G and G

[2006] FCWA 63

JURISDICTION:

FAMILY COURT OF WESTERN AUSTRALIA

ACT:	FAMILY LAW ACT 1975
LOCATION:	PERTH
CITATION:	G and G [2006] FCWA 63
CORAM:	MARTIN J
HEARD:	9, 10, 11, 16, 18 & 21 MARCH 2005
DELIVERED:	20 JANUARY 2006
FILE NO/S:	PT 143 of 2004
BETWEEN:	G

Applicant/Wife

AND

G

Respondent

Catchwords:

Settlement of property - valuation of legal practice - offers
Section 75(2) factors

(Page 2)

Spousal maintenance

Child support - adult child maintenance

Legislation:

Family Law Act 1975 - s 66L, s 72, s 74, s 75 and s 79

Category: Not Reportable

Representation:

Counsel:

Applicant/Wife : Mr Wilson of Senior Counsel with Ms

Wilkinson

Respondent : Self Represented Litigant

Solicitors:

Applicant/Wife	:	Kim Wilson & Co
Respondent	:	Self Represented Litigant

Case(s) referred to in judgment(s):
AJW v JMW (2002) FLC 93-103
B and B (2000) FLC 93-002
B and B [1999] Fam CA1142
Best and Best (1993) FLC 92-418
Chorn and Hopkins (2004) FLC 93,204
Harrison and Harrison (1996) FLC 92-682
Hegarty and Hegarty No SYD 3496 of 2002

Hickey and Hickey and A-G for the Commonwealth of Australia

(Intervener) (2003) FLC 93,143

1 The issues for determination were the parties' respective applications for settlement of property. The proceedings were commenced by a Form 3 application filed by the wife on 12 January 2004, to which the husband filed a response on 24 February 2004.

2 The principal issues were:-

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1. Whether the husband was bound by the wife's acceptance of an offer made by him in December 2004.

2.	The value of the asset pool, the most significant issues being the valuation of the husband's interest in his legal partnership, but there were also issues of appropriate adjustments for add-backs and debts.
3.	The appropriate adjustment for s 79(4)(e) factors.
4.	The precise provision for spousal maintenance, and whether, in effect, all the mortgage payments for the former matrimonial home, in which the wife resides, and which the husband had agreed to pay for the next ten years, were to be characterised as being spousal maintenance, or settlement of property.
5.	The precise arrangements for child support and adult child maintenance.

3 For the wife, it was submitted that her property settlement proposal represented about 62% of the parties' assets being retained by her, and the husband said his proposal represented 77% in the wife's favour, but as a percentage of a much smaller asset pool.

4 At the outset, I apologise to the parties for the delay in delivering judgment. As a result, some issues may now have been resolved or clarified, for example, the Federal Court claim and the husband's income to June 2005. To state the obvious, since no-one has sought to reopen, I have had regard only to the evidence and submissions at trial. However, I will give both parties the opportunity to make further submissions as to the appropriate form of orders, having regard to whatever are the current circumstances.

Background

5 The husband is 50 years of age and a legal practitioner. He is the managing partner of a major Perth law firm. The wife is 46 years of age and is also a legal practitioner, although she is not in legal practice. Since the birth of the children, she has worked part- time in various legal capacities. The parties met in 1978, and, although in a relationship and financially involved with each other to some extent, did not commence cohabitation until they married in March 1986. There are four children of the marriage:-

• [T], born April 1986 (19 years), who was in his first year of [study at the university];

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• [P], born February 1988 (17 years), who was in Year 11 at [a private boys school];

• [A] born August 1989 (16 years), who was in Year 10 at [a private girls school]; and

• [TB] born July 1992 (13 years), who was in Year 7 at

[primary school].

6 The children have resided with the wife since separation and have had varying, but generally fairly limited, contact with their father, not involving overnight stays.

7 The parties separated in May 2003. They were divorced, on the husband's application, in April 2005.

8 The wife has not re-partnered. The husband lives in a de facto relationship with [TS], a legal practitioner, who has two children living with her, aged 11 and 3 years. The children, particularly the younger child, spend a substantial amount of time with their father, who is a doctor.

9 The husband completed his law degree and commenced articles at the predecessor of his present firm in 1978. In 1985, the husband became a salaried partner and in 1986, an equity partner. The wife completed her law degree and commenced articles at another medium sized firm in 1981, becoming an associate partner in 1986.

10 While an articled clerk, the wife had purchased a unit. In 1985, the parties purchased a [residential property] using equity in the unit (which, by then, had been taken over by the husband), and other funds provided by the husband.

11 In 1986, around about the birth of their eldest child, the wife ceased employment, and thereafter she cared for the children on a full-time basis for several years.

12 In 1988, the parties purchased [another residential property], and kept the [previous home] as an investment property.

13 In 1989, the parties purchased a property [in a riverside suburb], for $192,500 and this became the family home after the sale of the [former matrimonial home]. The [two properties] were sold to facilitate the purchase of the [new matrimonial home], which was virtually debt free as a result.

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14	In December 1989, a few months after [A's] birth, the wife suffered a stroke which has caused some permanent loss of left field vision and residual weakness in the left side of her body.
15	In 1991, the parties purchased the property adjoining [the matrimonial home] for $172,500. They borrowed funds to demolish the house on that property and built a new house which cost approximately $300,000. Once the new property was complete, the parties sold [the matrimonial home] and applied the proceeds to the mortgage, which then reduced to about $200,000, and this was the matrimonial home until separation.
16	In 1993, the wife commenced employment as [an administrator] at the [university]. She resigned in 1998.
17	In 1997, the parties became involved in a business enterprise with friends, borrowing $60,000 to buy [entertainment equipment] in [a country town]. This was not successful and in 1999, the husband transferred the $60,000 loan for the [entertainment equipment] to the mortgage of the former matrimonial home, increasing the mortgage facility against the former matrimonial home to $260,000.
18	In 1999, the husband became managing partner of the major law firm where he had worked for many years.
19	In November 2001, the husband purchased a property at [a coastal resort], for $295,000 as family holiday accommodation. The whole of the purchase price was borrowed and secured by way of an interest only mortgage against this property. The sum of $59,000 was secured against the title to the former matrimonial home. The property earnt some rental income of $20,000 per year gross, less the mortgage instalments and other expenses. The husband was able to claim the loss in his tax returns. The property was sold for $452,000 in 2005, and the net proceeds of sale of $145,925 were to be held in trust pending my determination.
20	In 2001, the wife commenced doing some casual legal administration work at a law firm.
21	In that year, the husband commenced a relationship with his present partner, [TS], who was then an employee of his firm, and this was discovered by the wife in June 2002. The two years leading up to separation were a very difficult time as the husband's relationship developed and the parties grappled with the ramifications.
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22	In 2002, funds were required to be invested by the equity partners at the husband's firm. His contribution was $75,000 for which the former matrimonial home was provided as security.
23	In April 2003, the wife borrowed $27,500 to purchase a VW Beetle on the suggestion of the husband.
24	After separation, the husband did not inform the wife or children where he had gone for two weeks. He lived in rental accommodation close to the former matrimonial home for several months.
25	In May 2003, shortly after separation, there was a violent incident between the parties, with the husband breaking the wife's fingers on her right hand. The wife had a surgical bone graft to the middle finger of her right hand on 30 July 2003.
26	During 2003, the wife returned to working on a casual basis for a legal firm.
27	In October 2003, the sum of $5,000 was paid by the husband to the parties' son, [T] for his high school graduation. The money was used to purchase a computer and bicycle.
28	In November 2003, the husband moved into rental accommodation with [TS] in [the northern suburbs].
29	In December 2003, the wife and the children holidayed [overseas] at a cost of about $16,000, which was provided by the husband.
30	The proceedings in this Court were commenced by the wife on 9 April 2004.
31	In April 2004, the husband paid a further $5,000 to [T] on his eighteenth birthday.

