When considering the split of assets there are many considerations which a court has to take into account. These are contained in Section 25 of the Matrimonial Causes Act 1973.. The objective of the court is to ensure that any potential settlement is fair and reasonable to the parties involved.

The factors considered by the court are:

• The income, earning capacity, property and other financial needs which each party has.
• The financial needs and responsibilities which each of the parties to the marriage has or are likely to have.
• The standard of living enjoyed by the family before the separation.
• The age of the parties and the length of the marriage.
• Any physical or mental disability which either of the parties have which may affect them in the future.
• The contributions made by each party to the family which includes contributions towards looking after the marital home and caring for the family.
• The conduct of each of the parties. The courts may take conduct into account regardless of whether it took place during the marriage or after separation providing the conduct is such that it would be inequitable to disregard it
• The value to each party to the marriage of any benefit which, by reason of the divorce or separation, a party will lose the chance of acquiring. This will include pensions and any policies such as insurance or assurance policies.
• Where a divorce or separation matter concerns children the Court’s primary concern will be the welfare of the children and how their needs will be met.

One of the factors which the court considers is the conduct of the parties involved in the proceedings. The courts will consider the conduct providing it is serious. For the courts to take a parties’ conduct into account the conduct must be inequitable to disregard.

The courts will only take a parties’ conduct into account if the conduct is obvious and significant. Simply relying on the grounds of adultery or unreasonable behaviour does not amount to conduct which may be likely to affect the split of the finances and assets. If a section 25 conduct argument is bought successfully this can impact the way the assets are split in one parties’ favour.

The starting point to raise a conduct argument under Section 25 of the Matrimonial Causes Act is by listing this within the financial exchange form. This is known as the Form E. The information regarding the conduct of a party needs to be entered into section 4.4. of the Form. E. The Section specifically states “Bad behaviour or conduct by the other party will only be considered in very exceptional circumstances when deciding how assets should be shared after divorce/dissolution. If you feel it should be considered in your case, identify the nature of the behaviour or conduct below”.

The courts will generally take into consideration 2 types of conduct when looking at a section 25 conduct argument. These are personal misconduct and financial misconduct. Physical conduct relates to bad behaviour committed by the other spouse. This is usually what separating couples rely on when considering a divorce or separation. Physical conduct most commonly falls into the ambit of divorce or separation on the grounds of unreasonable behaviour of adultery. It must be noted that physical conduct or misconduct very rarely impacts a financial settlement or division of the assets. For certain behaviour to be considered to be amounting to serious conduct it must directly impact how a court should divide the finances assets. Despite this there is no guarantee that the court will reduce a parties’ financial settlement for such behaviour.

A common section 25 conduct argument under physical misconduct is usually domestic violence. Where violence has been committed against one party the courts may take this into account where the violence affects the parties’ financial position. An example of this is where due to the domestic violence one party is unable to obtain an employment and have or are likely to suffer financially.

In cases where conduct has been established the courts can reduce one parties financial entitlement. An example of this can be seen in the case of H v H 2005. In this case the husband had attacked his wife with a knife and caused serious knife injuries. A tape recording of the incident supported the wife’s account. The wife was formerly a police officer and had been unable to work as a result of this incident and the husband’s behaviour. The husband was sentenced to 12 years in prison for attempting to murder his wife in the matrimonial home in front of the young children.

Whilst serving his sentence the husband was refusing to consent to the sale of the matrimonial home or for it to be let out. The courts concluded that this was not merely a conduct argument for which it would be inequitable to disregard under s.25 of the Matrimonial Causes Act 1973 but was conduct at the very top end of the scale. The court decided that it must place the wife’s needs much higher than those of the husband. This is an example of a physical misconduct which the court considered when considering a financial settlement and a division of assets given that the husbands conduct, and behaviour was so serious it affected the wife’s earning capacity.

Financial misconduct under a section 25 conduct argument is usually relied on where one partner recklessly or intentionally dissipates assets prior to the financial proceedings. In effect one partner is to try and reduce the amount of finances and assets which are available for division. In such cases the courts have the power to add the finances or the assets back into the matrimonial pot as if the party still had these assets. The court will require any financial conduct to have taken place deliberately or recklessly. This will usually include cases where there has been excessive spending or behaviours such as gambling or dissipating assets.

