We consider a controversial court decision on the treatment of morally questionable spending in a divorce settlement.
As specialist family lawyers, the team at Slee Blackwell are well used to clients complaining that their errant spouse has been spending money extravagantly and depleting the assets to be shared between them. The question separating couples often ask when calculating the funds available for division is whether the money that has been “wasted” by their spouse can be added back into the equation, so that they don’t lose out.
This has long been a tricky argument to succeed on, but a recent case (MAP v MFP 2015) may have further restricted the availability of what are known as “add-back” arguments. The usual response to these arguments is that however frivolous the spending, the reality is that the money has gone and it can’t be recovered. The latest judicial indications support this view so that only the most deliberate attempts to spend money in order to put it beyond the reach of the other spouse are likely to result in a nominal credit to their account to compensate the prejudiced party.
Generally, a party can spend their money as they choose and a court will only criticise that spending if it “recklessly depletes the assets and thus potentially disadvantages the other spouse”. Even if there has been reckless spending it has long been the case that a court will only consider adding back money already spent where there is a surplus of asset after the parties’ needs have been met. There is logic to this; if the spending spouse needs accommodation, it would be inappropriate to put them in a position where they are unable to fund that accommodation as a result of notional monies being added to their share to reflect what they have previously spent.
Most people reading MAP v MFP however would assume that the husband in this case should surely be penalised for his spending. Here, over a two year period, the husband had spent £1.5 million on credit cards, cocaine, rehab fees and prostitutes! Not surprisingly, the wife felt that there should be an add back, with the money he spent being credited to the husband’s share of their assets on divorce.
The court however disagreed. It took the view that an “add back” argument is essentially about a spouse’s conduct – namely that one party has behaved in such a way that they should be financially penalised. Conduct arguments are notoriously difficult to sustain in the family courts; the conduct complained of must be both “obvious and gross” and sufficiently serious that it would be inequitable for the court to disregard it.
In this instance, the court concluded that the husband was a “flawed” personality and that his addictions controlled him to such an extent that he could not stop himself from spending the money. The judge commented that this trait was common among successful men. The husband was deemed to be a complex personality with his addictive tendencies the downside; the upside being that he had made a great success of his business in which the wife was able to share. She had to take the bad with the good. Whilst his expenditure might be morally culpable, it wasn’t intended deliberately to defeat the wife’s claims and couldn’t therefore justify him receiving a lesser share of the assets. If the wife were to share in the financial gains of his successful business she had to accept a proportion of the costs arising from the less attractive facets of her husband’s personality.
Some women’s rights campaigners might challenge the assumptions that lay behind this judgement (should women accept that successful men are inevitably drawn to drugs and prostitutes?) but for now the case is likely to be quoted by lawyers defending claims for add backs. Add back arguments will nevertheless continue to be raised in correspondence between divorce lawyers. However, if they are to stand any chance of succeeding it seems that not only must there be a surplus of assets over and above each party’s basic needs but the spending complained of must be deliberate and have been incurred with the clearest possible intention of reducing the other party’s claims.
At Slee Blackwell, we recognise that separating couples need realistic cost-effective legal advice. We pride ourselves on ensuring that’s what you get right from the outset. If you have an argument on ‘add back’ or on any other form of marital conduct we’ll advise you. But we won’t encourage you to pursue arguments that are unlikely to succeed in achieving anything other than increasing your legal costs.
For FREE initial advice give us a call on Taunton 01823 354545 or drop us an email