AKENZUA and AKENZUA

[2014] FCWA 65

JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA

ACT: FAMILY LAW ACT 1975

LOCATION: PERTH

CITATION: AKENZUA and AKENZUA [2014] FCWA 65

CORAM: CRISFORD J

HEARD: 9, 10, 11, 14, 15, 16 & 24 APRIL 2014 AND WRITTEN SUBMISSIONS

DELIVERED : 1 OCTOBER 2014

FILE NO/S: PTW 1963 of 2010

BETWEEN: MR AKENZUA

Applicant

AND

MS AKENZUA
Respondent

Catchwords:

PROPERTY SETTLEMENT – Where it is just and equitable to make orders in relation to the parties’ property – where the parties agree that contributions made to their property up until separation were equal – where the wife says that the parties contributed equally up until the date of trial – where the husband says his financial contributions were overwhelmingly greater than the wife – where the Court considers the husband’s overall contribution to be 52.5 per cent – where the wife says there should be a 5 per cent adjustment in her favour pursuant to s 75(2) factors – where the husband’s original position was there should be no adjustment to the contribution based entitlement but changed in his closing submissions seeking an adjustment of 2.5 per cent in his favour – where the Court makes no adjustment to either party for s 75(2) matters.

PROPERTY SETTLEMENT – Where the wife seeks to have the parties’ outstanding legal fees added into the balance sheet as a liability – where the wife has been billed approximately $169,000 more than the husband – where the husband has paid approximately $182,000 more towards his legal fees than the wife – where the Court has a wide discretion in relation to the treatment of legal fees – where the emphasis should be on an approach which delivers a just outcome in the particular circumstances of the case – where there is considerable disparity between the parties’ legal fees that remain unpaid – where the Court does not include the legal fees in the balance sheet.

PRACTICE AND PROCEDURE – Leave to Reopen – where the husband sought to reopen his case in relation to the right of first refusal in respect of a medical centre – where there were no reasons given for the delay which resulted in the application – where there was no explanation as to why the matter had not been dealt with before the evidence had all been completed – where there was no reason to justify the reopening of the evidence.

CHILDREN’S ISSUES – Where the parties were able to settle the majority of issues that had been in contention – where for the other matters the parties planned to attend counselling to resolve the differences – where the Court will await further information before proceeding to deal with the children’s issues.

Legislation:

Family Law Act 1975 (Cth) - s 75(2), s 79

Category: Not Reportable

Representation:

Counsel:

Applicant: Mr F Castiglione QC

Respondent: Mr K Wilson SC

Solicitors:

Applicant: Bannerman Solicitors

Respondent: Kim Wilson & Co

Case(s) referred to in judgment(s):

Beklar & Beklar [2013] FamCA 327

Bevan and Bevan (2013) FLC 93-545

Chorn and Hopkins (2004) FLC 93-204

Cook and Cook (No 6) [2010] FamCA 810

Daines & Daines (2014) FamCAFC 61

Duffus and Vandenberg [2013] FCWA 10 (unreported)

Hart and Hart [2013] FCWA 110

Hurst v Webber (2009) 233 FLR 337

In the Marriage of Farnell (1996) FLC 92-681

Marsh & Marsh (2014) FLC 93-576

Murray v Figge (1974) 4 ALR 612

Stanford and Stanford (2012) 247 CLR 108

Summitt (Re-opening) [2009] FamCA 365

Watson and Ling (2013) FLC 93-527

WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL
JUDGMENT - PARTIES’ NAMES AND IDENTIFYING DETAILS HAVE BEEN
CHANGED

1After [Mr Akenzua] (“the husband”), who was born [overseas], and [Ms Akenzua] (“the wife”), who was [also born overseas], married in Perth, Western Australia [in] December 1995 they took active steps to increase their wealth by acquiring real estate.

2This acquisition was funded by their individual incomes and, as Mr Castiglione QC, counsel for the husband noted, it was also funded by “howling mortgages”.

3The husband obtained a Bachelor of Medicine and a Bachelor of Surgery (MBBS) in 1994 and works as a medical practitioner with the Western Australian Department of Health. His company [O and S Services Ltd] provides management services to the [Suburb P Medical Centre] (“the PMC”), a business he acquired in November 2002.

4The wife completed her degree in Pharmacy studies in 1995 and is the deputy chief pharmacist at [a] hospital. She owns the [Suburb P Pharmacy] (“the pharmacy”) which was acquired in 2001. She is the trustee and a beneficiary of the [Sanyu Family Trust] which provides management services to the pharmacy.

5There are two children; [Adeben] born [in] 2000 and [Owethu] born [in] 2005. The children have lived in a week about arrangement with the parties since June 2010. The parties separated in March or April 2010.

6The husband commenced proceedings on 14 April 2010 and since that time the parties have engaged, with vigour, in many highly contested court events. The Chief Judge of this Court conducted judicial conferences on 30 October 2012 and 23 November 2012. There was no settlement.

7The Court must now determine proceedings for the alteration of property interests pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”).

The property of the parties

8In determining whether it is just and equitable to make any order at all altering the parties’ existing interests in the property they acquired during their 15 year relationship the Court must identify the nature of those interests (as determined by common law and equity).

Balance sheet

9There are a number of items of property the value and treatment of which are in contention. These matters require explanation.

(a) Property A, Suburb D (“Property A”)

10[Property A] was originally acquired by the parties as an investment property [in] 2007 and, as such, had been rented. In late 2009 Property A was untenanted and continued to be so until shortly after separation when the wife took up residence there. She has remained in the property since that time and wishes to retain it.

11Pursuant to court orders of 13 January 2012 Property A was placed on the open market for sale. Initially, in March 2013, it was marketed at $2.4 million. The property was then put up for auction [in] April 2013 where there was only a vendor bid of $1.8 million. Property A remained on the market with a listed price of $2.3 million. [In] September 2013 the parties received an offer for the property of $2 million, subject to the purchaser obtaining finance. A counter offer of $2.3 million, with a rent back provision to the wife of $800 per week for a period of six months, was made on 19 September 2013. The prospective buyers counter offered at $2.1 million. The counter offer was not accepted. Thereafter, pursuant to a court order on 29 November 2013, the property was removed from the market.