The case of M v M 2006 is a an example of financial conduct within a financial settlement proceedings in which case the courts departed from the principle of equality. In this case the husbands financial conduct was considered by the court when reaching a financial settlement. The husband in this case was dissipating his finances and assets through gambling. Despite undertaking not to gamble the husband continued gambling and failed to maintain his wife, failed to meet the outgoings of the matrimonial home and failed to pay for the mortgage. The husband continued paying substantial amounts of money to his mistress. The courts construed that this amounted to financial conduct and this constituted conduct which it would be inequitable to disregard. The courts therefore divided the major asset of the matrimonial home in the wife’s favour.

It is however important to note that the aim of the court is not to punish one party for their conduct during the marriage or for the reason of their divorce or separation. The focus of the court is to ensure the financial and matrimonial assets are divided fairly and in a reasonable manner. The courts encourage the separating couple to focus on making sure they can proceed with their life and meet their future needs in terms of their finances rather than punishing someone for what has taken place in the past.

The general options the court consider when a section 25 argument has been successfully been found is to consider the adding back position. This is where the courts would add back the finances or the assets as if they hadn’t been spent or dissipated. This would mean the value of the assets or finances which are no longer available would be added back and divided by the courts.

An example of the courts approach can be seen in the case of MAP v MFP 2015. The case involved a husband who was a managing director and a 95% shareholder of a successful family property development company. The wife was the company secretary and finance director as well as owning the remaining 5% of the shares. The parties remained married for 40 years. The husband had serious cocaine and alcohol addiction problems. The husband spent approximately £230,000.00 on unsuccessful rehabilitation treatment. And continued spending £6,000.00 per week on his drugs and alcohol. Whilst the husband was away the wife continued to work and discovered the husband had been involved with prostitutes.

The courts considered the add-back argument and whether they should add on the amount of money the husband spent on his drugs and alcohol addiction, treatment and prostitutes. The courts stated they must be satisfied that there had been “wanton dissipation of assets”, when deciding the case that the husband had significantly overspent. However, the courts did not find that the husband overspent to reduce his wife’s claim. The husband overspent because of his addiction which he could not prevent. This was down to the husbands flawed character. The court could not add-back items of expenditure which the wife was hoping to be added back to increase her financial claim. The court made no adjustment to the financial award based on the husband’s conduct.

However, it must be noted that even if a court finds there is conduct which should be considered, it does not necessarily mean that there will be a reduction in the financial claim or a total extinction. The court has discretion and will consider all factors when making its decision. Bad conduct may be used as a starting point for one party to argue that the court should depart from the principle of an equal division of assets which is the usual starting point in financial remedy cases.

The courts ultimate duty is to ensure that the needs of both parties are met. The courts will not make a reduction and reduce one parties award who will not be able to meet his basic needs. The courts will only consider conduct where the assets exceed the needs and the conduct is not related to a parties’ character but was done recklessly and intentionally. This means quite often unless the conduct is very serious, it will not be considered when considering the financial settlement and division of assets.

If you are involved in a set of financial remedy proceedings, you need to identify from the outset whether any conduct issues are likely to be raised. Early identification is critical to ensure you are adequately prepared for what is likely to come your way. If you believe you may be subject to a conduct argument you may need to seek legal advice and assistance. At Kabir Family Law, our family lawyers have vast amounts of experience of dealing with all types of family financial claims.

We can assist you in preparing a statement to the family court which will assist you in highlighting how your conduct is not significant and may not warrant an adjustment in a financial settlement or a division of assets. You must be able to prove to the court that your conduct was not reckless or intentionally to affect the financial claim.

In order to defend a conduct argument, you will also need to provide evidence to support that your behaviour did not amount to poor conduct and that your behaviour was not carried out in a way to reduce the other parties claim. Without being able to show your conduct was not directly related to the financial settlement you will struggle to defend the conduct argument.

Where one party conducts themselves badly within the litigation process itself the court can impose cost orders on the relevant party. This usually occurs when one party fails to comply with court rules and orders without any valid reason. Such misconduct is dealt with by way of an order from the court rather than the family court making an adjustment to the financial settlement or division of assets.