Tito v Tito
[2012] NZCA 493
•29 October 2012
| IN THE COURT OF APPEAL OF NEW ZEALAND |
| CA856/2011 [2012] NZCA 493 |
| BETWEEN KEVIN TITO |
| AND AROHA TITO AND JOHN ANDREW |
| Hearing: 16 October 2012 |
| Court: Randerson, French and Venning JJ |
| Counsel: Appellant in person |
| Judgment: 29 October 2012 at 11.30 am |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe order of the Māori Appellate Court is confirmed but the time for holding the general meeting of owners is extended by three months dating from this judgment.
CThe Māori Land Court is to issue directions as to the manner in which the general meeting of owners is convened and conducted.
DThere is no order as to costs.
_______________________________________________________________
REASONS OF THE COURT
(Given by French J)
Introduction
Mr Kevin Tito is a trustee and the majority shareholder in the Mangakahia 2B2 No 2A1A Ahu Whenua Trust.
He appeals a decision of the Māori Appellate Court regarding the appointment of the respondents as co-trustees.[1]
[1] Tito – Mangakahia 2B2-No 2A1A (2011) Māori Appellate Court MB 86.
Mr Tito contends that the Appellate Court erred in making those appointments and seeks to have the respondents removed.
More fundamentally, Mr Tito also seeks termination of the Trust. However, as was explained to him in an earlier judgment of this Court granting Mr Tito an extension of time to file the present appeal,[2] and again at the hearing, issues relating to termination of the Trust are beyond the scope of this appeal. The termination was not the subject of the decision from which he appeals.
[2] Tito v Tito [2011] NZCA 539.
Our sole focus therefore is on the validity of the trustee appointments made by the Māori Appellate Court.
Factual background
The Trust was established in 1998 with five trustees pursuant to a Court Order made under s 215 of Te Ture Whenua Maori Act 1993 (the Act) over land comprising 41.1843 hectares.
There are now 20 owners holding 1,020 shares. After his uncle’s death in late 2009/early 2010, Mr Tito’s shareholding increased to 660.375 shares, which represents a 65 per cent shareholding. His sister, Ms Ngaroma Tito, holds 220.125 shares.
The land is leased to a neighbouring dairy farmer at an annual rental of $16,500. The rental is the Trust’s sole source of income.
Unfortunately the Trust has had a somewhat troubled history, characterised by intra-familial conflict and mismanagement.
Concerns about the administration of the Trust prompted Mr Tito to apply in May 2008 to the Māori Land Court under s 19 of the Act for an injunction to restrain the Trust manager from “altering the books to clear his name and retiring as trust manager”. He also applied for an order under s 238(1) to enforce the obligations of the Trust. Subsequently, in October 2008, Mr Tito filed an application for termination of the Trust.
Following several hearings, all three applications were considered by Judge Ambler in a reserved decision dated 23 January 2009.[3]
[3] Tito – Mangakahia 2B2-No 2A1A (2009) 130 Whangarei MB 134.
Judge Ambler found that the trustees had acted in breach of the Trust Order by failing to convene any annual general meetings during the life of the Trust and in failing to undertake reviews of the Trust required under the Order to be held every three years. The Judge also found that the trustees had abdicated their responsibilities as trustees by leaving the Trust’s affairs solely in the control of a trust manager. As a consequence, the current accounts of beneficial owners had been overdrawn, payments had been made without the requisite authority and the financial statements contained inaccuracies. The Judge was not however prepared to terminate the Trust, which he considered was necessary for the land given that it was being leased and given the significant disparity in shareholding. In Judge Ambler’s view, the real issue was not whether there should be a trust but who should be the trustees.
Of the five original trustees, one was deceased, another was incapacitated, while the remaining three had not only breached their duties but two of them held less than one per cent of the interest in the land, and the third suffered from ill health.
The Judge identified two options regarding trusteeship. The first was to reduce the trustees to three, comprising Mr Tito, his sister Ms Ngaroma Tito (or their respective nominees) and an independent professional trustee, possibly the Māori Trustee, to represent the balance of the owners. The second option was to appoint the Māori Trustee as sole responsible trustee with advisory trustees.
