Scott & Scott - [2006] FamCA 1379

FAMILY COURT OF AUSTRALIA

SCOTT & SCOTT

[2006] FamCA 1379

PROPERTY - CHATTELS – VALUATION – Alleged error in exclusion of chattel from the asset pool where there was evidence from the husband and wife as to its value – Discretion to offset chattels retained by each respective party rather than account for item in property pool

PROPERTY – VALUATION – Medical Practice – Adversarial expert evidence - Capitalisation of maintainable earnings methodology – Valuation of income stream as “Value to Owner” adopted by Trial Judge – Relevance of partnership agreement containing goodwill figure - Divergent figures for reasonable salary for partner of practice and capitalisation rate applied to earnings – Trial Judge’s discretion to determine the issue with relevance to the material before her, including expert evidence - Lenehan and Lenehan (1987) FLC 91-814 - Where neither expert’s evidence was inherently unbelievable, or outside their area of expertise

PROPERTY – CONTRIBUTIONS – Post-separation – Inclusion of property in the pool which was acquired using monies generated after separation - Where contributions of one party to the welfare of the family in the post separation period equated to significant financial contribution of the other party

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

Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR 621
C & T [2002] FamCA 196
CDJ v VAJ(No 1) (1998) 197 CLR 172
Farmer & Bramley (2000) FLC 93-060
Gronow v Gronow (1979) 144 CLR 513

Harrison and Harrison (1996) FLC 92-682

House v. The King (1936) 55 CLR 499

In the marriage of Best and Best (1993) FLC 92-418.
In the marriage of Jacobson and Jacobson (1989) FLC 92‑003

In the Marriage of Mallet (1984) 156 CLR 605

Lenehan and Lenehan (1987) FLC 91-814

In the Marriage of Norbis v Norbis (1986) 161 CLR 513

Reynolds and Reynolds (1985) FLC 91-632
Turnbull and Turnbull (1991) FLC 92-258
Williams and Williams (1984) FLC 91-541

APPELLANT:

SCOTT

RESPONDENT:

SCOTT

FILE NUMBER:

ADF

2642

2003

APPEAL NUMBER:

2004

DATE DELIVERED:

21 December 2006

PLACE DELIVERED:

Melbourne

JUDGMENT OF:

Bryant CJ, Holden & Boland JJ

HEARING DATE:

30 November 2004

LOWER COURT JURISDICTION:

Family Court of Australia

LOWER COURT JUDGMENT DATE:

9 June 2004

LOWER COURT MNC:

[2004] FamCA 532

REPRESENTATION

COUNSEL FOR THE APPELLANT:

Mr Berman

SOLICITORS FOR THE APPELLANT:

Lesley Hastwell & Associates, Solicitors

COUNSEL FOR THE RESPONDENT:

Ms Pyke

SOLICITORS FOR THE RESPONDENT:

Ms W Botting, Solicitor

IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Full Court delivered this day will for all publication and reporting purposes be referred to as Scott v Scott.

Orders

The appeal is dismissed.
That the appellant husband pay the respondent wife’s costs as agreed and failing agreement as assessed under Chapter 19 of the Family Law Rules 2004 (Cth).

IN THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA
AT PERTH

Appeal Number: SA 39 of 2004
File Number: ADF 2642 of 2003

SCOTT

Appellant

And

SCOTT

Respondent

REASONS FOR JUDGMENT

Introduction

This is an appeal by the husband against orders made by Dawe J which have had the effect of dividing the property of the parties of $959,773 on a 60/40 basis in favour of the wife.
The trial of this matter proceeded over a period of five days in March 2004, with judgment delivered by her Honour on 9 June 2004.

Background Facts

The wife was born in … 1954 and was 50 years of age as at the date of trial. The husband was born in … 1956 and was 47 years of age. The parties married in December 1980. There are four children of the marriage, two adult daughters aged 21 and 19 years at date of trial and E and H aged 16 (almost 17) and 13 years respectively at date of trial.
The parties separated in March 2000 and a decree nisi of dissolution of marriage was pronounced in July 2001.
Before the marriage the husband was employed as a resident medical officer and trainee. The wife completed a Diploma in Community Nursing. In 1984 the family moved to N where the husband has been in practice as a medical practitioner ever since.
For the first few years of the marriage, the parties owned their property in U, which was ultimately sold in order to purchase the former matrimonial home at N.
From 1984 until 1 March 2000 the parties resided together at N. The husband worked as a partner in the N Medical Clinic (“the medical practice”). The wife attended to the care and upbringing of the four children and worked part-time from time to time.
In 1995 the Scott Family Trust was established with [a company] as Trustee. Both the husband and wife were appointed as Directors of the Trustee company and remained so at date of trial. The Scott Family Trust holds an interest in the discretionary trust, Medical Clinic N Trust (“the Trust”). The partnership of medical practitioners known as the N Medical Clinic, of which the husband was a partner, used the services of the Medical Clinic N Trust. The partnership was of fluid composition with partners departing and joining the practice regularly.
Around the time of separation, the parties entered into a Memorandum of Understanding setting out the financial support which the husband was to provide to the wife and children pending a final property settlement. The wife remained living in the former matrimonial home caring for the two youngest children of the marriage.
Whilst the husband reduced his level of financial support in March 2002, he continued to assist in the payment of school fees, private health cover and expenses in respect of the former matrimonial home in addition to his payment of monthly child support.
Subsequent to separation, in December 2001 the husband purchased a unit at G, a suburb of Adelaide at a cost of $130,000. He borrowed $101,000. At trial, the property had a value of $185,000, and the amount outstanding pursuant to the mortgage remained at $101,000.
In December 2002, the husband purchased a further property [in N] for $172,000. He borrowed $122,000 to purchase the property which was valued at $200,000 at trial.
It was common ground that both properties were purchased from the husband’s income from employment in the period following separation, rather than funds or assets existing at date of separation.
In addition to his purchase of real property, the husband travelled overseas in the post-separation period, purchased shares and established further superannuation interests.
At the date of the hearing the wife was working on a part-time basis whilst completing an Honours Degree in Social Work. The wife proposed to work 3 days per week on completion of her degree.

The trial Judge’s judgment

Her Honour initially identified the following issues for determination in the proceedings:
(1)The value of the husband's interest in the medical practice, partnership and the associated Trust.
(2)Whether the assets acquired by the husband after separation, being two real estate properties, some shares and increased superannuation contributions should be included in the list of assets and liabilities to be taken into account or left out of that calculation and treated as if they were a financial resource.
(3)The wife’s capacity to work full time and her earning capacity to be brought into account.
(4)Minor issues such as the value of the wife’s piano, the wife’s sale of the horse float and the value of the husband’s medical equipment.
Her Honour then proceeded to make findings in relation to each of the identified issues.