12On 29 November 2013 the Court also made consent orders pursuant to Part 15.45 of the Family Law Rules 2004 (Cth) (“the Rules”), that Garmony Property Consultants (“Garmony”) be appointed as Single Expert Witness to prepare a licensed valuation of Property A.

13A joint letter of instruction was sent to Garmony on 15 January 2014. The property was valued as at 7 February 2014. The valuer, Kirsty Norquay, provided a report dated 17 February 2014.

14Ms Norquay attributed a market value, “As Is”, of $2.15 million to the property. In arriving at that valuation she adopted the comparable sales method of valuation. She reports:

We note there has been a limited number of recent comparable sales in the surrounding locality and those indicated are considered the most relevant.

15Neither party administered questions to the Single Expert in relation to her report.

16In her oral evidence Ms Norquay said that she used a summation method as a cross check to the comparable sales method although this had not formed part of her written report.

17On 26 March 2014 the husband filed an interlocutory application pursuant to r 14.49 of the Rules that he have leave to appoint another expert witness to value Property A. This application was listed for the first day of trial, 9 April 2014.

18The affidavit filed by the husband in support of that application was, in the main, critical of the pool of comparable sales used by Ms Norquay in arriving at her valuation. Ms Norquay’s report compared five Suburb D properties. The husband deposes that from his own investigations there were other properties in the Suburb D area that had sold in the six months prior to the report, but which had not been specifically referred to by Ms Norquay. In addition, he obtained several market appraisals of Property A, all of which suggested a higher value by approximately $200,000.

19It is also of note that Property A was actually on the market in 2013 when most of the comparable sales were made. Property A had not sold. Ms Norquay liaised with the real estate agent who had the conduct of the sale of the property.

20I was not persuaded that this application fell within r 15.49 of the Rules. The wording of the expert’s report did not make it clear whether she had considered a greater pool of properties than those referred to in her report, which she termed to be “the most relevant” comparable properties. In any event, that matter alone, was insufficient to form the basis for the appointment of another expert.

21I dismissed the application on 9 April 2014, but invited Mr Castiglione QC to apply to reinstate it after his cross-examination of Ms Norquay, if he considered it warranted.

22On 14 April 2014, prior to Ms Norquay being called to give evidence, the solicitors for both parties in jointly signed correspondence provided her with further documents as follows:

We attach with this letter a list of properties sold in the [Suburb D] area that counsel for the applicant may be putting to you when you give your evidence.

23The documents contained a property profile report the husband says contained additional comparable properties sold in the Suburb D area. This was accompanied by a list of such properties which had been sold between March 2013 and March 2014. Mr Castiglione referred Ms Norquay to a number of properties on that list. Ms Norquay said she had already considered some of those properties but others she had not. She had only included what she considered to be the most relevant properties in her report for the Court.

24I was satisfied that Ms Norquay gave reasons for not including the additional properties in her comparable sales. One reason included that although the properties were of a similar size and age the land value was very different given the precise location of the property. She also identified that smart renovations and better presentation had a bearing on some of the values. She explained that she would not have included others in any event, even if she had seen them, simply based on age, block size and location making for a poor comparison.

25I was satisfied that although Ms Norquay referred to only a handful of comparable sales she did so in a reasoned manner. I am not persuaded that her value requires a further expert to show she did not take into account all she should have pursuant to r 15.45 of the Rules.

(b) The Pharmacy

26On 12 March 2001 the wife purchased the pharmacy in her sole name for approximately $900,000. She hired a manager to run the business.

27The pharmacy is located alongside the PMC, a dental centre, a pathology laboratory and is next to the Suburb P Shopping Centre. There is ample parking available in the medical centre and in the shopping centre for the customers of the pharmacy.

28Mr John Thornett, chartered accountant of Peak Strategies, was jointly instructed by the parties’ solicitors to prepare a report in relation to the value of the wife’s business interest in the pharmacy as at 30 June 2013. Mr Thornett’s report issued in March 2014. He attributed a value of $989,000 to the pharmacy. This is accepted by the husband. The wife maintains the value of the pharmacy at trial should reflect certain weaknesses that were not known to Mr Thornett at the time he conducted his valuation. She asked the Court to apply a discount and fix a value of $789,000 to the pharmacy.

29In his report Mr Thornett identified a weakness of the pharmacy as follows:

The success of the pharmacy is largely dependent on the success of the medical centre. If for whatever reason the medical centre closes, the viability of the pharmacy would be questionable. Please note Mr Joe Lamhut of Walker Wayland Health, the party undertaking the valuation of the medical centre has advised us that he is not aware, nor has been made aware of, any material matters that would impact on the ongoing operations of Suburb P Medical Centre.

30On 1 April 2013 the wife’s solicitors asked questions of Mr Thornett to ascertain if there would be any impact on his valuation if the PMC closed down, the referrals from the PMC were terminated or the wife was not given a first right of refusal.

31Mr Wilson SC, counsel for the wife, says that these were matters not known to Mr Thornett or to Mr Lamhut when they each undertook their valuation. This revolves around the husband’s future intentions in relation to the PMC. The wife deposes that 70 per cent of the pharmacy business comes from the medical centre. Mr Thornett said the PMC made up 77.8 per cent of the script volume of the pharmacy.

32Whilst it is accepted that the value of the pharmacy could be affected if the PMC either moved, closed down or formed a relationship with another pharmacy to which it actively promoted its patients, there was little concrete evidence to support any of those scenarios.

33Mr Thornett said that if the husband gave the wife a first right of refusal on any sale of the PMC or an undertaking to that effect, this would stabilise the value of the pharmacy. However, he said if such first right of refusal or undertaking was not given there would only be a problem if the PMC closed and was not thereafter operated as a medical centre. The husband’s evidence is he is not going to sell the PMC in the next 10 to 12 years. He is renewing the lease which he said was a straight forward procedure. In the future he plans to work within the PMC himself.

34The husband said an oral first right of refusal has already been given to a medical practitioner, Penny Liang, who currently practices in the business and who owns the real estate from which the PMC operates. If the PMC was to simply change hands as a medical centre there is little evidence that this would affect the operation or value of the pharmacy.

