Couples at war
Ex-partners are spending years and vast amounts on bitter legal fights over relationship property. In part one of a two-part investigation, Jane Phare asks what’s gone wrong with the system.
What’s wrong with the divorce system?
Sarah Sparks doesn’t hold back when describing the legal system that nearly destroyed her life. She fought for years to resolve a relationship property dispute with her ex, but after spending nearly $2 million on legal fees and expert witnesses, withdrew from High Court proceedings last year. Now she’s waiting for a decision on an application for costs of $444,000 against her.
She uses words like “brutal” and “horrendous” when describing the sevenyear process she went through. The legal system, she says, is “broken”.
From the outside Sparks could easily be dismissed as a bitter divorcee, used to a lavish lifestyle and now furious that the expense account, stylish family home and designer handbags have slipped from her grasp.
But the adjectives Sparks uses to describe the system that separated couples find themselves buried in are echoed by others the Weekend Herald has spoken to: lawyers, forensic accountants, academics and others who have battled for a fair share. They all know about Sparks. One lawyer called her “courageous, resilient, strong”. They don’t know how she kept going.
And that’s the point, Sparks says. What’s wrong with a system that forces couples to go to war for years, destroying their finances, families, mental health and emotional wellbeing along the way?
Those working in the industry echo her anger and frustration at a system that enables unfair tactics: money, property and businesses protected in trusts; delaying tactics that push up costs; controlling money so the other side is forced to give up; not revealing assets under discovery. The list goes on.
Sparks’ back-story is well known among the Queen City’s wealthy set: married to property developer Greg Olliver, three children, didn’t see the split coming, sold her jewellery and borrowed money to fight through the courts, ran out of funds, represented herself in court — sometimes up against two or three lawyers — before giving up. The result was . . . very little.
Now Sparks has come out fighting. Not for her, she says. That battle is a lost cause, buried deeply somewhere in a complex web of trusts and companies. She might never know the truth, but she can guess.
Instead, she wants to be a voice for those in similar circumstances who have contacted her since her story became public.
“I’m here for all those other women who have been locked out of the system. They haven’t got the money and they can’t trace where everything’s gone.”
Sparks, and most of the divorce lawyers in town, are frustrated at the lack of action over promised changes to the outdated Property (Relationships) Act
1976. She’s dismayed that the Government has yet to implement changes recommended in the Law Commission’s
2019 report on the Act, published after several years of research.
The report is now on the back burner while the commission examines the laws of succession (after death). University of Auckland law professor Mark Henaghan thinks the Government has deliberately slowed its progress because parts of it won’t be popular with “voters with lots of assets”.
“The law of succession is just an excuse,” he says. “It’s only a small part of the Act, dealing with relationship property on death. It’s social legislation that we should get onto quickly. It’s limped on for far too long.”
Henaghan has specialised in family law since 1980 and it doesn’t take much to get him riled up about the subject. Over the years he’s advised dozens of people, mostly women, including Sparks, trying to wade their way through complex networks of companies and trusts.
The process of discovery — when the parties exchange information — is far too slow, he says. The other side will drip-feed information to drag cases on for years. Why is that allowed to happen, he asks?
“The time and delay is unbelievable. All those big cases, some of them are 10 and 12 years in the courts. And they get nothing. I think it’s so unfair,” he says.
“It should be speedy and inexpensive and it’s neither of those things. It’s just not good enough. People need to get on with their lives.”
Pushing for change
Recognising the need for change, the commission has recommended a new Relationship Property Act and says it wants to “address behaviour that causes delay and increased costs”.
One of its most unpopular recommendations in wealthy circles – or popular, depending which side you’re fighting on – targets the use of trusts to protect assets from a spouse or partner.
Back in 1976 the Property (Relationships) Act was seen as ground-breaking social legislation, recognising women’s contribution to the relationship, apart
from income, and dividing assets 50/50. But times, and relationships, have changed.
The commission’s research showed an increasing number of multiple relationships, with people coming into a union already owning considerable property and sometimes with one, or two, sets of children. Creating trusts became one way of protecting property from a new spouse or partner.
