In Xanthopulos v Rakshina [2023] EWFC 50, the court was concerned with a claim made by the husband under Part III of the Matrimonial and Family Proceedings Act 1984 (MFPA 1984). With the parties spending almost £9m in legal fees between them, and the litigation being described as ‘some of the most costly and destructive litigation imaginable', Sir Jonathan Cohen considered the weight to be given to post-nuptial agreements and litigation misconduct.
Practical implications
In his judgment, Sir Jonathan Cohen stated that, when considering claims under MFPA 1984, Pt III, the parties’ connection to England and Wales is to be considered. He noted that, in some cases, the degree of connection to England and Wales can be determinative, but in others the importance of this factor can be diminished by other case-specific factors such as in this case.
The judgment in this case reaffirms the guidance set out by Lord Phillips in Radmacher (formerly Granatino) v Granatino [2010] UKSC 42, [2010] 2 FLR 1900, when considering the weight to be given to nuptial agreements. Within that case, Lord Phillips concluded that ‘the court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement’ so as to uphold ‘respect for individual autonomy’. Lord Phillips recognised that ‘it would be paternalistic and patronising to override their agreement simply on the basis that the court knows best’, particularly where the nuptial agreement in question ‘addresses existing circumstances and not merely the contingencies of an uncertain future’.
In this case, Sir Jonathan Cohen noted that needs and compensation, the first two of the three strands identified in White v White [2000] 2 FLR 981 and Miller v Miller; McFarlane v McFarlane [2006] UKHL 24, [2006] 1 FLR 1186, can most readily render nuptial agreements unfair. He expanded by stating that, when entering into nuptial agreements, parties are unlikely to intend to enter into such agreements if this were to lead to one party being in a position of real need while the other party enjoys a sufficiency or more, which would likely render it unfair to hold the parties to the terms of such an agreement. Further, Sir Jonathan Cohen went on to state that if the devotion of one party to looking after the family and the home enables the other to accumulate wealth, it is likely to be unfair to hold the parties to a nuptial agreement that would enable the latter to retain the full extent of the wealth they were able to accumulate. He added that, where the factors of needs and compensation do not apply, and both parties are able to meet their own needs, fairness may not require a departure from the parties’ nuptial agreement. It is in relation to sharing, the third strand, that the court is most likely to make an order in the terms of the nuptial agreement.
Litigation misconduct was also considered as part of the factors under section 25 of the Matrimonial Causes Act 1973 (MCA 1973). In his judgment, Sir Jonathan Cohen reiterated that it is well-established that litigation misconduct can be taken into account as conduct within the terms of MCA 1973, s 25(2)(g), per Rothschild v De Souza [2020] EWCA Civ 1215, [2021] 1 FLR 996. In Rothschild it was held that such litigation conduct can justify a party receiving less than their needs.
Sir Jonathan Cohen also considered the approach to be taken in situations where solicitors exceed the sums granted by way of a legal services payment order (LSPO), as had happened with the husband’s solicitors in this case. He said that ‘it is not the job of the court to act as the insurers of solicitors who overshoot, let alone dramatically overshoot, the sum provided by way of LSPO’ and reiterated Cobb J’s judgement in Re Z (No 2) [2021] EWFC 72 and stated that ‘if solicitors run short of funds then it is their duty to apply to the court for a further order’ and that continuing work when the LSPO has already been exceeded is done ‘at their own risk’. Sir Jonathan Cohen went further by making suggestions of methods to reduce costs. He stated that ‘judicial continuity would be a huge advantage’, unlike in this case where the children and finance proceedings were initially dealt with by a range of different judges before being allocated to him. It was also suggested that a ‘far stricter’ approach should be considered as to how LSPOs are to be utilised, perhaps with the provision of funds being ‘firmly tied to compliance with court orders’ to avoid situations such as in this case where the husband repeatedly breached court orders.
