RP Answer Templates - Summary Relationship Property and Family Finance PDF

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Relationship Property Templates LAWS310 Introduction: The Property Relationships Act 1976 (PRA) deals with the division of relationship property on separation. Generally, relationship property is that used the relationship or created during the relationship (s2 s8 contains specific examples. Relatio...

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Relationship Property Templates – LAWS310 Introduction: The Property Relationships Act 1976 (PRA) deals with the division of relationship property on separation. Generally, relationship property is that used during/by the relationship or created during the relationship (s2 PRA); s8 contains specific examples. Relationship property disputes will be treated as normal civil proceedings (B v K) and the courts will operate on the principles of open justice (Ridge v Parore at [27]). While a stated purpose of this act is to provide for the just division of relationship property (s1N(c)) it has been recognised that this act is not just technical, dry rules but social legislation of the widest application and should be approached in that spirit (M v B). Achieving justice in this sense means making decisions which are predictable and consistent (M v B) – “the chancellors foot was amputated many centuries ago” (para [35]). Furthermore, the PRA is a code covering common law and equity (s4).

Section 21/21A Agreements: Introduction:  Section 21 agreements are a pillar upon which NZ’s prop relationship scheme is built – de Malmanche.  Wood v Wood: Fisher K indicated that previously FC has been too willing to strike down – courts are now more cautious about invalidating agreements. o Approved by CA in Harrison.  2 types: o S21 contracting out agreements o S21A settlement agreements.  Can be struck down by the court on 2 grounds: o Fails to comply with formalities – s21F o Where the agreement would cause serious injustice – s21J. Failure to comply with formalities – s21F(2)-(5)  Certain basic requirements per s21F: o Agreement must be in writing and signed; o Each party must get independent legal advice; o Agreement must be witnessed by a lawyer; o Lawyer must signify they explained the effect.  Independent legal advice – s21F(3): o Independent advice:  Edmond: Advice from 2 lawyers at the same firm – only exceptionally will this count as independent advice – rebuttable presumption.  Ward: Independence can be undermined by personal friendship with one of the parties – here wifes lawyer friend of both (family solicitor) pressured, HELD not independent.  VFKM v FJS: fact lawyer previously acted for other party does not automatically mean not independent.  Wells: lawyer acting for other in unrelated matter – not independent. o Quality advice:  Odlum: Duty to advise clients of the consequences of the agreement and of the Act – what their position would be if the Act did in fact apply. Must ascertain the extent of the relationship prop and the value. Must also ascertain client in a fit state to give informed consent.  Russell: Wife wanted quick cash, lawyer said that if wanted roof over head to sign but court could always undo, lawyer didn’t look at farm accounts/value property – only 15 min consultation. Not sufficient. Length of time not determinative but indicative.  C v W: shortness of consultation led to finding a breach – 2 of 36 mins and 1 of 18 mins. Time is not determinative however.  Graham: lawyer cannot rely on what party says as to value of property – lawyer needs to initiate own investigation. Insufficient despite advised considerably on advantages of s21A.

Ward: Lawyer must also ensure partner in a psychologically fit state – assessment of emotional wellbeing. ALSO has to offer wisdom/advice as to whether wise to sign agreement relative to Act entitlements.  Coxhead: Lawyer must advise on implications and wisdom of agreement, the desirability and whether good deal.  C v W: Mere fact that a party is intelligent and can understand does not negate.  Russell v Preston: even if client is aware of what is doing, lawyer needs to warn whether to sign one-sided or disadvantageous agreement: muted caution not enough, emphatic advice needed. BUT NO PREJUDICE – s21H: residual power of court to accept agreement wholly or in part if non-compliance did not materially prejudice the interests of the party.  Fraser: 2 steps to this process: 1) satisfied that that there is no material prejudice; 2) the residual discretion, whole or in part.  Courts use a ‘what if’ test: Williams-Tarrant v Calvert: Could will ask what partner would have done if properly advised and appreciated their position.  Graham: prejudice in not being valuation of property not saved by extensive explanation of downside of agreement.  Wells: only rarely will a lack of independence by a lawyer be immaterial – attacks the very rationale of allowing parties to contract out.  Burton v Thom: CA: prospects of persuading a court that a client inadequately advised had not been materially prejudiced are weak.  C v W: agreement partially validated as satisfied wife would have signed irrespective. 