Value of the Husband’s Interest in the medical practice, Partnership and Medical Trust

In addition to their own evidence, at trial each party adduced evidence from a chartered accountant relevant to the value of the husband’s interest in the medical practice. The wife adduced evidence from Mr Mott, whilst the husband relied upon the evidence of Mr Jorgensen.
At the conclusion of the trial, the wife submitted that the husband’s interest in the medical practice was valued at $247,708. She relied upon both the written and oral evidence of Mr Mott in support of her submission as to value. The husband argued that the interest was valued at $96,894, relying upon the evidence of Mr Jorgensen.
Her Honour preferred the valuation method adopted by Mr Mott, including his capitalisation rate and re-assessed salary figure of $145,000. The result was a valuation of the husband’s interest in the medical practice and Trust at $196,000.

Whether the husband’s assets acquired after separation should be included in the asset pool

At trial, counsel for the husband asserted that the two real properties, superannuation and shareholdings acquired by the husband in the period post-separation from earnings in the same period, should be excluded from the net matrimonial property pool. It was submitted that the husband’s interests in this regard should be considered his financial resource pursuant to s 75(2) rather than property available for division.
After reference to Farmer and Bramley (2000) FLC 93-060 and the unreported decision of C & T [2002] FamCA 196, her Honour acknowledged that the husband had used his “substantial income” since separation to acquire the relevant property, and the real estate had subsequently increased in value. The result was that the pool had grown due to the husband’s capacity to save from his own income and specifically purchase property which had enjoyed subsequent and significant appreciation. Her Honour was satisfied that the authorities required her to include the relevant assets in the pool and then assess the contributions which had been made by both parties to date of trial.

Wife’s capacity to work full-time / earning capacity

Her Honour then turned to consider the wife's earning capacity. She concluded (at paragraph 65):
Whatever the wife’s future job prospects are, the significant factor is the husband’s substantial income earning capacity as a medical practitioner (whether in a rural area or otherwise), compared to the more modest expectation of the wife. I accept that for the immediate future whilst H is in the wife’s care, it is reasonable for her to limit her employment to enable her [to] devote proper attention to her role as caregiver for the children. This has been the role of the wife throughout most of the period of the marriage.
The husband does not take issue with her Honour’s assessment.

Minor Issues

Her Honour then moved to what she described as “minor issues”, such as the value of wife's piano, the wife’s sale of a horse float and the value of the husband's medical equipment. Insofar as these issues were concerned, she concluded (commencing at paragraph 66):
The husband seeks to include the piano retained by the wife at a value of $15,000. The wife maintains that there is no valuation of the piano. In various documents filed on behalf of the wife the piano is variously estimated to have a value from $10,000 to $13,000. The husband asserts that it is worth $15,000.
Similarly in relation to furniture and household equipment, the tools and medical equipment and other personal items retained by the husband there are no valuations by either party. In this case it is not appropriate to accept the guesses of either of the parties as to the value of these various items.
Some of the items are retained by the husband. The majority of the household goods and effects are retained by the wife. I take into account that these items are in the possession of each of the parties but cannot include specific figures for them in the pool of assets.
The husband sought to bring into account the horse float previously in the possession of the wife at a figure of $4,000. The wife says that she sold the horse float in December 2002 for $2,000 and used the money for the payment of family expenses. The only reliable information about the value of the horse float is the amount received on sale. I therefore propose to bring the horse float in at a figure of $2,000.
Her Honour recorded that whilst she had not included figures for the piano, furniture, household effects, sporting goods, medical equipment or other personal assets retained by each party, she did both acknowledge their existence and the fact that the wife had retained items of “greater number and value” than the husband (at paragraph 72).
After identifying a schedule of assets and liabilities, her Honour concluded that the value of the matrimonial property pool was $959,773 (at paragraph 70).

Contributions

Her Honour declined to make an adjustment in favour of either party to reflect post-separation contributions, and assessed the contributions of each party to date of separation, and to the date of hearing, as equal.

Section 75(2) considerations

Her Honour declined to make an adjustment in the wife’s favour to reflect the husband’s capacity to acquire investments in the period following separation. Instead, her Honour noted the duplication of such an approach given the inclusion of the relevant assets in the pool available for division (at paragraph 84).
Her Honour ultimately found that a further 10 per cent adjustment in the wife’s favour was appropriate in light of the short term need of the wife to provide care for the youngest child of the marriage, and the significant disparity in income earning capacity between the parties. The husband does not take issue with her Honour’s assessment in this regard.
His Honour found the net assets to have a value of $959,773 and the wife received 60% of the net matrimonial pool to the 40% apportioned to the husband. Relevantly for the purposes of this appeal, in addition to the transfer of the husband’s interest in the former matrimonial home, and discharge of the mortgage, the husband was required to pay to the wife the sum of $206,439.

Grounds of Appeal

The husband relies on sixteen grounds of appeal where it is asserted that her Honour erred (Notice of Appeal filed 5 July 2004).
They can be conveniently grouped into the following areas:
1.The exclusion of the piano from the asset pool (Ground 2.1);
2.The valuation of the husband’s medical practice (Grounds 2.2 to 2.11 inclusive);
3.The addition of after acquired property to the asset pool (Grounds 2.12 and 2.13);
4.The failure to give weight to the husband’s contributions after separation (Grounds 2.14 and 2.15); and
5.The failure to consider the practical impact of the distribution (Ground 2.16).
The husband sought, if successful, that the amount payable to the wife of $206,439 be varied to $54,909 or such other amount as the Court might determine.

Applicable Principles

This is an appeal from a discretionary judgment. There is a long line of authority that establishes the principles to be applied in such appeals (see House v The King (1936) 55 CLR 499 at 504; Australian Coal and Shale Employees’ Federation v The Commonwealth (1953) 94 CLR 621 at 627; Gronow v Gronow (1979) 144 CLR 513 at 519; In the Marriage of Mallet (1984) 156 CLR 605 at 621; Norbis v Norbis (1986) 161 CLR 513 at 518; CDJ v VAJ(No 1) (1998) 197 CLR 172 at 230-1).
In In the Marriage of Mallet (supra), Mason J (as he then was) said (at 621-622):
It has been accepted…that a judgment of the Family Court in determining what order should be made under section 79 of the Family Law Act 1975 (Cth), as amended, is exercising a judicial discretion and that the well settled principle governing an appeal from the exercise of that discretion applies to the Full Court of the Family Court when it hears and determines an appeal from the making of an order under the section. The Full Court, in determining the appeal cannot substitute its opinion for that of the primary judge unless it is shown that he made some error in exercising the discretion, i.e., by acting on a wrong principle, by allowing extraneous or irrelevant factors to influence him, by failing to take into account some material consideration or by mistaking the facts… And in some cases the exercise of the discretion may be vitiated by the primary judge’s failure to give sufficient weight to a relevant factor.

