When Is an Add-Back Not an Add-Back?

Published: 15/01/2024 11:06


So-called ‘small money’ cases have historically been rarely published. However, the President’s Confidence and Confidentiality: Transparency in the Family Courts Report of 29 October 2021, in which he asked all judges to publish at least 10% of their judgments each year, and the subsequent reports of the TIG Anonymisation & Publication and Financial Remedies sub-groups (amongst others), have led to a welcome increase in such judgments.

A recent published extempore judgment from District Judge Hatvany sitting at the Family Court at Swindon – JN v GN [2023] EWFC 244 (21 November 2023) – is one such decision and a good example of justice ‘at the coal face’.

The facts were simple: a long marriage of 23 years to separation in 2013 with one adult child. W continued to live in the family home following separation whereas for the last four years H had lived with his new partner who lived in social housing with a secure tenancy. Both parties had modest incomes and pension provision.

The main asset was a three-bed family home worth £280,000 and after deduction of a mortgage of c.£47,000 net equity of c.£224,500. An equal share would have been c.£112,000 each. The parties agreed in ‘constructive discussions’ prior to the start of the final hearing (W represented by counsel and H in person) that the property should be transferred into W’s sole name but W sought that H should also discharge the mortgage in full and pay her outstanding costs (c.£19,000).

There were no other assets.

The judge stated that despite the large measure of agreement between the parties, he had to be satisfied that the outcome was fair having regard to the MCA 1973 s 25 factors. He stated that after a marriage of this length with one grown-up child ordinarily the starting point should be a 50-50 division. Both parties had identical housing needs and W was arguably over-housed in a three-bed property with an additional box room and so ordinarily it would have been sold to enable the parties to go their separate ways. The judge also acknowledged that H would be homeless if his new partner terminated their relationship. He therefore said that W’s proposals would leave her in a three-bedroom mortgage-free property and H with no security of tenure whatsoever. As such ‘[a]t first blush, and without further analysis, this does seem manifestly unfair’.

So far so relatively straightforward.

However in early 2020 H had received £468,000 by way of inheritance from his father with an additional £30,000 for a painting. He had then engaged in ‘an extraordinary generous and reckless spending spree’. H acknowledged spending £75,000 on his new partner and her family. Money was spent on holidays, a car and even a hot tub. H spent at a rate of £16,000 pm over a 2½ year period. H accepted that this expenditure had been both wanton and reckless. The judge found that none of this money remained despite H’s lack of disclosure.

Despite this money being non-matrimonial, it would have enabled H to rehouse and clear the mortgage on the family home. Were it not for the dissipation ‘this sum alone could have been used both to meet [H’s] housing need and discharge the mortgage on the former matrimonial home which would have left both parties with a mortgage free property’.

In addition, H admitted to receiving the benefit of an endowment policy in 2016 and that the parties had intended to put the proceeds of £28,000 towards the mortgage but this did not happen. It was on this basis that W argued H should now clear the mortgage. H also received £56,000 in 2019 when he cashed in one of his pensions.

Unlike his inheritance the court classed these monies as matrimonial assets – ‘both assets which had their origins in matrimonial endeavour’ – and so would have been available for division but H had had sole benefit.

As a consequence of this expenditure the judge said that H was:

‘right not to attempt to argue that his housing needs are not met if his beneficial interest in the property is to be transferred to [W] given this extraordinary dissipation of funds that could and should have been used to meet [H’s] housing need.’

The judge approved the parties’ agreement for the transfer of the family home into W’s sole name. The ‘radical departure from equality’ was justified in light of H’s spending of his inheritance, the endowment policy and pension. H was therefore forfeiting his claim to £112,000. However H was not required to clear the mortgage as there were not the funds to facilitate this. He was, however, ordered to pay £10,000 towards W’s outstanding costs to be paid in instalments of £350 pm owing to his lack of resources.

There is of course much reported authority on the ‘add back’ jurisprudence with its modern origins in Norris v Norris [2003] 1 FLR 1142 per Bennett J at [77] as developed in Vaughan v Vaughan [2008] 1 FLR 1108 per Wilson LJ (as he then was) at [14] from which the word ‘wanton’ is first drawn (with ‘reckless’ being drawn from Martin v Martin [1976] Fam 335 per Cairns LJ at 342H).

There can be little doubt that H’s expenditure in JN v GN was rightly classified as both wanton and reckless. It was (as it needs to be found to be) s@nbsp;25(2)(g) ‘conduct that it was “inequitable to disregard”’. However, as Vaughan v Vaughan makes clear at [14], the fiction of a notional reattribution ‘does not extend to treatment of the sums reattributed to a spouse as cash which he can deploy in meeting his needs, for example in the purchase of accommodation’ because ‘it does not re-create any actual money’ (BJ v MJ (Financial Order: Overseas Trust) [2012] 1 FLR 667 per Mostyn J (at [51]).

It is clear from the concessions made by H in his oral evidence (admitting not only the expenditure but also that it had been both wanton and reckless) why the judge decided the case as he did. He was clearly right to do so. The decision is consistent with the comments made in Butler v Butler [2023] EWHC 2453 Fam per Moor J at [39] that ‘[t]he fact that a judge rightly concludes that a case is a “needs” case does not mean that the judge must then make an order that satisfies both parties' needs’.

However, given the judge’s view that W was over-housed in a three-bed (plus) property and his acknowledgement that H risked potential homelessness if his current relationship ended (and as the judge said the court had no crystal ball in this regard), would the decision necessarily have been the same if it had been argued on H’s behalf that the reality of the judgment was in effect to treat the ‘add back’ sums as being available to meet H’s accommodation needs? In other words was H right not to attempt to argue that his housing needs would not be met if his interest in the family home was transferred to W given his dissipation of monies that otherwise would have been available to meet his housing needs?

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