Lazaros Panagiotis Xanthopoulos v Alla Aleksandrovna Rakshina

At the heart of this case is the husband’s unwavering belief that the wife as a 25% shareholder in the family supermarket business is, or is potentially, a fabulously wealthy woman. On 10 June 2022, the judge however had made a case management decision refusing the husband’s application to order a single joint expert report in relation to the wife’s 25% interest in the family business. Permission to appeal from that order was refused by the Court of Appeal.

The judge did however provide funds under a LSPO for the husband to instruct a shadow expert to consider the wife’s financial disclosure. Birch Legal were instructed by the husband. Notwithstanding the limitation on the extent of the permission granted, Birch Legal were instructed on a far wider basis than that which had been anticipated by the judge and their report purported to provide a valuation of the wife’s interests in the Russian family business.

On 3 October 2022, the husband was ordered to file and serve the report of Birch Legal by 7 November 2022. He did not do so then, nor upon any of the three further opportunities he was given to file the report between November 2022 and 9 February 2023. This was the case notwithstanding that he had the report since 11 November 2022 and had, following questions having been asked, received an addendum on 28 February 2023 (which addendum, Mr Cayford told the court, had not altered the report to any significant extent). Mr Cayford could offer no explanation as to why there had been no compliance with the orders to file the report.

On 20 October 2022, the judge gave directions for the instruction of Kirill Saskov, a single joint expert, to report on the wife’s rights under Russian company law as a 25% shareholder in relation to the realisation of her business interests and in relation to any restrictions there may be to such a realisation. His report was filed on 5 December 2022.

On 31 December 2022, Mr Saskov responded to a number of questions asked on behalf of the wife.

The husband’s shadow Birch Legal report was never served. On 7 March 2023, the husband made an application to rely on the second report of Birch Legal dated 28 February 2023 and to adduce the report into evidence.

The judge refused the application. There was no appeal from the order but, as with the judge’s refusal to grant an adjournment on 9 March 2023, it now forms one of the grounds of appeal before this court.

Notwithstanding that there had been no appeal against the judge’s refusal to admit the Birch Legal report and that it now formed part of the Grounds of Appeal, the husband in addition made an application for permission to rely on the Birch Legal reports as fresh evidence in the appeal, (later amended to limit the application to the February report). Mr Cayford rightly accepted that this was, in reality, an appeal from the judge’s refusal to admit the report. For that reason alone, we would have refused to admit the report. In any event, it cannot begin to satisfy the test in Ladd v Marshall [1954] 1 WLR 1489; [1954] 3 All ER 745. The report cannot on any view be regarded as fresh evidence; it was not only available at trial, but in existence many months earlier. The report could have been part of the evidence at trial had the husband not failed to disclose the report despite several orders requiring that to be done.

Further, the report dealt with issues for which permission had not been granted and also addresses different issues from those in the report of the single joint expert which had been limited to a consideration of the wife’s rights under Russian law.

The trial had therefore proceeded with evidence being heard only from the wife, her borther and the single joint expert. The judge did however use the Birch Legal report as, what Mr Cayford described as, an aide memoire with which to test the evidence of the single joint expert in the absence of the husband at the hearing. The judge had been, Mr Cayford accepted, right to do so and he had by his approach, in my view, struck the balance between blind acceptance of what the wife was saying on the one hand and avoiding a ‘disproportionate enquiry’ on the other. I do not accept as was submitted on behalf of the husband, that the judge’s limited use of the report in this way amounted to his having allowed the report to be adduced in evidence and that on that basis the present application and the appeal in relation to the Birch Legal report should be allowed.

Mr Saskov gave evidence at the trial, tested as described above. His evidence was that there is a relatively widespread practice in Russia of including in the participants (shareholders) of an LLC a ‘natural person’ who does not have a business interest of their own and does not participate in the management, but follows the instructions of other participants. The practice is known as ‘nominal participant.’ The real beneficiary, Mr Saskov explained, may require the nominal participant to receive and use a dividend in a certain way. He explained that often the nominal participant is given rewards in other forms such as employment, cars, houses etc and by being allowed to retain some of the funds received from the company.

Mr Saskov gave evidence that in Russia there is no market for a minority participatory interest and that as a rule only controlling stakes are part of transactions. It is therefore extremely difficult to sell a minority interest in Russia in the absence of consensus between all participants.

It was against this expert evidence that the judge made his findings as to the wife’s interest in the family business.

