Conduct in financial remedy proceedings - case law insights

When a marriage breaks down, understandably quite often, emotions run high. However, conduct in financial remedy proceedings, and whether it genuinely affects the financial outcome, remains one of the most misunderstood areas of family law. Understanding when conduct will influence a financial award is critical.

This can be particularly relevant in complex divorce cases, including those involving international or Islamic family arrangements.

Legal framework

The relevant legislation is section 25(g) of the Matrimonial Causes Act 1973, which requires the court to ‘consider the conduct of the parties where it would be inequitable to disregard it.’

In practice, the threshold is high.

However, recent case law has provided guidance on how conduct should be pleaded and, if accepted, how it should be reflected in the final order.

Obvious and gross

The leading authorities, including the House of Lords decisions in Miller v Miller; McFarlane v McFarlane [2006], established that conduct must be ‘obvious and gross’ before it will affect the financial outcome.

Categories of conduct

The case of OG v AG [2020] brought clarity by identifying four broad categories of conduct relevant to financial remedy proceedings:

Personal misconduct – only relevant in extreme circumstances.
Add-back cases – where one party has recklessly dissipated assets that would otherwise be available for division.
Litigation misconduct - behaviour during the court process itself.
Adverse inferences – arising from failure to disclose full and frank financial information.

In practice, particularly in high-value cases, categories 2-4 are more likely to influence the outcome than personal misconduct, especially where asset flows are complex, international or opaque.

The case of Tsvetkov v Khayrova [2023]

Two-stage process

In the widely reported case of Tsvetkov v Khayrova [2023], Peel J provided guidance on how to plead conduct in financial remedy proceedings.

Stage 1 - establishing the conduct

The party alleging conduct must:

Prove the underlying facts.
Demonstrate that the behaviour meets the very high threshold.
Show a causative link between the conduct and the financial loss (traditional approach).

Stage 2 – the s.25 balancing exercise

Even where misconduct is proven, the court must still weigh it against all other statutory factors to determine whether it should impact the final award.

The message is simple: conduct is ‘exceptional territory’, and not a routine argument. The court consistently emphasised in this case, that it is not a moral tribunal. Financial awards are designed to be fair and not to punish moral wrongdoing.

Practical guidance

When to raise the issue of conduct

If conduct is to be raised during financial proceedings, the allegations must be clearly set out in box 4.4 of the party’s form E court document. Form E is the mandatory court document used to provide full and frank disclosure of a party’s world-wide financial interests. This document should be completed before the first appointment in financial remedy proceedings.

If the issue of conduct arises following the first appointment, there is a duty on the party alleging conduct to raise this issue at the earliest opportunity. This is essential for the court to effectively case manage such allegations and to avoid the risk of the court disregarding the issue(s) at the final hearing.

Economic abuse & coercive control

Following the enactment of the Domestic Abuse Act 2021, recent family case law has shown a growing judicial willingness to confront serious wrongdoing, particularly economic abuse and coercive control, where it materially impacts the financial landscape of a marriage.

Economic abuse is defined as any behaviour that has a substantial adverse effect on another person’s ability to:

Acquire, use or maintain money or other property, or
Obtain goods or services.

Examples

Economic abuse captures a broad spectrum of behaviour, including preventing a spouse from:

Accessing marital funds.
Understanding the family’s financial affairs.
Using money autonomously.
Obtaining basic goods and services.

For many high net worth clients, financial control may not appear obvious, but the misuse of joint funds, business structures, trusts, family offices, offshore vehicles and the concealment of income streams and assets could lead to findings of economic abuse.

In the case of DP v EP [2023], the court found economic abuse. In this case, the husband was illiterate, and the wife managed the joint finances for both parties. The wife, however, placed matrimonial funds out of the husband’s reach. A finding was made that the wife’s conduct was ‘inequitable to disregard’, and her actions had a direct impact on the division of assets.

Conduct must make a material difference to the outcome

In the case of N v J [2024], before Peel J, a party had made allegations of domestic abuse, which included allegations of infidelity and the need for medical treatment due to false assumptions that he was paranoid, delusional and psychotic. In this case, however, the allegations of domestic abuse were excluded from consideration at trial. Peel J considered that it would make no material difference to the outcome when dividing the assets, maintaining the high threshold. The court held that there must be an identifiable financial impact.

Quantifying financial impact – is the legal landscape changing?

Recent cases – two judgements of Cusworth J

It has been traditionally the case that practitioners have advised clients that to raise conduct, such conduct has to meet the high threshold. In addition, to demonstrate a causal link between the alleged conduct and negative financial consequence, as in Tsvetkov v Khayrova [2023]. However, recent decisions of Cusworth J demonstrate that serious misconduct can still have a decisive impact on outcomes, even when it cannot be quantified or would otherwise cause unfairness.

