Waho v Olsen-Rātana
[2014] NZHC 2729
•4 November 2014
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-11177 [2014] NZHC 2729
UNDER (in part) the Trustees Act 1956 IN THE MATTER OF
TE KOHANGA REO NATIONAL TRUST DEED of 20 December 2013
BETWEEN
TONI JAMES DAVIS WAHO Plaintiff
AND
TINA OLSEN-RATANA First Defendant
TE KOHANGA REO NATIONAL TRUST
Second Defendant
Hearing: 15 October 2014 Counsel:
F E Geiringer and J K Mahuta-Coyle for Plaintiff
M F McClelland QC and E G Coburn for First Defendant
N J Russell and S I Jones for Second DefendantJudgment:
4 November 2014
RESERVED JUDGMENT OF MACKENZIE J
I direct that the delivery time of this judgment is
11.30 am on the 4th day of November 2014.
Solicitors: DLA Phillips Fox, Wellington, for First Defendant
Chen Palmer, Wellington for Second Defendant
WAHO v OLSEN-RATANA [2014] NZHC 2729 [4 November 2014]
[1] The second defendant, Te Köhanga Reo National Trust (the Trust), is a charitable trust, governed by a Trust Deed. The Trust is administered by a Board of Trustees (the Board) comprising eight trustees. The plaintiff, Mr Waho, is one of those trustees. The first defendant, Ms Olsen-Rātana, is one of two co-chairs of the Board of Trustees.
[2] On 27 August 2014, the Board held a special meeting to consider whether the plaintiff had brought the Trust into disrepute. The Board resolved by a majority that the plaintiff had brought the Trust into disrepute, and resolved to hold a further meeting on 10 September 2014 to determine whether the plaintiff should be removed as a trustee. The plaintiff commenced these proceedings.
[3] The plaintiff asserts that he has not brought the Trust into disrepute. He asserts that the first defendant has been misusing her roles as co-chair and trustee in a number of respects. In his statement of claim, he seeks the following relief:
(a) an order under s 51 of the Trustee Act 1956 or under the Court’s
inherent jurisdiction:
(i)to supervise the Trust by removing and replacing the first defendant as a trustee of the Trust; or
(ii)removing and replacing all of the trustees of the second defendant.
(b)an order restraining the Board of the Trust from removing the plaintiff as a trustee without the leave of the Court or until further order of the Court.
[4] The plaintiff applied for an interlocutory injunction restraining the Board of the Trust:
(a) from removing the plaintiff as a trustee without the leave of the Court or until further order of the Court, and
(b)requiring the first defendant to inform the plaintiff of all Board meetings and allow his participation as a Board member.
[5] The interim application first came before Mallon J on 1 September 2014. Counsel for the second defendant’s intimation that the meeting on
10 September 2014 would not take place in view of the proceedings and that, on the basis that the application would be heard soon, the Board did not intend to hold a meeting to consider the plaintiff’s removal as a trustee. Mallon J made a holding order in respect of the second aspect of the interim relief sought. The application was set down for hearing before me on 15 October 2014.
[6] Extensive affidavit evidence has been filed. I have not found it necessary, in deciding this interim injunction application, to consider the evidence in detail. A very brief description of the background will suffice for present purposes.
[7] In about October 2013, allegations were raised in the media that funds of the Trust had been misused by the then general manager of Te Pātaka Ōhanga Limited, the commercial arm of the Trust. I need not address the evidence about those allegations, or the steps which were taken (or not taken) by the Trust in the light of that disclosure. It is sufficient to record that there was a difference of view between the plaintiff and the first defendant, and apparently some of the other trustees, about the adequacy and appropriateness of the actions taken to address those allegations. In a letter of 10 March 2014 to his fellow trustees, the plaintiff set out his position in relation to these events. On 17 March 2014, he sent a copy of his letter to the Minister and Associate Minister of Education. He said that that letter set out a brief history of the events and recorded his concerns at that time and that he had been unable to convince his fellow trustees to address these concerns collectively so that he felt compelled to raise these matters with the Ministers directly. Some of the other trustees disapproved of that action. There was ongoing correspondence and dialogue between the plaintiff and other trustees concerning these issues.
