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Anthony & Cleopatra Act I, sc4
Add-backs and the case of MAP v MFP (2015) EWHC 627 (Fam)
In February 2015 the High Court heard the wife’s financial remedy claim, the wife having the initials MAP. She was aged 60. Her husband, MFP, was 62. It was a long marriage of forty years until separation in 2012.
From a legal point of view, one of the key questions the Court had to consider was whether to add-back monies that had been dissipated by the husband. It was a “big money” case based on a tremendous success story. The husband had left school at 15 with no qualifications but had gone on to build up a very successful property maintenance company. Plainly he was a determined and successful businessman. At the date of trial the company was worth £26 million and owned a property worth £4.4m. The husband owned 95% of the shares and the wife 5%. The company generated significant income of £1.1m – £1.2m although tax of £397,000 would be payable. The husband had a net salary per annum of about £275,000. The couple lived in a comfortable family home worth £2.3m and owned two villas in Spain. They had four children, who were all adults. The starting point was that, unless there was good reason, the fruits of the marriage were to be divided equally.
So what led to consideration of an add-back? The Court found that when he was in his early 50s the husband had been introduced to cocaine and had become addicted. The Judge referred to his having “a number of serious personal demons”. He had also been spending a lot of money on prostitutes and the Judge looked at the husband’s expenditure in the period 2013 and 2014. The wife put the figure as £1.5m but the Judge disagreed and thought the sum spent on drugs and prostitution was probably in the range of £250,000. The Judge did not, however, add-back this money to the husband’s share of the family assets. Why not?
The husband did not deliberately overspend in order to reduce the wife’s claim. The Judge said that “in part he did it because he could not prevent himself from doing it. It was down to his flawed character”. The Judge went on to note “a spouse must take his or her partner as he or she finds them”. The husband was flawed but it was also the husband’s character that enabled him to make a tremendous success of the business.
The final breakdown of the marriage occurred when the wife found out that the husband had been using prostitutes. Up until that point she had worked for the company and the husband unlawfully excluded her from the business. She was then unlawfully dismissed. As a consequence the wife lost the benefit of capital gains tax relief and so the Judge did add back in, for the wife’s benefit, the value of that relief which was £271,000.
The question of add-backs has been considered in other cases, particularly in the Court of Appeal in the case of Vaughan v Vaughan (2007) EWCA Civ 1085, in which the Court of Appeal referred to “the husband’s serious financial and forensic misbehaviour during the past two years”. The Court also said “the husband’s hostility towards the wife, which may be reciprocated, is of sickening intensity”. In fact, in that case the assets were relatively limited; in particular the matrimonial home was worth about £875,000.00. The husband had dissipated, without adequate explanation, something between £100,000 – £175,000 on gambling and on other unspecified expenditure. The Court of Appeal used the lower figure of £100,000 and observed that the “notional re-attribution has to be conducted very cautiously, by reference only to clear evidence of dissipation (in which there is a wanton element)”. The Court made this decision notwithstanding that the husband had produced a psychiatric report which found that he was suffering from a depressive illness of modest severity. The Court considered this point and thought that the husband’s problems were not so severe as to make any add-back unfair.
In Norris v Norris (2002) EWHC 2996 (Fam) the wife’s assets were £3.7m and the husband’s £4.1m. The husband was, again, a talented entrepreneur. In that case, although the Court did not consider the husband to be cynical, he had overspent in a period of two years the sum of £350,000, just as the litigation started. In particular he bought a Ferrari, just prior to the relevant period, for £115,000. The Judge made an allowance for the husband being a rich man but he did add-back into the husband’s assets the sum of £250,000, which the Judge thought “can only be classified as reckless”.
These cases concern wanton expenditure with an element of moral culpability. Instances where a party deliberately transfers or sells assets with the intention of defeating their spouse’s claims are an entirely different matter and the Court has express powers to address those circumstances.
This article is for information purposes only and is not legal advice. It should not be acted or relied upon and legal advice should be sought before applying any of the information in this article to any facts or circumstances.