The judge described how, from 2010, the wife’s father began to spread out the shareholding in the group of companies between himself, the wife, her mother and the brother. The judge set out the wife’s case in relation to her shareholding at para.[75] as follows:

“My father and my brother believed that breaking his shareholding down into minority 25% holdings would avoid a takeover bid. Minority holdings are not attractive as they lack any meaningful rights and carry significant discounts. My father and my brother did not discuss the transfer of shares into my name with me. It was not done in one transfer but gradually over a number of years. It was done simply to assist them in their business affairs. I did not pay for the shares and do not consider them to be mine. My father and my brother certainly do not consider them to be mine.

It is common in Russian culture, and this is true for my family, for the men to dictate to the women the extent to which they have any financial autonomy. My father and my brother considered that by employing me in their companies, they were giving me a chance to earn a living. They dictate if and when I receive dividends. I have no control over the shareholding. In just the same way the shares are held in my name but they retain full control and I have no power to sell them (the shares)”.

The judge made the following critical findings of fact between paras.[82] - [88]

The judge having in the absence of the husband, tested the evidence in so far as was appropriate, at para.[94] concluded that there was no realisable financial value of the wife’s shareholding to her and that her interest does not represent “an asset that is or will be available, for her to realise”.

That left the question of the dividend payments which had been made to the wife as a 25% shareholder. The judge set out at para.[99] the sums which had been paid to the wife by way of dividend between 2012 and the present. They were: 2012: £3.1m, 2014: £5.3m, 2015: £46k, 2016: £1m and 2020: £7m.

The evidence was that the wife had, at her father’s instruction, repaid the 2020 dividend to him. The judge at para.[100] took into account that on the face of it, the repayment to her father of this substantial sum was suspicious given that at that time, the marriage was “in its death throes”. He held however that on the evidence overall, that suspicion was displaced, and he accepted that the wife’s mother had similarly been instructed to repay her dividend, in her case to the brother.

In her oral evidence, the wife said that she had also returned the dividend she had received in 2014. The judge did not mention this specifically in his judgment but given his findings in relation to the 2020 dividend, there is no reason to believe that his view would have been any different.

The judge went on to consider the payment of future dividends to the wife within his analysis of the wife’s earning capacity, holding that from time to time it would be likely that the wife would be paid a dividend. The judge treated these prospective future dividends as funds she would need to rebuild the Coutts savings account and to repay the £1.37m she had borrowed from her mother towards costs, sums, he said at para.[97] which she would not “otherwise make up”.

It was against these findings that the judge concluded at para.[131] that the wife’s total assets amounted to £12.9m. This was made up of three properties in Russia worth £1.9m, the former matrimonial home in London valued at £4.9m, plus the £7.7m which then remained in the Coutts account. From that had to be deducted the money the wife owed to her mother, money the judge was satisfied and found at para.[70], had to be repaid.

The sum of £12.9m was on the judge’s findings therefore the totality of the assets available for distribution before any allowance was made for the husband’s debts to solicitors or the outstanding costs orders.

Between 10 September 2020 and 10 November 2020, the husband incurred costs with Messrs Vardags of £223,249, all of which remains outstanding. On 11 May 2021, by which time the husband was being represented by his third set of solicitors, he had run up a further £257,537.53 and £136,726 respectively, a total therefore of £617,512 in costs before Forms E had even been filed. It was against this disturbing backdrop that the wife made an open offer on 14 May 2021, modified on 17 May 2021, by which she offered to transfer the former matrimonial home in Ennismore Gardens (which she estimated then to be worth £7m) to the husband on account of his claims. The offer records that the purchase of the property was funded by money advanced by the wife’s family. The offer went on: “Whilst we accept, as the matrimonial home, it is likely to be subject to sharing, the entire purchase price is non-matrimonial and that will impact on your client’s overall claim”.

The letter explained that the offer was made in order to “openly illustrate to the court that our client wishes to meet your client’s needs claim, generously, to avoid the haemorrhaging of money on legal fees which the family cannot afford. Your client had been at pains to paint our client as some sort of Russian oligarch with unlimited money. He knows this is not true. If these proceedings continue, it will become plain that our client has some financial support from her family, but it has limits”. (original emphasis)

That offer was never responded to, a decision which the husband undoubtedly regrets as matters have turned out, but which was made at a time when his case was that the wife was worth at least £100m.

