Toailoa v Eliu
[2024] NZHC 1509
•10 June 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-1747
[2024] NZHC 1509
UNDER 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 (SISDAC) charitable trust board and the Samoan Independent Seventh Day Adventist Property Trust (SISDA Property Trust) charitable trust board
BETWEEN
SIAOSI DAVID SOOTAGA TOAILOA
First Applicant
Continued:…/2
Hearing: 8 April 2024 (further submissions received 19 April 2024) Appearances:
B O’Callahan and X Zhang for Applicants
G J Kohler KC and H P Short for First to Fourth Respondents D L Harries for Fifth Respondent
Judgment:
10 June 2024
JUDGEMENT OF WILKINSON-SMITH J
This judgment was delivered by me on 10 June 2024 at 4pm Pursuant to Rule 11.5 of the High Court Rules
…………………………
Registrar/Deputy Registrar
Solicitors:
Zhang Law, Auckland
CM & Associates, Auckland Crown Law, Wellington
TOAILOA v ELIU [2024] NZHC 1509 [10 June 2024]
Continued…
AND
FEU SEUMAALII
Second Applicant
PENIATA SAUNIA
Third ApplicationMATUAINA ELIU, SALETAULUA CHARLES FAAMANATU MAKA AND TONGA SEINI FATA
as trustees of the SISDA PROPERTY TRUST First Respondent
SUNRISE GLOBAL HOMES LIMITED
Second Respondent
WILLIE PAPU
Third RespondentWILLIE PAPU JUNIOR
Fourth RespondentATTORNEY GENERAL
Fifth Respondent
Table of Contents Para No
Introduction[1]
Background[15]
De-registration[34]
The Remnant Church[45]
The New Church Build Project[61]
Procedural History [69]
Issues[80]
The parties’ positions [81]
The applicants’ position[81]
The Respondents’ position[87]
The Attorney-General’s position[98]
The alternative application [100]
The evidence[104]
Pastor Toailoa[104]
Faavae Cherry Gagamoe[129]
Simas Finai[140]
Pastor Willie Papu[147]
Miracle Sopaima Deborah Pili Faatamala[167]
Tonga Seni Fata[184]
Financial statements of the Trusts[200]
Discussion[204]
Do the applicants have standing to bring this application?[211]
Is it reasonably necessary to appoint a receiver/manager?[219]
What form should the managerial appointment take?[246]
What conditions should attach to the appointment?[249]
Should the preservation orders remain in place?[252]
Orders[253]
Introduction
[1] The applicants are a former pastor and two elders of the Samoan Independent Seventh Day Adventist Church.
[2] As such they are former board members of the Samoan Independent Seventh Day Adventist Church (SISDAC) Charitable Trust Board under the terms of the Constitution.
[3] They have applied for orders in respect of the administration of two closely related charitable trusts namely SISDAC and the Samoan Independent Seventh Day Adventist Property Trust (SISDA Property Trust) (collectively, referred to as the Trusts).
[4]The main proceeding is at an early stage and does not have a hearing date.
[5] In the meantime, the applicants seek an interim order appointing either a receiver or a manager to administer the Trusts until further order of the Court or determination of the proceeding.
[6] The applicants say that the appointment of a neutral and experienced receiver or manager is required to protect the assets of the Trusts by ensuring they are competently managed and applied only to the charitable purposes of SISDAC.
[7] The applicants propose Andrew McKay of BDO New Zealand Ltd as receiver or manager.
[8] If the Court declines to appoint an interim receiver or manager, the applicants seek an order requiring the taking of audited accounts of the Trusts by a forensic accountant.
[9] The first respondents are those who have actual control of the Trusts’ property, as trustees of the SISDA Property Trust and directors of the second respondent Sunrise Global Homes Limited (Sunrise Homes).
[10]The third respondent is Pastor Willie Papu, spiritual leader of SISDAC.
[11] The fourth respondent is Pastor Willie Junior Papu, a former pastor of SISDAC.
[12] The first to fourth respondents (the Respondents) say by way of memorandum that they collectively represent SISDAC.
[13] The Respondents oppose the application, and they seek the discharge of interim preservation orders currently in place.
[14] The fifth respondent, the Attorney-General, is named in the proceeding in her capacity as protector of charities.
Background
[15] SISDAC was incorporated as a charitable trust board on 29 September 1980. Its charitable objective is to profess Christianity and teach the Bible among all people, particularly the Samoan people of New Zealand.
[16] SISDAC is a division of a broader Christian church operating in New Zealand, Australia, Samoa, American Samoa and the United States. The broader church is overseen by an informal governing body known as the Executive World Committee or the SISDAC World Committee (The World Committee). There is no independent corporate entity that operates the World Committee. The World Committee’s bank accounts are operated by SISDAC.
[17] The third respondent, Pastor Willie Papu, is the Executive Director of the World Committee. He was the Executive Director Minister of SISDAC New Zealand between 1983 and 2017. In the statement of defence, he is acknowledged as a co- founder of SISDAC.
[18] In June 2008, SISDAC was registered as a charitable entity under the Charities Act 2005.
[19] Over the years, SISDAC accumulated significant assets estimated to be in the region of $40 million.
[20] SISDA Property Trust was established in February 2008. It exists to help achieve the charitable interests of SISDAC.
[21]In October 2013 Charities Services began investigating SISDAC.
[22] In 2015, Charities Services referred some of its findings to the Serious Fraud Office (SFO).
[23] In 2016, SISDAC invested nearly $1 million into a cryptocurrency scheme “OneCoin” which resulted in those funds being lost.
[24] In May 2017 the SFO investigation concluded. Ms Elizabeth Papu (Ms Papu), SISDAC’s financial administrator, and Pastor Willie Papu’s daughter, was convicted of stealing over $1.6 million of SISDAC’s funds. She was sentenced to two years and nine months’ imprisonment in September 2017.
[25] In 2019, SISDAC invested $1.7 million into WFE Capital Ltd which was a high-risk investment. The Financial Markets Authority subsequently issued a warning setting out concerns that WFE Capital was involved in a scam.
[26] In July 2017, Charities Services commenced further investigation into SISDAC.
[27] The investigation concluded in December 2019. It was established that Mr Joseph Stowers, SISDAC’s former treasurer, took $498,997 of SISDAC’s funds as undeclared income. The investigation found that Pastor Willie Papu took $84,031.32 of SISDAC’s funds for the personal benefit of himself and his family and influenced the entity to make further improper payments of $63,309.88. Another officer Sina Hunt was found to have taken over $200,000 of funds for her personal benefit. Pastor Willie Papu Junior was found to have wrongfully received over $316,000 for his personal benefit. The findings were disputed by Pastor Willie Papu and Pastor Willie Papu Junior.
[28]On 27 August 2019, William Buck was appointed auditor of SISDAC.
[29] In an affidavit dated 16 October 2023, Michael Wood of William Buck deposed that, on commencing the audit work, a significant number of ledger accounts were unreconciled, and a significant volume of supporting information was either not maintained or not available.
[30] Mr Wood said that, in respect of the investment in cryptocurrency, SISDAC was not able to produce statements, contracts, certificates, or other paperwork of any kind to verify the existence and validity of the investments.
[31] Mr Wood inquired as to whether any due diligence was undertaken in respect of these investments but was not provided with copies of board minutes or other supporting information to suggest any due diligence was undertaken. Mr Wood’s impression was that SISDAC had not understood the risks of such investments and had not performed sufficient due diligence of the investments.
[32]Audit reports were produced for the years ending 2016, 2017, and 2018. The
31 December 2019 audit was commenced however it was difficult to obtain information. William Buck was unable to obtain supporting audit information, primarily around operating expenses despite numerous requests for information. The auditor eventually issued a disclaimer of opinion on 29 September 2022 and advised that William Buck was not prepared to accept any further engagement as auditors due to concerns over the lack of appropriate financial procedures and controls within the entity and concerns over the board’s financial management practices. William Buck was not appointed to undertake the 31 December 2020 audit.
