Neutral Citation Number: [2015] ewhc 2507 (Fam)

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H's "Day of Reckoning"

  1. H said that he had been caught out with an accelerated "day of reckoning" when EFG called in the loans. It was put to him that the reality was that he had never had any genuine expectation that he would have to repay whatever amount he ended up borrowing, in effect from the trust via the EFG facility. When it was suggested to him that but for EFG's actions and financial claims a time would have come when the loans were one way or the other discharged other than by repayment, he denied that. He said that he would have expected to be able to repay from earnings and commission working as Anthology's special agent. And indeed no doubt if the salary and bonuses were large enough they might be employed to wipe out the debt, as payments to an employee by a company within a trust might be made legitimately even though advances of capital to discharge a loan should not be possible without breach of trust.

  1. H anticipated that even now he might be taken on to carry on as before assisting Anthology hopefully to make lucrative gains for the benefit of NHT. Certainly that expectation had been canvassed by TB at both the Hong Kong meetings, of which more below. Failing that, he had made millions before and expected to be able to do so again. In the meantime, as I have said, he hopes that the trustees would not force him and thus the children to leave their home at Château T.
  1. He repeatedly said that he was unable to take up employment while he remained living in France, but that once he could get the children into boarding school in England he would be free to go and establish a base somewhere (he mentioned Monaco or Switzerland) from where to work. Their youngest son will be just 5 next October. He proved wholly unable to advance any reason why he could not commence employment while living in France, resolutely relying upon his privilege to avoid explaining what advice he had been given on this topic by lawyers in Monaco. So I am left in the dark about that, and assume that potentially wider adverse tax consequences may be the reason. It is very clear that H orders his life and does not make a move without very full consideration of the tax implications, and that he and TB share two at least of the same horrors: paying anything that cannot be avoided to fiscal authorities, or to W.

  1. The flavour and indeed I must say the improbability of what H appeared to have in mind emerge from these sample passages from his evidence:

MR. BATES: Your understanding, Mr. Joy: was the borrowing ever going to be repaid at any stage?

A Absolutely.

Q How and when?

A When we moved out of France and I was in a position to earn money and start working again.

Q And so what was your plan which was going to enable you to pay around about $25 million?

A Well, I wouldn't need to pay the $25 million; that would be the offset as to the value of the cars. If ten cars were sold, the debt outstanding to EFG may be less.

SIR PETER SINGER: Let us just assume, for present purposes, that seven million, or thereabouts, bearing in mind that you might need to draw down, had it continued, for your own personal use between now and the end of the seven-year period or however long before you left France, how were you going to pay off seven million?

A There was $2 million set aside for living in France; that was the living amount. I would go into business and start making money again. I've done it quite a few times before.

Q Making money for whom?

A For myself, my Lord, through salary and through bonuses - part of a job. And the family, of course.

MR. BATES: Is not the situation actually, Mr. Joy, that, as you know perfectly well, it is quite common to borrow from trusts? You know that, do you not?

A I have never borrowed [from] trusts for personal gain. I mean, I've used, as you say, the credit facilities for business, predominantly. This day of reckoning came and caught us out. It was never supposed to happen, it was never supposed to happen.

Q You are very keen on the presentation that you have not had a capital distribution from the trust; that I understand. But what you have had is the benefit of a very large loan facility, have you not?

A I have a $7-million bill to show for that.

Q And there was no firm plan in place by which you were going to be able to repay that sort of figure, was there?

A It was never considered a problem. We've come out of a business that's made many millions of dollars, hundreds of millions of dollars. It was not conceived as a problem in the short, or even long-ish, term.

  1. As for the position of RFG on the question of whether advances to H by way of loan might in due course have been forgiven, it appears clearly expressed in a passage in TB's Note of the December 2013 Hong Kong meeting:

"SDM asked the trustees why they were so exercised by the loss to the trust fund and whether it had always been in their contemplation that the facility would be repaid, one way or another, through the trust assets. The trustees responded that this was not within their foreseeable contemplation and was certainly not their intention at any stage. The trustees operate on the basis of full understanding of the concept of leverage in business finance and were well used to securing the borrowing facilities, this being a standard clause in most trust deeds."

  1. I must consider how much credence I can give to what on the face of it is an improbable if not indeed an incongruous scenario. For that purpose I must say something about the extent to which I can credit H's evidence, and express my views upon the extent to which I am able to feel confident about what TB has written about these loans, and on other topics, in Notes so clearly produced for court consumption.

