Legal Project Management Plan & Checklist
Claim trust assets as relationship property in New Zealand using PRA ss 44 and 44C compensation orders where a partner transferred assets into a trust.
Can trust assets be claimed as relationship property in New Zealand?: Yes. Under [Clayton v Clayton [2016] NZSC 29](https://www.courtsofnz.govt.nz/), a discretionary trust can hold relationship property where the settlor spouse retains effective control - for example, a power of resettlement that gives practical dominion over trust assets. Where trust assets qualify as relationship property, the applicant may seek a compensation order under s 44C of the Property (Relationships) Act 1976. The court awards compensation from the trust estate equal to the share the applicant would have received but for the disposition. Clayton remains the leading authority and no trust analysis is adequate without applying it.
What is the difference between a Section 44 and Section 44C PRA claim?: Section 44 allows the court to set aside a disposition of relationship property made with intent to defeat the other partner's rights; the transfer is unwound. Section 44 sets no time limit on when the disposition was made. Section 44C is broader: it applies where relationship property has been disposed of to a trust since the relationship began and the disposition has the effect of defeating the claim or rights of one of the partners, without needing to prove intent (s 44C(1)). Rather than setting aside the disposition, s 44C lets the court order the other partner to pay a sum of money or transfer property, or order the trustees to pay the whole or part of the income of the trust (s 44C(2)); s 44C(3) restricts when the income order can be made. Practitioners must identify which remedy - or both - applies on the facts.
NZ trustees joined as respondents to a PRA s 44C trust asset claim must get independent legal advice and defend the trust estate.
Jurisdiction: Family Court of New Zealand for compensation orders under s 44C. High Court of New Zealand where the matter is legally complex, where trust assets exceed the Family Court's practical capacity, or where a parallel setting-aside order under s 44 and trust law remedies are sought concurrently.
The Process at a Glance: The matter opens with a conflict check that must include all trustees, followed by a client interview to identify every trust in which the partner holds an interest. Trust deeds and financial accounts are obtained under the mandatory disclosure regime in the Trusts Act 2019. The Clayton analysis is applied to each trust to determine whether assets are relationship property. Where the threshold is met, an initiating application is filed in the Family Court, trustees are joined as respondents, and interim injunctive orders are sought to prevent asset dissipation. Discovery is directed at the trustees as well as the partner. Expert valuation evidence is obtained for all qualifying trust assets, valued at the hearing date. Counsel attend a judicial settlement conference and, if unresolved, a substantive hearing. If successful, a compensation order is entered against the trust estate and enforced.
Key Legislation and Case Law: Property (Relationships) Act 1976 - s 44 (setting aside dispositions made in order to defeat a claim; the section has no time window); s 44C (compensation orders where property disposed of to a trust, no intent requirement); s 2G (valuation at hearing date). Trusts Act 2019 - mandatory trustee disclosure; 125-year maximum duration. Key cases: [Clayton v Clayton [2016] NZSC 29](https://www.courtsofnz.govt.nz/) - leading Supreme Court authority on trust effective control; [Ward v Ward [2009] NZCA 139](https://www.courtsofnz.govt.nz/) - s 44C compensation methodology. Ministry of Justice: Family Court.
Further Reading
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| Matter numberⓘ | matter.matterNumber | text | Required | inheritedmatter-core |
| Matter title | matter.title | text | - | inheritedmatter-core |
| Matter typeⓘ | matter.matterType | text | - | inheritedmatter-core |
| Matter status | matter.status | text | - | inheritedmatter-core |
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| Client name | matter.clientName | text | Required | inheritedmatter-core |
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