Huang v Chen

[2025] NZHC 1003

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-001229

[2025] NZHC 1003

UNDER

Part 18 of the High Court Rules 2016 and the Trusts Act 2019

BETWEEN

XIN HUANG, JULIA BUHAGIAR and

JIANAN ZHANG as Trustees of the Bread of Life Christian Church

Plaintiffs

AND

XI CHEN, YANG LIU and JIEDAN LI

Defendants

Hearing:

3 April 2025

Appearances:

A Barker KC for the Plaintiffs

A Low and J Yu for the Defendants

Judgment:

30 April 2025

JUDGMENT OF ANDERSON J

This judgment was delivered by me on 30 April 2025 at 3.00 pm pursuant to r 11.5 of the High Court Rules 2016.

………………………………

Registrar/Deputy Registrar

Solicitors:Garry Pollak & Co Ltd, Auckland Turner Hopkins, Auckland

HUANG v CHEN [2025] NZHC 1003 [30 April 2025]

Introduction

[1]    The parties are the trustees (Trustees) of the trust (Trust) incorporated as a Board under the Charitable Trusts Act in 1988. The Board is incorporated to hold and manage the assets of the Bread of Life Christian Church in Auckland (the Church) for the charitable purposes stated in the Trust deed.1 The Church is an unincorporated body of members who share common religious beliefs.

[2]    In July 2022 the plaintiffs commenced proceedings seeking to remove the defendants as trustees. The defendants counterclaimed seeking the removal of the plaintiffs. The proceedings did not progress for a lengthy period while the parties tried, but failed, to come to a resolution. When the parties ultimately sought a trial date, the first available date was not until August 2026.

[3]    The pleadings demonstrate animus and deadlock between the opposing sets of Trustees. The congregants have since divided into two congregations, affiliated with either the plaintiffs or the defendants. A key underlying issue giving rise to a deadlock was, and remains, what should happen to a property at 75F Apollo Drive, Rosedale, Auckland (the Building).

[4]    I discuss the background below. For introductory purposes, it suffices to say that both sets of Trustees agree that the trial is so far away that some interim steps should be taken as relates to the Building. They disagree on what those should be. The plaintiffs consider certain limited works should be done to the property so that it can be used lawfully for church purposes pending trial. The defendants, for their part, say that the works should not be undertaken. Instead, they consider that interim receivers should be appointed to investigate leasing out the showroom area in the Building as office space pending trial.

[5]    The present application for determination is the plaintiffs’ application seeking orders effecting the implementation of the works they seek to have undertaken.

1      The Trustees were incorporated as a board under the Charitable Trusts Act 1957 on 21 July 1998 (the Board).

[6]    The defendants also have a live application for the appointment of interim receivers. It is now common ground interim receivers should be appointed. The proposed administrators and most of the terms have been agreed to, but that application was not formally before me. Reflecting the plaintiffs’ acceptance that receivers should be appointed, the orders they seek include authorising the receivers to be appointed to implement the works.

[7]For the reasons set out below I decline the plaintiffs’ application.

Background

[8]    The Board holds the assets of the Trust on trust for the charitable and religious purposes set out in the Trust Deed. These are for the development and spreading of gospel works; educational organisations; social welfare organisation; health care organisation; publication and distribution of educational and spiritual materials; and commission, ordination, authorisation or subsidisation of individuals and/or missionaries all over the world.

[9]    The Board has the power to buy, sell and lease property it thinks fit and necessary for the purpose of attaining the objects of the Trust. It also has the power to borrow or raise money on terms the Board thinks fit.

[10]   The Trust Deed requires decisions of the Board to be made by consensus or, failing consensus, a majority vote with the Chairman having a casting vote. There is no Chairman; or there is, at least, a dispute as to whether a Chairman has been validly appointed. The Trustees are currently deadlocked in administering the Trust.

[11]   In 2000, the Board decided to raise funds for the purchase of a building for the church. The Church had been holdings its Sunday services at the Sunnynook Community Centre (SCC), and using the community space there for prayer meetings and other events. After 17 years of fundraising, the Building was purchased for around

$3 million, half of which came from donations. The mortgage has since been substantially paid down (mainly through donations).

[12]   The Building incorporated a warehouse area and showroom downstairs plus smaller upstairs office areas. The original intention was that the Building would be converted into a church for the congregation with capacity for 300 persons. The Church obtained a building consent for this re-development in June 2023. The original plan became unworkable in part because of cost; and in part because of COVID-19 and the economic turmoil that accompanied it. In addition, a division developed in the Church concerning controversy over the retirement of the previous senior pastor in May 2020, and the appointment of Pastor Chen (one of the defendants) in September 2019. These events led to a reduction in the size of the congregation, and with it the need to revisit the original proposal for the Building.

[13]   The Building was subject to a lease to a commercial tenant until about October 2020. At a Board meeting in March 2021, a document was submitted to the Board with four options to be considered. These included converting the building into a church with capacity for 300 people; finding an appropriate building to replace the property; and leasing the Building and reconstructing it later for a church with capacity for 300 people. Another option (which the parties refer to as Plan B) involved implementing a downscaled redevelopment proposal whereby the current warehouse would continue to be commercially leased to a third party, but the adjacent showroom would be converted into a church for a congregation of around 100–150. The upstairs areas would be re-developed to accommodate other church-related functions such as a Sunday school. At the March 2021 meeting, the Trustees agreed to investigate the feasibility of Plan B.

