The essential step is to reduce complex valuation issues into reports and presentations that can be appreciated by judges, arbitrators and jurors.
Damages valuation is not just about valuation. The first step is to consider the allegedly harmful action and the appropriate means of quantifying damages given the legal context before we actually undertake the valuation.
The allegedly harmful action
We start an engagement by analyzing the allegations and their economic impact on the assets or investment. For example:
- Was the investment lost entirely or partially impaired?
- Was the harm permanent or temporary?
- Were there other factors at the time or since that would have affected the investment’s value but are not attributable to the allegations?
- What would have happened in the absence of the allegations? That is, what is the “but-for” or counterfactual scenario?
In short, we start by considering the alleged harm to the claimant’s investments in light of the facts surrounding that investment, both related and unrelated to the specific allegations.
The legal context
Our second step is to consider the legal context. In line with instructions from appointing lawyers, the court or the arbitral panel, we ensure we have a full understanding of the legal remedies available. For example:
- Are we considering the loss in value of an investment as at a specific date in the past or the loss in profits over a period of time?
- What time perspective needs to be adopted? Are damages assessed as at the date of the allegations or at the date of the hearing?
- Who carries the burden or proof and how would that impact the valuation approach?
- Did the claimant have an obligation to mitigate any losses? Does mitigation need to be accounted for in a damages assessment or as a separate issue?
Without grounding in the legal context there is every risk that a valuation will fail to meet the applicable legal standards.
The valuation approach
We only then consider the valuation approach to be adopted.
Sometimes the valuation approaches are determined by legal standards or case history. At other times we rely on market standards as would be applied in a transaction — adopting sound, established approaches to valuation.
In either case we discuss the options with the client and legal team to ensure that we are fairly reflecting the facts of the case, meeting the necessary legal standards and offering economically sound assessments.
We act as advisors to the finders of fact: the judges, the arbitrators, or the jurors. The finders of fact will only accept and apply our advice if we successfully convey it.
The final essential step is, therefore, to reduce complex valuation issues into reports and presentations that can be appreciated by judges, arbitrators and jurors. Whilst we rely on sophisticated valuation techniques we ensure our ultimate explanation is as jargon-free and clear as possible.