A Reckless Love?
By Kerrie Hall, Senior Solicitor specialising in Family Law.
When will the courts add – back money into the matrimonial pot if recklessly spent by another?
An ‘Add back’ is where the court adds back money into the matrimonial pot spent by one party which has reduced the matrimonial assets. The circumstances in which a court will do so are limited mostly to cases of “reckless and wanton” expenditure but will depend on the amount available in the case as a whole.
In the leading case of Vaughan the court considered a 40-year marriage where the Husband had squandered a large sum of money including £80,000 on gambling. While he had a serious depressive illness after losing his job as a pilot, the Husband spent a huge amount of money after separation decreasing the amount available to the parties. The Court of Appeal added money back into the matrimonial pot considering that there was clear evidence of dissipation with “a wanton element.”
The legal test was, however, complicated by the case of MAP v MFP in 2015 where the court was asked to consider whether £200,000 should be added back into the pot to account to the Wife for money the Husband had spent on cocaine, prostitutes, alcohol and therapy after the parties’ separation. The parties had been married for 40 years and the husband had built up a successful business during that time.
The Judge declined to add back the sums considering the husband’s “personality flaw” and that the dissipation was not motivated by a wish to reduce the wife’s claim; he was an ill man who had been in need of treatment. The Judge commented that while the Husband may have been morally culpable, “the wife had to take her spouse as she found him” and as he had those flaws when he had built up a successful business, the court and the parties could not pick and choose his flaws.
The court can also consider whether a transaction can be set aside as if it had never happened. Section 37 of the Matrimonial Causes Act allows the court to set aside a transfer made with the intention of defeating a claim for financial remedy. There is a strict legal test for this and again early consideration of the issues is vital to ensure pleadings are considered and drafted in good time. Indeed the court guidance is that if any party seeks to set aside or re-attribute funds then they must nail their colours to the mast early on in a case.
The court is also alive to the fact that an add-back does not physically recreate money but is a way of penalising the party who has been wanton; a party clearly cannot buy a house with the notional reattributed sum. The court should then cross check any findings will still meet parties’ needs.
Running an add-back argument is notoriously difficult and requires detailed consideration both of the sums involved and the conduct of the wrongdoer. Add-back arguments are unlikely to succeed unless the motivation to dissipate the sums is clear. Addiction and character flaws are now unlikely to be enough. Anyone considering separation needs to take early advice to ensure the matrimonial pot is not recklessly wasted when needed to meet future needs.
If you need advice or assistance then please contact our Partner and Head of Divorce and Family, Tracey Dargan, on 01992 300333.
Please note the contents of this blog are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.