Importance of quantifying the loss when making a claim in a commercial/contractual dispute
When things go wrong in business and a commercial or contractual dispute arises, then you make a claim for losses against the other party. Often these claims are not supported by even the simplest calculations and so will be rejected on the basis of the quantum of the claim even if you are successful in proving liability lies with the other party.
Therefore, it is vital that you engage Williamson & Croft’s expert forensic accountants at the start of the claims process to assist you in identifying and quantifying all the heads of loss suffered by you or your client.
In one recent case we were appointed by a client and their solicitor to quantify the losses after their initial approach to a supplier on a problematic contract had been rebuffed due to the claim of £60,000 not being supported by any substantive evidence.
Our client’s business is the hiring of high value plant to public and private sector bodies. They had contracted the supplier to conduct repairs to one item of plant and had originally been informed that this would take 3 months. Delays to the repairs meant that the plant was eventually only back in usable condition 12 months after the originally scheduled delivery date for the repairs.
Loss of profits
We were initially engaged to quantify the loss of profit to the business of not having the relevant asset available for rental for the period of delay.
The MD of the business had originally estimated this based on the income which the asset may have generated if it had been available for let from a “gut feel” and his knowledge of the business. In doing so he had believed that 50% of the income as the asset was only able to be used as part of a pair with another asset owned by the business. However, the unavailability of the plant being repaired actually meant that 100% of the income from potential hire of the pair of assets was consequently lost and so we were able to argue that the whole of this income formed part of the loss of profits and so the actual loss calculated was higher than the client anticipated.
Other heads of loss identified during our work
In reviewing the details of the case and the documentation for the contract for the repair we were able to identify a number of other losses suffered by the client as a direct consequence of the delay such as:
- Increased costs of over £10,000 due to an expired quote from another supplier who was to fit the repaired part of the plant onto the whole asset ready for use.
- Damage to another plant asset which was loaned to the supplier to backwards engineer a component and which they subsequently stripped for spare parts and;
- Staff and management time dealing with the delays to the contract, travelling to meetings and to view the asset on site, etc.
Our client’s solicitor responded to the supplier with a copy of our Report and highlighted the quantification and key elements of the claim which was now supported by calculations and detailed evidence.
The client was able to settle with the supplier before going to Court and for an amount higher than the originally rejected claim, on the basis of the additional heads of loss identified and the detailed Report prepared to support the loss of profits to the business in not having a key asset available for such a long period.
Looking for expert accountancy advice for your business? Wondering how Williamson & Croft’s forensic accountants can help you? With a team of industry professionals backed by exceptional reviews, you can’t go wrong. Please contact us today to find out more.