A decade of divorce proceedings: the war rages on
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The Supreme Court’s decision in the case of Potanina v Potanin, handed down on 31 January 2024, centred on the right of a respondent to an application under Part III of the Matrimonial and Family Proceedings 1984, which concerns financial relief after an overseas divorce. This couple have been warring in courts around the world for a decade already, with this judgment hotly anticipated.
The case has a long history. The parties, both Russian nationals, divorced in Russia after a 30-year marriage in 2014. The wife (the Respondent in the appeal to the Supreme Court) was awarded a share of the marital property amounting to some tens of millions of dollars. However, the majority of the husband’s wealth, estimated to be in the realm of $20bn, was held not legally but only beneficially by him, and of this the wife was entitled to no share whatsoever.
Meanwhile the wife obtained a UK investor visa and purchased a property in London. She spent increasing amounts of time in the UK and described herself as based in London from October 2017. She issued her application under Part III in October 2018.
The wife’s application for leave was made without notice to the husband, and although the Judge felt strongly inclined to order an inter partes hearing, he was ultimately persuaded to grant leave at that hearing.
When the order granting leave was served on the husband, he applied to have the order set aside in the way permitted by the procedural rules. The matter was returned to the same Judge who concluded after hearing argument from both parties that the wife’s connection with England was “both recent and modest” and acceded to the husband’s application to set aside his initial order.
The wife appealed the set aside decision to the Court of Appeal. The Court of Appeal took the law to be that the grounds on which a respondent could successfully apply to have a permission order set aside were limited to where “there is some compelling reason to do so”; in practice where “a decisive authority is overlooked or the court has been misled”, and that the compelling reason must be demonstrable by a “knock-out blow”.
It was found that in the first instance Judge had not been materially misled and that there was no “knock-out blow”. The Court of Appeal therefore determined that the husband had no ability to be heard at the permission stage and reinstated the wife’s permission, notwithstanding its conclusion on analysis of the parties’ respective positions that the test for permission under Part III had not been met by the wife.
The Supreme Court, on appeal by the husband, was tasked with resolving what it described as this “dystopian situation”. By a narrow majority of 3 to 2, the husband’s appeal was allowed. It was decided that the test applied by the Court of Appeal had no basis in law and was contrary to the fundamental principles of procedural justice. It was held that on an application to set aside permission granted without notice, the court is required to decide afresh, having heard argument from both sides, whether the order is to be made or not. The right to set aside is not limited to the ability to show by way of a “knock-out blow” that the court was “misled”, but rather the respondent to a Part III application has an unfettered right to be heard on the question of whether permission should be granted.
This decision allows the litigation war to continue raging, with the Court of Appeal having to consider afresh whether the wife’s application for an increase in her Russian divorce settlement can be entertained in this jurisdiction. The battle continues.
This article was first published in Today’s Family Lawyer on 15 February 2024.