[33] There have been no audits completed since the attempted audit for the year ending December 2019.
De-registration
[34] On 17 December 2020, the Charities Registration Board (the Charities Board) de-registered SISDAC effective from 5 February 2021.
[35] SISDAC transferred its main assets to the SISDA Property Trust to avoid a one-off tax assessment that would have been applicable if it were not re-registered within one year.
[36] SISDAC was de-registered because the Charities Board considered that two of SISDAC’s officers, Ms Papu and Mr Stowers, engaged in serious wrongdoing involving unlawful or corrupt use of the entity’s funds or resources.
[37] The Charities Board considered that SISDAC’s financial mismanagement provided the opportunity for Ms Papu and Mr Stowers to unlawfully take funds or resources. The Charities Board found that SISDAC failed to keep proper or accurate financial records, did not have financial controls or other policies or processes in place, and had little to no oversight of individuals within the entity.
[38] The Charities Board also considered that the entity and its officers engaged in other conduct that constituted gross mismanagement. SISDAC and its officers repeatedly failed to invest funds prudently, did not carry out due diligence in relation to proposed investments and allowed Pastor Willie Papu and Sina Hunt to exercise an undue level of influence over investment decisions. The poor investment decision making resulted in significant loss of SISDAC’s funds.
[39] The Charities Board ordered that no application for re-registration as a charitable entity could be made for six months from the date of de-registration; and disqualified Pastor Willie Papu and Mr Stowers from being officers of a charitable entity for four years from the date of de-registration.
[40] The Charities Board decided against disqualifying other officers including Mr Faavae Gagamoe saying;
the Board has taken into account Minister Faavae Gagamoe’s role in leading the changes the entity has made to its operations, voting against the WFE Capital investment, and raising concerns about this investment with the entity’s bank and its then counsel.
[41]SISDAC was removed from the Charities Register on 5 February 2021.
[42] In December 2021, SISDAC applied to be re-registered as a charitable entity. When seeking approval to be re-registered, SISDAC made the following representations:
(a)SISDAC had established a new investment committee to make recommendations to its executive committee regarding investments — which resolved to restrict speculative investments to no more than 10 per cent of the total portfolio.
(b)SISDAC had appointed external auditors (William Buck) to provide assurance that SISDAC was being managed appropriately.
(c)SISDAC had established a policy handbook for officers of the charity to abide by.
(d)Pastor Willie Papu would continue to take a spiritual leadership role in SISDAC but would no longer be involved in day-to-day administration and management.
[43]In 2021 SISDAC invested a further one million dollars in Bitcoin.
[44]SISDAC was re-registered as a charitable entity on 1 February 2022.
The Remnant Church
[45] Prior to SISDAC’s re-registration, a new church was established by trust deed, named the Universal Remnant Church of the Living God (the Remnant Church).
[46] The trust deed submitted with the application for incorporation as a charitable trust board was dated 28 June 2021 and stated at clause 2.1(a) that the purpose of the Remnant Church is to establish a branch of SISDAC.
[47] The Remnant Church was incorporated as a charitable trust board under the Charitable Trusts Act 1957 on 29 June 2021.
[48] Fourteen branches of the Remnant Church were then established and incorporated as independent charitable trust boards under the Charitable Trusts Act.
[49] Neither the Remnant Church nor any of the incorporated branches of the Remnant Church were initially listed on the register of charitable entities under the Charities Act.
[50] The establishment of the Remnant Church is cited by the plaintiffs as one of the catalysts for the proceeding. The plaintiffs brought the proceeding on 14 August 2023 initially ex parte. The respondents were served with the proceedings on 17 August 2023.
[51]On 21 September 2023, an AGM of the SISDA Property Trust convened which:
(a)reappointed the trustees of SISDA Property Trust;
(b)purported to amalgamate SISDA Property Trust, SISDAC and the Remnant Church; and
(c)affirmed that the properties held by SISDA Property Trust were not personally owned by the trustees but are held on trust for the benefit of the Church.
[52] On 22 February 2024 an application was made to register the Remnant Church as a charity.
[53] On 8 March 2024, the Remnant Church Board purported to amend the Remnant Church trust deed.
[54] The trust document submitted with the application for registration under the Charities Act is dated 7 April 2021. That deed was signed prior to the trust deed dated 28 June 2021 which was submitted when the Remnant Church was incorporated as a charitable trust board.
[55] Clause 2.1(a) of the 7 April 2021 trust deed is different to clause 2.1(a) of the 21 June 2021 trust deed. The earlier 7 April version provides that the purpose of the trust is to “(a) Establish a branch of the Remnant Church of the Living God Trust” rather than “a branch of SISDAC” as provided by the later 21 June trust deed.
[56] There are other differences in the 7 April 2021 trust deed which may affect the validity of the registration of the Remnant Church as a charitable trust.
[57] The Remnant Church was registered as a charitable trust on 22 March 2024 just before the hearing of this application.
[58]Pastor Willie Papu is the accepted spiritual leader of the Remnant Church.
[59] Mr Stowers, who is prohibited from acting as an officer of a charitable entity until 5 February 2025, was recorded as a trustee of the Sepulona I Siona Remnant Church of the Living God Trust — one of the 14 branches of the Remnant Church. It is unclear whether he has been removed as a trustee following registration of the Remnant Church under the Charities Act in March 2024.
[60] The applicants’ position is that the Remnant Church is a device through which Pastor Willie Papu retains control of SISDA Property Trust’s assets.
The New Church Build Project
[61] SISDA Property Trust is currently constructing a hall at Cape Road, Māngere (Māngere Church Hall).
[62] Since 2019, The Māngere Church Hall has experienced considerable cost overrun. The initial quote provided for the new build in January 2019 was $9,813,986.
[63] The Māngere Church Hall project was partially funded by secured mortgages between SISDAC and General Finance Ltd against some of SISDAC’s properties. As a result of its de-registration, SISDAC was in default for those mortgages.
[64] On 5 March 2021, SISDAC secured further finance from General Finance Ltd in the amount of $2,896,055.77. On 1 June 2021, SISDAC’s board approved taking a loan for $6 million; and either transferring church properties to SISDA Property Trust or transferring residential properties to a limited liability holding company so SISDAC could secure a loan to repay General Finance Ltd and complete the Māngere Church Hall.
[65] On 3 February 2022, 19 properties were transferred from SISDAC to SISDA Property Trust.
[66] On 14 July 2022, Sunrise Global Homes Ltd (Sunrise Homes) was incorporated. The directors of Sunrise Homes are Matauaina Eliu, Saletaulua Charles Faamanatu Maka and Tonga Seini Fata all of whom are also trustees of the SISDA Property Trust. Also on 14 July 2022, four properties were transferred from SISDA Property Trust to Sunrise Homes (the Sunrise Properties).
[67]On 2 December 2022, SISDA Property Trust took out a further loan of
$2 million from General Finance Ltd.
[68]The dedication of the Māngere Church Hall took place on 30 September 2023.
Procedural History
[69] In August 2023, Pastor Toailoa commenced the main proceeding, applied for Beddoe orders and brought an interlocutory application for interim relief seeking, among other things, the appointment of a receiver or manager pending the outcome of the main proceeding.
[70] He was joined in the proceeding by the second applicant, Feu Seumaalii, an elder of SISDAC at Ōtara and by the third applicant is Peniata Saunia, lead elder of SISDAC’s Ōtara branch.
[71] The application for interim relief was amended twice. This decision is made in respect of the second amended interlocutory application dated 26 January 2024.
[72]The main proceeding contains three causes of action.
[73] The first seeks a declaration as to the lawful trust deed of the SISDA Property Trust.
[74] The second concerns the transfer of property from SISDA Property Trust to Sunrise Homes. The applicants seek a declaration that the properties at issue are held on trust by Sunrise Homes for the charitable purposes of the SISDA Property Trust; and a direction requiring Sunrise Homes to transfer the properties to SISDA Property Trust and to account for any profits made by Sunrise Homes while holding the properties.
