When Property Valuation Mistakes Lead to an Appeal

How does an inaccurate property valuation affect settlement in separation proceedings?

Property settlement after separation can be complex, especially when significant assets are involved. Valuations of property, whether real property or otherwise, form an important part of family law property disputes that inform these settlements.

In Perna & Perna [2024] FedCFamC1A 183, the Federal Circuit and Family Court of Australia overturned final property orders because the trial judge relied on inaccurate and inadmissible evidence to assess property value.

This case is a powerful reminder: when it comes to family law property cases, detail matters. It is important to obtain expert advice from an accredited family law specialist about any aspect of your family law property case.

Rowan Skinner is a highly experienced property dispute lawyer and family law specialist. Consult with Rowan Skinner for expert family law legal advice and to seek help in navigating your family law and property disputes.

Why are property valuations relevant to separation proceedings?

Mr and Ms Perna were married for nearly 30 years before separating in 2019. During their marriage, they built a substantial farming operation and accumulated assets worth over $12 million, including two rural properties. These properties were originally connected to the wife’s family and were partly purchased through loans and vendor finance from her parents.

A key point of dispute was the 2009 purchase of one of the properties, which the wife claimed was sold to her and her siblings at a 20% discount below market value, which was a sign of her parents’ generosity. The husband disagreed, saying there was no evidence to support the claim of a discount.

How does one party receiving significant gifts during the relationship affect the division of property during separation?

At trial, the judge accepted the wife’s position and concluded that her parents’ financial generosity — including the discounted sale of the property — counted as a substantial contribution in her favour. As a result, the wife was awarded:

• 54% of the assets acquired during the marriage, and
• 100% of the post-separation assets, including her inheritance.

The husband received a minor 1% adjustment to account for his future needs, but overall, the decision resulted in him receiving significantly less, representing a difference of nearly $950,000.

How important are the sources of property valuations in separation proceedings?

The husband appealed the decision, arguing that the trial judge made a material factual error. Specifically, he said the judge wrongly concluded that the property was sold at a 20% discount without any proper valuation evidence.

The appellate court agreed. It found that the trial judge had relied on lay opinion (statements from the parties and some conveyancing correspondence) rather than evidence from a qualified valuation expert.

What is the law on expert evidence when it comes to property valuations?

Under the Evidence Act 1995 (Cth), courts generally cannot accept opinion evidence unless it comes from an expert with specialised knowledge based on their training, study or experience. This rule is especially important in property matters, where market value plays a central role in deciding who gets what in a settlement.

In this case, the wife needed to prove that the property was worth more than the purchase price to support her claim of a 20% discount. Her evidence was based only on statements by the homeowner (her father), and herself, who were not considered experts by the court. Without an expert valuer, she couldn’t prove the property’s valuation, meaning that the judge’s finding on that point was legally unsound.

These are property proceedings where the rules of evidence apply. Section 76 of the Evidence Act 1995 (Cth) (“the Evidence Act”) provides that, unless an exception applies, “[e]vidence of an opinion is not admissible to prove the existence of a fact about the existence of which the opinion was expressed”. This includes an opinion as to the value of real estate.

A relevant exception to the exclusion of opinion evidence is that which relates to expert evidence as set out in s 79 of the Evidence Act. That section allows for the admission of an expert opinion if the person providing the opinion has specialised knowledge based on their training, study or experience.

What is a relevant exception?

In Watton v Mac Taggart [2020] NSWSC 1233, Ward CJ in Eq, as her Honour then was, held that evidence of the value of real estate is inadmissible unless provided by an appropriately qualified expert .

On this issue, it is relevant to note that, in order to fall within the exception under s 79(1) of the Evidence Act, evidence must satisfy two conditions:

• First, the witness must have specialised knowledge based on his or her training, study or experience (Dasreef Pty Limited v Hawchar (2011) 243 CLR 588; [2011] HCA 21 (Dasreef) at [32]; Honeysett v The Queen (2014) 253 CLR 122; [2014] HCA 29 (Honeysett) at [23]); and,
• Second, the opinion must be wholly or substantially based on that knowledge (Dasreef at [32]; Honeysett at [24]).

