Conduct in financial remedy cases: a higher profile, not a lower threshold

Recent cases put conduct in financial remedy proceedings under the spotlight, but the threshold remains high and outcomes remain fact-sensitive.

In our 2023 article, Plead it or drop it, we explored the established approach to conduct in financial remedy cases: the jurisdiction is narrow and, even where conduct is successfully pleaded, it will rarely affect the substantive award. This article considers what more recent authorities add to that picture, particularly in cases involving coercive or abusive behaviour, non-disclosure and litigation misconduct.

The legal framework

Conduct is one of the factors the court must consider under section 25(2)(g) of the Matrimonial Causes Act 1973. The relevant wording is:

“the conduct of each of the parties, if that conduct is such that it would, in the opinion of the court, be inequitable to disregard it.”

Although the statutory wording is broad, the case law has long imposed a high threshold. The shorthand remains that conduct must usually be “gross and obvious” before it comes close to impacting the financial award.

In OG v AG (Financial Remedies: Conduct) [2020] EWFC 52, Mr Justice Mostyn identified four broad ways in which conduct issues tend to arise in practice:

1. Gross and obvious personal misconduct
2. Financial misconduct, including add-back arguments
3. Adverse inferences arising from non-disclosure
4. Litigation misconduct

In most cases, the court will also look for a clear financial consequence before conduct affects the substantive outcome.

In Tsvetkov v Khayrova [2023] EWFC 130, Mr Justice Peel set out a two-stage approach: first, the party alleging conduct must prove the facts relied upon, show that the threshold is met, and identify a negative financial impact caused by the wrongdoing; second, the court must decide what effect, if any, that should have within the overall section 25 balancing exercise.

Personal misconduct: a recent change of emphasis?

In N v J [2024] EWFC 184 Mr Justice Peel developed his approach set out in Tsvetkov v Khayrova and addressed the interplay between domestic abuse and conduct in financial remedy cases. The case involved allegations that one civil partner’s infidelity and deception, including false assumptions of paranoia, delusions and psychosis, had contributed to a serious deterioration in the other’s mental health, resulting in hospitalisation (including electroconvulsive therapy), rehabilitation and suicide attempts. Mr Justice Peel was clear that the increasing recognition of domestic abuse does not, of itself, lower the conduct threshold. He reiterated that the financial remedies court is not there to impose a fine, penalty or damages, or to moralise about parties’ behaviour during the relationship. Its task is to look forward rather than back and, where possible, to place the parties on the road to financial independence. Personal vindication is not the function of the financial remedies court, and misconduct must be directly relevant to the financial outcome to be relevant. Mr Justice Peel concluded that the alleged conduct should not be taken into account.

More recently, Mr Justice Cusworth has given two judgments in: LP v MP [2025] EWFC 473 and Loh v Loh-Gronager [2025] EWFC 483. Taken together, they are striking examples of the court concluding that, on exceptional facts, it would be inequitable to disregard personal misconduct.

• In LP v MP, Mr Justice Cusworth found that the wife had subjected the husband to prolonged deception, coercive and controlling behaviour, and serious abuse. The judgment records findings that she had falsely presented herself as a High Court judge, induced the husband to fund supposed judicial and academic commitments, pleaded guilty in 2020 to unrelated offences of fraud and dishonesty, and made grave false allegations against him in the wider family proceedings. Against that background, the judge concluded that this was one of the unusual cases in which conduct could not fairly be ignored and reduced the wife’s sharing claim by 40%.

• In Loh v Loh-Gronager, the court was dealing with a short, childless marriage governed by a pre-nuptial agreement under which the husband’s entitlement would otherwise have been about £6.45 million. Mr Justice Cusworth found that the husband had engaged in very serious misconduct, including substantial unauthorised withdrawals from joint funds and the creation and/or doctoring of email evidence relied on in the litigation. Against that background, the husband’s award was reduced very substantially, to about £2.37 million.

These three cases form part of a wider debate about how the court should deal with serious personal misconduct in financial remedy proceedings, particularly where coercive control, domestic abuse or economic abuse has affected the relationship. What is striking about Mr Justice Cusworth’s decisions is the weight he was prepared to give to the unfairness of leaving that conduct out of account, even where its financial consequences were difficult to quantify.

That is a different emphasis from Mr Justice Peel’s analysis in N v J. There, the focus was on pleading and case management: whether the allegations were truly exceptional, whether it would be proportionate for them to proceed, and whether they could make a material difference to the financial outcome. Mr Justice Peel was also clear that the increased recognition of domestic abuse does not automatically lower the conduct threshold.

These are all first instance decisions, turning on very different facts, and they do not create competing legal tests. They do, however, illustrate the breadth of judicial discretion in this area: Mr Justice Peel’s analysis is directed more towards controlling the use of conduct allegations where their financial relevance is uncertain, whereas Mr Justice Cusworth’s decisions show a willingness, in exceptional cases, to treat serious personal misconduct as relevant to the fairness of the award even where its financial consequences are not easy to quantify.

On either approach, the threshold for conduct remains high. What is clear is that the outcome will depend on the particular facts, the way the allegation is pleaded and evidenced, and, ultimately, the judge’s assessment of whether fairness requires the conduct to be reflected in the section 25 exercise.

Financial misconduct and add-back

Separate, but often connected to personal conduct, is financial misconduct. This is usually advanced through an “add-back” argument: the contention that one party has “wantonly or recklessly” dissipated assets, and that the court should treat those assets as notionally still available to that party when carrying out the section 25 exercise.

Add-back arguments should be approached with caution and are likely to succeed only in exceptional cases. The court will not carry out a forensic accounting exercise merely because one party says that the other has spent money unwisely or unfairly. The fact that money has been spent, even irresponsibly, does not of itself justify add-back.

