Transaction disputes: Party expert, single joint expert or expert determiner?

The heightened transaction dispute climate

Neil Rudd, Senior Manager, Forensic Services

In the lead up to the UK Government’s autumn Budget announcement on 30 October 2024, the mergers and acquisitions (M&A) sector went into overdrive, with buyers and sellers of companies anxious to get deals completed ahead of a widely predicted hike in capital gains tax (CGT). This forecasted CGT rate increase did indeed transpire, with 4% to 8% uplifts introduced depending on the circumstances, meaning that those who managed to complete deals by 30 October 2024, were relieved that they were able to crystallise their tax liabilities at the lower CGT rates applicable prior to this date.

It is likely that many M&A transactions were hurried during September and October 2024, given the drive to meet this fixed backstop date, and Crowe’s article examines the potential problems caused by proceeding at an accelerated pace. In summary, we are predicting a significant increase in completion account, earn-out account, warranty and misrepresentation disputes, given the volume of deals that have possibly taken place with less input from professional advisors than is normally necessary.

In this article, we examine the different ways in which a forensic accounting expert can become involved in a transaction dispute, including an assessment of the pros and cons of each, from the perspective of claimants and defendants.

Party expert witness in a litigated commercial dispute

Party expert witness, acting for either buyer or seller, is probably the most traditional role of a forensic accounting expert in the context of transaction disputes. This role is typically required where there is a warranty or misrepresentation claim, whereby an aspect of the claim requires technical accounting opinions, investigations or an assessment of the quantum of loss.

The forensic accounting expert will provide an impartial expert witness report, in accordance with Part 35 of the Civil Procedural Rules, setting out their opinion as to the relevant accounting matters.

Pros	Cons
The claimant / defendant has complete control over who they appoint as expert. The expert will be able to advise as to the strengths and weaknesses of the accounting aspects of the claim under legal privilege. The expert might identify helpful accounting evidence to use, that may not have previously been considered.	Likely a longer process, as both parties usually submit expert evidence, not always simultaneously, often followed by an experts’ joint statement. Likely more expensive, as the experts costs are all borne by their instructing party. One can never be certain which side’s expert evidence the Court will prefer.

Single joint expert in a litigated commercial dispute

Whilst not particularly widely used in transaction disputes, on occasions, the parties may agree that a single joint expert be appointed, responding to instructions agreed jointly by the parties. A single joint expert acts for both parties, with everyone involved having full visibility of all communications, information exchanges and reports produced.

Such situations where this approach may be employed, are where an accounting issue does not necessarily stem from a disagreement between the parties, but instead where there are problems requiring technical accounting knowledge, in order to progress a claim. A typical example may be investigating and resolving accounting irregularities.

Pros	Cons
Likely cheaper as the costs of one expert are shared between the parties. Likely quicker, as the expert normally only produces one report, with each side given the opportunity to ask questions. Usually provides more clarity of a likely outcome, as there is only one expert’s opinion for the Court to consider.	The claimant / defendant has less control over who is appointed as expert, as the parties will have to reach a compromise. The parties can sometimes find it difficult to agree the expert’s instructions. The expert will not be able to advise as to the strengths and weaknesses of the accounting evidence under legal privilege, to either party.

Expert determination under provisions within a Share Purchase Agreement

Expert determinations are common in transaction disputes, particularly when it comes to agreeing a set of completion or earn-out accounts, as share purchase agreements will often stipulate that this is the required method of dispute resolution. It is also a useful mechanism to utilise, when the area in dispute relates wholly to accountancy matters.

As with a single joint expert, one expert is jointly appointed by the parties (this appointment can be undertaken independently by the Institute of Chartered Accountants in England and Wales if the parties cannot agree), with both parties being given the opportunity to present their position and submit evidence to the appointed expert determiner. The expert considers the evidence presented to them and makes their determination, which is final and binding to the parties, absent fraud or manifest error.

Pros	Cons
Likely cheaper, as the costs of one expert are shared between the parties and there are usually less legal costs. Likely the quickest, as the share purchase agreement or expert determiner dictates the timetable. Provides absolute clarity on the outcome, as the expert determination is final and binding.	The claimant / defendant may have no control over the expert selected, if they are unable to agree between themselves. There is no appeal process. Additional costs may be incurred if a party needs the assistance of a shadow expert to assist preparing their submissions to the expert determiner.

How can Crowe help?

Forensic accounting experts can be utilised in a variety of ways by claimants and defendants in M&A transaction disputes. Choosing either party appointed expert, single joint expert or expert determiner comes with differing benefits and drawbacks, usually relating to cost, speed and clarity of outcome. The ‘best’ option will vary from dispute to dispute, but from the perspective of the forensic accounting expert, they should be equally adept performing any of the roles required.

For more information, contact Martin Chapman or your usual Crowe contact.

This article was first published in the Expert Witness Journal February 2025.