This month, Ben and Heather delved into the topic of de facto relationships, answering the following questions:
Family Law Act 1975 – sections referenced
Section 4AA of the Family Law Act provides a definition of a de facto relationship and the manner in which the Court can decide if a de facto relationship exists
Section 90SB of the Family Law Act defines what is considered a de facto relationship by the Courts.
Previous Podcasts referenced on today’s show
E45: Top Six Questions on Property Settlement
AppleSpotifyAmazonPocketcastiHeartRadioGoogle
Benjamin Bryant: Welcome to episode 46. I’m Benjamin Bryant from Bryant McKinnon Lawyers and we are recording this podcast in a professional sound studio for the very first time today. Up until now we’ve been recording this podcast from our office. Hopefully, for our listeners, the move to a sound studio means no more hearing the background office noises or phones ringing or mediation sessions in the room next door. And for my partner Heather McKinnon and I, it means a break from the office and a chance to really focus on our listeners and our topic. Are you excited Heather?
Heather McKinnon: Oh, very excited. I love being out here at the studio. I feel very grown up and I’ve got all this recording gear. We might give up our day job and become rock stars.
Benjamin Bryant: It does feel quite sophisticated. I agree. On today’s show, we’re going to talk about de facto relationships. Most people understand what a de facto relationship is, but there is often confusion about how and when a de facto relationship legally starts and ends. So, Heather and I are going to spend a half an hour with you to help clarify some things. Just before we get started, I need to do my usual reminder to listeners to share this show with friends and family starting down the path of separation or divorce. We’ve got a huge library on a wide range of subjects with world class experts, so please share with your friends and family who may benefit. Now let’s get on with our discussion of de facto relationships. Are you ready to go, Heather?
Heather McKinnon: Sure am.
Benjamin Bryant: Heather. We tend to bandy about the term de facto, but from a legal perspective, what is a de facto relationship?
Heather McKinnon: Well, it’s not that easy to define. We’ll talk a bit more about the legislation, but the lay way of describing it is, it’s a relationship between two adults that’s, from the outside, something resembling a marriage-like relationship. So, it’s been evolving over years. So, when I left university in the late 70s, there wasn’t anything acknowledged in the legislation. So, you were married and that was it. And marriage was between a man and a woman. De facto relationships started to enter the formal arena in the mid-80s, and they’re now are very common. I think you’ll find that probably half of adults will never formally marry. They’ll be in de facto relationships. So, the simple way to describe it is, a de facto relationship is defined as a relationship between two adults who have lived together for a period of two years. And so, when the legislation was being developed, the parliament has realised that many relationships fold in that initial period of a couple of years. So, they didn’t want people to feel they had legal obligations to each other from the moment they moved in. So, you get a trial period and once you hit that 24-month mark, you’re then in a de facto relationship. As long as it can be described according to the legislation that we’ll talk about later.
Benjamin Bryant: And Heather, unfortunately, the Family Law Act doesn’t define what a marriage-like relationship is, as you set out. But fortunately, Section 4AA does define, or attempt to define, a de facto relationship. And you’re quite right, it’s a couple living together on a genuine domestic basis who aren’t married. That’s essentially it.
Benjamin Bryant: Heather, how long do you have to live together to be in a de facto relationship?
Heather McKinnon: Well, the legislation talks about this two-year period, but it’s really hard to define that two year period because when does it start? When is the magical date that suddenly you enter this de facto relationship? There’s a real lot of case law around one side arguing that they weren’t in a de facto relationship and the other saying they were.
Benjamin Bryant: And of course, it’s not just the start of the de facto relationship that could be an issue. It is the end. You would think would be very clear when parties are no longer in a de facto relationship. But it’s not so clear, is it Heather?
Heather McKinnon: No, the cases are some of the most salacious because we do have to drill down into things like the sexual relationship between the parties, the exclusivity of that relationship, whether family and friends acknowledge the relationship. So, we get into all that tacky stuff like were you invited to the cousin’s wedding together? Did you spend Christmas Day together? Have you got joint bank accounts? There are hundreds of factors that lawyers use to try and either establish that the relationship is de facto or on the other side to say that it doesn’t meet that threshold?