[14]   The feasibility report was submitted to the Board in November 2021. The estimated costs of implementing Plan B are at around $98,000 inclusive of GST.

[15]   Pastor Chen, Mr Liu and Ms Li opposed, and continue to oppose, redevelopment. They are the defendant trustees in this proceeding. They want the Building to be either sold, or leased to commercial tenants (with income used to acquire a lease of a different building). The plaintiffs are the other trustees. They wish to progress with the development of the Building, as was always envisaged within the Church. They have raised funds for this purpose. This initial conflict has grown into a broader dispute around the direction of the Church, culminating in the present cross-

applications for removal of the respective sets of trustees. There is an issue whether funds donated for the building project could be used for other purposes.

[16]   As noted at the outset, the proceedings were issued in 2022 but it was only in 2024 that a fixture was sought, and obtained, for August 2026. In the meantime, the two factions of the Church, being the respective sets of trustees and their respective supporters, have continued to worship and gather separately.

[17]   The defendants and their supporters have continued to hold Sunday services at the SCC. However, they have also held prayer meetings and other gatherings at private residences and at the Building. The plaintiffs and their supporters have been holding services at the Building, as well as other gatherings.

[18]In the meantime:

(a)There have been employment proceedings in which Pastor Chen was held to have been constructively dismissed by the Board. The plaintiffs’ affidavits refer to a sum of $100,000 owed by the Board to Mr Chen as at 9 September 2024, associated with an order for his permanent reinstatement.

(b)The warehouse has continued to be leased to a commercial tenant.

(c)The plaintiffs sought and obtained a building consent dated 15 June 2023 (Building Consent) for what I will call a “modified Plan B”. This has since been extended from its initial expiry date to June 2025.

[19]The building works proposed are as follows (Building Works):

(a)the installation of fire safety doors, lighting and signage;

(b)the installation of air conditioning units; and

(c)the removal of one internal partition wall.

[20]   The defendants do not take issue with the removal of partitions. They oppose the other works.

Legal principles

Application for directions in a deadlock scenario

[21]   The plaintiffs seek an order directing the Building Consent be implemented or, alternatively, an order directing that the parts of the Building Consent that relate to the health and safety of occupants be implemented. They rely on s 133 of the Trust Act 2019 and the inherent jurisdiction of the Court.

[22]   Under s 133, a trustee may apply to the Court for directions about the trust property, or the exercise of any power or performance of any function by the trustee. On an application under s 133, the Court may give any direction it thinks fit.

[23]   There are generally said to be four situations in which a Court will exercise discretion on behalf of trustees or provide directions as to its exercise. One of those situations is where trustees surrender their discretion to the Court because they are deadlocked or disabled.2 The current situation falls within that category.

[24]   All parties acknowledge a deadlock exists in the present case. The plaintiffs apply on the basis that they surrender their discretion on the issue of implementing the works to the Court. While the defendants have not formally surrendered their discretion, in a case where it is appropriate for the Court to resolve a deadlock, unanimous surrender is not necessary.3 An application by only some of the Trustees is sufficient to engage the Court’s jurisdiction.

[25]The authors of Lewin on Trusts describe the Court’s approach when exercising

the trustees’ discretion in the following terms: 4

2      Public Trustee v Cooper [2001] WTLR 901 (Ch). The case is routinely cited for these

four categories. See Lyon Tucker, Nicholas Le Poidevin and James Brightwell Lewin on Trusts

(20th ed, Thomson Reuters, London, 2020) at [39.086].

3      Children’s Investment Fund Foundation (UK) v Attorney-General [2020] UKSC 33, [2022] AC 155 at [219].

4      Lewin on Trusts, above n 2, at [39.099].

Where the trustees surrender their discretion to the court, it acts in their place by giving directions. In doing so, the court will act as a reasonable trustee could be expected to act having regard to all the material circumstances and is not bound by the wishes of any beneficiary. The court has, however, no greater powers than the trustees have either under the trust instrument or under the general law.

[26]   In the context of a charitable trust, the Court is not seeking to execute the trust in the best interests of the beneficiaries but in the manner most likely to advance the charitable purposes for public benefit.

The application is not for interim relief

[27]   The plaintiffs characterise their application as one for interim relief. The application is “interim” only in the sense that it addresses the use of the Building until there is a final resolution or determination by the Court as to what will happen with the Building. However, it is not otherwise an interim decision. The Court is being asked to place itself in the position of the Trustees, as if the Court was a trustee deciding how to administer the Trust property in exercising their powers under the Trust. The fact that the power relates to how the property should be administered until resolution or determination of the deadlock should not obscure that analysis.

