Independence And The Financial Expert

A financial expert has to be fiercely independent given the recent changes to the Rules of Civil Procedure regarding expert witnesses in family law cases.

By: Suzanne Loomer (Ontario)

Financial experts are often retained in family law matters to provide a business valuation (if one or both spouses owns a business) or an expert report quantifying the income available for support purposes.  In providing an expert’s report, a financial expert must be, and must be seen to be independent and objective.  While this requirement has been prescribed in professional standards governing the valuation profession for many years, recent changes to the Rules of Civil Procedure regarding expert witnesses, and a recent family law case where an expert’s objectivity was called into question, highlight the importance of retaining an expert that will remain independent and objective.

Independence and the Financial Expert

Chartered Business Valuators (CBV’s) are often retained as independent experts to provide an expert’s report on one or more financial matters in a family law case.  The Canadian Institute of Chartered Business Valuators (CICBV) was founded in 1971, and oversees the qualification, certification, continuing education, ethical, professional and discipline standards of CBV’s.

According to the CICBV Practice Standards, an expert report must include a statement that it was prepared by the Valuator acting independently and objectively, that the Valuator’s compensation is not contingent on an action or event resulting from the use of the Report; and that the Report has been prepared in conformity with the Practice Standards of The Canadian Institute of Chartered Business Valuators. These standards have been in place for many years.

More recently, though, under the Rules of Civil Procedure, Rule 53.03 entitled “Expert Witnesses”, an experts is now required to acknowledge that it is his/her duty to provide evidence that is fair, objective and non-partisan and related only to matters that are within his/her area of expertise.  A certificate is to be attached to the expert’s report stating this acknowledgment.

A recent family law case before the Ontario Superior Court of Justice (Berge v. Wood), provides a good example of the importance of an expert maintaining independence and objectivity and how the weight that a court may afford an expert’s opinion is greatly reduced if the expert’s independence is in question.

In Berge v. Wood, the court’s view as to the reliability of the experts before it had an impact on the weight given to each expert’s report. One of the issues in Berge v. Wood was the valuation of an audiology practice.  The husband and wife each retained their own expert to determine the value of the practice.

Importance of Being Candid, Careful and Consistent

The court found that the evidence put forward by one of the experts was considered by the court to be candid, careful, and consistent and appeared to the court to be fair, objective and non-partisan.  In contrast, the court considered the other expert to be “vague, evasive, inconsistent” and partisan.  As a result, certain aspects of the latter expert’s evidence were given little or no weight.

This case provides family lawyers with some guidance concerning what to look for in ensuring that the expert report will stand up to scrutiny from an independence perspective.  Here are some “red flags” to look for:

• Assumptions or statements within the report that are internally inconsistent;
• Little due diligence or documentary review listed in the expert’s scope of review;  and
• Key assumptions that have not been tested for reasonability against the facts of the case or against independent research.

A properly qualified expert provides expertise to the court in an unbiased and objective manner. Family law lawyers can play an important role by assisting their clients in finding the right expert and vetting the expert’s report to ensure that his/her independence is maintained throughout the process.

____________________________________________________________________________________________

Suzanne Loomer MAcc, CA, CBVis a Managing Director of Campbell Valuation Partners Limited.  Suzanne provides assistance to clients and the courts with respect to the valuation of businesses and the calculation of income for support.  Suzanne has qualified as an expert in the Ontario Superior Court, Federal Court of Canada and in mediations and arbitrations. She is the co-author of Financial Principles of Family Law, a Carswell publication.

Related Articles

Financial Advisors Must Collaborate with Other Professionals in High-Net-Worth Divorce