Mano and Trenoski - [2007] FMCAfam 675

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MANO & TRENOSKI

[2007] FMCAfam 675

FAMILY LAW – Property distribution – alleged debts not included in property pool – Adjustment to achieve justice and equity.

Family Law Act 1975, ss.79, 75(2), 79(2)

Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93-143, (2003) 30 FamLR 355
Russell and Russell (1999) FLC92-877, (1999) 25 FamLR 629

Applicant:

MARIA MANO

Respondent:

GORAN TRENOSKI

File Number:

SYM3022 of 2006

Judgment of:

Lapthorn FM

Hearing date:

17 July 2007

Date of Last Submission:

17 July 2007

Delivered at:

Newcastle

Delivered on:

7 September 2007

REPRESENTATION

Counsel for the Applicant:

Mr David Dura

Solicitors for the Applicant:

Constantine G Pavlis & Co

Counsel for the Respondent:

Mr Greg Watkins

Solicitors for the Respondent:

Shepherds The Family Law Specialists

ORDERS

That within 14 days the husband pay to the wife the sum of $48,638.
That thereafter each party be solely entitled in law and in equity to the exclusion of the other to all other personalty and property of whatsoever nature and kind currently in their respective possession or control including all superannuation policies currently in their respective name or to which they have an entitlement to.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
NEWCASTLE

SYM3022 of 2006

MARIA MANO

Applicant

And

GORAN TRENOSKI

Respondent

REASONS FOR JUDGMENT

Introduction

The applicant wife and respondent husband who were married for 3 years can not agree as to how their property should be distributed between after their separation.
A significant issue in this case is the extent of the property pool. The wife alleges the husband’s parents owe them $66,100 and that that debt should be treated as an asset of the parties. The parents have not been joined in the proceedings. The husband denies any monies are owed by his parents. Rather he alleges that it is the parties that owe monies to his parents as well as a debt by him to his parents. These alleged debts are said to be around $10,000 and $7,000 respectively. The parents have not sought to intervene in these proceedings.
The issue has arisen following the parties initially agreeing to buy a duplex from the husband’s parents but not proceeding with the sale.
Another issue relates to the weight that should be given to wife’s initial contribution.

Background

The husband is 30 years of age having been born on 4 August 1977. He lives in Dover Heights and is a manager for Telstra.
The wife who is an analyst was born on 29 March 1980 and is therefore 27 years of age. She lives in Kogarah.
The parties became engaged in August 2001 and married on 20 October 2002. According to the wife they separated on 4 January 2006 whereas the husband says that they separated on 22 December 2005. Nothing turns on this disagreement. The marriage was of 3 years duration.
There are no children of the marriage.
When the parties married the wife had savings of $69,179 (including engagement presents of $3673) and a motor vehicle. The husband had savings of $3,673 along with a HECS debt of $6,297.
Each party lived with their parents prior to marriage and upon return from their honeymoon the wife moved in with the husband at his parent’s home in Riverwood. That home was a rental property. In February 2004 they moved into a duplex that was built for them by the husband’s parents.

Evidence

The wife relied on her affidavit and financial statement filed 31 January 2007.
The husband relied on his affidavit and financial statement and an affidavit of his father Jon Trenoski all filed 6 February 2007.
I had an opportunity to observe the husband and wife in the witness box along with the husband’s father. The husband did not impress as a witness. There were times when he appeared to avoid answering the questions put in cross examination and was often flippant in his responses. In most instances, where their evidence differed I preferred the evidence of the wife.

The law

In determining property proceedings the court is required to conduct a four staged process. The first task is to identify the assets, liabilities and financial resources of the parties at the time of the hearing. The court then considers the contributions made by the parties before looking at their future needs. Finally the court needs to be satisfied that the orders are just and equitable.[1]
[1]Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93-143, (2003) 30 FamLR 355, S79 Family Law Act

The property of the parties

Although the parties agree as to most of the assets and liabilities that make up the property pool they disagree as to whether there is a debt owed by the husband’s parents to the parties in the sum of $66,100 or if the parties owe the parents the sum of $10,000. If either debt is found to exist the next question to determine is whether it should be included in the list of assets and liabilities.

