Zimina v Zimin, Court of Appeal - Civil Division, October 05, 2017, [2017] EWCA Civ 1429

Issuing Organization:Civil Division
Actores:Zimina v Zimin
Resolution Date:October 05, 2017
 
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Case No: B6/2016/3070

Neutral Citation Number: [2017] EWCA Civ 1429

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

FAMILY DIVISION

Mrs Justice Roberts

FD14F00368

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 05/10/2017

Before:

LORD JUSTICE PATTEN

LORD JUSTICE FLOYD

and

LADY JUSTICE KING

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Between :

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Lewis Marks QC and Catherine Cowton (instructed by Stewarts Law LLP) for the Appellant

Richard Todd QC and Nicholas Yates (instructed by Vardags) for the Respondent

Hearing dates: 14, 15 June 2017

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JudgmentLady Justice King:

  1. This is an appeal against an order made by Mrs Justice Roberts on 13 July 2016. The respondent (wife's) application had been made pursuant to the Matrimonial and Family Proceedings Act 1984 Part III: Financial Relief in England and Wales after Overseas Divorce etc. (MFPA 1984 or Part III). By her order the judge ordered the appellant (husband) to pay to the wife a lump sum of £1,148,480 (£1.14m) together with provision for the children of the marriage.

  2. The issue before the court relates not to the quantum of the lump sum in itself, but as to whether it was appropriate in all the circumstances of the case for the judge to have made a lump sum order at all.

  3. The case turns on the proper application of sections 16 - 18 MFPA 1984 against the backdrop of the decision of the Supreme Court in Agbaje v Agbaje [2010] 1 AC 628 (Agbaje). This case specifically relates to a situation where, following foreign divorce proceedings, a foreign consent order was made with a number of ancillary agreements, in circumstances where both parties had legal representation. The terms of the order having been implemented, five years later (there having been no change in her circumstances) the wife made an application under Part III seeking substantial additional provision for herself.

  4. It is accepted by both the appellant and respondent that it is unusual for an order to be made under Part III where a foreign order is in place. The question for the judge, and now for this court, is whether this is one such case.

    Background

  5. The husband and wife are Russian nationals who married in Moscow in 1997. There are three children of the marriage, now aged 20, 19 and 17 years old. In August 2004 the family moved to London where they lived in rented accommodation until August 2007 when a substantial property in Kensington (the Kensington house) was bought for the family as a home. By the time the property was ready for occupation the marriage had failed and the wife and children moved in without the husband.

  6. The wife continues to live in the Kensington house with the two younger children of the family. The husband has remarried and has two young children, each of whom suffers from serious health problems. The husband now divides his time between homes in Cyprus and Bulgaria.

  7. It is common ground that all the wealth in this case was created by the husband's father, Dr Z. Dr Z's personal wealth was said to be in the region of $182m. Dr Z is a highly respected Russian philanthropist whose money has been largely used, through the vehicle of a charitable foundation, D Foundation, for philanthropic purposes and, in particular, the development of science and education in Russia.

  8. On 18 February 2005, Dr Z settled the BMT Trust, an irrevocable Bermudan settlement. Dr Z and the D Foundation were the two main beneficiaries, with provision, on Dr Z's death, for the husband, his children and Dr Z's wife (Mrs Z) to become members of a discretionary class. The BMT Trust bought and owned the Kensington house through a company, Kopt Development Ltd (``Kopt''). The BMT Trust also provided that, in the event of the husband's death, the wife was to receive an annuity, payable monthly for the rest of her life, at a minimum rate of $20,000 per calendar month. Both the BMT Trustees, and Kopt were joined as parties to these proceedings but have played no part in the litigation although they have been involved from the side-lines.

  9. In parallel with the arrangements through the BMT Trust, a further trust, the M Trust, was funded by Dr Z, but settled by Mrs Z. The husband and the wife were among the beneficiaries under this Trust and it was this Trust from which the family's day-to-day living expenses were funded. The Trust was wound up during the course of 2008.

