Dewat v Lal
[2023] NZHC 1908
•21 July 2023
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2023-470-09
[2023] NZHC 1908
UNDER Part 18 of the High Court Rules 2016 and the Trusts Act 2019 IN THE MATTER
of the SANATAN DHARAM TRUST
BETWEEN
SANJEEV DEWAT, KULDIP KUMAR, MOHAN LAL SAILY, ROMAN SAILY and
SANJEEV SHARMA as trustees of the SANATAN DHARAM TRUST
Plaintiffs/Applicants
AND
DARYODHAN LAL, RAM LUBHAIA, AJAY SHARMA and RAM DITTA SAILY
as trustees of the SANATAN DHARAM TRUST
First Defendants/Respondents
Hearing: 23 May 2023 Appearances:
J Delaney for the Plaintiffs/Applicants A Singh for the Defendants/Respondents K E Wilkinson for the Public Trust
Judgment:
21 July 2023
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 21 July 2023 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
DEWAT v LAL [2023] NZHC 1908 [21 July 2023]
Introduction
[1] The plaintiffs have applied for summary judgment seeking orders setting aside the purported resolution of the first defendants to remove the plaintiffs as trustees of the second defendant and the appointment of new trustees in their place.
[2] The plaintiffs and first defendants are (or were) trustees of the Sanatan Dharam Trust (Trust). In addition to other charitable purposes, the Trust is responsible for the administration and operation of the Sanatan Dharam Mandir Hindu Temple in Tauranga.
[3] There is a tenth trustee of the Trust, Kiran Patel, who is neither a plaintiff nor a first defendant. Kiran Patel has been served with these proceedings but did not participate in the hearing.
[4] In October 2022, the first defendants purported to remove the plaintiffs as trustees of the Trust pursuant to cl 6.7(g) of the Trust Deed (Trust Deed). The plaintiffs submit that the purported removal was not in accordance with the Trust Deed as the plaintiffs were prevented from voting despite being current trustees on the basis that they were the subject of the proposed resolution to remove.
[5] The plaintiffs say that the Court is able to interpret the Trust Deed on a summary basis because no additional evidence or discovery is required on this discrete issue. There is no dispute about the facts relating to the removal, the only dispute is whether those facts meet the requirements of cl 6.7(g) of the Trust Deed.
[6] The plaintiffs say further that the first defendants seek to justify the removal of the plaintiffs as trustees by reference to their alleged shortcomings as trustees. The plaintiffs deny the allegations but submit it is not relevant to the question for which summary judgment is sought as justification cannot cure the first defendants’ ultra vires actions. The plaintiffs say the removal or appointment of trustees is a matter of such importance that strict compliance with the Trust Deed must be achieved. It cannot be cured or overlooked.1
1 Attorney-General v Ngati Karewa and Ngati Tahinga Trust [2002] BCL 75 at [95].
[7] If summary judgment is granted on the basis that the first defendants did not act in accordance with the Trust Deed in removing the plaintiffs as trustees, the plaintiffs say it follows that the first defendants’ subsequent appointment of replacement trustees is also invalid as the appointments cannot have been made by resolution of the Trust Board pursuant to the Trust Deed.2
[8] In addition and even if their removal is set aside, the plaintiffs seek interim orders removing all ten trustees (the plaintiffs, the first defendants and the tenth trustee, Kiran Patel) as trustees of the Trust and appointing Public Trust as a replacement independent trustee. These additional orders are sought on the basis that the Trust Board is dysfunctional and unable to act in the best interests of the beneficiaries until the substantive matter is resolved. Kiran Patel has consented to his removal as trustee on this basis.
[9] Counsel for the first defendants proposes an alternative interpretation of cl 6.7(g) of the Trust Deed but otherwise seeks to justify the removal of the plaintiffs as trustees. The plaintiffs are not however seeking summary judgment in respect of whether there were grounds to remove the trustees. The only question that is before the Court for summary judgment is whether the first defendants had the power to remove the trustees in the circumstances in which they purported to do so, no matter whether there were grounds to do so or not. The grounds for removal are not therefore relevant to this summary judgment application (even if they could be determined on a summary judgment basis which is doubtful).
Summary judgment - legal principles
[10] Rule 12.2(1) of the High Court Rules 2016 provides that the Court may give judgment against defendants if the plaintiffs satisfy the Court that the defendants have no defence to a cause of action in the statement of claim or to a particular part of any cause of action.
2 At [31] to [64] where Randerson J discusses the approach to the validity of the appointment of trustees at improperly convened meetings.
[11]The principles applying to such applications are set out in the leading authority,
Krukziener v Hanover Finance Ltd:3
[26] The principles are well settled. The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3. The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Yong v Letchumanan [1980] AC 331 (PC) at 341. In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
Issues
[12]On the basis of these principles, the following issues need to be considered:
(a)Is it reasonably arguable that the first defendants had the power to resolve to remove the plaintiffs as trustees under the Trust Deed in the way in which they purported to do so?
