Dunstan v Credit Union South
[2020] NZHC 1063
•20 May 2020
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2018-412-000046
[2020] NZHC 1063
BETWEEN ANTHONY DUNSTAN
Applicant
AND
CREDIT UNION SOUTH
First Respondent
AND
JANICE FREDRIC, PETER MCKNIGHT, LOUISE EDWARDS, PETER BOOTH AND SHONA CUMMING
Second Respondents
Hearing: 23 March 2020 (By way of AVL) Appearances:
D R Tobin for Applicant
D G Hurd for Respondents
Judgment:
20 May 2020
JUDGMENT OF DUNNINGHAM J
This judgment was delivered by me on 20 May 2020 at 4.00 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date: 20 May 2020
DUNSTAN v CREDIT UNION SOUTH [2020] NZHC 1063 [20 May 2020]
CONTENTS
Introduction [1]
Background [6]
The applicant’s involvement on the Board [15]
The election process [28]
Are the decisions reviewable under the JRP Act or otherwise? [49]
The respondents’ submissions [50]
Mr Dunstan’s submissions [51]
Discussion [53]
Judicial Review under pt 30 of the High Court Rules 2016 [57]
Mr Dunstan’s submissions [57]
The respondents’ submissions [61]
Discussion [65]
Was there a failure to comply with r 23(a) of the CUS rules applying to members nominations? [70]
Mr Dunstan’s submissions [70]
Respondents’ submissions [75]
Discussion [79]
Were the committees inquorate? [90]
Mr Dunstan’s submissions [90]
Respondents’ submissions [95]
Discussion [99]
Were the decision-makers entitled to take into account third party
enquiries? [109]
Mr Dunstan’s submissions [109]
Respondents’ submissions [112]
Discussion [114]
Was there a requirement to apply the principles of natural justice and, if so, was the requirement breached? [118]
Mr Dunstan’s submissions [118]
Respondents’ submissions [120]
Discussion [126]
Exercise of the discretion [133]
The respondents’ submissions [134]
Mr Dunstan’s submissions [137]
Discussion [139]
Result [141]
Introduction
[1] In May 2017 Credit Union South (CUS) called for nominations for its annual election of Board members. Mr Dunstan, who had formerly been on the Board of Directors of CUS, and was its chairperson until his resignation on 27 January 2017, was nominated to stand by CUS members.
[2] However, his name was never put forward for election. Instead the Governance Committee, having regard to concerns raised by the Nominations Committee, determined that he did not meet the requisite fit and proper criteria. As a consequence, the Board held that he was ineligible under the rules of CUS to hold office as a director. That meant an election of Board members was not required as the number of candidates remaining equalled the number of vacancies.
[3] Mr Dunstan is aggrieved by that decision. He seeks judicial review of the Board’s decision ratifying the decisions of the Nominations and Governance Committees that he did not meet the fit and proper criteria, alleging:
(a)a failure to comply with the rules applying to members’ nominations under r 23(a) of the CUS rules;
(b)the Governance and Nominations Committees were inquorate;
(c)the Board and its respective Committees took into account irrelevant considerations in coming to the relevant decision; and
(d)the Board breached the requirements of natural justice in that it did not give him an opportunity to be heard on that decision.
[4] The relief he seeks includes a wide-ranging suite of declarations that confirm the various allegations he makes about the deficiencies in the decision-making process, and the quashing of the resulting decisions.
[5] The respondents, being the CUS and the Board members at the relevant time, comprehensively reject Mr Dunstan’s claim. They say:
(a)the decisions sought to be challenged are not reviewable under the Judicial Review Procedure Act 2016 (JRPA);
(b)there was no error of law or ultra vires action in determining that all would-be directors, regardless of the basis of their nomination, needed to meet the fit and proper policy;
(c)the Board had a clear and coherent fit and proper policy which was in addition to the suitability requirements established in the Non-bank Deposit Takers Act 2013 (NBDTA), and the Board and relevant Committees did not take into account irrelevant considerations when they made enquiries which went beyond the NBDTA suitability requirements;
(d)the Committees were in each case quorate and, in any event, the Committees’ decisions were subsequently confirmed and ratified by the Board;
(e)the applicant gave his consent to CUS making such enquiries as it thought necessary, and the enquiries made of third parties were within that authority;
(f)the principles of natural justice have no application to the CUS election process, but even if they did, they would be of the most rudimentary nature and were met in this case;
(g)even if the Court were to consider that there were grounds to intervene, it should exercise its discretion not to do so, especially given the issues of inutility and delay.
Background
[6] The CUS no longer exists, its business and liabilities having been taken over last year by Credit Union Baywide, another registered credit union. However, at the relevant time, the CUS was a financial co-operative registered as a credit union under the Friendly Societies and Credit Unions Act 1982 (FSCUA). It had registered rules (the Rules) with which it was obliged to comply. It also had a committee of management known as the Board.
[7] CUS would receive and invest funds from or on behalf of its members and, for the most part, those funds would be invested by making loan advances to members.
[8] CUS was also a non-bank deposit taker under the NBDTA. As such, it was required to be licensed by the Reserve Bank of New Zealand (RBNZ). To obtain that licence Ms Dickie, who was the Chief Executive Officer of CUS at the relevant time, says CUS was obliged to carry out an extensive programme of work setting up processes and policies to achieve risk management. In addition, the NBDTA set out a range of prudential obligations on organisations such as CUS and required the RBNZ to exercise oversight in relation to CUS directors and their suitability.
[9] CUS’s affairs were managed by a Board which was to be elected by CUS members. The Board was required to have at least five, but no more than seven, directors who would serve on a rotational basis.1 At all material times the Board had five directors, the minimum number required. Up to two independent directors could be appointed by the Board.2
[10] Under the Rules, the Board was empowered to determine, promulgate, and implement policies of CUS and generally to manage its affairs and records.3 It also
1 Rule 25(a) and 25(b).
2 Rule 25(a).
3 Rule 30.
had the power to establish committees as it saw fit to carry out such delegated functions as the Board decided.4 One of the permanent committees established by the Board at the relevant time was the Governance Committee. In addition, it convened a Nominations Committee as part of the electoral process in each year.5
[11] Pivotal to the substantive claim in this case is r 23, which sets out the procedure for electing the Board. Directors were elected for up to three years and were required to resign on a rotational basis, which meant there would be an election each year, unless the total number of nominations received was equal to the places to be filled.
[12] Rule 23(a) allowed for nominations to come from members. The rule required the Board’s secretary to give notice to the members of the date of the Annual General Meeting and to call for nominations for the vacancies on the Board. The members’ nominees were required to provide the “candidate’s Nomination Form, Profile Statement, Statement, Curriculum Vitae detailing their relevant skills and experience, Fit and Proper declaration, Suitability Notice for Directors under the Non-bank Deposit Takers Act 2013 and Personal Information Statement” within 30 days of the Annual General Meeting.
[13] Rule 23(b) required the Board to appoint a Nominations Committee of three members to nominate at least one member for each vacancy for which elections were being held. It went on to require these nominations to:
…be of members who are in the opinion of the Nominating Committee suitably qualified and … have met the requirements of the Credit Unions’ Fit and Proper assessment to the hold the office of Director
This requirement reflected the provisions of r 25 which set out a number of matters which would preclude a person from holding office as a director or trustee of the CUS, including, at r 25.1(j), persons who “[d]o not meet the Fit and Proper Assessment of the Credit Union”.
4 Rule 28.
5 The Committee is variously referred to in documents and by witnesses as the Nominating Committee, the Nomination Committee and the Nominations Committee. For convenience, I refer to it as the Nominations Committee except where quoting from a document using one of the other names.
[14] Thus, the Nominations Committee was responsible for ensuring sufficient candidates were nominated to fill the vacancies at each election, but nominations could also come from the members under r 23(a).
