Silich v White
[2020] NZHC 2107
•20 August 2020
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV 2019-419-141
[2020] NZHC 2107
IN THE MATTER OF the Insolvency Act 2006 IN THE MATTER OF
the bankruptcy of ALLEN POTETE WHITE
BETWEEN
PAUL DOUGLAS SILICH, LARRY WARREN CROW, CONRAD TAHANA O’CARROLL and PATRICIA RANGIKATA
O’CARROLL-LEOTA as trustees of Te Rununga O Ngati Tama Trust
Judgment Creditors
AND
ALLEN POTETE WHITE
Judgment Debtor
Hearing: 3 March 2020; further memorandum 18 March 2020 Appearances:
RA Idoine for the Judgment Creditors Mr A White in person
Judgment:
20 August 2020
Reissued:
4 September 2020
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 20 August 2020 at 4pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Anthony Harper, Auckland
Copy to: Mr A White
Silich & Ors v White [2020] NZHC 2107 [20 August 2020]
[1] The judgment creditors apply for an order adjudicating the judgment debtor (Mr White) bankrupt.
[2] I issued a judgment on the application on 20 August 2020, but I directed that, pending further order, the judgment was only to be made available to the parties and to the Official Assignee. The reason for that order was that there appeared to be an issue as to whether the names of the judgment creditors, or at least two of them, should be suppressed having regard to the provisions of the Criminal Records (Clean Slate) Act 2004. I invited submissions on that issue within five working days.
[3] By memorandum dated 21 August 2020, counsel for the judgment creditors advised that his clients took no issue with publication of the judgment in unredacted form. No memoranda were filed by Mr White or the Official Assignee. The judgment is accordingly now re-issued on an “open” basis, with no restrictions on publication.
[4] The bankruptcy application is based on a judgment for costs made against Mr White on 8 April 2019 in the sum of $13,827. A bankruptcy notice claiming that sum plus interest of $72.40 and further costs of $796 was served on Mr White on 12 July 2019. He did not within the 10 working days stated in the bankruptcy notice pay the sum demanded or apply for an order setting aside the bankruptcy notice.
[5] The judgment creditors filed their application for an adjudication order on 25 September 2019. On 7 November 2019, Mr White, acting on his own behalf, filed an affidavit which he described as being “in support of an originating application for the Court to use its inherent jurisdiction to set aside a bankruptcy notice”.
[6] The case came before me in the bankruptcy list on 11 November 2019. I noted that Mr White’s affidavit filed on 7 November 2019 was well out of time to be dealt with as an application to set aside the bankruptcy notice, but I accepted the document as sufficient notice that Mr White wished to oppose the bankruptcy adjudication application. I made a direction that if Mr White wished to oppose the bankruptcy adjudication application, he was to file and serve a formal notice of opposition by 25 November 2019.
[7] On 22 November 2019, Mr White filed two further documents. The first was a notice of his intention to oppose the adjudication application. In this document, Mr White contended that it would not be in the public interest to make an order for adjudication. He said there were matters that, if the Court had been aware of them at the time, would have made it likely that the judgment would not have been entered against him.
[8] The second document filed by Mr White on 22 November 2019 was an amended application to the Court to set aside the bankruptcy notice in the Court’s inherent jurisdiction. The grounds set out in this document were as follows:
(a)The bankruptcy notice was based upon a procedural defect;
(b)There are arguable grounds of defence to the claim for which judgment was given;
(c)A serious injustice giving rise to an abuse of process will arise if the bankruptcy notice is not set aside; and
(d)It is not in the wider public interest that adjudication be available to proceed.
[9] The amended application to set aside the bankruptcy notice was said to be based on s 37 of the Insolvency Act 2006 (the Act) and/or the inherent jurisdiction of the Court.
[10]Mr White filed a further affidavit, purportedly in reply, on 17 January 2020.
The judgment against Mr White
[11] The judgment creditors are four of the current trustees of the Te Rūnanga o Ngāti Tama Trust (the Trust). In 2017, they and three co-plaintiffs commenced a proceeding in this Court (the injunction proceeding) against Mr White and four other defendants, seeking an injunction restraining the defendants from communicating to
third parties certain confidential information which the Trust said was owned by it or its co-plaintiffs.
[12] The judgment creditors were the first plaintiff in the injunction proceeding. The second plaintiff was Ngāti Tama Custodian Trustee Ltd (NTCTL). NTCTL acted as the custodian trustee of the Trust. The third plaintiff, Homesoft Group Pty Ltd (Homesoft), was a company incorporated in Australia that owned the rights in relation to the My Virtual Homes Software (the software). The software enabled the design of a “3D Virtual Home”, and Homesoft marketed the software to consumers. NTCTL held an 82 per cent shareholding in Homesoft.
[13] The fourth plaintiff in the injunction proceeding was Situ Systems Pty Ltd (Situ), an Australian company which licensed the software for business use.
[14] The judgment creditors and their co-plaintiffs sued Mr White and the four other defendants for breach of confidence and causing loss by unlawful means. The judgment creditors and their co-plaintiffs resolved their dispute with the first, second and third defendants, but there was no settlement with Mr White or with the fifth- named defendant, Denise Tinney. Mr White and Ms Tinney are members of the Ngāti Tama Iwi, and as such they are beneficiaries of the Trust. Both were served with the injunction proceeding, but neither filed a statement of defence or took any other step. The judgment creditors and their co-plaintiffs sought judgment against Mr White and Ms Tinney by way of formal proof.
[15] Duffy J gave judgment against Mr White on 21 August 2018.1 As Ms Tinney was resident overseas, the Judge was not prepared to grant a permanent injunction against her, pending further submissions from the judgment creditors and their co- plaintiffs as to whether any order for injunction against Ms Tinney would have any utility.
[16] In her reasons for the judgment, given on 7 February 2019, Duffy J summarised the relevant facts as follows:
1 Silich v White [2019] NZHC 103.
[9] Gregory Lane is one of the directors of Homesoft and the chief executive of Homesoft and Situ. He has provided an affidavit in support of the plaintiffs’ case. The affidavit evidence establishes that a confidential report of the plaintiffs (the Lane Report), which was prepared by Mr Lane, on or about 10 February 2016 has unlawfully come into the hands of the defendants. The Lane report outlines the performance of [Homesoft], this report includes sales projections and refers to contracts with customers or potential customers. Included here are: (a) CSR Limited (CSR) which is a commercial entity based in Australia and New Zealand that is already a valuable customer of Situ; and (b) Caroma, which is a wholesaler of bathroom products in Australia and New Zealand, that is a potential valuable customer of Situ.
[10] The plaintiffs contend the Lane Report was issued in confidence. It has a confidential watermark and states on the inside cover:
This report is strictly confidential. Please do not distribute. The contents of this report could damage ongoing business dealings if made public and persons viewing this document are kindly asked to limit distribution to board members only.
This reference to board members means the Ngati Tama Trustees, being Paul Silich, Larry Crow, Conrad O’Carroll and Patricia O’Carroll, Lisa White, Tahuata White and Adrian White.
[11] On 7 May 2016, Mr Lane emailed the Ngati Tama trustees following a phone call which he received in relation to [the software]. The email outlined a business plan for Homesoft and Situ and included references to the CSR and Caroma opportunities. This information was commercially sensitive and confidential to [the Trust].
[12] [Mr White and Ms Tinney] appear to have obtained a copy of the Lane Report as well as the information contained in Mr Lane’s email of 7 May 2016. The plaintiffs cannot account for how this occurred as the fourth and fifth defendants are not trustees of [the Trust]. The plaintiffs believe a copy of the Lane Report was provided to [Mr White and Ms Tinney] by one of the other defendants.
[13] Since [Mr White and Ms Tinney] have been in receipt of [the Trust’s] confidential information the following has occurred: First, [Mr White] has contacted Mr Lane and Paul Condon the co-chief executive of Homesoft and Situ and demanded they provide [Mr White] with certain information in relation to [Homesoft and Situ]. [Mr White] has further said that if the requested information is not provided there will be “dire consequences”. Second, [Ms Tinney] has similarly contacted Mr Lane and made similar threats if her request is not acceded to. Third, on 29 March 2017 [Mr White] contacted Mr Lane again asserting that if a satisfactory response was not forthcoming by a certain date [Mr White] would contact CSR and Caroma detailing the “abysmal management” of Homesoft and Situ.
[14] To date neither [Mr White nor Ms Tinney] have outlined what the alleged “abysmal management” might be.
[15] Mr Lane expresses concerns that if [Mr White] proceeds with the threatened communications, either CSR or Caroma will terminate their business relationships with Homesoft and Situ. Of particular concern is the fact that Situ is a start-up company that has no goodwill or existing business reputation that would otherwise allow it to combat the bad publicity that might flow from [Mr White’s] threatened action. Accordingly, Mr Lane is of the view that unless [Mr White] is restrained from communicating with the existing and potential clients of Homesoft and Situ those companies will suffer irreparable financial harm.
[16] Mr Lane also details four other companies that offer Homesoft and Situ sound business opportunities. He is concerned that bad publicity might deter those companies from proceeding to deal with Homesoft and Situ.
