LEANZ
seminar on the Property Relationships Amendment Act
Wellington,
6 August 2001
Address
notes – Stuart Birks[1]
There are three main areas that I wish to address to highlight concerns about the Property Relationships Amendment Act: i) the policy-making process; ii) law and its application; and iii) associated broader social issues.
1. The policy-making process
The gender debate is characterised by limited and one-sided analyses, and appeals to emotion that are frequently based on unrepresentative examples. Much of the associated data are questionable. In fact it would perhaps be more realistic to say that the gender debate has yet to occur. Many commonly stated positions have gained widespread acceptance without being thoroughly tested.
A telling point is raised in a report produced jointly by Child, Youth and Family and the Ministry of Social Policy under the auspices of the Children, Young Persons, and the Families Act Research and Evaluation Fund Management Committee[2]. The report, in the context of child abuse and neglect, speaks of “substantial differences in the quantity of research undertaken by researchers in relation to the key dimensions of individual, family, neighbourhood, and social system” (p.9). It noted far more research into some factors than into the others. Discussing this, readers are cautioned as follows:
“Because certain factors and/or certain dimensions have been extensively researched does not mean that those factors or dimensions are more important in determining child abuse or child neglect than those that have not been extensively researched.” (pp.9-10)
As an aside, it is also pointed out that:
“Only a tiny number, if any, of the research reviewed could be confirmed as scientifically sound methodologically … Nevertheless…this body of research is, despite all its limitations, already informing policy and service perceptions and decisions.”
(p.12)
Similar criticisms can be made in other policy areas.
Debate on recent developments in family law has been limited or fragmented. These developments include, in order:
a) The Shared Parenting Bill (defeated on its first reading)
b) The Guardianship, Custody and Access review (in progress)
c) Property Relationships legislation (passed)
d) The Child Support Amendment Bill 2001 (at select committee)
The Shared Parenting Bill was defeated on the grounds that it was partial, and a comprehensive reassessment was needed, hence the review of guardianship, custody and access.
The property relationships legislation was initially going to be passed into law without calling for submissions, on the grounds that its terms had been considered in submissions on the Matrimonial Property Amendment Bill and the De Facto Relationships (Property) Bill. Consideration of post-separation earning capacity was not included in these earlier bills. The legislation was passed after a short delay, during which submissions were heard. The Child Support Amendment Bill was also introduced with little sign of prior planning and analysis.
Meanwhile the government is talking about an inclusive society (e.g. Helen Clark, 12 July 2001, Palmerston North), catching the knowledge wave (conference, Auckland, July 2001), and planning long-term for retirement (Steve Maharey, 13 July 2001, Wellington). In March 2001 Statistics New Zealand published a report, Framework for the Measurement of Social Capital in New Zealand, stressing the importance of relationships among people. In June 2001 the Ministry of Social Policy published a report, The Social Development Approach, aiming, among other things, to reduce social exclusion. A case could be made that the property and child support changes have implications, probably negative, for these objectives. They are also likely to be interrelated with issues of guardianship, custody and access. It is not clear why the government considers it appropriate to make these changes as two stand-alone pieces of legislation, having argued against piecemeal changes in relation to shared parenting.
The focus of debate on the property provisions of the Property Relationships Bill was essentially on the situation of women in existing relationships. That presents a very narrow focus. Consideration should also be given to men and children in relationships, and to all those not yet in relationships. There is mention of opting out provisions, but they are not guaranteed to be effective, and in all areas of the legislation it remains to be seen what interpretations will be given. Economists would see many difficulties that may not be apparent to lawyers and judges. Oversimplified assessment and false assumptions can result in inequities and perverse signals being given. We should be concerned that legislative change has been undertaken without serious consideration of the wider social dimension of its effects on relationship formation and breakdown. Given that the guardianship review is in progress, by implication the Property Relationships Amendment Act is assumed by the government to be unrelated to guardianship, custody and access issues. We should be concerned that the reasoning behind the Act is too narrow in focus.
