Kremen v Agrest: striking a balance by guest blogger Sabrina Salhi

A fellow blogger once asked the question: “If you had a 33 percent chance of crashing every time you drove a car, would you still get behind the wheel?” With the divorce rate in Britain on the rise, and no apparent decline in the rate of marriage in the UK- despite it being common knowledge that around one in three first marriages end in divorce; I wonder: why do people bother? For wealthier couples, marriage not only means putting your heart on the line, but also millions of pounds.

Described by Mr Justice Mostyn as a ‘chronic and complex case of matrimonial litigation’, Kremen v Agrest has been heard in court on numerous occasions, each time involving allegations of the concealment of millions of pounds.

Kremen and Agrest were Russian nationals who married in Moscow in 1991, and had three children, (now aged 20, 15 and 8). Both obtained Israeli and Greek citizenship (for reasons unclear), but lived largely in Austria until settling permanently in the United Kingdom in 1999. There were problems with the marriage in 2004, and the couple separated in 2007. Since then, the courts have on numerous occasions ordered Agrest to reach a financial settlement with Kremen, but he has fled abroad and failed to meet the orders.

This case revolved around a suspicion that the husband was guilty of ‘material non-disclosure’ (failure to fully declare his financial assets to the court). If so, the postnuptial agreement both parties had signed inIsrael in 2001 be rendered null and void.

Part three of The Matrimonial and Family Proceedings Act 1984 gives the English courts power to grant financial relief after a marriage had been annulled in a foreign country.

Part III, section 12 of this act states that:

“Where—

(a) a marriage has been dissolved or annulled, or the parties to a marriage have been legally separated, by means of judicial or other proceedings in an overseas country, and

(b) the divorce, annulment or legal separation is entitled to be recognised as valid in England and Wales, either party to the marriage may apply to the court in the manner prescribed by rules of court for an order for financial relief under this Part of this Act.”

In the original claim, Kremen argued that Agrest was an extremely wealthy and manipulative man who was concealing a fortune of around £100 million. She claimed entitlement to a lump sum payment of £10 million for herself and her children.

Agrest, by contrast, claimed that his marriage to Kremen was in fact completely invalid as he had already been married to another woman at the time of the ceremony. He also claimed that that the postnuptial agreement barred Kremen from making claims against him. Agrest agreed that he had been rich when the family first came to the UK, but said he had since lost everything.

In order to determine a fair financial settlement, it was essential to establish whether Agrest was guilty of material non-disclosure and the effect that this would have on the weight to be given to the postnuptial agreement.

The courts found that Agrest was a ‘serious and serial’ non-discloser, who had failed to fully reveal the degree of his entrepreneurial wealth to his wife – estimated at between £20 and £30 million. The validity of the marriage itself was extensively debated in both the Israeli and Russian courts. The postnuptial agreement, the courts agreed, was to be given no weight at all in proceedings, as Agrest had allegedly manipulated this to protect his assets. Having received no independent legal advice, Kremen had no full understanding of the implications of signing, and the rights that she was foregoing under English law – all requirements for such an agreement to be legally valid

The case of  NG v SG [2011] EWHC 3270 (Fam) established a precedent where if there has  been non-disclosure, the court should attempt a ‘realistic and reasonable quantification’ of those funds in broad terms, taking into account direct evidence, business activities and lifestyle. It is also essential that the court be sure that the non-dicloser does not benefit from his failure to fully declare.

In February 2012, Mr Justice Mostyn ordered a lump sum payment of £12.5 million to be made to Kremen by Agrest to more fairly reflect the extent of his wealth.

The Charging Orders Act 1979 clearly states that in deciding whether to make a ‘charging order’ (order for payment), two factors need to be considered: the personal circumstances of the person receiving the order, and whether any other debtor or creditor would be “unduly prejudiced” if the order were to be made. Mr Justice Mostyn used his discretion to find in favour of Kremen in the most recent Court of Appeal decision (5th February 2013), dismissing Agrest’s appeal.

The judge ruled that there should be a balance between the interests of a ‘judgement creditor’ (a person owned money who has proved this debt in court), and that of a wife, bearing in mind that it is of paramount importance that appropriate provision be made in divorce for the wife and any minor children (Harman v Glencross [1986] Fam. 81). In noting that a man called Chesnokov (the judgement creditor in this case) would suffer “very little detriment” if the transaction was set aside, Mr Justice Mostyn judged that the needs of Kremen and the children were significantly greater. If Kremen were to receive even a small amount of the money entitled, then she must receive the whole of the equity in a property called South Lodge purchased by Agrest.

The court considered not only the family’s need for ‘reasonable accommodation’, but also the wider financial needs of Kremen and her children. Agrest, contrastingly, was a wealthy man who chose to the property fully aware that ownership could be disputed.

A truly international case, Kremen v Agrest shows that where a postnuptial is manifestly unfair, a court will ignore it. It also highlights the need for the financial and physical safety of minors to be considered above all else. It is imperative to keep sight of what is truly important in big money international cases, where the clash of different legal systems can create even more complexity. But as Mr Justice Mostyn himself notes, I doubt that the most recent appeal will mark the end of this bitter litigation.

Although cases on the financial scale of Kremen v Agrest are rare, true “love” to bitter hatred can come surprisingly quickly-in big money divorces – children, or no children. It does make you wonder whether any couple where one party earns considerably more than the other can look far beyond material assets where divorce is concerned.

So, is it worth it; the financial, emotional and physical strain of divorce (and marriage)? When we hear stories such as that of a woman who fought an 18 year battle to eventually turn a $750,000 settlement into $15 million, the temptation is to shout definitely! But the reality of those 18 years, not only for the two main parties but also for the children and family members, it is not so simple. After all, you only get one life, and how much use is all that money really going to be when you are gone?

So why do people STILL bother with marriage? Well apparently, ‘to express true love’ still tops the list of reasons. You may be one of the lucky ones. I like to think that I am a ‘glass-is two thirds full’ kind of person. Are you?

 

My name is Sabrina Salhi and I am currently a first year undergraduate studying law at Durham University. I have a keen interest in family law, in particular in the area of finances in divorce. As a member of Durham University’s Pro Bono Society, I strongly believe that a lack of funding should not be an obstruction to justice in the 21st century, and I have been able to pursue this through my involvement in the Innocence Project which I have found very interesting.

In my spare time, I enjoy classical singing and am a member of my college’s women’s football club.

 

Photo by Morgan Harrison via Flickr under a Creative Commons licence

Marilyn Stowe

The senior partner at Stowe Family Law, Marilyn Stowe is one of Britain’s best known divorce lawyers with clients throughout the country, in Europe, the Far East and the USA.

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