N v J [2024] EWFC 184 (15 July 2024)

On Monday last week, in N v J, Mr Justice Peel handed down the most recent authority on pleading conduct pursuant to s 25(2)(g) Matrimonial Causes Act 1973.1

Those interested in this area have been keen to see whether Mr Justice Peel, as the Lead Judge of the Financial Remedies Court, would move the dial either in terms of procedure, or the application of the substantive law. Like all of Mr Justice Peel’s judgments, it is erudite, comprehensive and concise. It is also timely. Resolution’s working party on domestic abuse in financial remedy proceedings is due to publish their report in October. The Law Commission’s scoping report – which will deal specifically with the operation of ‘conduct’ as a factor to which the court must have regard when deciding financial remedies orders – is due in November, and the authors of the Fair Shares?2 report are in the process of reanalysing their data, including consideration of the impact of domestic abuse on the outcome of proceedings.

The results of the Resolution survey, which was distributed by the FLBA and Resolution earlier this year, will feature in Resolution’s imminent report and could not be clearer. Almost 80% of the 526 survey respondents3 considered that domestic abuse was not sufficiently taken into account by the court when deciding financial remedies cases. That figure increased to 85% in Schedule 1 Children Act 1989 cases and increased again to 87% in cases involving cohabitees (TOLATA).

When analysing the follow-up qualitative data, Resolution has found that professionals are equally as concerned about the ability of the FRC to prevent the on-going economic abuse that is perpetrated from the point of separation, through NCDR, the court proceedings and beyond the final order. This is consistent with the recent report published by UK Finance,4 a representative organisation of finance institutions, which explored how the failure to enforce and comply with financial remedy orders allows domestic abuse to continue to be perpetrated. In respect of these forms of post-separation abuse, Resolution will make proposals as to what changes are needed to make our system safer, fairer, and more effective for the most vulnerable.

In the absence of any PD 12J equivalent in the FRC, for matters of procedure as well application of the substantive law, we look to our judges to clarify and illuminate this undeniably tricky area of law, hence our eagerness to analyse how Mr Justice Peel approaches the issue in N v J. Before getting into the substance of the case, it is reassuring for anyone concerned about the impact of domestic abuse on separating families to hear the Lead Judge in the Financial Remedy Court condemning domestic abuse, straight out of the gate, as indubitably vile and indefensible – [2] – and recognising our increased awareness of the incidence of domestic abuse, and its harmful and pernicious effects; [29]. There is also recognition of the Fair Shares? research that many parties in the financial remedy process are thought to be victims of domestic abuse; [23].

It is welcome also that, whilst the opening might only just be wide enough for a brave litigant to catch with their fingernails, the door which requires relevant conduct to have a financial impact has not (yet) been slammed shut; [39]⁠(ii).

Case management of the conduct issue

N and J are male civil partners. N alleged that J’s personal misconduct should be taken into account in the final outcome. It was listed before Mr Justice Peel at a post-FDR directions hearing, which included determination of whether N’s conduct case should be excluded from consideration at the final hearing, in line with the procedure set out in the judge’s earlier decision in Tsvetkov v Khayrova [2023] EWFC 130.

The judge sets out paragraphs 43 to 46 of Tsvetkov at the beginning of his judgment by way of reminder. In summary:

a. A party asserting conduct must prove:

Stage 1

i. the facts relied upon;

ii. if established, that those facts meet the conduct threshold (exceptional);

iii. a necessary, negative financial consequence of the conduct alleged.

Stage 2

If stage one is established, the court will go on to consider how the misconduct and its financial consequences should impact upon the outcome of the financial remedies proceedings, undertaking the familiar s25 exercise which requires balancing all the relevant factors.

b. Process:

i. Conduct allegations must be particularised at the earliest opportunity (including in Form E box 4.4), stating how those allegations meet the conduct threshold and identifying the financial impact caused by it;

ii. The court should determine at the First Appointment how to case manage the alleged misconduct;

iii. This includes the power to prevent a party relying on conduct if satisfied the exceptionality threshold is not met or, even if proved, would not be material to the outcome;

iv. If permitted to advance conduct at trial, an exchange of short, focussed narrative statements dealing with the matters at (a) above will usually suffice by way of pleadings.

