Sofia Moussaoui’s matrimonial case Joy v Joy-Morancho [2015] EWHC 2507 (Fam) in Law Society’s Family Spotlights

In this complex, high-value case, a husband was able to demonstrate the assets attributed to him were not available for distribution. Sofia Moussaoui was instructed by the respondent.

1. What’s happened?

The claim

The wife came before the court seeking a lump sum of £27million on a clean break basis. She was asserting that the matrimonial assets amounted to at least £54million. By the time the matter came to final hearing, the husband’s case was that the assets of substance were held by the New Huerto Trust (NHT), of which he was an excluded beneficiary, and that his personal assets had either been extinguished or were subject to prior encumbrances. He therefore argued that there should be no capital award with nominal maintenance.

The financial background

The financial situation the husband was in had arisen because earlier on in the proceedings the wife obtained a worldwide freezing injunction, which her representatives subsequently served upon EFG bank (the bank). The parties had been meeting their living expenses by drawing down on a facility at the bank. The facility was backed by a guarantee from NHT, which held a counter indemnity from the husband. The injunction eventually caused the bank to assert that it constituted an act of default. It withdrew the credit facility immediately, recalling the loan, which then stood at circa US$19million. The husband had no means from which to pay back the loan and the bank implemented the guarantee against the assets of NHT.

This event had a major impact on the case in several respects. The parties lost the vehicle by which they met their living costs. NHT, having lost circa US$19m through the collapse of the facility, became even more determined that no further loses would be made to the assets of the trust and executed a deed permanently excluding the husband from benefitting from the trust. It further resolved to attempt to mitigate the trust’s loses by claiming against the husband’s personal assets, relying on the counter indemnity he gave.

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The trustees then embarked upon enforcement action against the husband in Switzerland and France in order to attempt to recover US$7.06million, which the trustees had calculated was the minimum sum that the husband had personally benefitted from his use of the EFG facility.

They successfully obtained orders against the husband’s personal assets, which comprised land in Zermatt, the husband’s shares in his home which were held 90% in the names of the children and 10% in the name of the husband, and a Piper aircraft. Attempts to secure the Bentley 1928 Tourer failed as it was subject to a prior charge in favour of DWFM Beckman for payment of the husband’s legal fees. Between the charge and the action taken by the trustees, the husband had no unencumbered personal assets against which the wife could recover a lump sum.

Other applications

As well as her aspirations against the husband’s personal assets the wife also attempted to secure the £27 million lump sum she was seeking by way of various applications. She sought to argue that the court had the power to order the transfer of assets held under the trust in satisfaction of her claim.

The various applications are detailed in the judgment, however in summary, the wife made the following claims:

  • A collection of motor cars was owned by the husband rather than the British Virgin Islands (BVI) company LCAL Anthology Inc (LCAL).
  • The husband had transferred the legal ownership to LCAL in order to defeat her claims, and sought to have the transfers set aside under S37 of the Matrimonial Causes Act 1973 (the 1973 Act).
  • The trust could be varied as an ante-nuptial settlement pursuant to section 24(1)(C) of the 1973 Act.
  • The court could secure the lump sum award against the two London properties which were both registered as owned by Glengariff Property Holdings, another BVI company held under the same trust structure.
  • She could enforce against the former matrimonial home which was a property in Bequia in the Caribbean held in the name of a St Vincent company, Blue Orchid, wholly owned by NHT.

The judgment

The wife’s multiple applications failed in every respect. The court was unable to make any lump sum award to the wife as all the assets were unavailable to the court for distribution.

Despite not awarding the wife any capital sum, and making a finding of fact that the husband did not have any capital assets available to him and that the trustees would not make money available to the husband for onward payment to the wife, the judge awarded the wife £120,000 per annum by way of maintenance (the husband is not in employment) and her indemnity costs with a payment on account of £334,263 payable within 14 days.

2. Why is it important?

The decision is important because it shows that it is possible to refute what appears to have become a presumption in “big money” divorce cases: that a husband must be making a false presentation when he asserts that assets the wife claims are under his control are not. Despite the adverse comments the judge made about the credibility of both parties, the judge failed to identify any deficient financial disclosure by the husband which went to his means or his asset position and, therefore, he was unable to make an order against any of the assets identified by the wife as available to the court for distribution.

There is an anomaly in a judgment which accepts that the husband is unable to pay and has no assets available to him whilst making an order that he pay substantial maintenance and costs, without identifying either how the maintenance award has been calculated or the source from which maintenance and costs can be paid.

3. How does this fit into existing law and practice?

This is the first case that I am aware of where a husband has been able to successfully demonstrate to the court that the substantial assets that are being attributed to him are not available to the court for distribution. That is the substantive and most important part of the judgment and relates to the failure of the wife to secure a capital lump sum of any value, despite aspirations of a £27million award. Both the maintenance order and the costs order will be the subject of an appeal. It remains to be seen how those orders fit into the existing law. The cost order appears to disregard the Family Proceedings Rules, rule 28.3(7)(f).

4. In what ways does this affect practitioners?

Practitioners may find themselves in a position where, having won their case, they are ordered to meet the costs of the losing party, despite the court being unable to indicate what asset is available to the winning party in order to make the payment. The same can be said in respect of the maintenance award. Further, a party may find themselves subject to an order to pay maintenance in a sum that does not appear to have been arrived at by way of any mathematical calculation of what is needed.

5. What, if anything, should I be doing differently as a result?

There was no sensible reason to serve the bank with the injunction. The bank did not hold any assets belonging to the husband and was just a credit facility. Service of the injunction on the bank caused the facility to collapse, which, in turn, not only cut off both parties’ ability to be maintained, but also resulted in the husband’s personal assets being subject to orders in favour of the trustees.

Practitioners should carefully consider whether an injunction is actually necessary in the context of any particular case and, once obtained, the implications of serving such orders as a matter of routine rather than necessity.

By Sofia Moussaoui, Family Law Partner at DWFM Beckman

For matrimonial and family law enquiries Sofia can be contacted directly at sofia.moussaoui@dwfmbeckman.com or 020 7408 8827.

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