Potanina v Potanin [2021] EWCA Civ 702
In Potanina v Potanin the court was concerned with a wife’s appeal against a 2019 order of Mr Justice Cohen setting aside his own without notice order for leave under Part III of the Matrimonial and Family Proceedings Act 1984 (MFPA 1984). The Court of Appeal considered the proper approach to both stages of an MFPA 1984 application and the wife’s appeal against the order setting aside leave was allowed. Maria Scotland, barrister and joint head of the family team at 5SAH chambers, considers the decision for Lexis Nexis.
This analysis was first published by Lexis®PSL on 20 June 2021 (subscription required).
What are the practical implications of this case?
The cases of Agbaje v Agbaje [2010] UKSC 13, [2010] 1 FLR 1813 and Traversa v Freddi [2011] EWCA Civ 81, [2011] 2 FLR 272 remain good law and confirm the approach to applications for leave and set aside.
The Court of Appeal held that Cohen J had fallen into error in embarking on a wholesale examination of the evidence and making findings at the set aside hearing in the absence of oral evidence and that a set aside hearing should be a sharp, short hearing. It is not a ‘return date’ of the type listed following the making of a without notice injunction.
At a return date of an injunction the judge, having had the benefit of both sides of the argument, decides whether fairness requires the injunction made to continue and if so for how long and on what terms. Under MFPA 1984, Pt III an application to set aside must establish compelling reasons to justify the revocation of leave, which per Agbaje must, absent a readily identifiable and briefly stated knock-out blow or omission of a decisive authority, be listed for hearing together with the substantive application for financial relief for which leave has been given at which hearing the court will consider what financial orders to make and quantum pursuant to MFPA 1984, s 17. MFPA 1984, s 16 comes into play at both the leave stage and at the final hearing.
The court observed that not all MFPA 1984, Pt III cases relate to families with massive or even substantial wealth, as in this case, and it is important that MFPA 1984, Pt III proceedings are straightforward and cohesive. The complexities and challenges seen in this case indicate that this area would benefit from consideration by the Law Commission.
What was the background?
The parties married in Russia in 1983 where they lived throughout the marriage. There were three adult children. The husband accumulated assets worth $US 20bn during the marriage. A sum of $US 76.1m was transferred to the wife in 2007. The husband’s case was that this was to allow the wife to achieve financial independence following their separation. The wife disputed this and said the date of separation was November 2013. The Russian courts found the year of separation to be 2007. The pronouncement of divorce in Russia on 25 February 2014 led to a ‘blizzard of litigation’ in Russia. There were also proceedings in Cyprus and the US.
The Russian courts' approach in financial applications is much the same as in England and Wales in that the starting point is the principle of sharing/equal division of the parties’ assets. However the sharing principle does not include assets owned beneficially by a spouse. The wife’s case was that she received only a tiny proportion of the vast wealth of this family, all of which had been accumulated during this very long marriage ($US 20bn). The extensive litigation in Russia related to the wife’s ultimately fruitless attempts to obtain half the assets held beneficially by the husband. Having failed in her claims in Russia, the wife moved to London in 2014, and in 2017 applied for leave to seek financial orders pursuant to MFPA 1984, s 15(1)(b) on the basis of her habitual residence in England.
MFPA 1984, Pt III permits a spouse to an overseas divorce to apply for financial orders in the family courts in England and Wales only so long as the applicant can persuade the court that there are substantial grounds for bringing the application. There is a two-stage process whereby at stage one the court considers without notice whether there are substantial grounds and, if so persuaded, grants leave for the matter to proceed on notice to a trial, at which hearing the court decides what financial orders are made and quantum. The respondent has seven days to seek to set aside the order for leave.
What did the court decide?
The court considered the approach to be taken in MFPA 1984, Pt III cases and gave the following guidance:
- the leave stage is only a filter of wholly unmeritorious applications
- the threshold is not high but there must be a ‘solid’ case to be tried
- the application for leave is made without notice
- in complex cases it is appropriate for leave to be determined on notice
- leave applications, whether without notice or on notice, should be given a short listing
- set aside should only be exercised where there is some compelling reason, where a decisive authority has been overlooked or the court was misled
- unless the respondent can deliver some ‘knock-out blow’, set aside should be heard with the substantive application
- the set-aside hearing should be a short, sharp hearing to decide whether the respondent can deliver the ‘knock-out blow’, not an appeal
- if leave is set aside the unsuccessful party should expect a costs order, and if the judge was previously misled a costs order on an indemnity basis
- once leave is granted, the question of whether to make orders and, if so, quantum should be determined at one trial of the MFPA 1984, Pt III application
Maria Scotland practices exclusively in family law with a specialism in high-end/ big money financial remedy applications and (private law) children work. She accepts instructions to act through a solicitor or directly from members of the public on a Direct Access basis. Maria is ranked in the Legal 500 in family law (including divorce & financial remedy). She is one of the leading family law juniors and is the joint head of the Family Team at 5SAH.
