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Does the Court have the right powers to divide property?

Different people own very different types of property. Sometimes, the property might be things we are all familiar with, like houses, cars and savings. In other cases, the property might be more complex, like rights to ACC payments, company shares or a legal claim against someone else.

When a court comes to divide a couple’s relationship property, there are some limits on its powers.

First, the court might be unable to determine whether a partner’s right to property should be shared if the property right is disputed. The court is often reluctant to make a ruling about whether something is property because it can affect the rights of other people to that property. Also, the Family Court specialises in handling family matters. It sometimes lacks powers to make rulings about property or commercial law.

Manu and Celia
Manu and Celia have separated. Celia says she has little property because, prior to the relationship, she transferred most of her valuable assets to her lawyer who is a trustee of a trust she created. The trust, Celia says, is for the benefit of any children she might have.

Manu does not believe that Celia intended to create a trust. He thinks she and her lawyer treat the trust property like it belongs to Celia. Manu wants to argue that the trust is a sham. That way the lawyer must transfer the property back to Celia so it can be divided with Manu.

Manu’s lawyer says that it is not clear whether the Family Court can hear Manu’s argument that the trust is a sham. The lawyer says Manu might need to start a separate court case in the High Court against both Celia and her lawyer.

Second, sometimes a court will decide that certain property, like superannuation entitlements or a partner’s beneficial interest in a trust, is relationship property. Other people, like KiwiSaver providers or trustees, hold those types of relationship property.

It is not always clear whether the court can make an order that requires the third party to divide the property between the partners. The law generally applies only between the partners to a relationship. Sometimes the law gives the court power to order third parties to divide the property. But in other instances it is unclear whether the court has the power.

It might be best for the court to have all the powers it needs to determine people’s property rights and then make orders dividing that property.

However, cases might be longer and more expensive. It might also be difficult for third parties if they must take part in the court case.

What do you think?

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