DUNSTAN v CREDIT UNION SOUTH [2021] NZCA 656

DUNSTAN v CREDIT UNION SOUTH [2021] NZCA 656 [3 December 2021]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA317/2020[2021] NZCA 656BETWEEN ANTHONY DUNSTANAppellantAND CREDIT UNION SOUTHFirst RespondentJANICE FREDRIC, PETER MCKNIGHT,LOUISE EDWARDS, PETER BOOTHAND SHONA CUMMINGSecond RespondentsHearing: 14 June 2021Court: Clifford, Thomas and Muir JJCounsel: Appellant in personD G Hurd and E M Buckley for RespondentsJudgment: 3 December 2021 at 12 pmJUDGMENT OF THE COURTA The appeal is dismissed.B Costs are reserved.____________________________________________________________________REASONS OF THE COURT(Given by Clifford J)Introduction[1] In September 2013 the appellant, Anthony Dunstan, became a director ofthe first respondent, Credit Union South (CU South). In March 2015 he was appointedchair of the Board of CU South. In January 2017, in circumstances to which we return,he resigned from both of those positions.[2] Later that year Mr Dunstan was nominated for election as a director ofCU South in the regular cycle of those elections. The second respondents, the thendirectors of CU South, determined that Mr Dunstan did not meet CU South's"Fit and Proper" policy applying to directors. On that basis, Mr Dunstan's name didnot appear on the ballot paper for the 2017 Board election.[3] Mr Dunstan challenged that decision by way of an application for judicialreview to the High Court. That application was dismissed.1[4] Mr Dunstan now appeals.Background[5] CU South no longer exists. Subsequent to the events at issue here,its operations were merged into a broader grouping of previously independent regionalcredit unions.[6] At the time of those events, CU South was, as its name reflects, a credit union.As such, it was registered and operated under pt 3 of the Friendly Societies and CreditUnions Act 1982 (the Credit Unions Act). As then required by that Act, CU South wasan unincorporated society.2 It administered a fund into which its members contributedmoney and from which its members borrowed money. CU South's constitutioncomprised a document called "Rules of Credit Union South" (the Rules).[7] Pursuant to the Rules:1 Dunstan v Credit Union South [2020] NZHC 1063 [Judgment under appeal].2 At [50].(a) CU South's objects were to promote thrift and the accumulation ofsavings by its members and to allow the use of those savings for itsmembers' mutual benefit by making them loans for provident orproductive purposes.(b) CU South was governed by an annual meeting and, between thosemeetings, its affairs were conducted by the Board.(c) The Board, which was also CU South's "committee of management"as defined in the Credit Unions Act,3 comprised a minimum of five anda maximum of seven directors. Of those seven directors, a maximumof two could be appointed by the elected members of the Board asindependent directors. Independent directors were persons who did nothave a significant contractual relationship with CU South.(d) Directors were elected for a three-year term, and retired in rotation.(e) Various persons were disqualified from holding office as directorsincluding, as relevant here, persons who did not meet what the Rulestermed the "Fit and Proper Assessment of the Credit Union".[8] The Rules of CU South also contained detailed procedures for the nominationand election of directors. As part of those procedures:(a) Notice to members of the annual meeting was to be given in advance,calling for nominations for appointment of directors, amongst otherthings.(b) There were two routes to be nominated to be appointed a director: eitherby the members in advance of the annual meeting, or by the NominationCommittee.3 Friendly Societies and Credit Unions Act 1982, s 2.(c) The Nomination Committee of three members appointed by the Chairof the Board had the duty to nominate at least one member for eachvacancy for which director elections were being held. Those nominatedhad to be, in the Nomination Committee's opinion, suitably qualified tomeet the Fit and Proper policy. The Nomination Committee procedurewas designed to address CU South's historic experience withinsufficient suitably qualified candidates standing for electionas directors.(d) Candidates nominated by members were to provide variousbackground material, including a "Fit and Proper declaration".[9] The officers of CU South, comprising a Chair, Vice Chair, Treasurer andSecretary, were elected by the directors from their own number. The Rules providedduties for each. As well as appointing directors, the members at each annual meetingappointed a minimum of one and a maximum of three of the directors to act as trustees.The role of the trustees was to act as the Credit Committee for CU South.[10] Directors and trustees were required to vacate their office immediately if,amongst other things, they failed to meet or maintain the requirements under theFit and Proper policy.