7. Just and equitable financial adjustment

Updates and background for this project (Digest)

• Introduction
• Overview of section 20
• Other ways of dividing up property: the FLA model
• Defining “just and equitable”
• Options for reform
• The Commission’s view

INTRODUCTION

7.1 An important objective of the Property (Relationships) Act 1984 (NSW) (“the PRA”) is to secure a just and equitable adjustment of property interests between parties to a domestic relationship, usually once that relationship breaks down. This Chapter deals with the criteria that the Courts apply when deciding whether or not to make an adjustment, and the terms of such an adjustment, under s 20 of the PRA. In doing so, the Commission considers the numerous criticisms of s 20, relating to its perceived limitations in dividing up property in a just and equitable way.¹

7.2 This Chapter evaluates s 20 in the light of the shift in focus that our review has undergone since the release of DP 44.² To this end, we take account of the context in which s 20 will be operating once the reference of the State’s powers comes into effect, when its application will arise predominantly in the context of same sex and close personal relationships. We also evaluate any options for reform in light of the likelihood that property settlements for married and opposite sex de facto couples will be regulated by the existing regime under the Family Law Act 1975 (Cth) (“the FLA”).

OVERVIEW OF SECTION 20

Background: Why s 20 was introduced

7.3 New South Wales was the first Australian State to give de facto couples statutory rights to seek a property adjustment order. Prior to the introduction of the PRA, a party to a de facto relationship who had no legal title in shared property had to mount complicated actions in equity to seek a beneficial share in the property. These actions were onerous, costly and often unsuccessful. Many of the equitable doctrines that were relied upon to claim beneficial interests had been developed in commercial contexts and did not translate well to personal relationships.³ For the most part, they failed to give sufficient recognition to:

• indirect financial and non-financial contributions of a partner to the assets and financial resources of the parties, for example, by way of contributions to the general household expenses which enable the other partner to acquire assets in his or her name; and
• financial and non-financial contributions of one partner to the welfare of the other partner and the children of the relationship (including homemaker contributions).⁴

7.5 In its report, De Facto Relationships (Report 36, 1983) (“Report 36”), this Commission considered that the common law’s failure to take into account a broader range of contributions effectively allowed the partner who acquired property in his or her name to be unjustly enriched by the unrecognised contributions of the other partner. The Commission therefore recommended that the Courts be given statutory powers to adjust legal rights in property, where it was just and equitable to do so, having regard to a wider range of direct and indirect financial and non-financial contributions than was the case under the general law.⁷

7.6 Factors the Commission considered relevant to the adjustment of property rights included direct financial contributions, physical labour in relation to building a house or working in a business, payment of household expenses, supporting the other partner while he or she studied to further a career, providing housekeeping or nursing services and caring for children. Further, the Commission made it clear that there was no need to establish a connection between the contributions made and the property claimed.⁸

7.7 The Commission specifically rejected allowing a broader consideration of any matter relating to the future needs of the parties when making property orders, unlike the position for married couples under the FLA.⁹ To the extent that future needs should be considered at all, the Commission recommended that they be recognised through a maintenance order, separately from an order for property adjustment. Although it acknowledged that de facto relationships resembled marriage to a certain extent, and that de facto couples were entitled to have access to a statutory regime for the resolution of property disputes when their relationships ended, the Commission was also of the view that de facto relationships should not be equated with marriage. The Commission considered that there were substantial differences between the two kinds of relationships and that the law should reflect this difference. Consequently, it recommended a more limited statutory regime for the distribution of property and financial resources for de facto couples than was then available to married couples under the FLA.

7.8 In 1999, the existing regime for property adjustment under the PRA was extended to include same sex de facto couples and people in close personal relationships.¹⁰

Current law: What s 20 provides

7.9 The property division scheme under the PRA allows for a court to adjust the interests in property¹¹ held by each party to a domestic relationship. Section 20(1) of the PRA provides that:

… [A] court may make such order adjusting the interests of the parties in the property as to it seems just and equitable having regard to:

(a) the financial and non-financial contributions made directly or indirectly by or on behalf of the parties to the relationship to the acquisition, conservation or improvement of any of the property of the parties or either of them or to the financial resources of the parties or either of them, and

(b) the contributions, including the contributions made in the capacity of homemaker or parent, made by either of the parties to the relationship to the welfare of the other party to the relationship or to the welfare of the family constituted by the parties and one or more of the following, namely:

(i)a child of the parties,

(ii)a child accepted by the parties or either of them into the household of the parties, whether or not the child is a child of either of the parties.

7.11 Of course, in the majority of cases, parties will not take a disputed claim to court to have adjudicated according to the terms set down in s 20. Instead, they will negotiate and settle the division of their property themselves, and apply to the Court to make an order in the terms to which both have consented.¹⁵ In such cases, there are two important incentives for parties to make use of the formal legal process set up by the PRA, in the form of consent orders made by the court, rather than relying on their own private arrangements: the first is the reassurance provided by a court-enforceable order; the second is the exemption from stamp duty arising from such a court-ordered transfer of title to property. In most cases, therefore, s 20 will not be applied to resolving disputed claims. It will nevertheless provide negotiating parties with guidance as to their legal entitlements and obligations, and provide the Courts with an overarching duty to ensure that their orders, including consent orders, are just and equitable, with regard to the factors set out in the section.¹⁶

How s 20 has been interpreted

7.12 DP 44 contains a full discussion of the manner in which s 20 has been interpreted. At the core of the debate is whether the words in s 20, “having regard to,” mean “having regard only to” or “having regard principally to” the factors contained in subsections (a) and (b).¹⁷

Three differing approaches to interpretation

7.13 There have been a number of widely divergent judicial findings on the correct approach to be followed under s 20. This has made it very difficult for decision-makers, practitioners and parties to reach consistent and predictable outcomes. These findings can be generalised into three differing approaches, which are examined in detail in DP 44.¹⁸ Briefly, they are:

• The adequate compensation approach, formulated by Justice Powell in D v McA.¹⁹ The applicant is required to show that his or her contributions have not already been adequately compensated during the course of the relationship. Homemaking and parenting contributions may be considered adequately compensated by the provision of “free accommodation” while the parties lived together. This approach has been criticised as devaluing the contributions of a homemaker.²⁰
• The reliance and expectation approach, formulated by Justice Handley in Dwyer v Kaljo,²¹ and since overruled.²² The Court is not limited to considering only those matters set out in s 20 in determining what is just and equitable. Other relevant factors can also be considered, such as the length of the relationship, and the future needs of the parties. Justice Handley interpreted the section as empowering the Court to make orders to remedy any injustice a party would otherwise suffer because of a reasonable reliance on the relationship, or a reasonable expectation from the relationship, and to restore to one party benefits rendered to the other party during the relationship.
• The strict contributions approach, applied by Justice Mahoney (with whom Justice Sheller concurred) in Wallace v Stanford.²³ According to this approach, the powers conferred on the Court by s 20 are not “at large”. The Court is confined to a consideration only of the two kinds of contributions mentioned in the section. Justice Mahoney based his approach on several factors, one of which was that s 20 was the result of this Commission’s conclusion, in Report 36, that people in de facto relationships should not be equated with those who are married.

7.14 A specially constituted five-member bench of the Court of Appeal was convened to clarify the correct approach to s 20 in the case of Evans v Marmont.²⁴ However, it is not entirely clear that it did.²⁵ Chief Justice Gleeson and Justice McLelland held that the contributions listed in s 20 are to be the focal point, but also suggested that other relevant factors may be considered, such as the length of the relationship, the needs of the parties and loss of opportunity costs.²⁶ Such considerations could not be taken into account independently but must be made in the context of assessing contributions, although their Honours did not specify how this was to be done or the weight such other considerations should be given.

7.15 In contrast, Justice Meagher, who (with Chief Justice Gleeson and Justice McLelland) made up the majority, held that “the court may have regard to each of the two [contribution] factors and not to any other factors”.²⁷ His view was not explicitly endorsed by any of the other judges.

The approach since Evans v Marmont

7.16 Cases since Evans v Marmont have tended to favour the strict contributions approach of Justice Mahoney in Wallace v Stanford (affirmed by Justice Meagher in Evans v Marmont).²⁸ In Powell v Supresencia,²⁹ for example, Justice Sheller (with whom Justices Tobias and Einstein agreed) held that the PRA prescribes the focal points by reference to which it is to exercise its discretion as to what order seems just and equitable. It is by having regard only to those matters in s 20(1)(a) and (b) that the Court may adjust property interests in a just and equitable manner.

OTHER WAYS OF DIVIDING UP PROPERTY: THE FLA MODEL

7.17 There is now legislation in every Australian jurisdiction to regulate the division of property following the breakdown of a de facto relationship. There are those jurisdictions that have followed the PRA model, ³⁰ and those that have chosen instead to adopt the model set up (for married couples) by the FLA.³¹ In more recent years, the majority have applied the FLA model.

The FLA model

7.18 The model for property division set up under the FLA allows for consideration of a much broader range of factors than is admitted under the PRA. These factors are both retrospective, allowing for consideration of each party’s past contributions, as well as prospective, allowing consideration of present and future needs.

