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5 De facto partners’ claims

Present law and purposes of reform

130 WHERE, DURING A DE FACTO RELATIONSHIP, one partner has contributed towards the value of the other’s property, he or she may claim that value. But there is no support claim. The Commission’s proposals are designed to eliminate the uncertainty which now surrounds the way contribution is assessed, and to allow a de facto partner to make a support claim as well. The Commission’s proposed reforms, however, will apply only after one of the partners dies. Claims made between living partners are not within our terms of reference.⁶⁵

131 De facto partners’ property and support are issues of growing concern. There is an upward trend in de facto relationships (see Appendix A). At the 1991 census, 161 856 identified themselves as de facto partners, up 40.7% on the number recorded in 1986.⁶⁶ Over 40% of de facto couples have children – compared to 60% of married couples.⁶⁷ Between 1981–1991 the proportion of women over 15 years of age in de facto relationships increased from 4% to 6% (11% for Mäori women), and it is increasingly likely that women will be in a de facto relationship at some time in their life.⁶⁸ While almost half (46%) of people living in de facto relationships in 1991 were aged in their 20s, and this age group increased by the greatest number in the 1980s, the incidence of de facto unions in other age groups has also risen.⁶⁹ New law should recognise the “important legal, public policy and demographic implications” of this increase.⁷⁰

132 The Minister of Justice has publicly announced that his Ministry has this matter under consideration, and that a Bill dealing with the rights of de facto couples who separate may soon be introduced into the House of Representatives. Any change to the rights of de facto couples during their lifetime is outside our own terms of reference. When that legislation is prepared, therefore, it will be necessary to look carefully at our own proposals to ensure that any difference in principle between any legislation is justifiable. However, in the meantime we will proceed on the assumption that the criteria in each regime are going to be comparable, although the provisions for lifetime rights could well involve more qualifications, and a greater degree of judicial discretion, than do our own.⁷¹

133 We recognise that this case for reform appears less pressing as regards claims made after one partner dies. At present, according to the statistics, the number of people aged 45 years and above who have been in de facto relationships is statistically small.⁷² But the numbers each year are not insignificant. 26 474 people over 15 years of age died in 1994.⁷³ Of those, some 6%, or 1 588, might be expected to be people who were in a de facto relationship.⁷⁴ Moreover, statistics may not give the full picture. For instance, it is possible that de facto partnerships amongst older age groups are significantly under-reported.⁷⁵ Our proposals anticipate greater future need, given the growing social acceptance of de facto partnerships amongst all age groups.

134 The general tendency in Australia and Canada has been to make provision for de facto partners in legislation dealing with lifetime claims, testamentary claims, or both.⁷⁶ More recently, the English legislature conferred on surviving de facto partners the same protection as is given to widows under the Inheritance (Provision for Family and Dependants) Act 1975 (UK).⁷⁷ The Commission considers that equivalent protection should be given to surviving de facto partners in New Zealand.

135 Concerns have been expressed about conferring categorical property rights on de facto partners. But these concerns are much reduced when one of the partners is dead. It is much more likely that the dead de facto partner would have wished to pass on property to the other partner on death, than in the case of separation. On the death of one partner any property which remains can be applied for the support of the survivor, and not for both partners, which is the case on separation. Where partners do not pass property to one another by will, it may well be because it has been neglected, or as a result of ignorance of the law.⁷⁸ It is a common misconception that the equal-sharing regime applies to couples who have been in a relationship for two years or more.

Proposal in outline

Example 5:

Male partner lives with Female partner in a de facto relationship for 25 years. They have 2 minor children. Before the children were born Female partner worked full-time as a librarian. The parties did not make any agreement about sharing property or supporting one another when the relationship ended. The partners accumulated $250 000 during the relationship, all of which is in Male’s name. Male’s will leaves Female $50 000 and a life-interest in a further $50 000. The rest of the estate goes to the children of the relationship and to a charitable cause. Female initiates a property division to allow her greater control over the capital.

136 Under the Commission’s proposals, Female will have the right to $125 000 as her share of the property accumulated during the relationship. She will also be entitled to a support award (probably a lump sum) to help her live independently. The size of the award will be determined by the judge, taking into account Female’s actual income, the effect of Female’s past and anticipated absences from the workforce and the effect of these absences on her earning capacity. The children will also have a claim (see chapter 6).

