The Supreme Court considered whether a respondent to a without-notice grant of leave under section 13 of the Matrimonial and Family Proceedings Act 1984 has an unrestricted right to apply to set aside that order. The Court held (3-2) that the ‘knock-out blow’ test was wrong in law, and the respondent is entitled to a full rehearing.
Background
The appellant, Vladimir Potanin, and the respondent, Natalia Potanina, are both Russian citizens who married in Russia in 1983 and divorced in Russia in February 2014 after a 30-year marriage. During the marriage, the husband accumulated vast wealth estimated at around US$20 billion, the largest part comprising an ultimate beneficial interest in approximately 30% of shares in MMC Norilsk Nickel PJSC. The Russian courts divided marital property equally but only included assets legally owned by the parties, excluding assets beneficially but not legally owned by the husband. The wife received between US$41.5 million and US$84 million (the exact figure being disputed), representing a tiny fraction of the husband’s beneficial wealth.
After the divorce, the wife obtained a UK investor visa in June 2014, purchased a flat in London, and established habitual residence in England. On 8 October 2018, she issued an application under section 13 of the Matrimonial and Family Proceedings Act 1984 (‘the 1984 Act’) for leave to apply for financial relief under Part III of that Act.
The Without-Notice Hearing and Set-Aside Application
In accordance with FPR rule 8.25, the wife’s application was made without notice to the husband. Cohen J heard it on 25 January 2019. Despite his strong inclination to order an inter partes hearing, he was persuaded by counsel for the wife to grant leave without notice. The husband then exercised his right under FPR rule 18.11 to apply to set aside the order. After hearing argument from both sides over two days, Cohen J concluded he had been materially misled, set aside the initial order, and refused leave, finding that the wife’s connection with England was ‘both recent and modest’ and the parties’ connection with Russia was ‘infinitely greater’.
The Court of Appeal’s Decision
The Court of Appeal allowed the wife’s appeal. King LJ, applying the practice derived from obiter dicta in Agbaje v Agbaje [2010] UKSC 13, held that the power to set aside leave granted without notice could only be exercised where there was a ‘compelling reason’ demonstrable by a ‘knock-out blow’ — in practice, only where the court had been materially misled. Finding no material misleading, the Court of Appeal restored Cohen J’s initial without-notice order granting leave.
The Issue(s)
The central issue before the Supreme Court was whether the test applied by the Court of Appeal — requiring a respondent to demonstrate a ‘knock-out blow’ or ‘compelling reason’ (typically that the court was materially misled) before an order granting leave without notice under section 13 could be set aside — was correct in law. A secondary issue concerned the proper interpretation of the threshold test of ‘substantial ground’ in section 13(1).
The Court’s Reasoning
The Majority Judgment (Lord Leggatt, with Lord Lloyd-Jones and Lady Rose)
Lord Leggatt identified the fundamental principle at stake at the very outset of his judgment:
Rule one for any judge dealing with a case is that, before you make an order requested by one party, you must give the other party a chance to object.
His Lordship held that the practice which had developed in dealing with section 13 applications violated this fundamental principle of procedural fairness. He traced in meticulous detail how the erroneous approach arose through a series of misunderstandings and missteps, describing it as ‘a chapter of accidents’.
Lord Leggatt examined the applicable rules of court. FPR rules 18.10(3) and 18.11 confer upon a respondent served with an order made without notice an unconditional right to apply to have it set aside. He emphasised:
This right is unconditional. FPR rules 18.10(3) and 18.11 do not say that the court’s power to set aside such an order may be exercised only where there is ‘some compelling reason to do so’ or where the party applying to have the order set aside can demonstrate that a decisive authority was overlooked or that the court was materially misled.
Lord Leggatt further explained that a ‘right’ which cannot be exercised unless a ‘knock-out blow’ is demonstrated ‘cannot properly be described as a right at all’. He noted that FPR rule 18.11 would be rendered redundant if it merely replicated the general power to set aside orders obtained by misleading the court.
