Sofia Bogolyubova v Gennadiy Bogolyubov
| Jurisdiction | England & Wales |
| Judge | Lady Justice King,Lord Justice Dingemans,Lord Justice Snowden |
| Judgment Date | 18 May 2023 |
| Neutral Citation | [2023] EWCA Civ 547 |
| Docket Number | Case No: CA-2022-001436 |
| Court | Court of Appeal (Civil Division) |
[2023] EWCA Civ 547
Lady Justice King
Lord Justice Dingemans
and
Lord Justice Snowden
Case No: CA-2022-001436
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE FAMILY COURT
SITTING AT THE ROYAL COURTS OF JUSTICE
Mr Justice Peel
ZC17J00073
Royal Courts of Justice
Strand, London, WC2A 2LL
James Turner KC (instructed by Mishcon de Reya) for the Appellant
Charles Howard KC (instructed by Hughes Fowler Carruthers) for the First Respondent
Lewis Marks KC and Marina Faggionato (instructed by Hogan Lovells) for the Second Respondent
Hearing date: 15 March 2023
Approved Judgment
This judgment was handed down remotely at 12:00pm on 18 May 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.
This is an appeal against a case management order made by Peel J (‘the judge’) on 12 July 2022. By his order, the judge refused an application to approve a proposed consent order in financial remedy proceedings, the terms of which had been agreed between Sofia Bogolyubova (‘the wife’) and Gennadiy Bogolyubov (‘the husband’).
The husband is a co-defendant in Chancery Proceedings. In those proceedings, it is alleged that he was central to a substantial fraud which had been successfully perpetrated against a Ukrainian bank called the Joint Stock Company Commercial PrivatBank (‘PrivatBank’). If PrivatBank succeeds in its claim against the husband, he could face a liability in damages and interests in excess of $4.2bn, a sum which would, in all likelihood, wipe out the entirety of his assets. The judge held that it would be both illogical and wrong to approve the proposed consent order until the extent of what he described as the husband's ‘potentially massive liability’ had been established.
In those circumstances, the judge adjourned the application generally. The issue before this court on appeal is whether, notwithstanding that this was a case management decision, the judge erred in law in declining to approve the proposed consent order pending the resolution of the third party proceedings. For my part, I have no hesitation in saying that he made no such error. The judge gave a careful reserved judgment before making an order which was not only well within his wide case management powers, but which, for the reasons set out below, was in my view entirely correct.
Background to the Proceedings
The husband and wife are both Ukrainian nationals. They were married in a religious marriage in London in 2008 before moving to the UK in 2009. They were subsequently married formally in this country on 26 May 2011, having entered into a pre-marital agreement on 10 March 2011. There are four children of the marriage who live with the wife, now in Switzerland. The husband lives in Ukraine.
At the time of the pre-nuptial agreement, the husband's wealth was recorded as £3bn. Under the terms of the pre-nuptial agreement in the event of a marriage breakdown, the wife was to receive a £1m lump sum plus £2m per year of the marriage. In addition, she was to receive maintenance of £500,000 pa for life and £20m in trust as a housing fund.
The parties separated in March 2016. By a separation agreement dated 20 February 2017, the pre-nuptial agreement was terminated and replaced by a settlement for the wife expressed to be for a minimum of £95m. Once again, the agreement recorded the extent of the husband's wealth which had, according to that document, now reduced by two thirds to £1bn.
Meanwhile, in 2016, Tatneft, a Russian oil company, had brought claims against the husband for around $300m and had, within those proceedings, obtained a worldwide freezing order against him. Under the terms of the February 2017 separation agreement, the wife was to receive certain assets via trust distributions within 6 weeks of the discharge of the Tatneft worldwide freezing order. Although judicial separation proceedings were issued in March 2017, no application was made by either the husband or the wife to have a consent order made reflecting the terms of the separation agreement in a way similar to that which is now sought by the parties in respect of the same agreement. It may be worth noting that in the Tatneft litigation, the husband's financial jeopardy stood at £300m (approximately one third of his wealth) and, unlike the present situation, there was therefore no question of the husband being left with no assets should Tatneft have succeeded in establishing its claims.
