England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL ( CIVIL DIVISION )
ON APPEAL FROM PRINCIPAL REGISTRY OF THE FAMILY DIVISION
(MR JUSTICE MOYLAN)

		Royal Courts of Justice Strand, London, WC2A 2LL
		30th March 2011

Lord Justice Thorpe:

1. The parties to this appeal are young, in their mid-twenties. They are both Russian, born to affluent families. Both were given a good start in life by their respective parents. The husband at the age of 21 received a donation of US $6 million from his parents and the wife in 2004 a donation of $1.6 million from her parents. In 2006 they met in the United States, where the husband was an undergraduate at Stamford. They married shortly after his graduation in August 2007. Thereafter they lived in London in an expensive home provided by the husband's parents. The marriage only lasted 18 months, but during its course their daughter, Maya, was born to them in July 2008. The husband had a right of residence here under a concession that grants a visa on the investment of £1 million in funds in this jurisdiction, and that concession, that entitlement, extended to his wife.
2. The breakdown of the marriage initiated a race between them to divorce, the wife accelerating in this jurisdiction, the husband in Russia. He won the race and obtained a Russian decree, but in this jurisdiction Singer J refused to recognise it. There was then an appeal to this court and, in judgments handed down on 13 July, the decision of Singer J was reversed. So the husband emerged triumphant with a Russian decree recognised in both jurisdictions.
3. Now this was a busy time, for on 12 July judgment was handed down in contested proceedings between the young couple and the husband's parents as to who owned beneficially the matrimonial home. The wife asserted that the beneficial interest was with the husband and she failed in that assertion, Moylan J holding that her evidence had been unreliable in many respects and that her parents-in-law were the beneficial owners of the matrimonial home. That was a significant decision, because it withdrew from the target area of assets that were within the jurisdiction, and therefore capable of enforcement, a sum of approximately £4 million, leaving only the deposit that had secured the investor visa.
4. As I have said, the Court of Appeal decision was handed down on the following day and on that day, the 13^th, commenced the fixture of what had been intended to be the wife's financial claims brought in this jurisdiction, founded on an anticipated English divorce and therefore reliant on the provisions of the Matrimonial Causes Act 1973.
5. So there were within the ancillary relief proceedings two very significant developments, one on the eve and the other on the first day, one withdrawing from the wife's reach the substantial English matrimonial property and the other obliging her to shift her financial claims from the Matrimonial Causes Act 1973 to Part III of the 1984 Act. The Court of Appeal judgment had been circulated on 7 July, so the wife's advisers were immediately aware of the fact that they were going to have to make this procedural switch, and the proposed application and affidavit in support were handed to the husband on 12 July, which was for Moylan J his reading day, reading into the papers. The husband had been represented in the Court of Appeal most ably by Mr Southgate, but by the time the ancillary relief proceedings commenced he was in person, although assisted by Mr Markovich, who I believe to be an American attorney, as his McKenzie Friend.
6. So Moylan J very sensibly treated the application for permission to bring a Part III application as an inter partes application, after all he had both parties before him, and on the 13th he delivered a judgment granting permission. That judgment is fully reasoned. It extends to some 42 paragraphs and it considers all the submissions advanced by the husband, who sought to oppose the grant of permission. Now that stance within the ancillary relief proceedings was quite at variance with the stance that he had adopted in the Court of Appeal in May, when Mr Southgate on his behalf criticised Singer J for having, as he put it, fired at the wrong target. As Mr Southgate graphically put it, the judge had fired at the target of the Russian state, the Russian jurisdiction, rather than visiting on the husband the consequences of his machinations within the Russian proceedings, not falling short of the invention of a hearing that never took place and the production of forged documents.
7. So, Mr Southgate said, the judge in London, properly directing himself, should have recognised the well-founded judgment of a foreign jurisdiction, the consequence of which would not be to deprive the wife of entitlement in this jurisdiction, since she had only to make the necessary procedural shift from the Matrimonial Causes Act to Part III. That had been the basis upon which the husband's appeal had succeeded in this court and it is fully reflected in the judgment that I gave introducing the background and the history of the litigation. Although I do not within the passages cited by Moylan J refer to any concession on the part of Mr Southgate it is plain that, when I expressed myself as I did in paragraph 76 and 97, I was reflecting the general position in the Court of Appeal in May that a grant of leave under Part III would be "a foregone conclusion".
8. On the following day, the 14^th, the husband applied for an adjournment, advancing four grounds, which were all considered, in turn, by Moylan J when he gave his reasons for refusing the adjournment application. He went on to survey the territory that section 25 required him to survey. It was a difficult decision because throughout the husband had been guilty of gross disregard of his breach of duty to give full, frank and clear disclosure of his financial circumstances, so in the end the judge was left with perfunctory disclosure, oral evidence from the husband which he trenchantly rejected and such documents as the wife had been able to glean either by disclosure orders or by accessing the internet. The judge came to the conclusion that, although he could not pinpoint the source of funds available to the husband presently and in the foreseeable future, nonetheless he could confidently meet the wife's needs with a sum for accommodation for the purchase of a home in London and in addition a capital sum for her maintenance, the combined total of which was £2.485 million. He also awarded her her costs in the sum of £350,000.
