What constitutes the end and what happens to your assets if something happens to you?

You might have heard the phrase ‘de facto relationship’ used, but not realised what exactly it referred to. In accordance with Australian Law, two people who are not already married yet have lived together as a couple on a genuine, domestic basis are automatically classified as a de facto relationship. This definition leaves room for confusion about what legally classifies as a de facto relationship and what exactly constitutes the end of one. 

In the recent decision of Fairbairn v Radecki [2022] HCA 18, the High Court was asked the question ‘when does a de facto relationship end?’ This question led the court to focus further on the division of assets and rights of those in the relationship.

The case dealt with a couple who commenced living together in late 2005 or early 2006. Throughout the relationship, both parties had entered into multiple formal cohabitation agreements reflecting their wishes to keep their assets separate. However, they did live together in a house owned by the appellant. Later in the relationship, the appellant was diagnosed with dementia and by 2017 was largely unable to make decisions for herself.

By January 2018, the NSW Trustee and Guardian were appointed to make health, welfare, and wealth decisions for the appellant. In March 2018, the Trustee moved the appellant into an aged care facility and sought that the house be sold to finance her ongoing care. This was opposed by the Respondent and consequently, the Trustee commence proceedings in the family court system.

Since the Trustee commenced proceedings in the family law system, it was required to show that there has been “a breakdown in a relationship”. If it had, the Court could make orders, if not, the Court could not make orders.

At first instance, the trial judge decided that the relationship had ended at the latest by 25 May 2018. On appeal, the Full Court decided that the parties were still in a relationship and that this was simply a dispute between the Trustee and Respondent about how best to manage the appellant’s affairs.

On appeal the appellant argued that since a de facto relationship is defined in the law as “having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis”, the relationship broke down when the appellant moved into the aged care facility. The Court rejected this stating that “living together” does not mean cohabitation and instead means “two people who share their lives together”. A de facto relationship may continue even though the parties physically reside at different locations and despite one of those parties suffering from illness.

Ultimately, the High Court concluded that the relationship has broken down at the latest by 25 May 2018 because the Respondent refused to make the “necessary or desirable adjustments in support of the appellant” and that “his conduct acted contrary to her needs”. The Court noted the following examples from the history of the relationship:

1. Due to her declining health and on the advice of her doctor, the appellant executed an enduring power of attorney so that her children could stop her from accessing her bank accounts. Upon discovering this the respondent drove the appellant to a Courthouse, and had a new power of attorney made in favour of him and his brother. This was later overturned as a tribunal found that she was “significantly cognitively impaired” when she executed that document.
2. Following the appellant suffering a fall at home, the respondent arranged for a solicitor to attend upon her to execute a Will. The Will provides that the respondent would have a life estate on the house. This was contrary to the fundamental premise of their relationship, namely the strict separation of their assets.
3. The Respondent consistently opposed the Trustee’s attempt to sell the house to cover her ongoing care costs, thus depleting her estate, and proposed that her super be used in the first instance to pay the costs.
4. The respondent refused to disclose his income and assets to Centrelink in circumstances where he had nominated himself as the appellant’s spouse. His refusal to provide this information led to Centrelink suspending the appellant’s income support payments.

Knowing legally whether you are in a de facto relationship or whether that relationship has broken down is a complex area of family law. This is where it’s important to have a solicitor to protect and give clarity on what may or may not become of your assets.

To speak to one of our Family Law Solicitors to find out if Mediation or Collaborative Practice is right for you and your situation, contact the team here.