FPR 4.1(6) was not the correct procedural route applicable to set aside or variation applications pertaining to final financial remedy orders. Accordingly, the Family Division, ruling on an application which arose in proceedings concerning the enforcement of a debt owed which a husband owed to a wife, held that there should be no variation of certain orders made in earlier proceedings, which required artwork and a yacht to be transferred to the wife. The court also held that there should be no stay of the wife’s claim against two respondents, in circumstances where the purpose of the Liechtenstein proceedings was different, holding that the fact that certain of the relevant assets were held in Liechtenstein did not mean that her claims were governed by Liechtenstein law. The court further ruled that the balancing exercise fell squarely in favour of making orders for disclosure in favour of the wife against two of the respondents in the proceedings.
 All ER (D) 01 (Sep)
*Akhmedova v Akhmedov and others
 EWHC 2235 (Fam)
14 August 2020
Divorce – Financial remedies – Applications for disclosure, variation of orders and stay of proceedings
In earlier proceedings, the judge had ordered the husband to pay the wife £453,576,512 by way of financial remedies consequent on their divorce. The husband had not voluntarily paid a penny of that award and, to date, enforcement had realised only about £5m. The tenth respondent, T, was alleged to have played a key role in assisting the husband to evade payment. The litigation between the parties (alongside the other respondents) was currently concerned with the enforcement of the debt which the husband owed to the wife.
Three applications were before the court for determination: (i) the wife’s application for disclosure from the eighth and ninth respondents, Counselor and Sobaldo, in support of her claims under s 423 of the Insolvency Act 1986 (IA 1986) and s 37 of the Matrimonial Causes Act 1973 (MCA 1973); (ii) an application by Counselor and Sobaldo for a case management stay of the proceedings, pending the outcome of proceedings in Liechtenstein; and (iii) an application by the first five committal respondents (Qubo 1, Straight, Counselor, WalPart and Sobaldo) to be released from their obligations under the orders made by the court in December 2016, March 2018, and August 2019.
(1) The court considered the proper approach to foreign law and considerations of comity.
It was well-established that an English court could, applying English law, order a party to do something which was or might be contrary to a foreign law (including criminal law). English courts had to have regard to their own interests in making the relevant order and did not, and could not, simply assume that foreign law took priority. Naturally, the English court did not lightly make orders which required breach of a foreign criminal law, but it was not in any sense precluded from doing so. Once the court had decided to make the order, the fact that compliance would or might constitute a breach of a foreign law did not excuse non-compliance with that order. Thus, one relevant consideration was the risk of prosecution and sanction in the foreign state. Another was the nature of the court’s orders and the circumstances in which they were made (see - of the judgment).
Comity was the legal doctrine under which courts in different jurisdictions recognised and enforced each other’s decisions, as a matter of courtesy and respect, based on the need for reciprocity, but not necessarily as a matter of law. It involved self-restraint in refraining from making an order which more properly appertained to the jurisdiction of a foreign state. It was also a two-way street, requiring mutual respect between courts in different states. That comity required a recognition of the territorial limits of each court’s enforcement jurisdiction, in accordance with generally recognised principles of customary international law (see  of your judgment).
It was settled law that, while comity involved self-restraint in refraining from making an order on a matter which more properly appertained to the jurisdiction of a foreign state, the courts of one country might legitimately wish to state plainly how they saw the issues in a case in which they had a legitimate interest, in the hope that their perspective might assist the foreign court in its judgment of the matter. That was not the same as trying to dictate to a foreign court how it should decide a matter within its own jurisdiction (see  of the judgment).
Thus, English courts would, in some circumstances, make an enforcement order against a defendant over whom there was in personam jurisdiction which affected property situated abroad. However, they would only do so subject to such orders being recognised and enforced by the courts in the state where the property was situated. In that way English courts ensured that their orders did not have exorbitant effect and did not infringe the sovereignty of the state concerned. An in personam order against a person/entity subject to English jurisdiction might be contrary to international comity because of its extra-territorial effect, in which case it would not be permissible to make such an order as a matter of international law (see - of the judgment).
The distinction between in personam orders which did infringe those principles and those which did not was to be determined by having regard to the following: (a) the connection of the person who was the subject of the order with the English jurisdiction; (b) whether what they were ordered to do was exorbitant in terms of jurisdiction; and (c) whether the order had impermissible effects on foreign parties (see  of the judgment).
Brannigan v Davison  AC 238 considered; Societe Eram Shipping Co Ltd v Cie Internationale de Navigation  UKHL 30 considered; Masri v Consolidated Contractors International Co SAL  EWCA Civ 303 applied; Masri v Consolidated Contractors International UK Ltd  EWCA Civ 1367 considered; Masri v Consolidated Contractors International SAL  EWHC 1024 (Comm) considered; Masri v JouJou  EWCA Civ 746 considered; Bank Mellat v Her Majesty’s Treasury  EWCA Civ 449 considered; Byers and others v Samba Financial Group  EWHC 853 (Ch) considered; SAS Institute Inc. v World Programming Ltd  EWCA Civ 599 considered.