The applicant’s involvement on the Board
[15] Mr Dunstan was first elected to the Board in September 2013 for a three year term. In September 2014, he was appointed deputy chairperson by unanimous resolution of the Board. In 2015, he was appointed chairperson of the Board, again by unanimous resolution, following the mid-term resignation of the then chairperson. In September 2016, he was reappointed as a director for a further three year term and reappointed as chairperson by a unanimous resolution of the Board. In the same year the Board also nominated him to be on the Board of the New Zealand Association of Credit Unions (NZACU).
[16] Mr Dunstan resigned as director and chairperson of the Credit Union in January 2017. The circumstances of this resignation need to be set out in some detail as they precipitated the enquiries which resulted in the finding that Mr Dunstan was not a fit and proper person to hold office as a director.
[17] The resignation followed a dispute over the Board’s policy on what was called the “Associate Programme”. Under r 29 of the CUS, the Board was empowered to appoint associate directors who:
… shall be entitled to have notice of all meetings of the Board and shall have speaking rights at those meetings provided however that an Associate Director shall not have voting rights or be counted in the quorum of the meeting of a Board.
[18] As Mr Dunstan explains, it was difficult to get candidates with the required skills and experience for election to the Board from within the CUS membership. The Board had resorted to allowing non-members to become members of CUS for the express purpose of qualifying for appointment to the Board. The solution promoted by the Board was to establish a programme that was aimed at developing the required governance skills and experience within existing members of the CUS by appointing them as associate directors under r 29.
[19] A proposal for the programme was drawn up and submitted to the Board at its meeting of 16 and 17 July 2015. At that stage it was proposed that the programme would only be “open to those who have been a bona fide member of Credit Union South for a minimum two (2) year period.” It went on to say “the programme aims to expose creative and innovative members to the cut and thrust of boardroom activities while exposing Credit Union South to the benefits that a fresh and creative mind will bring to discussion on matters such as social media, technology, sustainability and diversity.” Potential applicants for the Associate Programme were required to complete an application form and provide a curriculum vitae. Those applications would then be forwarded to the Nominations Committee who would assess potential candidates for appointment.
[20] Mr Dunstan’s clear understanding was that, to be eligible for appointment under the programme, applicants would be required to have been a bona fide member of the CUS for at least two years, and he says he gave assurances to a number of members on that basis. However, it is clear from other affidavits that the policy was modified to loosen the two year requirement. By 2 August 2015, the document outlining eligibility for the Associate Programme simply said that “programme applicants are expected to have been bona fide members of Credit Union South for a two (2) year period prior to application.”
[21] Matters came to a head at a Board meeting of 26 January 2017. Mr Dunstan says that it was moved that two applicants for the programme, including someone who had only very recently become a member of CUS, would be interviewed by a Nominations Committee comprised of a Board member, Ms Cumming, and Ms Dickie, the CEO.
[22] Mr Dunstan argued against it. His concerns were three-fold. He said the procedure was contrary to r 23(b) of the Rules which provided for the chairperson to appoint a Nominations Committee of three members. Secondly, the programme approved by the Board in 2015 contemplated applicants being interviewed and assessed by the Board. Thirdly, and seemingly the main sticking point, one of the individuals did not meet the criteria of the two year membership restriction which he believed applied. He said for these reasons he voted against the resolution and also
“felt compelled to resign in order to give effect to the principle of collective responsibility.” The next day he sent his formal letter of resignation to the Secretary.
[23] The other Board members recollect the issues at stake somewhat differently. Mr Booth confirms that the approved form of the Associate Programme at the time of the meeting in question stated that two years of membership was simply an expectation, not a requirement, for eligibility. He says that while there was a clear preference for members of longstanding, the Board did not insist on it, as it had struggled to identify suitable applicants from the existing membership. Of four people who had expressed interest, he thought it important to interview two of them who had sent in their applications for the role. However, he decided to seek Board approval to meet with the two candidates who had formally applied. He says the purpose of meeting with them was solely to be courteous, in recognition of their applications for the role, and to let them know that the Associate Director programme was going to be delayed due to the workload the Board had had at that time. He said it was very clear in the Board meeting that there would not be an appointment of anyone as an associate director at that time.
[24] However, it seems that even this explanation did not satisfy Mr Dunstan, who appeared fixated on the fact that the proposal was contrary to the assurances he had given to members that applicants would have to have been members for at least two years before applying. Ms Edwards described him as “obviously worked up … agitated and upset.” She records that “none of the other directors shared Mr Dunstan’s views or concerns.” They emphasised that there was no intention at that stage to admit either of the candidates to the programme. She says the directors were “unable to understand why Mr Dunstan was being so pedantic and so dogmatic about the issue.”
[25] Similarly, Ms Fredric said that it “made no sense to me that so much heat and energy was being expended in debating an issue of such little importance, relative to the really significant matters which the Board ought to have been addressing.” Mr McKnight, too, records his frustration that despite a very lengthy discussion prior to the meeting with Mr Dunstan, “he still seemed unable or unwilling to bring any sense of perspective to the issue.”
[26] This concern was exacerbated by the fact that Mr Dunstan had previously threatened resignation at a Board meeting on 17 December 2015 because of a conflict he had got into with representatives of the NZACU. Again, the other directors thought his reaction “seemed to be entirely out of proportion to the issue which he had raised”. On that occasion, Ms Fredric says that their request that he not pursue his expressed intention to resign was successful, but his behaviour was nevertheless concerning to her and other Board members.
[27] The consequence of Mr Dunstan’s resignation on 27 January 2017 was extremely serious for CUS. It left CUS with only four directors, short of the minimum of five required by the Rules, which meant the Board was inquorate. Ms Dickie explains that the position had to be, and was, immediately reported to Trustees Executors Ltd, as CUS’s supervisor, as well as to the Registrar of Friendly Societies and Credit Unions, and to the RBNZ. An urgent telephone conference with the remaining directors had to be convened to discuss how best to regularise the position. It was decided to appoint an independent director for a fixed period and Mr Booth, who had previously been involved with the CUS, was subsequently appointed as an independent director. However, as Ms Dickie says, the period between Mr Dunstan’s resignation and Mr Booth’s appointment was “fraught” and put at risk CUS’s relationship with its supervisor, the Registrar and RBNZ. She says “I am still at a loss
… to understand not only why Mr Dunstan felt it necessary or appropriate to resign, but also, to do so with immediate effect.”
The election process
[28] On 27 April 2017, three months after Mr Dunstan’s resignation, the Board appointed the Nominations Committee in preparation for the forthcoming 2017 election. The members were Mr McKnight, Ms Edwards and Mr Booth. The Governance Committee, which was at that time a standing or permanent Committee, comprised Mr Booth and the CEO, Ms Dickie, for the purposes of making decisions in relation to the election process.6
6 This is because Ms Fredric and Ms Cumming who had been appointed to the Governance Committee, took no part in the relevant deliberations as they were also standing as candidates for election as director.
[29] In due course, the Nominations Committee received the documents supporting Mr Dunstan’s nomination. Mr Booth recalls that there were, from the outset, concerns about Mr Dunstan’s nomination, partly because of behaviours he had exhibited as a Board member and chairperson, but most significantly, arising out of Mr Dunstan’s resignation in January 2017, which left the Board inquorate at a time when it was facing major decisions and actions.
[30] However, the Committee decided to seek a “broader and more objective perspective” by enquiring about Mr Dunstan’s performance in governance roles in other organisations.
[31] After obtaining legal advice, the Committee engaged an independent party, Personal Verification Ltd (PVL), to make contact with senior officers of Forbury Park Trotting Club and Clutha Community Health Company Ltd, two organisations where Mr Dunstan had served as a director, to ask a series of agreed questions of those parties. Those questions were:
(a)Did Tony fulfil his full term obligations to your Board? If no; what were his reasons for leaving early?
(b)Do you feel he fulfilled his obligations as a Director professionally?
(c)Would you reappoint Tony to your Board if the opportunity arose?
