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PLEASE NOTE: This article was published on the date listed below and may now contain information that has since been updated or changed. We have retained this article as it may still contain helpful comments. However, we advise you to make an appointment to see us for the most up to date information on this topic.

March 2005

Relationship Property and Economic Disparity

Equal division does not always apply

Section 15 of the Property (Relationships) Act 1976 was introduced into the Act in 2002 to address issues of inequality between spouses/partners following a break down of their relationship. The Select Committee considering the legislation had received a number of submissions that women were often disadvantaged at the end of a relationship if they had stopped working during the relationship to look after children.

Division of functions in the relationship

This Section allows the Court to compensate one party to the relationship if, at the end of the relationship, the income and living standards of the other party are likely to be significantly higher because of the division of functions within the relationship.

Section 15 does not refer to the gender of the claimant spouse, nor does it limit the ‘functions’ that can be used to mount a claim. Therefore a husband who gave up work to look after children is also able to claim under the section. Furthermore, section 15 can be argued in other circumstances such as where one spouse/partner has put their career on hold in order for the other spouse/partner to further their career.

However, since its introduction, Section 15 has been used by women who have given up work during the course of the relationship to take on the primary responsibility for childcare. In most of the cases, the women have then argued that they cannot readily re-enter the workforce due to a lack of current and marketable work skills, while their husband/partner has continued with their career. 
Criteria

In deciding whether to make such an order the Court may give consideration to the following:-

  • 1. The likely earning capacity of each spouse/partner.
  • 2. The responsibilities of each spouse/partner for the ongoing care of children.
  • 3. Any other relevant circumstances.

A mere disparity in likely future income or living standards is not enough. The claimant spouse/partner must be able to prove that the division of functions within the marriage was the primary cause of the disparity.

Court Decisions

Typically, the awards under this section have been in the vicinity of $30-50,000. There have also been decisions where significantly less has been awarded. In a recent decision in Hamilton, the sum of approximately $75,000 was awarded to a wife who had resigned from her employment and ceased her University studies to become the primary caregiver to the parties’ children. In awarding the compensatory sum, the Court accepted the expert evidence of an accountant who provided an assessment of the amount required to compensate the wife.
However, in a decision in July 2004, a wife was awarded a compensatory payment of $142,000. In that case, the wife had put her own career on hold to follow the husband to various parts of the world in order to further his career. She had also been the primary caregiver of the children. This decision is currently under Appeal, therefore it is unclear if the decision to award such a large amount will stand.

Conclusion

The reality is that there is little that can be done once a relationship has ended to either minimise or maximise the chances of succeeding or successfully defending a claim under Section 15 of the Act. By the time the matter proceeds to Court it is too late to undo the decisions that were made during the relationship in respect of the parties’ careers and childcare responsibilities. 
When negotiating the resolution of property matters, and a Section 15 argument is a possibility, then it is likely if a reasonable stance is taken by both parties, that resolution can be reached without the need to resort to costly Court proceedings.