Case note: When will a de-facto relationship be considered to have “broken down” and what might this mean for your property settlement?

In the recent High Court case of Fairbairn v Radecki [2022], the High Court considered this question when it granted special leave to the NSW Trustee and Guardian on behalf of Ms Fairbairn to appeal previous orders made by the Full Court of the Family Court of Australia. The High Court provided useful commentary concerning property settlement orders following the ‘breakdown’ of a de-facto relationship.

The Facts

Ms Fairbairn and Mr Radecki entered a relationship in or around late 2005 to early 2006. The parties lived in a property owned by Ms Fairbairn but had agreed to keep their assets strictly separate.

The couple entered two co-habitation agreements in 2010 and 2015 respectively, agreeing to each keep their own property and that Ms Fairbairn was to retain absolute ownership of the home that the couple were living in together.

By mid- 2017, Ms Fairbairn had been diagnosed with dementia, experienced cognitive decline and lost decision-making capacity, and an Enduring Power of Attorney was executed in favour of her children to a previous relationship.

Mr Radecki later secured a new Power of Attorney and a revised Will for Ms Fairbairn which was more favourable to Mr Radecki and gave him considerable control over her assets which he had not previously had throughout the relationship.

In 2018, the NSW Civil and Administrative Tribunal (NCAT) appointed the NSW Trustee and Guardian (the Trustee) to oversee Ms Fairbairn’s personal and financial affairs, revoking the Power of Attorney which had been made in favour of Mr Radecki.  The Trustee sought to move Ms Fairbairn into an aged-care facility and sell the property which had been captured in the previously mentioned agreements. Mr Radecki, who remained living in the property, opposed the sale, and the Trustee accordingly sought a property settlement order from the Federal Circuit Court of Australia (FCCA) to enable the sale of the home on Ms Fairbairn’s behalf.

Procedural History

Under section 90SM of the Family Law Act 1975 (Cth) (the Act), the Court can only make property settlement orders in relation to a de-facto where there has been a “breakdown” of that relationship. There was no dispute between the parties that there had been a de facto relationship. The question was rather if and when the de facto relationship had broken down?

The Trustee argued that Mr Radecki’s conduct during this time was not in Ms Fairbairn’s best interest and clearly favoured Mr Radecki’s financial interest. This conduct included:

• Mr Radecki was unwilling to cooperate with Ms Fairbairn’s children in the administration of her affairs. According to the primary judge, “the gloves were off” between Mr Radecki and the children.
• Persistent refusal to the Trustee to sell the home to pay the aged-care facility costs. Mr Radecki disagreed with this as he wanted to remain living in the property and asserted that it was Ms Fairbairn’s wish for him to do so (despite him owning two other properties). He instead suggested to pay the daily accommodation payments first from Ms Fairbairn’s superannuation, and when that was depleted he would make his own financial contributions. Alternatively, he would make an initial contribution and then be repaid by Ms Fairbairn’s estate.

The primary judge of the FCCA found that Mr Radecki’s conduct during this time was “plainly” in his financial interest, to live in the property rent-free while mortgage repayments and other outgoings continue to accrue at the expense of Ms Fairbairn’s estate.  The primary judge found that Mr Radecki’s behaviour went against a “fundamental premise” of their relationship, that their assets remain strictly separated and accordingly that the de-facto relationship had broken by no later than 25 May 2018.

Mr Radecki appealed the decision to the Full Court of the Family Court of Australia who later found that while Mr Radecki may have exhibited “bad behaviour”, none of that behaviour was fundamentally inconsistent with the relationship continuing.

The Trustee sought leave to appeal this decision to the High Court of Australia.

The High Court was asked to consider whether the term “breakdown of a de facto relationship” in the Act was nuanced and could include “something other than the end of the relationship”; or whether the term has a fixed meaning of the irretrievable end of a relationship.

So what is a de-facto relationship?

As always, it depends on the myriad facts and circumstances which together could satisfy the legal test. De facto relationships are defined under the s 4A of the Act, which provides that a person will be in a de-facto relationship with another person if: they are not legally married or related by family; and having regard to all circumstances of the relationship, they have a relationship as a couple living together on a genuine domestic basis.

When working out if persons have a relationship as a couple, the Act provides a non-exhaustive list of circumstances which may be considered, including but not limited to:

1. the duration of the relationship;
2. the nature and extent of their common residence;
3. whether the relationship is sexual in nature;
4. any financial arrangements between the persons;
5. the ownership, use and acquisition of property;
6. the degree of mutual commitment to a shared life;
7. whether there are children to the relationship or the care and support of children generally;

The Court may give as much weight to any or all the circumstances as may seem appropriate in determining the nature of the relationship.

What did the High Court of Australia decide?

The High Court rejected the Trustee’s argument that a de facto relationship has broken down at the point where parties no longer live together. The Court adopted a broader view of the phrase “living together” to mean the experience of sharing a life together and must be “construed to take account of the many various ways in which two people may share their lives together in the modern world”.

Despite this point, the High Court allowed the appeal and reinforced the original finding that the parties’ relationship had broken down at some stage prior to 25 May 2018. In making this finding, the Court noted that the relationship had not broken down due to Ms Fairbairn’s declining health and incapacity or moving into an aged-care facility. While they were relevant factors, they do not suggest in isolation that the relationship had broken down. The Court stated that while the parties may have previously had a mutual commitment to a shared life, this ended following Mr Radecki’s failure to make “necessary or desirable adjustments” for Ms Fairbairn and by his conduct, acting contrary to her interests. Importantly, the High Court found that it was an essential feature of the relationship that the parties kept their assets separate and Mr Radecki’s conduct as if he were no longer bound by this agreement supported the finding that the relationship had irretrievably broken down.

What does this mean for de facto relationships?

The High Court’s decision reinforces the following:

• cohabitation is not a necessary feature of a de facto relationship;
• that loss of capacity by one party does not necessarily mean the breakdown of a de facto relationship;
• the Court considers the intentions of the parties and the individual circumstances in de facto relationship, including financial arrangements and the use and ownership of property; and
• if there is evidence that a de facto spouse does not act in the best interests of their partner, it may constitute the end of their de facto relationship.