McGrath v Ter Hedde [1999] NSWSC 1192

New South Wales Supreme Court CITATION : McGrath v Ter Hedde [1999] NSWSC 1192 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 2124/99 HEARING DATE(S) : 08/11/99, 09/11/99 JUDGMENT DATE : 7 December 1999

PARTIES : Patricia Aileen McGrath v Gerrit Lambertus Josef Ter Hedde JUDGMENT OF : Master Macready at 1

COUNSEL : Mr A.R. Ridley for plaintiff Mr B.J. Knox for defendant SOLICITORS : Tilbury & Co. Solicitors, Armidale for plaintiff Stephen Rugendyke, Armidale for defendant CATCHWORDS : Family Law. Application under Property Relationships Act 1984 for adjustment of parties' property interests. Orders made for adjustment. No matter of principle. CASES CITED : Black v Black 15 Fam Lr 109. Green v Robinson (1995) 36 NSWLR 96 DECISION : Paragraph 52

- 1- THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

MASTER MACREADY

Tuesday, 7 December 1999

NO 2124 of 1999 PATRICIA AILEEN MCGRATH v GERRIT LAMBERTUS JOSEF TER HEDDE

JUDGMENT 1 MASTER: This is an application under the Property Relationships Act 1984 for an adjustment of the parties' property pursuant to s 20. The parties are agreed that they lived in a defacto relationship between May 1978 and the end of February1996. There were no children of the relationship and throughout the relationship they did not have any children forming part of the household. The defendant did have children from a prior marriage. The defendant was born on 28 November 1943 and the plaintiff on 7 April 1957. When they met they were respectively 35 and 21 years of age. They are now aged 55 and 42 years respectively. 2 Both parties were qualified and employed as either a printer or a lithoplate maker. At the time they met and for many years thereafter they worked at the University of New England. They commenced cohabitation in May 1978 and in December of 1979 they purchased a property at 67 Dangar Street, Armidale as tenants in common in equal shares for $26,000. The source of the funds was monies borrowed from the New England Credit Union. Apart from one exception towards the end of the relationship, for many years the parties purchased properties as tenants in common in equal shares and they each maintained accounts at the New England Credit Union upon which they drew to finance such acquisitions. In this case each of them borrowed $13,000 from the New England Credit Union to purchase 67 Dangar Street. In December 1983 the parties purchased a quarter share each in Lot 1583 Crescent Head, Kempsy for a total of $37,000. Once again the sums came from the Credit Union and this property was purchased by them along with another family. 3 The defendant's parents had lived in Australia for some time and in 1985 they returned to Holland with a view to living there permanently. They could not settle there and instead they came back to Armidale. This caused a change in the housing arrangements. The defendant's parents provided the parties with a loan for $38,000 and as part of the arrangements the parties executed a lease in favour of the defendant's parents of the property which gave them a right to live there for life with the parties paying rates and taxes and making repayments of $200 per week. The funds provided were used to purchase 140 Barney Street, Armidale for $47,000. This required each of the parties to borrow a further $23,500. A short time later there was also a further advance of $14,000 by the defendant's parents. 4 In October 1989 the defendant who had from time to time also carried on business as a bookmaker, won $25,000 on a Trifecta which he used to reduce the plaintiff's debt by $8,885 and his own debt by $16,000. In December of that year he had a further win of $8,000 and reduced his debt by $6,600. 5 In May 1988 the parties purchased 2 acres of land at 16 Lynches Road, Armidale for $38,000. Over the next 18 months a house was erected on the property. Substantially this was done by the defendant. He employed subcontractors and did a substantial amount of the labouring with assistance from others. In January 1990 the Barney Street property was sold for $92,500 and the proceeds were divided equally between the parties. Towards the middle of 1990 the parties gave up their employment at the University of New England and purchased the Girraween Newsagency for $140,000 plus stock of $15,000. They borrowed funds of $140,000 to make this purchase. The balance of the funds substantially came from the parties' retirement payments when they left the University of New England. The defendant received about $9,000 and the plaintiff $7,000. In July 1993 they purchased the freehold of the newsagency business for $225,000. 6 The parties worked hard in the newsagency business and purchased a sub-agency to increase its turnover. They were working seven days a week for twelve hours a day. In August 1995 they sold the newsagency for $650,000. All the parties' loans were paid out and the balance left over of $160,000 was deposited in an A.N.Z. Cash Management account. 7 In late 1995 without consulting the plaintiff the defendant purchased a unit in a block at the Gold Coast for $108,000. It was in a building in which the defendant's brother also had a unit. On 10 February 1996 the parties separated. In July 1996 they divided the cash management account after various withdrawals had been made by the defendant and each received $19,926 each. 8 On 6 August 1997 the Kemsey property was sold for $57,000 and each party received $14,285. In December 1997 the defendant purchased Nyssa Street, Armidale for $101,000 using a loan from his credit union of $78,000. This was purchased in his own name as had been the unit at the Gold Coast. In February 1998 the plaintiff moved back into the home at 16 Lynches Road she having left it when the parties separated on 10 February 1996. The basis on which she moved back was the subject of some argument at the trial. In December 1998 the defendant received $113,207 from his superannuation. Proceedings were commenced on 9 February 1998.