35There is no evidence that the husband, or any medical practitioner, would deliberately set out to form a relationship with another pharmacy and actively promote that other pharmacy to the PMC patients. Such a course is likely to offend appropriate professional conduct in any event.

36Suffice it to say here, I am not persuaded that the matters the wife considers to be weaknesses are of the magnitude she urges upon the Court such that a discount in its value should be given.

37In terms of the ability to stabilise the value of the pharmacy I will return to the issue of a first right of refusal upon a sale later in my judgment.

38I will adopt Mr Thornett’s value of $989,000.

(c) Suburb P Medical Centre

39The PMC has been open since 1980. The husband has had the business since 2002. The PMC has six consulting rooms catering for 12 doctors. Seven of these doctors are contractors and the remainder are employees. The PMC also has three nurses. The premises from which both the PMC and the pharmacy operate are owned by Dr Liang.

40On 29 November 2013 the Court made orders appointing Joe Lamhut of Walker Wayland WA as Single Expert Witness to prepare a report on the value of the husband’s business interests in O and S Services Pty Ltd and the PMC. Mr Lamhut was jointly instructed on 17 January 2014.

41Mr Lamhut provided a business valuation report dated 25 March 2013. In the valuation summary Mr Lamhut arrived at an estimated value of $365,000 which included goodwill and fixed assets at a written down value. He utilised a method based on capitalising the future maintainable earnings of the PMC. Mr Lamhut used the adjusted net profits of the business as at 30 June 2013. He found these to be $146,000 and then applied a capitalisation rate of 40 per cent to arrive at the figure of approximately $365,000.

42The husband adopts the value of Mr Lamhut. After having cross-examined Mr Lamhut, the wife’s position is that a conservative value of the business is $656,677, but it is open to the Court to find a value as high as $789,040.

43She challenges the valuation of Mr Lamhut both on his figure for the adjusted net profits and also on the capitalisation rate he applied. Her position is put as follows:

(i)Adjusted net profits

44Mr Lamhut found the net profit of the business to be $156,731. He made certain adjustments to those profits to arrive at his final figure. The wife’s main challenges were to three particular adjustments.

•Add back of $36,700 (wages)

45The husband advised Mr Lamhut that the wages paid to some of the PMC’s staff historically and in 2013 were below market rates. The staff were dissatisfied with this and he intended to increase the wages. Mr Lamhut said from the information provided to him by the husband and his practice manager he estimated a “catch-up” of approximately $36,700. This figure reduced the profit of the PMC by this amount in the 2013 year.

46The husband says the figure represents an increase in the wages of staff to reflect what is currently paid on the open market. It is common ground that the amount was not actually paid in the 2013 year, but the husband said it is in the process of being implemented.

47The amount was calculated on 2012 figures. Mr Lamhut explained that he had not updated the figures, but said that by taking the 2012 figures he had adopted a conservative approach. He accepted the figures had not been cross-referenced with any industry award.

48Mr Lamhut’s view was that it is normal practice to add back such an amount and that it had been his idea. I find Mr Lamhut took a broad approach to the quantum of the wages to be added back. He accepted that he had relied on the husband, through his practice manager, rather than cross-checking with any current industry standard. He did have access to the salary survey results for the category of General Practice and Private Specialist Practice for 2012.

49Mr Lamhut said that it was a step taken to normalise the underpayment by including it in the 2013 net profit figures.

50The wife’s position is that if the Court considered some provision should be made for the add back of wages, then $18,169.42 is the appropriate amount. This is the difference between the wages to income ratio for the PMC in 2013 and the industry standard. It is a difference of 1.59 per cent.

51Mr Lamhut agreed that, theoretically, this was an appropriate industry figure which could be used as a guide. He said the issue here related to a wide ranging industry and thus a broad range of figures was appropriate.

52It is accepted that on this issue of wages there is room for reasonable disagreement about what, if any figure, should be taken into account. I accept that staff were underpaid and that this needs to be rectified. Steps to ensure this happens should be part of the accounting process.

53Whilst Mr Lamhut accepted that the industry standard as put to him by Mr Wilson was theoretically correct I accept his assessment of $36,700. This was something included in both his draft and final report. It was a measure he took based on the information provided and utilising his expertise. I also accept that he adopted a conservative approach by using the 2012 figures. That figure will remain as an adjustment to the net profit.

•Add back of $14,560 (director’s fees)

54In the final valuation report Mr Lamhut added director’s wages to the adjustments to net profits to reflect the hours worked by the owner of the PMC. He said the hours worked were six to eight each week and represented tasks to do with the administration of the PMC. The market rate for a practice manager was adopted.

55It was pointed out by Mr Wilson that in Mr Lamhut’s draft report no provision had been made for director’s fees. However, after communication with the husband this had been included in the final report. Mr Lamhut confirmed he was aware that the husband did not work as a doctor within the practice. He said that it was appropriate for the proprietor, who spent approximately an hour a day there doing administrative tasks to be allocated a wage. Although he had not initially considered it he said it was a proper addition. I accept his evidence in this regard.

56The actual expense was of a notional nature calculated on a modest hourly rate. He considered an hour a day reasonable.

57I am persuaded that the figure is appropriate to be included as an adjustment to the net profit.

(ii)Capitalisation rate

58Mr Lamhut adopted a capitalisation rate of 40 per cent (2.5) in his valuation after he had considered the strengths and weaknesses of the PMC. He said that the margins for a capitalisation rate for this industry were two to seven times. His low figure was brought about by the weaknesses associated with the PMC.

59Mr Lamhut records in his valuation report that the demand for medical centres in Western Australia remains particularly strong. There is still a relatively low supply for sale.

60The wife’s position is that due to the husband’s input, which was not always disclosed to her, Mr Lamhut was not provided with a complete picture of matters which impact on the running of the PMC. This had the effect of overemphasising the weaknesses. The corollary of this is that its strengths were considerably underplayed.

61Mr Lamhut accepted that if there was less risk associated with the PMC, the business would be worth more than the figure he arrived at. I am satisfied that a higher capitalisation rate is appropriate and that rate should be 25 per cent (4). This takes into account that I have made no adjustment to the net profit figure Mr Lamhut adopted. I have determined the rate taking into account the evidence adduced in the cross-examination of Mr Lamhut.