Benjamin Bryant: Yes Heather, the human condition is very complex and it certainly gives us our career. But also it’s not necessarily one particular period. It can be a whole lot of different periods. It’s not necessarily just one. It may be in a very good long standing relationship, but a lot of people aren’t. And there’s a lot of off and ons. And it’s very interesting how the court sometimes deals with the off and ons, if we could say that. But what came to mind also Heather for our astute listeners is when a de facto relationship means the Family Law Act can jump in and do a property settlement. That’s what the context of a lot of people are talking about when a de facto relationship exists. And for the astute listeners, that’s Section 90SB of the Family Law Act. And there are circumstances when a de facto relationship gives a party standing to bring a property claim under the Family Law Act. And in summary, that is when the de facto relationship is being of a period no less than two years. If there is a child of the de facto relationship or when one of the parties or both of the parties make a substantial contribution to the assets of the other party, and there would be a serious injustice if the court rather was not to make a property adjustment order.
Benjamin Bryant: Heather what if your relationship starts out as platonic roommates and then becomes a more serious partnership over time? How does the law decide when the de facto relationship actually starts?
Heather McKinnon: Well, this would be one of the most common scenarios that we would see in our practice, and it’s particularly common in that first primary relationship. So, for example, a couple meet at university. They live in the same residential college. During uni, they commence a romantic relationship. They move into a unit together with friends. Eventually they decide that they’ll live on their own and their sexual relationship becomes permanent at some time over those years. So, we often have to look at external evidence to decide when did this relationship shift from, firstly, a platonic relationship in the early stages of friendship or romance to a domestic relationship that may or may not have been sexual, to a sexual relationship that may or may not have been casual to a permanent de facto relationship. So the markers for that transition, particularly in young couples, become things like when did they apply for their first loan together. So for example, buying a car and they merged their incomes for the purposes of getting the loan, What did they tell Centrelink? Did they advise the tax office that they were living together? We often subpoena medical records, particularly from hospitals where, when there’s an admission for an injury, who did the patient say was their next of kin? Is there evidence that family and friends saw you as a couple? So, for example, we troll through hoarder’s boxes who keep all the Christmas cards from Auntie Jan who writes to the couple. So there’s heaps of ways of trying to get a timeline, but that of course, is where the conflicts happen. And if we’re in cases where there’s significant money involved, heaps of time and energy is put into working out either to lengthen the time of the relationship or to shorten it, depending on which side you’re on.
Benjamin Bryant: And of course, the ultimate irony is that you need the power of hindsight to know what external evidence you may need on the fly if you don’t have the hoarding Auntie, like you said. It’s very difficult when you’re going back in time to find out where the loan documents were, who you spoke to, when the invoice was paid, when you set up the joint account, that can be very difficult. So that’s part of our everyday burden. Heather.
Benjamin Bryant: And I’ve got a couple of curly ones for you. Is it possible to be in a de facto relationship and not be living together?
Heather McKinnon: Well, this is the grist of the mill of human relationships, isn’t it? What do you do with these increasingly common long-distance relationships where, for careers you might have a couple, where one is in Sydney for most of the time and the partner’s going back to and from LA for most of the year? Is it the situation that the other aspects of the relationship feel like a permanent domestic relationship? Do they have financial goals that they work on together? Do they go to lots of important social occasions with family and friends? So certainly there’s case law that says you can not only have a couple of residences, but you might not have one shared residence. So there is good case law on both sides because these cases are often before the courts, because of the size of the property pool. So people have got a lot of resources to put into that forensic examination. And so we get the benefit of it because our clients don’t have to spend the money to sort of get an understanding of what the judges are looking at. But you could easily run a case that you’re not living together permanently in one physical place, but still in a de facto relationship.
Benjamin Bryant: That’s right. And again, going back to Section 90SB, it’s not just living together for a period of two years, which gives rise to perhaps a property settlement, but also if you have a child of the relationship or be making some substantial contributions and there would be an injustice if the court wasn’t to make a property settlement order. So interesting.
Benjamin Bryant: Is it possible to be in a de facto relationship if you’re already married to someone else?
