Jointly Retained Engagements – Valuations Perspective

by Trevor Hood

Original post: https://sbpartners.ca/jointly-retained-engagements

We are often asked to be jointly retained in family law matters where one spouse is a business owner. We are engaged by both spouses to provide an independent assessment of the value of the business interests for the purposes of dividing matrimonial assets or of the income available to the business owner for purposes of child or spousal support. Until recently, the decision of the joint retention was that of the parties but that is now changing.

Appointment of a Joint Expert by the Court

Recent changes to the Family Law Rules (the “Rules”) effective September 1, 2019 has expanded Rule 20.1 related to independent experts into three separate Rules including the new Rule 20.3 in which section (1) provides for the Appointment of Expert by Court[1] and states (1):

The court may, on motion or on its own initiative, appoint one or more independent experts to inquire into and report on any question of fact or opinion relevant to an issue in a case.

While the new Rules do not go to the extreme of requiring a joint expert for all family-law related business valuation reports like in British Columbia, there will be an expected trend towards more jointly retained Chartered Business Valuators (“CBV’s”). With that in mind, we wanted to highlight five key challenges and practical considerations when dealing with jointly retained valuation experts:

• Aside from avoiding dueling experts, the biggest potential benefit is reduced costs to the parties. However, it is our experience that the initial fees to prepare a joint report will be slightly higher given the steps required to maintain a transparent and open process and to ensure both parties are able to provide their input into the process. The larger cost savings comes from having a single expert in the court process and in testifying at trial.
• The exception to the above is when the parties decide to hire a “shadow” CBV’s to advise and assist the parties through the valuation process.
• The biggest challenge in our experience is ensuring that all parties are on the same page with the scope and level of work being completed. Whether it be the level of valuation report being used or the amount of forensic investigation being conducted, we have had a number of circumstances where, part way through the process, one party expresses expectations that are beyond the agreed upon scope of work and level of reporting, which in turn creates conflict.
• Another challenge tends to be the structuring of fees and what happens when one of the parties creates an obstacle that results in additional fees beyond the original scope of the mandate. Whether it is failure to provide disclosure or making enquiries beyond the scope of the engagement, it is important that parameters are established around the payment of fees and the communication when these issues arise.
• Despite best efforts, situations will arise where one of the parties may feel that the expert is not independent and is perceived as being biased in the favour of the other party. Ensuring that open and transparent communication occurs with all parties throughout the process is a vital step to mitigating the occurrence of this issue. Engagement letters should clearly document the communication process and steps surrounding the delivery of the report and the parties’ ability to provide feedback in support of full transparency.

[1] Ontario Regulation 250/19: Family Law Rules Filed July 25, 2019 effective September 1, 2019