7.19 Section 79 of the FLA authorises the Family Court to make any order altering a spouse’s property interests as it considers appropriate, but may not make an order that is not “just and equitable”.³² In deciding what is just and equitable, the Court must take account of the financial and non-financial contributions of the parties to the acquisition, maintenance and conservation of the property in dispute, and the contributions of the parties to the welfare of the family, including homemaking and parenting contributions. In addition, the Court must consider:

• the effect of any proposed order on the earning capacity of the parties;
• the matters referred to in s 75(2) in so far as they are relevant;
• any other order affecting the parties or a child of the marriage; and
• any child support that has been paid or is payable.

(a) the age and state of health of each of the parties;

(b) the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment;

(c) whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;

(d) commitments of each of the parties that are necessary to enable the party to support:

(i) himself or herself; and

(ii) a child or another person that the party has a duty to maintain;

(e) the responsibilities of either party to support any other person;

(f) … the eligibility of either party for a pension, allowance or benefit under:

(i) any law of the Commonwealth, of a State or Territory or of another country; or

(ii) any superannuation fund or scheme, whether the fund or scheme was established, or operates within or outside Australia; and the rate of any such pension, allowance or benefit being paid to either party;

(g) where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;

(h) the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;

(i) the effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant; and

(j) the extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party;

(k) the duration of the marriage and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration;

(l) the need to protect a party who wishes to continue that party’s role as a parent;

(m) if either party is cohabiting with another person – the financial circumstances relating to the cohabitation;

(n) the terms of any order made or proposed to be made under s 79 in relation to:

(i) the property of the parties; or

(ii) vested bankruptcy property in relation to a bankrupt party;

(na) any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage; and

(o) any fact or circumstance which, in the opinion of the court, the justice of the case requires to be taken into account; and

(p) the terms of any financial agreement that is binding on the parties.

7.22 The Family Court has held that there are four steps that it should take before making orders for property adjustment under the FLA.³⁴ The first step is to identify and value the property, liabilities and financial resources of the parties as at the date of hearing. Secondly, the Court should identify and assess the contributions of the parties within the meaning of s 79(4) and determine, usually as a percentage of the net value of the parties’ property, their contribution-based entitlements. The third step requires the Court to identify and assess the other matters referred to in s 79(4) including the spousal maintenance factors referred to in s 75(2) in so far as they are relevant, and determine the adjustment (if any) that should be made to the contribution-based entitlement of the parties at Step 2. Finally, the Court should consider the effect of those findings and determine what order is just and equitable in all the circumstances of the case.

The FLA model applied in other jurisdictions

7.23 The FLA model has been adopted, in various forms, in Western Australia, Tasmania, the Australian Capital Territory, and Queensland. The greatest variation is in Queensland, which makes no provision for maintenance. Overseas, New Zealand also has a scheme for property division which applies to both married and de facto couples.

Western Australia

7.24 Western Australia has afforded the same rights and obligations to de facto couples as married couples, by extending the provisions for property adjustment for married couples in its Family Court Act 1997 (WA) to opposite sex and same sex cohabiting couples.³⁵ The Western Australian legislation mirrors federal family law in all respects with the exception of the recent FLA amendments to superannuation.³⁶

Tasmania

7.25 The Tasmanian scheme closely follows the regime set up under the FLA. Section 40 of the Relationships Act 2003 (Tas) provides that a court may make an order for the adjustment of property interests of the parties, having regard to:

• the financial and non-financial contributions of the parties to any of their property;
• their financial resources;
• homemaking or parenting contributions made to the welfare of the family
• the nature and duration of the relationship; and
• any relevant matter mentioned in s 47.

Australian Capital Territory

7.27 The powers of the Court under the Domestic Relationships Act 1994 (ACT) to alter the property interests of parties to a domestic relationship are also based on the FLA model³⁷ albeit with a less extensive list of maintenance factors.³⁸ Under s 15, the Court must make an order that is just and equitable having regard to the nature and duration of the relationship, the financial and non-financial contributions of the parties to property or financial resources, contributions to the welfare of the other party or to any child of the parties, including homemaker contributions, any relevant s 19(2) matters, and any other matters the Court considers relevant. The s 19(2) factors are an abbreviated list of the spousal maintenance factors found in s 75(2) of the FLA.

7.28 In the first case decided under the ACT legislation, the ACT Supreme Court stated two principles: first, that, in matters under the Domestic Relationships Act 1994, recourse can and should be had to appropriate cases under the FLA, and, secondly, that the constraints on matters that the Court may have regard to under the New South Wales legislation do not similarly constrain the ACT court.³⁹

South Australia

7.29 Section 11 of the De Facto Relationships Act 1996 (SA) closely resembles s 20 of the PRA in its focus on the contributions of the parties as matters that the Court is required to consider when making an order for the adjustment of property. However, s 11(1)(d) of the South Australian Act expressly allows for the Court to consider “other relevant matters”.

Queensland

7.30 The Property Law Act 1974 (Qld)⁴⁰ bases its property division scheme on the FLA model, with one major difference. It confers no rights on de facto couples to make a claim for periodic maintenance orders.⁴¹ It includes consideration of factors very similar to the spousal maintenance factors in the FLA, but these are to be taken into account, where relevant, in the determination of a claim for property adjustment. Like the FLA, under the Queensland Act, the Court may make any order it considers “just and equitable” to adjust the property interests of either or both spouses⁴² having regard to the parties’ financial and non-financial contributions to the property⁴³ and their (or a child of the parties’) contributions to the welfare of the family.⁴⁴ It may then make a further adjustment to the contributions-based entitlement of the parties based on matters that are essentially the same additional factors that the Family Court may take into account under s 75(2) of the FLA.⁴⁵

7.31 While such an approach emphasises the “clean break” objective, it has a major disadvantage, namely that it presupposes that there are sufficient assets to distribute at the end of the relationship to ensure a just and equitable outcome. Where there are few assets to divide, there is little or no relief for the economically weaker party even if the other party has a high income or high-income earning potential.

New Zealand

7.32 New Zealand provides for a single scheme to apply to the division of property for married and de facto couples.⁴⁶ The Property (Relationships) Act 1976 (NZ),⁴⁷ (formerly the Matrimonial Property Act 1976) applies to married couples, civil union couples and de facto couples, including same sex couples.⁴⁸ When a marriage, civil union or a de facto relationship breaks down, the starting point under the legislation is of an equal division of relationship property,⁴⁹ defined as property acquired during, or in contemplation of, the relationship. The starting point of equal division also applies to the family home and family chattels, whether or not they were acquired by one party alone before the relationship.⁵⁰ The Court can depart from this starting point if there are extraordinary circumstances that make equal sharing unjust, in which case each party’s share will be determined according to their contributions to the relationship.

7.33 The starting point of equal sharing does not apply to short-term de facto relationships, lasting less than three years, unless there is a child of the relationship or the applicant has made a significant contribution to the relationship and the Court is satisfied that failure to make the order would result in serious injustice.⁵¹ If the equal sharing starting point does not apply, the property is to be divided according to the contributions each of the partners has made to the relationship.⁵² Special rules also apply to marriages and civil unions that have lasted less than three years.

7.34 Another significant development in the legislation is the power of the Court to make a further adjustment to redress any economic disparities between the parties. Section 15 allows the Court to award a lump sum payment (in addition to the initial division of property) where it is satisfied that the income and living standards of one partner are likely to be significantly higher than the other because of the effects of the division of functions within the relationship while the partners were living together.⁵³ The factors that the Court may consider when making such an order include the parties’ earning capacity, whether they have ongoing daily care of a child of the relationship and any other relevant factor.⁵⁴

7.35 Separate property is defined as any property that is not relationship property. This mostly includes property acquired by either party while they were not in the relationship,⁵⁵ but can also include inheritances and gifts received during the relationship.⁵⁶ At the end of the relationship, separate property is held by the party who acquired it, unless it has been transformed into relationship property. This occurs when contributions of the other party, or the application of relationship property, has resulted in an increase in the value of the separate property, in which case the increase is treated as relationship property.⁵⁷

DEFINING “JUST AND EQUITABLE”

7.36 Historically, the common law, and, subsequently, legislation, justified the adjustment of legal title to property, following the breakdown of a domestic relationship, on the basis that to do so was just and equitable. But what constitutes “just and equitable” in this context, or what should constitute “just and equitable”? As submissions have pointed out, legislation authorising the Courts to alter property entitlements in the interests of fairness should be based on a coherent view of the reasons why it is fair to do so, and the principles that define the notion of “just and equitable” in these circumstances.⁵⁸

7.37 As the Courts have interpreted it,⁵⁹ the PRA defines the notion of “just and equitable” in much narrower terms than does the FLA: the PRA recognises only previous contributions as justifying an adjustment of title, but does not recognise that a person’s future financial needs may also make it just and equitable to divide up property. The justification for this narrower view of what is just and equitable has been that de facto relationships are not the same as marriages, and do not bring with them the same rights and obligations with respect to property division.⁶⁰

Defining “just and equitable” in terms of past contributions: the PRA model

7.38 Section 20 of the PRA permits the alteration of title to property if it is just and equitable to do so, on the basis that the legal title does not properly reflect the financial and non-financial contributions each party has made to the property, or to the welfare of the family.

