The Court of Appeal’s decision in Awolowo v Awolowo and Linkserve [2025] EWCA Civ 641 is a masterclass in forensic scrutiny of alleged debts in financial remedy proceedings. It also serves as a reminder of the court’s critical role in sifting fact from fiction when third-party claims threaten to swallow the marital pot.
This case centres around whether a £1.6 million “loan” from the husband’s brother’s company was real—or a legal construct designed to keep assets out of the wife’s reach in her financial claim.
Background: A Debt Appears (Conveniently Late)
The case originated in financial relief proceedings under Part III of the Matrimonial and Family Proceedings Act 1984, following an overseas divorce. The husband asserted that a family home in the UK—seemingly unencumbered—was in fact held on trust for his brother’s Nigerian company, due to a historic £1.6 million loan.
The wife, seeing the equity in the property evaporate, applied to set aside the loan and related judgments under section 23 MFPA 1984 (mirroring section 37 MCA 1973), arguing that the debt was a sham intended to defeat her claim.
At first instance, Her Honour Judge Vincent found the debt genuine, holding that the wife had not proved the loan was a fabrication.
What the Court of Appeal Found
The Court of Appeal disagreed—and firmly. Lord Justice Moylan delivered a damning analysis of the original decision. Key findings included:
- The judge had misunderstood the effect of a Nigerian judgment, wrongly treating it as having determined the debt's legitimacy. In fact, it merely reflected an uncontested settlement agreement—not a finding of fact.
- The court below had failed to account for the almost total lack of financial documentation, such as company accounts or bank transfers that might corroborate the debt.
- Crucially, the judge discounted the wife’s evidence for lack of supporting documentation, even though such documents were in the control of the husband or his brother—a serious error in reasoning.
The matter was remitted to the High Court for full reconsideration.
Legal Themes of Note
- Sham Transactions and the Burden of Proof
The appellate court reiterated that proving a sham is a high bar, but also noted that if evidence creates enough suspicion, the evidential burden may shift. If a husband claims a company debt, he must come armed with documents to prove it.
- Foreign Judgments and Enforcement
This case also spotlights the limits of foreign judgment recognition, especially where there’s no adjudication of the underlying facts. Family courts must not be cowed by overseas decisions that amount to rubber-stamped settlements.
- The Balance of Interests
The Harman v Glencross and Kremen v Agrest lines of authority were crucial: where assets are insufficient to satisfy both a spouse and a creditor, the court must balance competing claims—not simply defer to a charging order.
Why This Case Matters
This decision underscores how creative debt claims can derail financial remedy cases—and the importance of judicial vigilance. When the origin of a debt is murky, and the creditor is a relative with no commercial incentive, alarm bells should ring. Especially when:
- The loan terms are uncommercial (interest-free, undocumented);
- The lender and debtor appear to act in concert;
- Critical financial documentation is absent.
Key Points for Family Lawyers
- Challenge debts robustly: If they surface late and lack documentation, seek full disclosure and test the evidence rigorously.
- Don’t assume finality in registered foreign judgments—look at the process behind them.
- Know your tools: Section 23 MFPA 1984 and section 37 MCA 1973 remain powerful weapons to prevent dispositions designed to defeat legitimate claims.
- Press for joined hearings: As here, courts can and should consider financial remedy claims and third-party enforcement claims together, to ensure fairness.
Conclusion
Following the Court of Appeal’s judgment, the case has been remitted to the High Court for rehearing. This means that the wife will have another opportunity to argue that the alleged debt is a sham and that the property should remain available to meet her financial claim. The court will now hear full evidence—likely including cross-examination of the husband and his brother—and reach a fresh decision on the legitimacy of the loan and whether the previous judgments should be set aside. For family law practitioners, the upcoming hearing may provide further guidance on how English courts navigate offshore debt claims in matrimonial contexts.
But for now, the Court of Appeal has made it clear that family justice is not a playground for manufactured debts. If there’s an elephant in the room claiming to be a creditor, the court will—eventually—ask for proof that it isn’t just a man in a costume.