[11] In addition to being required by the Rules to establish a NominationCommittee, the Board was empowered to appoint additional committees. The Boardhad established a Governance Committee. The general role of the GovernanceCommittee, which was captured in four-and-a-half pages of closely typed terms ofreference, would appear to have been the promotion of good governance by the Board.[12] Initial responsibility for the process for election of Board members was sharedbetween the Nominations Committee and the Governance Committee. At a high levelthe role of the Nominations Committee would appear to have been the identificationof suitable nominees, to check all the required information had been provided, and toensure the nominee's suitability and eligibility. Once those steps had been done,the job of the Governance Committee was to undertake a Fit and Proper assessment.The Nomination Committee was then to notify the Secretary which candidates couldappear on the ballot for election.[13] In July 2017 the Board, in ratifying the decisions of the Nomination andGovernance Committees, decided that Mr Dunstan did not satisfy the Fit and Properpolicy criteria. Accordingly, Mr Dunstan's name was not to be included on the ballotin the 2017 Board election.Mr Dunstan's judicial review application[14] Mr Dunstan sought judicial review of the Board's decision. In doing so headvanced some four grounds of review:(a) Failure to comply with the rules applying to members' nominations.(b) The Nominations and Governance Committees were inquorate.(c) The Fit and Proper policy was an irrelevant consideration, not havingbeen properly adopted by CU South and, in any event, not applicableto Mr Dunstan's nomination.(d) The Board had breached the requirements of natural justice in notgiving Mr Dunstan an opportunity to be heard on its decision.[15] Those grounds include, as indicated, whether the Fit and Proper policy was apolicy of CU South at all. Before addressing those grounds, we think it is helpful tosummarise what the terms of the documents said to constitute, and to reflect, thatpolicy provide.The Fit and Proper policy[16] CU South's Fit and Proper policy supplemented the requirement ofthe Non-bank Deposit Takers Act 2013 for CU South, as part of the process forlicensing, to provide a "suitability notice" for each director and senior officer, orproposed director or senior officer.4 The Fit and Proper policy provided, as the Judgeput it in the High Court, a "more comprehensive" Fit and Proper policy than that foundin the legislation.5[17] The Fit and Proper policy has its origins in a similar policy of the credit unionindustry's parent body, the New Zealand Credit Union. Mr Dunstan himself referredto that document as "our" policy when communicating with other members of theBoard in July 2015 on the question of the application of the policy to another members'nominee for election as a director. That document,6 as relevant, explains:NZCU Policy on Suitability of Board Member and Senior OfficersOverview: As part of the NZCU Governance Terms of Reference all currentand potential directors and senior officers are required to be of a "fit andproper" character to hold their position with NZCU. Fit and Proper: The term "fit and proper" relates to the candidates ability andcompetence to complete their role to a high standard and do so in a mannerthat brings no disrepute on NZCU or themselves. Character traits are alsoexamined and past actions or inactions are assessed. NZCU employ a robustset of procedures when assessing whether a potential candidate is fitand proper to hold the position they either hold or are aspiring to hold.Potential directors and CEOs are vetted by the NZCU Governance Committee,other senior officers are vetted by the CEO. Methods of vetting include, butare not limited to:• Candidates filling in and signing the NZCU Fit and Proper declaration(appendix A)• Verification of academic qualifications and professional memberships• Checks of employment history• Checks of directorships and shareholdings• Checks of bankruptcies and directorship disqualifications• Seeking probity reports from independent providers• Character references from reputable sources• Assessments from the recruitment process including intelligence andpersonality testing• Police checks• Credit checkBoard members and senior officers are required to keep the GovernanceCommittee fully informed of anything that may compromise their fit andproper status. The declaration must be completed annually and the4 Non-bank Deposit Takers Act 2013, s 13(1)(c).5 Judgment under appeal, above n 1, at [84]. See Non-bank Deposit Takers Act, s 15 as tothe requirements of suitability, and the Non-bank Deposit Takers (Debt Securities and SuitabilityConcerns) Regulations 2014.6 The document also reflects the "suitability" requirement of the Reserve Bank under the Non-bankDeposit Takers Act.Governance Committee monitor status in conjunction with the "suitability'requirement of the RBNZ.