Mediation and Early Settlement of Disputes – The Expert’s Role

Introduction

The early settlement of disputes and mediation was a recurring topic throughout London International Disputes Week (LIDW). Featured on several panel discussions and raised in Q&A,¹ this topic brought into sharp focus the role of quantum experts in cases that do not proceed to a full hearing. A common theme was that experts should be instructed early in proceedings. But is that the case in reality? 

Whether a dispute can be mediated or settled early will depend on its particular circumstances and it is safe to say that views on the efficacy of mediation and other forms of early settlement discussion are mixed. And yet, no rational business enters a dispute hoping for a lengthy and expensive route to an outcome. 

In the UK, mediation has recently been made compulsory for many small claims of less than £10,000.² Could a trend towards mediation in larger claims follow? If so, what does this mean for the work of quantum experts?

Ultimately, an expert’s role is to assist the court (or tribunal) by providing robust, independent evidence through written reports and/or oral testimony. However, the quantum expert can play an important role throughout the conduct of the dispute, especially if early settlement before a full hearing is possible. 

When Is an Expert Typically Engaged?

A quantum expert may be engaged:

• within a few weeks of a hearing, at the request of the parties, the Court or Tribunal, often in situations where quantum has not been addressed while liability has been the focus, or where issues of liability and quantum have been separated in a bifurcated hearing. The expert will be instructed to prepare a report and potentially provide oral testimony under cross-examination;
• at the outset of a matter, when a claim is being considered or a client has received notification of a claim (in the form of a letter before action or a request for arbitration); or 
• at any point in time in between.  

Expert input can be valuable: 

• to help identify the financial and accounting issues in dispute and assist with the drafting of orders for expert evidence to be sought from the Court or Tribunal;
• to provide an assessment of quantum in contemplation of making or accepting a Part 36 offer;
• during disclosure, to help identify the documents needed to address the expert issues; and
• during the gathering of fact witness evidence, to assist in preparing questions to put to key witnesses.

An Expert Is Not Just for Oral Testimony!

There are a number of ways in which an independent expert can assist in a dispute:

1. Providing early input into quantum, particularly in instances where the damages calculations involve complex financial models and assumptions. An independent quantum expert can provide an objective view on the calculation of losses, and prepare different permutations of loss based on the factual and/or legal issues in dispute. Getting to grips with quantum early:
   1. can inform a client’s appetite to bring a claim;
   2. enables the legal team to provide clear advice to the client on the parameters of any settlement discussions; and
   3. may inform legal strategy, by demonstrating the impact of the issues in dispute on quantum and the relative size of different heads of loss. 
       
2. Providing an independent view on other accounting or valuation issues at stake. For example, in warranty and indemnity (W&I) claims, an independent view at the outset on whether a warranty breach leads to a financial loss can be very impactful. 
    
3. Preparing a report for mediation. An expert can prepare a report that is disclosable without prejudice or open basis in mediation proceedings, adding credence to the client’s position.
    
4. Evaluating a settlement analysis. To ensure a settlement is based on complete information, is robust, stands up to scrutiny, and cannot be subsequently challenged by one of the parties claiming enticement into a settlement based on fraud or misrepresentation. This was the subject of an excellent panel during LIDW chaired by Alexa Day at Travers Smith in discussion with Ben Valentin KC and Paul Sinclair KC of Fountain Court Chambers. 

If an Expert Is Engaged Early, Are They Still Independent?

A key concern in engaging an expert early in the dispute resolution process is whether that expert remains independent if the matter proceeds to a hearing.³ This is something the expert and all parties involved should be mindful of when appointing an expert and agreeing to the scope of work. 

• If the expert is instructed early but to act as an independent expert later in the proceedings, the expert must conduct all of their work in accordance with civil procedure rule (CPR) 35, remaining objective and independent, with the overriding duty to the Court or Tribunal underpinning all of their work.
• Instructions provided to an expert in contemplation of litigation, prior to proceedings being issued, will typically be deemed privileged where the expert has been subsequently appointed for the purposes of the court proceedings.⁴ Instructions that form the basis of the Expert Report are not privileged and the Expert Report must state the substance of all material instructions, whether written or oral, on the basis of which the report was written.⁵
• Information and documents provided to an expert at any stage of the proceedings, whether helpful or unhelpful to their instructing party’s case must be considered and incorporated into any assessments of loss to the extent relevant. Information cannot be unseen.  Knowledge cannot be ignored if it is relevant and has an impact.
• An expert must apply the same rigour and scepticism to their work in preparing an early assessment of quantum or a report for mediation as they would for a CPR part 35 compliant expert report. It is in no one’s interest for the expert to provide an opinion that they would not ultimately be able to stand behind if the matter progresses.
• Experts can have an important role in mediation and settlement discussions depending on when during the proceedings a mediation is proposed. Experts can provide the most valuable input to a mediation process once expert reports on quantum and damages have been exchanged, to enable an open dialogue between the parties, their legal teams, and the experts on the key issues affecting quantum, facilitating constructive discussions and an assessment by the legal teams and their clients of the risk of pursing different heads of claim.

Conclusion

A quantum expert can add value throughout the dispute resolution process not just at a hearing; the early engagement of experts for an independent, objective assessment of loss can influence the case strategy and facilitate settlement discussions or mediation at an early stage. An expert’s analysis of different permutations of loss can assist the legal team to provide clear advice to their clients on the parameters of settlement discussions, and/or inform legal strategy. In all cases, the expert must remain conscious of their overriding duties and responsibilities to the court or tribunal, and carry out work that is independent and does not stray outside the parameters of their obligations. Whilst this can be avoided by following the steps set out above, if there are any concerns that this is the case, a client may opt to appoint a second independent expert with the original expert retained in an advisory capacity. 
 

^{[1] With particular thanks to the following law firms and panellists at LIDW24: @Dentons, "Settlement of disputes: are current approaches fit for purpose?";  Farrer, "Shareholder disputes - contentious exits and the international dimension"; Freshfields "Expert Advisor or Expert Witness: Benefits, Challenges & Top Tips"; RPC:  “Around the world in 90 Minutes: a comparative view of shareholder and joint venture disputes through the English lens” and Travers Smith LLP:  “Fraud: can it ever really be settled?”}

^{[2] Small claims mediation | The Law Society}

^{[3] Experts have an overriding duty to the Court, which overrides any obligation to the person from whom experts have received instructions or by whom they are paid (CPR Part 35, Rule 35.3).  Similarly in International Arbitration, an expert must provide a statement of his or her independence from the parties (IBA Rules, Article 5 and Article 6).} 

^{[4]Expert witnesses: The independence factor | Fieldfisher} 

^{[5] CPR Part 35, Rule 35.10 (3) and (4)}

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