Article – PDF – What is a defacto relationship

In 2008, the Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 was passed and substantially came into force on 1 March 2009. This Act had the effect of integrating de facto relationships into Federal Law and thus making de facto couples covered by the jurisdiction of the Family Court and Federal Circuit Court. This is true for all states and territories bar Western Australia, who has not referred the relevant powers to the Commonwealth and therefore still deal with de facto matters under state law.[1]

The Act made amendments to the Family Law Act 1975 (Cth) (“FLA”) that extend financial settlement to parties in de facto relationships, whether they are in a heterosexual or same sex relationship. De facto parties are now eligible to seek property adjustment and maintenance orders in the same capacity as married couples have been able to in the past.

A de facto relationship is now defined in section 4AA(1)  of the FLA as:

“A person is in a de facto relationship with another person If:

(a)  The persons are not legally married to each other; and

(b)  The persons are not related by family (see subsection (6)); and

(c)  Having regard to all circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.”

The circumstances referred to at s 4AA(1) subsection (c) above are outline in s 4AA(2) and include any or all of the following:

(a)  “The duration of the relationship;

(b)  The nature and extent of their common residence;

(c)  Whether a sexual relationship exists;

(d)  The degree of financial dependence or interdependence, and any arrangements for financial support, between them;

(e)  The ownership, use and acquisition of their property;

(f)   The degree of mutual commitment to a shared life;

(g)  Whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;

(h)  The care and support of children;

(i)    The reputation and public aspect of the relationship.”

All the above factors are relevant considerations, however it is not necessary to make a finding that one or more of the above factors existed to decide whether or not there was a de facto relationship. The court has a wide discretion when determining whether a de facto relationship exists or not. This is evidenced in the legislation where it states “the court is entitled to have regard to, and attach weight to, any matters that seem appropriate to the court in the circumstances of the case.”[2]

The legislation also specifically mentions that a de facto relationship can exist if the parties are a same sex or heterosexual couple and even if one of the parties to the relationship is married to someone else or is in a concurrent de facto relationship.[3]

The courts broad discretion has been exercised in many cases since the introduction of the new legislation. In Jonah & White [4] the parties were in a 17 years relationship that the women asserted was a de facto relationship but the man asserted it was an affair. The court determined that it was not a de facto relationship due to the secret nature of the relationship, the limitations of the relationship and the fact the parties were not identified to the public as having been in a relationship.

In Allenby & Kimble [5] the court took into account emails between the parties to help determine that the parties were in a de facto relationship. This was not the only factor however, the parties shared a bedroom and the man modified his property to allow the women to operate a business out of it that he derived no financial benefit from.

In Gissing & Sheffield [6] the applicant alleged that the parties were in a de factor relationship for 17 years that started out as a business relationship and then became a personal one. The respondent claimed that there was no de facto relationship and that it was merely a business relationship. The court found that a de facto relationship existed because the parties shared a common residence for significant periods of time, conducted joint bank accounts, shared income and payments of household expenses and the perception of their relationship to other persons. The court stated that on balance the evidence indicates the parties had merged their lives and for all practical purposes they were living on a genuine domestic basis.[7]

What happens after the court makes its determination?

After taking in all the circumstances contained in the legislation and relevant case law the court can make a declaration that a de facto relationship existed or didn’t exist.[8] This declaration has the effect of a judgment of the court.[9] However the court can only make such a declaration once it’s satisfied that the applicant or both parties were ordinarily resident in the participating jurisdiction when the proceedings were commenced.[10]

Once the court has determined that a de facto relationship exists it can only make a property adjustment or maintenance order in relation to a de facto relationship if it is satisfied of any of the following factors:[11]

(a)  “that the period, or the total periods, of the de facto relationship is at least 2 years; or

(b)  that there is a child of the de facto relationship; or

(c)  that

i.- the party to the de facto relationship who applies for the order or declaration made substantial contributions of a kind mentioned in paragraph 90SM(4)(a),(b) or (c); and

ii.-A failure to make the order or declaration would result in serious injustice to the applicant; or

(d) -That the relationship is or was registered under a prescribed law of a State or Territory.”

The court has a broad discretion to use any evidence relevant to the case at its disposal to find that a de facto relationship existed or did not exist. There is no black and white definition of what a de facto relationship is, as each case is different from the next.

Article written by Shaun Mill

 


[1] Australian Master Family Law Guide p 848

[2] FLA s 4AA(3)

[3] FLA s 4AA(5).

[4] [2011] Fam CA 221 per Murhpy J.

[5] [2012] FamCA 614.

[6] [2012] FMCAfam 1111.

[7] Gissing & Sheffield [2012] FMCAfam 1111, O’Sullivan FM at paras 192-198.

[8] FLA s 90RD.

[9] FLA s 90RE.

