Relationship property arbitration

Public policy

For the most part, family support obligations have been left to the Family Proceedings Act 1980, the Child Support Act 1991 and/or the Family Protection Act 1955. However in certain ring-fenced areas, support can also arise in proceedings under the PRA. The areas are economic disparity,¹⁷ discretions affecting children,¹⁸ occupation of the family home,¹⁹ vesting of tenancies²⁰ and the form in which the property division should be implemented.²¹ In exercising those discretions, a court must also have regard to any existing orders or agreements for support and may itself make orders in that regard.²² In short, support issues can arise on the periphery of dividing property under the PRA.

Traditionally, the courts refused to enforce agreements that purported to oust the jurisdiction of the courts. Agreements affected in that way included those in which a wife or child purported to contract out of the right to seek maintenance and support through the courts. The rationale was that if husbands and parents failed to discharge their support obligations, the community as a whole would need to shoulder the burden. For that reason it was thought that family support obligations ought to be subject to oversight by the courts. The view was that husbands and parents should not be free to contract out from them. Agreements treated as void in that way included those in which wives agreed to accept defined sums by way of maintenance and not to seek more,²³ those which purported to surrender rights under the Family Protection Act²⁴ and those which denied a father’s obligation to maintain a child.²⁵ There is little doubt that in an earlier age, relationship property arbitrations would have run foul of the courts’ public policy requirements in relation to family support.

All that has changed. There have been three developments.

First, the courts no longer have exclusive control over entitlement to support. Parliament has given spouses the power to enter into binding agreements governing spouse and child support.²⁶ There is a growing view that spouses and parents should be encouraged to resolve their own differences by agreement.²⁷

Secondly, recent decades have seen a strong public policy impetus in support of arbitration as a method of resolving disputes. The trend has been evident in both the common law²⁸ and the Arbitration Act. The first purpose of the Arbitration Act is “to encourage the use of arbitration as an agreed method of resolving commercial and other disputes…”.²⁹ Relationship property disputes are “other disputes”. The effect of that Act is that arbitration of such disputes is to be encouraged.

Thirdly, and most importantly, spouses have been given the power to enter into binding relationship property compromises. Parliament did not make these compromises conditional on court approval. Nor did it see the necessity for any independent mechanism for protecting the interests of children or a spouse’s right to support. The power to settle differences by contract has been entrusted to the parties. It would be odd if the parties were free to agree on rights themselves but not the mechanism by which those rights were to be determined. There is nothing in the relevant statutes or the common law to suggest that a distinction of that kind was intended.

It seems reasonable to conclude that the mere fact that a relationship property dispute has been resolved by arbitration rather than a court would not of itself be regarded as contrary to the public policy of New Zealand. At least where the relationship property regime which formed the basis of the award was the one which would have been applied by New Zealand courts in any event, the award would be enforced. That makes it unnecessary to consider the potential role of validation under the Illegal Contracts Act 1970.

There is the potential for a different outcome if the award is based on a radically different relationship property regime with features which a New Zealand Court considered to be contrary to public policy.³⁰ Whether an award of that kind might be unacceptable to a New Zealand court is an intriguing issue, but one which is beyond the scope of this article.³¹