His Lordship rejected the analogy with setting aside permission to appeal under CPR rule 52.18, identifying two critical distinctions. First, an application for permission to appeal follows a process where both parties have already had the opportunity to present their case to a judge, whereas a section 13 application may proceed without the respondent having any prior knowledge of the case. Second, the rules are materially different: CPR rule 52.18(2) expressly requires a ‘compelling reason’, whereas FPR rule 18.11 contains no such requirement.
If the applicable rules had been in their present form when the Agbaje case was heard or if the important differences between setting aside permission to appeal and setting aside leave granted under section 13 at a without notice hearing had been drawn to the attention of this court, I do not think it credible that Lord Collins would have suggested that the approach should be the same in both cases.
Lord Leggatt addressed the argument that efficiency justified restricting the respondent’s right to be heard:
No doubt a good deal of cost and court time could be saved across the board in litigation if courts were to adopt a practice of hearing from applicants alone without allowing respondents to participate in the process unless they can demonstrate by a ‘knock-out blow’ that the court was materially misled in their absence. … But the fundamental point is that fairness is not a value which can properly be sacrificed in the interests of efficiency.
He also rejected the argument that granting leave merely placed the respondent in the same position as an ordinary defendant:
No one has been able to point to any other example of a type of application which is usually dealt with — or which it is thought acceptable to deal with — after hearing argument from the applicant alone and without permitting the respondent to give reasons why the order should not be made unless he can demonstrate that the court was materially misled at a hearing held in his absence. The reason for the lack of any such example, I would suggest, is that, whatever the nature of the order sought, such a procedure has no place in a civilised legal system.
Clarification of the Threshold Test
Lord Leggatt also clarified the threshold test in section 13(1). He affirmed that ‘substantial’ means ‘solid’ as stated in Agbaje, but clarified that the threshold is higher than merely filtering out wholly unmeritorious or abusive claims. He drew an analogy with the reverse summary judgment test — whether the claim has a ‘real prospect of success’ — as the closest comparison.
The Dissenting Judgment (Lord Briggs, with Lord Stephens)
Lord Briggs agreed with the clarification of the threshold test but dissented on the main procedural issue. He argued that the knock-out blow test had been established by this court in Agbaje, reinforced in Traversa v Freddi, consistently applied for over a decade without criticism, and was the basis upon which FPR rule 8.25 was amended in 2017. He contended that the Supreme Court was poorly placed to intervene in matters of procedure, that the change would undermine the without-notice default regime, and that no fundamental principle of justice was truly at stake because the respondent’s opportunity to present their case was merely postponed to the final hearing rather than permanently denied.
Practical Significance
This decision fundamentally reforms the procedural regime for applications to set aside leave granted without notice under section 13 of the 1984 Act. The key consequences are:
- Where leave is granted on a without-notice application, the respondent has an absolute, unfettered right under FPR rule 18.11 to apply to set aside the order. On such an application, the court must decide afresh, after hearing from both sides, whether the test for leave is met.
- There is no requirement for the respondent to demonstrate a ‘knock-out blow’, a ‘compelling reason’, or that the court was materially misled.
- The onus remains on the applicant to satisfy the court that there is ‘substantial ground’ for the application — meaning a solid basis, analogous to a real prospect of success on the section 16 considerations.
- The obiter dicta in paragraph 33 of Agbaje v Agbaje, as applied in Traversa v Freddi and subsequent cases, are overruled on this point.
The decision reaffirms the primacy of procedural fairness – the audi alteram partem principle – as a foundational requirement that cannot be sacrificed for reasons of efficiency. It has significant implications for high-value international family finance cases involving Part III claims, where foreign respondents with limited connections to England and Wales face applications for financial relief following overseas divorces.
Verdict: The appeal was allowed by a majority of 3 to 2. The Court of Appeal’s order restoring the initial without-notice grant of leave was set aside. The issues raised by grounds 12 and 13 of the wife’s grounds of appeal (concerning whether leave should nonetheless have been granted on the merits and the effect of the Maintenance Regulation) were remitted to the Court of Appeal for determination.
Source: Potanina v Potanin [2024] UKSC 3
