The UK Supreme Court has handed down judgment in the international divorce case of Potanina v Potanin.
This international divorce case relates to a Russian couple who spent most of their married lives living in Russia and divorced and concluded financial matters in that jurisdiction. The husband had accumulated vast wealth in the 1990s and, whilst the Russian courts provided the wife with an equal division of the assets owned by the husband on the divorce, this did not include the various trusts and companies in which most of his wealth was invested.
The wife relocated to the UK following the divorce and applied to the Court for leave to bring an application to have their financial issues looked at again, this time in the English courts, under Part III of the Matrimonial and Family Proceedings Act 1984 (Part III).
What is Part III?
This provision of the Matrimonial and Family Proceedings Act 1984 entitles people who have divorced overseas and have sufficient connection with England and Wales to apply to the court to have their financial settlement reconsidered in this jurisdiction. To progress such an application, the applicant first needs to obtain leave from the High Court and do so by demonstrating to the court that they have been sufficiently wronged or disenfranchised through the overseas process to justify the application.
The leave process puts in place a filter to ensure that the grounds exist before the court begins considering the application in earnest. The English courts are deeply mindful of the need to respect overseas divorce judgements and will not want to undermine them by putting in place their own take on how financial matters should be resolved without strong justification.
Applying for leave
This leave process is where the Supreme Court’s focus was applied in the case. An applicant under Part III can either apply for leave by giving notice to their spouse that they are doing so, or they can apply without giving notice, if the justification exists. Mrs Potanina applied without notice, and so her former husband was not present at the hearing when her leave application was considered. She would have attended with just her legal team, and they will have advanced arguments in favour of her case, with no competing arguments from her former husband being put to the court in response.
When without notice applications are heard by the court and they succeed, a further hearing is later convened to provide the respondent to the application – in this case the husband – the opportunity of advancing their own arguments as to why the order should not be made.
It is this issue that came before the Supreme Court.
At the High Court hearing after he was given notice of the leave application, the former husband, Mr Potanin, persuaded the court that leave should not have been granted and the wife’s application was dismissed. The wife then appealed to the Court of Appeal, who took the view that in order to decline the wife’s application, the court would have had to be persuaded that there was a compelling reason or “knockout blow” advanced by the former husband that the case should not proceed. The Court of Appeal took the view that no such reason has been given and so allowed the wife’s appeal and her application to proceed under Part III. The husband then applied to the Supreme Court.
In its judgement, handed down on 31st January, the Supreme Court clarified the law in relation to without notice applications and the absolute right of a respondent to be given the opportunity to appear before the court and make their case. It was clarified that there is absolutely no requirement for a respondent to advance a “knockout blow”, or that their case should give a compelling reason in order to succeed. The onus still remains on the person applying under Part III to show a substantial ground – it is not for the respondent to have to do that.
The Supreme Court therefore decided that the Court of Appeal applied the wrong test. In doing so the former wife at that hearing before the Court of Appeal was not given the opportunity to advance her full case and its best points. The Supreme Court has therefore passed the case back to the Court of Appeal to consider the full spectrum of grounds raised by the wife again in the correct context.
The case provides us international family lawyers with clarification on the Without Notice procedure, and in particular, it refines how we are to deal with Part III applications we are making or responding to on behalf of our clients.
If anything, it makes the job of placing a Part III case before the Court for consideration of the full financial remedies, a slightly harder one, given that the respondent has a lower bar to overcome to persuade the court not to allow the case.
We will see over the coming months and years how the case law and procedure develops in light of this judgment.
If you would like help and support please contact our family team who will be happy to help.