62Whilst there were other inroads made by Mr Wilson into the supposed weaknesses of the PMC, there were two which Mr Lamhut identified as possibly warranting a change in his capitalisation rate.

63Firstly, he identified two new general medical practices had opened up in close proximity to the PMC. Mr Lamhut did not know the actual effect, if any, that such opening would have on the PMC. He postulated it could result in the loss of patients and, potentially, doctors. There was considerable uncertainty in the evidence about where the two new medical practices were located, whether in fact they were operating and the exact nature of their practice.

64Mr Lamhut knew nothing about the medical practices. He did not include them on the map he produced in his valuation. His report says the new surgeries would be opening in Suburb A and Suburb B. His evidence was that he had not been able to find these in the catchment area of the PMC on Google Maps.

65What he could say with certainty was that the profitability of the PMC was increasing and that the income received by the husband was “trending upwards”.

66The map relied upon by Mr Lamhut as showing the location of the PMC and other nearby medical practices, save for the two nominated by the husband, was included in his draft report yet the husband made no comment about the failure to identify the location of the two new medical practices. He raised many other areas of the draft report he considered deficient but made no mention of this.

67Given not only the upwards financial trajectory of the PMC and the vague evidence about any new medical practices, I consider this to be much less of a weakness than portrayed in the valuation report.

68The second major issue for Mr Lamhut was that five doctors who were then employed in the PMC were working towards retirement. It was unknown what would happen to the patients of these doctors after retirement. It was postulated there may also be difficulty replacing such doctors. Over and above this, the contracts for the services of the medical practitioners of the PMC were to expire in September 2013. At the time of writing his report the contracts were currently being renegotiated.

69Mr Lamhut said these two issues, that he considered to be weaknesses, had been identified by the husband. However, he considered them logical issues to include in his report. He accepted that the husband had not informed him that a former medical practitioner of the PMC had approached him seeking an indication of whether he could be re-employed. The husband said in cross-examination that he would take the medical practitioner back “if he had the capacity”. Mr Lamhut accepted that he was unaware of what steps the husband had taken in relation to replacing any doctors and whether any other steps had been taken to mitigate the effect of prospective retirement.

70There was no clarification of the position by the husband at trial. There was no evidence the PMC had vacancies or was struggling to get medical practitioners. This is information the husband could have provided.

71Mr Lamhut accepted that if the existing contracts had been renegotiated then this would remove a potential weakness of the pharmacy. He accepted there was no notification that the contracts had not been renewed.

72I also take into account another matter which was not known to Mr Lamhut. This relates to the marketability of the PMC. This includes any first right of refusal or an interest in the purchase of the PMC.

73Approximately two years ago, a medical practitioner of about 40 years of age, showed an interest in acquiring part of the PMC. The husband said he had made it clear he was not interested in selling his practice, but that the practitioner could, if there was capacity, return to the PMC to work.

74Mr Lamhut said that if there were potential purchasers or those with a first right of refusal then this indicated the strength of and a demand for the PMC. A person wanting to purchase a portion of its equity was also important to indicate the strength of the PMC.

75In his cross-examination the husband said that initially, about 10 years ago, he had given an oral first right of refusal to Dr [Liang]. This position had been confirmed within the last few years. He said the detail of any such right of first refusal had not been discussed. He said he was prepared to discuss it with Dr Liang, although the business was not up for sale.

76The wife has sought a first right of refusal from the husband during the course of these proceedings. It is a matter that has always been well known to the husband. In his cross-examination he accepted it “could be right” that 70 per cent of the pharmacy business came from the PMC. Up until mid-way through the trial he steadfastly refused to consider giving such right to the wife. He said that he had already promised Dr Liang a first right of refusal. He also, for the first time, said he did not believe that such a right could be given to a non-medically trained person. Despite this, in 2001 when the wife initially entered into negotiations to purchase the pharmacy, she obtained a first right of refusal from the then owner of PMC. It was on this basis that in late 2002 the husband acquired the PMC himself.

77The husband, on 16 April 2014 after the completion of his evidence, sought to tender undertakings about the selling of the PMC giving the wife a first right of refusal. The matter was unresolved at the conclusion of the trial.

78On 13 May 2014 the husband sought to reopen his case about this issue. I dealt with his application on 3 June 2014 where he sought:

The Applicant Husband seeks to re-open the evidence in the above matter which was heard before Justice Crisford in relation to the right of first refusal in respect of the [Suburb P Medical Centre].

79The husband sought to rely upon an affidavit he swore on 8 May 2014 as his additional evidence for the Court.

80Mr Castiglione accepted that the right of first refusal was “an issue of moment”. He said that since 2013 the wife’s case has been, in part, based on the husband giving an undertaking to allow her a right of first refusal should he wish to sell his medical practice. He said the husband had now decided to give the wife the undertaking. He said he attempted to do so towards the end of the trial but the two undertakings were not accepted by the wife, in part, because he said he had already given away such a right to Dr Liang.

81Mr Castiglione said that the additional evidence he sought to lead would clarify the previous first right of refusal. He accepted that the husband was late in providing the requested undertaking.

82Mr Wilson argued, correctly in my view, that there were no reasons given for the delay which resulted in the application and no explanation as to why the matter had not been dealt with before the evidence had all been completed. He rightly pointed out that it was a long standing and contentious matter. He said the affidavit sought to be adduced in support of the application offended the rules of evidence and contained evidence of opinion and hearsay. As such the evidence is inadmissible and it should not be adduced at all.

83Mr Wilson said the husband opened his case by refusing to give an undertaking to the wife, the husband’s evidence-in-chief consisted of the reasons as to why and during cross-examination the husband again refused to give an undertaking. He drew the Court’s attention to the tendering of the two undertakings on the sixth day of trial after the husband had given his evidence, and he says, without notice.

84Mr Wilson drew the Court’s attention to the correspondence annexed to the affidavit sought to be adduced. The husband’s correspondence to Dr Liang about this issue was initiated by Bannerman Solicitors on 22 April 2014. The last day of trial and the evidence of Mr Lamhut, the Single Expert Witness who valued the PMC, was on 24 April 2014.

85The letter about this issue was sent before the evidence had been completed. The correspondence was not copied to the wife’s solicitors or made known to the Court. It was included, amongst other documents, in a very late disclosure.

