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The Supreme Court decision in Potanina -v- Potanin [2024] UKSC 3

Posted
March 1, 2024
Family Law

This recent decision out of the Supreme Court here is a rather technical analysis of a rarer aspect of matrimonial finance law.

Under Part III of the Matrimonial and Family Proceedings Act 1984, a former spouse can apply in the courts of England and Wales for financial relief, even though their divorce took place overseas and another jurisdiction may have even made a financial order. This is known as a Part III application. The reasons behind this legislation are clear; it might be that a couple have lived in the UK for many years, but on separation one of them wishes to take advantage of the differing divorce law in another jurisdiction and issues an application for divorce there (sometimes without even telling their spouse about it), possibly with financial remedy proceedings to follow. That other jurisdiction may not have the same principles of sharing the matrimonial assets, or may only be able to make orders in relation to some assets and not others. This might create a situation of real unfairness, even where one party is unable to meet their needs or the needs of the children.

A Part III application therefore allows the person who is disadvantaged to make an application to the courts in England and Wales for financial relief, even though the divorce did not take place here. Whilst a person may not get so substantial an award as if the divorce had taken place here, an award should make sure that their needs and the needs of any children are sufficiently met.

So far, so good. But now consider the situation where a couple have never lived in England and Wales at all. They get divorced in their home jurisdiction, and get a financial order there too. The person who is unhappy with the order (and considers they should have gotten more) then moves to England and Wales and makes a Part III application here, looking for another chance to get more funds. Is this fair?

Both of these examples show behaviour which is known as ‘forum shopping’; looking for a jurisdiction where the law is most beneficial to you and then trying to apply there rather than where is most appropriate for the circumstances. In the first instance, the English law tries to stop a person forum shopping, by allowing the respondent spouse the opportunity to make a Part III application here, where it is more appropriate, even if they divorced elsewhere.

In the second example, English law tries to stop forum shopping by including a provision for leave (s13 MFPA 1984). Leave means that an applicant has to get the court’s permission to proceed with their application. When a court decides whether or not to grant an applicant leave they have to determine whether in all the circumstances of the case it would be appropriate for the courts in England and Wales to make an order, and there is a list of factors in s16(2) MFPA 1984 that the court should consider (such as the parties’ connections to the various jurisdictions, whether there is property here, the length of time since the divorce, the parties’ compliance with previous orders, etc.).

Leave applications are usually determined by hearing from the applicant, without notice having been given to the prospective respondent. If leave is given but the respondent thinks it ought not have been, then they can apply for the leave to be set aside and therefore the case would come to an end. It used to be the case that for the respondent to show that leave should not have been given, they needed to be able to show that there was a ‘knock-out blow’ to the applicant’s leave argument. This was based partly on the courts’ general wish not to spend a lot of court time arguing about whether leave to bring an application should have been granted, and then potentially even more court time arguing about the substance of the application itself – rather just to get on with it.

In Potanina -v- Potanin, the former wife applied for leave to bring Part III proceedings after a divorce in Russia ten years ago and much subsequent litigation there about the financial remedies following the marriage – up to the Russian Supreme Court – as well as additional financial litigation in the United States and Cyprus. After the divorce, the former wife moved to London. A year after being based here, she made a Part III claim.

As is the usual case, her application for leave was held without informing her former husband (who still lives in Russia). The judge was persuaded to grant her leave.  However when finding out about this, the former husband objected to the leave application and applied to set it aside. At a hearing the same judge determined that the former wife had misled him at the original hearing, and leave should not in fact have been granted and he set it aside. 

The former wife applied to the Court of Appeal, saying that the former husband had not had a ‘knock-out blow’ to her leave application, and as such the judge was wrong to have set aside leave. The Court of Appeal agreed with her and considered they were bound by this test. The former husband applied to the Supreme Court.

The Supreme Court held that this was not fair. Where a decision is made without one party having the chance to say anything about it, the interests of justice demand that he has the opportunity to argue before the court whether that decision was correct and to have it overturned if it was not. It is against the interests of justice for the party to have to reach some higher standard to have leave set aside, such as the “knock-out blow” (or that there is some other compelling reason or that the court was misled). The judge should consider the leave application afresh, with the benefit of hearing from both parties.

In terms of Ms Potanina and Mr Potanin, the case doesn’t end here. The Supreme Court granted the former husband’s appeal, but the case has gone back to the Court of Appeal to determine whether the former wife’s case should proceed anyway as leave ought to have been given – even with this lower test to set it aside. We shall have to see whether in six months’ time we get another judgment, letting us know where this case goes next.

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