Many in the business community wrongly assume that all accountants are business valuation experts. The UK courts are increasingly finding this assumption to be problematic, and they’re equally as willing to dismiss testimony when they sense a lack of direct relevant experience.
Francesca Muscutt, a partner at DAC Beachcroft, believes three UK decisions in the last year are essential for business valuation experts taking on new litigation engagements now. Her new article, “Accountancy Experts—The Importance of Objectivity, Relevant Expertise and Operating on a Level Playing Field,” suggests that the days of using accounting generalists in the UK courts may have ended. It emphasises the value of independent, specialised, experienced, and certified business valuation experts in litigation.
“There has been a spate of cases where expert witnesses have received some harsh judicial criticism,” Muscutt concludes.
The idea that experts must have relevant expertise is not new to anyone involved in business dispute resolution, but the court’s disregard for accountancy evidence in De Sena v Notaro [2020] EWHC 1031 (reported previously by BVWire—UK) was uniquely clear, Muscutt says. In that decision, the court held:
[E]xpertise is acquired by doing the thing in question, usually over many years, and merely being an accountant (or anything else) for a long time does not mean that you become an expert in everything that accountants (or whatever it may be) commonly do.
Even business valuation specialists may find themselves in serious trouble if they run afoul of CPR Part 35, PD 35 and the related 2014 Guidance for the Instruction of Experts in Civil Claims (2014 Guidance). These provisions “ensure all experts of like disciplines have access to the same material,” Muscutt says—pointing to an even more recent case of Dana UK Axle Ltd v Freudenberg FST [2021] EWHC 1413. The judge in this decision found serious breaches because the defendant exchanged information directly with the expert, circumventing both the legal team and the process for disclosing information obtained in conversations and site visits.
The result was harsh. “These breaches meant the parties’ experts were not operating on the same level playing field and the Defendant’s evidence was excluded in its entirety,” Muscutt says. “Direct contact between experts and client, without solicitor involvement, should always be avoided.”
A third case, Beattie Passive Norse v Canham Consulting Limited [2021] EWHC 1116, refers to a “worrying trend” noted by the courts. A business valuation expert’s “independent, objective opinions will be tested while giving oral testimony at trial and their evidence may be disregarded if they have insufficient expertise, or if they are perceived as simply a mouthpiece for those instructing them,” Muscutt concludes.