9. There was then an application for permission to appeal the financial order, the lump sum order. The order was in fact dated 16 August and the application seeking leave to appeal was in time. Subsequently the husband sought permission also to appeal the order of the 14 July, which contained both the grant of leave and the refusal of adjournment. At that stage his skeleton argument was settled by Mr Markovich but at a later stage Mrs Justine Johnston  came into the case and filed a well-drafted supplemental skeleton in which she attacked the judge on all three fronts. She submitted that the judge should have refused permission had he properly applied paragraph 16 of Part III. She asserted that he was also wrong on the 14 July to refuse the adjournment application, and finally she asserted that he was plainly wrong to order the impecunious husband to pay a lump sum which he manifestly had no means to meet.
10. As a matter of procedure I would favour extending the husband's time in relation to the order of 14 July and I would grant permission to appeal both that order and the order of the 16 August. Mrs Johnston's skeleton raises a number of submissions that are in general terms very well founded and ordinarily of force in standard case. She particularly, and rightly, stresses that section 16 of Part III requires the court to consider whether England and Wales is the appropriate venue for an application and in so doing must have regard in particular to the matters set out in section 16 (2)(a) to (i) inclusive. She submits that, had the judge concentrated on the statutory checklist in section 16 (2), he could only have come to the conclusion that Russia was the more appropriate venue.
11. In relation to the adjournment application Mrs Johnston says that it was simply unfair. The rules provide that the respondent to a Part III application is entitled to 28 days in which to respond, that this husband was a litigant in person, that he was having to adjust within the space of 24 hours to the outcome of the TOLATA proceedings and to the outcome of the appeal. He manifestly required time to prepare his case. Had he been given time he might have been able to make better disclosure and so escape some of the judge's wrath.
12. In relation to the order of 16 August Mrs Johnston says that the judge failed to identify where on earth this large sum was to come from. He did not distinguish between funds that the husband might generate himself and funds that might be provided by his parents. Inferentially, and insofar as the indications are expressed, the judge plainly thought that his parents would cough up. So says Mrs Johnston, the judge disregarded or had insufficient regard to the classic judgments in this field, namely the judgment of Waite LJ in Thomas v Thomas [1995] 2 FLR 668 and more recently the judgment of Mr Nicholas Mostyn QC, as he then was, in the case of TL v ML [2005] EWHC 2860. In particular she cites very clear statements of principle by Mr Mostyn in paragraphs 86 and 101 of his judgment, both of which seem to me to be neat expressions of the law.
13. The case for the respondent is put with equal skill by Miss Bangay QC leading Ms Sheridan. In the event we have not called on the respondent, since the testing of Mrs Johnston's general propositions as advanced in her skeleton, revealed that whatever may be said by way of generality does not extend to the very exceptional circumstances of the present case.
14. In relation to the judgment of 13 July granting the wife permission to proceed under Part III, I would only say that the judge, sitting as he was on the 13th and with the Court of Appeal judgment fresh handed down that morning, had really no alternative but to grant permission. The whole tenor of the proceedings in the Court of Appeal and the outcome of those proceedings was that if recognition was to be given to the Russian decree then the wife had her entitlement to bring her case under Part III. Furthermore any appeal against the grant of permission is extremely hard to make good in this court. After all the grant of permission only opens the door to a forensic process and, as Lord Collins emphasised in Agbaje v Agbaje [2010] UKSC 13, an appeal against the grant of permission would be extremely hard to progress successfully unless the judge below had been misled or had fallen into some obvious error of fact or law. Insofar as it was the exercise of the discretion, then the judge is entitled to the support of this court.
15. The attack on the order of the 14 July and the decision of that day to refuse the adjournment application is in my judgment equally hopeless. This was a case management decision of a judge who had lived with this case for some time. He knew that the wife's entitlement to a judgment had already been postponed from May to July and he knew that if postponed again there would be a further period of months of waiting before it would find a place in the overcrowded lists of the division. It was a pragmatic, sensible decision. Had he granted the adjournment, the wife would certainly have had a stronger basis upon which to seek permission to appeal in this court.
16. So that leaves for consideration the point of real substance that Mrs Johnston advances: was the judge entitled to find as he did in making his award? Again, Mrs Johnston says he should have properly considered the section 16 factors and he was plainly wrong to look at this as a case fit for decision in London. He was wrong to look too much to the past when the young couple had started married life here, choosing a London home and a London life. He should have focussed on the present and the future, the husband no longer having the investment visa, the wife likely to lose her right of residence here imminently. He should have looked at the essential Russian character of the case: Russian citizens, and all their true, lasting and profound connections with Russia. He should not have dismissed the Russian connections, the strong Russian connections, as he did in paragraph 178 of his judgment, which Mrs Johnston says is altogether too superficial. He simply said that, whilst the parties have continuing connections with Russia and the wife will not in fact continue to live here :