Henaghan has nothing good to say about trusts, calling them an “indictment on the rule of law” and “a rich person’s tool”. The irony is that they were created centuries ago to protect wealthy married women who could not own property, but could get income from a trust.
“Now they’re used to beat people over the head and deprive them of getting access to property.”
Aside from trusts, the commission also wants to see a fairer share of future earnings by introducing Family Income Sharing
Arrangements (FISAs) where there is an economic disadvantage after a split.
And it recommends that a family home preowned before a relationship, or gifted or inherited, should not be split 50/50. Instead, only the increase in the value of the property during the relationship would be shared.
Most in the divorce industry think the division of all assets after three years is unfair, and that a five-year relationship should be treated differently from a 25-year one. They’d like to see some sort of formula to work out a settlement. However the commission has recommended the threeyear timeline remain unchanged.
But Sparks, and anyone who has fought their way through the courts, thinks the outdated 1976 Act is only part of the problem. They’re critical of the court system itself, particularly the overloaded Family Court.
Auckland lawyer Jan McCartney, QC, finds the Family Court so difficult to deal with that she tries to put every case she can through the High Court, which she says has a case management system that is “gold star” by comparison.
Try ringing the Family Court, she says. You probably won’t get an answer.
Couples and lawyers can find themselves buried for years as they work their way through multiple appearances in the Family Court, the High Court, the Court of Appeal and the Supreme Court.
Sparks doesn’t mince words. “I think the court system in this context is broken. It’s not fit for purpose,” she says.
“The legal system treats us in such a brutal and commercial way. We’re talking about families here. Of all the jurisdictions, the Family Court is the most brutal.”
Auckland lawyer Sheila McCabe thinks the process of going to court is so “horrendous” that it should be a last resort. She believes lawyers have a duty to make clients aware of how brutal the court system can be, that their lives and finances will be aired in front of strangers.
“I mean, being cross-examined . . . it’s a skill that we have and we get taught. It’s a demolition. You are designed to pick apart the evidence of that person. You are trying to discredit them, or perhaps accuse them of hiding things. It’s a process that is hideous.”
Delays in the courts mean people can wait months, even years, for hearings, while valuations, particularly for property, quickly get out of date and have to be reassessed by experts at huge cost.
It’s a system that is open to abuse, with one or both parties using tactics to drag cases on for years until one side runs out of money and/ or the will to fight. The tactics include:
Not revealing assets, including bank accounts and the contents of trusts, under discovery orders.
The person with control over the finances and assets using that to their advantage to carry on a protracted legal battle. Bombarding the other side with interlocutory applications, backed by lengthy affidavits, designed to frustrate the process and add expense. Lawyers advising clients to “cut off the money” to make it difficult for their ex to pay legal bills. Divorce lawyers and forensic accountants have seen everything: joint bank accounts drained; money siphoned off overseas; threats over guardianship of the children; and more recently, putting property in another person’s name, often a trusted family member, either in New Zealand or overseas. The love story turns septic and money is usually behind the infection.
Many of the worst disputes involve a typical scenario: one spouse, more often than not a woman in a traditional marriage and without independent income, is left grappling to understand the family finances and fight for her fair share. And there is usually plenty of money — millions — but it’s unattainable.
Divorce lawyers say they have smart women coming to them who are embarrassed that they didn’t know they weren’t included on property title or in trusts, who have little knowledge of the family finances.
Forensic accountant Brendan Lyne is constantly surprised at the lengths some people will go to in order to protect their loot when there is plenty to go around.
“You see some fairly despicable things at times.”
And he’s astounded by some of the wealth in cases he’s involved in — hundreds of millions, he says — belonging to couples who fly below the radar. Around 80 per cent of his clients are women, often in the older age group, because they’re the ones who need a forensic accountant to untangle the complex tactics used to hide assets.
Lyne can spend weeks trying to understand property pools in 30 companies and five different trusts. Where has the money come from and where has it gone?
