For the press it is all about the cars – particularly the £470,000 vintage Bentley that Nichola Joy sought to have seized from her ex-husband Clive Joy-Morancho to pay towards her legal costs in their multimillion-pound divorce proceedings.
In the latest hearing, according to the national press, Mrs Joy “lost” that battle (Businessman wins divorce spat over vintage cars: Telegraph) but the truth is rather more complex. In particular High Court judge, Sir Peter Singer, made clear his dissatisfaction with Mr Joy-Morancho’s case (a fact that went unreported by the press), calling it a “sham, a charade, bogus, spurious and contrived” – and possibly even a fraud.
Mrs Joy does not avoid a tongue lashing, either. “What she says must be subjected to close scrutiny and approached with a degree of scepticism having regard to the many extravagant and often inconsistent observations to which she committed herself.”
For judges involved in this long-running (and continuing) case it must have something of the feel of a sophisticated whodunnit involving tens of millions in assets. Whose are they? Where are they? Is anyone wilfully hiding them? For others it’s a moral tale as the super-rich and their cash are sucked into the dark vortex that is a tax-efficient financial trust. As such, the papers’ reports have missed the real story.
The New Huerto Trust (NHT) was set up in the British Virgin Islands by Joy-Morancho as settlor in 2002 and he was also a discretionary beneficiary along with the couple’s three children. The trustee was Royal Fiduciary Group (RFG) and more recently Nautilus Fiduciary, of both of which Tim Bennett was a director. He was also an adviser to Mr Joy-Morancho.
The essence of this case (put simply) is that Mrs Joy claims half the money in the trust, built on the profits of Mr Joy-Morancho’s highly successful aviation business, LCAL – owned by the trust. Mr Joy-Morancho was an employee of LCAL (and hence of the trust), not a shareholder, earning up to £120,000 some years plus what Singer assumed were “prodigious” bonuses.
The trust has made clear Mr Joy-Morancho is no longer a beneficiary (except potentially as an employee, now of its car business, Anthology) – not least because of Mrs Joy’s claim that the trust’s assets are the direct property of Joy-Morancho – and hence in part available to her as a divorce pay-off.
There is a paradoxical circularity here: the trustees must protect the assets on behalf of the other beneficiaries, the children. If Mrs Joy continues to claim “her” half, the trust must continue to exclude Mr Joy-Morancho from any beneficial interest in the trust’s assets – so she cannot have “her” share from him; if she fails in her claim, however, it is quite possible Mr Joy-Morancho can become a beneficiary once more – though his case is that he has irrevocably ceased to be a beneficiary.
He says he has been impoverished by exclusion from the trust, which he is said to owe about $7m, along with the legal disputes he is embroiled in. He has salvaged sufficient funds, he says, to pay a French child maintenance order of €3,600 and rent for his wife for the time being but no more. (The couple, married in 2006 after a period living together, had been living since 2010 in a French chateau in Provence also owned by the trust; Mrs Joy now lives nearby after a separation in 2011.)
In the latest hearing, Singer granted Mrs Joy an interim award of a monthly payment adding up to £120,000 a year from Mr Joy-Morancho and awarded her legal costs of £345,000 against him. He declined, however, to award the multimillion lump sum payout Mrs Joy had been hoping for and declared £20m cars (other than the Bentley – now sold) were not her husband’s but belonged to the trust – hence presumably beyond her reach.
Although the press awarded this round to Mr Joy-Morancho, Singer said that in fact “neither party has won”. Singer postponed Mrs Joy’s claims for a lump sum and for an adjustment of property order. It seems further litigation is almost inevitable.
The trust had among its assets a £20m portfolio of collectible cars, bought by Mr Joy-Morancho. The famed 1928 Bentley tourer seems to have been, however, directly owned by Joy-Morancho – and apparently his only substantial liquid asset. Singer said:
The car was, according to evidence, charged to Beckmans lawyers in December 2013 for their costs to date in the divorce case. Unaware of this Mrs Joy obtained a High Court order in March 2014 restraining dealings in the car and a Piper Archer aircraft owned by her ex-husband. A judge in France had also issued a seizure order on the car and the plane on behalf of the trust, NHT. In September 2014 the car passed into the trust’s ownership on payment of £550,00 to Beckmans (and a £100,000 reduction in the amount owed to NHT by Mr Joy-Morancho). The car now seems to have been bought for $1.06m by a purchaser in New Jersey.
All these dealings with the car were, on the face of it, contrary to the March 2012 restraining order. So, far from Joy-Morancho winning his “divorce spat” over the car (as the Telegraph put it), he seems to have been forced to sacrifice his beloved Bentley and exposed himself to some risk of imprisonment for contempt of court. Singer said:
“I am at a loss to understand how [Joy-Morancho] and Beckmans can have overlooked the fact that the Bentley was at this juncture still subject to the order I had made in March 2014, restraining [Joy-Morancho] from disposing of or dealing with the vehicle. But I will say no more on that score having regard to the fact that [Mrs Joy] and her advisers at the pre-trial review on 26 September 2014 agreed not to pursue applications for committal against either [Joy-Morancho] or [Sofia Moussaoui]” (a Beckmans partner).
The press articles, supplied by an agency and almost identical in the Telegraph and the Daily Mail, make none of this clear, focusing on a “victory” for Joy-Morancho regarding the cars. One cannot help but think that the treatment and the fact that those two newspapers in particular found the hearing newsworthy is because the Joy v Joy-Morancho case plays to their particular views on divorce payouts – that husbands who have worked hard to create fortunes with their wives at home bringing up children should pretty well keep their fortunes intact.
