Section 182 Claims Explained: What You Need to Know About Nuptial Settlements and Property Division

Who can make a section 182 claim?

Only partners who are married or in a civil union can file claims under section 182 – de facto partners are not eligible to apply. You must have legally dissolved your marriage or civil union, which can usually occur only two years after separation. Section 182 claims need to be filed within a “reasonable time” after dissolution. What constitutes a “reasonable time” depends on the circumstances. For example, a delay in filing of two years and four months after dissolution was considered reasonable by the court in one case where the applicant didn’t know about filing deadlines and was dealing with complex property issues.

What is a section 182 claim?

Section 182 allows the court to modify “nuptial settlements”. A nuptial settlement is a legal arrangement — like a family trust or deed — that is connected or related to the marriage or civil union. It provides ongoing financial support or the potential for such support to one or both partners. Once a nuptial settlement is identified, the court can change the settlement between the partners after dissolution to ensure it remains fair given their relationship breakdown. Unlike the Property (Relationships) Act 1976, there is no automatic equal division of assets when determining a section 182 claim. Instead, the goal of a section 182 claim is to adjust the nuptial settlement fairly between the partners, considering the new circumstances of the parties’ separation and other relevant factors.

What is a “nuptial settlement”?

There are many transactions, documents, or deeds that are capable of being nuptial settlements. Instead of simply considering the type or title of the transaction, document or deed, the Court focuses on its practical effects. The key factors in deciding whether something is a nuptial settlement include:

• Whether the transaction, document or deed is intended to provide ongoing support.
• Whether it has a clear connection to the marriage or civil union.
• Whether it creates financial benefits, or the potential for future financial benefits.

What are some examples of a “nuptial settlement”?

Given the broad range of transactions, documents, or deeds that can qualify as nuptial settlements, here are some common examples:

1. Trusts created during the marriage: If a couple establishes a family trust during their marriage for their benefit and their children’s benefit, it usually qualifies as a nuptial settlement. Settling items of property into the same trust during the relationship also qualifies.
2. Trusts set up by one partner before marriage: A trust established by one partner before the relationship isn’t a nuptial settlement. However, if they marry later, a section 182 claim might arise against that trust. For example, in Bethell v Bethell, the trust had a broad range of beneficiaries, including future spouses. The trust was settled before the couple were married, meaning that the other spouse was not a beneficiary at the time of settlement of the trust. However, the couple later married, meaning the spouse fell within the class of beneficiaries as a result of the marriage. Furthermore, during the marriage, the trust bought a farm that the couple lived on and benefited from. In these circumstances, the court considered that the acquisition of the farm by the trust amounted to a nuptial settlement, even if the creation of the trust before the marriage was not in of itself initially a nuptial settlement.
3. Trusts amended to include a spouse as a beneficiary: If the beneficiaries of a trust are changed during the relationship to include a spouse or civil union partner, it may qualify as a nuptial settlement.
4. Trusts set up by third parties related to the marriage: Trusts created by family members, such as a trust set up by a parent for their child and their child’s spouse, can also be nuptial settlements. The case Clayton v Clayton confirmed that as long as a trust is connected to the marriage, it can qualify, even if it is settled by someone else.
5. Contracts or deeds related to the marriage: While most nuptial settlements involve trusts, other contracts or deeds can qualify as nuptial settlements if they create ongoing obligations tied to the marriage. For example, a deed in which a parent loans money to their child and their child’s spouse, with the deed explicitly stating that a portion of the debt will be forgiven at a future date provided they remain married, could be considered a nuptial settlement. This example contrasts with Booth v Booth (discussed below), where a debt from a one-off deal was not nuptial settlement as it did not create ongoing provision and was considered commercial rather than being tied to the marriage in question.

What are examples of legal arrangements that aren’t “nuptial settlements”?

Some transactions, documents or deeds will not qualify as nuptial settlements. Here are some examples:

1. Trusts set up by third parties without reference to the marriage: In Da Silva v Da Silva, a trust was set up by a grandmother for her daughter and grandchildren. The trust was settled by the grandmother during her daughter’s marriage, but it was not considered a nuptial settlement. The daughter and grandchildren were beneficiaries, but the daughter’s husband, Mr Da Silva, was deliberately not included as a beneficiary. Neither he nor the daughter were trustees of the trust, further demonstrating their lack of connection to it. In these circumstances, the court considered that the grandmother’s trust wasn’t a nuptial settlement as there was an insufficient connection between the trust and the daughter’s marriage to Mr Da Silva. This case demonstrates that a lack of connection between a settlement and the marriage can prevent a transaction, document or deed from qualifying as a nuptial settlement.
2. Commercial transactions without reference to marriage or civil union: Even when involving a married couple, commercial transactions are not automatically considered nuptial settlements if they lack ongoing provisions tied to the marriage. In Booth v Booth, a grandfather sold a farm to a company owned by his son and daughter-in-law, leaving the purchase price as a debt owed to him. The daughter-in-law argued that the loan was never intended to be repaid and would eventually be gifted. However, the court ruled that the debt was properly documented in a valid deed, making it a legitimate commercial transaction. Even if the grandfather intended to forgive the debt in the future, this had not occurred, and there was no legal obligation on him to do so. The sale was a straightforward, one-time business deal with no continuing provisions for the couple as spouses. This case highlights that family financial arrangements structured as valid one-off business transactions may not qualify as nuptial settlements, even when they involve a married couple.

What process does the court use to assess a section 182 claim?

