The Property (Relationships) Act 1976 (the PRA) has primary jurisdiction over relationship property. However, when there is a trust (or trusts) in the mix, the final division of property can be complicated – and often neither side (nor the settlors or trustees who may be caught in the cross-fire) will consider the end result just or even foreseeable.
There are two primary remedies under the PRA that apply to trusts, specifically s 44 (which relates to dispositions of property to a trust in order to defeat a spouse or partner’s claim or rights under the PRA and s 44C (compensation on account of property disposed of to a trust). These remedies are often considered inadequate in a real sense and consequently, where there is a relationship breakdowns and assets are held in trust, attacks against trusts often utilise provisions outside the PRA. See, for example, Clayton v Clayton (Vaughan Road Property Trust) where trust powers were accorded a value for relationship property purposes, and also the constructive trust arguments made by disadvantaged spouses or partners in cases such as Vervoort v Forrest, Hawkes Bay Trustee Company Limited v Judd and Murrell v Hamilton
Section 182 of the Family Proceedings Act 1980 (s 182), which was applied in Clayton v Clayton (Claymark Trust), gives the court the power to vary “nuptial settlements” following the dissolution of a marriage or civil union and is another tool in the post-relationship armoury. This provision, which does apply to de facto couples, has been reviewed in IP44 Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai (the Preferred Approach Paper). This Preferred Approach paper has been released as part of a review of relationship property law in New Zealand, which commenced in 2016.
At 6.12 of the Preferred Approach paper s 182 was described as follows:
The Supreme Court has described a nuptial settlement as a settlement that makes some form of continuing provision for one or both parties to a marriage in their capacity as spouses. This means there must be some connection between the settlement and the marriage. A court will exercise its discretion under section 182 to address the failure of the spouses’ expectation that the marriage would continue. To do this, the Supreme Court has said the first step is to examine what the spouses reasonably expected of the nuptial settlement when they assumed the marriage would continue. The second step is to compare those expectations to the spouses’ expectations of the settlement in the circumstances after separation. A court will also take into account other factors, such as the interests of children, the source and character of the assets, the length of the marriage and the suitability of the trust structure because of the changed circumstances.
At 6.26 the views of the Law Commission are expressed as follows:
Section 182 of the Family Proceedings Act is based on a very old provision designed to deal with marriage settlements in the mid-nineteenth century. It is out of step with the PRA’s principles and procedures. Section 182 gives the court a very wide discretion to vary a trust, in contrast to the much narrower jurisdiction under section 44C of the PRA, which prevents a court from interfering with the capital of a trust. But section 182 only applies to partners who were married or in a civil union. It does not apply to de facto relationships, as the PRA does. Further, a court can only make orders under section 182 after making an order dissolving the marriage or civil union. In contrast, a court can make orders under the PRA after the partners have separated but before formal dissolution. There can therefore be an issue with timing as a partner is able to make an application under the PRA before they can make an application under section 182.
In its preferred approach paper the Law Commission was of the view that s 182 should be repealed. See P32.
In Clayton v Clayton (Claymark Trust), the Supreme Court considered whether s 182 should have application to a trust settled by Mr Clayton after his marriage to Mrs Clayton. The Supreme Court found that a two-stage approach should be taken to s 182 claims.
The first stage is to determine whether a settlement is a nuptial settlement. In this regard a generous approach should be taken. To be a nuptial settlement, the arrangement must be one that makes some form of continuing provision for either or both of the parties to the marriage in their capacities as spouses. There must be a connection or proximity between the settlement and the marriage. The second step is to decide whether and, if so, how to exercise the discretion. It is not enough that there is a nuptial settlement.
In deciding this the nature of the assets is not determinative. What it requires is a clear connection between the marriage and the settlement of the Trust. A nuptial settlement can be made for business reasons and contain business assets.
