Trainer v Leake
[2018] NZHC 682
•16 April 2018
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
I TE KŌTI MATUA O AOTEAROA AHURIRI ROHE
CIV-2016-441-000147
[2018] NZHC 682
UNDER Part 18 of the High Court Rules IN THE MATTER OF
The Declaratory Judgments Act 1908 and the Trustee Act 1956
BETWEEN
MICHAEL BARRY TRAINER and CRAIG DOUGLAS RAWCLIFFE
Plaintiffs
AND
LAURENCE ADRIAN LEAKE, MARTYN ATHOL PATCHETT and DAVID JAMES HOLLOWS
Defendants
Hearing: 12, 13, 14 and 15 February 2018 Appearances:
M Macfarlane for the Plaintiffs
J M von Dadelszen for the Defendants
Judgment:
16 April 2018
JUDGMENT OF WOOLFORD J
This judgment was delivered by me on Monday, 16 April 2018 at 4:00 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors: Sainsbury Logan & Williams, Napier
Bannister & von Dadelszen, Hastings
TRAINER & ANOR v LEAKE & ORS [2018] NZHC 682 [16 April 2018]
Introduction
[1] This is a dispute between rival contenders as trustees of a religious trust. The plaintiffs, Michael Trainer and Craig Rawcliffe, say they are the trustees of the Hawkes Bay Revival Centre Trust (the Trust). They seek a declaration that the defendants, Laurence Leake, Martyn Patchett and David Hollows, are not trustees of the Trust and that they are the trustees. On the other hand, the defendants say the plaintiffs are not, or should not be, trustees and counterclaim against Mr Trainer for the sum of $122,487 paid to him by the Trust.
Factual background
[2] The Trust was established by deed dated 1 December 1986 (the Trust Deed). The purpose of the Trust is to hold real and personal property “for the benefit of the Religious body known as the Hawkes Bay Revival Centre” (the Church). The original trustees were Mr Trainer, Simon Waby and Frederick Needham.
[3] Clause 1 of the Trust Deed recognised Mr Trainer as the original pastor of the Church and provided an appointment process for his successor as pastor. It states:
“The Hawke’s Bay Revival Centre” is the unincorporated Religious body of persons for the time being holding (inter alia) the following tenets or beliefs:
…
and of which the said MICHAEL BARRY TRAINER is at present the Pastor, and the members of which body accept and recognise the said MICHAEL
BARRY TRAINER or his successor in office as hereinafter defined as having the oversight or control of such body in both Spiritual and Temporal matters. In the event of the said MICHAEL BARRY TRAINER ceasing to hold his present office through death or voluntary resignation his successor shall be appointed by FREDERICK JOHNSTON NEEDHAM (the Overseeing Pastor of the Auckland Revival Centre) or by the person for the time being appointed to exercise the office of “the Overseeing Pastor” pursuant to the Deed of Trust for the Auckland Revival Centre dated the 3rd day of November One thousand nine hundred and seventy (1970).
[4]Clause 1 also recognised Mr Trainer as the overseeing pastor. It further states:
The said MICHAEL BARRY TRAINER or his successor in office for the time being is for the purpose of this Deed called “the Overseeing Pastor”. There may at the discretion of the Overseeing Pastor be other person(s) from time to time holding a position in the said body wherein he or they bear the title “Pastor” but notwithstanding his office such person shall not be entitled as of
right to the office of Overseeing Pastor unless he be appointed in the manner set forth above. In case any question should arise as to whether a person or persons is or are a member or members of the Hawkes Bay Revival Centre the decision of the Overseeing Pastor shall be final and conclusive.
[5] The office of overseeing pastor of the Church is of real significance as the overseeing pastor has the power to appoint and remove trustees of the Trust. Clause 11 of the Trust Deed states:
11. THE Overseeing Pastor as hereinbefore defined shall have the power by Instrument in writing signed by him to remove any Trustee or Trustees from office without assigning any reason therefor and the propriety of his doing shall not be called into question by any person whatsoever. The statutory power of appointing new Trustee or new Trustees shall apply to this Deed and shall be exercisable by the Overseeing Pastor.
