1. Introduction
One of the most common questions asked during divorce is whether a spouse’s behaviour can affect the financial settlement. Many people assume that conduct such as adultery, domestic abuse, gambling, or hiding assets will automatically influence the outcome. In reality, the court’s approach is more nuanced.
The court’s primary concern is with the couple’s financial affairs, not with their behaviour generally. However, this principle is not absolute and in some situations the court can consider “bad behaviour” or, to use the language of the court, conduct.
In the case of OG v AG [2020] EWFC 52, the High Court set out four scenarios where conduct may be considered in financial remedy proceedings. Each of these scenarios is considered below. The key message is that conduct will only be considered in narrow circumstances.
This article only discusses conduct-related issues. For a broader overview of financial remedy proceedings, you can read our related article: A Guide to Financial Remedy Proceedings. For more detail on the categorisation of assets generally, see our article: Non-Matrimonial Assets in Divorce: Can inheritance, gifts and pre-marital property be protected?
2. Gross and Obvious Misconduct (Category One)
The first scenario is “gross and obvious” misconduct during the marriage. In other words, the conduct must be so serious that proceedings would become unfair if they did not account for it. The court in OG v AG clarified that this is a high threshold by reiterating a principle laid down in the landmark case of Miller v Miller [2006] UKHL 24, that conduct is irrelevant to the division of assets unless it has had direct financial consequences.
For example, if a spouse suffers long-term psychological injury because of sustained abuse during the marriage and can no longer work in the profession they previously practised, the court may consider whether that conduct has had a measurable financial impact. Another example is where “one party economically oppresses the other for selfish or malicious reasons”; for example, if one spouse intentionally causes detriment to a family business to spite the other.
These narrow boundaries of the “gross and obvious” test mean that the court cannot adjudicate on wider relationship affairs, such as infidelity, or even domestic abuse generally. The latter behaviour may be very distressing, but it lies beyond the legal scope of financial remedy proceedings.
3. Dissipation of Assets (Category Two)
The second scenario concerns economic dissipation. This occurs where one party has “wantonly and recklessly dissipated assets which would otherwise have formed part of the divisible matrimonial property”. This refers to situations where a spouse has unjustifiably depleted marital wealth. An example may be where a spouse has spent large amounts of matrimonial funds on high-stakes gambling. Another example may be where a spouse deliberately transfers substantial funds to friends or relatives shortly before separation in an attempt to reduce the assets available for distribution.
Where the court finds dissipation to have occurred, it can “add back” the dissipated funds. This means that the assets are conceptually restored to the matrimonial pot, so that the “innocent” spouse’s share of the assets is not unfairly reduced by the other party’s conduct.
However, as with “gross and obvious” misconduct, the evidential burden for this type of conduct is high. In explaining this, the court in OG v AG referred to the earlier case of Vaughan v Vaughan [2007] EWCA Civ 1085, in which it was stated that “the notional re-attribution has to be conducted very cautiously, by reference only to clear evidence of dissipation”. For an “add back” to be made, there must be clear and obvious evidence that those funds have been dissipated.
4. Litigation Misconduct (Category Three)
The third type of conduct the court may consider is litigation misconduct, which arises where a party fails to engage properly with the proceedings. For example, where a party repeatedly fails to comply with disclosure orders, produces documents late, or causes unnecessary hearings, the court may consider making a costs order against them.
Under rule 28.3(6) of the Family Procedure Rules, such misconduct can result in an adverse costs sanction being made against them, i.e., they can be ordered to pay some or all of the other party’s legal costs. This is essentially a “penalty” for their misconduct, which is separate from their share of the marital assets. The court in OG v AG clarified that litigation misconduct “should almost never alter the substantive distribution of assets”. While this rule was already well-established, the case clarified an important caveat.
The husband in OG v AG had obscured his assets earlier in proceedings. However, he provided full disclosure by 12 June 2020 − from that date, the “financial landscape” was clear to the wife. Yet, she continued to ask for a two-thirds share of the assets, advancing this argument based on the husband’s misconduct. The court criticised the wife’s behaviour, emphasising paragraph 4.4 of the Family Procedure Rules and Practice Direction 28A, which “requires the parties to negotiate openly in a reasonable way”. As a result, although the husband’s misconduct had been unjustified and warranted a costs award against him, the wife’s failure to negotiate in a reasonable manner justified a reduction in her overall costs award.
5. Hidden Assets (Category Four)
The final type of conduct is where one party fails to provide “full and frank disclosure” of their assets. Common examples are where a party is suspected of holding undeclared bank accounts, business interests, cryptocurrency holdings, or overseas assets and cannot provide a satisfactory explanation for discrepancies in the evidence.
Where a party conceals their wealth, the court can draw “adverse inferences” as to the existence and value of those hidden assets. Adverse inferences may result in the undisclosed asset being notionally accounted for in the pool of assets, so that they can be shared between the parties.
Explaining the framework for making inferences, the court in OG v AG reiterated the principles laid down in the earlier case of Moher v Moher [2019] EWCA Civ 1482. In that case, the court held that it can usually calculate at least a “ballpark figure” for the value of undisclosed assets. However, in the rare cases where the evidence is too thin to make an informed judgment, the court should refrain from mere guesswork.
6. Conclusion
When placed together, these four categories reveal the carefully defined parameters within which the court may consider conduct in financial remedy matters. The overarching principle is well-summarised by the words of the judgment itself: “The financial remedy 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.”
7. How can we help
Our specialist family barristers can help you navigate issues of conduct in financial remedy proceedings, whether you are making or facing allegations of misconduct. We also have parallel expertise in civil law as well as corporate and commercial law, making us well-positioned to provide support on financial remedy matters relating to technical trust or business interests.
If you need legal support in financial remedy proceedings, we can provide full or specific services depending on your needs, including:
- Advice on whether conduct allegations are likely to meet the relevant legal threshold.
- Advice regarding hidden assets, disclosure obligations, and dissipation arguments.
- Assistance with Form E disclosure, witness statements, and related applications.
- Representation at FDRs, final hearings, and other financial remedy proceedings.
We work on direct access. This means you can instruct our barristers directly without going through a solicitor. This can save time and reduce costs, while still giving you access to specialist support. Find out more about our direct access offering here.
We represent clients in London, Birmingham, Milton Keynes, Northampton, Bedford, Luton, and across the UK.
You can contact us to book an initial consultation.
Billal Malik is a barrister practising in family law, with extensive experience in children and financial remedy proceedings, particularly those with an overseas or immigration element.
8. Frequently Asked Questions
Does adultery affect a financial settlement?
Generally, no. The financial remedy court is concerned with financial consequences rather than moral blame. Adultery alone will rarely affect the division of assets.
Can domestic abuse affect a financial settlement?
Potentially, but only in limited circumstances. The court will usually require evidence that the abuse had a measurable financial impact, such as affecting a party’s earning capacity.
What happens if my spouse hides assets?
The court can draw adverse inferences and may assume the existence of undisclosed assets where the evidence justifies doing so.
Can gambling affect a financial remedy order?
Potentially. Where a spouse has recklessly dissipated matrimonial assets, the court may consider an “add back” exercise.
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