Introduction to Forensic Services

Forensic accountants can assist in a variety of situations and areas, including fraud investigations, cybercrime protection and financial crime advice and support.

The core of forensic accounting services is to provide expert assistance to resolve disputes. We help our clients find out what happened, who was involved, and to recover financial losses. Instructions are received from law firms, companies and individuals to assist with forensic accounting services in relation to disputes and investigations of varying sizes.

In addition, forensic accountants can prepare independent expert reports to be used in court (be that in Civil, Criminal or family proceedings) and act as an expert witness, applying our familiarity with the requirements of the relevant legal procedural rules in the UK and experience in giving evidence in court where required.

We are able to present technical evidence clearly and in plain non-jargon language the Court can understand, explore evidence from a number of different angles, and we have experience of working on a variety of matters, ranging from much smaller disputes through to larger, complex commercial disputes where quantum often runs into multi-million pounds, euros or dollars.

Some of the more common types of work undertaken includes matrimonial cases, shareholder disputes and loss of profit work. By understanding the difficulties in contentious proceedings, forensic accountants can guide their clients in a tailored and empathetic way to achieve their objectives.

Cases instructions vary considerably in size and below we set out the background to two case matters, one relatively small and the other a multi-million claim that we were instructed to defend.

Loss of profit

A recent small case we were instructed on involved a claim against an architect in relation to building work undertaken on student university accommodation. The building work was reportedly subject to defects in the form of water staining and loose stones. Subsequent investigation revealed the need to take down the façade and rebuild the stonework.

The Claimant claimed the cost of rectifying the defective stonework façade and a loss of rental income because of the disruption caused by the remedial works, and was looking to be remunerated for loss in income while additional building work was taking place and the accommodation could not be used. This proved contentious as the building’s architect believed the corrective building work was unforeseeable and not part of their responsibilities to prevent.

On behalf of the Defendant, we reported on loss of profits for the provider of the student accommodation, taking an independent approach based on the factual and accounting information available – this contrasts with the role of our instructing solicitors whose main aim is to get best result they can for their client in their role as advocates.

Our work entailed assessing each the claim in detail, challenging assumptions made and then considering the arguments put forward by the Claimant. Initially, we faced challenges in obtaining supporting evidence for our investigation but, to mitigate the effect of this, our draft report included a number of caveats.

We were then able to assist our client with providing a substantive response to the expert instructed by the Claimant, including a challenge on the period lost income was suffered, and the nature of costs that were saved during the period of building closure. After expert reports were filed by both sides, the case proceeded to mediation to try and reach a resolution to the dispute, and we made ourselves available to assist with any accounting queries - mediation went well and the case was settled.

Mediation is a flexible and confidential process to settle a dispute between two or more people, businesses, or groups of organisations. It can be used to resolve many different types of civil dispute and the Courts actively encourage cases to explore mediation as an option before expensive litigation is pursued.

Professional negligence

For a recent large, complex case we received instructions to defend a professional negligence claim against a law firm. That firm were acting for a company who provided accommodation for asylum seekers, predominantly in the North East of England. The claim was for damages due to a contract clause, drafted by the law firm, which was said to be incoherent, ambiguous, unclear and inadequate, resulting in significant financial losses for the Claimant.

As a result, the Claimant said they were liable for the expense of hostile litigation and lost many opportunities within the market, therefore impacting its profits. We faced huge challenges in reviewing the mountain of documents made in disclosure but were able to methodically review all relevant documents, bringing them into our calculations.

We were able to assist our client with determining quantum, reviewing loss calculations prepared by the Claimant’s accounting expert, under four separate Heads of Claim. Differing approaches were taken by the Claimant and Defendant for each of these Heads, with disagreements on the number of service users housed in accommodation during the period of claim. Extensive and complex calculations were required to determine the most accurate number of impacted service users.

There was frequent communication between us, our solicitors, the barrister and the insurers involved in the case (who would be picking up any financial fallout!) to facilitate a smooth litigation process, and to ensure our report had the best chance of gaining the client a favourable outcome in negotiations. Importantly however, our opinion was our own and not impacted by the wishes of the Defendant’s legal team who clearly would have preferred little to no claim at all.

Given the strength of our report, the Defendant’s legal team were able to negotiate a very favourable settlement for the insurers, resulting in a very satisfactory outcome, with a claim in excess of £100 million being reduced to less than £10 million.

We have advised in many professional negligence cases. In some cases we are simply asked to provide quantum advice, as with other commercial litigation disputes. On other occasions, we work in conjunction with other disciplines within our firm, to provide focused advice, which can encompass the duty of care of the relevant professionals as well as quantum matters.

How Crowe can help

The Crowe forensic team work on a significant number of forensic cases, of varying sizes; we are always happy to have an initial no obligation discussion on any matters where we can add value and advice. For more information, please contact Martin Chapman.

This article was first published in the Expert Witness Journal, February 2024.