H's credibility
  1. H's cross-examination by Mr Bates in October did not begin well. I must explain that in the course of the domicile proceedings in December 2012 and April 2013 H gave me every reason to suppose that, in that context, he would say whatever appeared to suit whatever his case was for the moment, which was in itself a rapidly shifting and changeable set of propositions. He conceded that he was domiciled in England at the commencement of proceedings on 1 May. He had therefore had overnight to consider the impact of a most singular situation which had arisen immediately before the luncheon adjournment on 30 April 2013, in the light of which I asked him to consider his position.

  1. The singular event was this. It became necessary to interrupt H's evidence to accommodate a witness who needed to travel back to Spain. Before the witness, Mr AC, was called Mr Leech asked H whether they had seen each other the previous evening. The answer was a straight "no." H said they had not discussed his wealth. He said that the last time he had seen Mr AC was at a family birthday party on the previous Saturday. Mr AC however from the witness box told Mr Leech that they had had dinner together the previous evening, and had discussed the case. H was of course present in court and heard his evidence. This is what then followed:

MR. LEECH: Would you like to tell us the truth now?

A Yes, I saw AC at my sister's flat yesterday. I saw him also at the birthday party of my niece.

SIR PETER SINGER: That was not the question you were asked. The question you were asked, quite specifically, was when did you last see him. So may I take it you lied?

A It seems that way, my Lord, yes.

Q Why does it only seem that way?

A Well, it is.

Q Why does it have to seem?

A Yes, I did.

Q All right. I think this is probably an appropriate moment to break for an early lunch. I would just like you to understand that, as I understand it, the concession having been made and so far no attempt to withdraw it, that you are domiciled … [sc: your domicile of origin is]… England.

A Yes.

Q You have to persuade me on clear cogent evidence that your case is accurate.

A Yes, my Lord.

Q I would like you to be thinking over lunch how at the moment, subject to whatever may yet emerge and the submissions that will be made to me, I would like you to think, if you were in my place, how I can begin to find your case … as things are at the moment, given that you apparently are incapable of maintaining the same story, accurately and truthfully, on a number of other issues.

A Yes, my Lord.

SIR PETER SINGER: So shall we say 2 o'clock?

(Adjourned for a short time)

MR. LEECH (to the witness): Mr. Joy, the reason you lied about when you last saw your friend Mr AC was because you did not want to admit to the court that you had spoken to him about your will and the date on it. Is that not right?

A That is not correct, my Lord.

Q It is the only reason you would have lied, is it not?

A (No audible reply).

  1. As I say, the following morning counsel then acting for him announced that H wished no longer to challenge the court's jurisdiction. Clearly there must have been overnight communications between H and his legal team notwithstanding that he was still subject to cross-examination. That in the circumstances I in no way criticise, and mention only because of what transpired in response to the first series of questions put to H by Mr Bates on 31 October 2014:

Q Mr. Leech … asks you whether or not you saw one another the night before the hearing, that is you and AC. Do you see that at line 30?

A. Yes, I do, my Lord.

Q. And the answer that you gave at line 31 was: "No, we did not."

A. That's correct, my Lord.

Q. But that was not true, was it?

A. Actually, it was.

SIR PETER SINGER: "It was true we had not seen each other the previous night." Line 10: "I saw AC at my sister's flat yesterday." Those two statements seem to be in flat contradiction.

A. They are, my Lord.

Q. Is there an explanation?

A. Yes. I did not see AC on that Monday night and I don't know, I was so shocked at what he said, I have no explanation as to why I said that.

Q. We do not actually have his evidence but my recollection of it is very straightforward.

A. Mine too.

Q. Yours too. So tell me if you think I have got this wrong. "When did you last see the husband? Last night at dinner. Did you discuss the case? Of course."

Is that about it?

A. That was not AC's complete evidence, my Lord.

Q. And he had also seen you the previous Saturday at the birthday.

A. That's correct.

Q. But we are concentrating on last night at the moment. …Was he telling an untruth?

A. He was, my Lord.

Q. He was telling an untruth.

A. And I spoke to him about it after the event.

Q. He was telling an untruth when he said (A) he had seen me last night; (B) had dinner together.

A. I don't think he said we had dinner because he said he went off with his wife for dinner.

Q. And that we had discussed the case.

A. I don't know if he said that either. That's what I can't remember. But the gist of it's there, my Lord.

SIR PETER SINGER: (To the witness) So you are saying that in any event, whatever was the detail, you had not seen him the previous night and he was lying when he said he had.