32 The wife ceased her employment again on 30 April 2004.

33 On 8 June 2004, the wife gave notice through her solicitors to the husband's firm that the [P] Unit Trust distribution of $8,350 per month paid through [C] Nominees Pty Ltd as trustee for the [P] Unit Trust was to be paid in full to the [GPG] Family Trust bank account with the National Australia Bank, and this has occurred since 17 June 2004. Until then, the husband had paid the mortgage payments for the former matrimonial home by diverting trust income to meet this expense. The husband had in May 2004, cancelled the wife's ability to use an American Express account as he felt she was over-spending. The wife was withdrawing many of

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the deposits made to the mortgage account to meet living expenses.
The husband ceased making mortgage payments.

34 On 30 June 2004, [TS] purchased a property [in the northern suburbs] for $655,000. The husband paid the deposit of $10,000 and stamp duty of $34,170. [TS] has contributed about $123,000. The husband has since paid for improvements, including $16,677 sourced from long service leave entitlements, and $11,440 from other funds. He also meets the mortgage payment on the property of about $3,500 per month.

35 In July 2004, the husband ceased paying private school fees for the two younger children. He had paid the school fees for [P] at [a private boys school] in February 2004.

36 In July 2004, the wife sold her Honda Odyssey motor vehicle, receiving $17,000, which was used to pay legal fees, some living expenses and to visit her expert valuer,Wayne Lonergan, in Sydney.

37 By November 2004, notice had been received from the National Australia Bank requiring sale of the house unless the mortgage was repaid in full.

38 In December 2004, the wife made several refinancing applications and Westpac agreed to refinance the mortgage on the former matrimonial home.

39 On 3 December 2004, the husband made an offer of settlement which was accepted by the wife on 6 December 2004. However, the parties were unable to agree as to the terms of a minute of consent orders, although, for the wife, it was said that agreement had been reached as to the drafting of the child support agreement. Agreement was also reached in relation to the provision for spousal maintenance for the wife and adult child maintenance. The parties attended a judicial conference on 28 January 2005, and had a special appointment before Justice Penny, who had conducted the judicial conference, on 9 February 2005, but were unable to agree on the terms of the orders. However, the conference note states that all issues were settled and the parties were to prepare a minute of agreed orders.

40 For the wife, it was submitted there was really only one unresolved issue between the parties, namely, whether the payment then offered by the husband of $3,000 per month, to be used to reduce the mortgage against the [matrimonial home], ought to be characterised as property or as spousal maintenance.

(Page 8)
41	The wife claimed that the payment ought to be treated as property at the trial, and the husband sought to revisit the whole issue and sought that it be treated partly as property and partly as spousal maintenance. He proposed to pay to the wife as and by way of property settlement, the sum of $145,880 payable in 70 instalments of $2,084 per month, commencing from April 2005, and spousal maintenance, commencing from the month immediately following the making of the orders and continuing until July 2005, the husband to pay or cause to be paid the sum of $2,084 per month to the wife and $1,200 per month to the [matrimonial home] loan. The wife sought that orders be made in terms of her minute and that the husband sign the child support agreement. If not, she sought child support orders in terms of the draft agreement.
42	While agreement was reached in principle, since its precise terms had never been resolved between the parties, I do not accept the husband should necessarily be held to his offer when it was always an agreement in principle, although the dollar terms were agreed. Obviously, the issue of the reasonableness of the parties' conduct at that time may, and no doubt will, be addressed through argument in relation to costs.
43	As to the conduct of the trial itself, it could readily have focused on the real issues in terms of the appropriate orders alone, even though the parties did not, I believe, at any time, agree on the valuation of the husband's interest in his firm. It is almost unbelievable that, even with the assistance of extra conciliation, the parties felt so strongly about the narrow, in reality, issues in dispute they were prepared to go through the costs and strain of a trial extending over six days.
44	It has to be said that I felt the husband was extraordinarily insensitive to the wife in using [TS] as his assistant during the trial.
45	On 9 February 2005, it was ordered that until further order of the Court, the funds received from the sale of the [holiday house] property be held in trust by the husband in an interest bearing account.

Assets, liabilities and resources of the parties

46 In Hickey and Hickey and A-G for the Commonwealth of Australia (Intervener) (2003) FLC 93,143, the Full Court of the Family Court of Australia said, at p 78,386:-

(Page 9)

"The case law reveals that there is a preferred approach to the determination of an application brought pursuant to the provisions of s. 79. That approach involves four inter- related steps. Firstly, the Court should make findings as to the identity and value of the property, liabilities and financial resources of the parties at the date of the hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of ss. 79(4)(a), (b) and (c) and determine the contribution based entitlements of the parties expressed as a percentage of the net value of the property of the parties. Thirdly, the Court should identify and assess the relevant matters referred to in ss. 79(4)(d), (e), (f) and (g), (''the other factors'') including, because of s. 79(4)(e), the matters referred to in s. 75(2) so far as they are relevant and determine the adjustment (if any) that should be made to the contribution based entitlements of the parties established at step two. Fourthly, the Court should consider the effect of those findings and determination and resolve what order is just and equitable in all the circumstances of the case …"

47 At separation, the parties' assets were largely represented by the present assets at trial, although the [holiday house] property has since been sold.

Bank accounts

48 In their spreadsheets, both parties included minimal balances (under $100) for the wife's Statewest Credit Society account and St George Bank account. I do not propose to include such minor items as being irrelevant in the circumstances.

49 The wife also had had $3,200 in the National Australia Bank, but this had been spent by trial.

50 There were some other discrepancies in the parties' spreadsheets. The husband has a Challenge Bank account, [number] which he included as having a balance of $909, and this was eventually accepted by the wife. The husband has a National Australia Bank account, [number], which he submitted, in closing, had an agreed value of $9,630, but the wife included it as being "not disputed" at $11,418. In the absence of evidence, I propose to just take a middle figure as an estimate.

51 The husband has a National Australia Bank account, [number], which the wife sought to include at $1,194 as being in the husband's previous statement of assets and liabilities. The husband, in closing, said that he had never had such an account, but

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even if he had, I will not include it on the basis that the wife has
not been required to include her previous savings.

Real estate

52 The wife and children live in the former matrimonial home at [a riverside suburb]. Before the court was a valuation of a valuer, John Low, on behalf of the wife, valuing the property at $760,000. The husband had challenged this in his trial affidavit, and claimed it was worth $800,000, but in his closing submissions, accepted the figure of $760,000.

53 It had been agreed that the husband should receive the sum of $145,925, being the net proceeds of sale of the [holiday house] property being held in trust, as he required the funds to pay his tax bill. However, in closing, counsel for the wife submitted that, if I was not prepared to make the orders in the form sought by the wife, this sum should be paid off the wife's mortgage.

