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Review of the Property (Relationships) Act 1976 [2019] NZLCR 143; Review of the Property (Relationships) Act 1976 [2019] NZLCR 143; Te Arotake I te Property (Relationships) Act 1976

New Zealand Law Commission Reports

Review of the Property (Relationships) Act 1976 [2019] NZLCR 143 (28 June 2019); Review of the Property (Relationships) Act 1976 [2019] NZLCR 143; Te Arotake I te Property (Relationships) Act 1976

Last Updated: 26 July 2019

June 2019 Wellington, New Zealand

Report | Pūrongo 143

Review of the Property (Relationships) Act 1976

Te Arotake i te Property (Relationships) Act 1976

II REVIEW OF THE PROPERTY (RELATIONSHIPS) ACT 1976 LAW COMMISSION

The Law Commission | Te Aka Matua o te Ture is an independent, publicly funded, central advisory body established by statute to undertake the systematic review, reform and development of the law of New Zealand. Its purpose is to help achieve law that is just, principled, and accessible, and that reflects the heritage and aspirations of the people of New Zealand.

The Commissioners are:

The Hon Sir Douglas White - President Helen McQueen - Deputy President Donna Buckingham

Belinda Clark QSO

The office of the Law Commission is at:

Level 9, Solnet House, 70 The Terrace, Wellington 6011 Postal address: PO Box 2590, Wellington 6140, New Zealand Document Exchange Number: SP 23534

Telephone: 04 473 3453 Email: com@lawcom.govt.nz Internet: www.lawcom.govt.nz

A catalogue record for this title is available from the National Library of New Zealand. Kei te pātengi raraunga o Te Puna Mātauranga o Aotearoa te whakarārangi o tēnei pukapuka.

ISBN 978-877569-94-4 (Print)

ISBN 978-877569-93-7 (Online)

ISSN 0113-2334 (Print)

ISSN 1177-6196 (Online)

This title may be cited as NZLC R143. This title is available on the internet at the Law Commission's website www.lawcom.govt.nz

Copyright © 2019 New Zealand Law Commission.

This work is licensed under the Creative Commons Attribution 4.0 International licence. In essence, you are free to copy, distribute and adapt the work, as long as you attribute the work to the Law Commission and abide by other licence terms. To view a copy of this licence, visit https://creativecommons.org/licenses/by/4.0/
iii FOREWORD

LAW COMMISSION REVIEW OF THE PROPERTY (RELATIONSHIPS) ACT 1976 III

President

The Hon Sir Douglas White

Deputy President Helen McQueen

Commissioners Donna Buckingham Belinda Clark QSO

PO Box 2590

Wellington 6140 New Zealand Phone 04 473 3453

lawcom.govt.nz

Hon Andrew Little
Minister Responsible for the Law Commission and Minister of Justice
Parliament Buildings WELLINGTON


28 June 2019


Dear Minister


NZLC R143 – Review of the Property (Relationships) Act 1976 – Te Arotake i te Property (Relationships) Act 1976

I am pleased to submit to you the above report under section 16 of the Law Commission Act 1985.



Yours sincerely,

Douglas White President

iiiiii FFOOREREWWOORDRD

LAW COMMISSION REVIEW OF THE PROPERTY (RELATIONSHIPS) ACT 1976 IV

Foreword

Tēnā koutou
The Property (Relationships) Act 1976 (PRA) is a fundamental part of New Zealand's social legislation. It contains the rules for the division of property when a relationship ends as a result of separation or on the death of one of the partners. It is therefore likely to affect most New Zealanders at some point in their lives. However, the PRA is now over 40 years old, and the ways in which relationships and families are formed, how they operate and what happens when relationships end have changed hugely in that time.
In the 1970s, the paradigm relationship involved a marriage between a man and a woman in which children were raised and wealth was accumulated over time. Now, fewer people are marrying and more people are living in de facto relationships. More relationships end in separation, and repartnering is more common. These changes have taken place against a broader backdrop of demographic change in New Zealand. As a result, public values and attitudes to relationships and families have shifted.
Some significant changes to the law are required to achieve a just division of property between partners on separation. It is essential that the right pool of property is available for sharing. We have concluded it is no longer appropriate to share automatically the family home no matter how it was brought to the relationship. Only property acquired during the relationship or acquired for the couple's common use or benefit should be shared. We also think that some property held on trust has been wrongly excluded from the pool for division and that the courts should have clearer powers to address this. In response to the longstanding problem of how to share more fairly the economic advantages and disadvantages that can arise on separation, we have proposed an entitlement to share family income for a limited period after separation. We have also concluded it would be wrong to ignore the opportunity in this review to promote the best interests of children when their parents separate. Changes to the way in which relationship property disputes are resolved are important as well to address behaviour that causes delay and increases costs.
Our recommendations constitute a package of reforms. Many of our recommendations work together. For example, refining the pool of property available for division is balanced by a more effective regime to share the economic advantages and disadvantages arising from the relationship or its end.
Despite our recommendations for change, certain fundamental aspects of the law should remain as they are. The law should continue to value all forms of contribution to a relationship. This underpins the general approach of equal sharing, a "50/50 split", of relationship property. The law should continue to apply to relationships that are substantively the same – marriages, civil unions and de facto relationships of three years or more. Tikanga Māori should underpin the treatment of Māori land and taonga. The default rules of property sharing should not apply if partners, having received independent and sufficient advice, wish to make their own agreement about their property.

iii FOREWORD

LAW COMMISSION REVIEW OF THE PROPERTY (RELATIONSHIPS) ACT 1976 IV

This review has been striking for the quality of the feedback we have received through consultation and the considerable public interest in the issues under consideration. We are grateful again to the wider law reform community in New Zealand for its willingness to engage with us on our projects. We received extensive feedback from expert legal practitioners, academics and judges. We also received submissions from organisations working in the areas affected by the PRA. We have been helped by the results of a survey of public attitudes and values on relationship property division in New Zealand, which was carried out by the University of Otago and funded by the Michael and Suzanne Borrin Foundation. Last but certainly not least, we are grateful to those members of the public who provided insights into their experiences with the PRA and, in many cases, shared their personal stories with us.


Nāku noa, nā

Douglas White President

iii FOREWORD

LAW COMMISSION REVIEW OF THE PROPERTY (RELATIONSHIPS) ACT 1976 V

Acknowledgements

The Law Commission is grateful to all those who have assisted us during the course of this project. Since the start of the project in early 2016, we have received invaluable assistance from many individuals and organisations. We acknowledged these contributions in our earlier Issues Paper and Preferred Approach Paper. We note again the generous contributions of time and expertise from our expert advisory group and the support and guidance of the Māori Liaison Committee to the Law Commission throughout the project.

Members of the expert advisory group were:

• Professor Bill Atkin, Victoria University of Wellington
• Judge Andrew Becroft, Children's Commissioner
• Mr Stephen van Bohemen, barrister
• Mr David Goddard QC
• Mr Greg Kelly, Greg Kelly Law
• Professor Nicola Peart, University of Otago
• Dr Jan Pryor (to May 2018)
• Judge Laurence Ryan, former Principal Family Court Judge (to August 2018)
• Professor Jacinta Ruru, University of Otago
• Ms Renika Siciliano, McCaw Lewis
• Ms Kirsty Swadling, barrister and mediator

We also acknowledge the additional assistance provided by Chief Judge Jan-Marie Doogue and the Acting Principal Family Court Judges following Judge Ryan's retirement and, following her appointment, the assistance of Principal Family Court Judge Jacquelyn Moran.

We acknowledge with appreciation the role of the following independent reviewers, who considered and commented on various aspects of our work towards this report: Professor Bill Atkin, Victoria University of Wellington; Judge Andrew Becroft, Children's Commissioner; Jan Jakob Bornheim, University of Canterbury; Ms Anita Chan QC; Ms Vivienne Crawshaw QC; Mr David Goddard QC; Dr Maria Hook, Otago University; Ms Jan McCartney QC; Professor Nicola Peart, Otago University; Ms Jacinda Rennie, solicitor; Ms Kirsty Swadling, barrister and mediator; and Mr Stephen van Bohemen, barrister.

We also acknowledge with thanks the work of the Parliamentary Counsel Office Te Tari Tohutohu Pāremata in preparing several draft legislative provisions for inclusion in this report.

iii FOREWORD

LAW COMMISSION REVIEW OF THE PROPERTY (RELATIONSHIPS) ACT 1976 IV

The Commissioner responsible for this project is Helen McQueen. The legal and policy advisers for this report are John-Luke Day, Nichola Lambie, Jesse Watts, Lisa Yarwood and Karen Yates. The clerks who have worked on this report are Lucy Kenner and Maddy Nash.

We also acknowledge the valuable contributions made to this project by former legal and policy advisers Emma Bassett, Alec Dawson, Francis McKeefry and Mihiata Pirini and by former clerks Fady Girgis, Tasneem Haradasa, Oralia Rona and Kate Wilson.

Contents

Executive summary

A NEW RELATIONSHIP PROPERTY ACT

1. New Zealand has undergone a period of significant social change since the Property (Relationships) Act 1976 (PRA) was first enacted. Patterns of partnering, family formation, separation and repartnering have changed. These social changes influence public values and expectations and affect what constitutes a "just" division of property on separation. It is important that the law continues to keep pace with social change and reflect the reasonable expectations of New Zealanders.
2. In our view, the PRA is no longer fit for purpose for 21^st century New Zealand. We recommend that the PRA is repealed and replaced with a new statute that applies to relationships that end on separation, entitled the Relationship Property Act (the new Act). The new Act should give effect to the recommendations for reform set out in this report and otherwise modernise and simplify the law.
3. The central underpinning theory of the new Act should be an entitlement to share the fruits of the family joint venture. In a relationship, partners contribute equally but often in different ways to the family joint venture. This should entitle them to share the property of the family joint venture on separation. The new Act should retain a rules- based deferred property sharing regime rather than relying on judicial discretion. It should be the principal source of law for the division of property when relationships end on separation. We think this will best achieve certainty and predictability for separating couples, which will in turn promote people's ability to resolve property matters without having to go to court.
4. The purpose of the new Act should be to achieve a just division of property between the partners when a relationship ends on separation. We also recommend a new statement of principles to guide the achievement of the purpose of the new Act, reflecting the following concepts:
   • (a) A just division of property recognises tikanga Māori.
   • (b) All forms of contribution to the relationship are to be treated as equal.
   • (c) Relationship property is to be shared equally, unless special circumstances apply.
   • (d) The Act applies in the same way to relationships that are substantively the same.
   • (e) Economic advantages or disadvantages arising from the relationship or its end are to be shared.
   • (f) The best interests of any child of the relationship is a primary consideration.
   • (g) Partners are free to make their own agreements about the status, ownership and division of property, subject to safeguards.
   • (h) Questions arising under the Act should be resolved as inexpensively, simply and speedily as is consistent with justice.

5. We do not recommend that the "clean break" concept should be expressed as a principle of the new Act. In our view, the clean break concept is but one factor that is relevant to achieving a just division of property in the circumstances of each individual case. In some cases, ongoing use of property or future periodic payments may be necessary in order to achieve the purpose of the new Act.
6. We think there is a need for greater public awareness of and education about partners' rights and obligations to share property at the end of a relationship. We recommend that the Government consider ways to improve public awareness of the PRA or the new Act, if enacted.
7. The new Act should only apply to relationships that end on separation. A separate statute is needed to deal comprehensively with relationship property claims arising on the death of a partner, alongside family protection claims and testamentary promises claims. The rules of this statute should be the subject of further consideration within a broader review of succession law.

CLASSIFYING PROPERTY

8. The PRA classifies property the partners own as either relationship property or separate property. Relationship property is generally divided equally between the partners when the relationship ends. The way the PRA classifies relationship property has emerged as a key issue in our review.
9. The PRA's definition of relationship property includes the home and chattels the family used during the relationship, regardless of which partner owns them, when they were acquired or the source of the funds used to acquire them. We consider that this "family use" approach to classifying relationship property can result in unjust outcomes if the property was owned by one partner before the relationship began or if it was received by one partner as a third party gift or inheritance during the relationship.
10. We consider that the full value of the family home should no longer be treated as relationship property just because it was used by the partners during the relationship. Instead, property should be treated as relationship property if it was:
    • (a) acquired by either partner for the partners' common use or common benefit; or
    • (b) acquired or produced by either partner during the relationship, excluding third party gifts and inheritances.
11. We do not propose changing how family chattels are classified. We think that the risk of unfairness in treating all family chattels as relationship property is small given that family chattels are usually of low value, are less likely to increase in value over time and are more likely to be replaced during the relationship. There are also exceptions for heirlooms and taonga, and we recommend below a new exception for chattels of special significance. We do, however, recommend limiting the definition of family chattels to those items "used wholly or principally for family purposes" so it only captures those family chattels that are used by the partners during the relationship.
12. Property acquired before a relationship was contemplated and property acquired by one partner as a gift or inheritance from a third party should be treated as separate property, even if that property is used as the family home. The PRA currently has different rules about when separate property becomes relationship property, depending on whether separate property was acquired before the relationship was

contemplated or whether it was acquired by gift or inheritance. We think the law should be simplified by applying the same rules to all types of separate property as to when separate property becomes relationship property.

13. In some situations, an increase in the value of separate property will be attributable to the relationship and should therefore be treated as relationship property. This includes when separate property is used as the family home. In that case, any increase in the value of the home should be treated as being attributable to the relationship and classified as relationship property. This recognises that the home is a key family asset that has financial, emotional and practical value to the partners and recognises the likelihood that both partners will have directly or indirectly contributed to the preservation and improvement of the family home for the benefit of the family joint venture.
14. Increases in value on other items of separate property should also be treated as relationship property if they are attributable, directly or indirectly, to:
    • (a) the application of relationship property;
    • (b) the application of the non-owning partner's separate property; or
    • (c) the actions of either or both partners.
15. We consider this approach to classification better reflects most people's values and expectations about what property belongs to them as a family and ought to be shared.
16. We think the PRA's definitions of relationship property and separate property should be replaced in the new Act with new provisions to modernise and simplify the law. We also favour placing the burden of proof on the partner who contends property is their separate property. At Appendix 2, we include draft new provisions that have been prepared with the assistance of Parliamentary Counsel.

CLASSIFYING DEBT

17. The PRA requires partners to share the net value of relationship property by ascertaining the total value of the relationship property and then deducting from that total the value of any relationship debts. We are broadly satisfied with the way the PRA defines a relationship debt. Our main concern is that the definition of relationship debt in the new Act should focus on debts that are incurred for the partners' common use and benefit rather than on debts that are incurred jointly. We also consider the new Act should address situations where a couple has no property but only debt. We recommend the court should have powers to divide net indebtedness.
18. There may be situations where a partner incurs debt in a way that disadvantages the other partner but that debt would still meet the definition of a relationship debt. For example, a partner may incur a debt without the knowledge or consent of the other partner or the debt may be on imprudent terms. However, because of the uncertainty it would cause, we do not think it is desirable to introduce a remedy that gives the court discretion to reclassify these kinds of debts. We anticipate too that, in extreme cases, the court could respond to such situations by using its general power to depart from equal sharing.
19. The classification of debts connected to the home needs to change to be consistent with our recommendations regarding how family homes should be classified. We recommend that, when a family home is separate property because it has been

acquired before the relationship was contemplated, any debt incurred before the relationship was contemplated to acquire, improve or maintain the home should be the owning partner's personal debt. If the partners repay the principal debt using relationship property, the non-owning partner should be compensated.

CLASSIFYING SPECIFIC ITEMS OF PROPERTY AND DEBT

20. The PRA excludes heirlooms and taonga from the definition of family chattels. This means they will not automatically be classified as relationship property when they have been used for family purposes. We recommend an additional category of property that should be excluded from the definition of family chattels. These are items of special significance that have a special meaning to a partner and cannot be replaced by a substitute item of similar monetary value.
21. Special provision is needed for personal injury payments made under either the Accident Compensation Act 2001 or a private insurance policy. Currently, personal injury payments can be treated as relationship property depending on when the entitlement to the payment accrued. This might deprive the injured partner from the funds they need for rehabilitation or from compensation for personal impairment, including funds received after a relationship ends. We prefer an approach that classifies personal injury payments depending on whether they are to support the injured partner's rehabilitation or to replace the injured partner's earnings. We therefore recommend that all personal injury payments, except those that compensate for loss of income during a relationship, should be separate property.
22. Family gifting and lending can have significant implications under the PRA. While gifts to the couple might be treated as relationship property, some loans will be deducted from the total value of the relationship property before it is divided. Problems sometimes arise when parents give financial assistance to children and the nature of the transaction is ambiguous. The law presumes the advance is a gift unless the contrary can be proved. We do not think this presumption needs to change. However, it is important the public are aware of the need to properly document the nature and terms of the advance.
23. Student loans are debts that are classified under the PRA like any other debt. Usually they are classified as personal debts. This can cause problems if a partner has repaid their loan through relationship property income, especially when the other partner's student loan remains outstanding. However, we recommend no reform because the current approach of classifying a student loan based on the circumstances of each case appears to work well.

QUALIFYING RELATIONSHIPS

24. The PRA applies to marriages, civil unions and de facto relationships, but the rules are different depending on the length of the relationship and, if the relationship is less than three years' duration, whether the relationship is a marriage, civil union or de facto relationship. We think that some of the rules applying to different relationship types require reform in order to ensure that the law applies in the same way to relationships that are substantively the same.

Marriages and civil unions

25. The PRA applies to all marriages and civil unions, although marriages and civil unions of less than three years' duration are subject to special rules of division. These special rules were designed to prevent one partner obtaining a windfall gain if the marriage or civil union ended after a short period of time. However, relatively few marriages and civil unions end within three years, especially given that any time spent in a preceding de facto relationship is counted when calculating the length of the marriage or civil union. Our recommendations relating to the classification of property outlined above will also reduce the risk of windfall gains. We therefore think that the special rules for marriages and civil unions of less than three years' duration should be abolished and that the new Act should apply to all marriages and civil unions in the same way. We think it is appropriate to emphasise the partners' decision to formalise their relationship rather than to focus on an arbitrary three year milestone.

De facto relationships

26. De facto relationships must satisfy two requirements in order to qualify for equal sharing under the PRA. First, the relationship must meet the statutory definition of de facto relationship. Second, the partners must have lived together as de facto partners for three years or more. We refer to this requirement as the "three year qualifying period".
27. The statutory definition of de facto relationship requires partners to "live together as a couple". The court will consider all the circumstances of the relationship when deciding whether a couple meets this requirement, including the list of matters set out in the statutory definition. We think this definition is suitable and should remain. There are benefits to its breadth and flexibility given the diverse nature of de facto relationships and the range of public attitudes and values about what is important when deciding whether a de facto relationship exists.
28. We also think that the three year qualifying period remains appropriate. It is broadly consistent with public attitudes and values, and is a well-settled feature of New Zealand's property sharing regime. While some submitters thought that the qualifying period should be longer than three years, often the underlying discontent was about what property is shared after three years. This concern will be addressed by our recommendations relating to classification discussed above.
29. While we are satisfied that the definition of de facto relationship and the three year qualifying period remain appropriate, we think that the new Act should provide partners with greater guidance about when a relationship is likely to be a qualifying de facto relationship. We therefore recommend that there should be a statutory presumption that the partners are in a qualifying de facto relationship if they have maintained a common household for a period of three years or more. The presumption should be rebuttable by evidence that the partners do not meet the definition of de facto relationship.
30. De facto relationships that do not satisfy the three year qualifying period normally fall outside the PRA unless the relationship meets additional requirements. If these requirements are satisfied, special rules of division apply. We think de facto relationships of less than three years' duration should continue to be excluded from the property sharing regime, except where:

(a) there is a child of the relationship and the court considers it just to make an order dividing relationship property; or
(b) one partner has made substantial contributions to the relationship and the court considers it just to make an order dividing relationship property.

31. When either situation arises, the de facto relationship should be subject to the ordinary rules of division rather than the existing special rules that apply. This will simplify the eligibility criteria and make the new Act easier to apply.

Relationships involving young people

32. While the PRA imposes no minimum age requirement on married or civil union partners, the Marriage Act 1955 and the Civil Union Act 2004 have a minimum age requirement of 16 and require people aged 16 or 17 to first obtain the consent of a Family Court judge before marrying or entering a civil union. In contrast, only people aged 18 or over can be in a de facto relationship for the purposes of the PRA. A de facto relationship that ends before the youngest partner turns 21 will therefore generally be excluded from the PRA because the three year qualifying period will not have been met.
33. We consider that the new Act should impose minimum age requirements to ensure that young people are not subject to legal rights, duties and responsibilities that are inappropriate for their age. However, we do not think that the minimum age requirement for de facto relationships should be higher than the requirement for marriages or civil unions. We therefore recommend that the same minimum age and consent requirements should apply to all de facto relationships and marriages and civil unions governed by New Zealand law and that these should be consistent with the requirements in the Marriage Act and Civil Union Act.

LGBTQI+ relationships

34. Some relationships among members of the lesbian, gay, bisexual, transgender, queer or questioning, intersex+ (LGBTQI+) community may differ from heterosexual relationship forms and norms. We recommend that the statutory definition of de facto relationship be amended to adopt the gender neutral terminology of a relationship between two people, regardless of their sex, sexual orientation or gender identity. Otherwise, we are satisfied the definition of de facto relationship contains a flexible framework to accommodate the different ways in which members of the LGBTQI+ community may maintain relationships.

Contemporaneous relationships

35. The PRA has special rules to address the division of property in situations where a person is in more than one qualifying relationship at the same time (contemporaneous relationships). However, these rules are flawed and do not appear to have ever been successfully applied in practice. We think the special rules should be reformed so that, where property is relationship property of two or more qualifying relationships, a court can apportion the contested relationship property between the relationships in accordance with the contribution of each relationship to the acquisition, maintenance or improvement of that property. The ordinary rules of division should then apply to each relationship's pool of relationship property, including the exception that applies when

the court thinks there are extraordinary circumstances that make equal sharing repugnant to justice.

Multi-partner relationships

36. The PRA is premised on a qualifying relationship being between two people who live together as a couple. Although the PRA has special rules for when a partner maintains two separate relationships, the PRA does not apply to three or more people who are in an intimate relationship together. Multi-partner relationships may share many of the hallmarks of a qualifying relationship. However, we do not recommend any change at this time to recognise multi-partner relationships in the property sharing regime. We think that such changes would need to be considered within a broader context, involving more extensive consultation, about how family law should recognise and provide for adult relationships that do not fit the mould of an intimate relationship between two people. We recommend further research be undertaken.

Domestic relationships

37. The PRA does not apply to non-intimate relationships between two people who provide care and support for each other. Again, these relationships may share many similarities with relationships that come under the PRA, but we do not think the property sharing regime should, at this time, be extended to domestic relationships. As for multi-partner relationships, any change would be a fundamental shift in policy and should be considered as part of a broader review. We recommend further research be undertaken.

DIVIDING RELATIONSHIP PROPERTY

38. A cornerstone of the PRA is that, on division, each partner is entitled to share equally in the relationship property. We think this rule should continue. Equal sharing is easy to understand and simple to apply. It is also consistent with public attitudes and values and is familiar to many people. Repeal of the equal sharing rule would be a radical shift in policy that we do not think is warranted.
39. There are limited exceptions to equal sharing. When a court considers there are extraordinary circumstances that make equal sharing repugnant to justice, it can order that the partners' relationship property be divided based on the partners' respective contributions to the relationship. We think this exception should continue to address truly extraordinary cases where a just division of property would not be achieved if the equal sharing rule was applied.

The relevance of misconduct

40. We think the extent to which a court can take into account a partner's misconduct should be clearer. We agree with the intent of the current law that a division of property should not be based on moral judgements about the partners' conduct, nor should partners be encouraged to unnecessarily focus on each other's behaviour. We think misconduct should not generally affect a partner's entitlements under the property sharing regime.
41. However, if misconduct is gross and has significantly affected the value of relationship property, we recommend the court should be able to apply the exception to equal

sharing. The misconduct must still amount to extraordinary circumstances that would make equal sharing repugnant to justice. In addition, where a partner's misconduct is gross and affects the value of relationship property, we consider it should be possible for that misconduct to affect that partner's entitlements in other specific and limited instances. Those instances would be where the court is required to assess the partners' contributions, grant orders regarding the use and occupation of property or decide how it will implement a division of relationship property.

42. We recommend that the Government consider the relevance of family violence to the division of property at the end of a relationship in the context of its wider response to family violence.

Adjustments to equal sharing

43. In addition to the general exception to equal sharing, there are several more limited provisions in the PRA that enable the court to adjust the partners' shares in relationship property in specific circumstances. We think the court should continue to have the power to adjust property sharing where:
    • (a) both partners owned a home when the relationship began but only one home is relationship property;
    • (b) one partner's separate property has been sustained by the other partner or by the application of relationship property or the other partner's separate property;
    • (c) one or both partners have made contributions after the relationship ends;
    • (d) one partner's separate property has been materially diminished by the deliberate action or inaction of the other partner;
    • (e) after the relationship ends, one partner has materially diminished the value of relationship property by their deliberate action or inaction; or
    • (f) one partner's personal debts have been satisfied out of relationship property or the other partner's separate property.
44. Several submitters told us that partners will sometimes dissipate relationship property during the relationship. While we recognise the difficulties this can cause, we are satisfied the existing remedies are adequate to address extreme cases. We do not favour the introduction of a specific remedy in the new Act for dissipation of relationship property during the relationship as we do not think it is appropriate or desirable for a partner's use of property to play a greater role in division.

SHARING ECONOMIC ADVANTAGES AND DISADVANTAGES

45. Section 15 of the PRA gives the court the power to compensate one partner from the relationship property pool when there is a significant disparity in the partners' income and living standards because of the way they divided their functions during the relationship. This gives effect to the PRA's principle that a just division of property has regard to the economic advantages or disadvantages arising from the relationship or its end (economic advantages and disadvantages).
46. This remedy is mainly intended to address situations where one partner worked less during the relationship, usually to care for the partners' children and maintain the household. The other partner is then freed up to pursue a career. At the end of the

relationship, equal division of relationship property would not recognise the reduced income-earning prospects of the partner who has given up workforce participation, nor would it recognise the economic benefits the other partner will continue to enjoy from their established career.

47. However, this remedy has been largely unsuccessful in effectively addressing economic advantages and disadvantages. Problems include the time and cost of making a successful claim and the inconsistent approaches adopted in the courts. A further problem is the requirement that compensation be awarded from relationship property, which is an issue when there is a small amount of relationship property available for division.
48. Alongside the court's powers under the PRA, under the Family Proceedings Act 1980, a court may require a partner to pay the other partner maintenance to meet their reasonable needs at the end of a relationship. There is some overlap with the court's powers under the PRA. However, maintenance does not adequately reconcile economic advantages and disadvantages. Further, the moral basis for why one partner should be liable to provide income support to the other partner through maintenance after the relationship has ended is unclear in contemporary New Zealand.
49. We think economic advantages and disadvantages could be better shared through a new limited entitlement to share family income. We therefore recommend the introduction of Family Income Sharing Arrangements (FISAs) to replace both the court's compensatory powers under the PRA and maintenance under the Family Proceedings Act. Under a FISA, partners would share income for a specified period, calculated by a formula that takes into account the partners' incomes before separation and the length of the partners' relationship.

How a FISA would work

50. The economically disadvantaged partner (Partner A) should be eligible for a FISA if they were in a qualifying relationship with the other partner (Partner B) and:
    • (a) the partners have a child together;
    • (b) the relationship was 10 years or longer; or
    • (c) during the relationship:
      • (i) Partner A stopped, reduced or did not ever undertake paid work, took a lesser paying job or declined a promotion or other career advancement opportunity in order to make contributions to the relationship; or
      • (ii) Partner B was enabled to undertake training, education and/or other career sustaining or advancing opportunities due to the contributions of Partner A to the relationship.
51. These eligibility criteria are designed to capture situations where the partners' varying contributions can reasonably be expected to have given rise to economic advantages and disadvantages. Through those contributions, it is likely there was an (often implicit) expectation to share economic advantages and disadvantages throughout the relationship.
52. The amount payable under a FISA should usually be determined by a statutory formula. Under the formula, Partner A would be entitled to half the family income following separation for a period of time that is approximately half the length of the relationship,

up to a maximum of five years. The family income should be calculated based on the partners' combined average income over the three years prior to separation. The statutory formula should also apply a discount to the payments due to Partner A in order to recognise that the partners' expectations to share economic advantages and disadvantages decrease over time as they transition out of the family joint venture.

53. Either partner should be able to apply to a court for an order adjusting the amount payable under a FISA or adjusting how it should be implemented. A court should have power to make the order if it is satisfied that failure to grant the application would result in serious injustice, having regard to the purpose and principles of the new Act and a statutory list of considerations. Partners should also be able to make their own agreement about the amount of FISA payments or how a FISA is to be implemented. An agreement would need to conform to the procedural safeguards that apply to other contracting out and settlement agreements.
54. We recommend the same mechanisms that are used to enforce maintenance and child support should be available to enforce the FISA regime. The Government may also wish to consider extending the role of the Inland Revenue Department under the Child Support Act 1991 in the context of the FISA regime.

TRUSTS

55. Many people in New Zealand use trusts as a means of holding property. When a partner places property on trust, they pass legal ownership to the trustees. In most cases, trust property will fall outside the PRA because it is no longer beneficially owned by the partners.
56. Because property held on trust generally falls outside the PRA, there is no requirement that trust property be divided at the end of a relationship. The remedies available under the PRA to access trust property at the end of a relationship are also of limited effect, either because they are hard to claim or because they give the court inadequate powers. The result is that the PRA does not ensure the just division of significant amounts of property used and enjoyed by families in New Zealand.
57. By settling property on trust, a partner can unilaterally affect the division of property in a way that is inconsistent with the procedures for contracting out of the PRA. When entering a contracting out agreement, the PRA requires the partners to follow a procedure designed to ensure they both enter the agreement with informed consent and do not unwittingly compromise their rights under the PRA. The same procedures do not apply when partners settle property on trust in contemplation of or during a relationship.
58. The task of determining what rights and remedies partners have in relation to trust property at the end of a relationship is complex. The types of interests and powers that constitute property are a developing area of law and found in case law rather than the PRA's rules. Several remedies are found outside the PRA, including the court's broad powers under the Family Proceedings Act to vary trusts that are nuptial settlements. These remedies are founded on different principles to the PRA. They give the court different powers. They involve different procedures.
59. We think the court should have broader powers in order to provide for a just division of property when a trust is involved. We recommend a new remedy that enables the court to respond to the various ways in which a trust might hold property that is produced,

preserved or enhanced by the relationship. We also recommend a partner should be able to lodge and sustain a notice of claim over land held on trust if the partner has an arguable claim under the new remedy. We think the court's power to vary a trust under the Family Proceedings Act should be repealed. The new Act should be the principal source of law in relation to the division of property when a trust is involved, and partners should not have to look elsewhere for relief.

CHILDREN'S INTERESTS

60. Parental separation can have significant and wide-ranging impacts on children. The PRA recognises that children have an indirect but nonetheless important interest in the division of relationship property. One of the purposes of the PRA is to provide a just division of property while taking account of the interests of any children of the relationship. The court is directed to have regard to the interests of any minor or dependent children, and the PRA provides a range of tools that can be used to meet children's needs following parental separation. They include powers to settle relationship property for the benefit of any children of the relationship, postpone the vesting of relationship property, grant a partner the right to occupy the family home, award use and possession of furniture and household effects to a partner and make orders in relation to child support. The PRA also provides for the appointment of a lawyer to represent any minor or dependent children in relationship property proceedings.
61. In practice, however, children's interests have not played a prominent role in relationship property matters. The tools available to benefit children are rarely used, and it is unusual for children to participate in relationship property proceedings. Consequently, we think the PRA fails to strike the right balance between partners' property entitlements and children's interests following parental separation.
62. We recommend several changes that aim to give greater priority to children's interests without altering the general rule of equal sharing. We think the new Act should include a statutory principle and an overarching obligation on the courts to have regard to the best interests of any minor or dependent children. We recommend procedural rules to ensure a court has the information it needs to perform this obligation effectively, and to promote the importance of considering children's best interests. We recommend a new presumption in favour of a temporary occupation or tenancy order for the benefit of any minor or dependent child of the relationship. It should be available to any person who is a principal caregiver of the child. The power to settle property for the benefit of any children of the relationship should remain, and the court should be required to have regard to any unmet needs of the children. Other tools, such as the court's powers to postpone vesting or grant use and possession rights over furniture, should be strengthened.
63. We also recommend a review of the effectiveness of the Child Support Act 1991 in meeting children's needs and setting the level of financial support to be provided by parents for their children. We think that the problems identified by submitters and researchers with how parents take financial responsibility for their children ought to be addressed through a review of the child support regime rather than indirectly through reform of relationship property law.

CONTRACTING OUT AND SETTLEMENT AGREEMENTS

64. The PRA allows partners to opt out of the PRA by making a contracting out or settlement agreement about how their property is to be divided.
65. The PRA ensures partners do not sign away their rights without appreciating their entitlements under the PRA and the implications of the agreement. For example, partners must receive independent legal advice, each partner's lawyer must witness them sign the agreement and the lawyer must certify that they have explained the effect and implications of the agreement. If these requirements are not met, the agreement is void, although a court can give effect to it in some circumstances.
66. Even if an agreement has been properly entered, the court retains power to set the agreement aside entirely if it is satisfied the agreement would cause serious injustice.
67. We think the PRA strikes the right balance. It gives partners the freedom to make their own agreements about how their property should be divided on separation while protecting vulnerable partners by ensuring that they enter such agreements with informed consent. We recommend the general policy continue under which the procedural safeguards remain and the court has discretion to set aside agreements that would cause serious injustice.
68. However, we think the regime could be improved through several changes:
    • (a) Cost and time could be saved by allowing lawyers to use audio-visual technology to witness a partner signing an agreement.
    • (b) The provisions that allow a model form agreement to be set by regulation should be repealed. We doubt the model agreement is used in practice or saves legal costs.
    • (c) The court should have power to set aside seriously unjust agreements wholly or in part. We think a court could better serve the partners' intentions by preserving some aspects of their agreement or varying the agreement rather than setting the whole agreement aside.
    • (d) When the court considers whether to set aside an agreement because it would cause serious injustice, or whether to give effect to a non-compliant agreement, it should have regard to the best interests of any minor or dependent children.

TIKANGA MĀORI

69. We think that the new Act should continue to accommodate and respond to matters of tikanga Māori through its framework, principles and operative provisions. In particular, we recommend the statement of principles in the new Act include the principle that a just division of property recognises tikanga Māori.
70. Māori land should continue to be excluded under the new Act. This means that, if the family home is on Māori land, or property a partner has contributed to is Māori land, the non-owning partner will have to look to other remedies outside the property sharing regime. We do not have evidence that this is a significant problem in practice. However, consideration could be given to providing remedies through Te Ture Whenua Māori Act 1993.
71. We recommend greater protections for taonga. Currently, taonga are excluded from the definition of family chattels, but they are not excluded entirely from the PRA. This

means that, in some situations, a partner may have to relinquish taonga when a relationship ends. We recommend reform to ensure a partner does not have to relinquish taonga on separation. We also recommend that taonga be defined in the new Act by reference to tikanga Māori, but further consultation is required to inform how the definition should be drafted.

72. We do not recommend reform to recognise Māori customary marriage under the new Act. Recognition of Māori customary marriage, and the property entitlements that should follow, should be considered within a broader context that also considers how Māori customary marriage should be accommodated in other areas of law, in particular, the Marriage Act 1955.
73. What constitutes Māori custom or tikanga in any particular case is a question of fact that may require expert evidence. We think there are several ways of improving how the courts resolve questions of tikanga Māori, including a greater use of experts and warranting Māori Land Court judges to sit alongside judges in the Family Court.

PROPERTY ORDERS

74. We are broadly satisfied the court has adequate powers to implement a final division of relationship property. However, we consider the court's powers to make interim distributions of property could be clarified and strengthened. We think the new Act should allow the court to make interim distributions of any property it has determined is relationship property. In appropriate circumstances, the court should also be able to require a partner to distribute their separate property to account for the relationship property they retain in their possession.

Superannuation and KiwiSaver entitlements

75. We recommend several changes to the way partners' entitlements under superannuation and KiwiSaver schemes should be divided. The court's powers to bind superannuation and KiwiSaver scheme managers are currently based on a requirement that the partners enter an arrangement or deed. We do not think this requirement serves a useful purpose, so it should be removed.
76. We also recommend making specific provision for partners to be able to divide KiwiSaver entitlements without needing a court order but only on certain conditions. KiwiSaver entitlements provide important long-term financial benefits, particularly in retirement. They are becoming a common item for property division. Partners should therefore be able to require a scheme manager to transfer funds between the partners' KiwiSaver accounts unless one partner is ineligible to join a scheme. The partners' agreement to divide the entitlements must satisfy the requirements for a valid contracting out or settlement agreement. Partners wishing to divide KiwiSaver entitlements in another way should continue to be able to offset the entitlements by one partner keeping their KiwiSaver entitlements while the other takes relationship property of equivalent value, or otherwise seek a court order.

Protection of property prior to division

77. The PRA contains several mechanisms to prevent a partner from disposing of property prior to division:

(a) A partner can register a notice of claim on land in which they claim an interest under the PRA to prevent dealings with the land.
(b) A partner can apply to the court to restrain dispositions of property that will defeat their rights under the PRA or recover the property if the disposition has already been made.
(c) While proceedings under the PRA are pending, it is a criminal offence for a partner to dispose of family chattels or remove furniture and household effects from the family home without the other partner's consent.

78. We are generally satisfied these mechanisms are adequate. We suggest some minor amendments to make the court's powers to restrain dispositions more consistent with the court's general powers to make interlocutory injunctions and to extend the criminal offence relating to unauthorised disposal or removal of chattels to apply earlier in the resolution of relationship property matters.

Rights to occupy or possess property

79. The court has powers to grant a partner exclusive use and occupation of the family home and vest a tenancy in one partner. When exercising these powers, the court must have particular regard to the need to provide a home for any minor or dependent children of the relationship. When one partner has exclusive possession of relationship property after separation, the court may sometimes order that the partner pay occupation rent to the other partner to compensate them for preventing access to their share of the property.
80. We think the court's powers to grant occupation and tenancy orders are important to provide for the accommodation needs of partners and their children after separation. In paragraph 61 we recommend a new presumption in favour of a temporary occupation or tenancy order for the benefit of any minor or dependent child of the relationship. We also think the court's powers could be strengthened in several other respects.
81. The court should have greater powers to make occupation orders over property that is not relationship property. We recommend that the court should have the ability to make occupation orders over one partner's separate property. We also recommend that the court's jurisdiction should extend to homes held on trusts that are connected to the relationship. The court should continue to have broad powers to make occupation orders on terms it considers appropriate in the circumstances, including the payment of occupation rent.

RESOLUTION

82. A key issue identified in this review is that the PRA does not facilitate the inexpensive, simple and speedy resolution of relationship property matters. Lengthy delays and unaffordable costs can exacerbate what is already a deeply traumatic time of anxiety, uncertainty and conflict for many separating partners. We therefore make a range of recommendations designed to promote the just and efficient resolution of relationship property matters.

Access to information

83. We think there needs to be more comprehensive and easy to understand information about the property sharing regime and options for resolving relationship property matters. We therefore recommend that the Government develop and publish a comprehensive information guide. The object of the information guide should be to promote out of court resolution as far as possible by giving partners the information they need in order to participate effectively in the resolution of relationship property matters. The information guide should be widely available in a range of different formats and languages. We also think that consideration should be given to funding community organisations to provide person-to-person support for people who have difficulty accessing, navigating and applying the information guide themselves. Such support should enable people to take the first steps in the resolution process but is not intended to replace the need to obtain legal advice.

Access to affordable legal advice

84. Access to affordable legal advice is essential in ensuring access to justice for relationship property matters given the complexity of the law in this area and its impact on partners' rights and responsibilities. Without legal advice, any contracting out or settlement agreements partners reach are unenforceable. Access to affordable legal advice was raised as an issue by many submitters. We think the Government should reconsider the current policy settings for the provision and funding of legal advice on relationship property matters.

Resolving relationship property matters out of court

85. Partners can resolve their relationship property matters out of court in a range of different ways, including by lawyer-led negotiation or by using a dispute resolution service such as mediation, collaborative law, arbitration or online dispute resolution. There is no publicly funded service, although parents can raise relationship property matters during Family Dispute Resolution (FDR) if it will help them resolve parenting disputes.
86. We think that partners should be encouraged to voluntarily participate in out of court dispute resolution processes to resolve relationship property matters. We recommend promoting out of court resolution by introducing new "pre-action procedures" in the Family Court Rules 2002 that will provide a clear process for partners to follow when attempting to resolve relationship property matters out of court. Consideration should also be given to extending a voluntary modified FDR service or some other form of publicly funded service to relationship property matters, particularly in light of the recommendations the Independent Panel examining the 2014 family justice reforms has made relating to FDR. Safeguards would be necessary to ensure that FDR is appropriate for relationship property matters. We do not recommend providing a specific dispute resolution service for some or all relationship property matters such as low value claims.

Resolving relationship property matters in court

87. When partners cannot resolve relationship property matters themselves, they can apply to the Family Court for orders dividing their property. There are several practical issues

with the Family Court process that can hinder the just and efficient resolution of relationship property matters. There are costs and delays in going to court because relationship property proceedings take a long time to resolve. Partners may sometimes use tactics to delay proceedings to force the other partner to incur added expense and settle for less than they are entitled to.

