Case of Ledarn & Ledarn [2013] FamCA 858 (1 November 2013)
There was a breakdown of a 29 year old marriage. The Court had to deal with a dispute over which party should keep the family business (a large manufacturer of car accessories), and also the value of this business.
The wife had been the manager of the business, however the husband also had some involvement having designed its “unique product”, which attributed to the success of the business. The husband had entered into bankruptcy in 2003, and as a result the structure of the business was changed to give much of the control of the business to the wife.
Experts had valued the business (and associated trusts) at around $8 million, whereas the wife believed that the business was worth “at least $10 million to her”.
The courts usually apply the “hypothetical prudent purchaser” test when determining the value of a business to be retained by one party or sold pursuant to the terms of the settlement, however in this case it was held that the value of the business to the wife (including her ability to continually make money from the business well after the breakdown of the marriage), needed to be taken into account. According to Cronin J:
“Normally, the primary test is the hypothetical prudent purchaser but it is conceivable and often seen in family law cases that the commercial or capital value of the shares in a company do not reflect the value for the particular spouse who controls or retains them after separation particularly where that party stands to benefit from those entitlements after the conclusion of the relationship.”