Determining equality of outcome when relationships end

By Judge Ian McHardy

When relationships break up, separating couples can generally expect to get a half share of the property they owned together. However, a 50/50 split does not always result in a fair outcome.

Judge McHardyThe law around relationship property was amended in 2001 to allow the Family Court to take better account of each partner’s differing contributions to a relationship and the impact of these roles on future earning capacity.

Previously, the legislation sought equality of division at the time of the property was divided, rather than equality of outcome.

Section 15 of the Property (Relationships) Act 1976 provides a departure to the principle of equal division of relationship property.

Where income and living standards of one partner are likely to be significantly higher after a break-up because of the way functions were divided within the relationship, it gives the court the power to order one partner to compensate the other by foregoing part of their half-share.

Typically, this will be where one partner has taken on the caregiver or home-maker role and the other has been the breadwinner.

The concern with the old legislation was that the standard division of relationship property was harshly and disproportionately affecting women who had given up their careers to care for children while supporting the spouse’s career.  As a result, the stay-at-home partner typically left the relationship with less capacity to earn a reasonable income.

Section 15 aims to recognise that staying at home to manage the family often diminishes earning capacity because this partner sacrifices the development of his or her own skills and career to enable the other partner to work and earn more.

It aims to ensure each partner is placed on a fair footing to deal with life after separation.

To determine any compensation under section 15 requires an assessment of evidence of the future economic circumstances of the parties based on the effects of the division of roles during the relationship.

“The concern with the old legislation was that the standard division of matrimonial property was harshly and disproportionately affecting women who had given up their careers to care for children while supporting the advancement of the husband’s careers”

The first step is future looking, and whether the income and living standards of one partner are likely to be significantly higher than the other’s.

In contrast, the second step looks to the past, and whether division of functions in the relationship is the reason for the disparity.

Lastly, the court must be satisfied that an award is just in the circumstances. Compensation should adequately address disparity but not past the point where it creates disparity the other way.

When introduced, section 15 was intended to apply to the exceptional case, not the norm. In practice, it has been open to differing interpretation and has not always remedied disparity, especially for modest or average-income families where the pool of property is limited.

The New Zealand Law Commission is reviewing the Act, including section 15, to update the framework for relationship property division and to reflect the reality of modern relationships.

It has signalled it will propose a new regime for sharing the economic advantages and disadvantages when a relationship ends.