88. We think the Family Court processes could be improved to facilitate the timely progression of relationship property proceedings. This will help ensure that the threat of court action and court-imposed penalties effectively deters partners from engaging in bad behaviour when resolving relationship property matters out of court. It will also ensure that court action is a real and efficient option in those cases where resolution is not possible any other way. We recommend establishing a new Family Court Rules Committee to develop new procedural rules for relationship property matters and issue guidance on these rules as required. This should include case management procedures tailored to relationship property proceedings. We also think the Family Court should have a broader power to appoint a person to conduct an inquiry into any such matter as may assist the court to deal effectively with the matters before it.
89. Clearer guidance should be provided on the imposition of penalty costs and other consequences for non-compliance with procedural requirements. Otherwise, we are satisfied the general principle that costs should "lie where they fall" is appropriate for relationship property proceedings. Where costs are awarded, the distinctive characteristics of relationship property proceedings justify a separate scale of costs, and we propose this be developed by the new Family Court Rules Committee.
90. We recommend that the Government consider reducing the application and hearing fees for relationship property proceedings in recognition of the fact that the introduction of fees for relationship property proceedings in 2012 resulted in a reduction of PRA applications to the Family Court. We also recommend that the Government collect data on the progress and resolution of relationship property proceedings in the Family Court in order to monitor whether the Family Court is adequately resourced to deal appropriately with relationship property proceedings.

Disclosure

91. Achieving a just and efficient resolution of relationship property matters in and out of court relies on both partners having sufficient information about each other's property and finances. Disclosure can be challenging in relationship property matters, particularly when one partner has greater knowledge of the couple's financial affairs. This can put the other partner at a disadvantage. While partners are required to make some initial disclosure when they file proceedings and can apply for discovery under the Family Court Rules, we think that the current law and processes are inadequate. We recommend that the requirements for disclosure should be strengthened by:
    • (a) providing in the new Act that the partners have a continuing duty to give timely, full and frank disclosure of all relevant information;
    • (b) developing specific procedural rules that set out a prescribed process for disclosure that applies before an application is made to the court and provide a clear procedure for initial and subsequent disclosure in relationship property proceedings; and
    • (c) having clearer and stricter consequences for non-disclosure.

JURISDICTION OF THE COURTS

92. Every application under the PRA must be heard and determined in the Family Court. There is no financial limit on the claims the Family Court can hear. The Family Court can, however, transfer proceedings to the High Court if it decides that the High Court is the more appropriate venue to deal with those proceedings. Substantive decisions under the PRA are subject to a right of appeal to the High Court.
93. There are several issues that affect the Family Court's ability to hear and determine property disputes that arise between partners at the end of a relationship. It is unclear whether the Family Court can decide certain issues relating to trusts or general civil law and the Court has no jurisdiction under the Trustee Act 1956 or the Companies Act 1993.
94. We think that the Family Court should have first instance jurisdiction to determine all matters related to relationship property proceedings. The Family Court has a specialist jurisdiction in family and relationship property matters. It regularly deals with complex cases and applies principles of general law. We are satisfied extending its jurisdiction to handle wider property issues in relationship property proceedings is appropriate. The High Court should continue to exercise a supervisory role through the existing rights of appeal and the ability to transfer proceedings to the High Court.

Appealing interlocutory decisions

95. Although partners have a right of appeal to the High Court, the law is not settled on whether this includes a right to appeal interlocutory decisions. Some interlocutory decisions are important and concern the partners' substantive rights, whereas others are relatively insignificant procedural matters. We recommend there should be an automatic right to appeal interlocutory decisions in relation to interim distributions, occupation, tenancy and furniture orders, transfer of proceedings to the High Court, notices of claim, restraining dispositions of property or orders for disclosure made in relation to a trust or company or under the Family Court Rules. For all other interlocutory decisions, a partner should need to seek the Family Court's leave to appeal.

Overlap with the Domestic Actions Act 1975

96. We recommend the repeal of Part 2 of the Domestic Actions Act 1975. It provides for the settlement of property disputes arising from the termination of agreements to marry. It overlaps with the PRA regime and is outdated. A remedy will continue to be available through a claim based on constructive trust for couples who made decisions affecting their property but were not in a qualifying relationship for the purposes of the new Act.

CREDITORS' INTERESTS

97. As a general rule, the PRA does not affect the rights of creditors. Apart from limited exceptions, creditors have the same rights against a partner and that partner's property as if the PRA had not been passed. We think this general rule remains sound and should continue under the new Act.
98. One of the exceptions is a partner's protected interest in the family home. This takes priority over the unsecured debts of the other partner. The protected interest suffers

from many problems because it is available only to homeowners and it is questionable whether the extent of the interest provides effective protection. However, it is difficult at this stage to recommend reform. The broad question of the appropriate balance of interests between a debtor, their family, and creditors is not within the terms of our review. We consider further policy work is needed to determine what property rights partners and creditors have in bankruptcy.

99. The PRA provides remedies for creditors when an agreement or disposition between partners has the effect of defeating creditors' interests. There are difficulties with how this provision applies in practice that we think need to be clarified in the new Act. In particular, we recommend creditors should have a two year period in which to challenge agreements or dispositions that have a defeating effect. When a partner is bankrupt, the Official Assignee should have clear powers to set an agreement or disposition aside. We also think the provision should clarify that, in some cases, a court should not order recovery from a partner who receives property under a settlement agreement. The partner would need to show that they received the property in good faith, that they did not suspect the other partner's insolvency and that they have altered their position.

CROSS-BORDER ISSUES

100. Cross-border issues can arise where one or both partners live overseas or have a connection to another country or where their property is located overseas. The PRA applies to immovable property situated in New Zealand and movable property regardless of where it is situated if at least one of the partners is domiciled in New Zealand. The PRA does not apply to immovable property situated outside New Zealand. These rules give rise to several problems. They prevent the resolution of property disputes under a single legal regime. They are silent on what country's law is to apply when the PRA does not apply, which creates uncertainty and risks leaving gaps in the law. The domicile test is also problematic. The country where a partner is domiciled might have very little connection to the relationship. Relying on one partner's domicile might also be unfair to the other partner, especially if the domicile was acquired after the relationship ended.
101. We think that the law to be applied to property disputes between partners should be the law of the country with which the relationship had its closest connection. When the new Act applies under this rule, a court should be able to classify all the partners' property as relationship property or separate property regardless of where it is located, and the net value of relationship property available for division between the partners should include the value of any items of relationship property that are situated overseas. A court should be able to use its full range of ancillary powers to implement a division in a way that best addresses the partners' circumstances and the location of the property. If property is situated outside New Zealand and is immovable (for example, land), a court should be able to make orders against the partners themselves rather than against the property directly.
102. We think the PRA's provisions regarding choice of law agreements should be repealed and replaced with rules in the new Act that give partners more flexibility to make agreements about their property. Agreements should need to satisfy certain requirements, including that the agreement is valid under the law of the country that is chosen under the agreement, or under the law of the country with which the

relationship had its closest connection. The court should, however, retain discretion not to give effect to a valid agreement if it would be contrary to New Zealand public policy.

103. We recommend that the Family Court should have first instance jurisdiction in respect of all property disputes between partners, regardless of whether the new Act or the law of another country applies. The Family Court is generally more accessible and cost- effective than the High Court, and it has the expertise to deal with property disputes between partners. However, we think that partners should continue to apply to the High Court in order to enforce in New Zealand a judgment made by a foreign court. Various requirements must be satisfied before a New Zealand court will enforce a foreign judgment, depending on the jurisdiction where the order was made, the type of judgment and the relevant law that applies to the enforcement procedure. We think the procedures in the High Court should continue to apply.

Recommendations for reform

CHAPTER 2: A NEW RELATIONSHIP PROPERTY ACT

CHAPTER 3: CLASSIFYING PROPERTY

CHAPTER 4: CLASSIFYING DEBT

CHAPTER 5: CLASSIFYING SPECIFIC ITEMS OF PROPERTY AND DEBT

CHAPTER 6: QUALIFYING RELATIONSHIPS

CHAPTER 7: SPECIFIC RELATIONSHIP TYPES

CHAPTER 8: DIVIDING RELATIONSHIP PROPERTY

CHAPTER 9: ADJUSTMENTS TO EQUAL SHARING

CHAPTER 10: SHARING ECONOMIC ADVANTAGES AND DISADVANTAGES

CHAPTER 11: TRUSTS

CHAPTER 12: CHILDREN'S INTERESTS

CHAPTER 13: CONTRACTING OUT AND SETTLEMENT AGREEMENTS

CHAPTER 14: TIKANGA MĀORI

CHAPTER 15: PROPERTY ORDERS

CHAPTER 16: RESOLUTION

CHAPTER 17: JURISDICTION OF THE COURTS

CHAPTER 18: CREDITORS' INTERESTS

CHAPTER 19: CROSS-BORDER ISSUES

CHAPTER 1

Introduction

1.1 Dividing property when relationships end is often a challenging task and one that typically comes at a time of emotional upheaval. When relationships end as a result of separation, both partners will generally be worse off financially because the resources that were being used to support one household must now support two. How property is divided can significantly affect the financial and emotional recovery of partners and their children.
1.2 The Property (Relationships) Act 1976 (PRA) sets out the rules that govern how property owned by either or both partners is divided when a relationship ends. It applies to marriages, civil unions and de facto relationships. The policy of the PRA is the just division of property, and this policy is given effect primarily through the rule that each partner is entitled to share equally in property connected to the relationship (relationship property) while retaining their property that is kept separate from the relationship (separate property). There are, however, a range of exceptions to this general rule that recognise the diversity of relationships and infinite variety of different circumstances that can arise.1
1.3 The Law Commission was asked to review the PRA, which is now over 40 years old, to determine whether it is still operating appropriately and effectively. This report sets out our findings and makes recommendations for change.

OUR REVIEW

1.4 Our review of the PRA has been wide-ranging. The terms of reference are set out in Appendix 1 and required consideration of the PRA rules and how relationship property matters are resolved in practice.
1.5 The terms of reference do not include other areas of family and social legislation, such as the child support regime in the Child Support Act 1991, the maintenance regime in the Family Proceedings Act 1980 or the social security regime in the Social Security Act 1964. Nonetheless, the PRA cannot be considered in isolation from these regimes, and some of our recommendations relate to or may affect these regimes. In Chapter 10, we address the maintenance regime and recommend its repeal. In Chapter 12, we discuss the child support regime and recommend a review of the effectiveness of child support in meeting children's needs and setting the level of financial support to be provided by parents for their children.

1. For an overview of how the Property (Relationships) Act 1976 operates in practice, see Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at ch 3.

OUR PROCESS

1.6 In October 2017, we published our Issues Paper,2 following extensive research and preliminary consultation with community groups, government organisations and academic and practitioner experts. The Issues Paper was divided into 13 parts and sought feedback on a wide range of different issues. To aid consultation, we also prepared a Consultation Paper, which summarised the key issues identified in the Issues Paper for members of the public. The content of the Consultation Paper was published on a consultation website, through which people could tell us their own story about how the PRA has affected them or answer any of the consultation questions online.
1.7 At the same time, we published a Study Paper,3 which explored the social context of our review and how New Zealand has changed over the last 40 years. The Study Paper described the significant demographic changes that have taken place since the PRA was first enacted and set out what we know about how relationships and families are formed, how they operate and what happens when relationships end in contemporary New Zealand.
1.8 The Commission received 313 submissions on the Issues Paper and Consultation Paper. They included 255 submissions from individual members of the public, 24 submissions from individual legal practitioners, judges, academics and other experts and 34 submissions from organisations, including government entities, law firms, dispute resolution service providers and community organisations. The key themes from consultation are addressed in Chapter 2.
1.9 In addition to receiving submissions, the Commission hosted 16 public consultation meetings throughout the country, at which we received many useful contributions. We also met with lawyers, academics, the Judges of the Family Court and the Māori Land Court and other experts.

The Preferred Approach Paper

1.10 We published our Preferred Approach Paper4 in November 2018. Given the breadth and depth of issues arising out of this review, we concluded that a paper that set out our preferred approach on key matters would help us refine our recommendations and provide an opportunity for further focused consultation. The Preferred Approach Paper made 71 proposals for reform on key matters such as the need for a new statute to apply to relationships ending on separation and the need to give further consideration to the rules that should apply to relationships ending on death within a broader review of succession law. We also made proposals in the key areas of classification and division of property, the types of relationships the PRA should cover, reform of section 15 (compensation for economic disparity), trust property, children's interests, contracting

² Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017).

3. Law Commission Relationships and families in contemporary New Zealand: He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017).
4. Law Commission Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai (NZLC IP44, 2018).

out and settlement agreements, tikanga Māori, the resolution of PRA disputes and creditors.
1.11 We received 100 submissions on the Preferred Approach Paper, which included 57 submissions from members of the public, 34 submissions from individual legal practitioners, judges, academics and other experts and nine submissions from organisations including government and community organisations.
1.12 Since publication of the Preferred Approach Paper, we have finalised our policy decisions on the matters addressed in that paper, informed by the consultation response. We have also addressed matters that were not covered in the Preferred Approach Paper, drawing on the consultation response to the Issues Paper, and with the benefit of further consultation and external review from individual academic and practitioner experts. These new matters include the classification of debt, the treatment of specific items of property and debt, eligibility of specific relationship types, adjustments to equal sharing, property orders, jurisdiction of the courts and cross- border issues.
1.13 Throughout this process, we have been supported by an expert advisory group and have sought guidance from the Law Commission's Māori Liaison Committee on those matters that may be of particular concern to Māori.
1.14 We have also had the benefit of assistance from Parliamentary Counsel in drafting proposed legislative provisions reflecting our recommendations relating to the classification of property and trusts.

MATTERS ADDRESSED IN THIS REPORT

1.15 This report is the culmination of a three year review. We make 140 recommendations addressing a wide range of issues.
1.16 Our recommendations do not address every aspect of the PRA and its operation. Many aspects of the current law remain satisfactory and should continue. Our approach has been to make formal recommendations only where we consider that reform of the current law is required or where we think it is helpful to positively endorse the current law on key aspects of the relationship property regime.
1.17 In developing these recommendations, we have recognised that reform can be achieved in a variety of ways and that legislation is not an exclusive solution.5 In considering each issue, we have therefore also taken into account:6

• (a) whether the courts should be left to develop and determine the law on the issue;7

5. See Lord Toulson "Democracy, Law Reform and the Rule of Law" in Matthew Dyson, James Lee and Shona Wilson Stark (eds) Fifty Years of the Law Commissions: The Dynamics of Law Reform (Hart Publishing, Oxford, 2016) 127; David Ormerod "Reflections on the Courts and the Commission" in Matthew Dyson, James Lee and Shona Wilson Stark (eds) Fifty Years of the Law Commissions: The Dynamics of Law Reform (Hart Publishing, Oxford, 2016) 326; and Ellen France, Judge of the Supreme Court of New Zealand "Something of a Potpourri: A Judge's Perspective on Law Reform" (address to the Law Commission's 30th Anniversary Symposium, Wellington, 3 November 2016).

⁶ See Law Commission The Second Review of the Evidence Act 2006: Te Arotake Tuarua i te Evidence Act 2006

(NZLC R142, 2019) at [1.18]–[1.33].

7. This recognises that the constitutional role of interpreting the provisions of legislation and applying those provisions to the particular facts of the case rests with the courts: Philip A Joseph Constitutional and Administrative Law in New

(b) whether the issue might be resolved through increased use of existing provisions in the PRA;
(c) whether, instead of legislative reform, the issue could be addressed through greater education of the public and professionals; and
(d) whether the issue is a broader policy problem that might benefit from separate examination.
1.18 We also recognise that it is important when making law reform proposals to ensure, as far as practicable, that they do not have unintended consequences. Where we have not identified significant practical issues with the current law, the potential for introducing unintended consequences may weigh against proposing reform.
1.19 This report is divided into 19 chapters. Following on from this chapter, we look at:

• (a) the history of the PRA and the need for a new Relationship Property Act (the new Act) (Chapter 2);
• (b) how property should be classified under the new Act (Chapter 3);
• (c) how debt should be classified under the new Act (Chapter 4);
• (d) the classification of specific items of property and debt, including chattels of special significance, ACC and private insurance payments, family gifting and lending and student loans (Chapter 5);
• (e) how the new Act should apply to marriages, civil unions and de facto relationships (Chapter 6);
• (f) whether the new Act should apply to specific relationship types, including relationships involving young people, LGBTQI+ relationships, contemporaneous relationships, multi-partner relationships and domestic relationships (Chapter 7);
• (g) how relationship property should be divided under the new Act, including the general rule of equal sharing, the exception for extraordinary circumstances and the relevance of misconduct (Chapter 8);
• (h) how partners' property interests, including their entitlement to an equal share in relationship property, should be adjusted in different circumstances (Chapter 9);
• (i) how partners should share the economic advantages and disadvantages arising out of the relationship or its end (Chapter 10);
• (j) what should happen to property held on trust (Chapter 11);
• (k) the role of children's interests under the new Act (Chapter 12);
• (l) the rules that should govern partners' ability to contract out of the new Act and enter into settlement agreements (Chapter 13);
• (m) how the new Act should accommodate and respond to tikanga Māori (Chapter 14);
• (n) the orders a court should be able to make to implement a final division of relationship property, grant interim distributions of property, divide superannuation

Zealand (4th ed, Brookers, Wellington, 2014) at [2.4.3] and [21.2.2]–[21.2.3]. In doing so, the courts are able to resolve issues of interpretation and develop the law in a way that promotes the legislation's purpose and principles and ensures it works as Parliament intended.

and KiwiSaver entitlements, protect property prior to division and grant a partner the right to occupy or possess property (Chapter 15);
(o) how relationship property matters under the new Act should be resolved in practice (Chapter 16);
(p) the jurisdiction of the courts to hear and decide disputes under the new Act (Chapter 17);
(q) how the interests of creditors should be affected by the new Act (Chapter 19); and
(r) what should happen when one or both partners have a connection with another country, or own property in another country (Chapter 20).

Our terminology and approach to anonymisation of court decisions

1.20 Three types of relationships are at the centre of the PRA: marriages, civil unions and de facto relationships. For readability, we use the term "relationship" unless we are referring to a specific relationship type. Likewise, we use the term "partner" to refer to a spouse, civil union partner or de facto partner. Often the discussion in this report takes place after a relationship ends, but for simplicity, we will continue to refer to "partners" rather than "former partners".
1.21 The PRA also uses the terms "child of the marriage", "child of the civil union" and "child of the de facto relationship". These terms have separate but largely identical definitions in section 2 of the PRA. In this report, we refer to "child of the relationship" to mean any child of the marriage, civil union or de facto relationship.
1.22 Many court decisions under the PRA are anonymised through the use of fictitious names or the use of parties' initials. Some decisions are not anonymised yet are still subject to publication restrictions.8 To address this, we have replaced the names of parties with initials when our discussion of the facts of a case includes sensitive information that could identify vulnerable individuals.

⁸ Property (Relationships) Act 1976, s 35A; and Family Court Act 1980, ss 11B–11D.

CHAPTER 2

A new Relationship Property Act

the history of the PRA and the need for a new Relationship Property Act to regulate the division of property between partners on separation and, in particular:

• the purpose and principles that should govern the new Act;
• the need for greater public awareness of the PRA and any new Act; and
• the need for a separate Act for relationships ending on death.

IN THIS CHAPTER, WE CONSIDER:

HISTORY OF THE PRA

2.1 In order to understand why the PRA functions in the way it does, it is helpful to consider briefly how the law governing the division of property at the end of a relationship has evolved.1

The doctrine of matrimonial unity and its impact on Māori women

2.2 The law New Zealand inherited from England deemed a husband and wife to be one legal person, and that person was the husband. This was known as the doctrine of matrimonial unity, and it meant that most of the wife's property rights were acquired by the husband on marriage.2 The husband, in return for the ownership and control of property the wife brought into the marriage, had an obligation to maintain the wife and children that endured even if the husband and wife ceased living together.3

1. We discuss the history of the Property (Relationships) Act 1976 in greater depth in Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [2.2]– [2.42].

² See RL Fisher (ed) Fisher on Matrimonial and Relationship Property (online ed, LexisNexis) at [1.4].

3. A Angelo and W Atkin "A Conceptual and Structural Overview of the Matrimonial Property Act 1976" (1977) 7 NZULR 237 at 241–242.

2.3 This was in stark contrast to the role of women in traditional Māori society. They were nurturers and organisers, valued within their whānau, hapū and iwi.4 Both men and women had the capacity to hold property.5 Marriage "did not alter this reality".6 A woman retained ownership of land that was hers prior to marriage, and decisions regarding it were the woman’s to make, subject to whānau and hapū interests.7
2.4 The role of Māori women in society was gradually undermined in the period of colonisation that followed the signing of the Treaty of Waitangi.8 When English law was applied to Māori women, their status became the same as their English counterparts. 9 Māori customary marriage was eroded by the English Laws Act 1858 and successive marriage laws that required Māori to conform more closely to the legal requirements for establishing marriage under English law. By the 1950s, customary marriages were no longer legally recognised.10 The relationship of women with the land was also challenged by the colonial concepts of individual land ownership and the role of men as property owners.11 The Native Land Act 1873 provided that husbands should be party to all deeds executed by married Māori women.12 Husbands, on the other hand, were free to dispose of their Māori wives' land interests without their wife being a party to the deed.13 Legislation enacted during this period also moved land ownership into individual (usually male) ownership rather than guardianship, again reducing Māori women's control.14

4. Law Commission Justice: The Experiences of Māori Women – Te Tikanga o te Ture: Te Mātauranga o ngā Wāhine Māori e pa ana ki tēnei (NZLC R53, 1999) at 11.
5. Angela Ballara "Wāhine Rangatira: Māori Women of Rank and their Role in the Women's Kotahitanga Movement of the 1890s" (1993) 27 The New Zealand Journal of History 127 at 133–134. See also Law Commission Justice: The Experiences of Māori Women – Te Tikanga o te Ture: Te Mātauranga o ngā Wāhine Māori e pa ana ki tēnei (NZLC R53, 1999) at 15; and Judith Binney and Gillian Chapman Ngā Mōrehu The Survivors (Oxford University Press, Auckland, 1986) at 25–26.
6. Jacinta Ruru "Indigenous Peoples and Family Law: Issues in Aotearoa/New Zealand" (2005) 19 International Journal of Law, Policy and the Family 327 at 330. See also Law Commission Justice: The Experiences of Māori Women – Te Tikanga o te Ture: Te Mātauranga o ngā Wāhine Māori e pa ana ki tēnei (NZLC R53, 1999) at 22.
7. Jacinta Ruru "Indigenous Peoples and Family Law: Issues in Aotearoa/New Zealand" (2005) 19 International Journal of Law, Policy and the Family 327 at 330; and Angela Ballara "Wāhine Rangatira: Māori Women of Rank and their Role in the Women's Kotahitanga Movement of the 1890s" (1993) 27 The New Zealand Journal of History 127 at 134.
8. Law Commission Justice: The Experiences of Māori Women – Te Tikanga o te Ture: Te Mātauranga o ngā Wāhine Māori e pa ana ki tēnei (NZLC R53, 1999) at 11; and Pat Hohepa and David Williams The Taking into Account of Te Ao Māori in Relation to Reform of the Law of Succession (NZLC MP6, 1996) at 29.
9. Law Commission Justice: The Experiences of Māori Women – Te Tikanga o te Ture: Te Mātauranga o ngā Wāhine Māori e pa ana ki tēnei (NZLC R53, 1999) at 17.

¹⁰ At 22. See the Māori Purposes Act 1951, s 8(1) and the Māori Affairs Act 1953, s 78.

¹¹ At 11.

12. This followed unsuccessful attempts by Pākehā husbands to "gain control of the lands of their Māori wives" by challenging a provision of the Native Lands Act 1869 that enabled married Māori women to deal with their land as if "feme sole" (an unmarried woman). See Angela Ballara "Wāhine Rangatira: Māori Women of Rank and their Role in the Women's Kotahitanga Movement of the 1890s" (1993) 27 The New Zealand Journal of History 127 at 134.
13. Law Commission Justice: The Experiences of Māori Women – Te Tikanga o te Ture: Te Mātauranga o ngā Wāhine Māori e pa ana ki tēnei (NZLC R53, 1999) at 21.

¹⁴ At 21–22.

The separation of property system

2.5 The Married Women's Property Act 1884 brought significant reform in New Zealand. It repealed the doctrine of matrimonial unity inherited from England and replaced it with a "separation of property" system. While the previous law deemed husband and wife to be one legal person (the husband), the effect of the Married Women's Property Act was to treat husband and wife virtually as strangers.15 The Act looked at property as his or hers rather than "theirs".16 It required a court to divide property according to each spouse's entitlements under general property law principles. More often than not, the husband was the legal owner of all the couple's property because the property was acquired in his name and had been paid for from his earnings. The Act did little for married women who had remained homemakers, earned no income and had no opportunity to contribute financially to the purchase of property.17 On separation, many women were left without any rights to the property acquired and used in the course of the marriage.

The Matrimonial Property Act 1963 – recognising non-monetary contributions to property

2.6 In the second half of the 20th century, concern grew at the way the law disadvantaged women. There was increasing recognition that a wife may have supported her husband for many years in a way that enabled him to earn income and acquire property. In response, the Matrimonial Property Act 1963 was enacted. It retained the separation of property system but with a "superimposed judicial discretion" that enabled a court to make orders overriding the spouses' strict legal and equitable interests in the property.18 When making those orders, a court was required to have regard to the contributions the husband and wife made to the property in dispute, whether "in the form of money payments, services, prudent management, or otherwise".19 The philosophy of the 1963 Act was to produce an outcome that recognised a wife's role in the family at a time when marriage was still a defining structure of society and a wife's role was still largely in the home.
2.7 Despite the 1963 Act's new focus, a number of problems with the Act's practical application emerged over the next decade. In particular, there were complaints that the approach of requiring a spouse to show specific contributions to identified items of property still caused difficulties for married women.20

15. AM Finlay "Matrimonial Property – Comparable Sharing: An Explanation of the Matrimonial Property Bill 1975" [1975] II AJHR E6 at 3.
16. Special Committee on Matrimonial Property Matrimonial Property: Report of a Special Committee (Department of Justice, June 1972) at 3.
17. AM Finlay "Matrimonial Property – Comparable Sharing: An Explanation of the Matrimonial Property Bill 1975" [1975] II AJHR E6 at 4.
18. Matrimonial Property Act 1963, s 5(3); and A Angelo and W Atkin "A Conceptual and Structural Overview of the Matrimonial Property Act 1976" (1977) 7 NZULR 237 at 248.

¹⁹ Section 6(1).

20. See Special Committee on Matrimonial Property Matrimonial Property: Report of a Special Committee (Department of Justice, June 1972); and NV Douglas "Women's Rights Committee: June 1975" [1975] IV AJHR I13.

The Matrimonial Property Act 1976 – A new deal

2.8 To address the problems identified with the 1963 Act, Parliament enacted the Matrimonial Property Act 1976. When the Bill was introduced to Parliament, the Minister of Justice explained in a White Paper that the legislation embodied the concept of "marriage as an equal partnership between two equal persons and as the basis on which our present society is built".21 Spouses were not treated as strangers but as partners in a common enterprise.22
2.9 The Matrimonial Property Act 1976 enabled the court to look at the marriage assets as a whole and relate the contributions of the husband and wife to them rather than to specific items of property. The Act did this by introducing the concept of "matrimonial property". Broadly speaking, matrimonial property encompassed the family home, the family chattels and all other property the husband or wife acquired after the marriage except by inheritance or gift.23 It was this matrimonial property that was subject to equal division between the husband and wife.24 Separate property, in contrast, belonged solely to the husband or wife and was not eligible for sharing. All property owned by either spouse that did not come within the definition of matrimonial property was separate property.
2.10 In the years following its enactment, the general rule of equal sharing of matrimonial property became accepted in New Zealand as the new norm.25 The Matrimonial Property Act 1976 was recognised as "social legislation" that provided a "fair and practical formula" for resolving property matters when marriages came to an end.26

The 2001 amendments and the new Property (Relationships) Act 1976

2.11 In 1988, a Working Group reviewed the Matrimonial Property Act 1976. The Group made several key recommendations to extend the regime.27 They included that the Act should apply to de facto couples, and the Act should apply the same rules of property division when a spouse died.
2.12 Although not acted on immediately, the Working Group's recommendations were implemented in 2001 as reforms to the Matrimonial Property Act 1976. The Act was renamed the Property (Relationships) Act. It was extended to cover de facto

21. AM Finlay "Matrimonial Property – Comparable Sharing: An Explanation of the Matrimonial Property Bill 1975" [1975] II AJHR E6 at 3.
22. Bill Atkin "Classifying Relationship Property – A Radical Re-Shaping?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 153 at 156.
23. See explanation of matrimonial property in AM Finlay "Matrimonial Property – Comparable Sharing: An Explanation of the Matrimonial Property Bill 1975" [1975] II AJHR E6 at 6.
24. Section 11 of the Matrimonial Property Act 1976 established a general rule that the family home and chattels would be divided equally between the spouses. The balance of the matrimonial property would be divided equally unless a spouse's contributions to the marriage partnership had "clearly been greater than that of the other spouse" (s 15), in which case, the balance was divided in shares according to each spouse's contributions.
25. See JM Krauskopf and CJ Krauskopf "Sharing in Practice: The effects of the Matrimonial Property Act 1976" (1988) 10 Fam Law Bull 140; and John Priestley "Whence and Whither? Reflections on the Property (Relationships) Act 1976 by a Retired Judge" [2017] OtaLawRw 4; (2017) 15 Otago LR 67 at 74.

²⁶ Reid v Reid [1979] NZCA 30; [1979] 1 NZLR 572 (CA) at 580 per Woodhouse J.

²⁷ Department of Justice Report of the Working Group on Matrimonial Property and Family Protection (October 1988).

relationships, both same-sex and opposite-sex. A new part was added to the PRA to provide for the division of relationship property if one partner died. The general rule of equal sharing was extended to apply to all matrimonial property (renamed "relationship property"). New sections 15 and 15A were introduced to achieve greater substantive equality by permitting compensation for economic disparity between the partners caused by their division of functions in the relationship. Changes were also made to the PRA to recognise the particular significance of taonga and heirlooms.
2.13 The 2001 amendments were the last time significant changes were made to New Zealand's relationship property law other than the inclusion of civil unions in 2005.28

THE NEED FOR REFORM IS CLEAR

2.14 The PRA is social legislation. It has both shaped and reflected societal values in the way people enter, conduct and leave relationships. In particular, it reflects the state's expectations as to how the wealth and resources of a family should be shared when relationships end. As former Principal Family Court Judge Peter Boshier has observed:29

The State ... carries an overarching responsibility to provide a blueprint for societal values which impact the way people live, behave and interact, both with each other and with their children. Within the umbrella of family law, it is appropriate to express such values from time to time. Accordingly, countries amend their laws to reflect perceptions of changing social norms and obligations and this is further carried out through how the courts interpret and apply the law.

2.15 It is important that the PRA continues to keep pace with changes in New Zealand's social context and reflects the reasonable expectations of New Zealanders. In our view, the PRA is no longer fit for purpose for 21^st century New Zealand.

The changing social context

2.16 New Zealand has undergone a period of significant social change since the PRA was first enacted. We explored these changes in detail in our Study Paper.30
2.17 New Zealand is now more ethnically diverse. The Māori, Pacific and Asian populations have each more than doubled since 1976.31 In 2013, one in seven people identified as Māori.32 Children today are also almost 10 times more likely to identify with more than one ethnic group compared to older New Zealanders.33 The population is ageing and at significantly different rates across ethnic groups, which will continue to drive ethnic

²⁸ Civil Union Act 2004; and Property (Relationships) Amendment Act 2005.

29. Peter Boshier and others "The Role of the State in Family Law" (2013) 51 Family Court Review 184 at 190. See also Bill Atkin Relationship Property in New Zealand (3rd ed, LexisNexis, Wellington, 2018) at 259 where Atkin observes that "relationship property law cannot be value-free" and that we should therefore "not avoid the debate about values".
30. Law Commission Relationships and families in contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017).
31. Ian Pool and Natalie Jackson "Population change – Key population trends" (5 May 2011) Te Ara – the Encyclopedia of New Zealand <www.teara.govt.nz>; and Statistics New Zealand 2013 QuickStats about culture and identity (April 2014) at 6.

³² Statistics New Zealand 2013 QuickStats about Māori (December 2013) at 5.

33. In 2013, 22.8 per cent of children under 15 identified with more than one ethnic group, compared to just 2.6 per cent of adults aged 65 and over: Statistics New Zealand 2013 QuickStats about culture and identity (April 2014) at 7–8.

diversity in the future.34 Religious identity is also changing. Fewer people identify as Christian, while almost half the population report that they have no religion.35
2.18 These population shifts have coincided with changing patterns of partnering, family formation, separation and repartnering.36 What it means to be partnered has changed significantly since the 1970s, when the paradigm relationship involved a marriage between a man and a woman in which children were raised and wealth accumulated over time. Now, fewer people are marrying and more people are living in de facto relationships.37 In 2016, 46 per cent of all births were to parents who were not married (or in a civil union).38 There is also greater recognition and acceptance of relationships that sit outside the 1970s paradigm, including same-sex relationships.39 More relationships end in separation,40 and increasing rates of separation are driving a rise in repartnering,41 which is leading to an increase in stepfamilies. There has also been a significant increase in single parent families, with the proportion of single parent households almost doubling since 1976.42
2.19 These social changes have undoubtedly influenced public values and expectations, and increasing diversity in relationships and families affects what a "just" division of property on separation looks like today. Relationships are no longer "one size fits all", and the law must change to reflect this reality.

34. Statistics New Zealand National Population Projections: 2016(base)–2068 (19 October 2016) at 5 and 7; and Statistics New Zealand 2013 QuickStats about culture and identity (April 2014) at 8.

³⁵ Statistics New Zealand 2013 QuickStats about culture and identity (April 2014) at 27–30.

36. Data is not routinely collected in New Zealand for the specific purpose of investigating family characteristics and transitions. As a result, there are some significant gaps in our knowledge. We do not know, for example, how many relationships end in separation or how many people repartner and enter stepfamilies. For a discussion of these limitations, see Law Commission Relationships and families in contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017) at Introduction.
37. In 2013, 22 per cent of people who were partnered were in a de facto relationship, compared to 8 per cent in 1986. In contrast, the percentage of partnered people who are married has fallen from 92 per cent in 1986 to 76 per cent in 2013: Law Commission Relationships and families in contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017) at ch 1 Figure 1b, citing Statistics New Zealand Population Structure and Internal Migration (1998) at 10; Statistics New Zealand Population Structure and Internal Migration (2001) at 52; and Statistics New Zealand "Partnership status in current relationship and ethnic group (grouped total responses) by age group and sex, for the census usually resident population count aged 15 years and over, 2001, 2006 and 2013 Censuses" <nzdotstat.stats.govt.nz>.
38. In 1976, only 17 per cent of children were born out of marriage: Statistics New Zealand "Live births by nuptiality (Maori and total population) (annual-Dec)" (May 2017) <www.stats.govt.nz>.

³⁹ In 2013, 8,328 people recorded that they lived with a same-sex partner, up from 5,067 in 2001: Statistics New Zealand

2013 Census QuickStats about families and households – tables (November 2014).

40. For example, in 2016, the divorce rate was 8.7 (per 1,000 existing marriages and civil unions), compared to 7.4 in 1976: Statistics New Zealand "Divorce rate (total population) (annual-Dec)" (June 2017) <www.stats.govt.nz>. This does not include de facto separations, for which no information is collected.
41. In 2016, remarriages accounted for 29 per cent of all marriages, compared to 16 per cent in 1971: Statistics New Zealand "First Marriages, Remarriages, and Total Marriages (including Civil Unions) (Annual-Dec)" (May 2017)

<www.stats.govt.nz>.

42. Single parent households comprised 9 per cent of all New Zealand households in 2013, up from 5 per cent in 1976: Law Commission Relationships and families in contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017) at ch 5 Figure 5a, citing Statistics New Zealand "Household composition, for households in occupied private dwellings, 2001, 2006 and 2013 Censuses (RC, TA, AU)"

<nzdotstat.stats.govt.nz>; and Arunachalam Dharmalingam, Ian Pool and Janet Sceats A Demographic History of the New Zealand Family from 1840: Tables (Auckland University Press, 2007) at 17.

Borrin Foundation research on public attitudes and values

2.20 The Law Commission has had the benefit of a survey of public attitudes and values on relationship property division in New Zealand, carried out by the University of Otago and funded by the Michael and Suzanne Borrin Foundation (the Borrin Survey). The results of the Borrin Survey have been published in Relationship Property Division in New Zealand: Public Attitudes and Values – A general population survey.43 The Borrin Survey is the first time research of this nature has been carried out in New Zealand.
2.21 The Borrin Survey was a nationwide, statistically representative telephone survey of 1,361 individuals, designed to address the Commission's need for information about how New Zealanders think couples should share their property following separation. Results of the Borrin Survey provide a sound basis for measuring and analysing:

• (a) public awareness of and general support for key PRA rules;
• (b) whether the PRA reflects what most people think is fair on separation; and
• (c) the prevalence of contracting out of the PRA.

2.22 Results of the Borrin Survey are referred to throughout this report where relevant.
2.23 The University of Otago is carrying out a second phase of research, also funded by the Michael and Suzanne Borrin Foundation, which is due to be completed in January 2021.44 This research will investigate how separating couples divide their relationship property and resolve any disputes that arise. This will provide an invaluable evidence base for assessing how the PRA is operating in practice. Similar research has been undertaken in Australia,45 but comparable research has not previously been carried out in New Zealand.

Key themes from consultation on our review of the PRA

2.24 Consultation at all stages of our review provided valuable insights into the way the PRA works for New Zealanders. We refer to the results of consultation throughout this report. Consultation identified some key themes.

Equal sharing of pre-relationship property after three years is unfair

2.25 Under the PRA, the family home and family chattels are shared equally in all marriages, civil unions and de facto relationships of three years or more. The operation of this rule in relation to property owned by one partner before the relationship began was the most common concern raised by members of the public. It was also identified as an issue by individual practitioner and academic experts and some organisations. Many submitters thought that equal sharing of pre-relationship property after three years was particularly unfair in the case of de facto relationships, as there has been no deliberate decision by the partners to formalise their relationship by getting married or entering a

43. I Binnie and others Relationship Property Division in New Zealand: Public Attitudes and Values – A general population survey (Michael and Suzanne Borrin Foundation, Technical research report, October 2018).
44. Michael and Suzanne Borrin Foundation "Relationship property division research" <www.borrinfoundation.nz>; University of Otago Children's Issues Centre, "Research Activities" University of Otago <www.otago.ac.nz>.

⁴⁵ See, for example, Lixia Qu and others Post-separation parenting, property and relationship dynamics after five years

(Australian Institute of Family Studies, 2014).

civil union. Most submitters were primarily concerned with the family home. We address this theme in Chapter 3.

The PRA fails to effectively address economic disparity

2.26 Section 15 of the PRA allows a court to compensate one partner where their income and living standards after separation are likely to be significantly lower than the income and living standards of the other partner and the disparity is because of the effects of the division of functions within the relationship.
2.27 The need to reform section 15 was a strong theme in submissions from individual practitioner and academic experts and organisations, as well as from some members of the public. Submitters generally agreed that section 15 had failed to achieve a just outcome that recognises the reality of what one partner has gained and one partner has given up in terms of their respective careers and the contributions made during the relationship. Many submitters mentioned the inadequacy of child support and maintenance. Submitters in favour of some form of redress for economic disadvantage noted it should be accessible and should be available without a long and expensive court dispute. We address this theme in Chapter 10.

Partners should not be able to avoid the PRA through the use of a trust

2.28 Most submitters who commented on trusts said that trusts are often used to avoid the property sharing rules under the PRA and that the existing remedies in respect of trust property are complex. We address this theme in Chapter 11.

The PRA should give more priority to children's interests

2.29 There were diverse views on whether the PRA gives children's interests adequate priority. Many submitters thought the PRA should do more to recognise children's interests and meet their needs. However, some felt that, while children's needs must be provided for after separation, this was not the role of the PRA but of other more child- centred legislation, such as the Child Support Act 1991 and the Care of Children Act 2004. We address this theme in Chapter 12.

The PRA does not facilitate inexpensive, simple and speedy resolution

2.30 Many submitters told us that resolution of PRA disputes is expensive and slow, that power and information imbalances between partners impair access to justice and that people want more freedom to resolve relationship property matters themselves. We address this theme in Chapter 16.

Better awareness of and education about the PRA is needed

2.31 The need for more public awareness about how the PRA operates was a common submission among members of the public, lawyers and other experts in the area. Some submissions also demonstrated a need for better understanding of some of the key PRA rules and requirements, including when the PRA applies, what property is divided, how property is divided, what happens when one partner dies and the requirements for contracting out of the PRA. We address the need for better education about the PRA below.

A NEW RELATIONSHIP PROPERTY ACT

2.32 Our recommendations in this report are intended to achieve a property sharing regime that meets the reasonable expectations of New Zealanders when a relationship ends on separation. Our recommendations have been informed by what we have learned about New Zealanders' attitudes, values and expectations of property sharing through consultation and the results of the Borrin Survey. They are also informed by what we know about New Zealand's changing social context, summarised above.
2.33 We address our recommendations relating to general issues arising from our review below.

A new relationship property statute is required

2.34 We recommend that the PRA should be repealed and replaced with a new statute to apply to relationships that end on separation (the new Act). The new Act should be titled the Relationship Property Act because this name is simple, clear and reflects the key subject matter of the statute. We address relationships that end on the death of a partner at paragraphs 2.74–2.80 below.
2.35 The PRA was first enacted in 1976 as the Matrimonial Property Act 1976, but few of its provisions have survived unaltered. Significant amendments have been made to both the property sharing rules as well as the scope of those rules, extending over time to capture relationships ending on death, de facto relationships and civil unions. As a result of significant and multiple amendments over the past 43 years, the PRA is an unwieldly and unnecessarily complex statute that does not meet modern standards of legislative drafting.
2.36 The new Act should:

• (a) reflect our recommendations in this report;
• (b) adopt relationship and gender neutral terms, wherever possible;46 and
• (c) modernise and simplify the language of the provisions as far as possible, in a way that does not affect their established meaning.

2.37 Few submitters commented on our proposal to repeal the PRA and replace it with a new statute. The New Zealand Law Society (NZLS), the Auckland District Law Society (ADLS) and several practitioners supported the proposal. ADLS also noted that consideration would need to be given to appropriate transitional provisions. We agree that transitional provisions would be necessary but do not address this matter in this report. The need for transitional provisions, and the form they take, is dependent on the Government's response to our recommendations.

