The Facts
Couple commence relationship
The parties met in late 2011 at a massage parlour, where the woman worked. The man was married at the time.
In February 2012, the parties had dinner together and commenced a sexual relationship. In March 2012, the parties discussed having a child together and the woman stopped working at the massage parlour, at the man’s request. The man also began to spend overnight time at the woman’s house, although the parties disagreed as to how often this occurred.
In April 2012 the man began transferring $2,000 per month to the woman, along with two additional transfers of $10,000 in June 2012 and July 2012.
Parties enter into financial agreement and commence IVF
In August 2012, the parties signed a financial agreement as a de facto couple pursuant to the Family Law Act. The financial agreement contained provisions for the man to support the woman and their child financially if they ever separated.
The parties then began IVF treatment and the woman became pregnant in September 2012. The man separated from his wife in October 2012. The parties’ child was born in mid-2013.
The man continued to make payments for the woman, including a transfer to her of $8,000 and the payment of her car insurance in September 2013. However by December 2013 the relationship had deteriorated and the parties separated.
Woman seeks to rely on financial agreement after separation
Before the separation, the man indicated that he would not comply with his obligations under the financial agreement. A dispute arose, and the woman ultimately started court proceedings to enforce the terms of the financial agreement.
The primary question for the court to determine was whether a de facto relationship did in fact exist at the time the financial agreement was executed by the parties. If a de facto relationship did not exist at that time, then the parties’ relationship would not fall under the Family Law Act and the financial agreement would be invalid.
Expert commentary on the court's decision
Family Court finds that de facto relationship existed
The matter was first determined by the Family Court, in Cham & Sha [2015] FamCA 355 with the judge at first instance applying the legal definition of a de facto relationship to the parties’ circumstances and ultimately finding that a de facto relationship did exist from mid-March 2012 until September 2013. As the financial agreement was executed on 3 August 2012, it was therefore valid.
The man immediately appealed that decision.
In the case Sha & Cham [2017] FamCAFC 161, the Full Court of the Family Court dismissed the appeal, finding that the first judge was right to conclude that a de facto relationship did exist at the time the financial agreement was executed.
Relevant law for determining the existence of a de facto relationship
Section 4AA of the Family Law Act states that two people are in a de facto relationship if they are not legally married to each other, they are not related by family, and, having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.
To determine whether two people have a relationship as a couple, a court will examine a range of circumstances listed in paragraph (2)(a)-(i) of section 4AA:
Importantly, section 4AA also explicitly states that a de facto relationship can exist even if one of the persons is legally married to someone else or in another de facto relationship.
Appeal court confirms correctness of initial decision
Of particular interest in this case are the comments that the appeal court made about how to assess whether people are in a de facto relationship.
The appeal court judges found that the first judge correctly applied section 4AA of the Family Law Act when considering the circumstances of the parties’ relationship. Part of that process is to work through section 4AA and consider whether the parties’ circumstances fit within each sub-paragraph.
Importance of taking a holistic view of the relationship
Even though each sub-paragraph was considered in detail by both the first judge and the appeal court, the appeal court confirmed that the decision of whether a de facto relationship existed should be based on a holistic view of the relationship, including an overall assessment of the circumstances of the relationship, rather than a specific evaluation and weighing up of the section 4AA factors in favour for or against a finding that a de facto relationship existed.
The appeal court ultimately concluded that the first judge had correctly adopted this approach, and therefore there was no error. The appeal court was also quick to make a finding that the first judge had provided adequate reasons.
Therefore, while section 4AA certainly provides a comprehensive guide to circumstances that should be considered when trying to establish the existence of a de facto relationship, it is not a checklist that you can simply work through. You must also take a step back and consider all aspects of a relationship holistically.
Circumstances of relationships can vary significantly
While this may seem like a somewhat informal and casual approach for the court to take, it is important to bear in mind that as people go about their lives, the circumstances of relationships can vary significantly, and therefore a rigid approach or “test” may produce inequitable outcomes.