Why expert determination is a fitting alternative to litigation

by DAVID COOK and CHRIS GAHAGAN of DRC Forensics

[EXPERT DETERMINATION: it’s something that we handle quite frequently, and which we consider is a quick, efficient and costeffective means of resolving disputes and contentious situations.

Expert determination is a form of dispute resolution which is an alternative to litigation, usually for the resolution of a dispute between the parties by an expert. It can also be used in some situations where there is not an actual dispute, for example where a valuation of a private business is needed.

Expert determination is applicable to many situations – not just financial or accounting disputes – although that is the area we deal with as expert accountants. The parties agree the process with the expert, subject to any specific requirements of any contract or agreement in force. The split of the expert’s fees between the parties is normally decided by the expert.

The outcome is private to the parties. It is faster and cheaper than litigation and is binding on the parties.

The choice of expert is no different from the choice of expert in a litigation case. The expert needs to know their own subject as well as the rules of engagement. They also need to be independent, fair-minded, competent, experienced and able to apply a transparent process.

The best way to assure competency is to select an experienced expert from a recognised professional body. When considering appointment, don’t be afraid to ask the expert for their detailed CV and question their experience.

It is quite common for agreements or contracts to have a clause stating that, where there is a financial dispute, it shall be determined by an independent accountant to be agreed upon by the parties, or in default of agreement appointed by, for example, the president of the Institute of Chartered Accountants in England and Wales (ICAEW).

The ICAEW maintains a register of competent accountants which includes us. Applicants will, in the first place, be directed to the register with a view to agreeing on and selecting a firm that suits their requirements and has the expertise they are looking for.

Once appointment has been confirmed the expert will contact the parties, setting out their terms of business. That will normally state that all communications will be to all parties. It will not usually include a fee estimate or timetable until the expert has had full details of the dispute. In our case it would include confirmation that the determination will be conducted in accordance with the provisions of the relevant agreement or document and the ICAEW’s or the Academy of Experts’ rules for expert determination, to the extent that that is permitted by the agreement.

The parties will need to agree as much as possible and set out the areas of dispute, which needs to be as specific as possible to reduce the time and cost of the process. The more specific the dispute, the easier it is to progress the matter efficiently.

The expert will issue a procedure and timetable, which will usually allow both parties to make initial submissions, then comment on the other party’s submissions, and then respond to the expert’s points and make further submissions as the expert considers necessary. Matters will usually be conducted by email and other correspondence as required. In some cases it may be considered necessary to have part of the presentations at a meeting. The expert would use the meeting to put questions and obtain information, although it is rare for this to be necessary. It is normal practice for the determination to be issued once the expert’s fees have been paid. The expert decides how the cost should be split between the parties. It is also usual to have provision that, if one party does not pay, the other can pay the balance to have the determination released.

Normally, as per the ICAEW’s rules, the determination will not give reasons or details of the basis of the findings; its purpose is to provide an answer – it is not an expert opinion or report. It should be clear, concise and define the scope of the dispute and how it has been decided, and should not include unnecessary material.

Expert determination is more efficient than litigation: it is faster, cheaper, private and binding. It is enforceable. It does need the parties to fully embrace the procedure and co-operate and there is no recourse to the court unless there is manifest error or breach of procedures. q