Agrest & Anor v Kremen

There are two proposed appeals from orders made by Mostyn J in the Family Division on 15 October 2010. The first proposed appellant is Boris Agrest, who I will call “the husband” for the purposes of this short judgment; the second proposed appellant is Mr Leonid Fishman, an associate of the husband's, who was the beneficiary of a charge over Whitecliff, a property that was once the matrimonial home of the husband and his former wife (who I will just call “the wife” for the purposes of this judgment), Janna Kremen.

The proceedings have a very long history. They are now under the umbrella of Part 3 of the Family and Matrimonial Proceedings Act 1984. A clear outline of some of the history was given by Thorpe LJ in a decision in July 2009 refusing permission to the husband to appeal an earlier order in a string of orders that have been made in the English courts. That judgment, together with a judgment of HHJ Hughes from May 2008 and Mostyn J's judgment leading up to the October orders, provide my source for the brief chronology which I will give in the course of this judgment. I have not been provided with the full sequence of judgments in the English courts in order to do any better than that; in particular I have not been provided with a copy of the judgment of Jonathan Cohen QC, sitting as a deputy High Court judge on 12 February 2009.

The parties have citizenship of a number of countries. I think that the husband has citizenship of Russia, Israel and Canada, and that in the wife's case her citizenship is of Russia, Israel and Greece, but nothing turns on those particular facts. They were married in Moscow in 1991. They have three sons, the eldest one nearly 20, and the youngest one, born in March 2004, aged six.

In 1999 they bought a property in England called Whitecliff. It is said by Thorpe LJ that they moved to this country about two years later. There were proceedings in the Israeli courts, which on 3 July 2001 approved an agreement between the parties which seems to have been in the nature of a separation agreement made in May 2001. In August 2003 the Israeli courts dissolved the marriage. The parties cohabited after the divorce, principally at Whitecliff, and only separated finally in late 2006 or early 2007. After the separation in May 2007 the husband sought to enforce the separation agreement that had been approved by the Israeli courts. It required the transfer of Whitecliff, then worth at least £2 million, to the husband by the wife. The wife was to keep her jewellery and property in Austria and get a cash payment of a million US dollars. Facing the husband's enforcement application in Israel, the wife transferred Whitecliff to the husband's sole name, and she got her cash sum. She then almost immediately agreed to lend that cash sum to the husband on terms that it would be repaid on or before 31 December 2007. It was not repaid; the husband paid only £10,000 and then said that he had not got the funds to pay more. So in October 2008 the wife issued an application for financial relief under Part 3 of the 1984 Act.

That was not the first application to come before the English courts. In May 2008 HHJ Hughes QC had dealt with a number of applications relating to Whitecliff. The wife had applied to have the transfer to the husband set aside on the basis that it had been secured by undue influence. That claim failed. The husband had sought an order that the house should be sold, but that was not resolved on that occasion because the judge thought that it was premature to resolve it. Earlier an ouster order had been made preventing the husband from being in the house, and he sought to have that order set aside. The judge found that he had been violent to the wife but that an ouster order should not have been made ex parte, although she then appears to have endorsed the continuation of the same relief, presumably granted following an inter partes hearing.

There was also an application about the children in relation to which orders were made, and the wife had applied under Schedule 1 of the Children Act 1989 for financial relief and that application was adjourned by HHJ Hughes for various reasons.

HHJ Hughes revisited the case in October 2008 looking at issues to do with the children and also the application the wife had made for financial provision which the judge had previously adjourned. She dealt with the issues to do with the children, but the husband wanted to argue that the forum conveniens for dealing with the financial issues was Israel and that issue was not ready for a hearing then.

Mr Jonathan Cohen QC ruled on it on 12 February 2009. He granted the wife's application for leave to proceed under Part 3 of the 1984 Act and he made various ancillary orders, including an interim maintenance order. That set of orders by Mr Cohen was unsuccessfully appealed to the Court of Appeal, and that it was that produced the judgment of Thorpe LJ in the summer of 2009 to which I have already made reference.

Various orders were made at various times in the proceedings by various judges. I do not have all of them. Then on 3 February 2010 District Judge Basset ordered that the wife's application for an order for payment of school fees and maintenance for the children under Schedule 1 of the Children Act and her application to enforce the arrears of maintenance that had arisen in relation to the court's order be listed in March 2010. I think that application actually came to be heard in April 2010; and the wife's application also that the husband should pay her £10,000 by 1 March 2010 on account of arrears of maintenance due to her.