“Successful business people tend to be fairly controlling, and strategic,” he says tactfully.
“What the wife hears is ‘everything I have is yours’. What he fails to mention is that everything he has is in a trust.”
He talks of a recent case where the husband siphoned off large amounts of money overseas throughout the relationship, allegedly to repay a debt.
But in fact the funds were being channelled back to his personal trust in Auckland. “Just a shocker, really,” Lyne says.
He’s had cases where clients have given up or settled for just a small percentage of what they were entitled to.
Divorce lawyer Lady Deborah Chambers, QC, says women are more vulnerable if they haven’t been the money earner. Spousal maintenance and making sure clients have enough money to mount a legal challenge is an area she has worked hard on.
Chambers was the driving force behind a Court of Appeal ruling last year that required former Queenstown millionaire Tim Biggs to pay his ex-wife Sophie $700,000 “without delay” while she fought for her share of an estimated $59 million of relationship property.
New Zealand has had its fair share of high-net-worth divorce disputes, including the one between model Kylie Bax and Greece-born photographer Spiros Poros, with the couple trading bitter claims and counterclaims.
Divorce lawyer and mediator Jeremy Sutton says high-net-worth cases that drag on for years can often be blamed on a mixture of competitive lawyers, the legal system and clients who are not ready to settle.
Divorce lawyers hear it all: “He’s a narcissist; she’s got mental health issues.”
He’s wary of new clients who have already changed lawyers six times. And some lawyers, he says, just email back and forth — he expects the nasty ones on Friday afternoons — without resolution.
“It gets you nowhere. I believe in sorting things out quickly.”
He’s in favour of “collaborative law”, where both sides and their lawyers meet.
“If you get people in the same room for a day you can usually do quite well.”
But Sutton says if the Friday emails keep coming and mediation’s not an option, he’ll opt to file in court to focus the other side. Once there’s a court date pending, resolution doesn’t seem such a bad idea, he says.
Prenuptial agreements
Prenuptials, known as “contracting out” agreements, have become increasingly common, particularly in second and third relationships. Chambers is in favour of prenups as long as they’re fair, and says both sides need to get independent advice.
But they should not be set-andforget documents. Lawyers warn that with the passing of time, and changed circumstances, prenuptial agreements need to be renegotiated. If not, there’s a risk that the agreement will be declared void by the court because it has become unjust.
In the US, celebrities increasingly include “no cheating” clauses in prenups. Chambers has had Kiwi clients who want them written in, but she’s not in favour.
Her reasoning is this: a traditional wife’s economic circumstances are poor because the couple had children and she stayed at home to look after them. That’s not going to change, whether or not she had an affair.
“How she behaves is irrelevant,” Chambers says.
It might well be a good reason to end a marriage, but not one to deny maintenance or a fair share of relationship property.
Emotion gets in the way
Talk to any lawyer involved in relationship property disputes and they’re invariably in favour of a sensible, tidy settlement. But they don’t happen that way very often.
Emotions like bitterness, resentment, envy, distrust and grief often get in the way. Sam Bassett, an accountant and valuer with Moore Markhams in Auckland, says he frequently realises, while working on a significant case, that it’s not about getting a fair monetary settlement. “It’s about making his life, or her life, completely unbearable for as long as possible. And that’s frustrating.”
The emotional toll cannot be underestimated, McCartney says, and it’s not just women who suffer.
“People think it’s the women who get hit hardest, and they do; it’s awful. But don’t think the men aren’t having a hard time too.” One party might be trying to run a business while constantly being hit by court proceedings, trying to see their children and deal with a failed relationship.
“It’s really tough,” she says. “The earlier we can get resolutions, the better off we’re all going to be. Both parties go through deep, terribly troubling anguish. It shows the Family Courts are not working if they can't respond to that.”
What the wife hears is ‘everything I have is yours’. What he fails to mention is that everything he has is in a trust.
Forensic accountant Brendan Lyne
[Trusts are] used to beat people over the head and deprive them of getting access to property.
Law professor Mark Henaghan