As noted in Clayton:
 … Where there is a family trust (whether discretionary or otherwise) set up during the currency of a marriage with either or both parties to the marriage as beneficiaries, there will almost inevitably be that connection. As Lord Penzance said in Worsley v Worsley:
“The Court would have a great difficulty in saying that any deed which is a settlement of property, made after marriage, and on the parties to the marriage, is not a post-nuptial settlement.”
 An exception may be where the trust is set up by a third party and there are substantial other beneficiaries apart from the parties to the marriage and their children. The other view may be that, as long as the trust has the relevant connection to the marriage and one or both of the parties are beneficiaries, the trust will be a nuptial settlement. But we do not need to decide this point. In this case the trust was set up by Mr Clayton during the marriage and there were no substantial other beneficiaries.
 The test may be more difficult to meet where there is a settlement made before marriage and a future spouse is named as a possible beneficiary but, at the time of settlement, there is no particular spouse in contemplation. One view may be that once a marriage has taken place and the spouse identified, then there will be the necessary connection with the marriage. Even if that is not the case, however, it may be that each disposition of property to such a trust after marriage could constitute a post nuptial settlement.
Nuptial settlements are premised on the continuation of the marriage or civil union. The purpose of s 182 is to empower the courts to review a settlement to remedy the consequences of the failure of the premise on which the settlement was made. Each case will require individual consideration.
In Clayton there was a clear difference between the benefits Mrs Clayton would have received from the trust had the marriage continued and her current position after the dissolution of the marriage. This provides a clear basis for exercising the discretion under s 182.
Further, in Clayton the trust was settled during the marriage to benefit the Clayton family unit. All of its assets were acquired during the marriage. Had the matter not been settled, the Supreme Court would have made an order to split the Trust equally into two separate trusts.
However, what is the position where a trust is settled by say a parent, or grandparent? In Bethell v Bethell a trust was settled by Sam Bethell’s mother to hold land that had been farmed by three generation of the Bethell family before Sam and his brother Hugh. Contemporaneous succession planning created a significant debt from the Trust to Sam that was Sam’s separate property for the purposes of the PRA. The facts of the matter following Sam’s divorce from his former wife Diana are complicated and relate to the parties in question. Of relevance for the purposes of discussion is the approach taken by the High Court to where the decision of the Family Court was appealed. Nation J took the view that it was necessary to be clear as to what the relationship property position was. As noted at :
“In considering issues as to a potential settlement under s 182 FPA, I wanted to be clear as to the payment Sam would have to make to Diana to achieve an equal sharing of agreed relationship property assets.”
The elements of a nuptial settlement are expanded on at  to 
 Section 182 FPA permits the Court to enquire into “any ante nuptial or post nuptial settlement made on the parties”. It thus gives the Court jurisdiction to deal with such a settlement made before a marriage. It is well established the section will apply where the settlement is for the benefit of either party. The issue in Clayton, as in this case, was whether there was a connection or proximity between the settlement and the marriage. What does that mean?
 It is significant that the Supreme Court said the connection or proximity has to be between the settlement and the marriage. It will not be sufficient that the trust deed contemplates a marriage taking place at some stage.
 The Supreme Court in Clayton recognised that the terms of the trust deed and the particular range of beneficiaries may indicate it was not a nuptial trust.
 Consistent with this, Peters J, in Da Silva v Da Silva, held that a trust established during the settlor’s daughter’s marriage was not a nuptial trust. The daughter and her five children were beneficiaries. At the time the trust was settled, it acquired shares in a commercial property. Peters J held there was insufficient connection or proximity between the settlement and the marriage in that case. The settlor had established the trust for the benefit of herself, her daughter and the daughter’s children. She found the settlor had made a deliberate decision not to include Mr Da Silva as a beneficiary. Neither he nor the settlor’s daughter had been appointed as trustees when the trust was created.