(b)If not, should the resolution removing the plaintiffs as trustees be set aside?
(c)Should the appointment of the replacement trustees be set aside?
(d)Should interim orders be made pending the outcome of the substantive proceedings removing all trustees and replacing them with Public Trust?
Factual Background
[13] As stated, the plaintiffs, first defendants and Kiran Patel are (or were) trustees of the Sanatan Dharam Trust.
3 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
[14]The Trust is a registered Charitable Trust:
(a)founded by the Trust Deed dated 14 September 2009; and
(b)incorporated as a Charitable Trust Board on or around 13 November 2017.
[15] The plaintiffs and first defendants accept that the trustees of the Trust are governed by, and subject to, the terms of the Trust Deed. I record that cl 5.2 provides that there is no limitation on the exercise of the Trustees’ powers except as provided in the Trust Deed.
[16]The objects of the Trust are set out in cl 3.1 of the Trust Deed as follows:
3.1PRIMARY CHARITABLE PURPOSES OR OBJECTS
The Trustees shall hold the Trust Fund for all or any of the following Charitable purposes (or objects), each being independent of any other, in New Zealand:
·To contribute to the religious, spiritual and cultural development of Hindu’s in Tauranga and Mount Maunganui and surrounding areas.
·To liaise and cooperate with other New Zealand Hindu Organizations to promote the Hindu faith throughout New Zealand.
·To provide and establish a link between Hindu Organizations and other religious Hindu Organizations throughout the World so that information of common interest may be exchanged.
·To establish and maintain a Hindu Temple
·To conduct religious ceremonies for Hindu followers
·To promote and foster a better understanding amongst the people of New Zealand for the Hindu Religion
·To arrange from time to time speakers to speak on Hindu topics
·To give assistance to the poor and needy
[17] Clause 6.3 provides that Trust Board membership shall be not less than two and not more than 11 members.
[18] Termination of a Trust Board member is governed by cl 6.7 of the Trust Deed, as discussed in more detail later in this judgment.
[19] The Trust is responsible for the administration and operation of the Sanatan Dharam Mandir Hindu Temple (Temple).
[20]The Temple is located at 108 Whiore Avenue, Tauriko, Tauranga (Property).
[21] The registered owners of the Property as recorded on the record of title (the registered owners) are 9 original or former trustees of the Trust, including some of the plaintiffs and first defendants.
[22] The plaintiffs say that the Property was purchased by the Trust on or around 2 March 2012 using donations and loans from devotees (worshippers) of the Temple and that the registered owners hold the Property on trust for the Trust. The first defendants deny this in their statement of defence, including pleading that the land was not purchased by the Trust but by the 10 individual persons named in the statement of claim and on the record of title.4
[23] In June 2019, proceedings were filed in the High Court by the Tauranga Spiritual Society and two of the first defendants, Daryodhan Lal and Ram Ditta Saily (the 2019 proceedings). The Tauranga Spiritual Society was incorporated on 18 April 2019 by 15 members of the Temple including three of the first defendants and Dharam Pal Tiwari, a former and replacement trustee, and Ram Pal Tiwari, a replacement trustee.
[24] The second to fourth named plaintiffs, Kuldip Kumar, Mohan Lal Saily and Roman Saily, were the defendants in the 2019 proceedings.
[25] The 2019 proceedings concerned the management, decision making and operation of the Trust by the Trust Board, including decisions to remove Dharam Pal Tiwari and Daryodhan Lal as trustees of the Trust.
4 I note that according to the record of the title there were initially 10 registered owners which appears to have reduced to nine owners in September 2014 with the removal of Lakhivir Kumar’s name.
[26] In December 2021, the plaintiffs and defendants in the 2019 proceedings entered into a Settlement Deed in full and final settlement of those proceedings.
[27]Under the Settlement Deed, inter alia:
(a)Within 10 working days of execution of the Settlement Deed by the parties, the defendants in the 2019 proceedings (2019 Defendants) were to call a meeting of the Trust with the current trustees;
(b)At the meeting:
(i)the 2019 Defendants were to facilitate the resignation of one of the current trustees as trustee of the Trust;
(ii)the 2019 Defendants (or those that remain as trustees following the resignation) were to vote in favour of appointing the following new trustees:
1. Kiran Patel;
2. Ram Ditta Saily;
3. Daryodhan Lal;
4. Ajay Sharma; and
5. Ram Lubhaia
(together, the new trustees)
(iii)Formal appointment of the new trustees was to occur by way of majority vote “(specifically, 75%)” of the remaining trustees.
