Can You Get a Second Expert Opinion in a Family Law Property Case?

You may need to consult a second expert valuation

A valuation can have a major effect on the outcome of a family law property settlement.

If a business, company, trust or property needs to be valued, the parties will often jointly appoint a single expert valuer. The idea is straightforward: rather than each party obtaining competing valuations, one independent expert provides an opinion for both parties and, if necessary, the Court.

That process can work well — until one party receives a valuation they strongly disagree with.

The immediate reaction is often: I want another valuer.

Unfortunately, it is not that simple.

Once a single expert has been appointed, a party generally cannot simply obtain another report on the same issue and rely on it in Court. Under rule 7.08 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021, the Court’s permission is required before evidence from another expert can be used on the same issue.

The Rules deliberately seek to avoid unnecessary competing expert evidence and the cost that comes with it.

So what should you do if you believe the single expert has got it wrong?

Start by understanding the report

Before looking for another expert, the first step is deceptively simple: read the report carefully.

Expert reports can be long and technical. Business valuations in particular can run to dozens of pages and involve accounting concepts, assumptions, comparable transactions and valuation methodologies that are unfamiliar to most clients.

It can therefore be tempting to turn immediately to the final number.

That is usually a mistake.

The real question is not simply whether you dislike the valuation. It is why you say it is wrong.

For example:

·       Has the expert relied on an assumption that is factually incorrect?

·       Have relevant documents or information not been provided?

·       Has the expert misunderstood the nature of the business or asset?

·       Is there a genuine dispute about the valuation methodology?

·       Has there been a significant change since the valuation date?

·       Does the report itself explain why the expert rejected the approach you expected them to adopt?

Sometimes the answer to a client’s concern is already contained in the report.

Ask the expert to clarify the report

The Rules provide mechanisms for clarifying a single expert report.

A party may ask written questions of the expert under rule 7.26. The parties may also arrange a conference with the single expert under rule 7.25.

These processes are intended to clarify the report, rather than provide an opportunity to cross-examine the expert outside Court. Questions should therefore be focused and directed to genuine areas of uncertainty.

In a complex valuation matter, it can be useful to involve both counsel and an appropriately qualified expert adviser when preparing those questions.

There may also be other practical ways to address a concern. For example, a single expert might be asked to provide an updated valuation, consider further documents or address an alternative methodology.

That can be considerably cheaper than an application seeking permission to rely on a second expert.

Salmon & Salmon: use the available processes first

The importance of attempting to clarify a single expert report before seeking another expert was demonstrated in Salmon & Salmon [2020] FamCAFC 134.

The case concerned a single expert accountant who had prepared valuations of various entities and superannuation interests.

The husband obtained another expert report which criticised the single expert’s conclusions and sought permission to rely upon that evidence.

The application was refused.

Importantly, the husband had not first used the procedures available to confer with the single expert or formally ask questions seeking clarification of the report.

The Full Court refused leave to appeal. It emphasised the purpose of the expert evidence rules, including restricting expert evidence to what is necessary, using a single expert where practicable and avoiding unnecessary costs.

A mere difference of opinion — particularly in a valuation case — will not ordinarily justify introducing another expert.

Salmon is therefore an important reminder that a party dissatisfied with a report should usually explore the available avenues for clarification before asking the Court to allow competing expert evidence.

That does not mean a party cannot obtain independent expert assistance. Another expert may, for example, assist lawyers and counsel to understand the report, identify legitimate areas of concern, formulate questions or prepare for cross-examination.

The more difficult question is whether that expert should be permitted to give evidence.

Neales & Neales: when a second expert may be justified

The Full Court considered the issue again in Neales & Neales [2022] FedCFamC1A 41.

The husband held a one-third interest in three entities which owned commercial properties.

The parties jointly appointed a single expert to value those properties. The expert valued them at between approximately $33.8 million and $34.2 million.

The husband was dissatisfied with the valuation and asked questions of the expert. He later obtained another valuation from a different expert, who valued the same properties at approximately $22.5 million.

The difference was substantial — around $11 million.

The husband applied to rely on the second expert.

The primary judge refused the application. Importantly, the size of the difference between the two valuations was not, by itself, enough to justify introducing another expert. The purpose of the Rules would be undermined if a party could obtain a second valuation merely because they were unhappy with the first.

The matter went on appeal.

The Full Court found that the husband’s complaints should not have been considered individually.

Taken together:

·       there were differences in valuation methodology;

·       there were matters said not to have been known to the single expert;

·       there was a substantial difference between the competing valuations; and

·       the valuation had particular financial consequences for the husband as a minority shareholder.

The Full Court concluded that those matters, considered cumulatively, were capable of amounting to another “special reason” for allowing evidence from a second expert.

The important point is that Neales was not simply about two valuers reaching different numbers.

The Court looked at the combined significance of the underlying problems with the expert evidence.

When will the Court allow another expert?

Under rule 7.08, the Court may permit evidence from another expert where:

1.     there is a substantial body of opinion contrary to the opinion of the single expert and that contrary opinion may be necessary to decide the issue;

2.     another expert knows of matters not known to the single expert which may be necessary to decide the issue; or

3.     there is another special reason for allowing further expert evidence.

The Court will also consider the broader purpose of the expert evidence rules. Those rules seek to limit expert evidence to what is genuinely necessary, control costs and avoid unnecessary duplication.

The third category — “another special reason” — is deliberately broad.

Neales demonstrates that several concerns which might not be decisive individually can become significant when considered together.

But permission should not be assumed.

Is another expert actually worth it?

Even where there may be a legal basis to seek a second expert, there is a separate commercial question:

Is it worth doing?

A second expert can add considerable cost.

There may be:

·       the cost of obtaining the second report;

·       legal fees associated with an interim application;

·       counsel’s fees;

·       conferences between the experts;

·       supplementary reports; and

·       additional hearing time.

The appointment of another expert can also delay the final resolution of the case.

Those costs need to be weighed against the amount genuinely in dispute and the likely effect of the expert evidence on the overall property settlement.

Sometimes the better approach is to challenge the single expert’s assumptions or methodology in cross-examination rather than seek permission for another expert.

In other cases, further questions, additional information or a supplementary report may solve the problem.

What should you do if you disagree with a single expert report?

A sensible approach is usually:

1. Read the report

Identify precisely what you say is wrong and why.

2. Clarify the report

Consider written questions, a conference with the expert, further documents or an updated or supplementary report.

3. Consider the practical consequences

Compare the likely benefit of another expert with the cost, delay and complexity involved. Consider whether the issue could instead be dealt with through clarification or cross-examination.

4. Identify the legal basis for another expert

If another expert is genuinely required, consider the grounds under rule 7.08 before making an application.

A disappointing valuation does not necessarily mean the valuation is wrong.

Equally, the appointment of a single expert does not mean their opinion is beyond challenge.

The important question is whether there is a genuine problem with the expert evidence and, if so, what is the most proportionate way to deal with it.