Conduct and Divorce – when does it matter

Clients in divorce proceedings often raise concerns about the (mis)conduct of their spouse either during the marriage or on separation. As advisers, we are frequently asked by spouses on divorce:

1. 1. If conduct is something that will be considered by the court in financial remedy proceedings; and 
   2. what impact it may have on distribution. 

In this article, I explore some of the common themes and issues arising and provide a summary of the court’s general approach. It is important before running a conduct case that parties seek legal advice, partly because conduct arguments can have significant cost consequences, and partly because they are generally not the most straightforward of legal arguments to run or evidence. There are also important procedural considerations that parties should observe if they wish to run a “conduct case”, in particular the timing of when conduct should be raised during proceedings and evidential considerations which go to how such arguments are pleaded. I address some of the procedural considerations in a separate article which you can find here.

When assessing the division of the financial resources available to parties on divorce, the English court considers various factors under section 25(2) of the Matrimonial Causes Act 1973. One of these factors is the conduct of each party, but this must be so significant that it would be inequitable to disregard it.

Examples of Financial Conduct 

1. Dissipation of Assets:
   
   The court will generally consider conduct that dissipates the marital asset base. For example, in Martin v Martin [1976], extravagant living and reckless spending by a spouse was not allowed to disadvantage the other and adjustments were made for this. In his judgment, Lord Justice Cairns stated that “a spouse cannot be allowed to fritter away the assets by extravagant living or reckless speculation and then to claim as great a share of what was left as he would have been entitled to had he behaved reasonably”.
   
   
2. The “Add-Back” or Reattribution Principle:
   
   Dissipated funds can be "added back" to the asset schedule in financial remedy proceedings and adjustments can be made by the court on distribution to correct excessive, reckless or wanton spending. For example, in Norris v Norris [2002], £250,000 of overspending by the husband was notionally “added back” to the asset schedule so that the wife was not disadvantaged by her spouse’s conduct.
   
   There must however be evidence of reckless or wanton spending. A spouse pleading financial conduct will generally need to be able to show not just the dissipation of assets but a wanton element. For example, in Vaughan v Vaughan [2007], £100,000 was added back due to gambling losses. Other examples of “wanton” conduct may include the deliberate sale of matrimonial assets at an undervalue or excessive and disproportionate spending on luxury items, in particular if this is out of kilter with what was normal during the marriage.
   
   
3. Non-Financial Conduct
   
   For non-financial conduct to be considered it must be egregious to impact on the financial division of matrimonial resources. One of the most notable examples of this in case law is the matter of H v H [2005], where a husband's attempted murder of his wife was recognised to amount to non-financial conduct which was inequitable to disregard. This resulted from a violent attack by the husband upon his wife in the presence of their children. The severity of the assault was such that the husband was sentenced to prison for 12 years and the judge found that this was a “magnifying factor” that justified the wife’s needs taking priority over the husband’s.   
   
   
4. Emotional harm:
   
   There is also some (if limited) authority that suggests that conduct which causes significant emotional harm to another spouse may be considered. In FRB v DCA (No 2) [2020] for example, a wife's deception about her child's paternity was given some weight. However, parties should be aware that conduct which causes emotional harm is much more esoteric and, in practice, it is rarer that courts will adjust for this when it comes to distribution, save for in very exceptional circumstances.
   
   
5. Unreasonable litigation conduct
   
   Another area in which the court will consider conduct is in respect of a party’s approach to litigation, although here the remedy tends to be in adverse costs orders rather than in an adjustment to the division of the matrimonial acquest. By way of example, in the case of HD v WB [2023], a husband was penalised by way of a costs order for unreasonably pursuing a case against his wife to challenge an existing prenuptial agreement.
   
   
6. The duty to negotiate
   
   Another increasingly common example of litigation misconduct flows from a failure of one party to negotiate. In MB v EB [2019], a husband's failure to negotiate led to a cost penalty against him. Similarly, in OG v AG [2020] whilst the husband had failed to provide full disclosure in a transparent and timely manner, the wife’s failure to negotiate properly once the financial landscape was clear resulted in a costs award in her favour being reduced by £50,000.
   
   In OG v AG [2020] Mr Justice Mostyn determined that:
   
   “30. The revised para 4.4 of FPR PD28A is extremely important. It requires the parties to negotiate openly in a reasonable way. To take advantage of the husband’s delinquency to justify such an unequal division is not a reasonable way of conducting litigation. And so, the wife will herself suffer a penalty in costs for adopting such an unreasonable approach.
   