(c)On appointment of the new trustees, the 2019 Defendants (who remain as trustees) were to put to vote whether the record of title for the Temple should be updated to reflect the Trust’s current ownership. It was
agreed that Ram Ditta Saily and Daryodhan Lal would attend the meeting but would abstain from voting on this motion. In the event that 75% of the voting trustees (being 6 out of 8) voted in favour of the title being updated, the title was to be updated and the cost of updating the title was to be met by the Trust.
(d)It would be an event of default under the Settlement Deed if a party failed to perform or comply with any of the terms set out in the Settlement Deed (Default). In the event of any Default, the non- defaulting party would be entitled to bring a claim for loss caused by the Default, including legal costs on a solicitor/client basis.
[28] In January 2022, pursuant to the Settlement Deed, a resolution was passed to appoint the new trustees. The plaintiffs and the new trustees, four out of five of whom are the first defendants, formed the Trust Board.
[29] A Trust Board meeting was held on 3 April 2022 at which the plaintiffs say a 75 per cent majority voted in favour of “sorting out the Trust title.” The first defendants deny this although their evidence is difficult to follow as to exactly what they say did happen at this meeting.
[30] Ajay Sharma, one of the first defendants, and who voted against the resolution, sent a lengthy email on 10 April 2022 raising numerous issues with the minutes of the meeting.
[31] There was a further Trust Board meeting on 1 August 2022 at which the plaintiffs say it was resolved to seek clarification from Holland Beckett, a law firm that had been acting for the Trust, over whether the Settlement Deed required the Trust to update the title of the Property, as Ajay Sharma had suggested the Property title was separate and the Trust did not own the land.
[32] On 22 August 2022, Holland Beckett advised by telephone that updating the Trust title means updating ownership of the Property to the Trust’s name.
[33] On 25 August 2022, Holland Beckett provided advice in writing including as follows:
The reference to “updating” the “title” refers to changing the names listed as owners of the land. The Trust owns the land, but when the land was bought, it was bought in the names of the trustees at the time. The names that are on the title at the moment are from 2009, and include people who are no longer trustees of the Trust.
Holland Beckett had been instructed by the trustees to update the title in accordance with paragraph 2 of the settlement agreement. We have advised that the names on the title can be updated to just the “Sanatan Dharam Trust”, which means that you would not need to update the title every time a trustee is appointed or resigns.
[34] The email asks the trustees to confirm whether Holland Beckett should continue with the process of updating the title. It finishes by saying that if there is disagreement between the trustees about updating the title, the Trust will need to take independent legal advice.
[35] Ajay Sharma sent a further email on 28 August 2022 including disputing the minutes of the 1 August 2022 meeting. Daryodhan Lal then sent an email on 4 October 2022 saying the first defendants will not attend meetings until a new secretary is appointed to the Trust Board as they do not accept Roman Saily is legally the Trust secretary.
[36] On 11 October 2022 one of the plaintiffs, Sanjeev Sharma, sent an email to all trustees notifying them that the Trust bank account has been frozen because “there has been no Trust meetings and no consultation with the rest of the trustees about Trust funds being spent”.
[37] Ajay Sharma sent an email on the same day alleging that two of the plaintiffs, Roman Saily and Kuldip Kumar, had made a “secret attempt” to change the “Trust land title”. Ajay says in his email that when they had the Trust meeting (on 3 April 2022), six of the trustees voted to “update the title not to change the Trust land title.”
[38] Ajay Sharma sent a further email to the trustees on 16 October 2022 calling for a vote to remove the plaintiffs as trustees based on their freezing of the bank account
and changing the “trust land title” with the plaintiffs “excluded in voting as they cannot be judging themselves.”
[39] On 16 October 2022, a meeting was held by the first defendants at which they purported to remove the plaintiffs as trustees. On the same day a letter was sent to the plaintiffs advising that they were “terminated as a trustee with immediate effect.”
[40] On 20 October 2022 the first defendants purported to appoint Dharam Pal Tiwari, Ram Pal Tiwari and Deepak Attri as replacement trustees.
Did the first defendants have the power to remove the plaintiffs as trustees as they purported to do under the Trust Deed?
[41] The first defendants purported to remove the plaintiffs as trustees pursuant to cl 6.7(g) of the Trust Deed. Before going on to consider the interpretation of this clause, I briefly set out the general principles applying to the interpretation of the Trust Deed.
Interpretation of Trust Deed – legal principles
[42] The key principles relating to the interpretation of contracts, including Trust Deeds,5 are as follows:6
(a)The court’s approach is objective. It must determine what the contract would mean “to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”.7
(b)If the language at issue has an ordinary and natural meaning, construed in the context of the contract as a whole, that will be a powerful, but not a conclusive, indicator of what the parties meant.8
5 See, for example, Re Hayward Trustee Services Ltd [2022] NZHC 2217 at [36].
6 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432 as confirmed in Bathurst Resources Ltd v L&M Coal Holdings Ltd [2020] NZSC 73 at [1(a)].