In their blog from August 2023, Nicholas Allen KC and Harry Campbell considered whether, arguably, excluding a s 25(2) issue at First Appointment was tantamount to strike out or summary judgment, in circumstances where the Supreme Court5 has held that summary judgment is inconsistent with the court’s meticulous duty to consider all the circumstances of the case and, in particular, the eight matters set out in s 25(2) MCA 1973.

The following month, that argument was settled. In his Year in Review, Mr Justice Peel made it clear that he did not:

‘regard robust case management of this sort as akin to a strike out of a financial remedies claim of the sort regarded as impermissible by the Supreme Court in Wyatt v Vince [2015] UKSC 14; it is robust identification of relevant issues so as to enable the court to exercise its s 25 discretion in a focussed and proportionate way.’

In N v J, the issue of conduct was held over to the post-FDR hearing before Mr Justice Peel (as the putative trial judge) at the direction of His Honour Judge Hess when timetabling and reallocating the case to High Court level. Mr Justice Peel clarified, per Tsvetkov, that in the ordinary run of cases the issue of conduct should not be adjourned in this way but that it was clearly sensible – [13] – to have done so in this case due to the reallocation to High Court level and the scale of the resources (about £32m). The judgment does not say whether the conduct statements were filed in advance of the FDR or whether the conduct issue formed any part of the FDR judge’s indications.

The facts

N and J entered into a civil partnership in 2012 and, by the time they separated in July 2023, they had been in a relationship for either 17 years (per N) or 14 years (per J); [10]–[11].

At the time they met, N had negligible assets and J had substantial wealth. Of the current assets of £32m, £3.25m is in N’s name, most of which is represented by his 50% share of two jointly owned properties. The rest, mostly liquid, is held by J. J’s case (challenged by N) is that at the start of the relationship he had assets worth about $19m; [7], [15].

The parties appeared6 to have entered into a partnership agreement in 2012 which provided N with about £2.6m; [9]. J has subsequently offered openly to increase that to £5m; [16]⁠(ii). N has not yet set out his stall in terms of final outcome, but his case is that J’s pre-acquired wealth has been matrimonialised over time [16]⁠(ii) and he may yet contend for 50% of the assets at final hearing; [18].

N has had mental health issues which deteriorated from about 2012 onwards and with particularly severity from 2016, alleging this was because of J’s conduct; [8].

The substance of the conduct complained of by N is set out at paragraph 16(iv) of Peel J’s judgment:

‘Conduct. N alleges that during their relationship, J lied about his cheating and infidelity. As a result, says N, he increasingly required treatment (hospitalisation, rehabilitation, medication and Electroconvulsive Therapy) based on false assumptions that he was paranoid, delusional and psychotic. He says he felt he had lost his mind and “embraced madness”, believing he was delusional when in fact J was indeed liaising sexually with other men. It was not until August 2021 that J admitted he had had paid sexual encounters with other men from 2011 onwards.’

It seems therefore that the case was pleaded as gaslighting – a form of emotional and psychological abuse where a person causes the other to question their sanity, memories, and perception of reality. However, the detail of the allegations in the judgment is sparse.

The decision

N’s allegations were excluded from the issues for consideration at trial; [43]. As ever, it is a case which turns on its own facts, but in reaching that decision, Mr Justice Peel:

1. Surveyed the legal landscape from Wachtel [1973] Fam 72 to OG v AG [2020] EWFC 52, concluding that the increased awareness about the pernicious effects of domestic abuse does not lower the ‘obvious and gross’ hurdle; [24]–[29];
2. Analysed those decisions in which it has been said the court took conduct into account notwithstanding the fact there was no negative financial consequence of that conduct (K v L [2010] EWCA Civ 125, FRB v DAC (No 2) [2020] EWHC (Fam), Al Khatib v Masry [2002] EWHC 108, Goddard-Watts [2023] EWHC Civ 115) concluding that, even in those cases, the final awards were largely justified on an application of other s 25(2) factors, primarily needs; [32]–[37];
3. Determined that N’s allegations do not meet the high conduct threshold; [43]⁠(i), [43]⁠(v).
4. Found that, in any event, the pleaded conduct would have no direct financial consequence (save perhaps for increased medical costs which could be awarded on needs grounds) – [43]⁠(vi) – and as such, the conduct claim would not make a material difference to the outcome; [43]⁠(viii).

