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“Reattribution” after MAP v MFP or “For better, for worse”

Ella Calnan, barrister of Fourteen, considers the future prospects of claims for reattribution of expenditure in financial remedies cases.

Ella Calnan, barrister, Fourteen

Ella Calnan, barrister, Fourteen 

Insofar as it relates to the reattribution – or "add back" – of certain categories of wasteful or morally dubious expenditure, the recent decision of Mr. Justice Moor in MAP v MFP [2015] EWHC 627 represents yet another example of the infinite flexibility of section 25 of the Matrimonial Causes Act 1973.  The facts of the case are striking, and the scale of the add back, unusual. 

The case came before the court at the end of a 40 year marriage during which the parties had started with nothing, raised four children and accumulated assets of £25 million.  The greater part of the resource comprised the husband's shareholding in a property maintenance business, established by him in the early 1970s, and behind the growth of which the judge found him to have been "the driving force" (although both of the parties had worked in the business).

The dispute over reattribution
The wife contended that the resource would have been larger still, had the husband not been spending in the order of what she claimed was £6,000 per week on cocaine, and other substantial amounts on escorts, as well as further sums totalling £230,000 on therapy and a number of unsuccessful periods in "rehab" as the husband sought to overcome his addiction.  This expenditure which, all told, she calculated to be in the region of £1.5 million over the period January 2013 to December 2014 (post-separation), should, she argued, be added back to the resource and allocated to the husband as part of the division of assets (which division, subject to quantification and issues of timing of receipt, both agreed should be equal).  Moor J recorded the wife's case in the following terms:

"[17] In approximately 2007, the Wife became aware that the Husband was using the Class A drug, cocaine. He has also abused alcohol. He accepts he satisfies the test for addiction to cocaine but denies it in relation to alcohol. The root cause may be depression but there is no doubt that the effect has been disastrous both for his health and for the state of his otherwise entirely happy marriage.

[18] He has regularly attended residential inpatient rehabilitation at very considerable cost. This has been at both Nova Vide in Portugal and at The AB Retreat in the USA. He has spent approximately £230,000 on such treatments. Regrettably, the treatments have not provided a lasting cure and he has regularly relapsed on his return to this country.

[19] The Wife's case is that he has been spending up to £6,000 per week on his drug and alcohol habit. She also alleges that he has spent large sums of money on prostitution."

The husband did not deny that he had become addicted to cocaine, nor that he had periodically paid for sex.   He disputed the scale of the expenditure claimed by the wife and argued that the reattribution of such expenditure on cocaine and escorts as the court may have found to have occurred was not required in order to achieve a fair result.  He disputed that the monies spent on therapy and stints in rehabilitation could, in any circumstances, amount to the type of expenditure which should be "added back".

Counsel for the husband argued that his addiction and the expenditure which had flowed from it ought not to see him leave the marriage with less than the wife.   He sought to persuade the court that the wife should not be permitted to cherry pick the husband's character – rejecting the addictive side of the husband's personality but embracing that part of his personality that had over many years created the family business and allowed it to flourish.  Such expenditure as there had been on drugs and escorts was to be seen as part of a continuum of behaviour which had commenced long before the marriage failed.  Moreover, the court needed to be particularly circumspect when dealing with issues of addiction since addiction was an illness.  The court's power to add back such expenditure was better deployed in cases where the motive underpinning the expenditure was a desire to deplete the resource to the parties' mutual disbenefit.

The law
The authorities that typically guide the court in its consideration of the appropriateness of reattribution of "add backs" are Norris v Norris [2002] EWHC 2996 (Fam), [2003] 1 FLR 1142 and Vaughan v Vaughan [2007] EWCA Civ 1085, [2008], 1 FLR 1108.  The effect of those cases was summarized by King J in GS v L [2011] EWHC 1759 (Fam), [2013] 1 FLR 300:

"[91]   In the reported cases the courts have, therefore, taken into account the extent, timing and nature of the alleged wanton dissipation and set it against the backdrop of its general assessment of the overspending party. Against that backdrop the courts have then moved on to consider to what extent fairness requires there to be a degree of 'add back' and in doing so exercised considerable caution, bearing in mind that fictional money cannot be used to meet a party's housing or other needs."

