Economic Disparity Claims (Section 15)

Economic disparity Section 15 NZ refers to a provision in the Property (Relationships) Act 1976 that allows a court to award compensation when one partner’s income and living standards are significantly higher than the other’s post-separation due to the division of functions during the relationship. This claim aims to redress the economic imbalance caused when one partner sacrifices career advancement for domestic duties.

In the landscape of New Zealand family law, few topics are as contentious or as misunderstood as economic disparity. For couples navigating a separation, particularly those in high-conflict dynamics, the assumption is often that a 50/50 split of the asset pool is the end of the story. However, the law recognizes that equal division of capital does not always result in equal economic futures.

When one partner leaves a marriage with a thriving career and high earning potential, while the other leaves with a stagnant CV and primary care of the children, the playing field is far from level. Section 15 serves as the legislature’s attempt to level that field, yet it remains one of the most difficult claims to substantiate in court. This guide explores the legal, financial, and psychological dimensions of Section 15 claims.

Understanding Section 15 of the Property (Relationships) Act 1976

The Property (Relationships) Act 1976 (PRA) is the governing legislation for relationship property division in New Zealand. While the Act generally presumes an equal sharing of relationship property, Section 15 provides an exception to this rule. It is designed to compensate a partner whose future standard of living is likely to be significantly lower than the other partner’s because of the way functions were divided during the relationship.

The “division of functions” usually refers to the traditional scenario where one party focuses on income generation (the career partner) while the other focuses on domestic management and childcare (the domestic partner). However, the law is gender-neutral and applies to any relationship structure where roles were specialized to the detriment of one party’s future earning capacity.

For a Section 15 claim to be successful, the court must be satisfied that:

• The income and living standards of partner B are likely to be significantly higher than those of partner A.
• This disparity is caused by the division of functions within the relationship.

It is crucial to understand that Section 15 is not spousal maintenance. Maintenance is intended to meet reasonable needs for a short duration. In contrast, a Section 15 award is a compensatory capital sum—a redistribution of the relationship property pool to account for the “human capital” lost by one party and gained by the other.

The Core Concept: Compensating for Career Sacrifice

At the heart of an economic disparity claim is the concept of career sacrifice. In many long-term relationships, it is economically efficient for one partner to prioritize their career while the other manages the home. This allows the career partner to work late, travel, and pursue promotions without the constraint of domestic logistics. The domestic partner, meanwhile, often steps out of the workforce or reduces hours to part-time, effectively pausing their career trajectory.

When the relationship ends, the career partner retains the benefit of that uninterrupted progression—skills, seniority, and reputation. The domestic partner, however, cannot simply “catch up.” They have lost years of experience, missed networking opportunities, and may face ageism or skill obsolescence in the job market.

The “Invisible” Contribution

In high-conflict divorces, the high-earning partner often minimizes the domestic partner’s contribution, claiming they “paid for everything.” Section 15 legally validates the invisible contribution of the stay-at-home parent. It acknowledges that the high earner’s capacity to earn was facilitated by the domestic partner’s labor. Without someone managing the home front, the career partner could not have dedicated the same energy to their professional growth.

For more detailed statutory definitions, you can refer to the legislation.govt.nz database regarding the Property (Relationships) Act 1976.

Calculating the Value of Lost Opportunity

Determining that a disparity exists is only the first hurdle; quantifying it is where the legal complexity deepens. New Zealand courts do not use a rigid formula, which creates uncertainty for litigants. However, the landmark Supreme Court case Scott v Williams provided a methodology that is often applied, though it is not mandatory.

The “Diminution” vs. “Enhancement” Approach

Courts generally look at the disparity from two angles:

1. Diminution of the Claimant’s Income: How much less is the claimant earning now compared to what they would have earned had the relationship not occurred and they had continued their career uninterrupted?
2. Enhancement of the Respondent’s Income: To what extent was the high earner’s career boosted by the division of functions?

The calculation often involves forensic accounting and actuarial evidence. Experts may project what the claimant’s career path would have looked like absent the relationship. For example, if a partner left a law firm as a junior associate to raise children, an expert might calculate the present value of a partnership track they likely would have achieved.