[10] FLA s 90RG.

[11] FLA s 90SB.

 

 

Peter Hooper – Hooper Family Lawyers – We are family lawyers in Brisbane. Find us searching family lawyers Brisbane; divorce lawyers Brisbane; family lawyer Brisbane; Brisbane family lawyers; family law solicitors Brisbane; divorce lawyer Brisbane; family law lawyers Brisbane; divorce solicitors Brisbane; divorce lawyers in Brisbane; best divorce lawyer Brisbane.

Article – PDF – Succession planning

Blended families and second marriages can be challenging; and statistically second marriages are more likely to end in divorce than first marriages.[i]  For many people in this situation, often middle aged or later in life[ii], one concern is how can assets be best protected moving towards retirement and/or preserved for the children of the first marriage in the event of separation or death?

The potential claims

The potential claims that might arise from a second spouse/partner are typically those pursuant to the Family Law Act 1975 (“FLA”) with respect to property adjustment/spousal maintenance in the event of relationship breakdown[iii]; or a family provision claim.

A family provision claim is made pursuant to the Succession Act 1981 (“Succession Act”) in the event of death. This might be an issue where there are children from a first marriage who benefit under the will. A family provision claim is against the estate and arises if the deceased spouse does not make adequate provision in the will for the surviving spouse.

The difficulty for clients with respect to the above is:

  • High costs of family law litigation in the event of dispute; or high legal costs for the estate in family provision litigation;
  • These types of claims involve discretionary remedies which creates a degree of uncertainty as to the outcome;
  • Acrimonious dispute between spouses/partners; or between the children of the first marriage and spouse/partner.

What protection can the law offer?

Methods of asset protection such as via corporate or trust structures are of little assistance in the family law arena.-It is well settled that the real issue for the court in determining whether the matrimonial property pool ought to be expanded by trust or corporate assets is control.[iv]

Thus the court can look behind the veil and determine whether the facts and circumstances support a conclusion that assets ought to be included as “matrimonial property”.

Since 2000 (and 2009 for defacto couples) changes to the FLA make it possible for persons contemplating a relationship/marriage; or in a relationship/marriage; to contract out of the property adjustment/spousal maintenance provisions by entering into a Binding Financial Agreement.

What is a Binding Financial Agreement?

A Binding Financial Agreement is a Financial Agreement that is binding because it has met the formal requirements of the FLA necessary to make it binding.[v]-Where a Financial Agreement is binding, it removes the jurisdiction of a court to make a property adjustment or spousal maintenance order.[vi]

Thus the Binding Financial Agreement can specify matters such as how property is to be distributed, whether property brought to a relationship is to be retained or quarantined out of the property pool available for distribution, whether spousal maintenance is payable and the extinguishment of future spousal maintenance claims.

Third parties can be parties to Binding Financial Agreements and thus inter entity transfer of property is possible as well as making allowances for loans from family members etc.

What happens to a Binding Financial Agreement when a party to the agreement passes away?

A Binding Financial Agreement operates despite the death of a party and is binding on the personal representative of a party.[vii]

Opinions are divided however as to whether a Binding Financial Agreement for married couples becomes operative upon the death of a party. The significance of this would be to allow the Binding Financial Agreement to be used as a succession planning tool i.e. the Binding Financial Agreement would specify what joint property (or even property in the name of the surviving spouse) would fall into the deceased estate upon the death of a party pursuant to the Binding Financial Agreement.

The arguments for and against concern the wording of a number of sections[viii] (see endnote for explanation and why I think Binding Financial Agreements have force and effect on death) however there may be other provisions included in a Binding Financial Agreement that make a Binding Financial Agreement useful as a succession planning tool and protect against a family maintenance provision claim.

Binding Financial Agreements and family provision claims

Apart from the Binding Financial Agreement potentially being used to include or exclude assets from an estate, there is also potential to use the Binding Financial Agreement to “contract out of” the family maintenance provisions of the Succession Act.

In this respect the Binding Financial Agreement cannot remove the jurisdiction of the court to make an order because the Succession Act is Queensland legislation while the FLA is Federal legislation. Nevertheless a provision in the Binding Financial Agreement to the effect that neither party shall make a claim on the estate of the other, while not binding on a State Court, may represent important evidence of the intention of the parties and with respect to what “family provision” was considered adequate by the parties. This was the case in Queensland in Hills v Chalk & Ors (as executors of the estate of Chalk (deceased)) [2008] QCA 159where the court said at 46:

“In this case, the voluntary statement of the parties of their mutual intentions and expectations in a form intended to be binding affords a reliable conspectus of the totality of the relationship of the parties and of their respective relationships with others who have a claim on their bounty. In my opinion, the court should have regard to such a voluntary statement by the parties of their intentions and expectations…”

Further, in other jurisdictions the succession laws have been amended to permit parties to contract out of family maintenance provisions. For example, section 95  of the NSW Succession Act 2006  provides a person may contract out of/release their rights to a family provision order[ix]. A clause can be inserted into the Binding Financial Agreement in contemplation of the succession law in Queensland being amended to allow for a similar provision.

