‘Business’ is a term that covers a multitude of different structures. The most common are limited companies (whether public or private), partnerships and sole traders. There is obviously a big difference between a multinational PLC and a sole-trading plumber. The courts will treat different businesses in different ways.

This article is structured into two parts. The first considers how businesses are approached at a final hearing. The second deals with case management considerations.

Part 1: How businesses are approached at final hearing

The court has to establish the value of the parties’ interests in the business (‘computation’) and then consider how that value should feature within the outcome of the case (‘distribution’).

Computation

The court will need to make a finding about the value of the business. In many cases, it will be necessary to have expert input – this is considered in further detail under the heading ‘Part 2: Case management’ below.

The best starting point is Peel J’s summary of the law in the recent case of HO v TL [2023] EWFC 215:

‘21. First, it is for the court to determine the value, not the expert.

22. Second, valuations of private companies can be fragile and uncertain. In Versteegh v Versteegh [2018] EWCA Civ 1050 Lewison LJ said at para 185:

“The valuation of private companies is a matter of no little difficulty. In H v H [2008] EWHC 935 (Fam), [2008] 2 FLR 2092 Moylan J said at [5] that ‘valuations of shares in private companies are among the most fragile valuations which can be obtained.’ The reasons for this are many. In the first place there is likely to be no obvious market for a private company. Second, even where valuers use the same method of valuation they are likely to produce widely differing results. Third, the profitability of private companies may be volatile, such that a snap-shot valuation at a particular date may give an unfair picture. Fourth, the difference in quality between a value attributed to a private company on the basis of opinion evidence and a sum in hard cash is obvious. Fifth, the acid test of any valuation is exposure to the real market, which is simply not possible in the case of a private company where no one suggests that it should be sold. Moylan J is not a lone voice in this respect: see A v A [2004] EWHC 2818 (Fam), [2006] 2 FLR 115 at [61] – [62]; D v D [2007] EWHC 278 (Fam) (both decisions of Charles J).”

23. Third, I suggest that the reliability of a valuation will depend on a number of factors such as:

“(i) whether there are applicable comparables, (ii) how ‘niche’ the business is, (iii) whether the business is to be valued on a net asset basis (for example a property company) or one of the recognised income approaches (such as EBITDA or DCF), (iv) the extent of the parties’ interests, and accordingly their level of control, (v) the extent of third party interests, (vi) the relevance of any shareholders’ agreements, (vii) whether there is a realistic market for sale, (viii) the volatility or otherwise of the figures, (ix) the reliability of forecasts, and (x) whether the assumptions underpinning the valuation are seriously in dispute.”

24. Fourth, in practice the choices for the court will be, per Moylan LJ in Martin v Martin [2018] EWCA Civ 2866 at para 93: (i) “fix” a value; (ii) order the asset to be sold; and iii) divide the asset in specie. The latter option (divide the aspect in specie) is commonly referred to as Wells sharing (Wells v Wells [2002] EWCA Civ 476).

25. Fifth, whether a business should be retained by one party, or sold, or divided in specie will depend on the facts of each case. Relevant features will include whether the business was founded during the marriage or pre-owned, whether it has its origins in one party’s nonmarital wealth, whether the parties were both involved in its strategy and operation, the ownership structure of the business, whether Wells sharing is practical or realistic given that it will usually continue to tie the parties together to some extent, and how to ensure a fair allocation of all the resources in any given case.

26. Sixth, as was pointed out in Wells (supra), Versteegh (supra) and Martin (supra), there is a difference in quality between copper-bottomed assets and illiquid/risk-laden assets. As Moylan said LJ at para 93 of Martin (supra):

“The court has to assess the weight which can be placed on the value even when using a fixed value for the purpose of determining the award to make. This applies both to the amount and to the structure of the award, issues which are interconnected, so that the overall allocation of the parties’ assets by application of the sharing principle also effect a fair balance of risk and illiquidity between the parties. Again, I emphasise, this is not to mandate a particular structure but to draw attention to the need to address this issue when the court is deciding how to exercise its discretionary powers so as to achieve an outcome that is fair to both parties. I would also add that the assessment of the weight which can be placed on a valuation is not a mathematical exercise but a broad evaluative exercise to be undertaken by the judge”.

27. Seventh, when deciding how to reflect the illiquidity or risk in a private company, the court has three choices:

“i) The business valuation may incorporate a discount for factors such as lack of control, lack of marketability, and lack of risk. This is particularly common where a party has a minority holding, or otherwise does not have overall control, and there are relevant third-party interests. In such circumstances, the court may simply adopt the business valuation as reflecting these matters. This I term an ‘accountancy discount’.

ii) To step back when conducting the s25 exercise and, in the exercise of its discretion, to allocate the resources in such a way as to reflect illiquidity and risk. Conventionally, that would be to allocate to the party retaining the business a greater share of the overall assets to provide a fair balance. As Bodey J said in Chai v Peng and Others [2017] EWHC 792 (Fam) at para 140:

‘It is a familiar approach to depart from equality of outcome where one party (usually the wife) is to receive cash, while the other party (usually the husband) is to retain the illiquid business assets with all the risks (and possible advantages) involved’.

It will be for the court to determine whether, and to what extent, to reflect this aspect in what might be a termed a ‘court discount’. Of particular relevance, it seems to me, is whether the illiquid (or less liquid) business represents the principal asset in the case, in which event the distinction between liquid/illiquid assets may be sharper and require particular attention, or whether it is a relatively modest part of the overall assets.

iii) The court might, in the right case, take both the valuation, which includes an accountancy discount, and apply a further court discount i.e. an amalgam of (i) and (ii). Moylan LJ in Martin (supra) at para 94 considered that this would not be double counting: ‘… this is not … to take realisation difficulties into account twice’. It will all depend on the case. If, for example, the accountancy valuation includes a discount for a minority holding, but it is clear that there is no possibility of realisation of interest in the future by sale or otherwise, it seems to me that it would not be unfair to further take that factor into account when allocating assets.”’

Issue 1: Does the business have a value at all?

The first question is whether the business has a realisable capital value (and, if so, when), or whether it is simply a vehicle for an income stream. Most (but not all) sole-trader businesses and service companies (which are usually just vehicles for tax-efficient income generation) are worth nothing more than the net assets on the balance sheet.