Moor J reviewed Martin, Vaughan and Norris at paragraphs [63] – [67] of his judgment:

"[63] I now turn to the law as to add-back. It does seem to me that arguments in this area essentially come down to an issue of conduct as defined in section 25(2)(g) namely "conduct that it would in the opinion of the court be inequitable to disregard". As Baroness Hale makes clear in Miller/McFarlane, for such conduct to bite it has to be "gross and obvious".

[64] The add-back authorities essentially say the same. For the court to "add-back" assets that have been spent, the court has to be satisfied that there has been "wanton dissipation of assets". In Martin v Martin [1976] Fam 335, Cairns LJ said:

'A spouse cannot be allowed to fritter away the assets by extravagant living or reckless speculation and then to claim as great a share of what was left as he would have been entitled to if he had behaved reasonably.'

[65] Bennett J considered the same issue in Norris v Norris [2003] 1 FLR 1142 where he said:

'The overspend…at a time when he was about to and then did enter into protracted litigation with the wife, can only be classified as reckless...In my judgment, there is no answer that the husband can sensibly give to the question "Why should the wife be disadvantaged in the split of the assets by the husband's reckless expenditure? A spouse can, of course, spend his or her money as he or she chooses, but it is only fair to add back into that spouse's assets the amount by which he or she recklessly depletes the assets and thus potentially disadvantages the other spouse within the ancillary relief proceedings.'

[66] The matter was considered by the Court of Appeal in Vaughan v Vaughan [2007] EWCA Civ 1085, [2008] 1 FLR 1108 where Wilson LJ said:

'The only obvious caveats are that a notional reattribution has to be conducted very cautiously, by reference only to clear evidence of dissipation (in which there is a wanton element) and that the fiction does not extend to treatment of the sums reattributed to a spouse as cash which he can deploy in meeting his needs, for example, in the purchase of accommodation…'

[67] The question of moral culpability was canvassed later in the judgment where it was said that:

'No doubt there are cases in which the mental incapacity of the dissipating spouse is such as to render reattribution unfair; but I agree with the circuit judge that the husband's problems were not of that severity'."

Having reviewed the authorities and the evidence, Moor J came to the following conclusions:

"[89] I accept that the Husband has significantly overspent. I further accept that it is the Husband who has done, this not the Wife. In the relevant period, he spent £259,559 on Spanish builders, who were working on the Spanish Villas. I am satisfied that this was, during this period, almost exclusively spent on the Husband's villa but that is more an accident of time. Equally substantial sums had previously been spent on the Wife's villa. Mr Molyneux described it as being like the painting of the Forth Bridge. It is only similar to the Forth Bridge in one sense, namely that it never finished. I am satisfied that perfectly good work would be done but the Husband would not be satisfied and would decide to start again. That, however, is his personality.

[90] I do not find, however, that the Husband overspent to reduce the Wife's claim. In part he did it because he could not prevent himself from doing it. It was down to his flawed character. This court could not possibly add-back the expenditure on drug therapy. This was him trying to put matters right. Whilst I accept that he did not always take advice, I reject Mr Pocock's description of him going to this therapy as a "holiday" to get away from the pressures of life or the litigation. He was ill and he needed treatment. The same illness, however, prevented him at times from accepting the treatment.

[91] Equally, I cannot add-back items of expenditure that were simply extravagant or part of his obsession with perfection. I have had the most difficulty with the expenditure on cocaine and prostitution. I have, however, come to the clear conclusion that I should not add-back even these items. As I have already noted, a spouse must take his or her partner as he or she finds them. Many very successful people are flawed. This is true of this Husband. I have decided that it would be wrong to allow the Wife to take advantage of the Husband's great abilities that enabled him to make such a success of the company while not taking the financial hit from his personality flaw that led to his cocaine addiction and his inability to rid himself of the habit. It may have been morally culpable. Overall, it was irresponsible. But I find that this was not deliberate or wanton dissipation. It would be wrong to add it back."