Property of the parties at the commencement of the relationship. 9 As has been point out in numerous cases it is convenient when carrying out the task under s 20 to note the property of the parties at the commencement of the relationship and at the conclusion. At the commencement of this relationship the parties had minimal assets. The plaintiff had a 1976 Datsun 220B valued at $5,000 and furniture of a minor value. The defendant had a Datsun 240K motor vehicle valued at $5,000 and other minor assets.

Assets at the conclusion of the relationship. 10 At the conclusion of the relationship the parties held the following assets.

1. 67 Dangar Street, Armidale which was occupied by the defendant's parents who had the benefit of a lease for life.

2. 16 Lynches Road, Armidale.

3. Unit 31 Paradise Towers, Surfers Paradise in the name of the defendant.

4. 25 acres at Crescent Head Road, Crescent Head.

5. The balance of a personal loan which was being repaid by the purchasers of the newsagency business.

6. Furniture some of which was taken by the plaintiff when she left Lynches Road on separation.

7. 1979 Ford Cortina having a value of $2,000 in the name of the plaintiff.

8. The defendant's Subaru Station wagon having a value of $12,000.

9. The defendant's interest in the Lifetrack Super Fund having a value of approximately $100,000. The amount received by the defendant when it matured in December 1998 was $113,207.11.

