De Facto Couples: - Property Proceedings in The Family Law Courts

Amendments to the Family Law Act commenced on 5^th December 2008, enabling unmarried couples to seek resolution of property disputes in the Family Court of Australia and Federal Magistrates Court of Australia. Chris Turnbull reports.

The Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 came into force on 5 December 2008. This Act creates a new Part VIIIAB of the Family Law Act and amends a number of other related Acts. Financial matters arising out of separation of de-facto couples can now be resolved in a Court exercising jurisdiction under the Family Law Act.

What is a “de facto” relationship?

A person is in a de facto relationship with another person if the persons are not legally married to each other, they are not otherwise related by family, and having regard to all of the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.

A de facto relationship can be between members of the opposite sex or members of the same sex.

The circumstances of the relationship may include the duration of the relationship, common residence, a sexual relationship, financial interdependence, care and support of children, and public reputation (s. 4AA). There is no threshold requirement of cohabitation.

This is a broad test.  In the context of child abduction proceedings, the Full Court of the Family Court has interpreted similar (New Zealand) provisions widely.[i]

A Court may make an order or declaration if the Court is satisfied that the period, or the total of the periods, of the de-facto relationship is at least two (2) years, or there is a child of the de-facto relationship, or if failure to make the order or declaration would result in serious injustice to the applicant (s. 90SB).

Orders that can be made

The Court may make such orders as it considers proper for the maintenance of a party (s. 90SE (1), for a declaration of an interest in property (s. 90SL (1)) and for alteration of property interests (s.90SM (1)). Part VIIIB (Superannuation Interests) is extended to apply to a de-facto relationship. 

Third parties may be included in de facto property proceedings (in a similar way to the existing Part VIIIA).

The Court may make an order or declaration about the existence or otherwise of a de facto relationship (s.90RD).

Time Limits

Proceedings must be commenced within the standard application period, which is defined as two (2) years from the date of separation. Leave may be granted for a party to apply after the end of the standard application period, if hardship is established.

Participating Jurisdictions

Not all States have referred power to the Commonwealth. For parties to be eligible to apply, they must be ordinarily resident in a participating jurisdiction. Presently, this includes all States and Territories except South Australia and Western Australia.

If the parties are ordinarily resident in these States, then the laws of those respective States still apply.

In Queensland the Family Law Act will apply to the exclusion of Part 19 the Property Law Act 1974 (Qld). Queensland Courts will have no jurisdiction. (s.90RC).

For a Court to have power to make orders for alteration of property interests and for maintenance of a party, then either or both of the parties to the de facto relationship must meet the geographical requirement.

The requirement is that either or both of the parties were ordinarily resident in a participating jurisdiction when the application for the declaration or order was made (or when they separated), and both parties were ordinarily resident in that jurisdiction during at least a third of the de facto relationship.

There is an exception to this rule if the applicant for the declaration or order made substantial contributions in a participating jurisdiction (s.90SK; 90SD).

Agreements

Financial Agreements can be made before, during and after the de-facto relationship (s90UB, 90UC, 90UD). Financial Agreements are binding if the requirements in s. 90UJ are met. Those requirements are precisely the same as those for Binding Financial Agreements for Married couples.

Agreements can be set aside (in the same way as present Binding Financial Agreements). A Court will apply a strict interpretive approach and strict compliance requirements should be applied.  Failure to comply with the requirements will result in the agreement being set aside [ii]

Recognized Cohabitation and Separation Agreements made under Part 19 Property Law Act (prior to the commencement date) remain binding provided that a State Court could not make an order that is inconsistent with the agreement.

Parties separated prior to commencement

Parties to a de facto relationship that broke down before commencement may choose for the new provisions to apply.  Such a choice can be made if (a) no final order in respect of the property or financial resources of the de-facto parties, (b) no Recognized Agreement made pursuant to Part 19 Property Law Act (Qld) has been entered into, or (c) that such an agreement has been entered into but ceased to have effect without any property being distributed or maintenance being paid.

