Knowledge

Documentation and Litigation

Rehana MoosaBy Rehana Moosa

Published in the September 2012 edition of Corporate Risk Canada Magazine

Litigation can be a scary and intimidating process. Preparation is key and includes ensuring that the documentation you need to prove your case is ready at hand.

Below are some common forms of litigation and documentation that should be retained and provided to your lawyer, opposing counsel, and experts that may be involved.

Lost Profits

A business can suffer lost profits due to the loss of a key piece of equipment, a fire or flood, a business dispute, or the negligence of a third party.

  • Monthly sales reports. Reviewing monthly sales will help third parties understand your business including who your customers are, any trends / seasonality, and most importantly, how your business earns revenues.
  • Annual budgets / business plans. Your business plan can provide a point of comparison to show the impact of the loss, based on how you expected the business to perform before the loss occurred.
  • Evidence of cancelled customer contracts, customer complaints, or lost orders. Keep all emails and correspondence from your customers that document lost orders and sales. If your customers cancel over the phone, take notes and document their reasons for revoking the order.
  • Extra expenses incurred to keep the business in operation. Examples of extra expenses include setting up a temporary location while repairs are being made, paying your employees overtime to make up for lost production, and hiring subcontractors to fill orders. Keep copies of all invoices and receipts related to these expenses.

Breach of Contract

In the case of breach, the documentation you need will depend on the type of contract, as well as its specific terms and the nature of the breach. In general, you will need:

  • Original contract, including any revisions and amendments. The contract sets the guidelines as to what goods / services will be provided, the responsibilities of each party, and payments to be made. The contract may also specify how a breach is to be compensated (liquidated damages clause).
  • Invoices issued and payments made under the contract. This will show how the supplier of the contract earned its revenues and the goods / services provided in exchange. You should also include documentation to support the amounts being billed, such as employee timesheets, subcontractor invoices, and receipts for supplies purchased.
  • Correspondence between the parties of the contract. Keep track of all emails, phone calls and letters related to the contract. This can provide a timeline showing when problems arose, and how and when the problems were addressed. It can also provide a background of the case and indicate what claim / defense will be presented by the opposing side.

Product Liability

In product liability cases, your claim can consist of the cost of manufacturing the product, shipping costs (i.e. sending defective products to the manufacturer or replacement products to customers), and disposal costs.

  • Production records for the recalled product. These records should include a summary of all production costs incurred to manufacture the defective products.
  • Detailed timeline showing the sequence of events. Your timeline should document significant events from the start of the business relationship to the present date. This can help you track when problems first arose, and which costs should be included in your claim.
  • Historical replacement rates and / or customer returns of the defective product. If your business experienced a low rate of customer returns in the past, these rates can help determine the extent to which returns of the defective product were over and above what would normally be expected.
  • Contract between the purchaser / user of the defective product and the supplier / manufacturer. The contract will provide the terms and conditions regarding the specifications of the product being sold, and the required standard of quality.

While the litigation process can be complex and uncertain, using these guidelines can help you be prepared and strengthen your case.

Contact us to learn more.   647-426-0146  |  rehana@rmforensics.ca

Communications are intended for informational purposes only and do not constitute legal advice or an opinion on any issue. For permission to republish this content, please contact Rehana Moosa Forensic Accounting Professional Corporation.

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