10. The plaintiff's interest in the Lifetrack Super Fund having a present value of $42,804.30.

11. The balance of the Cash Management Account in joint names being approximately $55,604. 11 As I have mentioned Crescent Head Road was subsequently sold after separation and the parties paid out for their interest. Each contributed an equal amount to its purchase and received an equal amount on its sale. Accordingly that property can be put to one side in the consideration of the matter apart from noting the benefit which they received from the investment. 12 After separation the defendant withdrew $13,959 from the Cash Management account without the knowledge of the plaintiff. The balance of the account was divided so that each received $19,926 and the account was closed. 13 As I have mentioned in late 1997 the defendant purchased a property at Nissa Street, Armidale in his own name and in February 1998 the plaintiff moved back into 16 Lynches Road which had been vacated by the defendant. 14 There were disputes in the evidence on the value of the relevant properties some of which were agreed during the hearing. In respect of 67 Dangar Street, Armidale the plaintiff's valuer originally valued it at $102,000 and the defendant's valuer at $98,000. As a result of discussions between the valuers it is agreed by the parties that the value of the property is now $98,000 and, taking account of the life leasehold interest of the defendant's parents, it has a value of $67,000. 15 The property at 16 Lynches Road was valued by the plaintiff's valuer at $167,000 as at 22 October 1999. However, $15,000 of that sum was as a result of improvements made to the property by the plaintiff and her present partner after they moved into the property in September 1998. The defendant's valuer originally valued it at $180,000. After discussion with the valuer for the plaintiff the defendant's valuer, Mr Broun, reduced his valuation at the commencement of his evidence to $175,000. This followed what he described as discussions on comparables with Mr Knight the valuer for the plaintiff. In the witness box he further conceded that he would have to reduce the value to $173,000 because apparently he was mistaken as to whether the site was connected to the sewer. 16 It is necessary to consider which of the two valuations is appropriate. Strangely, Mr Broun did not set out in his valuation of Lynches Road the comparables upon which he relied. When tackled about this he explained he was merely trying to save the parties' costs in this regard and, in the event that the matter ultimately went to a hearing, he would look at the comparables prior to a trial. In any event apart from one property at 91 Trelawney Road he did not give details of the other comparables that he considered. Mr Knight, apart from the considering the comparables, also did a valuation on a summation basis in which he adopted a rate of $575 per square metre for building. Mr Broun adopted a far higher figure. It seems to me when looking at the comparable sales which have been advanced by Mr Knight that the summation method seems to be borne out by those comparables. 17 There was criticism of Mr Knight in that he described Lynches Road in his valuation as being located on the south eastern outskirts of the city in a fringe residential area. I think it is probably inaccurate to describe it on the "fringe" but I do not see this as a major problem with the valuation. In my view, having regard to the more open use of comparables by Mr Knight and also having regard to the summation method he has adopted, that his valuation is preferable. Accordingly, I am satisfied that the value of 16 Lynches Road at the present time is $167,000. It should be appreciated that part of the value has arisen because of improvements made by the plaintiff and her partner after separation. The clear valuation evidence of Mr Knight is that the improvements added $15,000 to the value. Given a description of the improvements and comparing photographs this seems quite a rational conclusion. Even Mr Broun conceded the substantial improvement in the presentation of the place between 1995 and the present time. In these circumstances the value of these improvements which occurred after separation was solely the result of the plaintiff's endeavours and should not be taken into account. Accordingly, the value for the purposes of adjustment should be $152,000. That the value is so is also indicative of the fact that both valuers agreed that there had been a fall in the value of residential property in Armidale of about 5% over the period from separation to date. 18 The personal loan as a result of the sale of the newsagency was $33,000 with the purchaser repaying it at $550 per month. The defendant received since separation $23,650 and there is still $5,500 to be received. The amount the defendant has received should be taken into account. 19 The property at Paradise Towers, Surfers Paradise. This was purchased in 1995 for $108,000. There is no valuation evidence directed to its present value. The property has been let and the defendant has paid the outgoings and received the net rent. The figures are as follows:- Rates 12,908.45 Electricity 394.95 Legal Costs 4,925.00 Repairs & maintenance 1,500.00 19,728.00 Less net rent received 6,416.00 $13,312.00

20 There was criticism of the defendant for not dealing with what rental was received prior to 30 June 1998. The parties do not appear to have resided in the property and, given the absence of cross examination on the subject, I would conclude that it was not leased prior to that time. I take the reference to "net rent" to be a reference to rent after agent's commission. 21 It would be appropriate for the unit to be considered in the adjustment process at $108,000 and for the defendant to be credited with the sum of $13,312. 22 The furniture. The plaintiff claimed that at separation she took $5,000 worth of furniture and left approximately $20,000 behind. There was an expert valuation of the furniture left behind which was taken by the defendant to his property at Nissa Street which amounted to $4,765 rather than the $20,000 alleged by the plaintiff. Accordingly I conclude that the parties have had an equal share of the furniture and there should be no adjustment in this regard.

