Economic Disparity - What Does This Mean for You? 09 Dec 2011
Section 15 of New Zealand's Property Relationships Act 1976 was introduced to address issues of inequality between partners following a breakdown of their relationship. The section empowers the Court, following a division of relationship property, to compensate a spouse/partner if his or her living standards and income will be significantly less than the other party because of the division of functions in the relationship.
Why recognise economic disparity?
The intention behind the section is to recognise that one partner may be economically disadvantaged as a result of a relationship ending because of the division of functions during the relationship. That disadvantage will not be overcome by an equal division of relationship property.
Reported decisions on the section are now accumulating and the limits of the section are being tested.
When will section 15 apply?
The section will apply where there is a real and significant difference between the respective income and living standards of each partner. The disparity must arise from the division of functions in the relationship and not, for example, from a difference in earning capacities which existed before the relationship began.
The most typical circumstance will be where one party compromises a career to look after children and/or to assist a high flying partner to increase his or her earning capacity.
Finally for an award to be made, there must be circumstances which convince the Judge that it is just to compensate the disadvantaged party. In considering whether it is just to make an award, a Judge will usually consider factors such as:
- The length of the relationship;
- The length of the career break;
- The length of time required to rectify the break in career path;
- The position of the children now and in the future;
- The career possibilities available to the disadvantaged person; and
- The amount of property available for division.
While this section has not and will not produce a flood of claims, it is important that the circumstances of each possible claimant are considered at the point of separation.
A departing partner who treats the other partner of lesser means with consideration and kindness following the separation may well be limiting the chance of a successful claim being made against him or her. Ongoing support following a separation through assistance with housing or voluntary maintenance payments, will certainly influence the Court in the exercise of its discretion. In reality, the partner providing the assistance is already recognising the economic disadvantages which have flowed from the separation.
A successful award of compensation can result in a significant payment. In one court decision, for example, the Court in recognising the economic disparity, made an adjustment to the division of assets of $75,000.00.