This observation is not limited to small service companies or self-employed individuals. A recent example is the decision of HHJ Hess (sItting as a Deputy High Court Judge) in CG v SG [2023] EWHC 942 (Fam). The business in question was a limited partnership providing professional services in the financial advisory sector. There was a working capital base, but 100% of the profits were distributed to the partners at the end of each financial year. Turnover represented retainers (which represented a break-even figure) and success fees. Importantly, this was a ‘singleton’ business dependent on the husband’s continued involvement. The husband was entitled to 95% of the profits and 90% of the revenue was generated by the husband. Any purchaser would require onerous tie-in obligations contingent on future performance. Both parties were given permission to rely on Daniels v Walker experts, and the single joint expert (SJE) was not called to give evidence.

To show the range of opinions with which HHJ Hess was faced, the SJE had valued the husband’s shareholding at £8,750,000 (EBITDA of £1,067,000 x 2.5 plus surplus working capital). The wife’s expert valued the business at £18,850,000 (EBITDA of £2,700,000 x 5.5 plus surplus cash). The husband’s expert’s opinion was that the value of the business was £2,633,000 representing the distributable profits held by the partnership. There was no meaningful EBITDA separate from the husband’s own earnings, that the multipliers were too high, and that there was no meaningful surplus capital.

HHJ Hess agreed with the husband’s expert. The husband’s future earnings would not fall to be shared (following Waggott v Waggott [2018] EWCA Civ 727). Also of interest is the fact that, despite the husband beating his open offer, there was no order as to costs. HHJ Hess held that the test is not whether a party has beaten their offer, but whether a party has litigated unreasonably. It was not unreasonable on the facts of that case for the wife to have relied on her expert’s opinion at the final hearing.

Issue 2: Double counting capital value and income stream

If a business is valued on an earnings basis and the recipient is receiving maintenance from that income, then there is a risk of double counting. See:

• V v V (Financial Relief) [2005] 2 FLR 697, where Coleridge J said the following about an optician’s business owned by the husband:

‘[28] … There can, of course, be no hard and fast rule in relation to the extent to which the capital value of businesses are or are not brought into account but where (as here) there is no real value except as an income stream, to include it in circumstances where there is no suggestion that there should be a clean break, runs the serious risk, in my judgment, of double counting. I consider that the proper approach in a case of this kind is for the court to treat such business assets as primarily a secure income of the parties, from which there has to be a substantive and unlimited order for periodical payments.’

• Smith v Smith [2007] EWCA Civ 454, [2007] 2 FLR 1103, where Coleridge J (sitting in the Court of Appeal) allowed an appeal where the District Judge had divided the parties’ assets equally, included the value of the business on the husband’s side, and ordered the husband to pay maintenance to the wife:

‘[30] … (3) Having included the company at full value and allocated it to the husband, to award the wife the equivalent of half the husband’s income generated from the company by way of periodical payments for joint lives was also wrong. It amounted to double counting where, in particular, the business premises was expected to generate a further income for the wife in addition.’

It may be appropriate to view any residual capital value as being something that would be realised by the owner on retirement. If so, a deferred lump sum may be appropriate. I consider this in greater detail below.

Issue 3: Accountancy discounts

At [27] of HO v TL (above), Peel J drew a distinction between accountancy discounts and court discounts. A classic example of an accountancy discount is a discount to reflect minority ownership. If a party owns some, but not all, of a business, there may be an issue about whether or not a discount should be applied. The question of whether a minority discount should apply is a matter for the court, not for the expert. Many experts will apply a minority discount, or will give figures that deduct one. That does not mean that the court will do so. In other contexts, such as valuations for HMRC for tax purposes, discounts are commonly applied. However, in the financial remedy context, these discounts are less common. There are a number of cases that essentially say the same thing. The question to ask is whether the shareholding owned by the party to the divorce proceedings will be sold separately from the other shareholdings. If so, a discount may apply. If not, it won’t. In G v G (Financial Provision: Equal Division) [2002] 1 FLR 1143, Coleridge J did not apply a minority discount because he found that the shareholders would act in concert together. In other words, it was a quasi-partnership. Mostyn J rejected a minority discount argument in Clarke v Clarke [2022] EWHC 2698 (Fam) at [17]:

‘… (a minority discount) it is also completely unreal because, in my judgment, on the evidence it was not possible for the judge to find that there were any likely circumstances in which the respondent would sell his shares other than in conjunction with his fellow 50% shareholder. It is my opinion that the judge should have looked into the future, and asked himself whether it was more likely than not that a discount would be suffered. The answer to that question would, on the balance of probability, be no. If the judge was satisfied that the business was run as if it were a partnership, and if the judge was satisfied on the balance of probability that no discount would be suffered on any disposal in the future, then the judge should not have made a middle choice. It seems to me that the question is a binary one. Either the discount applies or it doesn’t. There is no room for a third way.’

Mostyn J’s views summarise the orthodox reasoning. In most cases where minority discounts are in issue, the other shareholders are business partners or family members. Usually (but not invariably) the aim would be to sell the business as a whole, rather than sell a minority share to a third-party investor. If so, a discount is unlikely to be appropriate. The constitutional documents of the business such as the articles of association may also provide a guide. Discounts are unusual in relation to partnerships. Some companies have provisions about these in the articles of association or shareholders’ agreements. However, if a party owns a small investment in a company owned and operated by third parties and where it is realistic to expect that they would sell that minority interest separately, then a discount may be appropriate.

Issue 4: Court discounts

Peel J’s second category of discounts is the ‘court discount’. The paper value of an interest in a business is (usually) different to cash. It is unlikely that the owner of shares can realise the value quickly. The valuation itself is far less certain than the value of a residential property. How should this be dealt with?

The first case to deal with this issue at appellate level was Wells v Wells [2002] EWCA Civ 476, [2002] 2 FLR 97. There are various cases dealing with this topic, but the current state of the law is set out in the Court of Appeal decisions of Versteegh v Versteegh [2018] EWCA Civ 1050 and Martin v Martin [2018] EWCA Civ 2866. In the above quote from HO v TL, Peel J cited part of Moylan LJ’s judgment in Martin. A fuller quote is below:

‘92. Given the proximity of the decision in Versteegh v Versteegh, and also, as it happens, given that my views have not changed from what I said in H v H, I can see no reason why we should depart from the conclusions and guidance set out in the former, namely that valuations of private companies can be fragile and need to be treated with caution. Further, it accords with long-established guidance and, I would add, financial reality.

93. How is this to be applied in practice? As referred to by both King LJ and Lewison LJ, the broad choices are (i) “fix” a value; (ii) order the asset to be sold; and (iii) divide the asset in specie: at [134] and [195]. However, to repeat, even when the court is able to fix a value this does not mean that that value has the same weight as the value of other assets such as, say, the matrimonial home. The court has to assess the weight which can be placed on the value even when using a fixed value for the purposes of determining what award to make. This applies both to the amount and to the structure of the award, issues which are interconnected, so that the overall allocation of the parties’ assets by application of the sharing principle also effects a fair balance of risk and illiquidity between the parties. Again, I emphasise, this is not to mandate a particular structure but to draw attention to the need to address this issue when the court is deciding how to exercise its discretionary powers so as to achieve an outcome that is fair to both parties. I would also add that the assessment of the weight which can be placed on a valuation is not a mathematical exercise but a broad evaluative exercise to be undertaken by the judge.

