The Supreme Court’s recent decision in Cooper v Pinney [2024] NZSC 181 (“Cooper”) has clarified the extent to which trust powers may be considered relationship property under the Property (Relationships) Act 1976 (PRA), refining the scope of its earlier landmark ruling in Clayton v Clayton [2016] NZSC 29 (“Clayton”).
THE DIFFERENCES BETWEEN CLAYTON AND COOPER
In Clayton, the Supreme Court found that a spouse’s control over a family trust was so extensive as to be tantamount to ownership, and the trust property therefore should be considered relationship property, and subject to division under the Property (Relationships) Act. In contrast, the facts of Cooper allowed the Court to distinguish the position. The Court found that not all trust powers will be treated in this way.
In Cooper, Raewyn Cooper argued that her former de facto partner, Marcus Pinney, had similar control over a trust (the MRW Pinney Trust), and that his trust-related powers should be classified as relationship property. Unlike Clayton however, Pinney’s powers were constrained by fiduciary duties and trust deed provisions.
The Court ruled that because Pinney was not a sole trustee, could not act unilaterally, and remained bound by fiduciary obligations to other beneficiaries, his powers did not equate to ownership of the trust assets. As a result, his rights under the trust were not classified as relationship property, and Raewyn Cooper had no claim to them.
WHAT THIS MEANS FOR YOU
- Not all trust powers are property. A person’s rights in relation to a trust may only be considered relationship property if they effectively have unfettered powers.
- Trust structure matters. If a trust has multiple trustees, requires unanimous decisions, and the trustees retain fiduciary obligations, the assets should fall outside ny relationship property dispute.
- Legal advice is essential. Individuals involved in trusts— whether seeking to protect assets or claim a share—should seek legal advice early to clarify their rights.
- Prevention is better than litigation. A well-drafted relationship property agreement can help avoid costly disputes. Proper trust structuring and careful drafting of trust deeds remain crucial.
If you have concerns about how a trust may be treated in a relationship property dispute, or if you are considering structuring a trust for asset protection, we recommend seeking specialist legal advice as early as possible.
