An article in the Herald Sun on 1 July 2016 reported that a wealthy Melbourne Real Estate Director has been accused of collusion, after a mansion sold for $8 million after the finalisation of a property settlement (whereby the Real Estate Director valued the property $3.13 million less, just eight months prior).
The Wife agreed to a property settlement for the Husband to retain the real estate property and she receive a cash adjustment sum. The parties’ allegedly engaged the Real Estate Director to provide an “independent” valuation, prior to agreeing to the terms of settlement.
Notwithstanding a Facebook post claiming the sale price of the home “exceeded expectations”, the significant difference between the value used in the family law negotiations, compared to the sale price, was of concern to the wife.
An order has since been made at Court injuncting the Husband “from destroying or disposing of documents and communications between himself and other agents that may shed light on what transpired, until the matter returns to court”. At the time of the article being published, the Husband and the valuer had not yet had the opportunity to respond to the collusion claims.
Whilst there has not been any determination, in family law property settlement negotiations or litigated matters, where the value of an asset is in dispute, the default position is to engage an expert to value the item. Some parties prefer to save money and instead take an average of market appraisals. However no matter what method is used, there is an element of discretion of the “expert” that cannot be overcome. To realise the true value of the item, the item should be sold in an open market, in an arm’s length transaction.
It is not uncommon for parties to set out estimated values of items when calculating the net value of the pool of assets available for division. However, such estimates must be given in good faith and should be supported by evidence. Otherwise, if one person has been fraudulent or has not provided full and frank disclosure as to their true financial position, then this could be the basis to set aside any orders made in respect to property settlement. Then, the Court can determine instead a fair and equitable property adjustment.
Absent any unconscionable conduct on behalf of the Husband or the valuer, it may be difficult for the Wife in this matter to seek further funds be paid to her from the sale proceeds of the house. It was always a risk that the property could indeed have been valued at a higher price. Whilst it is unfortunate for the Wife, if the Husband was lucky enough to sell the property at a much higher (unexpected) price, then it could be difficult for the Wife to convince the Court to set aside the final property orders made enforceable, that provided the parties with a clean financial break from each other.