“The only word … is apocalyptic”: Xanthopoulos v Rakshina  EWFC 30
26th May 2022
Mostyn J (“the judge”) dealt with:
- Lazaros Panagiotis Xanthopoulos, the husband’s, (“H”) application for a further legal services payment order (“LSPO”); and
- Alla Aleksandrovna Rakshina, the wife’s, (“W”) application to be released from an undertaking given on 15 June 2021 that, pending determination of H’s financial claims, she would preserve and not deal with, charge or in any way diminish an account with Coutts ("the Coutts account") and all sums contained therein ("the undertaking") – c. £11 million.
The judge made preliminary comments criticizing the parties’ “shocking’ preparation for the hearing. He warned that “the deliberate flouting of orders, guidance and procedure is a form of forensic cheating […] Advisers should clearly understand that such non-compliance may well be regarded by the court as professional misconduct leading to a report to their regulatory body” .
In the 18 months since H filed his petition, the parties had incurred costs of £5,401,503.
In his further application for a LSPO, H was seeking:
- £250,000 for his outstanding costs with his most recent set of solicitors;
- Future costs totaling:£79,585 for an appeal hearing against a recent children judgement (assuming H got permission to appeal)
- £285,095 for a rehearing of the children proceedings (assuming H won the appeal);
- £233,295 for the costs from this hearing to the First Appointment;
- £75,533 to fund H’s defence to a claim mounted by H’s former solicitors in respect of unpaid bills.
In total: £673,508 – up to the First Appointment only.
W did not give estimates for (i) (ii) and (iv). Re (iii), she estimated £96,732 on the Part III claim to the First Appointment.
The judge estimated the cost of an FDR and a full trial of a Part III claim would be around £750,000 per side. Thus, the parties were looking at total future costs of between £1.8 million and £2.6 million. Overall, the domestic litigation costs were likely to total between £7.2-8 million – a “beyond nihilistic”, “apocalyptic” figure .
H was 42. W was 41. H was Greek but was born and spent most of his life in Russia. He described himself as a homemaker. W was Russian. She held a senior position at Maria-Ra, an extremely large retail grocery business in Russia with some 1,300 outlets.
The value of W’s interest in Maria-Ra was hotly disputed. Per H, W was very wealthy: he said Forbes had named her as the 75th richest woman in Russia and that, on a conservative estimate, her corporate interests were worth in excess of £300 million.
Per H, the parties cohabited in 1999. It was unclear whether W accepted this. The parties married in Moscow on 25 March 2006 and separated in September 2020. H issued an English divorce petition on 21 September 2020. W instituted parallel divorce proceedings in Russia. Despite a Heiman injunction in force against W, on 11 March 2021 a Russian court pronounced a divorce on W’s application. The parties agreed that, on condition H did not challenge the Russian divorce, the financial proceedings would be reconfigured to proceed under Part III MFPA 1984.
The parties had two children aged 15 and 5, who had been the subject of now-concluded child arrangements proceedings.
W remained living in a property in her sole name, worth, W said, £5.25 million. H lived in rental accommodation, funded by W pursuant to an interim order at a cost of £10,000 pm.
W’s resources: W’s Form E disclosed:
- A property in London said to be worth £5.25 million.
- An adjacent property said to be worth £5.25 million. W said that her brother had funded the entire purchase price of the property, with the intention that she hold it on bare trust for him, so she had no beneficial interest in the property.
- Real property in Russia with a combined value of c. £1 million.
- a sum of £11 million in the Coutts account.
- Various other accounts holding comparatively modest sums.
- an interest in the business referred to above, but W had not fully articulated her case on the issue so far.
H’s resources: H had next to nothing in his own name but said W’s Form E was a false presentation, as set out above.
Liabilities: both parties had liabilities, the most relevant being those to H’s former solicitors and W’s current solicitors.
The parties had engaged in “near-constant litigation about every conceivable issue” . Of note amongst the multitude of applications and orders were the following:
- On 22 January 2021, a LSPO was made in H’s favour of £750,000 designed to take H to the conclusion of the hearing to determine jurisdiction in the children proceedings and the divorce and proposed mediation.
- On 15 June 2021, W gave the undertaking.
- On 14 October 2021, an order was made that W be released from the undertaking to enable payment out of the Coutts account of £590,355 to H’s solicitors and £496,267 to W’s solicitors, supposedly to take the parties to the conclusion of the children proceedings and the First Appointment in the Part III proceedings. On 15 March 2022, a further order was made releasing £110,000 from the Coutts account to cover interim maintenance and W’s living expenses.
- H’s former solicitors applied in Form D11 dated 28 March 2022 for an order that they be removed from the court record. The judge granted that application on 29 March 2022.
