Property Settlements

Separation: What Happens to the Ring?

TGB's Virginia Bui writes about what happens to the engagement ring when a couple splits before getting married.

engagement-ring.jpg

TGB’s Virginia Bui writes about what happens to the engagement ring when a couple splits before getting married.


An interesting but somewhat controversial question which sometimes arises when parties separate is ‘What happens to the engagement ring?’  This question is asked by not just those couples that separate many years into their marriage, but is also posed by those couples who are engaged but split before they walk down the aisle.  The question is further complicated by the increasing number of couples who cohabitate in a de facto relationships whilst engaged and then have broader claims for property settlement outside of just the engagement ring.

Historically in Australia the Courts would typically require the return of the engagement ring.  If the gift of the ring was made in contemplation of marriage and the marriage did not proceed then the ring giver is entitled to the return of the ring (Davies v Messner [1975] 12 SASR 333 and Cohen v Sellar [1926] 1 KB 236).  From the recipient’s point of view, it is the Court’s position that in instances where the wedding did not proceed retaining the ring would be unconscionable (Muschinski v Dodds (1985) 160 CLR 583).

Matters are unfortunately no longer this straightforward with modern day couples departing far from traditional relationship paths.  The law with respect to engagement rings can be considered in the following contexts:

1. Couples that become engaged but do not cohabitate before marriage (‘the traditional engagement’);

2. Couples that cohabitate, become engaged but never marry (‘de facto couples’); and

3. Couples that go on to marry (‘married couples’).

Traditional Engagements

Traditional engagements are rare nowadays with most couples deciding to move in together prior to the big day.  Research from the Australian Bureau of statistics shows that this trend has steadily increased over the past 20 years with 67.2% of couples living together prior to marriage in 1988 increasing to 76.8% of couples in 2007.  Couples who have not married and do not fall within the definition of a de facto relationship will find that there is no governing legislation leaving very old case law dealing with concepts usually beyond the normal scope of family law such as contract and constructive trusts which are dealt with in the State Courts.  The past cases which have dealt with engagement rings in this context may not necessarily reflect the current view of the Courts.

De facto couples pre 2009

What are more common are couples who cohabitate, become engaged and never marry.  In South Australia parties to a de facto relationship have been able to seek legal recourse through the Courts with respect to property settlement for close to 20 years now.  This commenced with the inception of the Domestic Partners Act 1996 (SA) which was dealt with in the State Courts which changed in 2009 when South Australia relinquished its powers to the Commonwealth.  Since this time, property settlement of de facto couples along with those of their married counterparts have been dealt with under the federal jurisdiction of the Family Law Act 1975 (Cth) (hereinafter referred to ‘the Act’).  It is only a very small number of parties who separate prior to changes in the law (i.e. 2009) who will have their matter dealt with the State Court with the vast majority of cases now heard in the Federal Circuit Court or the Family Court of Australia.

De facto couples post 2009 and married couples

Section 4AA of the Act defines a person as living in a de facto relationship with another person if “they have a relationship as a couple living together on a genuine domestic basis”.  The most common grounds upon which parties will fall within the definition of a ‘de facto relationship’ is if they have a child together or if they have been together for at least 2 years.

Under the Act property is defined as “property to which those parties are, or that party is, as the case may be, entitled to whether in possession or reversion”.  This applies to parties who are married or are deemed to be in a de facto relationship.  As to how an engagement ring will be treated in the course of property settlement proceedings will turn on the facts of each case.  Some interesting scenarios have been discussed below.

As engagement rings generally hold significant sentimental value they are generally excluded from property settlement negotiations.  This approach was recognised by Watts J in the decision of Damiani & Damiani [2012] FamCA 535.  In that case the parties agreed that the wife would return her engagement ring and that this would be considered as part of the husband’s share of the asset pool.  His Honour noted that the parties’ agreement was contrary “to the normal practice of excluding engagement rings from the balance sheet…” (at paragraph 122).  Having said that, there is no set position as to when and how engagement rings should be treated.

However, there is the one known amongst the uncertainty and that is that the value attributed to the engagement ring is only ever a fraction of the purchase price.  It is a common misconception with property that the value to be attributed is the purchase or the insurance value.  Neither are correct.  As is the case with other items of property, the value for the purposes of property settlement is the current second hand value which is often much lower than the purchase price.

Another issue which has arisen for the Court’s consideration relates to how to deal with an engagement ring when its whereabouts are unknown.  There have been cases where the wife has sold an engagement ring or even claimed to have lost it.  In the first scenario where the ring is sold, the proceeds gained will generally be included in the asset pool.  In the relatively recent decision of Marsden & Baker [2013] FamCA 320 the wife sought to retain the proceeds of sale of an engagement ring worth $170,000.  The ring was sold for $70,000 which was used towards payment of the legal fees and her general living expenses.  Needless to say the husband agreed to this forming part of the property pool, a concession which His Honour Justice Benjamin did not seek to disturb.

When the whereabouts of a ring are unknown the Court is limited by what it can do without having the necessary evidence before it.  It is currently known for an engagement ring to be flushed down a toilet or thrown into the sea or the rubbish bin.

Interestingly, there have been a number of cases where the Court has been asked to account for funds used to purchase an engagement ring for a new partner.  In the Full Court decision of Chorn and Hopkins (2004) FLC 93-204 the Court found that the trial judge had erred by including as a notional asset an engagement ring which the husband had purchased for his new partner 8 months after separating from the wife.  The ring cost $28,000 and was paid for on credit for which the husband was solely responsible.  The Full Court’s reasoning was that the expenditure could not be considered a distribution of the matrimonial property and its inclusion could therefore not be justified.  It appears from this decision and the decisions which have followed that the question of whether or not funds used are added back to the asset pool will depend on whether the funds originated from the marriage.

In summary, parties will often elect to exclude an engagement ring from the property pool due to its sentimental value.  In instances where a party has sought to have it included the Court does not seem to have hesitated to include engagement rings in the property pool.  This has reaffirmed the Court’s position that contributions to property do not commence at the time of the marriage, whether that being engagement rings or other property (In the marriage of Jackson and Jackson (1988) FLC 91-904).

How engagement rings can be accounted for in property settlement will differ on a case by case basis and it is strongly advised that legal advice is sought.  On a final note, it is very rare that an engagement ring is dealt with in isolation from property settlement.

TGB Lawyers has the largest family law team in SA, as well as offices in Perth, Brisbane and Darwin. For advice about your family law issue, contact your nearest TGB location