Toailoa v Eliu

[2024] NZHC 2217

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-1748 [2024] NZHC 2217

UNDER THE

Trusts Act 2019, the Charitable Trusts Act 1957, and Part 18 of the High Court Rules

IN THE MATTER OF

the Samoan Independent Seventh Day Adventist Church charitable trust board and the Samoan Independent Seventh Day Adventist Property Trust charitable trust board

BETWEEN

SIAOSI DAVID SOOTAGA TOAILOA

First Applicant

Cont:/

Hearing:

on the papers

Counsel:

B O’Callahan and R J Warren for applicants (respondents to application for directions)

J D McBride and S Cameron for first, second, third and fourth respondents

D L Harris and A A A Ghandour for fifth respondent M K Mahuika for sixth respondent

Judgment:

8 August 2024

JUDGMENT OF JOHNSTONE J

(application for directions re stay order)

This judgment was issued by me on 8 August 2024 at 2pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Zhang Law, Auckland

CM & Associates, Auckland
Crown Law Office, Wellington

TOAILOA v ELIU & ORS [2024] NZHC 2217 [8 August 2024]

AND

FEU SEUMAALII

Second Applicant

AND

PENIATA SAUNIA

Third Applicant

AND

MATAUAINA ELIU, SALETAULUA

CHARLES FAAMANATU MAKA AND TONGA SEINI FATA, AS TRUSTEES OF THE SISDA PROPERTY TRUST

First Respondents

AND

SUNRISE GLOBAL HOMES LIMITED

Second Respondent

AND

WILLIE PAPU

Third Respondent

AND

WILLIE JUNIOR PAPU

Fourth Respondent

AND

ATTORNEY-GENERAL

Fifth Respondent

AND

SAMOAN INDEPENDENT SEVENTH DAY ADVENTIST CHURCH

Sixth Respondent

[1]    By  result  judgment  dated  28  March  2024,1  with  reasons  delivered  on  31 May 2024,2 I made orders in this proceeding (the Costs Proceeding):

(a)declaring it reasonable and appropriate for the applicants (the Toailoa applicants) to commence proceedings (the Main Proceeding) seeking to remove the trustees of trusts I referred to as the Property Trust and the Church, and otherwise regularising aspects of the trusts’ constitutions and administration;

(b)declaring it reasonable and appropriate for the Toailoa applicants to seek interim orders in the Main Proceeding appointing an interim receiver or trustee of the Property Trust and the Church; and

(c)directing that the Toailoa applicants be reimbursed such of their reasonable legal costs in doing so as may be approved by the Registrar of this Court, from the assets of the Church and, if necessary, the Property Trust.

[2]    The surviving first respondents, trustees of the Property Trust (Mr Maka and Ms Fata), sought a stay of my orders, pending determination of appeals to the Court of Appeal  against  my  orders  and  orders  of  Wilkinson-Smith  J   made   in   the Main Proceeding. On 24 July 2024, I granted the stay, but made an order that the Property Trust must pay $100,000 to the Registrar of the High Court at Auckland, in respect of the Toailoa applicants’ legal costs relating to the appeals.3

[3]    By application dated 31 July 2024, Mr Maka and Ms Fata seek directions under s 133 of the Trusts Act 2019 “as to how they should comply with” my order to pay

$100,000 to the Court. In particular, they seek:

(a)Confirmation that the trustees may use funds from the [Property Trust’s] GST reserve account to comply with the order to pay

$100,000 into court and that this is a reasonable and proper exercise of their powers as trustees, and will not constitute a breach of their trustee obligations.

1      Toailoa v Eliu [2024] NZHC 701.

2      Toailoa v Eliu [2024] NZHC 1412.

3      Toailoa v Eliu [2024] NZHC 2030 (judgment re-issued 26 July 2024).

(b)Any other directions the Court deems appropriate to ensure the trustees can comply with the order, while maintaining the Trust’s ability to meet its ongoing financial obligations.

[4]    The Toailoa applicants, as respondents to the application by Mr  Maka and Ms Fata of 31 July 2024, have expressed reservations as to whether exercise of the court’s jurisdiction under s 133 would be appropriate. But, formally speaking, they abide. So does the Church. The Attorney-General, understandably, has taken no steps.

[5]    Mr Maka and Ms Fata accordingly seek determination of their application on the papers.

Jurisdiction

[6]Section 133 of the Trusts Act provides as follows:

133     Trustee may apply to court for directions

(1)A trustee may apply to the court for directions about—

(a)the trust property; or

(b)the exercise of any power or performance of any function by the trustee.

(2)The application must be served, in accordance with the rules of court, on each person interested in the application or any of them as the court thinks fit.

(3)On an application under this section, the court may give any direction it thinks fit.

(4)This section does not restrict the availability of alternative proceedings within the court’s jurisdiction, including a declaration interpreting the terms of the trust.

[7]    Section 133 sets out what the learned authors of Law of Trusts (NZ) describe as a “familiar provision”, traceable first to its immediate predecessor, s 66 of the Trustee Act 1956 (repealed), and before that the Court’s broad jurisdiction in equity.4 As the authors assert:

In deciding whether to make the directions sought, the court carefully examines the evidence to ensure the trustees are truly entitled to make the decision and take the steps they have taken or propose to take, and asks the

4      James Anson-Holland Law of Trusts (NZ) (online ed, LexisNexis NZ Ltd) at [TRU133.01].

following  three  questions  (Re  Darlow  (as  trustees  of Hugh  Green Trust)

[2021] NZHC  2184,  (2021) 5 NZTR  31-016;  BC202163044 at  [33] citing

Public Trustee v Cooper [1999] All ER (D) 1524, [2001] WTLR 901 (Ch) at 925):

(a)Have the trustees in fact formed the opinion which the court is asked to confirm?