 In Kidd v Van den Brink, the settlor settled a trust in 1990.13 He and his first wife had recently separated. At the date of settlement, they had four children aged between 16 and 22. None of the children were married. Under the trust deed, the final beneficiaries were the children of the settlor. The discretionary beneficiaries included the settlor’s children and any wife of any final beneficiary. Ms Kidd and one of the settlor’s children, Mr Stephen Van den Brink, began living together in August 1998. They had a child, separated in 2006 and their marriage was dissolved in August 2008. They were living in a home belonging to the trust. Ms Kidd sought a resettlement from that trust pursuant to s 182.
 A full High Court said:
 In our view the plain words of s 182 reinforce the importance of the referability of the particular marriage to the settlement. The juxtaposition of the settlement “on the parties” with the power to make orders “with reference to … any property settled” suggests that a qualifying settlement will be primarily directed towards and provide for the benefit of the particular family unit; that is, the husband and wife and their children. The assumption of the existence of the marriage and its continuation is the qualifying nuptial characteristic. Tipping J’s discussion of the classical ante-nuptial settlement in Ward at  highlights its unitary nature and its necessary degree of connection, both physically and temporally, to the particular marriage. “The parties”, being “the parties to the marriage”, will be the principal beneficiaries of a qualifying settlement.
 We agree with Ms McCartney that Ms Kidd does not have to establish that the trust was created in contemplation of this particular marriage. The test is whether the settlement is referable to the particular marriage. However, we agree with Mr Thorp that the trust was no more than a settlement created before this marriage. All the settlor’s children were unmarried at settlement; the deed was not specific or related to any particular marriage. At best the instrument contemplated that a marriage, rather than the particular marriage between Mr Van Den Brink and Ms Kidd, might occur. That contingency was possible but incidental to the primary objects, and its occurrence would simply qualify a child’s spouse for membership of a wide class entitled to the trustee’s consideration for a benefit.
 The trust was not premised upon the existence or continuation of this marriage. Its purpose was not to make continued provision for this marriage; there was no temporal or physical link. Ms Kidd, her husband and their child were not collectively the principal beneficiaries. The trust’s purpose was to provide for a range of individuals who might include Stephen Van Den Brink’s wife while they remained in the state of marriage or, as Mr Thorp points out, any other person who married one of the settlor’s children.
 Furthermore, an order under s 182 would affect the rights or interests of third parties. For example, a direction that the trustees make capital provision for Ms Kidd from the assets of the trust, as is sought here, would fetter the wide discretionary powers and purposes set out in clause 5.1. Section 182 does not contemplate interference with the rights enjoying [sic] by nominated beneficiaries other than the members of the immediate family unit created by this marriage. That prospect illustrates the misconception underlying this application.
 We agree with Judge Adams. There is not the necessary degree of qualifying connection between the settlement and this particular marriage …
 In our judgment Ms Kidd’s claim that the Van Den Brink deed of trust is an ante-nuptial settlement is unarguable.
 So, in Kidd v Van den Brink, the full High Court found that the wife did “not have to establish that the trust was created in contemplation of this particular marriage. The test is whether the settlement is referable to the particular marriage.” In the circumstances of that case, the Court had no difficulty in holding this had not been established.
What this means is that the date of the deed of trust will not be determinative of the matter. This is discussed further in Bethell as follows:
 Mr Tothill was the solicitor advising the Bethell family at the time a number of steps were taken with succession planning after Sam’s father died. He confirmed, as is apparent from the trust deed, that the beneficiaries of the Stumpy Trust were to be Sam, his children, grandchildren, siblings and spouses of the above. At the time the trust was formed, it was obviously contemplated that Sam would have a spouse, children and grandchildren.
 Mr Tothill said it was not intended Sam’s wife would benefit from succession planning or Timpendean Farm. I cannot accept that as the reality given the way, as a spouse and a discretionary beneficiary, Diana could benefit from the subsequent trust. Consistent with that, Diana subsequently benefited from the trust through the ways she, along with Sam and their children, was able to use and enjoy the farm and the family home owned by the Stumpy Trust and have the Stumpy Trust pay for expensive alterations to the home and the installation of a tennis court and swimming pool.