[32] PVL then interviewed four individuals, two of whom were Board members of the Forbury Trotting Club and two of whom were Board members of the Clutha Community Health Company Ltd.
[33] The four individuals interviewed were able to identify Mr Dunstan’s strengths, for example the interviewees variously stated that; “he had good qualifications”, “he did make some good decisions”, “he did fulfil his obligations as a Director professionally”, “he was a very committed and diligent Director” and he was “always well prepared for meetings”. However, they also identified weaknesses and three were of the view that they would not reappoint Mr Dunstan to their Board if the opportunity
arose, while the fourth interviewee was not unequivocally positive, saying Mr Dunstan “quite often had a different view” and “didn’t have the ability to take the Board with him in terms of articulating a case as to why his views ought to be accepted.”
[34] After discussing the information obtained, it was agreed that the PVL enquiries supported the concerns already identified by the Nominations Committee. That Committee, at its meeting of 10 July 2017 determined that his nomination should be referred to the Governance Committee “for assessment against the Fit and Proper Assessment”.
[35] The scope of the fit and proper assessment is a disputed issue in this hearing. However, for the purposes of the narrative, the Board members relied on the following three documents as setting out the criteria for a fit and proper assessment:
(a)the NZCU Policy on Suitability of Board Members and Senior Officers;7
(b)the CUS Nominations Committee Terms of Reference adopted by the Board on 16 July 2015 and amended on 27 May 2017; and
(c)the CUS Fit and Proper Assessment for Director and Trustee Nominees Terms of Reference, again adopted by the Board on 16 July 2015 and amended on 27 May 2017 (the CUS Fit and Proper Assessment).
[36] The CUS Fit and Proper Assessment provided that “the Governance Committee is responsible for assessing whether a potential director is a fit and proper person and whether there are suitability concerns (as provided for under s 15 of the Non-bank Deposit Takers Act 2013)”. In making such an assessment, the CUS Fit and Proper Assessment provided that the Governance Committee was required to:
(a)gather all information about the nominee and, with the nominee’s prior consent, obtain a range of information relevant to the assessment;
7 Which had been developed in late 2014/early 2015 as part of CUS’ application for a licence under the NBDTA, and subsequently adopted by the Board.
(b)assess whether the nominee meets the suitability concerns set out in the schedule to the Non-bank Deposit Takers (Debt Securities and Suitability Concerns) Regulations 2014; and
(c)consider whether the person meets the Fit and Proper criteria as set out in Board policy taking into account, among other things, character traits (where these are relevant to the role e.g. ability to get on with others), and past actions or inactions where they are relevant to the role.
[37] When the Nominations Committee referred the matter to the Governance Committee, that committee immediately convened by telephone. At its meeting on 10 July 2017, the Governance Committee made a finding that Mr Dunstan had not met CUS’s fit and proper requirements and recommended to the Nominations Committee and the Board, that Mr Dunstan’s name should not appear on the CUS ballot papers for the 2017 election.
[38]Mr Booth, who was a member of the Governance Committee, explains that:
What really tipped the decision were the references received from PVL and the commentary from the existing Board. The existing Board had clearly lost its tolerance for Mr Dunstan’s emotional outbursts and resignation. It plainly had no confidence in Mr Dunstan.
He added the external references revealed that these other bodies had experienced much the same sort of behaviour as CUS had experienced and, all bar one, expressed a clear view that they did not want him back.
[39] Mr Dunstan was advised of this by letter dated 13 July 2017 from Mr McKnight, the chairperson of the Nominations Committee. In it, Mr McKnight advised that the Governance Committee had determined that Mr Dunstan did not meet the fit and proper criteria under the Credit Union South policy and, therefore, under r 25.1(j) he was not eligible to hold office as a director or trustee. He was advised that the Committee “has noted particular concerns about your behaviours and actions whilst on the Credit Union South Board including the manner and timing of your resignation being one concern.” The letter concluded by saying the Board had notified the secretary that his name should not be included on the ballot paper.
[40] Mr Dunstan responded on 15 July 2017 requesting “an immediate review of the Governance Committee decision”. He advised that his resignation was:
…forced upon me as a matter of personal integrity given that the Board had resolved to interview a candidate when I believed that this decision was contrary to assurances that I had given to members of the Credit Union in relation to the Associate Director Programme.
[41] He said he was not aware of any behaviours and actions that would entitle anyone to form the view that he was not a fit and proper person under the rules of CUS. He also advised that if the matter was not resolved to his satisfaction it would be referred to CUS’s external dispute resolution provider, Financial Services Complaints Ltd.
[42] Two days later Mr McKnight responded saying he did not believe that the terms on which the CUS’s dispute resolution provider operated would enable it to participate in a process relating to a fit and proper assessment. He also said that, although the decision of the Nominations Committee was final and no correspondence would be entered into, he would:
..return the Committee’s report to it for further deliberations together with a copy of your letter setting out the reasons for your earlier resignation. If you have further information which you consider the Nomination Committee and Governance Committee should consider, then such information can also be provided to these Committees for their consideration.
The letter concluded by pointing out that there was “time pressure” so Mr Dunstan would need to supply the further information by 5.00 pm, 19 July 2017 to enable the two Committees to report back by 5.00 pm, 21 July 2017.
[43] Mr Dunstan responded the same day, challenging Mr McKnight’s view that the independent dispute resolution service provider would be unable to determine the issue and, again, saying that he was not aware of any behaviours or actions that would entitle anyone to form the view that he was not a fit and proper person for the purpose of the rules of CUS. He then said that he would need to be “provided with sufficient detail of any concerns that are being taken into account” to respond and suggested it would be improper to proceed with any further steps in the elections until the matter had been resolved.
[44] Mr McKnight responded by letter the following day. In it, he reminded Mr Dunstan that, “as part of the fit and proper assessment, a range of information is sought and considered” and that Mr Dunstan “signed up to this process through and by the Director Nomination Form in the 2017 Director Election Handbook”. He then summarised the concerns that had been reported by internal and external people, being “your inability to work well with others, your unwillingness to consider any view which does not accord with your own and your attitude of “my way or the highway”.” The letter went on to say:
The aggressive tone of your correspondence and your stated reasons for your resignation consistently reinforce these comments. Your commentary makes it clear that you resigned because the Board did not agree with your view. You knew, or as Chair should have known, that this would leave the Board inquorate, with the resultant inability to transact business and unnecessary difficulties with regulators. Resigning in this manner is not professional and shows poor judgement. You have not, at any time, acknowledged the very significant difficulties and cost that your resignation incurred CU South and that you had previously verbally resigned over another minor event. We are aware that you have also resigned early from other boards and not completed your Director appointments.
The letter concluded by advising that the decisions of the Nominations and Governance Committees would stand.
[45] The Nominations Committee met again on 19 July 2017. The Committee noted that no further information had been received from Mr Dunstan and resolved to confirm that Mr Dunstan had not met the fit and proper assessment. At a subsequent meeting on 27 July 2017 the Board considered the advice of the Governance Committee and the conclusions of the Nominations Committee that Mr Dunstan did not meet the fit and proper criteria to hold office as director, and it ratified and confirmed the advice and decision of those two Committees.
[46] As the other two Committee nominees had satisfied the fit and proper assessment and were the only candidates for two positions, they were endorsed as the successful candidates, subject to suitability approval by the RBNZ.
[47] Mr Dunstan then lodged an online complaint to the Registrar of Credit Unions at the Ministry of Business Innovation and Employment, saying that the Board’s decision to decline his nomination was contrary to the Rules because CUS members
“have the right to elect the directors they wish, even without the approval of the Nominating Committee or [CUS] generally” and that r 25.1(j) of the Rules was only intended to ensure that CUS could comply with the NBDTA suitability requirements.
[48] However, the Registrar declined to assist, saying “while the rules regarding the nomination and reviewing of possible Board candidates could be clearer, this is a matter for the Credit Union and its members to consider.” In due course, Mr Dunstan issued these proceedings.
