SS v IS
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Roberts |
| Judgment Date | 14 June 2023 |
| Neutral Citation | [2023] EWHC 1544 (Fam) |
| Court | Family Division |
| Docket Number | Case No: ZZ20D61511 |
[2023] EWHC 1544 (Fam)
THE HONOURABLE Mrs Justice Roberts
Case No: ZZ20D61511
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Nichola Gray KC (instructed by Boodle Hatfield) for the applicant
Jaqueline Julyan SC (instructed on a direct access basis) for the respondent
(Application to vary nuptial settlement; extracting value from business assets; appropriate structure for meeting sharing claim; treatment of non-matrimonial assets)
Hearing dates: 9 th, 10 th, 11 th, 12 th and 15 th May 2023
Introduction
This is an application by SS (“the wife”) for a financial remedy order against IS (“the husband”). Both parties are Russian nationals. The wife has British citizenship and intends to remain living in England following the conclusion of these proceedings. The husband has indefinite leave to remain in this jurisdiction and holds dual Romanian nationality. Whilst he sees London as his home for the foreseeable future, his business affairs are structured through several international trust structures whose collective principal purpose appears to be the reduction, if not elimination, of the personal tax consequences for the husband of operating commercially in this jurisdiction.
The parties met in their early twenties when both were students living in Moscow. Having lived together from 2003, they were married in February 2004 and their first child, W, was born later the same year. At that point in time they had more or less nothing in terms of assets and were living with the wife's parents. Over the course of the next three years they had acquired, renovated and sold their first home and moved into a second property in Moscow.
By this stage the husband had taken his first tentative steps towards establishing his career in the restaurant business. He describes himself as an entrepreneur and is justly proud of all he has achieved during a working life which started when he was 15 years old. Together with one of his close childhood friends, MP, they embarked together on their first commercial enterprise in Moscow which was funded with a loan from the husband's father. The early years of their restaurant venture proved successful. As profitability increased, the husband and MP opened several more restaurants and were soon able to invest in the acquisition of a commercial property portfolio. In 2007, discussions began about the possibility of expanding into London with a new venture. The husband approached TA, another childhood friend who was then working between Moscow and London. He agreed to become a partner and TA subsequently moved to London to launch their first restaurant in Mayfair. Over the course of the next three years, two more restaurants were launched as part of a successful chain. In 2011, the three partners came up with an idea for a new restaurant concept (“the B&L business”). The first flagship restaurant was launched at the end of that year. As a result of its success, the husband and MP decided to leave Moscow and relocate to London. The husband and MP sold the majority of their Russian business interests and moved with their families to this jurisdiction. By the end of 2012, MP's brother had joined the business ventures. In this judgment, I propose to refer to them as “the P brothers”.
The parties realised US$3 million when they sold their Moscow apartment in anticipation of the move. On arriving in England, they rented an apartment in Cadogan Square where their second child, F, was born in May 2012. In 2013 they purchased the former matrimonial home in Knightsbridge for £4.55 million with a substantial interest only mortgage of c.£3 million. The property was purchased in the sole name of the husband. Following the parties' separation in September 2020, that property has remained home to the wife and their children who are now respectively 19 and 10 years old. Their son, W, will be attending a central London university from September this year. He is currently living in a flat which his father has rented although he returns regularly to the family home to see his mother and sister. F is a pupil at a private London day school. She is a talented ballet dancer and is likely to move later this year to a well-known London ballet school where she will continue with her education in parallel with perfecting her craft as a dancer.
The wife issued a petition seeking dissolution of their marriage in October 2020. Her application for a financial remedy order followed in December that year. Since separation the husband has been renting various properties in central London. He is now living with a new partner who has her own career. Although she is contributing to some of their joint outgoings, there is no current suggestion that she is financially dependent on the husband.
In terms of litigation history, the matter was transferred to the High Court following an early directions hearing on the basis of the apparent complexity of the husband's financial affairs. On behalf of the wife, Ms Gray KC submits that his failure to engage fully in the disclosure process in a timely and transparent manner has led to unnecessary delay and expense and, in certain respects, amounts to litigation conduct. She relies on aspects of that conduct as supporting the case she advances on behalf of her client in relation to the need for security. As will become apparent, the only asset available to satisfy the wife's claims in this jurisdiction is the equity of c.£2 million in the former matrimonial home. All other assets, including the value of the business assets (the majority of which are accepted to be matrimonial and thus properly the subject of equal sharing) are held in Jersey and Panamanian trusts.
Thus, in this case, the court is dealing with a relatively long marriage of seventeen years during which two children have been born. The husband has an older son, E, who is now 20 and currently studying in Switzerland. E is supported by his father although, given his age, this is unlikely to be a long-term financial dependency.
The wife has not worked since the parties arrived in London. She qualified as a lawyer whilst living in Russia and practised in that jurisdiction for about six years before becoming a full-time mother to their two children. Prior to the breakdown of the marriage, she had started a degree course at the conclusion of which she hoped to achieve a BA in art and conservation. The pressures of the divorce and this litigation resulted in a decision, taken jointly with her university, to take time away from her studies for a period. She intends to return to her course as soon as she is able and is hopeful that it will provide the platform for a new career in that field. She recognises that her ongoing responsibilities to the family will limit to a greater or lesser extent the income she will generate in future from that source.
The asset base including the corporate structure beneath the offshore settlements and the issues engaged in computation and distribution
As the case was opened, it appeared to be common ground that the assets in the case amounted to c.£9 million on the basis of the value attributed by the SJE to the husband's business interests. For these purposes, the court has had the benefit of two reports from Ms Faye Hall, formerly of Smith & Williamson and now with Evelyn Partners. The figure of c.£9 million is based upon the conclusions she has reached in her updated report dated 25 April 2023 in relation to the value of shares held by the trustee of the settlements of which the husband, or the husband and wife, are beneficiaries. It reflects her expert view of what an arm's length sale transaction between a willing seller and purchaser would be likely to achieve were the shares in the various corporate entities held by the trusts to be sold. Because of ongoing developments between the husband and his business partners, that figure may need to be adjusted in the light of the open proposals which the parties have advanced at this final hearing.
Both parties accept that the resources in this case are insufficient to achieve a clean break at this point in time in terms of the wife's ongoing income claims. They have agreed that she should continue to receive periodical payments for a period of ten years. The issues for the court to resolve in this context are (i) whether that period should be extendable, and (ii) how much she should receive. This, in turn, has engaged issues about the husband's ability to draw an income from the business both now and going forwards.
Whilst I have referred to the P brothers as the husband's and TA's business partners (which they remain), it would be more accurate to describe them as former, or disaffected, business partners. Despite their longstanding connection, any relationship between them founded on trust and confidence has long since evaporated. Since 2018/2019 they have been engaged in formal attempts involving their lawyers and trustees to terminate their business partnership and thereby extract from joint structures a fair value for the assets held within them. Whilst the husband's relationship with MP and his brother appears to have broken down completely, the wife remains on reasonably friendly terms with MP, his wife and their family. She accepts that she was aware of the tensions between her husband and his business partners and was kept informed to a greater or lesser extent of the state of the ongoing negotiations between them which, at one stage, in 2021, involved a proposal for a share swap which would separate out the shareholdings in the various entities. Most recently, MP, who was called as a witness at the final hearing, made a proposal to purchase the shares held by the Jersey trust of which the husband and wife are the sole beneficiaries. The...
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