    The Russian Proceedings

  10. On 1 September 2008, the marriage having broken down, immediately prior to the wife and children moving into the Kensington house, the husband sent an email to the wife (copied in to Dr Z) which confirmed the details of their separation. Having dealt with a number of personal matters the husband turned to what he described as the ``material position'' saying :

    ``2. However my relations with Ella develop and whatever changes may occur in Ella's personal life, I believe it essential and I will apply my efforts in good faith to finance the basic education of the children at private schools (and subsequently at university), medical care for the children, the residence of the children at [the Kensington house], reasonable expenses for [the] children's clothes, food and transport.

    Please note: Ella is an integral part of the children's lives, so her accommodation is also guaranteed.''

  11. On 1 November 2008 the husband issued divorce and associated financial proceedings in Russia. On 28 November 2008 a draft settlement agreement provided for each party to retain the assets held in their own name, with the wife to have a Moscow apartment and the husband their Russian country house. The wife and the children were to live in the Kensington house and the husband was to pay rent to Kopt on their behalf. Although it was some months before a detailed agreement was reached, this proposal formed the basis of the ultimate order made by consent in the Russian courts.

  12. Matters stalled for a number of months whilst the wife attempted, and ultimately failed, to bring proceedings in England. Meanwhile, Mr Harper, of Withers who represented the wife, wrote to the trustees of the M Trust indicating that they would be shortly making an application under Part III of the Matrimonial Family and Proceedings Act 1984. Mr Harper asked for a full set of the trust documents and accounts. On 26 February 2009 the trustee's solicitors sent Withers a bible of trust documents for both the BMT Trust and the M Trust, (the latter of which had already been wound up), together with undertakings not to take any steps intentionally to prejudice the wife's or children's interests in the BMT Trust.

  13. On 1 April 2009 the husband's solicitors wrote to Withers saying that the husband would pay the rent on the Kensington property, together with child periodical payments and school fees. On that basis, they said that any application for leave to bring proceedings under the 1984 Act would be opposed. Two days later, on 3 April 2009 the Trust's solicitors wrote to Withers saying that the trustee ``was and is sympathetic'' to the wife's wish to remain in the Kensington property and offering reassurance that there was no intention to sell the property in the foreseeable future. A further letter of comfort on similar lines was sent on 8 June 2009.

  14. At a hearing on 30 June 2009 the Russian judge expressed, in robust terms, his wish for the case to be settled, indicating that he was considering reporting the parties to the Russian tax authorities. It would seem that such a report would have been in the context of the husband being the alleged wrongdoer, and the wife a witness. In her first witness statement the wife said in relation to the negotiations leading up to the settlement:

    ``....(H) refused to participate in the renewed negotiations but once I told him that I would co-operate in the tax investigation which that judge threatened to instigate unless we reached an agreement, he produced an amended agreement, now in its third version. We signed the document...''

  15. It was this document of July 2009 which was incorporated into an order dated 21 August 2009. Pursuant to the order, the wife retained investments in her own name and a flat in Moscow to a total value of $10m out of total assets of $13.3m (this settlement, it is agreed between the parties, is equivalent to £5.1m when converted to sterling using the exchange rate applicable at that time.)

  16. The same, or the following, day the wife's tenancy in respect of the Kensington house was extended for a further three years. The Russian order contained a number of additional clauses agreed between the parties of a type often found in recitals to an English order. In particular:

    ``To approve the amicable agreement concluded between B D Zimin and E V Zimina regarding the following:

  17. Any property, including real property, personal property, stock, deposits, shares in capital assets of organizations, financial and other investments, property in trusts and funds in bank accounts acquired during the time of the marriage is the property of that Party in whose name the indicated property was registered.

    . . .

  18. The parties have concluded this agreement as obligatory for them in all countries of the world, wherever they may live, and wherever their property may be located.

  19. This agreement will comprehensively regulate all property and financial relationships between the parties.''

  20. The order and the circumstances leading up to the agreement as reflected in the order were the subject of extensive evidence and led to Roberts J making the following findings:

    i) That the wife was at all times represented by both English and Russian lawyers.

    ii) That following the Russian judge having questioned whether tax liabilities had been evaded through the various movements of funds which had funded the parties' lifestyle, the wife had threatened the husband that she would give evidence against him if they did not reach agreement.

    iii) At the time the order...

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