Transferring potential relationship assets to a family trust prior to a developing de facto relationship becoming permanent does not stop those assets being clawed back as relationship property if transferred with intent to defeat a spouse’s claims, the Court of Appeal decided in a landmark ruling.
In March 2004, Joanna Bell shifted in with Todd Sutton at his Auckland Point Chevalier home. Both were aware of the relationship property implications; if their relationship became permanent and extended beyond three years, she would have the right to share in the Point Chevalier property. She suggested in an email to Todd that he take steps to get Point Chevalier transferred to a family trust, so ‘it can never be counted as relationship property.’
The two lived together at Point Chevalier for the next eight years. Their relationship ended in September 2012. Joanna laid claim to a share of Point Chevalier as relationship property.
A series of cases through the Family Court and High Court determined their de facto relationship clearly started sometime between December 2004 and January 2005. By that time, they presented to families and friends as a couple, not simply as ‘friends with benefits.’ The two had visited Todd’s sister in Australia, spent Christmas with his parents, holidayed around New Zealand together and taken an overseas holiday to Malaysia.
In late November 2004, Todd had transferred ownership of Point Chevalier to a family trust, the Court of Appeal was told. Point Chevalier could not be relationship property, he said, since he no longer owned the property when the legally confirmed start date for their de facto relationship was a couple of months later.
Property disposed of ‘in anticipation’ of a de facto relationship could be clawed back if disposed of ‘with intent to defeat’ a de facto partner’s rights, the Court of Appeal ruled. The Property (Relationships) Act emphasises rights as a couple. Steps taken prior to a de facto relationship becoming permanent can impact on subsequent rights as a couple. At the time Todd transferred Point Chevalier to a family trust, a permanent de facto relationship was contemplated. Transferring the asset was done with the intent of defeating her claim to share in the property, the court ruled. Point Chevalier was treated as relationship property.
Joanna’s email in early 2004 suggesting Todd might transfer Point Chevalier to a family trust was treated by the Court of Appeal as evidence that as at that date she was willing to sign an agreement contracting out of any rights to the property. No such agreement was signed. Todd’s subsequent transfer of Point Chevalier to a family trust proved ineffective. At time of the transfer, they had been in an exclusive relationship for about sixteen months and had been living together for over eight months.
Sutton v. Bell – Court of Appeal (2.12.21)
22.012