In a modern world of increasingly complex personal relationships, the lines demarcating ownership of business assets between partners in life can become blurred.
Our relationship property laws are accustomed to dealing with business assets which fall within the pool of relationship property, but the courts have found it challenging to ascertain how our assets should be treated when relationships are more complex than just between two adults.
The High Court and the Court of Appeal have both dealt with appeals in the past two years resulting from a dispute over ownership of a farm property which was occupied by a couple who were legally married as husband and wife, each of whom was in a relationship with another woman.
The pool of property between the three of them included a veterinary practice, a paintball business, a lawn-mowing business and a farm. One of them also practised as an artist.
All three parties separated and a dispute arose over ownership of the farming property, in particular, which had a registered valuation of more than $2million.
The usual forum for determining ownership of property after separation is the Family Court, which has jurisdiction over the Property (Relationships) Act (PRA). However, the PRA does not explicitly accommodate a three-way relationship and the matter was initially referred to the High Court to determine jurisdiction.
The High Court considered it would be unworkable to stretch the PRA to cover multiple contemporaneous relationships as existed in this case, so, ultimately, the person whose name was on the title to the farm property was successful in rejecting claims to the farm. Not surprisingly, this case was appealed to the Court of Appeal, which decided the matter this month.
In the High Court, the judge noted that the relationships that did qualify under the PRA were marriages, de facto relationships and civil unions, each of which is defined in the PRA. Each of those relationships is plainly limited to relationships between two people.
The judge considered that Parliament had premised the PRA on the notion of “coupledom” and that extension of the Property Relationships Act to polyamorous relationships was a matter for Parliament.
In the Court of Appeal, the judges looked at the concept of a couple and whether it required exclusivity. They noted that “neat commercial balance sheets remain both unachievable and irrelevant in this context, as between those two partners’’.
‘‘The many forms of contribution that characterise a committed intimate relationship are no less relevant in this scenario: they should all be taken into account, and treated as equal.”
Consequently, they could not see any logic in reverting to an approach based on money and property rights just because the relationship is a multi-party one.
The Court of Appeal acknowledged that the protection that the PRA provided to each spouse did not become less relevant or less necessary in circumstances where the spouses continued in their relationship and also form a multi-partner relationship with a third person. It remains just as important to recognise the equal contribution of both spouses and to provide for a just division between them of any relationship property.
Accordingly, the Family Court jurisdiction extends to determining claims among three people in a polyamorous relationship where each partner in that polyamorous relationship is either married to, in a civil union with or in a de facto relationship with each of the other partners in that polyamorous relationship.
The Court of Appeal has referred this case back to the Family Court for a determination of the relationship property entitlement of the parties. None of the parties had entered into any form of contracting-out agreement or “prenup”.
Even had they done so, it may have been very difficult to determine how such an agreement should be applied in the context of these relationships, and particularly where there would have needed to be two contracting-out agreements between the three parties.
What this case does emphasise is the lack of awareness among individuals as to the implications of their personal relationships on ownership of business assets where they are in a qualifying relationship. Awareness is greater where the relationship is one that we are more accustomed to recognising such as a marriage, civil union or a de facto relationship.
The fundamental premise of the Property Relationships Act is that of equal sharing and this case demonstrates that equal sharing doesn’t mean 50% but can mean equal between more than two parties to a relationship. It is important that we think flexibly when analysing personal relationships, including when we are advising on ownership of business assets which can be subject to the same principles of equal sharing as the family home, even in a polyamorous relationship.
Many of the issues which arose in this case can be avoided with a good agreement entered into before the relationship(s) break down.
- Sally Peart is a partner in the firm Marks & Worth Lawyers in Dunedin and advises on commercial and intellectual property law, and the intersection with the law of relationship property and trusts.
