Y v Z

This is a short judgment to amplify a decision which was communicated to the parties during the course of a directions hearing listed before me for 2 days. The principal issue at that hearing was whether the wife should be permitted to amend her case to rely on MCA 1973 s.25(2)(g) conduct, in circumstances where the order which I made at the First Appointment in March 2024 had recorded that she was “not advancing a case relying on allegations of conduct pursuant to s.25(2)(g) of the Matrimonial Causes Act 1973”.

On the face of it, and as characterised by leading counsel for the husband, this is a radical volte face by the wife which the husband’s leading counsel said that the court should not now allow her to undertake, especially given the stern warnings contained in Peel J’s decision in Tsvetkov v Khayrova [2023] EWFC 130 at [46(vi)] about how allegations of conduct should usually be filtered and case-managed at the First Appointment, and in line with the overriding objective in FPR 2010 r.1.1. However, as I shall explain, I am not satisfied that this application does in truth represent a change in the case which the wife wishes to present, but rather is the end product of an argument between the parties about whether, at that first hearing, the wife had unwittingly boxed herself in, so as to prevent her from running a case that was in any way critical of the manner in which the husband had behaved during their marriage, which she maintains is relevant to the implementation of a Pre-nuptial Agreement (‘PNA’) which the parties had entered into.

Background. The Wife is Y.

The Husband is Z.

Although the parties agree about the sum value of the husband’s capital entitlement under the PNA, the wife relies on four specific contested allegations in relation to the husband’s behaviour during the marriage, which she says should affect the computation of the amount still due to him from her, over and above what he already holds. These are:

I should say at the outset that the fourth allegation is in a different class from the others, for two reasons. First, the two later emails had not been produced and relied on by the husband by the time of the First Appointment, and, the wife says, the significance of the first could not fairly have been appreciated then. If a change of approach to the question of conduct needs to justified, she says that it is by reason of the emails. Second, while this last allegation amounts to a serious accusation of litigation misconduct if proved, and possibly worse, and might have a serious impact on credibility, the underlying documents and the acts alleged would not of themselves have the effect of impacting on the husband’s award – only corroborating the case of one side or the other, depending on the court’s eventual findings. In the event, however, I do not need to consider them separately at this stage given the balance of my determination.

Issue. It is common ground that the effect of clauses 2.9 and 2.16.1 of the PNA is that the husband is entitled to £6,449,802 under those terms. The wife’s case is that the husband should be treated as having had £4.2m of that sum already, pursuant to the above transactions. The husband rejects this suggestion. This is the principal issue between the parties for determination at trial. What they now disagree about is whether, if all of the evidence surrounding those allegations is to be explored at the trial, including the suggestion that the husband acted in bad faith when, on the wife’s case, he took the money without her consent or informed consent, those matters can only be considered as an allegation of s.25(2)(g) conduct.

Leading counsel for the husband accepts that the wife should be permitted to argue that fairness dictates a reduction in the husband’s award as a result of his having received these funds. They stress that this will be strongly resisted by the husband ‘for reasons that will be developed at the final hearing’. They acknowledge that this was clearly what I had in mind at the first appointment in March 2024, when I observed that:

“Yes, I entirely take that you are entitled to put the case you want to put. The heading under which you put it may be irrelevant, there are plenty of ways in which the court’s general discretion under the 1973 Act can be stretched to accommodate it.”.

However, the husband’s leading counsel goes on from there to complain that in the absence of s.25(2)(g) conduct having been formally pleaded and relied on, the wife should not be able to explore (for example) the husband’s motivation, and so whether he was acting in bad faith. In terms, he argues in his position statement that:

Leading counsel for the husband accuses leading counsel for the wife of assuming ‘judicial permission to run a conduct case by the back door’, and says that this will result in his client being hamstrung, in the absence of proper case management, from being able properly to respond to the allegations that are made. In essence, they are arguing that the wife’s case must be formally pleaded as conduct if it is to be fairly pursued. However, they then add, because at the first appointment, and in light of my observation recorded above, the wife’s team were content to record that they would not seek to put their case within the confines of s.25(2)(g), they should now be prevented from running at all any part of their case which considers aspects the husband’s behaviour, rather than simply focuses on its consequences.

Leading counsel for the husband asserts that my observation ‘did no more than state the law’, that there were a number of heads under which the Wife could seek to make her case, and that one of them was conduct. They say that there is not sufficient new information before the court to justify any change to the position which the wife accepted at the first appointment, which was, they say, that the husband’s behaviour in relation to these transactions would not be the subject of scrutiny. In terms, they say in their skeleton argument:

For his part, leading counsel for the wife denies that they are seeking to run a changed case from that which they were putting in March 2024, save that they now augment it by reliance on the subsequently produced emails. They say that, if to run their case they are required to formally plead conduct, contrary to the view which I had expressed at the First Appointment, and on which basis, the wife says, she agreed to the recital that she would not be relying on s.25(2)(g), then they should be permitted to do so. As explained, I had initially taken the view that in this matter the court is not considering principally whether an award should be adjusted directly on account of one party’s behaviour, the classic conduct case, but rather seeking to determine fairly whether that party should be treated as having already received a significant part of their entitlement. But, I accept that here there is something of a balance – a question of evaluative computation.

The issue of conduct in financial remedy applications is much considered and debated at present. Peel J has recently twice sought to identify the circumstances which should usually obtain before an allegation of conduct is allowed to proceed before the courts, in Tsvetkov v Khayrova [above], and then in N v J[2024] EWFC 184. It is right that in the first of those cases he said this, at [46]:

All of that is sensible and realistic case management provision. In this case, the wife has already filed four statements dealing with the issues, and the husband three. In addition, she further particularised the allegations which she sought to rely on in a statement of case ahead of this hearing to which the husband has replied. So the parties’ respective positions are already very clear. That the wife wishes these sums to be deducted from the husband’s entitlement, and why, has been made plain by her throughout, just as his determined opposition to that outcome has been.