7 Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL) at 912 per Lord Hoffman.
8 Firm PI 1 Ltd v Zurich Australian Insurance Ltd, above n 6, at [63].
(c)If there remains an ambiguity after the interpretive exercise, the court will generally prefer an interpretation that does not flout business sense.9
Relevant facts regarding purported removal and replacement
[43] I set out the facts in relation to the removal of the plaintiffs as trustees as set out in the affidavit of one of the first defendants, Ajay Sharma. If it is not reasonably arguable that there was power to remove the plaintiffs based on the facts as the first defendants set them out, then summary judgment ought to be granted because this version of the facts is the most favourable to the first defendants.10
[44] Mr Sharma’s evidence is that on or about 16 October 2022 he wrote an email to all of the trustees proposing a meeting to pass a resolution to terminate the positions of the plaintiffs as trustees. The proposed resolution stated:
I Ajay Sharma as a Trustee of Sanatan Dharam Trust propose a resolution given above as reason to terminate the Membership/ Trustee Position in our Sanatan Dharam Trust. The Trust act is Based on Good Faith and Transparency. Alleged trustees undertook steps which is against the trust act. They have attempted fraud which falls under a criminal act. Some of the land owners have been advised and some yet to be advised, they will avail their options and the concerned parties will be involved.
Resolution Based on stopping the bank Account and changing their trust land title / involvement Secretly done by
Roman Kuldip Kumar Mohan Lal
Sanjeev Sharma Sanjeev Deewat
I have attached my investigations and communications with this email. Alleged Trustee are excluded in voting as they cannot be judging themselves.
D.lal, Ajay Sharma, Ram Ditta, Ram Lubhaia, Kiran Patel will be voting in this resolution and once we meet the desired quorum set by trust deed will then send a result letter to alleged trustees with their options. I vote to terminate their membership/trustee.
9 At [77] to [79]; see also Bathurst Resources Ltd v L&M Coal Holdings Ltd [2021] NZSC 85 at [41].
10 I record that the evidence of the other first defendants is almost identical to the evidence of Mr Sharma, in some cases being word for word. In addition to not complying with r 9.7(4)(b) of the High Court Rules and s 83(2)(a) of the Evidence Act 2006, this would considerably reduce the weight of the first defendants’ evidence if it was a case being determined on the evidence.
[45] Mr Sharma’s evidence is that a meeting was held “of the trustees other than the ones to be removed” on 16 October 2022 and it was resolved to remove the plaintiffs as trustees of the Trust. Mr Sharma attaches a copy of the handwritten minutes of the meeting to his affidavit. The minutes record that the trustees in attendance were the four first defendants and notes apologies from Kiran Patel as he was out of the country. The minutes record that each of the four present trustees voted in favour of terminating the plaintiffs’ “membership/Trustee Position from the Sanatan Dharam Trust”.
[46] Mr Sharma deposes that the plaintiffs were each sent a termination letter on 16 October 2022 with copies of the letters attached to his affidavit. The wording of the letters is the same with each setting out the alleged grounds for removal and including the following paragraph:
Sanatan Dharam Trustee decided to terminate your membership/trustee position within the Trust. According to the Trust Deed the quorum was formed against you.
[47] The remaining trustees then purported to appoint three new trustees to the vacancies. Mr Sharma does not set out the details of the appointment of the replacement trustees but says:
29. I deny that the removal of the applicants as trustees and the appointment of new trustees was done unauthorizedly. The decisions were taken in line with the spirit of the Trust deed dated 14 September 2009 after following a fair and democratic process. We genuinely updated the Charities services register.
Relevant clauses in Trust Deed
[48]Clause 6.7 relevantly provides as follows:
6.7 Termination
A Trust Board member’s appointment shall be terminated on the happening of any one of the following events:
(a)The member's resignation in writing personally delivered to the Chairman or the Secretary or sent by registered post to the Registered Office of the Trust.
(b)The member becoming of unsound mind.
(c)The member being declared bankrupt.
(d)The member being convicted of a criminal offence which, in the opinion of the other members of the Board warrants resignation.
(e)The member's death.
(f)The member's inability to diligently and practically exercise their duties as a Trust Board member (including regular attendance at meetings) beyond any period of leave of absence granted by the Trust Board.
(g)The member’s removal by resolution of a majority of the other members of the Trust Board and confirmed in writing by the Trustees, where the remaining trustees do not believe the trustee to be performing their duties in accordance with the principles recorded in this Deed.
(h)The expiration of their term of appointment (if any).