86The granting of leave to re-open proceedings is a discretionary one guided by the interests of justice. As such leave to re-open a hearing to adduce further evidence is likely to be granted where justice is more able to be done in the particular case if such leave were granted (Summitt (Re-opening) [2009] FamCA 365). Matters that are to be considered in the exercise of this discretion were outlined in the case of Murray v Figge (1974) 4 ALR 612. These include:

•whether the further evidence is so material that the interests of justice require its admission; and

•whether the further evidence could not by reasonable diligence have been discovered earlier.

87Other matters of relevance were cited in Cook and Cook (No 6) [2010] FamCA 810 per Young J, including what explanation is offered for not having called the evidence in chief.

88I was not persuaded that there was reason to justify the reopening of the evidence. The issue in relation to the right of first refusal has been ongoing for almost two years and the evidence sought to be adduced could have been discovered much earlier. Again, it was information the husband had knowledge of. The husband’s solicitors had taken steps to address the matter not long before the close of evidence but did nothing to advise the wife or Court about it. The husband gave his evidence in relation to the first right of refusal and he was never sought to be recalled. Mr Castiglione said the issue of recalling the husband was raised but “dissipated”. I am not satisfied that this explanation justifies the re-opening of the evidence or that the evidence is so material that it is in the interest of justice to require its admission. Even if the evidence was found to be admissible the weight to be given to it is slight. The content of the affidavit did not squarely address the facts in issue here.

89True it is that the exact terms of any rights of refusal have not been fully aired in the Court, but I accept that there is more than a passing interest in the PMC in the event of a sale. This fact was not known to Mr Lamhut.

90I am persuaded that the two general medical practices opening up close by, if indeed they have opened up or are close by, have not impacted on the PMC to the extent suggested by Mr Lamhut. The demand for the rights to obtain the PMC are matters about which Mr Lamhut was not made fully aware. Once aware, Mr Lamhut agreed the capitalisation rate could be looked at again. He accepted that a rate of between four and four and a half was not inappropriate.

91When re-examined on any first right of refusal Mr Lamhut said “it would certainly add to my choice of capitalisation rate. It would need to be actual rather than theoretical. I would consider it one way or another to assess risk and therefore capitalisation rate”.

92I intend to apply a capitalisation rate of 25 per cent (4) to the adjusted net profit of $146,000 and find the value of the PMC to be $584,000.

Liabilities

Wife

(a)Investec property loan ([Property B, Suburb E])

93The [Property B] property was purchased by the wife in her sole name [in] 1997 for $82,000. The value at trial was agreed to be $355,000. It is an investment property from which the wife receives some rental income.

94On 4 April 2012 the wife’s Investec facility, which was secured over the Property B property, was drawn down in an amount of $110,000. The wife deposes that this was made up of approximately $63,000 as residual for the purchase of the Property B property and the balance was debt relating to the pharmacy. She is paying an interest only component on the loan facility. The interest charged on the loan is variable and commenced at 7.55 per cent and at the time of swearing her affidavit on 1 April 2014 it was 6.60 per cent.

95The wife says that an amount of $110,275 should be included in the balance sheet. The husband accepts the facility exists, but says that it should only be $100,000.

96In his cross-examination the husband conceded that the loan, in at least July 2013, was $110,000.

97I am satisfied the wife has only been paying interest on the amount and that it is unlikely to be the figure postulated by the husband. I have no clear understanding for his contrary position. It was addressed in his closing submissions in a cursory fashion and with the citing of an incorrect exhibit number.

98I intend to include an amount of $110,000. That figure has varied slightly over the course of these proceedings, sometimes depending on whether the wife adds a discharge fee or not. I will allow the amount of the actual drawdown.

(b)Legal fees

99The wife seeks to have the parties’ outstanding legal fees added into the balance sheet as a liability. The husband argues that any outstanding legal fees should be taken into account in a general sense pursuant to s 75(2)(o) of the Act. The position in relation to legal fees, as far as can be ascertained from a reading of the costs notifications of each party dated 14 April 2014, shows:

Wife ($)	Husband ($)
Amount billed to 31 March 2014	524,216.68	355,034.00
Wife billed $169,182 more than husband
Amount paid	98,285.75 (to April 2014)	280,455.00 (to 31 March 2014)
Husband paid $182,169 more than wife
Outstanding fees as at 31 March 2014	425,930.94 (not including GST)	186,798.00 (including GST)

100The content of the costs notification of each party lacked some detail about the parties’ legal fees. The notifications did not provide an exact comparison and each dealt with matters slightly differently.

101The wife was clear about the source of any payment of her legal fees. The source was her present income or borrowings. The husband simply denotes that his payments came from “post-separation resources”. When queried he said it was mainly from his income and his credit card.

102The wife says some of the husband’s legal fees have come from joint funds. He had retained his solicitors prior to separation and, at least in the early days of any payments, she says it is likely they were from their joint finances.

103The Court has a wide discretion in relation to the treatment of unpaid legal fees. Both counsel referred me to Stanford and Stanford (2012) 247 CLR 108, Bevan and Bevan (2013) FLC 93-545 and Watson and Ling (2013) FLC 93-527.

104A number of the authorities referred to by the parties dealt with the notion of addbacks. The wife is not seeking to have paid legal fees added back but that unpaid legal fees be included as a liability.

105In Chorn and Hopkins (2004) FLC 93-204 the Full Court did a thorough examination of commonly accepted principles relating to the treatment of paid legal fees.

106Ryan J in the recent decision of Beklar & Beklar [2013] FamCA 327 referred to a summary given by Boland J, writing ex judicially, about the principles that emerged from that case. These are as follows:

•The treatment of funds used to pay legal costs remains ultimately a matter for the discretion of the trial judge.

•In determining how to exercise that discretion, regard should be had to the source of funds.

•If the funds used existed at separation and are such that both parties can be seen as having an interest in them (on account, of contributions) then such funds should be added back as a notional asset of the party, who has had the benefit of them.

•If the funds used to pay legal fees have been generated by a party post-separation from his or her own endeavours or received in his or her own right (for example, by way of gift or inheritance), they would generally not be notionally added back as a notional asset; nor would any borrowing undertaken by a party post-separation for payment of fees be taken into account as a liability in the calculation of the net property of the parties.

