Conduct – how bad does it really need to be?

FRB v DCA [No. 2] [2020] EWHC 754 (Fam)

This case concerned a husband and wife who were from extraordinary family backgrounds. Both from Indian heritage, they said that the other’s family were worth around £2billion – their money was made in various different ways including land, hotels, hospitality and the provision of health services. The proceedings involved various cross-applications for financial matters as well as applications in respect of the parties’ 9-year-old son.

The parties married in India 17 years ago but lived in London throughout the marriage. They lived life at an extremely high standard. The wife estimated that the parties spent around £10m per year (the husband subsequently said it was far less – Cohen J later suggestion that it was well in excess of £5m per year). They flew to different countries to enjoy their various properties by private jet or first class.

Despite the extravagant lifestyle their relationship had broken down and in 2017 the parties separated. The husband then moved to Dubai and the wife remained in the family home in London with their son.

After hearing rumours that the wife had engaged in a long-term affair, the husband requested a paternity test was required. Despite raising the child as his own, the paternity test (in December 2018) revealed that the husband was not the child’s biological father. A second test in February 2019, confirmed the same. The wife subsequently admitted to the affair but alleged that she never suspected that the husband was not the biological father

The issues involved in this case were complex. Not only because of the extent of the assets from the marriage and the wealth involved, but because of the various issues in valuing those assets and establishing their source.

Cohen J had to deal with the following issues: the assessment of the assets, in terms of value, origin and ownership; whether those assets were subject to a family arrangement, either general or specific; whether those assets were subject to a clawback; minority discounts; the movement of resources; tax; pre-acquired wealth; ‘Known unknowns’, ie. assets which it had been established existed, but which it was impossible for the court to value with accuracy because of inadequate information; ‘Unknown unknowns’, ie. entities which Cohen J found to exist but of which there were no details;

And most interestingly the court had to consider whether the wife’s behaviour in relation to the child’s paternity amounted to bad conduct under s. 25(2)(g) of the Matrimonial Causes Act 1973, and if so its impact upon the outcome of the case. Most practitioners experience is that the type of conduct that is usually considered  relevant in financial proceedings is financial conduct such as gambling, criminal activity and so on i.e. conduct that has a real impact on finances or would be unfair to disregard it. The court had to carefully consider whether the conduct of the wife should be considered and if it would be inequitable to disregard it.

Cohen J found that even though the wife claimed that she did not know that she was carrying another man’s child, he found it impossible to believe that the thought never crossed her mind. It would be unreasonable to assume that if you are having an affair and fall pregnant that the biological father can be certain.

Cohen J went on to consider the overwhelming impact this news, after raising the child for so many years, would have had upon the husband. Therefore, Cohen J concluded that the wife’s actions did constitute ‘conduct so egregious that it would be inequitable to disregard.’ Subsequently Cohen J accepted that this conduct could have the effect of reducing the wife’s award in finances.

However, Cohen J was conscious of the husband’s financial disclosure which had been seriously deficient. The judge was confident that the husband had access to funds far beyond what was disclosed in court. Therefore, in consideration of all of the circumstances in the case, it was held that the wife’s award should not be reduced as it would ‘inflict a double jeopardy.’

Cohen’s J awarded the wife £64m, half of the marital assets of £128m. The matrimonial home would be transferred free of any charge to the wife. In addition Cohen J ordered that the husband should pay the wife a lump sum of £49m, and ordered the husband to pay the child’s school fees, all associated educational expenses, and maintenance of £60,000 pa. He commented that it would be up to wife to obtain whatever further assistance she sought from the child’s biological father. Cohen J was satisfied that the award could more than permit the wife to live within her reasonable needs met, as he regarded her budget as ‘hugely inflated’ and commented that the wife was only 38 and could not ‘expect to make her way through life living at an astronomic standard paid for by her former spouse’.

One wonders what reduction the judge would have made to the wife’s award if the husband had been completely honest in his disclosure.

If you have a family case you need assistance with, make an appointment to see Sophia by contacting Mavis on 020 8885 7986.