Contents

Chapter 19
Relationship property and trusts

Section 182 of the Family Proceedings Act 1980

RECOMMENDATION

R51 Section 182 of the Family Proceedings Act 1980, under which the courts may vary the terms of ante- and post-nuptial settlements, including trusts, when a marriage or civil union is dissolved, should be amended to also cover de facto relationships. The following changes should be made to the jurisdictional requirements of section 182:
(a) the terms “de facto partner” and “de facto relationship” should have the same meaning as these terms have in sections 2C and 2D of the Property (Relationships) Act 1976;
(b) the triggering event that allows an application to be made to the court, or the court to make an order varying any qualifying settlement, should be changed from when a marriage or civil union is dissolved to when the parties to a relationship separate; and
(c) an application to the court should be able to be made in respect of relationship settlements rather than nuptial settlements. The term “relationship settlement” may need to be defined.

Current law and issues

19.34Under section 182 of the FPA the court may vary the terms of ante- and post-nuptial settlements, including trusts, when the marriage or civil union of the parties comes to an end. The section 182 jurisdiction is separate from the PRA rules and the concept of equal sharing in the PRA is not directly relevant to a determination under section 182. The Supreme Court in Ward v Ward made it clear that there is no entitlement to a 50/50 or any other fractional division of the trust property under section 182.392 What is relevant, however, is that the nuptial settlement was premised on the continuation of the marriage.393 Under section 182, the court must assess whether an order is necessary and, if so, in what terms, to reflect the fact that that fundamental premise (the continuation of the marriage) no longer applies.394  

19.35A “post-nuptial settlement” under section 182 clearly includes any trust established after a marriage if the trust is intended to provide for the couple (and their children). If, in light of all the circumstances, there is good reason to intervene, then the court is able to remove capital or assets from the trust, vary the terms of the trust, or resettle the trust for the benefit of one or both parties to the marriage or civil union. The court may also make orders concerning administration and management of the trust.

19.36Much has been written about section 182 and whether it is an anachronism overlooked when the PRA was enacted. As discussed, the PRA rules and the concept of equal sharing in the PRA are not directly relevant to a determination under section 182. Under section 182 the court seeks to give effect to the parties’ original expectations of the nuptial settlement in a logical and fair way where the parties’ circumstances have fundamentally changed.395 It is sometimes suggested that this means section 182 is inconsistent with the principles in the PRA. However, the Supreme Court has noted there is no necessary inconsistency in allowing the courts to exercise a trust-varying power in the circumstances covered by section 182 while providing that, in the wider and distinct relationship property context, trusts will prevail over relationship property rights, subject to sections 44 and 44C.396

19.37Whether or not section 182 was overlooked at the time the PRA was enacted, it provides an additional and alternative option in some circumstances for challenging the division of property following a relationship breakdown, where property has been settled on a trust as an ante- or post-nuptial settlement. It, however, applies only to married and civil union couples. It does not apply to de facto relationships so rather unfairly only provides a remedy for some couples and not for others. We consider that this inconsistency in the treatment of de facto couples is now an anomaly that should be addressed.

Extend section 182 of the FPA to de facto partners

19.38We recommend amending section 182 of the FPA to apply also to ante-relationship and post-relationship trusts (and other settlements) established to benefit de facto partners as well as married and civil union partners. The recommendation would allow the court to vary the terms of any relevant ante-relationship and post-relationship settlement (including any trust) when a qualifying relationship between de facto partners as well as married or civil union partners ends. It should be noted that section 182 applies to all ante-nuptial and post-nuptial settlements, so the change applies to all such settlements and not just to trusts. The reform necessitates changing the triggering event for applications to separation rather than legal dissolution and a shift away from the language of “nuptial”.

19.39The reform proposed does not alter the fundamentals of the provision or the test applied by the courts, but rather expands the class of potential applicants. Further, the basis on which the jurisdiction is exercised, as carried out in Ward v Ward,397  seeks to perpetuate the objects of the settlement. This means that there is no departure from core trust principles.