[18] Those requirements are reflected in Terms of Reference for the Nominationsand Governance Committees, adopted in July and November 2015 respectively,to which we return later.This appeal — an overview[19] In a detailed and carefully reasoned judgment Dunningham J declinedMr Dunstan's application for judicial review.7[20] Before us on appeal Mr Dunstan, as he had in the High Court, allegednumerous failures by the Board and its two committees to comply with procedural andsubstantive obligations leading up to the Board's decision. He advanced no fewer than28 separate grounds of appeal. Many pointed to procedural irregularities atthe committee level.[21] In that context we think it is important to bear in mind that, at all relevant times,the reality was that of the five Board members (that is the second respondentsMs Fredric, Mr McKnight, Ms Edwards, Mr Booth and Ms Cumming):(a) Ms Fredric and Ms Cumming did not participate as they were eithereligible for, or eligible and standing for, re-election as directors.Therefore it fell to Mr McKnight, Mr Booth and Ms Edwards todischarge the Board's responsibilities;(b) the Nominations Committee also comprised Mr McKnight, Mr Boothand Ms Edwards; and(c) the Governance Committee at the time comprised Ms Fredric,Ms Cumming and Mr Booth. Ms Fredric and Ms Cummings being7 Judgment under appeal, above n 1.disqualified, Ms Dickie, the then CEO of CU South, was co-opted toassist Mr Booth.[22] The discretionary relief available under judicial review responds to materialprocedural irregularities in the decision-making process which deprives a decisionreached of substantive validity. Generally, the merits of a decision — save forirrationality — are not for the courts to pass judgment on. Here the ultimate decisionwas made by the Board, at a quorate meeting, by the very people who had beeninvolved throughout as Board members, members of the Nominations Committee andmembers of the Governance Committee. On that basis, a finely grained interrogationof internal processes — as invited by Mr Dunstan's submissions — would be anexercise of highly questionable utility, and one we do not propose to undertake.[23] Rather we focus our attention on the following substantive issues as raised byMr Dunstan's appeal of the High Court decision:(a) Is the Board's decision amenable to judicial review?(b) If it is, did the Rules provide for the Board to apply the Fit and Properpolicy to Mr Dunstan prior to forwarding his nomination for election asa director to the members?(c) If they did, did the Board apply that assessment to Mr Dunstan andreach its conclusion that he did not meet that assessment, in aprocedurally fair and substantively reasonable way?[24] When considering those matters, and any relief which may be called for,we bear in mind the following matters:(a) CU South, as an unincorporated society, was effectively a club tofacilitate members' financial self-help. Therefore, the interests of theofficers and members of that club are essentially private ones.(b) It is not the law's approach, even if judicial review is available,to subject interactions within a club to great scrutiny.8(c) Of particular significance, CU South no longer exists.[25] In noting those matters we observe that, as best we can tell, the events inquestion here occurred in the context of challenging times for CU South. CU Southhad for some time faced considerable difficulties in maintaining its existence asa viable entity. Inevitably, conflicts arose between those involved in CU South whenthey responded to those circumstances in different ways. Our overall sense is that itwas those conflicts which — to what precise extent we cannot assess — contributedto the events at issue.[26] That said, we turn to the issues as we see them.Is judicial review of CU South available to Mr Dunstan?The Judge's decision[27] The Judge concluded Mr Dunstan was unable to judicially review the Board'sdecision for two reasons:9(a) As CU South was not a body corporate the decision Mr Dunstan soughtto challenge did not involve the exercise of a "statutory power".10Therefore, that decision was not reviewable under the Judicial ReviewProcedure Act 2016.11(b) Nor was that decision reviewable at common law, in terms ofthe provisions of pt 30 of the High Court Rules 2016. The operationsof a credit union did not have a sufficient public dimension to make itamenable to review.12 Mr Dunstan had an alternative remedy in8 Hopper v North Shore Aero Club Inc [2007] NZAR 354 (CA) at [9]–[10]; and Peters v Collinge[1993] 2 NZLR 554 (HC) at 566.9 Judgment under appeal, above n 1, at [68].10 