H’s application for a further LSPO
At the outset of the hearing, the judge indicated to H that he considered his application bound to fail in circumstances where his solicitors had come off the court record the day beforehand. Even had H’s solicitors remained on the record, however, the judge would have had serious reservations about the relief sought for the reasons set out below.
H sought an order to clear all of his outstanding costs (c. £250,000) with his solicitors.
The judge stated that:
- An LSPO should only be made in respect of outstanding costs to current solicitors where, without payment, those current solicitors would likely cease acting for the party in question.
- The position is entirely different in relation to former solicitors as they have already ceased acting for the party in question.
As H’s solicitors came off the record the day before the hearing, they fell into the second category so the judge made no award in respect of their outstanding costs.
Had H’s solicitors remained on the record, the judge stated that he may have declined to make any award at all – or only a proportion of the outstanding costs – on the basis that H, having already been provided with a substantial sum on 14 October 2021 to take him to the conclusion of the children proceedings and the First Appointment in the Part III proceedings, should have budgeted with greater care.
The judge stated that, now H’s solicitors had come off the record, their costs schedules were entirely redundant. It was unknown, and unknowable, whether any future solicitors instructed by H would estimate their costs to be the same.
The proper course was for H to instruct new solicitors and to make a fresh application supported by a detailed budget.
Even if H’s solicitors had remained on the record, the judge had the following comments to make on H’s application:
Future children litigation costs: appeal
These costs were speculative as permission to appeal had not been granted. Although jurisdiction to make an award in such circumstances did exist, it should be exercised extremely cautiously. Therefore, the judge would likely have refused to make any LSPO to cover these costs.
Future children litigation costs: the five-day hearing
This limb of H’s application was obviously premature. The judge would have refused to make any LSPO to cover these costs.
Part III costs: now to First Appointment
The judge said that (i) the costs sought were exorbitant and (ii) as a matter of principle, it could not be right that when a LSPO has been made on the basis that it was to fund costs for a certain period for there then to be an enormous overspend, with the consequence that an applicant returns for a further order seeking more costs for the same period. He would therefore have been extremely reluctant to award much, if anything, under this limb.
Costs of other proceedings
The judge said that this limb of relief could not possibly fall within the lawful scope of a LSPO. It was, in effect, an application for an interim lump sum, a form of relief that was beyond the powers of the court.
W’s application to be released from her undertaking
The judge applied the relevant test as set out in Birch v Birch  UKSC 53, namely, per Lord Wilson JSC, “unless there has been a significant change of circumstances since the undertaking was given, grounds for release from it seem hard to conceive” .
W’s case was that:
- There had been a number of significant changes in circumstances since she gave the undertaking on 15 June 2021, including the war in Ukraine which had restricted her ability to access funds in Russia. H didn’t accept this.
- The undertaking hadn’t functioned well in practice. As its terms were so restrictive, it had generated a number of interlocutory skirmishes because an order was required to authorize the release of funds from the Coutts account.
- W should be able to pay her reasonable fees without needing to seek H’s permission. W’s counsel referred to HMRC v Begum  EWHC 2186 Ch and Anglo-Eastern Trust Ltd and Kermanshahehi  EWHC 3152 as authorities for the principle that the court should not police a party’s payment of her own costs from her own money.
The judge was persuaded on all three of W’s points. The order was to be framed in terms that W’s release from the undertaking was dependent on an injunctive order being made restraining W from dealing with the Coutts account, save as to payment of her legal fees and H’s interim maintenance.
At the hearing, W’s counsel applied for an order that the parties be granted anonymity.
The judge provided an extensive break-down of the history surrounding secrecy, and anonymity, in financial remedy cases.
Of note are the following comments:
- The current rubric (beginning This judgement was delivered in private…) which is systematically attached, as a default condition, to all financial remedy judgements is likely to be completely ineffective save in relation to judgements about child maintenance.
- The Administration of Justice Act 1960, which specifically addresses the status of hearings held in private, does not include the Matrimonial Causes Act 1973 in its section 12(1) list of sensitive types of proceedings which are covered with the mantle of secrecy, breach of which is a contempt of court. Thus, a financial remedy case which is not mainly about child maintenance is not a secret proceeding under this provision.
- Anonymisation could only be imposed by the court making a specific anonymity order in an individual case. Such an order could only lawfully be made following the carrying out of the “ultimate balancing test” referred to by Lord Steyn in Re S (a child)  UKHL 47;  1 AC 593 at paragraph 17.
Carrying out the Re S balancing exercise, the judge made a specific reporting restriction order at the conclusion of the hearing that the children should not be named, nor their schools and home address.
Otherwise the judgement was not to be anonymised.