Total quality management and a ‘right first time’ attitude are well-established phenomena in the best run UK manufacturing companies but arguably less so in the legal profession. However, the new Civil Procedure Rules (CPR), introduced this year, impose far more of a requirement for lawyers to get it ‘right first time’ than was previously the case.
Traditionally, many lawyers have delayed the appointment of an accounting expert or adviser until late in the litigation process. The idea that this will cost less for the client is often the primary motivator. But even before the CPR, the hidden costs of acting in this way often outweighed any ‘savings’ in expert fees, particularly when previously unconsidered issues were thrown up at a late stage. But a key risk of the CPR is that these issues will be exposed at an early stage, associated costs will no longer be hidden and there will be potentially serious consequences for the success of the litigation.
So how can an expert accountant help? Until now, most discussion of expert accountants in the context of CPR has related to the appointment of a single joint expert, disclosure of an expert’s instructions and ensuring that the expert understands that his overriding duty is to the court. In other words, attention has focused on Part 35 of the rules relating to the instruction of experts for the court and not the use of an accountant as an adviser to the litigation; as important as Part 35 is to understand and incorporate in expert work. Those of us striving to make a real difference to our clients have broadened our attention to other areas of the CPR.
Advice on quantum
Pre-CPR, some litigators may have approached an accountant to advise on quantum as they drafted the statement of the claim. But many did not, on the basis that the pleadings could be altered at a later date and that the highest possible figure should be inserted as a short-term measure. Few litigators included any detail in pleadings addressing how quantum had been calculated, leaving it as something that would be covered by the expert’s report.
Under the new regime, such an approach will not be tolerated. The claimant must ensure that the quantum of the claim is closely approximated and well explained so that it is lodged on the right track and the defendant is able to respond to the claim. Penalties for not doing so include adverse cost awards or even the strike out of the claim.
A good litigation support accountant will ensure a good approximation of the quantum upfront, and that its basis is clearly explained. They will be able to alert the litigator at the outset to the issues that the defendant will
raise or alternative methodologies for calculating quantum.
Financial/commercial issues
Pre-CPR, litigators may not have focused on complex commercial or financial issues that turned the case until quite late on in the life of the claim. The emphasis may have been to deal with the procedural requirements and to ‘wait and see’ how the defendant responded. Defendants may have taken the same approach, considering the merits of the claim much later when they knew the plaintiff was ‘serious’ about pursuing the claim. Being familiar with how to account for goodwill arising on an acquisition under Financial Reporting Standard 10, for example, was a luxury that could be left until later.
In the new regime, claimants and defendants alike are expected to be conversant with all the main issues that affect the case, whether legal or accounting-related – and earlier on. Knowledge will be tested at case management conferences. Patchy understanding or misunderstandings can be penalised by the court via imposition of unsuitable deadlines or wasted cost orders.
A good litigation support accountant should be able to avoid such pitfalls by preparing you on the relevant technical or commercial issues. Lawyers should not be expected to re-invent the wheel by struggling with the complexities of a particular accounting standard on their own. This is ground already covered by accountants through their exam training, technical updates and private reading.
Settlement options
Settling on the steps of the court used to be common, often years after a claim was lodged, simply from minds being focused by the imminent trial. As a defendant, stalling tactics may have been used as a key ploy. Mediation may not have even been considered.
Courts now want to know what attempts have been made to dispense with the dispute. Parties may be ordered to adopt mediation as an option. Litigators may have to discuss unfamiliar technical or accounting issues central to the case or evaluate options at short notice.
A good litigation support accountant can be on hand either to attend mediation or settlement talks in person, or be at the end of a phone line. They can help the litigator calculate the options being discussed in a traditional ‘bean counter’ role, or suggest other commercial bargaining factors that can be thrown into the mediation melting-pot to ensure, not only a good, immediate solution for their clients, but also a continued trading relationship.
The CPR seeks to streamline procedures. This may mean changing the way things have been done for years, but the potential for lawyers to demonstrate even greater client understanding and value is not one to be missed.
Maggie Stilwell is a senior manager in Ernst & Young’s litigation support department.
