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There is a matter awaiting determination from the High Court of Australia on when the Family Court can disregard a gift by one party to another when deciding a property settlement.

the facts

Mr Fazarri and Ms Hsaio began an intimate relationship in August 2012, when Mr Fazarri was still living with his former wife.

In March 2013, he separated from his former wife and leased his own premises. Mr Fazarri was a man of substantial assets, whereas Ms Hsaio had property of little value. Ms Hsaio was still living in her own apartment when in April 2014, Mr Fazarri purchased a property known as G Street, Suburb H (“G Street”) for $2.2 million, paid for exclusively by him.

When the property was purchased, Ms Hsaio was given a 1/10 interest in the property as a tenant in common.

In December 2014, while Mr Fazarri was in hospital with a suspected heart attack, Ms Hsaio asked Mr Fazarri to increase her interest to 50 per cent. The Court found (and upheld) that she pressured him to transfer the property. The title was altered from 27 February 2015, making the parties joint tenants of G Street.

In March 2015, the parties executed a deed (“Deed of Gift”), that confirmed Ms Hsaio’s siblings would receive $500,000 each if Ms Hsiao died before Mr Fazarri, and it would only have legal effect if the parties owned G Street as joint tenants at the time of her death.

Mr Fazarri and Ms Hsiao were married on 22 August 2016. The marriage lasted 23 days.

the decision at trial

Mr Fazarri initiated proceedings in the Federal Circuit Court for a property settlement between himself and Ms Hsaio. The matter was transferred and listed for trial in the Family Court.

The Judge found Mr Fazarri’s financial contributions as a whole were overwhelmingly greater than Ms Hsiao’s.

Ms Hsiao failed to appear on the second day of trial and the judge made orders severing the tenancy,  bringing the Deed of Gift to an end. Mr Fazarri was ordered to make a cash payment of $100,000 to Ms Hsiao. The effect of the orders left Ms Hsiao with assets of $430,000 and Mr Fazarri in excess of $12 million.

In his reasoning, the Judge referred to the Deed of Gift, specifically, clause 7 which read:

“The parties agree that this deed will have no application in the event that:

1. “the parties do not own the Property (G street) as joint tenants (emphasis added) as at (“the wife’s death”) or
2. (the husband) predeceases (the wife).”

Ms Hsiao appealed against the Judge’s decision.

the issues on appeal

Ms Hsiao argued the trial judge made a property settlement order that failed to properly take into account the 50 per cent ownership she held in G Street and her entitlements according to the Deed of Gift.

Ms Hsiao also made an application to present further evidence/documents which she argued show Mr Fazarri was not under duress to sign the transfer of land documents. She conceded these documents and evidence were available at the time of the trial but they weren’t presented because she had not complied with previous orders.

the decision at appeal

On Appeal, the Full Court of the Family Court of Australia found :

• The trial Judge exercised his discretion according to the just and equitable principles as set out in section 79 of the Family Law Act 1975 (Cth) (“the Act”) and found that whilst cognisant of the terms of the Deed of Gift, the trial Judge was not bound by those terms when determining what was a just and equitable property settlement order. In any event, given the applications each party had made for final orders, clause 7 (referred above) provided that the Deed of Gift had no application.
• The Court also rejected new evidence that the then unrepresented Ms Hsaio failed to produce at the trial (including a medical certificate explaining her absence).

Importantly, the Full Court stated that section 71A of the Act has the effect of providing that parties may enter into a financial agreement that ousts the jurisdiction of a court exercising jurisdiction under the Act in respect of financial matter to which the agreement applies. Parties cannot otherwise enter into an agreement that does so.

Ms Hsiao’s entire appeal was dismissed.

pending high court determination

Ms Hsiao has now filed proceedings in the High Court of Australia. Her application is on two grounds:

• Whether a finding that Ms Hsiao had pressured Mr Fazarri to transfer 40 per cent of G Street to her is to be set aside; and
• Whether the Full Court ought to have received further evidence from Ms Hsiao, not previously included

Ms Hsiao’s case is that the Court was required to take into account her interests in the Deed. The Terms of the Deed said that if the parties were separated or divorced, any property settlement would take into account any payment of the $1 million gift. Ms Hsiao argues although the Deed does not oust the jurisdiction of the Court, the parties’ intentions of agreement, is a relevant consideration in the Court exercising the discretion to make a property settlement order.

Mr Fazarri’s case is that because orders were made severing the joint tenancy, the parties were no longer joint tenants. The legal effect and operation of that Deed, consistent with clause 7 of it, was at an end.

The High Court will now need to consider the nature and impact the Deed of Gift made between the parties. If it is found the Deed no longer was in operation, does the Court have to take into account the parties’ intentions or agreement?

takeaways

This case highlights the importance of seeking expert family law advice prior to making any “gifts” during any relationship.

One option is to enter into a Financial Agreement, which can be made before, during or after a marriage or de facto relationship.

They can deal with how, in the event of a breakdown in marriage or de facto relationship, all or any of the property or financial resources (personal and business assets, inheritance whether received or not) of both or either party will be dealt with, and spousal maintenance. Financial Agreements can be made in times of peace, limiting the stress, cost, exposure and interference with business assets.

If you want to know about Financial Agreements, please contact our Family Law team.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.