7.39 Disparity between legal title and actual contributions is as much an issue for de facto relationships as marriages, and as relevant to same sex relationships as opposite sex ones. It may also arise in close personal relationships. In one recent case, involving a lesbian relationship that lasted 15 years, one woman had made the bulk of the financial contributions, while the other had made the major non-financial contributions through the care of their two children.⁶¹ In another case, again involving a lesbian relationship, where legal title to the property was held solely in one woman’s name, the Court adjusted entitlements to the property in recognition of the financial contributions made by the other woman.⁶²

7.40 Financial contributions in short relationships are likely to be much more important than those made in comparatively long relationships.⁶³ This is because the Court considers them by comparison to the financial and non-financial contributions of the other party.⁶⁴ In short relationships, the period of the relationship may not be long enough to enable the major financial contributions of one party to be effectively or substantially offset by the contributions of the other. Inevitably, much depends on the nature and quality of the offsetting contributions made by the other party.

7.41 In its submission, the Equity Division of the Supreme Court asserted that the mere making of a contribution by a party to a domestic relationship in some way, and at some stage during the relationship should not, of itself, entitle them to be reimbursed for that contribution when the relationship breaks down. It is argued that there may well be many instances where one party has spent his or her own money on occasion and for some purpose and that this has not amounted to an increased level of ownership in either property or an asset. This does not mean that it will be just and equitable to repay or compensate the party for this amount in all cases. In other words a mere contribution will not automatically give a basis for the transfer of property on just and equitable grounds.⁶⁵

7.42 The assessment of non-financial contributions, including homemaking and parenting contributions, is not an exact science. As Justice McLelland noted in Davey v Lee:

Typically a de facto relationship involves the mutual conferring and receiving of benefits, (be they emotional, social, sexual or intellectual) of a kind which are incapable of evaluation in monetary terms, as well as other benefits which are, or may be in varying degrees, capable of such evaluation. Often, one or other, or both, of the parties may value non-material contributions to the welfare of the family more highly than material contributions. These, however, are not matters which lend themselves to detailed examination and analysis by a court.

7.44 The task of the Court in proceedings under s 20 “is not akin to an accounting exercise”.⁶⁶ Ultimately, it is difficult for the Court to say with any precision why non-financial contributions are valued in a particular way. As Justice White said, in Hughes v Egger, “the criteria to guide a discretionary judgment are so general that in the final analysis, the outcome depends on the judge’s impression of a mix of factors whose weight cannot be exactly weighed”. ⁶⁷

Criticisms of the PRA’s approach

7.45 It seems uncontroversial to alter legal interests in property so that they more accurately reflect the contributions made by parties to a domestic relationship. At least, all relationships legislation in Australia dealing with the division of property requires consideration of contributions made. What is controversial about the PRA’s current approach is its focus solely on past contributions, and the concern that such a limitation is incapable of achieving consistently just and equitable divisions of property. In particular, the following criticisms have been made.⁶⁸

Uncertainty in the law

7.46 The controversy surrounding the interpretation of s 20 has given rise to uncertainty and instability in practice.⁶⁹ The decision in Evans, which was intended to resolve the controversy, has failed to do so, though it does appear that the strict contributions-based approach has found most favour in subsequent cases.

Failure to allow consideration of future needs

7.47 If a strict contributions approach is indeed the correct approach, or at least the most favoured one, this calls into question the ability of s 20 to allow for a just and equitable distribution of parties’ property. A strict contributions approach is retrospective and does not allow account to be taken of the present and future economic needs of the parties, where those needs have arisen as a direct consequence of the relationship.

7.48 A number of submissions supported amending s 20 to give the court power to consider parties’ future economic needs.⁷⁰ On the other hand, the Equity Division of the Supreme Court submitted that legislation should not require consideration of all future needs, but only those which have arisen as a result of a party being in the relationship. The Equity Judges stated that s 20 often requires the court to play a balancing game, and it is not always as simple as taking assets from one party to accommodate for the other’s future needs; it may require a more subtle, albeit principled, approach of moderating and negotiating future needs.⁷¹

Economic disparities between the parties

7.49 Another criticism of the strict contributions approach, related to the issue of the failure to take future needs into account, is that it is incapable of properly redressing the economic disparities between the parties that arise out of the relationship.⁷² The financial circumstances that parties find themselves in at the end of their relationship are often a consequence of the roles and responsibilities they undertook during the relationship, particularly if, for example, one of the parties took time out of the workforce, or accepted part-time work, to take on the primary care of children. This will likely affect not only the party’s present income, but also that party’s future earning capacity, given the interruption to his or her career.

7.50 A number of submissions agreed that the PRA should be capable of redressing the economic disparities between the parties at the end of a relationship, provided such disparities are shown to have arisen directly as a result of the parties’ roles in the relationship,⁷³ though it may be an “ambitious exercise” and dependent on there being substantial property.⁷⁴ The Victorian Bar submitted that financial compensation may be appropriate where there is evidence that the parties agreed that one would undertake a less financially rewarding role, and both acted on this agreement, to the disadvantage of the first partner. But they warned:

... for courts to set about compensating a party without establishing the linkage between the role in the relationship (as compared with that party’s own strengths or weaknesses) is to compensate a party merely for having been in a domestic relationship. The task of compensating for the financially disadvantageous role should be undertaken conservatively, and the principles need to be stated clearly.⁷⁵

7.52 An alternative way of compensating for economic disparities arising out of the relationship is through an award of maintenance.⁷⁸ The advantage of this is that compensation would be feasible even where there was modest property at stake provided of course, that the paying party had an income. On the other hand, using an award of maintenance to compensate for taking on a less financially rewarding role in the relationship is not strictly consistent with the clean break principle.⁷⁹

Broadening “just and equitable” to include FLA matters?

7.53 Should the PRA be amended to allow, or require, express consideration of a party’s present and future circumstances and needs? Over 20 years ago, this Commission justified a restrictive approach on the basis that de facto couples should have fewer rights and obligations with respect to property division than married couples. In more recent years, the PRA’s restrictive approach has been compared with the more liberal approach under the FLA model, in terms of which is better able to fulfil its aim of achieving a fair division of property for de facto couples.⁸⁰ To this end, the arguments for and against conferring more limited rights on de facto couples have been assessed in general terms, rather than as they apply to the context of same sex and close personal relationships.

Arguments for conferring more limited rights on de facto couples

7.54 The principal arguments for conferring more limited rights on de facto couples generally, include the following.

• There is a qualitative difference between marriage and cohabitation, in so far as marriage involves a public commitment and conscious decision to enter a relationship of interdependence. It cannot be assumed that those entering a de facto relationship expect the same level of commitment and interdependence. Some may make a deliberate decision not to marry in order to avoid the dependence and obligations that, in theory at least, arise from marriage. The law should not impose the same considerations in the adjustment of property following the breakdown of that de facto relationship as it imposes on a marriage. Professor Parkinson submits that the intentions about property sharing of those entering a marriage are not the same as those entering a de facto relationship:⁸¹
  It is far from clear that the majority of de facto couples intend to engage in a complete socio-economic partnership from the inception of the relationship in which what is mine is all yours and what is yours is all mine.
• If de facto relationships are equated with marriages in so far as they impose the same rights and obligations for property division, then there may be less incentive for people to marry, which in turn erodes the institution of marriage.

7.55 In light of the shift in social trends since the PRA’s inception, the principal arguments for conferring on de facto couples generally, the same rights and obligations as married couples include the following.

• In so far as is relevant to questions of property adjustment, there is no real difference between marriage and a de facto relationship. As with marriage, people entering into a de facto relationship may have varying motives, intentions and expectations. Some de facto relationships may be relatively short-term, and casual, but others may last for decades. The relevant feature of both types of relationships, in so far as devising a property adjustment scheme is concerned, is a degree of interdependence, both emotional and financial. This characteristic may not bear any link to the commitment that the parties had to each other at the beginning of the relationship, nor their intentions upon entering the relationship. There are no doubt a number of couples who choose to live together for a variety of reasons without the express intention, at the time, to make a life long commitment to each other. It is arguable that, the longer a de facto relationship continues, the less important the parties’ original intentions are, especially for those who subsequently have children.
• People in de facto relationships are just as likely as their married counterparts to face economic disparities and future financial needs arising from the roles and responsibilities they have undertaken while in the relationship. This is especially so for those who have taken on the primary care of a child or children. A scheme that recognises only past contributions is incapable of achieving equity in all such cases.
• Society has demonstrated an increasing acceptance of de facto relationships, with more and more couples choosing to live in de facto relationships either as a prelude to, or instead of, marriage.⁸² The law should be available to help all those who need assistance in sorting out their lives after the breakdown of their relationship, and should seek to achieve fairness in all such cases, irrespective of the type of relationship involved. It is not true that in doing so, the law will make people alter their ways of life or change their moral codes:
  
  One of the fundamental misconceptions which plagues me is the failure to understand that heterosexual family life in no way gains stature, security and respect by the denigration or refusal to acknowledge other forms of family.⁸³
  
  
  
  
  

7.56 The above discussion examines the arguments for and against conferring broader rights on de facto couples with respect to property division legislation, by comparisons with married couples. But, assuming that any reforms to the PRA will apply predominantly to people in same sex and close personal relationships, what relevance will these arguments continue to have?

