Natalia Nikolaevna Potanina v Vladimir Olegovich Potanin

JurisdictionEngland & Wales
CourtCourt of Appeal
JudgeLady Justice King,Lord Justice David Richards,Lord Justice Moylan
Judgment Date13 May 2021
Neutral Citation[2021] EWCA Civ 702
Docket NumberCase No: B6/2019/3018

[2021] EWCA Civ 702

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM HIGH COURT OF JUSTICE (FAMILY DIVISION)

Mr Justice Cohen

FD18F00074

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Lady Justice King

Lord Justice David Richards

and

Lord Justice Moylan

Case No: B6/2019/3018

Between:
Natalia Nikolaevna Potanina
Appellant
and
Vladimir Olegovich Potanin
Respondent

Mr Charles Howard QC and Mr Deepak Nagpal QC (instructed by Hughes Fowler Carruthers Law) for the Appellant

Mr Stewart Leech QC, Mr Adam Wolanksi QC (who did not attend the hearing) and Mrs Rebecca Bailey-Harris (instructed by Payne Hicks Beach) for the Respondent

Hearing dates: 26–27 January 2021

Approved Judgment

Lady Justice King
1

Part III of the Matrimonial and Family Proceedings Act 1984 (‘Part III’) provides (subject to jurisdictional requirements set out in s.15) for the making of an application for financial relief following an overseas divorce. An order can be made notwithstanding that an order for financial relief has been made in a country outside England and Wales. By s.13 no application can be made without the leave of the court and by s.13(1) no leave is to be granted unless the court considers that there is ‘substantial ground for the making of an application for such an order.’

2

Chapter 6 of the Family Procedure Rules 2010 (‘FPR’) governs the procedure to be followed when making such an application, including at FPR r.8.25(1), that the application for leave must be made without notice and must be determined without notice unless the court thinks it appropriate for the application to be determined on notice (FPR r.8.25(3)). Where permission has been granted ex parte the respondent may, within seven days of the making of the order, make an application under FPR r.18.11 to set aside the order granting leave.

3

This appeal is concerned with the proper approach to an application made for the grant of leave and to any subsequent application to set aside an ex parte order for leave.

4

On 25 January 2019, on an ex parte application by the Appellant (‘wife’), Cohen J made an order granting leave to make an application under Part III. The Respondent (‘husband’) applied to set aside the order. Following two days of argument, Cohen J made an order dated 8 November 2019, whereby he set aside the order for leave and, on re-consideration of the wife's application, refused to grant her leave. The wife appeals against that order.

Factual Background

5

The husband and wife met as teenagers and married in Russia in 1983 where they lived throughout their married life. They have three adult children. In the early days of their marriage the couple were not well off, but the opportunities to create wealth in Russia during the 1990s were such that the husband accumulated vast wealth, estimated from published sources to amount to $20 billion.

6

The family had a lifestyle to match their wealth. Substantial cash reserves were held in the husband's name but most of the formidable fortune was held not in the husband's name, but through other entities in the form of various trusts and corporate vehicles. The husband fully accepted, it appears, that he is the ultimate beneficial owner of the assets held in this way.

7

Ultimately this long marriage foundered. The husband's case was that the separation came in 2007 although, he says, they did not go through any formal legal separation at that time in order to protect their youngest child from the distress of his parents' divorce until he was a little older. The husband says that the fact that they owned a number of properties allowed this fiction to be maintained and they continued to take family holidays together and to celebrate certain festivals as a family.

8

A sum of $71m was transferred to the wife in early 2007 together with a further $5.1m a little later. This, the husband says, was to allow the wife to achieve some financial independence following the separation. The wife disputes that this was the reason for the husband placing assets in her name.

9

The wife's case was (and is) that the separation did not come until November 2013 by which time, unbeknown to her, the husband had formed another relationship and had another child. The husband's announcement that the marriage was over was, on her account, a devastating ‘bolt out of the blue’.

10

The Russian courts found the year of separation to be 2007.

Procedural Background

11

The pronouncement of divorce in Russia on 25 February 2014 led to what the judge described as a ‘blizzard of litigation’.

