Lebanese Society of Aotearoa New Zealand Incorporated v The Lebanese Society of new Zealand
[2024] NZHC 2042
•25 July 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2023-485-378
[2024] NZHC 2042
BETWEEN LEBANESE SOCIETY OF AOTEAROA NEW ZEALAND INCORPORATED
First AppellantCEDARS OF LEBANON INCORPORATED
Second Appellant
AND
AND
THE LEBANESE SOCIETY OF NEW ZEALAND
First Respondent
THE REGISTRAR OF INCORPORATED SOCIETIES
Second Respondent
Hearing: 24 June 2024 Appearances:
F E Geiringer for Appellant
P Cranney for First Respondent
S P Connolly and S M Perera for Second RespondentJudgment:
25 July 2024
JUDGMENT OF CHURCHMAN J
Introduction
[1] On 9 June 2023, the Registrar of Incorporated Societies (the Registrar) issued its decision (the Decision) making a direction under s 27 of the Incorporated Societies Act 1908 (the Act) vesting a property at 128 Abel Smith Street, Wellington (the Property) in the Lebanese Society of New Zealand (Incorporated) (LSNZI).
LEBANESE SOCIETY OF AOTEAROA NEW ZEALAND INCORPORATED v THE LEBANESE SOCIETY OF NEW ZEALAND [2024] NZHC 2042 [25 July 2024]
[2] On 5 July 2023 the Lebanese Society of Aotearoa New Zealand Incorporated (LSANZI) and Cedars of Lebanon Incorporated (COL) filed an appeal against the Decision of the Registrar.
[3] The appellants seek a judgment allowing the appeal, quashing the directions of the Registrar, and directing that the Property be vested equally in the two appellants as tenants in common. They also seek an order that costs be met by the first respondent.
Background
[4] The Grand Society (the original Lebanese Society of New Zealand), was incorporated on 2 August 1944 as the Lebanese Society of New Zealand Incorporated. Pursuant to the rules of the Grand Society (the Rules) the society was comprised of a governing body made up of delegates elected by regional branches of the society. Each branch had its own President, Vice-President, Secretary, Treasurer and Trustees. The Grand Society eventually had branches in Wellington, Dunedin, Auckland, Christchurch and Hawkes Bay.
[5] In 1944 the Grand Society purchased a property in Cambridge Terrace, Wellington. It is said to have purchased this property with funds raised from a bank loan and money donated by members of branches, although how much was contributed from each branch is unclear. The Wellington Branch is said to have loaned 200 pounds for this purchase in 1944 and a further 200 pounds in 1948. The Wellington Branch rented the Cambridge Terrace Property from the Grand Society for use as its headquarters.
[6] In October 1950, the Wellington Branch demanded the return of the 400 pounds provided for the purchase of the Cambridge Terrace property. This money was returned under protest by the end of 1950.
[7] COL was incorporated in 1956 by the Dunedin Branch of the Grand Society. COL coordinated with the Grand Society for the creation of the new society’s rules and is said to have remained actively affiliated with the Grand Society. The Rules
were amended in 1959 to clarify that COL could remain affiliated while also being an autonomously incorporated society.
[8] In 1959 the Grand Society sold the Cambridge Terrace property and purchased the property at 128 Abel Smith Street. The Wellington Branch again rented space for its headquarters from the Grand Society in the new building.
[9] LSANZI was incorporated in 1976 as the Auckland Lebanese Society and was founded by the Auckland Branch of the Grand Society.
[10] In 1978 the Grand Society was dissolved by the Registrar for failing to provide financial accounts. Whilst LSANZI and COL were already incorporated in their own right and thus continued to exist, the other branches ceased to exist with the dissolution of the Grand Society.
[11] In the 1980s a group calling themselves the Wellington Lebanese Society formed and held themselves out as being the legal owners of the Property. It appears they took responsibility for the maintenance of the Property including the payment of rates and at least some of the other outgoings.
[12] During the 1980s attempts were made to resolve the issue of what to do with the Property and to revive an overarching national body, with meetings attended by representatives from Auckland, Wellington and Dunedin. These attempts were unsuccessful.