Judge Ambler directed the trustees to engage an auditor to undertake an audit of the accounts and following receipt of that audit to convene a general meeting of beneficial owners to elicit their views on trusteeship. The Judge then adjourned the proceeding to the August 2009 sitting to enable both those matters to be actioned before he made a final decision on trusteeship.
In August there was a further adjournment, there having been delays in obtaining audited accounts and the general meeting never having been convened.
The general meeting was eventually held on 12 November 2009. Those present either in person or by proxy represented over 95 per cent of the owners in the block. Everyone present opposed the appointment of the Māori Trustee as sole responsible trustee. Instead, it was agreed there should be five trustees, Mr Tito and Ms Ngaroma Tito’s daughter, Ms Aroha Tito, representing the majority shareholders and three representing the minority owners. Because there were more than three nominations, a vote was taken following which Mr John Andrew, Mr Brett Cassidy and Ms Dorothy Tito were appointed.
When the matter came back before Judge Ambler on 27 November 2009, the Judge noted the meeting’s objection to the appointment of the Māori Trustee. However, the Judge considered that in circumstances where the Trust had not operated properly, where financial statements were still doubtful and where action might need to be taken against former trustees or other persons, it was appropriate he appoint the Māori Trustee notwithstanding the opposition.
He accordingly made an order appointing the Māori Trustee as responsible trustee for a period of two years together with Mr Tito, Ms Aroha Tito and Mr Andrew as advisory trustees.[4] In the Judge’s view, three trustees was the best number (as opposed to five) because three better reflected the ownership makeup.
[4] Tito – Mangakahia 2B2-No 2A1A (2009) 143 Whangarei MB 271 (143 WH 271).
The orders were expressed to be conditional on the Māori Trustee accepting his appointment and finalising the terms of the order by 20 December 2009.
On 16 December 2009 the Māori Trustee accepted his appointment but sought to change the terms. Mr Tito learnt of this development and accordingly wrote to the Court on 22 January 2010 requesting that the matter be recalled. That did not happen. Instead, Judge Ambler convened a conference call on 4 February 2010 with the Māori Trustee, the upshot of which was that the Judge varied his previous order by changing the term of the Māori Trustee’s appointment from two years to three years.[5] None of the beneficial owners were given notice of the conference call and did not participate in it. There was no further hearing.
[5] Tito – Mangakahia 2B2-No 2A1A (2010) 1 Taitokerau MB 8 (1 TTK 8).
Mr Tito then filed an appeal in the Māori Appellate Court appealing Judge Ambler’s decision to appoint the Māori Trustee as responsible trustee and also appealing the decision to extend the period of the appointment.
Mr Tito confirmed to us that he did not appeal Judge Ambler’s decision declining his application to terminate the Trust.
The decision of the Māori Appellate Court
The Māori Appellate Court allowed the substance of Mr Tito’s appeal.
The Court held that Judge Ambler had erred in:
(a)appointing the Māori Trustee against the wishes of the owners contrary to the requirements of s 222(2)(b) of the Act;
(b)removing owner trustees without notice to them, without giving them an opportunity to be heard on their removal and without explicitly amending Mr Tito’s application under s 37(3) of the Act, to one under s 240; and
(c)breaching the rules of natural justice by varying his order in February 2010 without giving the owners an opportunity to be heard.
The Court quashed the orders made by Judge Ambler and then addressed the future direction of the Trust.
Noting that there were no longer any active trustees left to administer the Trust, the Court decided to appoint trustees itself and thereby avoid the delays that would be caused by referring the matter back to the lower court. It duly made orders appointing Mr Tito, Ms Aroha Tito and Mr Andrew as responsible trustees on an interim basis until the holding of the next general meeting of owners. The Court acknowledged that the general meeting had elected two other people as trustees. However one of them was a past trustee whose conduct had been criticised, and the other was a person in respect of whom there was no evidence to satisfy the Court that he had the skills, experience and knowledge to be an appropriate trustee.
