Valuing Ranch Assets

This blog post will discuss the method of valuing a ranch. I will refer to the case of Jans v Jans (Estate), 2016 SKQB 275 (CanLII) to illustrate the principles. This case was an estate law case with the crux of the dispute being who would inherit the family farm. In the course of giving its reasons, the Court assessed the value of the ranch assets, whether there was a contract regarding the disposition of the farm, whether there was unjust enrichment claim, and whether proprietary estoppel applied. In this blog post, I will only comment on the valuation of the Ranch assets. 

At trial, the plaintiff tendered expert evidence about the value of the ranch assets which comprised deeded land, leased lands, land improvements, equipment and supplies, and cattle (at paragraph 155).

The expert was qualified after considering the expert's training and experience. Specifically, the expert in this case had professional designations including Designated Industrial, Agricultural and Commercial Appraiser, senior designation from the Canadian National Association of Real Estate Appraisers, Practising Accredited Personal Property Appraiser, designation from the Canadian Personal Property Appraisers Group, and Internationally Accredited Commercial Appraiser, a designation from the National Association of Independent Fee Appraisers. The expert was also a certified instructor with the Canadian National Association of Real Estate Appraisers, and a past vice-president for the board of that organization. The expert also had personal experience in the Agricultural industry, including the operation of the expert's own cattle ranch (at paragraphs 156 to 158).

The expert's opinion about the value of the land was accepted. The Court accepted that the expert's methodology used to value the land complied with the appropriate professional standards, and that the expert used appropriate comparables to asses the value of the leasehold and deeded land. The expert also used adequate data and used appropriate databases to assess the depreciated replacement cost of the buildings and other improvements (at para 162). The land appraisal also separately assessed the value improvements to the ranch houses, grain storage, shops, corrals, and site services (at paragraph 165).

The expert's opinion about the value of the equipment was accepted despite being challenged about not considering comparable sales data, the expert having limited personal knowledge of the condition or presence of items, and the expert basing his opinion from a list of equipment provided by the plaintiff which list ostensibly included personal opinions from the plaintiff (at paragraphs 167 to 169). In the result, the court did not diminish the frailties of the expert's opinion, but still concluded that the equipment appraisal was conducted in accordance with proper practice and was a "reasonably reliable and appropriate means of estimating the fair market value of the items listed (at paragraph 171). 

The expert's opinion about the value of the cattle was accepted which was based upon considering the average value of the cattle from market reports from Balog Auction Services and Medicine Hat Feeding Co. (at paragraph 176). 

The expert also relied upon a "Calculation Valuation Report" which purpose was to calculate the fair market value as at December 31, 2013. The figures in this report were calculated on the basis of the best available information including financial statements, tax returns, and trial balances. 

Of note, however, is that the defendants did not introduce expert evidence of their own (at paragraph 162). It appeared from the Court's judgment that the expert's evidence withstood  cross-examination from the defendant. It is an open question whether the expert's evidence in this case would have been accepted if the defendant had tendered their own expert evidence which may have weakened or contradicted the expert's valuations or assisted the defendant in their cross-examination of this expert. 

The takeaway from reviewing this judgment is that care should be taken when retaining an expert witness; and whether to retain your own expert to challenge the other party's expert evidence. 

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Link to full case here: https://www.canlii.org/en/sk/skqb/doc/2016/2016skqb275/2016skqb275.html