Issues on Appeal

The Exclusion of the Piano

It was submitted by the husband that her Honour erred in excluding the piano from the asset pool when there was evidence from the husband and wife as to its value. Although there was initially a dispute as to the value of the piano, the husband contended and the wife did not disagree, that in the end the husband accepted the wife’s estimate of the value of the piano at $10,000.
Her Honour’s consideration of this issue is extracted above. It was essentially her Honour’s position that it was inappropriate to accept the guesses of either of the parties as to the value of the piano, the husband’s medical equipment and furniture and household items retained by both parties. Instead her Honour noted that some items were retained by the husband, acknowledged that the majority of the household goods and effects were retained by the wife, but was not able to include specific figures for each item in the pool of assets (reasons for judgment paragraphs 66-68).
It is submitted that as the husband was prepared to accept the wife’s lower value of $10,000 for the piano, it should have been included in the calculation of the net matrimonial property pool at that value.
We do not consider that her Honour erred in any appellate sense in treating the furniture and household items, including the piano, tools, medical equipment and other personal items as she did. Even with a concession as to the estimated value of one item, her Honour had no valuation of the other chattels and the offsetting carried out was within her Honour’s discretion. We find no merit in this ground.

The Valuation of the Husband’s Practice

The discrepancy in value between the valuers relied upon by each party was noted by her Honour (at paragraph 33) as having arisen from:-
33.1 The method of valuation. As indicated in the joint statement of the accountants:
“Mr Jorgensen relies on the ‘value to the owner’ based on the value of the income stream to the Scott family represented by the fair market value and amounts agreed to by partners entering and leaving the partnership. Mr Mott relies on the ‘value to owner’ which seeks to value the income stream to the Scott family”. (page 4 of joint statement).
33.2 The reasonable salary to be attributed to the work of a partner when ascertaining the profit upon which the future maintainable earnings is calculated. Mr Mott used a salary of $114,000 per annum for partners while Mr Jorgensen used $190,000.

Further, and specifically with reference to the divergence in valuation methodology, her Honour recorded that Mr Mott’s valuation was based on the capitalisation of future maintainable earnings. Mr Jorgensen, in contrast, used the goodwill figure provided for the Partnership Agreement, established on 4 August 1975, and adopted by each successive partnership as the constitution of the group had altered over the subsequent years. Her Honour noted that for the purposes of admitting new partners to the practice, and paying outgoing partners, the goodwill value of $84,400 had been consistently used.
Her Honour recorded Mr Jorgensen’s reasoning in relation to methodology at paragraph 38:
At page 19 of his report, Mr Jorgensen says at 4.9:-
“I have considered both the capitalisation of future maintainable earning method and the net tangible assets method together with the evidence of recent sales. I have determined that the interests in the practice should be valued on the basis of recent sales.”
In assessing the husband’s interest in the partnership, Mr Jorgensen calculated equity in the partnership at $27,018, thereafter deducting that amount payable to the partnership by the husband and adding that loaned from the Scott Family Trust to the Trust. The resulting valuation was $96,895.

After noting her own responsibility to determine the value of the husband’s interest on the whole of the material before the Court, including the divergent expert opinion, her Honour moved to consideration of each respective valuation methodology (at paragraph 42):
The concept of “value to owner” considers and takes into account the benefits to a particular owner even though this may not be based on a hypothetical third party purchaser. The cases of Reynolds and Reynolds (1985) FLC 91-632 and Turnbull and Turnbull (1991) FLC 92-258 dealt with the value of shares in a proprietary company. The Full Court also dealt with this issue in Harrison and Harrison (1996) FLC 92-682 where they approved the approach taken by the trial judge and quoted from her judgment as follows.
“
`The husband's submission was that although the shares can be artificially valued they are valueless because unrealisable. This ignores the benefits which accrue to the husband through their ownership. Amongst those benefits are the right to receive dividends, which in the past have been substantial, the buffer of a loan account, the provision of a motor car, yacht and trailer, the contribution towards payment of certain household bills and the flexibility of being, if not self-employed, employed by a company in which he is share holder and director and whose ethos allows him a degree of autonomy. It also effectively ignores the assets of and business conducted by the companies and the reality of the husband's interest in them.’
Her Honour then considered the relevant law, including the decisions in Hull and Hull (1983) FLC 91-360 , Turnbull and Turnbull (1991) FLC 92-258, Reynolds and Reynolds (1985) FLC 91-632 and Sapir v Sapir (No 2) (1989) FLC 92-047. On page 27 of the appeal book, the trial Judge then made the following significant finding:
`I am satisfied in the context of proceedings under the Family Law Act that when a judge is determining the value of shares held by a party in a family company, she or he must look at the reality of the situation and value the shares on the basis of their worth to the shareholder. In this case, the husband's shares can only be valued on the basis of their worth to him in the context of the Harrison family as a whole. That worth is substantial.
In all the circumstances of this case I reject the submission that the husband's shareholding in both companies should not be included in the pool of assets. The pool totals $524,357.’
In our opinion, the trial Judge correctly interpreted the law as it stands in relation to the value to be placed upon interests in family companies.”
…
In my view there are similarities between the valuation of shares referred to in these cases and the valuation of the husband’s interest in the medical partnership and medical trust. The Partnership Agreement fixes the value of the goodwill but also provides for that value to be altered by agreement.
Harrison (supra) supports the view that the husband’s interests in the partnership and medical trust “can only be valued on the basis of their worth to him”. I therefore prefer the reasoning and method adopted by Mr Mott, the chartered accountant rather than that of Mr Jorgensen, the chartered accountant instructed by the husband.
Mr Mott had previously referred to Harrison (supra) in the context of the joint statement produced by both experts (at paragraphs 4.22 to 4.23):
Mr Mott contends that the “value to owner” approach is relevant in this situation. Whilst there are regular admissions and retirements, there is no evidence in Dr Scott’s tax returns of sales of partial interests. It could be argued that the amounts paid are, in fact, deposits which are refundable on departure. The stamped partnership agreement, dated 1^st July 2003, appears to indicate a value of $0.00 (date stamped 11^th September 2003).
There is judicial support for the view that the “value must be a realistic one, based upon the worth of the shares to the party himself or herself” (Harrison and Harrison (1996) FLC at p. 83,807). Whilst the opinion relates to shares in private companies, the sentiment could well apply to professional partnerships where the admission/retirement procedures could be perceived to be manipulated to lower admission/retirement amounts for revenue or family law purposes.
Her Honour then turned to consider the difference of opinion between Mr Mott and Mr Jorgensen on the issue of a hypothetical reasonable salary to be used in calculating the profit of the partnership. While Mr Mott initially utilised a figure of $114,000 per annum as a reasonable salary for a partner, in the joint statement prepared by the accountants, a further calculation was carried out by Mr Mott in which he used some of Mr Jorgenson’s calculations for recent partner’s billings, management allowance and superannuation to come to a partner’s salary package per doctor of $145,333. Mr Jorgensen adopted the figure of $190,000. Her Honour found a figure of $145,000 to be a reasonable salary when calculating the profits to arrive at a figure for future maintainable earnings.
Her Honour noted the means by which each witness arrived at their assessment (commencing at paragraph 46):
Mr Jorgensen based his figure of $190,000 on a calculation set out in page 8 of the joint statement using the South Australian Salaried Medical Officers Association Enterprise Agreement for a senior consultant which is fixed at $110,333 per annum plus 5 per cent for an on-call allowance with additions for a managerial allowance. He then increased the amount to take into account a differential of 37.5 hours to 55 hours (which Dr Scott claimed to be his average weekly working hours). This method is flawed. The 55 hours already include the on-call and managerial allowance. It is also flawed as it does not take into account that the salary is to be one which is reasonable in the circumstances and not particular to Dr Scott himself.
Mr Jorgensen also compared the actual salaries and billings of the doctors in the Medical Practice and averaged them over a period of years to reach a figure of $193,384.
Mr Mott’s calculations were based on wages to be paid to full time medical practitioner as paid by the MCM Trust of $101,007 (paid to salaried doctors) to which were added certain on costs and the percentage for superannuation, totalling $114,000.
At page 5 of the Joint Statement a further calculation is carried out in which the partners billings, management allowance and superannuation are taken into account, with a conclusion of a partner’s salary package per doctor of $145,333. This figure is based on recent billings and takes into account appropriate figures for a management allowances and superannuation. I therefore prefer the figure of $145,000 as a reasonable salary when calculating the profits to arrive at future maintainable earnings.
The divergence in ultimate valuation was also due to the differing capitalisation rates adopted by each expert. Her Honour noted that Mr Jorgensen placed more emphasis upon the risk factors inherent in a country medical practice, but recorded her view with regards to his overstatement of the relevant risk (at paragraph 52):
Taking into account the nature of the Trust business, its connection to the Medical Partnership and the relative lack of risk associated with the conduct of the Medical Practice (even taking into account the husband’s evidence of the difficulties in the South East between the medical practitioners and the local hospital), I accept the capitalisation rate used by Mr Mott rather than the rate suggested by Mr Jorgensen.