   31. It is important that I enunciate this principle loud and clear: if, once the financial landscape is clear, you do not openly negotiate reasonably, then you will likely suffer a penalty in costs. This applies whether the case is big or small, or whether it is being decided by reference to needs or sharing.”
   
   This case serves as an important reminder of the importance of negotiating reasonably once the financial landscape is clear and it is important that this obligation is carefully and properly observed.
   
   
7. Over-spending on legal fees
   
   The court may also make costs awards to adjust for over-spending, including where one party is found to have incurred disproportionate legal costs during litigation. Authority for this can be found in the case of YC v ZC [2022], where the court excluded a portion of the wife’s unpaid legal costs from the computation exercise and refused to adjust for this on distribution, to avoid prejudice to the husband’s position.
   
   In this case the wife had incurred legal costs of £463,331 against the Husband’s costs of £159,044. The judge determined that “the court should be slow to allow the grossly disproportionate spender to feel that there is no check on legal costs spending … W must bear the burden for [her] poor decision making”. In practical terms, the judge dealt with this by way of a £200,000 add-back to her side of the asset schedule which resulted in the husband retaining more of what was available from the remaining pool of assets.

A very high threshold:

Notwithstanding the above authorities, parties should be aware that conduct cases are not always clear cut and in more recent years there are examples of judges been more cautious about adjustments for conduct.

In MAP v MFP [2015] for example, the wife sought an add-back against her husband based on excessive spending, which she asserted amounted to 1,486,803. From that sum, the husband was found by the court to have incurred expenditure of approximately £250,000 on prostitutes and cocaine. The court did not adjust for this expenditure or compensate the wife, in part because the judge found that the spending was not intended to reduce her matrimonial claims. Despite being satisfied there was an over-spend by the husband, this was not enough on its own to support an add-back or justify an adjustment to the distribution exercise. Mr Justice Moor’s determination in this case is illuminating and I reproduce some of the more relevant extracts from the judgment below:  

87. Before I deal with my conclusions, I propose to deal with two matters raised by Mr Molyneux in relation to add-back that I do not accept. First, it is correct that in October 2014 the Wife did make an open proposal to divide the assets equally without add-back. Mr Molyneux attempted to rely on this as evidence of the injustice of add-back. I reject that submission. Now that we no longer have Calderbank offers, litigants must be encouraged to make open proposals as early as possible that are designed to encourage settlement. If the other party spurns such an offer, the court is entitled to ignore it completely and decide the case entirely on the merits. I will have no hesitation in a suitable case in awarding an applicant more than an open offer he or she has made if that is justified.    

88. Second, Mr Molyneux suggested that the add-back argument infringed the principle of equality.  Again, I do not agree. If there has been spending that should be added-back, the court is in fact finding that the assets should have been greater than they are, thus justifying a higher payment to the party who had not wasted those assets to achieve the equality that he or she should have had.

89. I accept that the Husband has significantly overspent. I further accept that it is the Husband who has done, this not the Wife…

90. I do not find, however, that the Husband overspent to reduce the Wife’s claim. In part he did it because he could not prevent himself from doing it. It was down to his flawed character.  This court could not possibly add-back the expenditure on drug therapy. This was him trying to put matters right. Whilst I accept that he did not always take advice, I reject Mr Pocock’s description of him going to this therapy as a “holiday” to get away from the pressures of life or the litigation. He was ill and he needed treatment. The same illness, however, prevented him at times from accepting the treatment.

91. Equally, I cannot add-back items of expenditure that were simply extravagant or part of his obsession with perfection. I have had the most difficulty with the expenditure on cocaine and prostitution. I have, however, come to the clear conclusion that I should not add-back even these items. As I have already noted, a spouse must take his or her partner as he or she finds them. Many very successful people are flawed.  This is true of this Husband. I have decided that it would be wrong to allow the Wife to take advantage of the Husband’s great abilities that enabled him to make such a success of the company while not taking the financial hit from his personality flaw that led to his cocaine addiction and his inability to rid himself of the habit. It may have been morally culpable. Overall, it was irresponsible. But I find that this was not deliberate or wanton dissipation. It would be wrong to add it back".

MAP v MFP [2015] is a reminder that conduct claims are not always clear cut. Judges retain a degree of discretion and with this inevitably comes some litigation risk. It is important to carefully consider the merits of a conduct case in advance of formerly pleading this.