It is unusual for a decision of the Local Court of NSW to garner significant public attention, and even more unusual for any Local Court to have to consider a historically unsettled area of law. But the recently published judgment in Toh v Su [2017] NSWLC 10 is not your typical case.

The legal question before the court was one of conditional gifts – that is, what happens where somebody gives you a gift that is conditional on you doing something, and you fail to do it. What makes the case unusual (and media-worthy) was that the purported condition in this case was marriage, and the gift was an engagement ring.

Courtship goes to court

The case concerned a couple who had decided to get married. The plaintiff had bought the defendant an engagement ring and a wedding band for each of them. The plaintiff and defendant had also bought a number of other gifts (including jewellery, a handbag, and an iPhone) for each other from their own and joint bank accounts.

Unfortunately life does not always go as planned, and the parties decided to split up. When the parties split up they agreed that “everything that belongs to each party will be returned to each party”. The former couple began dividing up what they had bought each other. The plaintiff asked for the return of the engagement ring, the wedding bands, and a number of the other gifts back. His ex-fiancée refused.

He commenced proceedings in the Local Court of NSW, seeking the return of the engagement ring on the basis that it was a conditional gift, the return of the wedding bands on the basis that they are his property and his ex-fiancée was holding them on bailment, and finally the return of various gifts because of the agreement that “everything .. will be returned to each party”.

Engagement in the ring

The first question was whether an engagement ring is a conditional gift that is to be returned in the event that the parties fail to get married. The court noted that the answer to this question is still unresolved.

Magistrate Brender referred to the old English authority of Cohen v Seller [1926] 1 KB 536 (Cohen), which held that where an engagement ring is given by one person to another, there is an implied condition that the ring is to be returned if the engagement is broken off. The law was that an engagement ring:

retained the character of a pledge or something to bind the bargain or contract to marry and was given on the understanding the party who breaks the contract must return it.

The Magistrate noted that the Marriage Act abolished the right to recover damages for a breach of promise to marry, but the Marriage Act expressly does not affect an action for recovery of gifts given in contemplation of marriage. Magistrate Brender also noted that since the passage of the Family Law Act the concept of fault with respect to divorce had been abolished. Therefore, the question of who actually breaks a contract with respect to a marriage is one that is not relevant at law.

Ultimately, the question before the Court was whether Cohen remains good law with respect to these modern developments.

The Court noted that Cohen has been applied as recently as 2007 by the Supreme Court of NSW in Papathanaspoulos v Vacopoulos. In that case, the principles from Cohen were used to find in favour of a man who had proposed to a woman. The woman rejected his proposal and proceeded to throw the engagement ring into the garbage. The Court held in that case that based on Cohen, if she had not intended to fulfil the condition of the gift of the ring (getting married), the woman should have returned the ring to her suitor.

Notwithstanding this recent application by a more superior court, Magistrate Brender considered he was not bound by the same and decided not to apply Cohen. The Magistrate noted that to apply it treats the ring as a “deposit” to a “contract” that is breached by one party. This is against the “essential philosophy” of the developments in the Marriage Act and the Family Law Act. It is “also not consonant with modern ideas. A gift of an engagement ring should be now seen, like other gifts, as given absolutely … Many gifts are given in happy times and with optimism. Sometimes that optimism is borne out, sometimes it isn’t.”

The Court thereby refused to order the return of the engagement ring.

Other gifts and wedding bands

With respect to the agreement to return other gifts to each other, Magistrate Brender found that in the “domestic, emotional setting” that there was no intention for the parties to form a legally enforceable contract. Accordingly, none of the other gifts were to be returned.

The wedding bands, however, were in a different category. They were bought by the plaintiff, and given to his ex-fiancée for safe keeping until the wedding in a bailment relationship. Therefore, the Court ordered that the bands be returned.

Implications

This case, whilst novel, is a reminder of the different categories of legal relationships that can be created through an exchange of property, and clarifies the entitlements of couples when they split up. That is, the fact that a ring was given in contemplation of a marriage does not give it a special status so as to elevate the protection the law provides, and the fact that a person might agree to something does not mean they have an intention to form a contractual relationship. The context in which a person has agreed to something (and in particular if it was in a domestic or commercial setting) may be a vital consideration.

Therefore, notwithstanding the emotionally charged times a person might find themselves in during the breakdown of a relationship, as far as property is concerned, the ordinary legal rules with respect to gifts, bailment, and contract apply. Care must be taken by all of those involved as to the type of legal relationships they are forming whilst they are creating, or breaking, personal ones.