[13] In 1989 the Wellington Lebanese Society sought to have the Grand Society reinstated to the register. This was rejected by the Registrar. In 1991 they registered a new society called the Lebanese Society of New Zealand (Incorporated).
Registrar Decision
[14] In a decision dated 9 June 2023, the Registrar stated it was common ground that the Property could not be disposed of in the manner provided by the rules of the Grand Society. The decision also found it was common ground that the Property was not subject to a trust, and thus s 27(2) did not apply.
[15] Since there was nothing in s 27(1) to indicate what factors the Registrar should consider in making the decision, the Registrar expressed his own view that it was appropriate for a direction to be made that would achieve equivalent or at least similar objects to those of the Grand Society. The Registrar considered that both societies had similar objects to the Grand Society and there was nothing within either set of objects that made them more equivalent or compatible with the objects of the Grand Society.
[16] The Registrar held that little would be achieved by traversing the matters relating to the dissolution of the Grand Society and earlier events, given they occurred several decades ago and thus were “truly historic events”.
[17] The Registrar stated that such funds as had been expended on the Property since the dissolution of the Grand Society had come from LSNZI or persons associated with LSNZI. It is noted that LSNZI is based in Wellington as was the Property.
[18] The Registrar consequently found that it was appropriate to make a direction that the Property was to vest in LSNZI and made that direction accordingly. The Registrar finally stated there was nothing to prevent LSNZI and LSANZI putting aside their differences and working together to achieve their objects, including in respect of the Property.
The Law
[19] Given the Registrar’s decision was made under the Incorporated Societies Act 1908, with the new Incorporated Societies Act 2022 being passed whilst the issue was before the Registrar, the applicable legislation is the Incorporated Societies Act 1908 rather than the new act.
[20]Section 27(1) of the Incorporated Societies Act 1908 provides that:
On the liquidation of a society or on its dissolution by the Registrar, all surplus assets after the payment of all costs, debts and liabilities shall, subject to any trust affecting the same, be disposed of in the manner provided by the rules of the society or if such assets cannot be disposed of in accordance with the rules, then as the Registrar directs.
[21]If the surplus assets are subject to a trust, they are to be disposed of as follows:1
(a)where a liquidator was appointed by the court, as the court or a judge directs; or
(b)where a liquidator was appointed by a resolution of the members or where the society was dissolved by the Registrar, as the Registrar directs.
[22] The directions available to the Registrar under s 27 include a direction vesting all or any of the assets of the society in such person or persons as may be specified in the direction.2
[23] To appeal against a decision of the Registrar a notice of appeal must be delivered to the Registrar within one month after the date on which the decision was given.3
[24] The appeal is an appeal against the exercise of a discretion. For the appeal to succeed the appellants must show that the Registrar acted on a wrong principle, failed to take into account a relevant matter, took account of some irrelevant matter, or was plainly wrong.4
Submissions
Appellants’ submissions
[25] The appellants’ original pleadings in their notice of appeal were that the Registrar gave inadequate reasons, failed to deal with the second appellant’s claim, failed to address or resolve the issues of fact and law raised in support of first appellant’s claim, erred in finding the historical information to be irrelevant, erred in not finding the Property was subject to a trust in favour of the appellants, and failed to address the appellants’ superior claim to the Property. The appellants sought the
1 Incorporated Societies Act 1908, s 27(2).
2 Section 27(3)(a).
3 Section 27(2).
4 May v May (1982) 1 NZFLR 165.
quashing of the Decision and a direction that the Property be vested equally in the appellants as tenants in common.
[26] The appellants now submit that the Court should make an order that the Property be sold with the proceeds distributed equally between the two appellants and the first respondent. They submit that this would dispose of the assets in a way that would ensure they are used to further the objectives of the original society, and note there is little guidance on how property should be disposed of under s 27 of the Act. The appellants further submit that the source of the Grand Society’s assets is not readily ascertainable, given the Property was purchased indirectly from donations made by branch members and the branches 80 years ago, with the full details unknown.
