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Deceit, broken promises and unequal sharing

30 June 2017 - By McKenzie Cox and Helen Tyree

The recent High Court decision in Bowden v Bowden [2016] NZHC 1201, [2017] NZFLR 56 has brought attention to “extraordinary circumstances” in relationship property division. In this case, the High Court upheld the Family Court decision to divide a couple’s relationship property on an 80:20 basis in favour of the deceased husband’s estate. Such a drastic divergence from the equal sharing regime begs the question – what are extraordinary circumstances and when do they apply?

Section 13 of the Property (Relationships) Act 1976 (PRA) provides for an exception to equal sharing in extraordinary circumstances. It is a stringent test and successful applications are rare, but as Bowden v Bowden has proven, this section should not be overlooked. In determining an application under s 13, the Court’s considerations are threefold:

  1. Are there extraordinary circumstances?
  2. Do those extraordinary circumstances make equal sharing repugnant to justice?
  3. What should the division be in light of the parties’ contributions?

These are strong words and these stringent tests are designed to limit the scope for unequal sharing. In Joseph v Johansen (1993) 10 FRNZ 302, Richardson J held that the test “is not to make an assessment against some kind of marriage norm, but rather to consider whether tested against the whole range of marriages the particular circumstances are to be characterised as ordinary.”

The successful cases under s 13 (and its predecessor s 14) can be generally categorised into five types:

1. Injection of capital

Injection of capital towards the end of a relationship, not acquired because of the relationship – for example, a significant inheritance.

2. Brevity of the relationship

The longer a relationship lasts, the more difficult it is to find exceptional circumstances. In J v J [2003] NZFLR 1088, an s 13 claim failed despite injection of a $204,000 inheritance near the end of a 22-year relationship. However, in Bowden v Bowden, the relationship was three years and two days long and the parties kept their finances entirely separate. This arrangement, combined with the fact that the parties were in their late 50s/early 60s at the time the relationship began, compelled the Court to find extraordinary circumstances. This case can be compared to Sydney v Sydney [2012] NZFC 2685 where the relationship was a similar length, but a 60:40 division was made. Such a disparity in the divisions awarded highlights that each case is assessed contextually and in accordance with its own unique facts.

3. Gross disparity of contributions

This factor must usually be combined with others to find extraordinary circumstances because the Act presumes that both partners contribute equally to the relationship. For example, in Sydney v Sydney, the husband brought all of the assets into the relationship and the wife earned her income by working in the husband’s business. While a successful case, it exemplifies the reluctance of the Court to diverge from equal sharing in some cases.

4. Non-contributing partner

In Bevan v Bevan [1977] 1 MPC 23 (SC) and in Johansen v Joseph (1992) 9 FRNZ 643, [1993] NZFLR 248 (High Court) the husband in each case spent his income on drink and gambling and did not support his family in any way. This was sufficient to meet the threshold. In D v D (1997) 15 FRNZ 302, [1997] NZFLR 424 the wife’s mental illness required her to be in residential care for most of the couple’s 24-year marriage. The Court found that she contributed only 20% to the marriage partnership and divided the property 20:80 in favour of the husband.

5. Negative contributions

In H v N (2001) 21 FRNZ 369, deceit, broken promises and a failure to honour undertakings amounted to extraordinary circumstances, as did forgery of a wife’s signature on loan documents in WLP v CSM, FC Porirua FAM-2002-91-540, 29 June 2005. Both cases resulted in an s 13 adjustment.

In the context of section 13, “justice” is concerned with the recognition of contributions to the relationship, rather than “justice” in a broader sense. Like “extraordinary circumstances”, “repugnant to justice” is a stringent test. Many times an s 13 argument has failed because the Court is not satisfied that equal sharing would be repugnant to justice, despite the case presenting the technical ingredients of extraordinary circumstances.

When preparing an s 13 argument, it is not enough simply to show a disparity of contributions. Consideration must then be given to the overall circumstances. The question is what makes the disparity in contributions so out of the ordinary that it results in equal sharing being repugnant to justice. Once this threshold has been met, the Court will quantify the parties’ individual contributions to the relationship in order to reach a just division.

Helen Tyree is an Associate and McKenzie Cox is a Solicitor at the specialist Wellington family law firm McWilliam Rennie.

Last updated on the 30th June 2017