A recent High Court decision in the case of MAP v MFP  EWHC 627 (Fam) has highlighted the hurdles in running a successful argument for what is known as “add back”. Keystone’s Claire O’ Flinn examines the interesting judgment and what it means for the future of family law.
You could be forgiven for thinking that if you separate from your spouse, and they then spend large amounts of money enjoying themselves, that the divorce court considering your settlement would consider that you should receive a similar amount to bring about equality.
But the case of MAP v MFP provides us with fresh guidance, proving that this is not the case.
The husband and wife in question were childhood sweethearts and had been married for forty years with four adult children. Together they had built up a successful property maintenance business which was worth approximately £22m. The husband was managing director and the wife was company secretary and credit controller.
The husband had addictions to both cocaine and alcohol and had been in and out of various expensive residential rehabilitation programmes. The wife alleged that he spent £6,000 a week on cocaine and alcohol alone, as well as significant sums on prostitution.
Following their separation the husband dismissed the wife from the company, leaving her without a salary, without payment of dividends and no longer being eligible for entrepreneur’s relief on her shareholding.
The wife sought 50% of the assets and an “add-back” of £1.5m to reflect what she viewed as her husband’s “reckless and wanton expenditure”.
While the wife succeeded in securing a figure in relation to the entrepreneurial relief she would otherwise have been entitled to had she not been dismissed from the company, a dividend that the husband had unreasonably withheld from her and settlement regarding any potential claim for unfair dismissal she may have under employment law, she controversially did not succeed in her add-back argument in relation to the money spent on his addictions.
While the judge, Mr Justice Moor, accepted that the husband had spent excessively and was wholly responsibly for the termination of the wife’s positions in the company, he refused the add-back in relation to the therapy, saying that the husband was “trying to put matters right”.
For richer, for poorer?
The wife also failed on the add-back of the monies spent on cocaine and prostitution. Moore J said that “[a] spouse must take his or her partner as he or she finds them. Many successful people are flawed. This is true of the husband … it would be wrong to allow the wife to take advantage of the husband’s great abilities that enable 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”. He made it clear that in this case, the expenditure was neither “deliberate or wanton”, although it had been “irresponsible”.
So is the court essentially saying that you have to take the rough with the smooth? For richer or poorer? In sickness and in health? It will be interesting to see how the courts define a personality flaw in subsequent cases.
I think that what we can take away from this case, and bearing in mind that all cases are fact-specific, is that in order to run a (rarely) successful case on financial misconduct, expenditure has to be wanton. To put it another way, there has to be a motivation.
In running a conduct argument, clients have to be mindful of the lengthy and expensive litigation which follows. It is not that, as lawyers, we shy away from conduct arguments, but in advising our clients against pursing them in the majority of cases, we are thinking of the bigger picture of reaching a settlement and setting you free from litigation, not encouraging you to dig deeper.
George Best famously said, “I spent a lot of money on booze birds and fast cars. The rest I just squandered.” I wonder how the courts of 2015 would view that.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.