Financial Contributions by the parties. 23 It is important when considering these not to merely note the amount of the contributions but also to note when they were made. The time value of money is important particularly when, as happened in this case, the parties were able to invest in appreciating real estate. 24 During the relationship the parties' wages from the University were apparently equal. They were in two businesses, namely, the after hours print business and the Girroween Newsagency. Both worked full time and, accordingly, their income contribution to the relationship, leaving aside the defendant's alleged betting income, were equal. 25 The defendant appears to have had an obligation to pay maintenance to his former wife in the amount of $108.33 per month and I accept the plaintiff's evidence that this was paid from May 1978 to December 1983, a total of $7,258.11. He also paid his younger son's school fees in an amount of at least $2,586. Apart from these payments there is no suggestion that the parties did not apply their income to their joint purposes. The defendant's payments above will be taken into account when making the necessary adjustment.

Financial Contributions by the plaintiff 26 The plaintiff's main financial contributions were her wages and efforts in the two businesses to which I have referred. These must be taken into account in her favour. There is also:-

(a) The defendant's withdrawal of $13,959 from the joint cash management account in 1996.

(b) The defendants receipt of the vendor payments since separation amounting to $23,650.

(c) The payments made by the deceased for maintenance and school fees of $9,834.

Financial Contributions by the defendant 27 The defendant submitted that from his betting activities he had a surplus of $143,000. The defendant kept records of his winning bets of $227,742. However, he kept no records of his losing bets. He merely estimated these at $100,000. He sought to justify these winnings on the basis that the parties would not have their present assets without such winnings. This ignores the extensive capital gains the parties have made through their dealings in real estate. The defendant's post separation expenditure demonstrated a use of capital for living expenses. The various explanations for the change in his gambling luck after separation are not believable. 28 Generally, I did not find the defendant as accurate a witness as the plaintiff. Given the incomplete nature of the records, I am not prepared to accept the defendant's claim of betting winnings except to the extent admitted by the plaintiff. These were Trifecta wins in late 1987 of $31,550. 29 Since 1966 the defendant has met expenses of the Gold Coast unit of $13,312 and is to be credited with this amount. 30 The other major contribution on the defendant's part is the provision by his parents of a loan of $38,000 in 1986 and $14,000 in 1993. By separation they had repaid $14,300 off this loan but had the opportunity to use the funds to invest in real estate which as a result of inflation has greatly increased in value and led to their present wealth. The first use of these funds was to purchase 140 Barney Street, Armidale in 1986. The property was sold in 1988 realising a capital gain of $45,500. It is thus a substantial contribution on the part of the defendant.

