Catherine Rawlin 15 Feb 2017 02:31pm

Diary of a forensic accountant: Part 6

In the last of a series on life as a forensic accountant, Catherine Rawlin examines how mediation can mitigate even the most grievous of disputes

Caption: Mediation is a fascinating and effective process, says Catherine Rawlin.

You will probably have learned by now, if you are an avid reader of this series, that the work we do is quite heavily focused on the quantification of the financial impact of an unusual event upon a business.

The quantification work we do can be part of a collaborative process, for example, between insurers or its advisers and the insured business. On the other hand, we may be acting for one side in a bitter dispute between two parties.

There are a number of routes by which such a dispute can be resolved, for example arbitration or litigation, but in almost all cases, before the case gets to the stage of a formal hearing, and often before it even gets to the stage of the formal process starting at all, the parties will seek to resolve their case through mediation. Recently, I went along to the mediation of a dispute and want to share with you what happened.

Mediation is where a neutral third party - a trained professional mediator - works with the parties to help them resolve their dispute. The mediation can be scheduled for a day or sometimes longer. The idea is not that the resolution is imposed on the parties, in the way a judgment is in litigation or an award in arbitration. Instead, the parties find their own resolution which is embodied in a formal agreement at the end of the mediation, marking the end of the dispute.

Read more from our diary of a forensic accountant series

Back to the matter in hand. A benefit of mediation is that it is entirely confidential so I cannot share too much of the background, but I can say that it involved an alleged breach of contract between a supplier and a customer where I was appointed as the expert forensic accountant for one of the parties. Before the mediation, there was a massive difference between the parties – both on the legal issues and the value of the losses, where there was a difference between my calculation and that of the other party’s expert of hundreds of thousands of pounds.

On the day in question, all the parties, their advisors and the mediator arrived at the offices of one of the solicitors. We had the use of three rooms – one for each of the two parties and one for the mediator.

Before the day, there was preparatory work done by the parties and the mediator. Predominately, this involved each party summarising their position in writing and the mediator reading these.

Once introductions and formalities had taken place between the mediator and the parties in their own rooms, an opening meeting for all parties and their advisers took place. Everyone introduced themselves and the parties verbally set out their case. This was also a chance for some controlled “venting” of pent up frustration by one party.

We then returned to our rooms and the mediator shuttled from room to room, talking to the parties, asking questions, listening closely to the answer and asking more questions. A key aspect of these meetings is that the parties can talk openly – knowing that the mediator will keep what is discussed confidential unless they have express permission to share anything with the other side. This continued for a while and the mediator then proposed that the expert forensic accountants from each side meet, with him present, to discuss and attempt to narrow the differences between them on the valuation of the claim. We met for an hour or so and managed to narrow down some of the areas of difference in the numbers.

Read more from our forensic accountancy series

At this point, my clients decided to make an offer to the other side. This was relayed by the mediator who returned with a counter-offer from the other side. This was not acceptable to my clients so they made a further offer. After a further small movement by the other side, this was agreed. This makes it sound far more straightforward than it actually was, and probably doesn’t give the impression of the hours of sitting in one’s room, waiting for the mediator to return from his meeting with the other side. The mediator had to work hard to make the parties look differently at their case and to see the benefits of reaching a settlement.

Once a verbal agreement was reached, this was then enshrined in a written agreement. We were allowed to go home at this stage - it was already 7pm - but it took another two hours for the parties to agree the wording of the agreement. This was an early finish by mediation standards though, sometimes they go on well into the night.

Mediation is a fascinating and effective process in my experience, leading to resolution of sometimes very hard fought disputes. At the end of the day, the parties can go back to their businesses and concentrate on them without the distraction and further cost of a legal dispute.

I know in our case, our side was certainly pleased that the case was settled and satisfied that the amount agreed was fair, having had the chance to hear all the arguments directly from the other side.

Catherine Rawlin is a partner in the London office of RGL Forensics with over 25 years’ experience of forensic accounting and dispute resolution.