[75] The third concerns the replacement of the trustees of SISDA Property Trust and SISDAC. The applicants seek:
(a)the removal of the First Respondents as trustees of the SISDA Property Trust and/or SISDAC.
(b)the appointment of alternative or additional trustees of SISDA Property Trust and SISDAC, including independent professionals with governance expertise; and/or
(c)orders altering the constitution of SISDA Property Trust and SISDAC concerning the appointment and removal of trustees and/or the delegation of powers.
[76] On 14 August 2023, following the commencement of the proceedings but before the Respondents had been served, four members of the SISDAC board met and resolved to remove Pastor Toailoa, as trustee and head minister of SISDAC church and from all other responsibilities in SISDAC or its associated entities effective immediately.
[77] On 17 August 2023, Lang J made an interim preservation order in respect of the assets held by the SISDA Property Trust.1 Lang J declined to make an order appointing a receiver or manager pending service of the proceeding on the respondents taking the view that the interim preservation orders would provide adequate protection pending first call of the matter.
[78] The application for Beddoe orders was heard separately before a different Judge.
[79] The interlocutory application for appointment of a receiver or manger was set down for hearing before me.
Issues
[80]The issues to be decided are:
(a)Do the applicants have standing to bring the application?
(b)Is it reasonably necessary to appoint an interim receiver/manager?
(c)If it is necessary, what form should the managerial appointment take?
(d)What conditions should attach to the appointment?
(e)If it is not necessary to appoint an interim receiver/manager should an order be made requiring the taking of an audited account by a forensic accountant from the SISDA Property Trust and SISDAC?
(f)Should the interim preservation orders remain in place?
1 The minute refers to the SISDAC Property Trust, but this is clearly a typographical error. The application relates to the SISDA Property Trust, and the order is intended to and does relate to the assets of the SISDA Property Trust.
The parties’ positions
The applicants’ position
[81] The applicants’ primary concerns arise from the establishment of the Remnant Church and the continued role of Pastor Willie Papu in the management of the affairs of both SISDAC and SISDA Property Trust.
[82] The applicants say that the assets of the SISDA Property Trust are being used for the purposes of the Remnant Church. They say that tithes and donations made to SISDAC are being distributed to the Remnant Church and that there is generally poor management and administration.
[83] The applicants say that the affairs of SISDAC and the SISDA Property Trust are effectively run by Pastor Willie Papu — who is banned from being an officer of a charitable entity.
[84] The applicants raise the following concerns with the administration of SISDAC and SISDA Property Trust:
(a)proper meetings are not being held;
(b)accounts are being prepared late and are not audited;
(c)a bitcoin investment is not properly accounted for;
(d)properties have been transferred to Sunrise Homes without adequate documentation;
(e)the Māngere Church Hall project which had a budgeted cost of
$9 million has a cost overrun of about $24 million as the actual cost is over $32 million; and
(f)record keeping is loose and SISDAC and SISDA Property Trust are struggling to meet their financial obligations.
[85] The applicants submit that the congregation demonstrates blind faith in Pastor Willie Papu and the trustees and, as a result, is deterred from seeking accountability and is hostile to oversight.
[86] The applicants submit that the assets of the Trusts are in jeopardy because of Pastor Willie Papu’s ongoing influence and the lack of any oversight or challenge to him. Essentially, the applicants say that the situation has not demonstrably improved following re-registration and the concerns expressed in the de-registration decision remain.
The Respondents’ position
[87] The Respondents challenge the standing of the applicants to bring the proceedings. They submit that the orders sought are excessive and unnecessary. The trustees have sworn that they will not alienate the properties and there is no current risk to the assets of the trust.
[88] The Respondents view the proceeding as personally motivated due to Pastor Toailoa’s demotion as an officer of the church.
[89] The Respondents submit that the overwhelming majority of the congregation does not support the appointment of a receiver or manager or the use of church funds to pay for receivers and accountants. They refer to a petition to the Court signed by over 1000 members of SISDAC during dedication celebrations for the Māngere Church Hall.
[90] The Respondents submit that the appointment of a receiver or manager could have disastrous financial consequences, including a cessation of tithes and donations and a corresponding inability of SISDAC to meet its financial obligations. The Respondents also say that appointment of a manager or receiver would be a default event under the loan agreement with Global Finance Ltd.
[91] The Respondents further say that the proposed receiver or manager is not a member of the church or the Samoan community and does not possess the cultural literacy that would be required to manage the assets of the church.
[92] The Respondents urge judicial caution in making orders that would have far- reaching consequences.
[93] The Respondents say there was no need for interim preservation orders as there is no risk of dissipation of trust assets. The trustees of the SISDA Property Trust have no intention to sell or otherwise dispose of any of the church’s properties. The Sunrise Properties transferred in July 2022 were transferred to secure better lending.
[94] The Respondents say that the church has for 40 years managed its own property and affairs. Whilst acknowledging the historical issues which led to de-registration, the Respondents submit that they have taken the appropriate steps to rectify historic issues of non‑compliance.
[95] The Respondents say that there has not been any diversion of property to the Remnant Church. The 19 church properties remain owned by SISDA Property Trust on trust for the benefit of SISDAC. Registered addresses of the branches of Remnant Church do correlate with the church properties, but the properties have not been transferred to the Remnant Church.
[96] The Respondents say that Pastor Willie Papu remains involved as the spiritual leader of SISDAC but has no defined role in the administration or management of the church. Pastor Willie Papu has complied with the Charities Board’s orders. As spiritual leader due reverence is paid to him by the congregation, but the trustees know their responsibilities.
[97] The Respondents say that the overspend on the Māngere Church Hall was a result of several factors including delays caused by the COVID-19 pandemic and design decisions being implemented “on the fly”. The fact that there has been a significant overspend is not a sufficient basis to allege mismanagement and the Respondents have taken appropriate steps to rectify the issues.
The Attorney-General’s position
[98] Ms Harris appearing for the Attorney-General said that the Attorney-General, as fifth respondent shares many of the applicants’ concerns for the Trusts. Although
there does not appear to be any risk of dissipation, the fact that the Sunrise Properties appear to have been transferred contrary to the trust deed is of concern.
[99] The Attorney-General acknowledges that care needs to be taken but says that the Court may consider there are concerns which, collectively, support the appointment of a manager.
The alternative application
[100] In the event the Court refuses to appoint a receiver or manager, the applicants seek an order requiring the taking of an audited account by a forensic accountant from the SISDA Property Trust and SISDAC.
[101] The applicants submit that such orders can be made by appointment of an “expert witness” under r 9.36 of the High Court Rules or the appointment of a forensic accountant to take an account under pt 16 of the High Court Rules.
[102] The Respondents submit that these orders are unnecessary and not in the best interests of SISDA Property Trust and SISDAC. The Respondents say that the Court would not normally appoint an expert witness under r 9.36 prior to trial and it is not appropriate to order the taking of an account under pt 16 to assist the applicants to establish their claims.
[103] The Respondents say there is no good reason why the applicants cannot undertake their own enquiries by the usual methods namely: discovery; inspection; interrogatories; and briefing of appropriate expert witnesses.
The evidence
[104] There is considerable dispute between the parties and findings of fact must wait until the substantive hearing. I set out the main evidence filed as it gives context to the evidence which does not require a credibility finding and which I rely on in my decision.
Pastor Toailoa
[105]Pastor Toailoa has sworn a number of affidavits in the proceedings.
[106] He deposes that he first joined SISDAC in 1984 and subsequently graduated with a diploma of theology from the SISDAC Ministerial Seminary in 2005. Pastor Toailoa served as a church minister of SISDAC from 2005 to 2014 and as a pastor from 2015 onwards.
[107] He was appointed by Pastor Willie Papu as a division leader for SISDAC Auckland in September 2020. He says that Pastor Willie Papu decided to remove him as a division leader and asked him to join the Remnant Church.
[108] Pastor Toailoa says his purpose in bringing the proceeding is to rectify serious failures in the governance of SISDAC and its financial management.