[27] In their submissions the appellants contend that the Property cannot be disposed of in accordance with the Rules, as r 15, which concerns dissolution, requires a resolution to be passed by a majority of the financial members. No such resolution was ever passed. Rule 15 also directs that the Lebanese government is to distribute half the assets, which the appellants submit is not an available means of distribution given that the Lebanese government is said to face issues with corruption and includes Hezbollah which some countries consider a terrorist organisation.
[28] The appellants additionally submit that the Property is subject to an institutional constructive trust in favour of the appellants as they are the only two branches of the Grand Society remaining. They submit this is because the branches contributed funds to the purchase of the Property, had a reasonable expectation of interest due to representations from the Grand Society that the Property was for all Lebanese in New Zealand and suggested the branches would indirectly own the Property, and that it was reasonable for the Grand Society to yield the interest due to its representations to that effect.
First Respondent’s submissions
[29] The first respondent submits that its continued operation as an unincorporated society after the dissolution of the Grand Society, including its retention of control of the Grand Society’s assets, documents, records and bank account shows continuity
between it and the Grand Society. It states that it acted as the owner of the Property because it genuinely considered itself to be, and that it was paying rates and outgoings, attending to maintenance and other responsibilities relating to ownership, and that at various times it raised funds from its members or friends of the society to meet shortfalls, and leased the property to assist in meeting the costs associated with owning the Property.
[30] The first respondent submits it is the Grand Society and not the Wellington Branch as alleged by the appellants. It argues the repayment of the Wellington Branch’s loan did not disentitle it from an interest in the Property and that given there was no evidence of what financial loans or contributions the appellants made towards the Property, there is no use speculating based on incomplete records and documents. The first respondent also contends the incorporations of the appellant societies were intended to distance them from the Grand Society and meant they were no longer branches of the Grand Society prior to dissolution.
[31] The first respondent also notes the remedies sought by the appellants have changed without the pleadings being amended and take issue with the original alternative remedy of selling the Property and giving the proceeds to the Lebanity Enterprise NZ Charitable Trust (the Lebanity Trust) as it claims there is little difference between the Trust and the appellants. In respect of the claims of an institutional constructive trust, it is submitted that the claim that the appellants are the only beneficiary of such a trust contradicts the appellants’ submission that the Property is for the use of all Lebanese in New Zealand. The first respondent submits it has and will continue to hold the Property for the benefit of all Lebanese in New Zealand.
[32] The first respondent opposes the division of the property between the parties as this would compromise other regions and would be inconsistent with the first respondent’s duty to hold the assets for the benefit of all Lebanese in New Zealand.
[33] The first respondent seeks the dismissal of the appeal and for costs to be awarded against the appellants. However, if the Court decides the first respondent is not the same entity as the Grand Society, then it submits that the Court should order the distribution of the assets of the Grand Society substantially in accordance with r 15
of the Rules by directing that the Property be sold and the proceeds given directly to charities in Lebanon and New Zealand chosen by the New Zealand government. Alternatively, if the proceeds are to be divided amongst the parties, the first respondent submits that they should be awarded two thirds of the proceeds on the basis they will hold the property for the benefit of the rest of New Zealand, with the remaining third to be divided between the appellants.
Analysis
Admissibility of further evidence
[34] In a minute dated 9 August 2023, I made a direction that any party wishing to rely on evidence that was not before the decision-maker must make an application for leave to do so under r 20.16 of the High Court Rules 2016 (HCR) by 29 September 2023. No such application was made, despite the fact the parties sought to refer to new evidence. Consequently, I will only rely on the evidence that was before the Registrar.
Concession of the Registrar
[35] In a joint memorandum with the appellants dated 14 February 2024, the Registrar stated:
With the benefit of hindsight, with reference to the May v May criteria, the Registrar is willing to concede that relevant material did not receive the full consideration that it should have.
It is therefore accepted that it is open to the court to interfere with the Registrar’s decision notwithstanding whether or not it involved the exercise of a discretion.