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Negligence claim:  Connell v Odlum: HELD that lawyer owes a duty of care to both parties in advising on s21 agreements – reason is that non-client may rely on certification that agreement properly carried out: may make financial arrangements in reliance.  Russell v Preston: duty enhanced as opposing lawyers asked for an undertaking.  Thom v Davys Burton: Claim must be within standard limitation period.

Avoidance for serious injustice – s21J: o General:  C v S: Patterson J looked at ‘serious’ – unfairness must be considerable, substantial and of a kind that the courts conscience demands intervention.  Wood: onus of proof on person alleging serious injustice  Place v Peat: court must be ‘satisfied’: allegation of serious injustice to be clearly demonstrated. o S21J(4) contains the factors which must be taken into account in determining:  Wood: court must turn attention to each of these matters, cannot just focus on 1 element.  VFKM v JS: court ‘may’ set aside – discretion BUT if satisfied that serious injustice the court, in reality, has no choice whether to set aside.  Sloss: If agreement seriously unjust whole agreement must fall – cannot sever part. o Provisions of the agreement – s21J(4)(a) o Length of time since agreement made – s21J(4)(b): 2 views:  C v W: the longer the time since made the more likely parties have ordered affairs in reliance.  BUT longer since made more likely circumstances changed. o Agreement was unfair or unreasonable in the light of all the circumstances at the time it was made – s21J(4)(c):  Unfair – process: look at consent of parties, whether understood what doing, free and informed consent, advice sufficient, stress etc:  Mumby v Passfield: Wife in fragile health (upset, stressed, sleep deprived) AND advice inadequate (did not obtain accounts of rel prop business).  Carter: unfairness can occur even where good advice given – wife in extreme and disabling state of shock.  C v S: BUT must show something akin to duress, not just pressure: o Harrison: CA noted that these agreements usually driven by one party who may accompany with implicit/explicit threats to the relationship – CA

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noted that it would be destabilising to the contracting out regime if this pressure was the basis to hold agreements unjust. o Wells: pressure itself usually not sufficient – need something akin to undue/exploitive pressure. o Pragley: Guilt over affair did not lead to unfairness.  Unreasonable – outcome: look at adequacy of agreement, what would have gotten under statute.  Wood: difficult to show for contracting out (s21) agreement which did no more than protected a parties separate property – otherwise little point in having provision for contracting out.  Harrison approved Wood: with s21 agreements unreasonable circumstances more likely to be found in unfair process than quality (quantum) of outcome.  Wells: France J confirmed that disparity of outcome more important in post settlement (s21A) agreements: o Tovey v Merwood: s21A agreement where property divided 84:16 – set aside as fundamentally contrary to statutory rights. Agreement ‘unfair’ or ‘unreasonable’ in light of change of circumstances – s21J(4)(d):  C v S: 6 years after separation coastal prop worth $200k rezoned and subdivided and worth $2.5m – argued unreasonable/unfair in light of change of circumstances: HELD sanctity of contracts still applies – would lead to floodgates opening if accepted.  Harrison: change in circumstances must be factual, not change in law ie under PRA.

Occupation Orders:     

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Under a s27 occupation order one party may be given exclusive possession of the home but problem is that often major relationship asset – contrary to clean break principle. In a study by Peart undertaken in 2011: 18/28 cases successfully got an order so good chance. It is clear that the court must have regard to the interests of minor/dependent children pursuant to s26 (R v R) but now also under s28A. S28A reaffirms the application of s26 following concerns that courts were too willing to order a sale. It is clear from Gordon that children’s interests are not paramount: particular regard does not mean paramount regard. Robertson J in the HC in W v W agreed, holding that the interests of children do not need to be taken into account to the exclusion of all others. o HELD: 5 years after separation cut down to 3.5 on appeal. In R v R Burns J outlined at para 64 a number of factors to be taken into account. o HELD: Allowed an order until a further order made to ensure children comfortable and secure while they come to terms with changed circumstances.

