Presented by Ross Knight for Legalwise on 23 November 2022
Setting the scene
At law school we were taught that the Property (Relationships) Act 1976 (“PRA”) – or in my case, back then, the Matrimonial Property Act 1976 (“MPA”) was a “code”. It was not something I ever questioned, much less had a need to consider until much later in my career, mostly because in our day-to-day practices, the application of s4 is seldom relevant. That is not to say it is unimportant because it certainly is or can be. It is just that for the most part, we tend to routinely dispense advice to our clients about their rights and entitlements without any reference to s4 at all. But we know it is there and that is the first take away today.
So,
a. What is s4 all about?
b. What does it mean?
c. What is its purpose?
These, and other related questions are at the core of this paper
My objective is to demystify, to the extent that is possible; to provide a practical perspective by taking a closer look at some of the seminal decisions on the effects and implication of this somewhat illusive provision.
Jurisdiction – Which Court?
Prior to the 2001 reforms, the Family Court and High Court had concurrent jurisdiction in matrimonial property matters.
The Family Court now has almost exclusive jurisdiction over relationship property applications[1] subject to the appeal procedures. The Family Court zealously guards its specialist status, seen most often in its consideration of applications to transfer proceedings to the High Court.[2]
The test for deciding whether a case should be transferred to the High Court changed under the Property (Relationships) Amendment Act, 2013 as to whether the High Court is the more appropriate venue for dealing with the proceedings.
Complexity – which was previously a key factor, is now one of several to be considered, along with the existence of other proceedings between the parties in the High Court on related issues and any other matter that the court considers relevant in the circumstances[3].
Although the Family Court’s originating jurisdiction is now a given in relationship property matters, there are occasions where litigants attempt to bypass it, having regard to s4, the PRA.
For more information on the Family Court’s exclusive jurisdiction and how that interacts with the Civil jurisdiction, see Yeoman v Public Trustee[4] and Shirtliff v Albert[5].
The Act as a Code – What does that mean?
Section 4, the PRA boldly describes the Act as a “code” but what does that mean? Broadly and with certain exceptions, it means the Act:
a. Replaces the rules and presumptions of common law and equity and applies to all property transactions between spouses and partners and spouses, partners and third parties.[6]
b. All questions concerning relationship property that arise in other proceedings between spouses, partners or between both or either of them, and any other person, must be decided as if those proceedings were brought under the Act.[7]
But –
c. The provisions do not apply where the Act specifically says so,[8] or where de facto partners have lived in a de facto relationship for less than 3 years.[9]
d. Nor do the provisions affect spouses or partners who act as trustees.
However, if the Court accepts jurisdiction in relation to de facto partners who have been together for less than 3 years, under s25 (1) (a) PRA, and a question relating to relationship property arises between those de facto partners in any subsequent proceedings that are not proceedings under the Act, then the question (in those proceedings) must be decided as if it had been raised in proceedings under the Act.[10]
It follows that on this preliminary and limited analysis, the Act is at best a partial code. The learned authors of Fisher on Matrimonial Property and Relationship Property (NZ) say of s4 PRA at 1.23:
“The appearance of an exhaustive statutory code is misleading (see [125], especially the possible liability of one partner to account in equity for breach of fiduciary duty). Even in that situation the principles derived from the Act are not exhaustive (see [1.35]). The Act may therefore be regarded as the principal source of law for determining property disputes between spouses and de facto partners, rather than an exhaustive code as to relationship property rights in all circumstances. The operation of s4 as a code can also have the effect of excluding certain causes of action from consideration. Thus, claims in tort must be rejected in the context of relationship property proceedings…. In summary “[t]he plain intention of s4, and particularly subsections (3) and (4), is to cause the 1976 Act to predominate over all other legalisation which might otherwise apply, to the extent that issues are dealt with by the 1976 Act …”[11]
The origins of s4 and law reform
When he tabled the Matrimonial Property Bill in the Parliament on 23 November 1976, the Hon Jim McLay said of the bill, that it -
“... provides a complete matrimonial property code…it provides for limited protection from creditors and adjustments between spouses where part of the property has been used to meet debts. It permits spouses to contract out of the provisions of the Act. It recognises the rights of dependants and minors. It makes provision for special orders in relation to life insurance and superannuation rights and for the variation of maintenance orders when dealing with matrimonial property. It permits a spouse to register notice of his or her claims against a certificate of title to matrimonial property…” [12]
Latterly, in October 2017, in its Issues Paper no.41, titled, Dividing Relationship Property – time for change – the New Zealand Law Commission said at 26.19 –
“The PRA is not, however, an exhaustive code. This is because the PRA only applies to transactions between partners regarding property, and where the PRA provides, transaction between either or both partners and third parties. The PRA will not apply in all circumstances where the property rights of partners are in issue. As observed in Fisher on Matrimonial and Relationship Property:
The [PRA] may therefore be regarded as the principal source of law for determining property disputes between spouses and de facto partners, rather than an exhaustive code as to relationship property rights in all circumstances.”
