Appeal Dismissed in Property Settlement Case: Federal Circuit and Family Court Upholds Business Valuation

Gare & Farlow [2023] FedCFamC1A 98 (23 June 2023)

Introduction:

The Gare & Farlow case is a family law appeal concerning property settlement orders. The appellant, Ms. Gare, argued that the primary judge overvalued her business, resulting in her having to pay a larger cash sum to her ex-husband, Mr. Farlow, than she should have been required to. She also contested the admission of evidence from Mr. Farlow's expert witness regarding the value of the business.

Facts:

The parties began cohabitating in and married soon after. They separated but continued living together with their two children until Mr. Farlow left the home. Ms. Gare launched proceedings seeking property settlement orders. The primary judge divided their net assets 60-40 in favor of Ms. Gare but required her to pay Mr. Farlow a cash sum due to the perceived overvaluation of her business.

Issue:

The main issue in this case involves a dispute over the valuation of the appellant wife's business in a property settlement following separation. The appellant argues that the primary judge erred by over-valuing her business, thereby requiring her to pay a larger cash sum to the respondent husband than she believed was fair.

There were two key aspects to this issue:

• Whether the primary judge erred by admitting the evidence of the husband’s expert witness about the value of the business under the Evidence Act 1995 (Cth).
• Whether the primary judge erred in his interpretation and application of relevant legislation and case law in deciding on the value of the business.

Rules:

The Evidence Act 1995 (Cth), particularly sections 76 and 79, are relevant here. Section 76 imposes an opinion rule rendering opinion evidence inadmissible, while section 79 allows an exception for expert opinion evidence in an area of specialised knowledge if based on relevant training, study or experience.

The Family Law Act 1975 (Cth), particularly Part VIII (Financial Matters), sections 75 (Spousal Maintenance) and 79 (Alteration of Property Interests), are also important as they provide guidance on how property is to be divided following separation.

In addition, Australian case law provides precedent for how these laws should be applied.

Relevant cases cited include:

Carr v Baker (1936), Preston & Preston (2022), Samper & Samper (2021), Seltsam Pty Ltd v McGuiness & Anor (2000), and The Commonwealth v Milledge (1953).

Application:

The court rejected all of the appellant's grounds for appeal. Regarding the admissibility of expert evidence, it found that the husband's expert was sufficiently qualified to give admissible expert opinion evidence based on his training and experience under s79 of Evidence Act.

As for determining the value of business, despite using different methodologies ("value to owner" versus "net asset backing"), both experts' opinions were valid forms of analysis. However, given the fluctuating estimations from wife’s expert - from 56,948 to 73,057 then admitting it was worth nothing - compared to husband’s expert consistent valuation at $429,500, it was reasonable for the primary judge to find husband’s expert more persuasive.

Conclusion: The court dismissed all grounds of appeal, affirming that no error had been made by the primary judge in admitting and relying on the husband's expert witness evidence regarding business valuation. The appeal was unsuccessful with costs ordered against the appellant.

Details of Parties:

- Appellant: Ms. Gare

-Respondent: Mr. Farlow

- Counsel for Appellant: Dr Smith

- Solicitor for Appellant: Garland Hawthorn Brahe Lawyers

- Counsel for Respondent: Mr Wilson

- Solicitor for Respondent: Cohrssen Partners Lawyers