No open proposals were put before the court by the husband before trial. It was only on 31 October 2023, the day before the hearing of this appeal, that there appeared in a second “unagreed bundle” filed on behalf of the husband, a document which was described as an open offer. In it the husband offered to settle the matter before the appeal, listed to be heard the following day, on the basis of a clean break order on the following terms: the Ennismore Gardens flat (now valued at £4.858m) was to be transferred to the husband together with £6.9m being the remaining balance in the Coutts account, a total of £11.758m. In addition, the outstanding costs orders against the husband of £1.04m in respect of the wife’s and the brother’s costs would be discharged. If the wife was unable to procure the brother’s consent to discharge the order in respect of his costs, then a further lump sum of £334,903 was to be paid by the wife to the husband. The total value of the offer was therefore £12,798,000.

It follows that the husband rejects entirely the findings of the judge who had held the wife’s total capital assets to be £12.9m.

The judge adopted a conventional approach to determining the order, considering each of the Section 25 factors in turn at para.[63] onwards. The judge accepted at para.[109] that the parties’ contribution to their children had been equal, “albeit hugely assisted by staff”. He took into account that given the husband’s mental health difficulties and the toll the litigation had taken on him, it would take some time before the husband would be able properly to exercise his earning potential.

The judge regarded the case as one where the order should be calculated by reference to the husband’s needs rather than by way of the sharing of the assets. He noted that the wife had made all the financial contribution and she alone had worked but that in so far as the acquisition of capital was concerned, that was not as a result of her work, but came from family gifts and the legal ownership of shares.

The judge rejected as ‘ridiculously inflated’ the husband’s desire for a housing fund of £8.5m to provide a primary home in London and a second home in Greece: para.[112]. The judge’s impression was that the husband has spent the bulk of his time in Greece and that it was unlikely that he would make his future in England: para.[114]. The wife produced estate agent particulars for properties in an Athens suburb at a cost of between €500k and €560k and in London for between £770,000 and £900,000. Notwithstanding orders having been made for the husband to provide particulars of alternative suitable properties, he had failed to do so. The judge having held that the husband was likely to live in Greece, ordered the wife to provide €600k to enable a property to be bought there which the husband would be entitled to occupy for life. In addition, she was to provide €60k for furnishings.

So far as income was concerned, the judge ordered the wife to pay to the husband four years of maintenance at the rate of approximately £60k pa as by that stage, the husband would be able to support himself. In addition, the judge allowed £15k for the first year to cover the costs of medical treatment and relocation.

On the basis of this order, the wife agreed that the orders for costs made against the husband would not be enforced without the leave of the court and that she would forgo costs in respect of various other matters where costs had been reserved.

The judge said that he had adopted a ‘needs-light’ approach which he regarded as consistent with the application of the post nuptial agreement and the merits of the case. It is therefore necessary to move on to consider the approach of the judge to the other features of the case.

The judge, between paras.[33] and [45] of his judgment, set out the background and circumstances which had led to the making of the post-nuptial agreement on 22 November 2013. The agreement was reached at a time when the marriage was “not running smoothly”. The main bones of contention on the part of the wife were said by her to be the husband’s failure to stop smoking, or to obtain work, or to provide other than limited help with the children. This had led to her fearing that the husband had married her for her money. The wife’s case, as was accepted by the judge, was that the husband’s response to her having expressed these fears, was a proposal by him that in order to prove to her that theirs was a love match, he would enter into an agreement that in the event of divorce he would make no claim against her.

The husband, the judge found, followed this up by making arrangements for them to see a notary when they were in Moscow for a conference in November 2013. At that meeting, the judge accepted, the husband had declined an offer made by the wife that she would pay him $1m if she instituted divorce proceedings.

Prior to the agreement being made there was no financial disclosure by the wife and neither party had independent legal advice. The critical part of the agreement as translated said:

“2.3

In the event of the dissolution of the marriage, the spouses agree that the property acquired during their marriage and which is the subject of their respective separate property, shall remain the property of the spouse in question without any payment or other compensation, and this property shall not be subject to division.”

The circumstances in which the agreement came about was one of the only areas where the judge had any sort of evidential picture of the husband’s case as he had filed a narrative of his account of the circumstances in which the agreement came to be made in a written response to the wife’s Notice to Admit Facts. In that response he wholly rejected the wife’s account and said that the wife had arranged the meeting with the notary, had given instructions to the notary and that he, the husband, had had no opportunity to express a contrary view.

The husband however accepted that he had entered into the post-nuptial agreement on 22 November 2013 and, as he recorded in his Form E dated 22 December 2021, he was well aware that it stated that he was to “receive no financial remedy following the termination of our marriage.”