Same sex relationships: What do they look like?

Look around. Sex, Friendship, Loss, Fun, Violence, Love, Boredom, Breakfasts, passion, need and ecstasy. These are our relationships.⁸⁴

7.58 Is it possible to generalise about any type of human relationship in any sensible way? Like heterosexual relationships, there is bound to be great diversity in the range of same sex relationships to which s 20 will apply (although all will involve a period of co-habitation, as currently required by the legislation). Some will be relatively brief (although all will last for at least two years),⁸⁵ while others may span several decades. Some may have started with a mutual intention to form a life-long partnership, while others may have formed from less ambitious beginnings. There may be a large pool of assets, or there may be next to nothing. The extent of financial dependence, and interdependence, between partners will vary, as will the degree to which their assets have become enmeshed. A single legislative provision must accommodate all these permutations. Thus far, the same can be said of any legislative provision dealing with the adjustment of property interests following the breakdown of a domestic relationship, whether it be a same sex or opposite sex de facto relationship, or a marriage.

7.59 In Chapter 1, the Commission referred to the scant statistical data relating to same sex couples in Australia, from which it is difficult to draw any reliable conclusions about relevant characteristics.⁸⁶ In the Australian Capital Territory, Professor Jenni Millbank conducted an empirical study of gay and lesbian couples who made use of the property adjustment scheme under the Domestic Relationships Act 1994 (ACT).⁸⁷ However, the number of such cases was so small that she could not draw any definitive conclusions about the types of relationships to which the legislation is being applied,⁸⁸ except that there was a relatively low use of the Act by same sex couples. Elsewhere, Professor Millbank has described certain features as common among same sex couples, such as that same sex couples often own property in only one partner’s name, even when both contribute to the mortgage, and same sex couples quite often have openly non-monogamous relationships that are nonetheless committed and stable.⁸⁹

7.60 Of the same sex couples who participated in the Commission’s focus groups, financial arrangements varied between couples. The most common arrangements were (i) pooling of all money and (ii) payment of equal contributions into a joint account, out of which came all shared expenses (mortgage, groceries, utility bills, etc). Only one couple in each focus group had totally separate finances.

7.61 In the Sydney focus group on property rights, about half of the participants owned their property with their partner, mostly as joint tenants. Two women said they had bought as joint tenants, but had contributed to the purchase price proportionate to their income. They also owned separate property, and one said that she had also bought a holiday house that she put into her partner’s name for business reasons, in order to protect her assets from possible legal action.

7.62 The incidence of children, and child-caring responsibilities, in same sex families is also relevant to the question of property adjustment. It seems that a greater proportion of same sex relationships are childless, in contrast with opposite sex relationships, and, of course, the traditionally gendered division of roles with respect to child-raising does not readily transfer to same sex relationships. Nevertheless, while there may be fewer same sex couples with children, there is still a significant proportion of same sex households with children reported.⁹⁰ One study, commissioned by the Gay and Lesbian Rights Lobby, suggests that lesbian co-parents have a more even distribution of domestic labour than their heterosexual counterparts, that co-mothers are less likely than heterosexual fathers to be in full-time employment, and that co-mothers generally undertake a higher burden of child care than heterosexual fathers, although mothers tend to take a somewhat higher burden of child care than co-mothers.⁹¹ It is possible that, at least for some of these families, one partner will have borne the majority of child-care responsibilities, with the consequent compromise to his or her earning capacity, and future needs with respect to the continued care of those children. Moreover, the financial impact of separation may be more greatly felt by a lesbian or gay man who has cared for children than his or her heterosexual counterpart, in so far as there may be no legal obligation on the same sex partner to pay child support if the law does not recognise him or her as a co-parent.⁹²

7.63 Although it seems impossible to generalise about same sex relationships, there are two common features that set them apart from opposite sex relationships in ways that may be relevant to considerations of property division:

• lesbians and gay men cannot marry; and
• same sex relationships remain in the minority in our society, and occur against a social background in which homophobia and social disapproval continue to be felt, to greater and lesser degrees.

7.65 Homophobia continues to be part of Australian society, and homophobic violence has been described as “pervasive”.⁹⁵ Homophobia, and fear of social (and/or family’s) disapproval, may have an effect on same sex couples in several ways that are relevant to questions of property distribution. First, it may discourage them from publicly acknowledging their relationships, and/or from living with each other, even though, in other respects, their relationships bear the features of a “de facto relationship”. This is an issue relating to the ways in which the law gives recognition to particular types of relationships, and is discussed in Chapter 2. Secondly, homophobia may provide a strong disincentive to same sex couples from making use of formal legal mechanisms under the PRA to adjust their property entitlements, following the breakdown of their relationship. They may be concerned, for example, that they will be forced to come out to their families, or the general public, by making use of the PRA,⁹⁶ or they may have a general distrust of the legal system’s ability to deal with their relationship in a fair, unprejudiced manner. Lastly, as a minority group facing social intolerance, some same sex couples may consider it important that they remain independent from the mainstream, avoiding regulation by a legal system that accepts as its norm heterosexual relationships.⁹⁷ These issues are relevant to considerations both of ways in which the PRA can be made more accessible to people in same sex relationships,⁹⁸ and ways to allow couples to make their own choices about the division of their property, with appropriate safeguards, independently of the system under the PRA.⁹⁹

Close personal relationships

7.66 If it is difficult to generalise about the various types of same sex relationships to which s 20 of the PRA will apply, it is perhaps even more difficult to do so for close personal relationships. There is very little case law or commentary to provide guidance as to the types of relationships that will come within the scope of s 20 under this category. It is typically described as encompassing carer relationships; certainly, when the concept of a “close personal relationship” was introduced in Parliament, the example of the adult daughter caring for her ageing parent was evoked as an example of one such relationship. It has been suggested elsewhere¹⁰⁰ that the alignment of close personal relationships with traditional relationships of adult children caring for parents, and other such carer relationships, diverted the public’s attention away from the more controversial recognition that was to be given to same sex relationships through the introduction of the Property (Relationships) Act. In this way, the category of close personal relationships became much narrower than was perhaps originally intended.

7.67 Whatever may have been the original intentions behind the introduction of this category, close personal relationships now seem most likely to comprise carer relationships. While it may be unlikely that a property dispute between a carer and his or her ageing and/or seriously ill parent or other loved one will come before the Courts while the parent or loved one is still living (as opposed to a claim against his or her estate), nevertheless s 20 of the PRA provides a framework for dividing up property between the carer and the “patient”. As such, the traditional arguments for conferring more limited rights than are available under the FLA, do not readily apply to close personal relationships, as such relationships do not necessarily involve a quasi-marital or otherwise sexually intimate relationship. Instead, they will be typified by one party who is dependent on the other at all levels, including, perhaps, in terms of the management of finances, and the other party who is likely to have compromised his or her income and earning capacity to care for the other. These characteristics all raise concerns for the future needs of both parties, which could not currently be taken into account under the existing framework set up by s 20.

OPTIONS FOR REFORM

7.68 The preceding discussion highlights the criticisms of s 20, and its limitations in achieving equitable divisions of property. It also calls into question the continuing relevance of the arguments against conferring broader rights, as under the FLA model, in light of changes in the PRA’s social context, and the characteristics of the two groups to whom the PRA will apply.

7.69 If the existing regime for property division under s 20 of the PRA were found to be no longer appropriate, there would be two options for reform:

• Adopt the FLA model, in legislation that either mirrors exactly s 79 and 75 of the FLA, or that includes some variation; or
• Formulate a new regime with an expressly specific focus on same sex and close personal relationships.

Advantages of adopting the FLA model

7.70 There are two important advantages of incorporating the FLA model of property division into the PRA, which can be identified in simple terms:

• The FLA model is arguably better equipped to achieve just and equitable results than the PRA because it allows consideration of a broader range of matters, including future needs of the parties. A broader discretion allows for consistently fairer results because it is better able to accommodate the varied situations arising in individual relationships.
• For the sake of uniformity, the FLA model should be applied to same sex couples and people in close personal relationships, as it will be to married couples and opposite sex de facto couples. The alternative, which is a separate regime for same sex and close personal relationships, may be perceived as unfair and discriminatory.

7.71 Despite these advantages, there are nevertheless several perceived shortcomings of the FLA model which have been previously identified, and which are equally relevant when considering a proposal to adopt the FLA model for property distribution for same sex and close personal relationships. These criticisms include the following.

7.72 The first criticism is that the FLA places too much discretion in the hands of the judges, by allowing consideration of such a wide range of factors. Too much discretion creates uncertainty about the law, which in turn may make disputes harder to settle. There is also the risk that individuals will be unclear about their rights under the law, and whether or not they have a legitimate claim against their former partner. Consequently, they may be more willing than they would otherwise be to concede property in exchange for keeping children in their residence, or out of fear of violence. In response to this criticism, it has been argued¹⁰¹ that there is no evidence that a large amount of discretion makes disputes harder to settle, and that the Family Court has developed a substantial body of case law to provide guidance on the exercise of its discretion. Presumably, that jurisprudence could be applied to the PRA, if it adopted the FLA model. It is necessary for courts to retain a wide degree of discretion if they are to accommodate all the varieties of facts, circumstances, and relationships that come before them in a fair manner.