54 For the wife, it was submitted that the sum of $72,281, spent by the husband on [TS's] property should be included as an asset in the husband's hands, as it should really be an add-back. In closing, it was suggested that one of the reasons for this was that the parties had agreed contributions overall should be regarded as being equal.

55 The husband's position was that this was not appropriate since the stamp duty paid was irrecoverable in any event, and the funds have been paid from earnings made since separation.

56 The husband pays the mortgage on the property on an ongoing basis, but would have to accommodate himself in any event, but not at such a high cost. The husband has clearly contributed to the property, and would be given credit for this, whether or not the relationship continues. I have therefore determined that these funds should be included as an asset in his hands.

Shares
57	The husband personally has 64,548 [E] Limited shares which, at trial, were valued at 23 cents per share, totalling $15,168. It was agreed that the husband should retain these shares, although the wife claimed to be uncertain of the value and extent of the shareholding. I note that, as of this week, the share price has dropped to 19 cents a share, but the husband could have sold them by now, so I propose to leave them at the figure as at trial.
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Motor vehicles

58 It was agreed that the wife's VW Beetle vehicle should be included at $18,000, and that the husband's 1994 BMW vehicle be included at $28,000. The husband included as an asset in the pool the wife's 1998 Honda Odyssey motor vehicle which she sold for $17,000 using the proceeds to fund legal fees to travel to Sydney to see Wayne Lonergan, and meeting legal expenses. The husband claims the vehicle should have been sold for as much as $25,000. I do not propose to add the value of the vehicle back, in circumstances where I have decided not to add back the paid legal fees, and the sale proceeds have been largely used for the cost of litigation.

Other assets

Boat

59 The husband has an interest in a 44 foot launch operated for charter business through [GEH] Boat Charters. The boat was purchased in 2000, for $225,000 in partnership with [DH] and [PE]. In late 2003, [PE] indicated he wanted to retire from this partnership, and so [DH] and the husband acquired his interest by the payment of $7,000 each to [PE], and the refinancing of the Statewest loan that was used to purchase the boat. [MK], a friend of the husband, who sometimes used the boat, acquired a 1% interest for his company.

60 The husband therefore now has a half interest in the boat which is sometimes chartered by his legal firm which pays some of the expenses for the craft. The husband and his associate, [DH], otherwise have the use of the boat on weekends. It was eventually agreed that the value of the husband's interest in the boat should be included at $95,000. The wife, however, included as an unknown amount any value of [GEH] Boat Charters since the arrangements and costs met by the husband's legal firm are uncertain.

61 The wife did not claim that the substantial sums paid on repairs and refurbishment of the boat in fairly recent times should be added back in the husband's hands.

[“M” – a business]

62 The parties had what was initially a one-third interest in a partnership to purchase and operate a business known as ["M"] in [the western suburbs]. The interest was held via the [GPG] Unit Trust with the only unit holder being the [GPG] Superannuation Fund. As a result of accounting advice, the husband "purchased"

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the units from the Superannuation Fund for $32,000 in 2003, and paid this amount into the Superannuation Fund bank account. The business continues to trade as a partnership with the husband being the sole unit holder in the [GPG] Unit Trust.

63 The business has not made a profit for several years, and the husband said the loss in 2003 was about $45,000, as was the anticipated loss in 2004.

64 The husband says this should be included at nil value, and counsel for the wife, in closing, accepted this.

Other chattels

65 As to the husband's household effects, for the wife it was submitted they should be included at $17,885 which was the estimate of her valuer, Wayne Gardiner. In closing, the wife accepted this figure. The wife's chattels were agreed at $30,635.

Jewellery

66 The wife has jewellery which has been valued at $3,645 by a single expert, Helen Haddy. The husband accepts this valuation, but says that the wife's Rolex watch has not been included. The wife said the husband also had a Rolex watch of similar value. Since the parties have one each, I do not propose to attempt to include a value for them.

67 For the wife, it was requested it be noted that $1,575 of the jewellery had been given to her by her parents, but I fail to see why this was significant given contributions were agreed.

Interest in business/partnership

68 By far the most significant issue between the parties as to the extent of the asset pool, was the value to be placed on the husband's interest in the partnership in his firm.

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The husband's evidence was that his interest should be included at $348,000 representing the balance of his current account and equity fund.
69	The wife sought to include the interest at $942,000, to include an additional $567,000 as the value of capitalised super profits, pursuant to the valuation, and evidence, of her expert valuer, Wayne Lonergan.
70	The provision of support staff and other services to the firm occurs by a service trust known as the [P] Unit Trust, established by deed dated 1 April 1978. Each of the partners, or an entity associated with him or her, is a unit holder in the service trust. The husband's 100 units in the trust are actually held by the wife in her capacity as trustee of the [GPG] Family Trust. The Trust was established in 1986, and the husband is guardian and appointor and the parties and their children beneficiaries. The [GPG] Unit Trust was added as a beneficiary by a Deed of Amendment dated 1 May 1999.
71	The partners also contribute, from their earnings, to a long leave fund which has a balance of about $16,500. They are eligible to take long leave every five years. The payment of monies is deducted from the profit otherwise allocated to equity partners (and on which tax is paid). The husband's evidence was that he had no long leave entitlements as at the date of his trial affidavit, being September 2004, as he used the money to which he was entitled to assist in meeting expenses associated with the [northern suburbs] property.
72	The firm also used to use another entity as well, known as [MN] Pty Ltd, to employ partners to assist in the administration of the practice, for which they were paid a salary. This, in turn, provided greater opportunities for superannuation.
73	On the advice of the firm's accountants that this structure was no longer acceptable to the Australian Taxation Office, it was disbanded as from the year ended 30 June 2002, and an income package of the partners to that point paid via -
• the partnership
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• [P] Unit Trust • [MN] Pty Ltd
had since been paid by the partnership and [P] Unit Trust only.
74	The income distributed via the firm for the years ended 30 June 1996 to 30 June 2004, was summarised by the husband in his affidavit filed 28 September 2004, as follows:-
75

Year ended	Taxable Income	Tax (all	Reverse effect	Net income
(all firm sources)	payees)	of add-backs

30 June

estimate

1996	169,365	- 63,891	-16,166	89,308
1997	89,903	- 25,575	3,583	67,911
1998	147,062	- 53,619	- 15,123	78,320
1999	230,479	- 93,718	- 20,885	115,876
2000	496,410	-222,293	- 67,050	207,067
2001	511,296	-223,232	- 92,746	195,318
2002	612,897	- 272,404	- 65,157	275,336
2003	872,343	-397,846	- 85,640	388,857

76 As at the time of trial, the income distribution from all sources for the June 2004 financial year had been finalised at $947,000.

77 The husband's estimates have been prepared by treating the sum of the partnership and [MN] (if any amount) as one taxable income, and the whole of the [P] amount as another taxable income.

78 The husband said that other factors which may have affected the actual tax paid, for example, the wife's income from employment, have not been taken into account.

79 In relation to the national partnership of the firm, the husband's evidence is that the original franchise agreement was for the period from 1 July 1992 to 31 March 2002. The agreement has

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been extended on a number of occasions. The husband's evidence is that there is mutual concern about the agreement. From the point of view of the national partnership, there was originally concern about the financial performance of the Perth office. At the time of trial, agreement had not been reached in relation to extending the franchise beyond 30 June 2005, and the husband's evidence, supported by the National CEO, is that there is a very strong push by the national partnership for the Perth firm to be integrated into the national firm - "It is not a case of if, but when". There is a franchise fee which will be the subject of review if the franchise agreement was renewed.