A. That's correct, my Lord, and I can go further to say that. Mr Leech asked him does he know where my sister lives and what address, and AC had difficulty remembering which, had he been there that previous night, he would have remembered because he knows my sister fairly well. He's a man in his 70s and he was confused. He had not seen me on the Monday night; he had seen me on the Saturday night. That's the truth. In the absence of AC I can't ----

  1. As might be imagined, this was the first time this extraordinary explanation had been given: yet as might also be imagined, and as has been the case, the "AC lie" had in the intervening 18 months frequently been remarked upon in correspondence and in position statements for W as an instance of H's unreliability. I reject the explanation given by H as pure fiction, but as nevertheless indicative of the misguided lengths to which he will go to avoid responsibility: on this occasion not financial responsibility, but responsibility for having been caught out attempting blatantly to deceive the court.

  1. The consequence is that I must approach every relevant and significant assertion made by H with extreme caution. He showed in the context of the jurisdiction proceedings the extent to which he would duck and dive, weave and contrive.

TB's role
  1. 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 H's children, prepared to abandon H 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 H from responsibility towards W.

  1. Their professional relationship goes back many years, back to at least 1997 when TB twice advised H and W1 on issues which included domicile. Their active involvement has at times has been quite intense, for instance during the course of protracted IR enquiries which involved the preparation and consideration of spurious scenarios considered for presentation to the tax authorities. H has clearly come to rely on TB not only for the financial and fiscal and trust advice which is his speciality, but also for guidance in how he should approach what he and TB by June 2010 had come to see as a troubled relationship between H and W. There is no doubt whose side TB took, and the note of a lunchtime meeting at Château T in June 2010 which he prepared evinces his clear dislike for her (sentiments which, I should say, she clearly reciprocated).

  1. H explained that he had committed the management of the old HT to TB before the breakdown of his relationship with W1 at the end of 2000 and the beginning of 2001. He made the reluctant concession (fully supported however by contemporaneous notes of what he told her made by another of his professional advisers much nearer the time) that HT played a defensive part in the arrangements he made at the end of that marriage. It is also clear that since the establishment by H of NHT in 2002 TB has played a leading role in its management. He has thus been there to manage the trust and to advise and assist H throughout the wealth accrual years of LCAL when (according to the evidence of H) something like US$100m accrued to NHT.
  1. The Car Portfolio stemmed from TB's belief that quality classic and racing cars were investments tipped to achieve healthy growth, said H. But the venture was also firmly founded and grounded on personal attributes of H which were available to NHT once LCAL ceased air chartering operations and H embarked upon what he expected to be a sabbatical of seven or so years duration, with the shift of residence from Bequia first proposed as Switzerland but then translated to France. H has a passion for collecting these vehicles, driving them, and for parading with them on their own fashionable international circuit. He undoubtedly regarded them as his collection.

  1. The investment has proved lucrative for its owner. The example of the sale of one particular Alfa, purchased for US$2m and sold for US$5.8m, on its own establishes that. H let slip a comment in his evidence which I have highlighted in one of the extracts above (at paragraph 152) but was not picked up at the time: "If ten cars were sold, the debt outstanding to EFG may be less." Car sales would however only reduceNHT's guarantee liability if their proceeds were paid to EFG in reduction of overdraft balances on the relevant accounts – which there was no evidence to suggest had ever occurred, and was an eventuality which had never been previously mentioned as part of the scheme of things. If H meant that car sale proceeds would have reduced his overall debt to NHT then that suggests some profit-sharing or commission arrangement – which might possibly become payable via Anthology once H can resume his activities on a paid basis when these proceedings are behind him and he has sufficient time to do the job as TB would expect and require. It begs the question whether during his years in France, not able to be paid since he took up French fiscal residence in September 2010, he has built up any reserves of unpaid commission, for instance on the US$3.8m profit realised on that Alfa, sold in March 2013, to a man from Texas who conceived an instant desire to own that car when he saw it, with H beside it, at a race meeting.
  1. H's activities in furtherance of the acquisition, the promotion, the racing, parading and the sale of cars within the collection continued alongside his French sabbatical, unpaid it would seem, without apparently infringing the afflicting embargo which precludes his employment while resident for tax purposes in France. That period in fact covers virtually the whole lifetime of the Portfolio as, as H recounts it, it was only in 2009 that acquisition of the collection got underway. So one can understand how during this period he would have received no formal remuneration notwithstanding the enormous contribution he made to the selection, negotiation of purchase or sale and day-to-day management and administration of assets worth over, and possibly well over, US$20m. I have to ask myself whether and when H's day of reckoning with NHT for that, but for W's claims, would have arrived, and by what method he would have been recompensed.