7.73 The second and third criticisms relate to the contributions component of the adjustment process, and thus are equally relevant as criticisms of the current approach under s 20 of the PRA. It is argued that the assessment of contributions is “conceptually flawed”,¹⁰² that is, it is a ludicrous idea to assert that the Courts can logically compare contributions that are by their nature fundamentally different from one another. For example, how is the Court to compare, in monetary terms, a husband who sacrificed a high-earning career to spend more time with his family, with a husband who devoted most of his time to his career, and consequently contributed a large income to his family? In response to this criticism, the Family Law Council has argued that the assessment of contributions accords with public perceptions of fairness, and it is not persuaded that some other approach is demonstrably preferable.¹⁰³

7.74 The third criticism relates to the homemaker contribution, which is a feature of both the FLA and the PRA models. The homemaker contribution requires the Court to consider the contributions of a homemaker, or parent, to the welfare of the other party, or to the children in the relationship, in the division of property. It may be difficult to assess and quantify the parties’ homemaking and parenting contributions, and such an exercise inevitably relies on the subjective assessment of the trial judge. The difficulty in quantifying homemaking contributions may mean that they are inadequately recognised, particularly where the financial contributions of the other partner have been of a “special” kind.¹⁰⁴ Indeed, the Queensland Law Reform Commission specifically rejected the New South Wales model of property adjustment on the basis, among other things, that it undervalues homemaker and parenting contributions.¹⁰⁵

7.75 Lastly, it has been argued that the FLA model cannot be based on a just foundation if it allows for any future needs to be taken into account, irrespective of whether or not those needs arise from the relationship. It may be questioned whether the law should allow for compensation for the misfortunes of a spouse with serious needs, where those needs have not arisen from the relationship, such as, for example, in the case of serious illness. It is argued that the future needs component of the Family Court’s discretion should be confined to needs which have arisen as a result of the circumstances of the marriage, in particular a role division which leads one spouse to withdraw from participation in the workforce, usually to care for children. However, on the face of the legislation, there is nothing which requires a party’s future needs to be linked to the marriage, and it certainly seems possible that the Court may take account of an unrelated future need in adjusting property interests.¹⁰⁶

Devising a different model

7.76 The alternative option for reform of s 20 is to devise an entirely new model of property adjustment, in response to the perceived shortcomings of the FLA model. A separate regime for property division would then apply solely to same sex and close personal relationships.

7.77 A number of alternative models have been suggested in the past, in the context of proposed overhauls of the FLA scheme. They have included the following:

• A general rule of equal sharing of property, which can be departed from in certain, defined circumstances, including: where one party has made a substantially greater contribution to the relationship; or to take account of possible disparities in the parties’ future needs and resources, which is wholly or partly attributable to a party’s responsibility for the future care of the children of the relationship, or to a party’s income earning potential having been affected by the relationship.¹⁰⁷
• A system of adjustment which continues to take account of each party’s contributions, but starts with the general presumption that parties have made equal contributions, and with a requirement to consider certain matters, including whether or not the role of parent has affected a spouse’s ability to earn or derive income.¹⁰⁸
• Equal division of “communal property”,¹⁰⁹ with grounds for adjustment of equal shares to take account of certain factors, such as the parties’ future needs, or economic disparities resulting from the relationship.¹¹⁰
• A method for taking account of economic disparities and future needs arising from the division of roles in the relationship, which aims to calculate and compensate for the opportunity costs of having children, by identifying economic loss, attributing it to child raising, and quantifying an amount for such loss. The ‘opportunity cost’ would then be charged as a “partnership debt” against the property, and repaid to the spouse who incurred the cost. The remaining property, after that debt has been repaid, is then divided equally between the spouses.¹¹¹
• An equal division of property, which can then be adjusted to take account of four listed objectives: first, ensure the housing needs of any children of the relationship are adequately met; secondly, ensure adequate provision for the parent who has the primary care of any children of the relationship; thirdly, assist an economically dependent spouse to adjust to the breakdown of the relationship; lastly, compensate a party for serious economic disadvantage as a result of the circumstances of the relationship, subject to a defence that it would be contrary to the interests of justice to make the other party liable to pay compensation.¹¹²

What submissions said

7.79 The Equity Division of the Supreme Court submitted¹¹⁵ that the FLA model is “not desirable” on the grounds that there are inherent differences between marriage and domestic relations. It preferred something similar to the Queensland model provided there is a clear nexus between consideration of the parties’ future needs and the circumstances of the relationship. The Equity judges argued that future needs are only a proper subject for compensation to the extent that they arise from the relationship, and even so it may not be appropriate for the defendant to meet all these needs. Professor Parkinson submitted¹¹⁶ that the marriage paradigm is inappropriate given that many relationships covered by the Act will be relatively short-term and transitory, and will be one of a number of such relationships entered into during a person’s lifetime.

7.80 There was some support for the adoption of the FLA model.¹¹⁷ New South Wales Young Lawyers reasoned that this would give scope for consideration of the future needs of the parties, in situations where entering the relationship has led to a diminished earning capacity for one of the parties.

7.81 The Gay and Lesbian Rights Lobby submitted that s 20 should take future needs into account. They prefer the Queensland model because of its clarity but are concerned that it has no specific provision for maintenance and would only support its adoption if the PRA also included specific child support provisions for the children of same sex couples to the age of 18. They conceded that future needs factors may not be appropriate for people who do not cohabit or for those who are not in intimate couple relationships.

7.82 A submission from Lesbian and Gay Solidarity argued that the general aim of this review should be to give equal rights and responsibilities to all people in relationships. As it is unlikely that any change will be effected at the federal level to bring same sex couples within the ambit of the FLA, it submitted that the PRA should be amended to mirror the FLA and thus remove any inequality at least for New South Wales residents.

7.83 Dennis Farrer,¹¹⁸ a family law practitioner with 30 years’ experience in the area, submitted that in his view, a “just and equitable” outcome requires the Court to have regard to those matters in s 75(2) of the FLA, or at least “the major ones”. In his view, the ACT legislation, which is modelled on the FLA and contains an abbreviated list of s 75(2) factors, achieves this.¹¹⁹

An alternative approach based on parenthood

7.84 Professor Parkinson submitted that s 20 fails to address why and in what circumstances property should be adjusted at all when couples separate, whether married or not. He compared a partnership approach with a restitutionary approach and argued that the partnership approach (which assumes that the parties should share equally the fruits of their joint endeavour to the home and family) should only apply where there are children. The reason for this is not because of what each party contributed but to compensate the party who suffered adverse economic consequences from the relationship because, for example, they assumed greater caring responsibilities and depended on the security of the relationship.¹²⁰

7.85 Professor Parkinson argued that a restitutionary approach, whereby each party gets back what he or she put in, should apply to those relationships where there are no children unless it can be demonstrated that there has been an adverse economic impact on one party for other reasons (for example, caring for an ailing partner). He also concluded that, rather than focusing on contributions, the Court should look at the issue of detrimental reliance as the primary justification for altering the parties’ property rights.

7.86 The Victorian Bar made a similar recommendation. It argued that the PRA should draw a distinction between relationships where there are children and those where there are none:

…on the basis that the law has a greater interest in the regulation of economic outcomes for adults who enter into relationships with other adults where the welfare of children who are the progeny of such relationships is directly involved. It is submitted that s 75(2)-type factors have a clear role to play in such cases.¹²¹

… a higher level of responsibility ought to apply in cases where a child is born to the relationship, including children conceived within a relationship using an artificial conception procedure. Different considerations may apply in other domestic relationships including those involving a child who is, properly, the child of only one of the parties.¹²²

7.89 Another submission similarly advocated a restitutionary approach where there are no children of the relationship. It was submitted that in these cases the partners should, on separation, take only whatever property they brought into the relationship. There should be no claim on the assets of the other partner. It was also submitted that it would be unfair to impose any obligation of support on a person in respect of any child that is not his or her own biological or adopted child.¹²³

Questionnaire and focus groups

7.90 The vast majority of respondents to the questionnaire (93%) believed that the law governing the way in which property is divided on relationship breakdown should be the same for both same sex relationships and opposite sex de facto relationships.

7.91 Most respondents to the questionnaire agreed that the current range of factors that a court was required to take into account under the PRA was appropriate. Some commented that the Court should pay particular regard to whether the parties had an agreement or understanding, whether the relationship had been registered, the property owned by each person prior to the relationship, the contributions made by the parties to the property, whether either party had a disability requiring ongoing support, and the payment of child support. One respondent commented that non-couple income (such as an inheritance) should not be included in the pool of property considered.

7.92 There was substantial support for the consideration of future financial obligations and needs in the determination of property disputes. There was also considerable support for conferring an entitlement to claim maintenance from the other person.