At [53]–[55]; and Judicial Review Procedure Act 2016, s 5(1)(b).11 At [55].12 At [65].contract.13 That is, he could have sued to require compliance bythe Board and CU South with the Rules, as he said they were tobe understood.Mr Dunstan's arguments[28] Mr Dunstan does not challenge the conclusion the Judge reached based onthe fact CU South is not a body corporate. Rather he says that as CU South had deniedhis request for a review as provided by r 71 of CU South's Rules, the Judge was wrongto find he had an alternative remedy available to him. Moreover s 118(d) of the CreditUnions Act separately gave a right of judicial review. Concluding judicial review wasunavailable to him was, finally, inconsistent with his rights as affirmed by s 27(2) ofthe New Zealand Bill of Rights Act 1990 (NZBORA).Analysis[29] Mr Dunstan did not explicitly challenge the Judge's conclusion that, asCU South was not a body corporate, judicial review under the Judicial ReviewProcedure Act was not available to him. If that is accepted, and we see no error in theJudge's conclusion on that point, it is difficult to see how the arguments he made onappeal on the availability of judicial review can succeed.[30] There would remain the possibility that his arguments on appeal, if accepted,would establish that the limited common law pathway for judicial review of decisionsof unincorporated bodies was engaged. Alternatively those arguments might reflectan argument which was not made: that is, the Board, with responsibility for an entitylicenced under the Credit Unions Act and regulated under the Non-bank DepositTakers Act, was exercising a statutory power or right conferred under one or both ofthose Acts when making the challenged decision.[31] As the Judge acknowledged, under the common law pathway for judicialreview (reflected in pt 30 of the High Court Rules) a decision of an unincorporatedbody may be reviewable if it has a sufficiently public dimension. However, as its13 At [66]–[67].objects reflect, CU South was essentially a private organisation providinga cooperative framework for its members to save and borrow and, more generally, toadopt prudent financial practices in their private lives. That is not a "public" function.Moreover, the decision Mr Dunstan challenges is very much an internal one, involvingCU South's Rules, the contract between its members. Those considerations suggestcommon law review is not available.[32] As for Mr Dunstan's specific arguments on appeal, noting they had not beenraised in the High Court:(a) The Judge was not wrong in finding Mr Dunstan had an alternativeremedy. She was explicitly referring to Mr Dunstan's right in contractto challenge what he saw as a breach of the Rules.14 She was notreferring to the complaint mechanism found in r 71 at that point,whether or not r 71 was applicable in the circumstances.(b) Section 118(d) of the Credit Unions Act does not create an alternativestatutory pathway for judicial review. Section 118 applies the disputeresolution provisions of ss 78 to 81, available to members of friendlysocieties and members of credit unions. Those provisions provide firstfor the dispute to be considered under the rules of the relevant body(here r 71 of the Rules),15 or by way of reference to the Registrar ofFriendly Societies and Credit Unions.16 Section 81, which is appliedby s 118(d), creates a mechanism to take the dispute to court whereeither the Registrar makes no decision within 40 days on the referenceor, as they may do, declines the reference. In those circumstances thecourt "may hear and determine the matter in dispute".17 That is notjudicial review. Rather it is a mechanism whereby the court maydetermine the dispute notwithstanding the procedural rules of theentity involved.14 At [66].15 Friendly Societies and Credit Unions Act, s 78(2).16 Section 79.17 Section 81(1).(c) Nor does s 27(2) of NZBORA assist Mr Dunstan. CU South is nota tribunal or public authority within the meaning of s 27. Thus, to theextent Mr Dunstan asserts failures to follow procedures his complaintdoes not engage his rights to justice as affirmed by that provision.[33] In our view, therefore, those arguments do not affect the correctness ofthe Judge's decision that common law judicial review was not available toMr Dunstan.[34] We have raised the question of whether those arguments reflect a propositionnot explicitly put before the Judge or, indeed, us: that is, that the challenged decisionwas a statutory power of decision18 conferred by or under either or both of theCredit Unions Act or the Non-bank Deposit Takers Act. That said, the propositionmay have some strength. As we have explained, CU South's Fit and Proper policysupplemented and expanded the procedures its Rules provided to enable it to givesuitability notices on registration, and, on an ongoing basis, to satisfy its obligation tonotify the Reserve Bank of "suitability concerns".19 Given the considerable overlapbetween the procedures for and substance of the Fit and Proper policy and decisionson suitability, it might be suggested that the statutory power of decision under whichsuitability notices or notifications are given is also involved in the application of theFit and Proper policy.