When long-term cohabitation doesn’t guarantee a property adjustment

Cosola & Moretto [2023] (No 2) [2022] FedCFamC1F 924

The matter of Cosola & Moretto sets out the circumstances of a de facto relationship of approximately 15 years where the primary judge determined that it was not just and equitable to adjust the property interests of the parties pursuant to s 90SM (3) of the Family Law Act 1975 (Cth).

Facts

The parties commenced cohabitation in January 2004 and separated in December 2018. The length of the relationship was approximately 15 years and there were no children of the relationship. 

At the commencement of the relationship, the respondent owned a property (Property 1), subject to a debt to his parents. The appellant subsequently moved into Property 1 where they lived during the relationship. The appellant did not directly contribute to the costs or outgoings of Property 1. 

Similarly, at the commencement of the relationship the appellant also owned her own property (Property 2), which was tenanted. The appellant exclusively retained any rental income received from Property 2. The respondent did not directly contribute to the costs or outgoings of Property 2.  

In December 2003, the parties incorporated a company where the parties were equal shareholders, however the respondent was the sole director and sole employee. The appellant undertook banking and administrative roles for the company and had access to the company’s bank account. The respondent generated the income of the company by completing skilled work as a tradesman. The primary judge found that the only reason the company was established was because the respondent was a tradesman who was previously operating as a sole trader and he needed to establish a company to undertake work for another company. All costs and outgoings for the respondent’s Property 1 were met from the company bank account. 

The appellant worked in a retail business and did not contribute her income earned from her employment into either the respondent’s bank account or the company’s bank account. 

The appellant sought a property adjustment in her favour from the respondent’s property.

Outcome

At the time of separation, the appellant retained Property 2, and the respondent retained Property 1 which was still subject to the same debt that existed at the commencement of cohabitation.  

The court determined that it would not be just and equitable to make an order altering the property interests of either party. In making this determination, the Court considered the following facts and circumstances of the parties:

• That each party was free to deal with their assets as they pleased.

• The primary judge found that the appellant dealt with Property 2 as she saw fit, without recourse to the respondent and without his knowledge. This included drawing down on the loan secured against Property 2 to lend monies to her son.

• The parties did not intermingle their financial affairs.

• The parties did not operate a personal joint bank account during the relationship, did not acquire real estate jointly or obtain any joint loans, and did not discuss how they would manage their financial affairs.

• There was no evidence that the parties made any future plans for their life together. There was no evidence that the parties executed mutual wills, named each other as beneficiaries on their superannuation policies, or took out life insurances naming the other as a beneficiary.

• The parties each dealt with their own real property, being their single biggest asset, free of consultation or consideration of the other party.

• The appellant had the benefit of occupation of the respondent’s home rent free while making her own home available for use to her son.

• Each party contributed by undertaking homemaking responsibilities.

Takeaways

The court revisited the principle set out in Bevan, stating that there must be “separate consideration of whether it is just and equitable to make any order altering property interests before the need to consider the extent which existing interests are to be altered and the manner in which that is to be done.”

In determining whether an alteration of property interests is “just and equitable” the High Court highlighted its power to apply judicial discretion in Stanford where “the expression of ‘just and equitable’ is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations.”

This decision puts paid to the perception of the family law jurisdiction that “everyone gets a prize” and particularly in circumstances of a long relationship such as 15 years.  The Court determined that there must be a principled basis for altering a parties legal and equitable interests in property and the manner in which the party's conducted their financial affairs during the relationship is relevant to this consideration.

Authors: Fiona Hoad and Katherine Jian