[17] While [Mr White] is the person who is primarily responsible for the threats, there is evidence to show that he has disclosed this information to [Ms Tinney] and that she is similarly inclined to carry out the threats.
[17] Duffy J was satisfied that the plaintiffs had made out a prima facie case for relief against Mr White on their breach of confidence cause of action. The subject information had the essential characteristics of confidential information, the plaintiffs had not authorised its release to either Mr White or Ms Tinney, and Mr White and Ms Tinney would or might in the future release the confidential information to diverse persons (which would be to the detriment of the plaintiffs).
[18] Duffy J made a permanent injunction order against Mr White in the following terms:
[Mr White] is restrained from communicating either directly or indirectly by whatever means possible with any customer or potential customer of Homesoft or Situ, including in particular CSR Limited and Caroma.
[19] Her Honour gave leave to the judgment creditors and their co-plaintiffs to file a memorandum claiming costs, and, following receipt of that memorandum, her Honour made the order for costs which formed the basis for the bankruptcy notice issued against Mr White.
Mr White’s evidence and submissions
[20] In his first affidavit, Mr White described himself as a kaumātua of the Ngāti Tama Iwi.
[21] After working in the wool industry in Australia for some 37 years, Mr White retired in 2009. He and his wife returned to New Zealand in February 2014. On his return, Mr White decided to see if he could use his skills to assist the Ngāti Tama Iwi.
[22] Mr White discovered that the Iwi was in what he termed dire financial straits. It had received a substantial settlement under a Treaty claim, and the settlement funds were initially held by NTCTL. However, approximately $20 million of the settlement funds ($14.2 million plus earnings) had been lost and was unaccounted for.
[23] Mr White described his concerns over the absence of proper financial statements for the Trust, the absence of any audits conducted between 2003 and 2012, the absence of any elections held between 2003 and 2016, and a failure to convene annual general meetings between 2003 and 2016. He said that no tax returns were filed between 2004 and 2012, and that “an inordinate amount of money was channelled through a subsidiary company of the Trust called Ikatuna Limited”, by way of advances to Ikatuna. The only directors of Ikatuna were Mr Gregory White and the judgment creditor, Mr Paul Silich.
[24] Mr White said that, for the most part, Mr Gregory White acted as CEO of the Trust between 2003 and 2012, when the Trust’s settlement funds were lost. Mr Silich was a trustee of the Trust from 2008 to 2019, and he has been chairman of the Trust from 2016 to the present time.
[25] The Trust’s annual report for 2017 recorded that $1,933,231 had been advanced to Homesoft as at 30 September 2014. NTCTL determined that there was no likelihood of that advance being repaid, and it was written off at 30 September 2015. The Trust’s remaining asset base of around $4.3 million had been written off in 2013.
[26] Mr White went on in his affidavit to catalogue in some detail various alleged failures and defaults of those responsible for the administration of the Trust and NTCTL, including the judgment creditors. He expressed the view that the $18–20 million had disappeared in very suspicious circumstances, and the only conclusion
was that there had been a massive cover-up involving a large number of people. Against that backdrop, he began to ask detailed questions and seek reports.
[27] Mr White said a number of companies associated with Homesoft have been put into liquidation or have ceased operations. All of the Trust’s investment in Homesoft has been written off.
[28]Against that background, Mr White set out his grounds of defence as follows:
(a)Confidentiality was not breached as alleged or at all. The confidential report dated 10 February 2016 prepared by Mr Greg Lane (the Lane Report) was in fact released on the Ngāti Tama website, and the version of the document released on the website looks very similar to the document on which the judgment creditors and their co-plaintiffs relied in the injunction proceeding. The Lane Report was available on the Ngāti Tama website from February 2016 until April 2018, when the website changed. Prior to the website changing, there was no embargo on the Lane Report.
(b)Mr White has continually asked the Trust for information regarding minutes, motions, strategic planning and audited financial reports for all of the Ngāti Tama investments as disclosed in an affidavit filed by Mr Silich in the injunction proceeding. To date, Mr Silich, as chairman of the Trust, has only ever responded by serving papers on him to appear in court to answer charges.
(c)There are procedural defects in the adjudication application. Two of the persons named as trustees in the injunction proceeding were deemed not to be trustees, by virtue of a provision in the Trust’s Trust Deed which deems a person who at any time has been convicted of an offence punishable by a maximum term of imprisonment of five or more years to be disqualified from holding office as a trustee.
(d)When Mr White was served with the bankruptcy adjudication application, the judgment creditors were not in fact trustees of the Trust. Under the terms of the Trust Deed, the judgment creditors’ respective terms of office as trustees expired on 28 February 2019, and they had not been re-appointed.
(e)There would be a serious injustice if the present bankruptcy proceeding were used to silence Mr White and prevent him or any other kaumātua from asking questions about the financial state of NTCTL and the Trust.
[29] On his personal position, Mr White said he is a senior member of the Church of Jesus Christ of Latter Day Saints. He is a registered marriage celebrant for the church, and if a bankruptcy order were made, he would have to resign the role of celebrant. There would be serious injustice to him if that were to occur.
[30] Mr White said that he did not initially appear in the injunction proceeding because “this whole thing is a sham”. He noted that there were four other individuals named as defendants in the injunction proceeding and they have not been pursued as he has. He suggested that the only reason for making him bankrupt was to preclude him from being nominated as a trustee of the Trust, and to silence him.
Evidence of Mr Silich
[31] Mr Silich said in his evidence that he is chairman of the Trust, as well as a director and the sole shareholder of NTCTL.
[32] Mr Silich described the Trust as a private trust created in January 2003. Generally, the object of the Trust has been to represent and exercise the collective tino rangatiratanga of the Ngāti Tama Iwi. NTCTL was incorporated shortly before the Trust was established, to be the custodian trustee for the Trust. It was intended to hold the Trust’s assets, such as its shareholding in various companies, as well as the titles to land. The broad purpose of having NTCTL as a custodian trustee was to avoid the administrative inconvenience of updating the various land and other registers each time a trustee of the Trust left or a new trustee was appointed.
[33] Mr Silich said that Mr White does not occupy any official role within the Trust or its related entities. Nor does he exercise any special powers of audit or oversight within the Trust, its related entities, or the Iwi generally. Mr Silich asserted that the historical matters relating to the alleged loss of Trust assets and/or poor management of the Trust, noted by Mr White as giving cause for concern, are irrelevant to the bankruptcy application. For that reason, he said that he did not address them in his affidavit, other than to say that the allegations about mismanagement are baseless and are wholly denied.
[34] Mr Silich contended that, from around 2017, Mr White and other individuals have waged a campaign of interference and obstruction against the Trust and NTCTL. The conflict reached a tipping point in 2017, when certain individuals (including Mr White) threatened to interfere with NTCTL’s commercial interests if their demands were not answered. Those threats resulted in the issue of the injunction proceeding.
[35] Mr Silich confirmed that, after a protracted period of negotiation, the injunction proceeding was settled with three of the five defendants. Mr White received the legal documents in the injunction proceeding, but he refused to file a statement of defence or engage with the Trust and NTCTL.
[36] Mr Silich said that Mr White did not contact the Trust or NTCTL or their lawyers in response to the bankruptcy notice. And the judgment creditors had no indication that Mr White intended to oppose the bankruptcy proceeding until the last working day before the first call on 11 November 2019, when Mr White served his affidavit asking the Court to set aside the bankruptcy notice.
[37] Mr Silich referred to the Lane Report, and he said that it was circulated to the board of the Trust and Mr Gregory White on the same day. Each page of the Lane Report was watermarked with the word “Confidential”, and the first page was marked:
THIS REPORT IS STRICTLY CONFIDENTIAL PLEASE DO NOT DISTRIBUTE
THE CONTENTS OF THIS REPORT COULD DAMAGE ONGOING BUSINESS DEALINGS IF MADE PUBLIC AND PERSONS VIEWING
THIS DOCUMENT ARE KINDLY ASKED TO LIMIT DISTRIBUTION TO BOARD MEMBERS ONLY
[38] Mr Silich said that in the course of 2016 and 2017, Mr White and others had been writing to him, Mr Lane, and Mr Paul Condon (another shareholder in Homesoft), requesting information about the Trust’s businesses. On 24 March 2017, Mr Silich asked Mr Condon and Mr Lane to direct all enquiries from Ngāti Tama individuals to him. He said that he was concerned to keep company information, especially information about prospective clients, confidential.
[39] Mr Silich then referred to emails received from Mr White in March 2017, in which Mr White repeated previous demands for information about Homesoft and Situ. Mr White threatened to write to CSR and Caroma, advising those companies of the “abysmal management” of the Trust/NTCTL.
[40] Mr Silich said that the only way Mr White could have obtained any information concerning CSR and Caroma would have been through one of the trustees of the Trust who had access to copies of the Lane Report. Mr Silich said that he had checked with the other trustees (not being part of the ‘minority faction’) and Mr Gregory White, and they confirmed that they did not pass on any information in the Lane Report to Mr White. Mr Silich expressed the belief that one or more the trustees (wrongly) disclosed the information to Mr White.