Background
Described as a case with a ‘depressingly lengthy history’, Xanthopulos concerned the husband’s application for financial remedy orders pursuant to leave given under MFPA 1984, Pt III.
The husband, aged 43, moved to Athens aged nine or ten having been born in Russia, before moving to Moscow to study at university. The wife, aged 42, was born in Siberia but also moved to Moscow to attend university, where the parties met. They started dating in 1999 but separated briefly in early 2005 before reconciling later that same year, before marrying in Moscow in March 2006. The case therefore concerned a marital relationship of 14-15 years. The parties made a home together in Siberia. Their eldest daughter was born four months after their marriage, before their youngest child was born a number of years later in September 2016.
The work ethic of the wife and her family was noted. The wife started working part-time in late 2006, in her family business which her father established in 1993. She started working full-time from 2008 and soon after was appointed as CFO where she was in charge of the accounts and banking side of the business. This was considered to be an administrative role rather than strategic. The husband worked in the wife’s family business starting in late 2006, albeit for only 18 months. This was his last employment.
In 2010 the wife’s family purchased the parties’ family home in Siberia. The family moved in in December 2012.
The parties moved to London in 2011 to enable their eldest daughter to have an English education. They lived in a rental property splitting their time between London and Siberia. The wife continued working in the family business. They returned to Russia in 2013.
The parties’ marriage was not running smoothly and they had periodic arguments. The wife questioned whether the husband had only married her for her money, which the husband denied. They entered into a post-nuptial agreement in Moscow in 2013 which stipulated that they were each to retain their own assets.
Between 2012 and 2014 the wife received from her mother the sum of £12.7m. The wife’s case was that this payment was made for the benefit of the eldest child, to fund her education and future to enable her to be financially independent, albeit no formal trust was set up.
In 2016 the parties returned to London to enable their eldest daughter to have one more year at her primary school before starting secondary school in London. In February 2016 the wife purchased her London home for £6.25m. In September 2016 she gave birth to their second daughter.
In 2020 the family returned to Siberia foreseeing the Covid lockdown. They returned to London at the start of the new school year. On 1 September 2020, the wife purchased two flats in London with money provided by her brother. It was determined that the flats were held by the wife in trust for her brother and that she was not the beneficial owner.
The wife described the family’s standard of living as ‘very comfortable but not profligate’, a description which Sir Jonathan Cohen accepted. It was thought that the wife had made all financial contributions to the family but the contributions to the children were said to be equal.
The parties’ relationship ended when the husband issued a petition for divorce in England on 21 September 2020. He then obtained a without-notice freezing order on 2 October 2020. The husband served his divorce petition and freezing order later that night 2 October 2020, which came out of the blue for the wife. The husband left the London home in late 2020. The parties’ divorce was granted on 11 March 2021 in Russia and the husband was granted permission to apply under MFPA 1984, Pt III on 15 June 2021.
Children Act 1989 proceedings
The proceedings under the Children Act 1989 were described by Sir Jonathan Cohen as ‘very protracted and complex’ and ran concurrently with the financial remedy proceedings. In the children proceedings the parties ‘fought bitterly over which jurisdiction should prevail and almost every substantive decision of the court in both jurisdictions has been the subject of appeals’. Proceedings in England concluded in the summer of 2022, but continued in Russia regarding the husband’s contact with his youngest child.
MFPA 1984, Pt III
Sir Jonathan Cohen described the financial remedy proceedings as ‘some of the most costly and destructive litigation imaginable’ with in excess of 60 hearings taking place across England and Russia and with the husband changing solicitors an astonishing seven times. He recorded that ‘the total costs of their litigation about jurisdiction, children and money are now approaching £9 million’, all of which was funded by the wife. This was described by Sir Jonathan Cohen as a ‘grossly exorbitant use of the court’s time and [the wife’s] money’ which had been ‘contributed to in significant part by [the husband’s] failure to comply with court directions and the repeated LSPO applications’.
