Economic disparity relationship property refers to a compensatory adjustment made under Section 15 of New Zealand’s Property (Relationships) Act 1976. It occurs when the division of functions during a relationship causes one partner to have significantly lower income and living standards than the other post-separation, requiring the court to award a larger share of relationship property to redress the imbalance.
What is Economic Disparity in Relationship Property?
In the landscape of New Zealand family law, the principle of equal sharing—often referred to as the 50/50 split—is the starting point for dividing relationship property. However, the law recognizes that an equal division of assets does not always equate to an equal economic future. This is where the concept of economic disparity comes into play.
Economic disparity addresses the reality that during a relationship, partners often assume different roles. One partner may focus on career advancement and income generation, while the other prioritizes domestic duties, childcare, or supporting the partner’s career. When the relationship ends, the “career partner” retains their enhanced earning capacity, while the “non-career partner” may face a diminished earning capacity due to years spent out of the workforce or in part-time employment.
A claim for economic disparity is not about need or maintenance; it is about compensation. It acknowledges that the partner who sacrificed their career potential contributed to the other partner’s ability to earn, and therefore, the resulting inequality in living standards is unjust if left unaddressed. The remedy is usually a lump sum payment derived from the relationship property pool, effectively altering the split from 50/50 to a percentage that favors the disadvantaged party (e.g., 55/45 or 60/40).
The Legal Framework: Section 15 of the PRA
The governing legislation for these claims is the Property (Relationships) Act 1976 (PRA). Specifically, Section 15 empowers the court to award compensation if it is satisfied that income and living standards are significantly likely to be higher for one partner than the other because of the effects of the division of functions within the relationship.
To succeed in a Section 15 claim, a rigorous legal test must be met. It is not enough to simply show that one partner earns more than the other. The claimant must prove a causal link between the relationship roles and the financial outcome. The statutory requirements can be broken down into three distinct limbs:
1. Significant Disparity in Income and Living Standards
The court must first determine that the income and living standards of partner A (the respondent) are likely to be significantly higher than those of partner B (the applicant). This looks at the future trajectory of both parties. “Significant” is a high threshold; a minor difference in salary will not qualify. The disparity must be substantial enough to warrant judicial intervention.
2. The Division of Functions
The court examines how the couple arranged their lives. Did one partner stay home to raise children? Did one partner move locations to support the other’s job promotion, sacrificing their own career network? This is known as the “division of functions.” The law does not judge these choices but looks at their factual occurrence.
3. Causation
This is frequently the most contentious element. The disparity in income and living standards must be caused by the division of functions. If a partner has a lower earning capacity simply because they chose a lower-paying industry prior to the relationship, or due to health issues unrelated to the relationship, a Section 15 claim may fail. The disadvantage must stem from the roles played during the partnership.
Compensating for Career Sacrifice and Division of Functions
The core philosophy behind Section 15 is compensating for opportunity cost. When a partner steps back from the workforce to manage the household, they lose more than just current wages. They lose experience, seniority, professional development, and Kiwisaver contributions. This is often described as the “human capital” loss.
Conversely, the partner who remains in the workforce benefits from an “unencumbered” career path. They are supported by the domestic efforts of the other partner, allowing them to work late, travel, and focus entirely on professional growth. Under the PRA, this enhanced earning capacity is not technically “relationship property” that can be divided (like a house or car), but the result of that enhancement contributes to the disparity.
Consider a scenario where two lawyers marry. One continues to make partner, earning $300,000 annually. The other stops practicing to raise three children for 15 years. Upon separation, the practicing lawyer retains that high income. The other lawyer, attempting to re-enter the workforce, may only secure an entry-level position or administrative role. The division of functions (one earning, one caring) has directly caused a massive gap in their future economic realities.
Distinguishing Section 15 from Spousal Maintenance
It is vital to distinguish economic disparity awards from spousal maintenance, as they serve different purposes within New Zealand family law. While both involve payments from one partner to another, the legal basis differs significantly.
- Spousal Maintenance: This is based on need. It is a financial support payment to help a partner meet their reasonable needs after separation. It is usually periodic (e.g., weekly payments) and temporary, intended to bridge the gap until the partner becomes self-sufficient.
- Section 15 (Economic Disparity): This is based on compensation and justice. It is a reallocation of property. The claimant does not need to prove they are in financial hardship; they only need to prove they have been economically disadvantaged relative to the other partner due to the relationship. Section 15 awards are typically capital sums paid out at the final settlement.
In many high-asset cases, a party might apply for both, but the court will often calculate the Section 15 award first, as receiving a large capital sum might reduce the need for ongoing maintenance.
Calculating the Claim: Methodology and Quantum
Determining the “quantum” (amount) of a Section 15 award is one of the most complex areas of relationship property law. Unlike child support, there is no fixed calculator or percentage. The courts have struggled to find a consistent formula, leading to what is often described as a “broad brush” approach.
The leading case that provided a methodology for calculation was the Supreme Court decision in Scott v Williams. While not a strict rule for every case, it established a framework often used by forensic accountants:
The Diminution of Value Approach
This method focuses on what the claimant lost. Experts attempt to calculate:
The difference between Scenario A and Scenario B represents the “diminution” of their earning capacity. This figure is then projected forward (often for a period until retirement or a set number of years) and discounted to a present-day lump sum value. The court usually applies a contingency discount for the uncertainties of life (e.g., illness, unemployment).
