Litigation awards. Making the quantum leap forward
24 September 1996
Roger Pearson looks at arguments in favour of settling quantum before liability. Roger Pearson is a freelance journalist.
In many legal circles the idea of homing in on quantum before liability has been considered would be regarded as heresy. Yet while such a strategy might seem to put the cart before the horse, it can pay dividends.
Two leading accountancy experts argue that there is a case for quantum to be given far earlier consideration than it is in many actions. Robert Hughes and Nigel Macdonald, partners in City accountants Ernst & Young and experienced expert witnesses, say they are in no doubt that although number crunching is a turn-off for lawyers, attention paid to quantum at the outset, rather than as the final act of a case, is cost effective.
"Examination of quantum will not provide a magic formula for settlement in all cases, but it can lead to settlement in some, and there is a strong argument for giving it careful thought at the outset," Macdonald says.
Hughes cites a recent case in which he was called in by the defendants at the last minute, not to act as an expert, but to "run his eyes" over figures being put forward in what was viewed as a £5 million claim. "It quickly became obvious that one casting error, a straightforward adding-up mistake, had added £500,000 to the figures being claimed," says Hughes.
"We spent two to three weeks after that going through the claim in detail and decided that it was not worth anything like £5 million, but something around £100,000. The upshot of the investigation into quantum was that just before the case was scheduled to be heard, it settled at the doors of the court for £100,000."
Hughes and Macdonald say the tragedy of this story is that had they been called in earlier, and quantum properly investigated, they would have spotted the errors of the claim and the whole matter could have been settled far earlier and at far less cost to the parties.
Hughes cites another case which he says "cried out" for an early probe into the issues of quantum. He says when he suggested quantum should be considered as a preliminary issue counsel and solicitors rounded on him and told him it was something that was not done.
"The problem is that lawyers regard the logical approach to be one of deciding liability and then turning to quantum after that has been settled, and it is a logic that seems to be unshakeable in the legal mind," says Macdonald.
"But what is the point in going through hugely expensive hoops to decide liability in a case if it then turns out that the value of the claim pales into insignificance when set against the expense of the cost of the fight over liability?"
Macdonald says the risk and reward ratio should be investigated in more cases than it is. Litigants should devote some time and effort, at an early stage, into probing the true value of a claim.
But it is not just the lawyers who are at fault when it comes to the quantum calculation, say Macdonald and Hughes. They believe members of their profession can also be open to criticism. They often see claims that are obviously inflated and say that a good deal of responsibility for this has to lie with professional advisers.
"I don't know why they do it - perhaps it is because accountants are not used to litigation, but you do get them trying to be supportive of a client and in doing so helping their client to come up with a large figure to put on a claim," says Macdonald. "The fact of the matter is that the adviser who does this, though trying to help, can be doing the reverse, quite apart from the fact that he fails in his duty to the court.
"An inflated claim put forward by professionals attempting to be sympathetic to a client can prove counter-productive and heap up costs for a case that, at the end, is not going to realise anything like the sum the client has been advised it is worth.
"Chartered accountants have a duty to be objective and I feel it is important, in the interests of their clients, that they do not fall into the trap of trying to act as proponents of an unrealistic position in the mistaken belief that litigation is a game of bluff."
Hughes says that far from frightening off defendants, an inflated claim can be less intimidating than a realistic one. "The defendant is likely to realise that the inflated claim will be laughed out of court, but he will take the realistic one far more seriously," he adds.
Hughes and Macdonald believe the time has come when the legal and accountancy professions need to take stock of their joint strategies in both these areas.
"In a minority of cases, where quantum is easy to determine but the underlying issue in the case requires lengthy evidence, I would like courts to consider the idea of trying quantum first," Macdonald says.
"This would be a cost-effective approach which judges might consider in their new, post-Woolf role, as case managers. Once quantum has been determined the prospect for settlement is greatly increased.
"It must be in the interests of every solicitor and accountant expert that their clients can see that commercial common sense has been applied in the way the case has been put together."