuation. The judge concluded that the valuation Kate had ascribed to the business was fair.

Single joint expert valuation – between Ofsted ratings

Appointed as single joint expert in matrimonial proceedings to value a company operating a children’s nursery owned jointly by the parties. The valuation was made more complex by the fact that the nursery had recently received a poor Ofsted report and was struggling to fill places as a result, despite the fact that a revised Ofsted report was received shortly thereafter. Also instructed to comment on the ways in which value could be realised either by the sale or transfer of shares and the resulting tax consequences.

Single joint expert valuation – loss of major customer

Acting as single joint expert to value a company providing facilities management services on the assumption that the husband remains with the company or was to have no further involvement in the company. The valuation was complicated by the fact that a customer representing almost 50% of the company’s turnover had given notice to terminate its contract the month after the valuation was completed. Also instructed to comment on the taxes payable on the disposal of the parties’ shares and the liquidity of the company, including the funds which could be extracted and the maintainable income of the husband. Unusually, Kate was required to give evidence at the final hearing. The matter settled shortly after her evidence was given.

Valuation for collaborative meeting

Attending a collaborative meeting with the husband and wife to explain the valuation of their shares in a company providing light installation for private and commercial properties. Advising on the ways in which the wife’s shareholding could be transferred to the husband in a tax efficient manner.

Valuation of a café business

Valuing the business of a café in circumstances where an alternative location for the business was not available. The claim was based in part on the premise that the café had not been developed to its full potential due to the fact that the compulsory purchase order had been known about for some years.

Assessment of claim for the closure of a branch

Assessing the merits of the claim from a charity shop under a compulsory purchaser order, advising on the additional information required in order to substantiate the claim and advising on the areas of negotiation and possible settlement figures. The shop acted as a drop off location for donations which were sold at other shops, making it difficult to determine the underlying profitability of the branch impacted by the compulsory purchase. In addition, the developer was conscious of the negative publicity of striking a hard bargain with a charity which meant that a different approach to advising on the negotiations was required.

Assessment of claim for transforming business

Assessing the merits of a claim made by a café owner under a compulsory purchaser order, identifying the additional information required in order to conclude on the amount of compensation payable and advising on the areas for negotiation and possible settlement figures. The assessment was made more complex by the fact that the claimant was attempting to take the opportunity arising from the relocation to transform their business from a café into a bar.

Quantification of compensation on termination of agency – interior decoration

Acting on behalf of the defendant to review a claim for compensation due on termination of a commercial agency made by an agent dealing in the interior decoration marketplace. We considered the assumptions made in respect of the claim, in particular in relation to the apportionment of costs between different agency agreements, to help the defendant understand the reasonable quantification of compensation due.

Quantification of compensation on termination of agency – academic study guides

Acting on behalf of the claimant to quantify the compensation due on termination of a commercial agency relationship relating to the sale of academic study guides. The calculations were complicated by the fact that the market for the products being sold had recently undergone a significant change due to the introduction of new examination structures in private schools.

Advising on the strengths and weaknesses of a £20 million warranty claim

Appointed to advise the seller of a hair and beauty product retailer in relation to warranty claims brought by both parties following the £20 million sale of the business. We assessed the strengths and weaknesses of both parties’ cases and the financial impact of these. The seller had a strong £3 million claim compared to the buyer’s largely unsubstantiated but significantly higher value claim. We assisted our instructing solicitors and counsel to draft a robust defence to the buyer’s warranty claim and the case ultimately settled on a basis favourable to our client before proceedings were issued.

Expert determination of earn out dispute

Appointed as independent expert to settle a dispute surrounding the earn out on the sale and purchase of a company involved in the supply of components to the automotive and industrial markets. We were required to interpret the SPA and apply the relevant accounting principles, a task that was made more difficult by the fact that the purchaser had amalgamated the recording of financial information of the target company with its existing business.

Expert determination of completion accounts dispute relating to deferral of costs

Appointed as expert to determine the completion accounts in the sale and purchase of a company which put on an annual exhibition for the medical industry. The sale and purchase took place days before the exhibition and we were instructed to conclude on the extent to which various costs should be deferred under the terms of the SPA.

Advisor to party in a completion accounts dispute

We acted as the expert advisor to a group of shareholders who had sold their nursing home company for c£80 million. The purchaser disputed the completion
accounts, proposing a number of adjustments which would have resulted in a £6 million reduction in net assets. We led the expert determination process for our
clients, liaising with the clients, their former accountant, auditors and legal advisors and gathering relevant information to enable us to draft the initial submission, a response to the purchaser’s initial submission and responses to the expert’s questions. The expert made a favourable determination for our client, who won over 94% of the amount in dispute.

Completion accounts

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.

Insurance claim

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.

Shareholder dispute

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.

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.

Assessing merits of a claim for mediation

Acting as the expert advisor 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.

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.

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.

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.

Loss due to diversion of profits

Acting as expert for two defendant shareholders in response to a claim that the core operations of a business had been diverted to a new company to the detriment of the claimant third shareholder. We reported on the actual losses incurred, restating the accounts prepared to unwind transactions and remove the impact of various actions taken by the parties. Our view was that the claim being made was of minimal value.

Unfair prejudice between siblings

Appointed by the claimant to quantify the amount of personal expenditure incurred by a shareholder/director in a number of property development companies owned equally by two brothers. We were required to analyse bank and credit cards statements spanning a period of ten years and to calculate the current value of the companies. The matter settled on the third day at court.

Valuation of companies and trademark for mediation in unfair prejudice

Appointed by the defendant, the majority shareholder, in a claim for unfair prejudice brought by the minority shareholder of three companies involved in hair dressing and producing branded hair products in the name of the majority shareholder. We were required to value both the businesses involved and a trademark held by one of the companies. Our work was used to inform the parties at a mediation which was ultimately successful in resolving the dispute.

Warranty claim

Appointed to advise the seller of a hair and beauty product retailer in relation to warranty claims brought by both parties following the £20 million sale of the business. The seller had a strong £3 million claim compared to the buyer’s largely unsubstantiated but significantly higher value claim. We assisted our instructing solicitors and counsel to draft a robust defence to the buyer’s warranty claim and the case ultimately settled on a basis favourable to our client before proceedings were issued.

Completion accounts dispute

Appointed as advisor to the sellers to assist with the preparation of submissions to the expert in a completion accounts dispute following the £70 million sale of a group of nursing homes. The sellers were initially expected to pay out £5 million under the terms of the sale and purchase agreement but, following submissions prepared by the RS Forensic team, the buyer ultimately paid £900k to the sellers.

Shareholder dispute

Valuation of a non-emergency ambulance services company and its subsidiary in the context of a claim for unfair prejudice by the father of the majority
shareholder. Our valuation was used in negotiations for the purchase or buy back of the petitioners' shares and we provided tax advice on the structure of the settlement agreement. The valuation was made more complex as part of the shareholding to be valued had no voting rights attached, therefore the value associated with the voting rights had to be separated from the value of capital rights attributed to shares.

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