Mostyn J then dealt on 16 April 2010 with the wife's judgment summons in which she sought to have the husband committed for breach of his maintenance obligations. Mostyn J sentenced the husband to 35 days’ imprisonment, having found contempt proved. I think that might have been a suspended sentence at that stage. It was a sentence which was appealed to the Court of Appeal and, whilst the papers do not tell me the outcome of that, I think it is correct that the appeal was dismissed.

The husband is not present in court today or represented. Mr Beck, his McKenzie Friend, has attended. He accepts that he has no right of audience, but I have heard from him de bene esse. In fact, he was able to help me about the logistics of the husband not having attended, but he did not add anything -- although I gave him the opportunity to do so -- to the grounds of appeal that had been put in front of me in writing. The husband also contributed further in writing, explaining that he cannot come to this country at the moment because he cannot afford to pay for the travelling, having lost his job, and he contributed further a letter addressed in fact to King J dated 24 January 2011, which is today's date, in which he sets out a number of his complaints about the way in which matters have been handled in the courts generally and in front of Mostyn J.

The second appellant, Mr Fishman, has also not attended. He wrote an email to the court complaining, firstly, that it had taken too long for his permission application to be heard. That is a period of (as he calculated it) two months from the time when he filed his application, which I have to say does not strike me, particularly with the intervention of Christmas and the vacation, as a particularly long time; I am sorry that he feels that it is. He also complained that he was not able to be here today because he had too short notice and he had an important business deal that he had to attend to in Russia, but he indicated to the court that he would be asking his lawyer, who represents him in all proceedings, to attend the hearing. He did not ask for an adjournment in writing and he has not asked for an adjournment through his lawyer, who has attended today. Once again Mr Nikitin attends in front of me in the capacity of a McKenzie Friend only, because he has not got rights of audience in these courts, not being qualified in English law, but he has assisted me insofar as he can make sure that I have the correct documents and understand Mr Fishman's position, and he indicated that the arguments that Mr Fishman wished to extend to the court today were all contained within the written documentation.

That takes me to the hearing in front of Mostyn J in October of last year. There were three applications before the judge on that occasion; two of them concerned the property Whitecliff and in particular the charge in relation to it. That charge was dated 25 January 2008 and was granted by the husband to Mr Fishman. The wife was seeking to have it set aside on two bases; firstly under Section 23 of the Matrimonial and Family Proceedings Act 1984, and secondly on the basis that the agreement was a sham. Mr Fishman was defending the charge and wanted the funds which were in court, which were said to be the subject of that charge, to be paid out to him directly. In fact the property Whitecliff had already been sold by the time the matter came before the judge. There had been two prior charges over the property in favour of a bank which had foreclosed and the property had been sold in September 2009. Just over £1 million remained of the proceeds of sale, which is how there came to be funds in court. The charge was, as I understand it, to secure $5 million US.

The third application before Mostyn J was an application by the husband that all existing proceedings against him should be stayed. The husband did not attend the hearing before Mostyn J, just as he has not attended in front of me. Mostyn J recorded that his view was that the husband was a fugitive from English justice. Of course a different explanation is given in the written communication that the husband has sent to the court today, which, as I have already indicated, I have read and taken into account.

Section 23 of the 1984 Act sets out a scheme with regard to the treatment of dispositions which may defeat a claim by a party to a marriage for financial relief. I do not intend to go through all of that, but, turning straight to subparagraph (2) of Section 23, it reads as follows:

“Where leave is granted under section 13 above for the making by a party to a marriage of an application for an order for financial relief under section 17 above [I interpose to say that it has been here], the court may, on an application by that party --

(a)

if it is satisfied that the other party to the marriage is, with the intention of defeating the claim for financial relief, about to make any disposition or to transfer out of the jurisdiction or otherwise deal with any property, make such order as it thinks fit for restraining the other party from so doing or otherwise for protecting the claim;

(b)

if it is satisfied that the other party has, with that intention, made a reviewable disposition and that if the disposition were set aside financial relief or different financial relief would be granted to the applicant, make an order setting aside the disposition.”