94. I would also add that this is not, as Mostyn J suggested, to take realisation difficulties into account twice. Nor, as submitted by Mr Pointer, will perceived risk always be reflected in the valuation. The need for this approach derives from the fact that, as said by Lewison LJ, there is a “difference in quality” between a value attributed to a private company and other assets. This is a relevant factor when the court is determining how to distribute the assets between the parties to achieve a fair outcome.

95. It might be said, as Mr Marks referred to in his submissions, that it would be unfair to award one party all the “upside” in the event that the valuation proves to have been an under-estimate. That, however, is intrinsic in an asset being volatile. There is potential for the value to increase as well as decrease. If one party is not participating in that risk and is obtaining what Thorpe LJ referred to in Wells v Wells as a secure result, one aspect of achieving that result is that, because they don’t have the burden of the risk of a decrease in value, they also don’t have the benefit of an increase in value. As Bodey J said in Chai v Peng, at [140]. “It is a familiar approach to depart from equality of outcome where one party (usually the wife) is to receive cash, while the other party (usually the husband) is to retain the illiquid business assets with all the risks (and possible advantages) involved”.’

I will consider orders for sale and transfers of shares later. They are the exception, rather than the rule, because they offend against the clean break principle. If a party is being bought out, then you will need to consider whether or not to discount the shares to reflect illiquidity and risk, including the uncertainty of any valuation. Issues to bear in mind are:

• The amount of liquid assets that the paying party will retain outside of the company valuation. A shareholding worth £1m in a case involving in total £50m of assets is very different to a shareholding worth £45m out of £50m of assets. The consequences for the party retaining the illiquid asset are very different. If it is only a small proportion of their residual portfolio of assets, then there is less reason to discount. This issue was considered by Peel J in HO v TL at [27(ii)]. The hotel business was illiquid and valued by reference to its future revenue stream. The court found it to be worth £9.5 million in the context of total assets worth £22.5 million. Peel J held that it would not be appropriate to apply an accountancy discount but might be susceptible to a ‘modest’ court discount.
• The liquidity of the business. What can be drawn? How long is the paying party likely to have to wait before extracting value from the business?
• The fragility of the valuation. If the valuation is calculated on an earnings basis, then it relates to future profitability and is arguably less certain than a net asset valuation, e.g. that of a property investment business. There are different types of earnings-based valuations, too. Many use an EBITDA x multiplier +/- surplus/deficient assets as an approach. EBITDA will change annually, and there is often a debate about the multiplier, showing that different purchasers would adopt different approaches. Revenue generating businesses (e.g. hotels) may be valued on a discounted cashflow model, which is highly susceptible to large swings with minor variations in the methodology.

There is a raft of cases that deal with the fragile nature of private company valuations. An example in practice is S v S (Ancillary Relief after Lengthy Separation) [2006] EWHC 2339 (Fam), [2007] 1 FLR 2120, where Singer J noted the following:

‘[32] In April 2004 the accountants were a mere £14m apart, weighing in for W at £24.75m and for H at £10.61m. They briefly narrowed their differences when they reported jointly in July 2004, each moving about £1.4m towards the other. Mr Nedas, in his first report shortly before the abortive hearing before Baron J in June last year, retreated to a value of £4.66m to which Mr Lobbenberg responded the following month with a revised valuation of £23.5m. But when they met to see what common ground there was they discovered that there was less even than had been apparent, Mr Nedas reducing his valuation to £4.35m while Mr Lobbenberg increased his to something over £30m (revised on the eve of the hearing down to £27.2m). By then however Mr Nedas valued H’s shares in T Ltd at no pounds at all. For the purposes of the hearing, however, (and for reasons which do not matter for present purposes) the application proceeded upon the basis that H’s advisers took H’s shares to be worth either £4.35m or £3.73m (to include the value of his own preference shares).’

Note that the husband sold the business for £137,000,000 approximately one year after the hearing. The wife’s application to set the order aside failed (the case is reported as Stefanou v Gordon [2010] EWCA Civ 1601, [2011] Fam Law 458).

For example, in Chai v Peng [2017] EWHC 792 (Fam), Bodey J discounted the valuation by 30%, of which 10% was to reflect the fragility of the valuation and 20% to reflect illiquidity. Controversially (at least in the mind of Mostyn J in WM v HM [2017] EWFC 25, [2018] 1 FLR 313 (the first-instance decision in Martin)), Bodey J divided the assets 60/40 in the husband’s favour, to reflect the fact that the husband was retaining business assets. Mostyn J considered this to be double-dipping. There is an alternative construction, which is that the valuation was discounted to reflect the inherent risks in the business (Laura Ashley) and lack of liquidity in that business, but that those discounts did not reflect the fact that the husband would retain the majority of his assets in business assets. It is a fine distinction, though.

A court does not have to apply a discount. In R v R (Financial Relief: Company Valuation) [2005] 2 FLR 365, Coleridge J rejected an argument by a husband to discount the value of his shareholding in a business because of the risk factor: ‘[23] I think there is certainly a risk factor but I think there is also a reward factor, given the nature of the business and the husband’s track record. The husband does need a breathing space, I find, to rebuild the company to its former strength. The wife should be paid out in full but in an orderly way so as not to destroy the goose, as it is sometimes described, that lays the golden egg’. However, although Coleridge J ordered the husband to pay the wife £900,000 over 7 years, he incentivised the husband by reducing the amount he would have to pay if the sum was paid earlier. In HO v TL, one of the reasons why Peel J only applied a modest court discount was that the husband could sell the business and it was his choice to retain it. That business had been built up jointly by the parties during the marriage, though.

If it is possible to buy out the other party’s inchoate share by way of lump sum payments or a lump sum by instalments, that is usually preferable, because it allows for greater certainty and a deferred clean break. However, if it is not possible to do so (because of liquidity constraints), then a court will need to consider other options, such as a sale, transfer of shares, or deferred lump sum. I will consider this in more detail below.