80 The concern of the Perth partners was that their income has improved significantly in recent years and there is now a reluctance on the part of the equity partners to join the national partnership, as they earn more than a 100 point partner in the national partnership. At present, 100 point national equity partners (the maximum) are receiving an income of about $550,000 a year. The Perth partnership would have to be wound up, and while each partner would be paid in accordance with the partnership agreement, experience from other offices who have joined the national partnership shows that, after winding up costs, they lost a minimum of 10% of their equity. The husband would then be required to buy points at about $2,100 per point. The husband estimated that he and the other Perth partners would be allocated between 75 and 85 points.

81 Another concern of the husband, which he says could affect his position, is that the management structure of a national partnership involves a chief executive officer and three managing directors, one for each of the three main areas of practice. The majority of the management is based in Sydney and none of the other offices of the national firm within Australia has a managing partner. If the husband's firm joined the national partnership, then his position as managing partner would come to an end. His evidence is that he would have to return to practice as a lawyer, but he now does not have a client base as he has been working only as managing partner since 1999. However, to some extent, he contradicted himself in saying that he still had the important client of [CC] Which would move with him. His evidence is that it would be difficult for him to find employment in either his firm or any other firm in Perth and he would have to seek alternative employment of a management type.

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82

As to the husband's taxable income, compared to his actual income, his evidence is that the actual profit of the firm is divided between the seven equity partners equally, after taking into account all the expenses of the firm, some of which are not tax deductible, for example, entertainment expenses, car parking and some of the staff amenities. Accordingly, for income tax purposes, these expenses are "added back" to the profit on which tax is paid. Therefore, the husband's taxable income has ranged from $85,000 to $110,000 per year more than his actual income. In reality, his income to June 2004, was about $840,000.

Super profit issue

83 The real issue in relation to the value of the husband's interest in the partnership was whether this should include an additional sum to represent what has been commonly referred to as "super profits".

The wife's position

84 The expert called on behalf of the wife to value the husband's interest was Wayne Lonergan, a chartered accountant of Lonergan Edwards & Associates Ltd of Sydney, New South Wales. Mr Lonergan's evidence was that his instructions were to prepare a valuation of the indicative fair market value of the husband's proprietary interest in his partnership as 30 June 2004, as an expert on behalf of the wife.

85 I accept that Mr Lonergan is a leading expert in the field of corporate and business valuations in Australia and is the author of many articles and publications, including a text book on the valuation of business shares and other equity, which is presently in its fourth edition.

86 Mr Lonergan valued the husband's interest in the partnership at $477,000 for his share of net tangible assets based on 31 December 2003 balances - represented by a capital account of $229,000 and a current account of $248,000. He concluded the value of capitalised superannuation profits was $567,000.

87 As background, Mr Lonergan noted the husband's position as a 100 point equity partner and as the chief executive officer. He also noted that under the terms of the partnership agreement, which was effective on 1 July 1999, a partner:-

(Page 17)

• is allocated profit in accordance with a set of allocated profit share proportions adopted by resolution of the partners (clause 10.1);

• shall equally contribute partner funding from time to time (clause 11.3);

• holds equity in the partnership in proportion to his notional holding of equity units (clause 12.3);

• holds equity units in a conceptual form only (providing a mathematical basis for calculation purposes under the partnership agreement). Further equity units are stated to be "not in the nature of personal estate and may not be assigned or devised" (clause 12.4);

• wishing to retire from the partnership must give the other partners four months' prior written notice of their intention to do so (clause 18.2);

• is deemed to retire on the 30 June next following their 65th birthday (clause 18.3);

• on retirement, is entitled to receive the amount standing to the credit of their current account at the retirement date plus the value of their equity units (providing they have completed five years service as a partner) (clauses 18.5 and 18.6).

88 Other relevant matters with respect to the husband's interests were said to be:-

• the interest in the partnership is held in the name of the husband;

• the [GPG] Family Trust holds units in the [P] No 1 Unit Trust;

• the husband was then 49 years of age and had given no indication of his expected date of retirement from the partnership - for the purposes of his assessment, Mr Lonergan assumed that whilst the partnership continues to grow and produce a reasonable return, the husband will continue to be a partner until he is deemed to retire pursuant to clause 18.3;

• goodwill is not recognised as an asset of the partnership;

• the partnership agreement does not make any provision for the payment of retirement benefits to retired partners;

• for the purposes of his assessment, Mr Lonergan aggregated the income received from the partnership and the [P] No 1 Unit Trust.

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89 At para 15, Mr Lonergan referred to the valuation as not being a valuation of the partnership, but a valuation of the partnership interests in the hands of the individual partner, that is the partner's capital plus the capitalised value of future super profits that the partner is expected to receive, which represents a practical way of assessing the value of partnership interests in the hands of an individual partner for family law purposes, which he accepts are different from the generally accepted commercial concept of valuation.

90 He referred to the reasons for adopting his approach as

including:-

• consistency with precedent and other family law cases, for example, Best and Best (1993) FLC 92-418 and Hegarty and Hegarty No SYD 3496 of 2002;

• the need to recognise that even an asset that is not, in practice, transferable nevertheless can have a significant economic value to its holders;

• the need for consistency with the valuation principles applicable to other assets that generate future cashflows.

91 He acknowledged that the partnership interest has no value in exchange due to the provisions of the partnership agreement - "however, from a valuation perspective, a partnership interest is an "asset" which has a value to the holder equal to the net present value of the net future cashflows that the partner will receive (in excess of those cashflows attributable to the partner's notional salary and capital invested) while the partner continues to hold the interest".

92 In his opinion, a partnership interest is consistent with the definition of "control of an asset" meaning the capacity of an owner to benefit from the asset in the pursuit of the owner's objectives, and to deny or regulate the access of others to those benefits. An individual partner receives future economic benefits by virtue of their partnership interest, and the husband controls the asset as he benefits from the partnership distributions over and above the amount he would entitled to receive as a (notional) salary for his labour. Others cannot access this benefit without his consent.

93 The appropriate method to value the husband's interest in the partnership over and above his employment is the capitalisation of future maintainable super profits which is a long established and widely used method of valuing individual partnership interests.

(Page 19)

This adopts a "bottom up" rather than "top down" approach as used for the valuation of goodwill in normal valuation methodology. That is, it adds the capitalised value of super profits to net identifiable assets to assess total value. While this approach, in relation to firms with very large work in progress and debtors, could lead to an over-valuation of the interest, the working assets of this firm are not excessive.

94 The super profits methodology requires an estimate of the future maintainable earnings that the husband will receive from the firm. To the extent that this relies upon an extrapolation of his historic results, this would include adjusting the prior year's distributions from the partnership (and related entities) to eliminate non recurring or unusual items.

95 From this amount, the husband's notional salary and return on capital employed are deducted to determine the amount of super profits, which are then capitalised at an appropriate rate.

96 Super profits can be defined as representing the remuneration over and above that which would adequately reward the partner for the level of "personal exertion" expended in the practice, and to provide for a return on capital employed - so it is a measure of the husband's proprietary interest in the partnership in excess of the remuneration for his labour and capital input.

