Section 15 of the Property (Relationships) Act 1976 was enacted to provide courts with a power to redress economic disparity between partners after the breakdown of a relationship. The section allows the Court to compensate a partner from the pool of relationship when the disparity is caused by the division of functions during the relationship.

However, the section has been difficult to apply. It can be more costly than beneficial for applicants, especially when the potential award of compensation is small. This has been demonstrated in the recent decision of the High Court in G v G [2020] NZHC 1001. Walker J noted that the application of s 15 has been bedevilled by the wording “because of the effects of the division of functions”.

 

Background

In G v G, there was no challenge to the fact that there was a disparity between the parties living standards and income. The dispute focused on the cause of the discrepancy. When the parties relationship began, Mr G had been working on his career for over a decade. He was earning a salary three times that of Ms G. Ms G had to prove that the current disparity was caused by the division of functions during the marriage.

There was a relatively modest relationship property pool, worth a little over $1,000,000. Ms G argued that she should be entitled to compensation to the value of $550,000. This would have absorbed almost all of Mr G’s share of relationship property.

The High Court held that the functions of the relationship had been divided in a traditional manner. Therefore, there was a presumption that causation was established, as per Scott v Williams. Ms G had unilaterally decided to stop working in 2013. This meant the division of functions was not the only, or the most influential, cause of the economic disparity.

The Judge felt that Scott v Williams left open a possibility that a partial rebuttal of the presumption was possible. In this case, the presumption was partially displaced by external factors that had significantly contributed to the economic disparity. It was held that the proportion of disparity attributable to the division of functions was approximately 15-20%. The Judge held it was not just in the circumstances to make an award. However, if those circumstances had not existed, the award would have been in an estimated range of $40,000-$50,000.

 

Trust property

Any compensation made under s 15 can only be provided from relationship property. In New Zealand, substantial assets are commonly held by a family trust. This reduces the availability of property that can be used to compensate a disadvantaged spouse or partner.

 

Experts

Many of the practical problems with s 15 arise from the perceived need of experts to make a claim. It is common for parties to hire human resource experts to verify what a party’s earning potential would have been if they had not sacrificed their career for the family. A forensic account is also usually engaged to help calculate the quantum of the award. These experts can come at the cost of tens of thousands of dollars.

The time and complexity of such a claim also result in expensive legal fees. A section 15 claim cannot be resolved with the application of a formula. A multitude of approaches have been taken. This makes it increasingly difficult to prepare a claim.

Ms G did not engage experts in this case. Any compensation that she might have received would have been consumed entirely by these expert fees. This is a clear demonstration of why few section 15 claims come to the High Court. The uncertainty and lack of a formulaic approach result in expensive proceedings that prevent any claim from being worthwhile.

 

Lessons

Section 15 continues to cause major challenges for lawyers and their clients. Practitioners, in particular, need to consider whether to instruct forensic accountants and human resources professionals. The cost of a section 15 claim in proceeding to litigation needs to be balanced against the overall value of the relationship property pool. There are very few section 15 cases that proceed to a hearing.