Leading counsel for the husband seeks to frame the wife’s position as one of trying to withdraw a concession. I consider that argument misconceived. It has throughout been the wife’s position that the husband either took the money without telling her, or, if she was ever told, that she never understood the full picture, and that the husband fully intended that that would be the case. The only issue which I consider it fair for me to determine now is whether her case, if it is to be made out, must be pleaded as conduct under s.25(2)(g), or not. I have determined that the allegations should be so pleaded to ensure fairness to the husband, as he requires it, but I do not consider that I am indulging the wife by letting her make those arguments in the first place. She has sought to advance them throughout, and to prevent her from doing so by reason of the early recital would not be fair to her. As leading counsel for the husband acknowledges, she has sought to make her case out, as she is now, throughout the proceedings, so there is no sense in which the husband is being taken by surprise. It also remains a possible outcome that I do not find the s.25(2)(g) threshold met, but that some of what I do find has transpired will affect the eventual outcome of the case.

A further difficulty is that leading counsel for the husband’s case amounts to an argument that for a party’s behaviour to be considered in any context by a financial remedy court, it must be pleaded as conduct under s.25(2)(g). There have hitherto been a number of situations where a question of how a party has behaved may well have been relevant to the financial outcome of proceedings, without either party invoking the conduct provisions. One example might be the suggestion that a party has deliberately been minimising their earning capacity. Another obvious situation is in any case where one party wishes to rely on a PNA, but the other says that the document was procured by some unconscionable behaviour.

Where there is a nuptial agreement, the financial remedy court will ask whether, and if so how, its provisions should be implemented. That question will often involve a consideration of the parties’ behaviour, either at the time of the agreement or since, but rarely under the auspices of s.25(2)(g). In such instances, the courts will regularly make findings of fact having heard from a number of witnesses about how the parties behaved in negotiations, and whether one party under pressure was truly consenting or able fairly to reach an autonomous decision. That these cases are not routinely run as ‘conduct’ cases may be because the issue goes to what a party’s entitlement fairly is, rather than to whether, having established that entitlement, it then should be adjusted in either direction, by reason of some further unacceptable or damaging behaviour. I note too that in Treharne v Limb [2022] EWFC 27, where the claimant did seek to run a conduct argument around the circumstances leading to the drawing of such an agreement, Sir Jonathan Cohen found the approach misconceived, and said that the conduct argument, which took two days of the hearing, ‘added nothing’ [93], albeit on the facts of that case.

In this case, whilst the validity of the agreement is not in issue, how much should be paid to the husband to properly comply with its terms very much is. Whether the husband has behaved appropriately in all the circumstances is an issue which has yet to be decided. If it is not to be investigated, the proper analysis of the parties’ competing arguments will be quite impossible to achieve. I have always entirely comprehended both the way that the wife puts her case, and the serious questions which the husband raises about whether each different aspect of it should succeed. My initial view as explained was that, like the majority of PNA cases, the arguments did not need to be pleaded under s.25(2)(g). However, if leading counsel for the husband feels that their client would be disadvantaged by that not happening, then I am content that those pleadings should be prepared and the case argued such that it may be determined on either basis, and so that neither party feels that they are at a disadvantage. But I am clear that what should be avoided at all costs is a situation where this final hearing commences with the parties still arguing, not about the substance of their disagreement, but rather about whether the impact of a concession made at the First Appointment might be to prevent certain potentially relevant lines of questioning being put at trial or at all.

This type of dispute is perhaps one product of the current debate about conduct allegations within financial remedy claims generally. It must be right that in the vast majority of cases, there is no place for ‘fault-based’ financial determinations. Of course, too, there will always be some cases where it will be genuinely inequitable to disregard how one of the parties has behaved, and fair in all of the circumstances for that behaviour to be marked in the financial outcome in some way.

In this case, I have as explained accepted leading counsel for the husband’s requirement that formal conduct pleadings should be prepared, although I remain to be persuaded that they will add much to the evidence already before me; but I reject leading counsel for the husband’s suggestion that (a) we should proceed without them, and that (b) because of the earlier recital, the wife should now be prevented from running the case that I acknowledge that she has always made very clear that she intended to run. There is no doubt that, if what the wife alleges is proved to be s.25(2)(g) conduct, it will have had a financial consequence. Whether that case will succeed, in whole or in part, is another matter entirely.

The tests that the judges at first instance must apply in conduct cases are those mandated by the higher courts, and ultimately by parliament. If new rules are going to be considered which might specify what forms of behaviour are capable as qualifying as ‘conduct’ under s.25(2)(g), then they probably also need to consider making clear how other behaviour, which is relevant to the determination of the issues between the parties but falls outside the boundaries laid down for s.25(2)(g), should be approached. I use the term ‘boundaries’, as deliberately distinct from ‘threshold’. Behaviour which affects the fair implementation of a PNA has not hitherto needed in order to be relevant to the court’s consideration always to be classed as obvious and gross or to have a ‘gasp factor’, so as to surmount the s.25(2)(g) threshold. But it seems that the more the questions about the lines to be drawn around s.25(2)(g) conduct are debated, the more potential there is for parties to waste money arguing about the exclusion or admission of potentially relevant evidence.

In the meantime, I have every confidence that the courts will continue to adopt a commonsense and proportionate approach to the question in each case, keeping well in mind that financial provision is determined primarily by the criterion of fairness, which includes proportionality amongst its facets; but also that every case must be considered very specifically on its own facts.