Financial Remedies
August 2023

To achieve a fair and equitable settlement for all parties, “the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard” is an often-vexed issue.

This case concerned a multimillion-pound financial remedy hearing between Dmitry Tsvetkov (H) and Elsina Khayrova (W). This was a 10-year marriage with substantial assets, including a £22million Surrey mansion and other properties abroad. Mr Justice Peel found there to be deceit on W’s part regarding her assets, particularly her handbag collection valued at around £1million. Despite initially declaring she owned about 20 handbags, it emerged she had over 150. She had led the court on “a merry dance about handbags”.

Peel J made findings against W of multiple instances of “sustained duplicity” including, but not limited to, repeated lies to H and the court about possessions, her Form E being woefully deficient, and taking steps at the time of separation to place assets beyond H's reach - seeking to sell shares for $2.5m well below the true value. She had communicated with a party also in litigation with H and shared financial information with them to undermine H's position. In doing so, W breached an undertaking given to the learned Judge earlier in the proceedings as well as breaching the implied duty of confidentiality. The Court therefore largely found in H's favour on the main factual and computational disputes.

Although ultimately finding that the assets should be divided on a 50/50 basis, W was deemed chiefly responsible for the costly litigation and was ordered to cover half of H’s £1.76 million legal fees in the second Judgment. She had been successful though in arguing a 50/50 case per her previous offer to settle and H was found to have overplayed his claimed losses and his position on child maintenance was also found to be unreasonable. He had advanced a specific conduct case which in a number of respects had not been successful and occupied a significant amount of court time.

Both parties sought for the judgment to be anonymised. The learned Judge did not permit this but acknowledged that authorities in this area are currently uncertain. However, publication was justified here due to the litigation misconduct of W being of the utmost gravity and thus it was in the public interest to be aware that one party has abused the system as W had. Much was already known about the circumstances of the family given a previous published judgment in other litigation and there being a dispute with a garden company in 2022 which was reported in the national press. There had also been attempts on H’s life and he had previously given interviews to the Daily Telegraph and Daily Mail. H had not paid a penny of UK tax or filed a tax return since his return to the UK in January 2018. Moreover it was hard to see how anonymisation would realistically work.

Regarding conduct, the learned Judge approved of OG v AG [2020] EWFC 52 per Mostyn J and more broadly the jurisprudence that the relevance of conduct must clear a high bar and will only be considered in rare circumstances. He set out that there should be a two-step process for initiating a conduct claim in financial remedy proceedings. Firstly, the claimant must provide substantial evidence of the conduct and its financial ramifications. Further, he emphasised the need for detailed allegations to maintain clarity and prevent unnecessary court disputes.

The Court’s primary objective is to ensure the fair, quick and cost-effective handling of cases - per the FPR 2010. Rules 1.4 and 4.1 of the FPR 2010 define the limits of the court’s case management powers. The relevance and potentially protracting influence of permitting a conduct claim should be borne in mind. The Judgment suggests that excluding “conduct” during an interim phase might equate to an unauthorised summary judgment which would conflict with the broader scope of Section 25 of MCA 1973.

It reignites the discussion on the range of strike-out applications available in financial remedy proceedings, suggesting a careful strategy is required when dealing with these applications that respects the provisions of the 1973 Act. The option of interim hearings to resolve conduct arguments would maintain a balance between rejecting baseless allegations and preserving a platform for valid claims to be presented succinctly.

H had issued a notice to show cause as to why a Post-Nuptial Agreement ('PNA') signed on 9 April 2020 should not be made an order of the Court. W resisted on the basis of material non-disclosure by H.

This was a 22-year marriage. W was aged 57 and H was 48. They had four children aged between 15-23 years. The parties were jointly successful in building the marital acquest through their different endeavours in business and their company DB had a £100million turnover by end March 2020. The parties first separated in April/May 2019 and H petitioned for divorce in September 2019 but they reconciled in November 2019. In September 2021 the parties separated for the final time.

On 7 August 2019 H had sent W an asset schedule he had prepared and headed "Net Worth - As at 31 March 2019". According to that schedule, the "estimated value" of the assets amounted to around £83.5m, of which around £79.6m were in H's sole name. H provided a voluntary Form E in October 2019. On 31 October 2019 H offered W a settlement by which W would receive total assets of £30m. This offer was not accepted. On 13 December 2019 W sent to H an email containing a small number of questions about his Form E. H responded the next day. W did not follow up on his answers. On 24 December 2019 W, set out proposed terms for a PNA for “an equal split of the assets as of today's values”. She proposed to use H's estimates from his Form E and the schedule previously provided, resulting in total assets of approximately £75million (net of tax and contingencies for H). The parties discussed the terms of the PNA and draft Heads of Terms went back and forth. W's representatives confirmed on 23 March 2020 that the PNA was agreed. The final amount agreed for the lump sum to W was £36m to be paid over a period of time with index-linking. The parties signed the PNA on 9 April 2020.

