Limits on Relationship Property Agreement, Transfer of Property to Defeat Creditors

September 19, 2014

in Family & Relationship Property

iStock_000017754761SmallThe Court of Appeal has recently upheld a High Court decision which confirmed that the avoidance of a relationship property agreement intended to defeat creditors’ rights cannot improve the position of creditors only to preserve it.

This case was very interesting to the extent that the offending provision of the purported relationship property agreement was an attempt to transfer a jointly owned house property to the husband only and the insolvent wife was to retain various businesses, which were in financial trouble.

The creditors prevented the transfer from being effected by registering a Charging Order over the title to the property. The husband then died before the transaction could proceed further and this had the effect (as alleged by the creditors) of having the whole of the property in the assumed ownership of the insolvent widow and therefore the creditors alleged they could claim over the whole of the property.  All of the Courts involved (The Family Court in the first instance, then the High Court and the subsequently Court of Appeal) found that this was not correct and the only claim could be on the widow’s deemed half share in the property.  The legal basis for the Courts’ findings were that the absolute assignment of an interest in a joint tenancy operates in equity as to sever the joint tenancy and thereafter the property is held as tenants in common in equal shares.

This was a fair and just result otherwise the creditors would have benefited beyond their rights to recover against the whole of the property rather than just the widow’s half share.

Care should always be taken when structuring or transferring ownership of property pursuant to a relationship property agreement when creditors are involved.

Farry and Co. are experts in the areas of family and relationship property and can advise you in all aspects in relation to these transactions including the associated conveyance.

If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:

Michael Nidd
03 477 8870 or 09 379 0055


The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such.  Professional advice should be sought before applying any of the information to particular circumstances.  While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain. 

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