[49] The first defendants submit that the plaintiffs’ positions as trustees were terminated in accordance with cl 6.7(g). The written submissions for the first defendants include the following paragraph in relation to the interpretation of cl 6.7(g):
It is the [first defendants’] position that “other members of the trust board” means “members other than the ones to be removed”. Out of total 10 trustees, the [plaintiffs] were not authorized to vote and the majority of the remaining 5 trustees i.e. 4 out of 5 were authorized under clause 6.7(g) to pass the resolution to remove the [plaintiffs] as trustees which they did.
[50] The plaintiffs submit that the first defendants’ interpretation is “unarguable, irrational, and is not reasonably open to the trustees”. In support of this submission the plaintiffs point to the following:
(a)Clause 6.7(g) concerns the removal of a single member. It is written in the singular not the plural. It contemplates an exercise by which the proposed removal of a trustee is considered one at a time. It must be given its ordinary and natural meaning.
(b)Common sense does not support the [first defendants’] interpretation. By the [first defendants’] logic, a single trustee could remove all remaining trustees by declaring that they intended to remove them all simultaneously. This would make the Trust Board unworkable.
(c)Section 112 of the Trusts Act makes provision for trustees to be removed by the court where it is difficult or impracticable to do so without the assistance of the court. That is the course to be followed if a minority of trustees seek the removal of the majority.
(d)Some of the [first defendants] sought similar orders [against the plaintiffs] in the 2019 proceedings so are aware of the provisions.
[51] At the hearing counsel for the first defendants emphasised cl 2.2 of the Trust Deed which provides that words importing the singular shall include the plural. In the first defendants’ submission this means that trustees can be considered and removed together, with the “other members” in cl 6.7(g) being the trustees that were not being removed.
[52] The plaintiffs acknowledge that cl 2.2 of the Trust Deed states that the singular shall include the plural but submit that cl 6.7(g) cannot rationally be interpreted in this way. Counsel for the plaintiffs gives as an example the situation where one trustee wishes to vote out the remaining nine trustees and submits that if the first defendants’ interpretation was correct then this would be allowed under the Trust Deed because the other nine trustees could be excluded from voting.
[53] In my view it is not reasonably arguable that “other members of the Trust Board” in cl 6.7(g) means “members other than the ones to be removed” as the first defendants propose. That would be adding in words to the clause which are simply not there.
[54] The Trust Deed has very specific requirements for passing resolutions, including at meetings or in writing. Clause 7.1.3 of the Trust Deed sets out the quorum requirements for meetings as follows:
7.1.3Quorum
A quorum of members necessary for the transaction of the business of the Trust Board at any meeting shall consist of not less than seventy five per cent (75%) of the total number of members appointed to the Trust Board for the time being eligible to vote on the business being considered.
The acts and decisions of the Trust Board shall not be deemed to be invalid by reason of the fact that the number of members of the Trust Board present at any meeting is less than the number required by this Deed, provided the absent members have recorded their consent in writing (or by email).
Clause 7.1.4 then provides in respect of matters arising at the meetings:
7.1.4Matters or Questions Arising
Matters or questions arising at any meeting of the Trust Board shall be determined by consensus (except where provided to the contrary in this deed). Where it is provided that any question be determined by resolution of the Trust Board that question shall be deemed to have been determined in the affirmative if not less than three quarters of the Trust Board members present and eligible to vote on the question vote in favour of the affirmative. The chairperson shall not have a second or casting vote.
[56] Clause 7.1.6 provides that “a resolution in writing signed by all the members of the Trust Board for the time being shall be valid and effectual as if a meeting of the Trust Board duly convened and held had passed it.” There is therefore an ability to pass a resolution in writing, but it is required to be signed by all members of the Trust Board.
[57] In addition, the Trust Deed includes requirements in respect of who may call meetings (the chairperson, or the secretary on written request signed by two Trust Board members – see clause 7.1.1).
[58] Furthermore, notice of each meeting is required to be given to all members of the Trust Board by the secretary at least seven calendar days prior to the date appointed for the meeting, although the notice requirements may be waived with the approval of “not less than seven members of the Board personally present at such meeting” (cl 7.1.2).
[59] These requirements do not appear to have been complied with in respect of the meeting to vote on the removal of the plaintiffs as trustees.
[60] One of the issues arising between the trustees is the position of the secretary on the Trust Board with the first defendants refusing to recognise Roman Saily as the Trust Secretary, as set out in the factual background. The validity or otherwise of Roman Saily’s position as secretary is not a matter I can determine in this summary judgment application, so I do not rely on a failure to comply with the notice requirements in reaching a decision on whether the resolution to remove the trustees was made in accordance with the Trust Deed.
[61] In my view, however, the notice and meeting clauses support the interpretation of cl 6.7(g) that “other members of the Trust Board” includes all other current members of the Trust Board and not just “members other than the ones to be removed” as the first defendants propose, as the notice requirements can only be waived if seven trustees consent. Furthermore, a quorum at a meeting requires 75 per cent of total members or to avoid the need for a meeting, all trustees to consent. These clauses support an interpretation of cl 6.7(g) importing more stringent rather than less stringent requirements.