[109] Pastor Toailoa says that he is concerned that Pastor Willie Papu will arrange for the Remnant Church to take over the assets of SISDAC and SISDA Property Trust.
[110] He is very concerned that SISDAC could be de-registered again and that SISDA Property Trust could also be de-registered.
[111] Pastor Toailoa deposes that all tithes from the original SISDAC local churches, apart from those earmarked for the Māngere Church Hall, go straight to the Remnant Church.
[112] Tithes from the SISDAC churches in Mt Wellington and Ōtara go to the SISDAC divisions before being transferred to the Remnant Church.
[113] Each of the trustees of the SISDA Property Trust are also trustees of the Remnant Church or a Remnant Church branch. Pastor Toailoa states that Mr Stowers, who is prohibited from being an officer of a charity until 5 February 2025, is a trustee of one of the 14 branches of the Remnant Church.
[114] Pastor Toailoa says that, from his observation, Pastor Willie Papu did not step down from the leadership of SISDAC even though he had agreed he would not be involved in SISDAC’s day-to-day administration and management.
[115] Pastor Toailoa says that Pastor Willie Papu has retained effective control over the funds and assets held on trust by both SISDAC and SISDA Property Trust. He has been assisted by the trustees of SISDA Property Trust whom he personally selected as trustees and who are generally prepared to “obey his instructions without questions”.
[116] Pastor Toailoa says that one of the trustees of SISDA Property Trust, Ms Fata, confirmed to him that as far as she is concerned, the role of the trustees of SISDA Property Trust is to obey Pastor Willie Papu’s instructions, and that it was not up to her or the other trustees to question his instructions.
[117] Pastor Toailoa annexes emails between himself and Ms Fata which include the following statements by Ms Fata in an email dated 23 June 2023:
… anything we spent from our accounts, I have to get approval from Pr Willie regardless of what the funds for,
Moving forward, I will ask Pr Willie to give us approval to start deducting Tusaga Funds from the Tpuga and put aside (Administration Account) for Sabbath Domations as well as Office Bills as some of them are also unpaid.
[118] Pastor Toailoa says that Pastor Willie Papu has always been very enthusiastic about investing in cryptocurrency and other high-risk investments and was able to push through those investments because of his considerable personal influence.
[119]Pastor Toailoa says that Pastor Willie Papu proposed that SISDAC invest
$1 million into Bitcoin. This investment was proposed by Pastor Willie Papu even though SISDAC had already told the Charities Board it would limit high-risk investments.
[120] Pastor Toailoa says that, at the time, he had only recently joined the SISDAC board and Pastor Willie Papu told him that his first task was to get the Bitcoin investment approved. Pastor Toailoa says that he was not particularly enthusiastic
about the Bitcoin investment but felt that he did not know enough about investing in Bitcoin to contribute to the discussion.
[121] After SISDAC invested in Bitcoin, the Bitcoin wallet was kept on a computer in Pastor Toailoa’s office. Pastor Willie Papu called him and told him that the Bitcoin would be taken over by the World Committee and that his son would shortly be picking up the computer and would be handing it to the World Committee. The computer was then removed from Pastor Toailoa’s office.
[122]Pastor Toailoa says that SISDAC invested $1 million in Bitcoin but received
$700,000 worth of currency. According to Pastor Toailoa around $300,000 went missing at the outset.
[123] Pastor Toailoa says that most of SISDAC’s members including himself are poor. He and many others have been willing to donate hard earned cash to SISDAC to support SISDAC’s charitable mission. He says that transparency and accountability are necessary to ensure that donors can have the confidence to keep donating and SISDAC can fulfil its charitable mission.
[124] Pastor Toailoa says that the issue of an audit of the 2019 year was raised at meetings. Pastor Willie Papu queried whether it was necessary to undertake an audit given that SISDAC had been de-registered. Pastor Toailoa says that Pastor Willie Papu said that no auditor would be appointed until the Māngere Church Hall was finished.
[125] Pastor Toailoa denies any self-interest. He says that he appreciates and is thankful for the good things that Pastor Willie Papu has done for SISDAC in the past. Pastor Toailoa says that he was one of Pastor Willie Papu’s students. He says, however, that SISDAC is not his own church, nor Pastor Willie Papu’s church. It belongs to God and the congregation, and it is sad to see someone who he looked up to and had so much respect for not doing the right thing.
[126] In a further affidavit, Pastor Toailoa answers accusations that he has been responsible for misappropriation of funds. Those accusations were not raised at the
hearing in front of me and there does not seem to be any supporting evidence whatsoever that Pastor Toailoa has been responsible for the misappropriation of any funds.
[127] Pastor Toailoa swore an updating affidavit dated 19 October 2023 in which he raised a lack of building consents and Code of Compliance Certificates for the Māngere Church Hall.
[128] It appears that the building was used for a large public gathering prior to the issuing of any Code of Compliance Certificate or certificate for public use. In addition to concerns for the safety of attendees, Pastor Toailoa says that he is concerned that the trustees are ignoring regulatory requirements in relation to the building and thereby placing SISDA Property Trust and SISDAC at risk, both in relation to the regulatory breaches and in terms of reputation.
Faavae Cherry Gagamoe
[129] The applicants also rely on an affidavit of Faavae Cherry Gagamoe dated 25 October 2023.
[130] Mr Gagamoe deposes that he served as church minister from 2015 to 2021 in five different local churches in Auckland, and as church administrator for SISDAC. Mr Gagamoe states that he always reported to Pastor Willie Papu and that any decisions that needed to be made were discussed with and approved by Pastor Willie Papu. Mr Gagamoe managed a team of three to five office staff. The team was responsible for accounts received and payable, payroll, and oversight of income and expenditure for the church. Mr Gagamoe dealt with government agencies including the SFO, Commerce Commission, the DIA, the Charities Commission, and Inland Revenue.
[131] Before commenting on any matters involving the church, Mr Gagamoe says he always sought Pastor Willie Papu’s advice about the way to respond. Mr Gagamoe was involved in the Charities Board investigation.
[132] Mr Gagamoe says that the General Finance Ltd loan was negotiated by Pastor Willie Papu and signed in November 2020 at a time when the Charities Board was considering de-registration of SISDAC.
[133] The church was de-registered three months later in February 2021. This triggered an event of default under the General Finance Ltd loan. The church was liable for default interest and was required to refinance by paying down approximately
$1.5 million from its own funds and taking out a fresh loan for the balance of approximately $2.8 million.
[134] Mr Gagamoe says that the original quote for the Māngere Church Hall build was $9 million with another $2 million for the renovation of the hall.
[135] Defaulting on the loan caused an immediate blowout in the budget. However, COVID-19 created further delays and the increased cost of building materials added financial pressure. When Mr Gagamoe handed over administration to the new administrator and his team, all invoices relating to the Māngere Church Hall build were up to date. The construction company and contractors were still on board and there were no outstanding payments.
[136] Mr Gagamoe says that subsequently the construction company had no choice but to leave the project due to a myriad of issues including differences in work standards, lengthy delays in the payment of invoices, costly and amateur mistakes made by the leadership of the new cohort, sudden changes made to the scope of the work that were not properly planned and failed inspections.
[137] Mr Gagamoe was concerned by the decision of the new project team to change the contract from a fixed cost contract to a “charge up agreement”. This allowed potential abuse by the contractor and needed close monitoring.
[138] Mr Gagamoe says that Pastor Willie Papu was frustrated by the difficulties faced by SISDAC in raising finance and was concerned about reputational damage following the de-registration and fraud issue. Pastor Willie Papu determined that he
would establish a new church and that Pastor Toailoa, would keep SISDAC operational.
[139] The relationship between Pastor Willie Papu and Mr Gagamoe broke down when Pastor Willie Papu questioned his loyalty to SISDAC. Mr Gagamoe was removed from his role.
Simas Finai
[140] Simas Finai provided an affidavit in support of the applicants in response to affidavits filed by Pastor Willie Papu. Mr Finai was appointed as an elder for SISDAC in about 1999.