Distribution

The main question is whether the outcome to the case is likely to be driven by the sharing principle or the needs principle. In a ‘needs’ case, the value and future maintainable profit of the business is part of the background, and will have an impact on the evaluation of needs. But the most important factor is likely to be the ability of the business owner to extract funds to meet the other party’s needs. In this scenario, a court can consider:

• transferring funds from non-business assets;
• the extent to which funds can be drawn from the business (net of any applicable taxes). This will usually be by way of drawing against any sums owed by way of loan/capital account, dividends, salary and/or bonuses;
• whether the business could borrow to fund the extraction of capital;
• whether the paying party can personally borrow against the value of the business assets; and
• whether any family or friends are willing to lend money to assist.

Bear in mind that the court will also need to consider the paying party’s needs. They are entitled to be housed and to have an income to meet their own needs. The court will also need to consider the fair distribution of business and non-business assets. If one party is receiving all the wheat and the other all the chaff, a court discount is usually appropriate (as considered above).

In a sharing case, the first question will be the extent to which the business should be shared, and the second question will be how that should be achieved.

Post-separation endeavour

If a business has been established during the marriage, then it is a straightforward case for equal division, unless there is a sustainable argument for special contribution (exceedingly unlikely) or post-separation accrual. The principles relating to the latter were recently considered by Moor J in DR v UG [2023] EWFC 68 at [50]–[54], where the husband’s post-separation accrual argument was unsuccessful and the assets were divided equally. Per Moor J, departures from equality to reflect post-separation accrual only usually occur if:

• it is a ‘new venture’ case, where a new business has been established post-separation;
• there has been, or will be, a significant delay between separation and ultimate realisation of the proceeds, and there is more to do after the date of trial to harvest the asset. Examples of this are private equity cases, where carried interest will usually fall in many years after the divorce, and JB v MB [2015] EWHC 1846 (Fam), where the wife was awarded 20% of the value of the company, reduced from 50% to reflect the significant delay since separation and the husband’s ‘very significant post-separation endeavour’; or
• there has been a long and unjustified delay in bringing the application (as in S v S [2006] EWHC 2339 (Fam), [2007] 1 FLR 2120; and
• earn-out/lock-in arrangements, where the payer has to continue to work in the business after the sale.

Moor J was clear that the above is not an exhaustive list. Further, post-separation accrual arguments should be treated with caution. In CO v YZ [2020] EWFC 62, Moor J said:

‘In general, post-separation endeavour is relied on to argue for a greater share of an increased value of the assets. I have always had real reservations as to the concept for the reason that, if the assets have fallen in value, it is difficult to see why the other party should not then argue that he or she should not have to share in that fall in value. Such difficulties are avoided if the concept is severely restricted in its operation. It is, of course, a very different matter if there has been a significant delay in bringing the application, such as in Wyatt v Vince, but that is not the case here. Just as the Husband has continued to run his businesses, so the Wife has continued her contribution in caring for the four children. Moreover, she can say with some force that he has been trading her undivided share. In this particular case, I will also have to consider the very significant losses that the Husband has incurred in other business ventures since separation that the Wife had no involvement in, or even, initially, knew about.’

Pre-marital businesses: evaluating the ‘matrimonial’ proportion

Courts have taken different approaches to evaluating the non-matrimonial proportion of businesses that were formed before the marriage. The leading case is Hart v Hart [2017] EWCA Civ 1306, supplemented by XW v XH [2019] EWCA Civ 2262. To summarise the applicable principles:

• Is there a sharp dividing line between matrimonial and non-matrimonial property? If so, there is no need for a detailed enquiry. If not, then there should be a proportionate enquiry.
• The court should make such findings as the evidence allows. The non-matrimonial property may be de minimis and thus ignored. There may be a clear dividing line between matrimonial and non-matrimonial property (which would allow a demarcation and more formulaic approach). If so, this should be stated. Or there may be a complex continuum where it is not proportionate or feasible to draw a clear line, in which case it is appropriate to leave the determination of the impact of non-matrimonial property to stage 3.
• The court must exercise its discretion in accordance with s 25 Matrimonial Causes Act 1973, bearing in mind all of the factors. This does not mean that non-matrimonial property will be ‘shared’. But the court needs to determine that the outcome is fair having borne all of the relevant s 25 factors in mind. If the court has been unable to draw a sharp line and has deferred consideration of non-matrimonial property to this stage, then the court must consider what lesser award than 50% makes allowance for that non-matrimonial property. In most cases, the court will be able to, and should, make clear at some stage what part of the value of the assets or assets the court has determined is non-matrimonial property. The court does not need to be formulaic and has a discretion to apply a broad assessment that accords with overall fairness.

The approaches that have been adopted are summarised below.

Jones – accountancy-based methodology

In Jones v Jones [2011] EWCA Civ 41, the Court of Appeal failed to give one single agreed rationale for their decision. The husband had established the company 10 years before the marriage and had sold it by the time of the final hearing for £25m. An SJE had valued the business as being worth £2m at the date of the marriage. Wilson LJ began by taking the historic valuation of £2m but then doubled it to reflect an inherent ‘springboard’ that was latent within the business (which he described as ‘highly arbitrary’), and then uprating it by an index to reflect passive growth, to give a total figure of £9m for the present value of the non-matrimonial property. The residue (£16m) was matrimonial and divided equally. The overall percentage was 32%, which was within what Wilson LJ felt was the bracket of overall fairness of 30%–36%. That figure was then deducted from the proceeds of sale of the business to arrive at a figure for the matrimonial property, which was divided equally.

Martin – linear apportionment

In WM v HM [2017] EWFC 25, Mostyn J felt that the expert’s valuation of the shares at the date of the marriage at £1.5m to £3.3m did not begin to reflect the true present value of what the husband had brought into the marriage. Mostyn J instead apportioned the value based upon a timeline, beginning with the business’s foundation in 1978. The parties cohabited from 1988 and separated in 2015. £176m was matrimonial and £45m was non-matrimonial. The wife’s appeal was dismissed – see Martin v Martin [2018] EWCA Civ 2866.

Impressionistic approach

Examples are:

• Robertson v Robertson [2016] EWHC 613 (Fam), where the husband had founded ASOS, the online clothing company. The company had its roots in another company founded by the husband 6 years before the marriage, which lasted for 10–11 years. The husband’s ASOS shares were valued at £141m at the date of trial. Holman J felt that the expert’s valuation of the husband’s shares at the start of the marriage (£4m) failed to reflect the amount of work done by the husband on the business project before the marriage. Fairness required the shares to be treated as half matrimonial and half non-matrimonial.
• XW v XH, where the Court of Appeal had to form its own impression because the first instance Judge had not been specific about the extent of pre-marital value. At [163], Moylan LJ stated:

‘It is clear that, as in Robertson, the Company had its roots in a business started some years before the marriage, as reflected in the graph in the judgment, at [200]. I would also note that the graph of the Company’s progress in terms of turnover appears to be similar in shape, a J, to that of the company in WM v HM, at [18]. Applying the judge’s determination that the ultimate success of the Company was attributable to “a not inconsiderable extent” to its pre-marriage “foundations” and that they remained a “significant” factor, I consider that it would be fair to both parties to treat 60% of the wealth derived from the shares, of just under £490 million, as matrimonial property and 40% as non-matrimonial. This gives a figure of £293 million for the former and £195 million for the latter. If the former was shared equally between the parties, the wife’s share would be £146.5 million.’

