Irresponsible conduct with family assets could cost you dear in a divorce settlement

When it comes to divvying up the family silver on divorce, many people may be surprised to learn that even adultery or behaviour so unreasonable it leads to the breakdown of the marriage is highly unlikely to affect the final financial settlement.

Section 25 of the Matrimonial Causes Act 1973 lists the factors that the court must consider when looking at a claim for financial remedy. They include: "The conduct of each of the parties, whatever the nature of the conduct and whether it occurred during the marriage or after the separation….if that conduct is such that it would in the opinion of the court be inequitable to disregard it."

In the overwhelming majority of cases, a spouse's conduct will have no impact on their entitlement to a share of the assets.

But of course there are exceptions … as in the recent case of R v B and Capita Trusts, a judgement delivered in private but with the salient points allowed into the public domain as long as the anonymity of the parties involved, their children and where they lived, was preserved.

The case shows that conduct during the course of court proceedings, including where being advised by legal representatives, can be considered such bad conduct that it would be 'inequitable to disregard'. It shows the importance of being represented by sensible practitioners who have one eye on proportionality at all times.

What happened?

The judge described this recent case as one of the most remarkable he had heard and a clear example of how not to deal with the division of finances following marital breakdown.

The key issues at the final hearing involved the parties' respective conduct arguments and how these should be balanced against the competing arguments of needs and contributions.

In short, it involved a 15 year relationship where all the assets, around £3.5 million, were all in the wife's name. The wife's assets were largely derived from a share in the family business set up by her father in the 1950s. The husband had become involved in the business but that came to an end, after the couple separated, when it was discovered he had run up liabilities of £22 million.

And then the allegations, husband against wife and wife against husband, started coming thick and fast.

The husband alleged his ex had dissipated assets to her partner, a fraudster she had met on an on-line dating site, while the wife alleged the husband had run up liabilities either by fraudulent or incompetent mismanagement as well as litigation misconduct.

Husband's irresponsible conduct

In his judgement, the judge said he considered the costs of the case to be completely out of control and the litigation strategy not only financial suicide but 'so extreme it would be inequitable to disregard it'.

Pointing the finger of blame at the husband, he said the preliminary issue hearing, which cost more than £2 million, was caused entirely because of his irresponsible conduct of the family finances. His overall legal costs were £3 million.

The judge found that the husband was a liar in several respects including hiding loans of more than £7 million from the wife and her family, failing ever to declare any income tax to HMRC and taking money from the family business to fund his lifestyle regardless of the ownership structure. The judge said it would not be fair to ignore this conduct.

But he also said the wife had been reckless in her dissipation of assets to her partner but did not class this as conduct.

Final outcome

The judge criticised the husband as a result of his conduct which, he said, meant there was insufficient money left to meet both parties' reasonable needs.

He awarded him capitalised maintenance, with a lump sum of £839,000 and no pension provision. Because he had no state pension, had never had a national insurance number or paid any tax, the wife should not fund his misconduct, the judge said.

He'd also receive £411,000 to pay off some personal debts of £1.35 million and no other capital for his housing needs, the wife retained the balance and all of her interests in the various trusts.

For information and help on this area of the law, please contact Wards Solicitors' Family Law and Divorce team