Conduct, including instances of economic abuse, is one of the factors that the Court can take into account when determining the financial aspects of a couple’s Divorce or Dissolution in Financial Remedy proceedings. Economic abuse, a form of domestic abuse as defined under the Domestic Abuse Act 2021, can significantly impact a party’s financial circumstances and may influence the Court’s approach to asset division. By addressing such conduct, the Court ensures that any inequitable financial consequences arising from abuse are appropriately reflected in the final settlement.
Understanding Conduct, Domestic Abuse and Economic Abuse
Under Section 25(2)(g) of the Matrimonial Causes Act 1973 (the MCA 1973), “… the court shall in particular have regard to the following matters—… (g) 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;…” However, the extent to which ‘domestic abuse’ is conduct that the Court should have regard has long been the subject of debate and analysis by the Court.
Domestic abuse is defined by Section 1 of The Domestic Abuse Act 2021 (‘the Act’). Pursuant to s 1(3) of the Act: “ Behaviour is “abusive” if it consists of any of the following—
(a) physical or sexual abuse;
(b) violent or threatening behaviour;
(c) controlling or coercive behaviour;
(d) economic abuse (see subsection (4));
(e) psychological, emotional or other abuse;
and it does not matter whether the behaviour consists of a single incident or a course of conduct.”
Economic abuse is further defined at s 1(4) of the Act as :- “any behaviour that has a substantial adverse effect on the [victim]’s ability to (a) acquire, use or maintain money or other property, or (b) obtain goods or services”. This is a fairly, wide definition. Economic abuse could feasibly include a party’s failure to make adequate financial provision pending the outcome of the Financial Remedy proceedings; withholding funds to impede their spouse’s ability to secure legal representation; and a party’s failure to comply with their obligation to give full and frank disclosure.
Surviving Economic Abuse (SEA – a UK-based charity raising awareness of economic abuse) say “Economic abuse … often occurs in the context of intimate partner violence, and involves the control of a partner or ex-partner’s money and finances, as well as the things that money can buy. 1 in 7 women in the UK has experienced economic abuse by a current or former partner. Economic abuse can include exerting control over income, spending, bank accounts, bills and borrowing. It can also include controlling access to and use of things like transport and technology, which allow us to work and stay connected, as well as property and daily essentials like food and clothing. It can include destroying items and refusing to contribute to household costs. This type of abuse is a form of coercive and controlling behaviour. It can continue long after a leaving and can have lifelong effects.”
There is no doubt that there is increased awareness of the incidence of domestic abuse. The key question for parties involved in these processes is how such conduct should make a difference when determining the division of assets and liabilities in Financial Remedy cases?
The Court’s approach in Economic Abuse cases – a brief overview
The Courts have traditionally set the bar quite high in terms of conduct which may be taken into account pursuant to section 25(2)(g) MCA 1973, expecting the conduct to be both “obvious and gross” so that it cannot be disregarded. It cannot simply be an assessment of which party was more to blame for what went wrong. It should be conduct which is financially measurable in terms of its impact (Mostyn J in OG v AG [2020] EWFC 2022).
The Court will want the party alleging the conduct to prove the facts relied upon, which must meet the high/ exceptional threshold, and establish a link between the conduct and an identifiable (if not always measurable) negative financial impact. If proven, the Court will consider how the conduct and its financial consequences should be reflected in the outcome of the financial remedy proceedings by reference to all other factors in Section 25 of the MCA 1973. This was the test spelt out by Peel J in Tsvetkov v Khayrova [2023] EWFC 130.
In DP v EP (Conduct; Economic Abuse) [2023] EWFC6, the Court was content to take into account the wife’s conduct in concealing her activities associated with the purchase, sale and attempted sale of substantial assets from her functionally illiterate husband. She had taken advantage of her dominant position. This conduct was reflected in a deviation from a 50/50 split of the assets, giving the husband a 53% share of the assets in the circumstances. This was despite it being impossible to precisely calculate the precise negative impact on Husband’s financial position as a consequence of the wife’s conduct.
