Observations of the Family Law Single Expert System

Superannuation valuations are typically handled well under the single expert system. Defined benefit schemes, in particular, follow established valuation formulas. As there is rarely any real disagreement about how these interests should be valued, appointing a single expert makes sense and helps contain costs.

Business Valuations: A More Complex Picture

The story changes when we move into business valuations.

While the aim is to halve the cost by appointing just one expert, in practice, it’s rarely that efficient. A single expert report generally comes in at around two-thirds the cost of two reports, not half. Why?

• Written Correspondence Is Required: All communication must be in writing. This provides transparency but adds time and cost, particularly in complex matters.

• Dual Explanatory Role: In addition to producing a valuation, the expert must pre-emptively address questions from both sides, often explaining technical valuation principles in layman’s terms. That’s something that might otherwise be clarified quickly with a phone call in a two-expert process.

• Post-Report Questions: After the report is served, each party has 21 days to submit written questions. When those questions stem from a lack of understanding of accounting concepts, we often try to resolve the matter via a conference call with legal representatives before responding formally in writing.

When a Financial Investigation Is Also Required

Single experts are increasingly being asked to undertake financial investigations in addition to valuations. This is time-consuming and expensive.

In a two-expert process, we’d usually conduct a preliminary investigation first, then assess whether there’s a basis for more in-depth forensic work. The single expert system often requires jumping straight into a full investigation, even if it's not ultimately necessary.

Is the System Working?

For small businesses where the valuation is based on future maintainable earnings or net realisable assets, the system generally works well. Disputes are usually limited to two subjective factors, capitalisation rate and earnings estimate, and most experienced valuers fall within a similar range. The single expert appointment process helps eliminate fringe operators, ensuring consistency and professionalism.

However, complex trading businesses are another story.

In these cases, having two experts often leads to a more thorough and balanced outcome. One expert may uncover something the other has missed, or interpret financial nuances differently. The joint expert statement process is valuable here, encouraging experts to refine their positions and clearly present areas of agreement and disagreement to the Court.

Final Thoughts

The single expert system can offer efficiencies, particularly in well-defined or straightforward matters like superannuation valuations or small business assessments. But in more complex financial cases, a dual expert approach may ultimately provide the Court with a better-informed view, sometimes at a similar overall cost.

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Disclaimer:

The information provided in this article is general in nature and does not constitute personal financial, legal or tax advice. While every effort has been made to ensure the accuracy of this content at the time of publication, tax laws and regulations may change, and individual circumstances vary. Dolman Bateman accepts no responsibility or liability for any loss or damage incurred as a result of acting on or relying upon any of the information contained herein. You should seek professional advice tailored to your specific situation before making any financial or tax decision.