(2) Whether the proceedings should be stayed, pending the outcome of the proceedings in Liechtenstein.
The court’s power to stay proceedings was an ancient common law remedy and was expressly preserved by s 49(3) of the Senior Courts Act 1981 (SCA 1981) (see  of the judgment).
A relevant factor which the court could take into account when it considered whether to stay English proceedings was the risk of inconsistent decisions. The possibility of inconsistent findings could also be a powerful reason in favour of a stay even where the defendant was not party to the foreign proceedings, such as not to be bound by them. The authorities indicated that it made good commercial sense for the court to have regard, where appropriate, to the orderly resolution of the dispute as a whole, if necessary, by granting a temporary stay. Minimisation of the risk of inconsistent decisions and the avoidance of unnecessary duplication and expense was amply supported in the case law. However, it was plain from the authorities that, though the jurisdiction to grant a stay was a broad one, its exercise was cautious (see  of the judgment).
SAS Institute Inc v World Programming Ltd  All ER (D) 102 (May) was not authority for the proposition that the (English) court could not determine liability against the respondent who had submitted to the court’s jurisdiction, but whose assets were situated abroad. However, the enforcement of the (English) court’s eventual orders arising from the determination of liability might be circumscribed in the manner described in SAS v WPL if those assets were situated elsewhere and where recognition and enforcement was not available in Liechtenstein where the assets were situated (see  of the judgment).
In the present case, balancing all the factors, and for the reasons given, the application by Counselor and Sobaldo for a stay of the proceedings against them would be refused. The circumstances of the present case - when considered in the light of the overriding objective and the relevant case law which required a cautious approach to be taken to the exercise of the power to stay properly brought proceedings - were insufficient to be described as rare and compelling (see  of the judgment).
The court was not persuaded that it should reject the application by reason of relevant delay. Counselor and Sobaldo had issued the stay application shortly after they had filed their defence and had issued it before the close of pleadings. It had, therefore, been issued at the earliest reasonable juncture in the context of the IA 1986 s 423 claim. Even if there had been delay, the court would have had to assess the stay application on its merits in any event (see  of the judgment).
Analysis of the wife’s pleaded claim in the Liechtenstein civil proceedings and the s 423 claim suggested substantial legal, factual, and evidential overlap between both claims. The subject matter of the proceedings was not entirely different from the way that the wife contended (see - of the judgment).
The wife was on stronger ground in asserting that the purpose of the Liechtenstein proceedings was different. Those proceedings sought to replicate the relief already granted by Haddon-Cave J in 2016, namely, to preserve and recover the artwork which was the only remaining asset of Qubo 1 and Qubo 2. The s 423 proceedings sought to recover the monetary assets. Merely having different purposes did not mean that there was not significant factual overlap between both sets of proceedings (see  of the judgment).
However, while much of the same material might well be deployed in both sets of proceedings by way of evidence, the facts which each court had to determine were different (see  of the judgment).
There was no dispute between the parties that the Liechtenstein criminal proceedings (concerning broad schemes of evasion) also overlapped with the s 423 claim. However, Counselor and Sobaldo were not under criminal investigation. The court did not accept the submission that the wife’s assertion of a civil claim for damages against them within the criminal complaint was significant. Her claim in that regard was theoretical (not even embryonic), in circumstances where neither entity had been charged with an offence or was even under criminal investigation (see  of the judgment).
Concerning the appropriate forum, the wife’s claim was made pursuant to two English statutory provisions because, on her case, the transfer of the monetary assets had been intended to frustrate the present court’s orders and to deny her the remedies to which she was entitled under English law. The fact that the assets were held in Liechtenstein did not mean that her claims were governed by Liechtenstein law. The present court had to, first, determine whether the wife was entitled to the relief she sought, based on the facts and the applicable English law principles. If she was, the court had to then exercise its discretion as to the relief which would then be appropriate in circumstances where the assets were located outside the jurisdiction. In the present case, where the court had already found the husband to have engaged in a dishonest scheme of evasion by moving assets abroad to defeat the wife’s claim, a devolution of the responsibility for the primary determination of the wife’s entitlement to a court in Liechtenstein, applying different legal principles, would run counter to the interests of justice (see  of the judgment).