[62] I accept that the requirements of the Trust Deed are not clear in some instances and there are errors within the Deed. This includes it not being clear whether if a resolution is proposed at a meeting to remove trustees, the clauses in relation to resolutions at meetings apply (cls 7.1.3 and 7.1.4) or whether a simple majority of trustees (as apparently provided for on a simple reading of cl 6.7(g)) may pass such a resolution. Whichever way the Trust Deed is interpreted though, it is not reasonably arguable that the requirements of clause 6.7(g) have been met, whether as a simple majority of trustees or 75 per cent of trustees at a quorate meeting. Only four out of ten trustees voted to remove five trustees and so a simple majority was not reached.
[63] Counsel for the first defendants attempted to focus on the conduct of the plaintiffs, submitting that the removal of the plaintiffs as trustees was justified by the plaintiffs’ conduct. However, no matter how bad the plaintiffs’ conduct, the first defendants were still required to act in accordance with the provisions of the Trust Deed in order to remove the trustees or to seek the assistance of the Court if necessary.
[64] One of the issues relied on was the allegedly secret attempt to change the “trust land title”. The documents attached to Mr Kumar’s affidavit suggest that the trustees named in the title to the Property were holding the Property on trust for the Trust, with a deed of acknowledgement of debt from the Trust in favour of Mr Kumar as a lender to the Trust and a mortgage taken out by the Trust over the Property which could only have been agreed if the Trust owned the land. I note that section 14(1) of the Charitable Trusts Act 1957 provides that all property held by the trustees of any trust that is incorporated under that Act (as the Trust was in this case) shall immediately upon incorporation vest in the Trust Board without transfer, conveyance or assignment
being necessary. Section 14(2) goes on to provide that where any estate or interest in, or any mortgage or charge on, any land under the Land Transfer Act 2017 is vested in the Trust Board by virtue of s 14, the Registrar-General of Land shall register the Trust Board as proprietor upon receiving written application under the common seal of the Board.
[65] The second matter relied on, the freezing of the bank account, was potentially a reasonable response to the refusal of the first defendants to attend meetings, where the treasurer was one of the first defendants. However these matters are not for determining in this summary judgment application.
[66] The question is whether the first defendants had the power under the Trust Deed to remove the plaintiffs as trustees in the manner in which they did. I consider that the answer to the above question is straight forward and there is no reasonably arguable defence that the first defendants have acted in accordance with the Trust Deed in removing the plaintiffs.
If not, should the plaintiffs' removal as trustees be set aside?
[67] As the first defendants did not have the power to remove the plaintiffs as trustees in the manner in which they did, I set aside that resolution as being invalid.
[68] As Randerson J held in Attorney-General v Ngati Karewa and Ngati Tahinga Trust “the appointment or removal of trustees is a matter of such importance that strict compliance with the Trust Deed must be achieved.”11 His Honour noted in that case that the inadvertent or accidental failure to comply with technical requirements may be capable of being overlooked. However, I do not consider that the steps that were taken in this case can be described in that way. The first defendants ought to have ensured that the Trust Deed was complied with, and they did not. The involvement of some of the first defendants as plaintiffs in the 2019 proceedings makes it difficult to accept that they were not aware that the way in which they were purporting to interpret cl 6.7(g) of the Trust Deed could not have been correct. I have no difficulty in setting aside the decision to remove the plaintiffs as trustees.
11 Attorney-General v Ngati Karewa and Ngati Tahinga Trust, above n 1, at [95].
Should the appointment of the replacement trustees be set aside?
[69] If the resolution to remove the trustees was invalid and is set aside, then the appointment of the new trustees must also be set aside as not only will there not be sufficient vacancies for new trustees to be appointed but the invalidly removed trustees have a right to vote on the appointment of the new trustees which they have been denied. The defendants do not have a reasonably arguable defence that the appointment of the replacement trustees complied with the Trust Deed.
[70] In their evidence, the first defendants say that if the new trustees appointed are to be removed, then they ought to have the right to be heard and that “(i)t is a fundamental principle of equity and fairness that nobody should be condemned unheard.” The question for the Court in respect of the decision to appoint new trustees is whether those decisions were made in accordance with the Trust Deed. There is no suggestion that the new trustees have done anything wrong or that removing them, as a result of setting aside the decisions appointing them, is in any way condemning the new trustees. In the circumstances I consider it is appropriate to set aside the decision appointing them despite the new trustees not being served with the proceeding because the validity of their appointment does not depend on any actions or otherwise taken by them.
Should interim orders be made pending the outcome of the substantive proceedings removing all trustees and replacing them with Public Trust?
