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Economic Abuse and Divorce

Rebecca Christie, Associate with Hunters, explains the protections available to a divorcing client who has suffered economic abuse from their spouse.

 

Rebecca Christie, Associate with Hunters


The Domestic Abuse Bill currently before Parliament will, for the first time, explicitly include economic abuse within the definition of domestic abuse, reflecting the growing recognition of this form of abuse. As family lawyers, it is important that we are alert to signs that a client who has come to us for advice on divorce may have experienced economic abuse, so that we can advise them appropriately and adjust our conduct of their case accordingly.


What is economic abuse?

Economic abuse, also known as financial abuse, is a form of domestic abuse. The Domestic Abuse Bill provides as follows:

1 Definition of "domestic abuse"

(2)  Behaviour of a person ("A") towards another person ("B") is "domestic abuse" if—

(a) A and B are each aged 16 or over and are personally connected to each other, and

(b) the behaviour is abusive.

(3) Behaviour is "abusive" if it consists of any of the following—

(a) physical or sexual abuse;

(b) violent or threatening behaviour;

(c) controlling or coercive behaviour;

(d) economic abuse (see subsection (4));

(e) psychological, emotional or other abuse;
and it does not matter whether the behaviour consists of a single incident or a course of conduct.

(4)  "Economic abuse" means any behaviour that has a substantial adverse effect on B's ability to—

(a) acquire, use or maintain money or other property, or

(b) obtain goods or services.


Economic abuse can take many forms and affect people from all walks of life. The campaign group Surviving Economic Abuse identify a number of behaviours which would amount to economic abuse including:

- Preventing a partner from working or training;

- Ensuring a partner's salary is paid into a joint bank account to which they do not have access;

- Controlling how money is spent, including dictating what a partner can buy, closely examining their bank statements/receipts and requiring them to justify all purchases;

- Building up debt in a partner's name, sometimes without their knowledge; and

- Holding all the family assets in their sole name and denying a partner information about the family finances.

Economic abuse can make it very difficult, from a practical as well as psychological perspective, for a victim to leave the abusive relationship. Economic abuse may isolate those who experience it from friends and family if they do not have money to socialise, damage their career prospects if they cannot work or train, and be destructive to their self-confidence, especially if they cannot buy clothes and hygiene or beauty products. Economic abuse is a form of controlling or coercive behaviour, and may also indicate that other forms of domestic abuse are present.

Some who have been subjected to economic abuse will not realise that what they have experienced is a form of abuse. The full picture may emerge as they respond to their lawyer's questions about their financial circumstances. Great sensitivity is required in raising with a client that what they have experienced may be a form of domestic abuse. It will be important for the lawyer to understand the nature and extent of the behaviour, so that appropriate consideration can be given as to what steps need to be taken to protect the client, and how the abuse may affect the conduct and outcome of the financial remedy proceedings. It may also be sensible to signpost the client to organisations that will be able to provide practical advice and support, such as Surviving Economic Abuse.


What applications might be needed where the client has experienced economic abuse?

Personal protection


As with all types of domestic abuse, it is essential to protect the client's personal safety. If the client is still living with their partner, it may be appropriate to seek an occupation order requiring the partner to vacate the family home under s33-40 Family Law Act 1996 ('FLA 1996'). When preparing a supporting witness statement, attention should be drawn to the practical and psychological implications of economic abuse, and the likely consequences for the client of having to continue to live with their partner throughout the financial remedy process. The need for the client to start rebuilding their life, and the harm they would suffer from delaying this, should also be addressed.

When granting an occupation order, the court can, under s40 FLA 1996, require the party who is vacating the property to pay the rent, mortgage or other outgoings on the property, as well as repair and maintenance costs. This may be essential if the client has no access to financial resources, in particular until a claim for maintenance pending suit can be made and determined.

If the client believes their partner will continue to behave abusively after leaving the home, for example by sending abusive messages, then it may be appropriate to apply for a non-molestation order limiting the contact they may have with them.


Preservation of assets

Economic abuse may indicate a heightened risk that the perpetrator will attempt to put assets beyond the court's reach as part of their efforts to continue exerting financial control over their partner. This could include transferring assets to third parties such as friends or family, charging assets and disposing of the cash released, or transferring assets out of the jurisdiction. If such a risk is identified then issuing financial remedy proceedings swiftly will be a sensible step, to limit the amount of time the perpetrator has available to rearrange their financial affairs before financial disclosure is required.

If the family home is in the other party's sole name, the client's matrimonial home rights should be registered as soon as possible to guard against transfer of or borrowing against the home. Applications to register Land Registry notices or restrictions against any other property owned by the perpetrator should also be considered.

It may be necessary to act fast to apply to prevent a disposition under s37 Matrimonial Causes Act 1937 ('MCA 1937'), or for a freezing order under the court's inherent jurisdiction. Whilst a history of economic abuse will not alone suffice for an injunction to be granted, alongside other evidence it can be important context evidencing the risk of disposal of assets.

Where assets have already been transferred by the abusive party in an attempt to defeat the client's claims, an application could be made under s37(2)(b) MCA 1973 to set aside the transaction.  However, where the transferred assets represent a relatively small proportion of the overall finances, the appropriate way forward is likely to be to argue that the assets should be "added-back" to the other party's side of the asset schedule.


Enforcement of financial disclosure orders

Where the other party has, throughout the marriage, denied the client access to information about the family finances, financial disclosure will need to be scrutinised particularly carefully as the client's capacity to identify assets that have been omitted will be limited, and the other party may fail to make full disclosure as a perpetuation of the economic abuse.

