Ebert v Hird - [2006] SADC 102

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
EBERT v HIRD
Judgment of His Honour Judge Boylan
31 March 2006
FAMILY LAW AND CHILD WELFARE - DE FACTO RELATIONSHIPS - ADJUSTMENT OF PROPERTY INTERESTS
Applilcation for division of property pursuant to De Facto Relationships Act 1996. Parties in de facto relationship for about 4 years - initially lived in house owned solely by plaintiff - plaintiff applied proceeds of sale of that house to purchase of a house acquired jointly. Consideration of defendant's entitlement to benefit derived from proceeds of sale of plaintiff's house. Extent and effect of defendant's contribution to renovation work on plaintiff's house.
Held, defendant entitled to derive some benefit from profit on sale of house in plaintiff's sole name when dividing property subsequently acquired jointly.
De Facto Relationships Act 1996 S.10, S.11, referred to.

EBERT v HIRD
[2006] SADC 102

This is a claim for division of property pursuant to the De Facto Relationships Act 1996 (“the Act”).
Ms Ebert and Mr Hird lived together in a de facto relationship for about four years. During that time they bought two houses, one at West Croydon and one at Elizabeth, which are still registered in their joint names. Now that their relationship has ended, Ms Ebert and Mr Hird want to divide their property. Ms Ebert wants to keep both houses and Mr Hird is prepared to sell his interest in them to her but they cannot agree on the value of his interest in the house at West Croydon. Therefore, Ms Ebert has brought these proceedings seeking orders that Mr Hird transfer to her his interest in the houses upon her paying him a sum to be fixed by the court. She seeks various orders about other property but there is no dispute about those matters.
The value of the houses has been agreed. The West Croydon house is valued at $275,000 and the Elizabeth house at $180,000. In respect of each house, the parties owe $130,000 by way of mortgage.
The dispute between Ms Ebert and Mr Hird has arisen because they have contributed unequally to the acquisition of the West Croydon house. I shall return to that issue.
The Court’s power to divide property
Section 10 of the Act gives the court power to divide the parties’ property. That Section reads as follows:
“10(1)On an application for the division of property, the court may make orders it considers necessary to divide the property of either or both the de facto partners between them in a way that is just and equitable.
(2) For example, the court may make orders for –
(a)     the transfer of property from one de facto partner to the other; or
(b)            the sale of property and the division of the net proceeds between the de facto partners in proportions decided by the court; or
(c)     the payment by one de facto of a lump sum to the other.”
The approach which the court is to take in deciding whether or not to divide the property and, if so, the orders it should make is set out in Section 11.
“11(1)In deciding whether to make an order for the division of property under this part, and if so the terms of the order, the court –
(a)must consider the financial and non-financial contributions made directly or indirectly by or on behalf of the de facto partners to –
(i)the acquisition, conservation or improvement of property of either or both partners; or
(ii) the financial resources of either or both partners; and
(b)must consider the contributions (including home-making or parenting contributions) made by either of the de facto partners to the other partner or to children of the partners or either of them; and
(c)must have regard to the terms of any relevant cohabitation agreement; and
(d) may have regard to other relevant matters.”
In this case, neither of the parties has children and there was no cohabitation agreement. Moreover, the parties are agreed that their contributions of the type envisaged in Section 11(1)(b) were pretty well equal. They are also agreed that they have contributed equally to the acquisition of the Elizabeth house. Therefore, this case is essentially about the extent of their contributions, financial and non-financial, made directly or indirectly by or on behalf of each of them to the acquisition of the house at West Croydon. To assess those contributions, I must review the financial history of their relationship. There is little dispute about that history.
The history of the relationship
Ms Ebert and Mr Hird met in 1998 and began living together in November 1999. Their relationship ended in February 2004.