[28]   There is no doubt that the Court can make directions under s 133 in this scenario. But the test that applies is not whether there is a seriously arguable case that a reasonable trustee would exercise his or her powers in the way proposed by the plaintiffs. Rather, it is a substantive question. The Court will act as a reasonable trustee could be expected to act having regard to all the material circumstances. The question of whether the balance of convenience favours the making of the orders may be relevant but that is because it would be relevant to a prudent trustee, not due to application of the test for interim relief.

Plaintiffs’ submissions in support of the application

[29]In support of the Court making the orders, the plaintiffs say, in summary:

(a)They and their supporters will fund the works, “at least on an interim basis”. What they mean by this is that the issue of whether the plaintiffs

will be reimbursed for the works by the Board will be determined by the Court or the Board as constituted after the substantive hearing.

(b)The terms proposed by the plaintiffs are that the interim receivers need to be satisfied that the funds are in hand to pay for the works, as a condition of their implementation.

(c)If the Court ultimately determines that the works were unnecessary or should not have been implemented, they are easily reversible.

(d)Whereas the defendants say that the leasing of the showroom is a matter that should be considered fully by the interim receivers in due course, the plaintiffs say that the defendants have provided nothing credible to the Court to suggest that the showroom could be leased as office space for the short term between when the receivers appointed will be in a position to seek a tenant and disposition.

(e)Only if the works are undertaken can the showroom and upstairs area lawfully be used for church services or meetings (other than office purposes). That is because the current building consent is for office use only. I understood Ms Low for the defendants to accept this in oral submissions. Yet both factions of the Church are using the property for non-office purposes at the moment. I observe that the plaintiffs appear to be making somewhat greater use of it, with the defendants holding Sunday services at the SCC.

(f)The works would increase the maximum number of persons able to use the office space upstairs and the showroom. The plaintiffs pointed to evidence from social media that the defendants and their followers’ use of the upstairs area has exceeded the current permitted maximum (the defendants say this was a “one-off” and should not have occurred). Increase in permitted numbers for the showroom would enable the plaintiffs and their supporters to hold Sunday services in the showroom

without being restricted. Should they wish, the defendants and their supporters could do so also.

(g)Although technically, only increased numbers above the permitted maximum would necessitate the works from a health and safety perspective, many in the congregation are older, hence the works would increase the safety of the premises in case of fire.

(h)The works to make the Building better fit for current use by both groups would therefore benefit all congregants pending a resolution of what will happen to the Building.

[30]   In many respects, the plaintiffs’ submissions were to the rhetorical effect: “what is the downside”? For example, the plaintiffs are prepared to bear the cost of the works; those works are reversible and would be beneficial if the showroom is ultimately converted into a church facility.

[31]   The plaintiffs say that granting the orders they seek would not prejudice the result of the substantive proceeding. If the result of the proceeding is that the new trustees continue with development of the premises into a fully functioning church, then these works, as a subpart of that development, will clearly be of assistance. If the Building is ultimately sold, or leased on commercial terms, then it is difficult to see that these works would in any way hinder or restrict that potential outcome.

Defendants’ position

[32]   Although the defendants raised a number of issues in written submissions, in oral submissions, the gist of their opposition relates to the financial consequences.

[33]   They raise that the works are not properly costed, and that the Church will incur an uncertain amount of liability that they are in no financial position to bear. They further say that income should be earned from leasing the showroom rather than incurring cost by using the showroom for church purposes. The defendants emphasise that whether the Building should be used as a church is the issue that will be resolved by resolving the deadlock at trial.

[34]   The defendants say there are two reasons to lease the showroom. First, the Board resolved to do this before the proceedings were commenced. This is disputed, and I put this to one side. Second, they say it is the duty of prudent trustees to invest assets comprising the trust fund. Leasing the showroom until it can be used for church services is an ordinary incident of that duty. They say the income derived from leasing the showroom is necessary for the proper administration of the Board and the Church.

Decision

[35]   There is force in the plaintiffs’ arguments set out above that the use of the Building for church purposes should be regularised pending trial. That is particularly so given that the plaintiffs say that they and their supporters will take the risk of the funds incurred not being reimbursed. Hence the costs of the work may be cost neutral, unless the Court subsequently orders reimbursement, or the Trustees later resolve to do so.

[36]   However, the Church is in a poor financial position. This is acknowledged in the plaintiffs’ solicitors’ correspondence between the parties and because of the outstanding sum owed to Pastor Chen. It is also demonstrable from the Church’s financial accounts. In my view, in those circumstances, authorising works to facilitate the continued use of the showroom and offices by congregants would be a step a prudent trustee would take currently only if the Church was unable to obtain revenue from these areas.

[37]   I simply do not have the information to assess whether the proposal to undertake the works on the one hand, or for a lease, is the appropriate course. The Court has no, or certainly insufficient, evidence that allows me to properly weigh whether a short-term lease of the showroom is realistic. A prudent trustee in this scenario would seek that information and consider the present and likely financial obligations of the Trust. They would not go ahead with authorising the works without investigating the leasing scenario. I do not consider that I should do so.

[38]   As I have said, the parties agree that interim receivers should be appointed. A receiver is in a position to investigate the prudent course of action. On the information before me, I am in no such position.

Result

[39]I decline the plaintiffs’ application.

[40]Costs are reserved.

Anderson J