Te Whanau O Hato Petera Trust v The Roman Catholic Bishop of the Diocese of Auckland
[2018] NZHC 105
•12 February 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-1860
[2018] NZHC 105
IN THE MATTER of caveat no. 10765875.2 BETWEEN
TE WHANAU O HATO PETERA TRUST
Applicant
AND
THE ROMAN CATHOLIC BISHOP OF THE DIOCESE OF AUCKLAND
Respondent
Hearing: 15 September 2017 Appearances:
C La Hatte for the Applicant
M V Robinson & N M Thompson for the Respondent
Judgment:
12 February 2018
JUDGMENT OF WOODHOUSE J
This judgment was delivered by me on 12 February 2018 at 12 p.m. pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Solicitors / Counsel:
Mr C La Hatte, Barrister, Wellington
Woodward Law Offices (Applicant’s instructing solicitor), Solicitors, Lower Hutt Mr M V Robinson, Simpson Grierson, Solicitors, Auckland
TE WHANAU O HATO PETERA TRUST v THE ROMAN CATHOLIC BISHOP OF THE DIOCESE OF AUCKLAND [2018] NZHC 105 [12 February 2018]
[1] This is an application for an order sustaining caveats. The caveats are lodged against titles to land registered in the name of the respondent, the Roman Catholic Bishop of the Diocese of Auckland. The land subject to the caveat is registered in the Bishop’s name in his capacity as Bishop
[2]There are two issues:
(a)The caveat is in the name of Te Whanau O Hato Petera Trust (the Trust). The Bishop contends that the persons who lodged the caveat are not trustees of the Trust and, therefore, could not lodge a caveat in the name of the Trust, and cannot bring this application in the name of the Trust to seek to sustain the caveat as they purport to do. The issue is, therefore, whether the persons who lodged the caveat are properly appointed trustees of the Trust. The parties have referred to this as the “mandate” issue.
(b)The second issue is whether the interest claimed in the caveat is a caveatable interest.
[3] I will refer to those who have lodged the caveat as “the claimants”. References to “the trustees” are to persons who both parties accept were properly appointed to that office.
Background
[4] Hato Petera College is on the land subject to the caveat. In July 1994 the Bishop leased part of the land to the Trust. The principal objective was to enable the Trust to operate a boarding hostel for pupils at the College.
[5] In July 1995 the trustees were incorporated as a board under the Charitable Trusts Act 1957 (the Act). References to powers, duties and acts of the trustees include the powers, duties and acts of the board unless otherwise stated. Similarly, references to “the Trust”, will generally include references to the board.
[6] The lease expired in August 2014. In 2015 the Bishop and the Trust entered into an occupancy agreement dated 12 July 2015. This recorded that the Deed of Trust for the Trust and the Memorandum of Lease formed the basis of the occupancy agreement. On this application it was accepted that in substance the lease continued subject to the express terms recorded in the occupancy agreement.
[7] In September 2015 the trustees advised the Bishop that the Trust was in serious financial difficulties, was unable to maintain buildings, and recommended that the boarding hostel close. The position of the Trust deteriorated. This led to a decree issued by the Bishop on 31 December 2015.
[8] By that decree the Bishop made a number of determinations relating to the Trust in exercise of a power granted to the Bishop by cl 21.4 of the Trust Deed. I will set cl 21 out in full because there are further provisions in it which are relevant to the mandate issue:
21WINDING UP
21.1Subject to the approval of the Bishop, the Trust shall be wound up if a three-quarters majority of the Trustees present at a meeting of the Board so resolves,
21.2Should a resolution for winding up be passed and approved as provided in sub-clause (1), all appropriate steps shall be taken to carry this into effect,
21.3If upon the winding up of the Trust after satisfaction of all debts and liabilities there remain trust assets then these shall be transferred and paid to the Bishop to be applied by him for the purposes of the trusts herein contained
21.4When in the sole opinion of the Bishop it is impossible impractical or inexpedient to carry out the objects of the Trust or the amount available is inadequate to carry out those objects then the assets of the Trust shall be transferred to the Bishop and applied by the Bishop for the charitable apostolic and religious purposes of the Roman Catholic Diocese of Auckland within New Zealand with particular priority being given to the educational and spiritual needs of the Catholic Maori community
[9] By the decree all assets of the Trust were transferred from the Trust Board to the Bishop, including the occupancy agreement (referred to in the decree as “the lease”).
[10] Although there was the formal decree by the Bishop, the unchallenged evidence for the Bishop also establishes that agreement was reached between the Bishop and the trustees that the occupancy agreement between the Trust and the Bishop would come to an end, the Trust would cease to operate and be wound up, the Bishop would meet the liabilities of the Trust, and a new entity would be established to take over operation of the boarding hostel.