Other cases where conduct has been alleged:-
- The attempted murder of the wife by the husband (H v H (2005) EWHC 2911 fam) resulted in an order giving the husband only a small portion of the assets because the conduct impacted the wife’s earning capacity and therefore her income and housing needs increased;
- extreme domestic abuse and coercive control were sufficient (Seales v Seales [2023]);
- “wanton and reckless” dissipation of assets:-
- In Norris v Norris [2002] EWHC 2996 (Fam) [2003]1 FLR 1142 there was an “add back” of £250,000 to the value of husband’s assets to reflect his overspend
- In Vaughan v Vaughan [2007] EWCA Civ 1085 [2008] 1 FLR 110, the sum of £100,000 was reattributed to the value of the Husband’s assets to reflect the minimum sum he had gambled away and wasted
- In BD v FD [2016] EWHC 594 (Fam), the sum of £300,000 was deducted from the Wife’s award to reflect her excessive spending. The balance was still adequate to meet her needs
- DH v RH (financial remedy proceedings) (2022) – £800,000 of wife’s legal costs were added back to the value of her assets to reflect her reckless expenditure on legal costs
- Husband’s lifetime gifts to his children from previous marriage, which did not negatively impact on the high standard of marital lifestyle, were insufficient in F v F (Financial Remedies : Premarital Wealth) [2012] EWHC 438 (Fam) [2012} 2 FLR 1212. The Court concluded that the gifts were not intended to defeat the wife’s claims nor ‘wanton or reckless behaviour’ to justify any add back argument
- Wife’s claims for an add ack of £1.5Million in MAP v MFP (Financial Remedies: Add Back) (2015) EWHC 627 fam to reflect husband’s spending, primarily on drugs and prostitution, were not sufficient because the spending did not constitute wanton or deliberate dissipation designed to defeat the wife’s claims. The conduct was part of husband’s personal characteristics (albeit flawed).
- In X v Y [2022] EWFC 95, it was said that the Court has discretion not to make a final award and leave matters open ended where there has not been full disclosure to preserve the possibility of a fair outcome and the Court concludes that a one-off division of capital is likely to cause unfairness and injustice to the other party
Generally, financial misconduct and litigation misconduct are treated differently. Financial misconduct regarding the financial circumstances of the parties (i.e. dissipating assets, etc), if proven, is more likely to impact on the financial settlement as in DP v EP above. Litigation misconduct, i.e. failing to provide full disclosure, missing deadlines, etc. within the court process, is likely to result in cost penalties rather than impacting upon the financial settlement (Mostyn J in OG v AG [2020] EWFC 2022 and Tsvetkov v Khayrova [2023] EWFC 130).
Although, in Xanthopolous v Rakshine [2024] EWCA Civ 84, the Husband’s woeful litigation conduct (described as “chaotic … with scant regard for court orders”) resulted in a “needs-light” award because it was considered the Husband’s litigation conduct could not be remedied by any further order for costs and should rightly be fed into the financial award, and arguably justified an award which did not meet his needs. There had already been a series of costs orders against the Husband, which had not been paid. Therefore, it was right and proper for this debt to be reflected in the financial award. He could not meet the costs orders previously made against him and, if they were to be written off, the capital sum awarded to husband could and should reflect this. To give him a debt- free start, would unfairly leave the wife having to clear the excess costs incurred due to the husband’s litigation misconduct.
It is important to assess whether the alleged conduct is likely to have an impact. Rule 28.3(7)(c) of the Family Proceedings Rules 2010 (FPR 2010) provides that on any application for costs the Court must have regard to “whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue”. Therefore, there is a risk to a party making allegations which are unlikely to make a difference and where the allegations are considered simply to be a “mudslinging” exercise.
Financial Remedy Proceedings – A Time for Change?