Solicitors will need to take a firm line, identifying gaps in financial disclosure through Schedules of Deficiencies. Enforcement can be sought through applying for a penal notice to be attached to a disclosure order and then applying for committal if compliance remains outstanding (as in Young v Young [2013] EWHC 34 (Fam), where Mr Young was sentenced to six months imprisonment for his refusal to comply with a disclosure order).

Ultimately, if full disclosure cannot be obtained then the court can be asked to draw adverse inferences against the offending party (see Moher v Moher [2019] EWCA Civ 1482 for a recent decision on this). Evidence of economic abuse and financial secrecy will be relevant to the court's assessment of whether undisclosed assets exist.


Payment of legal fees and ongoing living costs

Where a client has been denied access to family resources and/or prevented from developing a career of their own, they may be unable to afford to meet their daily living expenses or legal fees. An early application for MPS may therefore be required. The other party may provide limited financial support on an ad hoc basis, continuing their economic abuse by subjecting the client to financial insecurity. In such circumstances, an MPS application may be appropriate.

It is important to appreciate that putting together a budget may be challenging for someone who has not had control over their own finances for many years, or has been told that their (modest) spending aspirations are frivolous and wasteful. The client may therefore need considerable support with this. Similarly, once MPS is in place, do not underestimate the potential stress that the client may experience in having to manage their own financial affairs for the first time in many years.

In an economic abuse situation, the abusive partner may refuse to pay the other's legal fees even where this is affordable. A Legal Services Payment Order can be sought under s22ZA of the MCA 1973, but the client will be expected to take out a litigation loan instead where that is possible. Some clients may prefer this in any event as they would not then be dependent on the other party's compliance with an order to meet their legal fees, but those who have been subject to economic abuse through debt being accrued in their name may be concerned by the prospect of taking on more debt.


How might economic abuse affect the outcome of financial remedy proceedings?

Practical consequences of economic abuse


Economic abuse may have created financial realities which need to be factored into the financial settlement. If one party has not been permitted to work, then their earning capacity may be impacted, in both the short-term and the long-term, and this may be exacerbated by mental health difficulties resulting from the abuse. Debts may have been accrued by the abuser in the client's name which need to be repaid, and which may have caused long-term damage to the client's credit-rating and mortgage capacity. These realities will need to be accommodated in any settlement made.


Conduct

Under s25(g) MCA 1973 the court may take into account "the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it".  In the recent case of OG v AG [2020] EWFC 52, Mr Justice Mostyn stated that this "can extend, obviously, to economic misconduct… If one party economically oppresses the other for selfish or malicious reasons then, provided the high standard of 'inequitable to disregard' is met, it may be reflected in the substantive award" (paragraph 35).

Mostyn J's view, expressed in OG v AG, was that conduct should only be considered to the extent that its impact is "financially measurable" (paragraph 72) and should not involve additional sanctions reflecting a "moral judgment" (paragraph 71). However a different view was taken by Cohen J in FRB v DCA (No. 2) [2020] EWHC 754 (Fam), where he considered that the "emotional damage" suffered by the husband as a result of the wife concealing that the child of the marriage was conceived with another man should be reflected in the substantive award.

In the recent Court of Appeal decision of Rothschild v De Souza [2020] EWCA Civ 1215, the Court of Appeal confirmed that where assets are insufficient to meet needs as a result of one party's conduct, the court is entitled to prioritise the needs of the party who has not committed the conduct, meaning conduct can lead to a party receiving less than their needs.

It is clear that the financial consequences of economic abuse should be suffered by the perpetrator, not the victim, when the final award is made, and this may mean the perpetrator is left unable to meet their financial needs. In cases of severe economic abuse there may be an argument that the emotional damage suffered by the victim should also be taken into account, though it seems that judges will take different views on whether such arguments are legitimate.


Financial separation

Whilst s25A MCA 1973 requires the court to consider in every case whether a clean break is appropriate, striving to achieve a clean break is particularly important where there has been economic abuse. Whilst remaining dependent upon their former partner for maintenance may be inevitable (and will be, where there are children and child maintenance is payable), continuing financial ties should be minimised, as they provide an opportunity for further economic abuse. If the case has reached a final hearing, the importance of this consideration should be emphasised to the judge.

In respect of any aspect of the order where the other party's co-operation will be required (for example in selling the family home), it will be important to work through in advance how enforcement will work if they do not co-operate, and seek to build into the order as much protection for the client as possible (for example by giving them sole conduct of the sale). The history of economic abuse should explain the need for such provisions.


Litigation misconduct and costs

A party who has carried out economic abuse during the marriage may well continue this abuse by way of litigation misconduct in financial remedy proceedings, whether by failing to make full disclosure, refusing to negotiate, or otherwise. The courts are increasingly willing to penalise litigation misconduct with costs orders, with Mostyn J stating in OG v AG that litigation misconduct should be "severely penalised in costs" (para 39), "if you are guilty of deliberate non-disclosure…you will pay a penalty in costs" (para 89), and "if you do not negotiate reasonably you will be penalised in costs" (para 94). The Court of Appeal in Rothschild v De Souza helpfully made clear that in some cases litigation misconduct can also be reflected in the substantive award.


Conclusion

This discussion illustrates that economic abuse has the potential to affect many aspects of financial remedy proceedings. Increased awareness of economic abuse will enable family lawyers to recognise where it has been a feature of a marriage, enabling us to take steps to minimise the risk of the financial remedy proceedings providing further opportunities for economic abuse, and to support our clients on their paths to financial independence.

15/10/20