[6]In settling the Trust on 1 December 1986, the settlors intended:
(a)That any successor to Mr Trainer as pastor should have the oversight or control of the Church in both spiritual and temporal matters;
(b)Mr Trainer’s successor as pastor should be formally appointed by the overseeing pastor of an affiliated church who was named as Mr Needham or his successor; and
(c)The pastor who had oversight or control of the Church in both spiritual and temporal matters was the overseeing pastor and had consequential rights to remove existing trustees and appoint new trustees.
[7] Between 1992 and 2004 various changes were made to the trustees of the Trust. There is no issue with the validity of these changes. By a deed of retirement and appointment of trustees dated 6 March 1992 signed by Mr Trainer and Mr Waby as the continuing trustees, Mr Needham as the retiring trustee and Jock Duncan as the new trustee, it is recorded that Mr Needham retired as a trustee and Mr Duncan was appointed as a new trustee.
[8] Between January 1995 and April 2004 three further deeds of retirement and appointment of trustees were executed. The first deed dated 31 January 1995 recorded Mr Duncan as a trustee, the retirement of Mr Waby as a trustee and the appointment
of Bryan Smith as a new trustee. The second deed dated 27 June 1995 recorded the retirement of Mr Duncan and Mr Smith as trustees and the appointment of Mr Watkins and Mr Leake as new trustees. The third deed dated 2 April 2004 recorded the retirement of Mr Watkins as a trustee.
[9] Following the retirement of Mr Watkins as a trustee on 2 April 2004, Mr Trainer and Mr Leake, one of the plaintiffs and one of the defendants, were the sole trustees of the Trust. In their capacity as trustees, they are the current registered proprietors of two properties held by the Trust for the benefit of the Church. In or about 1990 premises were purchased at Tuckers Lane, Clive, Hawkes Bay, which are utilised by the Church as their place of worship. A beach property at Whangaehu Road, Porangahau, Hawkes Bay, was also purchased in two lots on 20 April 1995 and 13 December 2000, which is utilised by the Church as a holiday camp.
[10] On 17 January 2007, Mr Trainer relinquished his position as pastor of the Church and later that year, moved to Auckland. He said he resigned because he could not accumulate the biblical support for an issue that had bothered him and was not convinced of the direction that was being taken by the Church. There is no issue with the validity or effectiveness of Mr Trainer’s resignation. No formalities were required. The other trustee, Mr Leake, carried on from his role of assistant pastor to become pastor of the Church from that time. He has, however, never been formally appointed as Mr Trainer’s successor as pastor by Mr Needham as required by Clause 1 of the Trust Deed.
[11] Later the same year, on 14 December 2007, Mr Trainer signed a letter, which states:
TO WHOM IT MAY CONCERN
This is to certify that Michael Barry Trainer wishes to tender his resignation as Head Trustee from the Hawkes’ Bay Revival Centre Trust Board.
Mr Trainer’s resignation as a trustee of the Trust was not, however, valid in terms of the Trustee Act 1956 because it was not in the form of a deed. Nonetheless, Mr Trainer has had no involvement in the Trust or its affairs since leaving the Hawkes Bay. He
says, however, that since that time there have been no actions undertaken by the Trust which have required his input.
[12] Notwithstanding his letter of resignation as head trustee, seven and a half years later, on 30 July 2015, Mr Trainer wrote to the lawyer for the Trust stating that he would remain as head trustee and nominating James Hastings and Robert Jarvis as trustees of the Trust. The relevant documentation appointing Mr Hastings, and Mr Javis as trustees was, however, not drafted. Mr Trainer then sought independent legal representation.
