Valuation of Assets in Family Law
When parties separate and enter into negotiations or commence proceedings in Court for a property settlement, one of the first steps is to identify and value the assets.
In many cases, parties are able to agree on the values of their assets and a formal valuation is not required. This often happens with the value of real estate, particularly where parties exchange appraisals.
In more complex financial structures involving businesses or trusts, a valuation is often necessary.
A valuation is prepared by a qualified valuer who has specialised knowledge based on their training, study or relevant experience, to provide a valuation. A valuation is typically more reliable as to the value of a particular asset. There is a cost involved of having assets valued by a qualified valuer.
Unless they have received instructions to the contrary, the majority of valuers will value assets based on what is known as the “fair market value”. This is the price that a willing, but not anxious buyer, acting at arm’s length, with adequate information, would be prepared to pay to a willing, but not anxious seller, of the shares or assets.
The Court has held however, that there is no fixed rule as to what is the proper method of valuation.
The Court must approach a question of valuation on a realistic basis. The method of valuation depends not only on the type of property or asset concerned, but also on the purpose for which the goods (assets) were originally acquired and the need to realise on them in the shorter or longer term.
Typically, if you are represented, your lawyers will make enquiries and assist you to identify a number of expert valuers who may be able to prepare a valuation of the assets for you
Where possible, parties are encouraged under the Family Law Rules to agree on a Single Expert Valuer. The benefit of having a Single Expert Valuer is that the cost of their report or opinion is typically shared between you and your former spouse. In addition, the values provided by the Single Expert Valuer are accepted by the Court as evidence without either you or your former partner or spouse having to apply separately to the Court to accept the evidence.
Once the identity of the Single Expert Valuer is agreed upon, and both parties have resolved the issue of who pays what amount for the Single Expert Valuer’s costs, the next step is to agree on the “terms of reference” and “instructions” to the Single Expert Valuer.
Where the asset that is to be valued is a business or a trust, your lawyer will often work with your accountant to ensure that appropriate and relevant information is brought to the valuer’s attention.
There are also a number of relevant Family Law Rules which are required to be complied with when a valuation report is ordered for Court purposes. Your lawyer will need to ensure that these rules are complied with in their written instructions to the Single Expert Valuer. If you and your former spouse cannot agree on the appointment of a Single Expert Valuer, it may be necessary for you or your former spouse to make an application to the Court to appoint the Single Expert Valuer.
Alternatively, if both you and your former spouse have appointed separate experts, not only will you need to apply to the Court to accept the evidence given by your valuer, there is likely to be a need for a conference of those two experts to be organised.
At the conference, the valuers discuss their respective opinions, and see if they can come to an agreement on some or all of the issues forming their report. Ultimately, where there is no agreement as to the value of an asset, the Court will decide the value for the asset, based on the information provided by the expert or experts, the evidence given by the expert at Trial, and any other relevant evidence.
Download the full article here.