On 22 January 2021 the wife was ordered to pay to the husband the monthly sum of £20,000, half for the purpose of funding the rental of a London property and half by way of maintenance. By this point the proceedings had commenced with ‘ferocious intensity’.
The husband made many LSPO applications and the wife was required to fund both party’s legal costs, and the costs of her daughter who was represented separately in the children proceedings, which was described by the wife as a 'Kafkaesque nightmare’.
A matter of days before the final hearing, on 9 March 2023, the husband made an application to adjourn the final hearing which was initially due to start on 13 March 2023. The application, which was considered at a remote hearing, was refused but the start date for the final hearing was pushed back to 15 March 2023. The husband attended the remote hearing but his camera remained switched off, with his location unknown.
By the time the matter reached final hearing, the husband had failed to provide a number of key documents including his MCA 1973, s 25 statement, housing particulars, replies to the wife’s schedule of deficiencies, updating disclosure, medical records, or any open offer.
When the final hearing commenced, the husband failed to attend and his whereabouts was unknown. He had ‘simply vanished’. His solicitors attended day one of the final hearing but departed that same day. They informed the court that they were in contact with him but that they were unable to discharge their professional obligations and as a consequence had to withdraw. An application was made to come off the court record, which was approved. The final hearing took place between 15 and 22 March 2023. Sir Jonathan Cohen was asked to consider striking out the husband’s claim under Family Procedure Rules 2010, SI 2010/2955, 4.4, but he decided against that course, primarily because it would likely have resulted in further litigation which would have prevented a resolution to matters.
The parties’ assets
The wife’s assets included
The wife’s debts included the sum of £1.367m owed to her mother and £176,000 owed to her solicitors. She also owned a 25% share in her family businesses, but it was considered that she had no beneficial interest in those shares and that the family business was owned by her father and brother only. Her net assets amounted to around £12.9m, excluding her jewellery and her interest in the family business. Only £2m of this was considered to be matrimonial (that being the sum she put into the purchase of the London property). Further, she earned a modest salary of around £60,000 pa.
The husband on the other hand had no assets of significance and had no income since 2008. He did however incur a liability to his multiple solicitors for their costs. He was considered to be capable of earning his own living and meeting his own needs, although it was thought that he would need some time to be in the position to do so as the proceedings had had a substantial impact on him.
Court’s considerations
When considering the husband’s case under MFPA 1984, Pt III, Sir Jonathan Cohen considered the parties’ connection to England and Wales. At the time of the final hearing, the wife and the youngest child lived in the family home in Siberia. The eldest daughter remained in England to attend school. Then wife travelled to England to visit her daughter and for the purpose of these proceedings. The husband rented a property in London, but it was unknown how much time he spent there. This case was considered to be one which fell in the middle ground between the ‘very close and the tenuous’. Sir Jonathan Cohen considered that the parties’ connection with England and Wales was to provide their children with an English education, which led to them owning their own home in London, although no time was spent in England outside of school term time and their main home remained in Russia. It was noted that in some cases the degree of connection to England and Wales can be determinative. However, in this case the importance of this factor was diminished by the impact of the post-nuptial agreement, the husband’s litigation conduct and the costs resulting therefrom, and the modest matrimonial element of the parties’ assets in this case.
Consideration was given to the weight to be given to the parties’ post-nuptial agreement. It was the wife’s case that the husband arranged the meeting whereby the parties prepared the agreement which they subsequently entered into. The wife instructed that the husband declined to accept her offer of payment of $1m in the event that she initiated divorce proceedings against him and stated that he did not want any money. Sir Jonathan Cohen accepted the wife’s account of events to be accurate. He considered whether it would be unfair to hold the parties to their agreement. He held that it was freely entered into by the husband and wife with full knowledge of the financial situation. At the time the agreement was entered into, the husband was aged 32 and had the opportunity to build a career. Sir Jonathan Cohen concluded that it was not for the court to overrule the terms that the husband chose when entering into the post-nuptial agreement.