The future for reattribution?
Many practitioners – and perhaps an even greater number of judges toiling in the Family Court – will see MAP v MFP as a dampener on the enthusiasm of those who would wish to advance cases based around reattribution.  Perhaps the following observations can be made:

1. In the majority of cases, no question of adding back monies into the matrimonial resource will arise since the courts have made it plain that notional monies cannot be used to meet real needs.   Given the expansive interpretation given by the courts to the meaning of need, and the consequentially small number of cases in which a surplus remains after needs are met, for most litigants, arguments based around an audit of who has spent what and whether or not such expenditure can rightly be described as "reckless and wanton", are unlikely to be entertained by the court.

2. Where needs are met and the sums sought to be added back are surplus to those needs, the scale and nature of the expenditure added back will need both to be clearly evidenced, and to be something substantially out of the ordinary.  If Moor J is correct in describing add backs as being a form of financial misconduct and thus falling within s25(2)(g) then the conduct complained of must be both "gross and obvious" (or deserving of the "gasp factor" as Nicholas Mostyn QC (as he then was) suggested in submissions to Burton J in S v S [2006] EWHC 2793).  In that case, the judge summarised the law on conduct in the following terms:

"[37] It is common ground that for conduct to be taken into account in the assessment of financial provision/property adjustment, either by way of enhancement of the position of the 'innocent' party, or reduction or elimination of the entitlement of the 'guilty' party, such conduct must be exceptional. The statutory provision in s25(2) I have already set out in paragraph 22 above, namely by reference to subsection (g) that the court shall have regard to conduct 'if that conduct is such that it would in the opinion of the court be inequitable to disregard it'. The exceptional nature of this course is referred to by Lord Nicholls in Miller at para 65, and again by Baroness Hale at para 145:

'It is only equitable to take their conduct into account if one has been very much more to blame than the other: in the famous words of Ormrod J in Wachtel v Wachtel [1973] Fam 72 at 80 the conduct had been 'both obvious and gross' … It is simply not possible for any outsider to pick over the events of a marriage and decide who was the more to blame for what went wrong, save in the most obvious and gross cases.'"

How many reattribution cases can truly be said to fall within this category of exceptionality?

3. Perhaps, ironically, MAP v MFP was just such a case.  Even a finding of £250,000 of illegitimate expenditure, rather than the £1.5 million sought by the wife, may be regarded as prompting the gasp factor referred to by Nicholas Mostyn QC (as he then was).  But even this was insufficient to secure the enhanced award contended for by the wife.  The application of section 25 in pursuit of a fair outcome means that even substantial expenditure on cocaine and prostitution is no guarantee of a successful outcome. The court, as the judgment of Moor J demonstrates, is apt to take a more nuanced approach to the realities of failed marriages than simply to impose a financial punishment on one or other of the parties.  Moor J's conclusion that "…I have decided that it would be wrong to allow the Wife to take advantage of the Husband's great abilities that enabled him to make such a success of the company while not taking the financial hit from his personality flaw that led to his cocaine addiction and his inability to rid himself of the habit," ought to be seen not only as  a reminder of the high threshold which those bringing reattribution cases will have to overcome, but also of the fact that courts are apt to take the view that each person must take their spouse as they find them.  If Moor J's approach holds sway, then the only cases in which a party has a realistic prospect of succeeding on an add back claim, will be where (i) the assets outstrip needs, (ii) the expenditure is exceptional and thus capable of being classed as financial misconduct, and (iii) the expenditure is not a continuum of flaws and failings which manifested themselves within the marriage. Perhaps add back cases will in future be limited to those larger money cases where the complained of expenditure is motivated purely and simply by an effort to reduce the resource and by so reducing the resource to disadvantage the other party.