Unequal sharing and adjustments following separation

Relationship property division in New Zealand is governed by the Property (Relationships) Act 1976, which covers marriages, civil union partnerships and de facto relationships. Generally where those sorts of relationships have lasted for three years or more the relationship property owned by the parties will be divided equally. However, there are some circumstances which may warrant unequal sharing of the relationship property or some other monetary adjustment. These are circumstances where it is recognised that equal sharing would be unjust and contrary to the principles of the Act.

Unequal sharing

Section 13 – Exception to equal sharing Section 13 provides that where there are “extraordinary circumstances” that make equal division of the relationship property “repugnant to justice” then the property may be shared in accordance with the contribution of each party to the relationship. The strong wording used in s 13 makes it a very difficult threshold to meet. As identified by the case law it is clear Parliament did not intend the equal sharing regime of the Act to be eroded by ordinary circumstances. There must be some extreme circumstances. Examples of where such circumstances exist include

• The injection of a large amount of separate property into the relationship shortly before separation.
• Where one party has contributed a significantly more to the relationship than the other. It is important to keep in mind that it is not unusual for one party to make a greater financial contribution than the other. There must be a gross disparity in the contributions.
• Brevity of the relationship coupled with unequal contributions. The Court will look at the “tapestry” of the marriage and where the relationship has lasted for a long time it will be more difficult to satisfy the Court that s 13 should apply.
• Non-contributing partner. As a starting point the Act presumes that both parties are contributing equally to the relationship. A persistent failure to contribute may support a finding of extraordinary circumstances.

It is important to remember when considering the above circumstances that contributions are not limited to monetary or financial contributions. Contributions under the Act can also include the care of children, the management of the household, and other assistance and support. Section 15 – Division of functions The s 15 exception to equal sharing upholds the principle in s 1N(c) of the Act that a just division of relationship property has regard to the economic advantages or disadvantages to the spouses or partners arising from their marriage or relationship ending. It allows the court to redress significant future disparity between the parties. Section 15 applies where the Court is satisfied that the income and living standards of one party is likely to be significantly higher than the other party because of the effects of the division of functions within the relationship. It is important that the disparity in income and living standards has been caused by the division of functions within the relationship. There needs to be some causal link. In considering whether qualifying circumstances exist the Court will consider the following factors

• The likely earning capacity of each party;
• The responsibilities of each party for the ongoing care of any children of the relationship;

If s 15 applies then the Court can make an order compensating the disadvantaged party. Application of s 15 A recent High Court case, X v Y, has explored the application of section 15. In X v Y the parties were married for 24 years and had two children. At the beginning of the relationship both parties were working. The wife later left her job and undertook a period of study. Following the completion of her studies the wife took a position with a Chartered Accountants office to pursue a career in accounting. She did well in that position, gaining experience in the health sector, a network of contacts and a good reputation. Four years later the family moved towns so the husband could pursue a significant career opportunity. The wife searched for a new job but there was nothing which suited her particular experience and qualifications. A few years before the separation the parties’ daughter became seriously ill. Her treatment required extensive parental involvement, a role which was occupied by the wife. Following separation the wife made an application under s 15 of the Act. At the time of separation the wife was 50 and had been told that her age would make it difficult for her to advance as a chartered accountant. In comparison the husband was well positioned as a partner in a lucrative firm. The husband argued the wife stopped working because she wanted to retire, that there was no causal link. In dismissing the husband’s argument the Court warned that when determining whether a causal link exists the inquiry need not be into the merits of a decision as to the domestic roles. There is a perception, in absence of clear evidence to the contrary, that such decisions are made jointly. The Court concluded that the daughter’s illness and the move to the new town clearly restricted the possibilities of the wife advancing her career. Therefore a s 15 adjustment was appropriate. In considering the quantum of the award the Court emphasised that because circumstances vary case to case there can be no precise formula. What is important is the overall circumstances that gave rise to the disparity between the parties and what will be just going forward. The Court acknowledged that what is just for the wife must not be at the expense of what is unjust for the husband. The Court awarded the wife $65,000 which was to be paid out of the husband’s relationship property share.

Adjustments

There are a number of monetary adjustments which may be made following separation. These include

• Compensation for contributions made after separation (s 18B); and
• Compensation for dissipation of relationship property after separation (s 18C).

The effect of those sections is that if you spend relationship money or sell relationship property after separation you may have to compensate your spouse or partner for such expenditure. On the other hand, if you spend separate money reducing a relationship debt or maintaining relationship property you may be entitled to compensation for the money you have spent. Section 18B was raised in X v Y in relation to the wife’s occupation of the family home and use of the joint account. In considering the husband’s argument for compensation the Court emphasised that precise accounting is not appropriate as such an approach would be contrary to the way spouses and partners run their affairs during the relationship. Regarding the husband’s claim for occupation rent the Court declined to make an order because the family home was owned by a trust and was therefore not relationship property.

Conclusion

The equal sharing regime of the Act is the crux of relationship property division in New Zealand. It reflects the principle that relationships are joint ventures which parties contribute to equally, albeit in different ways, and therefore parties should equally share in the fruits of the relationship. In most cases equal division results in a fair and just division of property, however this is not always the case. In those cases where the equal sharing regime results in an unjust outcome there are mechanisms to acquire a larger share of relationship property or an adjustment. While these mechanisms may address the imbalance to an extent they often fail to produce the desired result. Section 13 has a very high threshold which is difficult to meet and the s 15 awards are often conservative.

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