Both Counselor and Sobaldo submitted that the English court should not grant relief which would require a breach of Liechtenstein law, having taken the view that they were forbidden by Liechtenstein law to transfer assets to the wife, unless she established a right to those assets under Liechtenstein law. The question of relief was a consideration which would engage the present court once entitlement had been established. Counselor and Sobaldo could make those submissions at trial when there could be a full investigation of the facts and relevant law (see  of the judgment).
Determination of the liability under English law of Counselor and Sobaldo to the wife should not be abandoned merely because an outcome in the wife’s favour might present her with enforcement difficulties in the UK and elsewhere. In fact, as comity required and as anticipated in authority, the court in Liechtenstein was expected to have regard to the present court’s view on the issues in the present case, in the hope that that perspective might assist the Liechtenstein court in its judgment of the matter (see  of the judgment).
The present court should not refuse to determine matters properly before it simply because it might be necessary to take steps to enforce any relief granted abroad. Furthermore, the claims against T could not be heard in Liechtenstein and would continue in the UK in any event (see - of the judgment).
Practically, a stay of the proceedings involving Counselor and Sobaldo would delay for years the wife’s efforts to obtain the sums awarded to her in December 2016. Moreover, while the continuance of the present proceedings would undoubtedly put Counselor and Sobaldo to additional expense, the court could not discern any additional prejudice to them which bit on the adjudication of the wife’s claim. They were free to defend it whereas, if the stay were permitted, the wife would be faced with significant obstacles affecting, for example, the properly brought claim against her son and be compelled to incur significant additional expense in initiating proceedings in Liechtenstein (see ,  of the judgment).
Bundeszentralamt Für Steuern (being the Federal Central Tax Office of the Federal Republic of Germany) v Heis and others (as the joint special administrators of MF Global UK Ltd); Deutsche Bank AG v Heis and others (as the joint special administrators of MF Global UK Ltd)  EWHC 705 (Ch) distinguished; SAS Institute Inc. v World Programming Ltd  EWCA Civ 599 explained; Metropolitan Bank Ltd v Pooley 10 App Cas 210 considered; Reichhold Norway ASA v Goldman Sachs International  2 All ER 679 considered; Curtis v Lockheed Martin UK Holdings Ltd  EWHC 260 (Comm) considered; Masri v JouJou  EWCA Civ 746 considered; Societe Eram Shipping Co Ltd v Cie Internationale de Navigation  UKHL 30 considered.
(3) Whether the variation application, for Qubo 1 and Straight to be released from their obligations to execute transfers to the wife of the artwork and the yacht respectively, should be allowed.
With respect to the artwork, paragraph 16 of the December 2016 order under the heading ‘Transfer of Property’ required Qubo 1 and Qubo 2 to transfer the legal and beneficial ownership of the artwork to the wife and to deliver up the artwork to her. Although it did not explicitly say so, it was plain that the December 2016 order was a final financial order, namely a property adjustment order within the meaning of s 24 of MCA 1973. It was also an order which granted relief pursuant to IA 1986, and so might be described as a hybrid final financial order (see ,  of the judgment).
Paragraph 9 of the March 2018 order transferred the yacht into the wife’s name pursuant to MCA 1973 s 24(1), IA 1986 ss 423(2) and 425(1)(a), such that the wife held absolute beneficial title to the yacht. Paragraph 9 of the March 2018 order transferring the yacht into the wife’s name was plainly a property transfer order pursuant to MCA 1973 s 24 of the MCA. Paragraph 10 was made pursuant to IA 1986, and so, once more, the whole order was a hybrid final financial order (see ,  of the judgment).
The August 2019 order provided, ancillary to a freezing order, that Counselor and Sobaldo should provide, to the best of their ability, information to the wife’s solicitors within seven days of service of the order (see  of the judgment).
FPR 9.9A made provision for an application to set aside a financial remedy order of the type made in December 2016 and March 2018. The orders made clearly fell within the definition of financial orders in FPR 2.3(1) (see  of the judgment).
It was settled law that four conditions had to be met before any application on the basis of new events could succeed, namely that: (i) new events had occurred since the making of the order invalidating the basis, or fundamental assumption, on which the order was made; (ii) the new events should have occurred within a relatively short time of the order having been made; (iii) the application to set aside should be made reasonably promptly in the circumstances of the case; and (iv) the application, if granted, should not prejudice third parties who had, in good faith and for valuable consideration, acquired interests in property which was the subject matter of the relevant order (see 128] of the judgment).
While the categories of cases in which FPR 9.9A could be exercised were not closed and limited to those identified in para 13.5 of PD9A, the jurisdiction to set aside was to be exercised with great caution, not least to avoid infringing upon the finality of judgements, subverting the role of the Court of Appeal, and undermining the overriding objective by permitting re-litigation of issues (see  of the judgment).