The Half-The-Difference Method

In Scott v Williams, the court adopted a broad-brush approach often summarized as “half the difference.” This involves:

• Estimating the future earnings of both parties over a specific period (e.g., until retirement or for a set number of years).
• Calculating the difference between the two projected incomes.
• Awarding half of that difference to the disadvantaged party.

While this sounds straightforward, the variables are highly contested. Arguments arise over the projected retirement age, the discount rate applied to future cash flows, and whether the high income is truly sustainable or merely a temporary peak.

Why Economic Disparity Claims Are Hard to Prove

Despite the clear intent of the law, Section 15 awards are relatively rare and difficult to secure. High-conflict psychology often plays a role here, as the wealthier party may have the resources to drag out litigation, making the cost of pursuing the claim prohibitive for the disadvantaged partner.

1. Establishing Causation

The most significant legal hurdle is causation. The claimant must prove that the disparity is because of the division of functions during the relationship. The defense will often argue that the disparity is due to:

• The claimant’s personal choice not to work.
• The claimant’s lack of ambition or inherent skill.
• External market forces (e.g., an industry downturn) rather than domestic duties.
• The high earner’s exceptional talent, which would have resulted in high income regardless of the relationship status.

2. The “Significant” Threshold

The Act requires the disparity to be “significant.” There is no fixed dollar amount or percentage that defines significance. It is contextual. A disparity of $20,000 might be significant in a modest asset pool but insignificant in a multi-million dollar estate. This ambiguity allows high earners to argue that while there is a difference, it does not meet the high threshold required by Section 15.

3. Jurisdictional Inconsistency

Because judges have wide discretion, outcomes can be unpredictable. One judge might view a career sacrifice as a compensable loss, while another might view it as a lifestyle choice that was compensated by the lifestyle enjoyed during the marriage. This unpredictability discourages many lawyers from recommending a Section 15 claim unless the evidence is overwhelming.

Psychological Validation Through Financial Recognition

In the niche of high-conflict divorce and relationship psychology, Section 15 represents more than just money; it represents validation. Financial abuse is a common tactic in high-conflict relationships, where one partner controls the resources to maintain dominance. The lower-earning partner is often made to feel “less than” or indebted to the earner.

Restoring the Power Balance

Winning an economic disparity claim is a judicial acknowledgement that the domestic partner’s contributions were valuable. It dismantles the narrative that “money equals worth.” For a survivor of a high-conflict marriage, receiving a Section 15 award can be a critical step in psychological recovery. It provides the financial autonomy necessary to break free from post-separation control mechanisms often employed by narcissistic or controlling ex-partners.

The Cost of Validation

However, the pursuit of this validation comes at a psychological cost. Section 15 inquiries are invasive. They require dissecting the history of the relationship, critiquing parenting roles, and analyzing career failures. For a vulnerable party, having their career potential attacked by their ex-partner’s legal team can be re-traumatizing. It is essential to weigh the potential financial gain against the emotional toll of a prolonged legal battle.

Strategic Considerations in High-Conflict Divorces

If you are considering a Section 15 claim in New Zealand, strategy is paramount. In high-conflict scenarios, the opposing party will likely resist disclosure and aggressively defend their income.

Documentation is Key

To prove the division of functions, you need evidence. This includes:

• Employment records showing when you resigned or reduced hours.
• Evidence of childcare arrangements (e.g., lack of daycare usage because you were home).
• Communications discussing career prioritization (e.g., emails agreeing to move cities for the partner’s job).

Expert Witnesses

Do not rely on guesswork. Engaging a forensic accountant early can help determine if the quantum of the claim justifies the legal fees. They can provide a preliminary report on the potential value of the disparity.

Settlement vs. Court

Because Section 15 is risky for both sides (the high earner risks a large payout; the claimant risks high fees for no result), it is often used as a powerful negotiation lever. A strong Section 15 argument can encourage a more favorable settlement on the general division of assets (e.g., a 60/40 split) without needing to go to a full trial. This is often the preferred outcome in high-conflict cases to minimize ongoing contact and conflict.

For further reading on the broader implications of family law and economic fairness, resources from the New Zealand Law Society provide authoritative guidance on finding legal representation.

Frequently Asked Questions