Are the decisions reviewable under the JRP Act or otherwise?
[49] Mr Dunstan’s proceedings are brought under s 5(1)(b) of the JRPA. He seeks review of the decisions on the basis that they were made in the exercise of a statutory power as defined, being “a power or a right … conferred by or under - the constitution or other instrument of incorporation, rules or by-laws of any body corporate”.
The respondents’ submissions
[50] The respondents point out that CUS was not, at any relevant time, a body corporate. Instead, as required by the FSCUA at the time, it was an unincorporated society. That is why s 157 of the FSCUA which was in force at the time, made provision for CUS to sue and be sued through officers on its behalf. The respondents say that would not be necessary if CUS was a body corporate. Furthermore, this provision has been removed following the introduction of a requirement for credit unions to be incorporated.8 The FSCU now provides that after incorporation, a credit union is “a body corporate”.9 The clear inference, the respondents submit, is that without incorporation, the CUS was not a body corporate.
Mr Dunstan’s submissions
[51] Mr Dunstan, however, submits that the JRPA does apply. Section 4 of that Act states that an application for judicial review, means “an application for judicial review in relation to the exercise, refusal to exercise, or proposed or purported exercise by
8 Friendly Societies and Credit Unions Act 1982, s 98, as amended by s 14(1) of the Friendly Societies and Credit Unions (Regulatory Improvements) Amendment Act 2018.
9 Section 100B(3).
any person of a statutory power”. The term “person” expressly includes “a body of persons whether incorporated or not”.10
[52] While the definition of statutory power relied on refers to the rules of a “body corporate”, Mr Dunstan submits that CUS is a body corporate, saying a credit union is a creature of statute, or is at least governed by statute, and the effect of s 157 recognises that CUS was a body separate from its members. He argues that the legal definition of a “body corporate”, being “an association of persons regarded in law as a single person”,11 or, “an entity that has legal personality, i.e. it is capable of enjoying and being subject to legal rights and duties …”,12 encompasses the CUS, even though the CUS was unincorporated. This is because, if it was in default, the CUS members were not sued separately and the CUS had the ability, under s 157, to sue others.
Discussion
[53] I accept the respondents’ submissions that the CUS was an unincorporated body when it made the challenged decisions. While it was governed by statute, the provisions of the FSCUA did not convert it into a body corporate. It is for this reason that s 157 was required. Its circumstances are analogous to that of the National Party, which was also an unincorporated body, as discussed in Peters v Collinge.13 There Fisher J held:14
The National Party is an unincorporated society. Fundamentally, the jurisdiction to review steps taken by such a society is to be found in contract. In some special situations a private body may be subject to non-contractual judicial review, for example where it exercises quasi-public functions … [i]n some trade cases, exclusion powers or the exercise can also be struck down
… [t]ime constraints permit me to say only that in my view this is not one of those exceptional cases which fall outside the scope of contract.
[54] In this case, the Rules governed the relationship between CUS members and bound them contractually. This is confirmed by s 105(1) of the FSCUA which at the relevant time provided that:15
10 Judicial Review Procedure Act 2016, s 4.
11 Peter Spiller New Zealand Law Dictionary, (LexisNexis Wellington, 2019).
12 Elizabeth Martin (Ed) A Concise Dictionary of Law (Oxford University Press, 1983).
13 Peters v Collinge [1993] 2 NZLR 554.
14 At 566.
15 Friendly Societies and Credit Unions Act 1982, s 105(1) [Historic version (22 November 2006 to 31 March 2019)].
The rules of a credit union shall bind the credit union and its members and all persons claiming through them respectively to the same extent as if each member had subscribed his name, and there were in such rules a covenant on the part of himself, his executors, and administrators to conform to such rules subject to the provisions of this Act.
[55] For these reasons, I am satisfied that the decisions sought to be reviewed are not exercises or purported exercises of statutory power as defined in s 5(1)(b). They are decisions made pursuant to a contractually binding set of rules agreed to by members of the CUS. They are not, therefore, reviewable under the JRPA.
[56] However, as both parties accept, judicial review of a private organisation may be available under pt 30 of the High Court Rules 2016, despite there being no exercise of a statutory power as defined by the JRPA. There must, however, be an exercise of quasi-public functions or an action of direct, significant effect upon the public, and I go on to consider whether that is the case here.
Judicial Review under pt 30 of the High Court Rules 2016
Mr Dunstan’s submissions
[57] Mr Dunstan’s position is that if I find he cannot proceed under the JRPA, then I should treat the claim as having been brought under Part 30. Mr Tobin points out that in New Zealand Maori Council v Foulkes, Kós J confirmed that decisions of a private body may be reviewable if they have a substantial public dimension.16 That is gauged by the following considerations:
(a)the nature of the power being exercised, so that if it has public dimension by determining legal rights or having significant impact on the public generally, it is more likely to be amenable to review; and
(b)whether judicial review is necessary in light of the availability of alternative remedies.17
16 New Zealand Maori Council v Foulkes [2014] NZHC 1777, [2015] NZAR 1441.
17 Reflecting the comments of Fisher J in Peters v Collinge, above n 13, cited in [53] above.
[58] Mr Dunstan’s position is that there is a substantial public dimension to the issues he wishes to air. CUS had a membership of around 20,000 members and managed $120,000,000 in assets. There must be a public interest in ensuring that significant financial assets are managed appropriately by ensuring that those appointed to manage the CUS are properly elected. Should the CUS collapse, the community effect would be significant.
[59] Furthermore, the actions complained of had an effect on who, within the membership, could stand to be a director. Mr Dunstan submits that the effect of the decision is that directorship is limited to those with whom the current directors would like to work and this has a direct significant effect upon the public as it may affect their decision to become members or directors of CUS. Unlike in Peters v Collinge,18 which was about a selection process within the National Party membership, in Mr Dunstan’s case it was the election itself that was affected. CUS was also purporting to determine Mr Dunstan’s legal right to be elected as an official of CUS.
[60] In terms of whether judicial review was necessary, Mr Tobin notes that in the Foulkes case, the primary issues at stake were questions of illegality and rationality, not process. However, in Mr Dunstan’s case, questions of procedure are squarely in issue and he submits those are best dealt with through judicial review.
The respondents’ submissions
[61] The respondents, however, while accepting that Part 30 may be available in the case of an unincorporated body, contend that the decisions in question are not within the exceptional categories of decisions referred to by Fisher J in Peters v Collinge, and by Kós J in Foulkes.
[62] The two factors relied upon by Mr Dunstan, being the size of the membership and the value of funds under management, do not support the contention. First, while the membership of CUS is substantial, only some 380 members voted at the last election, many of whom were staff and friends and family of staff. Mr Hurd argues that an electoral process participated in by approximately two per cent of the
18 Peters v Collinge, above n 13.
membership hardly indicates a substantial public dimension to the relevant decisions. Furthermore, mass membership of the National Party did not result in that entity’s decisions in Peters v Collinge, and in Payne v Adams, having a sufficient public dimension to make them reviewable under Part 30.19
[63] Furthermore, the value of funds under management does not elevate the matter to having a sufficient public dimension to warrant judicial review. In Foulkes, the Court of Appeal declined to invoke judicial review, even though the issues concerned the Crown Forestry Rental Trust which held very substantial assets.
[64] Finally, if the nature of the enquiry is relevant (i.e. process as opposed to illegality or rationality), Mr Dunstan will first have to establish that natural justice principles apply under the Rules, and the respondents say he cannot do so.
Discussion
[65] I do not consider this is an appropriate case to invoke the parallel common law judicial review path contained in pt 30 of the High Court Rules. The operation of a credit union does not have a sufficient public dimension to make it amenable to review. It is essentially a private organisation, albeit with considerable statutory oversight, whereby members have agreed to mutually benefit each other by investing funds and then lending those funds to other members.
