When a court determines how finances are to be distributed on divorce, there are a number of factors it must consider. Those factors are set out in Section 25 of the Matrimonial Causes Act 1973 and include the requirement to consider ‘the conduct of each of the parties, if that conduct is such that it would be inequitable to disregard it’. There is however no statutory definition of conduct, meaning that the courts have had to grapple for half a century with (a) what type of conduct is so serious in nature that it should be taken into account and (b) how that conduct, if established, should be reflected in the division of the assets and any costs orders.
Thankfully, there are a number of recent cases which have made significant progress in identifying the categories of conduct and, as recently as July of this year, a clear procedural framework was established for those who wish to run a conduct argument within financial remedy proceedings.
This first step, before a party or practitioner can decide whether to plead conduct, or drop it, is to decide which category the behaviour falls into. In the case of OG V AG[2020] EWFC 52, Mostyn J identified four different categories:
The first was ‘gross and obvious personal misconduct’ which, according to Baroness Hale in the earlier case of Miller v Miller [2006] UKHL 24, should only be taken into account in very rare cases because “it is simply not possible for any outsider to pick over the events of a marriage and decide who was the more to blame for what went wrong, save in the most obvious and gross case”. Examples of ‘gross and obvious’ misconduct are found in cases such as Jones v Jones [1976] Fam 8 and Bateman v Bateman [1979] Fam 25, which involved severed tendons and stabbings and, in the former, the Court of Appeal held that the husband’s conduct “was of such a gross kind that it would be offensive to a sense of justice that it should not be taken into account”, later described in the case of S v S [2007] 1 FLR 1496 as the “gasp factor”. This type of conduct can be used as a lens through which the other section 25 factors are considered but, importantly, there must be a correlation between the misconduct and the financial consequences for which the aggrieved party seeks redress.
The second identified was ‘financial conduct - wanton and reckless dissipation’, otherwise known as the “add-back” jurisprudence, where one party has squandered assets which should have formed part of the divisible matrimonial property. The case of M v M [1995] 3 FCR 321 was cited by Mostyn J as an example of this, where the husband dissipated capital through his obsessive approach to the litigation. If this type of conduct is found, the dissipation is likely to be reflected in the substantive award by adding back the amount dissipated to reduce the impact on the innocent party, or redressed by adjusting the distribution of assets from an equal division to take account of the dissipation. There must be evidence of dissipation and the dissipation must have a deliberate element, as established in Vaughan v Vaughan [2007] EWCA Civ 1085.
The third identified was ‘litigation misconduct’ where there has been disregard for the duties of disclosure, dishonest presentation of the assets, a failure to negotiate, or even where a party has run a case that is bound to fail. According to Mostyn J, the correct way to address this type of conduct is to penalise the guilty party in costs, commenting that “it is very difficult to conceive of any circumstances where litigation misconduct should affect the substantive disposition”.
The fourth identified was ‘the evidential technique’ of adverse inferences being drawn (from a silence or absence of evidence) where a party has failed to comply with disclosure obligations entitling the court to make, for example, findings about the existence or value of assets. This could be accepting that a party has an interest in a property which will then be included in the computation exercise. A blunt but effective way of redressing uncooperative behaviour.
Having identified the categories of conduct above, the question turns to how and a party might deploy a category successfully. In the very recent case of Tsvetkov v Khayrova [2023] EWFC 130 Mr Justice Peel helpfully set out a two-stage test which, he said, a party asserting conduct must prove:
Stage One
(i) the facts replied upon (stating with particularised specificity the allegations);
(ii) if the facts are established, that those facts meet the conduct threshold; and
(iii) that there is an identifiable negative financial impact upon the parties generated by the alleged wrongdoing (this is the causative link between act/omission).
Stage Two
Provided that stage one is established, the court will go on to consider how the misconduct, and its financial consequences, should impact upon the outcome of the financial remedy proceedings, undertaking the familiar section 25 exercise which requires balancing of all the relevant factors.
In terms of when a party should nail their colours to the mast, Mr Justice Peel went on to confirm that allegations of conduct should be particularised at the earliest opportunity, noting the increasing tendency for parties to use Box 4.4 (‘the conduct box’) of Form E, to either (a) reserve their position on conduct, suggesting they might run the argument at a later date, or (b) recount a “litany of prejudicial comments which do not remotely approach the requisite threshold”.
Mr Justice Peel concluded in Tsvetkov v Khayrova that “these practices are to be strongly deprecated and should be abandoned” because “the former leaves an issue hanging in the air [and] the latter muddies the waters and raises the temperature unjustifiably”.
In his view, conduct allegations should be clearly set out in Section 4 of a party’s Form E, given that a box exists precisely for that purpose. To advance a conduct case at a final hearing, he said, is entirely unsatisfactory and “forensically dishonest”, and that parties who do so are attempting to “use the back door when the front door is not available”.
This exact issue arose in the very recent case of O v O [2023] EWFC 161 in which the wife stated, in her Section 25 statement, that it was not a conduct case but subsequently included an entire section headed “s.25(2)(g) conduct” with countless generalised assertions, none of which were pleaded formally and were therefore largely ignored by the judge.
In terms of case management, Mr Justice Peel said that the court should determine how to manage any alleged misconduct at the First Appointment, in furtherance of the overriding objective to actively manage cases, and that the court is entitled at that stage to make an order preventing reliance on conduct if it is satisfied that the exceptionality threshold would not be met.
This is a clear directive that the non-committal halfway house of mentioning conduct in a Form E to leave the door open will no longer be tolerated.
Commentary
Grateful as clients and practitioners may be for clear guidance on this prickly area, some will understandably be hesitant about particularising allegations of conduct as early as Forms E. Indeed, it may not be appropriate to raise conduct issues if parties are trying to mediate, or where settlement negotiations are better served by focusing on reaching an agreement amicably, without unnecessarily raising the temperature.
This latest guidance is however another forceful reminder that the question of whether to plead conduct or drop it should be carefully considered at an early stage. A difficult task in the most tempestuous of cases.
Clients will need to take advice when considering whether to raise the issue of conduct, so that they can discuss whether the threshold is met, and which category the conduct may fall into. Getting advice at an early stage is key, leaving it to be asserted later could lead to it being excluded altogether.