The court will usually look for clear evidence that the assets have been depleted in a way that is wanton, reckless, or to reduce the other party’s claim. Poor financial decisions, extravagant living, or expenditure reflecting a party’s flawed character will generally not be enough to lead to a notional reattribution of assets. As elsewhere in financial remedy proceedings, the court’s concern is fairness, not punishment.

A useful recent illustration is BY v GC [2025] EWFC 397. The wife sought reattribution in relation to payments arising from a failed Covid-era investment venture. The husband had repaid £6.7 million of principal to Mr Z, with whom he had invested, having given an assurance that he would make good the investment if it failed. He had also sold shares in another company in part to fund that repayment, and paid Mr Z a further £500,000 in interest.

Deputy High Court Judge Nicholas Allen KC reiterated that add-back is a species of conduct available only in clear and obvious cases of wanton or reckless dissipation and only where it would be inequitable to disregard the conduct. On the facts, the court accepted that the principal repayment reflected a genuine obligation and that the share sale had been undertaken in good faith rather than as a reckless dissipation of assets. However, the court did reattribute the £500,000 interest payment because no genuine obligation to make that payment had been established. The case is therefore a helpful reminder that context matters, and that not every disadvantageous or unilateral financial decision will justify a notional add-back.

Non-disclosure and adverse inferences

While successful personal conduct and add-back arguments remain rare, cases where non-disclosure results in the court drawing adverse inferences are more common. If the family court does not accept a party’s presentation of their resources at face value, the financial consequences can be substantial.

MK v SK [2026] EWFC 28 is a useful recent example. Mr Justice Peel drew robust adverse inferences about the husband’s access to resources in the millions of pounds, in the face of incomplete and unreliable disclosure from him to the contrary. The court then proceeded to assess the outcome and make a substantial award to the wife based on those inferences.

The recently published judgment in Gohil v Gohil [2025] EWHC 3646 provides a more extreme illustration. A consent order from 2004 recorded the wife’s belief that the husband had not provided full and frank disclosure, but she nevertheless compromised her claims to achieve finality at that stage.

In an extraordinary turn of events, the husband was convicted of money laundering and forgery, the wife had to go to the Supreme Court to have the original consent order set aside, and the financial remedy rehearing did not finally conclude until more than twenty years after the original proceedings.

The disclosure issues were stark. There was evidence that signatures had been forged, offshore accounts said to be depleted or closed were later shown to have been replenished, and the husband’s explanations for the source of funds used to purchase various assets were found to be entirely lacking in credibility. Mr Justice Williams ultimately found very substantial non-disclosure in 2002, further non-disclosure thereafter, and rejected the husband’s case that years of investigation had disproved the existence of hidden wealth. He described the husband as capable of “the most breath-taking dishonesty” and concluded that, on the balance of probabilities, he still had access to hidden assets likely running into seven figures.

In those circumstances, the disclosure failures did not merely undermine credibility but resulted in broad and significant inferences as to resources. On the exceptional facts, the non-disclosure also fed into the wider section 25 exercise, with the court holding that the husband’s conduct was “gross and obvious” and awarding the wife the entirety of the identified untainted assets, about 69.5% of the matrimonial pot.

What these cases illustrate is that, in practice, non-disclosure and the adverse inferences which flow from it may prove far more significant than issues of personal misconduct. Where the court concludes that a party has failed to give a full and reliable account of their resources, the consequence may be not merely a finding on credibility, but a materially different award based on inferences drawn in place of the evidence that should have been provided.

Litigation conduct and costs

A party’s conduct within the proceedings themselves can also have serious consequences, but in this context the issue is usually reflected in costs rather than the substantive division of assets. The family court is generally reluctant to use the substantive award as a punitive mechanism, but case law shows that it is willing to recognise litigation misconduct through costs where fairness requires it.

The starting point is that there will usually be no order as to costs in financial remedy proceedings. However, if a party has pursued the litigation improperly, failed to negotiate openly and reasonably, or conducted the case in a way that generates unnecessary time and expense, that starting point can fall away. In practice, behaviour amounting to litigation misconduct could include failing to comply with directions, advancing meritless arguments, withholding material information, or otherwise increasing the costs of the proceedings without good reason.

A further judgment in LP v MP [2026] EWFC 36 serves as a useful illustration. Having already been found to have committed personal misconduct during the relationship, Mr Justice Cusworth held that the wife’s conduct of the proceedings, including non-attendance at hearings, failure to provide proper disclosure, the service of deliberately untrue material and a refusal to engage reasonably in settlement, amounted to litigation misconduct. He therefore ordered her to pay 85% of the husband’s costs on an indemnity basis, observing that such gross litigation misconduct should be severely penalised in costs. The wife’s conduct therefore had a two-pronged, and expensive, impact in this case.

Where does this leave us?

Taken together, the recent authorities do not establish a change in the law on conduct. The statutory wording is unchanged, the threshold remains high, and conduct arguments, particularly those based on personal misconduct, are still likely to succeed only in exceptional cases.

Whether conduct should be raised, and if so in what form, remains a fact-sensitive question requiring careful analysis and strategic judgment. In some cases, the better route may be a focused non-disclosure argument or an application for costs, rather than a distinct pleading of personal misconduct.

Conduct is not simply a mechanism to punish bad behaviour for its own sake. The courts remain wary of conduct arguments becoming expensive satellite litigation, particularly where the likely outcome would be little different even if the allegations were proved. Those considering running such an argument will therefore benefit from specialist legal advice at an early stage to consider not only whether a conduct argument is appropriate, but what it is intended to achieve.