At trial, the judge in the absence of the husband, tested the wife’s evidence by putting to the wife that the agreement might appear to be unfair in the sense that it left the husband with “little or nothing”. The wife in response, told the judge that it was what the husband had wanted and that it was fair given that: “She was brought up on the philosophy that you only earn or save by working. The husband was young and able. He was perfectly able to work. If the husband was determined not to work or contribute to the family finances that was his decision”.

The judge made the following findings in relation to the PNA:

Mr Cayford submitted that the post nuptial agreement should have been wholly disregarded by the judge. He acknowledged that he was in difficulty in going behind the judge’s findings as to who had initiated entering into an agreement, but submitted that there had been no disclosure and “in this country a document with those provisions would not be upheld”. English law, he rightly observed, applies to this Part III application and the court has a complete discretion to ignore the agreement if it is unfair.

Radmacher (formerly Granatino) v Granatino [2010] UKSC 42; [2010] 2 FLR 190 established that the absence of legal advice is not fatal if the unrepresented party has a proper appreciation of the agreement reached. The judge found that the husband not only appreciated what the agreement meant, but had rejected an offer of $1m in order to prove his point that his marriage was a love match.

The court was taken to Pierburg: a case heard under Part III in which a wife had many years earlier told her German fiancé that she was marrying for love not money. At her request, an agreement was drawn up excluding her from any financial provision. There was no disclosure and the wife received no legal advice. The parties separated 34 years later and reached a fresh agreement (“the Dusseldorf agreement”) giving her a life interest in their (relatively) modest London home, lifetime maintenance and a lump sum of €3m. The wife sought to repudiate the agreement, seeking a substantial lump sum and a clean break.

At the time of trial, the husband in Pierburg was worth €180m. The judge concluded that the wife’s connection with England was modest and that therefore a ‘needs light’ award was appropriate as had been the case in MA v SK; S Investments v MA (Financial Relief following Saudi Divorce) [2015] EWHC 887 (Fam); [2016] 1 FLR 310 (paras. [62]-[66]).

Notwithstanding that in Pierburg the husband could have comfortably capitalised any order, the judge held that given the terms of the post nuptial Dusseldorf agreement which provided for an order for maintenance for life, an order for lifetime maintenance was fair. Notwithstanding the husband’s wealth, the court, as in Radmacher, did not order the husband to transfer a capital sum to the wife in order for her to buy a property which she would own, but rather granted the wife secure lifetime occupation of her London home.

In the present case, the parties entered into the agreement when they were still only 32. The judge was considering the situation a decade later and had to decide whether it was fair to leave the husband with nothing in circumstances where he had not worked in any sort of structured way during the marriage and was now in his forties.

In Zimina v Zimin [2017] EWCA Civ 1429 (“Zimina”) the Court, as in Pierburg, was faced with the interrelation between Part III and the making of an earlier foreign agreement. In that case the agreement had been incorporated into a Russian consent order. The issue arose as to whether the adequacy of the provision should be assessed at the date of the agreement or at the date of the trial.

In my judgment in Zimina, I said at para.[63] that where there is a significant delay between the divorce (here the agreement) and the Part III proceedings, the wording of section 18 unequivocally requires the court to take into account all the circumstances as they are at the date of the trial, and at para.[64], I said that: “Further, the husband’s means and the adequacy of the provision as assessed at trial will, in any event, be but one part of the overall picture, which will be considered against the backdrop of the provision at the date of the divorce”, (here agreement).

In line with para.[61] of Radmacher that “it is not right to proceed on the premise that there will always be a significant difference between an ante- and a post-nuptial agreement.” this approach applies equally to a consideration of the terms of either a pre or post nuptial agreement. The date at which to determine whether or not the needs of a party are met is the date of the trial, albeit considered against the backdrop of the provision agreed between the parties at the date of the agreement.

As Lord Phillips said in Radmacher:

“73.

If the terms of the agreement are unfair from the start, this will reduce its weight, although this question will be subsumed in practice in the question of whether the agreement operates unfairly having regard to the circumstances prevailing at the time of the breakdown of the marriage.”

In the present case a decade has passed, the wife remains the only effective breadwinner and she has received substantial capital from her family in the intervening period. No doubt it is those features, together with the fact that the husband at present is incapable financially to provide for his own needs, and her approach to the Ennismore Gardens flat as set out in the offer of May 2021, that meant that the wife has at no stage sought to impose in full the draconian terms of the postnuptial agreement. That approach reflects Lord Phillips’ observation at para.[81] of Radmacher that: “The parties are unlikely to have intended that their ante-nuptial agreement should result, in the event of the marriage breaking up, in one partner being left in a predicament of real need, while the other enjoys a sufficiency or more, and such a result is likely to render it unfair to hold the parties to their agreement.”

