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Determining value of property or business as at separation or divorce
Our Vancouver Divorce Lawyers and Family Lawyers can help with proper valuations of family property in divorce, to ensure it is dealt with in a fair manner. Determining business valuation reports, income reports and property appraisals (for personal property or real property), is essential for a fair breakdown of family property. As our Vancouver Family Lawyer’s will advise, the relevant law regarding valuation of family property relates to Rule 13-3 of the B.C. Supreme Court Family Rules (SCFR). Specifically, Rule 13-3(1) makes it clear that a financial issue is regarded as (a) an issue arising out of a claim under Part 5 – Property division, or Part 6 – Pension Division, of the Family Law Act of B.C. It is important to note that income report does not amount to financial issues under Part 5 or Part 6 of the Family Law Act and therefore a joint expert is not necessary to prepare an income report. However, it is common for the parties to have such an expert jointly appointed.
Aquilini v Aquilini, 2012 BCSC 1616, sets out the legislative intention behind the joint expert rule. At paragraph 10, the court states:
“ In making those Family Rules, the Lieutenant Governor in Council has stated a strong policy preference for the use of jointly appointed financial experts in family cases. That policy decision responds to common features of family cases that are not necessarily present in other kinds of litigation. These include:
a) The central importance of the division of family assets and the corresponding need for valuation or accounting evidence;
b) The cost of obtaining such expert evidence in many cases;
c) The fact that the parties frequently do not have equal ability and resources to retain experts;
d) The fact that while separately appointed valuation or accounting experts may disagree on some matters, they frequently find a great deal of common ground, resulting in needless duplication of costs (this, of course, assumes that all experts, whether jointly or separately appointed, have proper regard to their duty to assist the court and not act as advocates for either party); and
e) The overly adversarial nature of some family cases, which can put in issue matters on which the parties should be able to agree.
Appointing an expert for business valuation or appraisal
In resolving financial issues, the court, under Rule 13-3(2), requires the use of a joint valuator or court appointed expert, as opposed to two separate valuators for each party. This valuator must be jointly appointed unless the court orders otherwise, or the parties agree otherwise. Furthermore, Rule 13-4(1) provides criteria which must be settled before the joint appointment can take place:
(a) the identity of the expert;
(b) the issue in the family law case the expert opinion evidence may help to resolve;
(c) any facts or assumptions of fact agreed to by the parties;
(d) for each party, any assumptions of fact not included under paragraph (c) of this subrule that the party wishes the expert to consider;
(e) the questions to be considered by the expert;
(f) when the report must be prepared by the expert and given to the parties;
(g) responsibility for fees and expenses payable to the expert.
Under Rule 13-4(2), if parties can agree on the matters above, then it is necessary for the parties to enter in an agreement that reflects those agreed upon matters:
(a) the agreement must be signed by each party to the agreement or their lawyers,
(b) the agreement must be signed by the expert to signify that he or she
(i) has been made aware of the content of this Part, and
(ii) consents to the appointment reflected in the agreement, and
(c) a copy of the agreement must be served, promptly after signing, on every party to the family law case who is not a party to the agreement.
If there are multiple financial issues, any agreement or order needs to specify the issues in respect of which the expert is retained. There needs to be a clear and concise agreement setting out the terms of the expert retainer for business valuation or appraisal. The agreement must be signed by the parties (or their lawyers) and the expert, who is being retained.
Who can give evidence with respect to business valuation or property appraisal?
Once A Joint Valuator Is Appointed
As our Vancouver Divorce Lawyers and Family Lawyers explain, once the joint valuator has been appointed and the agreement has been made, the joint expert is the only person capable of providing expert evidence on the financial issues in the case, unless the court orders otherwise.
The court may order otherwise, when a party has sought leave to introduce additional expert evidence; this would only be accepted by the court if it were necessary to ensure the fairness of the trial. Although this is extremely rare, the case of McDonald v Leung, 2019 BCSC 299, offers an example of when evidence may be accepted. In this case, it was found that the joint appraiser communicated with only one party, thereby limiting the input of relevant information, that the other party could provide. It was found that the joint expert was acting as though they were solely retained by one of the parties and relying on this evidence would be unfair. The courts are generally reluctant to grant leave to present additional expert evidence, once a joint expert has been appointed, because they do not want to undermine the purpose of Rule 13-3 of the SCFR (Jensen v Jensen, 2013 BCSC 297).
Property division under the BC Family LAw Act - Explains our Vancouver Divorce Lawyer
Upon separation, spouses dealing with a business or other family property, have essentially three options available:
1) One spouse can buy the other spouse out, either immediately or over a period of time;
2) The business or property can be listed for sale and upon sale, the proceeds can be divided as per the court order or agreement of the parties;
3) Parties keep their joint ownership and hope that they can continue to maintain the property or run the business without problems, after separation.
As our Vancouver Family Lawyer’s explain, if a party wants to buy out the other party, then a valuation of the business is necessary. As per section 87 of the Family Law Act, unless there is an agreement or court order that states otherwise, family property is valued based on a fair market value at the date of trial. You will need proper expert evidence with respect to the value of the property. The expert can be jointly appointed or ordered by the court.
In terms of who pays for the costs of the appraisal, business valuation or income report, it is common for the parties to agree to:
- sharing the costs of the report equally;
- one party paying the costs upfront at the first instance and the other party’s share of the costs be taken out his or share of property division; or
- one party paying the costs upfront at the first instance subject to the court later allocating the costs of the report between the parties.
Who should I use for business valuations or preparation of income reports?
Who should I use for property appraisal upon divorce or separation?
For property appraisals, our Vancouver Divorce Lawyers and Family Lawyers commonly use:
- Johnston, Ross & Cheng Ltd real estate evaluators
- Cunningham & Rivard real estate appraisal and consulting
- Macintosh Appraisals Ltd.
- Nearhood Appraisal Services – real estate valuations: for real estate and commercial appraisals in the northern BC.