In November 1996, Ms Ebert bought a house at South Road, Renown Park. The purchase price was $80,000. She borrowed $60,000 which was secured by way of mortgage in favour of Bank SA and she contributed $20,000. At first, she lived in the house with two tenants but they had gone by November 1999. In that month, Mr Hird lost his job. Until then he had been living in rented accommodation. The parties agreed that he should move in with Ms Ebert and he did so. Thus, the period of their de facto relationship began.
Mr Hird was unemployed for between four and six weeks. Thereafter, both of the parties were employed, or, in his case, self employed, for the duration of the relationship.
They lived together at Renown Park until March 2002 when they moved into a house which they had bought at Torrens Road, West Croydon. They still live there, on unfriendly terms. The purchase price of that house was $177,000. Together, they borrowed $240,000 from the National Australia Bank. That borrowing enabled Ms Ebert to discharge the mortgage on the Renown Park house in favour of Bank SA. Their loan of $240,000 was secured by mortgages in favour of the National Australia Bank. At the same time, that is, in March 2002, they opened joint bank accounts and pooled their resources.
After the move to West Croydon, the house at Renown Park remained empty but Ms Ebert and Mr Hird prepared it for sale, with some help from Ms Ebert’s family. In July 2002, it was sold for $137,000. $120,000 of the proceeds of sale was paid into the parties’ mortgage account. The net proceeds available to Ms Ebert, some $9,900 were spent on improving the West Croydon house.
In the meantime Ms Ebert’s parents, Mr and Mrs Field, had a housing problem. They had been given notice that they would have to leave their rented house at Elizabeth. To ensure that her parents had secure accommodation in an area of their choice, Ms Ebert and Mr Hird together bought a house at Donhead Street, Elizabeth for $125,000. Ms Ebert’s parents moved into that house and have lived in it ever since, paying rent to Ms Ebert and Mr Hird. Mr and Mrs Field want to stay there. Ms Ebert and Mr Hird also want the Fields to remain in that house.
It is not necessary to examine in any detail the financial aspects of the purchase of the Elizabeth house. The whole of the purchase price was borrowed and the parties agree that they have contributed equally to its acquisition in that each of them has contributed equally to repaying the loan. They accept that each of them is entitled to half of the equity in the Elizabeth house. It is necessary, however, to examine in some detail the parties’ financial history with respect to the purchase of the house at West Croydon. Before turning to that issue, I make some observations about the witnesses.
The witnesses
Ms Ebert was represented by counsel, Mr McGinn. She gave her evidence- in-chief mainly by affidavit. She called her parents and tendered some documents.
Ms Ebert impressed me as being a good record keeper with a good memory for detail. She was able to remain focussed on relevant issues. She was generally reliable although she was prepared to understate some of Mr Hird’s contributions, both financial and non-financial to the relationship. On most matters, where their evidence conflicts, I prefer her evidence to Mr Hird’s.
Ms Ebert’s parents, Mr and Mrs Field, were honest and reliable witnesses. I accept their evidence. There are some minor inconsistencies between them but they do not matter.
Mr Hird was unrepresented. He gave evidence but called no witnesses. His evidence contained internal inconsistencies and exaggerations but I do not think that he was deliberately untruthful. He found it difficult to focus on financial matters and to separate those matters from the emotional history of the relationship. He was able to make his position clear: by his contributions to the acquisition and improvement of Ms Ebert’s house at Renown Park, he says he is entitled to a greater share of the equity in the Croydon house than Ms Ebert is prepared to give him.
The purchase of West Croydon
I return to the “sticking point”, namely, the value of Mr Hird’s share in the house at West Croydon. Ms Ebert agrees that he is entitled to a share in the equity in that house because, since it was bought, he has contributed to the mortgage repayments. But Ms Ebert argues that her share is greater because she contributed to its acquisition the profit she made on the sale of her house at Renown Park. That profit is some $81,500, an amount which Mr Hird has not disputed. Ms Ebert’s position is that Mr Hird is not entitled to any share of that profit. Her submission is that $81,500 represents some 46% of the purchase price of West Croydon, $177,000. Therefore, she argues that she is entitled to receive 46% of the current agreed value of West Croydon before the amount owing is deducted and the net equity then divided. Mr Hird submits that Ms Ebert is not entitled to the whole of the benefit deriving from the $81,500.