Getting a Binding Financial Agreement?

Some people may argue that a Binding Financial Agreement in contemplation of marriage or “pre nuptial agreement” is unromantic or demonstrates a lack of commitment. Maybe…but having this discussion at a time when both parties are in love and looking to the future could also be said to be a preferable time to negotiate what is fair as opposed to during the period of emotional turmoil at the end of a relationship.

For people with children to another relationship and assets hard earned it makes sense to obtain the best protection the law can offer.

For people wanting to leave behind a legacy to children and others, rather than leaving behind court battles and an estate ravaged by legal costs, a Binding Financial Agreement can offer more certainty and protection for loved ones. Many lawyers will understand that often claims such as family provision claims may be settled and paid out even if they are without merit simply to avoid the legal costs of defending them.

The Binding Financial Agreement doesn’t have to be entered into at the start of the relationship; it can be made during and even after the relationship has broken down.

Binding Financial Agreements are very helpful provided they are created by a skilled lawyer. Strict legislative requirements are necessary to make them binding and in some circumstances they can be set aside.

Two idioms best capture the essence of Binding Financial Agreements, they are: a stitch in time save nine but a chain is only as strong as its weakest link.



[i] Australian Institute of Family Studies

[ii] 2011 Census data show that in 2011 the median age in Australia for males to become separated was 40.8 with divorce occurring at 44.4 while for females the median age for separation was 38.1 and 41.5 for divorce.

[iii] Since 1 March 2009 most de facto couples in Queensland separating after that date are able to seek remedies pursuant the Family Law Act 1975 which are in most respect the same as those available to married couples.

[iv] Deputy Commissioner of Taxation v Austin (1998) 16 ACLC 1,555; and Coventry, Coventry and Smith (2004) FLC 93-184.

[v] See sections 90G and 90UJ FLA.

[vi] See sections 71A and 90SA FLA.

[vii] See sections 90H and 90UK FLA.

[viii] Section 90H and 90UK are mirror provisions for married and defacto Binding Financial Agreements (“BFA”) except that the s.90UK provision contains a note which reads, “If the parties are still in the defacto relationship when one of them dies the de facto relationship is not taken to have broken down for the purposes of enforcing the matters mentioned in the financial agreement. Because section 90H doesn’t have a similar note it could be argued it is intended to mean death constitutes relationship breakdown for the purposes of the BFA. The difficulty with this is sections 90B(2) and 90C(2) refer to marriage “breakdown” which the definition in section 4 provides “in relation to a marriage, does not include a breakdown of the marriage by reason of death”.

The above would seem to put the matter beyond issue except for sections 90DA(1) and 90DA(1A). Section 90DA(1) requires that upon marriage breakdown, a BFA has no force or effect until a party signs a separation declaration. Section 90DA(1A) provides that section 90DA(1) does not need to be complied with if either or both spouses die. The note to section 90DA(1A) goes on to say:-“This means the financial agreement will be of force and effect in relation to the matters mentioned in subsection (1) from the time of the divorce or death(s)” (my emphasis). Thus the section clearly indicates a BFA has force and effect from the time of death.

In further support of this idea is section 90B(3)(b) and 90C(3)(b). This section provides that the BFA may contain “other matters” i.e. other matters in addition to how in the event of breakdown the property, financial resources and spousal maintenance is dealt with. It is submitted “other matters” might refer to how in the event of death the property, financial resources and spousal maintenance is dealt with.

A BFA is not terminated by death. Section 90J provides a BFA can “only” be terminated by including a terminating clause in a subsequent BFA (as referred to in sections 90B, 90C and 90D) or by making a “terminating agreement”. Therefore if the BFA is still operative, the surviving spouse could choose whether to sign the separation declaration in section 90DA(1) and give the BFA “force and effect”. Presumably this is why section 90DA(1A) was inserted and in my view gives further weight to the argument that BFA’s have force and effect on death of a party.

[ix] The release of rights to a family provision order in NSW requires the courts approval and other findings with respect to advantage to the releasing party; that it was prudent, fair and reasonable; and the releasing party had independent advice.

 

Peter Hooper – Hooper Family Lawyers – We are family lawyers in Brisbane. Find us searching family lawyers Brisbane; divorce lawyers Brisbane; family lawyer Brisbane; Brisbane family lawyers; family law solicitors Brisbane; divorce lawyer Brisbane; family law lawyers Brisbane; divorce solicitors Brisbane; divorce lawyers in Brisbane; best divorce lawyer Brisbane.