Financial remedies: no more ‘knockout blows’

On 31 January the Supreme Court handed down judgment in the case of Potanin v Potanina [2024] UKSC 3. By a majority of 3:2, Mr Potanin’s appeal was allowed. In a powerful opening paragraph, Lord Leggatt began: ‘Rule one for any judge dealing with a case is that, before you make an order requested by one party, you must give the other party a chance to object... What is always unfair is to make a final order, only capable of correction on appeal, after hearing only from the party who wants you to make the order without allowing the other party to say why the order should not be made.’

This is a comment upon the somewhat unusual, judge-made procedure which has evolved in the discrete area of financial remedies law that is Part III of the Matrimonial and Financial Proceedings Act 1984. This is the provision which allows spouses who have been divorced outside England and Wales to bring a claim for financial relief here, provided they can show ‘substantial ground for the making of an application for such an order’ (section 13(1)), specifically including their connections with the jurisdiction.  

In practice, this often means very wealthy couples who have already had one round of divorce finance settled in their national courts coming to London to have a second bite at the cherry, seeking a more generous award than they received first time around.  It has led to London earning its sobriquet as divorce capital of the world. Without delving into the facts of this case, Mr Potanin is undoubtedly one of the world’s richest people, with wealth estimated at $20bn, of which Mrs Potanina had already received between $41.5m and $84m in total in Russia.

If one looks at the background to Mrs Potanina’s application one might wonder at the procedure which has been in place for well over a decade – established as it was by the combination of the Supreme Court decision in Agbaje v Agbaje [2010] UKSC 13 and the Court of Appeal decision in Traversa v Freddi [2011] EWCA Civ 81.  

In order to bring a Part III claim, by section 13, the putative applicant first requires the court’s permission. Following rule 8.25 of the Family Procedure Rules 2010, Mrs Potanina applied without notice to Mr Potanin. In January 2019, Mr Justice Cohen, after saying ideally he would have liked to hear from both sides on the issue, nonetheless granted the permission sought.

The procedure, which had become well-established since at least 2011, is that the respondent (Mr Potanin) may then apply to set aside the permission just granted.  In order to succeed, the respondent must not only persuade the court that there is some compelling reason to set aside the permission granted. Unless he can do so by the demonstration of what was termed in Agbaje a ‘knockout blow’, the application to set aside is then adjourned to be heard with the substantive application for financial relief under Part III.  

In October 2019, upon the husband’s application, Cohen J set aside his grant of permission.  The Court of Appeal, however, determined that in line with the well-established practice, he should not have done so. That led to the strong opening paragraph of Lord Leggatt’s lead opinion.

Practitioners may read with interest the similarly powerful minority opinion given by Lord Briggs. He made two main points. First, that points of procedure should be left to the Court of Appeal, the specialist courts and the rule committee, not the Supreme Court. Second, there was no substantive unfairness in a filter mechanism which is designed to do no more than weed out the clearly unmeritorious claims. The inevitable increase in costs of contested permission hearings is, he said, a step back to the bad old days, precisely what the courts have managed to avoid for a decade or more. To which Lord Leggatt stated that, in essence, rough justice is no justice even if costs may, in some cases, be saved (although even that is debatable).

Interesting arguments indeed. However, as this case demonstrates, if Cohen J, appraised of the full picture, would not have granted permission, yet the law only permitted him a necessarily one-sided view presented by Mrs Potanina’s team, per Lord Leggatt: ‘… I would feel bound to say that, in the eloquent words of Mr Bumble, “the law is an ass”.’ (Paragraph 30).

We are therefore entering a new regime of Part III applications. Gone are the days of permission being granted unless the respondent can deliver a ‘knockout blow’. The court must now treat the word ‘substantial’ in section 13 as meaning ‘solid’, having a ‘real prospect of success’. As both majority and minority judgments made clear, this will inevitably lead to a greater number of contested Part III permission hearings  and time estimates should be listed in hours rather than minutes (expect half-day hearings to be the norm).

What then of Mrs Potanina’s claim? It trundles on, having returned to the Court of Appeal to determine the two further grounds of her appeal. The first was a merits-based argument that, even were Cohen J entitled to set aside leave, he should not have done so. The second was an argument based upon section 16(3) of the 1984 act and the Maintenance Regulation (Council Regulation (EC) No 4/2009 of 18 December 2008), a provision which no longer applies in the vast majority of cases because the UK has left the EU.

Whether London retains its ‘divorce capital of the world’ title remains to be seen (whether or not it ever merited the title is another matter). What can surely be stated with some certainty, with the greatest of respect to Lords Briggs and Stephens, is that the overall impact of greater scrutiny at the permission stage must be to lessen the total amount of court time spent considering Part III claims, with a resultant overall saving in costs across the board.

Nicholas Fairbank is a barrister at 4PB, London