[66] In any event, I consider that individuals within the CUS have an alternative remedy in contract. As was said by the High Court in Payne v Adams, unincorporated associations:20
… have substantial freedom in their internal arrangements including the making of rules. The courts will intervene at the instance of a member of the association to enforce the express or implied terms agreed by the members to be those governing the organisation.
[67] At the heart of Mr Dunstan’s complaint is that the Rules were not adhered to. Specifically, he asserts that the strict requirements of r 23(a) were not complied with, that the Governance and Nominations Committees were not constituted in accordance
19 Payne v Adams [2009] 3 NZLR 834 at [110].
20 At [94].
with the Rules, and that an implied term in the Rules requiring the principles of natural justice to be applied when determining the suitability of a candidate for election, was not complied with. These are all matters which can be pursued through the alternate path of a claim in contract.
[68] Accordingly, I do not consider the issues raised by Mr Dunstan are amenable to judicial review.
[69] That said, in the interests of finality, and in case I am wrong in my conclusion on the availability of judicial review, I go on to consider the substantive arguments raised.
Was there a failure to comply with r 23(a) of the CUS rules applying to members nominations?
Mr Dunstan’s submissions
[70] Mr Dunstan argues that there was non-compliance with r 23(a) because it does not require members’ nominees to undergo any vetting process by CUS. While, under r 23(b), persons nominated by the Nominations Committee (“committee nominees”) were required to have “met the requirements of the Credit Unions’ Fit and Proper assessment”, no equivalent provision applied to members’ nominees under r 23(a). Instead, he says the next step in the process under r 23(d), was for the secretary to simply send to each member the names of both committee nominees and members’ nominees, together with their curriculum vitaes. Under r 23(s), following the election, it was then for the Reserve Bank to accept the elected candidate’s suitability notice or to issue a notice of no objection, before the elected candidate could be formally appointed as a director of CUS.
[71] Mr Dunstan’s key point is that, having been nominated under r 23(a), the Rules did not require him to be vetted by the Nominations Committee. He was only required to provide a suitability notice pursuant to s 15 of the NBDTA and the associated
regulations. Pursuant to the schedule in those regulations, a suitability concern could only relate to:21
(a)bankruptcy or a related proceeding;
(b)having been a director or senior officer or otherwise held significant influence over an entity which was an at-risk, deteriorating or dissolved, or otherwise insolvent entity;
(c)having a criminal record or being the subject of particular criminal prosecutions;
(d)having been the subject of any investigation, adverse admissions or findings made, or disciplinary or regulatory action taken by a professional, occupation or certain independent body;
(e)having been a market participant involved in regulatory non-compliance;
(f)having an actual or potential conflict of interest that does or is likely to affect the person’s performance of his or her duties as a director of the NBDT.
[72] Mr Dunstan says that none of those concerns applied to him. Furthermore, Mr Dunstan says that the Fit and Proper Declaration which he was required to provide with his nomination form was solely intended to ensure compliance with the NBDT regulations. The nomination form, under a paragraph commencing “criteria for eligibility to hold office as a Director or Trustee”, stated (inter alia):
(a)that the applicant agreed to undertake a directorship “fit and proper suitability test” as required under s 15 of the NBDTA; and
21 Schedule to the Non-bank Deposit Takers (Debt Securities and Suitability Concerns) Regulations 2014.
(b)that the applicant acknowledged that s/he would be required to submit a suitability notice in compliance with s 15 of NBDTA.
[73] Mr Dunstan’s position is, therefore, that he was only required to meet the NBDTA suitability test, which he did, and that was all that was required of a member’s nominee. While r 23(b) does allow for a seemingly different fit and proper assessment for committee nominees, that did not extend to members’ nominees.
[74] In response to the submission that r 25.1(j) provides that a member is ineligible to be a director if they “do not meet the Fit and Proper Assessment”, he says that:
(a)the documents relied on by CUS do not amount to a properly promulgated Fit and Proper Policy; and
(b)if members nominees are to be subject to such an assessment, then it can only apply after the election. To suggest that it can be undertaken prior to the election is inconsistent with the Rules. While there was a statement in the Election Handbook that “all candidates must meet the requirements of CU South’s Fit and Proper Assessment” before determining which nominees will go forward as candidates, that statement is contradictory to r 23(a) and the Rules must prevail.
Respondents’ submissions
[75] The respondents reject the suggestion that r 23(a) does not allow for vetting or assessment of members’ nominations, and submit that Mr Dunstan overstates the significance of r 23(a) being silent on criteria which the Nominations Committee needs to be satisfied have been met. They say it does not follow that there is to be no formal vetting or assessment of members’ nominees. For a start, r 23(a) requires a number of documents to be submitted by a members’ nominee. These include both a fit and proper declaration and a suitability notice under the NBDTA. There would be no purpose in requiring these forms to be submitted if they were not to be reviewed.
[76] More importantly, though, r 23(a) needs to be read in the context of the Rules as a whole. Rule 25.1(j) precludes anybody from acting as a director who does not
satisfy CUS’s fit and proper assessment. It is clear that r 25.1(j) applies to all who would wish to be directors, not just committee nominees. Given the evident purpose of the rule, it would make no sense to apply it just to those nominated by the Nominations Committee and not to members’ nominees.
[77] While r 25.1(j) is silent on when the assessment is made and by whom, that is covered by the Terms of Reference documents adopted by the Board on 16 July 2015.22 The content of those Terms of Reference documents makes sense as there is no point in inviting members to elect a person as a director who is ineligible to serve in that role.
[78] For these reasons, neither the Board nor its Committees exceeded their powers when they adopted the course of vetting Mr Dunstan as a members’ nominee before determining whether he should be put forward for election.
Discussion
[79] There are a number of issues raised by Mr Dunstan’s arguments. The first is whether CUS had a Fit and Proper policy in place which was in addition to the NBDTA suitability requirements. I am satisfied there was. There are three clear and comprehensive documents setting this out. The first is the NZCU Policy on Suitability of Board Members and Senior Officers. It makes it clear that “all current and potential directors and senior officers are required to be of a “fit and proper” character to hold their position with NZCU”. It makes it clear that this is in addition to and sits alongside, the NBDTA requirement that all directors and senior officers file a suitability notice with the RBNZ.
[80] The document goes on to set out what the term “fit and proper” encompasses, saying that it relates to the “candidate’s ability and competence to complete their role to a high standard and do so in a manner that brings no disrepute on NZCU or themselves”. As the policy went on to explain, potential directors and CEOs are vetted by the NZCU Governance Committee and such methods of vetting include the candidates being required to fill in and sign a Fit and Proper declaration and various
22 Referred to at [35](b) and (c) above.
checks being done on the candidate’s background, including obtaining character references. The policy clearly spells out that character traits are examined as are past actions or inactions.
[81] The policy has separate headings for what is required to comply with the “Fit and Proper” assessment and what is required to comply with the suitability assessment under s 15 of NBDTA. That policy is then reflected in the CUS Fit and Proper Assessment Terms of Reference. It refers back to the policy and then sets out the process for carrying out the assessment which includes the following separate enquiries:
(a)reviewing suitability requirements set out in the schedule to the Non-bank Deposit Takers (Debt Securities and Suitabilities Concerns)
Regulations 2014; and
(b)considering whether the person meets the fit and proper criteria as set out in Board policy.
[82] Finally, the Nominations Committee Terms of Reference state that the Committee “has been delegated the responsibility of reviewing nominations received to ensure that such nominees comply with all requirements.” That includes checking that the nominee is not prevented from holding office as a director under all criteria set out in r 25.1, including (although considered under a separate step), the requirement to satisfy the fit and proper assessment. That requirement is set out at step three in the Nominations Committee Terms of Reference which says:
Under the current Fit and Proper Assessment Policy set by the Board (as may be updated from time to time), the Board has provided for the Governance Committee to undertake the Fit and Proper Assessment for potential Directors.
The Committee should therefore refer the nomination to the Governance Committee for a Fit and Proper Assessment to be undertaken.