Financial Resources 31 There is the superannuation which is a financial resource of the parties. The defendant's contribution was $113,207 and the plaintiff's contribution was $42,809. The defendant gave the following evidence. "After purchasing the newsagency business, both the plaintiff and I began to make superannuation contributions to Lifetrack Superannuation Funds managed by Lifetrack Management Pty Limited. As I was older and my superannuation would vest upon attaining the age of 55 years, my superannuation contributions were greater than those of the plaintiff who would be able to continue contributions for many years after my own superannuation entitlements vested." 32 All the payments came from the business in which they had both worked. 33 In Green v Robinson (1995) 36 NSWLR 96 the Court, inter alia, dealt with the way superannuation should be dealt with. His Honour, the President, at p 103 of the judgment had the following to say in relation to superannuation: "It is as erroneous to ascribe the superannuation payments to the separate and differentiated income of the parties as it is to ignore superannuation altogether. Despite equal pay legislation, and industrial decisions to the same end, it is well known that in Australia, female earnings are typically lower than male earnings. Inherent in the notion that each 'owns' the superannuation entitlements accumulated from his or her income, in an inescapable bias against vulnerable (usually female) members of a marriage or marriage-like relationship. This is a bias which the Act, far from condoning, forbids. By section 3(1), the Act requires, in relation to 'de facto partners or either of them', that the financial resources, which must be taken into account under section 20(1) of the Act, are to include entitlements under a superannuation scheme. This is therefore something which, in the exercise of the section 20(1) discretion, the Court must view as belonging not to Mr Robinson separately however he actually banks or notionally receives the contingent benefit, but to the financial resources of the parties which need to be adjusted, having regard to the contributions 'made directly or indirectly' by them. Conformably with the language of the Act and applicable jurisprudence which has developed in the Family Court on analogous problems, it is my view that Ms Green made an indirect contribution to Mr Robinson's superannuation entitlements. Just as he did to hers. The only difference is that his entitlement was more substantial. This was because of its longer duration and because of his higher base income. I shall assume that the contributions to superannuation made before the relationship commenced to be disregarded. See Lipman v Lipman (1989) 13 FAM LR 1; DFC 95-068 (SCNSW). Both parties argued the case on this basis, although it is not without controversy and contrary opinions exist. See e.g. In The Marriage of Gill (1984) 9 FAM LR 969. The funds must therefore be reduced pro rata for the contributions made before 1974. I agree generally in the approach of Cole JA to this adjustment. But, with respect, the error in his Honour's approach, is to require, in effect, proof by evidence of the direct or indirect contributions made by Ms Green to Mr Robinson's accumulating superannuation entitlements during the relationship. Such proof is not required in cases under the Family Law Act. In my view, the express mention of superannuation entitlements in section 3(1) of the De Facto Relationships Act, makes it plain that Parliament accepted that ordinarily, partners to such relationships would be making at least indirect, if not direct, contribution to the accumulation of the form of savings which superannuation constitutes. That, in my view, gave Ms Green, for the period of the relationship at least, such a stake in that aspect of the 'financial resources' of Mr Robinson, as must be reflected in a 'just and equitable order', designed to adjust the interests of the partners, as section 20(1) of the Act requires." 34 Powell J at p110 referred to the need to establish that one of the parties had in some way contributed to the other's superannuation entitlements and that by reason of that contribution, it was "just and equitable" that some order based upon, or derived from, those entitlements should be made. Cole JA dealt with the matter on p118 and inclined to the view that there was no evidence in the case to suggest that the appellant had made any contribution, direct or indirect, to the respondent's present superannuation entitlement, it being a deduction from his service pay. He held that a similar situation pertained to the appellant's superannuation.

35 It is not easy to reconcile the different views but it would appear from the comments of Powell J and Cole JA that there must be some factual matter which enables one to form the view that there had been a contribution to a spouse's superannuation entitlements. A common example of this would be a partner who stays at home to look after children thus enabling the other partner to go to work and earn a superannuation entitlement. 36 In the present case the relevant factual matter is that the parties' equal contributions led to the differential outcome. In these circumstances the total of the contributions should be equally shared in the adjustment process.

Non-financial Contributions

Contributions by the plaintiff The plaintiff alleges that as far as non-financial contributions are concerned she contributed substantially to the homemaker role. She alleges that she - (a) prepared 95% of meals (b) did 95% of the cleaning (c) did 100% of the laundry and ironing (d) and did 90-95% of the gardening. 37 The defendant did not seriously dispute this evidence. The contributions were for the whole of the 18 years and should be recognised in a real and not token way, see Black v Black 15 Fam LR 109.

Defendant's non-financial contributions 38 These appear to be his efforts as an owner /builder in constructing the home at 16 Lynches Road. There was also his labour in the erection of the home. There is no quantification of the extent of this contribution but I will assume that there were some real savings for the parties.

Discussion 39 The plaintiff claimed that the appropriate orders would be as follows:-

1. A transfer to the plaintiff of the defendant's interest in the whole of the property at 16 Lynches Road, Armidale.

2. Payment by the defendant to the plaintiff of $97,296.

3. Transfer by the plaintiff to the defendant of her interest in 67 Dangar Street, Armidale.

4. That each party retain their respective superannuation entitlements together with all items of personal property including motor vehicles now in their respective possession. 40 This would mean that the defendant would retain the unit at Surfers Paradise and presumably receive the $5,500 from the vendors of the business.. 41 For his part the defendant contended:-

1. That the plaintiff receive

(a) The property at 16 Lynches Road, Armidale.