137 The same principles that apply under the matrimonial property regime during lifetime will be carried over into our proposals (para 99). This still allows de facto partners some flexibility in applying these rules, to take into account the fact that the particular relationship may not carry the same expectations as a marriage does. In particular, a couple may agree on a different division of property (paras 356–361). Agreements (whether or not they are in writing) will be given effect as long as they are not unfair, or procured unfairly. Property which has been kept separate will not be subject to the equal-sharing regime. Partners who have worked throughout their relationship and suffered no financial disadvantage will have no support claims (paras 113–117).

138 How does this compare with the present law? To return to Example 5, under the present law, Female gets an award of only part of Male’s property. The judge will decide how large this is, taking into account Female’s contributions to that property.⁷⁹

139 In contrast, the Commission’s proposals (particularly as regards the support award) would (unless there is statutory modification of the present law)⁸⁰ result in different laws applying depending on whether the relationship ends because of death. The Commission accepts that there would be reservations about passing the proposals (regarding deceased estates) if the lifetime law is significantly different. However, a partial improvement in the law may be better than nothing. The advantages of the equal-sharing regime are discussed further in para 142. In most cases these advantages apply equally to de facto partners who separate during the lifetime of both partners.

Alternatives

140 The Commission considers the proposal to be preferable to the following alternatives:

• De facto partners confined to property claims under the present law: Commentators have criticised uncertainty in the level of awards under
  the present law and the extent to which (especially women) partners’ contributions to relationship property are taken into account.⁸¹ This uncertainty makes it more likely that the growing numbers of de facto partners in New Zealand will not understand or be protected by the law. Certainly they will have inferior protection (or none at all) against loss of earning power resulting from the relationship. Moreover, under the present law, courts cannot consider the interests of children when dividing property between de facto partners (especially their interest in being able to remain in a family home).⁸² Judges have acknowledged that the legislature might more properly assess and express social expectations in this field, and do so in a more definite and comprehensive way.⁸³
• Only de facto partners who formally register their relationships can make the claims: This is a curious option as it is unclear why any person who is unwilling to contract a marriage would be prepared to adopt this alternative method of having their relationship recognised. Partners may already be reluctant to enter into contracts, not having the forethought or means to consult a lawyer, or a formal arrangement may be inconsistent with their culture or beliefs. A partner with greater influence in the relationship may be unwilling to be tied by formal obligations. This option does not address these deficiencies any more than the present law which says that heterosexual partners can enter into enforceable formal contracts.⁸⁴ There is room to doubt how many de facto partners today protect themselves through these contracts, though perhaps this is changing: lawyers in various parts of the country have told us that they are being asked to prepare contracts more frequently.⁸⁵ In any case the law concerning de facto partners’ claims for property interests already holds that in default of any positive statement otherwise “the ordinary features of a shared life” will automatically give rise to property sharing.⁸⁶
• A statutory discretion to divide property and make support awards: De facto partners by definition (see paras 146–155) have been involved in relationships which have many of the qualities of a marriage relationship. If there is a clear intention that property be divided unequally, that will be done (paras 356–361). But where de facto partners share in a permanent, intimate relationship, an approach based solely on what each partner has contributed to the partnership property (whether item by item, or as a whole) does not seem appropriate. This has been recognised, to a degree, by the courts. While the courts have been reluctant to treat de facto partners in the same manner as spouses without Parliament’s sanction, they have acknowledged the case for doing so by comparing de facto partners’ rights and obligations with those of spouses.⁸⁷ Parliament has considered and enacted comparable proposals before. Proposals over 20 years ago envisaged applying the same property division legislation to de facto partners.⁸⁸ De facto partners have been treated in the same manner as spouses for a number of other purposes.⁸⁹

Reasons for the proposal

141 The Commission considers the proposal preferable to the alternatives because the proposal

• provides greater certainty and just resolutions of property division and support issues for the growing numbers of de facto partners in New Zealand,
• balances the freedom of individuals and fairness between de facto partners by making the consequences of a de facto relationship reasonably clear and allowing de facto partners freedom to make different arrangements (see paras 356–361),
• simplifies and rationalises the law, reconciling it with the law which applies to married people and allowing courts to address property division and support issues more clearly and consistently,
• reduces the ability of either partner or their estates to draw matters out and obtain an unduly favourable settlement by means of protracted and expensive litigation, and
• recognises that determining de facto partners’ property division and support affects the position of their children.⁹⁰

142 We are aware that there is a significant body of opinion which opposes any such measure. One reason often given for doing so is that de facto couples’ expectations are not as uniform or clear as those of married couples. Indeed, some people deliberately choose an unmarried state so as to avoid the consequences of the Matrimonial Property Act 1976. However, the Commission does not accept that this reasoning requires it to abandon the proposal. In particular:

