Four years together, a s 21 agreement and a family trust
Ana and Ravi separated in March 2024 after living together since September 2019 in a house Ana bought in her sole name in August 2019 for $1.05 million. Their daughter was born in 2021. In 2021 Ravi used $120,000 from an inheritance to pay for a kitchen and bathroom renovation and took six months off work to project-manage the build. In 2020, three months after Ravi moved in, they signed a 'relationship property agreement' prepared by Ana's lawyer. Ravi's 'independent' lawyer was Ana's cousin, who met him for 25 minutes in a cafe, never saw the trust deed or a valuation, and certified that he had explained the agreement. The agreement records that neither will claim against the other's property. In 2022 Ana transferred the house to the Ika Family Trust, of which she and an independent trustee are trustees; Ravi is not a beneficiary. Ana says the agreement and the trust mean Ravi gets nothing. Ravi wants to know what he can claim.
1. Advise on Ravi's relationship property status, the effect of the house being held in Ana's name and then in the trust, and the claims that remain open to him.
Read the worked answer
Status. Section 2D of the Property (Relationships) Act 1976 asks whether the parties lived together as a couple; the indicia include a shared home, financial interdependence, care of children, and the duration and exclusivity of the relationship. A shared home, a joint household, a child and four and a half years make this plainly a de facto relationship. Duration matters because s 2D requires at least three years' cohabitation before an order dividing property can be made, subject to the exceptions for a child of the relationship and for substantial contribution coupled with serious injustice. Ravi satisfies all three gateways.
The family home. Section 8(1)(a) makes the family home relationship property whenever it was acquired and whoever owns it - but only if it is owned by one or both partners. While the house stood in Ana's name it was relationship property notwithstanding that she bought it before cohabitation. Once transferred to the Ika Family Trust in 2022 it ceased to be owned by either of them, so s 8(1)(a) no longer applies of its own force.
What remains. (1) The equity built up before the 2022 transfer, to the extent it was relationship property and is traceable. (2) A s 44C compensation claim for his $120,000 and his labour. (3) An argument that the 2022 transfer was a disposition intended to defeat his claim (s 44). (4) The s 21 agreement, which Ana will rely on first. The trust does not extinguish the claim; it relocates it.
2. Assess the validity of the s 21 agreement and Ravi's prospects of having it set aside.
Read the worked answer
Formalities. A s 21 agreement must be in writing, signed by both parties, and each party must have received independent legal advice before signing, with the lawyer certifying that the advice was given and the effect and implications explained. The certificate is not conclusive: the advice must actually be independent and adequate. A 25-minute meeting in a cafe with the other party's cousin, without a valuation and without the trust deed, is vulnerable on both independence and adequacy.
Set aside. Even if the formalities are met, s 21J allows the court to set aside an agreement where giving effect to it would be 'seriously unjust'. The threshold is high and the onus is on Ravi; the court respects party autonomy and will not rewrite a bad bargain. The relevant factors are the terms, the time and circumstances in which the agreement was made, whether the parties understood it, and the disparity between the outcome and what the court would otherwise order.
Ravi's best points. The agreement was signed in 2020, two years before the home was moved into the trust, and neither Ravi nor his adviser was told of the trust planning; his advice came from a relative in a short meeting; and the practical result is that he receives nothing for four years of contribution and shared caregiving.
Ana's best points. He signed, he had a lawyer, and the agreement reflects a deliberate choice; mere unfairness is not enough.
Advice. Plead s 21J and formalities in the alternative, and seek discovery of Ana's file to show what was disclosed and what her lawyer was instructed to explain.
3. Explain how Ravi can reach the trust property, including the s 44C route, the s 44 argument and whether the trust can be attacked as illusory.
Read the worked answer
Section 44C. The court may order one partner to pay compensation to the other for contributions made to property held by a trust, where the trust property includes the family home or property derived from it. The court weighs the contributions (money and labour), the value of the trust property, and what is just. Ravi's $120,000 is documented, and six months of project management is quantifiable against what a builder or project manager would have cost. Section 44C does not make the trust property relationship property; it produces a money judgment against Ana personally, so her ability to pay matters.
Section 44. If Ana transferred the house to the trust in 2022 in order to defeat Ravi's claim, the court may treat the property as relationship property. The evidence is the timing of the transfer, the advice she received, her knowledge of the relationship, and whether she holds other assets. Intent must be proved; the transfer alone is not enough.
Illusory trust. Clayton v Clayton [2016] NZSC 183 asks whether the arrangement is a genuine trust or one where the settlor retained effective control. With an independent trustee and a discretionary class, that argument is weak - but stronger if Ana can appoint and remove trustees at will or has reserved a power to resettle on herself.
Practical. Seek discovery of the trust deed, the 2022 transfer documents and Ana's asset planning file (expect privilege claims). Quantify contributions from bank records and invoices, consider an order preserving the trust's equity, and give a realistic settlement range.