 What is probably true is that, as Mr Tothill suggested, it was intended Diana would not acquire legal ownership of farms which had been in the Bethell family.
The Court then considers the position in Clayton before reverting back to the current case:
 The Claymark Trust was established after the parties’ marriage and after the birth of their second child. So, in that sense, the circumstances there were different from here, where the Stumpy Trust was settled before the parties were living together. Nevertheless, it was material to the Supreme Court that Mr Clayton’s immediate family unit was intended to be the core beneficiaries. They also said that, the fact one of the purposes of the trust was to take the assets out of the circle of bank guarantees related to Mr Clayton’s business, was not a reason against holding it a nuptial settlement. The separation of property from the risks associated with business assets must have been for the purpose of protecting assets for the family. The Court said the nature of assets settled was not relevant to the question of whether or not the settlement was a nuptial settlement. It was the connection between the marriage and the settlement which was important.
 I agree with Judge Murfitt that the evidence here established there was an adequate connection or proximity between the establishment of the Stumpy Trust and the marriage between Sam and Diana for the Stumpy Trust to be a nuptial settlement.
The court found that the settlement of the Timpendean Farm onto the Trust was a nuptial settlement, notwithstanding that there was a debt back to Sam Bethell.
In considering the exercise of the Court’s discretion under s 182 it was noted at , by reference to Clayton v Clayton (Claymark Trust), that “Importantly, the principles of the PRA do not underpin s 182 and there is no presumption as to an equal resettlement of trust assets.” In determining how to exercise its discretion the court had regard to matters including:
- The funds available to each party following resolution of their relationship property matters ($2.3 m for Sam and $1.4m for Diana)
- That the Trust had provided accommodation and supported and expensive lifestyle during their marriage
- The expectation that the Trust funds would be utilised for Sam’s benefit following the marriage breakdown rather than for the longer-term benefit of his children
- The increase in the value of the trust land during the marriage due to Sam’s commitment to the land
- The pattern of succession planning that may not be able to be achieved moving forward due to Sam’s financial circumstances
- The benefit to Sam who remained in the farm property for 3 years after the parties’ separation
- Sam’s financial circumstances and the likely further erosion to the Trust’s capital
- The funds available from which there could be a resettlement, which the court valued at $1.49m
The Court then decided the appropriate outcome was a resettlement of $300,000 (approximately 20% of the available funds) onto “a new discretionary trust to be established by Diana for the benefit of herself, her children and grandchildren, and other beneficiaries as provided for in the Stumpy Trust deed, but to the exclusion of Sam, his siblings or their spouses.”
As noted at :
“Resettlement of that matter should ensure that, with the assistance of her trust, Diana will have available for herself and her children a home of a reasonable standard, either in Christchurch or elsewhere in Canterbury, and capital to provide a measure of financial security. But for the dissolution, that security would have been available to her through the way she and the children would have been able to continue benefiting from the capital in the Stumpy Trust, as they did during the marriage.”
- Bethell v Bethell  NZHC 3171
- IP44 Review of the Property (Relationships) Act 1976: Preferred Approach – Te Arotake i te Property (Relationships) Act 1976: He Aronga i Mariu ai
- Da Silva v Da Silva  NZHC 2064
- Clayton v Clayton (Claymark Trust)  NZSC 30
- Kidd v Van den Brink  NZCA 16
- Kidd v Van den Brink HC Auckland CIV-2009-404-4694, 21 December 2009
- Judd v Hawkes Bay Trustee Company Limited  NZHC 3298
- Murrell v Hamilton  NZCA 377
- Hawkes Bay Trustee Company Limited v Judd  NZCA 397
- Lankow v Rose  1 NZLR 277
- Vervoot v Forrest  NZCA 375
- In the Marriage of Knight (1987) 90 FLR 313