[13] Following independent advice, Mr Trainer procured Mr Needham to sign a deed dated 11 January 2016 purporting to appoint Mr Trainer as pastor of the Church, notwithstanding that Mr Leake had been filling that role since 2007. Two deeds dated 30 March 2016 were then executed by Mr Trainer in his capacity as “overseeing pastor”. In the first deed, Mr Trainer purported to remove Mr Leake as a trustee of the Trust. In the second deed, Mr Trainer purported to appoint his co-plaintiff, Mr Rawcliffe, as a trustee in place of Mr Leake.
[14] On the other hand, on 5 February 2016, Mr Leake purported to exercise his right as “the current trustee” under s 143(1)(d) of the Trustee Act to appoint his co- defendants Mr Patchett and Mr Hollows as new trustees. They then informed the Charities Commission they were trustees of the Trust.
Plaintiffs’ submissions
[15] The plaintiffs’ case is simple. They say that despite resigning as pastor of the Church in 2007, Mr Trainer never resigned from his role as overseeing pastor. They acknowledge that Mr Leake became pastor at the time Mr Trainer relinquished his position as pastor, but say it was permissible in terms of the Trust Deed for there to be both a pastor and an overseeing pastor at the same time.
[16] The plaintiffs also say that Mr Trainer’s letter of resignation as head trustee later the same year was ineffective as the position of head trustee is not recognised in the Trust Deed and the letter was, in any event, not a deed as required by s 45(1)(a) of the Trustee Act. Moreover, the plaintiffs say that Mr Needham did not appoint a
successor to Mr Trainer as overseeing pastor as required by the Trust Deed and as overseeing pastor, Mr Trainer had the right, in terms of the Trust Deed, to remove Mr Leake as trustee and replace him with Mr Rawcliffe.
Defendants’ submissions
[17] The defendants say that following Mr Trainer’s resignation as pastor and his move to Auckland, Mr Trainer renounced all his duties as a trustee and left Mr Leake to undertake all trustee duties effectively as sole trustee. They also say Mr Trainer refused or neglected to formalise his resignation as a trustee by signing a deed to that effect.
[18] The defendants therefore say that Mr Trainer has “refused to act” as a trustee of the Trust in terms of s 43(1)(d) of the Trustee Act. Furthermore they say that, when approached in 2015 to have Mr Trainer replaced and to appoint new trustees, Mr Needham had also refused to act. The defendants, therefore, say that Mr Leake was empowered as the surviving or continuing trustee to appoint Mr Patchett and Mr Hollows to be trustees of the Trust in the place of Mr Trainer as there was no other person nominated for the purpose of appointing new trustees by the Trust Deed able and willing to act.
Discussion
[19] The proper interpretation of the Trust Deed is crucial to the outcome of this case.
[20] At the outset, the Trust Deed records Mr Trainer as pastor. He is said to be accepted and recognised by “the unincorporated Religious body of persons” known as the Hawkes Bay Revival Centre “as having the oversight or control of such body in both Spiritual and Temporal matters”. The Trust Deed then provides that if Mr Trainer ceases to hold “his present office” (which must mean his office as pastor), his successor is to be appointed by Mr Needham, the overseeing pastor of the Auckland Revival Centre or by the person for the time being appointed to exercise the office of overseeing pastor pursuant to the Auckland Revival Centre Deed of Trust.
[21] The Trust Deed then records that Mr Trainer or his successor in office for the time being (which, again, must mean his office as pastor) is for the purpose of the deed called the overseeing pastor. The Trust Deed then provides that there may, at the discretion of the overseeing pastor, be (an)other person(s) from time to time holding a position in the Church wherein he or they bear the title pastor, but notwithstanding his office such person shall not be entitled as of right to the office of overseeing pastor unless he is appointed in the manner set forth above (appointment by the overseeing pastor of the Auckland Revival Centre).
[22] There is no doubt that Mr Trainer resigned as pastor in early 2007 and left the Hawkes Bay altogether. Since then he has not had the oversight or control of the Church in either spiritual or temporal matters. There is also no doubt that Mr Trainer intended to give and did give Mr Leake “the complete reins of the organisation, of the church” and that since then Mr Leake has had the oversight or control of the Church in both spiritual and temporal matters.