Discussion

The most significant issue in this appeal is the valuation of the husband’s medical practice. The grounds of appeal relevant to this issue include that her Honour erred in:
a)Rejecting Mr Jorgensen’s valuation methodology [2.2/2.3/2.9], reasonable salary figure [2.11] and capitalisation rate [2.4];
b)Rejecting the husband’s evidence as to his work practices [2.10];
c)Using a valuation methodology applicable to the valuation of shares where the practice was a partnership [2.8]; and
d)Attributing insufficient weight to:-
i)the net profit of the Medical Clinic, without consideration of the diminishing income to expenditure ratio [2.5];
ii)the husband being only one of a number of partners [2.6]; and
iii)the history of the partnership, and particularly financial arrangements relevant to departing partners [2.7]

The wife's valuer Mr Mott is a chartered accountant with 28 years experience. His initial report was dated 18 August 2003. That report valued the husband's interest in the partnership and the Trust at $275,000. An updated report dated 30 September 2003 was later prepared incorporating further information received by Mr Mott in the intervening period. Therein, Mr Mott valued the partnership and associated trust at $320,000.
On a “structure by structure basis”, Mr Mott initially valued the husband’s interests at $334,000, and on a “consolidated basis” he concluded that the interest was valued at $223,000. After averaging both valuations, Mr Mott concluded that the husband’s interests were valued at approximately $275,000 (this figure was subsequently adjusted to $196,000 once a different figure for salary was applied). It was this figure of $196,000 which was accepted by the trial Judge.
In a covering letter to his report of 18 August 2003 Mr Mott said:
Therefore, an indicative value to the Scott family of the interests of Dr Scott and associated entities in the medical practice and its associated entity is $275,000.
The valuation is based on the income streams generated by the assets. It does not necessarily reflect an arms length third party sale. However, I believe it does reflect the value of the assets to the Scott family.
The husband’s accountant, Mr Jorgensen, is also a chartered accountant of considerable experience. His report was dated 27 January 2004.
Mr Jorgensen’s valuation methodology is discussed in some detail from paragraph 4.1 of his report:
4.1Unlike a parcel of shares in a listed company for which market conditions are likely to exist, I must, in the case of a private practice, arrive at an assessment of the value at which a sale of the practice might be effected in the absence of market forces. In doing so, I endeavour to arrive at a price at which a hypothetical, willing but not anxious seller and a hypothetical, willing but not anxious buyer would be prepared to effect a sale.
4.2Two principal methods of valuation exist when valuing such a practice. They are the capitalisation of future maintainable earnings method and the net tangible assets method. [our emphasis]
4.3It is usual in the valuation of a business to review its past earnings, with a view to assessing the capacity to generate future maintainable earnings upon which a purchaser may rely to provide a return on the funds invested in the purchase price. [our emphasis]
4.4In my opinion, when valuing a business that is a going concern the value of the net assets of the business is not the appropriate measure of the value of the business. [our emphasis]
….
4.8Where there have been recent transactions between arms length parties this provides significant evidence of the price at which a hypothetical, willing but not anxious seller and a hypothetical, willing but not anxious buyer would be prepared to effect a sale. That is, if the purchaser and seller are willing but not anxious then it is reasonable to assume that a hypothetical, willing but not anxious seller and a hypothetical, willing but not anxious buyer would arrive at the same price.
4.9I have considered both the capitalisation of future maintainable earnings method and the net tangible assets method together with the evidence of recent sales. I have determined that the interest in the practice should be valued on the basis of recent sales. [our emphasis]
Both valuers considered the business structures on a consolidated basis. Whilst they describe their differences as “numerous” in their joint statement, they identify two main areas of difference:
3.2The major difference in underlying philosophy relates to the method of valuation. Mr Jorgensen relies on the “value to the owner” based on the value of the income stream to the Scott family respresented [sic] by the fair market value and amounts agreed to by partners entering and leaving the partnership. Mr Mott relies on the “value to owner” which seeks to value the income stream to the Scott Family.
3.3Within each method of valuation, the main two differences in terms of the conclusions reached by Mr Mott and Mr Jorgensen are the reasonable salaries used in respect of the partners and the capitalisation rates applied to earnings.