  1. Against that background TB clearly conceived and took steps to put into operation the plan to exclude H permanently from all benefit under NHT in reaction to the threat posed by W's claims, and the risk that they might result in orders affecting trust assets. His and H's case is that he embarked on that without consultation with and without informing his long-term client and the settlor of NHT, the person who had made such valuable contributions to the development not only of the trust's first US$100m but also to the profits made through the Car Portfolio. It is clear on the evidence that this plan was hatched before and was independent of the EFG account closure (for instance having regard to the fact that the application for sanction of the proposed deed reached Bannister J in mid-October 2013). In the judgment he gave in November he recorded that the application "is designed to ensure that the assets of the Trust are not available to the Court in the English proceedings."

  1. It is also against that background that in correspondence and at the meetings in Hong Kong TB has noted himself as saying things (with emphasis which I have applied) such as:

"The unwelcome developments of the recent past mean that the Trustees have no option but to consider whether to take measures to protect the trust assets from further losses which might result as a result of the matrimonial proceedings."

"[RFG] have determined that you should now be permanently and irrevocably excluded from benefit under the Trust. The minimal detriment that this may cause to you is outweighed by the benefit to the other beneficiaries under the Trust from your own exclusion." [Letter dated 26 November 2013]

"The Trustees were confident that the [jurisdiction] issue would be determined in favour of H as they were aware that H was not domiciled in the UK, so the UK courts would therefore not have jurisdiction to hear the financial matters. The Trustees were relaxed about the outcome. However, at the hearings on 1 May 2013 the jurisdiction case collapsed, and full English Matrimonial Proceedings commenced. The Trustees went into 'panic mode.'"

"The Trustees … considered the factual position very carefully, and in reaching the decision that they reached, did take the following additional matters into account:

a) H is currently excluded from benefit for tax reasons, and (on the present understanding of the Trustees) those tax reasons are likely to continue for the foreseeable future because H appears likely to continue to reside in France;

b) H has few other assets but is likely to take up a remunerated role in the Trust's car-related businesses…

c) On this basis it was not considered likely that H will have any significant capital or income needs;

i) …v) Although the future is never certain, the Trustees do not consider that H is likely to have the need of benefit under the Trust due to the intended offer of employment within the Trust's business interests…"

"… The Trustees' expectation was that H would be able to begin work once again soon, which would assist the various projects held by the Trust to grow, yield capital appreciation and add overall value to the Trust Fund."

"The Trustees are willing to make an offer of employment to H in respect of the car businesses. The Trustee's position is that they are not hostile to H or to his position. The Trustees recognise that H needs an income. H has skills which are of huge benefit to the Trust and its various car-related ventures, and the Trust would like to retain the benefit of those skills."

"No specific employment offer can be made at this time.[Meeting notes of 3 December 2013]

"We call upon you to make immediate transfers and assignments to us (or to a designated nominee) of all of the above assets [10% of Château T SCI, the Bentley, Piper Archer, Zermatt land]. We will be instructing Lawyers in both France and in Switzerland to seek immediate saisie conservatoire and commence formal recovery ('poursuite') proceedings." [Letter of 6 December 2013]

"The Trustees well recognise that [permanent Exclusion] is a drastic step taken by them. However the trustees do not accept that it would be open to them to reinstate H after the conclusion of the divorce proceedings.… The permanent Exclusion is not a device. … The permanent Exclusion has been executed and there is no power to reinstate H. This needs to be fully understood by all the parties and by the Courts. The Trustees believe they are acting in the best interests of the beneficiaries. No amount of judicial persuasion will result in the Trustees making distributions in breach of trust for the benefit of a non-beneficiary (namely W)."

"SDM asked if the LCAL car businesses were yet in a position to make H a formal job offer. TB noted that, to date, the Trustees have been unwilling to make H a firm job offer in relation to the car businesses, as they have been informed by the Protector that H's time is not his freely to dispose of, and that H is distracted by the seemingly never-ending rounds or matrimonial proceedings and the requirements to fly to London several times a month, often on very short notice. This inability to focus and to be available on a fixed full-time basis is crucial to the business plan. The executive position that the Trustees wish to offer H is full-time and is high-profile, and the Trust/LCAL expect to derive maximum value."

"SDM also informed the Trustees that the Bentley was already charged to Beckmans by way of a chattel mortgage against legal fees since November 2013." [Meeting notes of 10 April 2014]

  1. For the most part supinely H accepted the prospect of this role, indeed enthusiastically looked forward to resuming these activities. He was optimistic that RFG would not enforce by proceeding against the SCI his dispossession from Château T. He would feel secure in his employment because no doubt there would be formal written arrangements. He showed only intermittent anxiety about becoming dependent, again, on TB of whom at one point he said: "My Lord, I'd just been deceived. I had been completely blindsided by my trustee, if I call him my trustee, a man I had known for 20-odd years." The shock of this had left him "catatonic."

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