The fact that the wife had not sought to hold the husband to the strict terms of the agreement does not however mean that the judge should have disregarded the PNA or that he was not entitled to take into account the agreement between the parties, made with full understanding on both sides, that in the event that their marriage failed, they would each walk away with the assets each individually acquired during the marriage. Such an approach accords with Lord Phillips’ observations at para.[78] of the need to respect individual autonomy and that the court should respect the decision of the couple as to the manner in which their financial affairs were to be regulated.

There are nine grounds of appeal all of which fall under the essential banner as articulated in Ground 1 that the award was too low and left the husband in debt and in real need. A free-standing ground, Ground 2, that the award was discriminatory has, although not specifically abandoned, rightly not been pursued. The remaining seven grounds can be summarised as follows:

It seems to me that the best way to approach the appeal which will in turn provide the answer to the Grounds of Appeal is as follows:

That then disposes of Ground 5 (the wife’s wealth), Ground 8 (the refusal to adjourn the case on 9 March 2023) and Ground 9 (the Birch Legal report).

That leaves the court with the task, as identified by Mr Cayford, of deciding whether the order made by the judge in these challenging and complex circumstances, was outside the range of orders he could have made within his wide discretion such that he had been wrong to make the order he did.

In my judgment this is a case where the order was always one which should be limited to that which will meet the needs of the husband, all the available capital having come from the family of the wife. Although the husband now says that his settlement should not be so limited, such an approach sits uneasily with his Ground 3 which is specifically drafted by reference to a needs assessment and none of the Grounds of Appeal asserts that the judge was wrong in determining the case by reference to needs or that he should have approached the case as a sharing case.

The features which would impact upon the level of order to be made in this case, are as follows:

Arguments as to the difference, if any, of the level of award which was appropriate in this, a Part III case, as opposed to that which the husband would have received under the MCA 1973 had the divorce taken place in England, played little or no part in the judge’s analysis. Passing reference was made to Agbaje v Agbaje [2010] UKSC 13; [2010] 1 AC 628 with the judge noting that the legislative purpose of Part III is to alleviate the adverse consequences of “no or no adequate financial provision”.

Ms Stone KC on behalf of the wife, submitted that when considering what order should be made, there was for the purposes of section 16(2)(a) MFPA, only a limited connection with this country as the family were here only for the purposes of education and only during term time. Further, Ms Stone said, the wife at all times has continued to work full time in Siberia where the family’s principal home has been and where as a consequence, pursuant to section 16(2)(b), the family has the stronger connection.

The judge at para.[134] considered the parties’ connection with England and Wales to be “in the middle ground between the very close and tenuous”. The connection was to educate the children in this country and to that end they owned their home here, but on the other hand they were, he held, only here in term time and the judge found that their main home was in Russia. In my judgment, although the judge had found that the children were habitually resident in Russia, any suggestion that the property at Ennismore Gardens was other than a matrimonial home is unsustainable given the use made of the property and the terms of the open offer made on behalf of the wife in May 2021.

The judge put the fact that this is a Part III application and that the degree of connection with this country was in his view in ‘the middle ground’ into the balance in this way:

“135.

Whilst in some cases the degree of connection can be determinative, in this case the factor is eclipsed by the impact of the PNA, above all, but also by H’s litigation conduct and the costs resulting therefrom, and by the very modest matrimonial element of the assets.”

For my part, I would also add into the equation the fact that the divorce was only obtained by the wife in Russia at a time when the husband was pursuing, first in time, divorce proceedings in England. There having been a Russian divorce the jurisdiction dispute between the parties was never resolved. The parties, in the only sensible compromise reached during the course of this ruinous litigation, agreed that the matter should proceed by way of a Part III claim. In those circumstances, it would seem to me that the judge was right to take the view that the fact that the application proceeded by way of Part III was “eclipsed” by the other features of the case, not least the postnuptial agreement and the husband’s litigation misconduct.

Putting together all these features the judge determined that the proper order was one which was, as it was described in respect of the Part III claim in Pierburg and in MA v SK [2015] EWHC 887, as ‘needs light’.

In MA v SK, Moor J again dealing with a Part III case where there was a pre-existing agreement held as follows:

“108.

