(1) Are relationship property arbitrations valid in New Zealand?

The Property (Relationships) Act

(1) Spouses, civil union partners, or de facto partners, or any 2 persons in contemplation of entering into a marriage, civil union, or de facto relationship, may, for the purpose of contracting out of the provisions of this Act, make any agreement they think fit with respect to the status, ownership, and division of their property (including future property).

The purpose of s 21 is to permit contracting out of the PRA, whether in whole or in part. There seems no reason in principle why a couple should not include an arbitration clause in their contracting out agreement. The agreement must be “with respect to the status, ownership, and division of that property”. An agreement to arbitrate any dispute over their property must qualify as an agreement “with respect to” the status, ownership, and division of the property.

The alternative basis for an arbitration agreement is s 21A which materially provides:

21A Spouses or de facto partners may settle differences by agreement

1. 
   A husband and wife or de facto partners may, for the purpose of settling any differences that have arisen between them concerning property owned by either or both of them, make any agreement they think fit with respect to the status, ownership, and division of that property.
   

Section 21D enumerates some of the topics which agreements under ss 21 or 21A may address but it expressly provides that the list “does not limit the generality of sections 21 to 21B”. Sections 21A and 21B, too, are entirely consistent with agreements to submit a relationship property dispute to arbitration.

As to enforcement of the submission agreement, s 21L provides:

21L Enforcement of agreement

1. 
   Remedies that, under any enactment or rule of law or of equity, are available for the enforcement of contracts may be used for the enforcement of agreements under section 21 or section 21A or section 21B.
   
2. 
   This section is subject to the provisions of this Part.
   

That positive support for arbitration jurisdiction must then be compared with other features of the PRA which at first sight might seem inconsistent with arbitration. One is the fact that many of the discretions and powers in the Act are expressed as those of the “court”.¹⁴ “Court” is broadly defined in s 2 as the Family Court or other court having jurisdiction in the proceedings.

Use of the word “court” in the PRA would seem to be a classic case for the application of s 10(2) of the Arbitration Act. The effect of s 10(2) is that the fact that an Act confers jurisdiction on the High Court or a District Court, but does not refer to the determination of that matter by arbitration, does not, of itself, indicate that a dispute about that matter is not capable of determination by arbitration.

The other feature of the PRA requiring consideration is s 22. It provides:

1. 
   Every application under this Act must be heard and determined in a Family Court.
   
2. 
   This section is subject to any other provision of this Act that confers jurisdiction on any other court.
   
3. 
   Regardless of subsections (1) and (2), a Family Court Judge may order that proceedings be transferred to the High Court if the Judge is satisfied that the High Court is the more appropriate venue for dealing with the proceedings, because of their complexity or the complexity of a question in issue in them.
   
4. 
   The Family Court Judge may transfer proceedings on the application of a party to the proceedings or on his or her own initiative.
   
5. 
   Proceedings transferred to the High Court continue in that court as if they had been properly commenced there.
   

Although s 22(1) states that applications are to be heard and determined by the Family Court, it seems reasonably clear that this was not intended to exclude arbitration.

The sole object of the current s 22(1) appears to have been to reverse the primacy between the High and Family Courts. Before its replacement in 2001, s 22(1) provided that “The High Court and a Family Court shall each have jurisdiction in respect of proceedings under this Act: Provided that a Family Court shall have no jurisdiction … where proceedings … are pending in the High Court at the date at which the application is made”. The original s 22 therefore gave primacy to the High Court in certain circumstances where the proceedings overlapped.

The effect of the 2001 amendment was to reverse that primacy. All proceedings must now begin in the Family Court, albeit subject to the possibility of later transfer to the High Court. The original s 22 was expressed in an enabling form. It was consistent with the sharing of jurisdiction with other tribunals such as arbitrators. It seems highly unlikely that in reversing the primacy between the two courts in that way, Parliament intended to exclude arbitral jurisdiction by a side-wind.

This view gains strength from the fact that s 22(1) can operate only where there is an “application under this Act”. “Application” is relevantly defined as “a formal request to an authority”.¹⁵ In a legal context it is generally used to describe the commencement of court proceedings by lodging a request that a court exercise an existing jurisdiction to grant the applicant a particular form of relief. Courts do not need to wait for parties to confer jurisdiction upon them by agreement. They already have the jurisdiction to determine disputed rights. One party can, and normally does, make an application for relief.

The term “application” is less easily applied to arbitration. A party does not begin an arbitral process by making a substantive “application” in any normal sense. Nor does a party come to a potential arbitrator asking him or her to exercise an existing jurisdiction. An arbitration is commenced by an agreement between two or more parties that they will ask an arbitrator to decide between competing points of view. Only a strained use of the word would allow this process to be described as an “application”. And if there is no “application”, there is nothing upon which s 22(1) can operate.

It seems reasonable to conclude that the purpose of s 22 of the PRA was to remove the potential for demarcation issues between the High and Family Courts. It does so by defining the allocation of jurisdiction between them. The provision says nothing useful on the subject of arbitration.

The result is that arbitration jurisdiction finds positive support in the power to contract under ss 21 and 21A. Related provisions in ss 21D and 21L are consistent with arbitration. The frequent use of the word “court” in the PRA is not inconsistent with arbitration. Commencement in the Family Court under s 22(1) is concerned solely with the relationship between the High and Family Courts.

Relationship property arbitration is therefore consistent with the PRA. The next question is whether it is also consistent with the Family Courts Act.