Cusworth J’s recent decisions place less emphasis on proving a direct financial consequence. He states that although the financial consequences may be difficult to quantify, this does not mean they are absent, and to ignore the conduct because its impact cannot be precisely measured risks producing an unfair outcome. Therefore, he considered conduct as part of the assessment of fairness.

In LP v MP [2025], Cusworth J determined that the wife’s sharing claim should be heavily reduced due to her conduct. The wife’s conduct included coercive and controlling behaviour, verbal, emotional and physical abuse.

At trial, the husband had assets of circa £22 million and the wife had a property, and the parties jointly owned two matrimonial homes totalling circa £7.2 million. The facts of this case are quite extraordinary.

The judge made the following findings:

The marriage was founded on deception and fraud, which lasted throughout its duration. The wife had lied and claimed that she was a High Court judge and, as a result, sought large sums of money from the husband to pay for fabricated judicial trips and other made-up costs for her judicial career.
The wife was coercive, controlling and abusive.
The husband transferred significant sums to the wife based on her lies.

The court described the wife’s behaviour as ‘deplorable’.

Coercive controlling behaviour

Allegations of conduct relating to coercive, controlling behaviour are frequently raised in children and injunction proceedings but not so much in financial remedy proceedings.

It was not until the enactment of the Serious Crime Act 2015, s 76, that coercive controlling behaviour was made a criminal offence punishable with imprisonment of up to 5 years. It is defined as:

‘A pattern of behaviour that is controlling or coercive towards another person in an intimate or family relationship.’

The law specifies that for an offence to occur, the following conditions must be met:

The behaviour must be repeated or continuous.
The perpetrator (A) and the victim (B) must be personally connected.
The behaviour must have a serious effect on the victim, causing them to fear violence on at least two occasions or resulting in serious alarm or distress that significantly impacts their daily activities.
The perpetrator must know or ought to know that their behaviour will have a serious effect on the victim.

In the case of LP v MP, the judge stated at para 43:

‘I consider that there is a real risk of unfairness to victims of violent or coercive controlling behaviour, if the lack of readily quantifiable financial loss prevents the courts from even considering the fairness of taking their assailant’s behaviour into account in determining the outcome of a financial remedy application. Such behaviour may well have hard-to-predict but potentially far-reaching consequences, in some cases for the victim’s prospects of achieving self-sufficiency, in others for a fair financial outcome in all of the circumstances. That does not mean that the fact of such behaviour will inevitably lead to a different award, but in the right case, it clearly should do.’

This represents an important decision. Traditionally, courts have required a financial consequence before reflecting misconduct in the award. LP v MP suggests that, in sufficiently serious cases, the court may adjust the sharing principle even without precise financial quantification.

This decision does conflict with the earlier decision of Peel J in N v J, in which it was held that there is a need for financial impact to be proved.

If there are further developments on this point, we shall keep you up to date.

2. Wei-Lyn Loh v Ardal Loh-Gronager [2025]: Conduct and prenuptial agreements

Cusworth J has also addressed the impact of litigation misconduct in the case of Wei-Lyn Loh v Ardal Loh-Gronager [2025].

In this case, the parties had signed a prenuptial agreement. The agreement provided that the husband would receive a settlement of circa £6.5 million, which increased for each year the couple remained married. The wife asserted that the husband had already received approximately £4 million of the total amount by using money from their joint account for his personal use and business investments.

The judge held that the test for conduct and the approach taken to prenuptial agreements should be considered together.

In respect of personal conduct, the court held that ‘inequitable’ means no more and no less than ‘unfair’ or ‘unjust’. Fairness is also the key consideration when determining the weight to be attached to a prenuptial agreement, as established in Radmacher v Granatino [2010].

Cusworth J agreed that the husband’s award be reduced to circa £2.5 million because of the amounts he had already received and his general conduct. In this case, the judge described the husband’s behaviour as amounting to ‘the most serious level of litigation misconduct’ seen in such proceedings.

My take on how the financial remedy court considers personal misconduct

Although the financial remedy court remains cautious about allowing personal misconduct to influence financial awards, the recent decisions of Cusworth J are welcoming.

These reported cases, despite the disagreement on the correct approach amongst family law practitioners, could be an indication that the court in financial remedy cases may review allegations of personal misconduct – in line with LP v MP [2025] rather than with earlier principles as laid down in N v J [2024].

Nonetheless, the message is clear: raising conduct arguments must be carefully considered, precisely pleaded and supported by evidence.

When properly established, they could play a decisive role in determining the financial remedy outcome.

Conduct in financial remedy proceedings - case law insights