Singh
[2024] NZHC 2559
•6 September 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2024-404-001944
[2024] NZHC 2559
UNDER Part 19 of the High Court Rules 2016 and the inherent jurisdiction of the Court IN THE MATTER OF
the Calvary Indian Assembly of God
CHERYL SINGH
Applicant
SONNY SINGH and RAJESH JATTAN
Interested Parties
On the papers Counsel:
N W Woods for the applicant
P J Napier and J Leenoh for the interested parties N Taefi KC assisting the Court
Judgment:
6 September 2024
JUDGMENT OF CAMPBELL J
This judgment was delivered by me on 6 September 2024 at 3.00pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
SINGH [2024] NZHC 2559 [6 September 2024]
[1] This proceeding concerns the Calvary Indian Assembly of God, a church in East Tamaki (the Church). The Church has a board (the Board). The Board holds assets on trust for the Church (the Trust). The Trust is charitable.
[2] The applicant claims to be a Board member of the Church and trustee of the Trust. The applicant seeks orders that she be indemnified from the assets of the Trust for the reasonable costs she incurs in relation to two substantive proceedings that relate to the Church. Such orders are known as Beddoe orders. The applicant also seeks an order that the costs of an independent chair be paid by the Trust.
[3] The interested parties also claim to be Board members and trustees. They oppose the orders sought by the applicant. Further, they counter by applying for their own Beddoe orders if the applicant is granted the Beddoe orders she seeks.
Background
[4] The leadership of the Church is in two factions. The applicant is part of one faction, the interested parties part of the other. Members of each faction claim they are the validly appointed trustees and Board members and that the members of the other faction (or some of them) are not.
[5] This schism first appeared in 2020 or 2021. An earlier proceeding arising from it was commenced in 2021 and settled in 2022. The settlement provided that, among other things, an independent barrister, Andrew Gilchrist, would be appointed to act as chair of an interim Board.
[6] Mr Gilchrist oversaw a special general meeting in 2022 to appoint new trustees and a new Board. Following those appointments, Mr Gilchrist’s role as an independent chair came to an end in July 2022.
[7] Disputes arose again in about August 2022 and have continued ever since. The disputes include whether the applicant is a trustee or Board member, whether the interested parties are trustees or Board members, whether Mr Gilchrist was validly reappointed as an independent chair, and whether Mr Gilchrist should be paid by the Trust for his services since his (disputed) re-appointment.
[8] There are now two substantive proceedings on foot, in respect of which the applicant seeks Beddoe orders.
First substantive proceeding: the Originating Application
[9] On 4 April 2024, the interested parties filed an originating application under CIV-2024-404-752 against three of the other trustees and Board members, including the applicant (the Originating Application). In the Originating Application, the interested parties seek orders that the current trustees and Board members retire, that there be a fresh election of trustees and Board members, with proposed eligibility criteria for nominations and voting. The interested parties say there is an impasse between the parties, the administration of the Church is being affected, and that eligibility criteria for nominations and voting need to be defined in order to avoid further disputes.
[10] The respondents to the Originating Application (including the applicant) filed a notice of opposition. They say the interested parties are not trustees and so lack standing to bring the application as trustees, that the interested parties have acted contrary to the interests of the Trust (favouring their own interests over the Trust), that their conduct has exacerbated the dispute and impeded the effective management of the Trust, and that the proposed eligibility criteria are inappropriate.
[11] The Originating Application has a one-day hearing scheduled for 26 September 2024.
Second substantive proceeding: the Judicial Review Proceeding
[12] On 27 May 2024, the applicant filed an application for judicial review against the interested parties and the Trust under CIV-2024-404-1289 (the Judicial Review Proceeding). The applicant claims that the interested parties have repeatedly acted in an ultra vires manner and that they have acted ultra vires and unreasonably in purporting to remove the applicant as a Board member. The applicant seeks many orders, including:
(a)A declaration as to who are the validly appointed trustees and members of the Board.
(b)A declaration that the interested parties acted illegally and unreasonably in seeking to remove the applicant as a trustee and Board member.
(c)A declaration that the interested parties have acted unlawfully by removing members from the Church.
(d)A declaration that the appointment of a new pastor was not valid.
(e)A declaration that Mr Gilchrist was validly re-appointed in March 2023.
(f)An order that the reasonable costs for Mr Gilchrist’s attendances since March 2023 be paid by the Trust.
[13] On 11 June 2024, the applicant applied to consolidate her Judicial Review Proceeding with the Originating Application. By then the 26 September 2024 hearing date for the Originating Application had already been allocated. On 8 July 2024, Becroft J ruled that the hearing on 26 September 2024 would proceed, with the application for consolidation adjourned until after that hearing.