[23] The formal process of appointment of Mr Leake to succeed Mr Trainer as pastor by Mr Needham was, however, not followed as in the meantime, Mr Needham had doctrinal differences with Revival Centres International on issues of morality and had split from the international network and formed his own church, the Auckland Christian Assembly. Mr Trainer had also been instrumental in setting up a new Revival Centre in Auckland following Mr Needham’s split from Revival Centres International. Mr Needham was therefore not approached to appoint Mr Leake as Mr Trainer’s successor because Mr Leake had sided with Revival Centres International in its doctrinal differences with Mr Needham. Nonetheless, there is no doubt that Mr Leake has been endorsed as the pastor of the Church by Revival Centres International. Mr Leake could also be viewed as the overseeing pastor as there is no one more senior in the Church. In effect, he is both the de facto pastor and the de facto overseeing pastor.
[24] It is an obvious inference that Mr Needham was given the power of appointment of Mr Trainer’s successor as pastor because of his status in Revival Centres International as a senior pastor. Mr Trainer had, in fact, been requested to move from Auckland to the Hawkes Bay to set up the Church. Mr Needham’s split
from Revival Centres International can therefore be seen as frustrating the appointment process as specified in the Trust Deed.
[25] I am of the view that on a proper interpretation of the Trust Deed a person cannot be the overseeing pastor without being a pastor and having the oversight and control of the Church in both spiritual and temporal matters. Mr Trainer has not been the overseeing pastor since he resigned as pastor in early 2007.
[26] This interpretation was accepted by Mr Trainer when he procured Mr Needham to execute what is called a deed of appointment of pastor of the Hawkes Bay Revival Centre as appointor on 11 January 2016. Mr Trainer has also executed the deed as appointee. The deed sets out as background the following relevant provisions:
DThe Appointee (Mr Trainer) relinquished his role as pastor of the Church (Hawkes Bay Revival Centre) in or about 2007 and 2008 when he left the Church and returned to Auckland to live.
ENotwithstanding this, the Appointor (Mr Needham) until very recently erroneously believed that the Appointee (Mr Trainer) continued to hold the position of Overseeing Pastor for the purposes of the Hawkes Bay Revival Centre Trust Deed.
FAs a result, a successor to the office of Pastor of the Church has never been appointed.
GNow that the Appointor (Mr Needham) understands the link between the two roles, the appointor (Mr Needham) wishes to exercise his powers to formally appoint the Appointee (Mr Trainer) as Pastor of the Church.
[27] Mr Needham then purports to appoint Mr Trainer as the pastor of the Church with effect from the date of the deed, notwithstanding that Mr Trainer has not even attended any Church service since 2007, a period of approximately 11 years. Mr Needham says he is acting in exercise of the powers vested in him under the Trust Deed. In signing the deed, both Mr Needham and Mr Trainer confirmed that the background recitals D, E, F and G were true and correct in all respects. Mr Trainer must therefore accept that following his resignation as pastor in 2007 he also lost his role as overseeing pastor because of “the link between the two roles”. It appears that Mr Needham has co-operated with Mr Trainer because Mr Trainer has now sided with Mr Needham in his doctrinal differences with Revival Centres International on issues of morality.
[28] I am of the view, however, that the purported appointment of Mr Trainer as pastor of the Church on 11 January 2016 fails as the members of the Church did not and do not accept and recognise Mr Trainer as having the oversight and control of the Church in either spiritual or temporal matters. That is a prerequisite for appointment as pastor.
[29] The right of appointment of a pastor of the Church by Mr Needham is not absolute. The Trust Deed clearly provides that there needs to be a measure of acceptance and recognition of the person appointed as pastor. It is also a matter of practicality. The members of the Church are not going to give up control of spiritual and temporal matters to a person in whom they have no confidence. So, in a sense, the appointment of a pastor by Mr Needham is a formality at the end of a more informal consultative process, which can vary considerably according to the circumstances.