Post Separation Contributions: “spending money on the house by way of rates, mortgage payments, and general house maintenance, without any financial contribution from ex”   

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Pursuant to s18B, where the post-separation positive contributions of one party outweigh those of another party, the court can order compensation in the form of money or property where it is just to do so. RWR v AJR holds that ‘contributions’ in s18 goes well beyond money and can include child care and running the household but are not limited to such – wide provision. If children involved: C v C: the contributions made by a husband under maintenance order can be taken into account in making a s18 order. o It is clear from Shandil that childcare can be taken into account however, how much weight it will be given is questionable in light of X v X where it was said s18B cannot be used as an alternative to child support obligations. o HOWEVER: DPC v PMB: judge compensated under s18B for disproportionate contribution to childcare post-separation. Bennington: judge considered that post-abandonment the court could take into account wifes contributions to child support. Financial contributions: likely to be relevant but may be weighed against the fact that the other party is not using the asset and effectively has capital tied up. Under RWR v AJR it is clear financial contributions can

be offset and under Rush we need to take into account the monetary advantages and disadvantages experienced by either.

Discretionary Trusts – ie ‘bundle of rights’ “He also became a discretionary beneficiary under a family trust settled by his parents.”   

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Property acquired after marriage/relationship begins is prima facie rel prop – s8(1)(e) o The issue is whether being a discretionary beneficiary under a trust is rel prop – s2 Nation v Nation: CA at para 148: a discretionary beneficiary under a trust has no legal/beneficial interest until trustee exercises discretion in favour – mere expectation/hope until then. BUT Harrison: CA dicta at para 10 that may have a bundle of rights by virtue of being discretionary beneficiary – LR v JR: Judge Burns at para 79 said this ‘bundle’ is outside the trust and thus can be rel prop and subject to an order. o Walker v Walker reached similar conclusion to Harrison. R v R: suggestion of a spectrum of possibilities from expectancy/hope to bundle of rights. BUT Peart (Family Law online) argues that the decision in Financial Markets v Hotchin has dealt a ‘death knell’ to the bundle of rights argument. Extrajudicial comments of Justice Heath: there is “no general form of a ‘bundle of rights’ doctrine in New Zealand.”

Increases in value, income and gains from separate property – s9(3): 

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Increases in value of separate property are prima facie separate property (s9(3)) BUT this is subject to 2 exceptions: o If the increase is attributable wholly or in part to the direct/indirect consequences of the nonowner – s9A(1); or o If the increase is attributable wholly or in part to the application of rel prop – s9A(2). Onus of proof – s9A does have an onus – non-owner has to show a causal nexus between their actions and the increase in value – Rose v Rose. S9A(2) – Application of Rel Prop: o Discuss the facts and prima facie why increase in value is rel prop. o KRJ v RK: the increase in value is divided equally even though the reason for the increase may be inflationary – reinforced in Nation v Nation and by SC in Rose v Rose. o Peart and Briggs argue that this is out of line with the protection of separate property in the PRA. S9A(1) – actions of the spouse/partner: o The old position was that the non-owner had to show a direct causal nexus between their actions and the increase in value of the asset: Hight v Hight – could this be shown here? Unlikely. o BUT now the act applies to both direct and indirect actions – so long as the contribution is more than trivial or de minimis it will count: Rose v Rose at [35] and [44]. o Rose v Rose: domestic work and childcare accepted as contributions because allow other party to devote more time to increasing value – SC at [44].  As Lord Simon famously said: “The cockbird can feather his nest because he doesn’t have to sit in it.”  HELD wife entitled to 40% through her indirect contributions though never worked on vineyard BUT unique case – indirect income contributions avoided sale. Would be different with a passive investment. o Any increases will be shared relative to the contributions of either spouse to the property (not the relationship); inflationary gains go to the property owner. Peart and Briggs argue that the difference between s9A(2) and (1) treats monetary and non-monetary contributions different and thus breach s1N(c) of the PRA.

Alternative claim:  S17 sustaining of diminishing separate property: this is the so-called companion section of s9A where property has not increased in value but has been sustained by actions of a spouse/partner or application of rel prop.

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No need to show increase in value so lower standard. Atkin and Porter note that an award will likely be lower for this reason.