[35] However, as that argument was not raised before the Judge, or indeed onappeal, it is not one which we could consider further without at least seekingsubmissions. Moreover, we are hesitant, given the considerable time and resourcesthis dispute has now consumed, to further extend the process.[36] Since we have found the Board's decision is not amenable to judicial review,the appeal will be dismissed. Nevertheless we will, as the Judge did and forthe reasons given by her together with the possible availability of that alternative basis18 Judicial Review Procedure Act, ss 4 and 5(2)(b).19 Non-bank Deposit Takers Act, s 42.for judicial review, now go on to consider the substance of the arguments on whichMr Dunstan would have based his judicial review challenge.20Did the Rules of CU South provide for the Board to apply the Fit and Properpolicy to Mr Dunstan, prior to forwarding his nomination for election as adirector to the members?The Judge's decision[37] Mr Dunstan, by reference to what he said was the proper construction of theRules, challenged the Board's decision to apply the Fit and Proper policy to him.More fundamentally, he also said that what the Board asserted was CU's Fit and Properpolicy had not, in fact, been adopted in a procedurally regular manner.[38] The Judge rejected both of those arguments. She was satisfied that, as therespondents had argued, CU South had a "cohesive set of policy documents" requiringBoard members and senior officers to meet both the suitability requirements under theNon-bank Takers Deposit Act and under the Fit and Proper policy.21 She was alsosatisfied the Board acted in accordance with the Rules when applying that assessmentto Mr Dunstan.22Mr Dunstan's argument[39] As he had in the High Court, Mr Dunstan submitted the Board's records wereunable to establish the Board had adopted the Fit and Proper policy in a procedurallycorrect way. Moreover, the Board had been wrong to apply that policy to him. As hehad been nominated by the members the Rules required the Board to put thatnomination before the members in an annual meeting.Analysis[40] We find Mr Dunstan's assertion that the Fit and Proper policy had not beencorrectly adopted a little surprising, given Mr Dunstan was a member or Chair ofthe Board at the relevant times and had been involved in an earlier application of that20 Judgment under appeal, above n 1, at [69].21 At [84].22 At [79] and [85].policy. Putting that consideration aside, however, the Judge described the context forthis aspect of Mr Dunstan's challenge in the following way:[35] The scope of the fit and proper assessment is a disputed issue in thishearing. However, for the purposes of the narrative, the Board members reliedon the following three documents as setting out the criteria for a fit and properassessment:(a) the NZCU Policy on Suitability of Board Members and SeniorOfficers;(b) the CUS Nominations Committee Terms of Referenceadopted by the Board on 16 July 2015 and amended on27 May 2017; and(c) the CUS Fit and Proper Assessment for Director and TrusteeNominees Terms of Reference, again adopted by the Board on16 July 2015 and amended on 27 May 2017. (Footnote omitted.)[41] As we have already mentioned, an email from Mr Dunstan dated 3 July 2015describes the NZCU policy as "our" policy on Suitability of Board Members andSenior Officers. That email was sent in the context of the Board's consideration of thesuitability a former CU South CEO, Mr Leys, for election. Mr Leys had beennominated by a member. The Board, chaired by Mr Dunstan, did not consider Mr Leysa fit and proper candidate. Legal advice was sought, including from a Mr Harford.Ms Dickie, CU South's then CEO, explained in her affidavit:Based on what had been provided to him, Mr Harford proposed that he shouldprepare further documents to fill in some process gaps around the Fit andProper policy. Those documents were in turn, subject to minor corrections,approved by CUS' Board at its meeting on 16 July 2015. The furtherdocuments adopted by the Board are the Nominations Committee Terms ofReference and the "Credit Union South Fit and Proper Assessment —for Directors and Trustee Nominees — Terms of Reference". Bothdocuments, in their terms, are based on the policy on suitability documentwhich Mr Dunstan has annexed. Later, a Governance Committee Terms ofReference document was adopted.The effect of those documents and the processes undertaken pursuant to themis that all nominees for election as directors are checked against the variouscriteria in Rule 25.1, including being required to meet the Fit and Properpolicy, just as they are required to meet the suitability requirements of RBNZ.Under Mr Dunstan's chairmanship, the Fit and Proper policy, as just described,was duly applied to Mr Leys' nomination. As a result, his nomination wasrejected on the basis that he failed to meet CUS' Fit and Proper policy.