Sofia Bogolyubova v Gennadiy Bogolyubov & Anor

The Court of Appeal dismissed the appellant's challenge to a Family Court case management decision declining to approve a proposed consent order in financial remedy proceedings. The court held that, under section 33A of the Matrimonial Causes Act 1973 and the Family Procedure Rules (r 9.26 and PD 9A), a judge retains an inquisitorial duty when considering consent orders and may refuse to make an order where there are other circumstances into which the court ought to inquire. The judge was entitled to adjourn the application pending resolution of substantial third party Chancery litigation brought by PrivatBank because that litigation raised a realistic prospect that the husband’s entire asset base would be extinguished, making any assessment of net assets impossible and risking the creation of an unenforceable or unfair order.

The court weighed the Radmacher principle giving weight to nuptial agreements against the practical impossibility of computing net assets where there is a good arguable case of massive fraud. Authorities on competing claims (including confiscation and bankruptcy analogies) supported the approach of adjourning rather than approving a consent order which might improperly affect third party claims. The appeal was dismissed as a routine challenge to a reasoned case-management judgment.

Background and nature of the application:

• The husband and wife had negotiated a separation agreement (February 2017) providing substantial financial provisions for the wife and later sought judicial approval of a consent order reflecting those terms under the Family Procedure Rules (application made 7 December 2021).
• PrivatBank had issued large fraud claims in the Chancery Division against the husband seeking damages that could exceed his entire wealth (claims alleged to be in the order of $1.91bn plus interest, totalling approximately $4.2bn as at March 2022). A worldwide freezing order obtained by PrivatBank remained in place and the fraud trial was listed for hearing in the Chancery Division.
• The Family Court judge (Peel J) refused to approve the proposed consent order and adjourned the financial remedy proceedings because the potential liability to PrivatBank made it impossible to compute the husband’s net assets reliably.

Procedural posture: The wife appealed the judge’s case-management decision to the Court of Appeal challenging the refusal to approve the consent order and the adjournment.

Issues framed:

• Whether the judge erred in law in refusing to approve a consent order based on the Form D81 particulars when third party Chancery litigation could extinguish the husband’s assets;
• Whether the judge improperly prioritised PrivatBank (a non-proprietorial claimant) over the wife’s agreed entitlement;
• Whether the judge failed to balance the competing prejudices to the wife and to PrivatBank; and
• Ancillary issues on costs and alleged procedural irregularities.

Court’s reasoning and decision:

• The Court of Appeal held that the judge correctly exercised the inquisitorial function under section 33A MCA 1973 and FPR r 9.26. The judge was entitled to conclude there were other circumstances (the Chancery litigation) into which he ought to inquire before approving the consent order on the basis of the D81 alone.
• The Radmacher principle that gives weight to nuptial agreements was considered but did not displace the judge’s duty under s33A when the agreement related to an uncertain future where the husband faced a realistic risk of having no net assets.
• Authorities concerning competing third-party claims, confiscation and bankruptcy (MCA & Anor, Richards, Stodgell, George) were applied to show that where the husband’s assets may be reduced to nil by third-party judgment, the court must ascertain what assets are actually available before approving distribution by consent.
• The judge’s decision was a case-management exercise within a broad discretionary range and was not shown to be unlawful, unrealistic or perverse. The appeal was dismissed, and the summary assessment of costs was not disturbed.

Wider context: The court noted that adjourning to await resolution of major third party litigation is an appropriate case management method where the outcome may destroy the asset base, and that approving a consent order in such circumstances risks creating an unenforceable or unfair order.

Appeal dismissed. The Court of Appeal held that the Family Court judge had properly exercised his case-management and inquisitorial duties under section 33A Matrimonial Causes Act 1973 and the Family Procedure Rules, and was entitled to refuse to approve a consent order resting on the D81 where substantial third-party Chancery litigation presented a realistic prospect of the husband’s assets being entirely extinguished, making assessment of net assets impossible and rendering any immediate approval potentially unfair or unenforceable.

Appeal from the Family Court (Mr Justice Peel, case ZC17J00073) following a reserved judgment and case-management order refusing to approve a proposed consent order and adjourning financial remedy proceedings. The appeal was heard in the Court of Appeal (Civil Division) on 15 March 2023 and decided by judgment of 18 May 2023 (neutral citation [2023] EWCA Civ 547).