• The equal-sharing rule should cover those who drift into an enduring relationship, as much as those who formally commit themselves to it at the start.
• If the relationship has been a short one, and each partner’s assets and income have been kept separate, the provisions of the Matrimonial Property Act 1976 itself can apply, and are sufficiently flexible to deal with the situation adequately.⁹¹
• Given that so many de facto couples are caring for children, the safer “default” rule is one which protects the unprotected de facto partner, rather than one which makes claims problematical.
• If it is apparent that the couple desire a different and fairer method of sharing property, and have fairly agreed to it, their intentions will be respected (see paras 356–361).
• If one partner is propertied and the other is not, it is more likely that the propertied partner will have greater knowledge and access to advice: if the agreed property division is to be preferred to one which is governed by general rules of law, it makes sense to give the propertied partner the incentive to propose a property agreement.

143 The proposal also complies with section 19 of the New Zealand Bill of Rights Act 1990, which prohibits discrimination on the grounds of marital status and sexual orientation.⁹² At present, the law on its face draws these distinctions by confining some family claims to married spouses. As we read it, s 19 is breached if an unjustified distinction is drawn between the rights of people who are married and people who live together as part of an intimate domestic relationship, whether heterosexual or same-sex. Each couple has an equal right of access to the fairest system of justice which can be devised to deal with the consequences of the mingling of their assets and efforts and the long-term financial disadvantage that a relationship may cause.

144 Any such distinction in proposed new law has to satisfy s 5 as demonstrably justified in a free and democratic society. The distinction satisfies s 5 only if it has a legitimate aim, can rationally be seen as supporting that aim, and is a proportionate means of achieving that aim, taking into account the importance of the right.⁹³

145 This would be a difficult test for a legislature to satisfy as regards de facto partners, whether of the same or different sexes. In the Commission’s view a general policy of preferring marriage (as distinct from other relationships) or of preferring heterosexual couples (as opposed to gay or lesbian couples) cannot be a legitimate aim as these are the very arbitrary distinctions which are specifically forbidden by s 19 of the Bill of Rights Act itself.

Proposals in detail

146 DEFINITION – The Commission proposes that property division and support claim provisions apply to de facto partners whether of the same or opposite sex. But what is a “de facto relationship”?

147 Various efforts have been made to define the term. Clause 49 of the Matrimonial Property Bill 1975 and the majority recommendation in the 1988 Report of the Working Group on Matrimonial Property and Family Protection proposed that reformed property division law for de facto relationships ended by separation should generally apply only to relationships of 2 years standing. Yet the Group also recognised that without a discretion to shorten this time there might be injustice; for example “where a relationship, intended to be of some permanence, was terminated by the sudden death of one partner”.⁹⁴ These proposals also contained a second test of eligibility to claim: “that it was ‘just’ that the principles of the Matrimonial Property Act 1976 apply”. Atkin criticises this test as containing undisclosed standards.⁹⁵ The Commission agrees. Principles laid down for estate claims should be clearly articulated.

148 Definitions by reference to the nature of the relationship are preferable. But not all models are suitable. Australian state legislation (Northern Territory, Queensland, South Australia and Western Australia) use defined statutory criteria: living together for a specified period, membership of the household at the time of death, being maintained by the deceased (dependency) at the time of death. Criteria such as these have the potential to create arbitrary and anomalous distinctions between those protected and those unprotected, without making it significantly clearer which relationships the legislation is intended to apply to.

149 In particular, the proposed minimum time period for a de facto relationship to have existed is misconceived. It is advanced as the only way of telling whether there is a genuine de facto relationship. Let us assume that the relationship during the specified period of cohabitation must itself be one that is “in the nature of marriage” (eg, not a flatting or an intermittent relationship). There is, logically, an infinite regression. One cannot tell whether a relationship is “in the nature of marriage” until it has lasted for a certain period of time. The same question must therefore be asked of the relationship at the beginning of the period as is asked at the end.

150 There is a simple answer to this dilemma. If the parties to a relationship have mixed their assets and incomes and committed themselves to financial disadvantage as a result of the relationship, then the law should resolve their situation fairly, without regard to the time period involved. To specify a prior time period before such a law can apply, deprives people of the fairest way of resolving the dispute.

