Potanina v Potanin  UKSC 3 concerned an application for permission to issue financial provision proceedings in England and Wales for a Russian couple who had already been through financial remedy proceedings overseas.
What is a s13 application
Under Part III of the Matrimonial and Family Proceedings Act (1984 Act), the courts in England and Wales have the power to grant financial relief notwithstanding that a financial order has already been made overseas.
s13 states that the court’s permission is required to make an application for financial relief.
What does the judgment do
- It clarifies the position on s13 applications.
- It removes the additional barriers placed on respondents so they no longer have to show a “compelling reason”, that the court was materially misled, or to deliver a “knock out blow.
- It confirms that respondents have an absolute and unfettered right to apply to have the order set aside on the basis that the s13 test has not been met.
- It reminds applicants that the onus is on them to show a “solid” ground on which their application is based.
The Supreme Court corrected a practice it viewed as unlawful and the judgment serves as a reminder that any developing practices must always accord with procedural fairness.
The parties are both Russian citizens who married in Russia in and lived there during the marriage. Initially, the couple were not wealthy but in the 1990s the husband amassed significant wealth, estimated around $20 billion, through various trusts and companies of which he is a beneficiary.
Their marriage was dissolved by a Russian court in 2014. What followed was a “blizzard of litigation” over the division of assets with five separate proceedings. The approach of the Russian courts was an equal 50/50 split of all legally held assets, excluding those owned beneficially.
In 2018 the wife applied for permission to seek financial remedy under s13 of the 1984 Act. The wife’s application was made without notice to the husband, and without him being aware of the application. The Judge granted the wife permission to make an application for financial relief. The husband was then served with the order and applied to have it set aside. The Judge then heard arguments from both sides and found he had been materially misled at the first hearing. He held the test for granting permission under s13 was not met and set aside his original order and refused the wife’s permission.
The wife appealed. The Court of Appeal set out the law to be that power to set aside may only be exercised where there is a “compelling reason” to do so, and in practice this is when the court has been misled. The Court of Appeal held it must be possible to demonstrate a compelling reason by a “knock-out blow”. They concluded the Judge had not been materially misled and allowed the appeal.
Supreme Court decision
The husband then appealed to the Supreme Court. By a majority of 3:2 the Supreme Court allowed the appeal.
The Supreme Court was clear that before making an order requested by one party, the judge must give the other party the chance to object. If this is not practicable, the next best thing is that, if the judge makes the order, the other party is given an opportunity to argue that the order should be set aside/varied.
The Court of Appeal followed a practice by which they regarded themselves, and the judge, as “bound”. This approach was “patently unfair”. A judge will of course make better decisions having heard from both sides. There is no requirement for a party applying under FPR rule 18.11 to set aside leave to demonstrate a “knock out blow, or a compelling reason why the court should exercise the power to set aside, or that the court was materially misled”.
The correct position is, if a court makes an order granting permission under s13 having heard only from the applicant and without notice to the other party, the other party has an “absolute and unfettered right” to apply to have the order set aside on the basis that the test for leave is not satisfied. It does not require a “compelling reason” or “knock-out blow” to be shown. At the hearing to set aside the application, the onus remains on the applicant to satisfy the court there is a “solid” ground for making the application.
The dissenting judgment
Lord Briggs, with whom Lord Stephens agreed, was of the view the Supreme Court should leave the “knockout-blow” test in place. It has been applied “consistently” and “without any dissent or criticism” by family judges. The rules of the court governing s13 applications were adopted on “the assumption that Agbaje stated the relevant test”. To depart from that settled principle undermines: the “default” rule that applications are brought without notice to respondents, and reduces “judicial discretion” as to whether it is necessary to hear from respondents.
In his Lordship’s view, the previous approach to s13 applications raised no fundamental issues of justice, equity, or fairness that would justify the Supreme Court requiring a change from that practice, based on the exceptional circumstances of this case.