•Funds generated from assets or businesses to which the other party had made a significant contribution or has an actual legal entitlement may need to be looked at differently from other post-separation income or acquisitions.

•Outstanding legal fees themselves are generally not taken into account as a liability.

•If in the exercise of discretion it is determined that legal fees already paid should be taken into account as notional assets, then normally any liability associated with the acquisition of the monies used to pay the legal fees should also be taken into account. (Trends in the Full Court: Recent cases 9^th Australian Family Lawyers’ Conference, Sabah 11-13 June 2005)

107Also, well before in In the Marriage of Farnell (1996) FLC 92-681 Fogarty J commented:

… the common or usual practice is that, unless the parties themselves choose to approach it another way: (a) the liability of the parties for costs is generally disregarded in the sense that they are not treated as liabilities to be deducted in order to arrive at the net property figure; (b) costs already paid are not generally added back as notional property unless the particular circumstances justify it (such as here); (c) the circumstance that each party does have legal costs needs to be taken into account in a general way in considering the overall impact of the orders on the parties; (d) the circumstance that the parties have or have paid legal costs is a basic factor in determining, at the conclusion of the proceedings, whether an order for costs should be made within the parameters of s.117.

108More recently, in Watson and Ling (supra) Murphy J commented:

29Where, but for the disposal of money or other property by one party, legal or equitable interests in it would have been part of those existing at trial, it may be possible to assert, in the particular circumstances of a case, that the money or property is nevertheless to be considered as part of the existing legal or equitable interests of the disposing party (sham transactions and circumstances where it can be established that the property is held, for example, on trust by another for the disposing party are examples). The investigation of issues of that type might be seen to be part of the establishment of the existing legal and equitable interests at trial – a task which the majority of the High Court in Stanford (at [37]) said should be the first step in considering, pursuant to s 79(2) (cf s 90SM(3)), whether it is just and equitable to make an order.

30 In many other cases, for example those which come within the convenient rubrics of “waste” (see Kowaliw & Kowaliw (1981) FLC 91-092) or “premature distribution” (see, for example, Townsend), legal and equitable title to the money or property will have passed. It could not be said that the money or property is part of the “existing legal or equitable interests” of a party or the parties. The notion that such money or property should be treated as a “notional asset” or “notional property” appears to run contrary to the thrust of the decision in Stanford: at issue is the consideration of two separate questions, the first of which is whether existing legal or equitable interests should be altered.

…

33 … This Court has long eschewed the notion of “negative contributions” (see, for example, Antmann & Antmann (1980) FLC 90-908). Nevertheless, it might be argued that the “non-dissipating party” can be seen to have made a disproportionally greater indirect contribution to the existing legal and equitable interests (for example to their preservation) if it is established that, but for the other party’s unilateral dissipation, those existing legal and equitable interests would have been greater or had a greater value.

34 … It may be that aspects of the erstwhile treatment of legal fees pre-Stanford (see, for example, Chorn & Hopkins (2004) FLC 93-204) will require further consideration in an appropriate case.

109I accept that Stanford (supra) mandates that the first step in any property determination is to identify the present legal and equitable interests of the parties in their property. I do not read this to mean each and every interest must be included in the balance sheet or that there can never be what are termed “addbacks”. All issues are to be identified and taken into account, but the manner in which such interests are taken into account will depend on the particular circumstances of the case and the property interest in question, always bearing in mind the wide discretion reposed in a judicial officer.

110There continues to be a variety of approaches adopted by judicial officers in relation to the treatment of legal fees. The different approaches, in the main, are driven by the factual matrix of each case.

111For example, Boland J in Duffus and Vandenberg [2013] FCWA 10 (unreported) had this to say:

219 The principles to be applied when dealing with legal costs are clear. They are well explained by the Full Court (Finn, Kay and May JJ) in Chorn & Hopkins in its careful review of previous cases on this topic.

220 The mother has substantial unpaid legal fees. The father too has unpaid legal fees. In accordance with authority, I do not propose to include those outstanding fees as a liability. I will, however, take into account those outstanding fees, and the interest of the parties’ solicitors as unpaid creditors under s 75(2)(ha).

112When dealing with s 75(2)(ha) and the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt her Honour noted that, before her, she had one party with a considerable outstanding liability for legal costs which would need to be paid from her property entitlement. The amount was a sum significantly more than that of the other party. She noted that the disparity had occurred because one party had the capacity to meet legal costs during the period of the litigation whilst the other did not. Her Honour needed to satisfy herself of the ability of each party to pay their outstanding debts to their lawyers. Her orders were tailored accordingly.

113A different approach was adopted by Chief Judge Thackray in the matter of Hart and Hart [2013] FCWA 110. Again, it was remarked upon that a judge has a wide discretion conferred by the Act to deal with the question of legal fees in a way that is just and equitable.

114In the particular circumstances of that case his Honour found that the outstanding fees of both parties should be included as a liability. This is a position urged upon the Court here by Mr Wilson. His Honour also commented on the issue when dealing with the parties’ contributions after they separated. The issue of the disparity between the amounts expended on legal fees was a matter his Honour dealt with further when discussing s 75(2)(o) of the Act. This latter position is urged upon this Court by Mr Castiglione. There were other factual matters particular to Hart (supra) which are absent here, for example, the unpaid legal fees of each party were much the same. Thackray CJ referred to what was said by Warnick and Boland JJ in Hurst v Webber (2009) 233 FLR 337 at [34], that the various ways in which the court attempts to deal with the issue of legal fees are “designed to avoid one party effectively bearing a proportion of the other party’s legal costs”.

115In Beklar (supra) Ryan J undertook a careful analysis of the complex and discretionary issue of the treatment of legal fees and other losses generally. She concluded that in circumstances where property no longer exists (including paid legal fees), the better course is to address these matters when considering the application of s 79(4) of the Act.

116There can be no doubt that in any consideration of this thorny issue the emphasis should be on an approach which delivers a just outcome in the particular circumstances of the case.

117To automatically adopt a position where unpaid legal fees are included as a liability without taking into account the corresponding amount actually paid can unfairly result in one party bearing a proportion of the legal fees of the other party. Recently in Daines & Daines (2014) FamCAFC 61 the Full Court observed:

21.Including the unpaid sums as liabilities means that the parties share that liability in the proportion determined by her Honour to be just and equitable; her Honour has, in effect, determined that each party should bear a portion of the other’s costs.