The mandate issue
[11] Steps that were then taken by the trustees are determinative, against the claimants, of the mandate issue. These steps are recorded in documents, and no challenge has been made to the validity of the documents or to the steps taken as recorded in the documents. In summary:
(a)By written resolution made in March 2016 the trustees resolved to apply to the Registrar of Incorporated Societies for the Registrar to make a declaration pursuant to s 26 of the Act that the Board be dissolved. The grounds recorded in the resolution were that the Board was no longer carrying on its operations and the Trust had no assets or liabilities. Of relevance to subsequent events is the fact that the trustees who signed the resolution included Murray Painting, Janice Smith, and Rudy Taylor.
(b)The chairperson of the board was Mr Painting. Mr Painting signed a declaration, dated 26 April 2016, recording, amongst other things: the insolvency of the Trust and the provision made by the Bishop to pay the Trust’s debt; the fact that the Trust had no liabilities, creditors or assets; the determinations in the Bishop’s decree; that the Trust was no longer carrying on any operations; and the resolution to apply for a declaration of dissolution along with the grounds upon which that application was made.
(c)On 29 April 2016, Hato Petera Ltd was incorporated to take over operation of the boarding hostel. The three founding directors were Mr Painting, Ms Smith and Mr Taylor.
(d)On 1 May 2016 there was a hui at Hato Petera marae to explain to whanau what was happening. Mr Painting is described as the “facilitator/chairperson”. Five of the six trustees who had signed the resolution for dissolution in March 2016 attended the hui, including Mr Taylor. One of the entries in the minutes is as follows:
CLARIFICATION OF CURRENT STATUS:- UPDATE
1.As of Friday, 29th April, 2016 Te Whanau O Hato Petera Trust has been dissolved; No longer trading as Te Whanau O Hato Petera Trust.
Reasons for the decision are recorded in the following paragraphs.
(e)Notice of the Trust ceasing to operate and to be dissolved was advertised on 5 May 2016.
(f)At the same time the Board and Hato Petera Ltd jointly wrote to 57 creditors of and contracting parties to the Board to advise that the Trust had ceased to operate on 29 April 2016 and Hato Petera Ltd was taking over operation of the boarding hostel.
(g)In May 2016 the Bishop paid outstanding creditors of the Trust a total of $155,000.
[12] Hato Petera Ltd began operating the boarding hostel in or about May 2016. Neither an operational agreement nor a lease were ever entered into between the company and the Bishop because problems in the operation of the boarding hostel soon developed. It is unnecessary to go into the detail. On 25 August 2016, following advice from the Ministry of Education, students were evacuated from the boarding hostel because of student safety issues, staffing issues, governance failures, and conflicts within Hato Petera Ltd. By letter dated 4 September 2016 the Ministry of Education suspended the licence required under statutory regulations for the operation of the boarding hostel. This notice was given to Mr Taylor, Mr Painting and Ms Smith as the directors of Hato Petera Ltd.
[13] The caveat was lodged on 26 April 2017. The interest claimed is pursuant to the occupancy agreement dated 12 July 2015.
[14] The evidence for the claimants is from Mr Taylor. He says he is the elected chair of the Trust, having been elected in early 2015. It may be that Mr Taylor was elected chair in early 2015. However, the chair of the Trust from 2 December 2015 was Mr Painting. In his first affidavit, in support of the application to sustain the caveat, Mr Taylor said that the “trustees have recently been updated as can be seen from the record attached”. He produced a copy from the New Zealand Companies Office register of the particulars of officers and trustees of the Trust. This records the names of eight trustees, all of whom are recorded as having been appointed on 2 July 2017. There was a hui on 2 July, as noted below. Mr Taylor is recorded as “Trustee/Chairperson”. Mr Taylor is the only person recorded as a trustee who had also been a trustee in March 2016 when the Trust passed the resolution for dissolution and when it ceased operating.
[15] In a second affidavit Mr Taylor responded to very detailed evidence that had been given for the Bishop, and which included production of the documents summarised above, recording the events leading to the resolution to wind up. Mr Taylor, in his second affidavit, records his view on difficulties that had arisen in the governance of Hato Petera Ltd and his view, supported by a resolution passed by whanau at a hui in September 2016, that the registration of Hato Petera Ltd “did not meet the condition for the wind up of” the Trust because it was not endorsed by the whanau.
[16] Mr Taylor also produced minutes of a hui on 2 July 2017 called to elect new trustees of the Trust. This records the purported election of seven of the eight persons recorded in the public register as trustees appointed on 2 July 2017. Mr Taylor is not recorded as a trustee appointed on that date, although he appears in the register as having been appointed on that date. Mr Taylor was recorded in the minutes as one of two remaining trustees on the Board, the other being Janice Smith. Ms Smith is not recorded in the particulars of officers and trustees in the register. The evidence indicates that the disagreement that occurred between the three directors of Hato Petera Ltd had Mr Painting and Ms Smith on one side and Mr Taylor on the other.
