Conduct in Financial Remedy Proceedings

When considering what constitutes gross and obvious misconduct, the courts have made it clear that they will only take into account such conduct where “it would be offensive to a sense of justice that it should not be take into account” (Jones v Jones [1976] Fam 8) and it has been suggested that it must have a necessary ‘gasp factor’. It has also been established that there should be a link between the conduct and the financial consequences of the conduct.

Examples of where conduct has been considered are as follows:

• Attempted murder

In the case of H v H (Financial Relief: Attempted Murder as Conduct) (2005), the husband had been convicted of attempted murder of the wife. The Judge considered that ''the court should not be punitive or confiscatory for its own sake. The proper way to have regard to conduct is as a potentially magnifying factor when considering the other subsections and criteria‘’. Therefore, in this case, the court placed the wife’s needs as higher than the husband’s.

• Domestic Abuse

In the case of  N v J (2024), it was clarified that the recent focus on domestic abuse in the family justice system does not change the high bar to conduct claims established by case law in financial cases and that cases where conduct is taken into account, without a financial consequence, are ''vanishingly rare''. It was held that an inquiry into conduct must be proportionate to the case. This case highlights the need for a causative link between the abuse and the financial consequence of such abuse.

In the case of DP v EP (2023) findings were made against the wife of economic abuse. It was held that the conduct was inequitable to disregard. During the parties’ long marriage, the wife had bought and sold assets, deliberately concealing her actions from the husband who was illiterate and trusted her to manage his assets. The wife's conduct had financially measurable consequences, therefore this was reflected in the award, as the wife received a lower share of the assets compared to the husband.

The current case law provides that, in order for domestic abuse to be considered on the division of finances, then the conduct alleged must be at a high or exceptional level and have an identifiable negative financial impact caused by the act or omission. However, there is renewed discussion regarding the potential need for reform on the law regarding domestic abuse and pleading conduct in financial remedy proceedings.

The term ‘add-back’ was derived from Norris v Norris [2002] EWHC 2996 (Fam). If one party has “wantonly and recklessly” disposed of assets then there is a potential argument to “add-back” a sum to reflect what has been lost.

In the case of Vaughan v Vaughan [2007] EWCA Civ 1085, [2008] 1 FLR 1108 the husband, by his own admission, gambled away and wasted over £80,000. The Judge at first instance refused to ‘add back’ these sums, however later changed his view and held it was appropriate to reattribute a sum to the husband in view of his dissipation. 

In the case of  DH v RH (financial remedy proceedings) (2022), there was a successful add-back claim of £800,000 to reflect the unfairness arising from the reduced assets available for division because of the wife’s reckless expenditure on legal costs. In addition, the Court made a cost order of £255,654 due to the wife’s litigation misconduct. 

Although in the above cases, add-back arguments were successful, to demonstrate ‘wanton and reckless expenditure’ resulting in an add-back is rare.

A further example of where “add back” arguments were raised can be found in the case of F v F (Financial Remedies: Premarital Wealth) [2012] EWHC 438 (Fam). In this case the husband made lifetime gifts to four of his children from a previous marriage. The Court held that it was reasonable for the husband to do so, and the gifts did not adversely impact upon the high standard of marital lifestyle.

Litigation misconduct may arise when parties are in court proceedings and one party fails to comply with the Family Procedure Rules, Court directions and Court Orders.

The case of Tsvetkov v Khayrova [2023] EWFC 130 provided that where litigation misconduct is proved “this should be severely penalised in costs. However, it is very difficult to conceive of any circumstances where litigation misconduct should affect the substantive disposition”.

In the case of VS v OP (Litigation misconduct, quasi- inquisitorial approach and inferences) [2024] the wife filed her financial statement (Form E) 6 months late and when disclosed the form was deficient and did not enclose all the relevant documentation. The Court took a robust approach to the wife’s income and decided that the wife had not complied for a reason, although it would be reasonable to draw inferences.

The Court are able to draw inferences as a result of failure to provide full and frank disclosure. In the case of X v Y [2022] the Judge found that the husband had dishonestly and falsely manufactured his bank statements. The judge adjourned the wife’s capital claim against the husband for 10 years, due to the uncertainty of the husband’s assets.

Failure to provide disclosure may lead to inferences, but they still have to be reasonable - NG v SG [2011].

Stone King LLP appreciate that pleading conduct in financial remedy proceedings is a high bar, therefore obtaining legal advice is crucial before pleading conduct within proceedings.