UK: When Russian Law Determines Ownership Of English

Last Updated: 17 September 2013
Article by Vanessa Mitchell and Mark Harper

On 1 May 2013 the Court of Appeal handed down its judgment in the case of Slutsker v Haron [2013] EWCA Civ 430.

Proceedings were brought by Mr Slutsker against Haron Investments Ltd ('Haron') and Summit Trustees (Cayman) Ltd ('Summit'), a Cayman trustee, in respect of a London property purchased in late 2000 for £6m (now worth c. £40m) as a family home for his wife and children. Mr and Mrs Slutsker were divorced in Russia but Mr Slutsker brought his claim in respect of the London property to the English Court. We can of course only assume that the Russian Court was unwilling to deal with the overseas property, and that, given the wealth in the case, a needs-based claim for potential provision after an overseas divorce (under Part III of the Matrimonial and Family Proceedings Act 1984) was not going to be relevant. Mr Slutsker's case was therefore a pure 'property' law case. Had there been divorce (or Part III) proceedings in England, the question for the Court would have been quite different and issues of beneficial ownership and variation of settlements may well have come to the fore under English family law statutes.

The property was purchased using funds held in Switzerland in Mrs Slutsker's name. Contracts were exchanged in the name of Mrs Slutsker, but on advice, and for tax reasons, the ownership of the property was registered in the name of Haron (an English company), who declared that it held it as nominee for Mrs Slutsker. Haron subsequently declared that it held the property on trust for Summit, the trustees of the newly established Misha Trust. The beneficiaries of the Trust were Mr and Mrs Slutsker and their minor children. In 2009 (when the marriage broke down), the trustees executed a discretionary power to exclude Mr Slutsker as a potential beneficiary.

The fundamental question for the English Court was whether Mr Slutsker was entitled to a 50% share in the property and whether English law should apply to determine the issue.

Mr Slutsker argued that the Russian matrimonial property regime applied to the purchase monies, and this imposed the 'default-by-law' regime of joint ownership, given that no marriage contract electing separate property had been entered into. His case was that, although legal ownership was registered in the name of the company, the funds used to purchase the property belonged to the parties jointly (in equal shares). He then argued that English law principles should apply and that his interest in the funds should be traced into a 50% interest in the property, on a resulting trust basis. This was, he said, akin to the English law concept of a 'beneficial tenancy in common'.

The position in English law has never been clear (as acknowledged by the Court of Appeal) as to whether the law of the matrimonial domicile (Russia) or the law of the lexsitus (England) should apply as regards immovable property. However, for the purposes of the present litigation, the Court was content to decide the case on the same basis as the judge at first instance, and that Russian law, as the law of the matrimonial domicile, was to apply to the question of ownership between husband and wife.

In particular, Russian law was to apply through all the stages of the relevant history. The Court gave short shrift to Mr Slutsker's attempts to translate the parties' Russian law rights (in the funds) into English law rights (in the property); it would not apply a hybrid of English and Russian law. If Russian law afforded Mr Slutsker a right in the property, such right would be recognised in England, but not otherwise.

Under Russian law, Mrs Slutsker was entitled to dispose of the (joint) funds, there being an automatic presumption that the disposition of joint property was undertaken on the basis of mutual consent. Whilst it was open to Mr Slutsker to seek to set aside the transaction, he failed to do so within the Russian statutory limitation period.

Mr Slutsker asserted that he was unable to provide his consent to the disposition of funds and the ultimate transfer of the property to Summit because he had insufficient knowledge of the transactions, and that, in any event, the burden was on Summit to show that he had provided consent. The Court found it clear on the facts that Mr Slutsker had been included in the decision-making process and that he understood that the purchase of a property in Trust fell outside the scope of Russian law. The burden of proof was not on Summit, but on Mr Slutsker, who failed to demonstrate lack of consent. The use of a Trust structure (unknown and unrecognised in Russian law) was the critical factor, and whether he was aware of the fact that the trustees could exclude him was a matter of 'degree, not kind'.

The outcome was straightforward. The beneficial interest in the property never became an asset subject to the Russian family property regime. It was held that Mrs Slutsker had made an effective disposition, under Russian law, of joint family property, to which Mr Slutsker had consented. Russian law and would not recognise the existence of a separate beneficial interest.

Was the outcome unjust for Mr Slutsker? Mrs Slutsker's team asserted that this was a man who had political ambitions in Russia which would potentially require him to provide disclosure of assets. He had deliberately acquiesced in a transaction which fell outside the scope of Russian law and he could not then argue that Russian law should afford him protection in these circumstances. This landmark decision is a warning to those from abroad who hold immovable property in England. Acquiring a property in this country will not necessarily mean that English law principles will rule at the expense of the law of the matrimonial domicile as between husband and wife where there has been a divorce in that jurisdiction. The Court of Appeal has made it clear that it will be prepared to apply foreign law in such circumstances. This could be particularly relevant to any individual subject to a community property regime in their home country.

However, holding a property through a complex foreign structure or trust (where both spouses have acquiesced) may well put the property out of reach of a foreign spouse, where such a structure is unrecognised by the divorce laws of the matrimonial domicile. For some, there may be real advantages in doing this.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.