In Baghti  FamCA 711 (22 August 2012) Justice Fowler accepted the recommendation of a valuer (paras 694-718) that the wife’s retail business, owned by the wife and her sister in partnership, be sold, saying at paras 694-700:
“Professor WL stated that he had limited information available with respect to the operation of the business, and proper books and records had not been kept. He said the wife did not provide the till rolls, daily book or cheque stubs.
The reported results for the years ended 30 June 2005 to 30 June 2010 were based on a one week observation of D Business’ operations carried out by LL Partners.
While Professor WL was requested to value D Business without regard to the LL Partners’ documents, he indicated that this was not possible as the estimated turnover and revised income tax returns (lodged after the observation of the business suggested an under declaration of income) were based on the observations in the LL Partners’ documents.
Professor WL assessed the value of D Business at $225,000 including stock at valuation.
He assumed the estimates provided were a reasonable reflection of the turnover of the business and used FMRC Benchmark earnings for a retailer of the type and of a similar size to the business.
D Business has a loan owed to WS Mortgage Management in the sum of $195,040. It is also asserted by the wife and interveners that the amount of $400,000 is required to be repaid to the interveners once the business is sold.
It is Professor WL’s evidence that as his valuation conclusion is based on revenue estimates from a one week sample observation and earnings before interest and tax (EBIT) based on FMRC Benchmark data, the amount received on sale to a third party may vary significantly from the valuation.”
Justice Fowler referred to the valuer’s review of similar business sales in the Sydney area, the trading hours of the business, cost of renovations and assessment of value of the business “on the basis of capitalisation of EBIT, after allowance for notional proprietor salaries and rent in accordance with reported benchmarks” (para 704) and the factors relevant to the capitalisation of EBIT methodology. Fowler J said at paras 707-709:
“Professor WL acknowledged in his valuation that sales multiple/rule of thumb valuations are not a generally accepted valuation methodology, however in the absence of reliable financial information he has had regard to the range of price/turnover ratios implied from his review of comparable businesses in Sydney.
Professor WL gave evidence that the difficulty with the husband’s proposal for the wife and Ms B to continue to trade for another twelve months and have the business audited would be the cost of the auditors. He stated that this would not be a practical way of removing any uncertainty and that the alternative way of achieving a sales price would be to allow potential purchasers to work in the business and observe it themselves.
His evidence was to the effect that ultimately a sale to a third party at arm’s-length would be the only accurate way to place a value on the business.”
The Court’s conclusion was
“The Court finds that the value of the business will be realised upon its sale and the Court proposes to make orders for the sale of the business.” as stated at para 669 of the judgement.