Subparagraph (3) reads:

I am only reading the passages which are of relevance for this particular hearing, and so I turn to subsection (6):

The judge had already found, on 16 April 2010 when he was considering the judgment summons, that the husband was actuated by, as he put it, “extreme malice towards the wife” and had the means to pay her what he owed but refused to do so. He said in his October judgment that this finding had been bolstered by the contents of a conversation between the husband and the wife in May 2007, which made clear that the husband intended to leave the wife destitute.

Complaint is made about the reliance on that particular conversation and I will come to it in due course. The judge found that any transaction made by the husband from the beginning of 2007 onwards must be, as the judge put it, judged at least presumptively to have been effected with the intention, if not the dominant intention, of achieving that stated end.

I turn to the husband's proposed grounds of appeal. They are set out in a notice of appeal filed on 26 October 2010 and contained in the bundle provided on behalf of the husband. Although they were said to be settled prior to the receipt of the transcript of the hearing before Mostyn J and the judgment and said that they reserved the right to amend or supplement those grounds, in fact I asked Mr Beck expressly and there is no wish to make any further amendments. They were also said to be accompanied by a letter from Martin Walsh Cherer Limited. I have not got that, but it may be that that is because it is not relevant to this particular stage of the appeal process.

The broad ground set out in that notice of appeal was that the proceedings were not a fair trial contrary to Article 6 of the European Convention on Human Rights. No particulars are given with regard to that ground of appeal, but I have scrutinised the whole of the proceedings, insofar as I have been able to look at them, with that very much in mind, and I have not been able to find any respect in which that particular ground appears to be arguable.

The second ground is that the husband was already married when he married the wife; therefore the marriage to the wife was invalid and was declared to be so by the Russian courts in 2010. It is not explained in the grounds of appeal how that would affect the existing proceedings. As far as I know, no formal application has been made based on that ground for determination by Mostyn J or indeed by any other judge. It links to the fourth ground in the amended grounds of appeal, which is that there is a pending application in the Israeli court to annul the divorce there that took place in 2003 on the basis of the Russian court's finding that the marriage of the husband and wife was invalid. But pending proceedings in Israel are not, of course, the same as a formal application before the English courts based on what has happened with regard to the Russian view of the marriage expressed in the Russian order of 2010.

The third ground is that the judge ignored the Israeli separation agreement. Of course, the Israeli separation agreement was not the point of the proceedings that the judge was considering. It had been relevant at the point of leave being requested for Part 3 proceedings -- that was the hearing in front of Mr Cohen back in February of 2009 -- but leave was granted and that decision was upheld on appeal. The question of the Israeli separation agreement may be relevant again when matters are, as I understand they are due to be, considered for the whole of the substantive ancillary relief hearing this coming February, but it was not something which was relevant to the applications which were in front of the judge. This was an application to set aside a transaction and it had to proceed under the particular provisions of Section 23 and in particular those to which I have made reference earlier in this judgment. I cannot see how the Israeli separation agreement, which appears to have been fulfilled with regard to Whitecliff, had relevance in that context.

The fifth proposed ground relates to HHJ Hughes' judgment of May 2008. It will be recalled that that judgment took place before the proceedings began under Part 3 of the 1984 Act -- that is to say the proceedings in which the applications Mostyn J was considering arose. It is not said in the amended grounds of appeal why HHJ Hughes' judgment of May 2008 in a different set of proceedings should have led Mostyn J to a different conclusion in October 2010. HHJ Hughes' judgment was the one which dismissed the wife's claim -- quite separate from Part 3 of the 1984 Act -- that she had acted under duress in transferring Whitecliff to the husband and her application that the property should be transferred back to her.

After that point when the duress claim had been dismissed the proceedings took another tack -- the Part 3 1984 Act tack -- and HHJ Hughes' findings were overtaken by those proceedings. It is true that HHJ Hughes' findings included findings that the wife had not been truthful in every respect about the history of the Israeli divorce and agreement, but Mostyn J clearly had the matter of the Israeli circumstances in mind and refers in his judgment to HHJ Hughes' judgment, expressly commenting that the background to the case is set out in a number of judgments, the first of which is HHJ Hughes'. He says that in order to avoid unnecessary repetition those judgments should be referred to for the relevant background. So, very far from ignoring HHJ Hughes' judgment, he incorporates the background from that judgment into his own judgment.

