How does the law what a de facto relationship is in legal terms?

A de facto relationship is defined in Section 4AA of the Family Law Act 1975. The law requires that you and your former partner, who may be of the same or opposite sex, had a relationship as a couple living together on a genuine domestic basis. However, your relationship is not a de facto relationship if you were legally married to one another or if you are related by family.

But as in life, the lines marking a de facto relationship can often get blurry.

How The Court Determines What A De Facto Relationship Looks Like

In this case, the court was asked to decide whether a de facto relationship existed to the extent that upon the breakdown of the relationship, one party could claim a property settlement from the othe

Ms Chancellor and Ms McCoy began a same sex relationship in 1982. Ms Chancellor, at the time of the court hearing, was still working while Ms McCoy had retired from work to care for her elderly parents. In 1983 Ms McCoy purchased in her name only a house property at Property M $51,000 using deposit moneys of $27,000 together with a mortgage. They both lived in this property, with Ms Chancellor contributing financially to the household. Renovations were completed on the property, with Ms McCoy providing the funds and Ms Chancellor contributing with labour. In 1984, Ms McCoy’s parents gave them $35,000 to pay out the mortgage.

de facto relationship, marriage, separation, divorce, property settlementProperty M was then sold and Ms McCoy bought Property A, again in her name only. The couple lived there for several years. During this time, Ms Chancellor received a gift from her uncle of $50,000.

From the sale proceeds Ms Chancellor’s uncle received $25,000 and gifted to Ms Chancellor $50,000. She used this money to purchase a house in her name only. She rented this property out to her sister at a reduced rent. In the early 2000’s, this property was renovated with Ms Chancellor providing the funds, and Ms McCoy contributing with labour.

In 2006, Ms McCoy renovated Property A with funds from her own savings and from her own parents. At this time, she acquired a line of credit from a bank of $150,000.

In 2010, the parties separated under one roof. The following year, Ms Chancellor received an inheritance of $560,000 from her uncle’s estate.

In 2012 the parties attended private mediation and agreement was reached but never finalised into consent orders. In March 2013 Ms Chancellor commenced court proceedings to proceed out of time for a de facto property division.

In April 2013 Ms McCoy retired. At the same time, she drew down $96,000 from her superannuation which was used to pay out the (omitted) Bank to pay for legal costs and living expenses.

In or around September 2013 Ms McCoy drew down $60,000 from her superannuation to purchase a new car for $37,477, to pay legal costs, to pay living expenses

Ms Chancellor submits that this was a long de facto relationship during which time both parties contributed to the large property pool and therefore it is just and equitable for the court to consider a property division.

Ms McCoy submits that although the parties were in a long de facto relationship the parties’ finances were kept separate with each party accumulating their own financial pool and therefore it would not be just and equitable for the court to consider a property division.

The judge was required to decide whether the parties had been in a relationship that constituted a de facto relationship.

Was there a power imbalance in the relationship?

The parties are mature, educated and intelligent.

The parties are high achievers in their profession.

The parties are both (occupations omitted) and in the absence of evidence to the contrary, appear to have had similar employment conditions and opportunities.

Both parties were employed full time during the relationship, except for a 4 to 6 week period where Ms Chancellor was between jobs.

Whilst presenting as very different in character, there is no suggestion that one party was overbearing of the other or that there was any power imbalance in their relationship.

How did the parties acquire property?

During the relationship the parties utilised their own funds and resources to acquire real property in their own name.

Smaller purchases such as cars and boats were also acquired individually utilising their own funds.

Did the parties make financial contributions towards each other’s property?

The evidence supports that small direct financial contributions were made to each other’s properties, by way of purchasing items like curtains, paint and blinds.

Did the parties make indirect financial contributions to each other’s property?

The evidence supports that both parties made indirect financial contributions to each other’s properties by providing labour for improvements, maintenance and repair.

Did the parties share day to day living expenses?

de facto relationship, marriage, separation, divorce, property settlementDuring the whole of the relationship Ms Chancellor lived in properties owned by Ms McCoy. During most of the relationship Ms Chancellor paid $100 to $120 a fortnight Ms McCoy.

Ms Chancellor paid for half of the groceries.

Ms McCoy paid for bills on MasterCard in order to obtain points and Ms Chancellor reimbursed her in cash for her half share of the bills.

Ms Chancellor paid a total of $4,600 towards house insurances and Ms McCoy paid a total of $11,700 towards house insurances for her properties.

Did the parties have separate finances and financial independence?

The parties did not have a joint bank account. Each party paid for all costs associated with all renovation, repair and maintenance of their respective properties. Since separation the parties have been solely responsible for all costs associated with their respective properties.

Since separation the parties have both spent excessive amounts of money in litigation and have eaten into their financial resources to meet those costs with Ms Chancellor increasing her mortgage on her property and Ms McCoy drawing down on her superannuation and relying on her family.

Did the parties share future plans or goals?

The parties did not during the relationship discuss or execute mutual wills which left property to each other.

The parties did not name each other as beneficiaries on superannuation policies.

There is no evidence of life insurance policies where the other party was named as beneficiary.

There was lack of evidence as to whether the parties would share their assets or superannuation upon retirement.

There was lack of evidence as to the future plans the parties may have had or goals that might have been shared had the parties not separated.

Did each party understand the financial situation of the other party?

The evidence supports that Ms Chancellor lacked knowledge of Ms McCoy’s financial situation at the beginning of and throughout the relationship. For example, she wasn’t aware that Ms McCoy had a line of credit of $150,000. Similarly, Ms McCoy was unaware of the financial situation of Ms Chancellor, including whether she had any savings or what assets she owned.

As a result of the answers to these questions, the judge ordered that Ms Chancellor’s application for de facto property division be dismissed.

Despite the fact that the parties had been in a relationship for 27 years, their situation wasn’t sufficient for the court to determine that it was a de facto relationship.

If you’re in a de facto relationship, and you’re unsure about how to protect the assets and financial contributions made, you need to seek a binding financial agreement. This will also mean that you can avoid a protracted and expensive legal battle.

To find out more or to speak to one of our friendly family lawyers, please contact us today for your free, 10-minute phone consultation.