We observe that there is an internal inconsistency in Mr Jorgensen’s report. In paragraph 4.2 of his report he describes two principal methods of valuation, namely capitalisation of future maintainable earnings and net tangible assets. In paragraph 4.9, he seems to bring in another, namely evidence of recent sales, and then bases his valuation on it. It is not clear, in our view, whether he is asserting that this is a third category, or whether it is part of the two principal methods described by him in paragraph 4.2. If it is the latter it is not clear whether it is to be considered in capitalisation of future maintainable earnings or net tangible assets. In fact, as counsel argued the matter it became apparent that it was a factor relevant to capitalisation of future maintainable earnings.
Mr Jorgensen then capitalised the future maintainable earnings. He concluded that after incorporating the husband’s equity in the partnership (at $27,144), the revaluation of goodwill, the loan from the partnership to the husband, the portion of leave entitlement of the husband and the loan to the Trust by the Scott Family Trust, the husband’s net interest was $107,111.
After analysing past transactions, including a comparison of profit and loss statements for the years ended June 1992 and June 1993 and then the five years ended 30 June 2003, he concluded:
6.4 It can be seen that in the ten years ended 30 June 2003 revenue increased by 69% whilst net profit before partners' salaries increased by only 10%. That is, net profit has increased by only 1% per annum.
6.5 Wages and oncosts during the period excluding partners had increased from 16% of revenue to 47% of revenue. This expense has increased by 388% since 1993.
…
6.6 In my opinion, there can not have been any significant increase in goodwill since 30 June 1993.
6.7 Dr [D] left the practice on 31 December 2003 based on the spreadsheets in Appendix 8. Dr [A] entered the practice on 1 January 2004 based on the spreadsheets in Appendix 8.
6.8 Attached as Appendix 9 is a copy of the spreadsheet that would be used if Dr Scott were to leave on 1 January 2004, after the entry of Dr Angus.
6.9 On this basis, Dr Scott would receive $96,895 as follows:
Equity in Partnership  27,018
Loan from practice to Dr Scott  (8,440)
Loan from Scott Family Trust to MCM Trust     78,317
Payout  $96,895
6.10In my opinion, this is the appropriate valuation to use in assessing Dr Scott’s interest in the Medical Clinic N and the MCM Trust.
The relevant appeal grounds can be reduced to three issues:
a)whether in the face of a partnership agreement that stated a goodwill figure, and a history of partners entering and leaving the partnership in accordance with that agreement, capitalisation of future maintainable earnings was an appropriate valuation methodology, and should have been rejected by her Honour;
b)if capitalisation of future maintainable earnings was an appropriate valuation methodology, whether it was open to her Honour to accept the capitalisation rate advanced by the wife’s valuer, Mr Mott; and
c)whether it was open to her Honour to accept the evidence of Mr Mott in relation to a reasonable partner’s salary.
The trial Judge:
·rejected the methodology of Mr Jorgensen based on what he described as “recent sales” in paragraph 9 of his initial report, and described in the joint statement (at paragraph 3.2) as “the value of the income stream to the Scott family represented by fair market value and amounts agreed to by partners entering and leaving the partnership”; and
·accepted Mr Mott’s methodology of valuation of the income stream.
If we were to accept the argument advanced by counsel for the husband as summarised in sub-paragraph (a) above, then in our view the arguments advanced in (b) and (c) become largely irrelevant.
In argument before us the husband’s position was synthesised and the husband’s counsel put his argument, not on the basis that the trial Judge should have found that Mr Jorgensen had valued the interest in the practice on the basis of recent sales, which she rejected, but rather that (transcript 30 November 2004, page 9):
[W]e say Mr Jorgensen approached the matter in the way that a methodology of valuation should be approached - namely, giving consideration to value to the owner and then giving consideration to whether, in effect, the commercial aspects of the venture and the asset backing, in fact, produces an outcome which is either similar to or higher than that which the capitalisation rate produced. [our emphasis]
Counsel explained that submission further by saying:
In effect, what Mr Jorgensen is saying is that that avenue, in fact, produced a figure that was either equal to or greater than that which was produced by the capitalisation of maintainable earnings method and so it then did become relevant to bring to account the goodwill as set out in the partnership agreement because, in effect, it was the appropriate way to then try and assess a value to the business when the capitalisation of maintainable earnings produced a figure that was equal to or below the asset. [our emphasis]
In discussion with counsel for the husband as to whether Mr Jorgensen’s valuation was dependent upon the capitalisation of maintainable earnings coming to a figure equal to or less than the goodwill under the partnership agreement, counsel conceded that to be so and said (transcript 30 November 2004, page 12):
It is, if your Honour please, but we would also say that it is a matter of, certainly, prudent behaviour by an expert forensic valuer such as Mr Jorgensen, that it is always proper to carry out and have a look at and investigate what an asset backing valuation would produce in order to see whether in the general scheme of things there is some parity in terms of the results that have been achieved. So, yes, your Honour is obviously correct and we don't seek to persuade your Honour otherwise. Quite clearly, if your Honour finds that there is a higher capitalisation rate or a lower salary rate than that which Mr Jorgensen sought to enclose as one of his variables, that quite obviously that would produce a higher figure which would produce a figure higher than the partnership agreement would have provided together with the assets.
Later in argument the point was again raised with counsel for the husband in the following exchange (transcript 30 November 2004, page 30):
BRYANT CJ: So …we are really mainly concerned with the capitalisation rate and the salary used.
MR BERMAN: I think that's right but again the reasonableness or the appropriateness of the determination, at least in respect of the capitalisation rate, is something that we say can be conveniently cross-checked by looking at these other things and we say that's what Jorgensen did which by necessary implication adds weight to his determination in respect
The gravamen of this concession is that the apparent divergence in methodology presented to her Honour at trial was more illusionary than real and that both valuers used the capitalisation of maintainable earnings methodology, albeit in slightly different ways, to arrive at a value.

True it is that counsel for the husband contended that “cross-checking” against the partnership agreement was prudent but it is clear that his contention that the amounts paid to outgoing and incoming doctors was “commercial” and represented value to the owner, relied upon the premise that a capitalisation of maintainable earnings using Mr Jorgensen’s variables, produced a result equal to or less than that paid according to the partnership agreement.
Furthermore, counsel for the husband sought to explain the relevance of the partnership agreement to the valuation exercise not in terms of “recent sales” themselves but the fact that they were “commercial” payments (transcript 30 November 2004, page 30).
However we find this argument to be circuitous. The test of “commerciality” of the payments made by incoming partners under the partnership agreement that counsel asserted, is whether the value arrived at by capitalisation of maintainable earnings, produces a similar figure. The husband asserted that the figures used by his valuer, and especially the figure for salary, did produce a similar figure and thus the payments were “commercial” and should have formed the method by which the business interests were valued. But it is only if the husband’s salary figure is accepted that this will apply. Once the wife’s valuer’s figures are used, and accepted, then the payments no longer have the same “commerciality” to them.
Thus, as a result of the concessions on this point by counsel, grounds of appeal directed to her Honour’s adoption of an incorrect valuation methodology must fail.
We would add that the manner in which Mr Jorgensen’s evidence about methodology was presented would in our view have left it unclear to the trial judge that the argument was about the “commerciality” of the payment to outgoing partners under the terms of the partnership agreement, rather than the fact that the partnership agreement contained a goodwill factor which had been acted upon for incoming and outgoing doctors over a reasonable time frame. Certainly Mr Jorgensen’s reference at paragraph 4.9 of his report to “recent sales” is confusing.
But in any event we do not consider it has been established that her Honour erred in law in rejecting the methodology of Mr Jorgensen as originally asserted. That is, that she was bound to accept a valuation methodology based on the goodwill as expressed in the partnership agreement, as opposed to the capitalisation of the maintainable earnings and her failure to do so constituted an error of law.
At paragraph 42 of the reasons for judgment her Honour considered the concept of “value to owner”, having considered various relevant authorities, namely Reynolds and Reynolds (1985) FLC 91-632, Turnbull and Turnbull (1991) FLC 92-258, and Harrison and Harrison (1996) FLC 92-682. In our opinion, the trial Judge correctly interpreted the law as it stands in relation to the value to be placed upon interests in family companies.
Her Honour found that there were similarities between the valuation of shares referred to in those cases and the valuation of the husband’s interest in the medical practice and the Trust. Whilst most of those cases do not relate to the valuation of shareholding in a corporate structure emanating from a professional practice, the same methodology has been applied to professional practices: Best and Best (1993) FLC 92-418.
Whilst it might be prudent to be cautious when considering a professional practice which underlies a corporate structure, when the ultimate issue is value to the owner, we observe that in this case, her Honour had two expert witnesses offering different opinions and a discretion to be exercised on reasonable grounds, to accept or reject their evidence.
Given the approach adopted by the husband’s counsel, namely that if the husband’s valuer’s figure for salary was used, capitalisation of maintainable profits was not an inappropriate methodology, it was in our view open to her Honour to accept the methodology applied by Mr Mott and the consequent valuation, and we find no merit in this ground.