[141] He deposes that Pastor Willie Papu requested that the Remnant Church make additional cash donations to pay for the Māngere Church Hall and to assist with the payment of legal fees.
[142] According to Mr Finai there had been a total lack of transparency regarding expenditure on the Māngere Church Hall. It was never envisaged, he says, that the build would cost anywhere near $30 million.
[143] Mr Finai says that Pastor Willie Papu has accused Pastor Toailoa of stealing around $12 million from SISDAC in late 2022. That accusation has been repeated several times. Mr Finai regards the accusation as ridiculous and says Pastor Willie Papu would not let anyone else control where church funds went.
[144] Pastor Willie Papu has also accused Mr Gagamoe of stealing a large sum of money. He says that there is a fear amongst the congregation about speaking up in public against Pastor Willie Papu.
[145] Mr Finai was present at meetings which resulted in the termination of Pastor Toailoa’s roles at SISDAC. He says that Pastor Toailoa was told to step down as a division leader and move to the Remnant Church. However, Pastor Toailoa made it clear he was not prepared to leave SISDAC.
[146] The meeting was chaired by Pastor Willie Papu even though he is not entitled to act as an officer of a charity.
Pastor Willie Papu
[147] For the Respondents, Pastor Willie Papu filed an affidavit dated 27 September 2023.
[148] Pastor Willie Papu’s affidavit sets out the founding and structure of SISDAC. Pastor Willie Papu agrees that he is the leader of the World Committee, which was established in 1983.
[149] Pastor Willie Papu deposes that donations collected from the SISDAC churches are given to the World Committee to make decisions on funding allocations. The World Committee bank account is operated by Ms Fata, who is the north New Zealand finance officer of SISDAC.
[150] The World Committee exercises its discretion as to how donations are spent. Pastor Willie Papu accepts in his affidavit that, as the executive director of the World Committee, he has an influential position within the church and amongst the congregation. That influence stems from the respect and belief that members have in Pastor Willie Papu as their spiritual leader.
[151] Pastor Willie Papu deposes that his involvement with the church following de‑registration was to act as spiritual leader and to fundraise on behalf of the church. Matters relating to the administration and day-to-day affairs, finance and management remained with the boards and trustees.
[152] Pastor Willie Papu says that Ms Fata as the north New Zealand finance officer and trustee of the SISDA Property Trust plays a pivotal role in SISDAC and SISDA Property Trust affairs.
[153] At times Ms Fata would consult with Pastor Willie Papu but would make her own decisions, together with the other trustees. Pastor Willie Papu refutes
Pastor Toailoa’s claim that he never stopped being involved in the day-to-day administration and management of the church.
[154] Pastor Willie Papu says he did not attend initial meetings about the transfer of the four properties from SISDA Property Trust to Sunrise Homes. He did attend a later meeting of division leaders during which the transfer was discussed but only as an advisor and did not vote on the proposals.
[155] As to diversion of donations from SISDAC to the Remnant Church, Pastor Willie Papu says that Ms Fata, as the SISDAC finance officer, has control of the bank accounts. Any decision about how money is spent is always made by way of resolution and not by just one person.
[156] Pastor Willie Papu says that a total of $3 million was originally fundraised for the Māngere Church Hall build. Construction commenced in early 2019 with a budget of $9 million. By 2021, the build was nowhere near completion, but the building funds had been completely depleted under the administration of the former church administrator, Mr Gagamoe. To save the church from bankruptcy and mortgagee sale of its properties which were used as security for the loan, Pastor Willie Papu reached out to members of the church to assist financially with loan obligations.
[157] To complete the building Pastor Willie Papu says they had to take out a loan with General Finance Ltd — the only lending company that was willing to lend to the entity.
[158] Pastor Willie Papu deposes that he had nothing to do with the establishment of Sunrise Homes. Divisional leaders approved the transfer of the church’s properties to SISDA Property Trust. Sunrise Homes was established so the church could obtain a bank loan and enable the General Finance Ltd loans (with high interest rates) to be refinanced.
[159] Pastor Willie Papu deposes that the establishment of the Remnant Church was entirely based on the spiritual aims of SISDAC and says that the Remnant Church was
not established because SISDAC had been de-registered. It was always part of the plan to “go global”.
[160] The incorporation of the Remnant Church in Samoa occurred before SISDAC was de-registered as a charity in New Zealand. Pastor Willie Papu refutes any insinuation that the Remnant Church was not registered as a charity to avoid the oversight of Charities Services and the Charities Board.
[161] Pastor Willie Papu says that the Remnant Church was created in the knowledge that it would one day be amalgamated with SISDAC and SISDA Property Trust and that the properties of SISDAC and SISDA Property Trust will inevitably be regarded as properties of the Remnant Church. Pastor Willie Papu also regards the intermingling of funds between the churches’ bank accounts as inevitable.
[162] Pastor Willie Papu says that Pastor Toailoa, relocated to New Zealand from Australia with his family in 2020, having left Australia on unfavourable terms. This is disputed by the applicants.
[163] Pastor Willie Papu says, effectively, that Pastor Toailoa created disharmony within the church and that he would overturn or vary decisions made by the divisional leaders and executive committee.
[164] Pastor Willie Papu says that in May 2023 a decision was made by the World Committee to make internal restructures which resulted in Pastor Toailoa being removed from his position as the division leader of SISDAC Auckland and reassigned to be the leader of the Peniamina Region. Pastor Willie Papu says that the executive committee held a meeting on 14 August 2023 to officiate the removal of Pastor Toailoa as chairman.
[165] Pastor Willie Papu acknowledges that the decision to invest in Bitcoin was not vetted by an independent investment advisor but says that Pastor Toailoa was the chairman at the time the Bitcoin investment was approved and did not express any reservations about it.
[166] Pastor Willie Papu says that the exhibited statement from the World Committee bank account, shows that all money has been used appropriately to pay for the Māngere Church Hall build. No funds have been misappropriated and all are accounted for. Pastor Willie Papu says there is no need for a court appointed accountant to manage the church’s affairs.
Miracle Sopaima Deborah Pili Faatamala
[167] Miracle Sopaima Deborah Pili Faatamala provided an affidavit identifying herself as the secretary of the executive committee of the north New Zealand division of SISDAC.
[168] Ms Faatamala deposes that construction of the Māngere Church Hall has been a long-awaited project for the congregation and the new building is expected to be able to hold over 2,000 members. Ms Faatamala is aware that the church has experienced significant financial difficulties undertaking the Māngere Church Hall build. She deposes that the church has around 800 members in Auckland alone and depends entirely on tithes and donations from the members to continue running the church. Pastor Toailoa’s “breakaway group” consists of about 40 members.
[169] Ms Faatamala says that if the orders sought by the applicants are made, the congregation will not continue to voluntarily put tithes and donations towards paying the applicants’ legal fees.
[170] Referring to the Bitcoin investment, Ms Faatamala says that Pastor Toailoa was the chairperson who called the meeting and raised the proposal of investing $1 million into Bitcoin. She says that Pastor Toailoa was instrumental in having the Bitcoin investment approved.
[171] Ms Faatamala says that the Bitcoin investment is held in a digital “wallet” on an online account. There is a key to access the account and to transfer money from the account into the wallet. She deposes that the only person with the key to that account was Pastor Toailoa.
[172] Ms Faatamala deposes her understanding is that SISDAC and the Remnant Church are one and the same. She says that it was discussed and approved at the advisory committee meeting, attended by Pastor Toailoa, that tithes will be assigned to the Remnant Church’s bank account. She says that, at a further advisory meeting chaired by Pastor Meki Fesolai and attended by Pastor Toailoa on 5 April 2022, it was reaffirmed that tithes would be assigned to the Remnant Church while funds for Māngere Church Hall would be assigned to SISDAC.
[173] Ms Faatamala says that she was closely involved with the application to re‑register SISDAC. She outlines changes that were made as part of the application for re-registration.
