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March 2004

De facto Relationships of short duration

The concept of serious injustice

The Property (Relationships) Act 1976 (“the Act”) has been in place since February 2002 and the Courts are slowly gathering together a collection of decisions to guide practitioners and their clients through the new provisions and issues that were introduced.
An interesting case has come from the South Island dealing with relationships of short duration for unmarried partners (usually less than three years).

There is a distinction made between relationships of short duration between married and unmarried partners. For married partners, the Court will divide their relationship property according to the respective contributions to the relationship of each partner. For unmarried partners, the Court does not have jurisdiction to divide their property unless:

  • There is a child of the relationship; or
  • The applicant has made a substantial contribution to the relationship; and
  • In either case, the Court is satisfied that the lack of an order will result in serious injustice.

The presence of a child or a substantial contribution will not necessarily be a reason for the Courts to find that serious injustice will result.

What is Needed?

For an application of this type, the Court will need detailed and specific information about the likely result and degree of injustice that would result if the Court refused to intervene.

Section 15 of the Act empowers the Court to award lump sum payments or transfer property to one party where ‘economic disparity’ exists. Economic disparity arises if, on the division of relationship property, the income and living standards of one partner are likely to be significantly higher than those of the other partner because of the effects of the division of functions or roles within the relationship.

The birth of a child may be the key to a successful application under section 15 if one parent is unable to pursue a career by having to assume the primary caring position. If the Court refuses to intervene it would, in effect, block any application under section 15 to address economic disparity. On the other hand, the Child Support Act 1991 could provide relief through availability of financial support.

In the case from the South Island the Judge stated that a combination of factors, each not necessarily in itself amounting to a serious injustice, might together add up to a serious injustice. Unfortunately for the applicant in this case, she failed to satisfy the serious injustice test, despite the birth of a child during the relationship.

The risks of being in a defacto relationship, even if only for a brief time, can be significant as far as division of assets are concerned. To assume that your assets are protected until you have lived together for three years is dangerous.

Conclusions

Our best advice for you, when considering entering a defacto relationship, is either:
1. Contract out of the provisions of the Act; or
2. Have us create a Family Trust to protect your assets.