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Family judges are consistently taking a tough approach where there is bad conduct on the part of a litigant – or both, as in the case of RM and TM [2020] EWFC 41(6 May 2020). Litigants in person are not treated any more leniently. The deputy High Court judge in that case noted how the parties had embarked on “ruinous and recriminatory financial remedy proceedings” and set out the correct approach to conduct in view of s25(2)(g).
A ruling just a couple of months later considered the impact of conduct, particularly on costs (OG v AG [2020] EWFC 52 29 July). Notably, Mostyn J limited the application of s25(2)(g) and said conduct should be taken into account where it is inequitable to disregard – “but only where its impact is financially measurable”.
It had been a long marriage (25 years) and the parties had together established a successful ducting business. However, the business effectively became a tool with which H attempted to manipulate the value of the matrimonial assets to his advantage. It didn’t wash with the Family Court.
H had stopped working for their established company not long before a competitor company (CC) became incorporated. Both his father and some of his close friends were the shareholders, though H sought to distance himself from it.
In the proceedings, W raised the issue of H’s conduct and argued strongly that H was, in reality, the true owner and that the competitor company was a façade months in the making as a way for H to compete unfairly against her.
On that basis, W said the value of their established company should be discounted by approximately 40% and the net assets divided 2:1 in her favour. Mostyn J agreed and found on the evidence that H was indeed the true owner of the original company and that his conduct met the ‘inequitable to disregard’ threshold.
He applied a 30% discount to the company’s trading value but would not allow W two-thirds of the discounted assets as this was disproportionate and would also amount to a triple jeopardy.
The impact on costs
W also requested that H should 93% pay her costs, but Mostyn J described W’s demand as “untenable” because her own conduct had been below what was expected.
That said, Mostyn J described H’s handling and presentation of his litigation as both abysmal and dishonest. In a salutary warning for all litigants, this proved an expensive way of avoiding specialist legal advice: a costs order of £278,020 was made in W’s favour.
However, this was less than she might have been awarded. She had, for instance, unreasonably refused to openly negotiate (revised para 4.4 FPR PD28A) and so she suffered a penalty in costs. She was also guilty of nondisclosure, even if on a much lesser scale than H.
Guidance
Finally, where faced with potential ‘conduct’ cases, practitioners would do well to note four distinct scenarios in which conduct arises as highlighted by Mostyn J:
- Gross and obvious personal misconduct meted out by one party to the other (normally during the marriage)
- ‘Add-back’ jurisprudence - where one party has wantonly and recklessly dissipated assets which would otherwise have formed part of the divisible matrimonial property.
- Litigation misconduct – which should be severely penalised in costs.
- Failure to provide full and frank disclosure, such that adverse inferences may be drawn.
Learn more about this issue
These cases and their ramifications will be explored further in The Solicitors Group's upcoming virtual CPD event, LAW2021 Online: Family Law. Find out more here.