The new Act should be the principal source of law applying to division of property when relationships end on separation

2.38 Section 4 of the PRA currently provides that, instead of the rules of common law and of equity, the Act applies to transactions between partners regarding property and, where the PRA provides, transactions between either or both partners and third parties.47 There is still scope for the common law and equity to apply in limited circumstances.48

46. See discussion in Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [4.54]–[4.56]. Few submitters commented on our proposal to adopt relationship and gender neutral terms, although it was supported in submissions from the New Zealand Law Society, one practitioner and two members of the public. Another practitioner proposed that, for simplicity, the Property (Relationships) Act 1976 should use "marital" and "spouse" to describe all relationships.
47. Property (Relationships) Act 1976, s 4(1). In addition, s 4(4) provides that, if any question relating to relationship property arises in proceedings between spouses or partners or between either or both of them or any other person and such proceedings are not under the Act, the question must be decided as if it had been raised in proceedings under the Act.
48. For example, in Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [26.61], we noted the courts have upheld claims between partners for breach of fiduciary duty (M v M [1996] NZCA 472; (1996) 15 FRNZ 15 (CA)), negligent statement and deceit (K v K [2007] NZHC 855; [2008] NZFLR 30 (HC)), specific performance (Wallis v Wallis (1990) 6 FRNZ 645 (HC)), conversion and trespass ([LC] v B [2012] NZHC 898) and shareholder remedies under the Companies Act 1993 (B v F [2012] NZHC 722, [2012] NZFLR 661).

The PRA also draws on wider legal concepts, such as the definition of property. The PRA is therefore best described as the "principal source of law" for determining the division of property between partners49 or as a partial code.50
2.39 We recommend the new Act should continue to be the principal source of law for the division of property when relationships end on separation. To the extent that issues are dealt with under the new Act, it should "predominate" over other law, as is currently intended by section 4.51

Retaining a rules-based regime of deferred property sharing

2.40 Jurisdictions around the world recognise the need for special rules of property division when relationships end but differ on what form these rules should take.52 New Zealand, Canada and most European jurisdictions adopt a rules-based approach. Within these rules-based regimes, a range of different approaches exist. New Zealand operates a regime of deferred property sharing, because until a court makes orders to divide property, the partners may deal with or dispose of their property as if the PRA did not exist.53 Other jurisdictions that New Zealand often compares itself with (Australia, England and Wales, Scotland and Ireland) operate discretionary regimes under which a court has discretion to adjust the partners' property interests on separation.54
2.41 The debate on the merits of rules-based versus discretionary regimes is longstanding. Rules-based regimes typically provide greater certainty and predictability of outcomes in what can be a highly contested area of family law, while discretionary regimes allow for outcomes more tailored to the partners' individual circumstances. The disadvantage of a discretionary approach, however, is that the law is less predictable, which can hinder efficient resolution of property disputes and lead to protracted and expensive litigation.55
2.42 We think a rules-based deferred property sharing regime continues to be appropriate for New Zealand. We place significant weight on the desirability of certainty and predictability, which in turn promotes people's ability to make decisions without having to go to court. The new Act should continue to have some discretionary aspects, which act as essential safety valves. With the diversity of human relationships and behaviour, it would be unrealistic to expect that a statute could set rules for every circumstance.

⁴⁹ RL Fisher (ed) Fisher on Matrimonial and Relationship Property (online ed, LexisNexis) at [1.23].

⁵⁰ Nicola Peart (ed) Brookers Family Law — Family Property (online ed, Thomson Reuters) at [PR4.01].

⁵¹ Official Assignee v Williams [1999] NZCA 364; [1999] 3 NZLR 427, [1999] NZFLR 906 (CA) at [20].

⁵² Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [3.34]–[3.40].

⁵³ Except as otherwise expressly provided in the Property (Relationships) Act: s 19.

54. Family Law Act 1975 (Cth); Matrimonial Causes Act 1973 (UK); Family Law (Scotland) Act 1985; and Family Law (Divorce) Act 1996 (Ireland). The Australian Law Reform Commission has recently recommended retaining judicial discretion to divide property interests in a way that is just and fair in each case: Australian Law Reform Commission Family Law for the Future: An Inquiry into the Family Law System – Final Report (Report 135, March 2019) at [7.7].
55. See Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [3.1]–[3.12]; and the discussion in Joanna Miles "Should the Regime be Discretionary or Rules- Based?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 261. See also Ira Mark Ellman "The Theory of Alimony" (1989) 77 Cal L Rev 1.

The theory of the family joint venture should underpin the new Act

2.43 The rules of the PRA sit within a broader framework of policy, theory and principles.56 The policy of the PRA is the just division of property at the end of a relationship. This policy is underpinned by several theories that explain why division pursuant to the rules of the PRA is a just division.57
2.44 The primary theory of the PRA is based on the entitlement of each partner to an equal share in the property of the relationship. This is supplemented by two secondary theories. The compensation theory recognises that, in certain circumstances, one partner should receive an additional share of the other's property in order to compensate them for economic disadvantages a partner suffers from the relationship. The needs theory recognises that certain resources could help meet the needs of a partner or children of the relationship. The principles of the PRA (both explicit in section 1N and implicit in its operative provisions) then form the basis for the PRA's rules.
2.45 Few submitters commented on the theories underpinning the PRA. NZLS and Professor Nicola Peart agreed that the PRA strikes the right balance between the theories of entitlement, compensation and need. Peart considered that, for the purposes of certainty, entitlement is the better theory and that it appropriately recognises the modern concept of marriage and equivalent relationships as a partnership of equals rather than a relationship of dependence.
2.46 We consider that an entitlement to share the fruits of the family joint venture should be the central underpinning theory of the new Act. This is based on the theory that a "qualifying relationship", being a marriage, civil union or de facto relationship that satisfies the eligibility criteria,58 is a family joint venture to which the partners contribute equally but often in different ways. During the relationship, partners contribute to the family joint venture with the expectation that they will continue to share in the fruits of that joint venture – the product of their combined contributions – into the future. If that family joint venture breaks down, the PRA governs the just division of property of the family joint venture.59 This theory underpins our key recommendations about what property partners should share when a relationship ends.60
2.47 We consider that the theory of compensation should no longer play a role in explaining what property should be shared when relationships end. Accordingly, our

⁵⁶ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [3.1]–[3.12].

57. For further discussion, see Joanna Miles "Financial Provision and Property Division on Relationship Breakdown: A Theoretical Analysis of the New Zealand Legislation" (2004) 21 NZULR 268.
58. In Chapter 6, we recommend that a de facto relationship is a qualifying relationship for the purposes of the new Act if it satisfies the definition of de facto relationship currently in s 2D of the Property (Relationships) Act 1976 and either
    • (a) satisfies the three year qualifying period or (b) there is a child of the relationship and the court considers it just to make an order for division or (c) the applicant has made substantial contributions to the relationship and the court considers it just to make an order for division.
59. The notion of a family joint venture or similar concepts as underpinning relationship property law is well established. See Ira Mark Ellman "The Theory of Alimony" (1989) 77 Cal L Rev 1; Bill Atkin Relationship Property in New Zealand (3rd ed, LexisNexis, Wellington, 2018) at 259; and Kerr v Baranow 2011 SCC 10, [2011] 1 SCR 269 at [61] where the Supreme Court of Canada said "[t]here is nothing new about the notion of a family joint venture in which both parties contribute to their overall accumulation of wealth".

⁶⁰ See recommendations in Chapters 3, 10 and 11.

recommendations relating to Family Income Sharing Arrangements in Chapter 10 move away from requiring one partner to compensate the other when the division of functions during the relationship results in economic disparity on separation. Instead, we propose that partners should share future income in some situations in order to ensure the economic advantages and disadvantages arising from a relationship or its end are shared.
2.48 The theory of need may continue to play a role in the new Act in relation to children's interests given our recommendations in Chapter 12 to make the best interests of children a primary consideration and to continue to enable a court to settle relationship property on a child.

A new statutory purpose and statement of principles

2.49 We recommend a new statutory purpose and statement of principles to guide the achievement of the purpose of the new Act. The purpose and principles of the PRA are currently set out in sections 1N and 1M:

1M Purpose of this Act The purpose of this Act is—

(a) to reform the law relating to the property of married couples and civil union couples, and of couples who live together in a de facto relationship:
(b) to recognise the equal contribution of both spouses to the marriage partnership, of civil union partners to the civil union, and of de facto partners to the de facto relationship partnership:
(c) to provide for a just division of the relationship property between the spouses or partners when their relationship ends by separation or death, and in certain other circumstances, while taking account of the interests of any children of the marriage or children of the civil union or children of the de facto relationship.

1N Principles

The following principles are to guide the achievement of the purpose of this Act:

(a) the principle that men and women have equal status, and their equality should be maintained and enhanced:
(b) the principle that all forms of contribution to the marriage partnership, civil union, or the de facto relationship partnership, are treated as equal:
(c) the principle that a just division of relationship property has regard to the economic advantages or disadvantages to the spouses or partners arising from their marriage, civil union, or de facto relationship or from the ending of their marriage, civil union, or de facto relationship:
(d) the principle that questions arising under this Act about relationship property should be resolved as inexpensively, simply, and speedily as is consistent with justice.
2.50 The significance of the purpose and principles is well understood, particularly for social legislation, such as the PRA. They are often referred to in judgments under the PRA as an important part of the statutory context.61

⁶¹ As Woodhouse J observed in Martin v Martin [1979] 1 NZLR 97 (CA) at 99:

The primary purpose [of the Property (Relationships) Act 1976] is to substitute for abstract and individual notions of justice a settled statutory concept which must be taken from the Act itself. That fact will need to be remembered should the temptation arise to bend

A new statutory purpose

2.51 The purpose of the new Act should be to achieve a just division of property between partners when a relationship ends on separation.
2.52 In our view, the PRA's purpose statement is an unhelpful mix of concepts. The equal contribution of partners in section 1M(b), for example, is reiterated as a principle in section 1N(b). Section 1M(c) refers to a just division of relationship property, but in fact the overarching policy of the PRA is broader. In effect, section 1M(c) explains how the PRA achieves its broader objective of a just division of property at the end of relationships. Section 1M(c) is also confusing as it refers to taking account of the interests of children, but children's interests are not a principle of the PRA under section 1N.
2.53 The purpose statement requires reform to conform to modern drafting requirements for legislation.62 Importantly, the purpose statement should reflect the policy objective of the legislation so that the policy objective is clearly defined and discernible.63
2.54 Few submitters commented on our proposed new purpose provision, but those who did supported it, including NZLS and ADLS.

A new statement of principles

2.55 We recommend that the new Act should include a new statement of principles to guide the achievement of the purpose of the Act.
2.56 Principles provisions perform an important signalling function by setting out the public policy outcomes the statute aspires to facilitate, as well as promoting accessibility and transparency in the law. As a matter of good drafting practice, legislation that substitutes the general law and introduces rules based on distinct values should include a statement of principles to guide the interpretation and application of that legislation. 64

its language to conform with personal estimates of what some class of case may deserve. The next purpose is associated with the first. It is to substitute, for assessments arrived at by evaluating material contributions to property, a strong statutory bias in favour of the equal entitlement of spouses to matrimonial property of every kind.

See also Scott v Williams [2017] NZSC 185, [2018] 1 NZLR 507 at [143], [317] and [325]; Clayton v Clayton [Vaughan

Road Property Trust] [2016] NZSC 29, [2016] 1 NZLR 551 at [15]–[16]; and M v B [2006] NZCA 535; [2006] 3 NZLR 660 (CA).

62. See Legislation Design and Advisory Committee Legislation Guidelines: 2018 edition, especially ch 2. See also Scott v Williams [2017] NZSC 185, [2018] 1 NZLR 507 at [143] confirming the relevance of the statutory purpose and principles to any proceedings under the Property (Relationships) Act 1976.
63. Section 5(1) of the Interpretation Act 1999 provides that "[t]he meaning of an enactment must be ascertained from its text and in the light of its purpose". The Legislation Bill 2017 (275-2) currently before Parliament proposes to repeal and replace the Interpretation Act 1999. Clauses 10–12 of the Bill propose to continue the principle that the meaning of legislation must be ascertained from its text and in the light of its purpose and its context.
64. Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [4.18]. See Law Commission A New Interpretation Act: To Avoid "Prolixity and Tautology" (NZLC R17, 1990) at [229]; Law Commission The Format of Legislation (NZLC R27, 1993) at 9; Law Commission Legislation Manual: Structure and Style (NZLC R35, 1996) at [30]. See also R I Carter Burrows and Carter Statute Law in New Zealand (5th ed, LexisNexis, Wellington, 2015) at 122–123. See also Law Commission Review of the Search and Surveillance Act 2012: Ko te Arotake i te Search and Surveillance Act 2012 (NZLC R141, 2017) at [3.1]–[3.8]; and Law Commission Reforming the Law of Contempt of Court: A Modern Statute – Ko te Whakahou i te Ture mō Te Whawhati Tikanga ki te Kōti: He Ture Ao Hou (NZLC R140, 2017) at [1.93].

2.57 In the Issues Paper, we observed that the statement of principles in section 1N of the PRA is incomplete as it does not include many of the implicit principles of the PRA.65 We said that our preliminary view was that, broadly speaking, the principles of the PRA (explicit and implicit) remain sound but that some principles may need to change to better reflect people's changing values and expectations about what is fair when relationships end.66
2.58 Few submitters commented on this issue, but those who did, including NZLS and ADLS, agreed that a new statement of principles was required.
2.59 In light of our recommendations in this report and having regard to the results of consultation and the Borrin Survey, we have concluded that a new statement of principles is necessary to reflect the reasonable expectations of New Zealanders and to properly guide the achievement of the new Act's purpose.
2.60 The new statement of principles should reflect the following concepts:67

• (a) A just division of property recognises tikanga Māori. It should be explicit in the new Act that a just division of property should recognise tikanga Māori. This supports our recommendation in Chapter 14 that the framework of the new Act should continue to accommodate and respond to matters of tikanga Māori, particularly through the operative provisions in relation to Māori land and taonga.
• (b) All forms of contribution to the relationship are to be treated as equal. The performance of unpaid domestic and childcare responsibilities should be treated as of equal value to financial contributions to the relationship. Given the division of functions within families along traditional gender roles is still common in New Zealand,68 this also promotes the equal status of men and women. We consider it is appropriate that the new Act continues to recognise that an entitlement based on non-financial contributions is "not to be regarded as a matter of grace or favour, or as a reward for good behaviour, but as plain justice".69 This is reinforced by the

⁶⁵ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [3.9]–[3.11].

⁶⁶ At [4.13].

67. We do not consider the principle that men and women have equal status in s 1N(a) of the Property (Relationships) Act 1976 (PRA) needs to be retained in the new Relationship Property Act. We consider this concept is beyond any doubt in both New Zealand public policy and law and no longer requires specific articulation as a principle. In the Issues Paper, we also discussed whether the concept of a single, accessible and comprehensive statute regulating the division of property when partners separate and the concept that misconduct is generally irrelevant to property division should be expressed as principles: Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [3.11] and [4.18]. We are satisfied, however, that the concept of a single, accessible and comprehensive statute regulating the division of property when partners separate is sufficiently clear from the provisions of the PRA itself (including s 4) and does not require prioritisation in a principles section. We are also satisfied that the concept that misconduct is generally irrelevant to property division is clear from s 18A of the PRA. In Chapter 8, we recommend some clarifications to the role of misconduct and that the Government should consider the relevance of family violence to the division of property at the end of a relationship under the PRA in the context of its wider response to family violence.
68. Law Commission Relationships and families in contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017) at ch 6.
69. AM Finlay "Matrimonial Property – Comparable Sharing: An Explanation of the Matrimonial Property Bill 1975" [1975] II AJHR E6 at 10.

wide definition of contributions to the relationship in section 18 of the PRA, which we are satisfied remains sound.70
(c) Relationship property is to be shared equally unless special circumstances apply. This principle recognises that a just division of property will usually reflect the assumed equal contributions made by both partners. It embodies the general rule of equal sharing, which is the cornerstone of the PRA. The reason for introducing equal sharing in the Matrimonial Property Act 1976 remains as powerful today as it did then: the "great advantages of reintroducing certainty, putting husband and wife in an equal bargaining position should the marriage break up, and being consistent with broad social justice".71 Nonetheless, the new Act must continue to have some exceptions that act as essential safety valves. With the diversity of human relationships and behaviour, it would be unrealistic to expect that a statute could set a single rule for every circumstance.
(d) The Act applies in the same way to relationships that are substantively the same. This is consistent with the concept of equality as expressed in anti- discrimination laws and reflects the shift in family law policy towards greater recognition of a wide range of family relationships.72 This principle guides the eligibility criteria in the PRA and the rules applying to marriages, civil unions and de facto relationships. While implicit in the relevant operative provisions, such an important premise of the PRA should be explicit in the principles provision.
(e) Economic advantages or disadvantages arising from the relationship or its end are to be shared. The existing principle in section 1N(c) that "a just division of relationship property has regard to the economic advantages or disadvantages" arising from the relationship or its end was introduced in 2001 amid concerns that an equal division of relationship property does not always produce substantive equality between the partners.73 While we have concluded that section 15, the provision intended to give effect to this principle, has failed to provide an effective and accessible remedy for most New Zealanders, the concerns that led to its introduction in 2001 remain significant. Accordingly, we recommend a principle
that focuses on the sharing of economic advantages and disadvantages that arise from the relationship or its end.
(f) The best interests of any child of the relationship is a primary consideration under the Act. That a just division of relationship property should take into account the interests of any children of the relationship appears in section 1M of the PRA.

70. For example, in Scott v Williams [2017] NZSC 185, [2018] 1 NZLR 507 at [199] per Glazebrook J: "I would further accept that s 18 supports Mr Goddard's argument that the entire premise of the PRA is to treat all contributions within the relationship as equal." In Chapter 8, we recommend clarifying that the care of any child of the relationship, which is a contribution to the relationship under s 18(1)(a), includes the care of any former child of the relationship.
71. AM Finlay "Matrimonial Property – Comparable Sharing: An Explanation of the Matrimonial Property Bill 1975" [1975] II AJHR E6 at 7.
72. Mark Henaghan "Legally defining the family" in Mark Henaghan and Bill Atkin (eds) Family Law Policy in New Zealand (4th ed, LexisNexis, Wellington, 2013) 1 at 5. This reflects the right to freedom from discrimination on the grounds of marital status and family status enshrined in s 19(1) of the New Zealand Bill of Rights Act 1990 and s 21 of the Human Rights Act 1993.
73. See, for example, the discussion in Department of Justice Report of the Working Group on Matrimonial Property and Family Protection (October 1988) at 4–15.

Section 26 of the PRA also recognises the interests of children. However, while these provisions recognise that the interests of children of the relationship may be sufficiently important to warrant some degree of priority over their parents’ property entitlements, in practice children’s interests have seldom been prioritised in this way. This principle seeks to achieve a better balance between partners' property entitlements and children's interests following parental separation by elevating children’s “best interests” to a "primary consideration"
(g) Partners are free to make their own agreements about the status, ownership and division of property, subject to safeguards. While our recommendations in this report are intended to align the law more closely to public values and expectations, there will still be couples who will prefer to divide their property in a different way. The freedom of partners to make their own agreements about their property remains an "integral feature of [the PRA's] public legitimacy"74 and should be expressly recognised in the statement of principles in the new Act. Importantly, the principle concerns relationship autonomy rather than individual autonomy. A person should not be able to unilaterally contract out of their obligations under the new Act. They must do so by way of agreement with their partner. Safeguards should continue to ensure that both partners enter agreements with informed consent and the rights of third parties are not prejudiced. Agreements settling the partners' property matters at the end of a relationship must be made on the same basis if they are to be enforceable in a court.
(h) Questions arising under the Act should be resolved as inexpensively, simply and speedily as is consistent with justice. Inherent in this principle is a preference for people to resolve property matters out of court where that is consistent with justice. Avoiding court is generally in the interests of not only the partners but also any children of the relationship. Predictable outcomes encourage partners to resolve property matters out of court. Therefore, straightforward rules of classification and division of property, as opposed to rules involving an exercise of discretion, are consistent with this principle.75 However, situations will inevitably arise that were not contemplated by the statute. It is also inevitable that recourse to the courts will be necessary in some cases. In order for property matters to be resolved inexpensively, simply and speedily in court, a court must be properly resourced and court procedures need to be efficient and easy to follow. This principle promotes meaningful access to justice for those partners who are unable to resolve their property matters without assistance.
2.61 Consideration should be given to the most effective way to draft these principles, having regard to legislative design best practice. In particular, consideration should be given to whether any principles should be articulated separately in relation to a specific Part of the new Act.

⁷⁴ Wells v Wells [2005] NZHC 1761; [2006] NZFLR 870 (HC) at [38].

75. Bill Atkin "Classifying Relationship Property – A Radical Re-Shaping?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 153 at 158.

The clean break concept should not be a principle of the new Act

2.62 We do not recommend that the clean break concept should be expressed as a principle of the new Act.
2.63 A clean break in the context of the PRA is generally understood to mean that partners should be able to reach a final division of their relationship property and then continue with their respective lives without any ongoing demands on their property from their former partner.76
2.64 The PRA does not contain any explicit reference to the clean break concept.77 It is notably absent from the purpose and principles of the PRA and from the legislative background materials. However, this has not prevented the courts and commentators from implying a clean break principle under the PRA regime.78
2.65 We discussed the clean break concept in the Issues Paper and Preferred Approach Paper but did not expressly seek feedback on it.79 Nonetheless, several submitters commented on it. NZLS submitted that, while it was not wedded to the clean break concept, there was a "definite financial and emotional advantage to the parties" in the certainty of lump sum orders over periodic payments. Law firm Meredith Connell considered that any reform should not encourage a departure from the clean break concept, which it regarded as an important feature of the PRA. One practitioner considered that the clean break concept has been unnecessarily emphasised as a cornerstone of the PRA regime. They observed that the concept can be very hard on the partner who has the care of the children and who is often required to sell a home to ensure a clean break. It can also be very hard on a business or farm owner who is required to pay out half the market value of the property. That practitioner considered

76. Caldwell says that the clean break principle is premised on the notion that the parties will use their respective shares of the relationship property to start afresh. Its purpose is to achieve financial finality and to assist the parties to self- determine and become self-sufficient: John Caldwell "Maintenance – Time for a Clean Break?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 393 at 394.
77. Contrast, for example, to the maintenance regime in the Family Proceedings Act 1980, which gives effect to the clean break concept by requiring partners to assume responsibility for their own needs, within a reasonable time period, at the end of a relationship: Family Proceedings Act, s 64A. See also the discussion of the maintenance regime in the Issues Paper: Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [19.51]–[19.58].
78. See Scott v Williams [2017] NZSC 185, [2018] 1 NZLR 507 at 286 and n 364, where Arnold J states: "The clean break principle is not identified in the Property (Relationships) Act 1976 (the PRA), but is nevertheless seen to be an important underlying premise of the Act." In Z v Z (No 2) [1997] 2 NZLR 258 (CA), the Court of Appeal noted at 269 that:

The Act proceeds on the premise that on the breakdown of marriage the matrimonial property should be divided and adjustments made between the spouses and that they should then be free to go their separate ways without any competing continuing demands on the property of each other.

See also M v B [2006] NZCA 535; [2006] 3 NZLR 660 (CA) and Haldane v Haldane [1981] 1 NZLR 554 (CA). Caldwell says that there can be no doubt that the statutory regime as a whole is firmly grounded on the philosophy that "there should be a clean break between the parties as soon as practicable, with each able to take up their future life independently of the other": John Caldwell "Maintenance – Time for a Clean Break?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 393 at 394. See also Bill Atkin "Economic disparity – how did we end up with it? Has it been worth it?" (2007) 5 NZFLJ 299 at 302.

79. Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [4.10(c)] and [19.11]–[19.12]; and Law Commission Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai (NZLC IP44, 2018) at [5.92] and [7.35].

that there can be no clean break when there are children of the relationship, as the partners remain financially responsible and obliged to meet their needs. So long as that responsibility continues, there is no particular reason to require an early and final division of property. The Office of the Children's Commissioner questioned whether the statute should expressly exclude the clean break concept when there are minor or dependent children of the relationship.
2.66 While the clean break concept has an understandable attraction,80 in our view, it is but one factor that is relevant to the overarching purpose of the property sharing regime, which is a just division of property between partners. The new Act should achieve this purpose through providing a clear, certain and efficient way for couples to unwind their financial affairs at the end of their relationship, thereby facilitating a clean break, but only when that achieves a just result.
2.67 Clean break should not, however, be a goal of the new Act in and of itself. In some cases, a clean break will not achieve a just division of property.81 Ongoing use of property or future periodic payments may be necessary, particularly when giving effect to the principle that economic advantages or disadvantages arising from the relationship or its end are to be shared and the principle that the best interests of any child of the relationship is a primary consideration under the Act. As BD Inglis has observed:82

In a family which has been founded on the expectation of commitments into the foreseeable future, why should we say there must be a 'clean break' simply because one of the parties wants to end those future commitments? In some cases a clean break will be desirable; in others not: it all depends on the facts and the personalities in the individual case.

2.68 It would be desirable to explain the limited role the clean break concept has in furthering the purpose of the PRA in the background materials to the new Act.83 This would help avoid the clean break concept being inappropriately adopted in future as a gloss on the new Act.

80. Caldwell notes that "there is no available evidence to suggest that community thinking would favour anything other than a clean financial and psychological break taking place between former lovers and partners": John Caldwell "Maintenance – Time for a Clean Break?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 393 at 413.
81. Hammond J in M v B [2006] NZCA 535; [2006] 3 NZLR 660 (CA) at [262] expressed reservations about the clean break principle, stating that:

... care has to be taken not to press the clean-break principle too far. One of the difficulties with formal equality approaches to relationship property and maintenance was the notion that women ought to be able to remain financially independent of former husbands after divorce could be too readily invoked to castigate dependent women in the very name of those equality principles.

In Mark Henaghan "Sharing Family Finances at the End of a Relationship" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 293 at 326, Henaghan says:

... the application of the clean break principle in family finance disputes has meant that overall fairness, in terms of each party receiving an equal share of all the 'fruits' of their partnership, is compromised.

Margaret Casey in "Mitigating the Painful Effects of a Clean Break" (paper presented to New Zealand Law Society Family Law Conference, October 2013) 225 at 234 writes that:

We speak of "closure", "letting go" and "moving on" and encourage our clients to face the reality of living a life independent of the former partner. But there is no doubt for some parties independence is not achieved by a clean break.

⁸² B D Inglis "The Family Court: Progress and Change" (1988) 14 NZ Recent Law Review 18 at 22.

⁸³ Such as the explanatory note to the Bill.

RAISING PUBLIC AWARENESS OF THE PRA AND THE NEW ACT

RECOMMENDATION

The Government should consider ways to improve public awareness of and

education about the PRA and the new Act, if enacted.

R5

2.69 Consultation on the Issues Paper and Preferred Approach Paper highlighted a clear need for greater public awareness of and education about the PRA. One member of the public told us that they had never heard of the PRA until a claim was made against him. Another said that most people seem oblivious of the PRA and the chance they might lose property to a new partner. Another submitter said using less legalese would make the law more accessible to the public.
2.70 ADLS submitted that there should be a public education programme that includes secondary school students and involves all government departments. ADLS also said that there should be an intensive public education programme to inform the public of the principles of the PRA and of their right to contract out of the PRA. One practitioner observed that the publicity given to the inclusion of de facto relationships in 2001 was successful. Perpetual Guardian supported a public awareness programme, a professional development programme and introducing legal basics (including relationship property and succession law) into the secondary school syllabus. Several submitters also supported the provision of better information about rights and obligations under the PRA to partners on separation. We discuss these submissions in Chapter 16.
2.71 The need for greater public awareness of and education about the PRA was also reflected in the results of the Borrin Survey. That survey identified that, while public awareness of equal sharing was high (79 per cent of all respondents said that they were aware of equal sharing), less than half of all respondents knew that equal sharing applies to couples who have lived together for three years or longer.84 The need for greater public awareness and education will be even greater should the recommendations we make in this report be accepted.
2.72 We recommend that the Government consider ways to improve public awareness of the PRA or the new Act if enacted. This should include consideration of:85

• (a) a one-off public education campaign, which could be timed to coincide with the implementation of the recommendations in this report, if accepted;

84. I Binnie and others Relationship Property Division in New Zealand: Public Attitudes and Values – A general population survey (Michael and Suzanne Borrin Foundation, Technical research report, October 2018) at [108] and [112].
85. The Independent Panel appointed by the Government in August 2018 to examine parenting and guardianship matters following the 2014 family justice reforms similarly recommended an information strategy be developed to provide quality, accessible information on parenting and guardianship matters and an ongoing public awareness campaign to encourage parents to resolve their issues as early as possible and provide information on the services available and how to access them: Rosslyn Noonan, Chris Dellabarca and La-Verne King Te Korowai Ture ā-Whānau: The final report of the Independent Panel examining the 2014 family justice reforms (Ministry of Justice, May 2019), Recommendation 25. We discuss the Independent Panel further in Chapter 16.

(b) education in secondary school programmes and for professionals such as financial planners, business advisers and chartered accountants;
(c) the provision of information at different points of interaction with government departments, such as when applying for a marriage or civil union licence, when applying for state benefits or Working for Families Tax Credits and when applying for New Zealand residency;
(d) introducing requirements on registered professionals or organisations such as real estate agents and banks to provide some form of prescribed information to clients when buying or selling property, applying for credit or opening joint bank accounts; and
(e) producing and providing information online, in Family Courts around New Zealand and to community organisations such as Citizens Advice Bureau and Community Law Centres.
2.73 In Chapter 16, we make several recommendations that are intended to improve access to information about the PRA or the new Act if enacted. This includes the development of a comprehensive information guide that explains the law and provides information about the different options for resolving relationship property matters.

A SEPARATE STATUTE FOR RELATIONSHIPS ENDING ON DEATH

2.74 We recommend that the new Relationship Property Act should apply only to relationships ending on separation. The rules that apply when a relationship ends on the death of a partner should be the subject of further consideration within a broader review of succession law.
2.75 As we explained in the Issues Paper, the context for dividing property on the death of a partner is different to the context for dividing property when a relationship ends by separation.86 There may be tension between the competing interests of all those potentially affected by the death of a partner, including:

• (a) the deceased's freedom to deal with property under a will as they choose and the deceased's rights under the PRA;

⁸⁶ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at ch 36.

(b) the rights of a surviving partner under the deceased's will, the rules of intestacy, the PRA, the Family Protection Act 1955 and/or the Law Reform (Testamentary Promises) Act 1949;
(c) the rights of the deceased and the surviving partner to hold property in joint ownership or to have entered a contracting out agreement under section 21 of the PRA; and
(d) the rights of third parties who may benefit under the will or the rules of intestacy or who may have a claim under the Family Protection Act or the Law Reform (Testamentary Promises) Act.
2.76 These competing interests need to be considered and resolved as matters of policy before reaching a view on the rules that ought to apply when a relationship ends on the death of a partner. This is something we have been unable to do in a review that is solely focused on the PRA.
2.77 It is our view that a single separate statute is needed to deal comprehensively with relationship property claims, testamentary promises claims and family protection claims on death.87 This would make the law more accessible and coherent. It would also allow proper consideration of the interests of surviving partners, deceased partners, beneficiaries under a will or the rules of intestacy and potential claimants against the estate. It would also likely assist those advising on estate planning and those administering estates.
2.78 Submissions we received on the Issues Paper and Preferred Approach Paper were strongly in favour of a separate succession statute. Many submitters noted concerns about balancing the interests of a surviving partner with the interests of any children of the deceased partner. A common theme in submissions and consultation meetings was the lack of understanding among the public and some practitioners about how the PRA applies on the death of a partner. Practitioners also consistently raised many of the more technical issues we identified in the Issues Paper.
2.79 NZLS, Perpetual Guardian and Professor Peart were concerned about the risk of a gap in the law if the new Act were to be introduced in relation to division of property on separation while the current provisions of the PRA relating to division of property on death were to carry on. Perpetual Guardian's preferred response was also for a new succession statute to be created at the same time as any changes to the PRA are implemented. Its alternative response was to "band aid" the problematic provisions that are causing well-known issues within the PRA relating to division of assets on death. NZLS similarly submitted that sections 75, 76, 87, 88 and 95 of the PRA should be amended now to address and clarify the current operational problems with those sections without having to await the outcome of a broader review of succession law. Peart suggested that the Law Commission should prepare a separate statute for relationships ending on death that gives effect to the changes proposed on separation to the extent they apply on death and address the conceptual incoherence. One practitioner preferred the current death provisions in the PRA to remain as while they are not perfect, they are known and workable.

87. A similar proposal was made by the Law Commission 20 years ago in its report Succession Law: A Succession (Adjustment) Act (NZLC R39, 1997).

2.80 We recognise the unsatisfactory nature of recommending reform of the law in relation to the division of property on separation while leaving the current law to govern the division of property on the death of one partner.88 We therefore recommend that the Minister Responsible for the Law Commission ask the Law Commission to undertake a separate review of succession law as a matter of priority in our next annual programme.89 This review should address the division of property on the death of a partner, alongside the Family Protection Act, the Law Reform (Testamentary Promises) Act and the Administration Act 1969 as it relates to intestate estates. It should also consider how relationship property rights should interact with succession in a Māori context.90

88. A similar situation occurred when the Matrimonial Property Act 1976 was enacted but did not apply on the death of a spouse, meaning that the Matrimonial Property Act 1963 continued to apply to relationships ending on death until 2001: Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [34.16]–[34.23].

⁸⁹ Law Commission Act 1985, s 7.

90. For a discussion of possible issues that arise for Māori on the death of one partner, see Jacinta Ruru "Implications for Māori: Contemporary Legislation" in Nicola Peart, Margaret Briggs and Mark Henaghan (eds) Relationship Property on Death (Brookers, Wellington, 2004) 467 at 487–490.

CHAPTER 3

Classifying property

what property should be shared when relationships end and, in particular:

• whether the definition of property is appropriate;
• the basis for classifying relationship property and separate property;
• whether gifts and inheritances should be treated differently to other types of separate property;
• how increases in the value of separate property and income and gains on separate property, should be classified; and
• how the rules of classification in sections 8–10 of the PRA can be modernised and simplified.

IN THIS CHAPTER, WE CONSIDER:

THE DEFINITION OF PROPERTY

Background

3.1 The PRA does not comprehensively define property. Instead, it provides that property includes:1

• (a) real property:
• (b) personal property:
• (c) any estate or interest in any real property or personal property:
• (d) any debt or any thing in action:
• (e) any other right or interest

3.2 The PRA's definition of property is therefore broad and inclusive. In Clayton v Clayton [Vaughan Road Property Trust], the Supreme Court emphasised the need to interpret the meaning of property in a manner that reflects the PRA's statutory context.2 The Court said that, because the PRA is social legislation, the definition of property is broader than traditional concepts, including rights and interests even if they are not

1. Property (Relationships) Act 1976, s 2 definition of "property". An owner, in respect of any property, is defined in s 2 to mean the person who, apart from the Act, "is the beneficial owner of the property under any enactment or rule of common law or equity".

² Clayton v Clayton [Vaughan Road Property Trust] [2016] NZSC 29, [2016] 1 NZLR 551 at [38].

rights and interests in property.3 However, it remains to be seen whether the Supreme Court's decision will have wider implications for what is considered property under the PRA.4

Issues

3.3 In the Issues Paper, we identified two potential issues with the PRA's definition of property.5
3.4 First, we noted that the definition of property excludes wider economic resources, such as a partner's income-earning capacity6 and most interests in trust property.7 Not accounting for wider economic resources at the end of the relationship may fail to achieve equal division of the true value attributable to the relationship. We noted, however, that broadening the definition of property risked confusion and would create complex questions in each case (such as how to identify what proportion of an economic resource is relationship property and what proportion is separate property). We suggested that it might be preferable to recognise and account for wider economic resources in other ways, such as through amendments to section 15 to address economic disparity and a specific remedy for property held on trust.
3.5 Second, we questioned whether the definition of property can accommodate new and emerging types of property, such as virtual currencies, digital accounts or libraries, intellectual property rights and other forms of intangible or digital property.8 We expressed a view that the definition and, in particular, the catch-all "any other right or interest" is wide enough to capture all sorts of intangible things. However, the PRA's definition of property does not explain how or why something should be treated as property. We questioned whether it provides partners, lawyers and judges with sufficient guidance on whether new forms of property are indeed property for the purposes of the PRA. We also asked whether the definition of property should be amended to define property in greater detail.

3. At [38]. Contrast with the earlier case of Z v Z (No 2) [1997] 2 NZLR 258 (CA) at 279, where the Court of Appeal considered that a conventional understanding of property applied in the context of the Property (Relationships) Act 1976.
4. In Clayton v Clayton [Vaughan Road Property Trust] [2016] NZSC 29, [2016] 1 NZLR 551, the Supreme Court held that Mr Clayton's powers under the trust deed (the powers to appoint and remove beneficiaries, distribute any of the trust property to any one beneficiary, including himself, and bring the trust to an end) were a right that was captured within the definition of property under the Property (Relationships) Act 1976. This case is discussed in further detail in Chapter 11.

⁵ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [8.11]–[8.21].

6. In Z v Z (No 2) [1997] 2 NZLR 258 (CA), the Court of Appeal held that the personal skills of an individual do not come within the concept of property contained in the Property (Relationships) Act 1976.
7. A vested or contingent interest in a trust constitutes property, but a discretionary beneficial interest does not. See discussion in Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [20.31]–[20.34]. At n 4, we noted that powers to control a trust may also constitute property. However, many trusts will be structured so that beneficiaries only have a discretionary beneficial interest in the trust, and no person has unfettered powers to control a trust that would amount to property under the Property (Relationships) Act 1976. Therefore, trust property will not usually be subject to division under the Act.
8. Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [8.16]–[8.21]. For a discussion on digital information as property, see ch 5 in David Harvey Collisions in the Digital Paradigm: Law and Rule Making in the Internet Age (Hart Publishing, Oxford, 2017).

Approach in comparable jurisdictions

3.6 In jurisdictions that operate a discretionary regime (Australia, England and Wales, Scotland and Ireland), a court can take into account the wider economic resources of the partners when making orders to divide their property.9 However, jurisdictions that adopt a rules-based relationship property regime, similar to New Zealand, tend to rely on conventional definitions of property.10

Results of consultation

3.7 We received few submissions on the definition of property. Of the submissions received, most focused on the two particular issues of income-earning capacity and interests in trust property.
3.8 Members of the National Council of Women of New Zealand, one practitioner and one member of the public favoured treating income-earning capacity as an item of property. However, the New Zealand Law Society (NZLS) and Professor Nicola Peart supported reform of section 15 to address economic disparity instead of amending the definition of property. Peart also cautioned against comparisons with Australia and England and Wales given the significant differences in these regimes and their focus on meeting financial need rather than entitlements. No submitter favoured expanding the definition of property to include trust property, with submitters favouring other remedies to respond when the trust holds property that ought to be shared between the partners.
3.9 NZLS submitted that the current definition of property in the PRA should be retained and that the courts should decide on a case-by-case basis whether emerging forms of property are captured by the PRA. Professor Peart made a similar submission, observing that, if the definition of property is not broadly conceived, it will get out of date very quickly. Perpetual Guardian also noted that too much detail in the definition may hinder the ability of the courts to allow for emerging forms of property. However, one practitioner submitted that, while the existing definition should be retained, specific items of property should be specified, such as cryptocurrency. Another practitioner did not agree that it should be left to the courts to determine whether the PRA applies to emerging forms of property. That practitioner considered it would be preferable for the definition to provide greater certainty "so that cases will not be won simply on the ability of lawyers' advocacy skills or the judge's mood". The practitioner submitted that the definition should be expanded to include digital accounts. This should include accounts for created media (such as photos on Facebook or Dropbox), accounts for the

9. Family Law Act 1975 (Cth), ss 75 and 79; Matrimonial Causes Act 1973 (UK), ss 24 and 25(2)(a); Family Law (Scotland) Act 1985, s 11(5)(d); and Family Law (Divorce) Act 1996 (Ireland), s 20(2)(a). See, for example, Hall v Hall [2016] HCA 23, (2016) 90 ALJR 695; and Charman v Charman (No 4) [2007] EWCA Civ 503, [2007] 1 FLR 1246. However, in the recent case of Waggott v Waggott [2018] EWCA Civ 727, [2019] 2 WLR 297, the Court held that earning capacity is not capable of being treated as a matrimonial asset to which a principle of sharing can be applied.
10. In Ontario, for example, "property" means "any interest, present or future, vested or contingent, in real or personal property": Family Law Act RSO 1990 c F.3, s 4(1). The American Law Institute also considered that a special meaning of "property", different from its meaning in other areas of law, is neither necessary nor desirable. It observed that the most frequent occasion for debate over the definition involves the law's treatment of earning capacity and goodwill but that the treatment of these items should be determined by a specific policy choice rather than by the definition of property: American Law Institute Principles of the Law of Family Dissolution: Analysis and Recommendations (ebook ed, Thomson Reuters, March 2019 update) at § 4.03, comment (b).

family business or income-earning accounts (such as YouTube channels) and accounts for media consumption (such as iTunes or Netflix).

Conclusions

The definition of property in the new Act should retain the definition of property

from the PRA.

R8

RECOMMENDATION

3.10 We consider that the definition of property in the Relationship Property Act (the new Act) should retain the existing definition of property from the PRA. In particular, we do not recommend amending the definition of property to include wider economic resources. We consider that our recommendations for reform to respond to economic disparity (in Chapter 10) and in relation to property held on trust (in Chapter 11) will address the specific issues identified above. We have not identified any other issues with excluding wider economic resources from the definition of property that warrant reform.
3.11 We do not recommend listing specific items of property in the definition of property. In our view, the courts are best placed to determine, on a case-by-case basis, whether new and emerging forms of property ought to be captured by the new Act. We note, however, the concerns raised by some submitters that greater guidance on new and emerging forms of property is needed. Lawyers advising on relationship property matters need to ensure their familiarity with property that is subject to the property sharing regime. Education for all New Zealanders (discussed in Chapter 2) and the information guide (discussed in Chapter 16) should also address the types of covered by the new Act (including emerging types of property and, in particular, the appropriate sharing of digital accounts). The information guide may usefully contain a checklist of property to be considered.