Once jurisdiction to apply under section 182 is established and a nuptial settlement is identified, the Court examines what would likely have occurred with the nuptial settlement had the parties’ marriage or civil union continued. The Court also considers what has happened, or may happen, with the nuptial settlement after the parties’ separation. If the Court finds that the separation creates a disparity — where one party cannot access the same benefits they would have received if the relationship had continued — it must then determine what orders to make under section 182 to address and rectify this imbalance. This process is known by lawyers and the court as the ‘three-stage Preston v Preston test’.

How does the court determine what orders to make under section 182?

When deciding what orders to make, the Court considers several factors, including, but not limited to:

• The source and nature of the assets within the nuptial settlement.
• The contributions made by each partner (both financial and non-financial).
• The needs of any dependent children.
• Overall fairness.

The court’s goal is to prevent one party from gaining unfairly from the nuptial settlement at the expense of the other, now that the couple have separated. The court takes a flexible approach and uses its discretion to create a solution that fits the specific facts of each case.

Example: Preston v Preston

For example, in the case of Preston v Preston, the Court assessed whether a family trust settled by Mr Preston in 2004 for the benefit of his children constituted a nuptial settlement. Although the trust was initially settled three years before Mr Preston met Mrs Preston in 2007, it became a nuptial settlement in 2010 when Mr Preston effectively added Mrs Preston as a beneficiary. The Court found a significant financial disparity between Mrs Preston’s access to the trust’s benefits had the marriage continued, compared to her position after their separation in 2015. During the marriage, Mrs Preston had access to trust assets that provided her with rent-free housing and financial support. Had the marriage not ended, she would have continued to receive support from these assets, including dividends and assistance for her studies.

This decision highlighted the Court’s use of section 182 to address unfairness, ensuring that one party does not lose out on benefits they would have otherwise received if the relationship had persisted. To remedy the disparity, the Court awarded Mrs Preston $243,000 from the trust, which represented about 15% of its total value. The decision considered her contributions during the marriage, both financial and non-financial.

However, the Court recognised that as Mr Preston was the main source of the trust’s assets, Mrs Preston was unable to access a larger share of its value. Additionally, the marriage had been relatively short, and Mr Preston’s children were the final beneficiaries of the trust. In light of these factors, the Court aimed to close the financial gap Mrs Preston faced after the separation while also considering the source of the assets, the brief length of the marriage, and the interests of Mr Preston’s children.

When will a section 182 claim be determined unequally in one partner’s favour?

As illustrated in the example above, an unequal outcome may be appropriate when one spouse mainly funds a nuptial settlement, such as a trust, with assets they had before the marriage, especially in shorter relationships.

Another example: Little v Little

Another example is Little v Little, where the trust was set up before the marriage and primarily contained the husband’s pre-marital assets, including a funeral business. Although the wife worked in the funeral business for many years and helped increase its value, the Court determined that her section 182 award should only reflect the increase in the trust’s value during the marriage. This ruling acknowledged her contributions during this period but did not grant her half of the entire trust capital. In other words, the Court used its discretion to ensure the trust compensated her for the value she added, resulting in a slightly unequal division in the husband’s favour, as the base capital of the trust at the commencement of the relationship was preserved.

When will a section 182 claim result in the equal division of property?

In cases where a nuptial settlement such as a trust was settled during the marriage or civil union and has built up assets through the combined efforts of both spouses or partners, an equal division of property is more likely. When both parties have created and grown the trust’s capital during the relationship, a 50/50 split is usually considered fair. This division reflects the equal contributions made by both partners.

Do I have to apply to court to resolve my section 182 claim?

You don’t always have to go to court to resolve a section 182 claim. Many couples successfully negotiate and settle their claims outside of court after separating. When they reach an agreement, trust property can be adjusted or redistributed using a Section 21A Property (Relationships) Act 1976 agreement, along with other trust documents. This also means a settlement can happen without waiting for the marriage or civil union to be dissolved. Court involvement is usually required only if the parties can’t agree, or in more complicated cases.

What if there is a prenuptial agreement?

A prenuptial agreement can affect your ability to pursue a section 182 claim. According to subsection (6) of section 182, the court cannot use section 182 to change or override a prenuptial agreement made under the Property (Relationships) Act 1976 unless it believes that the interests of any child of the marriage or civil union require it. If a prenuptial agreement is in place, it’s important to review its terms carefully to understand how it may impact your ability to make or defend a section 182 claim.

How long does it take to resolve a section 182 claim?

The timeline for resolving a section 182 claim can vary depending on the complexity of the nuptial settlement, the willingness of the parties to negotiate, and whether court intervention is necessary. While some claims may be settled within a few months, others can take longer, particularly if litigation is required. Engaging a lawyer early in the process can help speed up negotiations and reduce delays.

Can other claims be pursued alongside a section 182 claim?

Section 182 is a standalone claim, but it can be filed alongside other claims typically available during separation. Each claim has its own legal requirements that must be met, but there is no restriction on pursuing multiple claims if the situation justifies it. For example, it is quite common for a section 182 claim to be filed alongside an application for the division of relationship property.

How Fixed can help with section 182 claims

The outcome of a section 182 claim is assessed on a case-by-case basis, emphasising the importance of engaging a lawyer experienced in handling such claims. An experienced lawyer can help navigate the complexities of nuptial settlements and ensure the best approach to defend or pursue a claim.

At Fixed, we simplify section 182 claims. Our team will help assess your rights, determine if a nuptial settlement exists in your situation, and gather the necessary documents to support your claim or defend against your ex-partner’s claim.

We prioritise negotiation to reach solutions outside of court, but if litigation is necessary, we’ll handle all the paperwork and guide you through the process. Contact us today for a free initial consultation to discuss your options.