Expert Witnesses in Financial Proceedings

60-Second Summary:

In order to reach an agreement on how to divide property between parties in a financial matter, it may be beneficial to appoint an expert witness who is qualified to determine the value of certain assets in the property pool.

It is important to consider when it may be appropriate to appoint an expert witness, whether it’s to value a financial interest in “property” or to seek an expert opinion in relation to an issue or issues in dispute between parties.

This article describes the different types of Expert Witness that can be called upon in different scenarios, lists some of the most common property categories for which independent valuation expertise may be required and takes you through the steps of appointing a single expert witness.

 

Types of Experts

There are three types of Experts who can be appointed during the course of Family Court proceedings:

• Expert Witness
• Single Expert Witness
• Court Expert

An Expert Witness is a witness instructed and called by only one party to the proceedings, to lead evidence for the benefit of that party (which is discouraged if the parties are able to agree on the appointment of a Single Expert Witness).

A Single Expert Witness is a witness instructed and called jointly by the parties, to be engaged by providing assistance in resolving a significant issue in dispute.

A Court Expert is an expert appointed exclusively by the Court to lead evidence independent of the parties (for example, if the Court deems it necessary to consider a range of opinions on a particular issue).

 

Identifying the Asset Pool

In financial matters, the asset pool available for division must be identified. To this end, each party has a duty to disclose all property in which they hold an interest.

“Property” is given a broad interpretation and may take the form of real estate, shares, household goods, cars, mechanical equipment (such as trucks and farm machinery), businesses or other entities, superannuation – basically, anything that has a value belonging to the parties and any company/business they might own part of.

In identifying the asset pool the value of each item of property must be established. During Family Court proceedings, and prior to the first Court date, the parties are required to provide an opinion as to the value of any property in which either of them holds an interest, together with “vouching” documents (ie written proof) where appropriate. This remains an ongoing obligation of both parties until the proceedings are concluded.

The value of property is often resolved by agreement, either on the face of disclosure documents provided by either party, or based on a compromise where the parties decide not to incur the costs associated with appointing an Expert.

 

Automotive Expert Witness

The value of cars, for example, can often be resolved on the basis of an online ‘Redbook’ valuation. However, if the value of a vintage car is in issue, it may become necessary to engage an appropriately qualified Expert.

 

Real Estate Expert Witness

Market appraisals from registered real estate agents often assist in the parties reaching an agreement as to the market value of real estate. However, the problem with appraisals tends to be that they provide a “range” and do not give a precise figure. Often, therefore, a licensed valuer may need to be appointed to provide a definitive dollar value. These will generally cost $600 to $900 plus GST for basic residential properties.

Where the value of property is not agreed, it may become necessary to obtain independent evidence. If the parties agree on the expert to be appointed, this can be done by adducing evidence from a Single Expert Witness, usually involving a trial affidavit with the expert’s report attached.

 

Other Financial Expert Witnesses

In valuing a party’s interest in a business, corporate entity and/or Family Trust, consideration of the relevant financial statements and taxation returns may be all that is required to agree on value. However, in some cases, it will be necessary to engage an independent valuer to identify the assets and liabilities and to value the interest in the entity (which may or may not include “goodwill’).

Quite separate to the determination of value, there may be questions surrounding various transactions which may or may not have been intended to deplete the property available for division. In some cases, an accountant or forensic accountant may need to be appointed as a Single Expert Witness to consider the veracity or propriety of various transactions.

A party’s interest in a superannuation scheme may also require expert valuation. For a standard “Accumulation Interest Scheme” a statement balance will usually suffice in providing evidence as to the current value of this interest. In contrast, a “Defined Benefit Interest” will usually require an Expert valuation. In some instances, the superannuation fund itself will adopt a “scheme specific” valuation method such that there is then no need for the parties to separately engage an Actuary to value the interest. In this case, a “Form 6 Request for Information” completed by the Fund Trustee may suffice. Other Defined Benefit interests may require valuation by an Actuary, who may be jointly appointed by the parties as a Single Expert Witness.

 

The Process of Appointing a Single Expert Witness

The parties must first obtain the consent of the proposed Single Expert Witness before the Family Court is able to appoint them. This is usually done by way of the parties signing and filing a Minute of Consent Orders, effectively providing joint instructions to the Single Expert Witness detailing the issues upon which their opinion is sought. This list of questions or issues is commonly referred to as the “Terms of Reference”.

Depending on the purpose of the Single Expert Witness’ engagement, a report will generally be prepared to confirm the item’s value, to set out the methodology adopted for the valuation, and to identify and address questions raised by either party. Once complete, the Single Expert Witness will attach their report to an Affidavit and file this in the Family Court, providing copies to the parties.

The Single Expert remains a witness in the Family Court proceedings and must adhere to the Family Court Rules (2021). When engaging a Single Expert Witness it is thus appropriate that a copy of the relevant Rules be provided to them, and that their report and conduct is in accordance with those Rules.

If either party has any questions arising from the Single Expert Witness’ report, that party must ask these questions in writing within 21 days following receipt of the report (or within 7 days of a conference subsequently convened by the parties alone or together with the Expert), and must provide a copy of these questions to the other party. The Single Expert will then have a further 21 days to respond to the questions in writing. The party asking the questions will be obliged to pay any additional costs incurred by the Expert in replying, as such questions will not be covered in the initial estimate/quote.

 

Costs

There will almost always be a cost associated with engaging a Single Expert Witness to prepare a valuation report, or to provide a report to address the agreed “Terms of Reference”. The parties will usually first obtain an estimate of fees, or in some instances, a specific quote and will then be equally liable for the reasonable fees and expenses associated with appointing the Single Expert Witness.

The parties may otherwise agree that one party is to meet all of the costs associated with the Single Expert (eg. if there is a substantial imbalance in the parties’ incomes and consequent abilities to pay). In some cases, the Court may order that one party is to meet the costs, without any contribution from the other party.

 

Key Takeaways

• There are various types of Experts available in Family Court proceedings.
• Don’t rush into obtaining an Expert Report without first trying to agree on their appointment with the other party – this could save much time and cost down the track.
• Ensure that you “do your homework” on the proposed expert. Do they have the correct experience and credentials? Have they undertaken previous Family Court related work? How do their costs compare with others?
• Avoid the appointment of Experts if values can be agreed by adopting a “middle ground” based on appraisals – especially if the asset pool is modest or the item in question is not particularly valuable.
• The appointment of a Single Expert Witness is more prevalent in complex financial matters, and in some cases forms the basis of persuasive evidence before the Court. Some matters are impossible to resolve without expert evidence.

 

Need Assistance?

If you are seeking more information about the need to obtain an Expert report in your family law matter, please contact DS Family Law or give us a call on (08) 9486 1766 to arrange an initial consultation.

One of our experienced solicitors will take you through the family law process and provide advice as to how you might best go about reaching an agreement with your former spouse, or otherwise to litigate matters in the Family Court – with or without the need to appoint an Expert Witness.

For more information on the process associated with the appointment of a Single Expert Witness in child-related proceedings, see our article Single Expert Witnesses in Parenting Proceedings.

 

The above information is general in nature and is not specific advice for your situation. If you have questions about how the information contained in this article may apply to your situation, you must seek independent legal advice.