Potanina v Potanin [2024] UKSC 3

A Russian billionaire's ex-wife sought financial relief in England under Part III of the Matrimonial and Family Proceedings Act 1984 after their Russian divorce. The Supreme Court addressed the test for setting aside leave to apply for such relief, ruling that respondents have an unconditional right to argue against leave granted without notice.

Facts

Vladimir and Natalia Potanin were both Russian citizens who married in Russia in 1983 and divorced in February 2014. During the marriage, the husband accumulated vast wealth estimated at around US$20 billion, largely held through trusts and companies. The Russian courts divided only legally owned assets, resulting in the wife receiving a fraction of the total wealth. After the divorce, the wife obtained UK residency and in October 2018 applied under section 13 of the Matrimonial and Family Proceedings Act 1984 for leave to seek financial relief in England.

Procedural History

The wife’s application was heard without notice to the husband by Cohen J, who granted leave. The husband applied to set aside this order under FPR rule 18.11. After hearing both parties, Cohen J concluded he had been materially misled at the initial hearing, set aside the grant of leave, and dismissed the application. The Court of Appeal reversed this decision, holding that the judge could only set aside leave if the husband could demonstrate a ‘knock-out blow’ showing the court had been materially misled, which the Court of Appeal found he could not.

Issues

The central issue was whether the test for setting aside leave granted without notice under section 13 of the 1984 Act requires the respondent to demonstrate a ‘compelling reason’ or ‘knock-out blow’ (such as material misleading of the court), or whether the respondent has an unconditional right to argue that leave should not have been granted.

Judgment

The Supreme Court, by a majority of 3-2 (Lord Leggatt, Lord Lloyd-Jones, and Lady Rose; Lord Briggs and Lord Stephens dissenting), allowed the appeal.

Majority Reasoning

Lord Leggatt, delivering the leading judgment, held that FPR rules 18.10(3) and 18.11 confer an unconditional right on a respondent to apply to set aside an order made without notice. He stated:

“This right is unconditional. FPR rules 18.10(3) and 18.11 do not say that the court’s power to set aside such an order may only be exercised where there is ‘some compelling reason to do so’ or where the party applying to have the order set aside can demonstrate that a decisive authority was overlooked or that the court was materially misled.”

Lord Leggatt emphasised the fundamental principle of procedural fairness:

“Rule one for any judge dealing with a case is that, before you make an order requested by one party, you must give the other party a chance to object.”

The majority traced how the ‘knock-out blow’ test originated from obiter dicta in Agbaje v Agbaje [2010] UKSC 13, which were based on a misreading of earlier dicta and subsequently applied without proper analysis to new rules to which they were inapposite.

Dissenting Opinion

Lord Briggs, with whom Lord Stephens agreed, dissented, arguing that the knock-out blow test had been established practice for over a decade, was sanctioned by the Court of Appeal and the Family Procedure Rule Committee, and that this court should not intervene in settled matters of procedure. He stated:

“I do not believe that it is right for this court to do so… The ‘knock-out blow’ test was established by the unanimous (albeit obiter) decision of this court a long time ago… and then treated as the last word on the subject by a unanimous Court of Appeal in Traversa v Freddi.”

Implications

This decision fundamentally changes the procedure for applications to set aside leave granted without notice under Part III of the 1984 Act. The respondent now has an unconditional right to argue that leave should be set aside on the merits, without needing to demonstrate that the court was misled. The majority also clarified that the ‘substantial ground’ threshold in section 13 means a case with a ‘real prospect of success’, akin to the reverse summary judgment test.

The case has broader significance for procedural fairness, reaffirming that parties must generally be given an opportunity to be heard before final orders are made against them. The decision may also influence how without notice applications are handled more generally in family proceedings.

Verdict: Appeal allowed. The Court of Appeal’s decision was set aside, and the issues raised by grounds 12 and 13 of the wife’s grounds of appeal were remitted to the Court of Appeal for determination. The Supreme Court held that on an application under FPR rule 18.11 to set aside an order granting leave made without notice, the court must decide afresh, after hearing argument from both sides, whether leave should be granted, without requiring the respondent to demonstrate a ‘knock-out blow’ or that the court was materially misled.

Source: Potanina v Potanin [2024] UKSC 3