THE BASIS FOR CLASSIFICATION

Background

3.12 The PRA classifies property as either "relationship property" or "separate property". Relationship property is shared equally under the PRA unless one of the limited exceptions or adjustments available under the PRA applies.11 Separate property is generally excluded from division.12
3.13 Relationship property is defined in section 8 of the PRA. The types of property defined as relationship property reflect three approaches to classification:

¹¹ Property (Relationships) Act 1976, ss 13–18C. As discussed in Chapters 9 and 10.

12. Subject to the court's power, in some limited circumstances, to make orders in respect of separate property: ss 15A, 18B and 18C.

(a) Property acquired or produced by either partner during the relationship is relationship property under a "fruits of the relationship" approach to classification.13
(b) The family home and family chattels are relationship property, whenever acquired, under a "family use" approach to classification.14
(c) Property acquired for the common use or common benefit of both partners is relationship property under a "family acquisitions" approach to classification.15
3.14 Separate property is defined broadly in section 9(1) as all property that is not relationship property. This includes, subject to the exceptions discussed below, new property acquired out of separate property, the proceeds of any dispositions of separate property, any increase in the value of separate property and any income or gains derived from separate property.16
3.15 As a general rule, separate property falls under one of three categories:

• (a) Pre-relationship property. Consistent with the fruits of the relationship approach to classification, the PRA treats property acquired by one partner before the relationship began as separate property (section 9(4)) on the basis that it was not acquired through the efforts of either partner during the relationship.
• (b) Third party gifts and inheritances. Property acquired from a third person by way of succession, survivorship or gift or because the partner is a beneficiary under a trust settled by a third person is separate property under section 10(1). Throughout this chapter, we refer to these items of property as "gifts and inheritances". This is also consistent with the fruits of the relationship approach to classification.
• (c) Special types of property. These are items that would ordinarily be relationship property but that the PRA provides for specifically. This includes property that one partner receives by gift from the other partner (section 10(3)) and certain chattels such as heirlooms or taonga (section 2).

3.16 Separate property will not always remain separate property. When separate property is used by the partners as the family home or a family chattel, the family use approach results in that property being classified as relationship property.17 Similarly, when pre- relationship property is used to acquire new property for the partners' common use or common benefit, the new property is relationship property under the family acquisitions approach.18
3.17 The PRA also recognises other ways in which separate property can be converted into relationship property:

• (a) When a gift or inheritance is, with the owning partner's express or implied consent, so intermingled with other relationship property that it is unreasonable or impracticable to regard that property as separate property, it will be treated as

¹³ Section 8(1)(e).

¹⁴ Sections 8(1)(a)–(b).

15. Sections 8(1)(d) and (ee). Note that s 8(1)(c) also classifies as relationship property all property owned jointly or in common in equal shares by the partners.

¹⁶ Sections 9(2)–(3) and 10(1)(b)–(c).

¹⁷ Sections 8(1)(a)–(b).

¹⁸ Sections 8(1)(d) and (ee).

relationship property under section 10(2). We discuss gifts and inheritances at paragraphs 3.90–3.103 below.
(b) When separate property, other than gifts or inheritances, is used with the owning partner's express or implied consent to acquire, improve or increase the value of or the amount of any interest of either partner in relationship property, that separate property will become relationship property, either by general operation of the rules of classification19 or by specific operation of section 9A(3).
(c) When new items of property are acquired during the relationship using a mixture of separate property and relationship property, the new item of property will be relationship property, and the separate property used to acquire the new property will lose its character as separate property.20
(d) When any increase in the value of separate property, or any income or gains derived from separate property, is attributable to the application of relationship property or the actions of the non-owning partner, that increase (or income or gains) is relationship property under sections 9A(1) or 9A(2). We discuss increases in the value of separate property at paragraphs 3.104–3.125 below.

The conceptual basis for classifying property as relationship property or separate property

3.18 The PRA adopts three approaches to classification (described at paragraph 3.13 above). The fruits of the relationship approach is based on the theory that a qualifying relationship is a family joint venture to which the partners contribute equally although perhaps in different ways. The equal contribution of each partner entitles them to share in the "fruits" of the family joint venture, being the property acquired or produced by either or both of the partners during the relationship. This theory is embedded in the statutory purpose and principles of the PRA.21
3.19 The basis for classifying family acquisitions as relationship property is that they have been made with the relationship in mind in order to benefit the family joint venture. When family acquisitions are funded from separate property, this can be regarded as a gift or form of monetary contribution to the relationship, and treating that monetary contribution as relationship property is consistent with the principle that all forms of contribution to the relationship are to be treated as equal.22
3.20 The basis for classifying property under the family use approach is unclear.23 It might be that the partners' use of the family home and family chattels signals their intention to

19. In Hyde v Hyde [2010] NZHC 1356; [2011] NZFLR 35 (HC) at [39], Ellis J observed that "where separate property is applied to enhance relationship property, the operation of some other provision of the Act will usually transmogrify the separate, into relationship, property in any event".
20. This is because the courts have interpreted s 9(2) as applying only when property is acquired wholly out of separate property. Property acquired out of mixed funds is treated as relationship property under s 8(1)(e): Allan v Allan (1990) 7 FRNZ 102 (HC) at 109 per Tipping J. See also Martin v Martin [2015] NZHC 1823, [2015] 30 FRNZ 568 at [28].

²¹ Sections 1M(b) and 1N(b).

²² Sections 1M(b), 1N(b) and 18(2).

23. See discussion in Robert Fisher "Should a Property Sharing Regime be Mandatory or Optional?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge

treat that property as "theirs" or that such conduct leads the partner who is not the legal owner of the property (the non-owning partner) to believe that they share that property and to reasonably rely on that belief. Alternatively, the family use approach might simply be a means of identifying those items of property to which the partners can be presumed to have contributed, due to their centrality to family life, therefore justifying an equal entitlement. Another possibility is that the family use approach is based on the theory that certain assets could help meet the future needs of a partner or children by recognising the special significance of core family assets to the support of the partners and children at the end of the relationship.
3.21 Robert Fisher QC argues that the explanation of the family use approach is historical, the family home being "the battleground on which women's property rights were first developed".24 Fisher argues that, once equal sharing was extended beyond the family home and chattels to all items of relationship property in 2001,25 the reason for the family use approach disappeared.26

Issues

3.22 A key issue identified in this review relates to the family use approach to classification and how it requires partners to share pre-relationship, gifted and inherited property simply because it is used by them as the family home or a family chattel. As we explore below, this can result in unjust outcomes and is inconsistent with public attitudes and expectations as to what property should be shared when relationships end.

The risk of unjust outcomes

3.23 The family use approach can result in unjust outcomes where the family home or chattels were owned by one partner before the relationship began or were received by one partner as a gift or inheritance during the relationship. It might also be considered to lead to unjust outcomes where the family home or chattels were purchased during the relationship using one partner's pre-relationship, gifted or inherited property. In that case, the family home or chattels might also be classified as relationship property under the family acquisitions approach to classification.

(UK), 2017) 329 at 337–340. See also Law Reform Commission of British Columbia Property Rights on Marriage Breakdown (Working Paper No 63, July 1989) at 13–15.

24. Robert Fisher "Should a Property Sharing Regime be Mandatory or Optional?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 329 at

339. Fisher notes that the Matrimonial Property Act 1976 sought to address the concern that the law failed to give adequate recognition to the wife's typically non-monetary contributions to the marriage. The home was the obvious starting point for making inroads to that problem, as it was the asset with which both parties were most closely associated and the property where the wife spent most of her time.

25. The Matrimonial Property Act 1976 originally established two classes of matrimonial property: "domestic assets", namely, the family home and chattels, which were subject to equal sharing; and "general assets", which comprised all other matrimonial property and were shared on the basis of each spouse's contribution to the marriage partnership: AM Finlay "Matrimonial Property – Comparable Sharing: An Explanation of the Matrimonial Property Bill 1975" [1975] II AJHR E6 at 7–8. In 2001, the two classes of matrimonial property were abolished and the general rule of equal sharing was extended to all items of relationship property: Property (Relationships) Act 1976, s 11.
26. Robert Fisher "Should a Property Sharing Regime be Mandatory or Optional?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 329 at 339.

3.24 Whether the family use approach results in an unjust outcome in any given situation will be influenced by a range of factors:

• (a) The value of the property subject to division. The family home represents the biggest asset for most New Zealand households.27 Some chattels can also be significant in value, such as artwork or expensive motor vehicles, although this is less common. The greater the net value of the property that is (or is attributable to) one partner's pre-relationship, gifted or inherited property, the more likely the other partner will be seen as enjoying a "windfall" when the relationship ends.
• (b) How long the partners used the property for. Under the family use approach, property is classified according to how it was being used before the relationship ended rather than looking at the partners' use of the property throughout the relationship.28 Therefore a decision to move into or out of a home that was one partner's pre-relationship property, gift or inheritance shortly before separating could significantly affect partners' property entitlements under the PRA.29
• (c) The nature of the relationship. The PRA captures a wide range of relationships and might include relationships where the partners have no expectation of sharing property or have drifted into a qualifying relationship without appreciating the property consequences. Some might think it is unjust to be required to share their property without making a deliberate decision to do so.
• (d) The duration of the relationship. The risk of unjust outcomes is higher in shorter relationships. The shorter the relationship, the less likely the non-owning partner's contributions during the relationship will be considered as properly entitling them to a share in the other partner's property.
• (e) The age of the partners. The older the owning partner was when the relationship began and ended, the greater the risk of injustice. For older New Zealanders who enter a new relationship later in life, their pre-relationship property is likely to have been accumulated over a significant period of their lifetime and may in some cases represent the product of one or more previous relationships. Further, the older the owning partner, the less likely they are able to financially recover to their pre- relationship position.
• (f) Whether the partners have other separate property. The outcome might be considered unjust if the family home represents the owning partner's only significant asset. The sense of injustice might also be greater if the other partner is

27. Law Commission Relationships and families in contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017) at 48.

²⁸ Property (Relationships) Act 1976, s 2H.

29. See Oakley v Oakley (1980) 3 MPC 127 (HC); and Buljan v Buljan (1981) 4 MPC 30 (CA). However, contrast these with F v F [2017] NZHC 1450, [2017] NZFLR 768 where the family home used for most of the relationship was Mr F's pre- relationship property, but the partners had moved out approximately nine months before they separated. The Family Court accepted that the home was no longer the family home and was therefore Mr F's separate property. However, on appeal, the High Court overturned the decision and said that, notwithstanding the family's relocation, the former home remained the family home within the meaning of the Property (Relationships) Act 1976. The Court reasoned at

[35] that the family had not been living away from the home for a considerable period of time, nor had the family clearly intended to move away from the home on a permanent basis. Had this been the case – for example, if the home had been sold so there was no possibility of returning – a different outcome might have been reached.

able to retain their own pre-relationship, gifted or inherited property simply because the property was not used as the family home or chattels.
(g) The non-owning partner's contributions to the relationship. The non-owning partner might have made substantial contributions to the relationship or to the family home directly, including monetary and non-monetary contributions. Examples include caring for the partners' children or using income or separate property to meet the couple's living expenses. In those cases, it might be just for the non-owning partner to be entitled to a share in the family home.
(h) Whether there are children. The presence of children can be an important factor in whether the family use approach results in an unjust outcome. For example, if the owning partner has minor or dependent children from a previous relationship, this might increase the injustice of sharing the family home if it is pre-relationship property. If the owning partner has adult children from a previous relationship, those children may feel their expectation to their parent's property through inheritance is greater than the other partner's rights under the PRA. In contrast, the family use approach might be considered to result in a just outcome if the partners have children together and raise them in the family home.
3.25 The risk of unjust outcomes can be avoided if a person is familiar with the law or takes legal advice. A partner could prevent their pre-relationship, gifted or inherited property becoming relationship property simply by ensuring that it is not used by the couple during the relationship or even perhaps by ceasing to use the property before the relationship ends.30 However, it is questionable whether this sets the right incentives, as "a rational and economically driven actor would be encouraged to keep their separate property fully separate rather than have the family benefit from it".31 People unfamiliar with the law are also at a disadvantage, as they may not appreciate the consequences of willingly sharing their property for family use.

The measures for mitigating the risk of unjust outcomes are no longer effective

3.26 As enacted, the Matrimonial Property Act 1976 mitigated the risk of unjust outcomes through several exceptions to equal sharing, which remain in the PRA today. These exceptions no longer present an effective response to the issue.
3.27 Section 14 provides that, in marriages of less than three years' duration, the general rule of equal sharing does not apply to the family home and chattels that were one spouse's pre-relationship property or a gift or inheritance. Instead, that property is divided in accordance with the contribution of each spouse to the marriage.32 However, this rule rarely applies because amendments to the PRA in 2001 extended the regime to de facto relationships. Under these amendments, the start date of a marriage is deemed to

³⁰ See cases discussed at n 29 above.

31. Jens M Scherpe "Contracting Out of the Default Relationship Property Regime – Comparative Observations" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 357 at 371. See also Law Reform Commission of British Columbia Property Rights on Marriage Breakdown (Working Paper No 63, July 1989) at 14.
32. A mirror provision applies in respect of civil unions: Property (Relationships) Act 1976, s 14AA. De facto relationships of less than three years' duration are normally excluded from the Act, unless special circumstances apply (s 14A).

be the start date of any preceding de facto relationship.33 Because most marriages are preceded by a period of living in a de facto relationship,34 the likelihood of section 14 applying is low. Our review of cases since 2001 identified on average one reported case per year that resulted in unequal sharing under section 14.35
3.28 Section 16 enables a court to adjust the shares of the partners in any relationship property where both partners owned a home that was capable of being the family home at the date the relationship began but only one home is included in the relationship property pool at the time of division. However, this does not apply if one partner brought the family home into the relationship and the other partner had different types of pre-relationship property, such as savings and investments, nor does it apply if one partner brought the family home into the relationship and the other partner had no property. Its application is therefore quite limited.
3.29 Finally, section 13 of the PRA provides a general exception to equal sharing for extraordinary circumstances that make equal sharing repugnant to justice. However, early case law established that the bare fact that the family home was one partner's pre-relationship property is not grounds for departure from the rule as an extraordinary circumstance.36

The changing social and legal context has increased the risk of unjust outcomes

3.30 Changes in the social and legal context since the Matrimonial Property Act 1976 was first enacted have increased the risk of unjust outcomes under the family use approach. The changing social context is explored in detail in our Study Paper, Relationships and Families in Contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei.37
3.31 In the 1970s, the paradigm relationship was one in which children were raised and wealth was accumulated over time. Today, people are generally marrying later in life38 and are more likely to separate and repartner.39 As a result, situations where one or

³³ Sections 2B–2BAA.

34. Law Commission Relationships and families in contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017) at 17.
35. We identified only one case that was argued under s 14AA (civil unions of short duration), but that case did not result in unequal sharing: Tupuae v Mawson (2009) 28 FRNZ 431 (FC).

³⁶ See Martin v Martin [1979] 1 NZLR 97 (CA) at 110–112.

37. Law Commission Relationships and families in contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017).
38. In 2016, the median age at first marriage was 30 for men and 29 for women, compared to 23 for men and 21 for women in 1971, when the marriage rate peaked: Statistics New Zealand "Marriages, Civil Unions and Divorces: Year ended December 2016" (information release, 3 May 2017) at 5.
39. In 1971, just 16 per cent of marriages were remarriages. Since 1982, however, approximately one-third of all marriages in New Zealand have been remarriages: Statistics New Zealand "First Marriages, Remarriages, and Total Marriages (Including Civil Unions) (Annual–Dec)" (May 2017) <www.stats.govt.nz>. These statistics do not capture people who enter a de facto relationship after separation. This is likely to be a significant group. One New Zealand study identified that 80 per cent of women who had repartnered within five years of separation had entered into a de facto relationship rather than remarrying: Ian Pool, Arunachalam Dharmalingam and Janet Sceats The New Zealand Family from 1840: A Demographic History (Auckland University Press, Auckland, 2007) at 238–239. That study also found that, within two years of separation from a first marriage, 30 per cent of women had repartnered and that women

both partners bring property into a relationship (such as a house) might be more common.
3.32 The extension of the PRA to de facto relationships in 2001 also increased the risk of unjust outcomes because de facto couples are more likely than married couples or civil union partners to "drift" into a qualifying relationship without having considered or expected they would have to share property they owned prior to the relationship.40 The Borrin Survey reports that, while 68 per cent of respondents knew the PRA applies to de facto couples, only 48 per cent knew that it applies after three years of living together, and awareness did not vary between those who had lived with their partner for more than three years and those who had lived with their partner for less than three years.41 This suggests that people may be reaching the qualifying period for a qualifying relationship under the PRA without appreciating the property consequences.
3.33 Changes to the residential housing market over the past 40 years are also significant. The proportion of people living in owner-occupied dwellings fell 15 per cent between 1986 and 2013,42 with 65 per cent of households owning their own home in 2013.43 Home ownership rates in Auckland have fallen relative to the rest of New Zealand, with only
61.5 per cent of Auckland households owning their own home in 2013, compared to 66.2 per cent of households outside Auckland.44 Declining home ownership has been attributed to a range of factors that have seen house prices rise at a rate that has outpaced rises in the average household income.45 If the rate of home ownership continues to decrease, fewer couples will have a family home to divide on separation, which may make the automatic equal sharing of the family home more of an anomaly.
3.34 Increasing house prices also means that the financial consequences of the family use approach are more significant as the PRA is requiring the division of an increasingly valuable asset. Family transfers, such as loans, gifts and inheritances from family members, may become increasingly common as it becomes harder for first home buyers to enter the property market.46 The extent to which a family home is funded by a family loan, gift or inheritance may also affect people's expectations of property sharing when relationships end.

who separated later in the study period (1950–1995) were increasingly more likely to repartner (at 238–239). While this study is now over 20 years old, it indicates that repartnering has become increasingly common in New Zealand.

40. See the discussion on the differences between early stage de facto relationships and marriages and civil unions in Chapter 6.
41. I Binnie and others Relationship Property Division in New Zealand: Public Attitudes and Values – A general population survey (Michael and Suzanne Borrin Foundation, Technical research report, October 2018) at [112]–[113] and [119].
42. Statistics New Zealand Changes in home-ownership patterns 1986–2013: Focus on Māori and Pacific people (June 2016) at 18.
43. Statistics New Zealand 2013 Census QuickStats about housing (March 2014) at 12. This includes households where the home was held in a family trust.
44. Rosemary Goodyear and Angela Fabian Housing in Auckland: Trends in housing from the Census of Population and Dwellings 1991 to 2013 (Statistics New Zealand, December 2014) at 10. This includes households where the home was held in a family trust.
45. Families Commission The Kiwi nest: 60 years of change in New Zealand families (Research Report No 3/08, June 2008) at 87 and 97.
46. Law Commission Relationships and families in contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017) at 52.

3.35 These factors point to a greater need today than in 1976 (or in 2001) to provide for the growing group of people who will bring pre-relationship, gifted or inherited property into a relationship and who may be adversely affected by the family use approach if that relationship ends.

Public attitudes and expectations of sharing

3.36 The changing social context will have influenced public attitudes and values on sharing property when relationships end. This is evident from the results of the Borrin Survey. While there was a high level of support for the general rule of equal sharing (74 per cent of respondents agreeing with the current law), 88 per cent of respondents who supported the current law thought that it was appropriate to depart from equal sharing in certain situations.47
3.37 One of these situations was where the family home was owned by one partner before the relationship began. Respondents were given a fact scenario and were asked whether a home that was one partner's pre-relationship property should be shared equally if the couple separates after six years. The majority (54 per cent of all respondents) thought that the home should not be shared equally even if the non- owning partner had paid most of the couple's living expenses during the relationship.48 However, 67 per cent of respondents were more favourable to equal sharing of only the increase in the value of the family home over the course of the relationship.49 This suggests that sharing pre-relationship property simply because it was used as the family home may no longer reflect many New Zealanders' sense of fairness.
3.38 Respondents were also asked about a scenario in which the partners purchased a home together but using one partner's pre-relationship savings as a deposit. On separation four years later, 72 per cent of respondents thought that the partner who contributed the deposit should get it back, even though the couple had purchased the home together and had shared expenses and mortgage payments.50 However, only 26 per cent of respondents still thought that partner should get the deposit back if the other partner paid for most of the mortgage payments and living expenses.51 This shows that many respondents were willing to change their views on sharing pre-relationship property depending on the different contributions the partners made during the relationship.

Results of consultation on issues with the family use approach

3.39 Dissatisfaction with the family use approach was a strong theme from consultation. It was raised in 33 per cent of submissions on the Issues Paper52 and in 38 per cent of

47. I Binnie and others Relationship Property Division in New Zealand: Public Attitudes and Values – A general population survey (Michael and Suzanne Borrin Foundation, Technical research report, October 2018) at 31 and 43.

⁴⁸ At 37.

⁴⁹ At 37.

⁵⁰ At 35.

⁵¹ At 35.

52. 88 submissions from members of the public, eight submissions from individual practitioner and academic experts, one submission from a judge of the Family Court and five submissions from organisations.

submissions on the Preferred Approach Paper.53 Dissatisfaction with the family use approach was also raised in five public consultation meetings and eight practitioner and academic expert meetings. Most submitters were concerned specifically with how the PRA results in automatic equal sharing of the family home.
3.40 NZLS said that, while the PRA works well in circumstances where a couple comes to the relationship with few assets, "classification of relationship property on the basis of family use can produce an unfair outcome for a partner who enters a relationship with assets that are converted by use to relationship property". Fisher submitted that the sharing of pre-relationship property was the "critical issue" with the PRA and the issue that has caused endless trouble for New Zealand couples.
3.41 Many submitters pointed to the factors identified at paragraph 3.24 above and the changing social context as a reason why the PRA's "one size fits all" approach to classification is no longer appropriate for the wide variety of different relationships it covers. Second or subsequent relationships, relationships entered into later in life, the presence of children from previous relationships and early stage de facto relationships were all given as examples of where the current rules could result in unfair outcomes.
3.42 There was no apparent gender divide among submitters on this issue. Several members of the public commented that the family use approach no longer protected vulnerable women leaving relationships. The National Council of Women of New Zealand said:

While women with limited opportunities to accumulate property and further their careers were often seen as vulnerable when relationships ended, older women who had acquired equity in their homes were also seen as at risk of losing property vital to their quality of life in retirement.

3.43 The Wellington Women Lawyers' Association observed that there may be a gendered difference in the type of assets that men and women accumulate and consequently differences in the way in which the law classifies them:

Many women prioritise having a home, and possibly a higher proportion of men have property divested into other legal entities such as companies and trusts, some of which would not be classified as relationship property, particularly a clearly separate business owned by a company.

3.44 A number of members of the public submitted that the current PRA rules are deterring them from forming a new relationship for fear of losing their assets. Others were concerned that the PRA is incentivising unconscionable conduct, specifically maintaining a relationship for three years for pecuniary gain.
3.45 Several practitioners submitted that the single biggest reason for contracting out agreements and for the establishment of family trusts has been to protect pre- relationship property from division in the event of a new or future relationship ending. A clear theme, however, was that the ability to contract out or settle property on a trust are not adequate substitutes for fair rules. In respect of contracting out, submitters pointed to the cost of contracting out agreements and the need to engage lawyers, the awkwardness and discomfort of having a discussion about contracting out in the early stages of a relationship, the lack of protections should one partner refuse to enter into a

53. 27 submissions from members of the public, nine submissions from individual practitioner and academic experts and two submissions from organisations.

contracting out agreement and the risk of an agreement being overturned in the future. In relation to trusts, some submitters pointed to the need for expensive legal advice in order to establish a trust, while others pointed to the legal uncertainty surrounding claims against property held on trust.

Approach in comparable jurisdictions

3.46 In developing our recommendations, we have considered approaches to classification in comparable jurisdictions. We note, however, that each comparable regime sits within its own legal, social and societal context, which will differ from the New Zealand experience. Our discussion below focuses on jurisdictions that adopt a rules-based relationship property regime. Other jurisdictions that New Zealand often compares itself with (Australia, England and Wales, Scotland and Ireland) operate discretionary regimes under which a court has discretion to adjust the partners' property interests on separation.54 These jurisdictions, other than Scotland (discussed below), do not classify property in their legislation.
3.47 Approaches to classification in comparable rules-based jurisdictions tend to fall on a spectrum. At one end, all property owned by either or both partners is shared under a "universal" model. At the other end of the spectrum, only the fruits of the relationship are shared. Sharing property on the basis of family use or the partners' intentions at the time of acquisition fall somewhere in between.
3.48 While there is widespread acceptance that the fruits of the relationship should be shared when relationships end,55 many jurisdictions define relationship property more broadly. In Canada, several provinces adopt a family use approach, providing that the family home is always shared, whenever acquired.56 In Scotland, pre-relationship property is shared if it was acquired for the partners' use as the family home or chattels.57

54. Family Law Act 1975 (Cth); Matrimonial Causes Act 1973 (UK); Family Law (Scotland) Act 1985; and Family Law (Divorce) Act 1996 (Ireland). The Australian Law Reform Commission has recently recommended retaining judicial discretion to divide property interests in a way that is just and fair in each case: Australian Law Reform Commission Family Law for the Future: An Inquiry into the Family Law System – Final Report (Report 135, March 2019) at [7.7].
55. Joanna Miles and Jens M Scherpe "The legal consequences of dissolution: property and financial support between spouses" in John Eekelaar and Rob George (eds) Routledge Handbook of Family Law and Policy (Routledge, Abingdon, 2014) 138 at 152.
56. In Canada, the family home is always shared if it is owned by one or both partners in Ontario (Family Law Act RSO 1990 c F.3); Quebec (Quebec Civil Code Book Two c V); Saskatchewan (The Family Property Act SS 1997 c F-6.3); Nova Scotia (Matrimonial Property Act RSNS 1989 c 275); New Brunswick (Marital Property Act RSNB 2012 c 107); Newfoundland and Labrador (Family Law Act RSNL 1990 c F-2); and Yukon (Family Property and Support Act RSY 2002 c.83). We note that the Ontario Law Reform Commission recommended repeal of the special rules for the family home in 1993, but that recommendation has not been adopted to date: Ontario Law Reform Commission Report on Family Property Law (November 1993). In September 2017, the Law Reform Commission of Nova Scotia also recommended excluding the value of pre-relationship property from division, regardless of the use to which that property is put during the relationship: Law Reform Commission of Nova Scotia Final Report: Division of Family Property (September 2017). That recommendation has not been adopted to date.
57. The definition of matrimonial property excludes property acquired by way of gift or succession from a third party but includes property acquired before the marriage "for use by them as a family home or as furniture or plenishings for such home": Family Law (Scotland) Act 1985, s 10(4). See also discussion in Kenneth McK Norrie "Scotland" in Jens M Scherpe (ed) Marital Agreements and Private Autonomy in Comparative Perspective (Hart Publishing, Oxford, 2012) 289 at 297.

3.49 Other jurisdictions rely solely on a fruits of the relationship approach to classification. In Europe, there appears to be a growing consensus that pre-relationship property, gifts and inheritances should not be shared, regardless of how they are used.58 The most common form of relationship property regime in Europe is a limited community of property under which acquisitions during the relationship are shared, excluding gifts and inheritances.59 No European country now follows a universal model, the Netherlands being the last country to shift towards a fruits of the relationship approach in 2018.60
3.50 In Canada, provinces with more recent relationship property legislation have moved away from a family use approach to varying degrees. In British Columbia, reforms in 2011 replaced the previous family use approach with a fruits of the relationship approach under which pre-relationship property and gifts and inheritances are excluded from division, although any increase in their value is shared.61 This was preferred over a family use approach as it seemed "to better fit with people's expectations about what is fair".62 Similar rules of classification apply in Alberta.63 In Manitoba, pre-relationship property is excluded from division unless the property was acquired in specific contemplation of the relationship.64 Any increase in the value of pre-relationship property is shared.65 Gifts and inheritances designed to benefit only one partner are excluded, including any increase in value or income derived from the gifted property unless the income or increase in value is used to purchase a family asset.66
3.51 The Law Reform Commission of Nova Scotia has also recently recommended adopting a more limited family use approach. Specifically, it recommended excluding the value of pre-relationship property from division, observing that:67

This accords with the purpose of family property legislation to recognize contributions to the relationship and the acquisition of assets prior to the start of the relationship cannot be said to be a product of these contributions.

3.52 The Law Reform Commission of Nova Scotia also pointed to the changing social context and considered that excluding pre-relationship property should encourage settlement because it accords more with people's sense of fairness.68 It rejected calls for giving the family home special status, observing that this leads to anomalies and can have adverse

58. The most common form of relationship property regime in Europe is a limited community of property under which acquisitions during the relationship are shared, excluding gifts and inheritances: Jens M Scherpe "Marital Agreements and Private Autonomy in Comparative Perspective" in Jens M Scherpe (ed) Marital Agreements and Private Autonomy in Comparative Perspective (Hart Publishing, Oxford, 2012) 443 at 478–479.

⁵⁹ At 449.

60. BE Reinhartz "New Matrimonial Property Law in the Netherlands" (paper presented to International Society of Family Law Conference, Amsterdam, 2017) at 2.

⁶¹ Family Law Act SBC 2011 c 25, ss 84(2)(g) and 85.

62. Ministry of Attorney General, Justice Services Branch, Civil Policy and Legislation Office White Paper on Family Relations Act Reform; Proposals for a new Family Law Act (July 2010) at 81. See also Law Reform Commission of British Columbia Property Rights on Marriage Breakdown (Working Paper No 63, July 1989).

⁶³ Matrimonial Property Act RSA 2000 c M-8, s 7(2).

⁶⁴ The Family Property Act CCSM 2017 c F25, ss 4(2) and 4(2.3).

⁶⁵ Section 4(3).

⁶⁶ Section 7.

⁶⁷ Law Reform Commission of Nova Scotia Final Report: Division of Family Property (September 2017) at 122.

⁶⁸ At 122–123.

consequences especially in second or third relationships.69 It also recommended that all increases in the value of pre-relationship property be shared,70 consistent with the British Columbian approach. The Commission did not, however, recommend abolishing the family use approach entirely. It considered that gifts and inheritances should continue to be shared where they are used for the benefit of both partners or their children.71 The Commission considered the logic of the family use approach in this context seemed to accord with people's sense of fairness and their expectations about what belongs to them as a family.72 It was concerned that the alternative approach taken in British Columbia, to exclude the original value of gifts and inheritances but share all increases in value regardless of how the gift or inheritance was used, might be hard to rationalise in many cases and could lead to more applications for unequal sharing.73
3.53 The American Law Institute, an independent organisation in the United States that develops proposals for law reform initiatives, also recommended a fruits of the relationship approach as a starting point, commenting that this:74

... reflects a widespread consensus that marriage alone should not affect the ownership interest that each spouse has over property possessed prior to the marriage or received after the marriage by gift or inheritance. In contrast, the law of nearly every state reflects the view that marriage alone is sufficient to support a spousal claim of shared ownership at divorce to property earned by marital labor (labor performed during marriage by a spouse).

3.54 Significantly, however, the Institute also recommended that a portion of separate property should be reclassified as relationship property at the dissolution of a "long- term marriage".75 The Institute explained the basis for this approach is that, after a lengthy marriage spouses typically do not think of their separate property as separate. The longer the marriage, the more likely it is that the spouses will have made decisions about their employment or the use of their marital assets in reliance on an expectation that their separate property will be shared.76 The Institute did not specify a definition of "long-term marriage" or the formula for determining the portion of separate property to be reclassified as relationship property, instead leaving those matters to be specified at state level.77
3.55 Our review of comparable jurisdictions indicates a shift in rules-based relationship property regimes since the 1970s away from a universal model and towards the fruits of the relationship end of the spectrum, especially in relation to the treatment of pre-

⁶⁹ At 128–129.

⁷⁰ At 125.

⁷¹ At 141–143.

⁷² At 142.

⁷³ At 142.

74. American Law Institute Principles of the Law of Family Dissolution: Analysis and Recommendations (ebook ed, Thomson Reuters, March 2019 update) at § 4.03, comment (a).

⁷⁵ At § 4.12.

⁷⁶ At § 4.12, comment (a).

⁷⁷ At § 4.12, comment (b).

relationship property that is used by the partners as the family home. However, it is also clear that many jurisdictions still place value on the partners' use of property as evidence of their property sharing intentions and expectations. Further, it can be seen that even a pure fruits of the relationship approach might not always achieve what partners would perceive as fair outcomes if all increases in the value of separate property are treated as relationship property without the need to establish any connection to the relationship.

Options for reform

3.56 In the Issues Paper, we identified two broad options for reform as being to:

• (a) abolish the family use approach to classification and classify all property on the basis of a pure fruits of the relationship approach (Issues Paper at [9.35]–[9.37]); or
• (b) adopt different approaches to classification depending on the length of the relationship (Issues Paper at [9.38]–[9.40]).

3.57 We also considered addressing concerns with the family use approach in other ways, such as by amending the exception to equal sharing in section 16, introducing a new exception to equal sharing or extending the qualifying period for all relationships.
3.58 Many submitters on the Issues Paper were in favour of moving away from a family use approach. Most members of the public who commented on this issue thought that the PRA should enable partners to leave a relationship with the property with which they entered the relationship. They did not think the mere use of one partner's property by the couple during the relationship should result in its equal division when the relationship ends. Most members of the public were concerned specifically with the family home. Several practitioner and academic experts also favoured moving away from a family use approach, including Fisher and Professor Peart. One practitioner submitted that moving to a pure fruits of the relationship approach would eliminate the need for family trusts and contracting out in order to protect pre-relationship property, inheritances and gifts; different rules for short-term relationships; and much of the relationship property litigation that currently exists. However, these submitters acknowledged that this would be a radical change to the current approach.
3.59 At the same time, some submitters felt that eliminating the family use approach altogether might not be appropriate where there are dependent children of the relationship and the non-owning partner is the primary caregiver. Others considered there would need to be reinforcement of economic disparity compensation and the power to use property to meet family support obligations. Some submitters preferred retaining the family use approach to classification and addressing the problem in other ways, such as through a change to the eligibility rules for qualifying relationships or to the existing exceptions to equal sharing.

Results of consultation on the Preferred Approach Paper

3.60 Ultimately, in the Preferred Approach Paper, we proposed limiting the family use approach to family chattels and classifying all other property, including the family home, on the basis of a fruits of the relationship approach and a family acquisitions approach to classification. Under our proposals, the family home would be separate property if it was acquired before the relationship was contemplated or was acquired as a gift or inheritance. However, if that home is sold and a new family home acquired during the

relationship, that new home would be relationship property. We also proposed classifying all increases in the value of the family home as relationship property, which we discuss below.
3.61 NZLS, nine practitioner and academic experts and 16 members of the public expressed support for our proposals in the Preferred Approach Paper.78 NZLS qualified its support on the basis that our proposals would be implemented as part of the suite of reforms put forward in our Preferred Approach Paper, including, in particular, our proposals for Family Income Sharing Arrangements (FISAs), which are discussed in Chapter 10. The most common reasons given by submitters in support of the proposals were that they were fairer, especially in relation to family homes brought into a relationship by one partner, were more appropriate for contemporary patterns of shorter relationships and multiple relationships over a lifetime and reflected common sense.
3.62 The Auckland District Law Society (ADLS), two practitioner and academic experts and seven members of the public supported our proposal to abolish the family use approach to the family home but did not think the proposals went far enough. Professor Peart and Professor Margaret Briggs and several members of the public thought that the family home would lose its separate property status too quickly under the family acquisitions approach. Briggs observed that a partner may sell the family home and acquire a new one for many different reasons, such as needing to move to a new town, accommodating a disability or because there was a natural disaster. None of these circumstances suggests an intention that the house should lose its separate property status. Peart did not see how the same intent, to use a family home for the partners' common use or common benefit, should have opposite consequences depending on whether the home was brought into the relationship by one partner or acquired during the relationship. Peart also questioned how the proposed rules would be interpreted and applied in practice. These submitters tended to prefer a pure fruits of the relationship approach under which partners could trace their separate property contributions into new acquisitions during the relationship, such as the purchase of a new family home. Some of these submitters also raised concerns about how increases in the value of the family home are classified, which we discuss below at paragraph 3.118.
3.63 Professor Mark Henaghan and Professor Bill Atkin did not support our proposals, as they were concerned that abolishing the family use approach would fail to provide for the primary caregiver of children in situations where the family home is the other partner's separate property. Atkin preferred dealing with the issue through exceptions to equal sharing (section 13 and a revised section 16). One practitioner thought the court should retain discretion to grant the non-owning partner more property when there had been minimal increase in value during the relationship. Two members of the public did not support our proposal. One person did not think it was appropriate to adopt a "one size fits all" approach to classification. Another person was concerned that the proposal would leave the non-owning partner with nothing, even if they had principal care of the

78. This included one member of the public who supported our proposals for relationships of less than 20 years, after which the full value of the family home should be treated as relationship property. Law Commission Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai (NZLC IP44, 2018), P5.

children of the relationship. However, this submission did not consider the effect of our FISA proposals, which are discussed in Chapter 10. That member of the public also noted that, if the home was classified as separate property, there would be a power and control imbalance, as the owning partner could take the attitude "this is my house and my rules".
3.64 Few submitters commented specifically on our proposal to retain the family use approach for family chattels. Professor Briggs agreed with the proposal on the basis that most chattels are not major items and it would be too impractical to adopt a different approach for chattels. Professor Peart thought that retaining the family use approach for family chattels for pragmatic reasons may be justifiable but only if the definition of family chattels excludes not only taonga and heirlooms but also items of special significance, such as art, antiques and pets acquired before the relationship began or by gift or inheritance during the relationship. ADLS observed that, in the relatively rare circumstances where chattels are of a significant value, reliance on contracting out or falling within another exception may be appropriate, but it considered an education programme to warn the public of this risk would be beneficial. We discuss chattels of special significance in Chapter 5.
3.65 Several submitters noted the need, when buying and selling property, for partners to obtain legal advice on the implications of the transaction under our proposals. NZLS and Professor Peart noted that partners may be contractually committed to a purchase before they can take legal advice. A practitioner proposed that there should be a three month grace period after a transaction before classification changed to give a partner "time to get out of the relationship if they don't like the consequences once they have advice".

Conclusions

3.66 We recommend that, at the end of a relationship, partners share all property that was:

• (a) acquired by either partner for the partners' common use or common benefit;
• (b) acquired by either partner during the relationship, excluding gifts and inheritances; or
• (c) used as a family chattel.

3.67 This retains the current family acquisitions and fruits of the relationship approaches to classification but limits the family use approach to family chattels only.
3.68 Our recommendations are reflected in the draft classification provisions set out in Appendix 2, which have been prepared with the assistance of Parliamentary Counsel. At the end of this chapter, we include a commentary on the individual clauses of these provisions.

A limited family use approach

3.69 We recommend abolishing the family use approach in respect of the family home for the same reasons discussed in our Preferred Approach Paper.79 Our view is that it is no longer appropriate to require partners to divide the family home simply because it is used by them during the relationship, regardless of the partners' intentions and expectations when that property was acquired. The current approach can lead to unfairness when the family home was owned by one partner before the relationship or was a gift or inheritance. In neither of these situations has the family home been acquired through the efforts of either partner during the relationship or for the purpose of being used by the partners as the family home. The decision to live in one partner's home might have been made for a range of reasons, and that decision alone should not entitle the non-owning partner to an equal share in the full value of that home if the relationship ends.
3.70 We do not, however, recommend abolishing the family acquisitions approach and relying purely on a fruits of the relationship approach. Under a pure fruits of the relationship approach, partners would be able to retain the original value of any separate property they contribute to the relationship, even if that property is used to purchase new assets for the partners' common use or common benefit. We do not favour this approach for several reasons:

• (a) First, we consider that treating family acquisitions as relationship property broadly reflects most people's values and expectations about what property belongs to them as a family. It prioritises the partners' intentions and expectations when property is acquired for their common use or common benefit rather than the source of funds used. We think this is appropriate. It reflects the reality that, over time, partners will make a range of decisions and contributions to the relationship in reliance on their continued use and enjoyment of property acquired for their

79. Law Commission Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai (NZLC IP44, 2018) at [2.90]–[2.95].

common use or common benefit. It would be unfair to prioritise contributions of separate property over other contributions made to the relationship.80
(b) Second, relying solely on a fruits of the relationship approach would be more difficult for partners to apply in practice. If partners were able to retain the value of any separate property contributions to the purchase of new property during the relationship, it would be necessary to determine what proportion of the new property is attributable to that separate property contribution and how any subsequent increase in value is to be shared. The task of apportioning the correct value to the respective separate property and relationship components will be complex and is likely to be imprecise, particularly when there has been a series of purchases and sales over time. In the case of a long relationship, it may be impractical and unrealistic to expect partners to have kept clear records about the origins of all their property. Separate property may have become so intermingled with relationship property through subsequent dealings that it is impossible to discern what portion of the property that exists at the end of relationship is attributable to the application of separate property. Fisher argues that a tracing exercise and robust estimations in place of precise calculation could be readily applied.81 In any event, the partners will likely require expert assistance, which will increase costs and delay resolution of relationship property matters.
(c) Third, we are concerned that other aspects of a pure fruits of the relationship approach would not accord with people's values and expectations, such as the treatment of debt. Broadly speaking, in a fruits of the relationship regime, partners share all gains as well as losses incurred during the relationship, regardless of whether debt was incurred for a family purpose.82 The risk of this approach is that debt incurred by one partner for personal reasons can have the effect of significantly diminishing the relationship property pool.
3.71 We have also considered addressing concerns with the family use approach by amending other rules in the PRA, such as the rules of division or the eligibility criteria. While some submitters were in favour of these options, especially the option of a longer qualifying period, these options do not directly address the central issue, which is the unfairness of the family use approach. We prefer addressing the issue directly through a change in approach to classification rather than providing an indirect remedy that might provide relief in some but not all situations.
3.72 We set out below what our recommendations mean for different types of property.

