What constitutes conduct in financial remedy proceedings?

The introduction of ‘no fault’ divorce in 2022 has gone a long way in removing allegations of ‘bad behaviour’ from the divorce and financial remedy process, however many people remain confused as to when behaviour remains relevant. Although unreasonable behaviour is no longer a ground for a divorce application, it may be considered by the court in relation to any financial settlement. We explore below different examples of ‘bad behaviour’ and whether the court would take them into account within financial remedy proceedings.

What is ‘conduct’?

The courts have a series of factors which must be taken into account within financial remedy proceedings. These are known as Section 25 factors, as they are found in section 25 of the Matrimonial Causes Act 1973. Section 25(2)(g) explicitly refers to the conduct of a party, “if that conduct is such that it would be inequitable to disregard it”. The threshold is therefore high, and most day to day grievances will not be considered.

Examples of behaviour and whether this constitutes conduct

We have set out below common examples of behaviour within divorce and financial remedy proceedings when we are asked whether it affects a financial settlement. Whilst not all of these constitute conduct under the Matrimonial Causes Act, and so may possibly influence the outcome of a financial settlement, every example of behaviour will clearly have a significant emotional impact and therefore it is important to ensure you have access to support from friends, family and other professional organisations.

Adultery

In most cases, adultery will not be taken into account in financial proceedings. Whilst many would argue that this is morally wrong, it does not meet the threshold of being so bad that the court must have consideration of it in the proceedings. 

Adultery may be taken into account if there has been ‘wanton or reckless’ spending which is linked to the relationship, as set out below in more detail.

Abuse

The abuse must be of an incredibly serious nature in order to constitute conduct under s25 of the Matrimonial Causes Act. The abuse is not limited to physical abuse but may also cover sexual, emotional or financial abuse such as:

Attempted murder

In H v H [2005], the husband was convicted of the attempted murder of his wife in a violent attack in front of their children. He was sentenced to 12 years imprisonment and the judge found that this abuse was of such a level that it would be inequitable to disregard it. The husband was ultimately left with only a small portion of the assets, with the bulk going to the wife.

Economic abuse

In DP v EP [2023], the family court made findings against a wife of economic abuse. The husband was illiterate and trusted his wife to manage his assets. During the marriage the wife had bought and sold assets, deliberately concealing her actions from the husband and moving funds out of reach of the husband. The conduct had financially measurable consequences which resulted in the wife receiving less than the husband.

Psychological abuse

In N v J [2024], where allegations of psychological abuse were raised, the judge clarified that the recent focus on domestic abuse does not change the high bar to conduct claims, and cases where conduct is taken into account with financial consequence are “vanishingly rare.”

Other steps may become necessary in cases of abuse, such as fact finding hearings to prove the allegations, (where there has not been a separate criminal trial), or injunctions. To find out more about non-molestation orders and occupation orders, you can read our articles setting out the criteria for each. Freezing injunctions can also be obtained to freeze assets on a worldwide basis if there is a risk of dissipation intended to defeat a claim.

Overspending

What is considered overspending, or a dissipation of assets, will be subjective based on the parties’ assets and their lifestyle throughout the marriage. 

Norris v Norris [2002] established the test that spending must be reckless. In this case, the wife’s assets were £3.6 million and the husband’s were £4.16 million. In the two years post-separation, the husband had overspent by about £350,000 on expensive living, holidays with his new partner, and ordering a Ferrari. The judge ‘added back’ a notional £250,000 to the husband’s assets to reflect the funds that had been recklessly spent. 

Subsequent case law has suggested that the spending must be deliberate or wanton dissipation of assets in order to reduce their spouse’s claim.

In MAP v MFP [2015] the husband was spending £6,000 per week on cocaine and sex work. Although it was morally culpable, it was down to his flawed character and not an attempt to reduce his wife’s claim. The judge did not add back any of the spent funds and held that you must take your partner as you find them.

Wanton expenditure can also cover legal costs if these are “unrestrained, unfocused and ultimately reckless.” In DH v RH [2024] the wife had spent £1.9 million on legal fees and the husband had spent £987,000. The judge held that £800,000 should be added back to the wife’s side of the asset schedule to reflect the unfairness arising from the reduced assets available for division because of the wife’s reckless spending on legal costs. The wife’s legal costs had become unrestrained in the lead up to the final hearing and she ignored judicial warnings about the level of her expenditure.

Gambling

Gambling can be a strong argument for an add back claim. In M v M [2006] the wife asserted that the husband had dissipated funds by gambling, unwise business transactions, and mortgage arrears. The wife succeeded in her claim for an add back in relation to the husband’s gambling, however it was impossible to quantify the dissipation. The wife knew he gambled, but not the extent of it. The husband had given an undertaking not to gamble further until the conclusion of the proceedings, however he had continued to gamble. The joint assets were therefore divided 62.5/37.5 in the wife’s favour.

Litigation misconduct

Litigation misconduct relates to failing to comply with court directions, unreasonably pursuing particular issues, or failing to negotiate reasonably. The usual rule in family proceedings is no order as to costs, meaning each party is responsible for their own legal fees. However, litigation misconduct can result in a costs order being made against a party. The behaviour is usually penalised in costs orders, but it can also be taken into account in the overall division of matrimonial assets. 

In DH v RH, in addition to the add back discussed above, the court also made costs orders of £255,654 against the wife due to her litigation misconduct, which included stealing confidential financial information from her husband. 

Costs orders are not just reserved for ‘big money’ cases, and in AA v AB (Costs) [2021] the court ordered the wife to pay £10,000 towards the husband’s costs for failing to negotiate despite the parties being in debt and the court acknowledging that the order might cause the wife hardship.

A word of warning: in Tsvetkov v Khayrova [2023] Peel J issued a strong warning against the indiscriminate pleading of s.25(2)(g) conduct:

“45. I have noted an increasing tendency for parties to fill in Box 4.4 (the conduct box) of their Form E by either (i) reserving their position on conduct or (ii) recounting a litany of prejudicial comments which do not remotely approach the requisite threshold. These practices are to be strongly deprecated and should be abandoned. The former leaves an issue hanging in the air. The latter muddies the waters and raises the temperature unjustifiably”.

How to assert conduct within financial remedy proceedings

The courts have set out a two-stage process in Tsvetkov v Khayrova [2023] for a party alleging conduct in financial remedy proceedings.

Stage one

The party asserting conduct must prove:

• the facts relied upon, i.e. the conduct that occurred;
• if those facts are established, that they meet the conduct threshold which, as set out above, has consistently been set at a high or exceptional level, and
• there is an identifiable negative financial impact upon the parties generated by the alleged wrongdoing.

Stage two

The court must then give consideration as to how the misconduct and its consequences should impact upon the outcome of the financial remedy proceedings. The court may choose to depart from equality in favour of the wronged party or they may make costs orders, (requiring a party to pay some of the other party’s costs), against the person behaving badly.

In N v J [2024], HHJ Peel emphasised that whilst the statute does not require there to be a financial consequence to conduct, it is apparent in virtually all reported cases. Even in cases of personal misconduct as set out above, there has been a financial impact. For example, in the attempted murder case of H v H above, the wife’s earning capacity was impacted by the attack and her housing and income needs increased which supported her receiving the lion’s share of the assets. 

Summary

Proving conduct in financial remedy proceedings is a high threshold and often difficult to do. Many behaviours are morally wrong and can cause significant emotional harm, however it is much more nuanced when assessing whether a court would take the behaviour into consideration when determining a financial settlement.   

If you have experienced any of the above examples, it is always best to obtain legal advice before trying to allege conduct within proceedings.