The choice must be made in writing, signed by both of the parties to the de facto relationship, and each of the parties was provided with independent legal advice and there is a certificate evidencing such advice.

There are no provisions in the Family Law Act that could enable a State Court to compel a party to ‘opt-in’.  If proceedings have commenced (and provided the time limitation has not yet expired) both parties could agree to discontinue the State Court proceedings and re-commence in the Family Court or Federal Magistrates Court.

Key differences

Where parties have separated after the commencement date, recognized separation agreements under the Property Law Act will be ineffective. The only options are to either prepare an agreement that meets the requirements of the Family Law Act, or by way of consent order pursuant to the Family Law Rules.

If a recognized agreement is in existence, at least in Queensland, it will not have been able to deal with the maintenance of a party, or parties, to the de facto relationship. Fresh agreements might be required to cover the possibility of a maintenance claim.

If the time limit has not yet expired, spousal maintenance claims might be able to be made even where there is a final division of property. In any event, a Court may make such orders for maintenance of a party, including lump sum orders, and orders for transfer of property to meet a maintenance liability, as it may consider appropriate.

Superannuation will be treated as property, and can now be split, either by agreement or by Court order. The full range of options previously available to Married couples can now be used, including provision of fixed based amounts, percentage splits, and splits during the payment phase. This includes self-managed superannuation funds.  Orders can now be made binding on Third parties.  

The Jurisdiction of the Courts in Bankruptcy will be able to be utilized.

Most importantly, parties will have access to the Rules and Procedures of the Family Court of Australia and Federal Magistrates Court of Australia, with the benefit of individualized case management, early intervention dispute resolution processes and pre-action proceedings (for applications to the Family Court of Australia).

De facto couples with both parenting and property disputes will be able to have all matters determined in one Court. In most cases, this will mean a significant cost saving for litigants.

Further information

To assist in interpretation of the amendments, the explanatory memorandum to the Bill (as it was), and the Bill digest are both available on the Australian Parliament website www.aph.gov.au .

This is a transcript of the Hansard of the House of Reps  Wednesday, 25 June 2008

 HOUSE OF REPRESENTATIVES 1
CHAMBER
Wednesday, 25 June 2008
—————

FAMILY LAW AMENDMENT (DE FACTO
FINANCIAL MATTERS AND OTHER
MEASURES) BILL 2008 introduces significant
reforms to allow opposite-sex and same-sex de
facto couples to access the federal family law courts on
property and spouse maintenance matters on relationship
breakdown.
This bill is long overdue, and gives effect to an
agreement between the Commonwealth, states and territories
made as far back as 2002.