Consideration was also given to litigation misconduct and costs. Sir Jonathan Cohen considered that the litigation misconduct considered in Rothschild did ‘not begin to approach what has happened in this case’. He considered the extent of the costs in the children litigation to be ‘horrifying’, with both parties litigating ‘furiously in England and Russia’, but that it was not something which could be taken further into consideration.
In terms of the financial remedy proceedings, Sir Jonathan Cohen considered the costs incurred by the husband to be ‘wholly disproportionate in many different ways’ which ‘caused [the wife] to incur excessive and unnecessary expense’. He changed solicitors on seven occasions and was represented by seven firms (one of whom was instructed on two separate occasions), 12 King’s Counsel and an array of juniors, ‘duplicating enormously the costs’. It was considered that ‘there could not be a justification for [the wife] funding that cost’. The husband also made 11 LSPO applications throughout the proceedings, often without a budget or with a budget provided very late, and sometimes without formal applications having been issued. He regularly breached orders, with the wife alleging 35 breaches of 15 orders made. Sir Jonathan Cohen stated that he did not have ‘the slightest doubt that this litigation would never have been conducted by [the husband] in the way that it has been if he was paying his costs from his own pocket’. The husband also forced the wife into initiating injunction proceedings when he refused to delete and return to her privileged documents which were disclosed erroneously, which led to further costs being incurred. Further, the husband failed to make any offers throughout the proceedings despite the wife making two offers in May 2021 which were considered my Sir Jonathan Cohen to be of a higher value than any settlement he would receive under the order. It was considered that the husband had taken no constructive steps since the first directions appointment on 28 April 2022 and by the time the matter reached the final hearing, costs orders had already been made against the husband in favour of the wife and her brother, totalling approximately £1m. On this point Sir Jonathan Cohen concluded that ‘appropriate orders for costs would completely eliminate any sharing claim that [the husband] might have and leave a large deficit. This must inevitably impact upon his needs-based claim’.
It was considered that ‘the financing of this case had become completely out of control’ with the sums incurred being ‘beyond any reasonable comprehension’. Across all sets of proceedings, the wife’s costs amounted to £4.266m and the husband’s costs amounted to £4.15m with a total of £5.4m being spent between them on the finance matter alone. All costs had been funded by the wife, save for £900,000 of this which the husband owed his solicitors and save for the wife’s brother’s costs. The husband’s solicitors exceeded the sums granted by way of LSPO by an astonishing £900,000.
The husband’s claim
The husband sought the provision of housing in both London and Athens at a cost of some £8.5m, which was described as a ‘grossly inflated claim’ and one which ‘could never have been justified’. Sir Jonathan Cohen determined that he did not have the need for a home in London.
Court’s decision
The wife was ordered to fund a housing fund for the husband in the sum of €600,000, on the presumption that he would make his home in Greece where the majority of his family resided, to be held so as to revert to the children when the youngest child obtained her majority, the benefit being the home will not be available to any creditors. The husband was to have the occupation of the property until he no longer needed it, on the basis that he was unlikely to be able to build up sufficient funds to purchase a property by the time the youngest child obtained her majority, and the wife was unlikely to need the funds the sale of the property would realise in any event. The wife was also ordered to fund the purchase costs including the grant of an usufruct and any property purchase tax, as well as the sum of €60,000 to furnish the property. The wife was also ordered to fund the husband’s maintenance for a period of four years, initially at the rate of £75,000 pa for the first year, reducing to £60,000 pa for the following three years.
The order was made on the basis that the costs orders already made in favour of the wife and her brother were not to be enforced without leave of the court. The wife also agreed to not pursue costs orders in respect of other matters from which she may be entitled.
Sir Jonathan Cohen adopted a ‘needs-light' approach when determining this matter, consistent with the post-nuptial agreement and the merits of the case.
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