Host: Okay, so it's still one that is taking place and needs to be thought about. On that basis then, to begin, with what is the difference between an affair and sexual misconduct?
Vanessa Gardiner: This is really important to differentiate between the two. An affair is effectively a consensual relationship between two coworkers, irrespective of position or your status in the business. This could be an emotional affair, talking, messaging, sharing experiences, having feelings but not actually a physical relationship. Or you can have a physical affair, a sexual relationship, which is most likely going to have a physical connection as well. Just to be clear, adultery is an affair that meets the threshold within divorce proceedings, which is a sexual relationship with a person of the opposite sex. Whereas an emotional affair, it doesn't meet the threshold for adultery. It could form part of an unreasonable behaviour petition in divorce. Whereas sexual misconduct, we are talking about sexual harassment, threatening behaviour, pestering, molesting, even sexual discrimination against a coworker, a peer, or a subordinate. We're effectively talking about criminal behaviour. There is a real big difference between having an affair and which or may not be adultery as well, and sexual misconduct.
Host: Okay. If that affair, whether emotional or adultery, results in divorce, what are the implications financially?
Vanessa Gardiner: This is quite interesting actually because there are two possible outcomes of how having an affair could impact in divorce proceedings. The first one is that it might have no impact whatsoever on the financial negotiations you have within divorce proceedings. The fact that an affair exists does not necessarily mean that the spouse should be punished financially, receiving less out of the matrimonial pot of asset if that affair has not actually had an impact on the matrimonial finances. It's not a moral issue, it's really whether there's been some kind of financial impact by the affair that's taken place.
Vanessa Gardiner: On the other hand, that affair could actually have a very significant impact on the financial negotiations if the affair has led to financial conduct, which the family court take into account and then make a prejudicial order against the spouse who had the relationship. So it's really important to understand that in the first instance, the family court does not take conduct into account which is not have some financial element or financial nature to it. But for example, if an affair happened to be contrary to your company policy, your spouse loses their employment or they leave because of reputational reasons perhaps. That could actually have significant financial implications that the court could then take into account. So it almost really depends on how the relationship that you have in the workplace impacts actually on your employment position and whether there are financial implications to that.
Host: Okay. Continuing to look at divorce proceedings then, so what if there was no affair but instead allegation or there's even a guilty verdict of committing acts of sexual harassment or misconduct at work, how would that impact things?
Vanessa Gardiner: Well, much like an affair, which has caused the loss of employment or leaving of a job, if there are financial implications to the sexual misconduct, the court can take those into account when dividing up the assets in the divorce and they certainly can penalize the spouse that caused the financial loss. The purpose, to be clear, within family court is not to punish criminal behaviour and not to necessarily have some kind of moral judgment. The point is that within divorce proceedings, the court has to come up with a fair and reasonable settlement, and they have to make sure that the needs of the other spouse and the children if there are any dependents, are met. The court, therefore, can penalize the spouse that's caused financial loss, if it means they can provide a fair and reasonable settlement for the other person.
Vanessa Gardiner: It's important to understand that if you're found guilty of committing acts of sexual harassment or sexual misconduct and there are criminal proceedings, that could lead to compensation claims or lead to you being imprisoned, and you might need reputational, employment, or criminal legal advice. And that all has a very significant financial cost. What you're doing by paying for that legal advice or paying that compensation that you're ordered to pay is you're actually depleting the matrimonial capital resources. And then if you couple that with loss of earnings, maybe the loss of share options, a potential inability to secure future employment, meaning loss of future earnings, and that then affects potentially ability to pay spousal maintenance and meeting cashflow needs. Then essentially, let's call it the betrayed or the spouse who's the victim in all of this, is actually going to be at a financial loss. So the point is the family court is looking to put that spouse in a position where they can meet their needs, and they will do so at the expense of the spouse who has caused the financial loss in the first place.
Host: Okay. So if the matrimonial pot has been depleted, as you've just described, what can the court actually do?
Vanessa Gardiner: Well, it's important to understand, when a couple gets married, they automatically acquire the right to make financial claims against each other within divorce proceedings. You can claim against all assets, real property, capital, business interests, pension funds, but also you can claim against income of the marriage when you separate. The family court has wide-ranging and discretionary powers, and they will look at each case on its own facts. They will look at circumstances and behaviour which led to the divorce proceedings, and they will look at how that affects the financial income and outcome for the parties.
Vanessa Gardiner: What the court does have the power to do, so let's say there's been a payment of extremely expensive legal fees or compensation massively depleting capital, the court can look at what they call add-backs. Now, this is a concept that's come through case law. What it means is the court can potentially add back spent sums of money and make the other spouse responsible for them. A betrayed spouse, let's say, is put back into the position they would have been had the legal fees or compensation claim never been paid out. One party is effectively credited with the share of the money they've already spent but doesn't actually any longer exist, whilst the other spouse receives the lion's share of the capital or the cash that's actually remaining. That is a really powerful power that they have to do that. They can effectively say money that doesn't exist is a portion to somebody within a financial settlement.