I have come to the clear conclusion that I should provide for the Wife on a "needs light” basis. I do not consider this should be restricted to the Radmacher v Granatino [2010] UKSC 42; [2010] 2 FLR 1900 concept of merely ensuring that a party is not left in a “"predicament of real need”". After all, it could be said that even the £1,689,613 that she has remaining is sufficient to escape from such a predicament. It would not, however, be nearly sufficient given the other factors, such as the length of the marriage, the contributions, the wealth of the Husband and the standard of living enjoyed.”

In my judgment, notwithstanding the features adverse to the husband which the judge factored into the equation, he was right not to restrict the husband to the Radmacher concept of ensuring only that the recipient is not left in a “predicament of real need”. The question remains however whether the order made, even if not, as asserted on behalf of the husband, leaving him in a ‘predicament of real need’, was insufficient given all the other factors including the length of the marriage, the recognition by the judge of the husband’s non-financial contribution and the standard of living they had enjoyed, regardless of whether that standard of living is judged by reference to that portrayed by the husband, or by reference to the more modest lifestyle described by the wife.

The question is therefore whether the ‘needs light’ order made by the judge left the husband in a predicament of real need and even if not whether it was fair in all the circumstances of the case.

In my judgment, the husband was not left in a predicament of real need. First and foremost, in my view, when considered against the backdrop of his findings in relation to the agreement, the judge cannot be criticised for making the husband’s housing provision by way of a life interest. Such an order is entirely in line with both Radmacher and Pierburg. This is reinforced by the fact that as a consequence of the husband’s litigation conduct, the assets available are significantly less than they otherwise would be and providing for the husband’s housing needs by way of a life interest ameliorates, to some limited extent, the financial damage the husband’s behaviour has caused to the wife whilst ensuring that the husband has secure accommodation for the rest of his life.

In my view, the judge was however in error in effectively requiring the husband to live in Greece and in providing him with only such sum to fund the purchase of a house as would be sufficient to provide him with an appropriate home near Athens, but not in London. It would seem that, quite understandably, the judge had what has been described by the parties as a ‘wobble’ after he had given judgment and until dissuaded by those representing the wife, had proposed to substitute by reference to the property particulars provided by the wife, the sum of £850,000 for the €600.000 he had put in his draft judgement in order to allow the husband to live in London or in Athens. In my judgment, the judge’s instincts were sound and he would have been right to have reconsidered the matter in that way.

This was a truly international family, with time being spent variously in London, Greece and Russia. In my judgment, the judge fell into error in making provision which deprived the husband of choosing where he would wish to live in the future. This was all the more so when the wife’s case leading up to the trial was set out on the basis that the husband might live in either country. Having regard in particular to the value of the matrimonial home in London, and that the wife had put forward property particulars on flats on sale of £900,000, I would substitute an order providing the husband with £1m to purchase a property whether in Greece or London to be owned by the wife but in which the husband will have a life interest.

In those circumstances, given that Mr Cayford’s instructions are that the husband intends to live in London, it seems sensible to express the furnishing fund in sterling rather than euros so that the fund ordered to be provided by the wife would at today’s rates be (rounded up) £52,300 but which given inflation since the making of the order, I would increase to £75,000 payable on the same terms as the judge’s order.

So far as income is concerned, the husband’s case is that he has done some property work for friends and family during the course of the marriage and would in the future, wish to produce an income for himself in the property world in London. In those circumstances, I can see nothing wrong with the judge’s order that the husband should receive periodical payments for a period of four years. It follows that as the four years was calculated by reference to the date of the judge’s order, the four years should now be recalculated from the 1^st of the month following the sealing of this court’s order. He should of course receive in addition a further sum, as the judge allocated to the husband for his health and relocation needs, which I would increase to £25,000.

So far as quantum of maintenance is concerned, in my judgment the judge fell into error with regard to the dividends. Even if they are received only erratically and distributed at the whim of the wife’s father and brother, they are a financial resource which the wife is likely to have in the future pursuant to section 25(2)(a) (as incorporated into Part III proceedings by section 18(3) MFPA 1984). The judge recognised that that would be the case, but seemed to regard future dividends as a means for the wife to recoup her capital following the haemorrhage of capital consequent upon these proceedings. Whilst having sympathy with his view, in my judgment it did not reflect the proper approach to the dividends.

I have in mind all the submissions made by Ms Stone and in reaching this conclusion I am not going behind the judge’s findings in respect of the wife’s entitlement to dividends. The fact remains however that the judge found that the wife had received significant dividends between 2012 and 2016 which she retained. Whilst the wife has not herself retained any dividends since then, there is no reason to believe that this is as a result of a downturn in the family business given that each of the four shareholders were allocated a dividend of £7m in 2020 albeit that the wife had to return hers to her father.