80. This is reflected in the Borrin Survey, which found that, while 72 per cent of respondents thought a partner who uses their pre-relationship savings as a deposit on a family home the partners purchase together should get that deposit back if the relationship ends after four years, only 26 per cent still thought that partner should get their deposit back if the other partner paid for most of the mortgage payments and living expenses: I Binnie and others Relationship Property Division in New Zealand: Public Attitudes and Values – A general population survey (Michael and Suzanne Borrin Foundation, Technical research report, October 2018) at 35.
81. Robert Fisher "Should a Property Sharing Regime be Mandatory or Optional?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 329 at 341.
82. For example, in British Columbia, "family debt" is defined to include all financial obligations incurred by a spouse during the relationship: Family Law Act SBC 2011 c 25, s 86. See also The Family Property Act CCSM 2017 c F25, s 11(1).

The family home

3.73 Under our recommendations, the family home will be treated in the same way as any other item of property for classification purposes, except that any increases in the value of the family home during the relationship will be treated as a distinct item of relationship property – see paragraphs 3.104–3.125 below.
Family homes owned before the relationship was contemplated or received as a gift or inheritance
3.74 When the family home was one partner's pre-relationship property or was a gift or inheritance, the value of the home when the relationship began or when the gifted or inherited property was received (original value) should be classified as the owning partner's separate property.
3.75 Any debt (including mortgage debt) incurred before the relationship was contemplated for the purposes of acquiring, improving or maintaining the family home should be classified as the owning partner's personal debt. If this debt is reduced through the application of relationship property (for example, by using the partners' income to pay the mortgage), the owning partner should be obliged to compensate the non-owning partner for an amount equal to half the reduction in principal debt. Any debt incurred after the relationship began should be classified according to the existing rules that apply to the classification of debt, currently found in section 20 of the PRA. This means, in effect, that the partners share the growth in equity of any family home during the relationship.
3.76 The owning partner should have the burden of proving that the original value of the family home should be treated as their separate property. When the family home is pre- relationship property, the owning partner would need to determine the date the relationship began, obtain a valuation of the home as at that date, work out the net value of the home at that date and calculate the extent to which a personal debt incurred to acquire, improve or maintain the home has been paid back from relationship property. While determining the start date of a relationship can be difficult, we note this is already becoming increasingly necessary in relationship property settlements in order to calculate KiwiSaver entitlements. Obtaining a valuation of the family home at the time the relationship began should be relatively straightforward in most cases, as will be calculating any reduction in personal debt associated with the home, although we note the need for people to be aware that they should keep bank records that will enable them to perform these calculations. We expect this task will be considerably easier in the case of family homes that are acquired by gift or inheritance as the date of acquisition and net value at that date are likely to be more clearly documented.
3.77 In Chapter 2, we recommend that the Government should consider ways to improve public awareness of and education about the new Act. This could include requirements on registered professionals such as real estate agents to provide some form of prescribed information to clients when buying or selling property. That information could raise awareness of the need to retain records in order to establish when the home was acquired and its original net value at the time the relationship began. Relevant records might include bank statements, loan statements, property valuations and sale and purchase records.
3.78 We appreciate that treating the original value of family homes brought into the relationship by one partner will, in some cases, reduce the size of the relationship

property pool. This might result in the non-owning partner receiving significantly less on separation. As some submitters pointed out, this would be undesirable if the non- owning partner was also the primary caregiver of the couple's children after separation. However, our recommended changes to classification must be viewed as part of a broader package of reforms recommended in this report. Our recommendations for FISAs in Chapter 10, in particular, will enable partners to continue to share their income for a limited period of time in certain circumstances, including if they have children together. The combined effect of our reforms is that the pool of resources to be divided on separation will be smaller or larger depending on the circumstances of the relationship. It is likely that, in shorter relationships and relationships entered into later in life, there will be less relationship property because of our recommendations for classification. In longer relationships, however, the partners are likely to have acquired more relationship property and meet the criteria for FISAs. For those relationships, there is a greater amount of property to be divided among the partners when they separate.
3.79 These recommendations will not affect the non-owning partner's ability to apply for an occupation order or any other ancillary orders in respect of the family home. We discuss occupation orders in Chapters 12 and 15.
Family homes acquired in contemplation of the relationship
3.80 When the family home was acquired in contemplation of the relationship, for example, while the partners were dating, it will be relationship property under the family acquisitions approach because the home was acquired for the partners' common use or common benefit. This is a common feature in other jurisdictions and minimises the risk of disputes over relationship start dates.
3.81 This retains the existing family acquisitions approach enshrined in section 8(1)(d), although it will now have wider application as it will apply to property acquired for use as the family home.83 The benefit of retaining the existing rule is that its application has been well established in case law, which addresses concerns raised in submissions (see paragraph 3.62).84 We expect that case law to continue to apply under our recommendations.

Family homes acquired during the relationship
3.82 When a family home is purchased during the relationship, it will be relationship property regardless of the source of funds used to purchase that home because it has been purchased for the partners' common use or common benefit. If partners wish to retain the value of their separate property contributions to the purchase of the home, they would need to contract out of the new Act.

83. Currently, s 8(1)(d) of the Property (Relationships) Act 1976 does not normally apply to acquisitions of property for use as the family home, as s 8(1)(a) will apply instead.
84. See, for example, B v C HC Auckland CIV-2011-404-1005, 4 October 2011 for a discussion of the meaning of "in contemplation of". See also McKay v Smith HC Invercargill CIV-2005-425-153, 22 June 2005; and Sloss v Sloss [1989] 3 NZLR 31 (CA) for a discussion of the common use or common benefit test. The effect of acquiring property for the partners' common use or common benefit is also addressed in Foote v Rea HC Tauranga CIV-2009-470-521, 19 May 2010; and L v P [2007] NZHC 1037; [2008] NZFLR 401 (HC).

3.83 Some submitters were concerned that, under this approach, property could lose its separate property status too easily if a home that is separate property is sold during the relationship and a new home is purchased with the proceeds (see paragraph 3.62). In principle, new acquisitions of property during the relationship are distinguishable from property one partner brings into the relationship because new acquisitions are made with the relationship in mind. When a new family home is acquired, the owning partner has made a purchase of property for the partners to use as their principal family residence.85 At a practical level, acquisitions of property during the relationship are also distinguishable from acquisitions made before the relationship was contemplated because there is the opportunity during a relationship for partners to contract out.
3.84 However, we recognise the risk of unfairness if a partner does not appreciate the consequences of purchasing a new home during the relationship using their separate property. We propose addressing this risk by improving public awareness of and education about the new Act (see paragraph 3.77 above). This must include the implications of purchasing new property for the partners' common use or common benefit, such as a family home. At a practical level, the purchase of a family home is an instance where the partners will have the opportunity to receive information and advice about the property conveyance and will generally require legal assistance to conduct the conveyance. As some submitters noted, people might enter into contractually binding agreements to buy and sell residential property before they obtain legal advice. We therefore recommend that the Government consider requiring real estate agents to provide this information. We do not recommend a grace period as proposed by one submitter (see paragraph 3.65), as we consider that, if a relationship did end within months of one partner acquiring a new family home from separate property, this could be grounds for an exception to equal sharing for extraordinary circumstances, currently found in section 13.
Family homes that are homesteads
3.85 There should continue to be special provision for family homes that are homesteads. A homestead is defined as a family residence situated on an unsubdivided part of land that is not used wholly or principally for the purposes of the household, such as a family home situated on a farm.86 Section 12 currently entitles the partners to share equally in "a sum of money equal to the equity of either spouse or partner or both of them in the homestead". This is inconsistent with the way in which the PRA divides other items of property. We do not consider that the focus on the equity of the homestead rather than the asset itself serves any useful purpose. We therefore recommend that the new Act adopt an amended version of this provision so that:

• (a) homesteads should continue to be treated as a discrete item of property, distinct from the remainder of the land not used wholly or principally for the purposes of the household; and
• (b) homesteads should be classified and divided in the same way as any family home under our recommendations.

⁸⁵ Property (Relationships) Act 1976, s 2 definition of "family home".

⁸⁶ Section 2 definition of "homestead", para (a).

The family chattels

3.86 We recommend that family chattels continue to be classified as relationship property whenever acquired. This is already subject to several exceptions, including where the family chattel is an heirloom or taonga.87 In Chapter 5, we also recommend a new exception for chattels of special significance.
3.87 There is less call for reform of the family use approach as it applies to family chattels, because chattels are usually of low value, are less likely than residential property to increase in value over time and are more likely to be exchanged or replaced during the relationship. While some family chattels can have significant value, such as art and antiques, we consider that the existing exceptions and our recommendation regarding chattels of special significance in Chapter 5 largely address any perceived problems with the family use approach to classifying family chattels. We also note that contracting out or reliance on the exception to equal sharing currently found in section 13 may provide a suitable remedy in rare cases where valuable items are not otherwise excluded from the definition of family chattels.88
3.88 In the absence of any strong call for reform in respect of family chattels, we think the practical benefits of the family use approach outweigh its disadvantages. It provides a bright-line test that does not require anything beyond a current valuation of the chattels, and treating all family chattels as relationship property to be shared equally deters arguments over what are generally assets of low value, promoting efficient settlement of disputes.
3.89 We do, however, recommend that the definition of family chattels should be limited to chattels "used wholly or principally for family purposes", consistent with a family use approach. The current definition captures all household furniture, appliances, effects, equipment and articles but does not specify that these must have been used by the partners during the relationship. This is in contrast to subsection (a)(iv) of the definition of family chattels, which includes only those motor vehicles, caravans, trailers, or boats "used wholly or principally ... for family purposes". The inconsistency means, for example, household items that are inherited by one partner but are not actually used by the couple during the relationship (perhaps because they are in storage or are on loan to a third party) would be considered relationship property. This inconsistency should be addressed in the new Act.

GIFTS AND INHERITANCES

Background

3.90 Gifts and inheritances are treated differently to other types of separate property under the PRA, including pre-relationship property. Rather than including gifts and inheritances among the general types of separate property under section 9, section 10 deals with gifts and inheritances in isolation.

⁸⁷ Section 2 definition of "family chattels", para (c).

⁸⁸ See, for example, S v S [2012] NZFC 2685.

3.91 Section 10(2) provides specific grounds for treating a gift or inheritance as relationship property. It focuses on whether the gift or inheritance has been intermingled with other relationship property to the extent that it is unreasonable or impracticable to continue to treat the gift or inheritance as separate property. The focus is therefore on the extent to which it is practical to trace the gift or inheritance into new forms of property rather than whether the owning partner intended that the gift or inheritance be applied to relationship property (section 9A(3)) or to the acquisition of property for the common use or common benefit of both partners (section 8(1)(ee)).

Issues

3.92 In the Issues Paper, we observed that whether gifts and inheritances should be treated differently to other types of separate property is fundamentally a value judgement.89 There is little discussion in the legislative material about why gifts and inheritances are treated differently to other separate property. The rationale alluded to in the case law is that property acquired from a third party has not been produced by the efforts of the partners and so should not be shared,90 but the same can be equally said of pre- relationship property.
3.93 Several practical issues arise as a result of the PRA's special treatment of gifts and inheritances. In particular:

• (a) It is unclear whether section 10 is subject to sections 8(1)(c) (co-owned property) and 8(1)(d) (property acquired in contemplation of the relationship for common use or common benefit). The PRA does not specify which provision should take priority when the partners use a gift or inheritance to purchase property in their joint names or in contemplation of the relationship. The courts have considered this issue on a number of occasions and are now tending to view section 10 as an "exclusive code", taking priority over section 8.91
• (b) When a gift or inheritance increases in value, the PRA does not specify whether section 9A(1) or section 9A(2) applies. If section 10 is intended to be an exclusive code, section 9A should not apply. The Supreme Court has, however, treated inherited property as being subject to section 9A.92 We discuss section 9A further below.

Approach in comparable jurisdictions

3.94 A range of different approaches are taken to the classification of gifts and inheritances in comparable jurisdictions. In some jurisdictions, such as Scotland, British Columbia and Alberta, gifts and inheritances are treated in the same way as pre-relationship

⁸⁹ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [10.61].

⁹⁰ S v W [2006] NZHC 1672; [2006] 2 NZLR 669 (HC) at [52].

91. See S v W [2006] NZHC 1672; [2006] 2 NZLR 669 (HC); McDowell v McDowell (2009) 28 FRNZ 379 (FC); B v B FC Christchurch FAM- 2005-009-3163, 29 June 2009; and Phair v Galland FC Oamaru FAM-2008-045-113, 8 February 2010.
92. In Rose v Rose [2009] NZSC 46, [2009] 3 NZLR 1, one partner inherited land from their father and so it would have been separate property under s 10 of the Property (Relationships) Act 1976. The Supreme Court said that the increase in value of that land could be considered relationship property under s 9A. It did not, however, expressly discuss the relationship between ss 9A and 10.

property.93 Other jurisdictions treat gifts and inheritances differently. In Ontario and Manitoba, increases in value of pre-relationship property are shared but increases in the value of gifts and inheritances are excluded.94 The Law Reform Commission of Nova Scotia has also recently recommended adopting different rules for gifts and inheritances. As noted at paragraph 3.52 above, the Commission recommended pre- relationship property be excluded from division but that gifts and inheritances (including any increase in their value) be shared where they are used for the benefit of both partners or their children.95

Results of consultation

3.95 In the Issues Paper, we asked whether gifts and inheritances should continue to be treated differently to other types of separate property.96 We received submissions from 22 members of the public. Almost all submitters thought that property received by one partner as a gift or inheritance should be treated as a special form of property, but views were mixed as to whether gifts and inheritances should be treated differently from other types of separate property. Several submitters thought pre-relationship property should be treated in the same way as gifts and inheritances.
3.96 Views were also mixed about whether gifts and inheritances should ever be treated as relationship property because of the way they were used. Some members of the public felt it was unfair to treat a gift or inheritance as separate property when both partners treated it as "theirs" and acted in reliance on it. An example given was when the partners had anticipated receiving a significant inheritance for some time, had held the inheritance in a joint bank account and had then invested it and lived off its proceeds until they separated. Other submitters, however, told us that gifts and inheritances should never be shared as it is not the intention of the donor that, if the recipient separates from their partner in the future, the partner should receive half its value. An example given was when parents gift money to their child for use as a deposit to purchase their first home.
3.97 NZLS observed, in its submission on the Issues Paper, that there is no clear rationale for the distinction between gifts and inheritances and other forms of separate property. It suggested that some of the concerns about the inequities created in the PRA could be removed if the PRA was amended so that the same conversion rules (when separate property becomes relationship property) applied to all forms of separate property. NZLS expressed a preference for adopting the intermingling rule in section 10(2) for all separate property over any conversion test based on family use. One practitioner, in contrast, did not think that intermingling should convert gifts and inheritances into relationship property. They considered that gifts and inheritances are always identifiable

93. Family Law (Scotland) Act 1985, s 10(4) (definition of matrimonial property excludes both pre-relationship property and gifts and inheritances); Family Law Act SBC 2011 c 25, ss 84(2)(g) and 85; and Matrimonial Property Act RSA 2000 c M-8, s 7(2).
94. Family Law Act RSO 1990 c F.3, s 4(1) definition of "net family property" and s 4(2); and The Family Property Act CCSM 2017 c F25, ss 4 and 7 (increases in the value of gifts and inheritances are excluded unless it can be shown that the increase was intended to benefit both partners).

⁹⁵ Law Reform Commission of Nova Scotia Final Report: Division of Family Property (September 2017) at 141–143.

⁹⁶ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at 203.

and traceable, and in any event, it is always possible to estimate the respective proportions of relationship property and separate property. However, they saw no reason why section 9A should not apply to gifts and inheritances in the same way as to other types of separate property.
3.98 ADLS, in its submission on the Preferred Approach Paper, submitted that gifts and inheritances should be treated differently to both relationship and other separate property and observed that the provisions of section 10 operate effectively. It submitted that an education campaign would make a significant difference to achieving justice and fairness, particularly in respect of the use of inherited monies to reduce a mortgage over the family home. ADLS suggested, as a solution, providing for a "short order" contracting out agreement specifically addressing the use of inherited funds for the reduction of a mortgage. We discuss this in Chapter 13.
3.99 Professor Peart was concerned that treating gifts and inheritances in the same way as other types of separate property would mean that gifts and inheritances could lose their separate property status too easily. For example, an inheritance used to buy a beach house for family holidays would be classified as relationship property under the family acquisitions approach to classification. Peart noted this would not necessarily be the case under the existing section 10.

Property acquired by one partner before the relationship began or from a third

party as a gift or inheritance during the relationship should be classified as

separate property. All forms of separate property should be subject to the same rules as to when separate property becomes relationship property.

R12

RECOMMENDATION

Conclusions

3.100 We recommend that the same rules should apply to all forms of separate property. The primary concern with the family use approach as it relates to gifts and inheritances is addressed in our recommendation regarding the basis for classification above. The family home will no longer be classified as relationship property if acquired as a gift or inheritance, although any increase in value of the family home will be relationship property under our recommendations discussed below.
3.101 We also note that, under our proposed classification provisions, there is no equivalent rule to section 8(1)(c) (all property owned jointly or in common in equal shares by the partners is relationship property). Our view is that property should not be classified purely on the basis of legal ownership, but rather classification should depend on whether property was acquired for the partners' common use or common benefit (or is otherwise relationship property under a fruits of the relationship approach to classification). This approach resolves the uncertainty about whether gifts and inheritances lose their separate property identity when they are used to acquire property in the partners' joint names. The court should have the ability to trace separate property funds that have been placed in a joint bank account with relationship property

funds, provided the owning partner can prove that it would be reasonable and practical to identify the separate property funds.97 Co-ownership will, however, be strong evidence that the property is relationship property under a family acquisitions or fruits of the relationship approach.
3.102 Whether property is owned jointly or in common in equal shares by the partners will be strong evidence that the property was acquired for the partners' common use or common benefit (or is otherwise relationship property under a fruits of the relationship approach to classification). However, we do not recommend classifying property purely on the basis of legal ownership as is currently the case under section 8(1)(c). For example, separate property should not be treated as relationship property simply because it is held in a joint bank account.
3.103 We do not, therefore, see any justifiable basis for continuing to treat gifts and inheritances differently to other forms of separate property. Applying the same rules to all forms of separate property would mean that gifts and inheritances lose their separate property status if they are used to purchase property for the common use or common benefit of both partners or are otherwise applied to already existing relationship property, for example, improving a family home. Increases in the value of gifts and inheritances that are attributable to the relationship will also be shared as relationship property.

INCREASES IN THE VALUE OF SEPARATE PROPERTY

Background

3.104 Increases in the value of separate property and any income or gains derived from separate property are usually treated as separate property and are excluded from division.98
3.105 However, increases in value and income or gains that are attributable to the relationship are treated as a separate item of relationship property under section 9A.99 Different rules of division apply depending on whether the increase in value, income or gains were attributable to the actions of the non-owning partner or the application of relationship property:

• (a) When any increase in the value of separate property, or any income or gains derived from separate property, was attributable wholly or in part to the application of relationship property, the increase in value (or income or gains) is relationship property and is shared equally.100
• (b) When any increase in the value of separate property, or any income or gains derived from separate property, was attributable wholly or in part, directly or indirectly, to the actions of the other partner, the increase in value (or income or gains) is relationship property but the share of each partner in that item of

97. Allan v Allan (1990) 7 FRNZ 102 (HC) at 108; Gough v Gough [1996] NZCA 439; (1996) 14 FRNZ 660 (CA); Buys v Buys HC Palmerston North AP23/98, 7 October 1998; and Moir v Moir [2007] NZCA 379 (leave to appeal decision).

⁹⁸ Property (Relationships) Act 1976, s 9(3).

⁹⁹ Rose v Rose [2009] NZSC 46, [2009] 3 NZLR 1 at [25].

¹⁰⁰ Property (Relationships) Act 1976, s 9A(1). See Mead v Graham-Mead [2015] NZHC 825.

relationship property is determined in accordance with the contribution of each partner to the increase in value (or income or gains).101
3.106 Section 15A is also relevant. It enables a court to order compensation when any increase in value of separate property is attributable wholly or in part, directly or indirectly, to the actions of the owning partner during the relationship. A court can only award compensation if it is also satisfied that, after the relationship, the owning- partner's income and living standards are likely to be significantly higher than the other partner's as a result of the division of functions within the relationship.
3.107 Where there has been no increase in the value of separate property, a partner may have a claim under section 17, which enables a court to order compensation where a partner's actions or the application of relationship property has sustained the other partner's separate property.

Issues

3.108 There are several problems with the current rules:

• (a) While monetary contributions (the application of relationship property) result in an equal entitlement under section 9A(1), non-monetary contributions (the actions of the non-owning partner) typically result in unequal entitlements under section 9A(2) that favour the owning partner.102 Having different rules of division in sections 9A(1) and 9A(2) is inconsistent with the principle in section 1N(b) that all forms of contribution to the relationship are treated as equal.103 It is also inconsistent with section 18(2), which states that there is no presumption that a contribution of a monetary nature is of greater value than a contribution of a non-monetary nature.104
• (b) The rules of division that apply when an increase in value is attributable to the application of relationship property under section 9A(1) undermine the concept of separate property. This is because they enable the non-owning partner to share in increases in value that are not attributable to the relationship, such as market inflation.105 The courts have in some cases sought to avoid unjust results by excluding contributions that have had minimal impact on the increase in value, thereby adopting an "all or nothing" approach to sharing increases in value.106
• (c) The rules of division that apply when an increase in value is attributable to the actions of the non-owning partner under section 9A(2) are unique. They require the court to determine each partner's entitlement in accordance with their contribution

¹⁰¹ Section 9A(2). See Rose v Rose [2009] NZSC 46, [2009] 3 NZLR 1.

102. For example, in Rose v Rose, the division was 60:40; in Clark v Clark [2012] NZHC 3159, [2013] NZFLR 534, the division was 75:25; and in T v W FC Papakura FAM-2009-055-432, 22 September 2011, the division was 80:20. In all cases, the division was in favour of the owning partner.
103. See discussion in Margaret Briggs and Nicola Peart "Sharing the Increase in Value of Separate Property Under the Property (Relationships) Act 1976: A Conceptual Conundrum" (2010) 24 NZULR 1 at 18.
104. In Rose v Rose [2009] NZSC 46, [2009] 3 NZLR 1 at [46], the Supreme Court observed that ss 1N(b) and 18(2) "have little or no application" under s 9A(2).

¹⁰⁵ See, for example, J v K [2013] NZFC 823, [2014] NZFLR 127.

¹⁰⁶ See, for example, V v V [2007] NZFLR 350 (FC).

to the increase in value rather than to the relationship, which is the formulation found elsewhere in the PRA, for example, in section 13. Section 9A(2) provides little practical guidance, the result being that the evaluation of the partners' relative contributions is likely to be "a matter of general impression".107
(d) Increases in value attributable to the actions of the owning partner are not directly captured by section 9A(2). This is inconsistent with the classification of other types of wealth generated through the partners' joint and several efforts during the relationship as relationship property, such as income generated by the partners. 108 While section 15A may provide relief in this scenario, its application is significantly limited by the additional requirement to establish a disparity in income and living standards attributable to the effects of the division of functions. To date, section 15A does not appear to have ever been successfully applied in practice.109
(e) Increases in value attributable to the application of the other partner's separate property are not directly captured by section 9A. Limited case law and commentary suggest that the application of separate property in these circumstances will constitute "the actions" of the non-owning partner for the purposes of section 9A(2),110 but it is preferable that this is made explicit.

Approach in comparable jurisdictions

3.109 A range of different approaches exist in comparable jurisdictions.
3.110 In Canada, most provinces treat all increases in the value of separate property as relationship property to be shared equally, including any inflationary gains.111 In these jurisdictions, only the original value of the separate property as at the beginning of the relationship or the date of acquisition of any gift or inheritance is excluded from division.

¹⁰⁷ Rose v Rose [2009] NZSC 46, [2009] 3 NZLR 1 at [46]; and Clark v Clark [2012] NZHC 3159, [2013] NZFLR 534 at [114].

108. While s 9A(2) of the Property (Relationships) Act 1976 might apply where the non-owning partner's indirect contributions free up the owning partner to make improvements to their separate property (see Rose v Rose [2009] NZSC 46, [2009] 3 NZLR 1 at [44]), this might not always be the case and/or capable of proof.
109. Claims under s 15A have typically failed either because the applicant failed to show that the disparity in income and living standards between the partners was linked to the division of functions in the relationship (de Malmanche v de Malmanche [2002] 2 NZLR 838 (HC); N v L FC Gore FAM-2004-017-21, 18 August 2006; and J v D FC North Shore FAM-2008-044-833, 13 May 2011) or because the applicant failed to show any increase in the value of the other partner's separate property (Beran v Beran [2004] NZFLR 127 (FC); A v F FC Manukau FAM-2006-092-2394, 23 December 2009; and J v D FC North Shore FAM-2008-044-833, 13 May 2011).

¹¹⁰ RL Fisher (ed) Fisher on Matrimonial and Relationship Property (online ed, LexisNexis) at [11.46]; Oakley v Oakley

(1980) 3 MPC 127 (HC); and Hight v Hight [1996] NZHC 1348; (1996) 15 FRNZ 129 (HC).

111. Ontario, British Columbia, Alberta, Manitoba (pre-relationship property only), Prince Edward Island, Nunavut and the Northwest Territories. See Family Law Act RSO 1990 c F.3, ss 4–5; Family Law Act SBC 2011 c 25, ss 84(2)(g) and 85; Matrimonial Property Act RSA 2000 c M-8, s 7(2); The Family Property Act CCSM 2017 c F25, s 4(3); Family Law Act RSPEI 1988 c F-2.1, ss 4 and 6; and Family Law Act SNWT (Nu) 1997 c 18, ss 35–36. This was also recently recommended by the Law Reform Commission of Nova Scotia in Final Report: Division of Family Property (September 2017) at 123. Arguments have been made to exclude inflationary gains in the past, but we are not aware of any jurisdiction adopting such an approach. See Manitoba Law Reform Commission Report on Family Law: Part II Property Disposition (Report 24, February 1976) at 70–71; Law Reform Commission of Saskatchewan Proposals Relating to Matrimonial Property Legislation (October 1985) at 10–12; and Law Reform Commission of British Columbia Property Rights on Marriage Breakdown (Working Paper No 63, July 1989) at 82–83.

The circumstances relating to the acquisition of the property might, however, be a relevant consideration in deciding whether to depart from equal sharing.112
3.111 The American Law Institute recommended that increases in the value of separate property be treated as relationship property only to the extent they are attributable to the efforts of either partner during the relationship.113 It considered that treating all increases in value as relationship property could provide an unjustified windfall to the non-owning partner, particularly if separate property increases in value disproportionately during a short marriage or reflects general inflation, and may be particularly inappropriate in respect of assets that are held for reasons other than investment.114 However, the Institute also recommended making provision for a portion of increases in value to be treated as relationship property after a long marriage for the same reasons given at paragraph 3.54 above.
3.112 In Scotland and most European countries, all increases in the value of separate property are separate property.115 However, Scotland operates as a discretionary regime under which a court may make an order for financial provision that is not limited to the partners' relationship property. In addition to the principle under Scottish law that relationship property should be shared equally is the principle that "fair account should be taken of any economic advantage derived by either person from contributions by the other".116 This enables a court to make orders reflecting the non-owning partner's contributions to separate property.117

Options for reform

3.113 In the Issues Paper, we identified three possible options for reforming the rules relating to increases in value in sections 9A(1) and 9A(2):118

• (a) Option 1: Replace sections 9A(1) and 9A(2) with a single contributions test under which increases in the value, income or gains attributable wholly or in part, directly or indirectly, to the application of relationship property or the contributions of the non-owning partner are shared between the partners on the basis of the contribution of each partner to the relationship.

112. In Nova Scotia, for example, whether the value of the relationship property substantially appreciated during the relationship is a relevant factor in determining whether equal division would be unfair or unconscionable: Matrimonial Property Act RSNS 1989 c 275, s 13(j). We discuss the different approaches to departing from equal sharing in Chapter 8.
113. American Law Institute Principles of the Law of Family Dissolution: Analysis and Recommendations (ebook ed, Thomson Reuters, March 2019 update) at § 4.04.

¹¹⁴ At § 4.04, comment (a).

115. Jens M Scherpe "A comparative overview of the treatment of non-matrimonial assets, indexation and value increases" (2013) 25 CFLQ 61 at 67–68 and 70–72.

¹¹⁶ Family Law (Scotland) Act 1985, s 9(1)(b).

117. See discussion in Jane Mair, Enid Mordaunt and Fran Wasoff Built to Last: The Family Law (Scotland) Act 1985 – 30 years of financial provision on divorce (University of Glasgow, 2016) at 103–104 and 147–150.
118. Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [10.30]–[10.41]. Options 1 and 2 are based on options identified in Margaret Briggs and Nicola Peart "Sharing the Increase in Value of Separate Property under the Property (Relationships) Act 1976: A Conceptual Conundrum" (2010) 24 NZULR 1 at 19.

(b) Option 2: Replace sections 9A(1) and 9A(2) with a narrow causation test under which only the increase in value, income or gains that is attributable directly or indirectly to the application of relationship property or the actions of the non- owning partner is relationship property. We noted that this could be broadened to include increases in value attributable to the actions of the owning partner, removing the need for section 15A. This would be consistent with the approach recommended by the American Law Institute.
(c) Option 3: Treat all increases in value of separate property as relationship property. This would be consistent with the approach adopted in most Canadian provinces.

Results of consultation

3.114 We received few submissions on the Issues Paper that addressed these issues. Through the PRA consultation website, 16 members of the public commented on when increases in the value of separate property should be shared, and most agreed with sharing increases in value in some cases. The most common response was that increases in value should be shared when they are caused by the actions of the non-owning partner (seven submitters).119 Four submitters did not think increases in the value of separate property should ever be shared.
3.115 In the Preferred Approach Paper, we proposed adopting Option 2.120 NZLS, ADLS, Professor Peart, one practitioner and two members of the public expressed support for our proposal. However, Professor Atkin and one practitioner thought that all increases in value, including any inflationary increases, should be shared when there has been an application of relationship property or contributions by the non-owning partner. That practitioner was concerned that excluding inflationary increases in value would disadvantage some non-owners, particularly in the case of family farms.
3.116 Professor Peart noted that our draft classification provisions did not clarify whether the actions and application of relationship property can be direct and indirect in relation to the separate property concerned. Professor Atkin also submitted that the draft provisions should expressly include direct or indirect actions of the partners.
3.117 In the Preferred Approach Paper, we also proposed treating all increases in the value of the family home when it is separate property as relationship property, including any inflationary gains.121 NZLS, seven academic and practitioner experts and six members of the public supported our proposal. ADLS was divided. Some of its members were concerned that the proposal would increase the number of people required to contract out of the PRA, would mean a home is no longer used as an investment vehicle and would give no value to the use of capital. Some ADLS members were also concerned that the proposal would be a disincentive to purchasing a home. Other members, however, pointed to the benefits of the proposal being a simple rule that would provide a level of certainty for the non-owning partner. ADLS noted it was unable to arrive at an

119. In addition, two submitters thought that increases in value should be shared "so long as the other partner has caused part of the increase in value", and three submitters thought increases in value should be shared "whenever a partner's separate property increases in value during the relationship".
120. Law Commission Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai (NZLC IP44, 2018), P8.

121 _P9.

adequate alternative proposal. One member of the public submitted that decreases in value should be treated in the same way and that the family home should be defined in a way that excluded parts of the home not used for family purposes, such as a granny flat that is rented out.
3.118 Fisher and Professor Peart expressed concern with our proposal to treat all increases in the value of the family home as relationship property. They thought that the normal rules on increases in value should apply to the family home. Fisher's concern was that the proposals would not avoid the need to rely on contracting out, trusts or the allocation of funds to separate property uses. Peart was concerned this proposal would make major inroads into the fruits of the relationship approach and did not think the loss of separate property status could be realistically attributed to the contributing partner's intention. Similar views were also expressed by six members of the public. Professor Atkin, in contrast, preferred a more general presumption that any increase in value of separate property is relationship property, removing the need for a specific provision for the family home.

Conclusions

3.119 We recommend replacing sections 9A(1) and 9A(2) with a single provision in the new Act that treats any increase in the value of separate property, or any income or gains derived from separate property, that is attributable directly or indirectly to the relationship as relationship property to be divided equally between the partners. Increases in value will be attributable to the relationship if they are attributable directly or indirectly to the application of relationship property, the application of the other partner's separate property or the actions of either or both partners. This ensures the equal treatment of monetary and non-monetary contributions to the relationship, consistent with sections 1N(b) and 18(2), which we recommend be retained in the new Act.
3.120 We recommend including increases in value attributable to the actions of the owning partner, which is not explicitly captured in section 9A(2). This is on the basis that all types of wealth generated through the partners' joint and several efforts during the relationship should be shared. This will not substantially broaden the provision's application, because as the Supreme Court observed in Rose v Rose, where the owning partner works on separate property, it is likely that section 9A(2) would already apply on the basis that the non-owning partner's actions will have had some direct or indirect

influence on any increase in value under section 9A(2).122 A consequence of this approach is that section 15A becomes redundant, and we therefore recommend its repeal.
3.121 The owning partner should not be required to share increases in value that have no connection to the relationship. This means that increases in value attributable to market inflation will not normally be shared (except in relation to the family home, discussed below) unless the application of relationship property or the actions of either or both partners preserved the separate property so that future increases could be obtained.123
3.122 These recommendations are consistent with Option 2 in the Issues Paper, which we think is fairer and will be easier to apply in practice than Options 1 and 3. Option 1 (dividing increases in value that are attributable to the relationship on the basis of the partners' contributions to the relationship) may produce unfair results when contributions to the relationship do not reflect the contributions made to the increase in value. Dividing property on a contributions basis under Option 1 would also be difficult in practice for the reasons identified at paragraph 3.108(c). Meanwhile, Option 3 (all increases in value are classified as relationship property) might be seen as unfair when increases in value have no connection to the relationship.

Increases in the value of the family home

3.123 We recommend making special provision for when the family home is separate property. Any increase in the value of separate property while it is being used as the family home should always be treated as being attributable to the relationship and classified as relationship property.124 This means that partners would share both inflationary and non-inflationary increases in value. This is for the following reasons:

• (a) A home brought into the relationship by one partner is different from other items of separate property. By living in and enjoying the home, the partners are more likely to treat the property as "theirs". The home is a key family asset that has financial, emotional and practical value to the partners. The home cannot therefore be considered separate to the relationship in the same way as other items of separate property.
• (b) It is reasonable to assume that, during the relationship, both partners will directly or indirectly contribute to the preservation and improvement of the family home for the benefit of the family joint venture, regardless of its separate property source. For example, the non-owning partner might stay at home and care for children of the relationship, enabling the owning partner to earn the income needed to finance

122. For example, when the non-owning partner's actions have enabled the owning partner to devote labour or expenditure to their separate property with consequent increase in value or when the non-owning partner has provided financial support by paying for household expenditure and thereby enabling the owning partner to pay for work on their separate property that increases its value: Rose v Rose [2009] NZSC 46, [2009] 3 NZLR 1 at [44].
123. This was the case in Rose v Rose, where, as explained at [50], not only had most of the improvements on the separate property been funded by relationship debt, but had it not been for the non-owning partner's financial contributions to the relationship, it was likely that the separate property would not have been retained, so all or part of the increase in value may have been lost.
124. That is, any increase in value of the family home is treated as an independent item of property that is notionally severed from the underlying separate property, consistent with the existing approach to increases in value attributable to the relationship under s 9A: Rose v Rose at [25].

and maintain the home, or the non-owning partner might work on the home or contribute to improvements that maintain or increase the home's value. Treating all increases in the value of the family home as relationship property will ensure the non-owning partner's contributions are recognised without having to prove the increase in value was attributable to the relationship, as will otherwise be necessary in order to share increases in the value of separate property.
3.124 Any increase in value that occurs while the separate property is being used as the family home should retain its relationship property status even if the separate property stops being used as the family home during the relationship. If the separate property family home is sold during the relationship, the entire sale proceeds will normally be treated as relationship property unless the owning partner can show that it is both practical and reasonable to trace the separate property funds.125
3.125 We recognise that, in some cases, dividing the increase in value and compensating the non-owning partner for half the reduction in debt (see paragraph 3.75) could force the sale of the separate property family home in order to meet the non-owning partner's entitlement. This could lead to unfairness, for example, where the owning partner is the principal caregiver of children and the sale of the home would result in relocation away from their community. However, the potential unfairness could be addressed through occupation orders or orders postponing vesting (discussed further in Chapter 12).126 It should also be noted that, under the current law, the owning partner would be required to share the entire value of the property rather than just the gains made during the relationship.

MODERNISING THE CLASSIFICATION PROVISIONS

Issues

3.126 We have identified the construction of the classification rules in sections 8–10 of the PRA as an issue. They are criticised as being "opaque and confusing" and "possibly the most complex in the world".127
3.127 Rather than adopting a broad definition of relationship property and a narrow definition of separate property, which is the general approach taken in most comparable jurisdictions,128 the PRA does the opposite. The definition of relationship property in

125. Gough v Gough [1996] NZCA 439; (1996) 14 FRNZ 660 (CA). See also Allan v Allan (1990) 7 FRNZ 102 (HC) at 108–109; Martin v Martin [2015] NZHC 1823 at [28]; Moir v Moir [2007] NZCA 379 (leave to appeal decision); and Buys v Buys HC Palmerston North AP23/98, 7 October 1998. We expect this interpretation to continue under our proposed classification provisions, as new s 9(3) would continue the existing rule in s 9(2).
126. In Chapter 10, we also discuss how potential claims for occupation rent by the non-resident partner might be offset against an entitlement to a Family Income Sharing Arrangement.
127. Bill Atkin "Classifying Relationship Property – A Radical Re-Shaping?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 153 at 154.
128. For example, in Scotland, "matrimonial property" means all property owned by either or both partners acquired, other than by way of gift or succession from a third party, either "(a) before the marriage for use by them as a family home or as furniture or plenishings for such a home, or (b) during the marriage but before the relevant date": Family Law (Scotland) Act 1985, s 10(4). In British Columbia, "family property" is defined to include, subject to the definition of excluded property, all real property and personal property that "on the date the spouses separate ... is owned by at

section 8 comprises a list of 12 different types of property. In effect, they add up to all property owned by either or both partners at the end of the relationship. Property that was owned before the relationship or was a gift or inheritance will not be included (unless it is converted into relationship property under the family use approach).
3.128 The broad definition of separate property as any property that is not relationship property in section 9(1) is not particularly helpful, because in effect, it simply means pre- relationship property and gifts and inheritances, which are, in any event, specifically identified as separate property in section 10(1).
3.129 The degree of specificity in the definition of relationship property means that many of its subsections are subject to a number of other provisions. For example, section 8(1)(e) (property acquired after the relationship began) is subject to sections 9(2) to (6), 9A and 10. Not only is this confusing to follow, it also leads to a range of interpretative issues, including those described at paragraph 3.93 above. Another issue is the circularity between sections 8(1)(e) and 9A(3),129 giving rise to two possible interpretations, as the Court of Appeal observed in Geddes v Geddes.130
3.130 A broader issue with the way the classification rules are currently drafted is that there is no guidance on who bears the burden of proof in establishing whether property is relationship property or separate property.131 Rather than requiring the applicant in relationship property proceedings to bear the burden of proof, the court adopts a semi- inquisitorial approach, which recognises that the applicant will often not be the legal owner of the property in dispute and so evidence relevant to the applicant's claims is more likely to be in the possession of the responding partner. Professor Atkin argues that the PRA should go further and specify who has the burden of proof in relation to establishing whether property is relationship property or separate property so as to promote clarity and certainty.132 As the owning partner will inevitably be in the best

least one spouse" or "a beneficial interest of at least one spouse in property": Family Law Act SBC 2011 c 25, ss 84–

85. See also the definition of "net family property" in Ontario: Family Law Act RSO 1990 c F.3, s 4(1).
129. This is because s 8(1)(e) of the Property (Relationships) Act 1976 provides that property acquired after the relationship began is relationship property, but this is subject to ss 9(2)–9(6), 9A and 10. Section 9(2) provides that property acquired out of separate property is separate property, but that is subject to s 9A(3). Section 9A(3) provides that property acquired out of separate property retains its separate character, unless it is used with the owner's consent for the acquisition or improvement of "property referred to in section 8(1)". There is therefore some circularity as s 8(1) includes property under s 8(1)(e), and "thus the circle returns to its starting point": RL Fisher (ed) Fisher on Matrimonial and Relationship Property (online ed, LexisNexis) at [11.55].
130. Geddes v Geddes [1986] NZCA 463; [1987] 1 NZLR 303 (CA) per Somers J at 307–308 and Casey J at 310. In that case, the husband used separate property to acquire a farm during the relationship. On one interpretation, the farm fell within s 8(1)(e), because it was acquired during the relationship and, by operation of s 9(2) and what is now s 9A(3), was relationship property. However, on this interpretation, all new property acquired out of separate property after the relationship begins is relationship property. The alternative interpretation was that the farm did not originate as set out in s 8(1)(e)

– it originated under s 9(2) and must be regarded as excluded from s 8(1)(e) altogether. On that interpretation, new property acquired during the relationship out of separate property never becomes relationship property under s 8(1)(e). The Court of Appeal adopted the latter interpretation, noting the former would negate the effect of s 9(2) and that this "bizarre result" cannot have been Parliament's intention: at 310 per Casey J.