118Any injustice can be exacerbated if those legal fees were unreasonably incurred.

119On the other hand, the application of s 75(2) in its many guises can tend to be amorphous and lack transparency. This creates difficulties in any subsequent application that may be made for legal costs. There is a potential for double counting if there is a lack of understanding of how precise figures are dealt with pursuant to s 75(2).

120Given the considerable disparity between the parties’ legal fees that remain unpaid I do not intend to include them in the balance sheet. Not only does that accord with what has been a long standing attitude of the courts, but it avoids an unjust result. I will, however, return to the issue of the legal fees later in my judgment.

Husband

(a)School fees – Investec overdraft liability, husband

121The husband claims a liability of $19,875, being paid school fees. He wants to have this amount included in the balance sheet.

122It is not in dispute that the husband has this liability for the school fees. The disagreement between the parties is how this amount should be treated.

123The husband’s position is that there was no determination by the Child Support Agency that he pay the school fees in lieu of child support, given that the annual school fees for the school where the children attend exceeds the figure of $10,000 per annum. He says that $10,000 is approximately what the wife would have received by way of child support.

124The wife’s position is that the present child support assessment of the husband is nil. This assessment remains in place until December 2017. She says that it takes into account the husband’s payment of the school fees and that his assessment has been reduced accordingly.

125Whatever the reason for the nil assessment, the husband’s present payments are for the school fees, which he has agreed to pay.

126There is no doubt that this is a present liability of the husband, but I am persuaded by the wife that it should not be included in the balance sheet. If it needs to be taken into account I will do so when I consider the primarily prospective factors of s 75(2) of the Act.

(b)Staff wages ([Suburb P Medical Centre])

127A number of issues in relation to unpaid staff entitlements for the PMC were resolved. What is left in dispute is how an amount of $39,169 in relation to annual leave entitlements owing to non-medical staff should be treated.

128Mr Lamhut did not take into account the long service leave entitlements of $51,521 in arriving at his valuation. This amount, by agreement, has been included in the balance sheet.

129It is unclear how the annual leave entitlements were treated by Mr Lamhut. I do intend to include the figure in the balance sheet. There was no real challenge that this amount is actually owed. The issue was whether it is immediately payable. The wife suggests it will only become payable on the sale of PMC. The husband says it is owing whether or not there is a sale. He said it became payable in February 2014. I accept it is a present debt of the PMC and I am not satisfied that particular figure was taken into account in the valuation.

130Given all the above, the parties’ balance sheet is as set out:

Property Description	Ownership	Value ($)
NAB bank account	Husband	39
Westpac bank account	Husband	399
CBA Complete Access account	Husband	386
[Suburb P Medical Centre]	Husband	584,000
Household effects	Husband	12,487
Jewellery	Husband	2,000
Total property	Husband	599,311
NAB bank account	Wife	350
[Property B, Suburb E]	Wife	355,000
[Property A, Suburb D]	Wife	2,150,000
[Suburb P Pharmacy]	Wife	989,000
Household effects	Wife	21,120
Jewellery	Wife	2,000
Total property	Wife	3,517,470
NAB bank account	Joint	571
Total property	Joint	571
Total property	4,117,352
Liabilities
Investec [Suburb P Medical Centre]	Husband	246,687
Unpaid staff entitlement (annual leave and long service leave)	Husband	90,690
ATO liability	Husband	76,135
ATO portal	Husband	75,985
Division 7A Director’s loan	Husband	53,620
Total liabilities	Husband	543,117
Investec [Property B property]	Wife	110,000
Investec [Suburb P Pharmacy]	Wife	850,000
ATO portal	Wife	106,218
ATO liability 2013	Wife	26,711
Total liabilities	Wife	1,092,929
Total liabilities	1,636,046
Total net property	2,481,306
Superannuation
GESB	Husband	230,113
Total superannuation	Husband	230,113
REST	Wife	30,618
Asguard	Wife	10,290
GESB	Wife	148,330
Uni Super	Wife	71,000
Total superannuation	Wife	260,238
Total superannuation	490,351
Total net property and superannuation	2,971,657

Is it just and equitable to make any orders?

131I consider it appropriate to make orders in relation to the parties’ property here. Their relationship is one of long standing and the parties worked together to secure their wealth despite the fact it was not always in joint names. If the Court does not make orders then it is likely that the Court will not arrive at a just and equitable result. This is especially so if the wife retains some of the presently available real estate in which the husband has an interest.

Contributions

132I now turn to evaluate the contributions of the parties to the property as defined in s 79(4) of the Act.

133The parties agree that up until the date of separation the contributions they made to their property were equal. The point of departure is what each says was contributed after they separated in early 2010.

134The wife contends the parties continued to contribute equally up until the date of trial. The husband says that after the parties separated his financial contributions were overwhelmingly greater than the wife and his contributions to the family and the children were equal to that of the wife. He maintains that overall contributions should be assessed at 55 per cent in his favour.

135The parties continued to operate in much the same way after they separated as they had during their time living together. Both of the parties worked hard and ran their own business. They both had other employment apart from the running of their own business. Each of them continued to contribute to the welfare of the family and to the raising of the two children, albeit apart. There was no change in roles.

136It is not helpful to quarantine the contributions made post-separation, but rather to analyse and weigh all of the contributions of all types made by both parties throughout the years of the marriage, both during cohabitation and after separation.

137As Murphy J in Marsh & Marsh (2014) FLC 93-576 comments:

107.… importantly, it is not the fact of separation or when contributions are made that is the delineator. It remains crucial to analyse and weigh the nature, form and characteristics of all contributions across the whole of the period under consideration.

138The husband was at pains to show that, mathematically speaking, he made a greater contribution to their joint assets after separation. To this end he produced schedules to compare his income and expenditure with that of the wife. It is trite to say that the evaluation of financial contributions is more complex than the mere calculation of the funds introduced by each party.

139The wife concentrated on how she had taken steps to maintain the assets not only by contributing financially, but also by refinancing debt at more commercial rates and trying to stem the flow of the “howling mortgages”.