[41] In response to Mr White’s evidence that the Lane Report was not confidential at all and was publicly accessible on the Ngāti Tama website, Mr Silich said that the version of the Lane Report Mr White produced with his affidavit was not in fact a complete copy of the Lane Report. It was a heavily redacted version that was published on the website for anyone who was interested. That public version did not contain any reference to CSR or Caroma, and it omitted commercially sensitive information that was in the Lane Report. Mr Silich concluded that Mr White must have either discussed the Lane Report with the minority trustees or obtained a copy of it himself.
[42] In response to Mr White’s evidence about the terms for which trustees of the Trust are appointed, Mr Silich acknowledged that all trustees’ terms technically expired on 28 February 2019. He described that as an unfortunate side effect of poor planning when the Trust Deed was drafted. A number of factors led to a delay of the 2019 trustee elections, and the Trust’s AGM was delayed to September 2019. The reasons for the delay were not sinister: some related to the timing of the Trust’s financial year (which ended on 30 September 2019), the completion of financial statements, and the timing of the end of year holidays.
[43] In the meantime, the Trust’s affairs needed oversight and supervision. The work that was ongoing prior to 28 February 2019 could not be stopped, and the trustees were not prepared to abandon their duties simply because the Trust needed to host elections. On that basis, business continued as usual between 28 February 2019 and the release of the trustee election results on 21 September 2019. All of the trustees’ actions in this interim period were undertaken in the performance of their obligations under the Trust Deed and in pursuance of the objectives of the Trust. Five of the seven newly-elected trustees were re-elected from the previous board, including Mr Silich.
[44] Mr Silich said that the injunction proceeding was taken as part of an effort to preserve the value of the Trust’s investment in Homesoft and Situ. That objective was achieved by the settlement with three of the five defendants, but Mr White refused to engage with the plaintiffs on their concerns.
[45] Mr Silich pointed out that the majority of the steps taken in obtaining the injunction order took place before the expiry of the terms of the trustees of the Trust on 28 February 2019. After the Court awarded costs in favour of the Trust, the judgment creditors considered it incumbent on them as trustees to attempt to recover the costs to relieve some of the burden that the Trust had occurred in protecting its interests. Enforcement of the costs order was simply another step in the furtherance of the Trust’s interests.
[46] Mr Silich said that at no point did the trustees harbour any ulterior motive in pursuing Mr White. There has been no effort to target him or single him out. A settlement was reached with three defendants, and the other defendant resides
overseas, making enforcement of the costs order against her more difficult. Mr White was simply the only defendant that remained.
[47] Nothing the judgment creditors have done has prevented Mr White from being nominated and running for election as a trustee of the Trust and in fact he did that in the September 2019 elections but was unsuccessful. He was also unsuccessful in challenging the validity of the election process. Mr Silich produced a copy of a judgment of the Māori Land Court issued on 23 October 2019, dismissing an application by Mr White.
Evidence of Mr White in reply
[48] Mr White repeated some evidence given earlier, relating to the loss of the Treaty settlement funds and the absence of any explanation to Iwi members as to where the money has gone. He also drew attention to particular provisions of the Trust Deed on which he relies.
[49] On the Lane Report, Mr White said that he downloaded two documents from the Ngāti Tama website (the chairman’s report to the 2016 AGM and the minutes of the first hui of newly elected trustees in 2016). The report that Mr White downloaded was available to beneficiaries in these two documents. It was a report of Mr Lane completed on 17 February 2016, and there was no embargo or confidentiality mentioned in the document, nor any mention of CSR or Caroma. The embargo was not placed on the report until after Mr White had threatened to contact CSR and Caroma, and that did not occur until 24 May 2017. Mr White said he was unable to obtain an “electronic certificate” verifying the version of the report produced by Mr Silich in his evidence (which was marked confidential and referred to CSR and Caroma).
[50] Mr White went on to describe asking Mr Silich for copies of documents relating to the Trust in the latter part of 2019, saying that he did not receive any reply. He regarded the seeking of information as a responsible action for a senior kaumātua such as himself.
[51] Mr White acknowledged that he mentioned CSR and Caroma in a communication to Mr Condon and Mr Lane on 24 March 2017. That letter led to the issue of the injunction proceeding.
[52] Mr White said that the confidentiality watermarks and the statements in the Lane Report relating to CSR and Caroma were later additions to the 17 February 2016 document, that did not exist when the report was made publicly available on the Ngāti Tama website in 2016. He suggested that the additions were “perhaps” made in April 2017 (after he had sent his March 2017 correspondence referring to CSR and Caroma).
[53] Mr White said that he did not appear in Court in the injunction proceeding because he is a retiree with limited money and “no desire to spend the rest of my life bouncing around courtrooms”. Also, there were four other defendants to defend the case.
Mr White summarised what he wants from the Trust as follows:
(a)Consolidated reports for all of the subsidiary companies;
(b)Bank statements;
(c)Minutes and resolutions from the companies and corresponding minutes and resolutions from the Trust;
(d)Lawyers’ recommendations re initiating a summary judgment against one individual, and the balance of litigation risk and litigation cost; and
(e)Auditor’s reports.
[55] He said that, to date, his requests for information and reports have been ignored, and no responses given.
[56] Mr White asked the Court to use its inherent jurisdiction to set aside the bankruptcy notice.
Submissions for the judgment creditors
[57] Mr Idoine, counsel for the judgment creditors, summarised the essence of Mr White’s opposition as follows:
(a)The injunction proceeding was wrongly decided;
(b)The adjudication application was not properly authorised by the Trust; and
(c)The adjudication application is an abuse of process.
[58] Mr Idoine objected to the “reply” affidavit sworn on 17 January 2020, submitting that Mr White has filed additional documents, including the reply affidavit, without the leave of the Court.
[59] On the merits of the injunction order, Mr Idoine referred to the conclusion of Duffy J that Mr White had come into possession of the confidential information, and that he intended to distribute that information to diverse persons to the detriment of the Trust. He further submitted that the report Mr White produced to support his argument that all he saw was a non-confidential document is in fact a heavily sanitised version of the Lane Report made available to the Iwi generally. Furthermore, the email string relied upon by Duffy J, in which Mr White threatened to disclose the information to third parties to the detriment of the Trust, itself referred to the confidential information. It is highly likely that Mr White learned of the confidential information by reading or discussing the contents of the Lane Report with a minority of aggrieved Iwi members, including a small number of trustees of the Trust, who were then engaged in a campaign of obstruction against the Trust.
[60] On the issue of the terms of the trustees expiring on 28 February 2019, Mr Idoine submitted that the trustees continued to act in accordance with their duties and in the best interests of the beneficiaries of the Trust. That happened to include pursuit of the outstanding debt owed by Mr White.
[61] Mr Idoine submitted that there are some circumstances where the Court will retrospectively endorse the actions of a trustee who was not validly appointed or whose tenure has expired. A trustee in this situation has traditionally been referred to as a “trustee de son tort”:2
A person though not appointed as a trustee who takes it upon himself to act as such and to discharge the trustee’s duties on behalf of others.
[62] In this case, the judgment creditors were acting as de facto trustees, and they are entitled to an indemnity against the Trust and its assets for reasonable costs and expenses incurred in the administration of the Trust.3 The Court of Appeal’s conclusion that the de facto trustees in Butterfield v Public Trust were entitled to an indemnity from the Trust and its assets implies that the Court considered that the de facto trustee’s actions were valid.
[63] The implication of the Court of Appeal’s judgment in Butterfield v Public Trust is that currency of office is not determinative in assessing the validity of a de facto trustee’s actions. Rather, the question is whether the trustee’s actions were reasonable, and taken in the discharge of their duties as (de facto) trustees. In this case, the trustees have always acted reasonably, in good faith, and in furtherance of the Trust’s interests.
[64] On the issue of the criminal convictions of two of the trustees, Mr Idoine relied on s 21(2)(a) of the Criminal Records (Clean Slate) Act 2005 (the Clean Slate Act). Under that section, all provisions relating to an individual’s criminal record or an individual’s character or fitness must be interpreted in a way that is consistent with the individual’s rights under the Clean Slate scheme. He submitted that the trustees who are the target of Mr White’s complaint are eligible persons under s 7 of the Clean Slate Act, and thus deemed to have no criminal record.
[65] On the exercise of the Court’s discretion to make an adjudication order, Mr Idoine referred to s 37 of the Insolvency Act, which provides:
37 Court may refuse adjudication
The court may, at its discretion, refuse to adjudicate the debtor bankrupt if—
2 Butterfield v Public Trust [2017] NZCA 367, [2017] NZAR 1439 at [17].
3 At [21].
(a)the applicant creditor has not established the requirements set out in section 13; or
(b)the debtor is able to pay his or her debts; or
(c)it is just and equitable that the court does not make an order of adjudication; or
(d)for any other reason an order of adjudication should not be made.
[66] Mr Idoine noted that Mr White has not raised any issues under the first two grounds in s 37. The focus of his opposition must therefore be the grounds set out in s 37(c) and (d).
[67] Mr White has not produced any evidence that adjudication would affect his career prospects or result in him losing his licence as a marriage celebrant. He is retired and is not a member of a professional body that would exclude an undischarged bankrupt. There are therefore no public interest or hardship considerations that would stand as an impediment to making an adjudication order.