[71] Even if the decisions removing the plaintiffs as trustees and appointing new trustees are set aside, the plaintiffs seek interim orders removing all trustees and appointing Public Trust as a sole, independent, professional trustee until determination of the substantive proceedings. Kiran Patel, the one trustee not involved as a plaintiff or defendant in these proceedings, consents to these orders but the first defendants oppose.
[72] The plaintiffs submit that the trustees may be removed, and Public Trust may be appointed, pursuant to ss 112 and 114 of the Trusts Act 2019 respectively, or pursuant to the inherent jurisdiction of the Court. They submit that these steps can be taken on a summary basis, referring to the Court of Appeal’s decision in Kain v
Hutton.12 The plaintiffs submit further that the principles governing the removal of a trustee are well settled and require the Court to consider:13
(a)The welfare of the beneficiaries;
(b)The security of trust property;
(c)The satisfactory execution of the trust;
(d)The settlor’s intentions, neutrality between beneficiaries and promotion of the purposes of the Trust.14
[73] The plaintiffs refer to Mendelssohn v Levinsohn15and Attorney-General v Ngati Karewa and Ngati Tahinga Trust16 in both of which Public Trust was appointed on an interim basis. In Mendelssohn, the Court of Appeal upheld the High Court’s decision to appoint the Public Trust as the sole independent trustee on an interim basis.17 In Attorney-General v Ngati Karewa and Ngati Tahinga Trust, the Court of Appeal declined leave to bring an appeal out of time so, in the plaintiffs’ submission, effectively endorsed the decision of the High Court to appoint the Public Trust on an interim basis.18
[74] In this case, Public Trust does not consent to being appointed as a trustee of the Trust, although it abides the decision of the Court. Counsel for Public Trust submits that it would not be an appropriate trustee of this Trust, including for the following reasons:
(a)Public Trust notes the primary charitable purposes and directions of the Trust set out in clauses 3.1–3.3 of the Trust Deed, are:
12 Kain v Hutton CA23/01, 25 July 2002 at [20].
13 Green v Green [2015] NZHC 1218 at [602]; citing Miller v Cameron (1936) 54 CLR 572 at 580– 581.
14 At [603]; citing Mendelssohn v Centrepoint Community Growth Trust [1999] 2 NZLR 88 (CA) at 97.
15 Mendelssohn v Levinsohn HC Auckland M96/96, 10 July 1997
16 Attorney-General v Ngati Karewa and Ngati Tahinga Trust, above n 1.
17 Mendelssohn v Centrepoint Community Growth Trust, above n 14, at 91.
18 Ngati Tahinga and Ngati Karewa Trust v Attorney-General [2002] BCL 763.
(i)to contribute to the religious, spiritual, and cultural development of Hindus in Tauranga, Mount Manganui and surrounding areas and includes maintaining a Hindu temple, and conducting religious ceremonies.
(ii)to use its facilities to promote the Hindu life and character and to provide opportunities for service. All decisions taken by trustees and all work undertaken in the name of the Trust are to reflect this precept and to be implemented with integrity, compassion and visionary leadership in a manner that is inclusive and collaborative.
(b)Public Trust refers to cl 6.4(c) of the Trust Deed which requires the trustees to subscribe “in writing to the vision statement, core values, and philosophy of the Trust as determined and agreed from time to time by the Trust Board”.
(c)Public Trust acknowledges that it is able to undertake a trustee role in terms of the management and governance of the Trust’s financial and property matters but is not in a position to fulfil the primary objective of the Trust, being the promotion of the Hindu religion.
(d)If Public Trust is appointed as sole trustee, the only way it would be able to fulfil the primary object of the Trust is by the appointment of an advisor under cl 6.3 of the Trust Deed and Public Trust does not know of any advisor who would have the appropriate religious and cultural experience to further the primary objective of the Trust.
(e)Furthermore, if an advisor or advisors could be found with the appropriate religious and cultural experience to further the primary objective of the Trust, then in Public Trust's view, they ought to be considered as potentially more appropriate trustees than Public Trust, and should be appointed instead.
(f)Public Trust is concerned that its normal administration fee may be disproportionate to the Trust's income as the financial information provided to Public Trust shows total donations and sundry income of approximately $68,000 and total expenses of approximately $31,000.
(g)Public Trust anticipates its annual trust administration fees and legal and accounting fees for the first year may be in the region of $10,500 plus GST and disbursements. The disbursements, which would necessarily include an advisor to advise on the religious and cultural purpose of the Trust, may be substantial.
(h)Finally, Public Trust observes that this is a dispute between two factions of the existing trustees of the Trust who, putting aside that there has been a breakdown in the relationship between them, are trustees who have been appointed on the basis that they are able to further the primary religious and cultural objectives of the Trust.