• IX v IY [2018] EWHC 3053 (Fam). This case involved assets of £38m which largely derived from a business, Zebra, that was founded before the marriage but which the husband developed and sold during it. The marriage lasted for 8 years. The parties each had children from previous relationships but no children together. There was no SJE valuation evidence. At [107(7)(f)], Williams J found that 60% of the business was matrimonial because the idea had been in place for 5 years and development of the idea into a viable business was well underway before the start of the relationship. However, the cohabiting relationship lasted for 8 years until the business was sold.
• IR v OR [2022] EWFC 20. Moor J considered a business that the husband had inherited from his father. This was a long marriage and the parties had five children. The assets were £185m, excluding a further c.£30m that had been settled on trust during the marriage for the parties’ children. During the marriage, when the husband was CEO and later Executive Chair, the business had grown dramatically. The company was founded in the 1950s. By 1997 (when the parties married), there were approximately 20 stores in the chain. The business was sold before the parties separated for $1b (gross), by which time there were more than 100 stores in the chain. Moor J said the following of the linear approach: ‘I consider [the straight-line approach] is far more likely to be of use in a case where it is one of the spouses who formed the business prior to the date of the marital partnership commencing, as opposed to a previous generation founding the company.’

Although it remains a valid option, the Jones approach has fallen out of favour. To the best of the writer’s knowledge, there is only one reported case where Wilson LJ’s Jones formula has been applied (CO v YZ [2020] EWFC 62), and in that case Moor J observed that he might have adopted a Martin time-line approach had he not already ordered an historic valuation. Judges regularly find that the historic valuation is of little relevance. Retrospective valuations are expensive to obtain, require historic financial records to be available, and are based upon what a purchaser would have paid at the time (i.e. they exclude from the calculation any events that occurred since the valuation date). Historic valuations were effectively ignored in Robertson and XH v XW. The most recent word is that of Peel J in GA v EL [2023] EWFC 187 (dealing with a Daniels v Walker application):

‘[32] In my judgment, although there may be cases where the historical valuation exercise can be carried out relatively simply, and will clearly assist the parties and the court, I consider that there must be clear justification for this approach to be adopted before the court gives permission for expert evidence as to past values to be undertaken. It should very much be the exception, rather than the norm.’

The linear method has become more popular, even if just by way of cross-check. The reported cases are those of Mostyn J, but this approach was endorsed by Moylan LJ in Martin itself and by Moor J in CO v YZ. It has been applied to prospective sharing of private equity carried interest (see A v M [2021] EWFC 89). It was not applied by Moor J in IR v OR, because that was a case where the business had been founded by a prior generation. Moor J considered that the straight-line approach was more helpful in cases where one of the spouses had founded the business before the marriage.

The intuitive approach is probably the most common. Peel J said the following in GA v EL:

‘31.iv) Obtaining a historic, black letter accountancy valuation is not the only way of approaching this issue. The straight-line approach adopted by Mostyn J in WM v HM [2017] EWFC 25 received approval in Martin v Martin [2018] EWCA Civ 2866. Calculations by reference to approved indices might be of some utility. But beyond these tools, the court’s approach might involve a more nuanced assessment reached after consideration of increase in turnover, number of employees, the genesis of inspirational business ideas, the actual work undertaken by the party, how such work drove the business and the like. Every case, every set of circumstances, is different, and as was explained in H v H [supra] the court is conducting a s25 exercise, within which valuations may assist the court, but are not the be all and end all. Ultimately, the court will need to weigh up a multiplicity of factors with the degree of generality or specificity it thinks fit.’

The difficulty with the intuitive approach is that it is easy for unconscious biases to creep in – a homemaker can never ask for more than 50% of the value of a business, and a breadwinner can often find some argument for a departure from equality.

Alternatives where a lump sum or offset is not viable

In N v N [2001] 2 FLR 69 (FD), Coleridge J engagingly said:

‘I think it must now be taken that those old taboos against selling the goose that lays the golden egg have largely been laid to rest; some would say not before time. Nowadays the goose may well have to go to market for sale.’

However, the company was not sold in that case. The husband was given 2 years to raise a lump sum, although Coleridge J did find that a sale of the company was likely. In reality, there are very few cases where it will be necessary to force the sale of a company. Note, though, that Peel J had no qualms in treating the hotel business in HO v TL as a resource that the husband could sell to meet a lump sum order ([92i]).

A court can transfer a party’s beneficial interest in a business (whether shares, loan account, or partnership interest) to the other party. However, there may be restrictions in the articles of association or partnership deed that make this difficult or impossible, so be cautious before taking this step.

In AV v DC (No 2) [2012] EWHC 438 (Fam), Bennett J transferred shares to the wife (finding that this would not result in the business being disrupted), although the transfer could be resisted under the articles. The order provided that if the company or the other shareholders objected, the wife could consider her position and make any necessary applications.

Where there are other shareholders, bear in mind the court cannot adversely affect a third party’s rights to property unless they have been given notice of the proceedings and have had the opportunity to intervene (Tebbutt v Haynes [1981] 2 All ER 238). A third-party shareholder whose pre-emption rights might be affected by a transfer of shares as part of a financial settlement on divorce may consider intervening in the proceedings to protect their position.

There are also tax consequences to consider.

There are a few reported cases where a court has transferred an interest in the business to the other party, but they tend to be situations where the payee already has a shareholding or where it is the option of last resort. Examples are:

• G v G (Financial Provision: Equal Division) [2002] EWHC 1339 (Fam), where Coleridge J transferred shares in the husband’s business to the wife, who had a minority shareholding beforehand. They were held on trust, so that the husband retained the voting rights.
• C v C (Variation of Post Nuptial Settlement: Company Shares) [2003] EWHC 1222 (Fam), [2003] 2 FLR 493, where Coleridge J transferred 15% of a company’s shares (held in a Cayman Islands settlement) to the wife, in order to achieve equality, holding said that where a wife had played a part in a company and wished to continue being involved, there had to be a compelling reason why she should not be entitled to do so.
• P v P (Financial Relief: Illiquid Assets) [2004] EWHC 2277 (Fam), where Baron J divided the shares between the parties to effect ‘broad equality of assets, taking account of the fact that the husband has a greater proportion of illiquid assets in the division.’
• F v F [2012] EWHC 438 (Fam), where a shareholders’ agreement made between a husband and wife about a family company was held to be a post-nuptial settlement, was rescinded, and the wife’s shares were transferred to the husband.
• Versteegh v Versteegh (above), where Singer J found it was impossible to value the business or estimate its future liquidity. He therefore ordered that the wife should have shares in the husband’s business (despite her arguments to the contrary). The Court of Appeal upheld this decision. Although a Wells order was an unattractive outcome, there were few other options, and the result was within Singer J’s bracket of discretion.

