Selecting the right business valuer for a divorce settlement is critically important. Using a valuer who lacks the appropriate experience and knowledge of legal requirements can undermine the credibility of the valuation and expose the appointing solicitors to criticism. This issue was highlighted in a recent high profile divorce case.
A high stakes case
The case of William Work and Mandy Gray  EWHC 562 (Fam) concerned the divorce of two US nationals who had been living in London for about 10 years and whose marriage broke down in 2013. Their combined wealth was $245m with assets ranging from commercial property to hedge funds and private equity investments. With such a diverse and exotic mix of investments highly technical arguments about discounts for lack of marketability would come to dominate the issue of valuation upon which the Court sought guidance from the experts put forward by the parties.
Divided by a common language
Mrs Justice Roberts was faced with two entirely different approaches by the experts instructed to value the divorcing couple’s investments. The two experts for the husband were partners in Big 4 firms in the USA with a combined 60 years’ business valuation experience while the wife’s expert had extensive experience in divorce valuations and the Family Procedure Rules (“FPR”) of the English Courts.
In the US, expert witnesses face the risk of having their testimony rejected under a Daubert challenge on the basis that it is not part of a body of authoritative opinion. This, combined with the restricting discipline of the Big 4 in a highly litigious country meant the husband’s experts confined their evidence to a narrow range of tried and trusted academic studies and research. In contrast the UK expert adopted a bespoke approach to the valuation which generally found favour with the judge.
Of particular interest in this case are the following observations:
- The US experts produced little by way of direct evidence for their opinions that was specific to the assets being valued. Mrs Justice Roberts noted that one of the US experts appeared to rely on his 32 years’ experience and supposed access to superior information in forming his opinions but that she, “was left at the conclusion of his evidence not knowing what that superior information was”. In contrast, the UK expert’s report included relevant material and analysis that enabled the judge to discern the basis and rationale that led to his conclusions.
- Neither of the US valuers were familiar with UK court procedures with one commenting that he had not read Part 25 of the FPR 2010 and knew nothing of its contents. The US experts, with their experience of the adversarial US courts, were reluctant to engage with the UK valuer to seek out areas of common ground which is encouraged under the FPR.
- The US experts were unwilling to revise their valuation conclusions for events occurring between their original reports in 2013 and the hearing date. The UK expert, aware that valuations for divorce proceedings in the UK should be as current as possible at the hearing date, did take into account new, relevant market evidence from the period 2013 to 2015.
Whether the US valuers or the UK expert were technically “right” in their opinions is difficult to tell in this complex case. However, the fact that the UK expert was clearly well versed in the FPR and understood what the court would be looking for in an expert witness report appears to have inclined the judge to favour his conclusions.
While the sums in this case were particularly high, the lesson is clear and applicable to all cases where the evidence of expert valuers is needed. While it is tempting to choose an accountant who has submitted the lowest fee quote, the parties and their legal advisers should always ensure the valuer has experience in preparing reports for the court and knowledge of the FPR (or the equivalent Civil Procedure Rules).
For further information about this subject please contact:
Head of Valuations
Burgis & Bullock Corporate Finance
Tel: 01926 468705