[68] Mr Idoine submitted that there is no jurisdiction to set aside the bankruptcy notice at this stage of the proceeding. He acknowledged, however, that the Court has a limited ability to consider the durability of the underlying judgment, although in this case the judgment was not a default judgment — Duffy J’s judgment followed a formal proof hearing at which Mr White had the opportunity to be heard.
[69] There has been no abuse of process in this case. The adjudication application has not been brought for any ulterior purpose, and the judgment creditors have endeavoured to engage with Mr White on several occasions. Their requests to do so have been ignored. Mr White has also made it clear that he will not pay the debt voluntarily. The judgment creditors had no alternative but to initiate proceedings in the hope that adjudication would ultimately bring relief. There is no agenda of trying to silence Mr White.
Mr White’s submissions
[70] Mr White’s submissions are substantially described in the summary of his evidence set out above. In his oral submissions, Mr White repeated his concerns about the management of the Trust and NTCTL, and the loss of the Treaty settlement money.
He referred to his inability to obtain answers to his questions from the trustees, which he considered he was entitled to as a beneficiary of the Trust. He expressed particular concern about certain transactions of the Trust or NTCTL that he regarded as suspicious, and he submitted that all of the people who appear to have benefitted from those transactions are the people who are now attempting to bankrupt him.
[71] In answer to a question from the Court about why he had not defended the injunction proceeding, Mr White said that other defendants were initially defending the claims, but they did a “secret deal” with the Trust without Mr White being aware of it.
[72] Mr White acknowledged that he had no money or other assets from which the debt could be paid, nor any desire to pay it. However, he would be willing to sit down with a group of kaumātua to see if the matter could be resolved with the Trust.
The request to delay giving judgment
[73] At the end of the hearing on 3 March 2020 I reserved my decision. On 6 March 2020, the parties asked me to delay giving judgment so that discussions could take place in an attempt to resolve the matter.
[74] Those negotiations were unsuccessful and, on 18 March 2020, I was asked to proceed to give judgment on the adjudication application.
Discussions and conclusions
Legal principles
[75]Section 13 of the Insolvency Act provides:
A creditor may apply for a debtor to be adjudicated bankrupt if—
(a)the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of $1,000 or more to those creditors between them; and
(b)the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and
(c)the debt is a certain amount; and
(d)the debt is payable either immediately or at a date in the future that is certain.
[76]Section 17 of the Act materially provides:
(1)A debtor commits an act of bankruptcy if—
(a)a creditor has obtained a final judgment or a final order against the debtor for any amount; and
(b)execution of the judgment or order has not been halted by a court; and
(c)the debtor has been served with a bankruptcy notice; and
(d)the debtor has not, within the time limit specified in subsection (4),—
complied with the requirements of the notice; or
(ii)satisfied the court that he or she has a cross claim against the creditor.
…
(4) The time limit referred to in subsection (1)(d) is,—
(a)if the debtor is served with the bankruptcy notice in New Zealand, 10 working days after service; or
[77]The other relevant statutory provision is s 37 of the Act. That section provides:
The court may, at its discretion, refuse to adjudicate the debtor bankrupt if—
(a)the applicant creditor has not established the requirements set out in section 13; or
(b)the debtor is able to pay his or her debts; or
(c)it is just and equitable that the court does not make an order of adjudication; or
(d)for any other reason an order of adjudication should not be made.”
[78] The Court's general discretion was described by the Court of Appeal in Baker v Westpac Banking Corp as follows:4
It is proper for the court to consider not only the interests of those directly concerned — the petitioner, other creditors, the debtor — but also the wider public interest. A creditor who establishes the jurisdictional facts as set out in
4 Baker v Westpac Banking Corp CA212/92, 13 July 1993 at 4.
[the equivalent of s 13 of the Act] is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made. The court will give proper weight to the commercial judgment of the petitioner but the oppressive use of the bankruptcy process may be a ground for refusing an order. Another ground may be the undoubted absence of assets but that will not necessarily preclude an order given the range of interests involved including the public interest in the continuing oversight of a bankrupt's affairs and the disqualifications that go with bankruptcy. In the end the court must balance the various considerations relevant to the case and determine whether the debtor has succeeded in showing that an order ought not to be made.
[79] In Re Tootell, ex parte Rabobank Australia Ltd, 5 Associate Judge Osborne referred to the decision of Master Williams QC in Re Epirosa, ex parte Diners Club (NZ) Ltd.6 In that case, the Master set out a list of factors which he considered relevant to the exercise by the Court of its discretion:
(a)What are the wishes of all affected parties, including the applying creditor, other creditors and the debtors?
(b)Does the debtor have the ability to meet his or her debts over time and, if so, does that meet the requirements of achieving finality within a reasonable period?
(c)What were the circumstances in which the debt was incurred, and do those circumstances suggest that the creditor is acting unreasonably in pursuing adjudication?
(d)Will adjudication be pointless?
(e)Will the debtor, if adjudicated, be rendered unable to support himself or herself?
(f)Does the debtor have such a standing in the community that significant issues of stigma or embarrassment will result?
5 Re Tootell, ex parte Rabobank Australia Ltd [2013] NZHC 2975.
6 Re Epirosa, ex parte Diners Club (NZ) Ltd HC Wellington B498/91, 6 March 1992.
[80]In Re Fidow, Fisher J noted:7
… it does appear that as a matter of legal authority one should not necessarily decline a bankruptcy merely on the ground that there are no obvious assets for the creditors. Clearly that must be a powerful factor to consider. But there are several other considerations which may be of equal importance.
One of these is the potential for further investigation. A bankruptcy makes available to creditors an array of procedures for investigating the financial circumstances of the debtor. Those procedures are likely to prove more effective than an investigation conducted by other means. I have previously adverted to the possibility that some investigation in this case might be rewarding. I intend no reflection upon Mr Fidow by that comment. In the finish, investigation may reveal nothing that is not already known. But I cannot entirely rule it out as a possible avenue of benefit for the creditors.
The next matter to be borne in mind here is that on a bankruptcy petition the Court must have regard to the public interest in a way which transcends the interest of the immediate party to the proceedings … The public interest in exposing and controlling an insolvent debtor is one which exists quite independently of the separate question of debt collection by his immediate creditors.
Application of the legal principles in this case
[81] In this case, the starting point is that the Court appears to have jurisdiction under s 13 of the Act to make an adjudication order. The judgment creditors hold a judgment for a sum in excess of $1,000, and the debt is for a certain sum. The judgment is payable immediately, and there is no dispute that Mr White did not comply with the bankruptcy notice within the 10 working day period prescribed for compliance. He acknowledges that he cannot pay the debt.
[82]I consider the issues to be resolved are the following:
(a)Is there any basis for the Court to look at the merits of the injunction judgment, and the subsequent costs judgment, to satisfy itself that (subject to Issues (2) and (3) below) Mr White owes the judgment creditors an amount exceeding $1,000 (s 13(a) of the Act)?
(b)What is the effect of the fact that the judgment creditors’ respective terms as trustees of the Trust expired on 28 February 2019? Were they
7 Re Fidow [1989] 2 NZLR 431 (HC) at 444.
entitled to obtain the costs judgment after that date, and initiate the bankruptcy proceeding?
(c)What is the effect of the provision in the Trust deed that precluded Iwi members with criminal convictions from holding office as trustees? If some of the trustees were in that category, is it arguable for Mr White that the convictions invalidated the action taken against him by the judgment creditors?
(d)Has the adjudication application been pursued by the judgment creditors for the ulterior purpose of silencing Mr White, or otherwise as an abuse of the Court’s process?
(e)Has Mr White shown, by reference to his personal circumstances or otherwise, that it would not be just and equitable to make an adjudication order, or that for some other reason an adjudication order should not be made?
[83] In considering Issues (1), (4) and (5), I am not prepared to attempt some sort of review of the management of the Trust or NTCTL over the last 15 to 20 years or enquire into the apparent loss of the Iwi’s Treaty settlement money. Those matters have no direct connection with the debt on which the bankruptcy adjudication proceeding is based, and Mr White has not articulated any personal counterclaim he might have (separate from his concerns as one of numerous beneficiaries of the Trust). The bankruptcy court is not in any event the right forum to conduct enquiries of that sort. They are matters to be resolved within the Iwi itself, or if they cannot be resolved there, to be referred to the Police (if criminal activity appears to have occurred) or made the subject of an appropriate (separate) civil proceeding.
[84] Similarly, I cannot in this proceeding resolve any disputes which might exist between different factions within the Iwi, except to the extent the existence of such disputes might support Mr White’s contention that the bankruptcy proceeding has been brought in bad faith, in an attempt to silence him. I deal with that argument under Issue
(4) below.
[85]I will address in turn the issues listed at [82] above.
Issue (1) — Is there any basis for the Court to look at the merits of the injunction judgment, and the subsequent costs judgment, to satisfy itself that (subject to Issues (2) and (3) below) Mr White owes the judgment creditors an amount exceeding $1,000 (s 13(a) of the Act)?