[174] Those changes included the establishment of an investment committee to make recommendations to the executive committee for prudent investment. The original members of the investment committee proposed that it be comprised of lay people and others who are not members of the church. However, the church decided to appoint church members including Pastor Toailoa and Ms Faatamala as members of the investment committee.
[175] Ms Faatamala says that Pastor Toailoa was asked to stand down as division leader for SISDAC Auckland in May 2023 and instead to serve as a pastor of the Peniamina local church. She says that this is not unusual as the World Committee makes such decisions from time to time for the betterment of the congregation. She says that Pastor Toailoa was asked to stand down because of poor work performance and complaints that had been made by members of the congregation to the World Committee.
[176] Ms Faatamala says that Pastor Toailoa is a man of huge pride who likes to be in power and he became very upset and discontented with the church when he was asked to step down.
[177] Ms Faatamala says that she became aware that Pastor Toailoa, along with some 30 members of the church (who she says are comprised mainly of his immediate
family), all stopped their tithings and contributions towards the Māngere Church Hall build.
[178] Ms Faatamala says that on 14 August 2023 the committee met and resolved to remove Pastor Toailoa as chairman of the board.
[179] At the AGM on 24 September 2023, attended by the executive committee and all the members of the Auckland congregation, the attendees confirmed the removal of Pastor Toailoa from the SISDAC executive committee.
[180] Ms Faatamala confirms, as secretary, that the church has not embarked on any further investments since re-registration and says that funds are not being used for any purpose other than the benefit of the church.
[181] Ms Faatamala says that while Pastor Willie Papu is influential and commands a lot of respect within the congregation, he does not dictate how SISDAC, SISDA Property Trust and the Remnant Church should be run.
[182] She says that it is not true that nothing occurs without Pastor Willie Papu signing off on it. He is often consulted for his wisdom and experience; however, the decisions of the trustees and the board are ultimately independent. Pastor Willie Papu does not attend meetings. Although he gives advice, the trustees are not bound by his advice.
[183] In a supplementary affidavit dated 13 October 2023, Ms Faatamala deposes that, at the dedication of the Māngere Church Hall, members of the congregation were invited to sign a petition to the Court confirming their knowledge of these proceedings and stating their opposition to the claims and applications currently being brought by the applicants. A copy of the petition signed by more than 1,000 members of the church is annexed to the affidavit.
Tonga Seni Fata
[184]Ms Fata provided an affidavit dated 27 September 2023.
[185] Ms Fata deposes that the ability of the church to continue operating is dependent upon the goodwill of the members of the congregation, both domestically and internationally. She says that their support will not continue if the orders sought by the applicants are made.
[186] Ms Fata says that the proposed receiver will not have any real understanding of the congregation or how the church operates, and this will be a major issue for the church.
[187] Ms Fata says that it is “our” religious belief that SISDAC and the Remnant Church are one and the same and intermingling of funds is inevitable; and there is no reason for them to be separated as while they have been incorporated as separate entities — they are one and the same. Ms Fata says that the members of the church generally consider SISDAC and the Remnant Church to be one and the same. Both names are used interchangeably and both names are to be used for the newly built Māngere Church Hall.
[188] Ms Fata deposes that the Bitcoin wallet is still held at the SISDAC headquarters.
[189] Ms Fata deposes that the Remnant Church was not established by Pastor Willie Papu so that he could maintain control over SISDAC. Rather the Remnant Church was established to advance SISDAC’s ultimate mission to “go global” and unite people of the same beliefs but potentially of different denominations.
[190] Ms Fata says that SISDAC is what identifies the group as Samoan and as members of the Seventh Day Adventist Church. SISDAC is at the core of the group’s religious and cultural identity. The Remnant Church, by contrast, is SISDAC’s global mission. SISDAC is centred on the Samoan community. The Remnant Church was established and intended to be open to everybody regardless of ethnicity or cultural background.
[191] Ms Fata says that SISDAC’s application for re-registration specifically referred to the fact that Pastor Willie Papu:
(a)had stepped down as leader of the church to allow the executive committee to lead and manage SISDAC;
(b)was not a signatory on any of SISDAC bank accounts and had no access to those accounts;
(c)was not a member of the board of trustees of SISDAC or the executive committee; and
(d)was not a member of the investment committee and was not permitted to attend meetings of the investment committee.
[192] Ms Fata says that she and many in the congregation have much respect and admiration for Pastor Willie Papu, not only as the co-founder of the church but also the unanimously appointed leader of the World Committee. She says Pastor Willie Papu remains the spiritual leader and leads fundraising efforts, but he is not involved in the day-to-day management and administration of either SISDAC, SISDA Property Trust nor the Remnant Church.
[193] Ms Fata deposes that the transfer of the Sunrise Properties was done to enable SISDAC to obtain finance with lower interest rates. Ms Fata says that the group was advised that banks were reluctant to lend to charitable trusts and would only deal with a company. As a result, Sunrise Homes was incorporated, and the properties transferred.
[194] She deposes that Sunrise Homes was incorporated on 14 July 2022 for the sole purpose of using it as a vehicle to make commercial investments on the church’s behalf. Ms Fata says that the four properties transferred to Sunrise Homes (out of 19 held by SISDA Property Trust) were the only properties that were owned outright.
[195] She says that it was understood that the properties were still to be held on trust for the benefit of the church and were not to be used for any private purpose.
[196] Ms Fata explains the lending arrangements. Sunrise Homes was offered a loan of $2 million with General Finance Ltd on 2 November 2022. A condition of the loan
was that the directors signed personal guarantees. That loan did not go ahead. Instead, there was a further application to General Finance Ltd by the SISDA Property Trust and a loan of $2 million was obtained on 2 December 2022 on the same terms as the Sunrise Homes loan offers but without the requirement for personal guarantees.
[197] The General Finance Ltd loan carries an ordinary interest rate of 10.85 per cent with the default interest rate being further five per cent in addition to the ordinary interest rate. At present the SISDA Property Trust is making over $36,000 a month in interest payments alone.
[198] Ms Fata acknowledges that there is no trust deed between SISDA Property Trust and Sunrise Homes.
[199] Ms Fata says that if the Court continues the interim preservation orders SISDAC will not be able to meet the repayments required to complete the church build and the SISDA Property Trust may also lose the benefit of the tax advantages it holds. Further, Ms Fata says that SISDA Property Trust will not be able to meet its ongoing liabilities including the monthly interest payments of approximately $36,000 if it is required to pay for an interim receiver and to pay for the applicants’ legal fees.
Financial statements of the Trusts
[200] In September 2023, Michael Prasad Group Ltd was appointed by SISDA Property Trust, SISDAC and the Remnant Church to complete financial statements for years up to and including 31 December 2022. These financial statements were completed by 20 February 2024.
[201] The financial statements show that SISDAC received charitable donations some of which were transferred to SISDA Property Trust and recorded as donations made and/or received. The Remnant Church also apparently received money from SISDA Property Trust. The notes about related parties in the performance report of the SISDA Property Trust state:
In addition, the Trust also had transactions and payments with the Universal Remnant Church of the Living. These are recorded as donations made and/or
received. The Trust and the Universal Remnant Church of the Living are related parties through their respective trust deeds.
[202] The notes about related parties in the performance report of the Remnant Church state:
During the year, the Trust entered into various transactions and payments with the Samoan Independent Seventh Day Adventist Property Trust. These have been recorded as donations made and/or received.
The Trusts are related parties through their respective trust deeds.
[203] The accounts do not provide the exact source of the charitable donations to Remnant Church. On the above observations some of the charitable donations made to SISDAC, SISDA Property Trust or the Remnant Church may have been transferred, potentially more than once, to the other entities.
Discussion
[204]The power to appoint a receiver or manager arises in three ways:
(a)pursuant to section 138 of the Trusts Act 2019;
(b)under the inherent jurisdiction of the Court; or
(c)pursuant to section 60(1)(d) of the Charitable Trusts Act.
