Divorce dispute over art business valuation

Introduction

The Central Family Court recently resolved a complex financial dispute arising from the divorce of Ms GO and Mr YA. The case, presided over by His Honour Judge Edward Hess, revolved around the valuation of a significant art business owned by Mr YA, which became a focal point in the financial remedies proceedings.

Background

The marriage between Ms GO and Mr YA, both of state retirement age, began in the 1970s and produced two adult children. The marriage broke down in 2019, leading to divorce proceedings initiated by Ms GO in July 2021. The financial dispute centered on the valuation and division of assets, particularly Mr YA's art business, in which he held a 95% stake.

Financial Proceedings

The proceedings commenced with Ms GO filing Form A in September 2021, followed by the exchange of Forms E in November 2021. The husband's Form E valued his art business at approximately £6 million, a figure contested by the wife, who believed the assets were undervalued. The court appointed a Single Joint Expert (SJE) to value the art collection, a process that faced numerous delays and disagreements.

Valuation Dispute

The SJE's report in November 2022 valued the husband's personal art collection significantly higher than his initial estimate, leading to further disputes. The valuation of selected art pieces was approximately 50% higher than the husband's figures, prompting the wife to argue for a corresponding uplift in the business's overall valuation.

Legal Arguments

The court had to navigate complex legal arguments, including the application of the Rule in Browne v Dunn, which requires parties to challenge evidence through cross-examination if they wish to contest it. The husband's failure to challenge the SJE's valuations led the court to accept these figures in its assessment.

Judgment

Judge Hess concluded that the business's value should be set at £13 million, considering a staggered sale over 7.5 years. The court ordered the husband to pay the wife a lump sum of £3 million by December 2025, with a provision for selling the business if the payment was not made. The judgment aimed to balance the risks associated with the business's illiquidity and the wife's need for financial security.

Outcome

The court's decision reflects a careful consideration of the complexities involved in valuing private businesses and the need to ensure a fair outcome for both parties. The judgment provides a framework for the husband to either raise the funds or sell the business, ensuring the wife's financial claims are met while considering the husband's circumstances.

Conclusion

This case highlights the challenges courts face in divorce proceedings involving complex asset valuations, particularly in niche markets like art. The judgment underscores the importance of expert valuations and the need for parties to engage with such evidence critically.

Learn More

For more information on resolving complex financial disputes in divorce cases, see BeCivil's guide to UK Family Law.

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