[86] In Ramsay Healthcare Australia v Compton, the majority of the High Court of Australia considered that the Court, sitting in its bankruptcy jurisdiction, can in an appropriate case look behind the judgment on which a bankruptcy notice was based to see if the debt is in fact owing.8 The majority considered that to be the case even where the judgment followed a defended hearing in which the debtor’s defence was unsuccessful, or where the debtor had failed to run an available defence to the creditor’s claim. (The reason a bankruptcy court might take that approach is that it is concerned not just for the position as between the creditor and the debtor, but with the debtor’s position vis-à-vis all his or her creditors). In Ramsay, the majority noted that “there was evidence before the primary [bankruptcy] Judge which, while it remained uncontradicted, was apt to suggest that the debt was not truly owing”.9 The primary Judge had not formed the view that that evidence had been adduced other than in good faith.
[87] In a separate (concurring) judgment in Ramsay, Edelman J considered the question as being whether “substantial reasons” had been given to the court hearing the bankruptcy application for questioning whether, behind the judgment on which the bankruptcy application was based, “there was in truth and reality a debt due to the petitioner”.10 His Honour went on to say:11
Whether a matter will amount to substantial reasons so as to permit the exercise of the discretion will depend on the particular circumstances. But as the history shows, where a judgment debt has been obtained after the testing of the merits in adversarial litigation then in the absence of some evidence of fraud, collusion or miscarriage of justice, a Court exercising bankruptcy
8 Ramsay Healthcare Australia v Compton [2017] HCA 28, (2017) 261 CLR 132.
9 At [71].
10 At [110].
11 At [110]–[111].
jurisdiction will rarely have substantial reasons to investigate whether the debt which merged in the judgment was truly owed.
[88] In New Zealand, Ramsay was considered by Associate Judge Matthews in Nightingale v James.12 The Associate Judge considered that there were material differences between the insolvency statutes in force in Australia and New Zealand such that the approach adopted by the High Court of Australia set out above is not strictly applicable in New Zealand.13 His Honour noted that it is not the common practice of the bankruptcy court in this country to engage in an analysis of the correctness or otherwise of the underlying judgment. However, if the Court has sound reason to believe that there is flaw in the underlying judgment, the Court will respond to it by giving time for reassessment of the judgment elsewhere (for example, by allowing time for the judgment debtor to appeal the judgment, or to apply to have it set aside), or by exercising its jurisdiction under ss 36 and 37 of the Act to refrain from making an adjudication order.
[89] In Keung v Official Assignee,14 Associate Judge Bell took a different view, preferring to follow Ramsay and the line of English and Australian authority which had preceded it. In Associate Judge Bell’s view, a judgment is prima facie evidence of a debt in a bankruptcy proceeding, but it is not conclusive. The Court retains the power to examine whether the debtor is in truth and reality indebted to the creditor, notwithstanding the judgment.15 Unlike the Associate Judge in Nightingale v James, Associate Judge Bell did not see any material differences between the legislation in force in Australia and New Zealand. Neither the Act nor the Bankruptcy Act 1996 (Cth) expressly states whether a judgment is by itself conclusive as to the indebtedness. Both statutes require the Court to be satisfied as to the debtor’s indebtedness to the creditor but leave it to the Court as to how that is to be established.16
12 Nightingale v James [2018] NZHC 965.
13 At [19].
14 Keung v Official Assignee [2020] NZHC 32.
15 At [39].
16 At [49].
[90] Associate Judge Bell thus concluded that the Court hearing a bankruptcy application does have a discretion to look beyond the underlying judgment when a debtor asks it to do so. But it does not look into the merits of the judgment against the debtor in every case. While the scope of cases where the Court will go behind a judgment is not clearly defined, the Court will need to be satisfied that there is a proper basis for doing so.
[91] Considering those authorities, I accept that jurisdiction exists for the Court to enquire into the merits of the judgment on which a bankruptcy application is based, and I accept (preferring the reasoning in Keung v Official Assignee over that in Nightingale v James) that there is no material difference between the relevant statutory provisions in New Zealand and Australia that would relegate the Court’s obligation to be satisfied a debt is in fact owing to merely one of a number of factors to be considered in the Court’s discretion. But as the majority noted in Ramsay, there must be at least some evidence before me to suggest that the debt is not truly owing by Mr White. As Associate Judge Bell noted in Keung v Official Assignee, the Court must be satisfied that there is a proper basis for looking behind the underlying judgment.17
[92] In this case, Mr White has not persuaded me that there is a proper “merits” basis to look behind the costs judgment that was made following the injunction ordered by Duffy J. In the words of the majority in Ramsay, Mr White has not produced any evidence which, considered on its own, is “apt to suggest that the debt is not truly owing”.
[93] It is common ground that a version of the Lane Report was posted on the Ngāti Tama website in 2016. It is also common ground that the website version did not identify CSR and Caroma, and did not contain what appears to be a commercially sensitive section headed “Cash Flow”.
[94] Mr White wrote to Mr Lane and Mr Condon of Homesoft asking for information relating to the business and affairs of Homesoft and Situ. Mr White’s requests were referred to Mr Silich as chairperson of the Trust, and Mr Silich sent an
17 At [51]. The debt in Keung, as in this case, was a costs order. Associate Judge Bell did not consider that would make any difference if the order resulted from a miscarriage of justice.
email to Mr Condon on 24 March 2017 asking that any further enquiries be directed to himself as chair of the Trust board.
[95]On 27 March 2017, Mr White sent an email to Mr Silich, in which he said:
… don’t you think we the people deserve to be kept informed about this unholy mess. You seem to be hell bent on protecting these Australian parasites whilst Ngati Tama sinks under the burden you choose to place on us.
As a beneficiary of Ngati Tama I can request the information from Paul Condon and Greg Lane. That request has been made and obviously they have received it because they notified you. Under ASIC rules they are obliged to supply this information and they know this even though it appears you don’t. They now have four days left to do so.
ASIC has been informed of the request and of Condon and Lane’s shady dealings along with your master Gregory Lloyd White and the disappearance of $14 mil of Ngati Tama money. If I do not receive a satisfactory answer by return mail I shall also be writing to CSR and Coroma as a start.
… [the trustees of the Trust] have been party to my request and have been listed … so Paul and Greg you can either supply it or suffer the consequences
…
[96] On 30 March 2017, Mr White sent another email to Mr Silich, in which he said:
… ASIC is now in action so will be in touch with your Australian … partners very shortly. As I have said to you, you now have three days before I write to CSR and Coroma detailing an abysmal management. Your urgent attention to this matter is required …
[97] In his affidavit sworn on 17 January 2020, Mr White appeared to suggest that his references to CSR and Caroma in his emails of 29 and 30 March 2017 were made without any knowledge that those two companies were the substantial commercial entities that Homesoft/Situ had either just entered into commercial arrangements with, or whose business Homesoft/Situ wished to obtain (or retain). Mr White stated what is not in dispute in noting that no embargo or confidentiality requirement appeared on the website version of the Lane Report, and that there was no mention of CSR and Caroma in the copy he downloaded from the website. He went on to say that he did not mention to Mr Silich that he would be writing to CSR and Caroma until 24 May
2017, but that statement appears to have been in error — it is clear that he made the threats relating to CSR and Caroma at least as early as 29 and 30 March 2017.
[98] Mr White then went on to say that CSR does not produce “homewares”, only building materials. He suggested that CSR would have no interest in the Ngāti Tama- owned software. He also pointed out that “Caroma” is simply a brand (owned by GWA Group Pty Ltd). He said that his knowledge of the Australian building industry is quite extensive (having lived in Australia for 37 years), and he chose to mention CSR and Caroma in order to get a response from Homesoft/Situ (and the Trust). He said that CSR is one of the oldest companies in Australia, and it has no features that are unique to a program such as that referred to in the Lane Report. CSR would not be even slightly interested in a software program of that kind.
[99] If I understood it correctly, Mr White appeared to be suggesting that the relationships with CSR and Caroma did not exist (or might not have existed) when he wrote his emails of 29 and 30 March 2017, and the Lane Report references to CSR and Caroma were only concocted after Mr White sent his March 2017 emails, in order to “create” a breach of confidence case against him. If that is what Mr White meant, the allegation is very serious. But in my view there is no sufficient evidence to support it.
[100] First, the suggestion that the confidential version of the Lane Report was “perhaps” created in April 2017 appears to be no more than speculation on Mr White’s behalf. Secondly, I think the allegation is improbable.
[101] The Lane Report showed that Mr Lane had managed to sign what he described as a very large deal with CSR, and the “Cash Flow” section stated the value of the “initial deal” with CSR and referred to an invoice for a specific sum having been sent to CSR. The Lane Report also showed that there was at least the prospect of a deal with Caroma.
[102] Duffy J had referred in her judgment to an email dated 7 May 2016 from Mr Lane outlining a business plan for Homesoft and Situ, which included references to CSR and Caroma. Her Honour accepted that the information in this email was commercially sensitive and confidential to the Trust, and that sensitivity would have extended to the identities of CSR and Caroma. The Lane Report may have been expanded from the original (website) version as negotiations progressed in 2016, but there is no evidence that the commercially sensitive material in it, including the references to CSR and Caroma, was not added until some time after Mr White sent his emails of 29 and 30 March 2017.
