What happens when you divorce a billionaire

The recent news that a Russian oil billionaire has been ordered to pay his former wife £435.58m (41.5% of the “total marital assets”) in a divorce settlement has created a huge stir.  This is largely due to the sum of money awarded; it’s one of the largest awards ever made by English Court.  But also because this case seems to confirm the reputation that London is the divorce capital of the world because of the generosity of its award to non-working spouses.  
However, if you try to ignore the eye-watering sums involved this case highlights a number of interesting points.  The first being jurisdiction.  The couple are not British nationals; the husband was born in the Caucasus and the wife was in born in Eastern Europe.  They met in Moscow and the couple married and then moved to London in 1993.  The marriage came to an end in 2014.  Divorce proceedings were issued in London, where they had been living.  As a result the wife’s application for financial relief was also heard in London.  Even though neither are British nationals it was possible to issue in London because the wife was able to show that she was habitually resident (section 5 of the Domicile and Matrimonial Proceedings Act 1973).  Until 1985, habitual residence had not been defined.  However in Kapur –v- Kapur [1985] 15 Fam Law 22, Bush J held that habitual residence is the same as ordinary residence; voluntary residence with a degree of settled purpose.  Subsequent cases including Ikimi –v- Ikimi [2001] 2 FLR 1288, L-K –v- K (no 2) [2007] 2 FLR 729 and Tan – v Choy [2014] EWCA Civ 251 have explored this concept further.  As a result it would not be difficult to establish jurisdiction on the basis of 12 months’ or six months’ habitual residence if that person had been living in England and Wales for business, education, family reasons or even for the sheer love of the country throughout the year immediately preceding the presentation of the petition.  Temporary or occasional short absences like going on holiday will not affect that nor will necessarily prolonged absences.  Also the illegality of the stay may not preclude jurisdiction or the fact that their real home is outside of England.

Many of the news headlines have also commented on the fact that the wife did not work but that the judge accepted her argument that she needed £39.2m to buy a London house, £27.8m to purchase a holiday home in France and £5m a year for living costs.  When it comes to finances an English Court will look at three factors; capital, pension and income.  When looking at these three “pots” the Court will take a number of factors into account including respective income, earning capacity, property and other financial resources, the parties’ financial needs, obligations and responsibilities, standard of living enjoyed by the family and the ages and the duration of the marriage.  Consideration will also be given to any physical or mental disability, any contributions which either party has made to the family together with any conduct which it would be inequitable to disregard or any lost benefit as a result of divorce, i.e. widow’s benefits from spouse’s pension.  However, first consideration must always be given to the welfare of any children of the family.  In this instance the children are now adults.

The primary issue is always the needs of the parties together with any needs of the children (where applicable) and to ensure that everyone is appropriately rehoused.  This is the case regardless of whether the parties are super rich or if they enjoy a more modest lifestyle.  Unlike other countries in the world, the English system does not have a formula with which to use to make these decisions.  Except that, in long marriages, the starting point is always a 50/50 split and other factors are then considered.  Each case is considered in a discretionary manner, on a case by case basis with the parties’ needs being the paramount consideration.  The fact that the wife had not contributed financially to the marriage is not a bar in awarding her a fair share of the settlement.    Whilst the wife did not work she stayed at home and looked after their children, without any help, and when her husband was often abroad on business.  The husband had argued to the Court that he had made a special contribution to the marriage as a result of his business acumen and therefore he should have a greater share of the marital assets.  This is an argument that the footballer Ryan Giggs, is currently using in his ongoing divorce case.  The Courts have defined this exceptional financial contribution as the quality of “genius”.  However, Courts have shown very little sympathy to this argument.  Mr Justice Haddon-Cave agreed that whilst the husband had indeed “clearly worked very hard to create wealth out of the Russian company” he had failed to show that he had made an exceptional financial contribution.  This seems to concur with another case where the Court of Appeal rejected the argument by the husband saying that genius was an “overused” word and should only be applied for the likes of da Vinci and Einstein.

For further information

Please contact Zoë Hughes at ZoeHughes@stoneking.co.uk or call 01225 324486.

For media enquiries

Please contact Léonie Spencer at LeonieSpencer@stoneking.co.uk or call 01225 337599.

Legal 500 logo

Investors in People logo

UK Chambers logo

Lexcel logo