Evaluation of the mandate issue
[17] The onus is on the claimants to establish that they are the properly appointed trustees of the Trust. The claimants’ evidence for that proposition is, primarily, the record of their appointment at the hui on 2 July 2017, coupled with the registration of trustees purportedly appointed on 2 July 2017. The narrative of events positively establishes that the claimants were not properly appointed as trustees and could not be properly appointed as trustees. This was the effect of the unanimous resolution in March 2016 of the trustees for the winding up of the Trust and the facts that all assets of the Trust had been transferred to the Bishop and the Trust had ceased to operate. There was also the resolution to apply to the Registrar for a formal declaration of dissolution. It appears that that final step was not taken, but that does not alter the effect of the March 2016 resolution having regard to the provisions in cl 21 of the Trust Deed. In particular, pursuant to cl 21.2, the only power left for any trustees, following the resolution, was for all appropriate steps to be taken to give effect to the decision to wind up. All appropriate steps were taken, save for the lodging of the formal application with the Registrar. No trustee had power to take any other steps. In particular, no person, whether a trustee, or former trustee, or not, had any power to call a meeting for appointment of trustees.
[18] For the claimants, Mr La Hatte submitted that the fact that the names of the purported new trustees are recorded in the register is “notice to the world that they are trustees and therefore authorised to bring this proceeding”. He submitted that that is the effect of s 20 of the Act.
[19] I do not agree. Section 20 has nothing to do with the validity of appointments. It is a standard provision, primarily for the benefit of third parties, declaring that acts of a person acting in good faith as a trustee shall be valid notwithstanding any defect that may afterward be found in the appointment of the trustee. The validity of appointments, or purported appointments, of the trustees depends on the provisions of the trust deed and the resolution of trustees in March 2016. It is not in issue that the resolution in March 2016 to wind up the Trust was a resolution of validly appointed trustees and a valid resolution. Mr Taylor expressly acknowledged this fact, which is not surprising as he was one of the trustees who voted to that effect.
[20] Mr La Hatte also appeared to argue that the winding up of the Trust, pursuant to the March 2016 resolution, was conditional upon other objectives being achieved and, in particular, a successful take over of the operation of the boarding hostel by a new entity. On this premise he submitted that, because Hato Petera Ltd had not succeeded, or because of the subsequent argument that the incorporation of Hato Petera Ltd had not been approved by whanau, the Trust somehow was revived. That certainly reflects the position of Mr Taylor and his supporters. But it is an untenable argument in light of the uncontested evidence recorded in the earlier narrative. Whatever the causes of the failure of Hato Petera Ltd, the incorporation of the company to assume management of the hostel was the course plainly agreed to by the properly appointed trustees. There is no evidence that the winding up of the Trust was conditional in any way – on the success of Hato Petera Ltd or otherwise.
[21] For these reasons the claimants had and have no “mandate”. Their purported appointment as trustees of the Trust and subsequent actions as purported trustees are nullities.
Is there a caveatable interest?
[22] Given the preceding conclusions it is not strictly necessary to determine whether the interest claimed in the caveat is a caveatable interest. I will nevertheless record why I am satisfied that there is no caveatable interest.
[23] As earlier recorded, the estate or interest claimed in the caveat is the occupancy agreement between the Trust and the Bishop. Mr La Hatte argued that the occupancy agreement amounted to an unregistered lease and that the interest of a lessee under an unregistered lease is a caveatable interest. It is unnecessary to consider that issue. This is because the occupancy agreement, whatever its true nature, plainly came to an end as a consequence of the decision of the Bishop, recorded in his decree dated 31 December 2015, to transfer the occupancy agreement to himself. He had the power to do so. There has been no challenge to the validity of the Bishop’s decree.
[24] In addition, the caveat itself is invalid. Mr Taylor has argued that it is a caveat lodged in the name of the Trust and that the authority came from the trustees purportedly appointed on 2 July 2017. But the caveat had been lodged over two
months before, on 26 April 2017. To seek to sustain this caveat in these circumstances is, or at least comes close to, an abuse of process. This conclusion is reinforced by a statement of Mr Taylor at the end of his second affidavit, when he said:
Our goal in this proceeding was to bring the Bishop to the table again to start the discussions about revival of the school and the boarding hostel. School numbers have dropped dramatically largely because the hostel was closed. So the future of the school is very much at risk, and we hope that the caveat will serve to remind the respondent Bishop of our interest in further discussions.
[25] The objective may be reasonable, but the means is not. There is no justification for caveating a title to land in order to encourage the owner of the land to enter into negotiations. And there is no justification for using Court processes in this way.
Result
[26] The claimants’ application is for an order sustaining caveat no. 10765875.2. Another caveat, claiming an interest pursuant to the occupancy agreement, was lodged by the claimants. This point was discussed at the end of the hearing, following which a consent memorandum was filed recording the agreement of the parties that the outcome of the application in respect of the nominated caveat will also apply to the other caveat. The order in the next paragraph is in accordance with that agreement.
[27] There is an order dismissing the claimants’ application to sustain caveat no. 10765875.2 and caveat no. 10765875.1. In consequence those caveats lodged against Certificates of Title NA79C/263, NA51D/931 and NA26B/813 are to lapse.
[28] The respondent is entitled to costs. If the respondent seeks costs, and is unable to reach agreement with the claimants, a memorandum for the respondent is to be filed and served by 2 March 2018 and any memorandum for the claimants in opposition is to be filed and served by 16 March 2018.
Woodhouse J
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