Gifts in property settlements— a simple science?

Hanna Psomoulis

By Hanna Psomoulis and Carol Pagès

In the recent case of Mabb & Mabb (2020) 60 Fam LR 299, the Family Court of Australia was asked to consider a gift of property received throughout a marriage, and determine its relevance in making a just and equitable property division.

Whilst there is no precise science to this calculation, a court, in determining how to divide property will consider the following in determining a just and equitable split: assets and liabilities of parties; contributions both direct and indirect, financial and non-financial; and the future needs of the parties.

As part of contributions, the courts will consider gifts made by persons to the parties of the relationship. A number of considerations apply in determining who should retain the gift, and who should be considered to have brought in the contribution. Where evidence is adduced which points to the gift being made to either one or both of the parties, this is an important finding as to the intention of the donor— it is ordinarily the ‘strongest indicator’ of the donor’s intention, however other considerations necessarily apply.

A distinction will also be drawn between gifts and loans notwithstanding that familial relations are involved. In the absence of a loan agreement, such transfers are presumed to be gifts.

The law in the area

Where gifts are made to one party, and the party uses this in the relationship

Where a gift is made to a party of the relationship, in their sole name, but that party applies this property to the relationship, it will be considered a financial contribution by that party alone.

However where a gift is made to one party in the relationship and this party does not apply this to the relationship but rather keeps it separate, it is generally not considered a contribution. Rather, this gift will only become relevant when making adjustments under s 75(2).

Where gifts are made to both parties

Where a gift is made to both parties by a relative of one of the parties, the circumstances of the case will be considered in order to determine whether the property is deemed to have been contributed by that relative on behalf of the related spouse alone, or to both parties to the relationship.

Where the gift is only made to the party because of their familial relation and as a means of benefiting that person in their relationship, then it will be deemed to be a financial contribution made on behalf of that party.

However, where a gift is made by a relative so as to benefit both the parties to the relationship, then it is to be considered to have been equally contributed by the parties.

Background of the case

The husband (the Appellant) and wife (the Respondent) commenced cohabitation in 1997, married in 1999 and separated between 2011 and 2012. Property division orders were sought.

The impugned property was 60 acres of land transferred by the Appellant’s parents to the Appellant and Respondent jointly. The Appellant had argued that his parents had promised him the land at an earlier point in time. However it was argued by the Respondent and accepted by the primary judge that at the time of the gift, the parents had intended that the property be gifted to both parties so that they could build a house on it and take care of the parents if the need arose.

The primary judge therefore held that it was to be considered to be a gift to each the Appellant and the Respondent and therefore an equal contribution. The Appellant argued that the property was not intended to benefit both the Respondent and the Appellant equally, and that it was for the respondent to establish such an intention by the Appellant’s parents.

Holdings on appeal

On appeal, the Full Court of the Family Court held that there was a presumption that a relative gifting a party to the relationship is intending to benefit the relative of that relationship. However, this is no more than an ‘evidentiary device’. The presumption is rebuttable and both parties bear the evidentiary proof of establishing their respective contentions as to the intention of the donor at the time of the gift. Factors pointing towards an alternative intention at a prior point are not relevant. Importantly, the fact that the property had been transferred to both parties jointly was a strong indicator of the actual intentions of the parents, and was sufficient in this case to rebut the presumption.

The court also highlighted that cases of gifts of property are distinguishable from cases of gifts of money.

Conclusion

Whilst there is no ‘hard and fast rule’ to determining a property split, this case demonstrates that the matter will very much turn on the circumstances of the case and evidence adduced by both parties. The actual intention of the donor at the time of the gift is critical, and therefore presumptions to the contrary will be displaced. Competent legal advice may assist you in making decisions and understanding your financial position.

We are able to assist if you are a parent providing a loan to one of your adult children, or if you have recently separated and would like some advice about the likely treatment of a loan or gift received by you and your former partner. If you have queries in this area, do not hesitate to contact our team of experienced legal practitioners at Scanlan Carroll.