It is a common situation, an aggrieved husband or wife starts to empty joint accounts and spend his or her savings to stop the other benefitting from the money in a divorce settlement.
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But in reality – can someone get away with reckless spending ahead of a divorce?
RECKLESS SPENDING AND CONDUCT
When deciding on what financial settlement to make, the courts use the factors set out in the Matrimonial Causes Act, 1973.
The Act says all the facts of the case should be considered, including
the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it.
Non-financial conduct has to be extreme if it is to be a factor in the settlement.
But financial conduct such as reckless spending can in theory be used to justify the courts ordering that it is ‘added back’ to the money that has been wasted.
If you believe your estranged husband or wife is intentionally reducing assets, NOTE: Courts have been clear that they will only carry out the adding back exercise very cautiously. There must be clear evidence of what has been called ‘wanton dissipation’
MAP V MFP AND THE ‘FLAWED INDIVIDUAL’
In the past, recovering some or all the amount wasted by one spouse was easier to achieve than it is now.
The case of MAP v MFP in 2015 has, many commentators believe, made adding back much more difficult. That’s largely due to a recognition by judges that seemingly reckless behaviour may be down to the flawed character of an individual.
To bring a successful claim to add back the notional amount that matrimonial property has allegedly been dissipated by, a spouse must demonstrate that:
- the behaviour that led to the reduction in assets was reckless and wanton; and
- the motivation for the spending was to reduce a financial claim.
In MAP v MFP the husband spent a large sum of money (in the hundreds of thousands) following separation from his wife of 40 years.
The money was used to pay for drugs, escorts and stints in rehab.
The wife asked the court to have the sums taken into account when deciding on the financial settlement.
The court refused, finding that the husband did not overspend with the intention of reducing the wife’s claim. His spending was, said the judge, down to his ‘flawed character’ and the wife should ‘take her husband as she found him’.
The husband’s behaviour might have been irresponsible but it did not amount to deliberate or wanton dissipation. As a result the judge decided it would be wrong to add it back.
CAN I PREVENT A SPOUSE’S OVERSPENDING?
In the highly emotional context of a bitter divorce it is tempting to let apparent misuse of funds by one spouse cloud your judgment.
But rushing to litigate because of this is rarely the right course of action. If you do think there is a risk of asset dissipation you should seek legal advice as a matter of urgency.
If attempting to get amounts of money or the value of assets added back when calculating a settlement you should, for the reasons outlined above proceed with caution. Remember:
- courts will only agree to your claim in very limited circumstances where assets are greater than the financial needs of the parties;
- they are unlikely to consider an add back if it will only make a small difference to your settlement;
- you must have very clear proof of deliberate or reckless asset dissipation;
- the overspending must be motivated by a desire to reduce your financial claim; and
- adding back must be fair having regard to all the circumstances of the case.
There are also remedies available such as freezing orders and other types of injunction that can “freeze” the asset until the court can consider the issue at financial settlement. But they must be sought before assets become impossible to trace. Again you should seek specialist legal advice at the earliest opportunity.
In appropriate cases a claim for add back may be worth it. But there is always a risk that you will spend more in legal costs trying to achieve the desired outcome. This is particularly so if the court makes no order for costs. In those circumstances you not be able them to recover your legal costs of the application from your spouse.
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