[103] When the injunction proceeding was commenced on 5 April 2017, the judgment creditors must have anticipated that their claims would probably be defended, and that the allegedly confidential information (including in respect of the commercial relationships with CSR and Caroma) would have to disclosed to the Court. The defendants might have issued subpoenas to witnesses at CSR and/or Caroma. In those circumstances, I think the likelihood of the judgment creditors running the risk of fraudulently “concocting” non-existent commercial relationships with CSR and/or Caroma, or non-existent confidential information, would be very, very low.
[104] Nor is Mr White’s explanation for his references to CSR and Caroma in his March 2017 emails convincing. If he did not know anything about an existing or prospective commercial deal between CSR and Homesoft/Situ when he sent the emails, and if he believed CSR could have no interest in the Homesoft/Situ products, why did he mention CSR at all in the emails? Stating that CSR is one of the oldest companies in Australia, and that he thought that mentioning it would draw a response from the Trust, did not provide an adequate answer, particularly in the context of his later failure to challenge the claims in the injunction proceeding.
[105] In her judgment in the injunction proceeding, Duffy J noted that Mr White had threatened “dire consequences” if his demands for information were not met by Mr Lane and Mr Condon. Her Honour recorded Mr Lane’s concern that, if Mr White proceeded with the threatened communications, either CSR or Caroma would terminate its business relationships with Homesoft and Situ. Situ was a start-up company with no goodwill or existing business reputation, and it would be difficult
for it to combat the bad publicity that might flow from Mr White’s threatened action. Her Honour recorded Mr Lane’s view that unless Mr White was restrained from communicating with existing and potential clients of Homesoft and Situ, those companies would suffer irreparable financial harm.
[106] Duffy J was satisfied that the plaintiffs had made out a prima facie case for relief against Mr White. The uncontested evidence was sufficient to establish that the information in question was confidential, and the plaintiffs had not authorised its release to Mr White or the fifth defendant. Her Honour was satisfied that Mr White and the fifth defendant either would or might in the future release the confidential information to diverse persons, to the detriment of the Trust, if they were not enjoined from so doing.
[107] Against that background, Mr White elected to take no part in the injunction proceeding. He did not file a defence; he did not appear at the formal proof hearing.
[108] The onus was on Mr White to persuade the Court that there is a good basis for enquiry into the merits of the injunction order made against him, and he has failed to do that. It appears from the evidence and correspondence which has been produced that Mr White knew what buttons to push in his late March 2017 emails, and it is difficult to avoid the conclusions that he was angry at what he regarded as corruption within the Trust, and with Mr Silich’s refusal to respond to his requests for information, and that he was prepared to use his (leaked) knowledge of the CSR and Caroma relationships in order to obtain the information he wanted.
[109] For all of those reasons, my answer to Issue (1) is “no”. Subject to my answers to Issues (2) and (3) below, Mr White has not raised a sufficient basis for the Court to enquire into the question of whether the injunction order should have been made against him, and the costs judgment against him was inevitable once the judgment creditors and their co-plaintiffs obtained the order for injunction against him. The costs order appears to have been made only in favour of the judgment creditors, and Mr White has not challenged the amount awarded.
Issue (2) — What is the effect of the fact that the judgment creditors’ respective terms as trustees of the Trust expired on 28 February 2019? Were they entitled
to obtain the costs judgment after that date, and initiate the bankruptcy proceeding?
[110]Clause 8.10 of the Trust Deed provides:
8.10 Term of Runanga Trustees
Each Runanga Trustee appointed shall remain in office until he or she dies, retires, is removed pursuant to the provisions hereof or his or her term expires. The inaugural Runanga Trustees shall have an inaugural term as set out in clause 8.1 above. Thereafter every Runanga Trustee (subject to death, removal or retirement) shall have a three year term.
[111]Clause 8.3 materially provides:
8.3Removal of Runanga Trustees
8.3.1A Runanga Trustee:
…
(d) will be deemed removed from office at the expiry of his or her term of office.
8.3.2Upon being removed under sub-clauses …
8.3.1 …
(d) above aRunanga Trustee shall immediately cease to hold office and shall deliver up to the Tumuaki all papers, documents and other material in whatever form, the property of or relating in some way to the ongoing operations of Te Runanga …
[112] It is common ground that the judgment creditors’ terms as trustees of the Trust all expired on 28 February 2019. The judgment creditors say that the steps they took after that date in filing the memorandum to obtain the costs award, issuing the bankruptcy notice and making the adjudication application, were all validly taken by them as de facto trustees (“trustees de son tort”) in furtherance of the Trust’s interests.
[113] In Butterfield v Public Trust, Kós J, delivering the judgment of the Court of Appeal, said:18
[16] … Most commonly [the label “trustee de son tort”] is apt to describe a stranger meddling in the affairs of the trust who assumes trusteeship responsibilities and thereby acquires trust property. … But it is also apt to describe an intended express trustee whose appointment has for some reason failed. That was the case in Pearce v Pearce where Romilly MR observed of the invalid appointee:
18 Butterfield v Public Trust, above n 2.
She was never regularly appointed trustee, but acted as such, and may be said to have been in the nature of a trustee de son tort …
… Although no authority was cited for the proposition, we think it apt also to describe a trustee whose appointment has ended by compulsory retirement … but who nonetheless continues to assume the office of trustee on a de facto basis.
[17] The expression “trustee de son tort” is an archaic law French description for a de facto trustee under an institutional constructive trust. Lord Millett described a trustee de son tort as a person though not appointed as trustee who takes it upon himself to act as such and to discharge the trustee’s duties on behalf of others. Such a trustee is said to closely resemble an express trustee. Indeed Lord Millett called them “true trustees … fully subject to fiduciary duties”. That is important because some of the incidents of express trusteeship may then apply to an honest de facto trustee. …
(footnotes omitted)
[114] In Dubai Aluminium Co Ltd v Salaam, Lord Millett described a “trustee de son tort” in the following terms:19
[138] … a person who, though not appointed to be a trustee, nevertheless takes it upon himself to act as such and to discharge the duties of a trustee on behalf of others. In Taylor v Davies [1920] AC 636 at 651, Viscount Cave described such persons as follows:
“though not originally trustees, [they] had taken upon themselves the custody and administration of property on behalf of others; and though sometimes referred to as constructive trustees, they were, in fact, actual trustees, though not so named.”
Substituting dog Latin for bastard French, we would do better today to describe such persons as de facto trustees. In their relations with the beneficiaries they are treated in every respect as if they had been duly appointed. They are true trustees and are fully subject to fiduciary obligations. Their liability is strict; it does not depend on dishonesty. Like express trustees they could not plead the Limitation Acts as a defence to a claim for breach of trust. Indeed, for the purposes of the relevant provision … which distinguished between property held on express trusts and other trusts, they were treated by the courts as express trustees. …
[115] In the present case, the filing of the costs memorandum and the subsequent issue of the bankruptcy notice and proceeding were steps taken by the judgment creditors to crystallise and get in a contingent asset of the Trust, namely its claim for costs following the successful application for an injunction against Mr White. Having succeeded in obtaining the judgment, it was always highly likely that the judgment
19 Dubai Aluminium Co Ltd v Salaam [2002] UKHL 48, [2003] 2 AC 366.
creditors would obtain an order for costs,20 and a validly appointed trustee would in my view have pursued the recovery of costs as an ordinary incident of his or her obligation to get in trust assets. The judgment creditors were no longer validly appointed trustees after 28 February 2019, but in my view the relevant steps they took in pursuing costs against Mr White were the kinds of steps which, as regards the beneficiaries of the Trust, are to be treated in every respect as if they had been duly appointed as trustees.21
[116] This is not a case where the judgment creditors have purported to exercise some (possibly contentious) discretionary power under the Trust Deed. As the plaintiffs in the injunction proceeding, the judgment creditors found themselves (after 28 February 2019) in possession of a contingent trust asset, namely a right to claim costs from Mr White, and they proceeded to take steps to convert that contingent asset into cash for the benefit of the Trust. In my view, their actions in so doing were no more than administrative steps taken in the discharge of the duties imposed on them as trustees de son tort; they were not steps taken in the purported exercise of particular powers or discretions under the Trust Deed. In those circumstances, the law regards their actions as having been validly taken.
[117] I add that Mr White can hardly complain about that result. The Trust was entitled to be paid costs on the injunction proceeding and, quite apart from the identity of those who took steps on the Trust’s behalf to recover the costs, it was his responsibility to pay those costs. Additionally, I observe that all of the named trustees in the adjudication application were re-elected as trustees in mid-September 2019.
[118] For those reasons, I accept Mr Idoine’s submissions on this issue. The judgment creditors were entitled to obtain the costs judgment after 28 February 2019, and they were entitled thereafter to initiate the bankruptcy proceeding.
Issue (3) — What is the effect of the provision in the Trust Deed that precluded Iwi members with criminal convictions from holding office as trustees? If some
20 Under r 14.1 of the High Court Rules 2016, all matters relating to costs are at the discretion of the Court. However, under r 14.2(a), one of the general principles the courts apply in making costs orders is that the party who fails with respect to a proceeding should pay costs to the party who succeeds.