[36] In light of this concession, the question for the Court to answer is not whether the Registrar erred in coming to her decision, but whether, in spite of the procedural error, the Registrar arrived at the correct decision, or the decision should be set aside and a different one made.
Is the property subject to a constructive trust?
[37] It is clear the Registrar did not err in finding there was no express trust in place, as there is no evidence of such a trust existing. Although it would appear the type of trust contemplated under s 27(1) and (2) would generally be a charitable trust, the use of the wording “any trust” in the provision indicates that consideration of whether the Property is subject to a constructive trust is not excluded.
[38] The pertinent type of constructive trust in this case would be one arising from contributions made to a property. These trusts have often been used in the context of contributions to property occurring in de facto relationships.5 In Lankow v Rose, Tipping J set out a four-step test for constructive trusts arising from contributions to property:6
(a)Direct or indirect contributions to the property in question;
(b)Expectation of an interest in the property;
(c)That such expectation is a reasonable one; and
(d)That the Defendant should reasonably expect to yield the claimant an interest.
[39] It does appear that the appellants contributed to the purchase of the Property. However, the amount contributed is unclear, given the limited documents and records available. The first respondent has also made some contributions to the property, in particular, payment of outgoings on the property. It is impossible to quantify the quantum of the contributions on the information available. It is also impossible to quantify the benefit received by the first respondent by way of continuing to use it after 1978 and receiving and retaining the rent on the property since the dissolution of the Grand Society in 1978. As confirmed in Wakenshaw, the test for a constructive trust is that a more than minor contribution needs to have been made.7 Because of the
5 R L Fisher (ed) Matrimonial and Relationship Property (Wellington, LexisNexis Butterworths, 2022) at [4.33].
6 Lankow v Rose [1995] 1 NZLR 277 at 294.
7 Wakenshaw v Wakenshaw [2017] NZCA 252 at [25].
paucity of evidence it is not possible to quantify with any precision the relative contributions of any of the parties to the property.
Is the second respondent effectively the Grand Society?
[40] The second respondent is not the same as or the legal successor to the Grand Society. It is a separate incorporated society. It therefore has no automatic entitlement to all the assets of the Grand Society.
Can a direction be made according to the Rules?
[41]Rule 15 of the Rules provides that:
The Society shall not be wound up except pursuant to a resolution passed by a majority of the financial members of the Society at a meeting called for the purpose and of which due notice as to time and place has been given to all members. Upon a dissolution under this rule, all the assets of the Society shall be sold and the proceeds thereof together with the other funds of the Society shall be divided equally into two parts, one of which shall be remitted to the Lebanese Government to be devoted to some charity in Lebanon and the other part shall be given to such charity in New Zealand as the Minister for the time being of Internal Affairs of the Government of New Zealand shall appoint.
[42] The wording “upon a dissolution under this rule” provides that the distribution of the proceeds of the sale of the Property by the Lebanese and New Zealand governments is only to occur with the voluntary dissolution of the Grand Society, not where it was compulsorily dissolved, as occurred here. All parties appear to oppose the involvement of the Lebanese government in distributing the proceeds, and it would be improper for this Court to direct the New Zealand government to do so without its consent, given it is not a party to these proceedings.
[43] I thus find that the Registrar did not err in determining that the Property cannot be disposed of in the manner provided by the Rules.
Should the Property have been vested in the first respondent?
[44] The Registrar’s decision found the expending of funds by the first respondent or those associated with it on the Property since 1978 and the fact the first respondent and the Property are located in Wellington to be determinative of which party to vest the Property in.
[45] Although those are potentially relevant considerations, there are other relevant matters the Registrar failed to have regard to. This includes the fact the Property was purchased with the intention of it being for the benefit of all Lebanese in New Zealand, and not just those in Wellington. This is evidenced by the letter of Mr Mattar, then President of the Grand Society, to the Lebanese community of New Zealand following the purchase of the Property in 1959. In that letter Mr Mattar stated the Property was “purchased for the use of the Lebanese of New Zealand” and was “not for the benefit of any one particular section of the community”.8 It was also explicitly stated that “for those visitors residing outside Wellington, it can also offer limited accommodation”.