"However the parties' more recent, more substantial connections have all been focussed on England."

17. Secondly she eloquently advances her complaint or criticism: the judge failed to distinguish between the husband's family assets in the sense of assets within the wider family that might be put at his disposal and his undisclosed funds resulting from his own efforts as an international businessman in the years since his graduation. I have already summarised her arguments, which are contained in paragraphs 33 to 37 of her skeleton argument.
18. That attractive argument seems to me to ignore a great deal of the judge's findings and conclusions which do not fit within that presentation. Whilst it is true that the judge did not specifically say that he was basing his conclusion as to ability to pay on parents as to X%, the husband's funds as to Y%, the judgment read as a whole shows that this husband was a very long way from a trustee child and trustee adult who had achieved nothing and who had attempted nothing since leaving university. The judge in paragraphs 108 to 11 records the husband's business activities since the set-up of an entity called 12BF in 2005. This is an offshore venture, a British Virgin Islands company which manifests itself voraciously as 12BF Management, 12BF Holdings, 12BF Capital Advisers Limited, 12BF Arbat Technology Fund and then some 12BF nanotechnology fund in Kazakhstan. The judge reviewed more fully these shadowy activities and possible sources to funds in paragraphs 135 to 150 inclusive of his judgment. I also note and support the judge's statement in paragraph 145 in relation to a shadowy foundation called the Guillermo Foundation:

"A foundation is a separate legal entity and in my experience its structure is often if not usually designed so that there are no beneficial owners as such."

19. Then in the following paragraph :

"Further, in my experience such structures are usually only used when the wealth to be protected is substantial because otherwise the expense involved is not justified by the potential savings to be made."