What of the reasoning itself?
We should assume neither that the reasoning underpinning the legislative change is impartial and consistent, nor that it has been rigorously tested. There are signs that we should be concerned.
In relation to child support, Fleming and Atkinson state that: “It would help if the application of the child support formula could take better account of the remarriage family situation, including the costs of access visits of non-custodial children, which can be considerable. Talking to some policy analysts about this, I have detected an implicitly punitive attitude towards non-custodial fathers, which is expressed in remarks such as “if a man leaves his wife he deserves what he gets” or “that man’s problem is that he has too many wives”. (Fleming R and Atkinson T (1999) Families of a different kind, Waikanae: Families Remarriage Project, p.159)
Consider also the varying approaches that we observe on paid and unpaid work, an area central to relationship property issues. Economists would generally expect costs and benefits of both to be considered. However we see:
a) costs of one, benefits of the other
It is common, and evidenced in Hyman’s Women and Economics: A New Zealand Feminist Perspective (1994, Bridget Williams Books), to refer to paid work in terms of its benefits (income earned), and unpaid work as a cost (time/effort incurred). Effort and sacrifices required to obtain consistent and high incomes get relatively little attention, so the background information that shapes our understanding of the issues is unbalanced.
b) benefits of both, then benefits of one only
In the Matrimonial Property Act 1976, now Property Relationships Act 1976, there is a general assumption of equal contributions of partners, considering both paid and unpaid work, during the time they are together. Debate on post-separation circumstances focuses on income alone, without mention of unpaid work or the effort and costs of earning income. The criteria applied in relation to pre- and post-separation circumstances are inconsistent.
c) benefits of the other only
A recent settlement in Australia demonstrates yet another dimension that those trained in law are willing to promote (reported in “The value of men’s housework”, Sydney Morning Herald, 2 August 2001, http://www.smh.com.au/news/0108/02/national/national114.html). A group of women received compensation for hardship due to the deaths of their husbands. To quote, “the women will be compensated for the work their husbands would have done around the house”. So these women should be compensated for a partner’s foregone unpaid work due to the end of a relationship. We are repeatedly told that women do the larger share of the unpaid work. Surely these women have less unpaid work to do because the partner is not there. They may also move on to another relationship. Perhaps we should in all cases consider costs and benefits to separated partners due to unpaid work changes. As the early deaths were due to work-related illness, the health effects of paid work should be included as a cost when considering contributions of partners to relationship property. This settlement was reached under the shadow of the law, and other similar claims are now expected.
Consideration of
future earnings and associated lump-sum awards is not a
straightforward issue. Even the more basic, equal splitting
presumption can be questioned on the basis of pre-relationship
circumstances, determinants of during relationship contributions,
obligations to others, and the length of the relationship[3]. It says something about the
law’s views on adult responsibility that an adult could
claim half of an unrelated adult’s assets on the basis of a
three year long relationship, however the court defines this,
whereas a child can live with a parent for three years and have
no resulting claim on that parent’s assets.
To focus only on the lump-sum issue where,
under certain circumstances, an award is made on the basis of the
future earnings (or, more precisely, the Court’s estimate of
the “likely earning capacity”) of the higher-earning
partner, there are several grounds for concern. The relevant
condition in the revised Property Relationships Act 1976 section
15(1) is worded as follows: “…if, on the division of
relationship property, the Court is satisfied that, after the
marriage or de facto relationship ends, the income and living
standards of 1 spouse or de facto partner (party B) are likely to
be significantly higher than the other spouse or de facto partner
(party A) because of the effects of the division of functions
within the marriage or de facto relationship while the parties
were living together.”
