Declarations and alterations of property interests for de facto couples - Divorce

The Family Law Act 1975 sets out provisions for declarations and alterations of property interests in Part VIIIAB, Subdivision C. A person with a property interest has the right or ability to enforce ownership of a property. This typically happens during the property settlement phase of a divorce proceeding. Property settlement allows divorcing couples to amicably split their finances and assets such as:

Superannuation. Similar to a pension, an employee will regularly make payments to his/her employer and the employer will release it upon retirement.
Cash in joint bank accounts
Shares, stocks, or bonds
Vehicles
Liabilities
Inheritance. Courts tend to add inheritance to a couple's asset pool if the giver of the inheritance intended to give it to the couple, instead of just one.
Jewellery
The marital home

Most couples want to enforce their right to own the marital home in divorce proceedings. De facto couples may also undergo the property settlement phase.

People in a de facto relationship are living together but not married. If these couples cannot settle on an agreement, they may then go to court and have them make declarations and alterations of property interests. Read on to know more about relevant sections regarding property interests.

Section 90SK: Geographical Requirement

It's important to discuss the geographical requirement needed for declarations and alterations of property interests. A court may make a declaration under section 90SL or an order under section 90SM for de facto couples if they know that:

Either or both de facto couples were ordinarily residing in a participating jurisdiction
Either or both de facto couples were ordinarily residing during at least a third of the de facto relationship. A state does not need to participate in the de facto relationship, for the purposes of this factor.
The applicant for the declaration or order made substantial contributions

All of these conditions apply in one or more states or territories that are participating jurisdictions at the time of application. Another alternative condition is that the de facto partners were residents in a participating jurisdiction when the relationship ended. Factors 1 and 2 will continue to apply in relation to applications made before the proclaimed day.

If a proclamation under factor number 3 is in force and a state ceases to be a referring state on a particular day, the proclamation is revoked due to Section 90SK on and from that day. If this is the case, Section 90SK has the effect as if the revoked proclamation had not been made. However, the revoked proclamation on applications made before the specified day is not affected.

Section 90SL: Declaration of Interests in Property

The court may declare the title or rights that a party has in respect of the property in proceedings between de facto couples. This applies after the de facto relationship breakdown and with respect to existing titles or rights in respect of the property. The geographical requirement is necessary during declarations of interest in the property. The court must also know that:

The period or total period of the de facto relationship is at least 2 years
There is a child in the de facto relationship
The party who applied for the order or declaration made substantial contributions in Section 90SM(4)(a),(b), or (c)
A failure to make the order or declarations and alterations of property interests would cause serious injustice to the applicant
The parties registered their relationship under a prescribed law of a state or territory

All of the factors above are under Section 90SB of the Family Law Act. To give effect to the declaration, the court may issue a consequential order, which may include an order for sale or partition as well as an interim or permanent order for possession. A consequential order is an order that follows as a result of the main order in the case.

Section 90SM: Alteration of Property Interests

Section 90SM discusses the alteration of property interests for de facto couples. The court may issue appropriate orders for the benefit of either or both de facto partners, their child, or for property settlement or transfer. This order may also include the following:

Altering the parties' interests in the property in the case of proceedings involving the property of either of the parties to the de facto relationship.
Altering the interests of the bankruptcy trustee in the vested bankruptcy property. In relation to a bankrupt (someone who cannot pay his/her outstanding debts) party to the de facto relationship
An order for a settlement of property in substitution for any property interests.
An order also requires another order requiring either or both de facto partners, the relevant bankruptcy trustee, to make such a settlement or transfer of property for the benefit of either or both de facto partners or their child.

The geographical requirement and matters in Section 90SB are necessary during alterations of property interests. If the court makes an order under Section 90SM(1) in property settlement proceedings, the order may be enforced on behalf of, or against, as the case may be, the estate of the deceased party. This is if a party to the de facto relationship dies after the breakdown of the de facto relationship.

Declarations and Alterations of Property Interests: Just and Equitable

The court must not make an order under this section unless it knows that, in all the circumstances, it is just and equitable to make the order. In considering if courts must make an order under this section in property settlement proceedings, the court must take into account:

The financial and non-financial contributions made for the acquisition, maintenance, and improvement of the property of the de facto couple. For instance, who bought the house in the first place or at least contributed more to the payment? Did one partner allocate funds for better windows and hired workers to refurnish the house?
The financial and non-financial contributions given to the children of the de facto couple. Financial contributions are basically child support payments or payments other than child support like allowances and gifts. Non-financial contributions are child care.
A party's contribution as a homemaker or parent. The homemaker is the person responsible for doing housework and house maintenance rather than working outside for the family.
The effect of any proposed order on the earning capacity of the de facto couple.
Matters referred to in Section 90SF, subsection (3)
Any other order made that can affect a de facto partner or a child of the de facto couple
Any child support that a de facto partner has provided or is liable to pay in the future under the Child Support Assessment Act 1989

In relation to gifts, courts will generally presume that the gift is only for the person who receives it. However, courts will also examine if the gift is for one person only or for the benefit of the relationship. For instance, if a person provides $30,000 for a de facto couple so they can travel together, and it is not yet used, the court will regard it as a joint contribution to the couple's asset pool.

Adjourning Proceedings

Courts may adjourn declarations and alterations of property interests proceedings themselves or by request of a de facto partner or a bankruptcy trustee. This is if there are great significant changes in the financial circumstances of either party to a de facto relationship.