[75]Public Trust proposes the following orders if it is to be appointed in the interim:
(a)a modification of the eligibility criteria for trustees in cl 6.4 of the Trust Deed to revise the requirement for Public Trust to adhere to the vision statement, core values and philosophy of the Trust; and
(b)directions under ss 116 and 118 of the Trusts Act 2019 vesting the title of the real property owned by the Trust into the name of the Trust as it has an incorporated Trust Board; and the associated mortgage into Public Trust’s name as trustee; and that any order made records the Record of Title unique identifier for land held by the Trust to avoid any issue with Public Trust registering the change of proprietor with Land Information New Zealand.
[76] The Trust is a charitable trust subject to the provisions of the Charitable Trusts Act 1957. Section 60(2) of that Act requires the Attorney General to be served with any proceedings where a party in respect of any property or income subject to a trust
for a charitable purpose is seeking to enforce or vary the trust. The issue of whether the Trust or the current and former trustees named on the title to the Trust are the owners of the Property appears to be one of the main reasons for the breakdown in relationships between the trustees. Furthermore, Public Trust has proposed the Court make orders involving the title to the Property.
[77] In Ready v Christian Church Community Trust, where orders were sought to replace trustees and for the interim appointment of Public Trust, Associate Judge Lester directed service on the Attorney General in accordance with s 60(2) of the Charitable Trusts Act “in his capacity as protector of charities and charitable trusts.”19
[78] In my view, removal of the current trustees and appointment of Public Trust ought not to occur without first serving the Attorney General.
[79] Furthermore, although the extent of the Attorney General’s involvement will be a matter for the Attorney General, the involvement of independent counsel may assist in reaching a workable solution as the issues largely appear to have arisen as a result of the first defendants, in particular, perhaps failing to understand the legal position. I am particularly concerned about the steps taken by the first defendants to remove the plaintiffs as trustees in circumstances where it ought to have been clear to them that they could not do so in the way they purported to.
[80] Once the Attorney General has been served, a case management conference will be arranged to discuss whether a judicial settlement conference ought to be convened in an effort to try and agree to a workable solution, or at least refine the remaining issues, and assist all parties to properly understand the issues that still require determination.
[81] In the meantime, I decline to make the interim orders as sought but instead adjourn that part of the application.
[82] I accept that the evidence indicates considerable dysfunction between the trustees. The situation calls for relatively urgent steps to try to make the position
19 Ready v Christian Church Community Trust [2020] NZHC 2638 at [6]–[7].
workable. I therefore include a direction for a case management conference to be allocated in the week beginning 14 August 2023 for the purposes of making further directions, including whether a judicial settlement conference may be beneficial.
[83] Finally, I record that I consider the factual position in the cases referred to by the applicants are distinguishable from the position here. In Mendelssohn v Levinsohn there was a dispute as to who the trustees were and in Attorney-General v Ngati Karewa and Ngati Tahinga Trust there were irregularities in loans made by the Trust concerned. Here, now that the decisions to remove the plaintiffs as trustees and appoint replacement trustees are being set aside there is no dispute as to the identity of the trustees. Although allegations of fraud have been made they relate to whether the title of the Property on which the Temple has been built ought to be updated to the name of the Trust Board, a matter that may have arisen as a result of a misunderstanding.
Result
[84]I grant the application for orders by way of summary judgment:
(a)setting aside the resolution to remove Sanjeev Dewat, Kuldip Kumar,
Mohan Lal Saily, Roman Saily and Sanjeev Sharma as trustees; and
(b)setting aside the appointment of Dharam Pal Tiwari, Ram Pal Tiwari and Deepak Altti as new trustees.
[85] I adjourn the application for interim orders by way of summary judgment removing all trustees and appointing Public Trust as sole trustee to allow service on the Attorney General as directed below.
[86] The Attorney-General is to be served with these proceedings in accordance with s 60(2) of the Charitable Trusts Act.
[87] A case management conference is to be allocated in the week beginning 14 August 2023 at a time to be confirmed by the Registry prior to which memoranda
(preferably joint) are to be filed proposing next steps, including addressing whether a judicial settlement conference ought to be convened.
Costs
[88] The plaintiffs have succeeded and in the usual course would be entitled to costs. The plaintiffs ask that costs be determined after memoranda have been filed but indicate that they will be seeking increased costs against the first defendants personally. Although clause 8.2 of the Trust Deed includes an indemnity clause for trustees when acting in the exercise or attempted exercise of the Trust, in my preliminary view it may be appropriate to order costs against the first defendants personally in circumstances where it ought to have been clear to them that they could not proceed as they purported to. I ask the parties to confer and only if costs cannot be agreed to file memoranda on behalf of the plaintiffs within 25 working days of this judgment, and the first defendants, 35 working days.
Associate Judge Sussock
Barristers/Solicitors:
J Delaney, Barrister and Solicitor, Harrington Chambers, Tauranga A Singh, Barrister and Solicitor, Auckland
S Findlay, Barrister and Solicitor, Public Trust, Wellington
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