[14] The interested parties filed a statement of defence to the Judicial Review Proceeding on 11 July 2024. No hearing date has yet been allocated for that proceeding.
The present application
[15] On 9 August 2024, the applicant filed her application for Beddoe orders and for an order that Mr Gilchrist’s costs be paid by the Trust. The applicant’s delay in applying for the Beddoe orders (the substantive proceedings having been commenced in April and May 2024) appears to be explained by an intervening event affecting her ability to pay for the costs of defending the Originating Application and of pursuing the Judicial Review Proceeding.
Procedural matters
[16] The applicant commenced her application an a without-notice basis. Lang J declined to deal with it without notice to the parties to the two substantive proceedings. He directed that it be served on those parties.
[17] After being served with the application, the interested parties filed a notice of opposition on 20 August 2024. The application had its first call on an on-notice basis the next day, before Tahana J. The Judge noted that the application needed to be resolved urgently, given the Originating Application had a hearing scheduled for 26 September 2024. She appointed Ms Taefi KC as counsel to assist, directed the interested parties to file written submissions by 28 August 2024, and directed that the application be determined on the papers. It appears the applicant was content to rely on the written submissions contained within the memorandum of counsel that was filed with her application.
[18] The interested parties filed their submissions as directed on 28 August 2024. At the same time, they filed an interlocutory application in this proceeding. They asked that, if the applicant was granted Beddoe orders in accordance with her application, that they be granted their own Beddoe orders for bringing or defending the two substantive proceedings. They filed an affidavit in support.
[19] No date has been allocated for a call of the interested parties’ Beddoe application, and the time for the applicant to file a notice of opposition to it has not yet elapsed.
[20] Ms Taefi filed her submissions on 2 September 2024. I am grateful for the assistance she has provided.
Issues
[21]There are three issues:
(a)Should Beddoe orders be granted to the applicant in respect of the substantive proceedings?
(b)Should Beddoe orders be granted to the interested parties in respect of the substantive proceedings?
(c)Should an order be made that Mr Gilchrist’s costs be paid by the Trust?
The first two issues require consideration of the legal principles that govern
Beddoe applications. I start with those.
Legal principles governing Beddoe applications
[23] A trustee enjoys a right of indemnity from the trust for costs and expenses properly incurred in the administration of the trust.1 This can include the costs of litigation in relation to the trust. But in all instances the indemnity is available only for costs properly incurred. In New Zealand Māori Council v Foulkes, Kós J explained:2
The limitation on a trustee’s right of indemnity is, however, that the expenses are “properly incurred”. The duty to seek advice does not extend, for instance, to pose questions the answers to which are perfectly obvious. Nor where no real and substantial dispute exists. Unnecessary proceedings, or the taking of unnecessary procedural steps needlessly increasing costs, may mitigate (or eliminate) the right of indemnity. Again, excessive costs lie beyond the scope of indemnity. Every dollar paid in trustees’ expenses is a dollar denied to beneficiaries of the Trust.
[24] If trustees are unsure as to the wisdom of bringing or defending litigation relating to the trust, and therefore unsure whether they will be entitled to an indemnity for the costs of the litigation, they are able to seek an order predetermining their entitlement to indemnity. Such an order is called a Beddoe order, named after Re Beddoe,3 an English Court of Appeal decision that confirmed the availability and utility of such an order. A Beddoe order authorises a trustee to bring or defend a proceeding and to be indemnified from the trust in respect of the costs incurred in that proceeding, including any costs the trustee might be ordered to pay to another party.4
1 Butterfield v Public Trust [2017] NZCA 367, [2017] NZAR 1439 at [20].
2 New Zealand Māori Council v Foulkes [2015] NZHC 489 at [31].
3 Re Beddoe [1893] 1 Ch 547 (CA).
4 Lynton Tucker, Nicholas Le Poidevin and James Brightwell (eds) Lewin on Trusts (20th ed, Sweet & Maxwell, London, 2018) vol II at [48-130]; McLaughlin v McLaughlin [2018] NZHC 3198, [2019] NZAR 286 at [19]; and McCallum v McCallum [2021] NZCA 237, (2021) 32 FRNZ 851
at [37] and [40].
A Beddoe application can be brought (as here) after the trustees have commenced bringing or defending the proceeding.5 In such cases the trustees are seeking directions that they continue to bring or defend the proceeding at the expense of the trust.
