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Divorce and unreasonable behaviour pretty much go hand in hand. Drugs, alcohol abuse and gambling addictions are unfortunately referred to on many occasion and is accepted as conduct so far as a divorce is concerned.

But what about when matrimonial resources have been dissipated or diminished as a result of that addiction to the detriment of the family as a whole. Surely common sense would prevail and allow there to be some recompense ( add back ) to the other spouse to bring back equality.

A recent High Court decision in the case of MAP v MFP [2015] EWHC 627 (Fam) has highlighted the hurdles in running a successful argument for what is known as “add back” and provides us with fresh guidance, proving that this is not the case.

Background

The husband and wife in question were childhood sweethearts and had been married for forty years with four adult children. Together they had built up a successful property maintenance business which was worth approximately £22m. The husband was managing director and the wife was company secretary and credit controller.

The husband had addictions to both cocaine and alcohol and had been in and out of various expensive residential rehabilitation programmes. The wife alleged that he spent £6,000 a week on cocaine and alcohol alone, as well as significant sums on prostitution.

Following their separation the husband dismissed the wife from the company, leaving her without a salary, without payment of dividends and no longer being eligible for entrepreneur’s relief on her shareholding.

The wife sought 50% of the assets and an “add-back” of £1.5m to reflect what she viewed as her husband’s “reckless and wanton expenditure”.

The law

While the wife succeeded in securing a figure in relation to the entrepreneurial relief she would otherwise have been entitled to had she not been dismissed from the company, a dividend that the husband had unreasonably withheld from her and settlement regarding any potential claim for unfair dismissal she may have under employment law, she controversially did not succeed in her add-back argument in relation to the money spent on his addictions.

While the judge, Mr Justice Moor, accepted that the husband had spent excessively and was wholly responsible for the termination of the wife’s positions in the company, he refused the add-back in relation to the therapy, saying that the husband was “trying to put matters right”.

For richer, for poorer?

The wife also failed on the add-back of the monies spent on cocaine and prostitution. Moore J said that “[a] spouse must take his or her partner as he or she finds them. Many successful people are flawed. This is true of the husband … it would be wrong to allow the wife to take advantage of the husband’s great abilities that enable him to make such a success of the company while not taking the financial hit from his personality flaw that led to his cocaine addiction”. He made it clear that in this case, the expenditure was neither “deliberate or wanton”, although it had been “irresponsible”.

So is the court essentially saying that you have to take the rough with the smooth? For richer or poorer? In sickness and in health? It will be interesting to see how the courts define a personality flaw in subsequent cases.

What’s next?

I think that what we can take away from this case, and bearing in mind that all cases are fact-specific, is that in order to run a (rarely) successful case on financial misconduct, expenditure has to be wanton. To put it another way, there has to be a motivation. This is unsupported by earlier case law.

In running a conduct argument, we have to be mindful of the lengthy and expensive litigation which follows. It is not that lawyers shy away from conduct arguments, but in advising against pursuing them in the majority of cases, we are thinking of the bigger picture of reaching a settlement and setting you free from litigation, not encouraging you to dig deeper.

George Best famously said, “I spent a lot of money on booze birds and fast cars. The rest I just squandered.” I wonder how the courts of 2015 would view that.

Conclusion

Principally, it is in the solicitor’s office when the issue is first raised where the law needs to have its clearest message in order to limit the occurrence of these allegations and where clarity ought to be give about what the law currently is that:

(i)the court will only accede to an add back most sparingly and will not do so where in real terms having regard to the other asset values it will make a minimal difference only.

(ii)such allegations of dissipation have to be significant in terms of the resources under consideration and evidentially to be very clear; and

(iii)the dissipation in question must be wanton ie deliberate or at least reckless in the sense the accused spouse must have realised the irresponsible and extravagant nature of the spending being embarked upon; and

(iv)even with (i) to (iii) in place, the add back proposed must not artificially affect the provision of the needs of the spouse in question; and

(v)the court must before adding back conclude that having regard to all the circumstances of the case, including, in particular, the actions of the other party, it would be fair to do so.

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