Morris presents NZLS seminar on remedies under the PRA

Sally Morris and Gemma Edwards have today presented an NZLS seminar, titled "Pursuing remedies against separate legal entities under the PRA 2025". The seminar explored the limitations of the Property (Relationships) Act 1976 when dealing with trust and company held assets, with a particular focus on the requirements for a successful claim under ss 44, 44C and 44F. Sally and Gemma also discussed the available claims outside of the PRA, including s 182 of the Family Proceedings Act 1980, and provided practical guidance for practitioners advising on asset protection.

Sally and Gemma identified that the most robust safeguard against PRA or s 182 claims remains a valid and comprehensive contracting out agreement under s 21 of the PRA. Trust structures, while still useful for other purposes, prove increasingly vulnerable to judicial examination, particularly where the parties have lived together or married after the trust was settled, trust assets have been used for mutual benefit, or the relationship has substantially altered the parties’ economic lives.

Where trusts predate relationships, but no relationship property has been disposed to them, clients must actively maintain the trust's separation from relationship assets. This includes by avoiding the use of trust assets (eg housing, income) for the benefit of both partners, preventing the intermingling of relationship property with trust property and ensuring the trust is not used to meet the day-to-day needs of the couple.

Where there is an intention to benefit both parties to the relationship, it may be preferable to establish a new trust for shared assets, preserving the character of the original trust. Independent trustee appointment also remains a crucial risk mitigation strategy. Courts are more likely to uphold the legitimacy of trust arrangements where trustees are not controlled or dominated by either party to the relationship, exercise their powers in accordance with fiduciary obligations, and make decisions in good faith and for legitimate trust purposes.

Finally, Sally and Gemma outlined that where assets are transferred to a trust for value, and the value is demonstrably received by the transferring party (eg through offsetting debt, or reinvestment in separate property), it becomes significantly easier to argue that the disposition was made in good faith. This can shield the transaction from challenge under s 44 and may also reduce exposure under s 44C.

Please get in touch with Morris if you require advice on claims against trusts on separation.