[8] On 15 August 2014, the first defendant and Mr Karetu, the co-chair, gave notice of a special meeting of the trustees to be held on 26 August 2014 (later altered) at the plaintiff’s request, to 27 August. The notice said:
The agenda for this special meeting is to consider whether Toni Waho has brought the Trust into disrepute.
[9] Mr Waho’s affidavit describes what occurred at the meeting in these terms:
54.I attended the meeting on 27 August 2014. Seven trustees attended, six in person and Mr Tohu by telephone. Te Ärikinui Kïngi Tūheitia did not attend. I put forward a proposal that the issues be referred to mediation. That was rejected by the Board by a vote of 4-3. I then distributed my response document. I offered to answer questions from the Board, but there were none. I asked what procedure was to be followed after the meeting. Ms Olsen-Rātana told me that she would inform me of the results of meeting and of any further meeting that was to be held to decide whether or not I should be removed from the Board. I left to allow the Board to deliberate and vote in my absence.
55. I am yet to receive a formal response from Ms Olsen-Rātana.
However, I was told by Ms Barrett on the evening of 27 August 2014 that the Board had voted 5-1 in favour of finding that I had brought
the Trust into disrepute and to hold a further meeting on
9 September 2014 to determine whether I should therefore be removed as a trustee.
[10] The relevant consequence which may flow from the decision of the trustees at the meeting is prescribed in cl 6.3 of the Trust Deed. That provides:
6.3A Trustee may be removed from office by a 75% majority vote of the Trustees present voting at a meeting duly constituted for the purpose of considering the fitness or suitability of the Trustee in question. A meeting to consider the fitness or suitability of Trustee to continue as Trustee may be called by simple majority of the Board if:
6.3.1The Trustee has been absent without consent of the Board for 3 successive meetings of the Board; or
6.3.2 The Trustee has brought the Trust into disrepute.
[11] The essence of the plaintiff’s submission on the first aspect of the relief sought is set out in his written synopsis in these terms:
Mr Waho seeks to enjoin the Trust Board from removing him as a trustees (sic). Mr Waho says that he has not brought the Trust into disrepute. If that is correct then the Trust Board has no power to remove him, and doing so would be a breach of trust. The balance of convenience favours granting the interim injunction. Mr Waho therefore asks the Court to enjoin the Trust Board from removing him until resolution of these proceedings.
[12] The claim that Mr Waho has brought the Trust into disrepute arises from his email of 17 March 2014 to the Minister and Associate Minister of Education. Mr Geiringer submits that whether Mr Waho has brought the Trust into disrepute is a question of fact. He submits that he has not, or at least that, for the purposes of the present application, it is seriously arguably that he has not. He further submits that cl 6.3.2 prescribes (or at least that it is seriously arguable that it prescribes) a condition precedent that must exist before a majority of the Board has the power to call a meeting to consider removal. He submits that it is for the Court to determine whether the condition precedent is satisfied. If it is not, then by calling the meeting the Board is acting inconsistently with the Trust Deed and therefore in breach of trust.
[13] The criterion for the removal of a trustee in cl 6.3.2, unlike the criterion in cl 6.3.1, is not a simple question of fact. It requires an exercise of judgement. Mr Geiringer’s submission that cl 6.3.2 is a condition precedent seems to involve two questions:
(a) who is to exercise the judgement by which it is determined whether or not a trustee has brought the Trust into disrepute? and
(b)if it is the trustees who are to exercise that judgement, on what basis may the Court intervene to review a decision by the trustees?
[14] To address both questions, a consideration of the general principles as to supervision by the Court of the exercise by trustees of discretionary powers is required.
[15] Where powers vested in trustees require the exercise of a judgement, the general rule is that the trustee is bound to exercise that judgement and the Court will not intervene unless the judgement has been invalidly exercised. The principles were discussed by Fisher J in Wrightson v Fletcher Challenge Nominees Ltd.1 He said that the role of the Court in reviewing a trustee’s decision is limited. The Court is not a court of appeal from the trustee’s decision. It does not consider the issue for
itself and substitute its own decision for that reached by the trustee. Rather, the Court looks at how the trustee reached its decision and will set aside the trustee’s decision only where the trustee has acted in bad faith or for an improper motive; made an error of law; failed to consider relevant considerations or considered irrelevant considerations; or reached a perverse or capricious decision.
