Shopping Around? - Boodle Hatfield

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03 Jan 2020

Shopping Around?

The parties in Potanin v Potanina* were Russian nationals. They married in 1983, separated in 2007 and were divorced in Russia in 2014. They have three children together.

While it was not always so, they were described by the judge as “massively rich” with a lavish lifestyle and assets which the wife asserted to be $20 billion.

Following complex and lengthy proceedings in Russia, referred to seasonally in the judgment as a “blizzard of litigation”, Mrs Potanina sought permission to bring a claim in England under Part III Matrimonial and Family Proceedings Act 1984 (“Part III”). This legislation permits certain individuals who have divorced abroad, to bring a claim in the English Courts for financial remedies where they have suffered hardship by reason of the foreign divorce.

Mrs Potanina’s case, which some may find distasteful, was that the award she had received in Russia (between $40 – 80 million) did not meet her reasonable needs and that she should have been awarded half of the matrimonial assets which she asserted were in the region of $6 billion. This is an outcome which might have been possible had the case been heard here. The wife was, however, unsuccessful.

Divorced abroad? There are still deals to found in England…

Those advising internationally mobile clients of significant means need to be aware of Part III claims and the ability for ex-spouses to bring claims in this jurisdiction where they believe they have suffered financially as a consequence of an overseas divorce.

To bring a claim in this jurisdiction for financial relief after an overseas divorce, the applicant must show that:

  • Either of the parties was domiciled in England and Wales on the date of the application or was so domiciled on the date on which the divorce took effect; or
  • Either of the parties to the marriage was habitually resident in England and Wales throughout the period of one year ending with the date of the application for permission or was so resident throughout the period of one year ending with the date on which the divorce took effect; or
  • Either or both of the parties to the marriage had, at the date of the application for permission, a beneficial interest in a possession in a dwelling-house situated in England or Wales that was at some time during the marriage a matrimonial home of the parties to the marriage.

Those seeking to bring a Part III claim must first obtain leave from the Court. Leave should not be granted leave unless the Court considers that there is substantial ground for making such an application. The case provides a helpful reminder of four key elements judges need to consider:

  1. The extent of the parties’ connection to England;
  2. Whether or not the applicant is bringing the application merely as a “top up”;
  3. The interplay between the adequacy of the award made in the overseas jurisdiction and the connection with England; and
  4. Whether the applicant has suffered injustice and/or hardship.

Know your high street and have a loyalty card

It was apparent that Mr Potanin had no connection to this jurisdiction either during or after the marriage. Similarly, his wife had no significant, if any, connection during the marriage. Her first contact with England after the breakdown of the relationship appears to have been to take advice from London divorce lawyers (not a particularly attractive feature of her case). It was only late in 2014 that Mrs Potanina purchased a flat in London. She retained property in Russia. No doubt with some heavy irony, the husband’s legal team highlighted the fact that England was only the fourth jurisdiction in which the wife had chosen to litigate.

The judge concluded that, if Mrs Potanina’s claim were to be allowed to proceed, then there would effectively be no limit to divorce tourism. He stressed that it is not the job of the English Courts to correct what might be thought to be deficiencies in the legal system of another country.

The judge considered the relevant case law in this area, referring to this as a “classic example of a spouse whose background and married life was firmly fixed in her home country and who had no connection with England…”. Claimants therefore need to think very carefully about whether they are able to establish enough of a link to this jurisdiction to be successful. If they are thinking about “divorce planning” during the marriage, clearly this needs to be undertaken early on and not just off the back of a quick consultation with a divorce lawyer followed by a tactical property purchase.

Buyer’s remorse…

The closing paragraphs of the judgment acknowledge that, had the wife been successful, the likelihood is that she would have achieved an even higher standard of living and one which she was entitled to argue for. The judge noted the wife’s disappointment and her intention to appeal his decision. This may not therefore be the last word on the matter.

Imagining the words “I’ll be back!” ringing around the High Court, family lawyers will no doubt be watching carefully to see if Mrs Potanina secures leave to appeal to the Court of Appeal. In the meantime, internationally mobile couples need to be aware of this area of the law and ensure (whether potentially making an application or defending one, perhaps through wealth protection planning) that they take seriously the potential remedies offered by the English Courts and also the hurdles that must successfully be overcome to gain access to them.

This article first appeared in EPrivateClient on 3 January 2020.