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16th March 2023

Conduct in Financial Remedy cases: new Court of Appeal guidance

Conduct in Financial Remedy cases: new Court of Appeal guidance
Anna Roiser
Anna Roiser
Senior Knowledge Lawyer

Commentary on the recent Court of Appeal decision in Goddard-Watts v Goddard-Watts [2023] EWCA Civ 115 has focused on its approach to re-hearing cases after an order has been set aside. However, the judgment also offers useful guidance on how the courts should reflect poor conduct by one party when considering financial settlements following divorce, diverging from the approach set out by Mr Justice Mostyn in OG v AG [2020] EWFC 52.

Under s25(g) Matrimonial Causes Act 1973, the court is required, when determining the financial provision to be made on divorce, to have regard to "the conduct of each of the parties, if that conduct is such that it would... be inequitable to disregard it". 

In OG, Mostyn J held that:

  1. Conduct may only be reflected in the substantive award where its impact has a financial consequence, e.g. where domestic violence has adversely impacted the victim's earning capacity;
  2. Whilst litigation misconduct (breaching the rules regulating the proceedings) should be severely penalised in costs, it was very difficult to conceive of any circumstances in which it should affect the substantive disposition. 

Macur LJ, giving the lead judgment in Goddard-Watts, challenged these points. The husband had fraudulently failed to make full financial disclosure, both in the original financial remedy proceedings, and again in the subsequent proceedings. Macur LJ, having cited OG, held that notwithstanding that the fraudulent non-disclosure was litigation misconduct, and that it had no direct financial consequences, it could be taken into account under s25(g) MCA 1973 in determining the substantive award by serving as "the glass" through which other factors would be considered. 

Mostyn J's suggestion that conduct must have a direct financial consequence to impact the substantive award was also recently rejected by HHJ Reardon in DP v EP [2023] EWFC 6. She noted that where conduct has had financially measurable consequences, its impact will already be taken into account when calculating the parties' resources and/or needs. Therefore, requiring a direct financial consequence before conduct could come within s25(g) would render that provision "nugatory". The judge held that aspects of the wife's economic abuse of the husband which did not have quantifiable financial consequences would result in her needs being met at a more modest level. 

The Court of Appeal's clarification that poor conduct need not have measurable financial consequences to impact a substantive financial award is welcome. These recent cases acknowledge that whilst the only redress the court can offer is financial, it does not follow that only financial harm should be recognised. This reflects the diversity of harm which serious misconduct can cause.