So I considered each of those matters carefully and I cannot see that the proposed grounds of appeal by Mr Agrest, the husband, are arguable, and I do not intend to give permission for them to go any further than this.

I turn to Mr Fishman's grounds. He wishes to appeal against, first of all, the granting of the order by Mostyn J setting aside the charge in his favour in relation to Whitecliff and the judge's refusal to release the proceeds of sale which were in court to Mr Fishman and the payment out from those proceeds of sale of approximately £250,000 to the wife in relation to arrears of maintenance and so on, prior to the final hearing under Schedule 1 of the Children Act and Part 3 of the 1984 Act on 14 February.

The grounds on which Mr Fishman wishes to appeal are, firstly and summarily, the legal charge should not have been set aside, as that fails to take proper account of the facts and evidence on record and before the judge. Secondly, the position was regulated by the Israeli orders in 2001 and 2003, which held that Whitecliff was in the sole ownership of the husband. Thirdly, the charge was made in compliance with all the formalities of English law.

It is extraordinary to note that Mr Fishman's case seeks to rely on the Israeli orders whereas Mr Agrest's case now seeks to say that the Israeli orders were invalid because he was already married and therefore there was no marriage to provoke a divorce in Israel or a separation agreement, but, be that as it may, the second point that needs to be made immediately about ground A is that it omits to consider the scheme under Section 23 of the 1984 Act, which is the legislation under which the judge was considering this matter. That fetters the powers of the owner of a property to dispose of his property where it may have the consequence of obstructing claims for financial relief in divorce. It matters not for that purpose, subject of course to the particular exceptions set out in that section to which I will come in due course, that formalities of registration and so on have taken place according to English law.

The ground entitled “B” includes these matters. The findings of the court were not based on evidence (that is a reworking of a matter already raised in A and a matter which is a continuous theme through Mr Fishman's proposed grounds). In particular it is specified under ground B that the husband had not in fact committed any acts of violence towards the wife, contrary to the judge's findings, and did not use any duress to persuade her to transfer the property into his name, and that both parties, Mr Fishman submits, had behaved very badly.

I return in this context to the conversation in May 2007 on which the judge relied. Mr Agrest and Mr Fishman both criticised the judge for the way in which he dealt with this conversation, saying that HHJ Hughes had found that conversation to be of doubtful probity and had rejected it. In fact, HHJ Hughes's position with regard to that conversation was not as simple as that. She dealt with it in paragraph 15 of her judgment, and it is clear from that that initially she had ruled the tapes of the conversation to be inadmissible because there was a question over the translation, but the matter was then revisited in the hearing in front of her and the tape was played and checked by the interpreter and the judge did listen to it and said that, making all due allowances for the fact that the wife knew that the incident was being taped and the husband did not, she still found it an inescapable conclusion that the husband has the capacity to be very aggressive indeed and to dominate the wife. So it is not fair to say that HHJ Hughes had rejected that conversation.

Ground C again argues that Mostyn J failed to consider all of the evidence. The problem with the grounds that are proposed by way of grounds of appeal is that, with the exception of the mention of the conversation in May 2007, very little specific detail is given of the complaints that are made about Mostyn J's approach and the submissions are broad and general. It is argued that Article 6 has been infringed by the judge setting aside the charge and that that action was contrary to Mr Fishman's right to have the case decided on the merits and would disproportionately affect him because it would relieve the husband of all his obligations towards him until the outcome of the final hearing between the husband and wife. Mr Fishman, if he were to be allowed to appeal, would ask for the orders made by Mostyn J to be discharged and the monies to be paid out to him.

He does not give any substantial reason in the course of his proposed grounds of appeal for that course of action. He does not allege an error of law; the thrust of his proposed grounds is really all to do with the findings of the judge and his decision ultimately not being in accordance with the facts. I have therefore to look at what were the facts.

Beginning in 1997 the husband and Mr Fishman had been in business together. They were old friends. I do not know what the relationship between them is at the present. Mr Fishman said that there were discussions with a view to ending a commercial relationship between them and that these discussions affected various business interests. They appear to have taken place in 1997. There were agreements on two days towards the end of January 1997 and two agreements on 1 February 1997. Mostyn J found that there were oddities about those agreements; for example, why only one of them was formally drawn up and witnessed, the reason given by Mr Fishman being described by the judge as highly implausible. Although Mr Fishman said to Mostyn J that another of the agreements was converted into a notarised agreement and Mr Fishman was given time to track that notarised agreement down and did produce a bundle of papers, the judge could not find the notarised document in the papers and the representative for Mr Fishman did not direct him to any document that had that characteristic.