131. In M v B [2006] NZCA 535; [2006] 3 NZLR 660 (CA), the Court of Appeal said at [39] that a court needs only to be satisfied about a state of events that has existed or that exists and that "[n]otions of onus of proof fit uncomfortably within this legislative regime". However, in the earlier case of Allan v Allan (1990) 7 FRNZ 102 (HC), Tipping J suggested at 105 that there is an onus on the party seeking to exclude property from the definition of relationship property to demonstrate on the facts that s 9 applies.
132. Bill Atkin "Classifying Relationship Property – A Radical Re-Shaping?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 153 at 163.

position to provide evidence to the court, several jurisdictions place the burden of proof on the owning partner to establish that any property in dispute is separate property. 133

Results of consultation

3.131 Several submitters commented on the draft classification provisions included in the Preferred Approach Paper.134 Professor Briggs supported the draft provisions, in particular, the starting point that all property is relationship property. Briggs commented that there are too many exceptions in the current provisions and that they are difficult to navigate. Briggs also supported clarifying that the onus should be on the owning partner to prove any property is their separate property. Professor Atkin identified a number of technical improvements that should be made to the draft provisions, including clarification of how property acquired after a relationship ends should be classified.
3.132 ADLS urged general caution in attempts at modernising legislation, noting that defined words and phrases that have been interpreted by the courts have great value to lawyers and their clients as it provides for certainty. It did not, however, express any particular concerns with the draft classification provisions except as otherwise identified in this chapter.
3.133 ADLS and NZLS supported our proposal to place the burden of proving property is separate property on the owning partner.

Conclusions

3.134 We recommend that the definitions of relationship property and separate property be redrafted to reflect our recommendations in this chapter to modernise the provisions, reflecting contemporary approaches in comparable jurisdictions, and to simplify the law so that it is clear and accessible.
3.135 New classification provisions should provide clear guidance to partners that the starting point is that all property of either partner at the end of the relationship is to be shared unless a partner can prove that certain items of property are their separate property.

133. See, for example, Family Law Act RSO 1990 c F.3, s 4(3); Family Law Act SBC 2011 c 25, s 85(2); The Family Property Act CCSM 2017 c F25, s 23; and The Family Property Act SS 1997 c F-6.3, s 23(6). A burden of proof on the owning partner was also recommended by the American Law Institute Principles of the Law of Family Dissolution: Analysis and Recommendations (ebook ed, Thomson Reuters, March 2019 update) at § 4.06.
134. Law Commission Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai (NZLC IP44, 2018) at 57–60.

This is consistent with the approach taken in most comparable jurisdictions and, we think, clearly places the burden of proof on the partner who will have ready access to the information required to establish that property is separate property on the balance of probabilities.
3.136 We recommend the use of examples in the new classification provisions to draw attention to the specific items of property that must be considered, for example, superannuation entitlements and the value of life insurance policies attributable to the relationship.
3.137 These recommendations are reflected in the draft classification provisions set out at the end of this chapter and in Appendix 2, which have been prepared with the assistance of Parliamentary Counsel.
3.138 We acknowledge ADLS's concern at paragraph 3.132 above about modernising the legislation, and note that the draft provisions retain, to the greatest extent possible, the language used in the current classification provisions. We intend that the draft classification provisions will preserve the current approach to classification except where we specifically recommend reform elsewhere in this chapter. The draft classification provisions are largely consistent with the draft provisions included in our Preferred Approach Paper, although some minor changes have been made to address technical issues, including clarifying when the classification exercise can take place, how property acquired after separation should be classified and how gifts between partners ought to be classified. These changes retain the current law in respect of these matters. We have also made minor changes to improve the operation of our proposed section 10, which sets out when property is not separate property.

DRAFT CLASSIFICATION PROVISIONS AND COMMENTARY

Nature of relationship property and separate property

8. Meaning of relationship property

Property is relationship property of the partners to a relationship if the property–
(a) is the property of either or both of the partners; and
(b) is not the separate property of a partner to the relationship.

9. Meaning of separate property

(1) Property is the separate property of a partner to a relationship if the property is not a family chattel and the property–

• (a) was acquired by the partner before the relationship began:
• (b) was acquired by the partner after the relationship ended:
• (c) was a gift to the partner from the other partner, not being property that is used for the benefit of both partners:
• (d) was acquired by the partner from a third person–
  • (i) by succession; or
  • (ii) by survivorship; or
  • (iii) by gift; or
  • (iv) because the partner is a beneficiary under a trust settled by the third person:
• (e) was received by the partner under the Accident Compensation Act 2001 as an entitlement for a personal injury, not being an entitlement that is weekly compensation for loss of earnings during the relationship:
• (f) was received by the partner under an insurance policy as a payment for a personal injury, not being a payment for loss of income during the relationship.

(2) An increase in the value of any property of a partner described in subsection (1), and income or gains derived from any property of a partner described in subsection (1), are the separate property of the partner.

Clause 8 continues the current rule that the partners must be the beneficial owners of any relationship property (section 2 definitions of "owner" and "property" to be retained).

The starting point is that all property will be relationship property unless a partner can prove that property fits the definition of separate property. See clause 11 regarding the onus of proof.

Clause 9 defines separate property.

Clause 9(1) continues the rule in section 8(1)(b) that family chattels will always be classified as relationship property. An amendment is also proposed to the section 2 definition of "family chattel" to apply only to chattels used wholly or principally for family purposes and to exclude chattels of special significance.

Clauses 9(1)(a) and (b) continue the rule in section 9(4) that the property a partner acquires before or after the relationship will be separate property. See clause 10 for exceptions to this rule.

Clause 9(1)(c) continues the rule in section 10(3).

Clause 9(1)(d) continues the rule in section 10(1)(a).

Clauses 9(1)(e) and (f) establish new rules that personal injury payments under the Accident Compensation Act 2001 or under an insurance policy will generally be separate property. The property will be relationship property if it compensates for loss of income that would have been earned during the relationship.

Clause 9(2) continues the rule in section 9(3).

(3) Property is also the separate property of a partner to a relationship if the property is not a family chattel and the property was acquired by the partner out of–

• (a) any of the partner's separate property described in subsection (1) or (2); or
• (b) any sale proceeds of any of the partner's separate property described in subsection (1) or (2).

(4) This section is subject to section 10.

10. When property is not separate property

The following is not the separate property of a partner to a relationship, but is relationship property:
(a) property acquired before the relationship began using separate property of a partner, if the property–

• (i) was acquired in contemplation of the relationship; and
• (ii) was intended for the common use or common benefit of the partners:

(b) property acquired during the relationship using the separate property of a partner, if the property was intended for the common use or common benefit of the partners:
(c) property acquired after the relationship ended that–

• (i) is income or gains derived from relationship property; or
• (ii) is proceeds from the sale or other disposition of relationship property; or
• (iii) the court considers just in the circumstances to treat as relationship property:

(d) any increase in the value of separate property that is the family home:
(e) any increase in the value of separate property of a partner, or any income or gains derived from separate property of a partner, attributable directly or indirectly to–

• (i) the application of relationship property; or
• (ii) the application of any separate property of the other partner; or
• (iii) the actions of either or both of the partners:

Clause 9(3) continues the rule in section 9(2).

Under clause 9(4), property that is separate property under clause 9 may lose its separate property status if any of the rules in clause 10 apply.

Clause 10 applies the same rules to all forms of separate property, eliminating the separate rules for gifts and inheritances currently found in in section 10.

Clauses 10(a) and (b) continue the rules in sections 8(1)(d) and (ee) that property acquired out of separate property should be relationship property if it is acquired before or during the relationship with the intention of being for the common use or common benefit of the partners.

Clause 10(c) incorporates the rule in section 8(1)(l) regarding income or gains from relationship property and the court's discretion under section 9(4) to treat property acquired after separation as relationship property.

Clause 10(d) establishes a new rule that applies when the family home was one partner's

separate property. The effect of this provision is that the value of the separate property family home when the relationship began (or when the home was acquired if it was a gift or inheritance under clause 9(1)(d)) will be the owning partner's separate property. Increases in value on that family home during the relationship will be relationship property. A family home acquired during the relationship using separate property will be classified as relationship property under clause 10(b).

Clause 10(e) is modelled on sections 9A(1) and (2). It classifies increases in value on a partner's separate property as relationship property to the extent the increase in value is attributable directly or indirectly to the application of relationship property, separate property or the actions of either or both partners.

Clause 10(f) continues the rule in section 9A(3).

(f) any separate property of a partner used with the express or implied consent of the partner for–

• (i) improving, or increasing the value of any relationship property; or
• (ii) increasing the amount of any interest of the partners in any relationship property:

11. Burden of proving that property is separate property

A partner to a relationship who contends that property is the partner's separate property has the burden of proof in relation to the matter.

Clause 11 establishes a new rule that a partner who claims property is their separate property must satisfy the court on the balance of probabilities that the property fits the definition of separate property.

CHAPTER 4

Classifying debt

what debts should be shared when relationships end and, in particular:

• whether the definition of relationship debt is appropriate;
• whether improperly obtained relationship debts should be treated differently;
• the role of the court where relationship debts exceed the partners' relationship property; and
• whether reform is necessary to reflect our recommendations in respect of classification of the family home in Chapter 3.

IN THIS CHAPTER, WE CONSIDER:

THE DEFINITION OF RELATIONSHIP DEBT

4.1 The classification of debts can be equally as important as the classification of property under the PRA. This is because the value of the relationship property to be divided between the partners is calculated by first ascertaining the total value of the relationship property and then by deducting from that total any relationship debts owed by either or both partners.1

Background

4.2 Debts are classified in a similar way to relationship and separate property. A relationship debt is defined in section 20(1) and includes debts that have been incurred or to the extent they have been incurred:

• (a) by the spouses or partners jointly; or
• (b) in the course of a common enterprise carried on by the spouses or partners, whether alone or together with another person; or
• (c) for the purpose of acquiring, improving, or maintaining relationship property; or
• (d) for the benefit of both spouses or partners in the course of managing the affairs of the household; or

¹ Property (Relationships) Act 1976, s 20D.

(e) for the purpose of bringing up any child of the marriage, civil union, or de facto relationship.
4.3 Section 20(2) provides that, for a debt to be a relationship debt under category (c) above, it is not necessary that, at the time when the debt was incurred, the property for which it was incurred was relationship property. All that is required is that the property later becomes relationship property. This means if a person incurs a mortgage debt in order to purchase a home before they enter into a relationship and the home becomes the family home and is therefore relationship property, the mortgage debt is similarly classified as a relationship debt.
4.4 A personal debt is defined broadly as any debt that is not a relationship debt or to the extent it is not a relationship debt.2
4.5 The classification of the particular property over which a debt is secured is irrelevant when classifying the debt. Instead, each debt must be examined in isolation to determine whether it fits the description of a relationship debt or personal debt. How a debt is classified for the purpose of dividing property between the partners does not alter any liability the debtor partner owes to creditors or any rights of security.3 The rights of creditors are discussed in Chapter 18.
4.6 The classification of relationship and personal debts reflects the policy that partners should share the burden of those debts associated with the two of them or their household but should not share the burden of each other's purely personal debts.4

Issues

4.7 We have not identified any issues with the general policy behind the treatment of debts under the PRA. Just as partners should share the property produced by the family joint venture, so too should they share the burden of any debt used to benefit the family joint venture.
4.8 We have, however, identified several potential issues with different aspects of the definition of relationship debt.
4.9 First, classifying all debts that are incurred jointly as relationship debts may be unfair in situations where debt is ostensibly incurred jointly but in reality it is incurred to support the private activities of only one partner.5 In Chapter 3, we recommend departing from the rule that jointly owned property should always be classified as relationship property. We explained that property should not be classified purely on the basis of legal ownership. Instead, classification should depend on whether property was acquired for the partners' common use or common benefit. In light of these recommendations, it may be appropriate to make similar amendments to the definition of relationship debt.
4.10 Second, it is not clear on the face of the PRA who has the burden of proof in relation to the classification of debts. Commentators suggest, and the cases confirm, that the

² Section 20.

³ Pursuant to ss 20A and 46.

⁴ RL Fisher (ed) Fisher on Matrimonial and Relationship Property (online ed, LexisNexis) at [15.5].

5. At [15.11]. The authors note that, in some cases, the courts have looked at the substance of the debt and not the form, presumably to avoid an unfair result.

burden is on the partner who is contending the debt is a relationship debt.6 It would, however, be desirable to clarify where the burden lies in the statute itself.
4.11 Third, the definition of relationship debt focuses on the purpose for which the debt was originally incurred, which may be unfair in situations where the debt is ultimately used for a different purpose.7 Examples might include where debt is incurred for a personal purpose but is subsequently used to pay off a relationship debt, or where debt is incurred for a relationship purpose but is gambled away by one partner. There is, however, little evidence that this is causing problems in practice. We expect that this is likely due to the fact that the courts will look at how a debt is used in order to determine the purpose for which the debt was incurred in the first place.8

Approach in comparable jurisdictions

4.12 Approaches to debt in comparable jurisdictions vary.9 Some jurisdictions divide relationship property on a global basis, similar to New Zealand, by deducting debts from the total value of relationship property to arrive at a net value of property for division. 10 Other jurisdictions impose a specific obligation on each partner to share the burden of certain debts alongside an entitlement to share the value of relationship property.11 The presence of debts can also be a relevant factor in determining whether to depart from equal sharing of relationship property.12
4.13 Comparable jurisdictions also take different approaches to defining the debts that are shared between the partners. Often this will depend on the approach to classification. In jurisdictions that adopt a fruits of the relationship approach, all debts incurred during the relationship are shared on the basis that partners should share all gains as well as all losses occurring during the relationship.13 In jurisdictions that adopt a family use

⁶ At [15.10]; Castle v Castle [1980] 1 NZLR 14 (CA) at 28; and C v C [2004] NZFLR 992 (DC) at [60].

⁷ Bill Atkin Relationship Property in New Zealand (3rd ed, LexisNexis, Wellington, 2018) at 220–221.

8. Parallels can be drawn to how a court determines whether property is acquired for the partners' common use or common benefit under s 8. In McKay v Smith HC Invercargill CIV-2005-425-153, 22 June 2005, the Court held at [33] that, although "the purpose of common use or common benefit must exist at the time of acquisition", the actual use to which property is later put will often be the only evidence from which the intention or purpose at the time of acquisition can be ascertained.
9. As we explain in Chapter 3, Australia, England and Wales, Scotland and Ireland operate discretionary regimes under which a court has discretion to adjust the partners' property interests on separation. These jurisdictions, other than Scotland, do not classify debt in their legislation. See Family Law Act 1975 (Cth); Matrimonial Causes Act 1973 (UK); and Family Law (Divorce) Act 1996 (Ireland).
10. In Canada, this is often referred to as an equalisation model and is adopted in the provinces of Ontario, Manitoba, Prince Edward Island and Nunavut and the Northwest Territories. Property is also divided on a global basis in Scotland: Family Law (Scotland) Act 1985, s 10(1).
11. For example, in British Columbia, on separation, each spouse is "equally responsible for all family debt": Family Law Act SBC 2011 c 25, s 81. In New Brunswick, the law imposes on each partner in relation to the other "the burden of an equal share of the marital debts": Marital Property Act RSNB 2012 c 107, s 2.
12. For example, in Nova Scotia, a court may order the unequal division of property if satisfied that equal division would be unfair or unconscionable, taking into account the amount of the debts and liabilities of each spouse and the circumstances in which they were incurred: Matrimonial Property Act RSNS 1989, s 13(b). Grounds for departing from equal sharing are discussed in greater detail in Chapter 8.
13. For example, "family debt" in British Columbia includes all financial obligations incurred during the relationship (and obligations incurred after separation for the purpose of maintaining family property): Family Law Act SBC 2011 c 25, s
    86. In Manitoba, net property is calculated by deducting all liabilities of a spouse other than those related to exempt assets: The Family Property Act CCSM 2017 c F25, s 11(1). In Scotland, all debts incurred before the marriage so far as

approach, the debts that are shared are often limited to debts acquired for a family purpose.14

Results of consultation

4.14 We did not seek submissions on the definition of relationship debt in either the Issues Paper or the Preferred Approach Paper, and no submitter raised material issues with the definition except in relation to improperly obtained relationship debts, which are discussed below.

Conclusions

4.15 We recommend that the Relationship Property Act (the new Act) should adopt an amended version of the definition of relationship debt in the PRA by replacing the reference to debts incurred by the partners jointly with a new provision for debts that have been incurred for the common use or common benefit of the partners. This will ensure that debts are classified in a manner consistent with property under our recommendations in Chapter 3 and addresses the risk of unfairness where jointly incurred debts are in fact incurred for a personal purpose. We also recommend removing the reference to debts incurred for the benefit of both partners in the course of managing household affairs, currently found in section 20(1)(d) of the PRA. It is unnecessary to retain this narrower category of relationship debt if a broader category of debts incurred for the partners' common use or common benefit is adopted.

they relate to matrimonial property and any debts incurred during the marriage are deducted from the value of matrimonial property: Family Law (Scotland) Act 1985, s 10(2). This is also the approach in Ontario: Family Law Act RSO 1990 c F.3, s 4(1) definition of "net family property".

14. In New Brunswick, "marital debts" means debts incurred "for the purpose of facilitating, during cohabitation, the support, education or recreation of the spouses or one or more of their children" or "in relation to the acquisition, management, maintenance, operation or improvement of marital property": Marital Property Act RSNB 2012 c 107, s 1.

4.16 We also recommend expressly providing in the new Act that the burden of proof is on the partner contending a debt is a relationship debt. This retains the court's current approach, which is appropriate as the partner who is seeking to share the burden of the debt with the other partner would have the best access to information about the debt. This is consistent with our rationale for imposing a burden of proof on the owning partner to prove that property is their separate property, discussed in Chapter 3.
4.17 We do not recommend reform to address situations where a debt is used for a different purpose than it was originally incurred for (discussed at paragraph 4.11 above). No submitter identified this as a problem, and reforming the definition of relationship debt to address this potential issue would risk creating new problems. For example, defining relationship debts based on how they are used would be inappropriate as not all debts will be conventional loans under which a sum of money is borrowed. Some debts will include tax liabilities, and it is not clear how a tax liability is "used". An alternative option could be to give the court discretion when classifying debts if a debt is used for a different purpose to that for which it was originally incurred. However, there are significant disadvantages in giving the court discretion when classifying debts. It would create uncertainty as to how the court will exercise its discretion, may lead to an increase in disputes and litigation and creates a risk of unintended consequences, such as the court exercising its discretion for a different unanticipated purpose. Although these risks could be mitigated by providing guidance within the provision on how the court should exercise its discretion, these disadvantages cannot be avoided completely.

IMPROPERLY OBTAINED RELATIONSHIP DEBTS

Background

4.18 If a debt meets the description of a relationship debt under section 20, the court has no discretion to treat that debt as a personal debt.15 Relationship debts will be deducted from the total value of relationship property regardless of the circumstances in which the debt was incurred.16

Issues

4.19 The court's lack of discretion to take into account the circumstances in which debts are incurred means that a debt can be classified as a relationship debt to be shared between the partners even if the debt was improperly obtained. This might include situations where the debt was incurred by one partner without the other partner's knowledge or by one partner on imprudent terms, for example, to support a failing business venture.

15. For example, in M v M HC Auckland HC99/97, 20 November 1997, a partner stole funds and applied them to the affairs of the household and bringing up the couple's child. The High Court held that the theft and whether the other partner knew about the source of the funds were immaterial. The essential question was whether the money was used for the purposes specified in s 20 of the Property (Relationships) Act 1976. Likewise, in W v F [2003] NZFLR 415 (HC), a partner dishonestly drew on a current account in a family company and applied those funds towards the construction of a home and other family expenditure. The partner concealed the drawings from the other partner. The High Court nonetheless held the debt was a relationship debt.

¹⁶ W v F [2003] NZFLR 415 (HC) at [37].

4.20 A further issue might also arise where one partner has been coerced or pressured by the other partner into incurring a personal debt. The debt may disadvantage the partner in several possible ways. For example, the debt may be incurred on disadvantageous terms or the amount borrowed may be used by the other partner for personal expenditure. According to one recent report, placing a debt in one partner's name is a potential form of economic abuse, and such abuse is not well understood.17
4.21 Section 13 may provide relief where the circumstances in which a relationship debt was incurred amount to extraordinary circumstances that make equal sharing repugnant to justice.18 For example, section 13 has been successfully relied on in situations where one partner incurred a $15,000 bank loan by forging his partner's signature without their knowledge19 and where one partner misappropriated money from a law firm's trust account, which resulted in the family home being sold to repay the stolen funds.20 When section 13 applies, a court determines each partner's share in the relationship property in accordance with their contribution to the relationship.
4.22 However, section 13 will not always provide relief in respect of improperly obtained relationship debts. In S v W, the Family Court and the High Court on appeal declined to apply section 13, even though the husband had incurred a sizeable debt that they concealed from the wife.21 That debt was classified as a relationship debt as it had been applied to the acquisition of relationship property, household expenditure and the payment of school fees.22 The borrowing had allowed the family to continue a high standard of living and enabled the wife to amass significant savings.23 The High Court held that, because the borrowing had been applied for relationship purposes, it did not meet the section 13 threshold of extraordinary circumstances making equal sharing repugnant to justice.24
4.23 In addition, section 13 is directed at adjusting each partner's shares in relationship property. Where a relationship debt has eroded the pool of relationship property, section 13 may be unable to provide relief to the other partner.25
4.24 Given the limitations of section 13, it may be preferable to give a court discretion to reclassify improperly obtained relationship debts as personal debts or to deduct only part of the relationship debt from the total value of the relationship property under section 20D.

17. Sandra Milne, Susan Maury and Pauline Gulliver Economic Abuse in New Zealand: Towards an understanding and response (Good Shepherd, Abbotsford, 2018) at 8.

¹⁸ The operation of s 13 is discussed in greater detail in Chapter 8.

¹⁹ M v P HC Wellington CIV-2005-485-1559, 18 September 2006.

20. Pickering v Pickering [1993] NZCA 591; [1994] NZFLR 201 (CA). See also K v R [2018] NZHC 3032, [2018] NZFLR 841, where one partner's conviction for fraud was a relevant factor in the Court's decision to apply s 13.
21. S v W [2013] NZHC 1809, leave to appeal refused in S v W [2014] NZHC 333 and, on the debt issue, confirmed in S v W [2014] NZCA 199.

²² S v W [2013] NZHC 1809 at [48]–[59].

²³ At [48], citing the Family Court judgment, S v W [2012] NZFC 7209.

²⁴ S v W [2013] NZHC 1809 at [80].

25. In W v F [2003] NZFLR 415 (HC) at [37], the Court held that, because the husband's dishonest and covert drawings on the family company were relationship debt, there was negligible relationship property after deduction of that indebtedness under s 20D.

Results of consultation

4.25 Few submitters on the Issues Paper and Preferred Approach Paper made submissions or shared personal experiences in relation to improperly obtained relationship debts. However, this was not identified as a specific area of concern in the Issues Paper or Preferred Approach Paper, so the low number of submissions may not necessarily reflect the extent of the issue.
4.26 The New Zealand Law Society (NZLS) identified the issue of improperly obtained relationship debts in its submission on the Preferred Approach Paper. It said there are situations where the lack of discretion under section 20 as to what is a relationship debt may cause injustice. For instance, where a party has unilaterally incurred a relationship debt, it might be appropriate for such a debt to be classified as personal or for some adjustment to be available in favour of the other party.

Conclusions

4.27 While we recognise the potential risk of unfairness when a relationship debt is improperly obtained, we do not recommend reform to give a court discretion to reclassify improperly obtained relationship debts as personal debts or to deduct only part of the relationship debt from the total value of relationship property. This is for several reasons.
4.28 First, it would be inconsistent with the general policy of the PRA and our recommendations in relation to misconduct. As we recommend in Chapter 8, one partner's misconduct should not affect property entitlements under the new Act unless their misconduct is gross and has significantly affected the extent or value of the relationship property. When one partner's conduct in improperly obtaining a relationship debt meets this threshold, a remedy will be available under the general exception to equal sharing for extraordinary circumstances currently found in section 13.26 To provide a separate remedy for situations where improperly obtained relationship debts do not meet this threshold would be inconsistent with the PRA's approach and our recommendations in relation to other types of misconduct, such as dissipation of relationship property through excessive expenditure during the relationship.27
4.29 Second, relying on the exception to equal sharing currently found in section 13 to provide a remedy in appropriate situations is, we think, appropriate. Under that exception, a court will make its decision having regard to all the circumstances of the case rather than simply looking at a debt or debts in isolation. As S v W demonstrates (discussed at paragraph 4.22), there may well be circumstances that weigh against granting relief when a relationship debt is improperly obtained.

• 4.30 Third, a specific remedy would introduce an undesirable level of discretion into the classification exercise, reducing certainty and increasing the risk of disputes, inconsistent with the principle of inexpensive, simple and speedy resolution. Given the wide range of situations in which a debt might be improperly obtained, it would be difficult to design a statutory remedy that provides clear guidance to partners, lawyers

26. See Chapter 8 for a discussion on s 13 and our recommendations to clarify the relevance of misconduct under that exception.

²⁷ Dissipation of relationship property is discussed in Chapter 9.

and the court as to what types of debts and in what circumstances the court should exercise the remedy. Discretion would be necessary, which would invite partners to dispute the proper classification of debts incurred throughout the relationship.

WHEN RELATIONSHIP DEBT EXCEEDS RELATIONSHIP PROPERTY

Background

4.31 The PRA does not expressly provide for situations of net indebtedness where the total value of relationship debts exceeds the total value of relationship property under section 20D.
4.32 In earlier cases, the courts had held that there was no jurisdiction under the PRA to divide net indebtedness.28 This was on the basis that the purpose of section 20D is to ascertain the value of relationship property that may be divided. If no property exists, section 20D cannot apply.
4.33 However, in more recent cases, courts have reached the opposite view.29 In C v W [Relationship Property], the Family Court interpreted section 20D as giving the court power to intervene irrespective of the extent of the partners' assets and liabilities so that one partner could be ordered to make a monetary payment to the other to ensure that there has been a just division of their property rights.30 This interpretation was endorsed by the High Court in Tapuae v Mawson.31 The Court observed that interpreting the concept of "net value" in section 20D to include an overall deficit overcomes the problem.32

Issues

4.34 In some situations, a couple's relationship debt may exceed their relationship property. It is problematic if the PRA does not address these situations. While the approach in more recent cases appears sound, there is merit in clarifying the extent of a court's powers in situations of net indebtedness in the new Act. For example, section 13, in particular, refers to the sharing of "property or money". It is unclear whether section 13 could be applied to divide relationship debt in unequal shares.

Results of consultation

4.35 We did not receive many submissions addressing situations of net indebtedness. However, Canterbury Community Law Centre told us that a big issue for its clients is how to apportion debt liability between partners, especially where there is little or no relationship property.

28. Green v Green [1994] NZFLR 423 (DC); Eves v Eves (2004) 23 FRNZ 1048 (FC); and G v G HC Wellington CIV-2005- 485-1676, 4 August 2006.
29. C v W [Relationship Property] [2007] NZFLR 1132 (FC); Williamson v Todd (2009) 27 FRNZ 760 (FC); and Tapuae v Mawson HC Napier CIV-2009-441-464, 10 December 2009.

³⁰ C v W [Relationship Property] [2007] NZFLR 1132 (FC) at [79]–[84].

³¹ Tapuae v Mawson HC Napier CIV-2009-441-464, 10 December 2009.

³² At [22].

4.36 Both NZLS and the Auckland District Law Society (ADLS) supported reform to address situations of net indebtedness. NZLS said that the absence of any specific provision for the court to determine responsibility for debts can be a source of injustice, particularly where a relationship debt is in one partner's name and there is insufficient relationship property to allow for a fair net division of assets and liabilities. ADLS said that often the debt is accumulated in the name of one partner to a relationship despite the debt being for relationship purposes. The partner in whose name the debt stands is particularly vulnerable as their financial position means they are unable to fund litigation. ADLS supported allowing for simple equal division of debts incurred during the relationship for relationship purposes and enabling a partner left saddled with relationship debt to obtain contributions from the other partner.

A court should have jurisdiction to make orders dividing relationship debts in

circumstances where the total value of relationship debts exceeds the total value

of relationship property.

R19

RECOMMENDATION

Conclusions

4.37 A court should be able to make orders under the new Act in situations of net indebtedness to ensure a just division of all of the partners' relationship property and relationship debt (or the net value of their relationship property). We therefore recommend clarification of the powers of the court in situations of net indebtedness (where the total value of relationship debt exceeds the total value of relationship property). In particular:

• (a) a court should have the power to make orders determining shares in or dividing relationship debts;
• (b) the rules that apply to the division of relationship property should also apply (with any necessary modification) to the division of relationship debts, including, in particular, the exception to equal sharing for extraordinary circumstances currently found in section 13; and
• (c) a court should have all the ancillary powers currently available under section 33 as may be necessary to give effect to any order made in relation to the division of relationship debts.

CLASSIFICATION OF DEBTS IN CONNECTION WITH THE SEPARATE PROPERTY FAMILY HOME

Background

4.38 In Chapter 3, we said that partners should share the growth in equity in the family home if it was owned by one partner before the relationship was contemplated or was received as a gift or inheritance from a third party (the separate property family home). This means sharing increases in the market value of the separate property family home as well as sharing any reduction in debts, including mortgage debt. In relation to debts, we said in Chapter 3 that:

(a) debt incurred before the relationship began to acquire, improve or maintain the separate property family home should be classified as the owning partner's personal debt;
(b) if personal debt in connection with the separate property family home is reduced through the application of relationship property (for example, by using the partners' income to pay the mortgage), the owning partner should be obliged to compensate the non-owning partner for an amount equal to half the reduction in principal debt; and
(c) debt incurred after the relationship began should be classified according to the ordinary rules that apply to the classification of debt currently found in section 20 of the PRA.
4.39 It is necessary to consider whether this can be achieved through the existing PRA provisions relating to debt or whether reform is required.

Issues

4.40 There are two issues with how the PRA's existing debt provisions would give effect to our approach to debt in connection with the separate property family home.
4.41 First, the current definition of relationship debt under section 20(2) includes any debt incurred for the purpose of acquiring, improving or maintaining relationship property, including debts incurred before that property becomes relationship property. Under our recommendations in Chapter 3, if a separate property family home increases in value during the relationship, that increase would be relationship property. It may therefore be open to a court to classify a debt incurred before the relationship as a relationship debt on the basis that a portion of the separate property family home later becomes relationship property. NZLS noted that one consequence of our recommendations in relation to classification may be that, on separation, a partner could be liable for relationship debt secured over a family home that was one partner's separate property. That liability could be greater than their share in the increase in value of the family home, leaving them in a net indebtedness situation. NZLS suggested that amending section 20 to address such situations could be a possible solution.
4.42 Second, in Chapter 3 we say that compensation should normally be limited to half the reduction in principal debt. This reflects our view that the non-owning partner should not normally be compensated for the payment of interest on the principal debt.33 Interest is a carrying charge is incurred so that the property can be used before having fully paid for it. In this context it can be treated as analogous to rent, which is a consumable item that is not accounted for on separation. This should, however, be subject to a limited discretion if, for example, the owning partner incurred debt on imprudent terms with excessive rates of interest. While section 20E provides for compensation where personal debt is satisfied from relationship property, it is a broad compensatory power and provides no guidance on the level of compensation.

33. A similar approach is recommended in American Law Institute Principles of the Law of Family Dissolution: Analysis and Recommendations (ebook ed, Thomson Reuters, March 2019 update) at § 4.06, comment (c).

The new Act should make express provision for debt incurred in connection with a

family home that is separate property, providing that:

1. a debt incurred by one partner before the relationship began to acquire, improve or maintain the home is that partner's personal debt; and
2. any repayment of that personal debt using relationship property or the other partner's separate property should entitle the other partner to compensation for an amount equal to half the reduction in principal debt or some other amount that a court considers just in the circumstances.

R20

RECOMMENDATION

Conclusions

4.43 We recommend that express provision be made to clarify the treatment of debts in connection with a separate property family home. We think it is desirable to clarify, in the new Act, how partners should share debts incurred before a relationship in connection with a separate property family home. This goes some way to addressing NZLS's concerns.
4.44 Debts incurred during the relationship in connection with the separate property family home should be classified in the ordinary way, so no amendment to the existing rules is necessary.

CHAPTER 5

Classifying specific items of property and debt

issues with classifying specific items of property and debt and, in particular:

• chattels of special significance;
• ACC and private insurance payments;
• family gifting and lending; and
• student loans.

IN THIS CHAPTER, WE CONSIDER:

CHATTELS OF SPECIAL SIGNIFICANCE

Background

5.1 The PRA classifies all family chattels as relationship property, whenever acquired, under a family use approach to classification.1 This includes any family chattels that are acquired as a gift or inheritance from a third party.2
5.2 The definition of family chattels is broad. It includes household furniture, household appliances, articles of household or family use or amenity, articles of household ornament, motor vehicles and household pets.3
5.3 In 2001, the definition of family chattels was amended to exclude heirlooms and taonga. This was in response to an earlier recommendation of a Working Group established to review the Matrimonial Property Act 1976.4 The Working Group noted the special nature of heirlooms and taonga and observed that other property acquired by gift or inheritance that does not fall within the definition of family chattels is separate property

¹ Property (Relationships) Act 1976, s 8(1)(b). The family use approach to classification is discussed in Chapter 3.

² Section 10(4).

³ Section 2 definition of "family chattels".

⁴ Department of Justice Report of the Working Group on Matrimonial Property and Family Protection (October 1988).

under section 10.5 Its opinion was that the special nature of heirlooms and taonga outweighed their nature as family chattels.6
5.4 The PRA does not define heirlooms or taonga. However, case law has established that, in order to be an heirloom, an item of property must:7

• (a) be passed down from one generation to another in accordance with some special family custom;
• (b) have unique characteristics or be of particular importance; and
• (c) have been in the partner's family for generations.

5.5 Examples of property the courts have held to be heirlooms include furniture,8 a clock9
and a painting10 when those items had been in the partners' families for generations.
5.6 Case law does not provide a conclusive definition of taonga, although the Family Court has held that taonga should be defined within a tikanga Māori construct.11
5.7 Heirlooms and taonga are excluded from the definition of family chattels but are not excluded from the PRA. This means they fall to be classified as either relationship property or separate property under the other rules of classification in sections 8–10. Heirlooms will typically be separate property under section 10 as they will have been acquired as a gift or inheritance from a third person. Taonga will also likely be separate property under section 10 unless they were created or acquired (other than by third party gift or inheritance) by a partner during the relationship.12
5.8 Heirlooms and taonga that are separate property will not normally be shared between the partners. They are, however, subject to other rules in the PRA under which separate property or a portion of its value can become relationship property13 or can be used to compensate the other partner.14

Issues

5.9 While the PRA already provides for some items of special significance (heirlooms and taonga), in the Issues Paper, we observed that there may be other items that should not

⁵ The Working Group reported at 18:

Heirlooms and taonga are of a special nature as much of their value lies in their individuality; as a family treasure they cannot be replaced by another, although in other ways identical, object. Where an object's value lies partly in the fact that it has been passed down from earlier generations its special character is lost if it passes to someone outside the family or tribal group.

⁶ At 18.

7. Humphrey v Humphrey FC Christchurch FAM-2003-009-3044, 25 May 2005 at [112]. See also H v F FC Auckland FAM-2005-004-1312, 27 January 2006 at [48]; and Stuart v Stuart FC Christchurch FAM-2003-00-5175, 16 March 2005 at [19].

⁸ Q v Q (2005) 24 FRNZ 232 (FC).

⁹ Stuart v Stuart FC Christchurch FAM-2003-00-5175, 16 March 2005.

¹⁰ H v F FC Auckland FAM-2005-004-1312, 27 January 2006.

¹¹ S v S [2012] NZFC 2685 at [54]. We address the definition of taonga in Chapter 14.

12. In that case, taonga may be relationship property under s 8(1)(e), and its value will be shared between the partners pursuant to s 20D.

¹³ For example, under ss 9A, 10(2) or 20E.

¹⁴ For example, under ss 18B and 18C.

be shared as relationship property because of the special significance the property holds.15 We referred, in particular, to:16
(a) property that has a special meaning for a partner and is irreplaceable, such as a gift from a close friend or family member who has died or a trophy or ornament awarded for a particular achievement; and
(b) property that is nominally owned by a partner but, due to its wider cultural significance, should not be treated as relationship property.
5.10 Classifying an item of special significance as relationship property simply because it is a family chattel may be unfair. It may also lead to arbitrary outcomes. For example, if one partner was gifted a valuable painting before the relationship began and kept that painting in a storage unit, it would be their separate property. If the painting was displayed in the family home for the partners' enjoyment, however, it would be relationship property. While a court could exercise its power under section 33(3)(c) to vest an item of special significance in the partner claiming a special attachment, the value of that item must still be accounted for in the global division of relationship property. If the item of special significance has a high monetary value, such as a valuable painting, this may not provide an appropriate remedy.

Results of consultation

5.11 Overall, 25 submitters commented on items of special significance in submissions on the Issues Paper and Preferred Approach Paper. They included 16 members of the public, four organisations and five academic and practitioner experts. Submitters generally favoured reform, specifically in relation to excluding items that have a personal significance for one partner from the definition of family chattels.
5.12 Members of the public generally supported treating heirlooms and other items of special significance as separate property.17 However, some submitters felt that such items should only be excluded if they are not related to the family joint venture (either because they were owned before the relationship was contemplated or were a third party gift or inheritance) unless the partners agree to treat the items as separate property. Two members of the public commented on items of wider cultural significance, submitting that these should be classified as separate property and treated in the same way as taonga.
5.13 The New Zealand Law Society (NZLS), Professor Nicola Peart, Professor Margaret Briggs and two practitioners supported excluding other items of special significance from the definition of family chattels. Peart said that the existing exclusion for heirlooms is too narrow and that art, antiques and pets acquired before the relationship began or

¹⁵ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [11.64].

¹⁶ At [11.67].

17. 15 members of the public addressed the question: "Should the heirlooms a partner owns be exempt from equal sharing?" 13 submitters agreed that heirlooms should be excluded. Two submitters disagreed, with one submitter saying it would be unfair to exclude heirlooms, and another saying that an heirloom should only be excluded if it was acquired before the relationship began or if the recipient specifically requests that it be kept separate. Five submitters addressed the question: "Are there specific items of property that should be exempt from sharing under the Property (Relationships) Act 1976 because they have special significance?" All answered in the affirmative.

by gift or inheritance should also be excluded. Perpetual Guardian and one practitioner did not support a separate category for other items of special significance. Rather, they felt a court should have sufficient discretion as to what is an heirloom. The practitioner noted that the existing exclusions were working well and that a partner claiming a special attachment to a particular item could seek to have that item vested in them when implementing the division of relationship property.
5.14 The Ministry for Culture and Heritage and the New Zealand Federation of Business and Professional Women noted that often taonga and heirlooms will be in the possession of a person as guardian or kaitiaki of the object for the rest of the tribe or for future generations. As such, taonga and heirlooms should not be treated in the same way as property the partners own.

Conclusions

5.15 In Chapter 3, we recommend that family chattels should continue to be classified as relationship property under a family use approach. However, we recommend limiting the definition of family chattels to include only chattels "used wholly or principally for family purposes", which is more consistent with a family use approach. Heirlooms and taonga should continue to be excluded from the definition of family chattels. In Chapter 14, we recommend that taonga should be defined within a tikanga Māori construct and in consultation with Māori, including on whether taonga should apply pan-culturally. We also recommend that the new Act should ensure that taonga cannot be classified as relationship property in any circumstances and that a court cannot make orders requiring a partner to relinquish taonga as compensation to the other partner.
5.16 In addition to heirlooms and taonga, we recommend excluding items of special significance from the definition of family chattels in the Relationship Property Act (the new Act). In our view, items of special significance, like heirlooms, should not be classified as relationship property simply because they are used as family chattels.
5.17 The effect of this recommendation is that items of special significance will be treated in the same way as any other item of property that is not a family chattel. If an item of special significance was owned by one partner before the relationship was contemplated or was received as a gift or inheritance from a third party, it will be separate property. However, if an item of special significance was otherwise acquired or produced by either or both partners during the relationship or was acquired for the

partners' common use or common benefit, it will be relationship property. This reflects our view that, while the special nature of items of special significance outweighs their significance as a family chattel, it does not outweigh their significance as a product of or acquisition for the relationship. Partners should continue to share the fruits of the relationship and family acquisitions, even if that includes items of special significance.18
5.18 If an item of special significance is relationship property, the court can vest that item in the partner claiming a special attachment, although its value would still be accounted for in the global division of relationship property.
5.19 We recommend defining "items of special significance" given that it is not an established concept like heirlooms. The definition should focus on items that have special meaning to a partner and are irreplaceable in that a similar substitute item or its monetary value would be an insufficient replacement.
5.20 This differs from our recommendation in Chapter 14 that taonga should not be classified as relationship property under any circumstances. Taonga are distinguishable from items of special significance as taonga are held in accordance with tikanga Māori and the principle of kaitiakitanga. A person in possession of a taonga is not seen as its owner but rather a guardian of taonga for the rest of the tribe and for future generations.19 We recognise that similar principles may also operate in respect of other items of cultural significance that are only nominally owned by one partner. In such circumstances, established principles of trust law would apply, and the partner would not be the "owner" of the property for the purposes of the new Act.20 Such property would therefore fall outside the new Act.
5.21 In Chapter 16, we recommend the publication of a comprehensive information guide. This guide should include information about how items of special significance are classified, including guidance on when an item may be a family chattel, an heirloom, a taonga or an item of special significance or excluded entirely from the new Act because it is not owned by the partners.

ACC AND PRIVATE INSURANCE PAYMENTS

Background

5.22 The PRA does not make special provision for the classification of personal injury payments made under either the Accident Compensation Act 2001 (ACC payments) or a private insurance policy.
5.23 In relation to ACC payments, the courts have held that a statutory entitlement under the Accident Compensation Act is property that is eligible for division under the PRA.21 The different types of entitlements can be categorised as follows:22

18. We discuss our approach to classification and recommendations that partners share in the fruits of the relationship and family acquisitions in Chapter 3.

¹⁹ See discussion in Department of Justice Report of the Working Group on Matrimonial Property and Family Protection

(October 1988) at 18. See also B v P [2017] NZHC 338.

²⁰ Property (Relationships) Act 1976, s 2 definition of "owner" and s 4B. See, for example, B v P [2017] NZHC 338.

