Ex-Files with Jeremy Sutton: ‘Can I get in on an investment my ex made with our money?’

'Am I entitled to share in the increase in value since she used relationship property funds?' Photo / 123rf

Q: I separated from my wife five years ago. She re-partnered shortly after our separation. We still need to divide our relationship property.

Two years ago, my ex-wife and her new partner purchased a property together in central Auckland at a mortgagee sale. My ex-wife contributed $500,000 towards the purchase price, and I understand her partner contributed roughly the same. She used $250,000 from funds held in a bank account which existed during the relationship and sold shares in her name (purchased during our marriage) to raise the funds.

The property my ex-wife and her new partner bought has now increased in value by $200,000. Am I entitled to share in the increase in value since she used relationship property funds?

A: My view is that you would be entitled to a share of the increase in value. It is not possible to say definitively though; it will depend on the exercise of the discretion (view) of the presiding judge.

Generally, property acquired by either party after the end of the relationship is separate rather than relationship property. For example, a car purchased with income earned from employment after separation.

In your case, your ex-wife has used relationship assets to invest after separation. The term deposit funds would otherwise have been earning interest and the shares would possibly have been increasing in value had she not sold them. You would have shared equally in half of any increase in the value of those assets. She has deprived you of that opportunity.

On the other hand, your wife and her new partner chose the property, potentially purchasing it under its true value. They could argue that their efforts primarily contributed to the increase in value. You would not be expected to share in the loss if the property declined in value.

Judges have discretion (under section 9 (4) of the Property (Relationships) Act 1976) to find assets to be relationship property rather than separate property if the Court considers it “just in the circumstances”.

Some examples of successful cases under s 9(4) include:

1. Where a bonus was paid to one party after separation but the relevant period of employment was before separation;

2. Where, after separation, one party received a payment for agreeing to sign a restraint of trade;

3. Where, as here, a property was purchased after separation with relationship property funds.

The case law indicates that the key factor is whether there is a link between the relationship and the acquisition or increase in the value of the asset acquired post-separation. As noted above, it will also come down to what the judge considers to be just overall.

At best, you would only be entitled to one-quarter of the total value of the property and therefore, one-quarter of the increase in value since your ex-wife only owns a half share of the property.

Alternatively, a judge may consider that a fair outcome would be that you should receive a sum that reflects how much you would have received in interest from the term deposit and any increase in value in the shares.

It would be worthwhile attempting to negotiate a share of the increase in value in your wife’s new property. If she does not agree, you must consider whether it would be worth pursuing the matter in court. You would need to factor in possible legal fees plus the litigation risk, given that the outcome will be dependent on the exercise of the judge’s discretion.

You and your ex-wife should also sort out a division of your relationship property sooner rather than later to prevent further disputes. If you are unable to resolve a division of property by agreement and need to resort to court proceedings, then you could include a claim to the new property in the overall relationship property proceedings.

- Jeremy Sutton is a barrister and family lawyer at Bastion Chambers.