Natalia Nikolaevna Potanina v Vladimir Olegovich Potanin

Heard on 31 October and 1 November 2023

Lord Leggatt ( with whomLord Lloyd-JonesandLady Roseagree):

Rule one for any judge dealing with a case is that, before you make an order requested by one party, you must give the other party a chance to object. Sometimes a decision needs to be made before it is practicable to do this. Then you must do the next best thing, which is — if you make the order sought — to give the other party an opportunity to argue that the order should be set aside or varied. What is always unfair is to make a final order, only capable of correction on appeal, after hearing only from the party who wants you to make the order without allowing the other party to say why the order should not be made.

This fundamental principle of procedural fairness may seem so obvious and elementary that it goes without saying. On this appeal, however, we are asked to review a practice which has developed in dealing with applications under section 13 of Matrimonial and Family Proceedings Act 1984 that violates this fundamental principle. The practice has its origin in some observations made obiter in a judgment of this court in Agbaje v Agbaje[2010] UKSC 13; [2010] 1 AC 628. So far as the report of that case shows, no argument was addressed to the Supreme Court on the point, which was not an issue in the appeal. However, those obiter dicta have subsequently been treated as authoritative guidance which lower courts must follow.

The procedural history of the present case shows the mischief which this has caused. After a day of reading and hearing argument from the applicant alone without notice to the respondent, the judge made an order in the applicant's favour under section 13 of the 1984 Act. When the respondent was notified of the order, he was told that he had the right to apply to have it set aside, which he did. After hearing argument from both sides, the judge concluded that the order sought by the applicant was not justified and should not be made. So he set aside his initial order and refused the section 13 application: [2019] EWCA Civ 2956 (Fam); [2020] Fam 189.

The Court of Appeal, however, following the practice by which they regarded the judge and themselves as bound, ruled that the judge should not have done this. No matter that after hearing what the respondent had to say the judge had come to the considered view that the application should be refused and gave detailed reasons for that conclusion. On what the Court of Appeal took the law to be, the respondent did not in fact have a right to say why the application should be refused unless he could show that the judge had been materially misled at the initial hearing held in his absence, which he could not do. Consequently, the Court of Appeal set aside the order made by the judge after he had heard argument from both sides and restored his initial decision (which he had concluded was wrong) reached after hearing from the applicant alone: [2021] EWCA Civ 702; [2022] Fam 23.

Before examining in more detail how this dystopian situation has arisen, I will briefly outline the legal context, factual background and procedural history of the case.

Part III of the 1984 Act (“Part III”) gives courts in England and Wales power to grant financial remedies after an overseas divorce. Financial relief can be ordered under Part III even where a financial award has already been made in a country outside England and Wales. The legislative purpose in enacting Part III, as explained by this court in Agbaje, at para 71, was “the alleviation of the adverse consequences of no, or no adequate, financial provision being made by a foreign court in a situation where there were substantial connections with England.”

The scheme of the legislation is to give courts in England and Wales a very wide jurisdiction to entertain an application under Part III but to impose on the court a duty before exercising this jurisdiction to consider whether England and Wales is an appropriate venue for such an application. To confer jurisdiction on the English courts, it is enough (amongst other ways of qualifying) that either of the parties has been habitually resident in England and Wales for one year before proceedings under Part III are begun: see section 15(1). However, section 16(1) states:

“Before making an order for financial relief the court shall consider whether in all the circumstances of the case it would be appropriate for such an order to be made by a court in England and Wales, and if the court is not satisfied that it would be appropriate, the court shall dismiss the application.”

Section 16(2) of the Act specifies a list of factors to which, in particular, the court must have regard when considering whether it would be appropriate for an order for financial relief to be made by a court in England and Wales. These include: the connections of the parties to the marriage with England and Wales, with the country in which they were divorced and with any other country; any financial benefit received in consequence of the divorce by virtue of any agreement or the operation of foreign law; any financial relief granted by a foreign court or any right to apply for such relief; the availability of any property in England and Wales; the extent to which any order made under Part III is likely to be enforceable; and the length of time which has elapsed since the divorce. As stated in Agbaje, para 52:

“The whole point of the factors in section 16(2) is to enable the court to weigh the connections of England against the connections with the foreign jurisdiction so as to ensure that there is no improper conflict with the foreign jurisdiction.”

If the court is satisfied that in all the circumstances of the case it would be appropriate for an order for financial relief to be made by a court in England and Wales, section 17 gives the court wide powers to grant financial remedies. Broadly speaking, the court has power to make any order for financial relief which it could make if the parties had been divorced in England and Wales.

As a protection for respondents (who are often resident abroad) against having to incur substantial expense in defending unmeritorious applications under Part III, the leave of the court is required before an application for financial relief under Part III can be made. This requirement is imposed by section 13, which states:

“(1) No application for an order for financial relief shall be made under [Part III] unless the leave of the court has been obtained in accordance with rules of court; and the court shall not grant leave unless it considers that there is substantial ground for the making of an application for such an order.”

It is with the operation of this provision that the present appeal is concerned.

Although the parties to this case, Natalia Potanina and Vladimir Potanin, have been divorced for almost a decade, I will adopt the convention prevailing in family proceedings of referring to them, respectively, as “the wife” and “the husband”. They are both Russian citizens who, until the wife took up residence in London after their divorce, had both lived in Russia all their lives, as the husband still does.

Both parties were born in Russia in 1961. They met at school as teenagers and married in Russia in 1983. Their marriage of 30 years was dissolved by a Russian Court in February 2014. They were both 53 years old and still habitually resident in Russia at that time.

In the early days of their marriage the couple were not well off, but since the 1990s following the collapse of the Soviet Union the husband has accumulated vast wealth, estimated from published sources to amount to around US$20bn. The largest part of this wealth comprises an ultimate beneficial interest in some 30% of the shares of MMC Norilsk Nickel PJSC, a Russian metals and mining company which is the world's largest producer of palladium and one of the largest producers of nickel, platinum and copper.

The husband asserts, and a Russian court has found, that the couple separated informally in 2007, at which time the husband made a series of cash transfers to the wife. The husband says that the purpose of these transfers was to afford the wife some financial independence following their separation. The wife disputes this and maintains that they did not separate until November 2013. It is not in dispute that this was when the husband initiated divorce proceedings in Moscow.

The pronouncement of divorce in Russia on 25 February 2014 led to what the judge in this case described as a “blizzard of litigation”. Between 2014 and 2018 there were no fewer than five separate proceedings litigated in the Russian courts. The first action was brought by the husband for division of the marital property; the other four actions were brought by the wife. All five cases went on appeal and there were hearings in the Russian Supreme Court and, on one occasion, in the Constitutional Court. There were also proceedings brought by the wife in the United States seeking disclosure of information and in Cyprus seeking (unsuccessfully) interim relief and declarations of 50% ownership of assets held in various trusts.

The approach followed by the Russian courts was to divide all marital property equally between the parties. For this purpose, however, only assets legally owned by one or both...