How much more so when that fortune is in part comprised of a prestige boy’s toy such as a 1928 Bentley tourer, understandably “high in his affections”. A more critical look at Joy-Morancho’s behaviour, on the evidence of the hearing and given the comments of the judge, might have been more appropriate. A taste of those comments is given below.
Harsh words: costs award
Part of the latest set of hearings comprised a cost hearing in which the judge decides which sides should bear what proportion of the other’s legal costs (if any). In principle the loser would pay the other side’s costs but this might be mitigated by other considerations – including what amounts to legal/moral arguments about the behaviour of each side. Singer here declared neither side the winner. Mrs Joy had not got what she sought but she had got more than her husband wanted to concede: “[Mrs Joy] has failed in a number of the specific applications she has made, but in light of my findings it is perhaps to be anticipated that in the overall balance it is [Mr Joy-Morancho] who may face a substantive costs order.” So Singer looked closely at how the two sides had behaved.
Singer’s strongest comments came in response to submissions on Joy-Morancho’s behalf about why he should not be made to pay his ex-wife’s legal costs. Counsel for Joy-Morancho had conceded that “in a number of respects [Joy-Morancho]’s evidence was unsatisfactory” but insisted there was no suggestion the trust was a sham and “the validity of the trust arrangements stands unimpugned”. But Singer said:
“One would think [from his counsel’s comments] that [Joy-Morancho] had throughout been meticulously compliant with the fundamental obligation to give full, frank and clear exposition of his financial situation: whereas the reality as I have found it to be is that from the very outset he has deliberately set about obscuring the true situation as to past, present and future. [Joy-Morancho]’s blatant dishonesty in relation to these proceedings cannot so easily be finessed away.”
Singer went further, taking up the issue of the trust not being a sham:
“These points to my mind miss the point entirely. There is a clear distinction between the question whether a trust can be characterised as sham (which was, as rightly stated, not asserted at the hearing), and the conclusion which I reached that the case collusively advanced by [Joy-Morancho] and [Bennett] was a rotten edifice founded on concealment and misrepresentation and therefore a sham, a charade, bogus, spurious and contrived. I do not shrink from applying to it the description fraud, a deliberate design to deceive, inflicted on [Mrs Joy] and on the court, and found by the court so to be.”
Much legal argument had gone into “[Joy-Morancho]’s case designed to establish that the English court would have no jurisdiction to entertain the divorce, and in particular of course [Mrs Joy]’s financial applications, because of his domicile in Spain alleged originally to be of origin, and subsequently of choice.” Singer was also scathing of this line, noting Joy-Morancho has “abandoned his pretence that he was domiciled in Spain”, and saying he had concluded:
“[Joy-Morancho] with [Bennett] was engaged over a number of years in investigating how best an imaginative but fundamentally contrived and false case on his domicile could be made initially to the English tax authorities, and subsequently persisted in the in-court domicile enquiry. Such an attitude and an endeavour pursued with such vigour and at such expense inevitably provoke suspicion, so that it is hardly surprising that [Mrs Joy]’s advisers and [Mrs Joy] herself did react. Slippery manoeuvres just as much as slippery slopes can be expected to bring out the truth of Newton’s third law of motion: For every action, there is an equal and opposite reaction.”
In other words Joy-Morancho brought a lot of Mrs Joy’s legal response upon himself. The domicile issue (one might call it a red herring) ended up generating £600,000 in legal costs.
Singer also looked at Tim Bennett’s role and relationship with Joy-Morancho, saying: “I must also form a view about the extent to which TB is in truth either the stern and unyielding guardian of a trust whose primary objects are [Joy-Morancho]’s children, prepared to abandon [Joy-Morancho] to debt-laden insolvency (with or without the benefit of Château T as the roof over his head); or whether I should conclude that he is capable of participating willingly and with determination in devising an elaborate protectionist facade to preserve [Joy-Morancho] from responsibility towards [Mrs Joy].” again his conclusion is scathing:
“The evidence is now complete and so is my conviction that [Mrs Joy]’s suspicions and her case against [Joy-Morancho] and Tim Bennett/RFG and the Trust are made out. Their position is an elaborate charade, the stage management of which has been conducted ruthlessly and without regard to cost. I do not need to speculate how TB plans to re-establish the access [Joy-Morancho] enjoyed to capital and income which previously was his albeit via elaborate financial arrangements designed no doubt initially for fiscal purposes to distance him from their source. I do not need to consider whether the exclusion deed could or could not be upset … I am confident that when the time is ripe and there is the will to get [Joy-Morancho] out of this impasse where seemingly he is stuck in what on any realistic view would be inextricable penury, TB will find a way.”
In other words, although, on the face of it Joy-Morancho has been excluded as a beneficiary of the trust, he would somehow be reestablished as a beneficiary – once his legal difficulties were overcome.
The release of the “Panama papers” on overseas tax avoiding trusts has turned the focus again onto Joy-Morancho’s financial affairs. See this piece by The International Consortium of Investigative Journalists April 2016).
The Law Society Gazette has a report here which does focus on the legal case, particularly the costs order meted out to Joy-Morancho.
The Guardian has added a correction to its Press Association version of the case (a follow-up with comments from Joy-Morancho’s solicitor, Sofia Moussaoui, welcoming the classic car win) to acknowledge Joy-Morancho has not won the substantive case: Husband winds divorce fight over classic car collection. Moussaoui’s role and the scathing comments by the judge about the case were not reported.