140There was substantial business borrowings secured over the pharmacy. Between July 2010 and April 2014 the total payments to both NAB and Investec were approximately $455,806. These payments were made through the pharmacy business. The payments had the effect of reducing the capital amount owing from $1,142,362 to $850,000. From April 2012 the repayments were about $12,000 a month.

141The husband provided evidence of his income, relevantly, from June 2010 until June 2013. Without taking into account any income from dividends, which the husband describes as “notional” as it goes directly to pay a Division 7A loan arrangement, or any “capital gains” he says he was entitled to in 2011 and 2012, the position is:

2010	255,095
2011	179,778
2012	115,988
2013	277,621
Total	828,482

142A mathematical correction was made to the 2012 figure provided by the husband.

143The husband gave evidence of what he says his contributions to the “joint” assets were. He provided this in an affidavit he handed to the Court at the trial on 10 April 2014. The husband drew a loose distinction between the parties’ investment real estate and the individual business each operated. He termed the former joint assets and treated the latter as an individual asset. He deposes that his contributions to the joint assets were:

2 July 2010 - 31 May 2011	179,593
4 July 2011- 28 June 2012	116,973
12 July 2012 - 24 April 2013	62,322
9 Aug 2013 - 26 March 2014	32,484
Total	391,372

144After the sale of most of the parties’ investment real estate, an Investec loan which was serviced by the husband had approximately $246,000 remaining on it. This amount relates to the PMC. Since May 2013 the husband has been servicing that loan through his business with payments of approximately $3,000 each month.

145The husband has also paid the private school fees for the children. He is not otherwise assessed to pay child support. The payment of school fees are included in his joint contribution schedule above.

146The wife’s income in the year ending 30 June 2010 was approximately $34,016. From 2011 to 2013 her total income was approximately $495,210. The figures do not take into account capital gains. These figures are extracted from source documents attached to the affidavits sworn by the wife.

147The wife made repayments on a loan for the Property B investment property. This property was in her sole name. It is accepted it was one of the parties’ investment properties. From July 2010 until February 2014 the total amount she repaid was $22,051. I have no real detail about the rental income received but it appears to have been around $17,000. The associated expenses relating to this property were never accurately identified.

148The husband said he calculated the wife’s contributions to joint debts commencing 3 April 2010. He included some of the wife’s payments for Property B property. However, he omitted the payments she made on 4 January 2011, 2 May 2011 and from 4 July 2011 until 2014. Apart from this there is no double up of the wife’s payments.

149Using the husband’s figures, but removing any reference to the Property B property which has been included in the calculations above, the husband says from 2 July 2010 to 12 June 2013 the wife’s contribution to joint debts was $41,176.

150The combined figure for the wife’s contribution to what the husband describes as joint debts is $63,227.

151Under cross-examination the husband accepted that at times the wife was paying more, overall, than he was. This was later in 2012 when the investment properties were all finally sold. However, her greater payments were made, generally through her business.

152I have done the best I can with the evidence provided by the parties. It is not the function of this Court to undertake an audit of income and expenditure. The figures were provided in an ad hoc fashion and were not always complete or accurate. Despite these various uncertainties, I am persuaded that on a strictly mathematical basis the husband made the greater contribution to what he described as the parties’ joint property after they separated. The husband bore the brunt of the mortgages for the investment properties until 2012. However, the wife through the pharmacy had a far greater business debt than the husband over the separation period.

153The position can be summarised as follows:

Husband ($)	Wife ($)
Income	828,482	529,226
Joint payments	391,372	63,227
Excess of income over joint payments	437,110	465,999

154The husband earned $299,256 more in income than the wife. He paid $328,145 more in servicing joint debts than she did. After their respective joint debt payments they had roughly the same disposal income.

155The husband paid legal fees of $280,455 and his living expenses. The wife paid legal fees of $98,286 and clearly her own living expenses. She does not really explain how she used the balance of her disposable income.

208I consider the orders and the practical outcome of those orders to be just and equitable.

Costs order 16 April 2014

209I dismissed the husband’s application filed 13 May 2014 to re-open his case and in doing so made an order for costs against him. I have already given reasons for the dismissal and they inform the reasons for the granting of costs.

210The husband made a forensic decision about how he would deal with the wife’s longstanding request for a first right of refusal. He chose a particular course. During the course of the trial it became obvious that such a course would not advance his position. In fact, it could have the effect of causing him prejudice on matters relating to valuation. His early concern for the position of a third party was quickly dispensed with as he tried to repair the damage. He was neither open to the Court nor the wife.

211Whilst I do not consider that the costs he is to pay should be on an indemnity basis I am satisfied at this stage that in relation to this application he must bear the wife’s costs to be taxed if not agreed.

Children’s issues

212The parties were able to settle the majority of issues that had been in contention in relation to their children. There were some matters about which they could not agree and they had planned to attend counselling to resolve the differences. Failing this, I was asked to determine any outstanding issues.

213Both sets of written submissions advise that the parties are attending upon Mr C De Rooster for counselling. Given it is best for these children if matters are resolved by agreement, I will await further information from the parties before I proceed to deal with these matters.

ORDERS

214I will hear submissions as to the form of orders I should make given my judgment. The wife should be given a period of time, about 60 days, to ascertain whether she can retain Property A and pay the husband his due. If she is not able to do so then the property will be sold.

215The husband is to sign the undertaking prepared by the wife in relation to the first right of refusal.

216I propose to make the following orders which can be modified and added to by counsel as to form where appropriate:

1The husband, ORATILWE TESHI AKENZUA, pay to the wife, SITEMBLIEQ DESTA RASIDA AKENZUA, her costs of the husband’s application filed 13 May 2014, to be taxed if not agreed.

2Within 60 days the wife pay to the husband the sum of $1,273,242.

3In default of payment by the wife of the sum set out in paragraph 2 hereof, the property known as Property A, Suburb D be forthwith placed on the market for sale, and the net proceeds of sale be divided to provide the husband with $52.5 per cent of the total net assets with the balance of $47.5 per cent to be retained by the wife.

4The husband forthwith sign the mutual undertaking provided to him by the wife.

I certify that the preceding [216] paragraphs are a true copy of the reasons for
judgment delivered by this Honourable Court

Associate