Who gets what under the new laws

In the first of a series of articles CCH looks at some of the issues surrounding the new property releationship laws.

Monday, February 4th 2002, 7:01PM

Question: Relationship property - Equal sharing rule - Exceptions

Is relationship property always equally shared?

Answer: No. There are three exceptions to the principle of equal sharing of relationship property. These are extraordinary circumstances, short marriages, and economic disadvantage.

Extraordinary circumstances

If there are “extraordinary circumstances” that make equal sharing “repugnant to justice”, an exception to the equal sharing principle may be granted. This is rare, however - in fact, lawyers refer to it as the “almost never” exception. The language of the provision is purposely strong - it implies that the partner losing his or her normal 50% share must have made a negative contribution to the relationship. Even domestic violence is not usually treated as an extraordinary circumstance justifying an unequal division in favour of the victim.

Under the Matrimonial Property Act 1976 the exception to equal sharing was easier to claim when dividing the non-domestic assets, eg, business investments, rather than the home and chattels. All that was needed was for one spouse to have made a “clearly greater contribution” to the marriage partnership. Outstanding business acumen and skill were specifically rewarded. In Reid v Reid [1979] 1 NZLR 572 (CA), [1980] 2 NZLR 270 (CA), for example, the husband had built up a highly successful business and was awarded 60% of the business assets. The home and chattels were still protected as domestic assets. He was seen to have made a “clearly greater contribution” to the marriage partnership, the implicit message being that the wife’s unpaid work was of lesser value than the husband’s work. This distinction has been abolished by the new Act to ensure greater fairness between men and women who followed traditional roles in their marriages.

Short marriages

Another exception to the principle of equal sharing of relationship property is if the marriage lasted less than three years. In a short marriage, the individual contributions to the marriage, not to the property pool itself, are compared and the contributions determine the share each party receives.

The Act will not usually apply at all to a de facto relationship of short duration.

Economic disparity

Economic imbalance is a new exception to the principle of equal sharing of relationship property. The new Act allows for compensation to be paid for “economic disparity” between a couple on separation, in the form of a lump-sum payment or transfer of property. This applies even to marriages and de facto relationships of short duration.

The reform is a result of the recognition that in traditional marriages equality does not always give equity. In 1988 a working group assessed how the Matrimonial Property Act 1976 was working. It found that merely splitting the assets 50-50 did not create a level playing field between the husband and wife. Rather, the spouse with custody of the children - usually the mother - rarely left the marriage on an equal career footing. A mother who is not in the workforce cannot take advantage of further training at work and so her earning potential is devalued over time. Because of her reduced potential, compounded by her ongoing custodial role, her standard of living will fall. Cases in the Canadian, US and Australian courts have cited statistics that show that while men tend to increase their standard of living, women are seriously disadvantaged by marriage breakdown.

The Act now stipulates four hurdles to be cleared before compensation for economic disparity can be paid out of the relationship property:

1. that after separation the income and living standards of one will be higher than the other;

2. that the difference is significant;

3. that the difference is because of a division of functions between the two during the marriage or de facto relationship; and

4. that the indicators of the economic disparity are:

the earning capacity of each party;
the responsibility for children;
and - any other relevant circumstances.

A fifth hurdle must also be cleared if the disadvantaged spouse or de facto partner seeks an adjustment out of the other’s separate property. In such a claim, as well as proving economic disparity (as above), the claiming spouse or partner must prove he or she contributed to an increase in value of the other’s separate property, whether directly or indirectly.

Compensation to the partner whose career has been put on hold and who is suffering from economic disparity should not be confused with entitlement to maintenance. The right to maintenance is designed to cover the future needs of a spouse or partner and the law governing maintenance has been amended to reflect the reforms of the property legislation.