The risks of running a conduct argument

When a marriage where one or both parties own and run a business comes to an end, the acrimony and mistrust can lead to huge suspicion and concern about the business owner’s conduct. This can be made worse if, as often happens, one party attempts to shut the other out of the business e.g. by removing them as director or partner or tries to limit their access to information about it.

Unfortunately, this sort of action can cause irreparable damage to the relationship and trust between the parties.  This in turn can lead to costly and highly acrimonious litigation between them.

WK v HN [2026] EWFC 169 (B) is a good example of this type of case and serves as a useful cautionary tale.

The parties owned a pharmacy business together and the husband also had an interest in other businesses.  The husband attempted to remove the wife as a director of the jointly owned business and litigation (and a costs order against the husband) ensued.  This action, amongst other behaviour alleged by the wife, led to the parties eventually proceeding to a ruinously expensive 5-day final hearing. It is also worth noting that the parties separated in 2022, the final hearing took place in March 2026, and judgment was given in May 2026. Nearly 4 years is a long time to be at war.

At the final hearing the wife pursued allegations that the husband had wantonly and recklessly dissipated assets, or had “warehoused” these, through his businesses as he was paying large amounts to third parties without legitimate purpose.  The wife sought adverse inferences against the husband and to add-back assets she said had been dissipated and/or warehoused.

The wife was unsuccessful in her arguments regarding the husband’s conduct and for adverse inferences and add backs to be made.  Her Honour Judge Owen found that the husband was an honest witness and that he had not wantonly and recklessly dissipated funds and that he had certainly not “warehoused” funds.

The Judge commented at paragraph 27 “The wife was in the witness box for almost an entire court day.  She is very angry and is clearly utterly convinced that the husband has dissipated funds with a view to excluding them from the financial remedy proceedings.  Indeed, describing her as angry is somewhat of an understatement.  She is furious.  She is consumed by fury.  She was almost shouting throughout her evidence.  In my judgment, she will never accept any other explanation for the dissipation of assets from the businesses”.

Despite her obviously strongly held beliefs, the wife was unsuccessful.  She also did significantly worse than the husband’s open offer to settle which had been made some time prior to the final hearing.  Accordingly, the husband sought a costs order against her.

The usual rule in financial remedy proceedings is that each party will bear their own costs.  However, the court can depart from that general rule by reference to the factors as set out in paragraph 28.3 of the Family Procedure Rules 2010.

Following submissions and detailed consideration of the facts, the Judge found that whilst it was reasonable for the wife to raise the issue of conduct, it was unreasonable for her to pursue this to final hearing.

The Judge said at paragraph 18 of the cost judgment WK v HN [2026] EWFC 170 (B)  “I do think that it was reasonable for the wife to raise the conduct allegation. She had legitimate questions to ask and she needed answers…” and “But what I also have to consider is whether it was reasonable to pursue the conduct issue. And I think there came a time when the wife, with the benefit of a good legal team, and I don’t criticise her current legal team and barrister, should have sat down and considered the evidence and whether it should realistically have been pursued, either whether it should been pursued or to limit the issues at trial.”

The husband sought a costs order against the wife in respect of total costs of £165,000.  However, having considered everything, the Judge ordered her to pay only £30,000 of the husband’s costs.  The Judge took a very broad-brush approach as there would have been costs incurred for preparing for the trial in any event and because they were conscious this would reduce the wife’s lump sum, who was primarily looking after the child and earned less than the husband.

Whilst the wife may have been relieved not to have to pay anywhere near the level of costs that the husband was seeking from her, no doubt having to pay £30,000 by way of a cost order from her hard-fought lump sum, was very difficult for the wife.

This sad case highlights the difficulties and risks associated with raising and then pursing a conduct argument all the way to a final hearing.  It is important, even where there has been concerning behaviour by one party, particularly in relation to a joint or solely owned business, that any suspicions are considered carefully and tempered in light of the evidence which becomes available as matters progress.  If the evidence does not stack up, then it is a significant risk for a party to pursue such allegations at a final hearing. In such circumstances efforts should be made to settle the case without incurring the enormous costs involved in a contested final hearing, or issues should be dropped or limited, to avoid the risk of a costs order being made if a judge finds that such allegations are unproven and should not have been pursued.

Get expert help

Our Family & Matrimonial Team has extensive experience in advising clients on the financial aspects of divorce, including cases involving complex and illiquid business assets. If you need expert guidance tailored to your situation, please contact Lindsay Davies at lindsay.davies@fsp-law.com or contact our Family & Matrimonial Team.