Daniels v Walker Applications

On 31 October 2023, Peel J handed down a judgment in GA v EL [2023] EWFC 187, involving an application to adduce evidence from a second forensic accountant three weeks out from a final hearing.

The husband wished to argue that the value of his business interests had risen exponentially since separation.  The parties therefore obtained a report from a SJE which included a valuation of the parties’ business interests at separation.  Oddly, and contrary to Mostyn J’s observations in E v L [2021] EWFC 60, the SJE had been asked to blind himself to what had actually happened since separation and to value the business as if it was 2019 (the “present day approach”), rather than using knowledge of what had actually happened since then (the “hindsight approach”).

In the judgment Peel J makes a number of useful points.

First, pursuant to the 2016 High Court Efficiency Statement, position statements for interim hearings should be no longer than 10 pages.  Peel J castigated leading counsel on each side for exceeding the limit (and the 350 bundle limit).  (No sanctions were applied, and so providing counsel and solicitors have sufficient brass neck it seems the limits will continue to be ignored.)

Secondly, the test for adducing further expert evidence is as follows:

a) Pursuant to Part 25, the starting point is always whether or not the expert evidence is necessary.

b) The party seeking to adduce the further evidence must advance reasons which are not fanciful (the familiar Daniels v Walker test).

c) If this hurdle is jumped the court then has a discretion as to whether to permit the evidence to be adduced.

d) In exercising that discretion the court will have regard to all the circumstances of the case, in particular:

(i) The nature of the issues.

(ii) The number of issues.

(iii) The reason the new expert is wanted.

(iv) The amount at stake.

(v) The effect of granting permission.

(vi) Any delay in making the application.

(vii) Any delay which will result if the application is granted.

(viii) Any special features of the case.

(ix) The overall justice to the parties.

In refusing the application, Peel J placed particular reliance on the last of these.

Thirdly, there will usually be limited utility in obtaining historic valuations of companies for the following reasons:

a) Company valuations are fragile anyway.

b) The further into the past the valuer looks the less robust his or her conclusions will be.

c) The extent of the pre and post marital wealth is a matter for the court.

d) A straight-line approach or a valuation by reference to indices may be just as appropriate, and the court’s approach will be nuanced.

e) There is a risk of satellite litigation.

On this basis Peel J expressed the view that the issue the second expert was being asked to give evidence about was to a large extent academic and unnecessary.  He also felt that the difference between the experts was relatively modest and the trial was too close.

Peel J emphasised that there was nothing to prevent the wife from putting to the SJE the questions and issues raised by her own expert.

In summary, applications to adduce further expert evidence are common and this is a useful summary from the lead Financial Remedy judge as to how these applications will be dealt with.

Courts accept that company valuations are more an art than a science and will focus on the current value rather than the historic.  Post-separation accrual may be relevant but the extent will depend on broad principles of fairness rather than a specious search for precision.

Nick Sproull

14 November 2023