Financial Conduct Considered in the Context of the Case of OC v AG [2020] EWFC 52 and Others

Divorce & Matrimonial Finance

31 January 2022

There are two areas of principle that are very difficult to argue successfully for a larger share of the marital acquest: contributions and conduct.  In this article I intend to look at the types of conduct that might be inequitable to disregard pursuant to section 25 (2) (g) of the Matrimonial Causes Act 1973, by way of a brief review of the limited scenarios categorised by Mr. Justice Mostyn in OG v AG [2020] EWFC 52.

It is also timely to consider the issue of litigation conduct in the light of the recent Statement of Efficient Conduct, published on the 11th of January 2022

At the outset, it is worth remembering that “the financial remedies court is no longer a court of morals.  Conduct should be taken into account not only where it is inequitable to disregard but only where its impact is financially measurable. It is unprincipled for the court to stick a finger in the air and arbitrarily to fine a party for what it regards as immoral conduct”. [72] (emphasis added).

Turning to the four distinct scenarios that were identified at [34] – [39]:

First, gross and obvious personal misconduct meted out by one party against the other, normally but not necessarily, during the marriage.  However, as most practitioners will be aware, such conduct will only be considered in very rare circumstances as confirmed in the case of Miller v Miller [2006] UKHL 24. Importantly, such conduct will only be reflected where there is a financial consequence to its impact. Mostyn J compared a case where the husband had stabbed the wife and the wound had impaired her earning capacity with the circumstances in Miller where Mrs Miller alleged that Mr Miller had unjustifiably ended the marriage discarding her in favour of another woman and therefore should not be allowed to argue that the marriage was short. The House of Lords rejected the argument and held that although the conduct was greatly distressing to Mrs Miller, it should independently be reflected in the Court’s decision.

More obviously, conduct under this head can extend to economic misconduct. Where one party economically oppresses the other for selfish or malicious reasons, then provided the high standard of inequitable to disregard is met, it may be reflected in a substantive award.

Second, is the add-back jurisprudence.  This arises where there is clear evidence one party has wantonly and recklessly dissipated assets which would otherwise have formed part of the divisible matrimonial property.

From the jurisprudence, the motive does not appear to be of magnetic relevance.

Third, where there is litigation misconduct that would disapply the normal rule of no order as to costs. Where proved, this should be severely penalised in costs. Note, however, that this is distinct from litigation misconduct affecting the substantive disposition.

This is an area which is becoming more fertile and has been given significant support by the recent Statement of Efficient Conduct in Financial Remedy Hearings; in particular, compliance with the duty to negotiate openly and reasonably pursuant to PD 28A para 4.4. To enable the court to examine the attempts at achieving a negotiated settlement, position statements for each hearing must now contain short details of the efforts the parties have made to negotiate. Regardless of the size of the case, a failure to make reasonable attempts to compromise cases in open negotiation will be met by cost penalties.

Notably, in OG v AG at [91] the fact that the husband was maintaining an untrue position in relation to the ownership of company AB did not absolve the wife of the obligation to negotiate reasonably.  The judge found that the wife’s open position had been penal over and above a costs penalty which was held to be not reasonable.  Mostyn J held as follows: “This is not reasonable and in my judgement PD 28A para 4.4 clearly applies. In my judgement the figure of £328,020 should be reduced by £50,000 to reflect the wife’s unreasonable and untenable open negotiation stance. I hope that this decision will serve as a clear warning to all future litigants: if you do not negotiate reasonably you will be penalised in costs. “

Fourth, there is the evidential technique of drawing inferences as to the existence of assets from a party’s conduct in failing to give full and frank disclosure, which was summarised in the case of NG v SG (Appeal: Non-Disclosure) [2012] 1 FLR 2011. The taking of account of such conduct is, however, part of the computation exercise rather than distribution. In Moher v Moher [2019] EWCA Civ 1482 Moylan LJ confirmed that while the court should strive to quantify the scale of the undisclosed assets it is not obliged to pluck a figure from the air where even a ballpark figure is in fact evidentially impossible to establish.

Practitioners need to be very clear as to which of the above-mentioned discrete issues arise in any given case to avoid a confused presentation.

It is also worth remembering that when considering conduct, it will rarely, if ever, defeat needs. Need is of course an elastic concept and conduct can defeat needs generously assessed.

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