Capitalisation Rate

Having concluded that the trial Judge was not in error in accepting the methodology of the wife’s valuer, we turn to the grounds of appeal based on the contention that her Honour should not have accepted the capitalisation rate used by Mr Mott.
Her Honour specifically rejected the capitalisation rate adopted by Mr Jorgensen on the basis that it overstated the risk factors inherent in the operation of a rural medical practice. It was submitted by the husband that in the absence of evidence to the contrary, namely a more moderate assessment of risk, it was not open to her Honour to reject Mr Jorgensen’s assessment, particularly in light of Mr Jorgensen’s investigations which exceeded those carried out by Mr Mott.
The husband described Mr Mott’s valuation methodology as both flawed and superficial given the absence of investigation. It was submitted by Counsel for the husband that the learned trial Judge did not comment upon the basis for Mr Mott’s determination of the appropriate capitalisation rate.
It was submitted by Counsel for the wife that the “risk factors” identified by Mr Jorgensen, namely, the difficulty inherent in disposing of country practices, the steady decrease in real profits over the last five years, and the difficulty attracting young doctors, did not accurately reflect the actual experience of the medical practice.
Furthermore, it was submitted that Mr Mott gave clear evidence as to the basis for his adopted capitalisation rate and the wife referred this Court to the expert’s report of 30 September 2003 in this regard (Appendix 2):
The task of selecting a capitalisation rate for the business is difficult and subject to a great deal of discussion (even on an arms-length basis).
I have selected a rate of 50% for the following reasons
(a)the difficulty of running the service trust without the partnership (requiring a very high capitalisation rate).
(b)the lack of risk associated with a medical practice in terms of competition and business failure (requiring a very low capitalisation rate).

At paragraph 4.20 of the joint report Mr Jorgensen asserted that:
The main difference between the valuations is not whether it is based on arms length transactions but is rather the difference in the salaries used to arrive at a value …if Mr Mott’s approach were amended to take into account a similar level of salaries for the doctors his valuation would be the same as the commercial valuation.
This passage makes it clear that the point in issue between the valuers was the salary arrived and not the capitalisation rate which Mr Jorgensen conceded does not make “that much difference to the bottom line”.
Mr Jorgensen emphasised this point again in his evidence (transcript 12 March 2004, page 233 line 5):
What do you say is inappropriate about using the capitalisation rate of the 50 per cent? If we look at what Mr Mott says, whatever the salary figure is, whether it’s your figure or his figure, or somewhere in between, what do you say is inappropriate about using a capitalisation rate of 50 per cent and, having said that, or is it a matter where it is just a differing view of what the appropriate capitalisation rate is without any particular science about it?--- I think it’s a differing view and the main problem I have is with the methodology in general, the way he’s gone about it and in the joint report we didn’t go into it because it really did come down to the difference between the salaries. If he used my salaries then his answer would come up to something similar to mine, effectively, by coincidence, and vice versa. If I’d used his salary, then my valuation would come up to something similar to his, again by coincidence but the difference between the capitalisation rates doesn’t make that much difference to the bottom line. [our emphasis]
Her Honour noted that “[t]here was little discussion about the capitalisation rate other than to acknowledge there were differences in the capitalisation rate used by the accountants” (at paragraph 50).
In any event, as the husband’s expert had effectively conceded the difference between the valuers was salary not capitalisation rate it is difficult to see what different outcome would be achieved even if her Honour had accepted a different capitalisation rate.

Goodwill

Grounds of appeal 2.5, 2.6 and 2.7 are all referable to the general submission that her Honour failed to give sufficient weight to considerations which would favour preference being given to Mr Jorgensen’s evidence.
Mr Jorgensen postulated that the reason there had been no significant increase in goodwill in the period since 30 June 1993 might be because the fundamentals of the business over that period had not justified any change.
The husband’s counsel submitted that the “uncontroverted” evidence of Mr Jorgensen together with Mr Mott’s “tacit” support lent “weight to the assertion that the validity of the partnership agreement in 1993 in terms of a proper reflection of the goodwill, namely, demonstrating an arms length commerciality as to the introduction and retirement of partners into the medical practice is heightened by the lack of evidence that shows goodwill has changed over the years”.
In his written submissions counsel submits that this was an important matter and fundamental to the methodology to be adopted and the assessment of the risk and capitalisation rate to be applied, and her Honour did not give it any weight.
Counsel touched upon the issue in oral submissions but did not advance what is contained in his written submissions. Given the concessions previously noted about methodology and capitalisation rate we do not find that her Honour erred in placing no weight on this evidence. We also note again that some of the husband’s arguments were articulated more clearly at appellate level.

