“Add backs” – Are the courts becoming more reluctant to make add back orders?

Norris v Norris (2003) 1FLR1142 introduced the concept of adding back into a spouse’s assets the amount by which he or she “recklessly depleted those assets” and therefore potentially disadvantaged the other spouse.

This was followed by the Court of Appeal case, Vaughan v Vaughan (2007) EWCA Civ 1985 in which it was held that there must be “clear evidence of dissipation”, a “wanton element” and that “re-attribution has to be conducted very cautiously”.

In a number of recent decisions the courts have narrowed the circumstances in which the “add back” principle is applied.

In N v F (Financial Orders: Pre-Acquired Wealth) (2011) EWHC586 (Fam) Mostyn J stated “In this country we have separate property. If a party disposes of assets with the intention of defeating the other party’s claim then such a transaction can be reversed under section 37 of the Matrimonial Causes Act 1973. Similarly, where there is “clear evidence of dissipation (in which there is a wanton element)” then the dissipated sums can be added back or re-attributed. Short of this a party can do what it wants with its money. What is not acceptable is a faint criticism falling short of either of these standards. If a party seeks a set aside or a re-attribution then it must nail its colours to the mast.”

In both R v R (2011) EWHC 3093 (Fam) and GS v L (Financial Remedies: Pre-Acquired Assets: Needs) EWHC 1759 (Fam) requests were refused for add back orders relating to one party incurring disproportionate costs. In the GS v L case King J declined to add back a husband’s alleged overspend of £56,000 post separation and took the view that the alleged overspend did not satisfy the Vaughan criteria.

There were similar refusals to make add back orders in BJ v MJ (Financial Remedy Overseas Trust) (2011) EWHC 2708 (Fam) and in F v F (2012) EWHC 438 (Fam). Both cases involved gifts by husbands to adult children. In the latter case the judge held that this was not “wanton and reckless behaviour”. It was entirely reasonable that the husband should have made lifetime bequests to his elder children at times when he was also making provision for the children of the family and wife in the present proceedings.

From a practical point of view it is difficult to understand the logic behind the “add back” principle except for cases in which assets would otherwise be divided equally. In cases where the needs of the parties dictate an unequal division of capital the principle would seem irrelevant and to have no practical consequence.