12

Between 2014 and 2018 the Russian courts heard five different cases brought by the wife. All five cases went on appeal and there were hearings in the Supreme Court and, on one occasion, in the Constitutional Court. There were also proceedings in both Cyprus and the United States.

13

In simple terms, the Russian courts approach divorce settlements by reference to an equal division of the parties' assets. The wife's primary case is that they do not, however, include for division assets owned beneficially but not legally by a spouse. The wife therefore received only a modest balancing figure calculated to bring her settlement up to one half of the assets held outside the corporate/trust structures and after credit had been given for the assets previously transferred to her. Maintenance known as ‘alimony’ is by virtue of Article 90 of the Russian Family Code, only payable to four categories of former spouse. The wife does not qualify under any of the four categories and therefore has no entitlement to maintenance under Russian law.

14

The extensive litigation in Russia related to the wife's ultimately fruitless attempts to obtain half the assets held beneficially by the husband.

15

There is a dispute as to the actual value of the wife's settlement. This centres around a dispute as to the relevant date at which to apply exchange rates to the conversion from roubles to dollars of monies received by the wife. It is not necessary at this stage to determine the correct amount and the judge did not attempt to do so, although he expressed the view that the value in dollars was more than the equivalent of $41.5m as asserted by the wife. In the event that the wife's appeal is allowed and the matter goes to trial, this is an issue which would need to be resolved in order to ascertain the value of the award the wife has received to date, as would be the basis upon which she has given away substantial sums to members of her family.

16

No doubt to most people, whether affluent or poor, the sums received by the wife made her a rich woman. Everything is, however, relative. The wife's settlement represented only a tiny proportion of the vast wealth of this family, all of which had been accumulated during this very long marriage. Further, given that at the date of the set aside hearing she was still only 58 years old, arguably the sum she received would nowhere near meet her long term needs when considered by reference to the lifestyle to which she had long been accustomed.

17

In June 2014, the wife obtained a UK investor visa. Later in the year she bought a property in London and her case is that, since the beginning of 2017, London has been her permanent home. Her application is therefore made pursuant to s.15(1)(b) on the basis of her habitual residence in England.

18

The wife made a without notice application for leave under FPR r.8.25 which provides:

“(1) The application must be made without notice to the respondent.

(2) Subject to paragraph (3), the court must determine the application without notice.

(3) The court may direct that the application be determined on notice if the court considers that to be appropriate.”

19

On 25 January 2019, the judge granted the wife ex parte leave to apply for financial relief pursuant to Part III.

20

In his brief ex tempore judgment the judge said:

“10. I am thus, satisfied having read her evidence and heard from Mr Howard, that the tests of s16(2) for the grant of leave are met.

11. I do not think that it is necessary for me to say anything more about the law. I have, of course, applied the test of whether there are solid grounds or substantial grounds for the court to be able to say that an order might be made. I am satisfied, for all the reasons given, that those grounds exist. If, of course, the husband feels that he does have what is sometimes known as a ‘knockout blow’ to the application, then it is open to him to make an appropriate application to strike out the leave.”

21

The judge's strong inclination at that hearing, as recorded in his October 2019 set aside judgment at para. [49], was to order an inter partes hearing. The transcript of the hearing demonstrates clearly that almost throughout the hearing this was not just his preferred approach, but also his firm intention. Mr Howard QC on behalf of the wife however skilfully persuaded the judge by reference to the judgments in Traversa v Freddi [2011] EWCA Civ 81, [2011] 2 FLR 272 (‘ Traversa v Freddi’) (see para. [35] below) to grant leave. At the subsequent application to set aside that ex parte leave to make an application, the judge expressed his regret in having acceded to Mr Howard's advocacy and to having heard the application without notice.

22

The husband applied to set aside the grant of leave pursuant to FPR 18.11, principally on the grounds that the judge had been misled in important respects as to the facts, issues of Russian law and the applicable principles of English law. The application was set down for a hearing over two days on 3–4 October 2019. A directions...

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