The husband’s reasonable salary figure

The manner in which the appeal was conducted led to this being the most important issue in relation to valuation.
Each expert differed as to their respective assessment of a reasonable salary figure. Mr Jorgensen took as his starting point the 2003 salary of a senior consultant pursuant to the South Australian Salaried Medical Officers Association enterprise agreement of $110,333 based on a 37.5 hour week plus on call of 5 per cent. This totals $161,822. Because the husband worked a 55 hour week compared to the “standard” week, he added a further allowance for on call, and a further managerial allowance. Once superannuation was added the husband’s package was $190,000.
Mr Jorgensen also used a second method to arrive at a similar figure. He observed that using actual figures the salaried doctor’s salaries as a percentage of billings were between 59 per cent and 66 per cent. He then “assumed”, again using actual figures, that partners would receive a salary of 65 per cent of billings plus superannuation. He then postulated that partners worked up to 10 extra hours on administration and added a further amount to arrive at $185,000.
Mr Mott initially based his figure for salary on the amount that the clinic paid to salaried full-time doctors. He added costs and superannuation to arrive at a figure of $114,000.
In the joint statement prepared by the accountants, Mr Mott did a revised calculation based on Mr Jorgenson’s second calculation (for the year 2003), but using a figure of 59 per cent rather than 65 per cent of salaries as a percentage of partners’ billings and adding allowances for management and superannuation to arrive at a salary package per doctor of $145,000.
He said “…using Mr Jorgenson’s approach, substituting Mr Jorgenson’s assumption with what Mr Mott believes is a realistic figure based on MCM’s actual experience, arrives at a valuation of $196,000 at December 2003…”
Whilst the husband conceded that her Honour was correct in maintaining that the fixed salary level was one which was required to be “reasonable” in the circumstances and not particular to the husband, he submitted that the salary should be determined with reference to a senior medical practitioner skilled in areas of rural and regional health who was likely to command a premium.
It was submitted by the husband that her Honour erred in rejecting the evidence of the husband as to the state of rural and regional general medical practice and the level of remuneration to be commanded in that environment and did not have good reason for rejecting that evidence.
However, Mr Jorgensen did not arrive at his salary figure by reference to the income of country practitioners as a specific sample group nor the level of salary applicable to doctors employed in the practice.
The husband gave evidence that salaried doctors in his practice were paid 45 per cent to 50 per cent of billings plus superannuation.
In our view, both experts speculated to some extent. Mr Jorgenson said in his evidence “… the comparison that I’d really like is what it would cost to bring in someone else that’s got Dr Scott’s qualifications and experience and get them to work the same number of hours. My gut feeling is that you’d have to pay them more than $190,000 for them to do it, but the practice wouldn’t bear it, because he only just makes a little bit more than that in profit.” (transcript 12 March 2004, page 228).
Mr Jorgensen also responded to counsel’s proposition that the husband’s billings were only $200,772 and that a salaried doctor who generated similar billings should be paid $190,000, with the reply “I’m suggesting it’s not a profitable business” (transcript 12 March 2004, p 224).
In adopting the salary level of Mr Jorgensen, her Honour would have been required to accept that the “reasonable salary” of a doctor was an amount which was almost equivalent to the husband’s total billings. That was at odds with the evidence concerning the appropriate rate of payment for salaried doctors and partners in his practice (AB 251).
The husband submitted that the trial judge rejected the evidence of the husband that he worked 55 hours per week. We think that submission cannot be maintained. Her Honour did not reject the husband’s evidence, but observed that the 55 hours already included on-call and a managerial allowance. Nor do we agree with the husband’s submission that the trial judge rejected the husband’s evidence as to the state of rural and regional general practice.
Her Honour carefully assessed the evidence of both valuers in relation to what constituted a reasonable salary. She rejected Mr Mott’s figure of $114,000, but accepted his adjusted figure of $145,000 which was based on actual figures from the practice, for reasons that were clear and open to her.

Conclusion: Issues of Valuation

Her Honour referred to the Full Court’s reasoning Lenehan and Lenehan (1987) FLC 91-814 and acknowledged that whilst she was obliged to take into account the opinions of both Mr Jorgensen and Mr Mott, her ultimate duty was to determine the issue with reference to all of the material before her, including the expert evidence. Neither valuer’s evidence was said to be inherently unbelievable, nor outside their area of expertise. Whilst obliged to apply “appropriate principles” her ultimate conclusion was a matter for her Honour’s independent judgment and while others may have been equally entitled to prefer the evidence of Mr Jorgenson, we do not find that her Honour has erred in any appellate sense. We also note the importance of the exercise of discretion by a trial judge in a case such as this where the evidence of the experts was contradictory, both between them and internally, and counsel for the husband made concessions at the appeal (appropriately in our view) about how the commerciality of the goodwill figure in the partnership agreement should be tested.

The Treatment of Assets acquired by the Husband following Separation

Within this category, the husband relied on four grounds:
2.12Her Honour erred in including the husband’s assets acquired after separation as assets in the asset pool.
2.13Her Honour erred as a matter of law in finding that the authorities required her to include after acquired assets in the pool.
2.14Her Honour failed to give weight to the contributions made by the husband following separation in respect of his financial provision for the family.
2.15Upon the determination of the trial judge that the after acquired assets of the husband should form part of the asset pool, Her Honour failed to attach adequate or sufficient weight to the contribution by the husband in respect of the after acquired property.
Her Honour reached the following conclusion in relation to the husband’s contribution to his “post-separation” assets (at paragraphs 78 to 83 inclusive):
Since the parties separated, the husband has had the benefit of the ongoing use of the interest in the Medical Trust and Partnership Practice. In order to acquire the assets, he has worked long hours in the medical practice. In the four years since separation, his contribution from his income has been significant.
When the parties separated, the children remained primarily in the care of the wife. The husband has taken some contact to the children, however the evidence clearly indicates that the wife has borne the major responsibility for the care of the children. The husband’s ability to supervise and assist in the care of the children has been limited due to the long hours he has committed to his practice.
It is conceded that since the separation, the husband has contributed financially to the care of the children by providing monies to the wife in relation to some school fees, payments pursuant to the Memorandum of Understanding and later payments of Child Support.
The wife has had the benefit of ongoing use of the former matrimonial home. The husband has also contributed for a time to the outgoings concerning the former matrimonial home.
The husband has increased the asset pool by approximately $197,000 in the four years since separation in March 2000 by saving from his earnings from the Medical Practice. At the time of separation in March 2000, E was 13 and H 10. It must be acknowledged that the wife has undertaken the significant responsibility as primary caregiver for the infant children of the marriage for that four-year period since separation.
Balancing the different contributions of each of the parties, I am satisfied that the contributions of the parties both financial and non financial should be considered equal.

As to the first ground, the husband did not contend that as a general principle, after acquired assets should be excluded from the pool. Rather he argued that in the exercise of her discretion, the trial judge ought to have done so.
It is submitted by the husband that her Honour failed to clearly articulate why she included the “after acquired” assets, and was obliged to do so as there was a significant period of time following separation of the parties. During that time, it was submitted the husband had met his financial obligations to the family, enabled the wife to remain in occupation of the former matrimonial home, and acquired the assets not just from income earned, but from careful economic management. This it was contended might lead to the suggestion that the husband was being disadvantaged because of his good economic management. It was further submitted that her Honour did not demonstrate that without the “after acquired” assets, the remaining property would have been insufficient to produce an outcome that was just and equitable.
We accept and rely upon the reasoning of this Court in Cavanaugh & Thrum (supra), an authority expressly relied upon by her Honour who extracted paragraphs 59 and 65 in her own judgment (our extract commencing at paragraph 57 of the Full Court’s judgment in Cavanaugh & Thrum):
Whilst Burke's case is clearly distinguishable from the current case, in that the source of moneys that led to the increase of the pool of assets did not have its genesis in the application of funds otherwise contributed to jointly by the parties, it is illustrative of the principle that s 79 does not prescribe a set of rigid legislative strictures on the way a trial Judge has to go about the task of evaluating what an appropriate and a just and equitable order should be. Providing proper attention is given to the matters set out in s 79(4) there may be many ways to explain how the result reached is appropriate.
The High Court's decision in Norbis further illustrates the point that there are many ways open to a trial judge to reach an appropriate conclusion and that no one way is required. However the authorities do not create a basis for the assertion made by the trial Judge in this case that a line should be drawn at the point of separation to determine what property should be included in the pool. Contributions may clearly change after separation in that there is no longer necessarily a community of contribution between the parties. There may no longer be a carrying out by each of their contributions in their own sphere to the mutual benefit of the other.
In many cases, contribution continues from one party without assistance from the other. This contribution might take the form of caring for the children or the management and improvement of assets. Sometimes the contribution consists of the obtaining of a windfall gain such as a lottery win or gambling win or the receipt of an inheritance or gift. The fact that these events have occurred post-separation goes to the weight to be given to the contributions rather than to the exclusion altogether of the asset out of the pool and the reconstruction of an artificial pool of assets as at the date of separation.
…
As Kay J said in Farmer v Bramley (2000) FLC 93-060, 27 Fam LR 316 at FLC 87,949, Fam LR 329 the court's task is to evaluate all of the contributions from the time of the commencement of the parties' relationship until the time of the hearing and give such weight to such contributions as the court thinks is appropriate in the circumstances.