[30] The deed dated 11 January 2016 did not purport to reappoint Mr Trainer as the overseeing pastor, but only as pastor. Nonetheless on 30 March 2016, in two separate deeds, Mr Trainer purported to act as the overseeing pastor in removing Mr Leake as a trustee of the Trust and appointing his co-plaintiff, Mr Rawcliffe, as a trustee in his place. Mr Trainer did not become the overseeing pastor once again because of the deed signed by Mr Needham and Mr Trainer on 11 January 2016 appointing him as pastor of the Church. I am of the view, however, that Mr Trainer had, in effect, already been succeeded by Mr Leake as pastor and overseeing pastor, although not formally appointed as such by Mr Needham.
[31] In evidence, Mr Trainer said he was willing to resign as a trustee if he could be convinced that the stance taken by Revival Centres International and accepted by the Church on the disputed issues of morality was right in the eyes of God. Mr Trainer accepted that his stance may potentially restrict the activities of the Church in relation to the use of the Trust assets and could be seen as imposing his stance on morality on others as the Church has clearly chosen to stay with Revival Centres International.
Counterclaim
[32] When Mr Trainer resigned as pastor of the Church and left the Hawkes Bay altogether in 2007, the Trust paid him a total of $122,487, which comprised:
(a)$9,750 paid as 13 weeks wages at $750 per week between 3 April and 26 June 2007 plus $780 as holiday pay paid on 11 July 2007, totalling
$10,530; and
(b)$84,805.81 paid as a direct credit on 18 December 2007; and
(c)$27,151.19 paid as a direct credit on 28 January 2008.
[33] The defendants now want the money back and in a counterclaim initially filed on 14 March 2007, they seek judgment for the sum of $122,487 against Mr Trainer.
[34] It is accepted that the payments recorded as wages and holiday pay between April and July 2007 were not in fact wages and holiday pay as Mr Trainer had already resigned as pastor, but rather should be seen in the same light as the direct credits paid in December 2007 and January 2008. The three lots of payments were all said to be in respect of money owed to Mr and Mrs Trainer for their contributions to the purchase and renovation of the beach property at Porangahau for use by the Church as a holiday camp.
[35] The evidence is, however, not clear whether such contributions were a loan, a donation or a capital contribution. The evidence is also not clear whether the amount owed arose through actual cash payments made by Mr and Mrs Trainer towards the purchase of the land and/or for materials used in the renovation of the property or represented recompense for the large number of hours expended by Mr and Mrs Trainer in the renovation of the property or a mixture of all three. It does appear that some of it, at least, was in respect of loads of shingle paid for Mr and Mrs Trainer, which were applied to a road on the property.
[36] The lack of clarity is as a result of the passage of time and the destruction of relevant primary records such as invoices and bank statements after seven years. The
amount owed is said to have arisen more than 20 years ago now – in 1985 and 1986. The earliest secondary records that are available are the Hawkes Bay Revival Centre financial statements for the year ended 31 March 1995. They do not disclose any loans or capital contributions by Mr and Mrs Trainer. There is a global amount recorded as donations, but there is no breakdown available. The first financial statements which contain any information relating to the money said to have been owed are for the year ended 31 March 2008. They record the sum of $111,957 as an addition to the cost of a “camp dwelling” recorded in the depreciation schedule. The sum of $111,957 represents the sum of $84,805.81 paid to Mr Trainer on 18 December 2007 and the sum of $27,151.19 paid to Mr Trainer on 28 January 2008. There is also a global amount recorded as salaries, but again there is no breakdown available.
[37] There is no doubt, however, that when Mr Trainer resigned as pastor of the Church and left the Hawkes Bay altogether in 2007, he and the other trustee of the Trust, Mr Leake, agreed on the sum said to be owed by the Trust to Mr and Mrs Trainer. Mr Leake says he trusted Mr Trainer and agreed to pay him what he said was owed without checking the details or requesting original records.
[38] There is also no doubt that the sum said to have been owed to Mr and Mrs Trainer should have been recorded in the Hawkes Bay Revival Centre financial statements both as a liability or contingent liability and as a related party transaction. Mr Trainer was a trustee who had entered into a financial transaction with a trust, which resulted in a substantial payment to him.
