When parties separate and enter into negotiations or commence proceedings in Family Court for a property settlement, one of the first steps that is required to work out how their property is to be divided, is the identification and valuation of the parties’ assets.
Do I need a valuation of my properties?
This depends on whether you are able to agree with your former partner or spouse on the value of each of your assets. In many cases, parties are able to agree on the values of their assets with the result that 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.
What is the difference between an appraisal and a valuation?
An appraisal is typically given by a real estate agent as a guide to the value of properties. It is an estimate based on their sales knowledge. They are typically given for free and may not be relied upon legally as an accurate value of the property in question.
In contrast, 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. A valuation will also usually be charged for by the qualified valuer.
How does the valuer value the asset?
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 (as defined in Spencer v The Commonwealth of Australia (1907) 5 CLR 418).
The Family 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 commodity 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: see Hull and Hull (1983) FLC 91-360.
We need a valuation, what do I do now?
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 in dispute 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 partner or 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 the agreement between the parties 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 lawyers 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 Family Court purposes. Your lawyers will need to ensure that these rules are complied with in their written instructions to the Single Expert.
If you and your former spouse cannot agree on the appointment of a Single Expert, it may be necessary for you or your former spouse to make an application to the Court to appoint the Single Expert you have chosen as the Single Expert valuer.
Alternatively, if both you and your former spouse or partner 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 Family Court will decide what value the Court will accept 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.
If you would like further information in relation to this matter or other legal matters please contact our office on Freecall 1800 609 945 or email us now.
*This information serves as a general guide and does not constitute legal advice. It is based on our research and experience at the time of publication. Please consult our knowledgeable Legal Team for any specific inquiries or advice relevant to your circumstances, as the content may not have been updated subsequently.