The Enhancement Approach
Alternatively, courts may look at the enhancement of the other partner’s career. However, New Zealand courts generally prefer the diminution approach as it is more directly linked to the compensation of the disadvantaged party. The final award is often expressed as a lump sum added to the claimant’s share of the relationship property.
For authoritative definitions and the full text of the legislation, you can refer to the Property (Relationships) Act 1976 on the New Zealand Legislation website.
Challenges in Proving Economic Disparity
Despite the clear intent of the legislation, successful Section 15 claims are notoriously difficult and expensive to prove. This difficulty often creates a barrier to justice for those with fewer resources.
The Evidential Burden
The claimant bears the onus of proof. They must provide evidence of the other partner’s future earnings and their own diminished capacity. This requires extensive disclosure of financial records, tax returns, and employment contracts.
The Cost of Expert Witnesses
To quantify the claim, lawyers typically engage forensic accountants or actuaries to model the “Scenario A vs. Scenario B” earnings. These reports can cost thousands of dollars. If the relationship property pool is modest (e.g., a single family home with a mortgage), the cost of proving the claim might outweigh the potential compensation. This limits Section 15 primarily to high-net-worth separation cases.
Causation Arguments
Respondents often defend these claims by arguing that the disparity is not due to the relationship. Common defenses include:
- “The claimant had low ambition or ability before we met.”
- “The claimant chose to stay home for personal reasons, not for the relationship’s division of functions.”
- “My high income is due to my unique talent (e.g., a professional athlete or artist), which exists independently of domestic support.”
Recent Case Law and Judicial Trends
Recent trends in New Zealand courts indicate a willingness to entertain Section 15 claims, but the “broad brush” approach remains dominant. Courts are cautious about adopting rigid mathematical formulas that might produce astronomical figures. Instead, judges often look at the overall justice of the case.
There is also ongoing discussion regarding the reform of the Property (Relationships) Act. The Law Commission has previously reviewed Section 15 and suggested that it is inefficient and unpredictable. Proposals have included replacing Section 15 with a Family Income Sharing Arrangement (FISA), which would provide a more formulaic entitlement to share income for a set period. However, until Parliament enacts new legislation, Section 15 remains the current law.
Recent High Court decisions continue to emphasize that the disparity must be “significant.” In cases where both parties earn good incomes, but one earns significantly more (e.g., $150k vs $500k), claims can still succeed, provided the causation test is met.
Practical Steps for Claimants
If you believe you are entitled to an economic disparity claim, preparation is key. The process involves several strategic steps to ensure the best chance of a fair settlement.
1. Secure Financial Disclosure
You cannot calculate a claim without knowing the true financial position of the other party. Ensure your lawyer requests full disclosure of all entities, trusts, and income sources.
2. Timeline of the Relationship
Create a detailed timeline showing the division of functions. Document when you left work, when children were born, times you moved for your partner’s career, and periods where you supported the household while the partner studied or built a business.
3. Cost-Benefit Analysis
Have a frank discussion with your lawyer about the size of the property pool. If the total assets are $500,000, spending $50,000 on accounting reports for a potential $30,000 adjustment makes little sense. In such cases, a negotiated settlement without extensive forensic accounting is often preferable.
For more general information on relationship property division, the New Zealand Law Society provides excellent resources for the public.
Conclusion
Economic disparity claims under Section 15 represent a critical mechanism for achieving fairness in New Zealand relationship property law. They recognize that the non-financial contributions of a stay-at-home parent or supportive partner have real economic value and that the career sacrifices made for the family unit should not result in lifelong financial disadvantage.
While proving these claims involves complex legal and accounting hurdles, understanding the criteria—significant disparity, division of functions, and causation—empowers individuals to seek the compensation they deserve. As case law evolves, the courts continue to refine how they value human capital and career sacrifice, ensuring that the end of a relationship does not mark the beginning of economic hardship for the partner who gave up the most.
People Also Ask
What qualifies as significant economic disparity in NZ?
There is no fixed dollar amount defined in the Act. “Significant” is determined by the court based on the specific circumstances of the case, comparing the likely future income and living standards of both parties. It must be more than a trivial difference; it must be a disparity that would be unjust to ignore.
How is Section 15 compensation paid?
Compensation for economic disparity is typically paid as a lump sum. This is achieved by adjusting the division of existing relationship property. For example, instead of a 50/50 split of the family home proceeds, the claimant might receive 60% or 70%.
Can men claim economic disparity in New Zealand?
Yes. The Property (Relationships) Act is gender-neutral. If a male partner has sacrificed his career to undertake domestic duties or support his female partner’s career, resulting in a significant disparity in future income, he is entitled to make a Section 15 claim.
Does economic disparity apply to de facto relationships?
Yes. The Property (Relationships) Act applies to de facto relationships that have lasted for three years or more (and sometimes shorter durations in specific circumstances), just as it applies to marriages and civil unions.
Is Section 15 the same as alimony?
No. New Zealand does not have “alimony” in the American sense. We have “spousal maintenance,” which is for meeting immediate financial needs. Section 15 is a compensatory property adjustment for lost earning potential, not a maintenance payment for daily living costs.
What is the time limit for making a claim?
Generally, proceedings must be commenced within 12 months of the marriage or civil union being dissolved (divorce), or within 3 years of the end of a de facto relationship. However, the court can grant leave to apply out of time in certain situations.