[42] Mr Booth, a previous elected director of CU South and appointed in February2017 to the Board to fill the vacancy caused by Mr Dunstan's resignation, confirmedMs Dickie's account of matters. In doing so he stated:I remember the issues concerning the nomination of Mr Andrew Leys,a former CEO, for election at the 2015 elections. Given the circumstances inwhich Mr Leys had stepped down as CEO, the then directors had majorconcerns about his suitability to be a member of CUS' Board. Mr Dunstan, asChair, drove the process in respect of Mr Leys, which finally culminated inMr Leys' nomination being rejected on the basis that he did not meet CUS'Fit and Proper Policy.During the course of the process, I am aware that significant work was doneto formulate and adopt policies and terms of reference to the NominationsCommittee and Governance Committee as to how the Fit and Proper Policywas to be applied. Again, that work was driven by Mr Dunstan with thesupport of other directors. The policies and procedures then put in place were,in the end, applied to Mr Dunstan in 2017 [43] Having reviewed the affidavit evidence, and the exhibits, we are satisfied, aswas the Judge, that the Fit and Proper policy was a properly adopted policy ofCU South. If nothing else, the application of the policy in the case of Mr Leys'nomination whilst Mr Dunstan was the chair of the Board establishes, irrespective ofMr Dunstan's own involvement in that process, that position.[44] We turn then to Mr Dunstan's argument that the Rules make it clear that, evenif properly adopted, the Fit and Proper policy was not to be applied to members'nominations (but rather only nominations made by the Nomination Committee).[45] In arguing this aspect of his appeal Mr Dunstan relied in particular onr 23(d)(ii). Rule 23 sets out CU South's procedures for the nomination and electionof directors. Rule 23(d) provides:(d) At least 14 days before the Annual Meeting the Secretary shall sendto each member the following:(i) The names of the persons nominated by the NominatingCommittee for each vacancy together with a copy of thecandidates' Curriculum Vitae detailing their relevant skillsand experience;(ii) The names of the persons nominated by members underclause 23(a) together with copies of each candidates'Curriculum Vitae detailing their relevant skills andexperience;(iii) Voting ballot papers for election of candidates.[46] Hence, Mr Dunstan argued, r 23(d)(ii) required his nomination to beforwarded, and no other provision of the Rules gave the Board or either of itscommittees the power to require otherwise. In particular, and in the case of members'nomination and election of directors, the Rules only provided for that policy to applyto a director once elected, rather than as a pre-condition to eligibility to stand forelection. He said that conclusion was supported by the approach taken underthe Non-bank Deposit Takers Act as regards suitability notices.[47] We accept that r 23(d)(ii) does not by itself expressly require a nominee'scompliance with the Fit and Proper policy. But r 23(d)(ii) needs to be read inthe context of the Rules as a whole and, more particularly, the significance of theFit and Proper policy in the process whereby nominations are received and forwardedto members. The starting point is r 25.1(j), which provides:25.1 The following persons may not hold office as Directors or Trustees:(j) Do not meet the Fit and Proper Assessment of the Credit Union.[48] The Fit and Proper policy is also referred to in:(a) Rules 23(a)(iii) and 23(b). The former requires a declaration from amember's nominee as to their Fit and Proper status; the latter reflectsthe requirement for the Nomination Committee to be satisfied that theirnominees meet the Fit and Proper policy.(b) Rule 60(g) which requires a director or trustee to vacate his or her officeimmediately if he or she has failed to meet or maintain the requirementsunder the Fit and Proper policy.[49] In our view, r 25.1(j) makes it clear that the Fit and Proper policy, andthe requirement to meet that assessment, applies to members' nominees equally as itdoes to nominees of the Nomination Committee. It would make little sense to interpretthe Rules so that requirement only applied to directors nominated by members oncethey had been appointed.