Following a divorce, spouses will likely consider dividing family property and settling support. However, dealing with equalization may raise issues of ownership and valuation of assets. The parties will have to make financial disclosure, which can include providing valuations of assets such as any business interests or real estate. This can hinder the resolution of issues if the parties dispute the proper valuation of a piece of property. Some cases may require a spouse to obtain a formal valuation to determine the proper value of an asset.
Parties Have an Obligation to Provide Valuations for Assets
Kraemer v. Kraemer dealt with the appraisal of a matrimonial home. The respondent maintained that he could not be required to value the home and that the value would be decided when the house was sold. Rule 13 of the Family Law Rules requires that parties file financial statements and make full and frank disclosure of their financial situation. Cases have repeatedly found that the objective of the Rules is to require accurate disclosure to deal with equalization and promote the early resolution of issues. When deciding who nears the onus of establishing the value of a property, the judge looked to Menage v. Hedges. That case acknowledged that legislation did not specifically state who was required to establish the value of the family property. However, because the property may be under the control of one party, it was accepted that the party having ownership or control had the primary onus of establishing its value. In cases where the valuations are not challenged, no further evidence justifying the values will be required. But if there is an issue about a value, the party must establish the accuracy of their sworn statement on a balance of probabilities.
In a similar case, Sheikh v. Sheikh, the judge noted that a party had to “provide credible evidence in support” of their valuation, which meant providing a “realistic value for each asset, not a guess or a fictional amount.” That case also warned that failure to provide evidence in support of a value could result in a value being assigned that is less advantageous to the party. Based on the case law, in Kraemer, the respondent did have an obligation to provide an accurate valuation of the matrimonial home. He provided a value that he claimed came from his knowledge of the real estate market, talking with friends and family, and as an opinion from a real estate agent. As the respondent used that opinion to support the value he set out in his financial statement, it was a relevant document that had to be produced.
Significant Assets may Require Professional Valuations
In Laurent v. Laurent, the husband had a real estate portfolio he held personally and through corporate vehicles. He sought to use MPAC assessments from the Municipal Property Assessment Corporation to support their value. The wife opposed this and argued that MPAC assessments were insufficient to prove the properties’ value and that third-party real estate appraisals were required. The Ontario Assessment Review Board had previously acknowledged that “MPAC’s valuations are based on a mass appraisal system and can generate inaccurate results for individual properties”. Based on that, the judge determined that MPAC assessments are not reliable estimates of the fair market value of any particular property. The husband had an obligation to provide credible evidence of the value of his real estate portfolio. While disclosure must always be relevant and proportional, the judge found that where a party has the means and ability to determine a credible value for significant assets, the party should be required to do so. The wife was correct that MPAC assessments were insufficient, and the husband had to provide third-party appraisals for his real estate interests.
Disclosure Must be Relevant and Proportional
Disputes can frequently arise about how to value a party’s business interest. In Witkin v. Storm, the applicant’s wife sought an order that the husband obtains a valuation of his interest in a corporation. The husband owned 33% of its shares as of the separation date. However, the husband received dividends from the corporation, after which the corporation became dormant with only a minimal amount in its bank account. The husband argued that his shares were excluded from equalization and that a business valuation was unnecessary. The Family Law Act does not include a definition of value. However, prior case law, including Menage v. Hedges, had concluded that when valuing a business, the fair market value should be used unless the court determined that method would result in an inequitable valuation. In this case, the judge was not clear that the value of the dividends that the husband received amounted to the asset’s fair market value on the valuation day. One entity was a holding company that owned shares in another company that owned land and earned rental income. For the judge, a range of factors should be considered when determining the value of the husband’s interest in the company, which could be different from the criteria used to calculate the dividends paid to him.
The husband asserted a proportionality argument that the cost of obtaining a business valuation would be disproportionate to the value of his share of the asset – namely, his dividend income. While that might be true if the dividend income is the proper value of the asset as of the valuation date, there was not enough evidence for the judge to determine that would be the outcome. The judge looked to the decision in Kraemer, holding that parties have the onus of providing credible evidence of the value of their assets and liabilities. Here, there was a dispute about whether one of the husband’s corporations was an asset excluded from equalization, but the judge could not presume that its value would not be relevant to equalization. Moreover, this did not absolve the husband of his obligation to provide evidence of the corporation’s value. Ultimately a certified business valuation was required to determine the value of the husband’s business interests.
Valuations Help to Equitably Divide Property
Valuing property during divorce can be a complicated process. Disputes can arise over the valuation of a spouse’s property interests. Parties who own or control an asset must establish the value of any property. Each spouse must support their proposed valuation with any supporting documentation they have. In some cases, parties must retain a third party to conduct a valuation which may help mitigate disputes.
Contact Ottawa Family Lawyers For Advice On The Valuation Of Assets In A Divorce
The skilled and trusted family lawyers at Tierney Stauffer LLP in Ottawa are passionate about helping clients navigate their family law matters. As trusted leaders in the Ottawa legal community, we can provide you with valuable information tailored to your unique situation so that you know what to expect and can understand your rights and obligations. To discuss your matter further or arrange a consultation, please contact us at 1-888-799-8057 or visit us online.