The other Wells sharing option is to order a deferred lump sum equal either to a set figure or to a percentage of the net proceeds of sale of the business if/when it is sold. This is often the only option, particularly where there are other shareholders and/or pre-emption rights or vetoes of transfer in the constitutional documents relating to the business.

Wells sharing (whether by transfer of an interest or deferred lump sum) is easy to order in theory, but it does require very careful drafting, often with corporate law input, to make sure:

• that the net proceeds of sale are properly defined;
• that there is no jiggery pokery (e.g. winding up the business in question and transferring the assets/clients to a new business or parallel trading entity);
• that income payments relating to ownership share are captured (dividends or the equivalent);
• that the business’s viability is not jeopardised (e.g. by undue income or bonuses being drawn);
• if appropriate, that there is security, often by way of a charge over shares;
• if transferring an interest, that a suitable shareholders’ agreement or partnership deed is drawn;
• if any of the consideration for a future sale is an interest in a new company, purchaser company or merged company, that the order captures that consideration (whether insisting on a cash out or rolling the lump sum over); and
• that there is appropriate disclosure: (a) so that the payee can see how the company is operating (so the types of documents that a shareholder might expect to see); and (b) to corroborate the lump sum when it is paid.

Such orders can also lead to further litigation down the line.

Part 2: Case management

Case management must always be considered in the context of the claim. I suggest that advisers consider the following:

• How central is the business to the case? Is it the main asset in the case, or is it a side-issue? If of tangential relevance, don’t spend too much time and money investigating the finer points of detail.
• If you can tell, how is the business likely to be approached at trial?
• Is the outcome likely to be driven by needs or by sharing? If needs, focus on what can be extracted from the business. If sharing, a valuation will be necessary.
• What are the issues about which expert evidence is required? Try to narrow them if at all possible.
• Do the parties own the entirety or majority of the business? If not, how many third parties have rights, and to what extent will those rights feature? An asset (‘any property’) jointly owned with a third party cannot be sold without giving that third party the chance to make representations pursuant to s 24A(6) MCA 1973, although a party’s share in such an asset can be sold without joinder.

Expert reports

The test is at FPR 25.4. A court may give permission for expert evidence if an expert report is ‘necessary to assist the court to resolve the proceedings’ (FPR 25.4(3)). In Re H-L (Expert Evidence: Test for Permission) [2013] EWCA Civ 655, [2015] 2 FLR 1434, Munby P confirmed that ‘“necessary” means “necessary”’. It has ‘a meaning lying somewhere between “indispensable” on the one hand and “useful”, “reasonable” or “desirable” on the other hand’, having ‘the connotation of the imperative, what is demanded rather than what is merely optional or reasonable or desirable’.

FPR 25.5(2) requires the court to have regard in particular to the issues to which the expert evidence would relate; the questions which the court would require the expert to answer; the impact which giving permission would be likely to have on the timetable, duration and conduct of proceedings; any failure to comply with FPR 25.6 or any direction about expert evidence; and the cost of the expert evidence.

FPR 25.6(d) states that the application should be made no later than the First Appointment. Examples of exceptions include where it is necessary to consider replies to questionnaire before deciding whether to apply, and where valuations of properties have been agreed for FDR but no settlement is reached at that point (see FPR PD 25D, para 3.10).

The court will apply the overriding objective at FPR 1.1. Cases must be dealt with expeditiously and fairly; the case must be dealt with in a way that is proportionate to the nature, importance and complexity of the issues; the parties should be on an equal footing; the court should save expense; and the court should allot an appropriate share of the court’s resources to the case, bearing in mind the need to allot resources to other cases.

The court must manage cases actively (FPR 1.4). The checklist includes controlling the use of expert evidence (FPR 1.4(2)(e)) and considering whether the likely benefits of taking a particular step justify the cost of taking it (FPR 1.4(2)(i)). There should also be consideration of the President’s Memorandum: Experts in the Family Court (4 October 2021) which follows the Supreme Court’s decision in Kennedy v Cordia (Services) LLP [2016] UKSC 6. This sets out four governing principles: (i) will the proposed expert evidence assist the court, (ii) does the witness have the necessary knowledge and experience, (iii) is the witness impartial, and (iv) is there a reliable body of knowledge to underpin the expert’s evidence.

There is a presumption that any expert evidence will be given by a single joint expert (FPR 25.11; J v J [2014] EWHC 3654 (Fam) at [46] per Mostyn J).

What a court will expect

The burden is on the applicant for permission to rely on expert evidence to have taken the following steps.

They should have made a formal application, unless the applicant did not have sufficient time to do so, in which case they may make an oral application (‘which should be seen as the exception and reserved for genuine cases where circumstances are such that it has only become apparent shortly before the hearing that an expert opinion is necessary’ – FPR PD 25D, para 3.8). This should set out the following information (FPR PD 25, para 3.11):

• The field in which the expert evidence is required.
• Where practicable, the name of the proposed expert.
• The issues to which the expert evidence relates.
• Whether the expert evidence could be obtained from an SJE.
• The discipline, qualifications and expertise of the expert (by way of CV where possible).
• The expert’s availability to undertake the work.
• The timetable for the report.
• The responsibility for instruction.
• Whether the expert evidence could properly be obtained by only one party.
• Why the expert evidence proposed cannot properly be given by the expert already instructed in the proceedings.
• The likely cost of the report on an hourly or other charging basis.
• The proposed apportionment (at least in the first instance) of any jointly instructed expert’s fee, when it is to be paid, and, if applicable, whether public funding has been approved.