The Court is therefore required to estimate both “likely earning capacity” and “living standards” of both parties, and to determine the extent to which differences may be due to “the division of functions”. These are not trivial matters. For brevity, I shall focus on likely earning capacity, although the division of functions criterion gives carte blanche to any imaginative lawyer or judge, hence: What training and career did someone forego to mind a home? Should someone’s unrealised potential to obtain a degree be taken as a sacrifice to be compensated? What of a primary earner’s similar unrealised potential due to an obligation to provide for the family? What if this earner supported a spouse through university – should that (ex-)spouse then be expected to earn?
On the relatively easier issue of earning capacity, it is no longer realistic to assume stable employment and career paths, so current and past employment history may be a poor predictor of future circumstances. Greater uncertainty is introduced if, in addition, we consider the effects of relationship disruption on employment paths. If, as is sometimes claimed, a relationship partner makes a significant contribution to someone’s success, then termination of a relationship is likely to be detrimental. Inland Revenue child support figures indicate that 25 percent of paying parents are beneficiaries[4]. Approximately 79,000 liable parents (or approximately 40 percent of paying parents) have incomes low enough for them to be assessed at the minimum child support level. If, on the other hand, there is more success in someone’s post-separation career, then should we assume that the relationship itself had been beneficial? If positive contributions are recognised in lump sum payments, then shouldn’t there also be scope for negative contributions to result in payments in the other direction? Except in transfers in one direction and in one specific area, “the division of functions”, the legislation actually reduces scope to consider unequal contributions.
To list some of the factors which are overlooked in the basic future income argument: incomes can vary; effort is required to earn income; there are lifestyle and family-life sacrifices associated with a sustained earning profile; there can be work-related health and life-expectancy costs; parties may re-partner, with associated costs of supporting new dependants, or with imputed income from unpaid work if living with a new, higher-earning partner (why assume that the lower-earning partner must obtain income from paid work after separation, rather than through a new relationship, if specialisation has been in unpaid work?); application of the lump-sum criterion may be due to there being a “child of the relationship”, but such a child may not be a child of the higher earner; only the lower earner can obtain a lump-sum payment, although a higher earner could make career and earning sacrifices; a lump-sum payment assumes continued high earnings by the payer, which may be linked to a presumption of non-custodial status; and the future earnings considered in an assessment does not take account of child support and associated tax, student loans, and the direct costs of children to liable parent as these latter are not generally considered in the child support formula[5].
Changes proposed in the Child Support Amendment Bill 2001 do not take account of the impact of lump-sum payments. If a liable parent has been required to make a lump-sum payment based on future income, then the payment is essentially a capitalisation of a share of “higher” future income. Tax, student loan and overlooked child-related costs can mean that the capitalisation grossly exceeds any higher future income remaining for the earner. Capitalisation also places on the earner all the risk of earnings being lower than assessed, and still requires the effort to be expended to earn the money. The distortions would be more transparent, and the anomalies less widely acceptable, if payments were presented as a rate out of extra future income, rather than as a lump sum. This would demonstrate that changes in property relationship and child support legislation are both tapping into the same income (“double-dipping”), although this has not rated a mention in the debate on these changes.
The use of a higher earner criterion is problematic. It ignores possible differences in circumstances before the start of a relationship, and is downplaying the value of financial as compared to non-financial, less easily measured, contributions. People may be better able to make such contributions as a result of their efforts and past sacrifices, in which case it could be argued that they are being penalised by this criterion. The legislation effectively imposes a high effective marginal tax rate on them, with associated implications in terms of disincentives and expensive avoidance measures. It could also act as a disincentive to lower income earners in relationships, as any increase in their earning power would reduce the earnings difference and hence their claim for a larger share of relationship property.