[16] This issue was also discussed in Sieff v Fox.2 Lloyd LJ (sitting as a judge of the Chancery Division) said:
[38] There are several different categories of case where an exercise by trustees of a discretionary power may be held to be invalid. (i) There may be a formal or procedural defect, such as the failure to use the stipulated form of document, for example a document under hand instead of a deed, or to obtain a necessary prior consent. (In some such cases, and for the benefit of some interested persons, equity may relieve against such a formal or procedural defect). (ii) The power may have been exercised in a way which it does not authorise, for example with an unauthorised delegation, or by the inclusion of beneficiaries who are not objects of the power. (iii) The exercise may infringe some rule of the general law, such as the rule against perpetuities. (iv) The trustees may have exercised the power for an improper purpose, in cases known as fraud on the power. Cloutte v Storey [1911] 1 Ch
18, [1908–10] All ER Rep 1073, among the cases cited to me, is an example of this, where the power was exercised in favour of one of the objects, but
under a private arrangement whereby he passed the benefit back to his
parents, who had made the appointment. Another example, in a different context, was Hillsdown Holdings plc v Pensions Ombudsman [1997] 1 All ER 862. I take it that references, for example in Gisborne v Gisborne, cited above (and in Re Hastings-Bass itself, see [44] below), to good faith are to be understood in this context, so that an exercise which is not in good faith is, or at any rate includes, a case where the exercise is a fraud on the power. (v) The trustees may have been unaware that they had any discretion to exercise: see Turner v Turner [1983] 2 All ER 745, [1984] Ch 100, an extreme and highly unusual case on the facts, which has been described as equitable non est factum. (vi) To these categories, of which the first four are clear and well-established, the rule or principle in Re Hastings-Bass is said to add a further class of case, namely where the trustees have failed to have regard to some relevant consideration which they ought to have taken into account.
[17] When the interpretation of cl 6.3.2 is viewed against that background, I do not consider it is seriously arguable that the question of whether a trustee has brought the Trust into disrepute is other than a question to be decided, in the first instance, by an exercise of judgement by the trustees, reflected in a decision of the majority of the
trustees. That decision would be reviewable by the Court only on the limited grounds to which I have referred.
[18] I am not satisfied that the plaintiff has demonstrated a seriously arguable question to be tried that cl 6.3.2 imposes a condition precedent which requires a decision other than one made by the trustees in the proper exercise of their powers under the Trust Deed. I am also not satisfied that the plaintiff has demonstrated a seriously arguable case that the decision of the trustees falls within the range of situations which are reviewable by the Court. On this interim application, it is best that I say no more than that on the question.
[19] That means that the interim application cannot succeed. For completeness, I
deal briefly with the balance of convenience. Mr Geiringer submits:
20. Granting this interim injunction would preserve the status quo.
Should Mr Waho be removed, even temporarily, then this will enable the other trustees to take steps without involving Mr Waho in the decision making. It may be difficult, if not impossible to undo those steps.
21.If removing Mr Waho is unlawful, then removing him temporarily while the case is resolve[d] is itself an injustice. On the other hand, it is difficult to discern what, if any, prejudice would be cause[d] to the respondents should Mr Waho be able to remain until the final determination of this case It is submitted that for these reasons the balance of convenience favours the granting of this interim injunction.
[20] I do not consider that the balance of convenience justifies the intervention of the Court. All of the trustees are bound to have regard in the best interests of the Trust. Neither Mr Waho nor any of the other trustees have any personal interest to protect. Their interests are solely as trustees. It seems from the extensive affidavit evidence filed, which I have not found it necessary to discuss, that there is a serious risk of dysfunctionality in the operation of the Board. Nothing which I have said should be taken as indicating any view on the steps taken by the trustees in relation to the plaintiff. But, whatever the merits may be, I see no basis on which the Court should intervene, to preserve his position as a trustee.
[21] For these reasons the order sought in paragraph 1.1 of the application must be refused. As to the order sought in paragraph 1.2, so long as he remains a trustee he
must be treated as such. The direction given by Mallon J at [4] of her minute was intended to deal with the exclusion of the plaintiff on the grounds of conflict of interest. I consider it appropriate to continue that direction.
[22] Costs are reserved.
“A D MacKenzie J”
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