[83]Step four includes the following direction:
If any nominee does not comply with all requirements, then the Nomination Committee must advise the nominee that their nomination cannot proceed with adequate detail to enable the nominee to understand the reasons. Further
the Board must instruct the Secretary to remove the nominee’s name from the ballot paper.
[84] In my view, this is a cohesive set of policy documents requiring Board members and senior officers to meet both the suitability requirements under the NBDTA, and a more comprehensive fit and proper assessment. The document gives guidance to the Nominations Committee on how it is to vet each candidate on both counts, and to the Governance Committee on how it is to make a final decision on the issue of whether the fit and proper criteria are met.
[85] Having established that there was a coherent fit and proper policy, the next issue is whether it applied to members’ nominees. That is clearly answered by the terms of r 25.1(j), which Ms Dickie explains was adopted in 2014, and which excludes any person from holding office as a director if they do not meet the requirements of that policy.
[86] The final issue is whether the Rules required such an assessment to be deferred until after the election in the case of members’ nominees. Such a reading of the Rules would be impracticable and inappropriate. When a member’s nominee is put forward for election, they must supply both a suitability notice for directors under the NBDTA and a Fit and Proper declaration and that must be done 30 days in advance of the Annual Meeting. While there is no express statement in the Rules that the documents provided by members nominees will then be vetted by the Nominations Committee and Governance Committee, that is the only logical way to interpret the Rules given the direction to provide this information and the requirement of r 25.1(j).
[87] It is an accepted principle of interpretation that legal documents such as the Rules should be interpreted in a way that achieves their evident purpose and avoids absurdity or anomalies.23 Here, the evident purpose is that no-one should be appointed as a director unless they meet all the requirements of r 25.1. Committee nominees are only eligible for election if they meet all the CUS criteria. Members nominees’ must supply a suite of information with their nomination under r 23(a), and the only evident
23 Being the gist of the discussion on contractual interpretation in Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444, (2010) NZBLC 102, 874, [2010] NZCCLR 23.
purpose of this is so they, too, can be assessed as suitable in all specified respects, before being put forward for election.
[88] It would be illogical to defer that check until after the election. It would require members to participate in an election (which in the present case would not otherwise have been required), only to find that their candidate is subsequently vetoed. It would put the CUS to the unnecessary cost of running an election, and would make the job of vetoing a director-elect under the provisions of r 25.1 more difficult than it would have been if done in advance of the election.
[89] That cannot have been the intended effect of the Rules and I consider that on a purposive reading of the Rules, they allow for vetting of members’ nominees in advance of election.
Were the committees inquorate?
Mr Dunstan’s submissions
[90] Mr Dunstan argues that even if the CUS was able to consider “fit and proper” considerations that went beyond NBTDA suitability requirements, the committees that did so were inquorate and, accordingly, their decisions were invalid. Furthermore, the subsequent Board resolution on 27 July 2017, which purported to ratify those committees’ decisions, did not cure that defect.
[91] The Nominations Committee comprised Mr McKnight, Mr Booth and Ms Edwards. Mr Booth was not a member of CUS. Rule 23(b) refers to the appointment of a “Nominating Committee of three members”, and the Rules define a member as “any person who is a member, or who is admitted to membership, of the Credit Union pursuant to these Rules and includes a ‘non-qualifying member’ as defined in Rule 8, but excludes a member to which Rule 7 applies”. It is not disputed that Mr Booth, the independent director appointed after Mr Dunstan’s resignation from the Board, was not a member as defined by the Rules. Accordingly, Mr Dunstan submits that the Nominations Committee was inquorate at its meetings of 5, 10, 17 and 19 July 2017, and all business transacted at those meetings is “void and has no effect”.
[92] Similarly, he submits that when the Governance Committee met on 10 July 2017, it comprised only Ms Dickie, the Chief Executive of CUS, and Mr Booth. The Governance Committee Terms of Reference state “the Committee shall be comprised of three or more directors, including the Chair, as determined by the Board.” On that basis Mr Dunstan argues the Governance Committee was inquorate as only one committee member, Mr Booth, was a director.
[93] Mr Dunstan says that these terms were adopted by the Board in its meeting on 16 July 2015, and that Ms Dickie in her evidence confirmed that the Governance Committee Terms of Reference he relied on were valid.
[94] Although in other evidence the respondents deny that the Board formally adopted these terms, he says it is the only document that sets out what the CUS intended in relation to Governance Committee membership and it does not allow for a Governance Committee member to be anything other than a director. In his submission, such a policy cannot simply be departed from when it suits, and so the decision of the Governance Committee is invalid and could not be ratified by the Board.
Respondents’ submissions
[95] The respondents reject the contentions that the Nominations and Governance Committees were inquorate when they dealt with Mr Dunstan’s nomination. In any event, they argue that the decisions of those committees were confirmed and ratified by the Board, and this necessarily cured any claimed irregulatory.
[96] In respect of Mr Dunstan’s argument that the requirement in r 23(b) for the appointment of a “Nominating Committee of three members” requires the Committee to be comprised as “Members” as defined, the respondents submit that, in the context, the word “members” simply refers to members of the Nominations Committee. First, the term appears in the sentence where its use is otherwise readily explicable (members of the committee). Second, it would be expected that the Nominations Committee would be comprised of directors and these may include independent directors who are not required to be members of CUS. The interpretation promoted by Mr Dunstan would disqualify independent directors from serving on the Nominations Committee
which would be impracticable, especially given there are so few directors. For these reasons, the respondents submit that there is nothing in r 23(b) which precluded Mr Booth, an independent director, from being eligible to serve on the Nominations Committee and the committee was not therefore inquorate.
[97] In terms of the Governance Committee, the respondents submit that its membership at the time of considering Mr Dunstan’s nomination, reflected the practical reality that some of the directors could not serve on it because they, too, were standing for election. That meant there were only three directors able to participate in any of these processes. All the remaining directors were members of the Nominations Committee and, given the differing roles of the two committees in the process, it would not have been appropriate for these two committees to be identically constituted.
[98] In addition, the document which Mr Dunstan relies on described as “Governance Committee Terms of Reference” does not appear to have ever been formally adopted by the Board. Mr Dunstan’s assertion that it was adopted by the Board at its meeting on 16 July 2015 is wrong as the Board papers for that meeting show that it was the Fit and Proper Terms of Reference which was adopted at that meeting. In any event, the respondents argue that the document was simply a policy and the Board was necessarily free to depart from it in appropriate cases, which is what has occurred here.
Discussion
[99] I accept that the term “member” is not used in r 23(b) with a capital letter as is the case with other defined terms used in the Rules. However, the Rules do not use the term “Member” with a capital “M” at any point in the text so this does not assist in its interpretation.
[100] However, on balance, I prefer the view of the respondents that, in the context, the reference to the Nominations Committee having “three members” refers to the number of appointees rather than their identity as members of the Credit Union. I say this because membership of such a committee is likely to comprise directors or, possibly, a senior employee such as the CEO. Those individuals are not exclusively required to be members of the CUS.
[101] In terms of the Governance Committee, I accept there is no record in the Board minutes which were before me in evidence that the document identified as the “Governance Committee Terms of Reference”, which states that the Committee shall be comprised of “three or more directors”, was formally adopted by the Board. That said, it appears to be accepted by the respondents that this document had been adopted, with Ms Dickie’s evidence confirming this.
[102] I consider, therefore, that it was intended that the Governance Committee operate in accordance with the Credit Union South Governance Committee Terms of Reference, and comprise three or more directors.
[103] I accept the practical difficulties that faced the Governance Committee on this occasion. However, I note that the Terms of Reference did allow the Committee to “delegate any of its responsibilities to subcommittees consisting of at least; one member of the Committee; and one other Director on the Board”. It was not able, though, to delegate any of its responsibilities to management such as Ms Dickie. In light of this, I accept Mr Dunstan’s submission that the Governance Committee was not constituted in accordance with the Board’s policy when it confirmed that Mr Dunstan did not meet the fit and proper assessment of CUS.