151 A much better definition, therefore, is found in cl 5 of the Queensland Law Reform Commission’s De Facto Relationships Bill. This Bill defines a “de facto relationship” as

[t]he relationship between 2 persons (whether of the same or a different gender) who, although they are not legally married to each other, live in a relationship like the relationship between a married couple.⁹⁶

152 This follows almost all the New Zealand legislation that applies to de facto partners. New Zealand legislation is usually applied to de facto partners by reference to the concept of legal marriage. The wording “in the nature of marriage” is most commonly used (11 references in the statute book), even when the legislation includes same sex relationships (see, eg, the Electricity Act 1992 s 111(2)(e)). Courts and tribunals have discussed “relationships in the nature of marriage” in a number of cases.⁹⁷

153 No other form of words effectively describes how close the relationship must be, in terms of emotional and financial co-dependence. In the Personal Injury report,⁹⁸ cl 61(2)(b) of the Commission’s Draft Safety, Rehabilitation and Compensation Act referred to “a settled relationship in the nature of marriage.” The Commission’s preliminary paper Evidence Law: Privilege⁹⁹ adopted the following definition:

154 Drawing on case law and previous legislative attempts at a definition, the Commission suggested in the Privilege paper that the key factors relevant to whether a relationship was “marriage-like” included the living arrangements of the couple, their emotional and sexual relationship and any pooling of financial resources.

155 The Commission concluded that these factors were in large part common sense. In the majority of cases, it should be readily apparent whether the relationship is covered. A list of factors relevant to determining whether a person is living in such a relationship is neither necessary nor desirable. The same applies in the law of succession.

156 SAME-SEX COUPLES – The Commission accepts that the proposal to link same-sex couples with the concept of a “de facto relationship”, through the terms “in the nature of marriage”, will be controversial. This controversy is sometimes linked with the perception that same-sex couples are more likely to have temporary relationships with no long-term commitment. But the courts will take the temporary nature of the relationship into account in deciding whether it is “in the nature of marriage”. Courts will also take into account whether there has been commingling of property and whether any financial disadvantage has resulted from the relationship. This is unlikely to occur if the relationship is a temporary and uncommitted relationship (as has already been pointed out, para 149).

157 Putting to one side the issue of long-term commitment, the issue is about descriptions and symbols. It raises a question about the effects of acknowledging in a statute that the two types of relationships are comparable, and of the linking of gay and lesbian relationships with those “in the nature of marriage”. But in the Commission’s view, considerations of simplicity and precision of drafting are decisive. We could perhaps devise a separate provision for same-sex couples, not linked explicitly with the concept of marriage. This would serve the same purpose without offending those people who object to the use of the term “marriage” in this context. But it would draw on exactly the same criteria as do the words “in the nature of marriage” (eg, companionship, property sharing, lawful intimacy, financial and other reliance, commitment, and so on). It would be difficult to capture in any other form of words the required intensity of the relationship. In any event, Parliament has recently accepted a very similar wording as the proper one in a related context.¹⁰⁰

158 PRIORITY OF PROPERTY DIVISION CLAIMS WHERE THERE ARE TWO OR MORE RELATIONSHIPS – There is a question about people who enter two or more de facto relationships (or a de facto relationship and a legal marriage). These seldom if ever arise in the case of married people (though the present law¹⁰¹ may be difficult to apply where one partner believes the couple have married, when the marriage is in fact bigamous).¹⁰²

159 Yet it would be surprising if these issues could not be resolved by applying present matrimonial property law principles. Relationships that are sufficiently “marriage-like” will usually be exclusive or monogamous: one to one at any given time. Sometimes at the time of death a will-maker who is legally married will also be involved in a post-marriage de facto relationship. In these cases the property division claims will be met in the order of the relationships. This is because the will-maker could not have brought property to the second relationship if it was already affected by unresolved claims arising out of the first. The de facto partner, whose relationship began after the will-maker left the marriage, can claim only from the property remaining after the legal spouse’s entitlement is settled.

160 This suggests a general principle:

Example 6:

Husband is married to Wife for 15 years. When they separate, a large part of the property accumulated during the marriage is held in Husband’s name. Six months after the separation Husband establishes a relationship in the nature of marriage with Partner. The de facto relationship ends on his death 2 years later. Wife does not claim a property division during Husband’s life.
The court would first deal with Wife’s property division (for her share of the property accumulated during the marriage which Husband and Wife held at the date of separation). The court would determine what part of the property Husband brought to the de facto relationship was subject to Wife’s first property division. Then it would consider Partner’s division of the property accumulated during the de facto relationship. Partner could have no right to share property which Husband brought to the de facto relationship but which was subject to Wife’s earlier right.