97 In adopting this method, it is necessary to make an allowance for the "notional salary" that the husband could earn as an employee with similar skills and experience rather than as a partner because his share in the partnership generates a (notional) salary, a return on capital invested, plus the additional benefits which partnership confers to him over and above employment and a return on his invested capital.

98 Fundamental to the super profits approach is the proposition that a partner earns an additional reward to compensate him/her for the risks inherent in a partnership. Partners face increased responsibility, effort, investment and risks beyond that of a salaried employee. The methodology recognises that leaving a partnership would not result in the inability to derive income as the notional salary plus interest on his capital could be earned somewhere else. However, if the husband left the partnership, this would be likely to result in the loss of the additional level of income or super profits attributable to being a partner of the firm.

99 Mr Lonergan did not hold himself out as being an expert on remuneration levels for specialised positions such as that held by

(Page 20)

the husband, or what is, or not, a reasonable salary in respect of the level of remuneration the husband could command in a capacity outside his firm. However, in assessing the level of notional salary, Mr Lonergan had regard to the level of distributions made to salaried partners of the firm and publicly available data with respect to legal salaries and executive salaries generally.

100 He said the determination of the (capital) value of super profits can be calculated on two bases:-

• the capitalised value of super profits using an appropriate capitalisation rate;

• the calculation of net present value of super profit to an assumed retirement date allowing for mortality and other vicissitudes (to the extent that this is not already allowed for in the discount rate).

101 Mr Lonergan adopted the capitalisation of super profits method as the husband had some 16 years to compulsory retirement under the terms of the partnership agreement. He said that the second method was suitable where the individual partner has a limited time to retirement, say five years, when super profits may only be earned until the partner retires from the practice. In such instances as it would be more appropriate to calculate the net present value of the partner's entitlement to super profits until the date of retirement using a risk adjusted discount rate and making allowance for the possibility that the partner may die or become incapacitated during this period.

102 As to the capitalisation rate, or earnings multiple, this is a matter of judgment reflecting both the expected returns from an investment in the practice and the expected risk involved. In particular, any unusual features in the following factors (amongst others) will be relevant when assessing the capitalisation rate applicable to the level of super profits:-

• the source of the practice's profits;

• the contributions of the key partners;

• the nature of the practice and its client base;

• the age, influence and turnover of the partners;

· Any particular strengths or weaknesses of the practice;

• staff loyalty, retention rates and availability of skilled professionals;

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• the necessity for the partner to work in the practice to continue to receive distributions;

• the partner having significant levels of non diversifiable personal investment in the partnership; and

• the unlimited liability faced by the partner/s.

103 Mr Lonergan said he was not aware of any such unusual features in this case.

104 The value of the partnership interest is then determined by adding the partner's interest in the value of net tangible assets (principally the capital and current account) to the value of the capitalised super profits.

105 Rather than extend this judgment even further, by reproducing Mr Lonergan's conclusions and calculations, I have annexed a copy of Chapter IV of his report to this judgment. In brief summary, Mr Lonergan referred to the profitability of the partnership as growing significantly over the last three years (to 31 December 2003, which was his cut off point), and this has been reflected in the distributions. He weighted the earnings in favour of 2003 and 2004 in assessing the level of future maintainable distributions. This recognises that notwithstanding the growth in the firm's earnings over the last two years, professional service practices are impacted by the economic cycle. He adopted a maintainable level of distributions of $785,000.

106 In assessing the level of notional salary, he had regard to several sources, including a salary survey undertaken by the Law Society of Western Australia, and the salaries paid to the firm's salaried partners. To the year ended 30 June 2003, the level of salary paid to the 17 salaried partners ranged from $40,783 to $564,080. Excluding "outliers" (which may be attributable to part- time work, consultancy or other special arrangements with high fee producing individuals) the range is $110,000 to $369,230, with the average salary being $189,125.

107 On the assumption that the husband could command a salary equivalent to a highly paid salaried partner then a notional salary would be some $284,000 to $419,000.

108 Salaries of senior associates and salaried partners as per a survey by Hays Personnel Services were applicable to Sydney, Melbourne and Brisbane, and separate Perth data was not available. For salaried partners the figures were $130,000 plus in Brisbane, $160,000 plus in Sydney and $140,000 plus in Melbourne.

(Page 22)

109 Mr Lonergan noted that:-

• The senior associate level of salary was considered too low as it is a comparison of salaried employees at the level below partner.

• The "publicly available data" includes the salaries paid by much smaller firms, were salaried partner equivalent payments would be much lower than the salaries paid to salaried partners in premium practices. He also referred to Hays Personnel Services' survey of salaries of in-house legal counsel in 2004, but, again, separate Perth data was not available, and the results of a survey of the Australian Bureau of Statistics, noting the earnings of senior and junior counsel.

Mr Lonergan referred to a survey of CEO and executive remuneration prepared by Egan & Associates for the year ended 2002/2003, which tabulates the CEO and executive remuneration, including bonuses, paid across Australia's 200 companies. However, the lower end companies were still larger than this firm's operation.

Based on the publicly available data and the salaries paid to salaried partners of the firm, he adopted a notional salary level of some $350,000, being a salary below the CEO salaries of the 25th percentile of public companies ($385,000) uplifted for inflation and the second highest paid salaried partner in the firm ($369,000) plus trust distribution. This level of remuneration is equivalent to the average of the highest paid salaried partners of the firm, excluding [DH]. This level of remuneration is very high when compared to the other remuneration levels to which he referred.

• As to return on funds invested, consistent with the super profits methodology, a return should be calculated as payable to the partner at commercial rates for the provision of capital and short term funding (through undistributed profits), that is, on their total capital and current accounts. Notwithstanding that the loans are, in substance, a form of equity, the super profits methodology applies on an interest based rate of return to these loans. In his opinion, the rate at which interest should be calculated is no less than 4% above the rate charged by banks on large advances, which margin reflects a reasonable return given the unsecured and subordinated nature of the loans and the risks associated with the business. As at 30 June 2004, the bank overdraft and indicator lending rate for large

(Page 23)

business was 8.85%. Incorporating the 4% premium, the rate would be some 12.85%. He proceeded to adopt a capitalisation rate of 33%, being a discount rate which he regarded as broadly consistent with that used in other family law cases, including Best and Hegarty. The methodology used to determine the appropriate capitalisation rate was set out in Appendix 'D" of his report and a copy of this is also annexed hereto.

• Maintainable super profit and the value of capitalised super profits were then derived as follows:-

$000

Maintainable partnership distributions	785
Less notional salary	(350)
Less return of capital employed in the partnership at 12.85%	(61)
374
Less tax at 50%	(187)
Maintainable super profits after tax	187
Capitalisation rate	33%
Value of capitalised super profits	567

(Page 24)

• As to the impact of franchise arrangements on future maintainable super profit, since the practice operates as a stand alone practice under a franchise arrangement with the national firm, reference was made to Mr Lonergan having been advised that it is "proposed that in future the arrangement be that Western Australia become part of a national partnership". Further, it was advised that the notional firm's board held the view that it was not appropriate to extend the term of the current franchise agreement. It was further contended that the earnings of a 100 point partner in the firm nationally was significantly less than that earned by the husband and even the highest paid salaried partner of the firm in Perth.