Alleged debt owed by the husband’s parents to the parties

The husband’s parents purchased a property in Lugarno in 2001 with the intention of building duplexes. They borrowed funds to meet the cost of construction. In early 2003 the parties agreed to purchase one of these from the parents. The wife says that the price was to be $500,000 but the husband says there wasn’t any agreement as to the price at that stage. He says that the only conversation about the price in early 2003 was that it would be significantly less than the market value given his father was to be the owner/builder.
No written contract was ever executed. There is no evidence as to any agreement as to when title would pass or what was to happen in the event of non-completion of the sale.
In April 2003 the parties gave the parents $100,000 which was paid into the mortgage of the parents. Thereafter the parties paid $1,300 per fortnight into the mortgage account from the husband’s salary. Extra payments were made from time to time from the wife’s salary.
The parties moved into the property in February 2004. The wife says that they were then told that the price for the property was $600,000. The husband says that it was $650,000 and that this was the first time a price had been fixed. He gave evidence of the wife agreeing to this price. The duplex was not transferred to the parties and they did not take out their own mortgage but kept making payments to the parent’s mortgage.
According to the wife later that year the price increased again to $720,000. This was not put to the husband.
After living in the property for more than 12 months the parties decided not to proceed with the purchase of the duplex and started looking for somewhere else to buy. They told the parents of this decision in April 2005. The husband gave evidence that the wife agreed with him that if they pulled out of the purchase they would have to pay rent to his parents for the Riverwood property and the duplex. They were to also repay monies borrowed from his parents to pay credit card debts. The wife denied any such agreement or borrowings from the husband’s parents.
Notwithstanding the agreement to withdraw from the purchase of the property the parties continued to pay the sum of $1,300 per fortnight into the parents’ mortgage account. By the time they had separated in late 2005 or early 2006 they had paid a total of $216,100. The husband’s father had returned $150,000 to the parties in June 2005 leaving the $66,100 claimed by the wife.
The husband says that they continued to pay the $1,300 as rent on the duplex of $450 per week including back rent for the duplex and the Riverwood property. Counsel for the wife argues that the husband unilaterally made these payments however this submission is not consistent with the wife’s evidence. She was aware of the payments which were coming from the husband’s salary whilst her salary was utilised towards the living expenses of the couple. Her evidence was that they continued to pay the $1,300 to help the parents. According to the wife they did not need the money at the time because they had not found another place to purchase.
Although the parents had been generous to the parties in allowing them to live at Riverwood and then agreeing to sell one of duplexes to them I find it hard to accept the wife’s evidence that there was no discussion about the consequences that would flow from pulling out of the sale, at least as between the husband and wife. If the parties were to get all their money back they would have lived rent free in the duplex from February 2004 until they vacated the property. I am not convinced the parent’s generosity extended that far. The husband gave evidence that the wife would refuse to discuss the matter with the parents. That may well have been the case.
Having said that I do not accept the husband’s evidence that there was a back dated agreement to pay rent for Riverwood. The husband had lived with his parents rent free prior to the marriage and the wife joined him after their honeymoon. I accept the wife’s evidence that there was never any discussion with her about paying rent for Riverwood either at the time she lived at the Riverwood property or after the sale of the duplex fell through. Although the parties did make one month’s payment towards the rent at Riverwood I accept the wife’s evidence that this came about at the parent’s request as they were short of cash that month. I also accept the wife’s evidence that the parties contributed towards the purchase of groceries and utility bills whilst they lived with the parents.
The husband’s father at paragraph 24 of his affidavit sets out in detail how he calculated that the parties owed him and his wife the sum of $19,000 in May of 2005. This was a few days prior to the amount of $150,000 being given back to the parties. If that amount was owing to Mr Trenoski snr the question arises as to why he just did not give the parties $131,000. The husband says that this was because they wanted to use $150,000 for a deposit should they find a home to purchase. They were looking in the Leichhardt area. I do not accept this evidence. The parties had not found any property they intended to purchase and there was no need for them to have the funds readily available.
The evidence of the husband and his father that there was an agreement to pay rent on both properties has the flavour of a scheme of family arrangement to the detriment of the wife. I find that any advantage the parents may have gained by withholding monies from the parties is likely to ultimately make its way back to the husband. The husband and his parents have conducted their affairs so as to assist each other for some time. The husband lived rent free at Riverwood prior to and after the marriage, the parents built the duplex that he and the wife intended to buy at a price below market value and the parties had enabled their money to be deposited into the parent’s mortgage to reduce the interest accruing on the loan. This family uses its resources to help each other.
I find that the husband and wife would not have had the benefit of living in the duplex rent free in the circumstances of withdrawing from the purchase of the property. I am not persuaded however, and it is not asserted, that the rent on the duplex would be equal to $66,100 for the period February 2004 to December 2005 even if I were to accept the figure of $450 per week asserted by the husband’s father.
I am not able to determine if there is a debt owed to the parties primarily because there is no evidence as to the terms of agreement between the parties and the husband’s parents. The parties are at odds as to the purchase price and there is a lack of evidence of any agreement as to what was to happen in the event that the sale fell through. Although I am satisfied that the husband’s parents have profited by retaining the parties’ funds over and above what rent would have been due there is insufficient evidence to establish a debt. For this reason I decline to accept the submission that the sum of $66,100 or a lesser sum should be notionally added back in to the list of assets.

Alleged debt owed by the parties to the husband’s parents

The husband says that the parents are still owed approximately $10,000 for the adjustment of rent and credit card payments.
The husband gave evidence that his parents paid $8000 towards some of the parties’ credit card debts. The wife says that these payments were reimbursements for items they purchased on their credit cards for the construction of the duplexes. The husband says that because the parties were putting most of their money on the parent’s mortgage they would not have sufficient cash to pay their credit cards from time to time. Although the wife did make extra payments to the mortgage from her wage I find that she primarily used her salary to meet the parties’ living expenses including the credit card debts. I accept the wife’s evidence that the monies given to the parties to pay credit cards was for the reimbursement of construction expenses.
Given this finding and my earlier finding as to the rent I find that there is no debt owed to the husband’s parents by the parties.

