V is for valuation – A-Z of Family Law

One of the fundamental tasks of a property settlement is to figure out what the assets, liabilities and superannuation of a relationship are, and what they are worth. Whilst some things are easy to value, like money in the bank, publicly traded shareholdings, or a mortgage, other things are much more difficult, such as private shareholdings or, the most commonly disputed asset, the family home.

The issue of value may well be sought by each party seeking a sale of the relevant asset and the net proceeds subsequently being dealt with. However, where one party wishes to retain an asset, parties will try their utmost to reach a single, agreed value for the purpose of exchanging offers or litigating at trial. Typically, these valuations will involve Chapter 7 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

The Division Two case of Cowie & Neylan [2023] FedCFamC2F 686, heard by Judge Taglieri, was a novel situation wherein the parties had agreed upon all aspects of the property settlement, including the overall percentage division and who was keeping which assets. The only remaining area of dispute was the value of the family home that the husband would be retaining, and therefore the sum that he would need to pay out the wife.

A single expert valuation had been obtained in May 2022 for the family home. The husband had then solely instructed the same expert for an updated valuation in May 2023. The wife engaged a separate valuer in May 2023. The valuations were approximately $500,000 apart.

The proceedings occurred as a ‘discrete issue’ hearing, with Judge Taglieri requested to hear the evidence and thereafter make a declaration as to the value of the family home.

A thorough review of the basis for each valuation was made. Judge Taglieri considered the strengths and weaknesses of each valuation and the respective findings and conclusions.

Assistance was found in the Full Court decision of Phillips & Phillips [2002] FamCA 350, wherein considerations were outlined for circumstances where a property’s value is disputed. These included:

· That a common-sense approach should be utilised, though there are no fixed rules; the proper methodology will depend upon the relevant facts.

· Reasons should be provided for preferring one valuer over another.

· The average of two valuations is not an appropriate default position, notwithstanding that a Court may reach this conclusion.

· If issues remain, the Court may ultimately need to make orders for sale.

Ultimately, Judge Taglieri made a declaration that the family home was worth $1.9 million, being around $100,000 shy of the average of the valuations.

This set of circumstances is certainly rare to see in a property settlement, but it provides an interesting insight into how the Court approaches disputed valuations and how parties may confine the issues when approaching a Final Hearing, rather than remaining at odds.

Some take-aways to consider are:

1. Where at all possible, utilise a single expert valuation under Chapter 7 of the Family Law Rules.

2. Consider the process for obtaining an adversarial valuation if need be, ensure that the evidence will be admissible, and understand the judicial process should a declaration need to be sought in relation to a disputed value.

3. Whether the issues in dispute can be confined and agreed upon prior to a Final Hearing such that costs and the risks of judicial discretion are minimised