In Honeysett (at [23]), it was suggested that reliance on acquisition of knowledge through a person’s subjective life experience would not satisfy the first of these conditions. It was said that specialised knowledge is to be distinguished from matters of common knowledge; that the person’s training, study or experience must result in the acquisition of knowledge; and that the concept of “knowledge” connotes more than “subjective belief or unsupported speculation” but that it “applies to anybody of known facts or to any body of ideas inferred from such facts or accepted as truths on good grounds”.

In Dasreef, the High Court (French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ) said that “the expert’s evidence must explain how the field of ‘specialised knowledge’ in which the witness is expert by reason of ‘training, study, or experience’, and on which the opinion is ‘wholly or substantially based’, applies to the facts assumed or observed so as to produce the opinion propounded” (at [37], quoting Heydon JA, sitting as his Honour then was in the Court of Appeal, in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 (Makita) at [85]). Their Honours later observed that “[a] failure to demonstrate that an opinion expressed by a witness is based on the witness’s specialised knowledge based on training, study or experience is a matter that goes to the admissibility of the evidence, not its weight” (at [42]).

Why was this case not a relevant exception?

Applying this reasoning to the facts of the Perna case, McClelland DCJ stated that:

• In the present case, what appeared to be suggested in the course of oral argument by [Counsel for the Defendant] was that mere ownership of a property in a particular location (in the case of the deceased) or searching to buy a property in a particular location at a particular time.
• I do not accept that one can draw a conclusion that a homeowner has specialised knowledge about property values solely from the fact of home.
• For the same reason, I cannot accept the suggestion that [the Plaintiff’s daughter] (whose evidence was in any event far from objective or impartial) had specialised knowledge of property values in the Glossodia area simply because she and her ex-partner had looked at acquiring property there some time ago.

McClelland DCJ  then stated that it cannot possibly be suggested that this evidence satisfies the test set out in Makita at [85], namely:

• In short, if evidence tendered as expert opinion evidence is to be admissible, it must be agreed or demonstrated that there is a field of “specialised knowledge”; there must be an identified aspect of that field in which the witness demonstrates that by reason of specified training, study or experience, the witness has become an expert; the opinion proffered must be “wholly or substantially based on the witness’s expert knowledge”;
• so far as the opinion is based on facts “observed” by the expert, they must be identified and admissibly proved by the expert, and so far as the opinion is based on “assumed” or “accepted” facts, they must be identified and proved in some other way;
• it must be established that the facts on which the opinion is based form a proper foundation for it; and the opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached: that is, the expert’s evidence must explain how the field of “specialised knowledge” in which the witness is expert by reason of “training, study or experience”, and on which the opinion is “wholly or substantially based”, applies to the facts assumed or observed so as to produce the opinion propounded.

If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert’s specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight.

How are factual errors by trial judges dealt with by the Family Court?

The Court ruled that the trial judge had made a significant error. In itself, this might not require the appeal to be allowed, however in this case the court ruled that the mistake had affected the final outcome. In response, it:

• Set aside the property settlement orders,
• Sent the case back for a new hearing before a different judge, and
• Granted the husband a costs certificate for the appeal.

What this means for you

If you’re separating and dividing assets, especially in high-value or complex cases involving businesses, family contributions, or inherited property, it’s crucial to:

• Get proper expert valuations early and not rely on estimates or informal advice;
• Work with a lawyer who understands the evidentiary rules and how to present your case effectively;
• Be aware that errors in evidence can lead to expensive appeals and delays.

How we can help

Here at Rowan Skinner and Associates Lawyers, we understand how stressful and complicated property settlements can be, especially when family relationships and significant assets are involved.

If you are struggling with your current situation, call our team at (03) 9995 9155 for a non-obligation discussion.  We service clients in Melbourne, Melbourne Northern Suburbs, such as Northcote, Alphington, Carlton, Fitzroy, North Fitzroy, Kew and Heidelberg, as well as South Melbourne and South Yarra.

 

Case: Perna & Perna [2024] FedCFamC1A 183 (15 October 2024)