The Potanin v Potanina threshold

Potanin v Potanina: Supreme Court Clarifies Part III Threshold

In 2024, the Supreme Court handed down its decision in Potanin v Potanina, providing crucial guidance on the threshold for granting permission under Part III of the Matrimonial and Family Proceedings Act 1984. This ruling has significant implications for individuals seeking financial orders in England following a foreign divorce.

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Background:  

• The parties, both Russian nationals, were married in Russia in 1983 and divorced there in 2024.
• During the marriage, the husband amassed an estimated $20 billion in wealth, largely held through trusts and corporate structures rather than in his own name.
• Upon separation, the wife received $76.1 million, but was unsuccessful in securing a larger award through Russian courts.

Following a ‘blizzard of litigation’ between the parties in Russia over the course of many years and the wife was ultimately unsuccessful in her attempts to persuade the Russian courts that she should be awarded significantly more than this sum, which did not represent her 50% share of the assets accumulated during the course of the parties’ long marriage.  

In June 2014, four months after the Russian divorce was finalised, the wife obtained a UK investor visa and later that year, she purchased a property in London. The wife claimed that this had become her permanent home since the beginning of 2017.  

Legal jounrey through the UK courts: The Part III Leave Application:  

In October 2018, the wife made a without notice application for leave to bring a claim under Part III of the Matrimonial and Family Proceedings Act 1984. In 2019, she was granted leave to apply for financial relief pursuant to Part III.  

The husband applied to set aside the grant of leave on the basis that the judge had been misled as to the facts of the case, issues of Russian law and the applicable principles of English law. In November 2019, Cohen J decided to set aside the grant of leave based on three categories of misrepresentation: (1) factual misrepresentation on incorrect information about the level of child maintenance and as to the strength of the connection to England, (2) misrepresentation as to the Russian litigation and (3) misrepresentation as to English law.   

Unhappy with this, the wife applied for permission to appeal the judge’s decision to set aside the grant of leave. The judgement was handed down in May 2021 which allowed the wife’s appeal and her Part III application to proceed. The Court of Appeal found that the judge had applied the wrong test and adopted the wrong procedure when setting aside the grant of leave.    

The husband then appealed to the Supreme Court. The judgment was handed down on 31 January 2024, and by a majority of 3:2 the Supreme Court allowed the husband’s appeal. However, the court did not agree that the wife’s case should be dismissed, but instead it had procedural issues.  

Threshold for the grant of permission:  

The Supreme Court confirmed that when considering whether there was ground for bringing a claim, “substantial” equated to “solid”.   

The threshold is higher than merely satisfying the court that the claim is not totally without merit or abusive. However, it did not need to be as high as “good arguable case”. Instead, the test would be more akin to there being a “real prospect of success”.  

Threshold on an application to set-aside leave:  

The Supreme Court also considered that the “rule one” for any judge must be that before an order requested by one party is made, the other party must be given an opportunity to object.   

Where a decision was made in the absence of one party, the other must be given an opportunity to argue that the order should be set aside or varied.   

Therefore, the practice of requiring a ‘compelling reason’ or ‘knockout blow’ violated this fundamental principle. Instead, where permission had been granted without notice, the respondent has an unconditional right to apply for that permission to be set aside, and, on hearing that set-aside application, the court should consider permission afresh, with the burden being on the applicant to show why permission should be granted.  

What does this mean for future Part III claims?  

This judgment provides valuable clarification on the criteria for granting permission when a party seeks a financial order following an overseas divorce.  

The threshold for permission has become more rigorous, requiring applicants to demonstrate that their claim has a real prospect of success, rather than simply showing that it is not entirely without merit or an abuse of process.  

This shift may deter “divorce tourists” as their claims will now undergo stricter initial scrutiny. The ruling serves as a reminder to wealthy individuals that the legislation is intended to alleviate hardship in cases of foreign divorce, rather than serve as a “top-up” for those who can afford to engage in litigation.