There may be some gendered motive behind the legislative change. Ruth Busch, speaking in favour of the changes at a Wellington seminar on 6 August 2001 referred to the feminisation of poverty. It is not clear that the data support such a claim, and the concept itself has come under some criticism. To quote from Autagavaia M K (1998) “First call for children”, an unpublished presentation to the Manakau Health City Forum:
“… the fatal flaw of the
‘feminisation of poverty’ analysis is that it treats
all women as members of an oppressed class. On the one hand, it
minimises the differences in condition and consciousness among
women. On the other hand, it minimises the commonality in
condition and consciousness between women and men of the same
class or ethnic group as in the case of Pacific People. Pacific
Islands women reject this analysis as it provides a distorted
view of women by leaving Pacific Islands men who are more
vulnerable to economic conditions entirely out of the picture.”
Future income issues have received publicity in the recent past. At the time, it was said that BvB [1997 NZFLR 217] did not set a precedent for the consideration of future income in matrimonial property settlements. Nevertheless we now see the principle applied. The woman in BvB could expect a much lower income after separation, but her share of matrimonial property under the legislation of the time approached $500,000. As the June 2001 report of the Tax Review states, low income does not necessarily indicate poverty. It is wrong to focus solely on income to determine relative well being. This is readily apparent if we note that a lump sum settlement would do nothing to change the measured incomes of either party.
While law changes appear to protect or enhance the economic position of “primary caregivers” (a questionable concept in itself) and custodial parents, we still see evidence of gatekeeping, whereby men face barriers to participating equally in these activities. This was evident in a workshop run by Otago University’s Children’s Issues Centre, (“Children whose parents live apart – family and legal contexts”, 27 July 2001, Wellington).
Extracts from Shelly Day Sclater (1995) “How adults cope with divorce – strategies for survival”, Family Law, March, pp.143-147 made up half of a handout for small group discussion sessions. It included the following:
“The vulnerable parent’s
energies are then channelled into ‘doing what’s best
for the children’, conceived from the vantage point of the
emotionally vulnerable parent, who is unable to see that the
disputes over the children he has become involved in have their
origins in his own inability to cope.”
Another handout referred to “a tension” for separated parents having to remain in some kind of relationship if they are both engaged in parenting.
In combination, the implication is that it is a problem for both parents to continue to be active, and that “he” is considering his own interests over those of the children if he wishes to stay involved. Such a charge is difficult to refute, as any assertion of a wish to be involved can be turned into “evidence” of his inability to cope.
2. Law and how it may be applied
We can anticipate the development of case law which will set in place certain guidelines. However the issues are complex, and we could question whether the end result will give appropriate outcomes. Without training in economics, lawyers are unlikely to be able to address the issues adequately. As likely post-separation circumstances affect the division of relationship property, property issues should not be considered in isolation. There are clear interactions with child support. Other relevant factors include post-separation direct costs of children, shared parenting, changes of custody, and re-partnering. There is a significant economic dimension to these issues. There are also issues of family structure and the interests of children. These are not legal issues alone. How will lawyers determine the guidelines to apply? Of equal importance, what confidence does the general public have in the ability of the Family Court?
There is currently much vocal criticism of the Family Court, including weekly protests outside several Courthouses. Auckland has experienced this for the past six months. The Family Law Section of the Law Society attempts to dismiss this mounting criticism of the Family Court as claims from "some disgruntled men", referring to litigants with individual grievances who feel unfairly treated [6].
It is worrying that a body representing lawyers should misrepresent the situation in this way. There are numerous, far more broadly based, concerns being voiced about the operation of the Family Court. The Family Court, the Law Commission and the Law Society have repeatedly failed to address these concerns. To repeat just a few of them here:
If the Family Court already has a poor track record in explaining itself, can we expect it to do any better when it addresses the additional complexities of the new legislation on relationship property?
Uncertainty about interpretation is already indicated by existing case law. In BvB we see evidence on post-separation income levels being accepted, although some of this fails to recognise current circumstances, much is based on data from a short period after separation, average figures are used although individual circumstances can vary widely, and Weitzman has admitted that her frequently cited US results were wrong and grossly exaggerated any disadvantage women might face.
