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FINANCIAL REMEDIES: Kremen v Agrest [2013] EWCA Civ 41

Date:12 FEB 2013
Law Reporter

(Court of Appeal, Sir Terence Etherton CVO, Thorpe, Moore-Bick LJJ, 5 February 2013)

In long-running financial remedies proceedings the wife sought part payment of a lump sum order of £12.5m via the only property owned by the husband in this jurisdiction. The property was owned by a company incorporated in the British Virgin Islands which was used by the husband to limit his tax liability. The husband claimed he had sold the single share in the company to a business associate who in turn entered into an agreement to sell it on. The wife applied under s 23(2)(b) of the Matrimonial and Family Proceedings Act 1984 to set aside the transaction on the grounds that the dealings with the company were a sham and intended to defeat her claim for financial relief.

In proceedings in the High Court the judge allowed the wife's claim on the grounds that by the time the buyer had arranged for a mortgage on the property he had become aware of the wife's claim and could not be said to have been acting without notice of the claim as per the provisions of s 23(6) of the MFPA 1984. The judge decided to exercise his discretion in favour of setting aside the transaction because the equity in the property which was in the region of £600-800,000 would make a significant difference to the wife's claim to financial relief. He found that the buyer would suffer very little detriment in doing so.

The judge ordered the buyer to be indemnified by the husband against all expenses and costs in connection with the transaction. The buyer subsequently initiated proceedings against the husband claiming losses of approximately £1.5m. He obtained judgment in default of defence and an interim charging order over the property was made in his favour. The application for a full charging order was dismissed on the grounds that it sought to undo the original order. The buyer appealed.

The appeal would be dismissed. In cases where the available assets were insufficient to satisfy both the financial claims of one former spouse and the debts of the other a conflict arose between the interests of the claimant and those of the creditors. When striking a balance between the interests of the creditor and the spouse, the interests of the creditor should be respected save to the extent that it was necessary to override them in order to make appropriate provision for the spouse and any minor children.

The judge had been wrong to characterise the buyer's application as an abuse of process. He was a bona fide judgment creditor and was entitled to have his interests as such taken into account fully. However, he had been the author of his own misfortune and the wife and her children would be likely to suffer a degree of hardship and the interests of justice would not be served if a charging order were made in his favour.