Webb v Webb

JurisdictionUK Non-devolved
CourtPrivy Council
JudgeLord Kitchin,Lord Carnwath,Lady Black,Lord Briggs,Lord Wilson
Judgment Date03 August 2020
Neutral Citation[2020] UKPC 22
Docket NumberPrivy Council Appeal No 0013 of 2019
Date03 August 2020

[2020] UKPC 22

Privy Council

From the Court of Appeal of the Cook Islands


Lord Wilson

Lord Carnwath

Lady Black

Lord Briggs

Lord Kitchin

Privy Council Appeal No 0013 of 2019

(Respondent) (Cook Islands)


Sean Owen McAnally

(Instructed by Keegan Alexander Barristers & Solicitors)


Isaac Hikaka

Tim Mullins

Benjamin Marshall

Laura Clews

(Instructed by Little & Matysik PC)

Heard on 20 and 21 January 2020

Lord Kitchin

( with whom Lord Carnwath, Lady Black and Lord Briggs agree)


This is an appeal in a dispute between spouses about the matrimonial property available for division between them after their relationship has come to an end. It raises many issues concerning the relevance of a tax debt incurred by the husband in New Zealand and whether it is enforceable in the Cook Islands, the validity of two trusts established by the husband and which hold assets said by the wife to be matrimonial property, and the approach to be taken to the assessment and valuation of matrimonial property where a financially dominant spouse fails to disclose relevant documents and information.


The appellant, Mr Webb, and the respondent, Mrs Webb, were married in New Zealand on 2 December 2005 and made their home there. They are both New Zealand citizens. They have a daughter, Bethany, who was born on 4 December 2006. Mr Webb also has a son, Sebastian, from a previous marriage. Sebastian was about three years old when Mr and Mrs Webb married.


Mr Webb is an entrepreneur who has managed his business affairs and assets through a complex structure of companies and trusts. His ventures have not always been successful. He was declared bankrupt on 26 July 2000 and discharged a few years later. Nevertheless, for the first nine years of their marriage, Mr and Mrs Webb enjoyed a relatively high standard of living which was apparently funded by Mr Webb's business activities. One of Mr Webb's business associates was Mr Andrew Tauber and together they operated through a group of companies called the Honk Group and an associated trust called the Honk Land Trust.


Shortly after Mr and Mrs Webb were married, Mr Webb established a family trust, the Arorangi Trust, for the purpose of acquiring land in the Arorangi area of Rarotonga in the Cook Islands and other assets in that jurisdiction. As settlor, he appointed himself as trustee and nominated himself and Sebastian as beneficiaries. In February 2006, the Arorangi Trust acquired a leasehold interest in a property in Arorangi known as the Arorangi Property. Later that year the Arorangi Trust acquired an interest in an adjacent property and Mr Tauber was appointed as another trustee and his children were added as beneficiaries. Yet further property has since been acquired by the Arorangi Trust, including an interest in a property known as the Terepai Arihii Property.


In August 2013 Mr and Mrs Webb and Bethany moved from New Zealand to the Cook Islands, where they lived in the Arorangi Property. By this time the relationship between Mr Webb and Mr Tauber had soured. In 2014 Mr Tauber retired from his position as trustee of the Arorangi Trust and his children were removed as beneficiaries. One of the Arorangi Trust properties (though not the Arorangi Property or the interest in the Terepai Arihii Property) was sold and the proceeds were paid to the Honk Land Trust.


Meanwhile, in 2011 the New Zealand Inland Revenue Department (the IRD) began an investigation into Mr Webb's business affairs. It focused on payments made to him by the Honk Group over many years and it led to the issuance of default assessments, including shortfall penalties, by the Commissioner of Inland Revenue for the 2001–2009 tax years. A challenge by Mr Webb to those assessments was rejected by the Taxation Review Authority by decision dated 7 October 2016. As of 15 September 2017, the sum of income tax, penalties and interest which remained unpaid was in excess of NZ$ 26m.


Mr and Mrs Webb separated in April 2016. Mrs Webb and Bethany continued to live in the Arorangi Property. Mr Webb returned to New Zealand with Sebastian and there he began a relationship with a Ms Brenda Dixon. Mr Webb thereupon arranged for the establishment of a new trust, the Webb Family Trust, and he and Ms Dixon were appointed as trustees. The settlor was a Mr Leslie Ellison. Mr Webb, Sebastian and Bethany were named as beneficiaries. Mr Webb also arranged for the Arorangi Trust to transfer some of its assets to this new trust for a nominal consideration.