20. During these paragraphs the judge recorded the inadequacy of the husband's explanation for his business activities and the activities of these entities. He also reviewed evidence which had been put before the court by the wife, either documents that had emerged on discovery or documents that had emerged by her inspection of the internet.
21. So the judge, moving to review the husband's credibility in paragraphs 154 to 159, instanced examples of the husband's unreliability by pointing out his shortcomings particularly in relation to his trading. So within that stream there was abundant material that would justify the judge in drawing the inference that the husband was an international entrepreneur conducting business activities of ultimate sophistication, chasing big deals and deliberately hiding from the court the extent of those operations and their potential for substantial profit.
22. In relation to the interdependence of the husband and his parents, the judge specifically considered the husband's case that his parents had only provided a start-up fund, namely the $6 million in 2007, and that he had no prospect of any further aid from that source. Having recorded the husband's evidence verbatim in paragraph 102 the judge continued in paragraph 103:

"I am satisfied that these answers were also wholly false."

23. The judge went on to demonstrate the extent to which the husband had been drawing down on either Amex cards maintained by his father and his mother or on cards at Corporate Finance Bank, an entity conveniently owned by his parents. The judge then, in paragraph 106, found that the reduction in the husband's reliance on these credit cards:

"...resulted not from a withdrawal of financial support but because the statements for these cards had been obtained as a result of court orders thereby revealing that the husband's parents had continued to provide financial support by the use of these credit cards and the level of that support."

24. So the judgment as a whole seems to me to answer completely these criticisms advanced by Mrs Johnston. As a matter of generality if the court in State A pronounces the divorce it will not be for the court in State B to deal exclusively with ancillary financial issues. That is what is known as bifurcation and is not generally accepted as a justifiable division of judicial responsibility. I would also accept as a generality that the considerations pointing either to London or to Moscow were more finely balanced than the judge expresses in paragraph 178 of his judgment. I accept that the judge might have more explicitly spelt out the source from which he anticipated judgment would be satisfied, but it is all implicitly there and in my submission plainly within the ambit of the judge's broad discretion.
25. Mrs Johnston has made much of the consideration of enforcement which she asserts is another strong pointer to Moscow. It does not seem to me that that submission goes far. The wife has an enforcement problem whether the order is made in London or in Moscow. The only immediately available fund is the deposit here in London, just under £1 million, but if the husband feels aggrieved by, as he would see it, the lack of fairness of this outcome he should reflect that he has no one to blame but himself. He has throughout this litigation acted with extreme tactical manoeuvring, sometimes relying on one legal team, then on another, then on himself in person. He has repeatedly failed to engage responsibly in these London proceedings. There is a rule of general application that if a litigant deliberately, designedly plays games with the court, the judge, obliged to found the award partially on speculation, should ensure that he does no injustice to the litigant who has cooperated but rather protects that litigant by the provision of essential needs. If the defaulter ends up with an unpalatable order, he has brought that upon himself.
26. By way of final word, it seems to me that enforcement is unlikely to be the subject of legal remedy either in this jurisdiction or in Moscow. The wife has the problem of converting her judgment into cash. The husband has the problem that he is the subject of a committal order in this jurisdiction which has, since its making, made it impossible for him to enter the jurisdiction. On arrival he would simply be arrested and imprisoned. He needs to be here in order to conduct his international business. London, he has declared at various stages, is his city of first choice. So each has something to give the other. The husband could receive from the wife liberation from exile, the freedom to come and go from this jurisdiction as he pleases, and he would achieve that by providing for the wife the financial needs which she has demonstrated and the judge has accepted. He needs also to have a continuing relationship with his daughter. He has expressed the strong wish that the wife will continue to provide a home for their daughter here in London. All that can be easily achieved by the negotiation of sensible arrangements for the payment either by one instalment or by several instalments of the outstanding balance of the lump sum.
27. So for all those reasons it seems to me that the two orders of 14 July and 16 August are sound orders, fully explained in admirably clear and convincing judgments. The appeals against both orders should simply be dismissed.

Lord Justice Etherton:

28. I agree.

Mrs Justice Baron:

29. I agree.

Order: Appeals dismissed