(b) Her interest in her superannuation.

(c) Her motor vehicle.

(d) Furniture and effects removed at separation.

2. That the plaintiff pay the defendant $66,852.

3. That the defendant receive -

(a) Dangar Street, Armidale subject to the life estate to his parents.

(b) The unit at Surfers Paradise.

(c) The Subaru motor vehicle.

(d) All furniture and effects retained. 42 The parties are agreed that Lynches Road should go to the plaintiff and Dangar Street to the defendant. There are future liabilities in respect of Dangar Street namely the outstanding repayments of $28,960 and the liability for future rates, insurance and maintenance. Based on the parents' life expectancy these are $64,861 and the defendant, if he indemnified the plaintiff in respect of her share of these liabilities, will be assuming a burden of $46,910 over the next 7.91 years. 43 Whether or not the defendant will repay the loan to his parents is doubtful because nothing has been repaid over the last 18 months without complaint from his parents. However, it is a liability which he will be assuming and should be taken into account. 44 The pool of assets to be divided between the parties is as follows:- Gold Coast Unit 108,000 67 Dangar Street 67,000 16 Lynches Road 152,000 Car of plaintiff 2,000 Car of defendant 12,000 Superannuation of plaintiff 42,809 Superannuation of defendant 113,207 Balance of newsagency sale 5,500 $502,516 One half $251,258 45 This pool of assets has resulted from the equal financial contributions of the parties except for the following minor adjustments. (excluding the time value of money). Plaintiff Defendant's withdrawals 13,959 Newsagency repayments 23,650 Defendant's maintenance 9,834 $47,443

Defendant

Trifecta winnings 31,550 Gold Coast Unit 13,312 $44,862 46 The difference in these figures is minor with the lapse of time making it even less. 47 The pool is also affected on the contribution side by:- Plaintiff Defendant Homemaker for Parents' loans of $52,000 18 years contributions to the erection of Lynches Road.

48 The properties to be retained by each of the parties is as follows:- Plaintiff

16 Lynches Road $152,000 Car 2,000 Superannuation 42,809 $196,809

Defendant Gold Coast unit 108,000 67 Dangar Street 67,000 Car 12,000 Superannuation 113,207 Balance of newsagency sale 5,500 $305,707 49 On the basis of an equal division the defendant would have to pay $54,449 to the plaintiff to achieve equality. 50 This leaves for consideration the more difficult assessment, namely, the above-mentioned non-financial contributions and the liability assumed by the defendant as a result of him indemnifying the plaintiff for the liability in respect of the arrangement with his parents. 51 The exercise is not capable of precise expression but, bearing in mind the various contributions and liabilities accepted, I think the appropriate result is that the parties should retain the properties referred to above with the defendant paying the plaintiff the sum of $60,000. The defendant has already received his superannuation and purchased his home at 6 Nyssa Street, Armidale. 52 The orders I make are as follows:- 1. Order that by way of adjustment of the parties' property interests:- (a) The plaintiff is to transfer her interest in the property at 67 Dangar Street, Armidale to the defendant. (b) The defendant is to transfer his interest in the property 16 Lynches Road, Armidale to the plaintiff. (c) The plaintiff is to retain her superannuation entitlement. (d) The parties are to retain the cars and other personal property in their possession. (e) The defendant is to indemnify the plaintiff against any liability of the plaintiff to his parents in respect of the arrangement for the parents to occupy 67 Dangar Street, Armidale. (f) The defendant is to pay the plaintiff $60,000 within 2 months. (g) The defendant is to retain all repayments of the personal loan from the purchasers of the parties' newsagency.

2. Order the defendant to pay the plaintiff's costs.

Last Modified: 12/07/1999 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.