• Mr Lonergan noted that the franchise agreement (clause 17) intended that the firm join the national partnership not later than 1 July 2001, and that if the parties failed to agree terms, the agreement would expire on 31 March 2002. Notwithstanding this clause, in July 2003, the board of the national firm resolved to extend the franchise agreement for a period until June 2005.

110 Mr Lonergan said at paras 70-71:-
"No further information has been provided with respect to the
ultimate outcome of the negotiations and one must question
whether the partners [of the firm] would agree to join the
firm's national partnership if it were to have such a significant
impact on their earnings. Accordingly, I have assumed that
Mr G's earnings will continue unaffected.
In my opinion, this issue cannot be viewed in isolation. If the
level of future partnership distributions were to decrease this
would also impact the payments made to salaried partners and
as a result would cause a reassessment of the level of notional
salary adopted in my valuation."

(Page 25)

The husband's position

111 At trial, the husband took the approach, rather than calling his own expert witness to challenge Mr Lonergan's methodology and conclusions, of dealing with the issue by cross-examination and submissions. His position, in summary, was that the super profit approach is not appropriately applicable to this case, nor are Mr Lonergan's calculations correct in assessing the value of that interest. Overall, his position was that Mr Lonergan's conclusions are not based on the correct evidence and are unrealistic, having regard to the reality of the situation.

112 In summary, he submitted:-

• Mr Lonergan has no expert qualifications on which he can make the assumption that the husband will not retire until the age of 65 years (which is comparable to the position in B and B [1999] Fam CA1142). Mr Lonergan admitted that he had no information other than the husband's age. Reference was made to para 36 of the report, which discussed where an individual partner has a limited time to retirement (say five years) it may be more appropriate to calculate the net present value of the partner's entitlement to super profits until the date of retirement using the risk adjusted discount rate and making allowance for the possibility that the partner may die or become incapacitated during this period.

The husband's position was that the chances of him being a partner of the existing partnership of the firm in Perth at age 65 was so remote as to be negligible and Mr Lonergan had no justification whatsoever for concluding to the contrary. He had avoided entirely any assessment of the retirement date because:-

-	he was not expert or qualified to make any assessment;
-	he had no information to assist him (other than information which cast serious doubt on his proposition);
-	he was aware that any attempt to make a proper assessment would highlight the question of whether his methodology was correct.
•	As to maintainable future earnings, the husband submitted that Mr Lonergan's opinion on future maintainable earnings was "half baked and seriously flawed". While Mr Lonergan had calculated a figure of $785,000, he had conceded that, at best for 2004/2005, the firm could be said to be tracking to the
(Page 26)
figure projected by the firm's accountant in October 2004 of $758,000 and he accepted that there are real challenges in doing so. He really was not aware of any relevant information about the firm's profitability, although the information was in his possession, that as at 31 January 2005, the year to date profit was $1,000,000 behind the year to date profit to 31 January 2004. Although Mr Lonergan was aware there were currently seven equity partners of the firm in Perth, he was not aware how many fixed income partners there were, nor in which area they practised.
The placing of major weighting on the last two years trading performance of the firm and some small weighting on one previous year ignored the current performance.
Mr Lonergan had unrealistically said that difficulties with the franchise should be disregarded and he had no knowledge of the performance of the national firm. He had accepted that there are potential costs, for example, new fitout of premises, for a new practice management system and rental pressures that had not been taken account of. He also accepted the pressure that areas of the firm such as insurance may be under because of fundamental changes, for example, legislative reform, but said that those partners can "re-skill". In this regard, the husband claimed that Mr Lonergan did not realise that the number of partners involved in insurance work is half the total number of the partners in the firm.
•	Taking it over four years, the husband submitted that the average equity partner profit was $658,000 which could be the likely outcome for 2004/2005 if performance did not improve for the balance of the year. The average possibly picks up the "peaks and troughs" referred to Hegarty's case (supra), but does not have to pick up other issues such as the national firm, expenses pressures and issues with the insurance practice. He submitted that without a franchise of long term duration (and there appeared little, if any, chance of obtaining one), then the figure likely falls, whether the firm joins the national firm of stands alone, to somewhere in the vicinity of $450,000.

(Page 27)

• In relation to notional salary, the husband pointed out that Mr Lonergan had already acknowledged in his report that he is not an expert on fixing the salary of someone like the husband, but still attempted to do so. In B and B (supra), the trial Judge had commented on the difficulty of a valuer having no expertise in the field of remuneration, which led to the wife's valuer's comments on salary being struck out. The husband maintained that, as advised to Mr Lonergan in advance, he had got the figures for salaried partners' salaries very wrong indeed, and he had conceded that in his evidence. Mr Lonergan had then said that the better and more appropriate comparison is between the husband and the CEO's in public companies rather than between the husband and his fellow partners, being fee earners, when he is not, so this means that salaried partners are now an irrelevancy to the exercise as far as Mr Lonergan is concerned.

Reference was made to the Egan & Associates survey as being outdated, and also inaccurate as not including long term incentives.

• The husband submitted that Mr Lonergan had done no assessment at all of the husband's possible value to other law firms, having regard to his track record given the level of performance of the firm since he had become managing partner, and that he still had some client base which would follow him to another firm, for example, the [CC].

• The husband submitted that it is clear from his report that really Mr Lonergan had fixed a notional salary for the husband primarily, if not entirely, by reference to the salaries of salaried partners at the firm. The husband then detailed the position in relation to the individual partners, pointing out unusual aspects of their positions. While, at one stage, Mr Lonergan had said that salaried partners cannot be compared to the husband in any event, it is clear that, in reality, the comparison was performed and he picked a range albeit that his figures were inaccurate for highly paid salaried partners of the firm, and his figure was exactly in the middle of that range.

(Page 28)

• The husband referred to para 71 of Mr Lonergan's report, in which he had said that his calculation of the super profit component would not change if the profit share of an equity partner at the firm went down, because in that event, the salaries of the salaried partners would simply be reduced by the same amount so the gap between the two, which is the super profit element, would remain the same. The husband said this was a silly proposition because salaried partners are paid at market rates and you just cannot reduce their salaries in that way, the real point to be made is that para 71 can only make sense if the notional salary for the husband is fixed by direct reference to the salaried partners' salaries. If the notional salary was being fixed by reference to some other measure - for example, the salaries of CEO's in public companies - then it is quite obvious that a former equity partner's profits could not have any impact at all on the salaries of those people and the super profit element would have to be reduced.

• The husband referred to the position of [DH], who had been a salaried partner earning exactly the same as an equity partner, apart from add-backs. [DH] filed an affidavit saying that he had agreed to become an equity partner in July 2005, only as a favour to the other equity partners, rather than because of any advantage to him. [DH] is not a fee earner either, being a team manager. [MB] was also a highly paid salaried partner at $467,450 per annum to June 2004. The

(Page 29)

husband submitted that another salaried partner, [GS], earned $440,200. Mr Lonergan had to make comparisons with CEO's of public companies as he only realised after he saw the husband's affidavit that he had made significant mistakes in his calculations regarding salaried partners' salaries.