(b)If so, is the opinion one which a reasonable body of trustees, properly instructed as to the proper meaning of any relevant provisions of the trust deed, could properly have arrived at?

(c)Is the opinion vitiated by any conflict of interest under which any of the trustees might have been labouring?

[8]    As that passage indicates, trustees’ applications under s 133 are usually brought where there is some concern on their part whether the course they have taken or propose to take, is both within, and a reasonable exercise of, their power as trustees. The advantage of obtaining a s 133 order in such circumstances is that it attracts protection under s 134 of the Trusts Act, which provides:

134      Protection of trustee while acting under direction of court

(1)A trustee acting under any direction of the court must be treated as having discharged the trustee’s duties as a trustee in relation to the direction, even though the order giving the direction is later declared invalid, overruled, set aside, or found to be otherwise ineffective.

(2)However, subsection (1) does not indemnify a trustee for any act done in accordance with a direction of the court if the trustee has acted in bad faith in—

(a)getting the direction; or

(b)acquiescing in the court making the order or giving the direction.

This case

[9]    This case is unusual, in that there is an existing order of this Court requiring the Property Trust to make the payment that it now seeks a direction to pay.

Mr Maka and Ms Fata’s position

[10]   Ms Fata has provided an affidavit in which she seeks to explain her reticence by providing an “update” in relation to the Property Trust’s financial position. In essence:

(a)The trust held $447,343.02 in its bank account, as at 30 July 2024.

(b)Of that sum, $280,001.24 was being held, in a sub-account used to receive GST refunds, as a cash reserve for future costs and expenses. The balance was being held in other sub-accounts.

(c)The trust requires to meet monthly instalments of around $41,350 per month in respect of its borrowings. It receives donations from its congregation — the Church receives the congregation’s tithes — but Ms Fata is “not able to predict” how much money will come into the Trust from month to month.

(d)If donations or tithes stop or reduce, Mr Maka and Ms Fata may have to use funds in the sub-account used for GST refunds to meet loan servicing costs. And if they are unsuccessful on appeal, they may have to apply to the Court to vary the existing interim preservation order requiring it not to dispose of its non-current assets.

[11]   For Mr Maka and Ms Fata, Mr McBride submits that they are concerned to ensure they will not face further criticism from the congregation, the Toailoa applicants or the Court, for disbursing funds in a way which might constitute a breach of trust or otherwise give rise to criticisms. Mr McBride submits that the funds held in the sub-account used for GST refunds are the only available source of funding as the funds in other accounts appear to be “tagged” for other purposes, and individually

would be insufficient. He refers to the orders I made on 28 March 2024, since stayed, directing that the Toailoa applicants be reimbursed their reasonable legal costs by the Church or the Property Trust, it being apparent that if Mr Maka and Ms Fata are unsuccessful on appeal the interim preservation orders will require review.

[12]   Mr McBride further submits that Mr Maka and Ms Fata seek directions “to ensure clarity in fulfilling their trustee duties and to confirm that the protections afforded by s 134 … will apply to actions they take to ensure compliance with the Court’s orders”.

Should the Court’s discretion be exercised?

[13]   Ms Fata’s affidavit does not seek to establish that the Property Trust does not have funds available with which to meet my order of 24 July 2024, requiring the Property Trust to pay $100,000 to the Registrar. It signals only that the Property Trust may encounter future financial difficulty if it is either unsuccessful in its appeal, or if the prior level of donations and tithes does not continue, so that it may become necessary for the trustees to apply to vary the interim preservation order so as to meet then-current liabilities. This aspect of the current application suggests that it is premature.

[14]There is, however, a more fundamental difficulty.

[15]   Section 134(1) of the Trusts Act is not confined in its terms or in its application to directions made by the Court under s 133. The provision applies to trustees acting under “any direction of the court”. My order of 24 July 2024 amounts to such a direction.

[16]   Further, it was made despite opposition on the part of Mr Maka and Ms Fata. There is therefore no question of it having been obtained by them, in terms of s 134(2), having “acted in bad faith” whether in “getting the direction” or “acquiescing in the court making the order or giving the direction”.

[17]   On this basis, Mr Maka and Ms Fata are already protected by s 134(1) from the criticism they suggest might be avoided by the Court making a further direction.

The relief they seek is a direction which affords them the same benefit as that to which they are already entitled. Their application is moot.

[18]   The mootness of the application is not saved by it being couched as an application for a direction to use funds in one of the Property Trust’s sub-accounts rather than another. The funds in the various sub-accounts are all available to the Property Trust to meet its responsibilities as they emerge. The Court’s order requires to be met. Whether the Property Trust chooses to meet the order by using funds held entirely or partially in any of its banking sub-accounts is not a matter that can be brought seriously into question given the immunity arising under s 134(1).

Result

[19]The application of Mr Fata and Ms Maka dated 31 July 2024 is dismissed.

[20]I make no order as to costs.

Johnstone J