Resolution is an organisation of lawyers and other family justice professionals who are committed to following a non-confrontational and constructive approach to resolving family issues. On 8th October 2024, Resolution published their Report on Domestic Abuse in Financial Remedy Proceedings. Their working party had been established following the Act coming into force and the evolution of the Family Court’s understanding of and attitude towards Domestic Abuse.
The result of Resolution’s survey were such that around 80% of professionals believed that domestic abuse, and specifically economic abuse, is not sufficiently taken into account in financial remedy proceedings. It is considered that the current approach of the courts to ‘conduct’ under s 25(2)(g) of the MCA 1973 results in unfair and unpredictable outcomes for some victim-survivors of domestic abuse.
Resolution’s Report highlights the need for a cultural to better meet the needs of victim-survivors of domestic abuse. They made a number of recommendations including changes to the Family Procedure Rules 2010 (FPR 2010) to ensure that parties are safeguarded from ongoing domestic abuse, to include a more focused case management process where domestic abuse is alleged. They recommend that there should be an increased emphasis on the duty of full and frank disclosure both before and during the Court processes, and further powers to address situations where parties are delaying and / or using the Court process to exert further abuse.
It was considered that Non Court Dispute Resolution (NCDR) should be considered as an option only following robust and ongoing assessments of risk, suitability, and safeguards. Resolution have urged the Family Court to respect the decision of a Mediation who has certified a party as exempt from NCDR due to domestic abuse, bearing in mind the benefits of not re-traumatising victim-survivors and the strict test applied by Mediators when certifying such exemptions.
This recommendation regarding NCDR is made against the backdrop of the recent changes to the FPR 2010 which have been effective since 29th April 2024 to promote the early resolution of private family law disputes through NCDR. NCDR has been widened for the first time and is no longer limited to mediation. It now means “… methods of resolving a dispute other than through the court process, including but not limited to mediation, arbitration, evaluation by a neutral third party (such as a private Financial Dispute Resolution process) and collaborative law” (FPR 2.3(1), emphasis added). The main features of the changes include reduced exemptions from Mediation; requirements for the provision of further information regarding attempts at NCDR; increased powers for the Court to enquire about attempts at NCDR, adjourn cases for the parties to explore NCDR, and take a party’s failure to engage in NCDR into account when considering whether to make a costs order. Whilst the new rules do not go quite as far as making NCDR compulsory, amendments to the costs rules mean that failure to attend a MIAM or NCDR without good reason must be taken into account by a judge when considering whether make a costs order.
Other recommendations in Resolution’s Report include further consideration of measures to ensure victim-survivors have adequate financial provision pending the final outcome of the Court proceedings. Resolution recommend a review of the legislation surrounding the availability of Legal Services Payment Orders (LSPOs – an order for one party to make a payment to another party for the purpose of funding specific legal services) and the thresholds for legal aid eligibility for all Family Law case types.
Where non-compliance with an Order and enforcement steps appear likely, it is recommended that Judges and legal representatives should co-operate to ensure that the penalties for non-compliance with an Order are decided at the time of the making of the Order.
In order to minimise trauma, costs and duplication where domestic abuse is also a factor in Children Act or other proceedings in addition to the Financial proceedings, it has been suggested that a consolidated fact-finding hearing before the Family Court would be beneficial.
Economic Abuse and Financial Remedy Legal Support
Domestic abuse, and specifically economic abuse, is not likely to disappear as a feature in Family Law cases. Parties involved in cases where domestic abuse is alleged should seek legal advice and representation at the earliest opportunity to ensure that they are safeguarded appropriately. Allegations of conduct must be raised at the earliest opportunity. However, parties should be given robust advice regarding the implications of raising conduct allegations which are not likely to meet the requisite threshold.
Our Family Law specialists at DTM Legal LLP will advise clients with regard to their specific circumstances and the necessary steps to be taken. Please contact Colette Blackburn by emailing colette.blackburn@dtmlegal.com or calling 0151 304 7145 for further advice and assistance.