The family’s lifestyle of private school fees, a nanny, a substantial flat in London and a home in Russia, together with substantial outgoings, could not have been maintained without that dividend income. The wife intends to continue to live her life on substantially the same basis including retaining a property in London for so long as either of the children are being educated here.

In those circumstances, a fairer figure to meet the needs of the husband, even on a ‘needs light’ basis for the period of time he needs to adjust towards financial independence (which I would maintain at a period of four years) would be £115,000pa. I appreciate that the husband’s maintenance will have to be paid from the Coutts account, but the judge found at para.[97] “that from time to time it is likely that a dividend will be paid from which she will benefit” and in the meantime the wife has the resources from which to satisfy this relatively short-term order.

In Rothschild v De Souza [2020] EWCA Civ 1215 (“Rothschild”) a case referred to by the judge, Moylan LJ had considered the impact of litigation misconduct on a needs assessment. Moylan LJ noted at para.[65] that whilst the general approach is that litigation misconduct within financial proceedings will be reflected if appropriate in a costs order, there are cases in which one party’s conduct has been such that it should be taken into account in determining its award. He went on at para.[78] to say:

“The depletion of matrimonial assets through litigation misconduct will plainly not always be remedied by an order for costs. As I have said, such an order simply reallocates the remaining assets between the parties and does not necessarily remedy the effect of there being less wealth to be distributed between the parties. What is important is that, whether by taking the effect of the conduct into account when determining the distribution of the parties' financial resources (both income and capital) and/or by making an order for costs, the outcome which is achieved is a fair outcome which properly reflects all the relevant circumstances and gives first consideration to the welfare of any minor children.”

He concluded by saying at para.[80] that “an order can be made which does not meet needs because to exclude that option would be to give a licence… to litigate entirely unreasonably”.

It goes without saying that the husband’s appalling litigation conduct cannot be remedied by any further orders for costs. The husband’s litigation conduct however can and was, rightly fed into the judge’s conclusion. In the light of Moylan LJ’s observations in Rothschild the judge could arguably have made an order which would not meet the needs of the husband; he did not do so and he was entitled to decide that the fair outcome was a ‘needs light’ award in all the circumstances of the case.

In his final order of 17 May 2023, the judge set out at para.[12] a list of orders for costs which had been made against the husband during the course of the proceedings all of which remain unpaid. Those orders were not to be enforced against the husband without the leave of the court. The modest costs order made against the wife by Moor J in May 2022 for a total of £5,000 was to be set off against the husband’s outstanding costs.

The judge held that what he described at para.[6] as the “grossly exorbitant” use of the court’s time and the wife’s money was “contributed to in significant part by H’s failure to comply with court directions and the repeated LSPO applications consequent upon the various changes of solicitors.” It was suggested on behalf of the wife that each change of solicitor cost about £50,000 when one took into account the time needed to read in by the solicitors and the latest King’s Counsel.

The judge in his judgment observed at para.[3] that the series of costs orders made against the husband presented “'particular difficulties in this case”. I agree, and in my judgment the debt the husband owes to the wife, which was occasioned by his litigation misconduct, must inevitably be reflected in the award made in order to meet his needs.

An order must be fair to both sides. Whilst the wife has by no means behaved perfectly, including her late payments in breach of the terms of various orders and in having removed S from the jurisdiction in breach of a Court of Appeal order, she has suffered very significant financial damage as a result of the husband’s litigation misconduct. It should be borne in mind that there are two minor children for whom she is solely financially responsible. The wife sensibly recognises that the husband is not in a position to hand over £1m to meet the costs orders made against him. But in my view, if the costs orders are to be written off, the capital sum awarded to the husband can and should reflect this.

That leaves the question as to whether the wife should have to pay the husband an additional £900,000 (or such figure as can be negotiated) to settle the overspend incurred by five different firms of solicitors.