[25] In deciding whether to make a Beddoe order, the fundamental question is whether predetermination of the trustee’s right to indemnity for the costs of the proceeding is in the best interests of the trust.6
[26] The prospects of success and the likely costs are relevant considerations in deciding whether granting a Beddoe order is in the best interests of the trust.7 As the editors of Lewin on Trusts say:8
A Beddoe order will be made if the judge is satisfied that it is in the interests of the trust to do so, a calculated risk being taken of the outcome of the [proceeding] and the likely costs consequences.
[27] Also relevant is the degree of self-interest the trustee has in bringing or defending the proceeding. The greater the degree of self-interest, the less likely it is that predetermination of indemnity is in the best interests of the trust, and so the less likely it will be that a Beddoe order should be made.9 Beddoe orders are therefore unlikely to be granted in self-interested litigation, such as breach of trust proceedings, proceedings concerning self-dealing and profits from the trust, and proceedings for or concerning the removal of trustees.10 However, there is no absolute rule that a Beddoe order is unavailable in such litigation.11 What matters is whether, in substance, the trustees “are acting in the best interests of the trust rather than for their own benefit”.12
5 Lynton Tucker, Nicholas Le Poidevin and James Brightwell (eds) Lewin on Trusts (20th ed, Sweet & Maxwell, London, 2018) vol II at [48-130] and [48-154]; and Fundación Pimjo AC v Aguilar & Aguilar Ltd [2015] NZHC 1402 at [41].
6 McLaughlin v McLaughlin [2018] NZHC 3918, [2019] NZAR 286 at [29]; and McCallum v
McCallum [2021] NZCA 237, (2021) 32 FRNZ 851 at [43] and [45].
7 McLaughlin v McLaughlin [2018] NZHC 3918, [2019] NZAR 286 at [32].
8 Lynton Tucker, Nicholas Le Poidevin and James Brightwell (eds) Lewin on Trusts (20th ed, Sweet & Maxwell, London, 2018) vol II at [48-137].
9 McCallum v McCallum [2021] NZCA 237, (2021) 32 FRNZ 851 at [45].
10 At [42].
11 At [45].
12 Spencer v Fielder [2014] EWHC 2768, [2015] 1 WLR 2786 at [27], quoted with approval in
McCallum v McCallum [2021] NZCA 237, (2021) 32 FRNZ 851 at [45].
[28] Cases have sometimes categorised proceedings in which it is appropriate for trustees to be indemnified for their litigation costs. These categorisations have also been used for the purpose of deciding whether it is appropriate to predetermine indemnity by granting a Beddoe order. In particular, it has been said that, where a beneficiary or third party is making a “hostile” claim against a trustee, it would only be in exceptional circumstances that it was appropriate to grant a Beddoe order.13 In McCallum, the Court of Appeal considered such categorisation as being of limited use and the expression “hostile” inaccurate. The Court preferred instead to examine the extent to which the trustee had a self-interest in bringing or defending litigation.14 I respectfully agree with that approach.
Should Beddoe orders be granted to the applicant in respect of the substantive proceedings?
The Originating Application
[29] The Originating Application has been brought by the interested parties to try to resolve the current impasse between the trustees. They say this will remove the obstacles to the proper administration of the Church. The interested parties also propose eligibility criteria for nominations and voting to avoid further disputes.
[30] Bringing this proceeding is in the interests of the Trust. There is a dispute as to who are the current trustees. There is also a dispute as to whether the current trustees (whoever they are) should be removed and replaced by trustees under a fresh election. And there is a dispute as to how any such election should be conducted. All those disputes need to be resolved, otherwise the Trust and the Church will remain in a state of dysfunction.
[31] It is equally in the interests of the Trust that the respondents to the Originating Application (including the applicant) oppose it. A proper contest on the matters in issue is more likely to produce a result that is just and that minimises the risk of further
13 Some of the authorities were considered by Thomas J in McLaughlin v McLaughlin [2018] NZHC 3918, [2019] NZAR 286 at [22]–[27].
14 McCallum v McCallum [2021] NZCA 237, (2021) 32 FRNZ 851 at [42]–[45]. Similarly, in McLaughlin v McLaughlin [2018] NZHC 3918, [2019] NZAR 286, Thomas J said that the nature of the claim is a relevant consideration “and this is where categorising the proceedings … may be useful”: at [33].
disputes. As Ms Taefi submitted, it is in the interests of the Trust that the issues on the Originating Application be fully explored. Ms Taefi’s view was that there were reasonable arguments for the applicant’s positions on those issues.
[32] The applicant has some, but limited, self-interest in the proceeding. Allegations are made against her (and she makes allegations in response), but the only relief sought in the proceeding is removal of the current trustees and their replacement with new trustees under a fresh election. No compensation is sought.
