Valuations: Where Experience Independence & Intent Becomes the Deciding Issue

Valuations: Where Experience Independence & Intent Becomes the Deciding Issue

This is an examination on certain applicable deliberations by Boddice J of the Supreme Court of Queensland in a civil trial that occurred during 2015, connected with a disputed business valuation.

In this hearing, his honour accepted that a Chartered Accountant, being a partner in a large city-based public practice was qualified – but he determined that those qualifications held, did not meet the parties intended needs.

Further, that the actual independence of that accountant became cause for concern

And finally that there was insufficient evidence of an appropriate course of action and methodology in that persons opinion of valuation to warrant changing his position.


The case in question was a argument between ex-partners and the business valuations they presented to the court. These two people, had been in business for only a short while when their specialized relationship soured.

They determined that a “Licenced Valuer” would be engaged to provide an opinion of value – and that value would be apportioned to each 50/50 when one party bought the other out.

The elements highlighted in this report, from the transcript of proceedings are concerned with three aspects within the deliberations of Boddice J. [Leach v Ross & Anor (2013)]

Point 1: What did the parties average when they hit a bargain to seek the opinion of a Licenced Valuer; and did a qualified accountant meet the criteria?

Point 2: Did the accountant approach the task with true independence?

Point 3: Was the time of action and methodology applied by the accountant “Fit-For-Purpose?”

Of particular importance is the fact that in Queensland, a “licenced valuer” (Which was the term used in the agreement between the parties in argument) holds a qualification as a land valuer and no more. The parties were not seeking a valuation of land – but of a business.

His honour stated “There is an agreement between the parties… (but) there is no such thing as a licenced valuer… the terms of the agreement included a person that does not exist”

His honour in attempting to determine what the parties meant, and who the parties wanted to provide their valuation – asked the question “Who might be the kind of person who could fit the description of the contract”

In his deliberations and comment, his honour arrived at someone “where a scheme exists for registration of valuers, where that person has gone by a course of action… of being recognised and accredited; and that includes issues of being a fit and proper person and all of the matters that a board must consider.”

“Now there is no such person (as a licenced valuer) But where there is, is licenced indicates a form of registration. There is a person called a Registered Valuer.”

Your experts are not properly qualified as valuers… They’re not Registered Valuers. They’re accountants… ” Further, his honour stated; “The experts you have put forward do not fall into that category and, in the circumstances, I do not see… that I can find they do fall within the category of people that the parties agreed would estimate the value of the business.”

In summary, when the barrister for the first party asked the estimate to rule on the appropriateness of the different skills of the authors of two separate valuations… between a well-qualified Accountant and a well-qualified Registered Business Valuer, it was the Accountant who did not keep up the applicable qualifications needed.

As closer scrutiny on the accountants actual work progressed, His honour asked questions of the accountants work and confirmed:-

• The accountants initial scrutiny and investigation also included scrutiny (of the business) on behalf of a possible investor – a person identified as a “co-investor” of the accountant in businesses.

• The accountant received just two sheets of paper, and whilst requests were made for “proper books” no other information was provided.

• The accountant “made an offer” on the basis of that limited scrutiny.

The limited work the accountant truly performed, and on the facts, that his opinion of value was derived solely from summarised financials (two sheets of paper) was incredibly risky.

The accountant truly made an offer to buy on behalf of his third party; a “co-investor”

This leads me to believe the accountants role was neither sufficiently identified in scope, nor sufficiently independent and would never be admissible. Indeed his honour commented on this, but was not ultimately required to rule on independence.

Continuing on the minor point of scope of work; His honour baulked at permitting the admissibility of the work performed by the Chartered Accountant. He rejected the work on this basis… “What is in issue is whether the value – the methodology that is adopted, is appropriate for valuation of this kind of business.

The party reliant upon the accountants’ valuation lost – because that valuation was not accepted…


Reliance on work that is not fit-for-purpose, that cannot be defended by its author on the basis of scope, course of action and methodology adopted; will fail.

A valuation and a valuer must be, and be seen to be, truly and factually independent.

A Registered Business Valuer has experienced a course of action of education, testing, assessment and ultimately accreditation by a specialized body. That person is recognised as meeting the specialized standards of the assessing body and they keep up their qualification by virtue of the bodies specialized and ethical conduct.

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