The Dominion of 30 May 2001 reported on a Court of Appeal decision that, even before the commencement of the Property (Relationships) Amendment Act, equal sharing of assets was appropriate for two people who were neither co-habiting nor having a sexual relationship (“Man told to share super money with ex-partner”, http://www.stuff.co.nz/inl/print/0,1103,811151a1701,FF.html). They were, “to all outward appearances” and “in many respects” a couple. Compare this to a TV documentary on the Family Court broadcast on 19 March 2001. A father was the caregiver for his son on a daily basis, but he was not married to or living with the mother at the time of the birth. The judge pointed out that he had no guardianship rights. This was despite the Court having the power to grant such rights. Perhaps the Court should have considered that he was "in many respects", or "to all outward appearances" a father.
Page 7 of the Ministry of Justice document, Relationship Property: a Guide to the Law presents an example of someone working in his own business, which is separate property. It states that, under the circumstances presented, the partner could be entitled to a share of the increase in value of the business.
The Dominion of 10 July 1996 reports a case where the Court of Appeal ruled that the bulk of a company that was claimed to be separate property should be considered matrimonial property on grounds including the “absence of evidence of a reasonable” payment by the company to the husband for his work, and “the wife’s frugality in managing the household”. How much discretion will the Courts claim in interpretation of the new legislation, and what detailed evidence will be required to constrain their subjective assessments?
Of equal importance, what prior assumptions do they have about the possible contributions of parties to a relationship and their relative circumstances after separation? Might they be guided by the sort of attitudes described by Mary Capamagian in the following extract of her submission to the review of guardianship, custody and access?
“Change the law so that if separated (or separating) parents cannot agree on which parents should have custody, it be prescribed that one parent, having a certain qualification, have custody. I suggest that the qualification be that the younger parent be automatically the custodial parent. Some of my colleagues think that the mother should be the custodial parent. It is interesting that all colleagues who gave this opinion were male family lawyers. I suspect that designating the mother as the qualifying parent would be politically unacceptable, hence my suggestion that the younger parent qualify.”
Those protesting outside the Family Courts may choose to feel, in the “absence of evidence” to the contrary, that a similar sleight of hand is being applied to conceal the true intent of this legislation. Will the Court be able to provide evidence to persuade them otherwise?
We cannot assume that lawyers will refrain from acting in areas where they lack the appropriate background. Consider child support review officers. Lawyers are engaged as review officers under the review process. This process requires them to consider claimed income and expenditure patterns by the liable parent and the recipient parent. A proper assessment would involve, for example, determining if the claimed expenditures are realistic, and if benefit entitlements are accurately stated. As the Minister of Revenue stated in the House on 30 May 2000, child support review officers do not receive specialized training to enable them to critically assess claimed income and expenditure levels. Nor is it a requirement for child support review officers to be familiar with benefit entitlements. In other words, these reviews are being undertaken by people who may be lacking the basic knowledge required. Similar problems are likely with the Property (Relationships) Act.
According to Cotter and Roper, there are even reasons to doubt that lawyers will behave in a suitably professional manner (Cotter W B and Roper C, 1996?, Report on a Project on Education and Training in Legal Ethics and Professional Responsibility for the Council of Legal Education and the New Zealand Law Society, New Zealand Law Society).
Cotter
and Roper reported to the Law Society that there was widespread
disregard for the rules, and even “conscious risk-taking to
get around them”. They went on to state that, “…there
is not so much a lack of knowledge of the Rules but rather there
exists a different corpus of authority [which] might come from
the president of the local district law society, the senior
partner of the firm or its ethics committee”.
The Law Society’s complaints procedure is known to be ineffective. Cotter and Roper state that, “…a perceived lack of rigour in enforcement contributes to the climate that the Rules do not matter”.
They ask, “Are lawyers operating effectively in a business environment but being inhibited by an outmoded concept that they are working as part of a profession, which has its own rules of conduct?” This question is itself surprising. If they are in business, then their product is the law. If appropriate standards are not met, then they are undermining their product. They are also undermining confidence in one of society’s major institutions and putting in question the value of such principles as that of judicial independence.