21. S v S (1984) 3 NZFLR 88 (DC) at 91. See also G v G (1995) 13 FRNZ 427 (HC) at 433 involving the right of action the wife had in tort against the manufacturer of a defective contraceptive device that caused the wife injury.

(a) Lump sum compensation payments for non-economic loss suffered as a result of permanent impairment.
(b) Weekly compensation payments to compensate people incapacitated through injury for their lost earnings.
(c) Treatment and rehabilitation payments to provide money and support to facilitate the injured person's rehabilitation.
(d) Fatal injury entitlements, including funeral grants paid to the deceased's estate, weekly compensation for surviving partners and survivor grants (one-off lump sum payments to surviving payments to meet death-related expenses).
5.24 ACC payments will be classified under the PRA according to when the statutory entitlement to the payment accrued,23 so if an entitlement accrued during the relationship, all ACC payments received in relation to that entitlement will be classified and divided as relationship property. Conversely, payments received during the relationship but derived from an entitlement that accrued before the relationship will be separate property.24
5.25 The classification of private insurance payments is very similar to ACC payments under the Accident Compensation Act. The right to payments under an insurance policy is a contractual right that crystallises upon the injury or illness occurring. The courts have held that, if the right crystallises during the relationship, the right is relationship property.25 So too are all future payments a partner receives under the policy that are attributable to this underlying property right, even if the payments are received after the partners separate.26

22. These categorisations are taken from the submission of the Accident Compensation Corporation and Ministry of Business, Innovation and Employment (ACC and MBIE); and Simon Connell and Nicola Peart "Accident Compensation Entitlements Under the Property (Relationships) Act 1976" [2017] OtaLawRw 9; (2017) 15 Otago LR 169 at 176–181. They reflect ACC's operational approach rather than specific and identifiable statutory entitlements. For specific legal entitlements, see the Accident Compensation Act 2001.
23. S v S (1984) 3 NZFLR 88 (DC) at 91–92 (concerning a lump sum compensation payment received after the relationship ended in relation to an injury suffered during the relationship); T v A FC Auckland FP88/00, 20 November 2003 at

[10] and [15] (concerning weekly compensation payments received during the relationship in relation to an injury suffered before the relationship began); and B v B [2016] NZHC 1201, [2017] NZFLR 56 (concerning a lump sum compensation payment a partner received for suffering asbestosis). In that case, there was an issue as to when the entitlement to payments accrued. Although the partner had contracted the condition some years before the relationship began, the partner was only diagnosed and received treatment during the relationship. The High Court said that, based on s 37 of the Accident Compensation Act 2001, the statutory right to payment accrues when the claimant first receives treatment for the injury, even if the injury itself was suffered and manifested some time earlier. There is limited case law addressing treatment and rehabilitation payments and fatal injury entitlements, but it is likely the courts would apply the same approach. See discussion in Simon Connell and Nicola Peart "Accident Compensation Entitlements Under the Property (Relationships) Act 1976" [2017] OtaLawRw 9; (2017) 15 Otago LR 169 at 184–186.

24. In G v G (1995) 13 FRNZ 427 (HC) at 434, the Court held that a payment received during the relationship but arising from a claim that accrued before the relationship was property acquired out of separate property under s 9(2) of the Property (Relationships) Act 1976.

²⁵ C v C HC Auckland CIV-2003-404-6892, 10 September 2004.

²⁶ C v C HC Auckland CIV-2003-404-6892, 10 September 2004; and G v G (1995) 13 FRNZ 427 (HC) at 434.

Issues

5.26 The current approach to personal injury payments raises several issues.27
5.27 First, classifying personal injury payments as relationship property may deprive the injured partner of the funds they need for rehabilitation or compensation for personal impairment.28
5.28 Second, the courts' approach of focusing on when the underlying entitlement or right to the payment accrued rather than when the payment was received means that payments received after a relationship ends can still be classified and divided as relationship property if the injury occurred during the relationship. In some cases, the courts have recognised the unfairness of requiring an injured partner to share payments that are intended as compensation for loss suffered after the relationship. In P v P, for example, the Court observed that a lump sum compensation payment was "entirely personal" and intended to compensate the injured husband for losses he would suffer "for the remainder of his days".29
5.29 Third, the courts' approach also means that weekly compensation payments received during the relationship in relation to an earlier injury would be separate property, even though those payments are intended to replace lost earnings that would have otherwise been earned during the relationship. This is contrary to the general rule that income received during the relationship should be classified and divided as relationship property.
5.30 Fourth, the current approach is complex. The classification of entitlements under the Accident Compensation Act depends on when a partner's statutory entitlement arose. This can be a complex legal question, particularly where the injury is not diagnosed or treated for some time.30

Approach in comparable jurisdictions

5.31 Compared to other rules-based property sharing regimes, New Zealand is unusual for allowing the division of personal injury payments. The law in most Canadian provinces excludes damages, settlements and insurance proceeds for personal injury from the

²⁷ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [11.7]–[11.12].

28. See discussion in Simon Connell and Nicola Peart "Accident Compensation Entitlements Under the Property (Relationships) Act 1976" [2017] OtaLawRw 9; (2017) 15 Otago LR 169.
29. P v P HC Nelson M8-83, 20 July 1983 at 9 per Hardie Boys J. See too S v S (1984) 3 NZFLR 88 (DC) at 92–93. In these cases, the courts applied the exception that extraordinary circumstances rendered equal sharing of the payments repugnant to justice. These cases were, however, decided prior to the 2001 amendments, when there was no general rule that property other than the family home and family chattels would be shared equally.
30. See as an example B v B [2016] NZHC 1201, [2017] NZFLR 56. In this case, one partner had suffered injury from exposure to asbestos well before the relationship began. However, the symptoms from the injury only revealed themselves during the relationship. Section 37 of the Accident Compensation Act 2001 provided that an injury is deemed to have been suffered under the Act when either (a) the injured person received treatment for the injury or

(b) the injury results in the person's incapacity, whichever is the earlier. As the partner in this case had first received treatment during the relationship, the High Court held that the partner's statutory entitlements accrued during the relationship. Accordingly, the funds the partner received from the Accident Compensation Corporation were held to be relationship property.

property eligible for division.31 Some provinces, however, allow division if the insurance moneys represent lost wages.32
5.32 The discretionary property sharing regimes in Australia, England and Wales do not exclude damages or compensation for personal injury from division.33 However, an aim of these regimes is to divide the partners' property to reflect the needs of the partners and their children. Any personal need the injured partner has to entitlements relating to their injury will likely be recognised through the division.34
5.33 The recommendations of the American Law Institute are helpful. It stated that insurance proceeds and personal injury recoveries should be classified as marital property to the extent that entitlement arises from the loss of a marital asset.35 If the insurance proceeds replace lost income from the injury, they are marital property and divisible. If they are for pain and suffering, they are not marital property and not divisible.36

Results of consultation

5.34 In the Issues Paper, we asked whether personal injury payments for an injury or illness sustained during the relationship should continue to be classified as relationship property, including any future payments.37 We received 20 submissions on this issue, and all but one submission was in favour of reform. Some submitters, including NZLS, the Accident Compensation Corporation and the Ministry of Business, Innovation and Employment emphasised that the classification and division of personal injury payments should depend on the purpose of the specific right or entitlement. These submitters said that treatment and rehabilitation payments were needed for the injured partner and therefore should not be shared. They also said that lump sum compensation payments should not be shared because permanent impairment is a purely personal loss that the injured partner will suffer for the rest of their life. Submitters were unanimous that weekly compensation payments should not be shared after the relationship ends. Most explained that the payments represent income, and it would be contrary to the general rule that income received after the relationship is separate property and is not divided.

31. See Family Law Act RSNL 1990 c F-2, s 18(1)(c)(ii); Matrimonial Property Act RSA 2000 c M-8, s 7(2)(d); Family Law Act SBC 2011 c 25, s 85(1)(c); The Family Property Act SS 1997 c F-6.3, s 23(3)(a); The Family Property Act CCSM 2017 c F25, s 8(1); Family Law Act RSO 1990 c F.3, s 4(2)3; Family Law Act SNWT (Nu) 1997 c 18, s 35(2)(b); and Family Law Act RSPEI 1988 c F-2.1, s 4(1)(b)(iii)2.

³² Family Law Act RSNL 1990 c F-2, s 18(1)(c)(ii); and Family Law Act SBC 2011 c 25, s 85(1)(c)(ii).

³³ See W v W [1985] HCA 52; (1985) 61 ALR 215 (HCA) at [3]; Aleksovski v Aleksovski [1996] FamCAFC 111; (1996) 20 Fam LR 894 (FamCA) at [42] and [52];

Wagstaff v Wagstaff [1992] 1 WLR 320 (CA); and M v M [2011] EWCA Civ 1056, [2012] 1 FLR 117.

³⁴ Wagstaff v Wagstaff [1992] 1 WLR 320 (CA) per Butler-Sloss LJ at 325:

There may be instances where the sum awarded was small and was specifically for pain and suffering in which case it would be unsuitable to order any of it to be paid to the other spouse. In some cases the needs of the disabled spouse may absorb all the available capital, such as the requirement of residential accommodation.

See also M v M [2011] EWCA Civ 1056, [2012] 1 FLR 117 at [22].

35. American Law Institute Principles of the Law of Family Dissolution: Analysis and Recommendations (ebook ed, Thomson Reuters, March 2019 update) at § 4.08(2)(a)–(b).

³⁶ At § 4.08, comment (c).

³⁷ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at 216.

5.35 We received three submissions on the proposal in the Preferred Approach Paper that personal injury payments should be classified as separate property except to the extent that the payment compensates for loss of income during the relationship.38 NZLS and the Auckland District Law Society (ADLS) agreed with the proposal. Professor Peart also supported the proposal, as it is consistent with the general rule that non-income related compensation is not produced by the partnership. However, Peart also argued that ACC payments used to improve the family home should be classified as separate property. This is because such payments are aimed at assisting the injured person and any subsequent increase in value in the home has not been produced by the partnership. Peart argued that by treating that increase in value as relationship property, the non-injured partner is getting a windfall at the expense of the injured partner, who will have to pay more to stay in the house adjusted to their physical needs.

Payments under the Accident Compensation Act 2001 or under a private

insurance policy for a personal injury should be classified as separate property

except to the extent the payment compensates for loss of income during the relationship.

R23

RECOMMENDATION

Conclusions

5.36 We recommend that the classification of payments received under the Accident Compensation Act and under private insurance policies that insure against personal injury should depend on the nature of the entitlements.
5.37 In respect of payments received under the Accident Compensation Act, we recommend that:

• (a) Lump sum compensation payments should always be classified as separate property as they are to compensate for the permanent non-economic loss of bodily functions that the injured partner will suffer for the rest of their life. We acknowledge that the pain and suffering a partner experiences from an injury might also affect the non-injured partner.39 For that reason, it might be argued that lump sum payments should be relationship property to the extent that both partners have been affected by the injury. On balance, however, we consider it is preferable to exclude lump sum compensation payments altogether in order to avoid problematic assessments of the extent to which a lump sum compensates loss suffered by both partners.
• (b) Treatment and rehabilitation payments should be classified as separate property as the payments are personal to the rehabilitation of the individual and it is

38. Law Commission Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai (NZLC IP44, 2018), P7.
39. For example, the non-injured partner will normally provide support and may also suffer as the couple's joint quality of life is diminished. See comments in American Law Institute Principles of the Law of Family Dissolution: Analysis and Recommendations (ebook ed, Thomson Reuters, March 2019 update) at § 4.08, comment(c).

undesirable to potentially undermine rehabilitation by making the payment subject to division.40
(c) Weekly compensation payments should be considered a substitute for income. On that basis, weekly compensation payments that replace the injured partner's income during the relationship should be relationship property, and weekly compensation payments that replace income after a relationship has ended should be the injured partner's separate property.
(d) Funeral grants and survivor grants should be classified as separate property. To divide a funeral grant could undermine the purpose for which it is given, while survivor grants are received after the relationship has ended and do not represent the fruits of the relationship. Weekly compensation payments paid to surviving partners should, like all weekly compensation payments, be considered a substitute for income. These will typically be the recipient's separate property because the relationship will have ended upon the death of the deceased. However, if the surviving partner has entered a new relationship, the survivor's weekly compensation should be classified as relationship property in the context of that relationship.41
5.38 We also recommend a consequential amendment to section 123 of the Accident Compensation Act. That section provides that all entitlements under that Act are inalienable except in limited circumstances. There is no reference to the PRA.42 Section 4A of the PRA provides that all other enactments must be read subject to the PRA unless the other enactment expressly provides to the contrary. This is sufficient for the PRA to prevail over section 123 of the Accident Compensation Act. However, it would be preferable for section 123 of the Accident Compensation Act to be explicitly subject to the new Act.43
5.39 We do not recommend special rules for personal injury payments that are used to modify relationship property, such as the family home or family vehicle. As Professor Peart and Simon Connell observe, it is difficult for such payments to retain their separate property character as it cannot be assumed that the use of a personal injury payment to modify relationship property will result in an increase in the asset's value.44

40. If, however, treatment and rehabilitation payments are used to modify relationship property, such as the family car, the payment may lose its separate property character, but there are other ways the injured partner may be able to retain the benefit of modifications to an item of relationship property. For example, when implementing a division, a court could order that the modified property vest in the injured partner. See discussion in Simon Connell and Nicola Peart "Accident Compensation Entitlements Under the Property (Relationships) Act 1976" [2017] OtaLawRw 9; (2017) 15 Otago LR 169 at 192.
41. We note, however, the view in Simon Connell and Nicola Peart "Accident Compensation Entitlements Under the Property (Relationships) Act 1976" [2017] OtaLawRw 9; (2017) 15 Otago LR 169 at 195 that survivor’s weekly compensation should be classified under the approach in C v C HC Auckland CIV-2003-404-6892, 10 September 2004. Under that approach, the compensation should be classified as a “one-off entitlement” rather than a series of fresh acquisitions of property. The key question would then be whether the surviving partner’s entitlement to compensation upon the date of the partner’s death arose when the surviving partner was in a qualifying relationship with a new partner.
42. In contrast, see s 127 of the KiwiSaver Act 2006. Section 127(1) prohibits the assignment or passing of a member's KiwiSaver interest. Section 127(2) provides exceptions with specific reference to the Property (Relationships) Act 1976.
43. Simon Connell and Nicola Peart "Accident Compensation Entitlements Under the Property (Relationships) Act 1976" [2017] OtaLawRw 9; (2017) 15 Otago LR 169 at 191.

⁴⁴ At 191–192.

Accordingly, when a personal injury payment is applied to relationship property, that payment will lose its separate property status, just like other items of separate property that are applied to relationship property, such as gifts or inheritances. An injured partner may, however, retain the benefit of modifications to an item of relationship property by seeking an order that the modified property vest in the injured partner.45 The PRA's existing rules already allow for this outcome as the court has flexibility in its ability to make orders to implement the division. We discuss the court's powers to implement a division and recommend these powers be retained in the new Act in Chapter 15.
5.40 Entitlements under private injury policies that insure against personal injury should also be classified depending on the purpose of those entitlements. Similar to the treatment of entitlements under the Accident Compensation Act, entitlements that provide funds for rehabilitation, such as the payment of medical expenses, should be classified as separate property. Likewise, payments that are to provide compensation for bodily impairment should be separate property. Payments that are to compensate lost income that would otherwise have been earned during the relationship but for the injury should be relationship property, but payments to compensate for income that would have been earned after the relationship should be the injured partner's separate property.

FAMILY GIFTING AND LENDING

Background

5.41 The law presumes that, when parents advance property to their children, they intend to do so as a gift.46 This is known as the presumption of advancement. If a partner contends that the advance was a loan, the onus is on that partner to prove that is the case.
5.42 The classification of a transfer of property between family members (a family advance) can have significant implications under the PRA. For example, if money is advanced to the couple to enable them to purchase a family home and that advance is treated as a gift, it will form part of the couple's relationship property to be shared equally, and its value will be reflected in the value of the family home.47 If that advance is treated as a loan, it will likely be considered a relationship debt under section 20 (as a debt incurred

⁴⁵ At 192.

46. See, for example, Narayan v Narayan [2010] NZHC 1973; [2010] NZFLR 161 (HC). In that case, the High Court said at [48] that while the presumption of advancement applied to an advance from one partner's parents, that presumption was rebutted by the existence of a document, executed by the parents and described as an "irrevocable document", in which they recorded that they had loaned the partners the money. The presumption of advancement does not apply to gifts between a partner and a son-in-law or daughter-in-law: Knight v Biss [1954] NZLR 55 (SC); and Terry Schwass Company Ltd v Marsh [2017] NZHC 1382, [2017] NZCCLR 19 at [20]. In the recent case Woolfe v Kaye [2018] NZHC 2191, a party argued the presumption of advancement should not apply to parental advances to adult independent children, as decided by the majority of the Supreme Court of Canada in Pecore v Pecore 2007 SCC 17, [2007] 1 SCR 795. The High Court dismissed the argument, observing at [188] that most New Zealand court decisions proceed on the assumption that the presumption does extend to adult children.
47. If a family advance to one partner is treated as a gift, it will be classified as that partner's separate property under s 10, unless it is applied to the family home or family chattels or is so intermingled with relationship property that it is unreasonable or impracticable to regard that property as separate property: Property (Relationships) Act 1976, ss 10(2) and (4). The classification of gifts and inheritances is discussed further in Chapter 3.

Issues

for the purpose of acquiring relationship property), and the value of the advance will be deducted from the relationship property pool under section 20D.

5.43 Family advances are likely to become more common in New Zealand. This is largely attributable to increasing house prices, which is putting home ownership out of reach for many without some form of family assistance.48 It may also reflect New Zealand's increasingly culturally diverse population as family advances can be more prominent in some cultures.49
5.44 As family advances become more common, so too does the scope for dispute over how that advance should be classified under the PRA. Disputes can arise where it is unclear whether a family advance was intended as a gift or a loan.
5.45 In the Issues Paper, we questioned whether the presumption of advancement reflected the contemporary and future trends of family advances in New Zealand.50

Results of consultation

5.46 We received 25 submissions addressing the classification of family advances. NZLS, Perpetual Guardian, one practitioner and 11 members of the public said the presumption of advancement should not apply. Perpetual Guardian said that including or excluding a presumption does not necessarily lead to fairness. Rather, better articulation of the arrangement at the time the funds are advanced is required. Similarly, NZLS said that the matter should be dealt with on a case-by-case basis. Some of these submitters thought family advances should be presumed to be a loan or that classification should depend on the wishes of the parent. ADLS noted that section 20 (definition of relationship debt) "has become a battle ground where the bank of mum and dad has been involved in the funding of the family home".
5.47 Several submitters supported retaining the presumption of advancement. The New Zealand Federation of Business and Professional Women submitted that advances should only ever be treated as loans if they are formally documented as such. The need to document loans formally was also raised by several members of the public.

Conclusions

5.48 We do not recommend reform in relation to the way the presumption of advancement operates when classifying property. In our view, the presumption of advancement is a well-established principle that provides the court with an appropriate starting point when classifying family advances. In the cases we have reviewed where the classification of a family advance is contested, the courts appear to be exercising their

48. See discussion in Law Commission Relationships and families in contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017) at 52.
49. In S v C [2003] NZFLR 385 (FC), for example, the Family Court at [8] accepted the husband's argument that, in Chinese culture, there was a very clear expectation that advances of money to buy a house were loans rather than gifts. The Family Court's judgment regarding the advances and their classification as relationship debts was accepted on appeal to the High Court: C v S [2005] NZFLR 400 (HC) at [53].

⁵⁰ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [11.77]–[11.82].

discretion appropriately to depart from the presumption of advancement and treat the advance as a loan.51
5.49 We consider that a more appropriate response to the rise in family advances is to improve public awareness of the need to properly document legal and financial arrangements between family members. In Chapter 2, we recommend that the Government should consider ways to improve public awareness of and education about the new Act. The need to properly document legal and financial arrangements should also be addressed in the comprehensive information guide, which we recommend in Chapter 16.

STUDENT LOANS

Background

5.50 Student loans are classified under the PRA like any other debt. This means that a student loan is a personal debt unless it fits within the definition of a relationship debt under section 20.
5.51 Typically, student loans are classified as personal debts.52 There have, however, been cases where a student loan has been classified wholly or in part as a relationship debt because it funded a couple's common enterprise (as it enabled both partners to come from overseas to live, study and work in New Zealand)53 or because it included living costs that were used to fund the family's living expenses.54
5.52 If a partner has repaid some or all of the student loan with relationship property, for example, through PAYE deductions from income earned during the relationship, section 20E will apply. Under that section, if a partner's personal debt has been paid or satisfied out of relationship property, that partner is obliged to compensate the other partner. However, the amount of compensation awarded may reflect the fact that the other partner has benefited from the higher education and enhanced earnings resulting from the student loan.55

51. See, for example, Narayan v Narayan [2010] NZHC 1973; [2010] NZFLR 161 (HC); and S v C [2003] NZFLR 385 (FC). The Family Court's judgment regarding the advances and their classification as relationship debts was accepted on appeal to the High Court: C v S [2005] NZFLR 400 (HC). See also Zhou v Yu [2015] NZFC 7668, [2016] NZFLR 338; Zhang v Li [2017] NZHC 129; and D v T [2017] NZHC 904.
52. O'Connor v O'Connor FC Christchurch FP1720/94, 16 December 1996; and Kauwhata v Kauwhata [2000] NZFLR 755 (HC). See also Nicola Peart (ed) Brookers Family Law — Family Property (online ed, Thomson Reuters) at [PR20.01(2)].

⁵³ Jayachandran v Daswani [2015] NZFC 5238.

⁵⁴ C v B FC Hamilton FAM-2005-019-991, 7 June 2006.

55. In Shaws v Reed [2016] NZFC 7925, [2017] NZFLR 243, Ms Reed had completed a degree shortly before the relationship with Mr Shaws began. Ms Read had incurred a student loan of almost $50,000, which was repaid from income Ms Read earned during the relationship. The Court awarded Mr Shaws compensation under s 20E. However, it recognised that Mr Shaws had received the benefit of Ms Reed's income during the relationship and therefore awarded Mr Shaws a "broad brush" sum of $10,000 (at [52]–[56]).

Issues

5.53 Student loans are likely to become an increasingly common type of debt, particularly for younger partners. Given their prevalence, we asked in the Issues Paper whether the PRA required reform to deal with what are likely to be two common scenarios:56

• (a) where a partner repays their student loan using relationship property income; and
• (b) where both partners have student loans but, due to the division of functions in the relationship, one partner works and is able to repay their student loan while the other partner does not work and still has the loan after the relationship ends.

5.54 In the Issues Paper, we asked whether a simpler and fairer option could be to classify student loans as relationship debts, subject to limited exceptions.57

Results of consultation

5.55 We received 14 submissions on the Issues Paper addressing student loans. NZLS and eight members of the public thought that student loans should be treated like any other type of debt and be classified according to the normal rules. One member of the public thought that student loans should always be relationship debt, while one practitioner and two members of the public thought that student loans should always be personal debt. Another practitioner observed that the question is connected to whether income- earning capacity is considered property and whether income-earning capacity that is enhanced by the relationship is considered relationship property. If so, a student loan should be considered a relationship debt.
5.56 In its submission on the Preferred Approach Paper, NZLS observed there was a risk of unfairness if one partner had an obligation to share future income under a Family Sharing Arrangement (FISA) as well as to pay compensation to the other partner for the repayment of a student loan during the relationship. NZLS suggested this issue could be addressed by making section 20E discretionary, by amending the definition of relationship debt in section 20 or through the exercise of discretion in awarding a FISA.

Conclusions

5.57 We do not recommend reform to specifically address the classification of student loans. The current approach enables a tailored decision to be made in each case, recognising that student loans will be incurred in different circumstances and for different reasons. It would be unfair to classify all student loans as relationship debts, particularly if one partner's loan is significant and has provided little benefit to the relationship. Consultation on this issue did not reveal any widespread concerns or issues with the current approach.
5.58 In response to the concern raised by NZLS where one partner is obliged to share future income under a FISA and provide compensation for the repayment of a student loan from relationship property, we agree that the power to award compensation, currently found in section 20E, should continue to be discretionary, enabling the court to award

⁵⁶ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [11.73]–[11.74].

⁵⁷ At [11.75].

an amount that is fair in all the circumstances of the case. We note that our recommendation in Chapter 4 that the new Act adopt an amended version of the definition of relationship debt that includes debts incurred for the partners' common use or common benefit would continue to allow a court to take a flexible and case-specific approach to classifying student loans. Lastly, under the FISA regime, we recommend an adjustment provision that could potentially be used to recognise a student loan that has ultimately facilitated a higher combined family income. We discuss FISAs in Chapter 10.

CHAPTER 6

Qualifying relationships

how the PRA applies to marriages, civil unions and de facto relationships and whether reform is required in relation to:

• the eligibility criteria for de facto relationships; and
• the rules that apply to short-term relationships.

IN THIS CHAPTER, WE CONSIDER:

INTRODUCTION

6.1 The PRA applies to marriages, civil unions and de facto relationships, but the rules are different depending on the length of the relationship and, if the relationship is less than three years' duration, whether the relationship is a marriage, civil union or de facto relationship.1

ELIGIBILITY CRITERIA FOR DE FACTO RELATIONSHIPS

Background

6.2 The two requirements that must be satisfied in order for a de facto relationship to qualify for equal sharing under the PRA are that:

• (a) the relationship must meet the definition of de facto relationship in the PRA;2 and
• (b) the partners must have lived together as de facto partners for three years or more.3

6.3 Once a de facto relationship qualifies for equal sharing, the PRA applies retrospectively from the date the de facto relationship began rather than from the date the de facto relationship satisfies the three year qualifying period. De facto relationships that do not satisfy the three year qualifying period are discussed below in the section on short-term relationships.

¹ Property (Relationships) Act 1976, s 1C.

² Section 2D.

³ Sections 1C(2)(b), 2E(1)(b) and 14A.

Defining a de facto relationship

6.4 A de facto relationship is defined as a relationship between two people, both aged 18 or older, who "live together as a couple" and who are not married to or in a civil union with each other.4
6.5 In determining whether two people live together as a couple, all the circumstances of the relationship are to be considered, including the matters prescribed in section 2D(2). We refer to these below as the "section 2D(2) factors", and they are:

• (a) the duration of the relationship;
• (b) the nature and extent of common residence;
• (c) whether or not a sexual relationship exists;
• (d) the degree of financial dependence or interdependence, and any arrangements for financial support between the parties;
• (e) the ownership, use and acquisition of property;
• (f) the degree of mutual commitment to a shared life;
• (g) the care and support of children;
• (h) the performance of household duties; and
• (i) the reputation and public aspects of the relationship.

6.6 It is not necessary for a court to make a finding in respect of any of these matters when determining whether two people live together as a couple.5 However, a court is entitled to have regard to such matters and to attach such weight to any matter as it thinks appropriate in the circumstances.6
6.7 The definition of de facto relationship is therefore broad and flexible. It gives a court a high level of discretion that focuses on how a couple's relationship operates in practice rather than its form. There are no prerequisites for the central concept of two people who "live together as a couple". It is not necessary, for example, for the partners to live in the same household, to share finances or to have a sexual relationship, although all these factors may be relevant to the court's exercise of discretion.7

The three year qualifying period

6.8 The three year qualifying period for de facto relationships was adopted as it was considered "an appropriate length of time for the duration of de facto relationships before the property-sharing regime takes effect".8 A qualifying period is generally

⁴ Section 2D(1).

⁵ Section 2D(3)(a).

⁶ Section 2D(3)(b).

7. The definition of de facto relationship is discussed in further detail in Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at ch 6.
8. Matrimonial Property Amendment Bill 1998 and Supplementary Order Paper No 25 2000 (109-3) (select committee report) at 9–10.

regarded as necessary for de facto relationships, because of their informal nature compared to marriages and civil unions.9 As Professor Bill Atkin explains:10

Marriage is a public event, recorded in a public registry, with the participants more or less knowing what they are committing themselves to. While for many, marriage is a social and ceremonial occasion, people are also aware that there are legal ramifications. They go into marriage with their eyes open. ... Marriage involves a lifelong, or at least long- term, commitment to the other person. The same is true of those who have entered a civil union ...

De facto relationships are very different. There is no public registry ... There is no ceremony. The legal consequences of a de facto relationship are probably obscure to most people. Some may drift into an association not being aware that the law would deem it a "de facto relationship". ... The majority probably begin to live together without thinking too hard about the consequences.

6.9 The three year qualifying period for de facto relationships has two broad objectives:11

• (a) First, it uses relationship duration as a measure of commitment. In the absence of a deliberate decision by the partners to formalise their relationship by getting married or entering a civil union, the passage of time is used to indicate when a relationship has reached a sufficient level of commitment that justifies the imposition of property sharing obligations.
• (b) Second, it acts as a safeguard against the retrospective imposition of property sharing obligations on unsuspecting partners.12 It gives partners an opportunity to live together as a couple and to recognise that their relationship is changing before they have to decide whether to accept the property sharing obligations the PRA imposes on them or to opt out of the PRA by way of a contracting out agreement. It also provides a safeguard against strategic or exploitative behaviour by one partner, such as entering into a relationship with the aim of acquiring a share of the other partner's property.13

9. See discussion in Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [15.4]–[15.14]. As discussed at paragraph 6.17 below, a qualifying period features in almost all comparable jurisdictions we have reviewed that extend or recommend the extension of a property sharing regime to de facto relationships.
10. Bill Atkin "Family property" in Mark Henaghan and Bill Atkin (eds) Family Law Policy in New Zealand (Wellington, LexisNexis, 2013) 209 at 216.
11. For further discussion, see Bill Atkin Relationship Property in New Zealand (3rd ed, LexisNexis, Wellington, 2018); and Margaret Briggs "Which Relationships Should be Included in a Property Sharing Scheme?" in Jessica Palmer and others (eds) Law and Policy in Modern Family Finance: Property Division in the 21st Century (Intersentia, Cambridge (UK), 2017) 37. For discussion on the qualifying period in comparable jurisdictions, see Law Commission of England and Wales Cohabitation: The Financial Consequences of Relationship Breakdown (LAW COM No 307, July 2007) at [3.33]–[3.45]; Law Reform Commission of Ireland Report: Rights and Duties of Cohabitants (LRC 82, December 2006) at [2.13]; Law Reform Commission of Nova Scotia Final Report: Division of Family Property (September 2017) at 113; and Alberta Law Reform Institute Property Division: Common Law Couples and Adult Interdependent Partners (Final Report 112, June 2018) at [197]–[199] and [246]–[249].
12. In M v P [2012] NZHC 503, [2012] NZFLR 385, Miller J observed at [23] that the effect of the Property (Relationships) Act 1976 is that "the law may impose the legal status of a de facto relationship retrospectively upon parties whose relationship gradually and without conscious election assumed that character".
13. Bill Atkin "Property division: Lessons from New Zealand" in Panagiotis I Kanellopoulous, Elini Nina-Pazarzi and Cornelia Delouka-Inglessi (eds) Essays in Honor of Penelope Agallopoulou (Ant N Sakkoulas, Athens, 2011) 129 at 138.

Issues

6.10 In the Issues Paper, we sought feedback on three questions:

• (a) Is it appropriate that the PRA applies to de facto relationships on an opt-out basis?14
• (b) Do the eligibility criteria for de facto relationships capture relationships that are not substantively the same as marriages and civil unions? This might be because the definition of de facto relationship is too broad15 or because the qualifying period is too short.16
• (c) Do the eligibility criteria for de facto relationships strike the right balance between flexibility and certainty?17

Results of consultation

6.11 We received a total of 116 submissions on the Issues Paper and Preferred Approach Paper that commented on various aspects of the eligibility criteria for qualifying relationships, including 95 submissions from members of the public, 13 submissions from individual practitioner and academic experts and eight submissions from organisations. Eligibility criteria were discussed at 16 public meetings and 15 practitioner and academic meetings. The great majority of these submissions were concerned with how the PRA applies to de facto relationships.
6.12 Submissions reflected a diverse range of views. Some submitters, including the Human Rights Commission (HRC), the National Council of Women of New Zealand (NCWNZ) and the New Zealand Law Society (NZLS), thought that the PRA should apply in the same way to all relationships that are substantively the same. HRC said that the different treatment of relationships that are substantively the same would be discriminatory under human rights law.
6.13 A common theme of submissions, however, was that the PRA should not apply to de facto relationships in the same way as it applies to marriages and civil unions. These submitters emphasised that de facto relationships were different to marriages and civil unions because de facto partners have not made a formal, legally binding commitment to each other. They thought that, if partners do not choose to formalise their relationship and that relationship ends, they should not be subject to the same legal consequences as married and civil union partners. These submitters tended to prefer that the PRA be opt in for de facto relationships or that a longer qualifying period should apply. We discuss consultation on the options for reform at paragraphs 6.21–6.31 below.
6.14 Other submitters pointed to the practical difficulties in imposing property consequences on de facto relationships. Professor Nicola Peart observed that a major problem with the way the PRA applies to de facto relationships is that some people will not realise

¹⁴ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [5.22]–[5.25].

¹⁵ At [6.29]–[6.47].

¹⁶ At [15.24]–[15.35].

¹⁷ At [6.48]–[6.51].

they are in a qualifying de facto relationship or from what date the PRA applies to them until after the relationship ends. NZLS agreed that the eligibility criteria are causing issues for some de facto relationships. It suggested that the commencement date may be the main reason, that is, the definition in section 2D can leave partners unsure as to when their relationship became a de facto relationship under the PRA.

Public attitudes and expectations of sharing

6.15 The Borrin Survey provides important evidence on public attitudes and expectations of sharing property when de facto relationships end. Key findings include:

• (a) Just under half of all respondents (48 per cent) knew that equal sharing applies to couples who have lived together for three years or longer.18 Respondents who lived with a partner tended to have higher awareness than those who did not have a partner (55 per cent),19 but awareness did not vary between those who had lived with their partner for more than three years and those who had lived with their partner for less than three years.20 A higher proportion of respondents (68 per cent) knew that equal sharing applies to married and unmarried couples in the same way.21
• (b) A range of factors were considered important in deciding whether equal sharing should apply to a couple. Around nine in 10 respondents said that having children together, living together as a couple, buying a house together and sharing finances were all important factors in deciding if equal sharing should apply to a couple.22 On average, respondents thought that, of the eight factors described to them, six were important.23
• (c) There was no consensus as to what was the single most important factor in deciding whether equal sharing should apply. The most common responses were whether the couple had children together (22 per cent), whether they were married (11 per cent), whether they lived together as a couple (eight per cent) or they had been together for a certain period of time (eight per cent).24
• (d) There was no consensus as to how long couples should live together before equal sharing should apply, but most were happy with three years. When asked how long they thought couples should have to live together, 32 per cent of respondents favoured a length of time less than three years, 38 per cent said it should be three years and 29 per cent favoured a length of time greater than three

18. I Binnie and others Relationship Property Division in New Zealand: Public Attitudes and Values – A general population survey (Michael and Suzanne Borrin Foundation, Technical research report, October 2018) at [112].

¹⁹ At [115].

20. At [119]. However, the small sample size of respondents who had lived with their partner for less than three years (44 respondents) means this finding should be treated with caution.

²¹ At [113].

²² At [124].

23. At [124]. The factors respondents were asked about were whether a couple have bought a house or property together, have children together, live together as a couple, share finances, are strongly committed to each other or love each other, are married, are in a civil union or have a sexual/intimate relationship.

²⁴ At [125].

years.25 The average length of time preferred was three years and three months. 26 When respondents were prompted with what the law actually says, six in 10 agreed with the current law.27 Among those respondents who did not agree with the three year period, some thought the length of time after which the law should apply should be shorter and some thought it should be longer, with five years being the most common preference (30 per cent of respondents who did not agree with the current law).28
(e) Many respondents viewed marriage differently to other relationship types. 70 per cent of all respondents thought that whether a couple was married was an important factor in deciding if equal sharing should apply.29 These respondents tended to think that the law should apply to married couples much sooner, with 47 per cent saying that equal sharing should apply as soon as a couple get married.30 These respondents often drew a clear distinction between marriage and living together, with over half saying that unmarried couples should live together for a period of time (typically three years) before equal sharing applies.31

Approach in comparable jurisdictions

6.16 There is considerable variation in how de facto couples are accommodated in property sharing regimes in comparable jurisdictions. In England and Wales, the property sharing regime applies to married couples only.32 Scotland33 and Ireland34 have introduced separate property sharing regimes for de facto couples, which provide more limited property rights compared to married couples. In contrast, de facto partners have the same property entitlements as married partners in Australia35 and in some Canadian provinces.36 Other Canadian provinces do not accommodate de facto couples in their property sharing regimes37 or only accommodate de facto couples on an opt-in basis.38

²⁵ At 29 (Figure Three).

²⁶ At [135].

²⁷ At [146].

²⁸ At 32 (Figure Five).

²⁹ At 26 (Figure One).

³⁰ At [140]–[141].

³¹ At [141].

32. A separate property sharing regime for cohabitants was recommended by the Law Commission of England and Wales in 2007, but this has not yet resulted in reform: Law Commission of England and Wales Cohabitation: The Financial Consequences of Relationship Breakdown (LAW COM No 307, July 2007).
33. In Scotland, cohabitants have property rights in relation to household goods and money allocated to household expenses, and a court may make orders for financial provision for economic advantages and disadvantages resulting from the relationship: Family Law (Scotland) Act 2006, ss 25–28.
34. In Ireland, cohabitants can apply for a property adjustment order or compensatory maintenance order if they are financially dependent on the other cohabitant and the financial dependence arises from the relationship or the ending of the relationship: Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 (Ireland), ss 173–175.
35. Family Law Act 1975 (Cth), pt VIIIAB. For Western Australia, see pt 5A of the Family Law Act 1997 (WA). However, in Western Australia, de facto couples do not have the same rights as married couples to split superannuation payments.

³⁶ British Columbia, Manitoba, Saskatchewan, Nunavut and the Northwest Territories.

³⁷ Ontario, Quebec, Alberta and New Brunswick.

However, experience in Canada has shown that opt-in regimes are ineffective in reducing the number of people who must rely on the law of equity,39 and two recent Canadian reviews have recommended that de facto partners be granted the same property entitlements as married partners.40
6.17 Most jurisdictions that include de facto relationships in a property sharing regime impose eligibility criteria in the form of a statutory definition that must be met as well as a qualifying period.41 The statutory definitions in Australia and Ireland are similar to the PRA's definition of de facto relationship as they focus on a central concept of two people who live together as a couple and include a statutory list of relevant factors.42
6.18 Definitions in other jurisdictions tend to give priority to shared residence. In Scotland, the term "cohabitant" is used, which is defined to mean a couple "living together as if they were husband and wife".43 The American Law Institute has proposed a definition of "domestic partners" that includes a presumption that two people are domestic partners if they have maintained a common household for a specified period of time. 44 In British Columbia, the definition of spouse includes a person who "has lived with another person in a marriage-like relationship".45 In Manitoba, the term "common-law partner" is used, which means a person who "cohabited with him or her in a conjugal relationship".46 Similarly, in Saskatchewan, the definition of "spouse" includes a person who "is cohabiting or has cohabited with the other person as spouses".47 In 2017, the Law Reform Commission of Nova Scotia recommended defining common law partner as a

³⁸ Nova Scotia, Newfoundland and Labrador, Prince Edward Island and Yukon.

39. See Alberta Law Reform Institute Property Division: Common Law Couples and Adult Interdependent Partners (Final Report 112, June 2018) at [148]–[168]. The Institute observed that Nova Scotia and Manitoba allow common law partners to opt in to the property sharing regime by registering their relationship with a government agency, but although registration regimes have been in place for over 10 years, both provinces have experienced very low rates of registration. In Manitoba, only 416 couples registered in the first 10 years out of an estimated 45,100 common law couples living in that province, according to the 2016 census. There were 68 registrations in Nova Scotia in 2013, 51 in 2012 and 76 in 2011.
40. Alberta Law Reform Institute Property Division: Common Law Couples and Adult Interdependent Partners (Final Report 112, June 2018); and Law Reform Commission of Nova Scotia Final Report: Division of Family Property (September 2017) at 14. The recommendations of the Alberta Law Reform Institute have been accepted and will come into force in 2020: Family Statutes Amendment Act SA 2018 c 18. See also Ontario Law Reform Commission Report on The Rights and Responsibilities of Cohabitants under the Family Law Act (October 1993).
41. We are aware of only one jurisdiction – Scotland – where there is no qualifying period for de facto relationships: Family Law (Scotland) Act 2006, s 25. However, the property entitlements of cohabitants are limited in Scotland.
42. Family Law Act 1975 (Cth), s 4AA; and Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 (Ireland), s 172. The Law Commission of England and Wales also recommended a definition based on the concept of "living as a couple in a joint household": Law Commission of England and Wales Cohabitation: The Financial Consequences of Relationship Breakdown (LAW COM No 307, July 2007) at [3.13].
43. Family Law (Scotland) Act 2006, s 25. Section 25(2) further provides that, in determining whether a person is a cohabitant, the court shall have regard to the length of the period during which the partners have been living together, the nature of their relationship during that period and the nature and extent of any financial arrangements subsisting during that period.
44. American Law Institute Principles of the Law of Family Dissolution: Analysis and Recommendations (ebook ed, Thomson Reuters, March 2019 update) at § 6.03(3).

⁴⁵ Family Law Act SBC 2011 c 25, s 3.

46. The Family Property Act CCSM 2017 c F25, s 1(1) definition of "common-law partner". See also Family Law Act SNWT (Nu) 1997 c 18, s 1(1), where "spouse" is defined to include a person who "has lived together in a conjugal relationship outside marriage with another person".