In my view, Mr Hird is right. By his financial contributions and the work he did to improve the property at Renown Park, he is entitled to derive some benefit from the profit made on its sale.
Financial contributions
There was a dispute between the parties about their earnings and respective financial contributions. As to their earnings, I accept Ms Ebert’s evidence that, for nearly the whole of the relationship, they were earning about the same. Her evidence on the topic accords with Mr Hird’s position as pleaded in his defence and counterclaim which were tendered as Exhibit P15.
There is a further dispute between the parties about the extent of Mr Hird’s financial contributions in the period between November 1999 and March 2002 when they pooled their resources. Ms Ebert’s evidence was that Mr Hird made no regular financial contributions between November 1999 and July 2000. She said that, because he was unemployed when he moved in with her, she thought it fairer and easier for him that he not pay any regular amount but that he pay household accounts as they fell due. When she found out that he was not paying them, or not doing so on time, she asked him to make regular weekly payments of $200 which he did from July 2000. I have some difficulty accepting her evidence. Mr Hird was unemployed for no more than six weeks. He had received a termination payment of some $3,500, enough for him to make sufficient contributions to expenses. While I accept that he did not make any regular contributions of fixed amounts before July 2000, I find that he was contributing an amount equal to $200 per week during that period. Ms Ebert impressed me as an astute business woman. She would have made sure that Mr Ebert paid his way and he had the means to do so. From July 2000, he paid her $200 per week until March 2002. By making those payments I find that he contributed indirectly to the mortgage repayments between November 1999 and March 2002. Thereafter, for a period of about three months until Renown Park was sold, he contributed directly by paying half of the mortgage payments.
The improvements to the house at Renown Park
Before they put it up for sale, Ms Ebert and Mr Hird made some improvements to her house at Renown Park. Ms Ebert gave evidence that some of the rooms were painted inside and that woodwork, gutters, a verandah post and the laundry floor were painted. She said that Mr Hird did most of the painting but that her family assisted.
Both Mr and Mrs Field gave evidence that they had gone to the Renown Park house on a couple of occasions with other members of their family to assist the parties prepare the house for sale. They had done so by helping to clear the garden and by Mr Field’s doing some painting. I find that they received no payment for this work. Mr Field said that Mr Hird had painted more or less the whole house, ceilings and walls, and that his work effected a noticeable change.
It was Mr Hird’s evidence that, in addition to doing the work already mentioned, he steam-cleaned the exterior of the house. I find that Mr Hird made a significant contribution to increasing the value of the Renown Park house by his labour. I find that the parties shared the cost of the materials which had to be bought to make the improvements.
Mr McGinn submitted that the work done by Ms Ebert’s family is a non-financial contribution made on her behalf to the improvement of the property pursuant to Section 11(1)(a)(i) of the Act. It is true that the Field family made a contribution to the improvement of Renown Park. But, in my view, that contribution was fairly small. I do not take it into account in assessing the value of Mr Hird’s share in the $81,500 profit.
While on the subject of Mr and Mrs Field’s assistance to the parties or to either of them, I shall deal with some evidence about the acquisition and improvement of the Elizabeth house. There was a dispute between Ms Ebert and Mr Hird about a sum of $1,000 paid by Mr and Mrs Field when the contract was made for the purchase of the house at Elizabeth. I accept the evidence of Ms Ebert and of her parents that Mr and Mrs Field paid the deposit. I also accept the undisputed evidence that Mr and Mrs Field spent some $3,400 on making improvements to the property. Again, I do not take those contributions into account in assessing the parties’ entitlements. There is undisputed evidence, which I accept, that Mr and Mrs Field paid a reduced rent for some of the time during which they have lived at the Elizabeth house. In my view, the contributions referred to above have been offset by the rent reduction.
