Fitton & Co Ltd v Dushyant Kohli

Permission for expert evidence is appropriate where there is at least a prima facie evidential basis for the issue and the court would otherwise have difficulty assessing it. The court need not determine the merits of the underlying contractual claim when deciding such an application. Where a party maintains that expert evidence is unnecessary, it may be inappropriate to require the parties to use a single joint expert. The court may instead permit each party to instruct its own expert and direct sequential service of the evidence.

The claimant brought a claim alleging breach of a share purchase agreement. It alleged that the defendant, the seller, had under-recorded VAT liabilities of Phoenix Motorcycle Manufacturing Company Ltd, thereby diminishing the value of the acquired asset and engaging an indemnity.

The claimant applied for appointment of a single joint expert, following earlier permission for expert evidence. The defendant applied to set aside that permission. The central issue was whether expert evidence was necessary to assess the alleged VAT shortfall and any resulting liability.

1. Applications. The defendant’s application to set aside permission for expert evidence was refused. The claimant’s application was upheld in part, but the existing direction for a single jointly instructed expert was revoked.
2. Need for expert evidence. The alleged VAT shortfall had at least a prima facie evidential basis. Without expert evidence, it would be difficult or impossible for the court to assess the precise extent of any under-recording. The applications were not the appropriate forum for determining whether the share purchase agreement had been breached; that issue remained for trial.
3. HMRC demand and indemnity. The absence of a demand from HMRC was of limited, if any, relevance. If VAT had been under-recorded, the taxpayer would be expected to correct the return and pay the tax. In any event, the under-recording would tend to diminish the value of the asset acquired. The existence of an indemnity did not remove the need for accurate figures, particularly since the defendant’s pleaded position denied liability to indemnify.
4. Form of expert evidence. It was wrong in principle to direct reliance on a jointly instructed expert where the defendant’s case was that expert evidence was unnecessary. Each party was therefore permitted to instruct its own expert if so advised. The claimant was to provide its expert evidence first, after which the defendant could ask questions and obtain his own expert evidence.
5. The existing trial date could not be maintained and a new trial date was required.