The applicant should also have made preliminary enquiries of any experts who might be instructed, including the following (FPR PD 25D, para 3.3):

• The nature of the proceedings and the issues likely to require determination by the court.
• The issues in the proceedings to which the expert evidence relates.
• The questions about which the expert is to be asked to give an opinion and which relate to the issues in the case.
• The date when the court is to be asked to give permission for the instruction (or, if permission has already been given, the date and details of that permission).
• Whether permission is to be asked of the court for the use of another expert in the same or any related field (that is, to give an opinion on the same or related questions).
• The volume of reading that the expert will need to undertake.
• Whether or not it will be necessary for the expert to conduct interviews (and if so, with whom).
• The likely timetable of legal steps.
• When the expert’s report is likely to be required.
• Whether and, if so, what date has been fixed by the court for any hearing at which the expert may be required to give evidence (in particular the final hearing) and whether it may be possible for the expert to give evidence by telephone conference or video link.
• The possibility of making, through their instructing solicitors, representations to the court about being named or otherwise identified in any public judgment given by the court.
• Whether the instructing party has public funding and the legal aid rates of payment that are applicable.

Each expert should have provided ‘in good time for the court hearing’ (FPR PD 25B, para 8.1). The preliminary information should include confirmation:

• That acceptance of the proposed instructions will not involve them in any conflict of interest.
• That the work required is within their expertise.
• That they are available to do the relevant work within the suggested timescale.
• When the expert is available to give evidence, the dates and times to avoid and, where a hearing date has not been fixed, the amount of notice required to make arrangements to come to court (or to give evidence by telephone conference or video link) without undue disruption to their normal professional routines.
• The cost (including hourly or other charging rates and likely hours to be spent) of attending experts’ meetings, attending court and writing the report (to include any examinations and interviews).
• Any representations that the expert wishes to make to the court about being named or otherwise identified in any public judgment given by the court.
• There should be a draft order (FPR PD 25D, para 3.12).

Whether to seek expert evidence

Decisions about whether to direct expert evidence will always be fact-specific. I suggest considering the following:

• What proportion of the business do the parties own?
• Who owns the remainder of the shares?
• Are there any documents that specify the valuation that must be adopted? This is most common in partnership deeds, but can appear in shareholders’ agreements, etc.
• Are the shares publicly quoted (if so, there is unlikely to be any need for a valuation)?
• Is there any indication or suspicion that the business will be sold within the foreseeable future?
• How close are the parties to retirement age, when it might be expected that the business would be sold or wound up?
• Are there complicated structures involving trusts and holding companies?
• Do the accounts show sizeable profits, or is the business simply an income stream for the family?
• Do the accounts show significant capital assets?
• How liquid does the business appear to be from the balance sheet?
• Is there a suspicion that the business’s capital is undervalued (e.g. is land included on the balance sheet at the historic purchase price)?
• Is there a suspicion that the accounts do not show the full picture; in particular, are there concerns about non-disclosure?

There are obvious cases where valuations are probably not required, for example a sole-trader’s self-employed business and small minority shareholdings in a FTSE company. There are also cases where it is clear where a valuation will be required, such as a company that was built up during the marriage and which shows large turnover and large profits. Many cases fall into the grey area in between.

Some types of company (such as holding companies that hold either properties or investments) will invariably be valued on a net asset basis, and so the main issue will be valuing the underlying assets and re-stating the balance sheet to take them into account. It would be better to obtain evidence about the underlying assets and ask the company accountant to re-state the balance sheet, or an SJE can be instructed on the basis that the task will be more limited and therefore (hopefully) proportionate.

There are examples where valuations have been found to be unhelpful, but that does not mean that it was wrong to obtain the valuation in the first place; rather that the court erred when deciding how to deal with the business within the context of the s 25 discretionary exercise. Classic examples are the ‘double counting’ cases (discussed above), where the business’s value is an income stream and where a maintenance order is a likely outcome. There may, for example, be a residual capital value that would be realised on retirement (much like a pension would be), which would be difficult to calculate if there is no expert evidence about the value.

Not every income stream should be valued. In Cooper Hohn v Hohn [2014] EWCA Civ 896, the wife made an application for permission to adduce expert evidence about the value of management entities through which the husband received an income stream for managing a hedge fund worth $1.15b. The income stream depended on the husband’s continued willingness and ability to manage the fund. The proposed evidence was a valuation of capitalised earnings, which was sought late in the proceedings, in breach of the court’s timetable and orders. Coleridge J dismissed the application. The wife’s appeal was dismissed. Ryder LJ held (at [37]):

‘Some assets cannot sensibly be ascribed a capital value. It is a fallacy that every asset must be valued in every case or even in every sharing case. Of course, the court will need to draw a balance sheet or asset schedule, but that does not lead to the conclusion that every asset must be valued in order for the court’s statutory duty to be complied with. The valuations sought in this case would likely be theoretical. It would not be a valuation of assets available for distribution between the parties.’

Ambit of the report

Remember that the scope of the instruction can be limited. For example, if the case is likely to be resolved by a maintenance order, you may only need a report about maintainable profits rather than capital value. In a needs-based case (where, for example, the company was pre-acquired), the main question may be of liquidity.

As discussed above, historic valuations are the exception rather than the rule. See, in particular, the judgments of Moylan J in Martin at [126]–[127] and XW v XH at [114].

Costs capping

Be wary of seeking a report without a cost estimate. Once an instruction has begun, there was little that the parties could do to rein the expert’s costs in. A court can cap the fees that the expert may recover in the first instance (FPR 25.12(5)).

Letter of instruction

The letter of instruction should be agreed between the parties. Note, though, FPR 25.12 and PD 25D, para 6.1 provide that the parties can email the court (copying the other party) and ask the court to resolve any dispute. Judges will be unenthusiastic about this – see CM v CM [2019] EWFC 16, where Moor J held that High Court Judges do not have sufficient resources to determine these disputes and that the parties ought to refer any disputes as a specific issue to an arbitrator.

Questions

Once the report has been obtained, the parties are each entitled to raise one set of questions ‘for the purpose only of clarification of the report’ (FPR 25.10). This also applies to solely-instructed experts. If an expert does not reply to the questions, then the court may direct that the expert’s evidence may not be relied on or that the party who instructed the expert may not recover the expert’s fees and expenses from the other party (FPR 25.10). Experts may apply to the court for directions for the purpose of assisting them in carrying out their functions (FPR 25.17). This is seldom used, but is possible where disproportionate questions are put and the expert seeks the court’s guidance about whether or not to answer them.

Daniels v Walker applications

For a detailed discussion of this topic, see the article by Nicholas Allen KC, ‘“For Reasons Which Are Not Fanciful” – Daniels v Walker Applications in Financial Remedy Cases’ [2022] 3 FRJ 175.

In most cases, the report of an SJE is accepted by the parties and may be submitted in evidence, so that the SJE does not have to attend the final hearing for cross-examination. However, there are cases where one party objects to the expert’s findings. The FPR do not make specific provision for instructing a new expert. Where the FPR are silent, the court may have regard to case-law decided under the CPR (although this is only by analogy and the court is not bound by that authority – see Goldstone v Goldstone [2011] EWCA Civ 39).