• The husband submitted that the reality is that even with the super profit approach, maintainable earnings cannot be justified above $658,000 in the current situation, and less than $450,000 in circumstances where the franchise is at an end. A notional salary less than [MB's] could not be justified, the respective rankings and value already being confirmed by the fact that the husband is an equity partner and [MB] is not. A notional salary equivalent to [DH]'s is the logical figure which is the same as the husband's current remuneration - "Once you have concluded that, then there is no super profit anyway. That salary, after taking account of the effect of add-backs (easily seen by comparing the actual dollar amount [DH] receives to the actual dollar amount that an equity partner receives, as explained in my affidavit on the subject, even though [DH] is on the same amount as an equity partner after adjustment for that) is an appropriate salary for me".

• As to the essential difficulty with the super profit argument in this case, the husband submitted that Mr Lonergan's whole proposition is predicated on the presumption that the husband has security of tenure, which is not the case. The lock step partnership situation did not apply in this case - the type being referred to by Mr Lonergan was one where the partner was entitled by specific provision in the partnership deed to remain in a fixed position for a certain period of time, come what may. At the husband's firm, it just meant new partners gradually increased their equity points over time. The husband said - "We can make any arrangement we want in respect to an individual partner, including a change in any number of [equity] points, demotion to salaried partnership or expulsion in the time it takes to call a partners' meeting. Such a decision under the Deed does not require unanimous approval, but approval of all partners less two".

(Page 30)

• The husband stressed the firm may well not exist in its current form or any similar form after 30 June 2006. There are also the issues of the husband's personal longevity with the firm as being under real question, for example, because of his personal problems and problem of lack of enthusiasm.

• The husband also criticised Mr Lonergan's role as an expert:-

1. Mr Lonergan had sought approval from the national firm to act for the wife in this matter. He was apparently told that such approval would only be given on the basis that the husband had given his own informed consent to him acting, but the husband was not approached.

2. Mr Lonergan has made assumptions in his report without a proper basis for so doing, so as to properly test the assumptions. Expert opinion is of no value unless the facts upon which it is based are proved by admissible evidence.

Mr Lonergan made assumptions about [DH] based on "instructions" from the wife. He could not make assumptions about [MB]'s revenue generation capacity with no information at all to make an

(Page 31)

assessment, nor could he assume a retirement age of 65, or the outcome of negotiations with the national firm. He could not make a calculation as to future maintainable earnings of a partner without taking steps to inform himself about the future maintainable performance of the firm itself.

"For him to suggest that his task in valuing a partner's interest did not require him to assess the partnership itself in any way means that he misled himself in a most serious way. To frankly admit that he was totally unaware that the firm's profit performance in the year to date is $1,000,000 behind the position at the same time in the previous year is a sad and sorry indictment of his performance".

184 Neither party is eligible for a pension allowance or benefit and both have some superannuation entitlements.

185 Both parties are entitled to a good standard of living, having regard to their qualifications and the family's high income. Neither party suggested that payment of any sum would increase the earning capacity of either party, for example, by enabling the wife to undertake a course of education or training.

186 A significant consideration in this case is the extent to which each party has contributed to the income, earning capacity, property and financial resources of the other party. Although a legal practitioner herself, the wife was not generally in employment outside the home during the marriage. She was the principal caregiver for the four children of the parties. From 1990 to 1993, the husband's earnings dropped significantly, having regard to problems in his firm and the wife undertook employment. At that time, the husband had considered a move to work for [another company], but decided not to take up this offer.

187 The marriage extended for approximately 18 years.

188 The position in relation to child support is that the husband has been paying the family a total of $100,000 per annum, and expects this to continue.

Conclusion - s 75(2) factors

189 Both parties accepted there had to be a substantial adjustment in the wife's favour for s 75(2) factors, although the percentages were wildly skewed because of the parties' different cases as to the

(Page 55)

extent of the asset pool. The husband has a very high earning capacity. I am not sure he fully appreciates just how high it is by community standards. He has some other benefits from his employment. On his own evidence, he works less than an eight hour day to achieve this, and has a pleasant lifestyle, for example, the use of the boat.

190 It may well be that the husband has to extend his working life longer than he would have liked because of his changed circumstances. While there are no certainties in life, his earning capacity is likely to remain very high for several years, although it may not remain quite at the present level.

191 While he is quite heavily committed financially, he has felt able to take on more financial commitments, which it was not necessary for him to do. While the wife has a reasonable above average earning capacity in the future, her employability is presently limited because of her health and because of her obligation to the children.

192 In the present case, percentages are of limited relevance - the asset pool is comparatively modest, having regard to the husband's present earning capacity. The principal capital asset remains the former matrimonial home, in which the wife and children reside.

193 Taking all these issues into account, I am satisfied that there should be such an adjustment for s 75(2) factors as would result in the wife receiving the former matrimonial home unencumbered - in due course.

194 This would take the wife to receiving nearly 93% of the present assets or an adjustment of 43%. However, this is not as extreme as it sounds, as the parties agree that the husband may pay the mortgage off over several years. It should always have been the case in the present circumstances, that the wife should have received the former matrimonial home unencumbered and this should be the wife's property settlement entitlement. I appreciate the husband says he was unable to borrow additional funds, but the monies used, for example, towards [TS]'s support and her home could have been used, at least partly, towards refinancing in the husband's hands, or clearing, the wife's mortgage debt.

Effect of orders and "the fourth step"

195 It is apparent from the above that, I am satisfied that a just and equitable division of the parties' property requires each party to

(Page 56)

retain their present assets, but with the husband paying out the
wife's mortgage.

196 The parties will each retain substantial debts, the husband as a result of his business commitments and his outstanding legal fees, and the wife because of the fairly extensive loans she has raised from her family.

197 There is an issue as to the proceeds of sale of the [holiday house], property which were earmarked to pay tax. These were being held in trust, but I do not know if this is still the case. However, on the evidence before me at present, the position would eventually be, I appreciate, somewhat artificially.

198 I will hear further submissions from the parties as to how it is now proposed the husband will pay the mortgage. If it is to be over time, it will need to be at a sufficient level to meet any interest payments due. I am also prepared to countenance "tax friendly orders" and further submissions as to the precise terms of the orders.

199 The division of the property would therefore be as follows:-

Husband Wife

Bank Accounts

Challenge Bank account No	909
National Australia Bank account No	(E)10,500
Real Estate
[matrimonial home]	760,000
Proceeds of sale, [holiday house]	145,925
Funds spent by husband on [the northern	72,281
suburbs] property
Shares
64,548 [E] Ltd shares at 23.50 cents per share	15,168

(Page 57)

348,000

Interest in partnership

Motor Vehicles

VW Beetle	18,000
1994 BMW	28,000
Other Assets
Boat	95,000
[“M” – a business]
Household effects	17,885 30,635

3,645

Jewellery

[GEH] Charters (business) NK

Total:	733,668	812,280
Liabilities
Mortgage [matrimonial home]	274,361

St George Bank loan	22,000
Business loan	195,000
Statewest loan (for boat)	51,000
Income tax	161,481
Loan from parents	(E)10,000

(Page 58)

Capital Gains Tax on sale of [holiday house]	35,000
property

Sub total:	452,481	296,361
Net total:	281,187	515,919
Superannuation

Unisuper	16,490
Westscheme	2,490
[GPG] Super Fund	54,241

Total:  335,428 534,899

-274,361	+274,361
61,067	809,260

Child support and spousal maintenance

200 There was so little dispute between the parties on this issue ($500 per year per child), as to be derisory. The parties agreed there should be a child support departure, and had agreed the husband pay $13,000 per child per year, which the husband sought to reduce to $12,500. It was agreed the husband would pay any school fees or university fees as well. While this is a very substantial commitment, the children's expenses are high and were always so. I am satisfied the husband should meet the previous amount agreed and that he can reasonably afford to do so. I will not require him to contribute to excursions as being likely to leave room for argument between the parties.