In May 2016 Mrs Webb issued these proceedings in the High Court of the Cook Islands for matrimonial property orders pursuant to sections 23 and 25 of the Matrimonial Property Act 1976 of New Zealand as that Act applies in the Cook Islands by virtue of the Matrimonial Property Act 1991–92. I will refer to the Act as incorporated into Cook Islands law as the 1976 Act. Various amendments have since been made to the New Zealand Act, which is now called the Property (Relationships) Act 1976 (NZ) but these have not been adopted in the Cook Islands. I will refer to the New Zealand Act as the 1976 Act (NZ).


The basis of Mrs Webb's application was that her relationship with Mr Webb had progressively deteriorated, that they were irreconcilable and that they had been unable to agree upon a division of the matrimonial property.

The decisions of the courts below

The proceedings came on for hearing before Potter J in May 2017. Mrs Webb contended that the Arorangi Trust and the Webb Family Trust were invalid because, among other deficiencies, they lacked the irreducible core of obligations necessary for a trust to exist; they were shams; and the settlor of each trust did not intend to relinquish control of the beneficial interest in the trust property. She also argued that the assets available for division under the 1976 Act comprised, among other things: the leasehold interest in the Arorangi Property; the interest in the Terepai Arihii Property; moneys in bank accounts in the name of the Arorangi Trust; and shares in companies called Solar 3000 Ltd, Fleet Lease Ltd, and Kuru Investments Ltd.


Mr Webb took issue with most of Mrs Webb's case. He argued, among other things, that the Arorangi Property, the interest in the Terepai Arihii Property and various other assets were all the property of the Arorangi Trust, and that the shares in Solar 3000 Ltd, Fleet Lease Ltd, and Kuru Investments Ltd were all held by the Webb Family Trust and, in the case of the shares in Kuru Investments Ltd, were acquired after the parties' separation. He also argued that if any of this property was matrimonial property in his hands then the value of such property available for division would necessarily be reduced, indeed wholly extinguished, by his unsecured personal debts including his debt to the IRD. This last contention was vigorously opposed by Mrs Webb on the basis that Mr Webb's debt to the IRD was not one that could be enforced in the Cook Islands and so did not constitute a debt owed by Mr Webb within the meaning of the 1976 Act. For that reason, she submitted, the debt to the IRD should not be brought into account.


Mr and Mrs Webb gave evidence at the hearing before Potter J. Mr Webb's evidence was directed at, among other things, the dealings and administration of the Arorangi Trust and the Webb Family Trust, and the relationship of these trusts to his personal business ventures and activities. Potter J gave her judgment on 23 August 2017. She found Mrs Webb to be an honest witness who gave her evidence carefully but had little knowledge or understanding of Mr Webb's business affairs or the operation of the trusts. Mr Webb's evidence, by contrast, was vague, evasive, at times contradictory and generally unreliable. Moreover, the documentary evidence as to the administration of the trusts contained what the judge described as disappointing gaps.


Nevertheless, Potter J dismissed the claim. She rejected Mrs Webb's attacks on the Arorangi Trust and the Webb Family Trust and found them to be valid. She went on to consider Mr Webb's assets. She found that there was a real likelihood that Mr Webb would have to pay the debts he owed to the IRD, and that they constituted personal debts which had to be brought into account and which, even if the trusts had been invalid, would have exhausted any matrimonial property, leaving nothing available for division.


An appeal by Mrs Webb to the Court of Appeal came on for hearing before Fisher, White and Grice JJA in November 2017. In a judgment of the court, given on 24 November 2017, the appeal was allowed. The court held that Mr Webb's tax debt to the IRD should not be brought into account because it was unlikely to be enforceable in the Cook Islands. On the second critical issue, namely the validity of the Arorangi Trust and the Webb Family Trust, the court held that these were invalid because the trust deeds failed to record an effective alienation of the beneficial interest in the assets in question.


It only remained to determine the value of the matrimonial property available for division. Mrs Webb contended for a value of about NZ$ 8.1m, including NZ$ 2.83m in respect of the interest in the Arorangi Property. Mr Webb argued for a value of only about NZ$ 4m. Three matters accounted for most of the difference between the parties: a debt of about NZ$ 3.3m which Mr Webb said he owed to the Honk Land Trust; a dispute as to the value of Mr Webb's shareholding in Solar 3000 Ltd; and a dispute as to the value of Mr Webb's interest in Kuru Investments Ltd, and whether it should be brought into account at all.


The Court of Appeal rejected Mr Webb's case in relation to the debt to the Honk Land Trust, finding that it was not genuine but rather the product of an ineffective tax avoidance scheme. As...

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