FLiP Advise the Wife in the Case of Xanthopoulos v Rakshina [2023] EWFC 50

A team at Family Law in Partnership led by Director David Allison and including Senior Associate Hannah Greene and Associate Rebecca Alexander, working closely with a Russian team at Pen & Paper, Attorneys at Law headed by partner Ekaterina Tyagay, and instructing Lucy Stone KC of QEB and Helen Williams of 29 Bedford Row has successfully represented a Russian national in a long-running case concerning financial provision following a divorce in Russia (Part III MFPA 1984, the “Part III Application”).

Judgement in the case of Xanthopoulos v Rakshina [2023] EWFC 50 was handed down on 4 April 2023 by Sir Jonathan Cohen. The key points arising from this judgement include:

• Conduct of former husband in pursuing financial claim led his former wife to incur “excessive and unnecessary expense.” The former husband’s failure to comply with court directions and repeated LSPO applications consequent upon the various change of solicitors was a “grossly exorbitant use of the court’s time and W’s money.”

• Consideration of orders for legal costs funding under the Legal Aid, Sentencing & Punishment of Offenders Act (LSPO). Sir Jonathan Cohen said in this case: “It is not the job of the court to act as the insurers of solicitors who overshoot, let alone dramatically overshoot, the sum provided by way of LSPO.” Orders for legal costs funding should be “firmly tied to compliance with court orders.”
• Impact of a Post-Nuptial Agreement “freely entered into” in Russia by the former husband.
• The degree of connection of the parties with England and Wales under a Part III Application.

This case has led to several reported judgements over recent months, the most well-known being Xanthopoulos v Rakshina [2022] EWFC 30, a decision of Mr Justice Mostyn that featured widely in the legal press and is a leading authority on the privacy of family proceedings. This judgement also hit the national press, largely due to what Mr Justice Mostyn described as the “apocalyptic” legal costs.

What is clear from the most recent decision, Xanthopoulos v Rakshina [2023] EWFC 50, is that, at least in connection with the Part III Application, the fault for the “apocalyptic” legal costs lay squarely with FLiP client’s former husband. The judge, Sir Jonathan Cohen, said: “the figures spent on costs are beyond any reasonable comprehension” and “whilst in some cases the degree of connection can be determinative, in this case the factor is eclipsed by the impact of the Post Nuptial Agreement and  H’s litigation conduct and the costs resulting therefrom” and “the costs incurred in these proceedings by H in prosecuting his application for financial remedies is wholly disproportionate in many different ways and has caused W to incur excessive and unnecessary expense.”

During the marriage the couple had entered into a Post-Nuptial Agreement in Russia that provided they would each retain their individual property in the event of a divorce. The judge found that this Agreement had been “freely entered into by H” and at his suggestion, and “was entered into by both parties entirely voluntarily with knowledge of the financial situation”, and that he held few assets at the time of the hearing but had “every opportunity to build up a career if he so wished”.  The judge commented: “it is not for the court lightly to overrule what he chose”.

Whilst the relevance of the Russian Post-Nuptial Agreement was a key issue in this case, what is more interesting is what the judge said about orders for legal costs funding under the Legal Aid, Sentencing & Punishment of Offenders Act (LSPO).

The former husband’s legal costs in this case, totalling approximately £3.4m, were paid by FLiP’s client under various LSPO orders. The judge referred to: “no less than 11 LSPO applications made by H, normally without a budget or one provided very late, and sometimes without a formal application ever having been issued”.  Despite the level of legal costs, the judge found that: “H has breached nearly every order that has been made” going on to say: “The schedule prepared by counsel for W recites 44 breaches of 15 orders made……at 12 different hearings” and “I have not the slightest doubt that this litigation would never have been conducted by H in the way that it has if he was paying his costs from his own pocket”.

Referring to Sir Stephen Cobb’s decision in Re: Z (No. 2) [2021] EWFC 72 the judge said: “It is not the job of the court to act as the insurers of solicitors who overshoot, let alone dramatically overshoot, the sum provided by way of LSPO”. He went on to say: “It is apparent that the financing of this case had become completely out of control. Quite how to stop such a situation occurring again is not straightforward.”  He said that judicial continuity would be a huge advantage and that “consideration might be given to being far stricter about how legal services payments are to be utilised in a case of a litigant who repeatedly breaches court orders. I would suggest that the provision of funds should be firmly tied to compliance with court orders.”

This will no doubt warrant considerable discussion across the family law profession. Clearly, there must be appropriate control on the use of LSPO orders to curtail the excesses whilst allowing the most vulnerable access to justice.

The outcome in this case saw the former husband being provided with a housing fund of €600,000 for a property in Greece where the judge found he was likely to live. The housing fund would be provided on the Greek equivalent of a trust with the beneficial ownership reverting to FLiP’s client when he no longer needed it. He was also awarded spousal maintenance for 4 years. The former husband’s litigation conduct was a significant factor in the determination of his award.

This case is likely to serve as a warning to litigants that when they behave badly, the court is likely to reduce any award to below what might otherwise be regarded as meeting their reasonable needs.  The judge commented that “if the conduct in relation to costs was bad in Rothschild v De Souza [2020] EWCA Civ 1215, that case does not begin to approach what happened in this case”.

Director David Allison, who led the Family Law in Partnership team in this case, focuses on financial claims on divorce, particularly those with an international element. His clients include business owners, entrepreneurs, bankers, other lawyers and their partners. David has a strategic approach to litigation that achieves results. You can find out more about David and his practice in his website profile.