Facts:
The parties were born in Russia, married there in 1983, and lived there all their lives until the wife moved to London after their divorce in Russia in 2014. They have three adult children. In the 1990s, the husband amassed a large fortune, currently estimated at $20 billion. Most of his assets – accumulated during the marriage – were held in companies or trusts but not registered in the husband’s name. The Russian courts did not consider them marital assets.
Following their divorce, extensive litigation occurred in Russia, the USA and Cyprus. In 2019, the wife sought permission to apply for financial relief pursuant to Part III of the Matrimonial and Family Proceedings Act 1984. 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. Upon service, the husband 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 and that the threshold of section 13 was not met. Thus permission was refused. The Court of Appeal allowed the subsequent plea for reconsideration and the husband then appealed to the Supreme Court.
Decision:
The appeal was allowed by a majority (3:2). The Supreme Court ruled that, based on procedural fairness, before making an order the Judge must give the other party the chance to object. If this is not possible or practicable, the next best thing is that, if the Judge makes the order, then the other party is given an opportunity to argue that the order should be set aside or else varied. The Court disagreed with the test used by the Court of Appeal which, in its opinion, led to an unfair and perverse result.
He continued by explaining that the approach taken was unfair as it denies a party adversely affected by an order the opportunity to object to the order. Moreover, the procedure is foolish as “judges make better decisions if they hear argument from both sides rather than from one side only. This is one of the main benefits of an adversarial process.” Finally, “a procedure which, while otherwise preventing a party from objecting to an order, allows that party to do so if he can show that the court was materially misled at a hearing held in his absence achieves the worst of both worlds” as it increases court time and costs.
Lord Leggatt thoroughly examined the inconsistency in the threshold test adopted by the Supreme Court in Agbaje. He stated that Section 13’s threshold “is higher than merely satisfying the court that the claim is not totally without merit or abusive. It does not seem to me necessary, or advantageous, to further explain the test by comparing it with tests applied in other procedural contexts.”
The right to apply for a leave to be set aside is unconditional. Section 13 does not require a ‘knock-out blow’ as established by the Court of Appeal. Lord Briggs (dissenting) did not share this opinion and ruled that the ‘knockout blow’ test was established by the unanimous guidance of the Supreme Court in Agbaje and used in Traversa v Freddi by the Court of Appeal. The test has been applied by family judges since this juncture and it was not criticised by academics.
Lord Leggatt reiterated that “the end result of this history is that there is a mismatch between, on the one hand, the fundamental principle of procedural fairness reflected in FPR rule 18.11 which entitles a respondent to apply to set aside an order made without notice and, on the other hand, the practice presently adopted in dealing with section 13 applications.”
Implications:
This is the second time the Supreme Court has had the opportunity to give a substantive judgement on Part III and how proceedings should be conducted. From this judgement, it is clear that the test adopted on Part III leave application is higher than previously and requires the applicants to demonstrate that the claim has a real prospect of success. At the same time, the test to be adopted to set aside application is now lower – which could greatly impact the practice.
Following this case, the relevant rules now give a party served with an order made without notice the right to apply to have this order set aside on the ground that the test for granting permission under s 13 is not met.