21 Dubai Aluminium Co Ltd v Salaam, above n 19, at [138].
of the trustees were in that category, is it arguable for Mr White that the convictions invalidated the action taken against him by the judgment creditors?
[119]Clause 8.11 of the Trust Deed materially provides:
8.11 Restriction on Runanga Trustees
The following persons are disqualified from being appointed or holding office as a Runanga Trustee:
…
(c) a person who at any time has been convicted of any offence punishable by a maximum term of imprisonment of five (5) or more years or has at any time been convicted of any offence involving fraud or similar conduct or any sexual misconduct irrespective of the maximum sentence applicable to such offences.
[120] Mr White contends that two of the judgment creditors have convictions that are caught by this clause, and that the effect of cl 8.3.1(c) of the Trust Deed is that these individuals were deemed to have been removed from office automatically (or to have been invalidly appointed).22 Mr White’s contention is that the votes of these two individuals were essential to obtain a majority on any trustee resolution to commence the injunction proceeding and the subsequent bankruptcy proceedings, and their votes could not be counted because they were disqualified.
[121] Mr White did not tender any proof of these convictions, and in particular he did not state when they were entered. In his first affidavit, he referred only in general terms to an affidavit Mr Silich had sworn in April 2017 in the injunction proceeding, without producing a copy of that affidavit. In his first affidavit sworn on 17 January 2020, he provided some further details of the alleged offending and convictions, but still did not say when the convictions were entered. However he did say that in a recent affidavit filed in a Māori Land Court proceeding one of the affected trustees had sought to discount the conviction as “minor and irrelevant because of the age …”
22 Clause 8.3.1(c) materially provides that a Rūnanga Trustee will be deemed removed from office immediately upon him or her ceasing to remain eligible under cl 8.11 to continue holding office as a trustee. Clause 8.3.2 then provides that upon being removed under cl 8.3.1(c), a Rūnanga Trustee shall immediately cease to hold office and shall deliver up to the tumuaki all papers, documents and other material in whatever form, the property of or relating in some way to the ongoing operations of Te Rūnanga.
[122] In his submissions dated 17 February 2020, Mr Idoine did not challenge the existence of the criminal convictions or suggest that they were not serious enough to meet the “gravity” thresholds in cl 8.11(c) of the Trust Deed. Instead, he advised that the trustees who are the target of Mr White’s complaint are eligible persons under s 7 of the Clean Slate Act, and “are thus deemed to have no criminal record”.
[123] At the hearing, Mr White did not challenge Mr Idoine’s advice that the two affected trustees qualify as “eligible individuals” under s 7, and I think that is consistent with his reference (in his affidavit of 17 January 2020) to the age of one of the convictions.23 In those circumstances, I will proceed on the basis that the relevant convictions are old ones, and that the two affected trustees qualify as “eligible individuals” in terms of ss 7 and 4 of the Clean Slate Act.
[124] In general terms, the Clean Slate Act provides that an “eligible individual” is deemed to have no criminal record “for the purposes of any question asked of him or her about his or her criminal record”.24
[125]Section 21 of the Clean Slate Act provides:
21 Relationship to other provisions
(1)In this section, provision means a provision—
(a)of any enactment (including, without limitation, section 184 of the Criminal Procedure Act 2011 and any rules made under section 409 of the Crimes Act 1961); or
(b)of a rule of law; or
(c)contained in any contract, agreement, instrument, or document.
(2)If a reference in a provision to—
(a)an individual’s criminal record or to an individual’s character or fitness is applied to an eligible individual, it must be interpreted in a way that is consistent with the eligible individual’s rights under the clean slate scheme; and
23 One of the s 7 eligibility factors requires the offender to have completed a “rehabilitation period” since the date the offender’s last conviction was imposed. “Rehabilitation period” is defined in s 4 of the Clean Slate Act as meaning “any period of not less than seven consecutive years after the date on which the individual was last sentenced, or a specified order was last made, in which the individual has not been convicted of an offence”.
24 Criminal Records (Clean Slate) Act 2004, s 14(1).
(b)an ability to request the disclosure of information about an individual is applied to an eligible individual’s criminal record, it must be interpreted in a way that is consistent with the eligible individual’s right to have his or her criminal record concealed.
(3)Nothing in this Act affects an eligible individual’s right under any provision to request information about, or a copy of, his or her own criminal record.
[126] Section 6 of the Clean Slate Act states that the scheme applies to “every question asked about, and every request made for the disclosure of, an eligible individual’s criminal record or information about an eligible individual’s criminal record whether asked or made on or after the commencement of the Act”. While it is most commonly used in the employment setting, there is nothing in the Clean Slate Act that limits it to the employment context. Indeed, s 6 states that the scheme applies to “every question” and “every request”.
[127] The Clean Slate Act does not expunge convictions: it only enables certain convictions to be concealed. But what if a conviction has been lawfully concealed but is subsequently discovered (for example, from information available in the public domain)? The commentary on the Clean Slate Act in Mazengarb’s Employment Law (NZ) addresses the issue, saying:25
In the absence of case law, any projected outcome is necessarily tentative in nature. Nevertheless, it is suggested that it would be difficult for an employer to establish justification for ending the employment in such circumstances. Factors effectively deemed to be irrelevant to the obtaining of employment under the [Clean Slate] Act would then need to be proved to be relevant to the retention of that employment, to the point where dismissal was justified. It might be argued … that this was the very type of mischief [the Act aims at].
[128] I agree with the last sentence in the passage from Mazengarb just quoted. In my view, the effect of the Clean Slate Act in this case has been to modify cl 8.11(c) of the Trust Deed, so that it is to be read as inapplicable to trustees or would-be trustees who are eligible individuals entitled to the benefit of the Clean Slate Act. The fact that their criminal records were later discovered (or were already known to some members of the Iwi when they were voted into office) does not in my view affect their
25 Mazengarb’s Employment Law (NZ) (online looseleaf ed, Lexis Nexis) at [CRA18.5.5].
appointment at the time, nor does it invalidate the actions they took as trustees during their terms of office as such.
[129]I reach that view for the following reasons.
[130] First, I accept that the Trust Deed is an “instrument” or “document”, for the purposes of s 21(1). Clause 8.11(c) of the Trust Deed therefore qualifies as a “provision” within the meaning of s 21(1).
[131] Secondly, cl 8.11(c) requires that the affected trustees’ criminal records are to be “applied” to them. They are “eligible individuals” under the Clean Slate Act, so s 21(2)(a) therefore applies. That means the Court is required to interpret cl 8.11(c) of the Trust Deed “in a way that is consistent with” the affected trustees’ rights under the clean slate scheme.
[132] What are those rights? Well, the fundamental right is the right conferred on an eligible individual by cl 14(1), namely that the eligible individual is deemed to have no criminal record “for the purposes of answering any question asked of him or her about his or her criminal record”. A false answer to this question is effectively deemed by statute to be the truth for particular, limited purposes.
[133] It may be that the Clean Slate Act was intended to apply in a narrow way, so that it would not be engaged at all unless and until someone asked a question or made a request about the person’s criminal record. On that view, the target of the Clean Slate Act would have been to maximise the person’s chances of moving on with his or her life, free of any stigma associated with an old criminal conviction, by limiting the means by which people such as prospective employers or landlords might find out about the old conviction.
[134] The formula of deeming what would otherwise be a falsehood to be true “for the purposes of answering a question”, is arguably consistent with that view of the purpose of the Clean Slate Act.
[135] But the “Overview” section of the Clean Slate Act says at s 3(1) that the broad purpose of the statute is to “limit the effect of an individual’s convictions in most circumstances [subject to certain exceptions in the Clean Slate Act] if the individual satisfies the relevant eligibility criteria”, and I think the words “consistent with” in s 21(2)(a) should be read in the light of that broad purpose. If a person is asked a question about his or her criminal record in circumstances where the answer will effectively determine his or her eligibility for a particular position, I think the statutory requirement that the person’s (false) denial is to be treated (by the person asking the question) as if it were true implies that the practical consequence (that the person is eligible for the position) is also deemed to be true.
[136] If the narrow construction at [133] above were correct, the implication would appear to be that Parliament intended that someone who has (falsely) denied that he or she has a criminal record will be in a better position (as regards eligibility for a particular job or position) than someone (with a similar criminal record) who has either not been asked the question about previous convictions or has answered it truthfully. I do not think that could be right. Nor would it be “consistent with the clean slate scheme” in this case if a candidate for election to the office of trustee were deemed to be qualified for election as a trustee because he or she (falsely) denied having convictions to which cl 8.11(c) of the Trust Deed applied, while a candidate with the same convictions was disqualified simply because he or she was not asked about them.
[137] The result is that s 21(2)(a) has the effect for which the judgment creditors contend. It is not reasonably arguable for Mr White that the convictions invalidated the action taken against him by the judgment creditors.
Issue (4) — Has the adjudication application been pursued by the judgment creditors for the ulterior purpose of silencing Mr White, or otherwise as an abuse of the Court’s process?
[138] There is nothing in this. Whatever might be the rights and wrongs of the management of the Trust and NTCTL over the years, there was a Trust asset in the form of the costs judgment against Mr White. The trustees of the Trust, whoever they might have been, had a prima facie duty to get that asset in.
