IQ Legal TrainingHousing Law WeekBerkeley Lifford Hall Accountancy ServicesAlphabiolabs

Home > Articles > 2017 archive

From Russia with love: the latest word on Part III MFPA 1984 Claims

Byron James, barrister, Expatriate Law (based in the United Arab Emirates) considers the recent guidance from the Court of Appeal in relation to applications made under Part III of the Matrimonial and Family Proceedings Act 1984

Byron JamesExpatriate Law (based in the United Arab Emirates) 

Can it really be over seven years since the Supreme Court delivered judgment in the Agbaje appeal? Agbaje was, of course, the Supreme Court's recalibration of the machinery for bringing claims after a foreign divorce, under Part III of the Matrimonial and Family Proceedings Act 1984 ("MFPA").  Lawyers and judges had, the Supreme Court chided, read into Part III requirements that had no foundation in the statute.  Stripping away that gloss, Lord Collins (delivering the judgment of the court) went back to basics and set out several extremely clear and cogent principles regarding how Part III claims ought to be approached. 

The excitement amongst lawyers at the time was that Agbaje represented a sea-change, which would see a significant increase in the number of Part III claims; those predictions partly came to pass.  More Part III claims are made and resolved now, compared with the pre-Agbaje epoch.  But there hasn't been an abundance of jurisprudence emerging to supplement Lord Collins's statements of principle.  That's not entirely surprising, given the highly fact-specific nature of Part III claims.  However, it means elements of uncertainty remain about the length and breadth of the jurisdiction, and when it is appropriate to make a substantive order. 

Giving judgment earlier this month in Zimina -v- Zimin [2017] EWCA Civ 1429, the Court of Appeal took the opportunity to address some of those uncertainties.  That case considered the proper application of sections 16 to 18 MFPA 1984 and the relevance of the existence of a foreign consent order, as well as the way the court ought to approach any delay in bringing a Part III claim.  

Giving the judgment of the Court of Appeal in Zimina -v- Zimin, Lady Justice King provides an attractively succinct summary of the post-Agbaje legal landscape (see § 36 to 47 of Zimina).  

Relevant background to Zimina
The husband and wife, both Russian nationals, had married in 1997.  They had three children, aged 17, 19 and 20 at the time of the Court of Appeal hearing. 

The family moved to London in 2004, and to a substantial Kensington property in 2007.  The family's wealth was largely the product of the endeavours of the husband's father, Dr Z.  In 2005, Dr Z had settled a significant sum in a Bermudan settlement ("the BMT Trust"), with the trust instrument naming the husband and children as discretionary beneficiaries consequent upon Dr Z's death.  The Kensington property was purchased by the BMT Trust via a corporate intermediary. 

Subsequently, the parties' marriage broke down, and in 2008 the husband started divorce proceedings in Russia.  Following a brief litigation skirmish about commencing parallel proceedings in England and Wales, the parties agreed terms of settlement.  That agreement was ratified by the competent Russian court in an order made in August 2009.

Under that agreement, the wife retained her own investments and the family's Russian property – together worth about US$10 million from an asset pool of US$13.3 million.  In addition, the wife and children were entitled to continue to live in the Kensington property during the children's minority.  This was not recorded in the Russian consent order but was agreed by the BMT Trust's trustees. 

The husband's family's circumstances required a re-arrangement of their financial affairs in 2013 / 2014, to minimise the tax consequences of a move to the USA.  The husband received a very substantial distribution from the BMT Trust, the lion's share of which was settled into new trusts to support the husband, his new family and the children of his marriage to the wife. 

The Zimina Part III claim at first instance
It is reported that, unbeknownst to the husband, the wife first consulted solicitors in England about the prospect of seeking additional financial provision as early as March 2012.  In April 2014, she sold the Moscow flat.  Several months later, she applied for (and was granted) permission to bring an application under Part III.  The substantive application progressed in the customary way, and came before Mrs Justice Roberts in March 2016 to determine Stage I (namely, whether it would be appropriate, under section 16 MFPA, for the court to make an order under Part III).

In allowing the application to proceed, her Ladyship was clearly concerned by the wife's delay in bringing her Part III claim.  In her judgment, her Ladyship indicated that she was persuaded "by the narrowest of margins" (at § 156) that it was appropriate for the English court to make an order for financial provision in the wife's favour. 

