The way you deal with disclosure of assets and how you handle your divorce really matters. Ideally both sides will be transparent about their finances and co-operate with the court as required. But this isn’t always easy, particularly if there’s a degree of animosity and distrust following the marriage breakdown. The 2022 High Court case of VV v VV is a useful illustration of how the conduct of parties during divorce proceedings can have a significant bearing on the final financial order.

VV was a bitterly contested financial case, involving multi-million pounds worth of assets. As we’ll see below both parties were guilty of misconduct. But the parties had different motives for their poor behaviour. And because the wife’s conduct had such a drastic, negative impact on the value of the husband’s assets the judge felt he had no option but to award her less than he might otherwise have done and to penalise her when it came to costs.

Background To VV v VV

The couple met in 2018. Both were in their fifties. There were no children. The husband was a high earning technology executive, the wife was a musician.

By August 2018 the husband was working for a digital technology company in America. As part of his employment package he would receive a significant number of shares in the company if he stayed in his role for at least one year.

The couple got engaged in March 2019. By September 2019, having been in his job for the year required for the lucrative stock options to kick in, the husband left his role in America and moved to the UK.

In January 2020 the couple got married. By June of that year they had separated, and the husband began financial remedy proceedings.

The couple were far apart when it came to what they each thought a financial settlement should look like. The husband offered the wife a lump sum of £400,000 on a clean break basis. In contrast the wife sought 50% of the husband’s shares in his former employer’s company. These were valued at approximate value of £6m.

In deciding what kind of financial order to make the court had to decide:

  1. Was the wife entitled to a share in the proceeds of sale of the shares (i.e. were the shares marital assets?)
  2. Did the parties’ conduct in the proceedings amount to misconduct?
  3. What were the wife’s needs?

Here we are chiefly concerned wite the question of misconduct.

How Can Conduct Affect Financial Settlement?

We examine the specific conduct of the parties in VV below. It’s first worth highlighting the four scenarios in which personal conduct can have a bearing on financial remedy proceedings:

  • Personal misconduct inflicted on the other during the marriage. This is only relevant in very rare occasions
  • Where one party has dissipated assets which would otherwise have formed part of the divisible matrimonial property. Again, it will only be in rare situations that this will apply
  • Litigation misconduct. Where proved, this should be severely penalised in costs, but it is unlikely that it will affect the overall settlement
  • Lack of full and frank disclosure that enable the court to make adverse inferences against one party

VV v VV The Husbands Conduct

The husband failed to disclose the extent of his shareholding in his former employer’s company. He suggested that their value was negligible. A lack of transparency like this as regards Form E is a serious matter. However, the husband explained his conduct on this occasion by saying that it was not so much an attempt to defeat his wife’s claim. Rather it was more a result of his fear that his wife in conjunction with his former employer would seek to interfere with a smooth realisation of the value of the shareholding.

As we’ll see it turned out that the husband’s fear was justified.

The court agreed that the lack of disclosure did amount to litigation misconduct. This would normally result in adverse cost consequences. But the judge was satisfied that the husband wasn’t motivated by a desire to pay his wife less. The judge relied on the fact that any money the husband received from selling the shares went into a bank account that he had properly disclosed in the Form E.

VV v VV The Wife’s Conduct

It became clear that the wife had, shortly after proceedings started, contacted the husband’s former employer directly with concerns that the value of the shares had not been disclosed on the husband’s Form E.

The former employer advised the wife to take the necessary steps to prevent the release of the shares to the husband. The steps she then took had catastrophic financial consequences. The fluctuation in the share price between the time when the husband wished to sell a portion of his holding and when he was actually able to sell resulted in a loss of approximately $76m.

The judge found that the conduct by the wife was ‘gross and obvious conduct’ which the court was entitled to take into account. Overall, in the judge’s view the wife directly caused the husband financial loss running into tens of millions of dollars.

Conclusion

The conduct of the parties mattered hugely in this case. That’s because the wife had failed to establish a sufficient length of cohabitation that could have enabled her to claim that the husband’s stock should be shared as matrimonial property. (See point 1 above.)

As a result the wife had to base her claim on needs and in this regard the court could consider the husband’s wealth, the length of the marriage, the wife’s age and health, and her standard of living.

In the event the judge awarded the wife £750,000 (a large part of which would go towards paying her legal bills). In a subsequent hearing she was ordered to pay £100,0000 towards husband’s costs because of her conduct. All in all a far cry from the £6 million originally claimed. And a warning too that in financial remedy proceedings participants should be wary of any action that could damage the personal financial position of the other party.

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