Mind your conduct!

When can conduct impact an award for financial remedies?

Answer: in three main ways: litigation conduct, financial conduct and personal conduct.

Personal conduct and financial conduct are considered under s.25 MCA 1973. S.25 says that the court shall have regard to a party’s conduct ‘if that conduct is such that it would in the opinion of the court be inequitable to disregard it’.

Examples of personal conduct cases include a wife stabbing her husband and a wife shooting her husband with a shotgun. These cases are (fortunately!) very rare.

Financial conduct (or ‘add-back’) is governed by the well-known guidance in Vaughan -v- Vaughan [2008] 1 FLR 1108. There has to clear evidence of dissipation in which there is a wanton element.

Third (and the topic of MF v SF) is litigation conduct, which is considered as part of FPR r 28.3. That rule says that although the general rule in financial remedies is no order as to costs, the court may make a costs order ‘where it considers it appropriate to do so because of the conduct of a party in relation to the proceedings’. Factors include any open offer to settle made by a party; whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; the manner in which a party has pursued or responded to the application or a particular allegation or issue; and any other aspect of a party’s conduct in relation to proceedings which the court considers relevant.

In the recent case of MF v SF [2015] EWHC 1273 (Fam), Moylan J made a substantial adjustment to a wife’s financial remedies award because of her unreasonable litigation conduct.

The total assets were just over £3m. The parties had been married for nearly 20 years and they had two children. H was an accountant who had been earning c. gross £550k p.a. He had been made redundant and now worked for a different company earning c. net £145k p.a. W was a beauty therapist who gave up full-time work when the eldest child was born. Since then she had provided occasional beauty treatments, on an informal basis, from the FMH.

The parties had so far spent around £980k on legal fees (£618k for W, £363k for H).

W’s case was that there was a ‘wide-ranging conspiracy’ between H and 3 senior employees of his company to deceive both her and the Court as to H’s true financial position. She argued that:-

1. H’s redundancy was a sham, and there was a secret agreement by which H would receive a substantial settlement and/or consultancy contracts in the future;
2. H was falsely claiming that he owed around £1m to his former employer;
3. In a conspiracy with his colleagues, H was trying to artificially deflate the value of the shares he held in a company (‘ABC’) linked to his former employer.

W also sought to reattribute £137k to H for alleged financial misconduct.

W’s open position was that she should receive £3.8m plus a 50% pension share, based on H’s shares in ABC being worth £6m. She sought global maintenance of £50k p.a, on an open-ended basis.

H sought a notional 50% split of the assets and offered termed maintenance of £36k p.a. plus school fees. He also sought various substantial adjustments in his favour to reflect his case as to litigation conduct and costs.

W’s case failed on all fronts. In her oral evidence, she accepted that one of H’s colleagues would have had to have been involved in presenting a false case if her allegations were true. Inconsistently, however, she also admitted that the very same colleague was ‘an honourable and very decent person’. The judge accepted the colleague’s evidence that he was not involved in any collusion to present a false case as to H’s redundancy, the value of his shares in ABC or in respect of the loans said to be owing.

The allegation as to the sham redundancy was ‘ludicrous’. It was ‘abundantly clear that the Husband’s redundancy was genuine and that it should always have been accepted as genuine by the Wife’. There was no evidence to support W’s case; it was merely ‘groundless suspicion’.

As to the value of the shares, it would have been ‘absolutely ludicrous’ to use W’s contended valuation method. She did not make out her case as to the loans. Her add-back claim also failed.

Interestingly, the judge found that W was an honest witness. It was just that her ‘deep distrust’ of H rendered her ‘unable to bring any sensible objectivity’ to the case. It was not clear that W appreciated the seriousness of her allegations against H and his colleagues, which amounted to an attempt to pervert the course of justice by giving false evidence to the court.

W’s case was baseless. She should have accepted H’s offer. Had she done so, she would have avoided her subsequent legal costs, which the judge found to be ‘grossly disproportionate’. She had pursued her allegations ‘in a wholly disproportionate manner’ and the core part of her case was ‘speculative and unfounded’. A costs adjustment would need to be made.

The parties’ wealth had been created during the marriage and so the starting point was equal division. The adjustments for costs sought by H totalled £400k, leaving him with £1.5m and W with £700k, excluding the pensions.

Weighing up all the factors, the judge awarded £1.3m to H and £900k to W. This was in addition to the equal pension sharing order sought by both parties. Overall, this left W with capital resources of £1.3m and H with £1.7m: a 43%-57% split.

H was ordered to pay W global maintenance of £50k p.a, which would reduce in keeping with her future earnings. She would also receive 25% of his bonus, capped at £50k. The maintenance would last until 2024 and a s.28(1A) bar was imposed.

The judge described it as ‘one of the more extreme cases’ he had seen. It should serve as a warning to those who wish to rely upon allegations of conduct that any such allegations should be based upon firm foundations.