[205] The test for appointment differs somewhat depending upon how the appointment is made.
[206] Appointment of a receiver under s 138(2) of the Trusts Act can be made where “reasonably necessary” in the circumstances of the trust, and just and equitable. This is a less restrictive test than the test for appointment under inherent jurisdiction which has been described as a measure of last resort.2
[207]In Armani v Armani Walker J said:3
2 Body Corporate 81012 v Memelink [2022] NZHC 1244 at [39] citing Andrew Butler (ed) Equity and Trusts in New Zealand at 33.1.4.
3 Armani v Armani [2021] NZHC 3145, [2022] 2 NZLR 547 at [86].
In its context, reasonably necessary means something more than expedient or desirable, falling closer to “required” or essential to achieve a particular outcome or purpose, but is not necessarily restricted to measures of a last resort. Even so, the availability of alternative, less drastic remedies will be a factor going to the “just and equitable” requirement.
[208] In Lama v Hope a manager was appointed pursuant to s 60(1)(d) of the Charitable Trusts Act to manage and administer a Buddhist monastery.4 The plaintiff submitted that appointment of a manager was necessary to ensure the proper administration of the trust until the resolution of the substantive issues in the proceeding. The Judge accepted that the assets of the trust were not presently at risk but noted that the impasse between the parties meant that the monastery was unable to pursue the objects of the trust deed in the manner intended. The Judge concluded that the appointment of a manager and administrator was necessary to facilitate the use of the monastery for the purposes of the trust.
[209] Appointment of a receiver or manager is clearly not a decision to be taken lightly. Such an appointment removes the power of the church to make its own financial decisions for the period of management. There are also issues of cultural literacy to consider. Any appointment imposes expense on the Respondents which will have to be met from tithes and donations made by people who are opposed to the making of the orders.
[210] On the other hand, this is not a situation where the Court is seeking to appoint a manager of its own volition. The applicants are Samoan and members of the same community and faith as the Respondents. They are aware of the cultural issues that arise. Nevertheless, they regard the appointment of a manager as necessary.
Do the applicants have standing to bring this application?
[211]The Courts generally take a liberal approach to standing.5
[212] The applicants are all former SISDAC board members and say they are seeking to protect the beneficial interests of SISDAC in circumstances where the trustees have
4 Lama v Hope HC Auckland CIV-2004-404-1363, 1 April 2004.
5 The Anglican Catholic Church Inc v The Holy Catholic Church (Anglican Rite) Trust HC Auckland CIV-2002-404-2751, 26 June 2003 at [21].
failed to do so. Pastor Toailoa was Chairman of the executive committee of SISDAC and a board member when the proceedings commenced.
[213] The Respondents say that the applicants are former SISDAC board members and have never been trustees or officers of the SISDA Property Trust and do not have any rights conferred upon them under the trust. The Respondents view the claim that the applicants have standing because SISDA Property Trust holds the properties on trust for SISDAC as tenuous in circumstances where they are no longer members of SISDAC and have stopped paying tithes.
[214] The Respondents say that a mere interest in how SISDAC operates is insufficient.
[215] It is true that the Courts may deny standing where a defendant can show that a plaintiff lacks good faith or that the complaint is clearly frivolous, vexatious, or otherwise untenable.6 But the main reason that the applicants are former members of SISDAC is because of the dispute that resulted in the current proceeding.
[216] While the applicants have never been officers or trustees of SISDA Property Trust, that trust only exists and holds property for the charitable purposes of SISDAC. SISDAC’s board members do have a proper interest in ensuring that SISDA Property Trust’s assets are applied for the charitable purposes of SISDAC, and they must be able to act to ensure SISDAC’s interests are protected.
[217] Applications of this nature will inevitably be brought by an applicant who is dissatisfied with the way in which a trust is administered. Such an application is always likely to lead to division and the removal or attempted removal of the dissident from any position in relation to the trust. It would be quite wrong to deny standing to such applicants. If they are correct in their concerns, they are insiders raising real concerns about mismanagement of a charitable trust with which they were previously closely associated. People in the position of the applicants are the only people likely
6 O’Neill v Otago Area Health Board HC Dunedin CP50/91, 10 April 1992 as cited in Whanganui District Council v New Zealand Parole Board [2012] NZHC 2248 at [76].
to know if matters are being mismanaged within a trust. It would be completely illogical and against natural justice to deny them standing.
[218]I find the applicants do have standing to bring these proceedings.
Is it reasonably necessary to appoint a receiver/manager?
[219] The main concern of the applicants is that nothing has changed since re‑registration so far as the management of the Trusts and the involvement of Pastor Willie Papu is concerned.
[220] The historic events behind the de-registration are not actually very historic. Pastor Willie Papu is not to be held accountable for the sins of his daughter, Ms Papu, but the decision of the Charities Board is very clear as to his own failings as an administrator.
[221] This Court cannot and should not delve into ecclesiastical matters.7 Pastor Willie Papu’s spiritual leadership is not under attack. Any ongoing de facto involvement by him as an officer of the Trusts does however represent a significant danger to the charitable status of the Trusts.
[222]The definition of “officer” under the Charities Act is:8
officer, in relation to a charitable entity,—
(a)means a person occupying a position in the entity who is able to exercise significant influence over substantial decisions of the entity including, but not limited to,—
(i)in relation to a trust, the trustees of the trust; and
(ii)in relation to any other entity, a member of the board or governing body of the entity (if it has a board or governing body); and
(iii)a person occupying any other position (for example, a chief executive or treasurer) if that position enables them to
exercise such influence:
7 Mabon v Conference of the Methodist Church of New Zealand [1998] 3 NZLR 513 (CA) at 523 cited in Pilgrim v Attorney-General (sued on behalf of the Ministry of Business, Innovation and Employment, Labour Inspectorate) [2023] NZEmpC 105, (2023) 19 NZELR 793 at [141].
8 Charities Act 2005, s 4.
(b)includes a person who has powers conferred on them to make decisions that would otherwise fall on the trustees, the board, or the governing body of the entity (regardless of whether the person holds a position in the entity):
(c)includes any class or classes of persons declared by regulations to be officers for the purposes of this Act:
(d)excludes any class or classes of persons that are declared by regulations not to be officers for the purposes of this Act
[223] The evidence suggests that Pastor Willie Papu has continued to act as a de facto officer of the Trusts. The level of influence he holds is demonstrated by emails from as late as June 2023 where church administrator, Ms Fata, advised Pastor Toailoa that all financial decisions needed to be approved by Pastor Willie Papu.
[224] The reverence in which Pastor Willie Papu is held is apparent from the affidavits filed by the respondents. There is an apparent “blind faith” in Pastor Willie Papu, certainly as a spiritual leader, and I find there is real difficulty for the Respondents in drawing a line between Pastor Willie Papu’s spiritual guidance and his involvement in the financial administration of the Trusts. There is a risk that the safeguards put in place upon re-registration are insufficient because of the reverence with which Pastor Willie Papu is treated and regarded by the congregation and by the trustees.
[225] The way in which the Remnant Church is treated as indistinguishable from SISDAC supports the applicants’ position. It does not seem to be disputed that charitable donations to SISDAC have been paid to the Remnant Church and that there is no clear delineation between the two entities. The Respondents themselves depose that they regard the entities as “one and the same” and say that intermingling of funds is inevitable.
[226] There is evidence of actual intermingling of SISDAC and Remnant Church funds. Emails exhibited show that donations sought from donors by SISDAC were deposited into accounts belonging to the Remnant Church.
[227] Charitable donations have apparently been passed to Remnant Church at a time when it was not registered as a charity. I note that the registration as a charity is
extremely recent and there are questions as to the validity of the registration. The tax implications do not seem to have been considered at all and the apparent lack of understanding of the difference in status is of concern. This supports the applicants’ contentions regarding mismanagement and represents, in my view, an unacceptable risk to both trusts.
