Relationship property & economic disparity - the basics

In New Zealand, the Property (Relationships) Act governs the division of property between couples.  The general rule is that once you have been in a relationship (de facto, marriage, or civil union) for three years or more, in the event of separation all relationship property is to be divided equally.

There are some exceptions to this general rule. 

For instance, there is provision in the Act for relationship property to be divided unequally where the income and living standards of one party is likely to be significantly higher than the other party after the relationship has ended, because of the effects of the division of functions during the relationship.

The Act recognises that the equal treatment of parties leaving a relationship can lead to inequality, especially where one party, during the course of the relationship, gave up opportunities to pursue a career due to the respective roles in the relationship.

The Court will look at the division of functions in the relationship and the actual disparity, rather than the reasons for the disparity.

The fact that a person had no clear career trajectory (due to the division of functions commencing before their career commenced) does not prevent them from making a claim for economic disparity.  The Court will also not look favourably on arguments that a party could have worked if they wanted to.  Instead the Court will look at what actually happened in the relationship.

Where parties have been in a “traditional” relationship, where one party worked and the other stayed home to care for children and/ or manage the household, and there is a disparity of income and living standards post-separation, it is generally assumed that the division of responsibilities in the relationship was for the benefit of both parties, and that it restricted one party’s income earning ability, and enhanced the other’s income earning ability.

In long term relationships, the Act assumes that parties have contributed to the relationship equally.  Accordingly, the Court assumes that the division of functions within the marriage has caused economic disparity, and it can be difficult to prove otherwise in the case of long term relationships.

When is economic disparity to be assessed?

Economic disparity is to be assessed at the date of separation, as that is when the division of functions in the relationship ended.

What happens if there is an economic disparity?

The Court may compensate the disadvantaged party by ordering the other party to pay them a lump sum of money out of their relationship property, or to transfer any other property out of their relationship property.

In determining whether or not to make an order, the Court may have regard to:

• The likely earning capacity of each party;
• The responsibilities of each party for the ongoing daily care of any minor or dependent children of the relationship; and
• Any other relevant circumstances.

Any compensation payment for economic disparity must be just, and should not reverse the disparity (i.e. lead to a disparity in the other direction).

The Court may take into consideration whether support has been given after separation, for example by way of mortgage repayments, or whether voluntary spousal maintenance payments have been made.  In some cases, the Court may decide that an economic disparity award is not necessary because spousal maintenance payments have been made instead.

How do I determine the amount of compensation payable?

In order to determine the amount of compensation payable, parties can instruct an actuary to obtain evidence of each partner’s future income and living standards and value potential pay-scales for a forgone career.  There is some expense to getting this done, and it can take some time.  Often, however, parties will agree on a figure they are willing to settle on.  It pays to take advice from a lawyer experienced in this area.

Learn more about spousal maintenance.