Submitters’ views

19.40Submissions responding to the Preferred Approach Paper were evenly divided over this proposal. Those opposed to the amendment argued that section 182 is an anachronistic anomaly that was overlooked by Parliament and is inconsistent with the PRA. Some said it should simply be repealed because the PRA was intended to be a comprehensive and complete set of rules to determine status and division of property between qualifying couples, while others argued for a separate review of the PRA that could consider section 182 as well.

19.41Those submitters who agreed that section 182 should be retained and extended to de facto couples said that, despite its history, it has become a useful provision that is utilised effectively by the courts to deal with situations not addressed by the PRA.398  Some noted, as we have, that there is not necessarily any inconsistency between section 182 and the PRA. There was support for separation rather than dissolution being the end-of-relationship triggering event. In practice, waiting the two years for a formal dissolution delays the resolution of all property issues.

19.42We have taken the various views of submitters into account. Our primary reason for recommending the amendment is that the current differing treatment of de facto relationships from married and civil union couples cannot be justified. This section continues to discriminate against some relationships when most other family law legislation does not. This anomaly should be removed.

19.43The controversy and difference of opinion between submitters is over whether section 182 should be retained at all. For the reasons outlined, we recommend that it must be retained. It has become a useful provision that gives effect to the original intention of parties that settle trusts and deals with real injustice that would otherwise be caused by changed circumstances. While we do not consider that it is inconsistent with the PRA, consideration could be properly given, when drafting our proposed amendment to section 182, to whether the amended provision could reasonably be included in the PRA.399

19.44Some consequential changes to the mechanics of section 182 are obviously needed to put de facto relationships, marriages and civil unions on an equal footing. There is no equivalent to “dissolution” at the end of a de facto relationship, nor is there the equivalent of a “nuptial” at the commencement. As already noted, we recommend that the court should be able to exercise its jurisdiction under the amended provision where the parties have separated and are living apart. This would essentially change the triggering event for the provision from dissolution to separation and bring it more into line with the PRA. Separation, rather than dissolution, is now widely accepted as the end of a marriage or civil union. The amendment would ensure that section 182 applications are not unduly delayed for all relationships. Another consequential amendment would be to change the language of “nuptial” settlements to “relationship” settlements. The approach taken in the PRA to defining a qualifying de facto relationship and to determining when separation occurs should also apply.

Application to existing trusts

19.45We have reached the view that the amendment to section 182 should apply to de facto relationship settlements entered into before, as well as after, the amended provision comes into force. Despite reservations generally over retrospective application, because people have entered into existing arrangements based on the current law, we think that in this case the advantages of parties being able to apply for relief under section 182 outweigh those general concerns. At present the courts apply section 182 to give effect to the parties’ reasonable expectations of the relationship settlement when it was made. If the provision applies retrospectively to de facto couples then they are given the opportunity to apply under the section to the court to give effect to their expectations of their relationship settlements. It is more likely that their expectations will be able to be realised. If they are not able to apply under section 182 then an arrangement that no longer meets the parties’ expectations of that arrangement will continue unchanged. We think that retrospective application is likely to largely be of benefit. It provides a mechanism for remedying a situation where there currently is no remedy. An important consideration here also, is that the court has a wide discretion when dealing with a settlement under section 182. The court must consider the interests of other beneficiaries of the trust.

19.46Another factor in favour of the provision applying to existing settlements is that the PRA already applies retrospectively. We think that it would be better for section 182 also to do so. While section 182 and the PRA serve different purposes, they are both concerned with resolving property disputes when a relationship ends. It would seem desirable for a consistent approach to be taken and this will mean that in some cases the parties will have the alternative option of applying under section 182.

392Ward v Ward, above n 379.
393At [15].
394At [62].
395At [62].
396At [19].
397At [62].
398See Peart “Protecting Children’s Interests in Relationship Property Disputes on Separation”, above n 384, at 29.
399Although it may make sense to move s 182 into the PRA, the section has an effect on maintenance agreements in certain contexts, so the implications of that would need to also be worked through before that step could be properly taken.