[228] The Respondents say that appointment of a manager would have disastrous financial consequences as tithes and other financial contributions will not be paid by a congregation that does not support such an order. The applicants say that the manager could resort to realising property to meet its obligations. There are 21 properties and not all are necessary for delivering the Trusts’ charitable purposes. The applicants’ position is that the issues at stake are significant enough to warrant the sale of property if necessary.
[229] The Respondents also raise the issue of the Global Finance Ltd loan and say that appointment of a receiver or manager is likely to be regarded as an event of default which would be catastrophic. The applicants submit that appointment of a manager under the Charitable Trusts Act would not trigger an event of default. The Attorney‑General regards that as questionable.
[230] Any appointment of a manager would not be for the usual purpose that a receiver is appointed but it may trigger an event of default and that must be factored into the decision. The default clause in the loan seems intended to relate to an insolvency situation. That is not the case here. The concern here is around the management of the Trusts and compliance with the conditions of re-registration. Nevertheless, there is a risk that the appointment of a manager under the Charitable Trusts Act could be seen by General Finance Ltd as an event of default. Even if that is incorrect, the Trusts could incur the burden of defending that claim. Against that concern, further de-registration would have the same effect. De‑registration was treated as an event of default previously.
[231] Appointment of a manager does create a risk of significant financial consequences, but those risks must be balanced against the risks that exist currently. The uncontested evidence supports a contention that funds donated to SISDAC were
passed to the Remnant Church. Pastor Willie Papu exerts considerable influence not only on spiritual matters but in every respect. The evidence of the former auditor establishes that there are ongoing and recent concerns about the financial management of the Trusts. Following de-registration there was a further high-risk investment in Bitcoin. There is a risk of further de-registration if the conditions of re-registration are not being complied with.
[232] The Charities Board previously expressed concern about the undue influence Pastor Willie Papu exerted. If Pastor Willie Papu continues to exert the same influence then the issues set out by the Charities Board remain.
[233] The Charities Board is separate to the Attorney-General’s oversight of charities but the Attorney-General’s ongoing concerns about the administration of the Trusts supports the applicant’s position.
[234] There has been a lack of any audit process at all since 2019. The auditor instructed in respect of the 2019 audit was unable to complete it and, in September 2022, expressed concerns over the lack of appropriate financial procedures and controls within the entity and concerns over the board’s financial management practices.
[235] The Respondents say that it is too early to consider the appointment of an interim manager or receiver and that the matter should continue to the substantive hearing. The Respondents say they do not oppose the applicants having their day in Court, (although it is noted there is a challenge as to standing) but say that it would be financially disastrous for a receiver to be appointed.
[236] It seems that if a receiver or manager is not appointed the parties will continue on the path of costly High Court litigation. That is their right, but it diminishes the argument that appointment of an interim manager should not be made for financial reasons.
[237] If there is no substance in the concerns, the appointment of a manager will reveal that, and the litigation will be at an end. That would seem to be in everyone’s
best interests. If there is substance to the concerns, then the appointment of the manager will protect the position of SISDAC and SISDA Property Trust from the prospect of further misuse of funds and de-registration for the same concerns that arose earlier. Nevertheless, this is not a decision to be made pragmatically. There is a legal test that must be met. That test is whether the appointment of a manager/receiver is reasonably necessary.9
[238] I agree that there is a serious question about whether the conditions of re‑registration have been avoided by the establishment of the Remnant Church and the ongoing influence of Pastor Willie Papu in the management of the Trusts. There are grounds for concern that Pastor Willie Papu still effectively operates as an officer of both trusts. There is a real risk of ongoing financial mismanagement.
[239] It seems to be acknowledged that the transfer of the four properties to Sunrise Homes was not done in accordance with the SISDA Property Trust deed. This seems to be an example of poor management rather than any actual attempt to dissipate the assets of the Trusts. The transfer of the properties in the way it occurred, however, is symptomatic of poor management and a lack of proper oversight. Poor management and lack of oversight means that actual wrongdoing could occur again as it has done in the past.
[240] If the Court declines to appoint an interim manager, there is a risk that there will be further action by the Charities Board.
[241] I have considered whether there is any realistic alternative to the appointment of an interim manager or receiver to address these concerns.
[242] The suggestion that a forensic accountant be appointed is problematic. History suggests that there will be difficulty with the provision of information and there is unlikely to be cooperation. Apart from the issues raised by the Respondents as to whether the rules permit such an appointment at this stage, there is a risk of ongoing litigation to obtain compliance. In my view, the appointment of a forensic accountant is not a practical or cost-effective solution.
9 Armani v Armani, above n 3.
[243] The central issue is the influence and involvement of Pastor Willie Papu as a de facto officer of both Trusts. Pastor Willie Papu is revered by his congregation and there does not seem to be any way of ensuring that he is not exerting undue influence other than by the appointment of an independent person who does not feel bound to obey Pastor Willie Papu.
[244] Given the evidence of the auditor Mr Wood, it is impossible to accept that the problems that existed at that time of de-registration have been effectively resolved. Pastor Willie Papu does not accept that there is mismanagement and, given his position as leader in every sense of the word, there is no internal way to address the problem.
[245] In the circumstances nothing short of appointment of an interim manager will suffice to ensure that the Trusts’ obligations are being met. The appointment of an interim manager is reasonably necessary.
What form should the managerial appointment take?
[246] The appointment will be under s 60(1)(d) of the Charitable Trusts Act. The most immediate concern relates to the charitable status of the Trusts.
[247] The danger is that ongoing financial mismanagement and the apparent ongoing influence of Pastor Willie Papu on the officers of the Trusts puts the charitable status of the Trusts at risk.
[248] Appointment of a manager should avoid the risk of de-registration for non- compliance with the conditions of re-registration and should ensure that systems for ongoing compliance can be put in place.
What conditions should attach to the appointment?
[249] The appointment must be limited in expense but not in time. If the appointment is limited in time, there is a potential for obstruction with a view to simply waiting out the management period.
[250] The manager will be required to report to the Court every 3 months. If the manager’s first report to the Court is positive there may be grounds for the Respondents to seek to vary or review the orders. Co-operation with the manager needs to be incentivised to avoid repeated recourse to the Court.
[251] It must also be made clear that the role of the manager is not to influence matters of a spiritual natural. The church has the right to control its spiritual destiny.
Should the preservation orders remain in place?
[252] The preservation orders will remain in place pending the first report of the manager unless the manager requests that they be discharged earlier.
Orders
[253]I make the following orders:
(a)Andrew McKay of BDO New Zealand is appointed as manager of the Samoan Independent Seventh Day Adventist Property Trust (SISDA Property Trust) and the Samoan Independent Seventh Day Adventist Church (SISDAC) for the purpose of managing and administering each charitable trust in the best interests of the objects of the trust until further order of the Court or determination of the proceeding.
(b)The manager is entitled to exercise any power of a trustee until further order of this Court.
(c)The manager must endeavour to consult with the applicants and the First Respondents when making decisions relating to funding the ongoing operation of SISDAC or the construction, use, maintenance or disposal of buildings or real property owned by the SISDA Property Trust.
(d)The manager must seek to identify and secure the property of SISDA Property Trust and SISDAC
(e)The manager must endeavour to prepare audited accounts for SISDA Property Trust and SISDAC.
(f)The manager must prepare periodic reports of his activities to the Court and parties to this proceeding no less often than every three months.
(g)The preservation orders currently in place remain in place pending the manager’s first report to the Court.
(h)The manager may request variation or removal of the preservation orders at any stage. Any such request may be dealt with on the papers if not opposed by the parties.
(i)The manager’s actual and reasonable fees are to be paid out of the assets of the SISDA Property Trust.
(j)The manager’s fees are capped at $50,000 (excluding GST), with leave to apply to the Court to extend this cap.
(k)Leave is reserved to the manager to seek any further directions or orders that might be required to implement the above orders.
(l)Leave is reserved to the parties to seek further directions or orders following receipt of each report provided by the manager.
[254]The costs of this hearing are reserved to the substantive hearing.
Wilkinson-Smith J
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