Dialogue: De facto law should heed property agreements

As the law stands, there is no contracting-out method guaranteed to survive the tinkering urge of some a judge, writes DONALD DUGDALE*.

At the start of this month, a new regime for property sharing between couples living in de facto relationships came into force.

The extension to such couples of the code already in place between husband and wife is an enlightened and civilised response to contemporary social conditions. So is the acceptance that not all such relationships are heterosexual.

But, as the formalists warned and the reformers always understood, this reform, admirable as it is, has its price.

Not a price so high that the change should not have been made at all, but a price nonetheless.

That price is the inevitable uncertainty that attends the question of whether there is or was a de facto relationship between any particular couple.

There is an infinite variety of circumstances between, at one end of the spectrum, a committed relationship intended to be enduring, and at the other, some transitory and casual connection.

The select committee that considered the legislation accepted the suggestion made by the Law Commission and others that some explanation of what Parliament intended by the term de facto relationship should be included in the statute.

But even so there will be cases in which deciding whether A and B had a qualifying de facto relationship will be difficult indeed. Much litigation lies ahead.

It will first be necessary for the Family Court to delve into and reach a conclusion as to the facts of the relationship. Then the court will have to decide on which side of the line the relationship should be classified.

It is, of course, precisely because of this uncertainty and its effect on property and other rights that historically the common pattern of evolution in Western countries has been from an acceptance of various types of informal marriage to confining legal recognition to marriages solemnised and recorded according to a state-imposed formula. (In England this was the effect of Lord Hardwicke's Act of 1753).

One obvious way of reducing the uncertainty is to let the parties decide for themselves whether the Property Relationships Act is to apply to their relationship.

There is no great difficulty or expense in A and B signing a document agreeing that, even if their relationship is or becomes a de facto relationship within the meaning of the statute, any financial disputes are to be determined as if it were not. The uncertainty problem is solved by making the question of classification irrelevant.

The trouble is that there is no absolutely watertight legal way of doing this. The 1976 statute introducing the matrimonial property regime permitted a contracting-out agreement to be set aside by a court if, in the court's view, it was unjust.

The fear was that dewy-eyed and innocent brides might ignore legal advice and subscribe to arrangements that further down the track left them seriously disadvantaged financially.

The framers of the 2001 amendments accepted that casting the statutory net wider meant a more stringent justification was needed for setting aside the parties' bargain. They said the higher test for setting aside agreements was considered necessary to provide reasonable certainty that agreements would be upheld by the courts.

Their formula does not, in fact, produce reasonable certainty. As the law stands, the court must be satisfied that giving effect to the agreement would cause serious injustice. The requirement that the injustice be serious is new. But there is no certain way for anyone to know in advance what the judge who happens to hear a particular case will regard as amounting to serious injustice.

The submission of the Law Commission to the select committee was that this change did not go far enough, and that any power to the court to set aside an agreement on the basis of the court's views as to its fairness should be removed altogether.

After all, there is a requirement that each party must be advised by an independent lawyer against whom redress could be sought if the advice given was inadequate. And if there really had been some such factor as duress or misrepresentation, the agreement, like any other contract, could be attacked on this ground. These arguments got nowhere.

This is not just lawyers' talk. As the law stands, there is no contracting-out method that can be guaranteed to survive the tinkering urge of a Family Court judge.

It is distressing to read press reports that couples have separated rather than run this risk. It is by no means uncommon for a widow yearning for companionship to shrink from forming a new relationship for fear of jeopardising assets that she relies on for her old age or feels an obligation to keep intact to pass them on to her children by her deceased husband.

There is enough loneliness in the world without it being increased as a consequence of legislation being framed with insufficient refinement.

It ought to be possible for couples to decide to marry or cohabit secure and confident in the knowledge that any agreement they have made regulating property matters will be given effect to. The usual view of bureaucrats and politicians is that measures like the one under discussion need time to shake down before they are revisited. This is inappropriate when people's domestic happiness is at stake.

The precise reform that is needed is a simple repeal of section 21J of what is now called the 1976 Property Relationships Act. A bill to do this would take about five minutes to draft.

There is need for such a change and it is best done quickly.

* Donald Dugdale is a Law commissioner.