Written by Alexander Lyall

The Court of Appeal (the Court) has issued a decision in the long-running matter over whether an artist could retain ownership of her copyrights under the scheme of the Property (Relationships) Act 1976 (PRA).[1] A novel point of law for the courts, the decision shines light on the previously unexplored interplay between relationship property and the Copyright Act 1994.

Equal distribution under the PRA

One of the key aims of the PRA is to recognise that not all contributions to a marriage are financial and that the equal contribution of both spouses should be honoured. Consistent with this purpose, the default position is that the parties are entitled to share equally in the relationship property.

Background

Before meeting Mr Palmer in 1996 and marrying him the year after, Ms Alalääkkölä had enjoyed success as a painter. A graduate of the Academy of Fine Arts in Finland, she attended a master’s program at New York University on a prestigious Fulbright scholarship. Her work was displayed at the Finnish National Gallery, among other art collections.

After 20 years of marriage, Ms Alalääkkölä and Mr Palmer separated in 2017. According to Ms Alalääkkölä, contributions to the marriage were not even. The “promising art career” she had developed had to be sacrificed for the good of the family. By the late 1990s her paintings became the main source of income. This turned her into a “painting machine” and the style of her art reflected a more commercial character. 

Mr Palmer disagreed with Ms Alalääkkölä’s characterisation. The marriage he recalled was one where both contributed to the commercial success of the art. Ms Alalääkkölä was the artist, but Mr Palmer commercialised the work. This included promoting and marketing the paintings, as well as creating art cards and prints for sale.

How can copyright be classified?

When the couple split, Mr Palmer stated his intention to continue the printing business. Ms Alalääkkölä argued that these were her copyrighted works and Mr Palmer could not continue to profit from them. The works being subject to copyright was a key part of this argument. If a copyright is not property under the PRA, as Ms Alalääkkölä argued, then it stood to reason that Mr Palmer could not then receive them as relationship property.

Decisions of the lower courts

Family Court

The matter was first heard in the Family Court.[2] There, Judge Grace found the copyrights to be the separate property of Ms Alalääkkölä. The works themselves were relationship property, but the copyrights had been derived from her skill and authorship. These had been accrued pre-relationship.

High Court

At the High Court, Mr Palmer successfully appealed the decision.[3] Justice Isac found that focusing on the skill behind the creation of the copyrights, rather than the property created, did not align with the focus of the PRA.[4] Justice Isac then pointed out that all kinds of property can exist that stem from skills acquired prior to a relationship’s commencement.  

Ms Alalääkkölä applied for leave to the Court of Appeal. The High Court called the issue a live question with potential consequences for the wider creative community, as well as New Zealand’s relationship property law.[5]  Seeing it as a novel point of law, the High Court granted leave.

Court of Appeal

At the Court of Appeal, Justice Katz for the unanimous Court considered three questions:

  • Is copyright “property” for the purposes of the PRA?
  • If the copyrights are property, how should they be classified in terms of the PRA?
  • If the copyrights are property, how should they be treated in terms of the PRA?

Is copyright “property” for the purposes of the PRA?

The Court first considered the scope of cover for property under the PRA. The Court noted that at section 2 of the PRA there is the inclusion of the category “any other rights or interests”. Copyright, as stated by the Copyright Act, is clearly a property right.[6] The Court agreed with the decisions of the lower courts that copyright is covered under section 2 of the PRA.

Are the copyrights separate property or relationship property under the PRA?

Property will be considered separate property in three broad circumstances:[7]

  • property acquired prior to the relationship or after the date of separation;
  • gifts or inheritances from third parties or distributions from a trust (subject to intermingling); and
  • specific types of property such as heirlooms, taonga, and gifts from the other spouse.

If the copyrights were to be classified as separate property, then Ms Alalääkkölä would have to show that she had accrued them prior to the relationship. Ms Alalääkkölä’s argument then was that her property interest in the copyrights was naturally bound to her skills as an artist. The development of these skills had occurred during her studies and work prior to meeting Mr Palmer. Furthermore, the business of producing and selling art was included in the property interests found within copyright. 

However, the Court held that the copyrights were relationship property. The property interests bound with copyright are wholly distinct from the skills necessary to create copyright.[8] The Court also agreed with the High Court’s assessment on the relationship between skills and property: 

Many skills are gained by people before marriage who then go on to use those skills during marriage to produce or acquire property. This does not put the property so produced or acquired beyond the reach of the PRA.

How should the copyrights be treated under the PRA, to ensure an equal division of relationship property?

Having found that the copyrights were the relationship property of the parties, the Court sought to determine how the division of the property would occur. Division by a court could occur in one of two ways: (a) the copyrights are divided between the parties; or (b) Ms Alalääkkölä retains ownership of the copyrights. The latter would involve a compensating adjustment made to ensure an overall equal division of the relationship property.

Ms Alalääkkölä was firmly of the view that she should retain copyrights in their entirety. As the author of the works, it was critical that she protect her artistic integrity and future professional interests. Transferring any of the copyrights to Mr Palmer could easily lead to a situation where her reputation and business could be negatively harmed. Ms Alalääkkölä expressed her concern that Mr Palmer would flood the market with cheap prints and merchandise, creating obvious complications in her bid to remain a respected artist.

The Copyright Act addresses this scenario. A core function of the copyright scheme is to grant the author of a work exclusive control of that work. Authors maintain their moral rights; consequently, they are entitled to intervene if the works they authored are being subject to derogatory treatment.[9] It would therefore be Ms Alalääkkölä’s right to prevent the mass replication of her works.

In light of this, the Court saw this situation as one which would go against the “clean break” principle. That is, it would limit Ms Alalääkkölä’s opportunity to function independently of the property held by Mr Palmer.[10] Allowing Ms Alalääkkölä to retain ownership of her copyrights would enhance the prospects of the parties being able to move on with their lives. 

However, this did not change the classification of the copyrights as relationship property. This means Mr Palmer is still entitled to compensation. The amount which he is to be granted will be considered by the Family Court in a future hearing as the Court of Appeal remitted the matter on this point.

Conclusion

This decision demonstrates the degree to which the courts will go to ensure an equal division of property occurs. As a property value, copyright is hard to assess. Not only is copyright intangible but it is subject to its own piece of governing legislation, the Copyright Act. The moral rights provided in the Copyright Act mean the courts must give serious thought to the implications of shifting ownership. Failure to do so could leave the parties in a position clearly not intended by the PRA.    

 

 

[1] Alalääkkölä v Palmer [2024] NZCA 24.

[2] Alalääkkölä v Palmer [2020] NZFC 1635.

[3] Palmer v Alalääkkölä [2021] NZHC 2330.

[4] Palmer (HC), above n 2, at [36].  

[5] Alalääkkölä v Palmer [2021] NZHC 3101, at [11]. 

[6] Section 14.

[7] Alalääkkölä (CA), above n 1, at [34].

[8] Alalääkkölä (CA), above n 1, at [42].

[9] At section 98.

[10] The “clean break” principle is not mentioned the Act; however, it has been identified as a relevant consideration by and for the courts. See Z v Z (No 2) [1997] 2 NZLR 258 (CA); Scott v Williams [2017] NZSC 185; and the Law Commission issues paper, Dividing relationship property – time for change?  Te mātatoha rawa tokorau – Kua eke te wā? (NZLC P69).

 

 

 

 

 

 

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