201 As to spousal maintenance, while I have said the wife's expenses are somewhat inflated, they still greatly exceed the funds available to her. She also has debts to pay, which she presently has no way of meeting. I am satisfied the wife has an ongoing need for spousal maintenance, and this is likely to continue until the youngest child leaves school, and that the sum of $48,000 is

(Page 59)

appropriate, having regard to the husband's ability to pay, and the
wife's present earning capacity.

202 It goes without saying that this will be variable with any substantial change in the parties' financial circumstances.

Proposed orders

With the intention that, pursuant to Section 81 of the Family Law Act 1975, these orders shall as far as practicable finally determine their financial relationship and avoid further proceedings between them:-

1. Within 30 days, the parties sign all documents and do all things necessary to:-

(a)	Transfer to the wife all the husband's right, title and interest in [matrimonial home] more particularly described in Certificate of Title Volume 1274 Folio 759 ("the [matrimonial home] property").
(b)	Cause the release of the [matrimonial home] property as security for the National Australian Bank business loan in the sole name of the husband in relation to his legal partnership.

2. As and by way of property settlement, the husband pay or cause to be paid to the wife the sum of $274,361, upon terms to be the subject of further orders.

3. The husband do pay the business loan of $195,000 and indemnify the wife as to any liability she may have in respect of the business loan of $195,000 secured against the title to the [matrimonial home] property.

4. The husband do sign all documents and do all acts as may be necessary to provide alternative security in respect of the business loan so that the [matrimonial home] property shall be released from the business loan within 18 months of the date of these orders.

5. Any interest the husband has in the VW motor vehicle in the wife's possession do vest in the sole name of the wife on the basis that the wife shall pay and indemnify the husband as to the St George's Bank loan for the VW.

(Page 60)

6.

Except as these orders provide to the contrary as against the wife, the husband retain all items of personal and real property in his possession or of which he is registered proprietor as at the date of the making of these orders including but not limited to:

(a)	the BMW motor vehicle;
(b)	the furniture and home contents in the husband's possession;
(c)	the husband's life assurance policy (if any) except as otherwise specified in these orders;
(d)	the shares in the name of the husband;
(e)	any proceeds of sale of shares;
(f)	the business ["M"];
(g)	any savings and/or cash in the husband's possession;
(h)	the husband's superannuation entitlements;
(i)	The husband's practice.

7.

Except as these orders provide to the contrary, the wife retain all items of personal and real property in her possession or of which she is the registered proprietor as at the date of the making of these Orders, including but not limited to:

(a)	the furniture and home contents in the wife's possession;
(b)	the wife's life assurance policy;
(c)	any savings and/or cash in the wife's possession;
(d)	the wife's superannuation.

8.

The husband do obtain for the wife an unconditional release of any other obligation the wife has in respect of any overdraft, the business loan and any other loan or loans of whatever nature including any loan in relation to the husband's motor vehicle.

9.

The husband and wife do cause the Family Trust to, and the husband in his personal capacity do, pay and indemnify and keep the wife indemnified as to:

(a)	any liability which the wife may have now or in the future in respect of any offices held by her at any time in the Family Trust;
(b)	any liability arising in respect of any claim, debt or demand for which the husband and/or the Family Trust become liable;
(c)	any loan account debt demand or other liability of the wife to the Family Trust;

(Page 61)

(d)	any action claim debt or demand made or to be made against the wife in respect of her involvement in the Family Trust;
(e)	any liability of the wife which arises as a result of the wife having been a beneficiary or in respect of any other involvement in the Family Trust;
(f)	Any other liabilities of the husband including any capital gains tax arising upon the sale of [the holiday house].

10.

The wife do pay and indemnify and keep the husband indemnified in relation to any personal debts in her name and credit card other than as is specified in these orders.

11.

The husband do pay and indemnify the wife as to any liability arising in any other entity, including but not limited to the [GPG] Unit Trust.

12.

Except as these orders provide to the contrary the parties each release the other from all debts owing from one to the other.

13.

Except as these orders provide to the contrary the parties indemnify each other in respect of any loans owed to any member or members of their respective families including but not limited to any loans owed to the husband's parents and/or any loans owing to the wife's parents and the wife's brother.

14.

To allow the wife to secure any payments with respect to the mortgage from the date of the housing loan and lump sum, at the wife's election, the husband do sign all documents and do all acts as may be necessary to allow the wife to obtain a life assurance policy against the husband's life in an amount of $350,000 on the basis that the wife shall pay or cause to be paid all the premiums for the policy.

15.

The husband do pay or cause to be paid by way of spousal maintenance to the wife to a bank account nominated by her as she may direct from time to time the sum of $48,000 per year payable in the monthly sum of $4000, the final payment to be made on the happening of the first of the following events:

(a)	The expiration of five years from the date of these orders;
(b)	The wife entering into a de facto relationship as is defined by the Family Court Amendment Act 2002;
(c)	The wife's remarriage.

16.

The husband do pay to the wife adult child maintenance for [T] born April 1986, and any children attending university, at the rate of $13,000 per annum payable monthly ($1084

(Page 62)

per month) until such time as [T] completed university or undertakes full time employment.

17. The husband within fourteen (14) days after receipt of the relevant invoice do pay or cause to be paid university fees for [T] and any children who are attending university.

18. The husband pay or cause to be paid to the wife to a bank account nominated by the wife child support for each of the children in the sum of $250 per week per child ($13,000 per child per year), net of any tax that might apply to these payments, on the basis that payments are to be paid monthly, the first payment to be made no later than one month from the date of the final orders made in the Family Court of Western Australia and the final pro rata payment in respect of a child to be made upon the happening of the first of the following events:

1.1	A child support terminating event in relation to the child as defined by Section 12 of the Act;
1.2	The child completing secondary education even if he or she has attained 18 years;
1.3	The child obtaining full time employment.

19. The husband within fourteen (14) days after receipt of the relevant invoice or receipt shall pay or cause to be paid or reimburse the wife if she provides a receipt:

2.1	All school fees incurred in respect of the children attendance at their private schools;
2.2	The cost of school uniforms for each of the children;

20. The parties sign all documents to give effect to these orders.

21. The undertakings filed by the parties in the Family Court of Western Australia be revoked.

22. The husband and wife jointly use their best endeavours to the extent that they are lawfully able to do so to minimise any stamp duty, income tax, PAYG tax instalments or capital gains tax payable in giving effect to the following orders.

23. The husband and wife each do all things reasonably requested of them by the other party to give effect to these orders in a tax effective manner.

24. All outstanding Court Orders be discharged.

25. The parties have liberty to apply in respect of the implementation of these orders.

26. The applications otherwise be dismissed.

I certify that the preceding [201] paragraphs are a true copy of the reasons

for

judgment delivered by this Honourable Court

(Page 63)

Associate

I certify that the preceding [202] paragraphs are a true copy of the reasons

for

judgment delivered by this Honourable Court

Associate