Heather McKinnon: Oh, these are the really good cases. So one of the most famous ones, that sort of laid down principles, involved a very wealthy business person who lived in Sydney and was married for 35 or 40 years, but for half of that time maintained a de facto spouse in Brisbane. So had two relationships for all intents and purposes, that were bona fide. One was a legal marriage and one was de facto. And the court found that. I think these cases are quite common among the super wealthy. We’ve got a long history in Australia of cases coming before the court, either in estate litigation where the oligarch dies and these two relationship cases come to the fore. Or more recently in the Family Court where the person who has ended either the marriage or the de facto relationship faces the other spouse coming forward to make a claim on the asset pool.
Benjamin Bryant: Juicy. To be recognised as being in a de facto relationship. Do you need to register like you would a marriage?
Heather McKinnon: Well, you know, some would say our politicians are fairly silly because no you don’t. And that’s why all this litigation occurs, because we’ve got this grey area where it’s hard to know when a relationship steps from being a casual one to a de facto relationship. There are plenty of ways you can register a de facto relationship so that there is some record that you had that intention. But most people don’t do that. I think it’s fair to say, and it’ll be interesting to have your input, that if there’s a power imbalance, particularly in relation to capital… So you have one partner either in a same sex relationship or in a heterosexual relationship that brings a lot of capital to the table. They will be doing everything to not meet the criteria for de facto. And so, you get a lot of young people who are in relationships with older, wealthier people that find themselves after 5 to 10 years having to mount a case that they deserve some of the wealth that’s been acquired in that decade. My experience is in those cases, the person with the wealth will not acknowledge through a formal document that they’re in a de facto relationship.
Benjamin Bryant: Of course, with a de facto relationship, I think it’s more of a nuance thing. It’s more of a natural progression. And again, the power of hindsight, being able to get the external evidence to clearly identify it can be tricky. And for some people it is a tactic. For some people it’s a oops, turns out we’re in a de facto relationship. And again, going back to the human condition, it’s very, very complex
Benjamin Bryant: And Heather, once you’re deemed to be in a de facto relationship, does the law view it any differently than a marriage?
Heather McKinnon: Not in my experience. In these cases that are contested, the first part of a hearing is for the judge to make a ruling on whether the de facto relationship existed and if so, for how long. Once they’ve decided that, then the property settlement part is the same whether you’re married or de facto. It’s really in meeting the threshold of whether you’re de facto that most of the litigation occurs.
Benjamin Bryant: Heather, when getting out of a long-term relationship, the first thing we need to consider is whether the law would deem you as being in a de facto relationship. So, what does the court consider when deciding if a de facto relationship exists?
Heather McKinnon: So probably the best way to do it is to go through a list of all the sorts of things that the court looks at. So under the relative legislation, have the parties been in a bona fide domestic relationship? Is there exclusive sexual relationship? Has the public nature of the relationship been evidenced by the way that family and friends and public authorities such as the Taxation Office and Centrelink, characterise the relationship? So the factors are prescribed in the legislation, but not really at a level that we need to determine it clearly. We’ve talked about bona fide domestic relationship. Does that mean you have the same residence, or can you have separate residences? Does it mean that you live in the same country? If you’ve got children who are in a situation where the parents think it’s better that they stay in separate households, you’ll find cases where the de facto couple will choose to spend a couple of nights at each other’s properties but not bring the children under the one roof. So, it gets really interesting to sort of examine the nature of the family in each of these cases.
Benjamin Bryant: And of course, Heather, it’s impossible for you to give us a very clear definition or category of what is or is not a de facto relationship. And, you know, we both got a matter that’s been in and out of the court system for 2006 for a couple that still does not know if they were in a de facto relationship. And in fact, one court is decided they were and another court decided they weren’t. So to be continued, it’s not straightforward. But Heather, you mentioned the list. And, you know, I’m a stickler for details and for our listeners. I’m going to go through that list. And so for the astute listeners, I’m reading out of Section 4AA of the Family Law Act and the circumstances that a court takes into account when defining whether a relationship or not exists takes into account the following things: the duration of the relationship, the nature and extent of their common residence, whether a sexual relationship exists, the degree of financial dependence or interdependence, and any arrangements for financial support, the ownership, use and acquisition of their property, the degree of mutual commitment to a shared life, whether the relationship is or was registered under a prescribed law, the care and support of children and the reputation and public aspects of the relationship. Which are the things that you spoke of Heather.
