What is ‘add back’ and when does it apply? – MAP v MFP [2015]
“Add back” is when a court nominally adds back into the pot the amount by which one party has reduced the assets. The court will only do this where it regards that there has been a “wanton dissipation of assets”, following the case of Vaughn v Vaughn [2007].
What counts as “wanton dissipation”? The recent case of MAP v MFP [2015] provides us with fresh guidance on this subject.
In this case, the parties had been married for 40 years and has amassed assets of £25 million. The wife argued that £1.5m should be notionally ‘added back’ into the pot and allocated to the husband as part of the division of assets. In other words, the pot should be deemed to be £1.5m greater and the husband should be deemed, when the court divided the assets, to have already had that £1.5m. The husband’s over expenditure included, the wife said, £6,000 per week on cocaine and large sums of money on prostitutes.
The court separated the different categories and dealt with them as follows:-
The wife had been dismissed from the husband’s company following separation and as a result, was no longer eligible for entrepreneur’s relief on her shareholding. The judge found the husband had been responsible for the dismissal and so ordered that the relief to which the wife would have been entitled be added back.
The judge ordered that a dividend that the husband had unreasonably held from the wife be added back.
The judge declined to add back the husband’s significant wasted expenditure on property improvements (£260,000) as it was found that he had not overspent to reduce the wife’s claim, but rather because of his own flawed character.
The husband had spent £230,000 on drugs therapy. The court found that this should not be added back as the husband had an addiction and he was trying to address this – he was ill and needed treatment.
Perhaps most controversially, the court declined to add back the c.£250,000 the husband had spent on drugs and prostitutes. In his reasoning, Moor J held that a spouse must take their partner as they find them, noting that:
“it would be wrong to allow the wife to take advantage of the husband’s great abilities that enabled him to make such a success of the company while not taking the financial hit from his personality flaw that led to his cocaine addiction… It may have been morally culpable. Overall, it was irresponsible. But I find that this was not deliberate or wanton dissipation”.
This case serves a reminder for practitioners seeking to run an add back argument that this is only likely to succeed in exceptional cases. There must be clear financial misconduct and such conduct must be gross and obvious. The court will not allow a party to “cherry pick” aspects of their spouse’s personality.
If you have any queries about this article please contact jonesnickolds on 0203 405 2300 or contact@jonesnickolds.co.uk