Post separation rent owed by the husband to his parents

From January 2006 until June 2006 the husband reduced the amount of the fortnightly repayments from $1300 to $800. He then paid $800 per month for 4 months followed by a lump sum amount of $2000. He claimed that he continues to owe his parents the amount of $7000 for unpaid rent. There is no evidence to justify including post separation unpaid rent in the list of liabilities of the parties.

Conclusion as to items to be included in lists of assets and liabilities

There is insufficient evidence to find that there is any debt owed in either direction and therefore I find from the evidence that the assets of the parties are as follows:

ASSETS	POSSESSION/CONTROL	VALUE
Wife’s ANZ Account “66936”	Wife	$200
Wife’s ANZ Account “15784”	Wife	$10,000
Wife’s ANZ Shares	Wife	$4,000
Wife’s Mitsubishi Lancer	Wife	$10,000
Wife’s personalty	Wife	$1,070
Agreed notional add-back of funds received by the husband	Husband	$30,000
Husband’s household contents	Husband	$7,000
Monies held in Shepherds The Family Law Specialists Trust Account	Husband	$100,000
Monies held in Constantine G Pavlis & Co Trust Account	Wife	$100,000
TOTAL	$262,270
SUPERANNUATION
Wife’s Superannuation	Wife	$30,520
Husband’s Superannuation	Husband	$31,699
TOTAL SUPERANNUATION	$62,219
TOTAL INCLUDING SUPERANNUATION	$324,489

LIABILITES
TOTAL LIABILITIES	NIL

TOTAL NET VALUE

$324,489

Contributions

I now turn to the second step in the exercise namely an assessment of the parties contributions.
At the commencement of the marriage the wife had savings of $69,000 (including $3,673 from engagement gifts). The husband says that the wife was able to save so much money because he paid for her expenses whilst they were going out. Although I accept that he did pay some of the wife’s expenses prior to the marriage I find that the wife was able to make significant savings because she lived with her parents rent or board free whilst she worked full time.
The husband did not have any significant savings at the commencement of the marriage. He had a HECS debt of approximately $6300. He gave evidence that this debt had been paid in full during the marriage and that some of it was recovered in his tax return. However in cross-examination he could not recall if this was the case and was unsure if he had even lodged the return. He appeared to want to avoid the questions on this topic and was quite flippant in his responses.
I find that at the commencement of the marriage the wife made a significantly greater contribution than the husband.
The parties had the benefit of living with the husband’s parents in the Riverwood property rent free after the commencement of the marriage until February 2004. The parents however benefited from the $100,000 deposited into their mortgage and the payments of at least $1,300 per fortnight. This reduced their interest payments on the mortgage. Although the provision of rent free accommodation may be seen as an indirect contribution by the husband the financial assistance to the husband’s parents by the parties offset any such finding.
The husband earned a higher income than the wife for 2 of the 3 financial years the parties were married although the total difference amounted to less than $25,000. Taking into account the husband’s higher income and the significant greater contribution made by the wife at the beginning I find that the wife has made a greater contribution overall which would be reflected in a percentage distribution of 60% to the wife and 40% to the husband.

Section 75(2) factors

Having determined the contribution elements the court is required to have regard to the provisions of s.75(2).
Both parties are young, in good health, have full time permanent employment and no children. Their superannuation holdings are similar in value.
Section 75(2)(0) requires the court to consider any other relevant fact or circumstance that the justice of the case warrants.
I have found that the husband’s parents have withheld funds from the parties and that these funds are likely to ultimately benefit the husband solely even though the husband and wife contributed to these funds equally. Although there was insufficient evidence to find the existence of the debt alleged by the wife I am satisfied that this is a fact that warrants an adjustment in her favour in order to achieve justice as between the parties. Although it is not possible to quantify any difference in rent due to the parents and the monies not returned by them I am satisfied that an appropriate adjustment of 3% in the wife’s favour is warranted.

Section 79(2) – just and equitable

The fourth stage of the process is to step back and assess whether in all of the circumstances it is just and equitable to make the orders proposed. It is the justice and equity of the actual orders that the court must consider.[2]
[2] Russell and Russell (1999) FLC92-877, (1999) 25 FamLR 629
The orders I propose to make will see the wife receive 63% of the asset pool and that that would be achieved by her receiving the sum of $48,638 form the husband and each party retaining all other assets in their respective control. I am satisfied that the order that the husband pay the wife that sum achieves justice and equity between the parties and therefore I will make the orders set out at the beginning of this judgment.

I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Lapthorn FM

Associate: Helen Drysdale

Date: 7 September 2007