The Appellate Court further directed that the trustees were to call a general meeting of owners within 12 months to consider the future administration of the Trust and the appointment of permanent trustees.
Events since the decision of the Appellate Court
The decision of the Appellate Court was delivered on 23 February 2011.
Mr Tito filed the current appeal in this Court in March 2011. Although the appeal was out of time, he subsequently obtained an extension of time.
In August 2011, Judge Ambler issued an interim injunction prohibiting the Trust’s former solicitors from disbursing the rent money and accumulated interest which had been paid to it by the lessees.
That injunction is still in force.
As a result none of the beneficial owners have received any payments in the last twelve months. No general meeting has been called and the three court appointed trustees have never met. A quorum of three trustees is required under the Trust Order and it appears that Mr Tito has declined to meet with the other two.
In effect, the Trust is in limbo pending the outcome of this appeal.
Finally, for completeness, we record that although the respondents did not appear at the appeal hearing before us, they did file written submissions.
Grounds of appeal
Mr Tito did not challenge the Appellate Court’s decision to quash the order appointing the Māori Trustee.
He does however contend that the Appellate Court was wrong to appoint Ms Aroha Tito and Mr Andrew as trustees because:
(a) both of them lack the necessary experience and skills;
(b)Ms Aroha Tito is unsuitable to be a trustee because she has received trust monies to which she was not entitled;
(c)under the Trust Order, trustee decisions can be made by a majority vote and the two of them could outvote him. That would be unfair when he holds 65 per cent of the shareholding; and
(d)there were irregularities at the November 2009 meeting which invalidate the election of Ms Aroha Tito and Mr Andrew. First, a person voted who was not eligible to vote because she was not an owner as required under the Trust Order. Secondly, Ms Aroha Tito was nominated by her mother, Ms Ngaroma Tito, in breach of s 227A(2), Ms Ngaroma Tito being a trustee at the time and therefore prevented from taking part in the process.
Other grounds raised by Mr Tito such as the fact that the Trust was illegally constituted in 1998 are beyond the scope of this appeal as was the main remedy which he sought, namely the dissolution of the Trust and the vesting of the land in him.
Discussion
The starting point is s 222 of the Act.
Section 222 confers an express power on the Māori Land Court (and, by virtue of s 56, on the Māori Appellate Court) to appoint trustees of any trust constituted under Part 12 of the Act. The Trust in question was constituted under Part 12 of the Act.
Section 222(2) states:
222 Appointment of trustees
...
(2) The court, in deciding whether to appoint any individual or body to be a trustee of a trust constituted under this Part,—
(a) shall have regard to the ability, experience, and knowledge of the individual or body; and
(b) shall not appoint an individual or body unless it is satisfied that the appointment of that individual or body would be broadly acceptable to the beneficiaries.
The language of s 222(2) is mandatory.[6] It uses the word “shall”.
[6] Clarke v Karaitiana [2011] NZCA 154, [2011] NZAR 370 at [51].
In appointing the Māori Trustee against the wishes of the owners, Judge Ambler purported to be acting under s 237 of the Act and not s 222.
Section 237 states that the Māori Land Court may exercise all the same powers and authorities as the High Court possesses in relation to trusts. The High Court’s power to appoint trustees is not fettered by any requirement that the appointment be broadly acceptable to the beneficiaries.[7]
[7] See s 51 of the Trustee Act 1956.
However, s 237(1) commences with the words “[s]ubject to the express provisions of this Part”. Section 222 is an express provision in the relevant Part and therefore it prevails over s 237.
It follows that we agree with the Appellate Court that Judge Ambler was not entitled to invoke s 237 to avoid the mandatory requirements of s 222. The Judge could only appoint the Māori Trustee to be a trustee if the Māori Trustee was broadly acceptable to the owners. He was not acceptable and therefore his appointment cannot stand.[8]
[8]It is not necessary for us to determine whether the Appellate Court was correct in also holding that there might be exceptional circumstances where the mandatory obligations in s 222 might not apply.