At the subsequent Stage II hearing in July 2016, her Ladyship assessed the wife as having a housing need consequent upon the sale of the Russian property, and taking into account the time-limited nature of her right to reside in the Kensington property.  Roberts J awarded the wife a lump sum of £1.14 million.   

The husband appealed, contending Roberts J ought not to have ordered any further financial provision to the wife. 

The questions raised on appeal in Zimina
In determining the husband's appeal, the Court of Appeal looked at three features of the case, and gave (to the extent possible) general guidance in relation to those, namely: 

The meaning of "financial benefit"
The Court of Appeal had no hesitation in giving "financial benefit" the broader interpretation.  Per King LJ (at § 51):

"not only is the wording of the statute clear, but, given the many differing forms of provision made in jurisdictions all over the world, it would be quite impossible to get a true and fair picture of the provision made for a wife if it was to be limited [to the financial benefit provided under the terms of the Russian consent order]".  

Thus, it was necessary and appropriate for a court dealing with a Part III claim to have regard to the range of financial benefits a spouse received, notwithstanding that those might arise outside the provisions of a foreign court order. 

Alternatively, King LJ rationalised having regard for the wife's use of the Kensington property (since September 2008) as a "highly relevant feature to which the court was bound to attach considerable weight when considering all the circumstances of the case" (at § 55). 

The date for assessing the adequacy of the financial provision
This issue became relevant given the significant improvement in the husband's financial circumstances in the years that followed the making of the Russian consent order.  Unsurprisingly, the husband contended the date of the Russian order was the relevant date for the enquiry, whereas the wife asked the court to prefer the date of trial of the Part III application.

Describing those as "polar opposite" submissions, King LJ rejected both, on the basis they failed to reflect "the statutory requirement to consider 'all the circumstances of the case' found in both section 16 and section 18" (at § 61).  Therefore, the court must necessarily consider the adequacy of the financial provision made as at the date of the foreign order.  Her Ladyship observed that usually the Part III application will be sufficiently proximate to the making of the foreign divorce.  Accordingly, there will not usually be much difference between the adequacy of the financial provision as at the date of the foreign order, and that at the date of the trial of the Part III claim. 

But what of the cohort of cases where there is a significant delay between those two events?  King LJ was clear that section 18 required the court in those cases "to take into account all the circumstances as they are which necessarily includes those at the date of trial" (at § 63).  The learned Judge observed – as had Lord Collins in Agbaje – that the full financial remedy procedure did not apply to a Part III application.  Instead, the court could (and should) make orders limiting disclosure to the extent necessary to do justice to the case.  Accordingly, the court may examine the husband's means at the date of trial if the circumstances of the particular application required.  Even then, the husband's financial resources at the date of trial were "but one part of the overall picture, which will be considered against the backdrop of the provision at the date of the divorce" (at § 64).

The court identified the significance of the parties' having achieved a concluded agreement intended to be a final settlement of their present and future financial claims.  In respect of that, King LJ said (at § 75): 

"In my judgment the court, when considering an application under Part III in such circumstances should, as part of their consideration of all the circumstances of the case, have well in mind the fact of the agreement and, in this context, not only the so called Radmacher 'fairness test' (if the judge chooses to put the fairness principle in those terms) but also Edgar which enshrines the principle that an agreement 'should not be displaced unless there are good and substantial grounds for concluding that an injustice will be done by holding the parties to the terms of their agreement'.

Her Ladyship observed that Roberts J had identified at first instance the relevance of Radmacher.  However, she had failed to go on to explain the impact of her finding that the Russian agreement was fair on the wife's application for further substantial provision.

For the husband, it was suggested that if financial provision was adequate at the time of the foreign order, the English court should only entertain a Part III application in the sort of situation envisaged in Edgar, where there had been fraud, misrepresentation or mistake, or in the event of a Barder-style change in circumstances.  The Court of Appeal cautioned against applying Barder principles too rigorously in a Part III context.  However, it accepted that the judgment in Barder was of assistance and had a place when considering "all the circumstances of the case".  Further, King LJ held that the Radmacher and Edgar decisions, encapsulating the domestic law in relation to agreements, "[provide] a valuable cross check" (at § 90). 

