2 March 2004

Update on the Property (Relationships) Act 1976

Just over two years has passed since the Property (Relationships) Act (the Act), came into force on 1 February 2002. Until that date the matrimonial property of married couples was split evenly between them on separation. The act made changes to that presumption and also covers the division of relationship property of de facto couples on separation.

The six-month period leading up to the new act saw many de facto relationships end because one partner did not want to be covered by the new property division rules in the new act. During that period one partner (usually the economically more powerful partner), proposed that the de facto couple sign an agreement that if they separated they would not be covered by the provisions of the act. Again, this resulted in the end of many de facto relationships, because, as one Judge recently observed … [these] property negotiations frequently have the same effect of an unseasonal summer frost, bringing the blossoming of a relationship to a premature end. Of course in many other cases both de facto partners signed contracting-out agreements before the act was passed without the relationship coming under too much pressure.

Unequal division of relationship property
The area that has received the greatest attention is the new section 15 (economic disparity), which gives the court the power to divide relationship property unequally, in favour of the partner (married or de facto), whose future income and living standards are likely to be significantly lower. The Family Courts have already used this power (which is discretionary) in a number of cases. These awards have generally been modest, principally because too much unequal division of property, in favour of one spouse over the other, would run counter to the act’s general principles of equal sharing. It is also important to note that relatively few spouses or de facto partners will qualify for an adjustment award because of the precise qualifying requirements set out in s15 of the act.

Some judges have adopted a quite scientific accounting approach when making the adjustment calculations for unequal sharing. Others have taken a more broad brush approach - simply opting for a capital adjustment sum considered appropriate and fair in that particular case.

There has been a handful of judgments dealing with what "living together as a couple" means – because this test has to be satisfied before the court has jurisdiction under the act to divide relationship property – but no clear pattern has yet emerged as to what type of relationship will qualify. However, it seems that the primary focus is assessing whether they are living together in some form of domestic relationship, as opposed to simply having an association or casual sexual relationship.

Cases where one party challenges the couples’ contracting-out agreement have generally been less successful - probably as the result of the more stringent test of "serious injustice" which the act introduced.

The new "trust busting" powers given to the court have not been fully tested yet. In relation to other claims for unequal sharing of relationship property – other than for economic disparity property – such as for relationships of short duration or extraordinary circumstances, it is unclear so far whether or not the act has made it more difficult to mount such a claim.

The new provisions giving the court power to make compensation awards for spouses who have contributed towards the other spouse's separate property are likely to be the subject of a definitive ruling from the Court of Appeal in March or April this year.

In contrast, the new provisions which create new rights to claim following the death of a spouse or de facto partner have not yet been the subject of any detailed analysis in a judgment, either in the Family Court or High Court. However, there are some interesting test cases in the pipeline and at least one High Court judgment, issued just before Christmas, has signalled it will be much more difficult for adult children of a first marriage to claw back assets into their late parent's estate, using the act, so that they can then bring a claim against that parent's estate by challenging the Will.

Summary
The impact of the act and its new provisions have been patchy – which is not unusual when dealing with social and legal reforms such as those this act embodies. Over the next 18 months or so further judgments will emerge from the Family Court and High Court which will hopefully provide better guidance for family law practitioners and for the public at large on the new boundaries that the Property (Relationships) Act has set.