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In this post, Madison Ingram, Trainee Solicitor in the ICE Disputes team at CMS previews the decision awaited from the Supreme Court in Potanina v Potanin. The appeal was heard by the Supreme Court on 31 October – 1 November 2023.

The Facts

Natalia Potanina (“Wife”) and Vladimir Potanin (“Husband”) are two Russian nationals who were married from 1983 to 2014. They spent their entire marriage living in Russia.

Husband claims that the couple began to live separate lives from 2007, whereas Wife claims they did not separate until 2013 when Husband told her that he wanted a divorce.

Throughout their marriage, Husband accrued substantial wealth, becoming a multi billionaire. In 2007, Husband transferred assets to Wife of approximately USD$76 million. This is acknowledged as being a small portion of Husband’s wealth – of which is mostly located in shares in companies or other business entities which were not registered in his name, but instead were held in trusts or corporate vehicles.

Upon the granting of their divorce in early 2014, Wife commenced a wave of litigation in Russia, the USA and Cyprus to obtain further financial relief from Husband’s assets. She was unsuccessful in all claims. She then decided to bring a claim for financial relief under English law on the basis that she had purchased a property in England in 2014 and, since 2017, had been living in England permanently. This was done by way of a without notice application for leave under rule 8.25 of the Family Procedure Rules 2010 (“the 2010 Rules”).

On 25 January 2019, Wife was granted leave to apply for financial relief pursuant to Part III of the Matrimonial and Family Proceedings Act 1984 (“the 1984 Act”) at an ex parte hearing.

Husband then applied under rule 18.11 of the 2010 Rules to set aside Wife’s application for financial relief on the basis that the judge had been misled as to the facts of the case, the issues of Russian law and the applicable principles of English law. His application was heard in the High Court in October 2019.

With the High Court finding in Husband’s favour, Wife then appealed to the Court of Appeal which overturned the High Court’s decision in a hearing in January 2021.

Husband has now appealed the decision to the Supreme Court, and judgment is awaited.

The Law

1984 Act:

S. 13 states that leave cannot be granted unless there is “substantial ground” for awarding the application.

S. 15 provides the requisite connection of an applicant to England and Wales. Since Wife was habitually resident in England for more than one year prior to the date of her application, this requirement appeared to be met.

S. 16 outlines several requirements for the court to ‘have regard to’ in determining whether England and Wales is the pertinent location for the matter to be dealt with.

S. 17 considers whether an order should be made.

S. 18 outlines several requirements for the court to “have regard to” in exercising its powers under s. 17.

2010 Rules:

Chapter 6 sets out the procedure to be followed when making an application for leave under the 1984 Act.

Relevant case law:

Agbaje v Agbaje [2010] UKSC 13:

This case provides important guidance on the application of Part III of the 1984 Act as to the test for granting leave and the correct approach to an application to set aside. The principles are as follows:

  • “The test is not high for the grant of leave but there must be a ‘solid’ case to be tried;
  • The power to set aside may only be exercised where there is some compelling reason to do so. In practice it will only be exercised where a decisive authority is overlooked or the court has been misled;
  • Unless the applicant can deliver a ‘knock-out blow’, an application to set aside should be adjourned to be heard with the substantive application.”

Traversa v Freddi [2011] EWCA Civ 81:

This case provides some key context to Agbaje v Agbaje in how the test ought to be applied. Specifically, it details that a hearing for application for leave should be considered rather quickly, and that if a case meets the s. 13 requirement under the 1984 Act, there is not to be “a rigorous evaluation of all the circumstances”.

Ex Parte Application

Wife was granted leave to make a without notice application under Part III of the 1984 Act, whereby the judge granted her ex parte leave to apply for financial relief. The judge had initially wished to order an inter partes hearing, however he was persuaded by Wife’s counsel with reference to Traversa v Freddi to grant leave.

Husband then applied to set aside said grant of leave, mainly on the basis that the judge was misled on the facts, aspects of Russian law, and the relevant principles of English law. This application was heard by the High Court.

Decision of the High Court

The High Court granted Husband’s application to set aside Wife’s application for financial relief on the basis that she did not meet the requirements under the 1984 Act.

Mr Justice Cohen (who was also the judge at the first hearing) stated that he did have the extent of the material that he was presented with at this stage at the ex parte hearing; and had such material been available to him at that time, he would not have granted leave to Wife to apply for financial relief.

Therefore, he made the order on 8 November 2019 to set aside the leave on the grounds that he had been misled at the ex parte hearing.

Wife then appealed such order to the Court of Appeal.

Decision of the Court of Appeal

The Court of Appeal set aside the High Court’s decision and allowed Wife’s appeal.

The Court of Appeal referred to Traversa v Freddi, in which it was established that a court ought to defer an application to set aside to be heard alongside the substantive application, unless the respondent can produce a “knock-out blow”. The Court of Appeal explained that where a court has been misled and the leave should be set aside, that is often a sign that the issue should be considered at trial as there is not an obvious “knock-out blow”. The Court of Appeal criticised the High Court’s diversion from this approach.

Further, the Court of Appeal criticised the High Court for undertaking a review of the application of s. 16 of the 1984 Act and making factual conclusions based on no oral submissions of which would have otherwise been available in a final hearing.

The Court of Appeal were therefore of the opinion that a hearing with oral evidence should have instead been conducted, and that the judge had indeed not been misled and that the issues which he identified were in fact not material enough to justify setting aside the application for leave.

Nevertheless, the Court of Appeal was sympathetic to the judge and understood that the situation had perhaps commenced on the wrong foot in respect of the lengthy and complicated nature of the initial leave hearing in January 2019, which had made subsequent legislation rather convoluted.

Husband appealed this decision to the Supreme Court.

Issues before the Supreme Court

It is now for the Supreme Court to consider whether the Court of Appeal was correct in its decision to grant Wife permission to apply for financial relief under Part III of the 1984 Act.

Comment

It is clear from the differing approaches taken in the High Court and the Court of Appeal that this area of the law requires clarification, of which it is hoped that the Supreme Court will provide. As the Court of Appeal stated at the conclusion of its judgment, the complexities do not end in respect of the leave application and possible setting aside, but rather extend also to the “approach and balance to be taken in relation to s. 16” of the 1984 Act. Additionally, despite the Law Commission undertaking a review of the law surrounding financial remedy on divorce, this specifically excludes the consideration of Part III of the 1984 Act. Therefore, the Supreme Court shall hopefully provide much needed guidance on this topic.

This case has already received attention in the media, with many stating that this could become the highest-value divorce case in English legal history. Indeed, if the Supreme Court uphold the Court of Appeal’s decision and grant Wife permission to apply for financial relief, it is not unlikely that this will encourage others to go down the same route.