The Tatneft worldwide freezing order was discharged on 11 March 2020, those proceedings having been dismissed after the husband had succeeded on a limitation point. The wife was, however, notwithstanding the terms of the agreement, unable to gain access to the assets as had been intended because, by that stage, a further worldwide freezing order had been obtained against the husband by PrivatBank through the following sequence of events:
a. In December 2016, PrivatBank (in which the husband had been a shareholder) was declared insolvent by the National Bank of Ukraine and was subsequently nationalised.
b. In December 2017, PrivatBank issued proceedings against the husband, alleging that he and seven other defendants had perpetrated a massive fraud during 2013 and 2014. PrivatBank seeks damages against the husband of $1.91bn plus interest (said to amount to a total of $4.2bn as at 17 March 2022).
c. On 19 December 2017, PrivatBank obtained a worldwide freezing order in this jurisdiction against the husband. The worldwide freezing order was set aside on 4 December 2018 on grounds that there was no jurisdiction to entertain PrivatBank's claims. The Court of Appeal allowed an appeal against that decision on 15 October 2019 ( PJSC v Kolomoisky and others [2020] Ch 783) and a further worldwide freezing order was made. Significantly, it should be noted that at para.[22] of the judgment it was recorded that both the husband and Mr Kolomoisky, the man alleged to be the co-conspirator, had each admitted that there was a ‘good arguable case of fraud on an epic scale.’
The fraud trial is listed for a 13-week hearing in the Chancery Division commencing in June 2023. It is accepted by Mr Turner KC on behalf of the wife that, in the event that PrivatBank succeeds substantially in its action against the husband, the resulting damages order would ‘wipe him out’.
On 18 October 2021, a decree of judicial separation was made on the wife's petition. Forms A were issued by each of the parties on 7 December 2021. The covering letter was signed by both the husband and the wife and expressed an intention to incorporate the terms of the February 2017 separation agreement in a consent order ‘subject to the variation or discharge of the second worldwide freezing order’.
The parties re-entered into negotiations in order to attempt to turn the separation agreement into a consent order that satisfied them both. This resulted in the proposed consent order at the centre of this appeal. An application for the approval of the consent order by the court was made on 7 December 2021.
On 16 February 2022, PrivatBank was notified that the husband and wife had made the application. Thereafter, on 17 March 2022, PrivatBank issued an application i) to intervene in the proceedings; ii) for a stay of the application for financial relief pending the outcome of PrivatBank's fraud claim against the husband; and iii) for specific disclosure of certain documents.
The issue came before Peel J on 9 June 2022 and a reserved judgment was handed down on 24 June 2022. The judge joined PrivatBank to the proceedings for the purposes of hearing its submissions and then discharged it as a party from the financial remedy proceedings. The judge refused PrivatBank's application for disclosure specifically in relation to the pre-marital agreement. There is no appeal against either of those orders.
That then left the husband and wife's application for approval of the consent order and PrivatBank's cross-application that the financial remedy proceedings should be stayed until after the trial in the Chancery Division. The judge refused the application to approve the proposed consent order and adjourned the financial remedy proceedings.
The proposed consent order
The judge was provided with a draft consent order substantially in the same terms as the separation agreement. In addition, the judge was provided with the ‘Statement of Information for a Consent Order in relation to a Financial Remedy’, commonly known as a Form D81 (‘D81’), which is required by the Family Procedure Rules 2010 (‘FPR’) r 9.26. This document now put the husband's assets at £3.8bn which, as the judge noted at para.[23], represented a ‘very significant increase on the figure in the separation agreement’. The notes to the husband's assets acknowledge that, as a large proportion of the husband's assets are held in Ukraine, they will have been heavily impacted by the current war, and that it was therefore not possible ‘realistically to value them with any degree of accuracy.’
Whilst much of the husband's wealth is held in Ukraine, the D81 identifies properties in London valued at £121m.
It is clear, and it was accepted by Mr Turner, that even if that figure of £3.8bn does not have to be adjusted down significantly to reflect the appalling impact of the Ukrainian war, nevertheless, should PrivatBank succeed in the litigation in the Chancery Division, the husband is unlikely to be able to meet the claim against him personally which, although amounting to $4.2bn as of March 2022, will now require there to be added at least one year's further interest.
Within the proposed consent order, there was what the...
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Paul Mark Simon v Lauren Belinda Simon
...to a financial remedy application in order to be heard as to whether a consent order should be made. 101 In Bogolyubova v Bogolyubov [2023] EWCA Civ 547 (‘ Bogolyubova’) at [13] a bank (PrivatBank) (‘the bank’) which alleged that the husband had executed a substantial fraud against it was ......