US v SR, Court of Appeal - Family Division, November 29, 2018, [2018] EWHC 3207 (Fam)

Resolution Date:November 29, 2018
Issuing Organization:Family Division
Actores:US v SR
 
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Case No: RG11D00397

Neutral Citation Number: [2018] EWHC 3207 (Fam)

IN THE HIGH COURT OF JUSTICE

FAMILY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 29/11/2018

Before :

THE HONOURABLE MRS JUSTICE ROBERTS

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Between :

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(No. 4) (Executory Mainframe Distribution Order: Change in circumstances:

Extent of the Court's Ability to Revisit Terms)

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Mr Richard Sear (instructed on a pro bono direct access basis) for the Applicant

The Respondent appeared as a litigant in person

Hearing dates: 7th, 8th and 9th March 2018

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JudgmentThis judgment was delivered in private. The judge has given leave for this version of the judgment to be published on condition that (irrespective of what is contained in the judgment) in any published version of the judgment the anonymity of the children and members of their family must be strictly preserved. All persons, including representatives of the media, must ensure that this condition is strictly complied with. Failure to do so will be a contempt of court.

Mrs Justice Roberts:

A. Introduction

  1. This matter has a lengthy, and depressing, history in terms of its journey through the courts as a piece of matrimonial litigation. Since October 2013, when I dealt with the initial fact-finding enquiry, the case has absorbed more than 24 days of court time. It returned to me in circumstances I shall describe on 7 March 2018. On that occasion it was agreed that there was insufficient time to enable me to deliver a judgment at the conclusion of the case. This is my reserved judgment in what I hope and intend to be the final occasion on which the court will be called upon to consider the financial repercussions of these highly acrimonious divorce proceedings.

  2. The issue before the court is the extent to which it is now necessary to revisit the means by which value is to be extracted for each of the parties from the matrimonial assets pursuant to an order which I made as long ago as 1 May 2015 (``the original mainframe order''). Before setting out my conclusions about these matters, I propose to deal briefly with the background to these proceedings. I shall then set out the basis on which I have jurisdiction to make the changes which both parties seek in terms of structure and implementation. Finally, I shall set out my conclusions.

  3. I shall continue to refer to the parties as ``the husband'' and ``the wife'' notwithstanding the fact that their marriage was dissolved over five years ago in February 2013.

    B. The background

  4. The husband is 67; the wife is 52 years old. He has remarried and now has a seven year old daughter. Together they have three daughters each of whom is now a young adult in tertiary education.

  5. Much of their married life was spent in Russia where the husband worked in the oil and gas industry. During the marriage, properties were acquired in Moscow as investment vehicles. The husband was earning a substantial income and was able to accumulate savings. By the time they separated in mid-2010, their assets amounted to more than £6 million. In the context of the marital breakdown, each made serious allegations about the other in terms of litigation misconduct. As I was subsequently to find after a ten day fact-finding hearing in October 2013, each had behaved reprehensibly in terms of their obligations to one another and the court to make full and frank disclosure of their financial circumstances. The husband had failed to disclose the existence of an offshore bank account which held US$850,000. His non-disclosure was aggravated by the fact that he forged bank statements which would otherwise have revealed the extent of his fraud. For her part, the wife had undertaken a series of property transactions without the husband's permission which resulted in a financial loss to this family of c. £1 million. To add insult to injury, by the time of what was anticipated to be the final hearing in July 2014, their combined costs bill stood at some £1.25 million.

  6. By the time of the final (distribution) hearing in July 2014, the global assets available for division were agreed to be just in excess of £5 million. Of that sum, £1.76 million was tied up in pension funds which were already being drawn by the husband who had effectively retired from paid employment. As I found, their combined (unpaid) costs bill then amounted to just under 40% of the remaining liquid resources which were needed to provide homes for each of them, an income stream for the wife and the discharge of a significant raft of debt which she had built up. As I said then,

    ``In this context, it is a staggering figure. The near financial ruin which these proceedings have inflicted on this family is compounded by the fact that, even now, each continues to spend significant further sums on various private detection agencies doggedly pursuing the other in terms of their mutual suspicions that each has still to make full and frank disclosure of their finances. They are sums which this family cannot afford .....''.

