While it may be necessary to cite unreasonable behaviour grounds in the divorce petition, it is a completely separate issue to pursue conduct arguments within financial remedy proceedings. It may be tempting for a spouse to list details of the other’s bad behaviour, but the court has no desire to get involved in the matter of who was to blame for the divorce. As a result, in the vast majority of cases, a spouse’s conduct will have no impact on the financial outcome, and any bad behaviour will not affect their entitlement to a share of the assets.
There are, of course, exceptions to the rule, and indeed, family law judges are obliged to take into account conduct that “in the opinion of the court would be inequitable to disregard” when determining the division of the family finances. Parties are specifically invited to include detail of any such conduct in their form E financial disclosure statement if they believe that their ex-spouse should receive less of the financial ‘pot’ as a result. Such arguments could lead to the need for extensive narrative statements about the allegations and evidence given by both spouses in the witness box if the case proceeds to a trial. Clearly, this is likely to add to the cost and delay of the proceedings, and raise the temperature given the inflammatory nature of the allegations.
Exceptional
It is only in very exceptional circumstances that conduct is relevant to financial proceedings. In these cases robust advice to clients is required to ensure that irrelevant detail about conduct is not included in a spouse’s financial disclosure simply because he or she wants revenge or to ‘name and shame’ their ex-partner. This approach is not considered good practice, nor is endless solicitor correspondence on the topic. Clients need to be aware that there could be adverse cost consequences for pursuing inappropriate conduct arguments.
For conduct to be taken into account, it must be “gross and obvious”, and such that a right-minded member of society would consider it of a level to justify a reduction or extinction of that party’s financial claims on divorce. Indeed, even where it is found that the conduct is gross and obvious, it will still be just one of a number of factors taken into account in determining the division of the assets.
In addition to cases in which the physical conduct of one party has altered the financial award – for example, where a physical attack by one spouse has left the other unable to work – financial misconduct is often cited as a reason for departing from an equal division of the assets. This usually arises when one party has dissipated family assets and as a result the other spouse seeks to ‘add-back’ from their ex-partner’s share of the financial pot those funds that have been deliberately and wantonly spent. For example, in one of the leading cases in this area, Vaughan v Vaughan in 2007, the court was prepared to add-back sums spent recklessly by the husband on gambling after the parties’ separation.
There have been two recently reported cases that provide guidance on the court’s current treatment of conduct or ‘add-back’ arguments.
Allegations
In the first case, US v SR in 2014, there were allegations of misconduct brought by each spouse against the other. The wife contended that the husband had misled her and the court in failing to provide full and frank disclosure about his financial position. The husband argued that his wife had disposed of properties during the litigation at an under-value in a wanton and reckless way which had resulted in loss to the family. In its judgment, the high court held that a spouse cannot be allowed to fritter away or dispose recklessly of assets and then claim as great a share of what was left as they would have been entitled to if they had behaved reasonably.
However, there must be clear evidence of wanton dissipation. In this case, the court found that £1m should be added back from the wife’s share to reflect the wanton and reckless sales of the properties. It also found that the husband was not only culpable of non-disclosure but had also behaved fraudulently by deliberately falsifying financial documentation. As a result, he was ordered to pay some of the wife’s legal costs to penalise his conduct.
In the more recent case of MAP v MFP in 2015, the husband had become addicted to cocaine during the latter years of the marriage. Despite spending significant sums on rehabilitation, he had often relapsed. The wife argued that £1.5m should be added back as a result of the husband’s reckless and wanton expenditure on cocaine, prostitutes, alcohol and therapy after their separation. The judge held that it would not be fair for these sums to be added back, stating that the husband’s expenditure “may have been morally culpable. Overall, it was irresponsible. But I find that it was not deliberate or wanton dissipation.”
Demons
He concluded that spouses must take their partners as they find them, and that the husband’s behaviour was caused by his ‘personal demons’ rather than a motivation to diminish his wife’s claims.
The differing outcomes in the cases of Vaughan v Vaughan and MAP v MFP above show that each case depends on its own specific facts, and it should not be taken as read that a finding of gross and obvious conduct will lead to a reduced or extinguished claim of the perpetrator. This is particularly the case if the family assets do not exceed each party’s capital needs – in such circumstances, a claim for add-back simply will not be practical or affordable.
The clear guidance from MAP v MFP is that to mount a successful conduct argument one needs to prove that the spouse’s misconduct was motivated by a desire to diminish the other party’s financial claim. If on the other hand, the expenditure is a result of a personality flaw which existed during the marriage, it will be much more difficult to persuade the court that an add-back would be appropriate.
Katie O’Callaghan is a solicitor in the family team at law firm Boodle Hatfield
Key points:
Family law judges are obliged to take into account conduct that “in the opinion of the court would be inequitable to disregard” when determining the division of the family finances.
Financial misconduct is often cited as a reason for departing from an equal division of the assets.
There must be clear evidence of wanton dissipation.