In Azarmi-Movafagh v Bassiri-Dezfouli [2021] EWCA Civ 1184 the issue of the treatment of costs in needs cases arose. At para.[53], I said that:

“All these cases turn on their own individual facts and in my judgment the most significant principle to be drawn from them, either individually or collectively, is that the judge at first instance has a wide discretion as to the extent to which it is appropriate to order an enhanced lump sum to a party in receipt of a needs award designed wholly or in part to satisfy their outstanding costs bills.” (my emphasis)

I went on at para.[63]:

“….in my judgment in cases where it is argued that an order substantially in excess of the sum required to meet a party’s assessed needs is sought in order to settle the outstanding costs (or debts referrable to costs) of that party, the judge should:

i)

Consider whether in any event the case is one in which consideration should be given as to the making of an order for costs under FPR 28.3(6) and (7) in particular by reference to FPR PD 28 para 4.4;

ii)

Whilst not carrying out a full costs analysis, the judge should have firmly in mind what the order which they propose to make by way of additional lump sum to meet a party’s costs would represent if expressed in terms of an order for costs. To do this would act as a cross check of the fairness of the proposed order.”

On the one hand, the husband’s needs must on some level be provided for after a 15 year marriage, on the other in order to give the husband a debt free start, the wife would have to give him up to £1m to clear the overspend, as well as forgiving the over £1m he owes to her as a consequence of his litigation misconduct. One presumes that the £334,903 owed to the brother would remain unenforced. All of that when the wife has already funded the entirety of the litigation in all of the proceedings including of the appeal to the tune of approximately £9.5m. In my judgment, there can be no question of the wife having to bear the responsibility for the overspend either in whole or in part.

The husband seeks ‘a sharing order’ to include the transfer of the matrimonial home and a substantial lump sum which would provide him with an income and enable him to pay off the overspend. For the reasons given, the judge was right to make a needs light order structured to provide the husband with a life interest in a property and term maintenance. An order requiring the wife in addition to satisfy the overspend would amount to an order for costs being made against her and would be wholly unfair given the circumstances in which the debt was incurred and that she has complied with the LSPOs made throughout these proceedings, which orders were made based on the budgets put forward by those same solicitors. If (which is not known but may well be the case) the overspends arose in whole or in part as a consequence of the husband making unreasonable demands of his legal advisors, all the more reason that the wife should not now bear any responsibility for those outstanding fees.

In reaching this conclusion, I use as a cross check the wife’s effective concession in her open offer of May 2021 that the former matrimonial home would be subject to the sharing principle notwithstanding that it was financed entirely by her, see Miller v Miller and McFarlane v McFarlane [2006] UKHL 24 at para.[22]. The net equity in the property is £4.858m, a half interest would therefore amount to £2.429m. The substitute order I intend to make, subject to the views of my Lords is in money or money’s worth, as follows:

The total award which the husband will have available to meet his needs, that is to say £1.56m, therefore corresponds to approximately £170,000 more than half the value of the Ennismore Gardens property less the amount of the costs orders outstanding against him.

That leaves the sum of just under £900,000 owed by the husband to five sets of his previous solicitors in respect of which, for the reasons set out at para.[159] above, I am satisfied the wife should bear no responsibility.

This is not the occasion for this Court to express a view as to how an overspend over and above the budgets given by solicitors in support of an application for a LSPO should be treated in a case where the appropriate order would otherwise be for the spouse in debt to receive a capital sum. That is not this case and I am satisfied that in this case the overspend is not the responsibility of the wife.

I would say however that there are lessons to be learned. It is surprising that solicitors, when overspending by such substantial amounts, did not regard it as a matter of urgency to return to the court in order to explain and to seek further funds. It may be that one of the difficulties here was that there were repeated applications for LSPOs as the husband changed solicitors’ firms on numerous occasions, rather than the more usual way of dealing with LSPOs, whereby an order is made to provide sufficient funds to cover costs up to and including the Financial Dispute Resolution hearing and then, if that fails, for a further order to be made to take the matter to trial.

In summary therefore, the judge was right to treat the case as one where a ‘needs light’ award was appropriate and in his general approach to the post-nuptial agreement and the husband’s litigation conduct together with the outstanding orders for costs which had been made against him. The correct structure was one which provided the husband with a life interest in a property and term maintenance. In my judgment however, the judge fell into error in the quantum of the husband’s housing need by, in particular, limiting it to one which would be appropriate for Greece rather than approaching it, as the wife had done in the materials she had put before the judge, by allowing a sum which would buy a property in either London or Greece. Further the judge was in error in treating future dividends as a means for the wife to recoup some of her lost capital as opposed to future income which would to some extent support the lifestyle of herself and the children.

To this limited extent the appeal is allowed in respect to those parts of Ground 1 (quantum), Ground 3 (s25 factors) and Ground 4 (housing) which relate to those features. Ground 2, 6 and 7 are dismissed in addition to dismissal of Grounds 5, 8 and 9 referred to at para.[130] above.