7.93 The comments given by respondents to the questionnaire regarding property division almost exclusively focused on the issues of equity and fairness. The general consensus was that all relationships, whether heterosexual or homosexual, are based on the same elements (such as love and trust) and should be recognised accordingly. In general discussion in the focus groups, participants indicated that although they did not necessarily see same sex relationships as conforming to the heterosexual paradigm, they did not think that the law should treat same sex and opposite sex relationships any differently. In relation to the factors which a court should be able to take into account when making an order for property adjustment, participants generally took a basic equality approach: that is, that same sex relationships should be treated the same as marriages. Therefore, the additional matters that may be taken into account under the FLA should also be taken into account under the PRA. Participants thought that it was appropriate to take a very wide range of factors into account and that it was better for an over-inclusive approach to be taken than an under-inclusive one. It was observed, however, that it can be very difficult to put a monetary figure on certain of the factors.

7.94 Generally, participants in the focus groups agreed that where property had been purchased together, the property should be split 50/50. Where the parties owned property before they entered into the relationship, the general view was that care must be taken to protect the rights of the legal owner.

7.95 A small number of participants had had bad experiences and cautioned others to “get a good lawyer and get good advice, and enter into a financial agreement with your partner”. Another issue that was raised was the need to plan carefully against the possibility that families will try to claim an estate against the partner, often disputing the existence of a de facto relationship.

THE COMMISSION’S VIEW

7.96 The Commission has reached the conclusion that s 20 of the PRA is in need of reform, and that the preferred option for reform is to adopt the FLA model.

7.97 Section 20, in its present form, is too restrictive to achieve a consistently fair division of property in all cases. Because it focuses solely on the past contributions that each party has made, it cannot redress economic disparities that arise upon the breakdown of a relationship and which are attributable to the role that each party has undertaken during the course of the relationship, and cannot make provision for future economic needs. Section 20 should be amended in a way that allows for such considerations to be taken into account, in the interests of fairness.

7.98 There are two points worth noting about this conclusion. The first is that it is clearly based on the view that relationships outside marriage should no longer be afforded more limited rights and obligations with respect to property adjustment than marriages. While there may be a number of de facto relationships that begin without the intention, or conscious decision, to make a life-long commitment to a partnership, in the way that a marriage (in theory, at least) begins, it cannot be assumed that all de facto relationships begin with an intention to enter a relationship that is somehow less committed than a marriage. This is especially the case for people entering same sex relationships, for whom the choice between marriage and cohabitation does not exist. Similarly, comparisons between the intentions of those entering a marriage versus a de facto relationship have no relevance for people who enter a “close personal relationship”. Moreover, the original intentions and expectations of those entering a de facto, or a close personal relationship, should assume less importance if, in reality, those relationships have given rise to a degree of interdependence and intertwining of assets. To confer the same rights and obligations with respect to property on such relationships says nothing, and makes no value judgment, about marriage, but simply acknowledges the social realities of the various ways in which people structure their private lives, and aims to provide a fair legal framework to provide safeguards when relationships break down.

7.99 The second point to be made about our conclusion relates to the issue of connecting future needs and economic disparities with the relationship. It has been argued, in submissions and in the literature,¹²⁴ that it is unfair if one party must have an adjustment of property made against him or her to accommodate future needs, or compensate for economic disparities, that are not attributable to the relationship. In relation to opposite sex relationships (whether inside or outside marriage), adjustment of property interests on the basis of future need and economic disparity has traditionally been viewed as a means of compensating a party, typically the woman, who faces a diminished income and earning capacity because she has left the full-time workforce in order to care for children of the relationship. It has been questioned whether it is the role of family law to compensate people for disparities that are not attributable to a relationship, or to act as some kind of “insurance” against any type of misfortune, such as a serious illness or disability that affects earning capacity.¹²⁵ Notwithstanding such doubts, on its face, there is no requirement in the FLA to accommodate only those future needs that arise from having children, or are otherwise attributable to a marriage, and it seems possible, in theory, for an adjustment to be made to accommodate other types of future needs, such as, for example, those arising from a serious illness.

7.100 For same sex relationships, the relevance of future needs to questions of property division should be considered. For these types of relationships, the gendered division of labour apparent in more traditional families is not readily transferable. It is also possible that a greater number of such relationships will be childless than in the heterosexual population. Nevertheless, there are increasing numbers of lesbian couples who have children together. Moreover, a number of people in lesbian and gay relationships will have children from previous, heterosexual relationships, and individual circumstances will differ as to the degree to which those children then become a part of the new household, where one or both partners provide care. The legislative framework should be flexible enough to take account of future needs and economic disparities that arise from a division of roles in same sex relationships, just as it does for opposite sex relationships. It will be a matter for the Court to determine, in individual cases, whether it is just and equitable to take account of future needs that arise from situations other than those involving the care of children.

7.101 Professor Parkinson, in his submission,¹²⁶ was particularly critical of what he considered to be the Commission’s insistence on affording the same treatment for all cohabiting relationships, irrespective of whether they occur inside or outside marriage. He doubted that such a policy position could recognise and respect much diversity in the forms such relationships take. He suggested that the distinction between those entering marriage and those entering a de facto relationship may still reflect, for many heterosexual couples at least, a difference in intention and expectation as to the level of their commitment to a fully interdependent life. He asserted that the Commission’s approach to property adjustment was driven by a conservative conception of the division of roles and financial dependency arising from a traditional heterosexual relationship, which we are seeking to apply to different types of relationships, a large number of which are without children, and which have a high degree of financial autonomy.

7.102 We do not agree that, by embracing a model for property division that accommodates consideration of the parties’ present and future needs, we are essentially reinforcing a traditional notion of a domestic relationship with little relevance to many modern relationships. Indeed, we consider that the contrary is the case. Arguments for a continuing differentiation in legal treatment of married and de facto relationships, in relation to property division, are flawed if they essentially rely on a general inherent difference between such relationships, whether or not they claim to be recognising and respecting the diversity of such relationships. By concluding that s 20 of the PRA should be reformed to include provision for consideration of present and future needs, we are opting for a more flexible legal framework which is better able to address the many different fact situations arising from the many different forms relationships now take. As we have already noted, there may be de facto relationships, perhaps particularly same sex relationships, which do not involve children, or which do not follow a traditional notion of a gendered division of roles, and for which consideration of future needs has little relevance. Some, or maybe even many, of these relationships may have begun without any real intention of a life-long commitment. The model for property division which we recommend is flexible enough to accommodate these types of relationships just as well as it can accommodate others which do involve children, or which otherwise give rise to economic disparities which should properly be redressed through the adjustment of property interests.

7.103 Having concluded that s 20 of the PRA is in need of reform, the Commission takes the view that the preferred option for reform is to adopt the FLA model. In doing so, we acknowledge the criticisms of the FLA model. In particular, we acknowledge the difficulties involved in quantifying different types of contributions (a criticism of equal relevance to the current PRA model), and we admit that the broader the discretion afforded to the Courts, the less certainty of outcome there may be in individual cases. This in turn may lead to difficulties in settling claims outside of court. Nevertheless, we consider that a broad discretion is necessary in order for one single framework to accommodate adequately the many different types of relationships, and fact situations that will arise. We see merit in aspects of alternative models that have been proposed, and see some advantages in recommending a legislative scheme that is tailored specifically for people in same sex and close personal relationships. Ultimately, however, it is preferable to adopt the FLA model for two reasons. First, it is the model that will be applied to the rest of the population of New South Wales. To apply some other model, which is entirely new, untried anywhere in Australia, and with no jurisprudence yet surrounding it, to same sex and close personal relationships, is likely to be seen as discriminatory, and give rise to confusion and unnecessary complexities. Secondly, the alternative models that have previously been proposed to replace the FLA model have themselves been the subject of criticism, and we are not satisfied that they would work any better in practice, or achieve any fairer results, as to warrant the imposition of a separate scheme on a select section of our community. We note that our conclusion is supported by the majority of views expressed in submissions and in consultations.

7.104 Comment should also be made about Recommendations 28 to 30. Recommendation 28 omits from the State legislation reference to the federal courts’ power to make orders adjusting vested bankruptcy property in relation to a bankrupt party. Such an order could not arise under State legislation because the State does not have the power to adjust proprietary interests that vest under federal law.¹²⁷ Recommendation 29 is consistent with the Commission’s Recommendation 17, to give legal recognition to the rights and obligations of functional parents and children, as well as legal parents and children. Recommendation 30 allows consideration, for example, of any obligations to pay maintenance, to safeguard against double-dipping.¹²⁸ Further qualification of the “s 75(2) factors” is recommended in the context of maintenance, in Chapter 10.

Recommendation 27
PRA s 20 should be amended to authorise the Court in its discretion to make an adjustment order that seems to it just and equitable, having regard to the circumstances listed in FLA s 79(4), and including those matters listed in FLA s 75(2).


Recommendation 28
In reproducing in the PRA the matters listed in FLA s 75(2), matters related to vested bankruptcy property, as articulated in s 75(2)(n)(ii), should not be reproduced in the PRA.


Recommendation 29
In reproducing in the PRA those matters set out in FLA s 79(4) and s 75(2), the expressions “child of the marriage” and “children of the marriage” should be redefined as child or children of the relationship, in accordance with Recommendation 17.


Recommendation 30
In reproducing FLA s 79(4) in the PRA, s 79(4)(f) should be redrafted to refer to an order under the PRA affecting a party to the relationship, or to an order affecting a child of the relationship made under Commonwealth or State law.