The bill follows the
enactment of legislation by a majority of states referring
necessary powers to the Commonwealth.
The reforms will provide greater protection for separating
de facto couples and simplify the laws governing
them. The reforms will also bring all family law issues
faced by families on relationship breakdown within the
federal family law regime. The federal family law
courts are the specialist courts in Australia with vast
experience in relationship breakdown matters. They
also have procedures and dispute resolution mechanisms
which are more suited to handling family litigation
arising on relationship breakdown.
The bill is consistent with the government’s policy
not to discriminate on the basis of sexuality. The bill
applies to both opposite-sex and same-sex de facto
couples. This bill amends the Family Law Act 1975
and related legislation to create a Commonwealth regime
for handling the financial matters of de facto
couples on the breakdown of their relationship. By
providing a consistent and uniform approach for de
facto relationships, this bill will alleviate the administrative
and financial burden currently faced by de facto
couples as a result of multiple de facto regimes applying
across the states and territories. It is also a more
effective use of court resources, legal aid and the like.
The current state and territory de facto property settlement
and spouse maintenance laws are far from uniform.
De facto couples currently have different rights in
different states and territories. This is unsatisfactory as
it is not uncommon nowadays for families to move
across state or territory borders, or to have property or
other financial resources in different states and territories.
These reforms will provide a national and uniform
system.
Also, where de facto couples have children and their
relationship breaks down, currently they can find
themselves with children’s issues in one of the federal
family law courts and property issues remaining in a
state court.
This will mean couples having to run parallel proceedings
in two court systems, placing unnecessary
additional costs and inconvenience on de facto couples,
as well as an administrative burden on the federal and
state court systems.
Clearly this is not the most efficient and effective
way to resolve these matters.
I am glad to say that this bill will address and resolve
these issues.
The bill enables federal family law courts to deal in
the one proceeding with both financial and child related
matters arising for separated de facto couples.
De facto couples will be able to obtain a property
settlement, split their superannuation interests and
make financial agreements, all recognised and enforceable
by the federal family law courts.
Most states agreed in 2002 to provide the Commonwealth
with a reference of power concerning the
financial matters relating to the parties of a de facto
relationship arising out of the breakdown of that relationship.
Since that date, New South Wales, Victoria,
Queensland and Tasmania have passed legislation referring
power to the Commonwealth. In the ACT, the
Northern Territory and Norfolk Island, the Commonwealth
will rely on its power over territories to apply
the new legislation in those jurisdictions.
The bill will require parties to demonstrate a geographical
connection such as residence in a state that
has referred power or a territory to gain the benefits of
the new approach.
I will now briefly outline some of the key aspects of
the approach to de facto financial matters introduced
by the bill.
What relationships will the bill cover?
Before a court can make an order, it will need to be
satisfied that the de facto relationship lasted for at least
two years, that there is a child of the relationship or
that a party to the relationship made a substantial contribution
to the relationship and it would cause serious
injustice not to grant an order. The bill also extends to
couples whose relationship both satisfies the definition
of ‘de facto relationship’ in the references of power and
is registered under state or territory law.
2 HOUSE OF REPRESENTATIVES Wednesday, 25 June 2008
CHAMBER
Declarations
A major difference between a marriage and a de
facto relationship is establishing when a de facto relationship
has commenced or ended. With marriage, it is
very clear when a couple have commenced their marital
relationship because of the ceremonial requirements
and declarations made before witnesses and authorised
celebrants.
Equally, it is usually easier to determine the end of a
marriage because of the formality of divorce.
In the case of a de facto relationship, identifying
whether a relationship existed, and when it was on foot
or not, can be more difficult. To assist the courts and
the parties in these situations, the bill provides courts
with the ability to make a declaration about a range of
important characteristics of a de facto relationship.
There are other benefits for de facto couples under
the new national regime as well.
De facto maintenance and property orders
The bill will allow a court to make orders for the
maintenance of one of the parties to the de facto relationship,
or an order declaring or altering the interests
or rights of a party to a de facto relationship in respect
to property.
Superannuation splitting
For the first time, the bill will allow de facto couples
to split their superannuation interests in the event of a
breakdown in that relationship. This will enable recognition
of the important contribution many de facto
couples make over the course of their relationship to
each other’s superannuation to be reflected in the
proper apportionment between them of what they have
accumulated for their retirement. This is an important
benefit that has been available under the Family Law
Act for married couples since 2002, but not for de facto
couples.
Binding financial agreements
De facto couples in participating jurisdictions will
also be able to enter into binding financial agreements.
These allow parties to enter into agreements about how
they will distribute their property or financial resources
or maintain each other in the event that their relationship
breaks down. Agreements will be possible before
or during a de facto relationship, or after it has broken
down.
Other amendments
The bill makes a number of other minor amendments
to improve the effectiveness of the Family Law
Act.
Full details of the measures contained in this bill are
contained in the explanatory memorandum to the bill.
This much needed reform will give separating de
facto couples the same rights as divorcing couples under
the comprehensive Commonwealth family law system.

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