Family Chattels, Heirlooms and taonga: 

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If item has been hung up: pursuant to s2 Family Chattels includes household ornaments (a(iii)) – the ‘item’ has been placed/hung up in the house and so is a family chattel. Family chattels are prima facie relationship property – s8(1)(b). o If locked away and only one party has the key then no element of family use – S v S. An exception to this is in the case of family heirlooms – ‘a valuable object owned by a family for several generations’ – Oxford English. Atkin and Parlour say that heirlooms must have unique characteristics and be of particular importance. o Apply facts of case – anything that makes it particularly special? RH v AT: one generation enough to be held to be an heirloom. Supported by Q v Q: desk in family for 2 generations sufficient. Also argument for taonga – can apply to non-Maori where an item is of special value/significance – Perry v West.

Acquisitions made from and proceedings from separate property – s9(2) ie damages in tort paid out and/or separate property used to buy flat with some rel prop.       

A primary purpose of the PRA is to keep separate property seperate Property acquired out of separate property and proceeds out of separate property will prima facie be separate property even if acquired during marriage/relationship (s9(2)) – involves a tracing exercise to find the source. YLL v RC: commercial prop sold and money moved from one bank to another – HELD not an acquisition, mere movement of funds. Gill: before marriage had option to take action in tort – this right is property (a chose in action) – if damages awarded after relationship starts will still be separate – just a different form of same action. Geddes v Geddes: The fact that money needs to be borrowed in the form of a mortgage does not affect classification of separate prop – the equity is separate. BUT CA in Swanson said that for s9(2) to apply must be wholly acquired from separate property – Tipping J in Allan said there may be an exception to this where the relationship prop component is de minimus/trifling. Reach a conclusion as to whether de minimus. BUT EXCEPTION where it is acquired for the common use/benefit of parties (s8(1)(ee)) – use determined as at the point of acquisition – Rose v Rose. Conclude.

Super Profits and Goodwill Ie law firm, accounting firm etc     

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Relationship property defined in s2 PRA. Newman: personal goodwill is nor rel prop under the Act – here surgeon getting 95% of work from referrals. Business goodwill is an asset – Thompson v Thompson: aggregate residual value in a business purchased. Z v Z: ‘super profits’ can be classified as property – it is the amount of income attributable to a position in a partnership beyond what would earn based on own skills and knowledge alone. M v B: law firm example – difference between potential earnings at the time of separation and what could get working alone at the bar. BUT must show some goodwill – lacking in T v T.

Immovable Property outside NZ: S7: The PRA cannot apply to immovable property outside of NZ due to the conflict of laws – lex situs: the law where the land is located.

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The existence of overseas immovable property cannot be taken into account when making judgements as to equal sharing – Samarawickrema and Shandil. BUT CA has indicated that may be an argument pursuant to s13 – extraordinary circumstances ( DJB v PB) or the possibility of a double home – s16 (Shepherd).

Short Duration – s14: Pg 11 If not short duration – claim will need to be under s13 extraordinary circumstances.    

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The family home is prima facie rel prop (s8(1)(a)) and the general rule is that it should be divided equally between the spouses/partners (s11). Exception in the case of marriages of short duration and shares will be determined according to contributions made to the marriage – s41(3). S2E provides that a marriage is one of short duration automatically if less than 3 years OR if it is ‘just’ to treat it as one of short duration. o S2B – immediately preceding de facto relationships will be treated as if part of the marriage. Describe facts – what is prima facie position, will need to prove that is just to treat as one of short duration. Martin v Martin – Marriage of 3.5 years o Cooke J at 106: court discretion will only be exercised if it is “a marriage in name only, and with little companionship and mutual support” o Richardson J at 109: parties must live essentially separate lives and have departed from the mutual support implicit in marriage. Hashis v Howes: marriage of over 7 years treated as short duration – marriage in name only. Gilchrist: domestic violence can negate the quality of the marriage. HELD by Judge Inglis (at 171-172) that changes to the social and legislative outlook towards domestic violence justified the departure from the generally non-judgemental approach of the PRA. o Marriage marked by physical and psychological abuse and thus treated as one of short duration. Whether Gilchrist would apply? To depart from equal sharing of family home and chattels, also need to show one of the requirements in s14(2) is met – if met, will be divided according to contributions (below): o S41(2)(a): house wholly or substantially owned by one party during relationship:  Treloar: ‘substantially’ read in light of wholly – noscitar a socis. HELD 70% not sufficient as c...