The PNA recorded that the parties intended the PNA to be binding upon them in the event of the permanent breakdown of the marriage, that they considered its terms to be fair, that they had received independent legal advice as to the PNA; each has had the opportunity to make enquiries of the other's disclosure and financial circumstances; they were satisfied that they have sufficient knowledge of each other's financial circumstances and have received sufficient information and documentation to be able to assess the terms and fairness of the terms of the PNA; they acknowledged disclosure was based on estimates of value and that formal appraisals have not been obtained, however they had had access to any information that might be needed if they had decided to have any property or income formally appraised.

W later came to question H's 2019 disclosure. H accused W of rooting around in his private office at the family home in an attempt to undermine the PNA. He accepted forgetting to disclose some smaller investments but said this did not affect the overall PNA and he denied W’s assertion of more significant non-disclosure of the true values and circumstances of the main assets in question.

Sir Jonathan Cohen reviewed the law.

Granatino v Radmacher [2010] UKSC 42 that “if it is clear that a party is fully aware of the implications of an ante-nuptial agreement and indifferent to detailed particulars of the other party's assets, there is no need to accord the agreement reduced weight because he or she is unaware of those particulars. What is important is that each party should have all the information that is material to his or her decision, and that each party should intend that the agreement should govern the financial consequences of the marriage coming to an end.”

On whether there has been material non-disclosure in this case he kept in mind the dicta of Mostyn J in BN v MA (Maintenance Pending Suit: Prenuptial Agreement) [2013] EWHC 4250 Fam 10 and noted the dicta of Moor J in KG v LG [2015] EWFC 64 that a decision by parties to negotiate does not absolve them from their duty of full and frank disclosure. “A husband cannot simply rely on an offer to provide full disclosure in a future Form E. He has to provide sufficient disclosure to give the wife a proper picture of his financial resources. In such circumstances, a Wife is entitled to rely on the information that is provided.”

He also had regard to the words of Peel J in HD v WB [2023] EWFC 2 that “W should not be prejudiced by H not having pursued lines of enquiry” … “the duty to disclose extends beyond what is certain on the date that the order is made to any fact relevant to the court's review of the foreseeable future.” A point affirmed by Wilson J in Kingdon v Kingdon [2011] 1 FLR at [23] that “notwithstanding the ability of a party to opt out from a detailed investigation of a spouse's finances if she/he wishes, the disclosure given by the other must be sufficiently accurate that it gave the receiving spouse sufficient information to make an informed judgment of the value of the family assets.”

The learned Judge found that there was material non-disclosure in the present and adjourned for further consideration as to the way forward in light of his findings.

The main issue was whether H should be held to the terms of a separation agreement executed by the parties in New York in 2015. It was W's case that H had hidden $35m (£27.4m) worth of assets from the proceedings.

W aged 75 and American. H aged 74 and English. H lacked capacity to conduct proceedings and was supported by a litigation friend. A separation agreement was signed in New York in November 2015 - being 15 years post-separation per H or only 2 years after the parties finally separated per W. The agreement had stated that any dispute with regards to payment would also be litigated in New York and H would meet W's reasonable costs.

W petitioned for divorce in England in May 2021 and Form A issued on 4 June 2021. The net value of H's visible assets were c.£5.6m. The net value of W's assets were c.£5.8m. Costs to final hearing came to £1.8m.

W sought a lump sum of £9.34m she said due to her under the separation agreement. She said the total assets were actually £39m and the award to W would be £15.2m/39% of the assets. H sought dismissal of all claims including repayment to him of the MPS paid to W during proceedings.

This was a fact-specific case and extensive evidence was heard from both sides. Mostyn J found H to be an “exceptionally poor witness” who was “rude, argumentative, avoidant of direct questioning (and) truculent” and “treated the entire litigation as if it was an impertinence and a joke”. He reminded himself though that a trial court must be “on its guard against the influence of demeanour”. The court must examine the actual evidence and avoid any formation of bias against any particular witness. Despite H having been dishonest in his presentation of his position, the allegation that H had hidden funds was not proven.

H was ordered to pay a lump sum of £1,614,000, including £200,000 towards W's costs. This payment reduced H's net worth to £3,941,565 (35%) and increased W's to £7,458,895 (65%). This was to “reflect both his estimated liability under a clutch of interlocutory orders and the court's very strong condemnation of his delinquency”.

The learned Judge praised both parties’ legal representatives for their “skill, assiduity and diligence” and that it was “a pleasure to conclude my judicial career with the receipt of such skilful advocacy”.

This was the fifteenth hearing of the matter. An anonymous lender, brokered by the husband’s McKenzie Friend, had apparently failed to provide the monies required for the husband to provide the financial settlement to the wife as the lender had been spooked by concerns as to their anonymity and confidentiality.

The Court declined to make a suspended order for committal and remarked that “it is within the control of [the nephews of the husband] to unlock the problem, and it would strike me as very disappointing if they did not come up with a solution” … “the decisions that they, the nephews, have taken in managing the family businesses have had the effect of stopping the flow of funds to their uncle” … “notwithstanding the financial difficulties of at least a part of the Barclay empire which have been widely publicised, I cannot imagine that a package could not be put together that would at the very least take the place of the vanished lender. It would be a sad reflection on the family if this priority was not satisfied.” … “I now suspect that [the lender providing the money required] is rather more likely to happen if the court spotlight is turned off than it would be if it remained on, but unless some solution is found the family is likely to find themselves back in this court.”