Lawyers'
techniques have also been described by the Honourable Justice
Robertson:
"The
hallmark of most litigation was stealth and
surprise. You kept both hands in
your pocket, every rabbit still in the hat, and you hoped, by
avoiding any forewarning, to be able to steal a march and win
your client's case. That is not the law as I observe it today...
At least from the perspective of the outsider it is a situation
where the prime driving force frequently appears to be a fees
budget which has to be met to maintain a predetermined standard
of living and lifestyle."
(Robertson, Hon. Justice, 1999, "The 'Lost Lawyer' - Where Have She and He Gone?" paper to the New Zealand Law Conference)
It is not immediately apparent that the Property (Relationships) Act will be appropriately applied, even if lawyers return to the higher objective of operating by “stealth and surprise”.
3. Wider social messages
The Act changes the rules relating to relationships. This will have an effect on behaviour. Apologists for family law in government and the Law Society have claimed that the law only affects those whose cases go to hearing, claimed to be variously 3, 5 and 12 per cent of guardianship cases. This is an extreme position, and at odds with most people’s understanding of the law. No such claim is made in relation to laws on speeding, or when handing down deterrent sentences, for example. However, the people making these extreme claims are the ones responsible for making and implementing family law. There is little indication that the wider social implications have been considered.
The Act will have an effect equivalent to raising the effective marginal tax rate for both partners in de facto relationships and in many marriages, discouraging either partner from undertaking paid work. Conversely, it increases the relative rewards of unpaid work. It remains to be seen how people in relationships will adapt, but, just as with high income tax rates, as a first-stage reaction we are likely to see costly avoidance measures and associated inefficiencies.
If it is felt that such avoidance behaviours go against the intent of the Act, we could anticipate further legislative change bringing increasing complications and tighter controls. While it is suggested that people can opt out of the legislation, it remains to be seen how secure this option will be, especially if there is a “child of the relationship”, who need not be a child of both parties.
There are other areas that merit attention. The Act may have implications for: the stability of relationships; re-partnering; custody outcomes and ability of NCP to be an effective parent; messages to children on roles and opportunities for the future; people’s willingness to study and work, and to plan long-term; and attitudes to and respect for the law.
Hon. Leanne Dalziel said in a speech in Auckland on 10 August 2001, “I’ve described my generation as the ‘instant gratification’ generation, who buy first pay later”. A law that transfers income and wealth from the higher income earners in relationships of only 3 years’ duration sends a clear signal that deferred gratification does not pay. If the government wishes to build an inclusive, forward thinking society of individuals who are willing to invest in their futures, it must look far more carefully at what it is doing in the area of family law.
[1] Centre for Public Policy Evaluation, Massey University, Palmerston North
[2] Saville-Smith K (2000)
Familial caregivers’ physical abuse and neglect of
children: a literature review, Ministry of Social Policy. http://www.dsw.govt.nz/publications/docs/familialcaregiverslitreview.pdf
[3] Some aspects of the equal sharing presumption are discussed in Birks S (1994) Women, Families and Unpaid Work”, http://www.massey.ac.nz/~kbirks/gender/econ/unp4web.htm
[4] http://www.ird.govt.nz/childsupport/csa.htm#facts
[5] (Henman P and Mitchell K, “Estimating the costs of contact for non-resident parents: a budget standards approach”, forthcoming in the Journal of Social Policy). Quoting from the abstract: “Costs of contact are found to be high. Where contact is with one child for 20 per cent of the year, the cost of this contact represents about 40 per cent of the total yearly costs of raising that same child in an intact couple household with a medium income, and more than half of the total yearly costs of that child in a household with a low income.”
[6] Media releases of 19 and 20 July 2001, at: http://www.familylaw.org.nz/media/media.asp