[50] That conclusion is reinforced by the terms of reference of the NominationsCommittee, which provide:PURPOSEPrior to each election of Directors and Trustees, the Secretary gives notice toall members calling for nominations for filling vacancies and setting out thepreferred skills required by the Board.Pursuant to the Rules, a Nomination Committee is appointed. The role ofthe Nomination Committee is to nominate at least one member for eachvacancy for which elections are being held and provide those nominations tothe Secretary.In addition to nominating members, the Committee has been delegated theresponsibility of reviewing nominations received to ensure that such nomineescomply with all requirements.(Emphasis added.)[51] We consider that conclusion is also supported by the relationship between theFit and Proper policy and the suitability notices and assessments. The Non-bankDeposit Takers Act requires the Board to consider questions of fit and proper statusand suitability of candidates for election, be they member nominations or nominationsof the Nominations Committee, before elections.23 If that were not the case, as regardsissues of suitability, and the Board was of the view a candidate was unsuitable, all thatwould happen would be that candidate might be elected, but the Board would have toimmediately give a suitability concern notice to the Reserve Bank.24 That makeslittle sense. The same applies in our view as regards the fit and proper assessment.23 Non-bank Deposit Takers Act, s 15.24 Section 42.Did the Board apply that assessment to Mr Dunstan, and reach its conclusionthat he did not meet the requirements of that assessment, in a procedurally fairand substantively reasonable way?[52] The circumstances in which Mr Dunstan had resigned from the Board inJanuary 2017 were central both to the Board's application of the policy to him andthe decision it reached. Those circumstances can be summarised as follows:(a) Whilst a member of the Board, and as Chair, Mr Dunstan had beenclosely involved in the establishment of what was termed an AssociateDirector programme. The purpose of the programme was to identifypersons who might be suitable for election as a director; to appointa member of the Board as a mentor for that person; and to introducethat person to the Board's procedures and substantive decision makingover time.(b) At the January 2017 Board meeting Mr Dunstan disagreed with theapproach the majority proposed to take to persons who might beapproached as possible associate directors. At issue was whether, asMr Dunstan maintained, the requirement was for such persons to havebeen bona fide members of CU South for a minimum two-year periodor whether that was a mere expectation, the fulfilment of which wouldnot be necessary in every case.(c) Mr Dunstan was adamant that in supporting the establishment of theAssociate Director programme he had assured members that aminimum of two years of bona fide membership was a requirement.Later documents detailing the programme suggested that the positionhad been relaxed over time, so that the "requirement" had become an"expectation". In any event the point for Mr Dunstan was one of suchprinciple that it occasioned his resignation.[53] That resignation caused the Board some inconvenience and, in the eyes of otherBoard members, confirmed the concern they had had for some time that Mr Dunstanwas rather inflexible in the way he approached his duties to an extent which was notconducive to the smooth functioning of the Board.[54] Those concerns resurfaced in August 2017, on the receipt of Mr Dunstan'snomination.[55] The Nominations Committee approached an independent party,Personal Verification Ltd (PVL) to make contact with senior officers of twoorganisations where Mr Dunstan had served as a director, to ask a series of agreedquestions. The following passage from the Judge's decision in the High Courtsummarised what then happened:25[31] Those questions were:(a) Did Tony fulfil his full term obligations to your Board? If no;what were his reasons for leaving early?(b) Do you feel he fulfilled his obligations as a Directorprofessionally?(c) Would you reappoint Tony to your Board if the opportunityarose?[32] PVL then interviewed four individuals, two of whom were Boardmembers of the Forbury Trotting Club and two of whom were Board membersof the Clutha Community Health Company Ltd.[33] The four individuals interviewed were able to identify Mr Dunstan'sstrengths, for example the interviewees variously stated that; "he had goodqualifications", "he did make some good decisions", "he did fulfil hisobligations as a Director professionally", "he was a very committed anddiligent Director" and he was "always well prepared for meetings". However,they also identified weaknesses and three were of the view that they wouldnot reappoint Mr Dunstan to their Board if the opportunity arose, while thefourth interviewee was not unequivocally positive, saying Mr Dunstan "quiteoften had a different view" and "didn't have the ability to take the Board withhim in terms of articulating a case as to why his views ought to be accepted."