Background

FRP was instructed as expert forensic accountant by a client who was defending a claim for loss of profits of £75 million relating to the alleged failure to supply medical scanning equipment. The claim covered a seven-year period and assumed that, but for the alleged failure to supply scanners, the claimant’s business would have grown by a factor of nearly 10 times.

Action

Our Forensic Services team prepared an expert report that analysed the loss of profits claim by reference to the actual financial performance of the counterparty, reviewing and commenting on the assumptions that were implicit in the claim and comparing projected profitability to that of other market participants. In doing so we worked closely with the client’s industry expert to understand whether the assumptions that had been made around growth were supportable by reference to market trends.

The expert report explained that many of the assumptions that had been made in the claim were not supported by accounting evidence, were inconsistent with market trends and assumed that competitors would have allowed the company to substantially expand its market share. Furthermore, we were able to show that a substantial proportion of the claim resulted from an inconsistent approach to the assessment of mitigation which was not justified by any supporting evidence or actions taken by the defendant.

Outcome

Forensic Services Partner, Henry Pocock testified in the High Court, being cross examined on FRP’s report. The Judgement substantially dismissed the loss of profits claim. In the Judgement Mr Justice Baker described FRP’s written and oral evidence as giving “honest, carefully considered, well reasoned and independent opinions.”