The Law Commission went on to say at 26.20:
“There is still scope for the common law and equity to apply in limited circumstances. In Mosead v Mosead, the Court of Appeal confirmed that section 4 (1) did not preclude a remedy in equity from breach of fiduciary duty by one partner against the other:[13]
In terms of s4(1) the PRA has effect in place of the rules and provisions of the common law and of equity to the extent, that they apply to transactions between husband and wife in respect of property. Its concern is with the identification and classification of interests in property, their value and division. Accounting for a profit arising from breach of fiduciary duty is a different enquiry from the just division of matrimonial property…The section is not directed to a breach of an equitable obligation of that kind resting on all fiduciaries.”
Then further at 26.21:
“The courts have also upheld claims between partners outside the PRA for negligent misstatement and deceit,[14] specific performance,[15] and claims in conversion and trespass.[16] Nor does s4 prevent debt recovery proceedings against a former partner.” [17]
And finally, at 26.22:
“Similarly, a relationship property dispute will not stop claims for relief under the Companies Act 1993 regarding companies in which both partners hold shares, including interim relief in an injunction.” [18]
In its June 2019 Report no.143, titled, Review of the Property (Relationships) Act 1976 – the Law Commission referred to and endorsed its earlier comments/conclusions in its 2017 Issues Paper.
Specifically, that:
“The new Act should continue to be the principal source of law for the division of property when relationships end on separation. To the extent that issues are dealt with under the new Act, it should "predominate" over other law, as is currently intended by section 4.”
Case Law Analysis
Where section 4 has prevailed – the Act has operated as a Code
a. Newport v Cook (1982) HC
b. Jew v Jew [2003] HC
c. B v F (2012) HC
d. Shorter v Shorter (1991) HC
e. Official Assignee v Williams (1999) CA
f. Edwards v Edwards (2012) HC
g. Hau v Hau (2018) HC but see Hayward at f. below
h. Smith v Endean (2022) HC
i. Whinery v Xiangling Niu (2022) FC
Where section 4 has not prevailed – the exceptions
a. Mosaed v Mosaed (1997) CA
b. Wallis v Wallis (1990) HC
c. Kerridge v Kerridge (2009) CA
d. LAC v KAY (2010) HC (unreported)
e. Country Land Limited v Blackley (2012) HC
f. Hayward v Commissioner of Police (2014) CA
Cf. Hau v Hau, see above
g. R L Humphries Trustee Limited v Humphries (2016) HC
[1] See s 22 PRA
[2] See s 38A PRA. Note: in its 2017 report (Law Commission: Dividing Relationship Property – Time for Change? Te mātatoha rawa tokorau – Kua eke te wā? (NZLC IP 41, Wellington, 2017 at [ 26.86]
[3] See s38A (2) PRA
[4] [2011] NZFLR 753
[5] [2011] NZFLR 971
[6] See s4 (1) PRA
[7] See s4 (4) PRA
[8] See s4 (2) PRA
[9] See s4 (5) PRA
[10] See s4(6) PRA
[11] Official Assignee v Williams [1999] 3 NZLR 427
[12] Hansard, 16 November 1976 – 14 December 1976, 38th Parliament, 1st session. Pg 4108 at 4110
[13] [1997] NZFLR 97
[14] Kerridge v Kerridge [2009] 2NZLR 708
[15] Wallis v Wallis (1990) High Court, Hamilton, CP 97/ 90, 10 August 1990, Doogue J
[16] Country Land Limited v Blackley [2012] NZHC 898
[17] [LC] v H [2013] NZHC 294. See also K v S [2014] NZHC 2765, involving debt recovery proceedings brought by the defendant’s former partner and by the former partners parents as trustees of a family trust
[18] S v B [2013] NZHC 497 the parties were in a de facto relationship and had recently separated. They were directors and equal shareholders in a company. The defendant threatened to close the business, and the plaintiff applied to the High Court for an interim injunction to prevent the defendant from doing so. The court considered the underlying relationship property dispute but at [8] determined that was not sufficient to persuade the court that the injunction should not be made.