De Facto Relationships & why you may need a Binding Financial Agreements.
Generally, a de facto relationship boils down to you and your partner having a relationship, living as a couple for two years but not being married. However, when a de facto relationship ends has always been somewhat unclear. The May 2022 case of Fairbairn v Radecki was so interesting because it clears up when a de facto relationship breaks down but also made very clear that a key part of a relationship was acting in your partners best interests. The possibility of a de facto relationship breaking down and our new understanding of when that can happen really drives home how useful binding financial agreements (BFA) can be.
The Fairbairn v Radecki decision, clarified that a couple could be in a de facto relationship even if they did not live together, if one of the people in the relationship is financially dependent on the other. However, the High Court stressed that a de facto relationship can be broken if one person doesn’t act in the best interest of their partner. In Fairbairn, Radecki failed to make necessary allowances for their partner. A key takeaway is that the individual’s conduct in a relationship is assessed when determining if a de facto relationship has broken down.
Fairbairn and Radecki’s story began as a relationship around 2005 or 2006. They lived in Fairbairn’s house, but both agreed to keep their finances and assets strictly separate. Roll the clock forward a decade, and they’ve met the requirements of a de facto relationship. This usually happens after certain criteria are met, which is explained in our article on Are you de facto married?
Unfortunately, Fairbairn suffered a rapid cognitive decline in 2015 and was diagnosed with dementia in 2017. The NSW Civil and Administrative Tribunal appointed a trustee to manage her finances and make healthcare decisions. The trustee decided that it was in Fairbairn’s best interest to place her in an aged care facility and intended to sell her home to fund her permanent stay. Radecki opposed the sale of the property. He argued that he was still in a relationship with Fairbairn and as such he had a claim on the house.
The issue went to court and ended up before the High Court of Australia, four years later. The High Court found that the de facto relationship had ended by May 2018 because Radecki’s actions while Fairbairn was in his care had not been in her best interests.
During this time Radecki took advantage of Fairbairn’s mental incapacity. The two best examples are, when he secured power of attorney for her, which gave him considerable control over her assets and when he had her sign a new will that heavily favoured him over her children. This behaviour and his refusal to make any adjustments to provide for and support Fairbairn made it clear to the Court that their relationship had broken down years ago.
Why are BFAs important and why should you have one?
So why is having a BFA so important especially in the wake of Fairbairn v Radecki? The case clarifies when a de facto relationship ends and that you have an obligation to act in your partner’s best interests.
If you are married or in a de facto relationship you can make a BFA. A BFA is an agreement that manages financial interest if there is a relationship breakdown. BFAs can be made before, during or even after a relationship. By agreeing how your property and finances will be distributed should your relationship breakdown, you can avoid the stress of having to negotiate with your now former partner or having to apply to the Family Court to have your assets divided.
While a BFA is incredibly useful to have, especially as what is or isn’t a de facto relationship or when it has ended can be unclear, there are several key conditions that are essential for a BFA to be legally binding.
· Your partner must agree to the BFA. No agreement means no BFA.
· The BFA must be prepared by a lawyer, who can only act for you.
· It is essential that you receive independent legal advice, so you understand the pros and cons of the BFA.
· Your legal advisor must provide a signed certificate explaining what they have advised you on.
· The BFA must be in writing and signed by both parties.
· You can only get a BFA if you are getting married, already married, in a de facto relationship or separated
· A BFA must have a separation declaration unless you have already separated.
· The separation declaration just means that the BFA doesn’t activate
· The separation declaration means that the BFA does not come into effect until the divorce/relationship breakdown occurs.
Family Law Advice:
Australian Family law is an area of the law that is always changing and developing. Because of this, it is especially important to be aware of where you and your relationship stand, and how changes to the law can drastically affect you. Having a BFA in place allows for assets to be distributed without involving the family court or the associated legal fees.
Voice Lawyers help people navigate the complexities of the Family law system with confident, practical advice.
This article is general in nature and is not legal advice. If you need help with a family law matter, Voice Lawyers hear you. Give us a call at 02 9261 1954 or email us at voice@voicelawyers.com or use the link on our website to book a consultation.
By Kayte Lewis and Enda Byrne
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