Host: After that point, if the spouse who's committed this act has had their income effected, how does that affect the requirement to pay spousal maintenance, for example?
Vanessa Gardiner: So, it's arguable that where you can show an income stream has been lost, or there's a foreseeable inability to achieve a similar future level of income, the ability to pay spousal maintenance is either reduced or compromised, which means that you might say they've lost their job, they've lost their income, if they've certainly been convicted of criminal offences relating to sexual misconduct, they're going to have difficulty obtaining the same level of employment, perhaps if they've had an affair and their reputation has been damaged, perhaps we're looking at a reduced income, should they still have to pay spousal maintenance?
Vanessa Gardiner: Well, if they can't, the court can then just say, "Well, what would you have paid had you still been earning that sum of money?" And then they look to see if there's sufficient capital available within the matrimonial pot instead. So instead of receiving a monthly maintenance payment, the other spouse can ask the court to make a determination as to whether a lump sum should be paid in lieu of maintenance. Effectively, let's capitalize those monthly maintenance payments into one lump sum, and that lump sum of money can be invested and drawn down by that spouse to produce a monthly income. Essentially, it's within the court's power to say, "Okay, you can't pay monthly maintenance, but we're not just going to dismiss those maintenance claims. We're going to look at the capital. And if there's a capital sum available that could be used to produce an income stream, then we're going to award a lump sum in lieu of maintenance to the spouse. She can take financial advice as to the best way to maximize the capital growth on the lump sum, but also how to maximize the income generated from that money as well."
Vanessa Gardiner: The problem arises for the spouse who is the victim of all this, where there simply isn't enough capital, there isn't enough cash to achieve a capitalization of the maintenance claim, which means either they have an open maintenance claim, but for, say, zero value with the potential to vary upwards in the future if the other spouse gets another job, gets another decent income. Or in some cases, they simply won't be able to claim maintenance at all, and they will never receive a maintenance payment or a lump sum. This is why all cases turn on their facts. And this is why, whilst the court will look to put someone in the position they should be in to meet their needs, they can't make decisions based on moral judgments, because ultimately it comes down to how much is in the pot to meet those needs. If it isn't there, it isn't there. You can't get blood out of stone, and we've had many a judge say that to us in court. You have to hope that there's sufficient capital in the background to basically capitalize that maintenance claim.
Host: Thanks, Vanessa. Again, quite a powerful resolution. This can be forward-looking and continue to hang over the future income.
Vanessa Gardiner: Absolutely, absolutely.
Host: What advice would you give to someone who had been accused of sexual misconduct or who had an affair, which it affected their employment and as a result, their marriage had broken down or they're separated?
Vanessa Gardiner: Most importantly, if you find yourself in any of the situations that we've talked about before, irrespective of which side you fall on, if you've had the affair or perhaps you're the betrayed spouse, you must take legal advice as early as possible. In divorce proceedings, timing can be everything from a tactical perspective. You must be proactive and you must be informed. There are lots of legal arguments in these types of cases where there is serious financial misconduct is raised. They're complicated, they're tactical, and you can make fatal errors early on if you don't know the law, and you don't know the consequences of what your actions might be. It's important to understand that there's an employment element to this as well. Some employers have strong policies against a coworking relationship whilst others don't. Some coworkers can make it work afterwards and everything is fine while others, they suffer serious backlash and reputational problems.
Vanessa Gardiner: Sometimes an affair with a coworker is just fun or sex. Sometimes later becomes love and marriage. I'm a divorce lawyer, I see a lot of affairs that turn into ongoing relationships and new families. But also sometimes this behaviour is criminal or emotional and can cause financial and reputational ruin. You must be very careful entering into these relationships in understanding what the potential future implications can be. And really as well, you should take employment law advice as to the consequences of a relationship with a coworker if you think there's a risk of it causing problems. For example, you have, what about an effect on the balance of power or possible sexual discrimination or hostile work environment claims if the relationship turns sour, and there are difficulties between the two people afterwards.
Vanessa Gardiner: There could be the opposite. You could have allegations by coworkers that someone's receiving preferential treatment because of a relationship that's known to have taken place between a partner or a manager and a subordinate. There are so many issues that can arise out of it as well as in an employment arena and not just within the effects of it within divorce proceedings and separation. So take legal advice if you have any concerns whatsoever.
Host: Thanks, Vanessa. So a lot to think about there. From what you're saying, really, the key thing is to be informed. Now, we're going to be including your contact details along with this podcast. What's the next step for anyone who finds themselves in this situation?
Vanessa Gardiner: Get in touch, pick up the phone, drop us an email, it's completely confidential. And have a conversation. The most important thing you can ever do in situations like these is to take advice and be informed and make decisions based on the information that you have. Sometimes people make decisions based on guilt or moral judgment without actually understanding what the law is or what they should do. It's important to make an informed decision, take advice, and don't let it fester. Don't leave it and think it will just go away or get better.
Host: Thanks, Vanessa. Thank you for listening to Straight talking business success. To find out more about the series, please visit gateleyplc.com/businesssuccess. From here, you can subscribe for updates, meet our speakers, and get more information on all of the topics that we've covered.