Pre-Marriage Gifts and the High Court of Australia

Introduction

There are not too many Family Law cases that make it all the way to the High Court. So when a case does make it, specialist family lawyers generally take a keen interest in the outcome.

The Judgment of five High Court Justices in the case of Hsiao v Fazarri was handed down on 14 October 2020. It was a split 3-2 decision to dismiss an appeal from a wife regarding property settlement Orders.

The Case

The case was interesting because it concerned significant gifts of interests in a $2 million property by a wealthy older man (who happened to be a commercial lawyer) to a woman of modest means with whom at the time he had an intimate relationship but who was not his de-facto partner.

The couple subsequently married but the marriage only lasted 23 days before separation. The gifts made prior to the marriage concerned an initial 10% interest in a $2 million property purchased by the husband, as he became and a subsequent transfer of 40% so that they owned the property equally by the time they were married. The agreed value of the gifts being $1,000,000 at the time.

Also prior to the marriage, a further document was signed by both parties confirming the joint ownership of the property and contained provisions about what was to occur if the wife - as she became, predeceased the husband or how the document should be treated by Courts if they were to separate.

It was not in dispute that the document was not legally binding on the Court although it was in dispute as to whether it ought to be taken into account and if so to what extent.

How Should the Court Have Treated the Pre-Marriage Gifts?

The wife’s case was to a certain extent damaged by the fact that her lawyers ceased acting for her in the days before the trial and she did not turn up on the day of the trial. The original trial leading to the decision proceeded on an undefended basis. Further, what the wife was arguing to begin with was inconsistent with her arguments at the appeal.

The Trial Judge (Judge who made the original decision) decided to make Orders providing for the wife to transfer her interest in the property back to the husband in exchange for the husband paying the wife $100,000. The Trial Judge had very little if any regard for the validity pre-marital gifts giving rise to the joint interest in the property especially the second transfer of 40% interest in the property which the Judge treated with a degree of suspicion.

The Appeal

The wife appealed of the basis that the Court did not properly find that she had a 50% in the property notwithstanding that this half interest was paid for in full by the husband prior to their marriage. As such she argued it was not fair for the Court to effectively disregard that fact in deciding to make Orders altering their interests in property in favour of the husband who was considerably more wealthy in terms of other property owned.

The majority of Justices (3-2) however determined that it was open to the Court to effectively undo those gifts noting the considerable discretionary power a Family Court Judge.

The dissenting Judgment was however quite powerful in finding that the Trial Judge made a mistake is not approaching the matter to begin with by recognising that the gift had been made on the parties own the property equally. These two High Court Justices were prepared to recognise to gifts of property is valid thereby placing more onus on the husband demonstrate why they should be any adjustment of interest in property between them at all.

One wonders what the outcome of those gifts would have been if the parties did not decide to marry.

Conclusion

The facts of this case are quite unique and therefore may not have a broad on decisions in most other cases. It is however a demonstration of how the most senior judicial officers can disagree with proper approach Family Law Act Judges when certain situations arise. In such cases all needs to be repaired so as to be the most persuasive in order to get the best outcome.

It also demonstrates the importance of effective legal representation or at least the significant consequences of ineffective representation. This is a matter crying out for a valid Financial Agreement to be entered into by the parties prior to their marriage.

You can call Sam Mcgee on 03 5445 1040 or make an online appointment.