Mr Hird’s claims of further contributions
In addition to contributing to the mortgage at Renown Park and effecting improvements, Mr Hird claims that he contributed to the relationship a sum of $9,000 which he had received as damages for personal injuries suffered by him and a further sum of $10,000 which he had withdrawn from his superannuation fund. He says that he contributed those amounts for the joint purposes of the parties, including two visits to Sydney to see his family. Ms Ebert claims that he used those amount solely for his own purposes. She further claims that they used moneys drawn on their joint accounts to repay loans in the total sum of $9,824.09 which had been taken out by Mr Hird prior to the beginning of the relationship and for his purposes only. I accept Mr Hird’s evidence that he had taken out the loans for the purposes of buying furniture and that that furniture went with him when he moved in with Ms Ebert. I make no attempt to ascribe any part of the damages payment or the superannuation withdrawal to Mr Hird’s sole purposes as opposed to the purposes of the relationship. It is neither possible nor necessary to disentangle the parties’ general finances. My task is to divide property on a basis that is just and equitable. In the circumstances, I am of the view that it is just and equitable to divide the property by assessing the contribution each of them made first to the purchase price and then to the mortgage repayments for the house at West Croydon. As it happens, the only area of unequal contribution is the purchase price.
Conclusions
As I have said, I am of the view that Ms Ebert is not entitled to the whole benefit of $81,500. For almost half of the time during which she owned the house at Renown Park, Mr Hird was contributing, albeit indirectly, to her mortgage repayments. For a few months at the end of the period, he was paying half of them. In addition, he laboured to improve the property. In my view, he is entitled to 20% of the benefit to be derived from the figure of $81,500.
Mr McGinn submitted that the capital increase on the sum of $81,500 should be accounted for by deducting it from the agreed value of the West Croydon house before making the necessary adjustments for the amount owing by way of mortgage. I accept that that is a fair way to proceed. Accordingly, I proceed as follows:
Forty six per cent of the value of West Croydon is to be divided between the parties on the basis that Ms Ebert receive 80% and Mr Hird 20%. The agreed value of the house is $275,000. 46% of that is $126,500. 80% of $126,500 is $101,200 and 20% is $25,300. I allocate those amounts to Ms Ebert and Mr Hird respectively. That leaves $145,500 subject to a mortgage of $130,000, that is a net equity of $18,500. I allocate half of that amount to Mr Hird.
The value of the house at Elizabeth is $180,000. $130,000 is owing. Therefore, there is a net equity of $50,000. I allocate half of that amount, namely, $25,000 to Mr Hird.
There is no dispute that, since separation, Ms Ebert has paid expenses associated with the West Croydon house in the sum of $12,790 without contribution from Mr Hird. I allow an adjustment in her favour of half of that amount, that is, $6,395.
I allow Ms Ebert a further adjustment of $875 which is one half of five mortgage payments made by her without contribution from Mr Hird, that is,
5 X $350 divided by 2 = $875.
I allow the plaintiff a further adjustment of $600 to meet Mr Hird’s share of expenses paid by Ms Ebert without contribution from him since the date of trial.
I allow an adjustment in Ms Ebert’s favour of a further $5,000 drawn by Mr Hird from their joint bank account to pay for dental expenses.
The effect of my allocations and adjustments is therefore as follows:
Ms Ebert is to pay Mr Hird                   )        $23,500
In respect of the West Croydon house )        $ 9,250
In respect of the Elizabeth house  $25,000   $57,750
Less – Expenses paid by Ms Ebert on
         Mr Hird’s behalf for West Croydon  $6,397
Less – Half of mortgage payments made
by Ms Ebert without contribution by Mr Hird                    $875
Less allowance for household expenses paid
by Ms Ebert since the date of trial   $600
Less amount withdrawn from joint bank
account by Mr Hird  $ 5,000     $12,872
$44,880
I round the final figure up to $45,000.
Mr Hird is to retain a payment of $45,000, his tools and his superannuation in the amounts of $39,917 and $6,397.
I shall hear the parties as to final orders.