161 This principle alone is insufficient to deal with contemporaneous relationships. The Commission proposes that:

162 Contemporaneous de facto relationships are not, as far as we can tell, frequent. But they can occur, for example, where a married will-maker establishes a long-term intimate relationship with a de facto partner at the same time as continuing a marriage. Neither spouse nor partner may know anything of the other relationship. In principle there will be a separate pool of property attributable to each relationship, but in practice it may be difficult to identify all the property as attributable to a relationship. Although some assets are clearly identifiable as connected with one household, others will not be connected to any particular household. Neither partner may know that they exist.

163 Where it is impractical to divide estate property into pools attributable to each of two relationships, each property division claim should be satisfied proportionately to the contributions each relationship made to the whole of the estate.

164 The principle of equal sharing, by contrast, would operate unfairly. While there may be equality between the two people concerned in each relationship, it by no means follows that each relationship contributes equally to the acquisition and improvement of property which has to be divided between the three (or more) people concerned. Admittedly, by rejecting the equal sharing principle, we are departing from the Matrimonial Property Act 1976, which presumes that

• partners’ contributions of all kinds are equal; and

• partners contribute to the partnership, not the property.

However, when there are two or more relationships, different principles must apply. It cannot simply be presumed that property is attributable equally where one relationship may have little to do with property acquisition. Nor can the law erect, contrary to the fact, a combined three (or more) person partnership to which each partner is taken to have contributed.

165 The Commission’s proposed rule will operate in this way:

Example 7:

Husband and wife have been married for 35 years when Husband dies. For the last 10 years of the marriage Husband, whose work took him to another town for half of each week, was also in a relationship in the nature of marriage with Partner. Neither Wife nor Partner were aware of Husband’s relationship with the other. Husband and Wife lived together in a large home and had significant assets after 35 years of marriage. For the last 10 years of the marriage Husband and Partner lived together in a small flat, and had accumulated some property together during this time.
The court would first divide the property of Husband, Wife and Partner into 2 separate pools, with all the property identifiably linked to each household attaching to the pool to be divided between the couple in that household. Some of Husband’s property would not be identifiably linked to either household. To attribute this unidentifiable property to 1 of the 2 pools, the court would assess the relative contributions of each partnership to the estate of the deceased as a whole (this might be influenced by the sizes of the pools of identifiable property, but that consideration would not be decisive).

166 PRIORITY OF SUPPORT CLAIMS WHERE THERE ARE TWO OR MORE RELATIONSHIPS¹⁰³

167 Where a marriage dissolves during spouses’ joint lifetimes, spousal support claims under the Family Proceedings Act 1980 Part VI are not time-barred after a fixed period (eg, two or three years) from separation. Instead they are constrained by a duty on each partner to assume responsibility, within a time that is reasonable in all the circumstances of the particular case, for meeting that partner’s own needs. On the expiry of that period of time neither partner is liable to maintain the other: s 64(2).¹⁰⁴

168 Rather than a provision like this, the Commission proposes a fixed time period within which former partners must make a support claim. This is much simpler from the point of view of an estate administrator. It also prevents the opening up of issues out of long abandoned relationships, based solely on the fact that the estate may be in a better position to support the claimant than was the living will-maker.

169 Former partners must make a support claim within five years of their most recent separation from the will-maker. If they do not, they will be barred from making a support claim against the will-maker’s estate. (This period is based on two years pre-dissolution separation time, plus a standard three years limitation period).

170 Further:

This is a useful provision to eliminate stale claims. It deals with the interpretation of property division agreements on separation. Property division settlements on or after separation comprise any potential support claim on the will-maker’s death, unless the contrary is specified in the agreement.

171 Unless one of the support claims is barred by the above rules, this general rule would apply:

Example 8:

Will-maker is survived by Wife (his former spouse) and Partner (his former de facto partner). Both survivors make a support claim against will-maker’s estate. The court makes a support award to Wife of $75 000. The financial consequences for Wife of a 25-year marriage are very significant. The court also makes a support award to Partner of $25 000. Partner is more readily able to support herself after an 8-year relationship.
There is insufficient property to meet both support awards in full. The court will divide the available property between the 2 support awards in accordance with the size of each award. The court will attribute the available property to the awards according to the ratio 3:1 (Wife’s award $75 000:$25 000 Partner’s award). The court therefore attributes 3/4 of the available property to Wife’s award and 1/4 to Partner’s award.

Conclusion

172 The Commission’s proposals would put de facto relationships in a similar legal position, as regards property division and support claims, to marriages. There could, of course, be differences in application of the relevant principles, if that is appropriate to the particular relationship.