[139] There is no evidence whatsoever that the judgment creditors have acted in bad faith in issuing the bankruptcy notice or in pursuing the bankruptcy proceeding, in an attempt to “silence” Mr White, or otherwise unfairly single him out — they have simply pursued the logical path of taking recovery action following Mr White’s failure to pay the debt. In those circumstances, there could be no basis for setting aside the bankruptcy notice for abuse of process, or otherwise in the inherent jurisdiction of the Court, even if that were possible at this late stage (a point I do not need to decide). Nor does it seem likely that the judgment creditors believed that Mr White would be silenced by the filing of bankruptcy proceedings. He had put his views on the administration of the Trust and NTCTL forcefully in the past, and the high likelihood was that he would continue to do so on the marae and elsewhere.26
[140]The answer to Issue (4) is “no”.
Issue (5) — Has Mr White shown, by reference to his personal circumstances or otherwise, that it would not be just and equitable to make an adjudication order, or that for some other reason an adjudication order should not be made?
[141] The starting point is that the judgment creditors are prima facie entitled to the adjudication order they seek. It was for Mr White to point to facts or circumstances that would make adjudication unjust or inequitable, or to some other reason for the Court to refuse the order sought. In my judgment he was not done that.
[142] First, he is clearly insolvent. He acknowledged at the hearing that he did not have the money to pay the debt.
[143] The wishes of the parties and other creditors may be a relevant factor in some cases, but it is a neutral factor in this case. The wishes of the judgment creditors and Mr White effectively cancel each other out, and no other creditors have appeared in support or in opposition.
[144] Mr White clearly does have some support from within the Iwi — at the hearing he submitted a letter from Mr Neville Baker, a former Māori Trustee, asking that no
26 That view appears to be confirmed by Mr White’s continuing participation in the affairs of the Iwi, including standing unsuccessfully for election as a trustee of the Trust at the AGM in late 2019.
adjudication order be made. A submission was also filed (without any leave of the Court) after the hearing, by Mr David Churton, the chairperson of a trust known as the Ngāti Tama Te Kaeaea Trust, asking that the adjudication hearing be adjourned so that he could give evidence. But the matters raised in both submissions were primarily concerned with the actions of those responsible for the loss of the Treaty settlement funds paid to the Iwi. They did nothing to address Mr White’s actions which led to an order for injunction being made against him and an order being made against him for costs. Nor did they address Mr White’s apparent decision to ignore the injunction proceeding and the bankruptcy notice that was subsequently served on him. As I have said above, the bankruptcy court is not the place for some sort of broad ranging enquiry into the rights and wrongs of the actions of those who may have caused or contributed to the loss of the Treaty settlement money.
[145] Mr Baker referred in his letter to an enquiry apparently being conducted into the affairs of the Iwi in the Māori Land Court, and Mr Enright (the lawyer who submitted a memorandum on Mr White’s behalf at the hearing) also referred to a “parallel” Māori Land Court proceeding in which Mr White is an applicant. But it appears that that proceeding will continue regardless of any order that might be made bankrupting Mr White. Mr Enright advised in his memorandum that a second applicant was to be added to the proceeding on 2 March 2020.
[146] In the end, it appears that Mr White has seen himself as waging a righteous war against those who have done harm to his Iwi. It may or may not be the case that when all enquiries have been completed that view will be vindicated, but that is not an issue to be addressed in this proceeding. The immediate problem for Mr White is that, no doubt in the heat of the battle, he overstepped the mark, and made certain threats that Duffy J later found sufficient to justify a formal injunction order being made against him (and an order for costs). His threats appear to have left the Trust with little option but to take legal action to attempt to preserve its commercial position, and it is concerning that Mr White apparently thought that he could make the threats, and then ignore the injunction proceeding and the subsequent bankruptcy notice, without having to accept any financial consequences.
[147] When Mr White eventually did elect to engage with the court process (after the bankruptcy adjudication application had been served on him), he did so with no apparent acceptance that he himself had been at fault in making the threats which resulted in the injunction proceeding (and in subsequently deciding not to appear and explain his actions to the Court). It was not helping the Iwi or the Trust to allow matters to go as far as they did, and I can only infer that Mr White felt that he could not back down from the course on which he had embarked.
[148] Mr White opposed the adjudication application without the assistance of counsel (until right before the hearing), but he is both articulate and intelligent, and he put his arguments forthrightly and clearly. He knew what he was doing.
[149] Unfortunately, however, some of his advocacy did not help his cause. In particular, he wrote a letter to the Court on 28 February 2020, seeking an adjournment of the hearing, on the basis that if the adjournment was not granted, an incorporated society of which he is the joint chairman would break off certain settlement negotiations with the Trust and The New Zealand Transport Agency (the NZTA). These negotiations were said to relate to the rohe of the Ngāti Tama Iwi. Mr White said in the letter that it was a condition of the continuing involvement of the society in the negotiations, “that the matter before this Court be discontinued”. If the judgment creditors chose to proceed with the adjudication application at the hearing on 3 March 2020, Mr White’s society would withdraw from the negotiations. That would have the effect of further litigation in this Court and the Māori Land Court on the substantive matters at issue between the parties.
[150] The full nature of the negotiations referred to in Mr White’s letter of 28 February 2020 was not made clear to me, but I think it fair to infer from the letter that a successful conclusion to the negotiations would have been of benefit to all parties, including the Ngāti Tama Iwi. The unfortunate appearance of the letter is that Mr White appeared to be willing to threaten breaking off negotiations that would have had potential benefit to his Iwi, in order to avoid personal bankruptcy.
[151] It might be suggested that there would be little point in bankrupting Mr White, who is an elderly kaumātua who is not running any business and does not pose any
threat to the commercial community. But I think there is a public interest in having those who behave (or threaten to behave) unlawfully (as Duffy J found Mr White did) seen to suffer at least some consequences for their actions.
[152] Looking at the remaining Re Epirosa factors,27 the circumstances in which the debt was incurred have been set out above. In my view, the circumstances favour an order for adjudication. Mr White issued threats which Duffy J considered amounted to a threatened breach of rights to confidential information owned by the Trust, and he then elected not to put forward any defence when he was sued by the judgment creditors. He said that he regarded the injunction proceeding as a “sham”, and the implication of that statement appears to be that he considered the injunction proceeding to be so flawed and/or dishonest that he did not consider it worthy of any response. But in taking that view he deliberately took the risk that there might be an adverse finding and an award of costs against him. As a general rule, I do not consider it in the public interest that those who take decisions of that sort should be free from the ordinary consequences of the decisions.
[153] There is no evidence that an adjudication order would leave Mr White unable to support himself, and to the extent there may be stigma attaching to an adjudication order I think Mr White has brought that upon himself. He has adopted tactics in his battle with the judgment creditors that not only overstepped the mark legally, but have caused further costs to the Trust. Mr White says in his January 2020 affidavit that many in the Iwi are shocked that Trust funds would be used to prosecute a kaumātua such as himself, but the bankruptcy proceeding is not a “prosecution”, and nor was the injunction proceeding. They represented attempts to either protect the Trust’s current position as the judgment creditors then saw it (the injunction proceeding), or defray the Trust’s expenses/recover a Trust asset (the costs application and the bankruptcy proceedings).
[154] Mr White is a kaumātua within the Iwi, and he is entitled to respect as such. I also accept that he firmly believes that serious wrongs have been committed within the Iwi (resulting in the loss of the bulk of the Treaty settlement money). But I think it
27 Re Epirosa, ex parte Diners Club (NZ) Ltd, above n 6, referred to at [77] of this judgment.
would send altogether the wrong signals to the community if wrongful actions deliberately taken by Mr White in the pursuit of his goal of bringing certain individuals to account were seen to be without consequence because of his status or standing within the community. Put simply, there cannot be one law for “important” people and another for those who are not perceived to fall into that category.
[155] Mr White is very active within his church, including as a marriage celebrant, but he has not provided any evidence that an adjudication order would prevent him continuing those activities.
[156] It is obviously a matter of regret that the issues that have brought the parties to the present position could not have been resolved within the Iwi. But apparently that has not been possible, and the Court is left to apply the law to the facts as it finds them. The facts put forward by Mr White are insufficient to displace the judgment creditors’ prima facie entitlement to the adjudication order they seek, and they have produced the appropriate certificate of non-payment of the debt.
[157] I have considered the possibility of adjourning the matter to allow Mr White to raise the money to pay the debt and costs, but he has already had plenty of time to do that if he had wished to do so. Also, I think there is a danger that an adjournment would only result in further adjournment requests to accommodate further negotiations, and I think the time for that has passed. If Mr White later finds that he can raise the necessary funds to pay the debt (including the judgment creditors’ further costs in this proceeding), and any other debts he may have, he will have the right to apply to annul the adjudication order under s 309(1)(b) of the Act.
Orders
[158]I make the following orders:
(a)An order adjudicating Mr White bankrupt.
(b)Costs to the judgment creditors on a 2B basis, plus disbursements as fixed by the Registrar.
[159]The foregoing orders are timed at 4pm on the 20th day of August 2020.
Associate Judge Smith
7
1