[39] However, the fact that there are no longer any primary records to prove the arrangement or the fact that the arrangement was not properly recorded in the Hawkes Bay Revival Centre financial statements does not make it unlawful. Nor does the lack of primary records impose any obligation on Mr Trainer to repay the money. It was agreed at the time by the two trustees with lawful authority to bind the Trust. That agreement can now not be undone.
[40] In the end, the defendants put their case on the basis that Mr Trainer had a conflict of interest, which was not declared or recorded and had engaged in self- dealing in breach of his duties as a trustee. The rule against self-dealing is a practical
application of a trustee’s fundamental fiduciary conflict principle. Fiduciaries are prohibited from acting in situations where there is a real possibility of conflict between the fiduciary’s personal interest and the duty he or she owes to the principal.
[41] It seems to me that Mr Trainer was not in breach of the rule against self-dealing for two principal reasons. First, the trust deed specifically permits self-dealing. Clause 6 provides:
6. IN addition to all other powers vested in them by law the Trustee shall have the following powers authorities and discretions:
…
(h) ANY PERSON or Company who is a Trustee hereof may contract and have dealings with the Trustees in respect of the trust property whether as purchaser, lessee, manager, partner, employee or otherwise howsoever and may be paid in all matters and all respects as if he or it were not a Trustee.
[42] Secondly, Garrow & Kelly Law of Trusts and Trustees states that the self- dealing rule can also be disapplied or negated with the consent of all beneficiaries.1 At the time of the payment to Mr Trainer, Mr Leake was recognised by “the unincorporated Religious body of persons” known as the Hawkes Bay Revival Centre as their pastor and “as having the oversight or control of such body in both spiritual and temporal matters”. Notwithstanding his control of temporal matters, Mr Leake spoke to a number of members at the time who were happy to pay Mr Trainer what he said was owed to him and his wife, provided it was lawful and recorded in writing.
[43] I am, therefore, of the view that the defendants have not been able to establish any tenable cause of action in relation to the counterclaim and have failed to prove that Mr Trainer should repay the money paid to him when he resigned as pastor of the Church.
[44] The plaintiffs also say that any cause of action arising out of the counterclaim is barred for limitation because the claim could have been made more than six years before the date the counterclaim was filed. It is, however, unnecessary for me to rule on the plaintiffs’ claim as I have found the defendants do not have a tenable cause of
1 Chris Kelly and Greg Kelly, Garrow and Kelly Law of Trusts and Trustees, (7th ed, LexisNexis, Wellington, 2013) at [20.173].
action, but if I am wrong in that regard, then I am of the view that the defendants’ counterclaim is barred for limitation. None of the exceptions to the general rule apply. The counterclaim was filed too late.
Orders:
[45]I make the following declarations:
(a)Mr Leake is both the pastor and the overseeing pastor of “the unincorporated Religious body of persons” known as the Hawkes Bay Revival Centre in terms of the Deed of Trust re Hawkes Bay Revival Centre dated 1 December 1986 (Trust Deed).
(b)As such, he has the power to remove any trustee from office and the statutory power of appointing new trustees in terms of Clause 11 of the Trust Deed.
(c)The Deed of Appointment of Pastor of the Hawkes Bay Revival Centre dated 11 January 2016 executed by Mr Needham and Mr Trainer, which purports to appoint Mr Trainer as pastor is invalid.
(d)The Deed of Removal of Trustee dated 30 March 2016 executed by Mr Trainer, which purports to remove Mr Leake as a trustee of the Trust is invalid.
(e)The Deed of Appointment of One New Trustee with One Continuing Trustee dated 30 March 2016 executed by Mr Trainer, which purports to appoint Mr Rawcliffe as a trustee of the Trust is invalid.
[46] Costs are payable by the plaintiffs to the defendants on a 2B basis with disbursements to be fixed by the Registrar.
Woolford J
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