  7. That bleak vista has not improved over the last four years. What had been transformed into a needs-driven case in 2014 remains a case informed by ongoing needs in circumstances where the resources available to meet those needs are likely to be even further stretched as a result of the near collapse of the Russian property market over the intervening months and years.

  8. For some time, neither party has had the resources to instruct lawyers. The wife is now being sued by her previous solicitors who have already obtained a partial default judgment against her in respect of unpaid legal costs. The husband is still living in rented accommodation in Edinburgh with his young family. He accepts that his aspirations in respect of a future housing fund will inevitably be much more modest than he (and the court) had originally envisaged. Whilst the wife appears to have been dividing her time between England and Russia, she continues to occupy the former family home in Berkshire whilst she is in this jurisdiction. Although she is not paying rent, there is a mortgage on that property of just under £300,000. Under the terms of the original order, that liability is for her account.

  9. For the purposes of the current hearing before me in March this year, the husband was able to secure the services of his previous counsel, Richard Sear, on a pro bono basis. The wife was unrepresented. However, I am entirely satisfied that her knowledge and understanding of this case and the issues which have arisen, together with my own detailed knowledge of the background, meant that she was not at any disadvantage in the presentation of her case.

    C. My conclusions at the end of the July 2014 hearing and the order made on 1 May 2015 as a result of the husband's subsequent Barrell application

  10. My judgment in respect of the original distribution exercise is reported as US v SR (No. 3) (Adverse Inferences/costs order reflecting litigation misconduct) [2014] EWHC 24 (Fam). In respect of the available assets I made the following findings:-

    (i) Property FC, the former matrimonial home in Berkshire, had an agreed value of £1.1 million with an equity of £777,000. The property was to be transferred to the wife who would take over responsibility for the mortgage. This was agreed on the basis that she would continue to make her permanent home in England for the foreseeable future in order to make herself available to the three children who were continuing their education in this jurisdiction.

    (ii) One of the Moscow investment apartments acquired during the marriage, Property A, had an agreed value of US$1.05 million (c.£613,000). The wife was in receipt of the rental income of some £27,500 per annum. The property was, and is, mortgage free. She was to retain that property as a vehicle for generating future income.

    (iii) Of the other property in Moscow, Property R, I said this at para 13 of my judgment:

    ``This is the Moscow property which has generated a great deal of controversy both in terms of its value, and in terms of the husband's suspicion that the wife's underlying agenda is to retain the property as a home for herself in the event that she decides to return permanently to Moscow in a few years' time when the children have completed their education in this jurisdiction. The wife accepts that she may well leave England when she no longer needs to be here for the children. However, without rehearsing at length the oral evidence which I heard on this subject, I am satisfied that the wife is fully aware of the urgent need for funds to be realised from the sale of this property. Whatever aspirations she may once have had, the plain fact of the matter is that, without releasing equity from this property, neither the husband nor the wife is going to have the financial means to run their lives, clear debt and provide for their future needs in terms of homes and incomes.''

    The best available evidence at the time was that the property had a gross sale value of US$3.5 million. The marketing agents believed that a sale at a figure of US$3 million could be achieved within a time frame of six to nine months. A mechanism was put in place for marketing Property R on the basis that, after top-slicing costs, tax and an education fund for the children of £100,000, each party would receive 50% of the net proceeds or the equivalent of c.£926,000 less any claw back for additional tax and expenses. From his share of the sale proceeds, the husband was to pay the wife a capitalised sum of £30,000 to cover his future contribution towards the children's expenses. His contribution was crystallised at that level because of (i) the children's ages, and (ii) his dependence on pension as his sole source of income. In relation to costs, I...

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