[104] However, that is not the end of the matter. Even if these decisions were amenable to review, such a procedural defect would not automatically invalidate the decision. This principle was encapsulated in A J Burr Ltd v Blenheim Borough Council, where Cooke J said:24
[T]he tendency now increasingly evident in administrative law is to avoid technical and apparently exact (yet deceptively so) term such as void, voidable, nullity, ultra vires. Weight is given rather to the seriousness of the error and all the circumstances of the case. Except perhaps in comparatively rare cases of flagrant invalidity, the decision in question is recognised as operative unless set aside.
[105]That principle continues to govern the court’s approach. As was by Elias J in
Murray v Whakatane District Council:25
24 A J Burr Ltd v Blenheim Borough Council [1980] 2 NZLR 1 (CA) at 4.
25 Murray v Whakatane District Council [1999] 3 NZLR 276 (CA) at 320.
[e]very unlawful administrative act … is operative until set aside by a Court.
… [t]he validity of a decision is therefore a concept which is “relative, depending upon the court’s willingness to grant relief in any particular situation”
[106] That principle will apply with particular force where an error is “no more than a technical irregularity”26 and where the applicant cannot point to “particular problems” resulting from it.27
[107] In the present case, even if the decisions of the Committees and the Board were amenable to review, I am satisfied by some margin that this ground is focused on a technical irregularity regarding the constitution of the Governance Committee and would not warrant setting aside the decision which was ultimately made by the Board. I say this for the following reasons:
(a)the Nominations Committee was, in my view, correctly constituted and came to a preliminary view that the Fit and Proper Assessment had not been met;
(b)the Governance Committee, although not constituted in accordance with the Terms of Reference developed by the Board, nevertheless reviewed the material and came to a decision that was reasonably open to it;
(c)had it been constituted in accordance with the Governance Committee Terms of Reference, it would have been identically constituted to the Nominations Committee and no doubt would have made the same decision; and
(d)in any event, the decision that Mr Dunstan had not satisfied the Fit and Proper Assessment was ratified by the Board. It did so after considering:
(i)the advice of the Governance Committee;
26 Campbell v Superintendent of Wellington Prison [2007] NZAR 52 (CA) at [31].
27 At [32].
(ii)the conclusions of the Nominations Committee;
(iii)the letters received from Mr Dunstan dated 15 July and 17 July 2017; and
(iv)the letters from Mr McKnight to Mr Dunstan.
[108] In my view, where the full Board had regard to all materials relevant to Mr Dunstan’s fit and proper assessment and confirmed the decisions of the Nominations Committee and the Governance Committee, there is no proper basis for asserting its decision was not valid.
Were the decision-makers entitled to take into account third party enquiries?
Mr Dunstan’s submissions
[109] Mr Dunstan submits that the Nominations Committee acted unlawfully by seeking “references” from third parties as part of its assessment process. He says he did not provide names of any referees on his nomination form and the decision to seek such further information was “nothing more than a fishing expedition to enable the Board to obtain information that might assist it in excluding [him] from the elections.”
[110] While the nomination form did give consent for CUS to obtain “necessary information as to fitness/proprietary”, Mr Dunstan said that:
(a)this was not an authorisation to contact “referees”;
(b)the information obtained was not “necessary information” as it went beyond the requirements of the relevant legislation; and
(c)it was for the RBNZ to make the relevant assessment of a member’s nominee.
[111] In short, Mr Dunstan says that the Nominations Committee’s actions in contacting referees was not authorised by him or by the CUS’s Rules. Thus, even if
the CUS is correct in its scope of the fit and proper assessment, this breach negates the assessment which was undertaken.
Respondents’ submissions
[112] The respondents rely on the consent Mr Dunstan gave in his fit and proper declaration. It authorised CUS “to obtain necessary information as to my fitness and proprietary, now and in the future, as required”.
[113] The respondents say that the consent given is clear and of the widest ambit, and the enquiries which were made fit within the consent granted. First, the consent given by Mr Dunstan extends to all enquiries considered necessary in respect of Mr Dunstan’s fitness and propriety. Second, the contention that the information obtained was not necessary because it went beyond the suitability requirements of the NBDT Regulations is incorrect, for the reasons already discussed. Thus, there is nothing in the Rules which precludes such enquiries being made, let alone when this is done with the nominee’s consent.
Discussion
[114] Mr Dunstan’s criticisms of the enquiries made of third parties appear to stem from the fact the Governance Committee said that it had obtained references based on “referees provided by Tony Dunstan”. That was incorrect. Mr Dunstan did not provide any referees and the individuals who were consulted were identified by the Nominations Committee, not him. However, that is not relevant to the issue of whether the enquiries made were appropriate and consistent with the Rules and other policy documents of CUS.
[115] I have already accepted that the fit and proper assessment for directors went beyond the NBTDA suitability requirements and were designed to ensure that candidates who were elected as directors were not precluded from taking on that role r 25.1(j). Given the breadth of that enquiry, it was appropriate to obtain further information from others who were in a position to comment on Mr Dunstan’s performance as a director.
[116] Indeed, the process adopted by the Nominations Committee members was exemplary. They identified a range of people who had experience working with Mr Dunstan as a director. They formulated a consistent set of questions to be asked of each individual, and they delegated the task of making those enquiries to a professional, independent entity to ensure the enquiries were made in an objective and consistent way.
[117] I am satisfied that the enquiries came within the consent granted by Mr Dunstan on the nominations form to obtain “necessary information as to fitness/proprietary”. As a consequence, the decision-making by the Committees and, ultimately, by the Board taking into account the information received, was both authorised by Mr Dunstan, and was appropriate and relevant to the fit and proper assessment.
Was there a requirement to apply the principles of natural justice and, if so, was the requirement breached?
Mr Dunstan’s submissions
[118] Mr Dunstan alleges breaches of natural justice in that he was not given a proper opportunity to be heard in respect of the concerns which the relevant committees had about him. He submits that there was an obligation on the Board to give him that opportunity before a final decision was made. He relies on the findings in Peters v Collinge to support this submission. In that case, the relevant rules of the National Party provided for nominations, together with remarks and recommendations, to be forwarded to the National Executive, and that the National Executive:28
… shall advise … of the approval or otherwise of the nominations received. Any approval or otherwise shall be at the absolute discretion of the National Executive … and no reasons need be assigned.
The Court nevertheless found that procedural fairness was required although a “relatively rudimentary standard” would suffice.29
28 Peters v Collinge, above n 13, at 558.
29 At 571.
[119] Mr Dunstan argues that although the Board asked him to provide any further information that he wished it to consider by 19 July 2017, he did not know what reasons there were for purporting to reject his nomination, nor did he consider the Board’s letter of 18 July 2017 as providing sufficient additional information to allow him to give a meaningful response. He also says the Board, in that same letter, said that the decisions of the Governance Committee and Nominations Committee would stand, which he interpreted as saying that the Board had already made its final decision without input from him. Thus, in his submission, the Board’s decision was made on 18 July 2017, prior to the 19 July 2017 deadline that had been given, and he had no opportunity to provide a meaningful response.
Respondents’ submissions
[120] The respondents reject the suggestion that the principles of natural justice apply at all, saying this case concerns the process for the election of officers of a private unincorporated body and there is no disciplinary element involved in that.30
[121] In respect of the decision in Peters v Collinge relied on by Mr Dunstan, they note that Fisher J was considering the possibility that the parties intended that natural justice would apply in the context of an interim injunction application. In that context he was prepared to contemplate that a rudimentary standard of natural justice would apply. However, in Payne v New Zealand National Party, where Panckhurst J decided he was considering an amended version of the same Rule that was considered in Peters, he held that the implication of even a rudimentary natural justice requirement was not seriously arguable.31 In coming to this conclusion, Panckhurst J observed that it was not a decision to expel or discipline the individual, but rather a judgment concerning compatibility between the candidate and the party.