Benjamin Bryant: And Heather, what if it’s a same sex de facto relationship? Does the court consider this any differently to heterosexual de facto relationships?
Heather McKinnon: You know, the definitions are exactly the same. So, you have two adults in a relationship the legislation doesn’t talk about whether it’s same sex or heterosexual. We recently had Catherine Boland talking about same sex relationships. Mostly we were focused in that episode on children. But certainly there’s some interesting material in there about those issues of public recognition and whether or not same sex relationships have any public difference or acknowledgement – that’s a part of this field that’s emerging.
Benjamin Bryant: And for listeners that want to check out the same sex episode, if we can call it that, with Dr. Catherine Boland, check out episode 44. You’ll find that on our website or wherever you get your podcasts.
Benjamin Bryant: Now, assuming you are in a legally de facto relationship, does the law manage property disputes any differently than a married couple?
Heather McKinnon: No, because once we’ve got through that threshold Ben, then we’re just straight into the sections. And as you said, the sections are the same in the Act, they’re just put under different numbers. But we’re looking at contributions, future needs. The same principles apply to all relationships in Australia, once that threshold is met.
Benjamin Bryant: And we’ve worked through how a court determines what’s a just and equitable arrangement in property settlements a lot on our podcast. In fact, it’s one of our most listened to topics, so we keep doing it. In fact, I think our last podcast episode 45 was on the very topic when it was just you and I Heather. But we’ve gone through it many times, so make sure you check out previous podcast episodes. If you want to know how the law does manage property disputes.
Benjamin Bryant: Heather, if there are children from a de facto relationship, does the law handle children’s matter any differently than for children of a marriage?
Heather McKinnon: Again, we have equality in Australia and there are no differences. The central tenant of how we make decisions about children are what’s in the best interests of children. And so, the issue of who the parents are, the parents may be de facto, same sex, heterosexual. They may in fact the attachment figures might be unrelated to each other. It could be a sister-in-law and an aunt that are looking at taking on responsibility for children. So, there’s still an overhang from the years where de factos were seen as second class citizens. But we’re well and truly through that legislative pathway now, and we have equality in Australia. So, you don’t need to be concerned that you’re going to be judged any differently if you don’t have the ring on your finger.
Benjamin Bryant: Yeah, that’s right. It’s almost like wake-up Australia, marriage and same sex relationships, it’s a non-event. Move on.
Heather McKinnon: That’s right.
Benjamin Bryant: And Heather, what about spousal maintenance? Can I apply for spousal maintenance if I’m in a de facto relationship?
Heather McKinnon: You certainly can. So spousal maintenance is very specific area of law. It’s a throwback in one sense to a past era where we had many relationships, where there was a financially dependent spouse and someone who was the sole breadwinner. But can I say there are two times where spouse maintenance is still really important to look at. The first is if there has been a de facto relationship for a long period of time and there are children and one spouse has taken on responsibility to be the primary parent, they will often have given up a lot of earning capacity and may in fact only be able to work part time. In that situation, the other spouse may be responsible for supplementing the income of that person for a few years until that person can get on their feet. The other time that it applies is when we’ve got de facto spouses where there’s significant earning disparity. So I’ve got one at the moment where I’ve got a young woman who is on about $100,000 a year, but her de facto spouse or ex was a much older person who has control over millions of dollars. So even though it appears that this woman can support herself on that money, it’s all a matter for the court to look at horses for courses. So spouse maintenance, although not relevant in a lot of our work, can really be important to look at if you’ve got dependency or you’ve got a big difference in earning capacity and the length of the relationship means that the spouse with lower earnings needs a top up to recognise the lifestyle they had during the relationship.
Benjamin Bryant: So it’s not necessarily about keeping the other party in the life that they were accustomed to during the relationship.
Heather McKinnon: Yeah, it’s all about needs, but the needs are assessed in relative terms. So it’s all about looking at what’s expected. And you know, in these cases that turn up in the newspapers where you’ve got billionaire couples, spouse maintenance can be )particularly in the early stages of the separation) a really big minefield for lawyers because we’re looking at the issue of what income should one be paying to the other so that they can meet their daily needs until the capital is divided.