1. See NSWLRC, Review of the Property (Relationships) Act 1984 (NSW) (Discussion Paper 44, 2002) (“DP 44”) at para 5.40-5.61.

2. See Chapter 1 at 1.33.

3. See DP 44 at para 5.3–5.5 and NSWLRC, De Facto Relationships (Report 36, 1983) (“Report 36”) at para 5.7 for a more detailed discussion of the equitable remedies used prior to the enactment of the De Facto Relationships Act 1984 (NSW). See also J Wade “Discretionary property for de facto spouses: the experiment in New South Wales” (1987) 2 Australian Journal of Family Law 75.

4. Report 36 at para 7.43.

5. See, for example, the test formulated by Deane J based on constructive trust principles in Baumgartner v Baumgartner (1987) 164 CLR 137 and in Muschinksi v Dodds (1985) 160 CLR 593. See the discussion in Report 36 at para 7.6-7.28.

6. The Courts have appeared more prepared to divide up property in same sex relationships on the basis of a resulting or express trust, or promissory estoppel, rather than applying a constructive trust: see, for example, Harmer v Pearson (1993) 16 Fam LR 596; Hartigan v Widdup [1992] ACTSC 25; Hammon v O’Brien (1990) DFC 95-091. More recently, Courts have divided up property following the breakdown of a same sex relationship on the basis of a constructive trust: see West v Mead [2003] NSWSC 161; Penzikis v Brown [2005] NSWSC 215. See Jenni Millbank’s discussion of the development of the common law in cases involving same sex relationships in “Domestic rifts: who is using the Domestic Relationships Act 1994?” (2000) 14 Australian Journal of Family Law 163; “Cutting a different cake: trends and developments in same-sex couple property disputes” (2005) Law Society Journal 57.

7. This was limited to financial contributions for the acquisition of assets. See Report 36 at para 7.42 - 7.43.

8. Report 36 at para 7.46. Contrast Green v Robinson (1995) 36 NSWLR 96 where the majority (with Kirby P dissenting) held that there had to be a nexus between contributions and the superannuation entitlement. For detailed discussion, see Ch 8.

9. See Report 36 at para 7.44.

10. See Property (Relationships) Legislation Amendment Act 1999 (NSW) Sch 1[9]. See Chapter 1 at para 1.9-1.11.

11. For the meaning of “property”, see PRA s 3(1) and Chapter 8 at para 8.2-8.4.

12. See Chapter 1 at para 1.32-1.37 for the assumptions that underlie the referral of powers.

13. See Recommendation 24.

14. See para 1.33.

15. Section 38(1)(j) authorises the Court to make an order by consent adjusting financial interests.

16. See PRA s 20(1).

17. Evans v Marmont (1997) 42 NSWLR 70 at 90 (Priestley JA). Note that Priestley JA answered this question by adopting the latter interpretation, although his was a dissenting view.

18. At para 5.16-5.39.

19. (1986) 11 Fam LR 214.

20. See below at para 7.74.

21. (1992) 27 NSWLR 728 at 744-746.

22. See Evans v Marmont (1997) 42 NSWLR 70.

23. (1995) 37 NSWLR 1 at 8-13, Sheller JA concurring at 23.

24. (1997) 42 NSWLR 70.

25. O Jessep, “Financial adjustment in domestic relationships in NSW: some problems of interpretation” (A paper prepared for a seminar conducted by the NSW Law Reform Commission, Sydney, 7 July 2000) at para 2.4.

26. See (1997) 42 NSWLR 70 at 75-81.

27. (1997) 42 NSWLR 70 at 97 (emphasis added).

28. See, for example, Rowling v Foley (1998) DFC ¶95-204; Wakeford v Ellis (1998) DFC ¶95-202; Stroud v Simpson-Phillips [1999] NSWSC 994 (McLaughlin M); Fuller v Taaffe (1998) DFC ¶95-198; Rose v Richards [2004] NSWSC 315; Turnbull v McGregor [2003] NSWSC 899; Hughes v Egger [2005] NSWSC 18. See A de Costa, Submission at 12-18.

29. (2003) 30 Fam LR 463 at 471 (Shellar JA), 482 (Tobias JA concurring), 483 ( Einstein J).

30. Victoria and the Northern Territory are the only jurisdictions to have followed the approach in NSW: see Property Law Act 1958 (Vic) s 285(1); De Facto Relationships Act 1991 (NT) s 18(1). See for example, Robertson v Austin [2003] VSC 80; Lovegrove v Richards [2003] VSC 465; Gabriel v Gabriel [2005] VSC 158; Fiket v Linco (1998) 145 FLR 456; Deans v Jones [2003] NTSC 117.

31. See Property Law Act 1974 (Qld) s 291-309; Domestic Relationships Act 1994 (ACT) s 15(1), s 19; Relationships Act 2003 (Tas) s 40(1), s 47; De Facto Relationships Act 1996 (SA) s 11. Family Court Act 1997 (WA) s 205ZD(3), s 205ZG(4). For discussion of the South Australian scheme, see H v G (2005) 34 Fam LR 35.

32. FLA s 79(2).

33. Section 75 relates to claims for spousal maintenance. Section 75(2) lists the matters to be taken into account in claims for spousal maintenance (as well as in claims for property adjustment).

34. See, for eg, Hickey v Hickey which reiterated the four-stage approach and in particular, noted that the same four stage approach applies to superannuation interests regardless of whether a splitting or flagging order is being sought: (2003) 30 Fam LR 355 at 370 (Nicholson CJ, Ellis and O’Ryan JJ). See also C and C [2005] Fam CA 429 at para 21-22 (Bryant CJ, Finn and Coleman JJ).

35. Part 5A, dealing with de facto relationships, was inserted in 2002 by Family Court Amendment Act 2002 (WA) s 47. A de facto relationship is defined as a relationship other than a marriage between two persons who live together in a “marriage-like” relationship. It does not matter whether the persons are of the same or opposite sex, or if they are married to someone else or in another de facto relationship: see Interpretation Act 1984 (WA) s 13A(1), (3).

36. This is due to the regulation of superannuation by the Commonwealth. In order to overcome this difficulty, the Western Australian government has referred powers to the Commonwealth in respect of de facto relationships in so far as it concerned the treatment of superannuation interests on relationship breakdown: see Chapter 8.

37. Domestic Relationships Act 1994 (ACT) s 15.

38. Domestic Relationships Act 1994 (ACT) s 19.

39. Ferris v Winslade (1998) 22 Fam LR 725 at 731-732 (Cooper J).

40. The Property Law Act 1974 (Qld) was amended in 1999 by the Property Law Amendment Act 1999 (Qld) to extend the statutory rights to bring a claim for property adjustment to same sex de facto couples. The amendments were in part based on the extensive work of the Queensland Law Reform Commission in the 1990s, which considered various models of property division: Queensland Law Reform Commission, De Facto Relationships (Report 44, 1993) at 48-49.

41. In its 1991 discussion paper, the Queensland Law Reform Commission said that because the legislation was concerned with beneficial entitlements to property it may be inappropriate to allow periodic maintenance to be awarded against de facto partners: Queensland Law Reform Commission, Shared Property (Discussion Paper 36, 1991) at 59. However, later publications by the QLRC recommended that the legislation cover maintenance because of the serious injustices that could arise if it were not available, especially if one partner had assumed a homemaking role: QLRC Report 44 at 70; Queensland Law Reform Commission, De Facto Relationships (Working Paper 40, 1992) at 48. This is despite arguments against including maintenance, such as that de facto couples have not made a life-long public commitment to support each other, that some have actually consciously avoided legal obligations and that there is a trend away from ordering long-term spousal maintenance upon marriage breakdown: QLRC Report 44 at 70. See Ch 10 for further discussion.

42. Property Law Act 1974 (Qld) s 286(1). Acts Interpretation Act 1954 (Qld) s 32DA, in combination with Property Law Act 1974 (Qld) s 260 define a “de facto spouse” as either one of two persons, whether of the same or opposite sex, who are living or have lived together as a couple.

43. Property Law Act 1974 (Qld) s 291. The provision expressly includes the financial contributions made by or for a child of the parties, and also their child’s non-financial contributions (provided they are substantial).

44. Property Law Act 1974 (Qld) s 292.

45. See Property Law Act 1974 (Qld) s 297-308.

46. Unlike NSW, New Zealand is not fettered by a constitutional division of powers that reserves all matters relating to marriage to a federal government, implicitly leaving relationships outside marriage to the domain of the State.

47. It was amended by the Property (Relationships) Amendment Act 2001(NZ) s 5(2).

48. There was some opposition to including a regime for the division of property for de facto couples in the same piece of legislation that provides a property regime for married couples. The Select Committee subsequently recommended that the terminology distinguish between the two groups. New Zealand, Government and Administration Select Committee, Report on Matrimonial Property Amendment Bill (1999). This was implemented in the Act as passed.

49. Property (Relationships) Act 1976 (NZ) s 11.

50. Property (Relationships) Act 1976 (NZ) s 8. Note that special provision is made where both parties enter the relationship as owners of a residential property, yet only one residence is used as the family home. The Court can make an order in whatever terms it considers just to compensate the party who owns the family home for the consequences of that property, but not the other party’s, being treated as relationship property under the Act: Property (Relationships) Act 1976 (NZ) s 16.