Discussion

(1) Domestic abuse as conduct

As set out by Mr Justice Peel in his judgment, both FPR 2010, PD 12J and the Domestic Abuse Act 2021 define domestic abuse. It can encompass, but is not limited to, psychological, physical, sexual, financial or emotional abuse. It can consist of a single incident or a course of conduct. However, he concludes that neither PD 12J nor the DAA 2021 affects the statutory definition of conduct in financial remedies proceedings as interpreted by case law; [21].

Practitioners remain somewhat in the dark as to what domestic abuse meets the ‘obvious and gross’ threshold to be deemed as conduct. There is clearly a range of views from professionals and litigants in the court system. Mr Justice Peel says that our awareness of the harmful and pernicious effects of domestic abuse does not lower the conduct hurdle in domestic abuse proceedings.

However, what society considers to be conduct capable of meeting that hurdle will change over time, and our justice system should reflect those societal changes. It might be said that the FRC is overdue a decision from a higher court equivalent to Re H-N and Others (Children) (Domestic Abuse: Fact Finding Hearings) [2021] EWCA Civ 448, which aligned the law and the court’s approach in private law cases with society’s increased awareness of the nature and impact of domestic abuse. Absent such a judgment from the Court of Appeal or statutory reform, N v J is the law on conduct, and the position is clear.

(2) Adverse financial consequence

Mr Justice Peel accepts that the words of the statute do not limit conduct to those cases in which a direct and negative financial impact can be discerned, and therefore does not slam the door shut on that altogether. Mr Justice Peel has nevertheless put down a very firm marker that there must be a causative link between the conduct and the financial consequence, even if that financial consequence is not easily measurable.

This issue has been the subject of discussion on these pages – see for example Andrew Day’s blog following the decision of Mr Nicholas Allen KC (sitting as a deputy High Court judge) in TK v LK [2024] EWFC 71. A troubling aspect of the need to evidence a causative link between the conduct and the financial consequence is that it can be interpreted narrowly. In KA v LE [2023] EWFC 266 (B), despite clear findings of serious domestic abuse,7 the judge felt unable to reflect those findings in his award as there was no immediately measurable financial consequence at the time of the final hearing. Arguably, such an approach fails to reflect the pernicious and long-term effects of domestic abuse, which might not surface immediately, but may nevertheless have an effect which lasts a lifetime on a victim’s health, self-esteem, long-term job progression or ability to form new relationships.

The financial consequences of serious psychological, physical, sexual, financial or emotional abuse are well documented. Some studies have shown that financial abuse occurs in as many as 99% of domestic abuse cases.8 Research produced by the Home Office reveals that the cost to the economy from lost output alone, arising from time off work and reduced productivity due to domestic abuse is £14 billion a year.9 In 2019 Women’s Aid10 reported 56.1% of victim-survivors said that domestic abuse had impacted their ability to work, and over two-fifths felt the abuse had negatively impacted their long-term employment prospects and earnings. The causative link between domestic abuse and reduced earning potential will often be difficult or impossible to prove. Nevertheless, as the law currently stands, a party must be able to prove a direct, negative financial consequence for conduct to be considered a relevant issue and for the party alleging it to be permitted to run it at a final hearing.

(3) Case management issues

In N v J, at the very least, the complainant was permitted to set out his allegations in a narrative statement and, we assume, had the opportunity of testing those allegations before a neutral evaluator at FDR before it was determined that those allegations should be excluded as an issue at final hearing. That process is arguably a fairer one than the process laid down in Tsvetskov and one which it is difficult to justify limiting to those cases in which there are substantial assets. It is not clear why there should be a closer examination of the materiality of conduct in a bigger-money case. Indeed, on the current jurisprudence (which effectively conflates conduct with needs), it is arguable that conduct issues will require even closer examination in lower-value cases which will be decided with strict reference to those needs.