[34] After discussing the information obtained, it was agreed that the PVLenquiries supported the concerns already identified by the NominationsCommittee. That Committee, at its meeting of 10 July 2017 determined thathis nomination should be referred to the Governance Committee"for assessment against the Fit and Proper Assessment".25 Judgment under appeal, above n 1.[37] When the Nominations Committee referred the matter tothe Governance Committee, that committee immediately convenedby telephone. At its meeting on 10 July 2017, the Governance Committeemade a finding that Mr Dunstan had not met CUS's fit and properrequirements and recommended to the Nominations Committee and theBoard, that Mr Dunstan's name should not appear on the CUS ballot papersfor the 2017 election.[38] Mr Booth, who was a member of the Governance Committee,explains that:What really tipped the decision were the references receivedfrom PVL and the commentary from the existing Board.The existing Board had clearly lost its tolerance for Mr Dunstan'semotional outbursts and resignation. It plainly had no confidencein Mr Dunstan.He added the external references revealed that these other bodies hadexperienced much the same sort of behaviour as CUS had experienced and,all bar one, expressed a clear view that they did not want him back.[39] Mr Dunstan was advised of this by letter dated 13 July 2017 fromMr McKnight, the chairperson of the Nominations Committee. [56] Notwithstanding any procedural irregularity, particularly as regards theconstitution of the Nominations and Governance Committee at this time, the Judgewas satisfied, as we are, that the decision Mr Dunstan had not satisfied the Fit andProper policy was made by the Board after considering:26(a) the steps taken and conclusions reached by both committees;(b) material provided by Mr Dunstan; and(c) the communications of the Board with Mr Dunstan following the initialnotification to him of the decision of the Nominations Committee.[57] She also rejected Mr Dunstan's two particular challenges to the Board'sactions: namely, that it was not entitled to approach third party referees for views onMr Dunstan,27 and that it had breached natural justice by not giving him a properopportunity to be heard before making its decision.28 In reaching her conclusions,the Judge was satisfied the further inquiry called for by the Fit and Proper policy made26 At [107]–[108].27 At [117].28 At [131].it appropriate for third party information to be obtained.29 The Board had met anynatural justice requirement that might apply in giving Mr Dunstan notice of, and anopportunity to comment on, the decision of the Nominations Committee.30[58] At the heart of Mr Dunstan's substantive issues was his rejection ofthe assessment made of him by those involved. In particular, he did not agree that histime on the Board had shown he was single minded on issues, or that he was convincedhe was right, or that he was not a collegial Board member. Nor did the circumstancesof his resignation add strength to those conclusions. Moreover, he consideredthe Board had acted unfairly and without authorisation by approaching third partiesfor their views. In so doing the Board had breached his privacy. Finally, he had notbeen given the opportunity to be heard by the Board before it had made its decision,or adequately after that had happened.[59] As we have said, the merits of the Board's decision are not for us and, weacknowledge that Mr Dunstan in arguing his appeal focused on the legal issues he hadidentified rather than the content of his dispute with the Board. That said, the Fit andProper policy authorised the making of third party inquiries. The Board gaveMr Dunstan the opportunity to comment on its decision. A candidate for election as adirector of an unincorporated society has, if any, limited natural justice expectationsand entitlements. Certainly, we do not think the procedures the Board adopted wereunfair or lacking in a natural justice sense. We are therefore not persuaded the Judgeerred in any way in reaching her conclusions.Result[60] The appeal is dismissed.[61] In the normal course, CU South would be entitled to costs for a standard appealon a band A basis with usual disbursements. However, as CU South no longer existsfollowing the transfer of its engagements, we understand the entitlement to costswould be that of its successor entity, Credit Union Baywide. The parties are invited29 At [115]–[117].30 At [131]–[132].to file further memoranda on who the appropriate party to award costs to is within 10working days of this judgment. Costs are reserved in the meantime.Solicitors:Gilbert Walker, Auckland for Respondents