Ex-wife a priority creditor

Posted: 5th February 2013

The ex-wife of a Russian businessman who is engaged in a ‘titanic struggle’ to make him satisfy her £12.5m divorce award will receive at least a small part of her due following a Court of Appeal ruling that her financial claim should be given priority over a judgment debt her ex-husband owes to a creditor.

Beach2The former couple separated in 2007 and years of costly litigation ensued with the ex-wife’s lawyers guiding her through the labyrinth of her former husband’s financial affairs. A family judge found that he was worth £20-30 million and ordered him to pay her a lump sum of £12.5 million in 2011; however her legal team has encountered enormous difficulties in enforcing the order because of the ex-husband’s absence from the UK and the paucity of his assets in this country.

The Court of Appeal’s ruling means that the ex-wife is now entitled to UK assets and cash worth over £1 million in total that have been successfully traced by lawyers and linked to her ex-husband. £600,000 from assets sales is being held in safe-keeping by the court and the ex-wife can now also realise the £420,000 equity in a property owned by a Virgin Islands company formerly owned by her ex-husband which he had used to minimise his tax liabilities.

During the divorce proceedings, the ex-wife has successfully fought off her former husband’s claims that their marriage was bigamous, and thus invalid, as well as arguments relating to a ‘post-nuptial agreement’ which was said to limit her entitlements but which was described by the family judge as ‘a charade’.

The judge had denounced the ex-husband - who claimed to have ‘no assets whatsoever’ - as ‘a serious and serial non-discloser (of assets) who is determined to do down his wife by foul means. His motivation is a mixture of a wish selfishly to protect his fortune for himself, even at the expense of his children, and a desire to inflict the maximum economic harm to his wife.’

At the Court of Appeal, it was argued by a creditor of the ex-husband that enforcement of a £1.46 million money judgment that he has obtained against the divorcee should take priority over the ex-wife's claim to the equity in the property in part satisfaction of the £12.5 million ancillary relief order.

Dismissing the creditor’s appeal, however, Lord Justice Thorpe said that his dealings in respect of the property were ‘deeply suspicious’ and ‘shadowy to say the least’. Although there was ‘no hard evidence’ that he had colluded with the ex-husband in an attempt to diminish his former wife’s financial claim, or that the relevant transaction was ‘a sham’, the judge said that there could be no comparison between his financial needs and those of a struggling ex-wife.

The judge, sitting with Lord Justice Moore-Bick and the Chancellor of the High Court, Sir Terence Etherton, concluded: ‘Whilst the wife needed every penny that she could get to meet her needs and the needs of the children, the creditor is a significantly rich man seeking to extricate himself from a bad deal which he had chosen to strike with full knowledge of the risks that he ran.’