Drawing those strands together, her Ladyship held that, where the financial provision agreed and implemented following a foreign divorce was:

then the English court:

"will scrutinise an application for further provision with care and will hesitate before making an order under Part III in circumstances where there has been no change in the applicant's circumstances which, had the proceedings been conducted in England, would have satisfied the Barder -v- Caluori conditions" (at § 91). 

King LJ observed, however, that there might be exceptions to this general statement of principle. 

The relevance of delay
In commencing her examination of the delay issue, Lady Justice King said this (at § 92): 

"One of the reasons that delay is iniquitous in Part III cases is because life by its very nature does not stand still. As a consequence, where matters come to court many years after they should or could have done, the judge is faced with the dilemma as to how to manage the fact that inevitably circumstances have changed for both parties and that great unfairness can be caused, and justifiable resentment felt if, years after a spouse believed that their financial relationship was at an end, a judge conducts a fresh evaluation of the recipient spouse's needs."

Informed by this proposition, the learned Judge confirmed the court could, in its discretion, conclude that it is inappropriate to make a Part III order where there has been substantial delay.  This might be the case even if the applicant, on an objective assessment, had unmet financial needs.  

She continued (at § 95):

"Where however at the date of trial, an outstanding need has been demonstrated to have been generated for the wife by virtue of her relationship with her former husband then, in my judgment, the court may, if it concludes it to be appropriate, make an order in favour of the wife having taken into account all the circumstances including the length of time since the divorce and the reasons for delay in making the application."

The Court of Appeal concluded the following features militated against the making of the substantive order in the wife's favour:

1. The provision received by the wife had been agreed, and the terms of that agreement were not only Radmacher fair but would also have withstood the Edgar test;

2. There had been no intervening change in the wife's circumstances, whether of a Barder nature or otherwise;

3. The considerable delay, coupled with the first instance finding that delay was in part tactical;

4. In Vince -v- Wyatt, the Supreme Court had held: "In order to sustain a case of need, at any rate if made after many years of separation, a wife must show not only that the need exists but that it has been generated by her relationship with her husband";

5. It was almost impossible for the wife to advance a case that she had, or would, suffer injustice or hardship if an order were not made.  Whilst not resulting in the inevitable dismissal of her application, the absence of hardship or injustice would still be an important consideration when it came to consider, "in all the circumstances," whether to make a Part III order; and

6. The financial provision the wife had received in 2009 was adequate then and remained adequate.

Accordingly, the Court of Appeal concluded that Roberts J had erred in making a lump sum order in the wife's favour and it allowed the appeal and set aside that order. 

So, seven years after the judgment in Agbaje we have another appellate court authority that significantly contributes to the jurisprudence concerning Part III claims.  We appear to have a definitive answer to the meaning of "financial benefit" for the purposes of section 16 MFPA.  When dealing with cases where the parties have achieved a settlement agreement abroad, domestic principles – whilst not always determinative – do resonate (Radmacher, Edgar and Barder in particular).  Delay (and the reasons for it) between the date of the foreign award and the making of a Part III application is relevant, and might of itself be reason (if of sufficient duration) to defeat a claim even if there was unmet financial need.  On the last point, the cautionary lesson for potential applicants is to get on with it!  Expect any delay to be looked upon with disapproval, especially if it bears the hallmarks of tactical choreography.

Finally, expect the court to look carefully at proportionality.  Whilst not part of the ratio of the Court of Appeal judgment in Zimina, it is apparent that the Court of Appeal was unimpressed with the magnitude of the wife's Part III litigation costs.  As against the lump sum awarded to the wife by Roberts J (£1.14 million), her legal costs were £1.3 million plus an additional US$398,000; thus, a net deficit of about £460,000!  King LJ remarked upon the fact (at § 105):

"that on any view the financial benefit received by the wife in 2009 more than met her long term needs and further, that had the wife not commenced this litigation and incurred costs of over £1m, she would have had sufficient funds to meet her needs both now and after she leaves the Kensington house".

Far from being relationship-generated, the Court of Appeal found the wife's needs to be generated by her "decision to embark upon the litigation as a means to undermine … fundamental aspects of the original agreement" (at § 106).

Expect judges to undertake a costs / benefit analysis when dealing with Part III claims, as they do with the range of other financial remedy applications.  A claim outstripped by the costs of the attendant litigation is not likely to be received sympathetically.