Claims to land overseas

When you own land overseas division of that property following separation can be complicated. The general rule is that the Courts do not have jurisdiction to deal with immovable property, such as land, which is not in New Zealand. This position reflects the principle that controversies over immovable property should be decided in the country where the property is located. A recent High Court case, Burt v Yiannakis, has explored the ambit of this rule. In that case the parties owned properties in London and New Zealand. The wife was arguing that she was able to bring claims in equity in relation to the London properties.

What is a claim in equity?

The majority of the law governing relationships (marriage, civil unions and de facto relationships) is contained in the Property (Relationships) Act. That is a statute, a written law, which has been created by Parliament. A claim in equity sits outside the written law. Equity developed out of frustration with the rigid applicability of the law. A claim in equity is one which relies not on the written statute law but on the justice system’s sense of fairness. An example of equity operating in the relationship context can be seen in the constructive trust law which developed out of the unfair treatment of de facto relationships prior to them being included in the Property (Relationships) Act. Prior to 2001 de facto relationships were not included in the Property (Relationships) Act and therefore were not entitled to equal division on separation. This was regardless of whether the de facto relationship had lasted 20 years and operated the same as if the parties were married. Recognising the injustice this distinction was causing for many de facto couples the Court developed constructive trust law which allowed de facto partners to have a claim against their partner’s property.

Land overseas and claims in equity

The essence of the wife’s claims in Burt v Yiannakis were that by her cash contributions to and her work on the properties, and because of promises and understandings between the parties, she had equity claims based on constructive trust, or estoppel, or resulting trust. The key issue was whether the Court had jurisdiction to consider claims in equity relating to overseas land in the property relationship context.

Section 4

Section 4 of the Property (Relationships) Act makes the Act a code. That means where there are transactions between spouses or partners then the Act must apply instead of the rules of the common law or equity. Section 4 applies to all property, not just relationship property. The section has been worded broadly to capture all claims that arise between spouses or partners. The High Court in Burt v Yiannakis considered that “transaction” means all exchanges or interactions concerning property and that it has the wider meaning of a property related event that occurs between the parties during a qualifying relationship. In that case the Court concluded that the exchanges, the provision of money and work performed, allegedly giving rise to a constructive trust or estoppels or resulting trust were “transactions”.

Section 7

Section 7 of the Property (Relationships) Act provides that the Act applies to immovable property that is situated in New Zealand. The Act therefore does not apply to immovable property overseas. The wife’s argument in Burt v Yiannakis was that because s 7 means the Act does not apply to immovable property overseas then such issues were not within the ambit of the Act and therefore her rights in equity were not barred by the s 4 rule. However, the Court did not accept this argument. The Court discussed the development of the law relating to constructive trusts in the relationship property context. Once de facto partners were included in the Property (Relationships) Act in 2001 the law relating to constructive trusts ceased to develop or be applied as s 4 excluded it. The Court considered that it could not have been intended that those excluded principles could resurrect when there was immovable property overseas. The Court concluded that s 4 functions as a jurisdictional bar in respect to claims brought in the common law or equity that relate to immovables overseas.

Private international law

The Court went on to consider the wife’s position at private international law, that is, outside the relationship property context. The common law position is that the New Zealand Courts have no jurisdiction in proceedings primarily concerned with title or the right to possession of immovable property overseas. The exception to this rule is where there is an claim based on contract or equity between the parties. This is called the in personam exception. The Court in Burt v Yiannakis recognised that it was arguable that a claim for constructive trust over a foreign immovable fits within the in personam exception and such claims would not be barred by s 4. However, the Court found that the in personam exception could not apply to constructive trust claims brought in respect to immovable property overseas in a relationship property context.

Conclusion

The intention of the Property (Relationships) Act was to create a complete regime for all relationship property claims with an exception in relation to foreign immovables. Relationship disputes involving land overseas must be dealt with by the local laws. The claims by the wife in Burt v Yiannakis proposed a back door way to obtain financial compensation for dealings with immovables overseas. However, to allow such claims would create practical and logistical problems as well as inappropriately asserting jurisdiction over foreign land.

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