I am going back now in the context of Mr Fishman's application to some of the history I have already dealt with in the context of the husband's application.

In 1999 Whitecliff was bought, and in 2001, as I have already said, there was trouble in the marriage and the Israeli divorce began, together with the financial agreement, which was not implemented at that point. In 2007, when the marriage was in trouble again, Mr Fishman says that he entered into two further agreements with the husband. This was in March 2007. The first of those agreements contemplated the husband putting up Whitecliff as a security in favour of Mr Fishman. That agreement acknowledged that Whitecliff was at that point owned by the wife but said that the husband would take the necessary measures to get a transfer of title into his favour. It was notable, the judge thought, that the wife was described at that point as the ex-wife, so Mr Fishman must have been aware that, as the judge put it, the relationship between husband and wife was fractured.

The second of the agreements at that time confirmed that the husband was indebted to Mr Fishman, originally under one of the 1997 agreements, in the sum of $5 million, which was to be paid in a way that was stipulated in the agreement. The transfer of the house from the wife to the husband took place in September 2007. The wife failed, as I have said, in her attempt to persuade a judge that that transfer occurred by way of duress. She also failed in showing that the original separation agreement had been in any way flawed; that was the hearing in front of HHJ Hughes. She also failed in satisfying Mostyn J that the transfer of the house from her in 2007 into the husband's name was produced by any form of undue influence. He rejected that as HHJ Hughes had rejected it in 2008. HHJ Hughes said about that:

But Mostyn J, having dealt with that transfer of the property from the wife to the husband, went on to describe how the sum that was paid to the wife for the transfer was almost immediately lent back to the husband and never returned to the wife. She had accordingly, in September 2007, given up a valuable asset (the house) for almost nothing.

Then the husband and Mr Fishman set about creating and registering the charge over Whitecliff. They dealt with the priorities in relation to the bank, and the new charge came into existence, as I have said, on 25 January 2008, being registered on 1 February 2008. Mr Fishman said that he was generally aware then that the husband was in litigation with the wife. The judge noted a lack of specificity and clarity in the terms of the dealings at that point. Around the same time Mr Fishman decided to sue the husband in Russia on one of the 1997 agreements and wanted judgment in Russia against him. Mostyn J was puzzled about this; he said:

When the husband did his statement of means for the English proceedings he mentioned that Russian judgment but said nothing at all about the $5 million dollars that I have just mentioned. Mostyn J sets out in the judgment the oddities of the facts around this issue and refers back to Mr Cohen's comment on them as well in his judgment of February 2009. Mostyn J sets out the unsatisfactory nature of the evidence generally about the various agreements and the fact that it was only explained finally by Mr Fishman in June 2010 in his affidavit how the charge related to the Russian businesses and not the non-Russian businesses, which were the subject of the Russian judgment.

The judge then analysed the position in accordance with Section 23 of the 1984 Act. He said firstly that the charge had the effect of defeating the wife's claim totally, at the very least by frustrating enforcement of her ancillary relief entitlements. Secondly, it must be presumed that the husband had the requisite intention for Section 23 and he had not appeared to rebut that. In any event, Mostyn J understandably took the view that the evidence established that intention very clearly. He therefore correctly, in my view, directed himself that the only question was as to the exception in Section 23(6), which can be found earlier in this short judgment.

That is the issue on which Mr Fishman was relevant to the whole issue between the husband and the wife in relation to the charge. The judge found at paragraph 35 of his judgment:

The finding that the judge made in that respect was not dependent in any way upon the evidence of the wife, and so any view that HHJ Hughes had expressed about the truthfulness or otherwise of the wife was not relevant to this particular issue. It depended upon the judge's evaluation of the evidence of Mr Fishman. If the husband had come he would have been evaluated too, but he did not come to give the judge that assistance, although the judge would have taken into account whatever was there in writing from Mr Agrest.

I have absolutely no reason to suppose that that was a questionable determination by the judge of the issue and nothing has been raised which would be a valid ground of appeal in regard to it, and so I also dismiss Mr Fishman's application for permission to appeal against the judge's judgment.