There are few examples of other s 25(2) factors – which a judge has the meticulous duty to consider in particular before reaching a final decision – being case managed out summarily at First Appointment. Even when it comes to issues such as prior agreements, in practice there are few examples of the abbreviated and summary approach endorsed in Crossley [2008] 1 FLR 1467 being adopted. Routinely, an agreement is considered in the context of all the circumstances of the case if the matter proceeds to trial. In this regard, whilst noting that Her Honour Judge Vincent directed a preliminary hearing on the issue of an agreement in the case of HJB v WPB [2024] EWFC 187 handed down this week, it is further noted that (1) that preliminary issue was not determined at First Appointment (as in N v J) and (2) Her Honour Judge Vincent had the advantage of written statements on the issue (as in N v J) and hearing oral evidence from the parties.

(4) Interplay with needs

N v J is a ‘big money’ case with assets of about £32m. Mr Justice Peel found that the only enhanced needs it could be claimed flowed from the conduct – even taking it at its highest – were increased medical costs. Those costs could comfortably be met from the available resources, therefore causation was irrelevant, and the conduct determined to be immaterial.

However, what of the cases where the assets are £250k or £500k or even £1m? At that level, an award meeting one party’s enhanced needs is likely to mean depriving the other party of having their needs met at the same level. If there is to be no enquiry into the cause of those needs, how does that fit with the principle that save in a situation of real hardship, the ‘needs’ must be causally related to the marriage (FF v KF [2017] EWHC 1093 (Fam)). With other species of conduct (e.g. financial misconduct) adverse findings seem to be required before reducing a party’s award to a level lower than they need. How are those findings to be made if the issue is excluded from the court’s consideration?

Further, although the potential implications of routinely litigating domestic abuse as conduct (proliferation of cases, longer hearings, increased costs, increased use of QLRs – see [38]⁠(ix) of N v J) are acknowledged as a possible consequence, the elephant in the room is, of course, that this may be a necessary response to our increased awareness about the potentially life-long consequences of domestic abuse. These are consequences which may (and indeed are likely to) have a negative impact on a victim’s life in a myriad of ways including (but not limited to) financially. The root cause of these potential implications is the prevalence of domestic abuse, not a lack of robust case management.

Perhaps it is time to grasp the nettle and assess the level of court resources actually required to give serious misconduct a fair consideration in these cases. In many cases the evidence will be clear and compelling; there will sometimes be criminal convictions or findings that have already been made in other family law proceedings. Section 25 statements and final hearings in financial remedy cases are already expansive in their exploration of the history and the issues arising between the parties. It is suggested that in many cases, the evidence is already before the court at final hearing, but the court is currently compelled to disregard it, not permitted to make findings or give weight to the abuse that has occurred or its impact on the victim-survivor.

In any event, the process envisaged in Tsvetskov in circumstances where a party is permitted to run conduct (i.e. short, focused narrative statements) militates against an extended or more expensive process, as does the clear signal that issue-based costs orders will be made in appropriate cases.

Conclusion

Research on the issue of domestic abuse as conduct and how that abuse is or can be reflected in financial remedy awards is ongoing. It will be interesting to consider as the research develops (especially that being undertaken by the Fair Shares? team) the correlation between domestic abuse and financial outcomes.

This is a developing area of law, and it is acknowledged by all of those interested in the subject that there are some thorny issues with which to contend, even beyond the fears of the floodgates opening. As identified by Mr Justice Peel at [38]⁠(v), in the absence of measurable financial consequences, there are difficulties quantifying conduct in a principled way,11 especially in a case where a sharing award comfortably meets both parties’ needs. However, if we are to properly reflect domestic abuse as conduct in financial remedy outcomes, these thorny issues will have to be grappled with.

This is unlikely to be an area in which N v J is the last word.