[46] An interest in the Property by the other branches of the Grand Society was also acknowledged after the dissolution of the Grand Society. In the Report on Lebanese Club Property in Wellington that was produced following a meeting of representatives from Auckland, Wellington and Dunedin in 1980 it was stated that:9
Under the present Grand Society rules other branches outside Wellington may wish to claim part of the proceeds if it is decided to sell the present building. If the Society is abolished and a Lebanese Association is formed with new rules, the question will have to be resolved on whether money from the sale of any premises in the Capital should stay in Wellington, or whether other centres with Lebanese communities should be entitled to claim part of the money.
[47] The rules of the respective societies are also relevant. The rules of the first respondent demonstrate a clear focus on the Wellington Lebanese community, including that only members of the society that reside within the Greater Wellington Region may be Committee members, and that no meeting may be held unless at least 50 percent of eligible members that reside within the Greater Wellington Region are in attendance.10 Although the purposes of the society are often expressed as being to benefit all Lebanese in New Zealand, this is often qualified with a particular focus on those in Wellington.
[48] I accept the submissions of the Registrar that when having regard to the statutory scheme of the Incorporated Societies Act 1908, the powers under s 27(1) are
8 Common Bundle of Documents 301.0042.
9 302.0392.
10 302.0528.
to be exercised in a way that will further objectives that are equivalent or at least similar to the Grand Society. The objects of the Grand Society were to promote the welfare of Lebanese Communities, to promote social intercourse among members, to establish branches throughout New Zealand, to encourage cultural development among members, to preserve interest in national habits and customs, to furnish aid to any members in distressed circumstances, and to contribute to any cause which the Society may deem worthy. In light of these objects, which express an intention to benefit Lebanese across New Zealand, I consider that the Registrar erred in vesting the property solely in the first respondents.
What direction should be made?
[49] It appears that the Court’s discretion is only limited by the need to have regard to the objects of the Grand Society. The most relevant object would be the benefit of all Lebanese in New Zealand. The most pragmatic solution seemed to me for the appellants and second respondent to set up an independent charitable trust which had as its principal objective the benefit of all Lebanese in New Zealand and for the property to be sold and the sale proceeds transferred to that trust.
[50] At the conclusion of the hearing, I adjourned the matter for the express purpose of providing the parties with an opportunity to do that.
[51] Regrettably, they have not been able to agree. In the absence of the parties’ agreement, it is not an outcome that the Court can impose on them. They cannot be forced to co-operate.
[52] The outcome that is most closely consistent with the objectives of the Grand Society is for the property to be sold with the net proceeds to be divided into three equal parts and one part to be paid to each of the first and second appellants and the second respondent for the use by them for the benefit of Lebanese in New Zealand.
[53] Given the level of animosity and mutual distrust displayed by the appellants and first respondent, it would not be appropriate for any of them to be responsible for the sale of the property and distribution of the proceeds in accordance with this decision. Accordingly, I direct that the Registrar of Incorporated Societies is
authorised to sell the property, to collect any rent outstanding or received from any tenant of the property between the date of this decision and the settlement of the sale, and to add that sum to the corpus available for distribution and to then distribute the net proceeds (following payment of any outstanding rates or other costs) in accordance with this judgment.
[54] I reserve leave for the Registrar of Incorporated Societies to apply to the Court for such further directions as may be required to implement this decision.
Costs
[55] As no party could be said to have been completely successful it is my preliminary view that costs should lie where they fall. However, should any party wish to apply for costs, they should file a memorandum no greater than three pages in length within 20 days of the date of this decision. Any memoranda in reply, of no greater than three pages in length, shall be filed within 14 days thereafter. Costs will then be determined on the papers.
Churchman J
Solicitors:
Woodward Law, Lower Hutt for Appellants Oakley Moran, Wellington for First Respondent
Crown Law Office, Wellington for Second Respondent
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