Case comment: GO v YA [2024]
The recently published High Court judgment of GO v YA [2024] EWFC 411, in which Jones Nickolds represented the wife, centred around the net asset valuation of a business set up by the husband which sold works of art.
Both the husband and wife were shareholders in the business. Much of the focus of the proceedings concerned how to determine the value of the underlying artwork and the appropriate methodology for realising the value of the artwork, to ensure the parties would receive an equal share net of tax and bearing in mind the husband’s intention to continue trading.
With the business owning thousands of pieces, many by well-known artists, this was a difficult exercise. As the judgment acknowledges this exercise was complicated by:
i. The fact the court-appointed joint expert was instructed to value a sample of the artwork, such that extrapolating its value across the entire inventory was not straightforward;
ii. The husband’s refusal to accept the court-appointed joint expert’s valuation of the artwork, but at the same time not formally challenging the expert’s evidence in cross-examination nor seeking alternative independent expert evidence; and
iii. The fact that an updating inventory of the artwork produced by the husband ahead of the final hearing contained a large number of errors and did not adhere to the HHJ Hess’ direction to set out the husband’s assessment of value for each artwork.
Ultimately, with a likely valuation bracket between circa £11-18m (pre-tax), HHJ Hess took a conservative approach. He adopted a figure of £13m and applied a reduction of 30% for taxation having considered the parties’ respective accountancy evidence, which put the wife’s notional half share in the business at £4.55m. This decision emphasises the inherent fragility in the valuation of assets like artwork, particularly on such a large scale, and the court’s understandable caution when tasked with determining the issue.
Whilst on very different numbers, the parties had each proposed the husband pay to the wife a series of lump sums over several years to effectively buy her out of the business. HHJ Hess was evidently concerned about the husband’s ability to raise the lump sums in this way and continue trading, so although he provided the husband with the opportunity to raise a lump sum to buy out the wife, he ordered that the husband would have to do this within a year, failing which the company would be sold and the proceeds divided equally. This shorter timeframe to buy out the wife resulted in HHJ Hess adopting a further discount (in addition to the discounts provided by the art and accountancy experts) from £4.55m to £3.1m. The husband was therefore ordered to pay the wife a £100,000 lump sum within 14 days and a second lump sum of £3m by December 2025. The application of a further discount again highlights the court’s cautious approach when faced with an uncertain set of circumstances.
The full judgement can be found here - https://www.bailii.org/ew/cases/EWFC/HCJ/2024/411.html.