51. Property (Relationships) Act 1976 (NZ) s 14A(2).

52. Property (Relationships) Act 1976 (NZ) s 14A(3). The situation regarding marriages of short duration is slightly different, See Property (Relationships) Act 1976 (NZ) s 14.

53. Property (Relationships) Act 1976 (NZ) s 15(1).

54. Property (Relationships) Act 1976 (NZ) s 15(2).

55. Property (Relationships) Act 1976 (NZ) s 9.

56. Property (Relationships) Act 1976 (NZ) s 10.

57. Property (Relationships) Act 1976 (NZ) s 9A.

58. Equity Division of the Supreme Court of NSW, Submission at para 6-7; P Parkinson, Submission at 4-5.

60. See Report 36 at para 5.56-5.57.

61. See Millar v Smith [2003] NSWSC 161.

62. Penizikis v Brown [2005] NSWSC 215.

63. DDM and GAJ [2003] FMCAfam 229.

64. See, for example, Bremner (1994) 18 Fam LR 407; Pierce (1998) 24 Fam LR 377.

65. See Equity Division of the Supreme Court of NSW, Submission at para 12.

66. Davey v Lee (1990) 13 Fam LR 688 at 689 (McLellan J), referring to the judgment of the Full Court of the Family Court in Ferraro v Ferraro (1993) FLC ¶92-335 at 79,578.

67. [2005] NSWSC 18 at para 160.

68. See DP 44 at para 5.40-5.61.

69. J Mee, “Property rights and personal relationships: reflections on reform” (2004) 24 Legal Studies 414 at 438.

70. Lesbian and Gay Solidarity, Submission at 4; Women’s Legal Resources Centre, Submission at 13-14; D Farrar, Submission at 3; Gay and Lesbian Rights Lobby Inc, Interim submission at 4-5; A de Costa, Submission at 19-20; NSW Young Lawyers, Submission at 7; Law Society of NSW, Submission at 5. See too the comments of the Queensland Law Reform Commission in relation to the NSW model under s 20 of the PRA. The QLRC described s 20 as having “serious defects”, and considered that its proposed model, incorporating provision for consideration of present and future needs, assured “fairer and more equitable” orders: Queensland Law Reform Commission, De Facto Relationships (Report 44, 1993) at 4-5.

71. Equity Division of the Supreme Court of NSW, Submission at 8. See too Victorian Bar, Submission at para 41, and P Parkinson, Submission at 15.

72. See discussion in DP 44 at para 5.41-5.43.

73. Victorian Bar, Submission at para 41; Gay and Lesbian Rights Lobby Inc, Interim submission at 4-5.

74. Victorian Bar, Submission at para 41. The submission from the NSW Law Society took an opposite view. It considered the PRA an inappropriate tool to compensate for the parties’ economic disparities.

75. Victorian Bar, Submission at 15.

76. At 10.

77. NSW Young Lawyers, Submission at 7.

78. Victorian Bar, Submission at para 41.

79. See Chapter 10.

80. Queensland Law Reform Commission, De Facto Relationships (Report 44, 1993) at 4-5, 48-55.

81. See P Parkinson, Submission at 4.

82. See para 1.49.

83. See A Nicholson, “The changing concept of family: the significance of recognition and protection” (1997) 6 Australasian Gay and Lesbian Law Journal 11 at 24.

84. See Lesbian and Gay Legal Rights Service, The Bride Wore Pink: Legal Recognition Of Our Relationships (2nd ed, Discussion Paper, a project of the Gay and Lesbian Rights Lobby, 1994) at section 5.

85. Because of the two years co-habitation requirement under the legislation: see Chapter 6.

86. See para 1.46-1.48.

87. J Millbank, “Domestic rifts: who is using the Domestic Relationships Act 1994 (ACT)?” (2000) 14 Australian Family Law Journal 1.

88. From November 1994 to May 1999, there were a total of 237 court files relating to claims for property adjustment under the Domestic Relationships Act, only five of which involved same sex couples (all of these being lesbian couples): see J Millbank, “Domestic rifts: who is using the Domestic Relationships Act 1994 (ACT)?” (2000) 14 Australian Family Law Journal 1 at 4, 6-8.

89. See J Millbank, “Cutting a different cake: trends and developments in same-sex couple property disputes” (2005) Law Society Journal 57 at 59.

90. See para 1.48, which refers to statistics collected from the 2001 census, recording that around 20% of lesbian households, and 5% of gay households, contained children (though the data does not detail whether these are children from previous relationships). In contrast, just less than half of opposite sex households include children. See also J Millbank, Meet the parents: a review of the research on lesbian and gay families (Gay and Lesbian Rights Lobby (NSW) Inc, 2002) at 6, 18-21.

91. See J Millbank, Meet the parents: a review of the research on lesbian and gay families (Gay and Lesbian Rights Lobby (NSW) Inc, 2002) at 10-11.

92. See Chapter 5.

93. See para 7.54 above.

94. See para 4.33 and Recommendation 15.

95. See J Millbank and K Sant, “Same sex relationship recognition in NSW” (2000) 22 Sydney Law Review 181 at 199.

96. This was one reason suggested by Professor Millbank for the under-use of the ACT legislation: see J Millbank, “Domestic rifts: who is using the Domestic Relationships Act 1994 (ACT)” 3 Australasian Journal of Family Law 163.

97. See C Caruana, “Relationship diversity and the law” (2002) 63 Family Matters 60 at 64-65.

98. See Chapter 1.

99. See Chapter 12.

100. J Millbank and K Sant, “A bride in her every-day clothes: same sex relationship recognition in NSW” (2000) 22 Sydney Law Review 181 at 203-205.

101. See Family Law Council, Submission on the Discussion Paper, Property and Family Law: Options for Change (1999) at para 7.38-7.45.

102. P Parkinson, “Reforming the law of family property” (1999) 13 Australian Journal of Family Law 117 at 122.

103. Australia, Family Law Council, Submission on the Discussion Paper, Property and Family Law: Options for Change (1999) at para 13.13-13.14.

104. See I Kennedy, “Special contributions’ and gender equality: recent developments in Australia and the UK” [2004] International Family Law 67.

105. Queensland Law Reform Commission, De Facto Relationships (Report 44, 1993) at 48-49.

106. See P Parkinson, Submission at 14-15, and see the decision of the Family Court cited in that submission at 15, Braithwaite and Fox (Family Court of Australia, unreported, 5487/1980, 7 June 2002, Frederico J). See also A Dickey, “Financial relief and nexus with marriage” (2002) 76(5) Australian Law Journal 287; Australia, Family Law Council, Submission on the Discussion Paper, Property and Family Law: Options for Change (1999) at para 7.24-7.27.

107. See Australian Law Reform Commission, Matrimonial Property (Report 39, 1987).

108. See Family Law Reform Bill (No 2) 1995 (Cth), and Option 2 in AG Department’s Discussion Paper: Australia, Attorney General’s Department, Property and Family Law: Options for Change (Discussion Paper, AGPS, 1999).

109. “Communal property” is property acquired during the course of the cohabitation, and the net increase in value of any property owned before the relationship began.

110. See Option 2 of the 1999 Discussion Paper: Australia, Attorney General’s Department, Property and Family Law: Options for Change (Discussion Paper, AGPS, 1999).

111. See K Funder, “Australia: a proposal for reform” in L Weitzman and M Maclean (ed), Economic Consequences of Divorce: An International Perspective (Oxford Clarendon Press, 1992) Ch 6. See reference to this proposal in P Parkinson, “Reforming the law of family property” (1999) 13 Australian Journal of Family Law 117 at 138.

112. See P Parkinson, “Reforming the law of family property” (1999) 13 Australian Journal of Family Law 117 at 138.

113. P Parkinson, “Reforming the law of family property” (1999) 13 Australian Journal of Family Law 117.

114. See N Seaman, Fair Shares (Sponsored by the Women’s Legal Services Network, 1999) Ch 1. This study considered barriers to women obtaining equitable property settlements under the FLA.

115. Equity Division of the Supreme Court of NSW, Submission at para 45.

116. P Parkinson, Submission at 14-16, and below at para 7.84-7.85.

117. Lesbian and Gay Solidarity, Submission at 3; Women’s Legal Resources Centre, Submission at 17; D Farrar, Submission at 3; NSW Young Lawyers, Submission at 7; Law Society of NSW, Submission at 5. The Gay and Lesbian Rights Lobby favoured adoption of the Queensland model, but with inclusion of a provision for maintenance: see Interim submission at 5.

118. At the time of making his submission, Mr Farrar was the President of the ACT Law Society and the Treasurer of the Family Law Section of the Law Council of Australia.

119. D Farrar, Submission at 3.

120. P Parkinson, Submission at 18-19.

121. Victorian Bar, Submission at 17.

122. Victorian Bar, Submission at 18.

123. G Fox, Submission at 2.

124. See above at para 7.75.

125. P Parkinson, “Reforming the law of family property” (1999) 13 Australian Journal of Family Law 117; Australia, Family Law Council, Submission on the Discussion Paper, Property and Family Law: Options for Change (1999).

126. See P Parkinson, Submission at 2-4, 14-16.

127. See para 11.19-11.21.

128. See Chapter 10.