The leading case in this area under the CPR is Daniels v Walker [2000] EWCA Civ 508. This case is often misinterpreted as giving the parties freedom to obtain their own expert. In fact, in making the following points, Lord Woolf MR (at [28]–[29]) was more restrictive:

• The instruction of an expert jointly by the parties should be regarded as the first step in obtaining expert evidence on a particular issue.
• If a party wishes to obtain further information before making a decision as to whether or not to challenge the report of a joint expert, then that party should (subject to the discretion of the court) be permitted to obtain that evidence, provided that the reasons for obtaining additional information are not fanciful.
• In the majority of cases, it will not be a sensible approach for the dissatisfied party to ask the court immediately for permission to call a second expert.
• In general terms, where a modest amount is involved it may be disproportionate to obtain a second report in any circumstances.

Under the CPR, the position is different if a party seeks to resile from the evidence of their own expert (as opposed to an SJE). If an expert was named in the order, then that party would need permission to instruct a new expert and the first expert’s report must be disclosed before they can rely on the new expert (Beck v Ministry of Defence [2003] EWCA Civ 1043). However, if a specific expert had not been named in the order, then permission is not required (Hajigeorgiou v Vasiliou [2005] EWCA Civ 236). The courts actively discourage ‘expert shopping’.

Lastly, there is a reported decision about a Daniels v Walker application in a financial remedies case. In GA v EL, Peel J held that such an application needs to satisfy the ‘necessity’ test (at [26]). At [28], Peel J summarised the applicable approach:

‘Whether the further expert evidence is “necessary” will be informed by the approach advanced in Daniels v Walker [2000] EWCA Civ 508 and several subsequent cases including Cosgrove & Anor v Pattison [2001] CPLR 177, Peet v Mid-Kent Healthcare NHS Trust [2001] EWCA Civ 1703 and Kay v West Midlands Hinson v Hare Realizations Ltd. From these authorities, I draw the following principles:

i. The party seeking to adduce expert evidence of their own, notwithstanding the fact that a single joint expert has already reported, must advance reasons which are not fanciful for doing so.

ii. It will then be for the court to decide, in the exercise of its discretion, whether to permit the party to adduce such further evidence.

iii. When considering whether to permit the application, the following non-exhaustive list of factors adumbrated in Cosgrove & Anor v Pattison (supra) may fall for consideration:

“… although it would be wrong to pretend that this is an exhaustive list, the factors to be taken into account when considering an application to permit a further expert to be called are these. First, the nature of the issue or issues; secondly, the number of issues between the parties; thirdly, the reason the new expert is wanted; fourthly, the amount at stake and, if it is not purely money, the nature of the issues at stake and their importance; fifthly, the effect of permitting one party to call further expert evidence on the conduct of the trial; sixthly, the delay, if any, in making the application; seventhly, any delay that the instructing and calling of the new expert will cause; eighthly, any special features of the case; and finally, and in a sense all embracing, the overall justice to the parties in the context of the litigation”.

iv. For my own part, I would draw particular attention to the words “the overall justice to the parties in the context of the litigation” which seems to me to encapsulate neatly the court’s task.’

Parties were allowed to adduce Daniels v Walker accountancy experts in the following financial remedies cases, but no reasoning was reported: R v K [2017] EWFC 59, FW v FH [2019] EWHC 1338 (Fam), CO v YZ [2020] EWFC 62, and E v L [2021] EWFC 60. In CG v SG (where there were millions at stake), HHJ Hess allowed both parties to call their own experts. The wife was granted permission first. She then opposed the husband’s later application to call his own expert, but was criticised for taking that stance.

If permission is granted, the court will direct that the experts meet and prepare a schedule of agreement/disagreement.

Cross-examination

FPR 25.9 provides that expert evidence will be in a written report and that the court ‘will not direct an expert to attend a hearing unless it is necessary to do so in the interests of justice.’ It is worth remembering that an expert provides opinion evidence to the court, and does not answer the question definitively. If either party wishes to challenge the expert’s assumptions, they should usually be given the opportunity to test the expert’s evidence under cross-examination (cf. TUI v Griffiths [2023] UKSC 48). It may be possible to avoid this by directing written questions on the relevant points in advance of the hearing (note that this would need to be a specific direction). A court can also make a costs order if you find that the costs of the expert’s attendance ought to be borne by the party who cross-examined that expert.

If there is more than one expert, those experts disagree, and the disagreement is likely to have an impact on the final outcome, then both experts will need to be cross-examined. A court can ‘hot tub’ the experts, by asking them to give concurrent evidence. The advantage of this is that the court can deal with issues point-by-point, rather than hearing one expert’s evidence and then waiting to hear the other expert’s. There can also be a free dialogue. The downside is that it requires the judge to be abreast of the main issues, so that the evidence can run to a set agenda.

If both parties have jettisoned reliance on the SJE in favour of their own experts, then you do not need to call the SJE to give evidence (CG v SG), but courts did do so in CO v YZ and in XW v XH (on a question of Italian law rather than valuation).

After the hearing

Experts are entitled to know how their reports have been used. In my experience, FPR 25.19 (quoted below), is honoured more in the breach:

‘(1) Within 10 business days after the final hearing, the party who instructed the expert or, in the case of a single joint expert, the party who was responsible for instructing the expert, must inform the expert in writing about the court’s determination and the use made by the court of the expert’s evidence.

(2) Unless the court directs otherwise, the party who instructed the expert or, in the case of the single joint expert, the party who was responsible for instructing the expert, must send to the expert a copy of the court’s final order any transcript or written record of the court’s decision, and its reasons for reaching its decision, within 10 business days from the date when the party received the order and any such transcript or record.’

Questionnaires

It is common for the non-paying party to ask questions about the business. They may or may not have had input from their own shadow expert. Standard questions will include:

• Financial statements/accounts going back 3 years.
• Evidence of the interest (e.g. shareholdings).
• Ledgers showing drawings/transactions on capital, current or loan accounts, probably for 2 years, but the length of time would be case-dependent.
• Copies of any partnership deeds (including variations) and/or any shareholders’ agreements.
• Details of the value at which assets are carried in the accounts, along with any valuations of those assets.
• Updating management accounts prior to the FDR (if the business produces them).

Other questions will be business-specific.

If there is a long list of detailed questions and an SJE is to be instructed, the court may send that list to the SJE and direct that the SJE request that information if the SJE considers that information is necessary for the purposes of preparing the report. The party raising the questions can always repeat any request that the SJE has not made after the SJE’s report has been obtained, but would need to show a good reason why those questions should be answered.