While the wording of FPR 9.9A(2) was permissive (‘a party may apply under this rule to set aside a financial remedy order where no error of the court is alleged’) permissiveness was not intended to suggest that, absent an appeal, other routes of challenge to a financial remedy order remained available. PD9A para 13.5 made clear that an application to set aside should only be made where no error of the court was alleged. If an error of the court was alleged, the correct route of challenge was an application for permission to appeal. PD30A para 4.1B made clear that an application to set aside pursuant to FPR 9.9A would be appropriate where no error of the court was alleged on the materials that ‘were before the court at the time the order was made’. However, by way of exception, permission to appeal might still be given where ‘a litigant alleges both that the court erred on the material before it and that a ground for setting aside under r 9.9A exists’. Thus, careful reading of those recently inserted provisions demonstrated that there was no reference in PD30A or in PD9A to other rules which might provide a procedural route for the setting aside or variation of final matrimonial remedy orders. Thus, it was highly doubtful, on the strict wording of the FPR, that the use of FPR 4.1(6) was appropriate to set aside a final matrimonial order since the coming into force of FPR 9.9A and the insertion of para 4.1B in PD 30A on 3 October 2016 (see  of the judgment).
There was no equivalent to FPR 9.9A in the CPR 1998 which might apply to the setting aside of orders made under IA 1986. Within the civil jurisdiction, the power to set aside a final order could only be exercised pursuant to CPR 3.1(7) and was confined only to ‘very rare’ or ‘exceptional’ cases. The court’s general power to vary such orders could be found in FPR r 4.1(6) (see ,  of the judgment).
It followed that FPR r. 4.1(6) was not the correct procedural route applicable to set aside or variation applications pertaining to final financial remedy orders (see  of the judgment).
On the facts of the present case, the application to vary the two final orders made in December 2016 and March 2018 had not been made promptly. The delay was a most serious obstacle to their variation and sat alongside the applicants’ behaviour in choosing to ignore the English proceedings, yet litigating in other jurisdictions to avoid the effects of the December 2016 and March 2018 final orders (see - of the judgment).
Further, the applicants could not bring themselves within any of the criteria in FPR PD9A para 13.5 in respect of either order. There was no fraud or material non-disclosure by the wife or mistake by the court, as defined in authority (see  of the judgment).
Thus, applying settled law, the applicants could not bring themselves within the criteria applicable to FPR 9.9A with respect to either the December 2016 or March 2018 orders. The fact that the orders had been executory did not afford the applicants a different route to setting them aside and varying them (see  of the judgment).
Turning to the relief granted pursuant to IA 1986, the applicants could not bring themselves within the ‘exceptional’ or ‘very rare’ circumstances which pertained to an application to set aside a final order within the ambit of CPR 3.1(7) (see  of the judgment).
Finally, if FPR 4.1(6) could theoretically be used to set aside an order made pursuant to IA 1986, the applicants could not, in any event, bring themselves within it (see  of the judgment).
It followed that the application to set aside and vary the final orders made in December 2016 and March 2018 would be refused (see  of the judgment).
Turning to the August 2019 order affirmed in October 2019, the delay by Counselor and Sobaldo in applying to vary the order was significant. They could not bring themselves either within FPR 27.5(3) or 4.1(6), and they could not meet all the criteria in FPR 27.5(3). Moreover, they could not demonstrate either a material change in circumstances, manifest mistake on the part of the judge or mis-statement of facts in accordance with the Tibbles criteria. Thus, their application to set aside or vary the August 2019 order would be refused (see - of the judgment).
Tibbles v SIG PLC (t/a Asphalt Roofing Supplies)  EWCA Civ 518 applied; Sharland v Sharland  UKSC 60 considered; DB v DLJ  EWHC 324 (Fam) considered; Bezeliansky v Bezelianskaya  EWCA Civ 76 considered; L v L  EWHC 956 (Fam) considered; US v SR  EWHC 3207 (Fam) considered; Terry v BCS Corporate Acceptances Ltd and others  EWCA Civ 2422 considered; Madison CF Uk v Various (2018)  EWHC 2786 (Ch) considered; Sangha v Amicus Finance plc (in administration)  EWHC 1074 (Ch) considered; Thevarajah v Riordan  UKSC 78 considered.
(4) Whether the wife’s application for disclosure should be allowed.
The balancing exercise in the present case, fell squarely in favour of making orders for disclosure against Counselor and Sobaldo. The absence of the material in question would very substantially interfere with the wife’s ability to pursue her claim and would clearly hamper the court’s ability to determine the proceedings fairly (see  of the judgment).
James Willan and Mark for the wife.
Graham Brodie QC and Richard Eschwege for the eighth and the ninth respondents, and the first to the fifth committal respondents.
Charles Howard QC for T.
Carla Dougan-Bacchus - Barrister.