⁴⁷ The Family Property Act SS 1997 c F-6.3, s 2(1) definition of "spouse".

person "who is cohabiting or has cohabited with another person in a conjugal relationship".48 Most recently, however, the Alberta Law Reform Institute recommended adopting a broader definition of "adult interdependent partners", capturing two people who live in a relationship of interdependence, defined as a relationship outside marriage in which any two persons share one another's lives, are emotionally committed to one another and function as an economic and domestic unit.49
6.19 The qualifying period for de facto relationships in other jurisdictions tends to be either two or three years, although Ireland adopts a qualifying period of five years or two years if the partners are the parents of dependent children.50

Options for reform

6.20 In the Issues Paper, we identified several possible options for reform in the event that the questions relating to de facto relationships required legislative amendment, including:51

• (a) making the section 2D(2) factors an exhaustive list, which could increase certainty by restricting a court's inquiry to a known list of factors;
• (b) giving more weight to one or more section 2D(2) factors, which could increase certainty and give more weight to factors considered more important characteristics of a relationship to which the PRA should apply;
• (c) introducing a rebuttable presumption that two people are in a de facto relationship if they have shared a primary residence and maintained a joint household,52 which could increase certainty, give more weight to common residence and reduce the need for detailed inquiry; and
• (d) increasing the qualifying period for some or all de facto relationships, which would accommodate concerns that three years is not achieving a just division of property when some relationships end.

⁴⁸ Law Reform Commission of Nova Scotia Final Report: Division of Family Property (September 2017) at 115.

49. Alberta Law Reform Institute Property Division: Common Law Couples and Adult Interdependent Partners (Final Report 112, June 2018) at [233]–[245]. See also the definition of "adult interdependent partners" in the Adult Interdependent Relationships Act SA 2002 c A-4.5, s 1.
50. Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 (Ireland), s 172(5). The qualifying period is two years in Australia and the Canadian provinces of British Columbia, Saskatchewan, Nunavut and the Northwest Territories. In 2017, a two year qualifying period was also recommended by the Law Reform Commission of Nova Scotia in Final Report: Division of Family Property (September 2017) at [4.5.2]. Manitoba has a qualifying period of three years. A three year qualifying period has also been recommended by the Ontario Law Reform Commission and the Alberta Law Reform Institute: Ontario Law Reform Commission Report on The Rights and Responsibilities of Cohabitants under the Family Law Act (October 1993) at 63; and Alberta Law Reform Institute Property Division: Common Law Couples and Adult Interdependent Partners (Final Report 112, June 2018) at [246]–[249]. The Law Commission of England and Wales recommended a qualifying period of between two and five years rather than a specific qualifying period: Law Commission of England and Wales Cohabitation: The Financial Consequences of Relationship Breakdown (LAW COM No 307, July 2007) at [3.45].

⁵¹ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [6.33]–[6.62] and [15.37]–[15.47].

52. This option was based on the recommendations of the American Law Institute in Principles of the Law of Family Dissolution: Analysis and Recommendations (ebook ed, Thomson Reuters, March 2019 update) at § 6.03.

6.21 Submitters on the Issues Paper had mixed views on the preferred option for reform. Some submitters thought that the PRA should only apply to de facto relationships when partners deliberately opt in to the regime. Others thought that the eligibility criteria should be more restrictive.
6.22 Some submitters thought that the definition of de facto relationship should make certain section 2D(2) factors more important or even mandatory, although there was no consensus among submitters as to which factors should be prioritised. Submitters variously prioritised living together in the same household, having children together, mutual commitment to a shared life, sharing finances or making other substantial contributions to the relationship.
6.23 NZLS thought there was merit in giving priority to whether the partners shared a common residence.53 It noted that most people can easily relate to the concept of a de facto relationship when two people live together in the same household. People often judge it a major step in their relationship to "move in" together. Other submitters, including Professor Peart and Community Law Wellington and Hutt Valley, noted that prioritising common residence would risk excluding some relationships that ought to be captured and including other relationships that should not be captured (such as where two older people decide to move in together to save costs and share expenses). NZLS also thought that there may be merit in expanding the section 2D(2) factors to include consideration of whether the relationship is a second qualifying relationship and in limiting the reference to care and support of children to biological or adopted children of both partners.
6.24 Some submitters, including NZLS, HRC and NCWNZ, favoured the existing qualifying period, but a longer qualifying period of five or even 10 years was a common submission from members of the public54 as well as from some individual practitioner and academic experts. Many submitters felt that three years was too short, especially for second and subsequent relationships later in life when partners are more likely to have accumulated assets before entering into a new relationship and to keep their finances separate during the relationship. Often the underlying concern was about what property was shared after three years. We address this concern in our classification recommendations set out in Chapter 3.
6.25 A small number of submitters raised concerns that touched on the objectives of the qualifying period (see paragraph 6.9). Some submitters thought that it can take longer than three years to build a genuine and committed relationship. NCWNZ noted that some of its members also thought that people might enter into de facto relationships for three to five years and never intend to make a longer-term commitment. The Wellington Women Lawyers' Association suggested a longer qualifying period for partners over a certain age on the basis that three years "does not fit the situation of

53. The New Zealand Law Society noted, however, that there were diverging views within the profession as to whether common residence should give rise to a rebuttable presumption that the partners are in a de facto relationship.
54. Submissions received through the consultation website indicated a preference for a five year qualifying period. We asked: "How long do you think a de facto relationship should last before the partners must share their relationship property equally if they separate?" Five people selected three years or less, 12 people selected five years and nine people thought it should be more than five years. Some submissions received by email and post also preferred a longer qualifying period, although it was not always clear whether this was in relation to de facto relationships only or all relationship types.

many older adults". Other submitters thought that three years was not long enough to provide a robust safeguard. Some said three years does not give people enough time to realise that the PRA could apply to their relationship and to contract out, while others said that people could maintain a relationship for three years for pecuniary gain.
6.26 A clear theme from consultation on the Issues Paper was that aspects of the eligibility criteria for de facto relationships are not well understood by some members of the public. NZLS observed that many people are unaware that common residence is not a requirement for a de facto relationship under the PRA and that people are often surprised to discover that, for the purposes of the PRA, their relationship may have started sooner than they thought. NZLS said "there appears to be an information lacuna in respect of rights under the PRA relating to de facto relationships". Submissions from members of the public also highlighted concerns that the definition of de facto relationship was broad enough to capture couples dating but not living together or flatmates and boarders. NZLS noted the need for significant education to better inform the public about the PRA, which it said should assist in creating more certainty for the public about when the PRA applies.

Results of consultation on the Preferred Approach Paper

6.27 There was a mixed response to our proposals in the Preferred Approach Paper that the PRA should continue to apply in the same way to all marriages, civil unions and qualifying de facto relationships and to retain the existing eligibility criteria for de facto relationships.55
6.28 We received submissions from 12 members of the public who expressed concern with the current law or our proposal to retain the current law. Some submitters were particularly concerned with how the PRA can apply to older couples and couples who do not share a household or finances where there has been no conscious decision to formalise a relationship through marriage or civil union. Several submitters favoured a longer qualifying period, but as with submitters on the Issues Paper, often the underlying concern was about what property was shared after three years (see paragraph 6.24 above).
6.29 NZLS agreed that the PRA should apply in the same way to all marriages, civil unions and qualifying de facto relationships but submitted that section 2D(2) be amended to make "the nature and extent of common residence" the first criterion in section 2D(2) and to replace section 2D(3)(a) and (b) to provide that the first consideration will be the nature and extent of common residence, and only if that criterion is not satisfied does the court need to consider the remaining criteria. NZLS did not agree with the observation in the Preferred Approach Paper that the case law does not reveal widespread problems with the way the definition of de facto relationship is interpreted and applied by the courts.56 NZLS also said that the start date of a de facto relationship

55. Law Commission Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai (NZLC IP44, 2018), P14–P15.
56. In Law Commission Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai (NZLC IP44, 2018) at n 260, we cited a study of reported cases from 2002 to 2009 that identified that 12 per cent of cases involving a de facto relationship involved a dispute over the application of the s 2D(2) factors: Thomas Cleary "Relationship Property Under the Property (Relationships) Act 1976:

is frequently a key issue (and often the only issue) in relationship property proceedings. It said the breadth of the current definition and the uncertainty it often creates mean that issues cannot be resolved efficiently, particularly given the courts' reluctance to have preliminary issues hearings about whether or not a qualifying de facto relationship exists.
6.30 The Auckland District Law Society (ADLS), on the other hand, said that it "cannot see an alternative to simply selecting an arbitrary time period within which the relationship becomes qualifying". It supported extending the qualifying period from three years to five years, noting that partners in a relationship of less than five years without children or meeting other qualifying criteria would still have rights under constructive trust law and rights reflected in the title to assets. Some members of the ADLS Committee were also of the view that real consideration should be given to providing a short form agreement at limited cost, perhaps with some form of educational support, to allow people to clearly opt in to the PRA. These members noted that this would provide clear certainty as to partners' rights and obligations but acknowledged that power imbalances and "various aspects of the human condition" will make some people vulnerable to the asset-owning party refusing to enter into such an agreement.
6.31 Several academic and practitioner experts supported our proposals, including academics Professor Peart and Nikki Chamberlain. Peart, however, supported making mutual commitment to a shared life an essential criterion, reflecting the approach of the courts in practice. Professor Atkin submitted that the PRA should specify that the claimant has the burden of proving the existence of a de facto relationship, which he considered would exclude some associations that are doubtful candidates for the PRA regime. One practitioner submitted that de facto couples should be required to opt in to the PRA or alternatively that the three year qualifying period be reconsidered, arguing that the current law applies too readily to a diverse range of relationships, many of which are far from being analogous to marriage.

Conclusions

An analysis of cases since the introduction of the Property (Relationships) Act 1976" (Summer Research Paper, University of Otago, 2012). The New Zealand Law Society noted that this case study only covered the period from 2002–2009 and that there is often a lag of several years before issues caused by legislative change are addressed by the courts. We agree with the limitations of this study, which we also identified in Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [6.50].

The Relationship Property Act should apply in the same way to marriages, civil unions and de facto relationships

6.32 De facto relationships that qualify for equal sharing (qualifying de facto relationships) should continue to be treated in the same way as marriages and civil unions under the Relationship Property Act (the new Act).
6.33 We acknowledge that many submitters felt that property sharing obligations should be a matter of choice and, in the absence of a deliberate decision to formalise a relationship by getting married or entering a civil union, should only be imposed on de facto relationships if the partners opt in to the regime. However, we do not prefer an opt-in approach for the following reasons:

• (a) The role of the eligibility criteria for de facto relationships is to ensure that only those de facto relationships that are substantively the same as marriages and civil unions are captured. Having different rules for relationships that are substantively the same risks being discriminatory on the basis of marital status under human rights law.57 It is also out of step with social trends, such as the increasing prevalence of de facto relationships and changing attitudes on issues such as living together before marriage or not marrying at all.58
• (b) Applying the same rules to marriages, civil unions and de facto relationships is consistent with public attitudes and values. The Borrin Survey identified that six in 10 respondents agreed with the current law (that equal sharing should apply to all couples who live together for three years).59 While seven in 10 respondents thought whether a couple were married was an important factor, a higher proportion of respondents (around nine in 10) said that living together was an important factor. 60

57. Section 19(1) of the New Zealand Bill of Rights Act 1990 and s 21 of the Human Rights Act 1993 together affirm the right to be free from discrimination on the grounds of marital status, including being married, in a civil union or in a de facto relationship.
58. Law Commission Relationships and families in contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017) at ch 1.
59. I Binnie and others Relationship Property Division in New Zealand: Public Attitudes and Values – A general population survey (Michael and Suzanne Borrin Foundation, Technical research report, October 2018) at [146].

⁶⁰ At 26 (Figure One).

Only 11 per cent of respondents thought that whether a couple were married was the most important factor.61
(c) Experience in jurisdictions that do have opt-in regimes for de facto relationships demonstrates that opt-in rules fail to reduce the number of people who must rely on the law of equity (see paragraph 6.16). In New Zealand, de facto relationships were brought into the PRA partly in order to avoid the need for de facto partners to rely on the law of constructive trust.62 In our view, it would be a backwards step to return to that unsatisfactory state of affairs. Imposing the same property sharing obligations on all qualifying relationships under the new Act, with the ability to contract out, ensures more people, especially vulnerable people, are subject to the protections under the new Act.63
(d) De facto partners have been included in the PRA on an opt-out basis since 2001. Introducing such a significant change would likely lead to public confusion and uncertainty.

A new rebuttable presumption to help determine whether a qualifying de facto relationship exists

6.34 We recommend that the eligibility criteria for de facto relationships should retain the existing definition of de facto relationship currently in section 2D of the PRA but should include a new presumption that partners are in a qualifying de facto relationship if they have maintained a common household for a period of at least three years. This presumption should be rebuttable by evidence that the partners did not live together as a couple to be determined having regard to all the circumstances of the relationship, including the section 2D(2) factors. The presumption should also be rebuttable by evidence that the partners do not meet the other criteria for a de facto relationship in section 2D(1), namely, they did not meet the minimum age requirement (see discussion in Chapter 7) and were not otherwise married or in a civil union with each other.
6.35 In the Preferred Approach Paper, we did not propose changing the definition of de facto relationships for several reasons.64 We cited the benefits of a flexible definition given the diverse nature of de facto relationships and the range of public attitudes and values about what is important when determining whether a de facto relationship exists.65 We also noted that our review of the case law did not reveal widespread problems with the way the definition of de facto relationship is interpreted and applied by the courts. We considered the real issue was around the lack of guidance these individual cases can provide to the general public but preferred addressing that issue through greater public education.

⁶¹ At [125].

⁶² For a discussion of the law applying to de facto relationships prior to the 2001 amendments, see Bill Atkin

Relationship Property in New Zealand (3rd ed, LexisNexis, Wellington, 2018) at 22–23.

⁶³ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [5.25].

64. Law Commission Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai (NZLC IP44, 2018) at [4.31].

⁶⁵ At [4.31(a)].

6.36 We did not propose a presumption in the Preferred Approach Paper. We acknowledge, however, NZLS's submission that the start date of a de facto relationship is frequently a key issue (and often the only issue) in relationship property proceedings and that the breadth of the current definition and the uncertainty it often creates means that issues cannot be resolved efficiently. We also find force in the weight of submissions from members of the public who were dissatisfied with the degree of flexibility in the current definition. We consider that prioritising the factor of maintaining a common household through a rebuttable presumption would provide greater certainty for partners, facilitating the inexpensive, simple and speedy resolution of disputes. Most partners, we think, will be able to pinpoint with some degree of accuracy when they started sharing a common household. Prioritising maintaining a common household is also consistent with the approach taken in some comparable jurisdictions, including Scotland and Canada, in particular. Preserving the existing framework of the definition of de facto relationship will ensure an appropriate degree of flexibility and judicial discretion is retained to address circumstances where partners should be covered by the new Act even though the presumption does not apply to them or where the presumption is rebutted by evidence that the partners were not living together as a couple.
6.37 Consideration should be given to whether the new Act should include a definition of what it means to "maintain a common household" and whether the presumption should expressly require maintaining a common household for a continuous period of time.66 We note the American Law Institute explained maintaining a common household as sharing a primary residence only with each other and family members or, when partners share a household with other unrelated persons, they act jointly rather than as individuals with respect to the management of the household.67
6.38 We also recommend the new Act provide that, when the presumption does not apply because the partners have not maintained a common household for three years or more, the burden of proof of establishing a qualifying de facto relationship is on the partner making a claim under the new Act. This is consistent with the approach taken in some cases,68 but we think it is helpful to express this in the new Act itself to clarify that the burden rests on the applicant and to minimise the risk of spurious claims.

No change to the three year qualifying period for de facto relationships

6.39 We do not recommend changing the qualifying period for de facto relationships.69 The diverse nature of de facto relationships means that choosing a qualifying period is a

66. As recommended by the American Law Institute in Principles of the Law of Family Dissolution: Analysis and Recommendations (ebook ed, Thomson Reuters, March 2019 update) at § 6.03(3)–(4).

⁶⁷ At § 6.03(4).

68. See for example, H v G FC Lower Hutt FAM-2005-032-527, 6 December 2006 at [3], where the Court said "[t]he onus must rest on the party asserting that a defacto relationship existed and this must be proved on the balance of probability". Compare, however, with the more general statement of the Court of Appeal in the recent case of B v B [2018] NZCA 546, [2018] NZFLR 854 at [27]:

Speaking generally, the Act does not rely on an onus of proof, except in the sense that an applicant will fail unless they can point to something in the evidence that supports their claim.

69. We discuss the rules that apply to de facto relationships that do not meet this qualifying period and make recommendations for reform below.

difficult and arbitrary exercise.70 While we acknowledge the views of many submitters who preferred a qualifying period of five years, on balance, we are satisfied that three years is appropriate for the following reasons:
(a) Results of the Borrin Survey identify that three years is broadly consistent with public attitudes and values as to when a de facto relationship reaches a point of commitment that justifies the imposition of property sharing obligations.71
(b) While many submitters were concerned that three years is too short, often the underlying concern was about what property is shared after three years. This concern will be addressed by our classification recommendations in Chapter 3 to limit equal sharing to property acquired during the relationship or for the partners' common use or common benefit (see paragraph 6.46). This will reduce the risk of unfair outcomes in relation to de facto relationships that only just satisfy the qualifying period.
(c) The risk of unfair outcomes in de facto relationships that only just satisfy the three year qualifying period is further mitigated in two respects. First, the relationship must satisfy the definition of de facto relationship. Under our recommendation above, the presumption that partners are in a qualifying de facto relationship if they have maintained a common household for a continuous period of at least three years can be rebutted if the evidence establishes they were not living together as a couple based on the factors in section 2D(2). Second, an exception to equal sharing for extraordinary circumstances that make equal sharing repugnant to justice will continue to be available under the new Act (see discussion in Chapter 8).72
(d) A three year qualifying period is now a well-settled feature of the PRA. It has been in place since 2001, and results of the Borrin Survey indicate that many people are aware of it, although there is still a need for greater public education, as discussed in Chapter 2. Preserving the status quo has the important benefit of minimising the risk of public confusion that might arise if the qualifying period is changed.
(e) Finally, extending the qualifying period would be out of step with trends in comparable jurisdictions, which generally adopt a qualifying period of two or three years.

70. The diversity of de facto relationships means it is difficult to make generalisations about when de facto relationships reach a level of commitment that justifies the imposition of property sharing obligations. In the Issues Paper, we explored the available evidence about the nature and duration of de facto relationships, which suggests most de facto relationships end (either as a result of the partners marrying each other or separating) within five years but that de facto relationships may now be more enduring than in the past: Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [15.27]–[15.32]. However, this evidence is of limited assistance in determining the appropriate qualifying period as it does not tell us when partners consider themselves to be in a de facto relationship that should have property sharing consequences.
71. A similar public values survey was undertaken in Alberta in 2016 as part of a review of the property entitlements of common law partners by the Alberta Law Reform Institute. Results of that survey suggested that most people who had lived in a common law relationship considered it to be a common law relationship by the end of the first year: Alberta Law Reform Institute Property Division: Common Law Couples and Adult Interdependent Partners (Final Report 112, June 2018) at [219].
72. Brevity of relationship coupled with a gross disparity in contributions is a recognised ground for departing from equal sharing under s 13 of the Property (Relationships) Act 1976. Often a party will argue s 13 in the alternative should a claim under s 14 fail. See, for example, B v B [2016] NZHC 1201, [2017] NZFLR 56; Brown v Starke [2016] NZFC 7132; S v S [2012] NZFC 2685; Q v Q [2012] NZFC 7272; L v R FC Christchurch FAM-2008-009-1355, 17 November 2011; and K v K FC Porirua FAM-2009-091-717, 1 February 2011.

SHORT-TERM RELATIONSHIPS

Background

6.40 If a marriage, civil union or de facto relationship lasts for less than three years, it is a short-term relationship and special property sharing rules apply.73 These rules differ significantly depending on the type of relationship.
6.41 Short-term marriages and civil unions are subject to the PRA's ordinary rules of division from the date of marriage or civil union, but a limited exception to equal sharing is available if one of the special situations outlined in sections 14 or 14AA applies.74 Specifically:

• (a) Where one partner's contribution to the relationship "has clearly been disproportionately greater" than the contribution of the other partner, all relationship property is divided on the basis of the contribution of each partner to the relationship.
• (b) Where the family home or family chattels were owned by one partner before the relationship or were received by one partner by way of gift or inheritance from a third party, those items of property are divided based on the contributions of each partner to the relationship.
• (c) Where one partner's contribution to the relationship "has been clearly greater" than that of the other partner, relationship property other than the family home and family chattels are divided based on the contributions of each partner to the relationship.

6.42 These rules recognise that applying the PRA's ordinary rules of division to short-term marriages and civil unions may lead to unfair outcomes in some situations (for example, where the family home was owned by one partner before the relationship began) and may encourage strategic or exploitative behaviour by one partner. The objective of the rules is therefore to prevent one partner obtaining a windfall gain if the marriage or civil union ends after a short period of time.
6.43 The rules for short-term de facto relationships fulfil a different objective. A short-term de facto relationship normally falls outside the PRA unless it meets the additional eligibility criteria specified in section 14A(2), namely:

• (a) there is a child of the de facto relationship75 and the court is satisfied that failure to make an order dividing relationship property would result in serious injustice; or
• (b) the applicant has made a substantial contribution to the de facto relationship and the court is satisfied that failure to make an order dividing relationship property would result in serious injustice.

73. A court can also treat a relationship of longer than three years as a short-term relationship if it considers it just, but there is no corresponding discretion to treat a short-term relationship as a relationship longer than three years' duration: Property (Relationships) Act 1976, s 2E.
74. See discussion in Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [16.3]–[16.8].

⁷⁵ See paragraph 6.68 for a discussion on the definition of child of the relationship.

6.44

Issues

The objective of section 14A is therefore to recognise that excluding all short-term de facto relationships from the PRA may lead to unfair outcomes in some situations. If the additional eligibility criteria are satisfied, each partner's share in the relationship property is to be determined on the basis of their respective contribution to the relationship (section 14A(3)).

6.45 In the Issues Paper, we highlighted a number of issues with the way the rules for short- term relationships operate in practice. In particular:

• (a) the rules for short-term marriages and civil unions are unclear and incomplete and may not always achieve a just division of property;76
• (b) the PRA treats short-term de facto relationships differently to short-term marriages and civil unions, which may be inconsistent with the implicit principle of the PRA that the law should apply equally to all relationships that are substantively the same and may be discriminatory under human rights law;77 and
• (c) the additional eligibility criteria for short-term de facto relationships in section 14A(2) are unclear and set a high bar where there is a child of the relationship.78

6.46 In light of our classification recommendations in Chapter 3, a more fundamental issue is whether it is necessary to retain the special rules for short-term relationships. Under our classification recommendations, partners will no longer be required to share property that was acquired before the relationship was contemplated (pre-relationship property) or was received by one partner as a gift or inheritance from a third party. Only increases in the value of pre-relationship, gifted and inherited property that occurred during the relationship and were attributable to the relationship, including any increase in the value of the family home, would be shared.79 This reflects a significant change in policy and directly addresses the risk of windfall gains in short relationships, which is the objective of the rules for short-term marriages and civil unions.
6.47 If the rules for short-term marriages and civil unions are no longer necessary and should be removed, the effect would be that the ordinary rules of division would apply to all marriages and civil unions from the date of the marriage or civil union. A separate question then arises as to how the PRA should treat short-term de facto relationships. Simply removing the rules for short-term de facto relationships would exclude all de facto relationships that do not satisfy the three year qualifying period (which would have the opposite effect of removing the rules for short-term marriages and civil unions).

⁷⁶ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [16.9]–[16.14].

⁷⁷ At [17.10]–[17.19].

⁷⁸ At [17.20]–[17.27].

79. Family chattels will, however, continue to be shared equally regardless of when they were acquired, for the reasons discussed in Chapter 3.

Approach in comparable jurisdictions

6.48 We have not identified any comparable jurisdictions that have special rules for short- term relationships. Rather, in other comparable jurisdictions, the same rules of classification and division apply to all qualifying relationships regardless of their length, but relationship duration can be a relevant consideration in determining whether an exception to equal sharing should apply (similar to section 13 of the PRA).80
6.49 As noted at paragraphs 6.17–6.19, most comparable jurisdictions that include de facto relationships in a property sharing regime impose a qualifying period, with the exception of Scotland.81 Several jurisdictions also provide different avenues into the property sharing regime for de facto relationships that do not satisfy the qualifying period. In Australia, the property sharing regime applies if the two year qualifying period is met or there is a child of the de facto relationship or one party has made substantial contributions to the relationship and a failure to make a property division order would result in serious injustice.82 Similarly, the Alberta Law Reform Institute recently recommended that the property sharing regime should apply if the partners live together for three years or live together and have a child together or otherwise enter an agreement to become interdependent partners.83 In Ireland, the qualifying period reduces from five years to two years if the partners are parents of a dependent child.84

Results of consultation

6.50 We received few submissions on the Issues Paper that commented specifically on the rules that should apply to short-term relationships.85 Submitters who did comment on short-term relationships had mixed views.
6.51 Submissions from members of the public tended to focus on short-term de facto relationships. Some submitters strongly felt that the PRA should not apply to short-term de facto relationships under any circumstances. Often these submitters were also in favour of increasing the qualifying period for de facto relationships. However, other submitters thought that the PRA should capture short-term de facto relationships in

80. For example, in Ontario, the court has the power to vary the equal sharing rule if it would be "unconscionable", having regard to the fact that the amount a spouse would receive would be "disproportionately large in relation to a period of cohabitation that is less than five years": Family Law Act RSO 1990 c F.3, s 4(6). Similarly, in Saskatchewan, the court may order unequal sharing if it would be "unfair and inequitable" to make an equal distribution of family property, having regard to the length of time that the spouses cohabited: The Family Property Act SS 1997 c F-6.3, s 21(2).
81. However, the length of time the couple have lived together is relevant to whether a qualifying de facto relationship exists: Family Law (Scotland) Act 2006, s 25.
82. Family Law Act 1975 (Cth), s 90SB. A similar recommendation regarding the presence of children was made by the Law Commission of England and Wales in Cohabitation: The Financial Consequences of Relationship Breakdown (LAW COM No 307, July 2007) at [3.31].
83. Alberta Law Reform Institute Property Division: Common Law Couples and Adult Interdependent Partners (Final Report 112, June 2018) at [229]–[259]. In Nunavut and the Northwest Territories, the property sharing regime also applies to de facto relationships of two years' duration or relationships of "some permanence" where the partners are natural or adoptive parents of a child: Family Law Act SNWT (Nu) 1997 c 18, s 1(1) definition of "spouse".

⁸⁴ Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 (Ireland), s 172(5).

85. Submitters were asked for their views on the operational issues with the special rules for short-term relationships but were not asked directly about whether the rules should remain, as this issue has arisen only through the development of our preferred approach to classification.

some circumstances. A common submission was that de facto couples who have children together should be captured or that a shorter qualifying period should apply to these couples.86 One member of the public submitted that a rigid qualifying period with no flexibility was unfair as it allows a person to walk out of a relationship just before the qualifying period is satisfied and avoid any consequences under the PRA.
6.52 Some organisations, including NZLS, the Wellington Women Lawyers' Association, HRC and the New Zealand Federation of Business and Professional Women (BPWNZ) supported the PRA applying to all short-term relationships in some situations, as did some practitioner and academic experts. BPWNZ noted that excluding short-term relationships could lead to unfairness in situations where one partner was the primary earner and the other an unpaid caregiver. The caregiver partner has lost the opportunity for income during that time and, in the absence of any property sharing entitlement on separation, may be left far worse off than when they entered the relationship.
6.53 Views were mixed as to whether all short-term relationships should be treated the same. Some submitters, including HRC, thought that the PRA should apply equally to all short-term marriages, civil unions and de facto relationships and that there should not be additional eligibility criteria for short-term de facto relationships. It argued that amending the PRA to apply equally to all short-term relationships would bring the law into greater consistency with New Zealand's international human rights obligations. Professor Peart agreed that the different treatment of different short-term relationships may not be justified under human rights law. NZLS said that there was a divergence of views among lawyers as to whether the different treatment remains sustainable. NZLS observed that partners who marry or enter into a civil union have "effectively 'opted in' and expressed their commitment by virtue of an official ceremony", but with de facto relationships, there is no such evidential basis. Other submitters expressed a similar view. NZLS said that whether the PRA should treat all short-term relationships the same is a question of policy, on which it expressed no view. It did not, however, support removing the additional eligibility criteria for short-term de facto relationships or applying the same rules of division to all short-term relationships.
6.54 NZLS also submitted that the eligibility criteria for short-term de facto relationships should be restricted to where a child of the relationship is the biological or adoptive child of both partners. Lawyers reported to NZLS that, while partners understand and accept that a biological or adoptive child of the relationship should give rise to entitlement under the PRA, most express surprise or even indignation that a child of a prior relationship can be the gateway to entitlement for the other partner under the PRA.
6.55 Few submitters commented on the rules of division that ought to apply to short-term relationships.87 Some submitters were happy to retain the existing rules of division for

86. Submitters on the consultation website were asked whether a different qualifying period should apply when a de facto couple have children together. 16 submitters said the presence of children should make a difference, while 11 submitters thought it should not make a difference.
87. In the Issues Paper, we proposed three options for reform for the rules of division for marriages and civil unions, namely, retaining the existing exceptions to equal sharing in special situations with some minor changes, applying contributions-based sharing to all short-term marriages and civil unions or adopting a fruits of the relationship approach to classification for all short-term marriages and civil unions: Law Commission Dividing relationship property

short-term marriages and civil unions (equal sharing with exceptions), although the Wellington Women Lawyers' Association noted the need, when the exceptions applied, to limit the weight to be given to financial contributions over non-financial contributions. HRC favoured extending the rules for short-term marriages and civil unions to de facto relationships. NZLS favoured a fruits of the relationship approach to classification for short-term marriages and civil unions, agreeing that the rationale for special treatment of the family home and chattels may be weaker in a short-term relationship. NZLS submitted:

We believe that most people would understand and accept, particularly in the case of short- term relationships, that the product of the partners' joint contributions during the relationship should be divided equally between them, with the ability to obtain compensation for improvements they had undertaken on each other's separate property, as opposed to changing the status of the underlying nature of the separate property itself.

6.56 NZLS did not, however, favour applying the same rules of division to short-term de facto relationships for the reasons discussed at paragraph 6.53. Professor Peart favoured a fruits of the relationship approach for all relationships (regardless of length) but also noted that, if this were adopted, there may be less reason to depart from equal sharing in short-term relationships.

Results of consultation on the Preferred Approach Paper

6.57 In the Preferred Approach Paper, we proposed repealing the provisions for short-term relationships and instead applying the ordinary rules of classification and division to all marriages and civil unions and de facto relationships that either meet the three year qualifying period or satisfy other additional eligibility criteria.88 We proposed that the additional eligibility criteria for de facto relationships of less than three years should require that there was a child of the relationship or one partner made substantial contributions to the relationship and, in either case, a court considers it just to make an order for division.89
6.58 ADLS and academics Professor Mark Henaghan and Nikki Chamberlain supported these proposals. ADLS noted that the current additional eligibility criteria for short-term de facto relationships, on which our proposals were based, were appropriate and have been refined over time by case law.
6.59 NZLS supported our proposal to repeal the special provisions for short-term relationships but reiterated its preference that the eligibility criteria for short-term de facto relationships should apply only to couples who have a child together, such as an adopted or biological child. NZLS noted that we preferred such a test when determining entitlement to a Family Income Sharing Arrangement (FISA). NZLS submitted that adopting two different tests for different entitlements under the PRA may lead to confusion and increased cost when considering contracting out and/or settlement agreements under Part 6 of the PRA. NZLS preferred a single definition of entitlement

– Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017) at [16.15]–[16.21]. We also proposed similar options for short-term de facto relationships at [17.40]–[17.42].

88. Law Commission Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai (NZLC IP44, 2018), P16.

⁸⁹ P17.

throughout the PRA and submitted that such entitlement be where the partners have a child together.

Conclusions

6.60 We recommend repealing the special rules for short-term relationships in light of our classification recommendations outlined in Chapter 3 and summarised at paragraph
6.46. Our classification recommendations overtake the objective of the special rules for short-term marriages and civil unions, as they minimise the risk of windfall gains and strategic or exploitative behaviour.
6.61 Other reasons for repealing the special rules for short-term marriages and civil unions are as follows:

• (a) The special rules for short-term marriages and civil unions rarely apply in practice.90 This is due to the small number of marriages and civil unions that end within three years.91 It is also due to amendments to the PRA in 2001, which mean that any time spent in a de facto relationship immediately preceding a marriage or civil union is counted when calculating the length of the marriage or civil union.92 Given the increasing tendency for partners to live together before marriage, short-term marriages are less likely today than in 1976.93
• (b) Repealing the special rules for short-term marriages and civil unions is consistent with public attitudes and values, as evidenced by the findings from the Borrin Survey. For 70 per cent of respondents, marriage was an important factor in

90. This is borne out in our review of cases available on Westlaw and LexisNexis, which identified approximately one case per year resulting in unequal sharing under s 14 since 2001 and no successful cases under s 14AA.

⁹¹ Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā?

(NZLC IP41, 2017) at [15.22].

⁹² Property (Relationships) Act 1976, ss 2B and 2BAA.

93. Superu Families and Whānau Status Report 2014 (Families Commission, June 2014) at 164. See also Law Commission Relationships and families in contemporary New Zealand – he hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017) at 17–18.

deciding whether equal sharing should apply to a couple,94 and these respondents tended to think that the law should apply to married couples much sooner than three years, with 47 per cent saying the equal sharing law should apply as soon as a couple gets married.95
(c) The risk of unfair outcomes in applying the ordinary rules of division to short-term marriages and civil unions is mitigated by the continued availability of an exception to equal sharing in extraordinary circumstances (see paragraph 6.39(c)).
(d) Repealing the special rules for short-term marriages and civil unions would be consistent with the accepted approach in comparable jurisdictions.
6.62 We also recommend repealing the special rules for short-term de facto relationships and extending the ordinary rules of division under the new Act to short-term de facto relationships that meet the additional eligibility criteria recommended below. In our view, this is an appropriate response given our classification recommendations, which, if adopted, will have the effect of reducing the pool of relationship property available for division in situations where the family home was one partner's pre-relationship property. If contributions-based sharing were retained for eligible short-term de facto relationships, this would likely result in situations where the non-owning partner receives significantly less than what they would have been entitled to under the current rules. We think this would be an unfair outcome for the small number of short-term de facto relationships that do satisfy the additional eligibility criteria.96
6.63 Our recommendations to repeal the special rules for all short-term relationships and extend the ordinary rules of division to short-term de facto relationships that satisfy the additional eligibility criteria also have the following advantages:

• (a) The eligibility criteria will be simplified, making the new Act easier to apply. One set of property division rules will apply to all marriages, civil unions and qualifying de facto relationships. Partners who are married or in a civil union will not need to determine when their relationship began (including any immediately preceding de facto relationship) or ended in order to determine what rules apply. Equal sharing is also more certain and easier to apply than contributions-based sharing. We consider that these recommendations will best achieve the principle of simple, speedy and inexpensive resolution of relationship property disputes as is consistent with justice.
• (b) Less emphasis will be placed on a relationship passing an arbitrary three year milestone. For marriages and civil unions, greater weight is placed on the partners' deliberate decision to formalise their relationship, consistent with public attitudes and values (see paragraph 6.61(b)). For de facto relationships, the additional eligibility criteria recognise the necessarily arbitrary nature of the qualifying period and give equal weight to other measures of commitment.

94. I Binnie and others Relationship Property Division in New Zealand: Public Attitudes and Values – A general population survey (Michael and Suzanne Borrin Foundation, Technical research report, October 2018) at 26 (Figure One).

⁹⁵ At [140]–[141].

96. Our review of cases available on the legal databases Westlaw and LexisNexis identified that the additional eligibility criteria for short-term de facto relationships in s 14A(2) of the Property (Relationships) Act 1976 have been satisfied in 21 cases since 2001, an average of fewer than 1.5 cases per year.

(c) Removing the rules for short-term marriages, civil unions and de facto relationships minimises the different treatment of different relationship types, consistent with human rights law (see paragraph 6.66 below).

Additional eligibility criteria for de facto relationships

6.64 We recommend that de facto relationships that do not satisfy the qualifying period should be subject to the new Act if they satisfy the additional eligibility criteria that:

• (a) there is a child of the relationship and the court considers it just to make an order dividing relationship property; or
• (b) one partner has made substantial contributions to the relationship and the court considers it just to make an order dividing relationship property.

6.65 These criteria provide different ways to measure commitment and should be given equal weight to the deliberate decision to formalise a relationship by getting married or entering a civil union or satisfying the qualifying period.
6.66 This means that short-term de facto relationships will continue to be treated differently to marriages and civil unions of the same length. We are satisfied that this different treatment is not discriminatory under human rights law given that early stage de facto relationships are different in nature to marriages or civil unions of the same length.97 In a de facto relationship, the partners have not made a deliberate decision to formalise their relationship and cannot be presumed to have accepted the legal consequences that entering into marriage or a civil union entails. Requiring the satisfaction of additional eligibility criteria for short-term de facto relationships ensures the new Act treats different relationship types that are substantively the same in the same way and avoids imposing property sharing obligations on de facto relationships that are not substantively the same as marriages or civil unions.
6.67 The recommended criteria are broadly consistent with the existing criteria under section 14A(2), with the important distinction that the threshold of "serious injustice" is lowered to "justice". We consider that this will achieve fairer outcomes through greater access to the court's discretion.
Where there is a child of the relationship
6.68 A child of the relationship is a well-established concept in the PRA. It includes any child of both partners (such as a biological or adopted child of both partners) and any other child who was a member of the partners' family when the relationship ended.98 This has been interpreted to include children who are "wholly or partially dependent on at least one of the parties for physical, material, emotional or social support" and who have "some presence in or belonging to the particular household".99

97. Differential treatment of people or groups on a prohibited ground of discrimination is potentially discriminatory under human rights law but only if it treats people in comparable situations differently: Ministry of Health v Atkinson [2012] NZCA 184, [2012] 3 NZLR 456 at [55] and [109]; applied in Child Poverty Action Group (CPAG) v Attorney-General [2013] NZCA 402, [2013] 3 NZLR 729 at [43].
98. Property (Relationships) Act 1976, s 2 definitions of "child of the civil union", "child of the de facto relationship" and "child of the marriage".

⁹⁹ M v L (2005) 24 FRNZ 835 (FC) at [33]–[34]. See also A v A [2012] NZFC 10192 at [26]–[34].

6.69 In our view, where there is a child of the relationship, partners can be presumed to be in a family joint venture to which the partners contribute equally although in different ways.100 Results from consultation and the Borrin Survey affirm that the presence of children makes a difference to people's attitudes about whether equal sharing should apply. Some respondents to the Borrin Survey regarded having children together as being a more important factor than how long the partners have been together (see paragraph 6.15(c)).
6.70 We acknowledge the concern raised by NZLS that the presence of a child who was a member of the partners' family but is not the biological or adopted child of both partners (such as a stepchild) might not provide an appropriate measure of commitment. We also recognise that we recommend adopting a broader definition of child of the relationship than that used to establish entitlement to a FISA in Chapter 10. The presence of a child in these two situations, however, is used to measure different things. In the context of FISAs, the presence of a child is used to measure the partners' expectations to share the economic advantages and disadvantages that arise from satisfying the responsibilities associated with having and raising that child. While such expectations can be reasonably inferred when partners have a child together (or make a permanent commitment in respect of the future care of a child through the adoption process), they cannot be presumed to the same extent in relation to other children of the family and may not necessarily endure beyond the partners' separation. In the context of short-term de facto relationships, however, the presence of a child is used as a measure of commitment. In our view, the presence of a child who was a member of the partners' family is an appropriate measure of commitment given social trends towards more diverse family structures.101 Our view remains that NZLS's concern is best addressed by reserving some discretion to the court so that it must still be satisfied that making an order for division would be just in all the circumstances.
Where one partner makes a substantial contribution to the relationship
6.71 A short-term de facto relationship to which one partner has made substantial contributions should also qualify for equal sharing.102 This gives a court broad discretion

100. We agree with the recent conclusion of the Alberta Law Reform Institute in Alberta Law Reform Institute Property Division: Common Law Couples and Adult Interdependent Partners (Final Report 112, June 2018) at [250]:

It is reasonable to presume that partners raising a child or children are in an economic partnership, even if the relationship lasts less than three years. Usually, both partners contribute to meeting the needs of the family. The contributions may include money, caregiving, or other domestic work.

This is supported by some research that suggests de facto partners raising children together have made a personal commitment to each other and have a degree of financial interdependence. See, for example, Jan Pryor and Josie Roberts "What is commitment? How married and cohabiting parents talk about their relationships" (2005) 71 Family Matters 24 at 31; Simon Duncan, Anne Barlow and Grace James "Why don't they marry? Cohabitation, commitment and DIY marriage" (2005) 17 CFLQ 383; L Jamieson and others "Cohabitation and commitment: partnership plans of young men and women" (2002) 52 The Sociological Review 354; Charlie Lewis, Amalia Papacosta and Jo Warin Cohabitation, separation and fatherhood (Joseph Rowntree Foundation, York, 2002); and J Lewis The End of Marriage? Individualism and Intimate Relationships (Edward Elgar, Cheltenham, 2001).

101. See discussion in Law Commission Relationships and families in contemporary New Zealand – He hononga tangata, he hononga whānau i Aotearoa o nāianei (NZLC SP22, 2017) at ch 4 and ch 5.
102. In Law Commission Dividing relationship property – Time for change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP41, 2017), we commented at [17.20] that the Property (Relationships) Act 1976 does not define or provide any guidance on what constitutes a "substantial contribution" to the de facto relationship. We are, however, satisfied

to recognise situations in which the substantial contributions made by one partner to the relationship demonstrate a significant commitment to the relationship. It also provides an avenue into the new Act for child-free couples and avoids discriminating on the basis of family status under human rights law.103

the courts will be able to determine when a partner has made substantial contributions for the purpose of qualifying for equal sharing. The test should continue to be used.

103. Section 19(1) of the New Zealand Bill of Rights Act 1990 together with s 21 of the Human Rights Act 1993 affirm the right to be free from discrimination on the grounds of family status (which includes having the responsibility for the part-time or full-time care of children or other dependants).

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