Cost reduction. Increased speed. Greater likelihood of resolving a dispute. These are some of the potential benefits for disputing parties who agree to jointly retain an expert.

The bad news, however, is that unexpected delays and increased costs may be incurred by clients if key terms of the expert’s retainer are not clarified in advance.

Types of disputes where a joint retainer may be used include shareholder disputes, matrimonial disputes, disputes related to estate litigation or commercial disputes with a damage quantification component.

The following considerations can help both sides get the most from their chosen expert:

To find a mutually acceptable expert, one party typically submits a list of potential experts and the other selects an expert from this list. When preparing this list, consider whether there is an actual or perceived conflict with any of the experts.

Think ahead about how the report will be used. An expert report can be prepared on a 'without prejudice' basis to assist the parties in resolving the dispute, or it can be prepared for use in court. In situations when a report is prepared on a without prejudice basis and the dispute is not resolved, the parties can then retain their own experts to prepare a report for use in litigation. Binding reports should ensure they do not contravene any arbitration or other regulations.

Determine the level of assurance required by the report. There are three different types of business valuation reports, which provide increasing levels of assurance. As expected, the cost of these reports typically increases with the level of assurance. In deciding on the level of assurance required, the anticipated cost should be balanced with the purpose of the report as well as the preferences of the users.

Clarify shares or assets being valued. Clarify in advance the exact assets being valued. This may include a complete interest in a company, a partial interest and/or shareholder loans.

Establish the valuation date. The relevant valuation date can be before or after an important event. This date should be agreed on by both sides in advance as it can affect the value depending on whether an event occurred before or after the valuation date.

Save time by specifying legal or other valuation provisions. Specific legal or other provisions that affect how the assets or shares are to be valued can be specified. In a shareholder dispute, as an example, it may be appropriate to specify that no minority discount is applicable. If these terms cannot be agreed on, calculations can be prepared using several different scenarios such as with and without minority discounts.

Payment of fees: A process for the payment of fees should be established including who will be responsible for paying the fees, how the cost will be allocated between the parties as well as when the fees will be paid.

Be specific on financial statements and needs for adjustment. Clarify whether the financial statements are to be accepted for purposes of the valuation or whether adjustments are required. This would be applicable when the parties would like an issue treated differently in the valuation than in the financial statements. A good example of this is revenue recognition, which may need to be adjusted when preparing a valuation. One other common adjustment is management remuneration. Depending on the circumstances, the expert may be required to make a determination.

Specify communication policies: To ensure that everyone is satisfied with the process and in order for the expert to maintain an appearance of independence each party should be copied on correspondence with the valuator. It is also recommended that each party should have access to the information and documents sent to the valuator so they can deal with concerns regarding the information provided at the beginning of the process rather than after a report has been issued.

Provisions for draft reports: It is typical to prepare a draft report prior to the final report for commentary by both parties. Provisions should be included for the manner, as well as the timing, in which comments are to be forwarded. In my experience, it is preferable to have comments forwarded in writing in the interests of efficiency and to ensure there is a record of issues raised.

Once the above decisions are made, the valuation process can be clarified, including the timing of each step in the process, who will be responsible for providing the information, the number of meetings that will be held and who will attend. This will establish a timeline to complete the report. This step is usually performed in conjunction with the expert retained.

Provisions should also be made for the issuance of a final report. This will include clarification regarding the circumstances when the draft report will be updated based on comments received, or finalized without changes made.

While unanticipated issues often arise in the course of a mandate, if the parties can agree on important terms regarding the process at the beginning of the mandate, the likelihood and the impact of these unanticipated issues can be reduced. This increases the chance that a dispute will be resolved to the satisfaction of both parties in an efficient and cost-effective manner.