Her Honour did identify the reasons why she was including after acquired property in paragraph 60 of the reasons for judgment. They were identified as the use by the husband of his substantial income to acquire real estate, shares and increase superannuation, and the increase in value of the real estate. Given the authorities to which we have referred, and her Honour’s explanation of why she was including them, the husband has failed to establish that her Honour erred in including post-separation assets.
Nothing was submitted to us either in writing or orally, to support Ground 2.13 and we do not need to consider it further.
Both remaining grounds go to her Honour’s failure to give appropriate weight to the husband’s contribution to the after acquired assets and to the contributions made by the husband following separation in his financial provision for the family.
It was submitted by the husband that if he failed to establish that her Honour erred in her treatment of the assets acquired in the post-separation period, then her Honour failed to afford appropriate recognition to the husband’s contribution to the assets which he acquired after separation. No adjustment was made by her Honour, where the husband submitted in his written submissions that an adjustment of 15 per cent was warranted, but reduced that figure to 10 per cent in oral submissions (transcript 30 November 2004, p 21).
It was submitted that the husband’s contribution of such a significant proportion of the value of the net matrimonial pool from post-separation earnings, coupled with his continued financial support of the wife and children during the same period, required a further adjustment to reflect the husband’s financial acumen and thrift in the acquisition of the relevant real properties, superannuation and shares.
Of the net matrimonial pool of $959,773, her Honour found the sum of $197,000 was referable to the assets acquired by the husband following separation and brought about largely by capital gain on the real property purchased by the husband using his income from the medical practice.
The trial judge noted that it was conceded that following separation the husband had contributed to the care of the children by providing financially for them, and that the wife had enjoyed the benefit of ongoing use of the former matrimonial home, to which the husband had contributed outgoings for a time. She found however, that the husband had the benefit of the interest in the medical partnership and Trust and the wife had the major responsibility for the children. Balancing all these things her Honour found that the contributions of the parties should be considered equal, to both the assets acquired during the marriage as well as after acquired assets.
Section 79(4)(c) clearly embraces contributions to the welfare of the family in the period after separation: Williams and Williams (1984) FLC 91-541, In the marriage of Jacobson and Jacobson (1989) FLC 92‑003
As we have previously said, this is an appeal from a discretionary judgment and some error or failure of her Honour to give weight to relevant matters must be established. Her Honour considered the relevant contributions of both parties after separation, and no error has been demonstrated in that process.

The practical effect of her Honour’s findings

The final ground of appeal asserted by the husband was that her Honour erred in failing to have regard to the real impact in monetary terms of the effect of her determination.
Her Honour took an “overall view” of the proposed adjustment to determine the equity of the prescribed outcome (commencing at paragraph 88):
The final step in the assessment is to take an overall view of the proposed adjustments to ascertain whether it is just and equitable. Sixty per cent of the net assets of $959,773 is $575,864. The wife wishes to retain the former matrimonial home, $300,000, the Commodore motor vehicle $9,050, the operating account $14,500 and her superannuation of $33,250. I made an interim order providing that she receive the proceeds of the joint account of $20,626. She has also had the benefit of the proceeds of sale of the horse float of $2,000, making a total of $379,426. The wife will also retain the debt due to the Commonwealth Bank of $10,000. This means she will retain net assets worth $369,426. On this basis, the husband would be required to make payment to the wife of $206,439.
The husband would retain the investment properties at [N] and [G], his Land Cruiser, the investments in Scott Investments Pty Ltd, his share of the Medical Clinic N Trust and the Medical Practice Partnership, the Stockland Property Trust, his shares, savings and superannuation.
Both parties have incurred legal fees.
To meet the payment to the wife the husband has available to him the significant investments of Scott Investments ($89,000), his savings of approximately $12,000 and the Stockland Property Trust of approximately $30,000. His substantial income gives him a significant borrowing capacity.
Taking an overall view of the adjustments, I am satisfied that the proposed orders providing for the wife to receive 60 per cent of the present net assets of the parties is an order which is just and equitable in all the circumstances.
The effect of her Honour’s ultimate determination was to require the husband to pay the wife the sum of $206,439. On his behalf, it was submitted that in order to effect this payment, the husband would be required to divest himself of “Scott Investments at $89,000; savings of $12,000 and the Stockland property trust of $30,000 which, other than his interest in the medical practice effectively represents all other property derived during the marriage leaving only that property acquired following separation”.
Counsel for the husband went on to submit that this was not a just and equitable outcome as the husband would effectively retain no property from the marriage and only that property acquired by him following separation.
We note that the husband retained his interest in the medical practice and the significant income stream that accompanied that interest. Additionally, he retained two real properties with not insignificant equity, and superannuation interests. We do not accept that her Honour erred in failing to properly appreciate the practical ramifications of her determination.
Her Honour was aware of the character of the assets to be retained by the husband and their genesis. The husband also retained his earning capacity which was of no small significance (see Best and Best (supra at 80,295)), and conceded by the husband. Her Honour recognised that the husband might not wish to realise assets to pay the wife and noted his capacity to borrow.
Having considered all the assets as constituting the pool, as she was entitled to do, and noting the earning capacity of the husband, her Honour fell into no error in making the orders she did.
Accordingly the appeal must be dismissed.

Costs of the Appeal

Before us the husband’s counsel conceded that in the event the appeal was dismissed it would be appropriate that an order for costs should be made against his client. Neither party submitted any appropriate quantum for a costs order nor were we provided with a schedule of costs. We therefore propose to order that the husband pay the wife’s costs of the appeal as agreed or failing agreement as assessed under Chapter 19 of the Family Law Rules 2004.

I certify that the preceding one hundred and thirty-one (131) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court.

Associate:

Date: 21 December 2006