What is the process to settle relationship property matters by agreement?

When a relationship breaks down, relationship property disputes can be settled in two ways, either by agreement between the parties or through the Family Courts.

4 Steps to settle by Agreement

Settling relationship property matters by agreement means the Family Court is not involved.  Instead, parties come to an agreement themselves usually with assistance from their lawyers.

This process ideally takes between three to six months. If there are delays with providing or obtaining disclosure, it can take a year or more.  If there is a lengthy delay, we would usually suggest filing with the family court.

Settling by agreement is far more effective in terms of time and money than the Court process. For these reasons we always encourage our clients to use this method if possible.

An outline of the agreement process:

  1. Step 1 – Disclosure / Information Gathering
  2. Step 2 – Negotiations
  3. Step 3 – Agreement
  4. Step 4 – Settlement

Step 1 – Disclosure / Information gathering

Why is this an important first step?

This is the very first step to resolution.  Many clients often want to jump ahead to the negotiation process before taking this very essential first step of information gathering.

This step is vital:

  • This will allow both parties to establish the total relationship property pool and compile a schedule of assets and liabilities.
  • From a practical perspective, meaningful negotiation cannot be undertaken unless both parties know what they are dealing with and have a full understanding of the details of what the relationship pool is comprised of. This includes knowing what property is relationship property and what the value of the relationship property is.
  • Without full disclosure, there is a real risk that whatever the parties agree in negotiations will be challenged and set aside by the Court in the future.  This would likely occur if it is later discovered that one party had not made a material disclosure. Non-disclosure should be avoided as it could lead to further legal costs and delays for both parties.
  • It is also in both parties’ interests to have a clean break and move on without worrying about their agreement being challenged.

What is the process?

Broadly, this process could be commenced by one party instructing their lawyer to write to the other party, notifying that they wish to separate and requesting from the other party financial information or other details in respect of relationship property. In New Zealand, due to the existence of the increasing complexity of property ownership (such as the use of family trusts and various company structures), in some cases, experts and valuations may be needed to provide clarity.

What “relationship property” covers[1]

Relationship property covers things of financial value that were gained during the relationship. It can include:

  • the family home and contents (but not taonga or heirlooms), other land or buildings and vehicles
  • salary or wages earned during the relationship, insurance payouts, superannuation you received, rents and other income from joint property
  • any property gained when you were in the relationship or had the relationship in mind and intended for both of you to use
  • non-personal debts (your personal debts are your own responsibility)
  • gifts or inheritances that have become mixed with relationship property
  • property you both agree is relationship property
  • increases in the value of relationship property, income from it or the proceeds from the sale of it.

Example

Generally, some examples of standard documents to provide or request include:

How far can you go with disclosure?

Clients are often asking the question of the extent of the documents they can request and what documents they are required to provide to their ex.

There are some important principles in New Zealand case law outlining the extent of disclosure and what parties need to provide in a relationship property matter.  A key High Court decision is Dixon v Kingsley [2015] NZHC 2044.

The fundamental principle is that the disclosure sought must be relevant, tailored and focused to the parties’ relationship property, keeping in mind that the law requires that disputes must be resolved as inexpensively, simply and as speedily as possible.

It is clear from this decision that reasonableness and proportionality are key considerations for any request for disclosure.  Therefore, you may not need to handover to your ex the requested document if the documents are not reasonably relevant to the case or it is overly onerous to provide (e.g. very expensive and time consuming to put together in light of its relevance).

A more recent High Court decision (Chen v Zheng [2017] NZHC 1721) also stated that parties need to seek material in an expeditious way and where such conduct becomes oppressive it may lead to a Court concluding “enough is enough”.

Delays / Applying for discovery with the Court

This step can often cause delays in the settlement of relationship property especially when parties are not forthcoming with information.

We can help clients avoid delays by proactively managing requests for information.  This may mean applying to the Family Court where one party has concealed information and misled the other party in relation to the true extent of relationship property.

Step 2 – Negotiation

Parties negotiate directly or through their lawyers. This can be done at meetings or through email.  Where the relationship pool is not significant, people tend to try to negotiate between themselves first to save legal fees.

Parties may also wish to have mediation, which means a mediator will facilitate the meeting.

Both of the parties’ lawyers will provide a letter of advice to their client, which summarises the facts of their case, the strengths and weaknesses of their claims, the options available, and the likely outcomes.

Once the parties are in a position to negotiate through their lawyers, this is usually done by way of a roundtable meeting.  It is common for one party to leave the room with their lawyer to another room to discuss the matter where necessary and obtain interim advice before entering the room again for further negotiations.

We have found that roundtable meetings can be an effective way to resolve relationship property matters where the parties are willing to engage in discussion through their lawyers in person.

Step 3 – Agreement

Where a resolution was able to be reached through negotiations, the final agreement is signed and certified by the parties’ lawyers.

The Agreement would usually contain standard clauses such as the following:

  • a disputes resolution clause;
  • full disclosure clause;
  • independent advice and freedom from undue influences clause;
  • review clause to review the agreement within X number of years; and
  • Counterparts clause

Step 4 – Settlement

As we are Barristers, we cannot assist our clients with settlement (such as the conveyancing of properties, wills, updating trusts and distributing the relationship funds / transfer of monies).

Solicitors can assist our clients with this final process and consider issues such as deferred settlement and updating the will.  We always recommend to our clients to update their will as soon as possible.

[1] Per the commentary at https://www.justice.govt.nz/family/separation-divorce/divide-relationship-property/