[122] In this case, the Rules are silent on whether natural justice principles are to be applied in the vetting of potential candidates for election. However, the respondents argue there are relevant indications elsewhere which contradict the suggestion that nominees’ input was to occur. For example, the Fit and Proper Terms of Reference
30 A disciplinary element being identified in Payne as a key factor pointing to a requirement to observe the principles of natural justice.
31 Payne v New Zealand National Party [2008] 3 NZLR 233 (HC).
state the “Governance Committee may, in its discretion, seek further information or clarification from the nominee.” That contradicts the suggestion that a nominee can expect an opportunity to respond. Furthermore, the Director Elections Handbook, which sets out the process for selection of candidates, concludes by saying “the decisions of the Nominations Committee are full and final, and no correspondence will be entered into”.
[123] The respondents also note that under the Rules, elections take place under strict time constraints which militates against an intention to impose natural justice requirements on the process. They also say the present case is distinguishable from Peters given that eligibility to stand for election as a director of a small credit union has far less public and private significance than eligibility to stand for Parliament with the support of a major party.
[124] In any event, the respondents argue if natural justice requirements are to be imposed here, then they could be no greater than the “relatively rudimentary” standards adopted by Fisher J in Peters, and the exchange of correspondence with Mr Dunstan here readily met that standard. Mr Hurd notes that CUS’s letter dated 18 July 2017 gave considerable detail about the matters which had been considered, including the concerns emerging from both internal and external enquiries. Nothing further was received from Mr Dunstan prior to the 5.00 pm 19 July 2017 deadline in response to these. There is, furthermore, no reason to believe that had more specific notice been given about the Committee’s concerns, that Mr Dunstan would have been able to refute them. Even in these proceedings, Mr Dunstan has offered nothing which is likely to have led to a different assessment by the committees.
[125] In all these circumstances, there was no breach of any standard of natural justice that could have applied here.
Discussion
[126] The starting point is, of course, that I have found there is no statutory power of decision involved, but rather a contractual relationship between members of an
unincorporated body of members which is governed by the Rules. However, as was said in Payne, simply because the body was governed by the rules:32
[t]his did not mean that natural justice, and in particular procedural fairness, did not apply, because there remained a strong assumption that it did unless there were clear indications to the contrary in the rules ...
[127] In Peters, the rule governing approval or otherwise of the nominations received were described to be “at the absolute discretion of the National Executive or Candidates Selection Emergency Committee and no reasons need be assigned”.33 That suggested, to Panckhurst J that there was no obligation to interview the affected candidate, nor to advise the candidate of the further information obtained.34 He concluded that it was not seriously arguable that r 94(b) contained a requirement of notice or an opportunity to refute. Instead, the Board had an unfettered discretion because the question at stake was whether the party and the nominee were philosophically compatible, and this excluded the requirement for even a rudimentary level of natural justice.
[128] In the present case, matters are somewhat more finely balanced, as the decision is not simply about compatibility with the relevant organisation. To be vetoed as a potential director because one fails to meet the fit and proper assessment is a decision of more consequence than failing to make the shortlist of candidates for a political party, and can have real consequences for an individual’s reputation.
[129] While the Director Elections Handbook says the decision of the Committee is full and final, that does not preclude Mr Dunstan being provided with an opportunity to respond to allegations that he is not a fit and proper person to stand for election as director before the decision is made.
[130] However, I concur with the respondents that any natural justice requirements to be implied into the Rules would not go beyond the relatively rudimentary standards envisaged by Fisher J in Peters. I accept that the high level of discretion vested in the Committees and the Board, the tight timeframes in which these decisions had to be
32 At [37].
33 Peters v Collinge, above n 13, at 558.
34 Payne v New Zealand National Party, above n 31, at [41].
made, and the type of decision to be made (being eligibility to stand, rather than disciplinary or punitive in nature), all point against a requirement to observe the principles of natural justice in a sophisticated way.
[131] In this case, I am satisfied that the correspondence with Mr Dunstan met this standard. In the letter of 13 July 2017, he was advised, in general terms, of the concerns the Board had, including, in particular, “the manner and timing of your resignation”. He then received a letter dated 18 July 2017 which gave considerable detail about the Committee’s concerns, including the difficulties he had with working well with others and his unwillingness to consider contrary view points. Although Mr Dunstan had the opportunity to reply to this letter by 5.00 pm 19 July 2017, he chose not to do so. He now suggests this is because the decision had already been made. I do not accept that was the case. There is nothing to suggest had he been able to refute these concerns comprehensively, that the Board would not have reconsidered its decision.
[132] I am satisfied, therefore, there was no breach of any standard of natural justice that applied in this instance.
Exercise of the discretion
[133] Given my conclusions that this case is not amenable to judicial review and, in any event, Mr Dunstan’s substantive claims have not been made out, strictly speaking there is no need to go on to consider the discretion to refuse relief. However, for completeness, I deal with this issue briefly.
The respondents’ submissions
[134] The respondents argue that relief should be denied because of lack of utility and delay. If it is accepted that CUS was entitled to make the assessment after the election, to comply with r 25.1(g), then there is no purpose in granting relief as either Mr Dunstan would not have been elected or he would have been elected, then assessed, with the same result.
[135] Furthermore, the CUS is now deregistered and there is no option for sending the matter back for consideration.
[136] There are also issues with it taking almost a year to commence these proceedings while Mr Dunstan unsuccessfully pursued complaints to CUS’s trustee and to the Company’s Office. Within this time, both the 2017 and 2018 director elections took place.
Mr Dunstan’s submissions
[137] Mr Dunstan, however, submits that there is no inordinate delay, nor any negative impact on the respondents from such delay. In any event, delay by itself will seldom result in relief being denied.
[138] More importantly, Mr Dunstan says the purpose of the relief is so that he can say the finding that he was not fit and proper was invalid. This would allow him in good conscience, to again apply for directorships. Even though the CUS has been deregistered, this does not prevent the Court from making the declarations sought and it should do so where the situation may arise in the future in respect of the applicant,35 or where it might provide guidance for others in a similar position.36
Discussion
[139] In this case, had I found the decisions to be amenable to judicial review and had I found in Mr Dunstan’s favour, I would have granted relief. I do not consider any prejudice resulted from the delay of about a year before proceedings commenced. More importantly, I consider there is some merit in Mr Dunstan saying it would be important to him to say that the finding that he was not fit and proper was not validly made. The Courts have been willing to grant relief where a person’s reputation is at stake, even if in all other respects the question of relief is moot.37
35 R v Canons Park Mental Health Review Tribunal, ex-parte A [1995] QB 60 (CA).
36 Nixon v War Pensions Appeal Board HC Wellington CP360/91, 5 March 1993.
37 S v M HC Auckland M477/97, 10 June 1998.
[140] While there is substance to the respondents’ submissions that, in all likelihood the same decision would have been made even if it was made after the election rather than before it, I would need to be cautious in simply assuming that. The evidence presented to this Court was not focused on denying the substantive allegations. Rather, it was focused on the procedure by which the Committees and then the Board made its decision that Mr Dunstan did not meet the fit and proper assessment.
Result
[141] Mr Dunstan has failed in his application to have the CUS decision regarding his eligibility to stand for election as a director judicially reviewed. Furthermore, I have found against him on all the grounds he advanced in seeking to have the decisions set aside.
[142] It follows that the respondents are entitled to costs. If costs cannot be agreed, costs submissions are to be filed as follows:
(a)the respondents are to be file and serve their submissions within 20 working days of the date of this decision;
(b)Mr Dunstan is to file and serve his submission in a further 10 working days from receipt of the respondents’ submissions;
(c)any submissions in reply, are to be filed and served within a further five working days.
[143]Unless I need to hear from the parties, costs will be determined on the papers.
Solicitors:
O’Neill Devereux, Dunedin Dawson Harford Ltd, Auckland