Benjamin Bryant: And finally, Heather, I want to ask you a question or put a proposition to you, which I guess we could spend a whole podcast episode discussing, but here it is. Let’s say I want to move in with my partner, but I’m worried about protecting my assets at the early stages of the relationship. Should I look at doing a prenup, or what lawyers refer to as a financial agreement?
Heather McKinnon: So, this is one of the great philosophical debates of our field of endeavours. So, we get clients regularly turning up who want to do a prenup because they’ve been burnt before. They have significant capital and their new partner doesn’t have much. What I say to them is this: that there has been an attempt to regulate those relationships through these financial agreements, but that they’re still something that I’m very concerned about in terms of whether they work or not. And I think we’ve done previous podcasts. One of the most interesting decisions recently is a High Court decision called Thorne and Kennedy, which looked at a de facto relationship where one spouse was very, very wealthy and wanted their intending spouse to sign one of these agreements. So we’ve had recent High Court guidance, if you like. Can I say the most important thing for all de facto couples starting out on the journey is to be open and frank about your financial position. The most powerful thing you can do to protect yourselves going forward is to set out clearly in a document what assets and liabilities both of you have when you start living together And if you’ve got significant wealth, it might be prudent to get valuations of the assets. Because if the relationship lasts for years, it can be often historically very difficult to work out what the value of things were, back when you got together. So I say to people, get your home, your investment properties, your superannuation, all of those things valued. Get your mortgage statements printed out, give each other copies of those, and acknowledge in writing that you’ve both got them. That’s probably, in my view, one of the most financially prudent things to do at the beginning of a de facto relationship. We know, Ben, that about a third of issues that cause stress in relationship are financial. Get into good habits at the beginning. Be open about your finances with each other. Share the information, and don’t hide any secrets. That would be my advice. There are lawyers, as you know, that will enter into these pre-nups or do these financial agreements. I think they’re a waste of money and they’re very likely to come unstuck eventually.
Benjamin Bryant: And of course, the difficulty with financial agreements before you’re deemed to be in a de facto relationship or a marriage is the sheer power imbalance, just like there was in the scenario of Thorne and Kennedy, the case that you mentioned. And if people are trying to enter into a document like that to isolate or quarantine or protect themselves and therefore there’s no remedy later on, the very intention of that document is not going to be realised when 20 years later, the court rips that document up. So, people have to be really careful. If parties want to know that their initial contributions essentially are not going to be dismissed, that they’re going to be taken into account, they can rest assured that under the legislation do nothing and it will absolutely be taken into account. And that’s when, as you said, it’s very helpful to have the valuations and stuff or that external evidence, as you said earlier. The other thing I also tell people, Heather when we’re giving advice is about financial agreements is: what if you say no? What does that mean? What if you say, no, I’m not going to enter into that financial agreement? What is the consequence of that? If the consequence is, well, we’re not going to get married or we’re not going to continue with the relationship. Bingo, there’s your power imbalance. And that’s dangerous.
Benjamin Bryant: Well Heather, what a great show. I think we’ve done a pretty good job of answering the questions that come up about de facto relationships. Personally, I think that sitting in this professional sound studio has helped us focus the mind. How do you feel Heather?
Heather McKinnon: It’s really great fun recording in a proper studio and you know, I like to think I’m always focused Ben, but sometimes I drift off.
Benjamin Bryant: Fair enough. And there’s no doubt that you did a great job clarifying things for people in de facto relationships. Next month, we will be focusing on divorce and children with special needs. Separation and divorce is always difficult with children. How do you tell them the marriage is ending? How do you create suitable living arrangements after separation? How do you deal with their questions and grief? But all of that becomes even more complex when children with special needs and neural diversity are involved. We will be joined by seasoned clinical psychologist Warwick McClellan to discuss these complexities of parenting arrangements for children with special needs. So, stay tuned for that one. And if you have any questions that you’d specifically like to ask Warwick, please email us on familymatters@bryantmckinnon.com.au or message us on Facebook.
Benjamin Bryant: We will put a link to any links for resources mentioned in today’s show on de facto relationships in the show notes on our website. And as always, remember to share this show with family and friends who may benefit. We hope to have your ears again next month.