[33] The interested parties nonetheless submit that the applicant should not be granted a Beddoe order in respect of this proceeding “because her opposition is neither necessary nor reasonable”. They criticise the applicant for seeking to address past alleged wrongs by the interested parties rather than engaging on their proposed eligibility criteria.
[34] I reject that submission. The interested parties themselves raise issues of past alleged wrongs by the applicant. These matters are likely to be relevant to determining whether the current trustees (whoever they are) should be removed by the court.
[35] Further, any concerns about the reasonableness of the applicant’s opposition can be met by limiting the Beddoe order by amount. The applicant was required to provide, by affidavit, an estimate of the costs of defending the Originating Application.15 She merely deposed that her solicitors estimated that the actual costs would exceed scale costs (calculated at $15,356) by “at least” 60 per cent. In the absence of any clearer estimate, I am not prepared to grant the applicant an open cheque. I will limit the Beddoe order to just over 60 per cent of the scale costs, namely
$25,000. This is a relatively modest amount in relation to the assets of the Trust.
The Judicial Review Proceeding
[36] The Judicial Review Proceeding seeks some orders that can be characterised as trying to resolve the current impasse (and therefore being in the interests of the Trust), such as the declaration that is sought as to who the current trustees are.
15 Rule 19.4A(1)(b)(ii) of the High Court Rules 2016.
However, this is an issue that may be resolved in any case in the Originating Application. These aspects of the Judicial Review Proceeding therefore may be unnecessary, given the scope of the Originating Application. I emphasise “may”. A final assessment cannot be made until judgment is delivered on the Originating Application.
[37] The balance of the Judicial Review Application addresses alleged historical events. It appears that some of the issues raised may be determined in any case in the Originating Application. Even if those issues are not determined, the result of the Originating Application is likely to inform whether it is in the interests of the Trust for these historical matters to be litigated.
[38] I therefore consider a determination on the Beddoe application in respect of the Judicial Review Proceeding should await the outcome of the Originating Application. I will adjourn that aspect of the Beddoe application.
Should Beddoe orders be granted to the interested parties in respect of the
substantive proceedings?
[39] I decline to determine the interested parties’ application for Beddoe orders. Tahana J made timetable directions for determination of the applicant’s application for Beddoe orders. The interested parties’ application was made too late to be added to and determined within that timetable.
[40] I will therefore adjourn the application. If the interested parties wish to pursue their application, they will have to seek appropriate directions for its determination.
Should an order be made that Mr Gilchrist’s costs be paid by the Trust?
[41] The applicant’s submissions did not explain the basis on which the court should make an order that Mr Gilchrist’s costs be paid by the Trust. Nor is that apparent from the application itself.
[42] Whether Mr Gilchrist’s costs are properly payable by the Trust depends in large part on whether Mr Gilchrist was validly re-appointed as independent chair. That is a matter in dispute between the different factions within the Church and Trust. The
dispute cannot appropriately be determined on an application such as this. The application does not set out the grounds on which it is alleged that Mr Gilchrist was validly re-appointed, and it is not clear that all necessary parties have been served with the application. It may be that this dispute is determined in the Originating Application. In any event, I decline to make the order sought on this application.
Costs
[43] In the absence of misconduct, parties to a Beddoe application are entitled to be indemnified from the assets of the trust for their reasonable costs on the application.16 There has been no misconduct in relation to this application.
[44] The applicant is entitled to be indemnified from the assets of the Trust for her reasonable costs of bringing the application, subject to a 10 per cent deduction to reflect the part of the application directed towards Mr Gilchrist’s costs. The interested parties are entitled to be indemnified from the assets of the Trust for their reasonable costs of opposing the application. In these circumstances no order for party-and-party costs is necessary.
Result
[45] I order that it is proper for the applicant to defend, and continue to defend, the Originating Application at the Trust’s cost and expense to the extent such costs and expenses are reasonably incurred, up to an amount of $25,000.
[46] I adjourn the applicant’s application in respect of the Judicial Review Proceeding until the first Duty Judge list after 10 working days after judgment is delivered on the Originating Application.
[47]I decline the applicant’s application for an order that Mr Gilchrist’s costs be
paid by the Trust.
[48] I adjourn the interested parties’ interlocutory application for Beddoe orders to the Duty Judge list on 12 September 2024 at 10.00am.
16 McCallum v McCallum [2021] NZCA 237, (2021) 32 FRNZ 851 at [71].
[49]I order that:
(a)The applicant is entitled to be indemnified from the assets of the Trust for her reasonable costs of bringing the application, subject to a 10 per cent deduction to reflect the part of the application directed towards Mr Gilchrist’s costs.
(b)The interested parties are entitled to be indemnified from the assets of the Trust for their reasonable costs of opposing the application.
Campbell J
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