An example of a financial circumstance is losing a job or paying for personal or their dependent's hospital bills. Having regard to the time when that change is likely to take place, it is sensible to adjourn the proceedings and a court can make an interim or final order with respect to the:

Property of the de facto couple
Either of the de facto couple
Vested bankruptcy property in relation to a bankrupt de facto party

Courts will adjourn proceedings assuming that the significant financial circumstances will provide equity for the de facto couple. The court will also take the following into account in forming its opinion for purpose of Section 90SM(5):

Who is a contributor or participant to a superannuation fund or scheme
Who may become entitled to the property as a result of the trustee of a discretionary trust exercising a power to distribute the trust property in his or her favour

What if a De Facto Partner Dies?

What happens if a de facto partner dies in a declaration and alterations of property interests proceeding? Section 90SM(8) has a provision for a de facto partner who dies after the relationship breaks down, but before the finalisation of property settlement proceedings.

What happens now? For instance, we have Jimmy and Kayla who are both de facto partners and decided to break up and undergo property settlement proceedings.

They have escalated their matters to court and have been going for 3 days. Unfortunately, Jimmy dies on the 4th day of the property settlement proceeding. The proceedings will continue, however, Jimmy's legal representative will become the new party to the proceedings. Furthermore, proceedings will still continue if the court is of the opinion that:

They would have made an order with respect to property if Jimmy hasn't died
It is still appropriate to make an order with respect to the de facto partners' property
The court may make an appropriate order with respect to any of the de facto partners' property
The court may make an appropriate order with respect to any of the vested bankruptcy property in relation to a bankrupt de facto party

Note: All of the mentioned orders above are enforceable on behalf, or against the estate of the deceased party.

Can the Family Court Not Make an Alteration Order?

Yes. However, the family court must not make the alteration order unless it makes the order with consent of all parties, or it is an order until further order. Additionally, when talking about declarations and alteration of property interests, the court must not make an order unless the:

De facto partners have attended a conference to which the proceedings related with the Chief Executive Officer, or a Senior Registrar or Registrar of the Federal Circuit and Family Court of Australia
Court knows that it is appropriate to make the order despite the parties attending a conference
Court knows that it is not practicable to require the de facto partners to attend a conference

Who Can Apply for an Order Under Section 90SM?

The following people can become a party to proceedings under Section 90SM(10):

A person who is a party to a de facto relationship (the other de facto relationship), with a party to the de facto relationship to the subject de facto relationship and applied for an order related to declarations and alterations of property interests in relation to the other de facto relationship. If this is the case, they may apply for orders under Section 90SM and a declaration under Section 90SL.
A person bound to a financial agreement with a party to the subject de facto relationship
A party to a marriage with a party to the subject de facto relationship and is an applicant or a person with a pending application for an order under Section 79 of the Family Law Act or a declaration under Section 78 of the Family Law Act in relation to a marriage or a void marriage. If this is the case, they may apply for orders under Section 79 or a declaration under Section 78.
Any other person whose interests would be affected if court makes an order under section 90SM

Section 90SM(10) does not apply to a creditor of a party to the proceedings if a party:

Is bankrupt
A debtor is subject to a personal insolvency agreement. If so, this person may apply for orders related to declarations and alterations of property interests in relation to the other de facto relationship.

When Can a Bankruptcy Trustee Join as a Party to the Proceedings?

Here are the conditions so a bankruptcy trustee can join as a party to the proceedings:

If parties make an application for an order under Section 90SM between the de facto couple with respect to their property or either of them,
The party was bankrupt when they made the application or after the application was made, but before it is finally determined
The bankruptcy trustee applies to the court in order to join as a party to the proceedings
The court knows that the bankrupt creditor's interests may be affected because of the making of the order under Section 90SM.

A bankrupt de facto partner cannot make a submission to the court in connection with any vested bankruptcy property unless the court grants leave. This is true if a bankruptcy trustee is a party to property settlement proceedings involving the parties to a de facto relationship. The court must not grant leave under this instance unless the court understands that there are exceptional circumstances.

When Can a Personal Insolvency Agreement Trustee Join as a Party to the Proceedings?

When discussing declarations and alterations of property interests, when can a personal insolvency agreement trustee join as a party to the proceedings? The court must allow the trustee of the personal insolvency agreement to join as a party to the proceedings if:

Parties make an application for an alteration of property interests order between the de facto couple with respect to their property or either of them
The party was a debtor subject to a personal insolvency agreement when they made the application
The party becomes a debtor subject to a personal insolvency agreement after they made the application, but before it is finally determined
The trustee of the agreement applies to the court in order to join as a party to the proceedings.

A de facto partner who is the debtor subject to the agreement cannot make a submission to the court in connection with any property subject to the agreement unless the court grants leave.

This is true if the trustee of a personal insolvency agreement is a party to property settlement proceedings involving the parties to a de facto relationship. The court will also not grant leave for this instance unless they are satisfied that there are exceptional circumstances.

Note: For the purposes of including a bankruptcy trustee and a personal insolvency agreement trustee as a party to the proceedings, an application for an order under Section 90SM is finally determined if:

The application is withdrawn or dismissed
An order is made as a result of the application other than an interim order

How Can We Help De Facto Partners?

This article has discussed the Acts relevant to declarations and alterations of property interests. Indeed, there are a lot of legal jargon, provisions, and conditions that help de facto couples navigate their property interests.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Australia: Declarations and alterations of property interests for de facto couples