As for Ms Aroha Tito and Mr Andrew, the results of the election at the November 2009 meeting demonstrate that they were broadly acceptable. It may be as Mr Tito claims, that one vote was invalidly cast but it was only one vote and the irregularity of itself would not preclude the Court from being satisfied as to their acceptability. Nor does the fact that Ms Aroha Tito was nominated by a trustee invalidate her nomination. The section relied upon by Mr Tito, namely s 227A(2), only prevents a trustee from voting or participating in a discussion on a matter if that matter directly or indirectly affects the trustee’s remuneration or the terms of the trustee’s employment as a servant or officer of the trust or any contract in which the trustee may be interested or concerned. Clearly, the discussion at issue did not involve a discussion of the type covered by s 227A(2). Mr Tito’s reliance on this section is misplaced.
Section 222(2)(a) also required the Court to have regard to the ability, experience and knowledge of Ms Aroha Tito and Mr Andrew. Enquiries were made by Judge Ambler about the attributes of the two and what skills they would bring to the Trust. He was satisfied they had the requisite attributes to be appointed trustees (albeit advisory trustees). The Appellate Court accepted that judgment based on the evidence presented to Judge Ambler.
Mr Tito was critical of Ms Aroha Tito’s lack of farming experience. However, as Judge Ambler noted, the problems facing the Trust were not really to do with the running of the farm. There was evidence she had worked as a property manager of commercial and residential buildings involving trusts and was currently working as a building consultant. For his part, Mr Andrew was a trustee of a whānau trust and while Mr Andrew had not ever owned a farm he did have practical experience working with animals.
Like the Appellate Court, we see no reason to disagree with Judge Ambler’s assessment.
In coming to that conclusion, we have not overlooked Mr Tito’s allegations made in submissions about Ms Aroha Tito receiving trust monies despite the fact that she is not a beneficial owner. In her reply submissions, Ms Aroha Tito acknowledged that trust funds had been paid into her personal bank account but stated that the payments represented her mother’s share of the Trust’s income and had only been paid into her account on the written instructions of her mother. She annexed a copy of one such written instruction. In the absence of any evidence, we cannot take this matter any further.
Mr Tito’s final complaint is that the trusteeship as constituted by the Appellate Court is unrepresentative because the other two could outvote him. However, the only solution that he could see was for him to have sole control, which would also be unrepresentative. Further, his concern is based on the premise that the interest of the shareholding which Ms Aroha Tito represents (her mother’s 220.125 shares) would coincide with those represented by Mr Andrew, which is not necessarily the case.
In our view, there are no grounds to interfere with the Appellate Court’s decision. The appeal is therefore dismissed.
The time has however now elapsed for the calling of the general meeting of owners ordered by the Appellate Court.
We therefore confirm that the order made appointing Mr Tito, Ms Aroha Tito and Mr Andrew as responsible trustees on an interim basis remains in place but that the time required for the calling of the general meeting is extended by a further three months from the date of this judgment.
That means the trustees must call a general meeting of owners before 28 January 2013. We further order that the Māori Land Court is to issue directions as to the manner in which the meeting is to be convened and conducted so as to ensure compliance with the requirements of the Trust Order and the Act. We suggest the Court’s directions might include a direction that the meeting be conducted under the supervision of a court official or some other suitable independent person.
Once permanent trustees have been appointed, then the Māori Land Court should consider the immediate discharge of the injunction.
Costs
There will be no order as to costs.
Suggestion
As Judge Ambler is recorded as having noted at one of the hearings, the business of this Trust should be a straightforward matter. It is a relatively small trust with limited income from just the one source.
Because of the unfortunate disputes over management and appointment of trustees, we would urge the owners to give serious consideration to the appointment of an independent professional such as an accountant to act as sole responsible trustee. That would require consequential amendments to the Trust Order but in our view it may be the best solution in the interests of all concerned.
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