Natalia Nikolaevna Potanina v Vladimir Olegovich Potanin (No 2) (Costs)

On an appeal from the Family Division, the general costs rule does not apply, but the successful party’s success may remain the decisive factor where there is no good reason for a different outcome. A prior costs order should not be varied merely because a later appeal succeeded on different, previously unargued grounds. Under the Civil Procedure Rules 1998, a reasonable payment on account may be ordered where there is no good reason to withhold it. A court cannot offset its costs order against, or vary, a costs order made by the Supreme Court. Where sanctions licensing creates practical payment difficulties, the payment period should allow realistic time for compliance.

This was a costs judgment following the wife’s appeal against Cohen J’s refusal of her application for leave to pursue a financial claim under Part III of the Matrimonial and Family Proceedings Act 1984, reported at [2019] EWHC 2956 (Fam). The substantive appeal was determined by the Court of Appeal on 4 September 2025 under [2025] EWCA Civ 1136.

The parties agreed that the husband should pay the wife’s costs of the substantive appeal. They disagreed about whether the Court of Appeal’s 2021 costs order should be varied after the Supreme Court’s later decision, whether a payment on account should be ordered, whether the husband could offset his liability against the wife’s liability under the Supreme Court’s costs order, and the appropriate payment period given sanctions licensing requirements.

Decision and reasoning

1. The Court of Appeal left paragraphs 6 and 7 of its 13 May 2021 costs order unchanged. The wife had succeeded on the fundamental basis of that appeal, and the Supreme Court had neither materially challenged nor disturbed that basis. The Supreme Court had decided the husband’s appeal on grounds that had not previously been argued: [2024] UKSC 3, at paragraph 40.
2. Although the general costs rule does not apply to an appeal from the Family Division under rule 44.2(3)(a) of the Civil Procedure Rules 1998, there was no good reason why the wife’s success should not be treated as the decisive factor. The court applied the approach identified in Baker v Rowe [2009] EWCA Civ 1162, at paragraph 25. The wife was properly regarded as the successful party because she had obtained leave to pursue her financial application.
3. In accordance with rule 44.2(8), there was no good reason to withhold a reasonable payment on account of costs. A payment of £350,000, representing a little over 70 per cent of the total costs claim, was appropriate. The costs remained subject to detailed assessment on the standard basis unless agreed.
4. The Court of Appeal had no power to vary the Supreme Court’s 28 March 2024 costs order. The husband’s proposed offset was therefore rejected. That order, under which the wife was liable for 50 per cent of the husband’s Supreme Court costs subject to specified conditions, remained unaltered.
5. Considering the practical difficulties of transferring funds under the relevant sanctions licence, 90 days was excessive but 14 days was unrealistic. The husband was given 60 clear days after the wife notified him that she had obtained the relevant licence or licences. Interest at the applicable judgment rate would accrue immediately after any missed due date.

• Supreme Court: On 28 March 2024, made a costs order requiring the wife to pay 50 per cent of the husband’s costs of the appeal, subject to specified licensing and timing conditions. The Court of Appeal held that order stood unaltered. The decision is referred to as [2024] UKSC 3.
• Court of Appeal (Civil Division): Made the earlier costs order on 13 May 2021 and determined the substantive appeal on 4 September 2025 under [2025] EWCA Civ 1136. The present judgment determined the related costs issues.
• High Court (Family Division): Cohen J refused the wife’s application for leave under Part III of the Matrimonial and Family Proceedings Act 1984: [2019] EWHC 2956 (Fam).