TE WHANAU O HATO PETERA TRUST v THE ROMAN CATHOLIC BISHOP OF THE DIOCESE OF AUCKLAND [2018] NZHC 105

TE WHANAU O HATO PETERA TRUST v THE ROMAN CATHOLIC BISHOP OF THE DIOCESE OFAUCKLAND [2018] NZHC 105 [12 February 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-1860[2018] NZHC 105IN THE MATTER of caveat no. 10765875.2BETWEEN TE WHANAU O HATO PETERA TRUSTApplicantAND THE ROMAN CATHOLIC BISHOP OFTHE DIOCESE OF AUCKLANDRespondentHearing: 15 September 2017Appearances: C La Hatte for the ApplicantM V Robinson & N M Thompson for the RespondentJudgment: 12 February 2018JUDGMENT OF WOODHOUSE JThis judgment was delivered by me on 12 February 2018 at 12 p.m.pursuant to r 11.5 of the High Court Rules 2016.Registrar/Deputy RegistrarSolicitors / Counsel:Mr C La Hatte, Barrister, WellingtonWoodward Law Offices (Applicant's instructing solicitor), Solicitors, Lower HuttMr M V Robinson, Simpson Grierson, Solicitors, Auckland[1] This is an application for an order sustaining caveats. The caveats are lodgedagainst titles to land registered in the name of the respondent, the Roman CatholicBishop of the Diocese of Auckland. The land subject to the caveat is registered in theBishop's name in his capacity as Bishop[2] There are two issues:(a) The caveat is in the name of Te Whanau O Hato Petera Trust (the Trust).The Bishop contends that the persons who lodged the caveat are nottrustees of the Trust and, therefore, could not lodge a caveat in the nameof the Trust, and cannot bring this application in the name of the Trustto seek to sustain the caveat as they purport to do. The issue is,therefore, whether the persons who lodged the caveat are properlyappointed trustees of the Trust. The parties have referred to this as the"mandate" issue.(b) The second issue is whether the interest claimed in the caveat is acaveatable interest.[3] I will refer to those who have lodged the caveat as "the claimants". Referencesto "the trustees" are to persons who both parties accept were properly appointed to thatoffice.Background[4] Hato Petera College is on the land subject to the caveat. In July 1994 theBishop leased part of the land to the Trust. The principal objective was to enable theTrust to operate a boarding hostel for pupils at the College.[5] In July 1995 the trustees were incorporated as a board under the CharitableTrusts Act 1957 (the Act). References to powers, duties and acts of the trustees includethe powers, duties and acts of the board unless otherwise stated. Similarly, referencesto "the Trust", will generally include references to the board.[6] The lease expired in August 2014. In 2015 the Bishop and the Trust enteredinto an occupancy agreement dated 12 July 2015. This recorded that the Deed of Trustfor the Trust and the Memorandum of Lease formed the basis of the occupancyagreement. On this application it was accepted that in substance the lease continuedsubject to the express terms recorded in the occupancy agreement.[7] In September 2015 the trustees advised the Bishop that the Trust was in seriousfinancial difficulties, was unable to maintain buildings, and recommended that theboarding hostel close. The position of the Trust deteriorated. This led to a decreeissued by the Bishop on 31 December 2015.[8] By that decree the Bishop made a number of determinations relating to theTrust in exercise of a power granted to the Bishop by cl 21.4 of the Trust Deed. I willset cl 21 out in full because there are further provisions in it which are relevant to themandate issue:21 WINDING UP21.1 Subject to the approval of the Bishop, the Trust shall bewound up if a three-quarters majority of the Trustees presentat a meeting of the Board so resolves,21.2 Should a resolution for winding up be passed and approved asprovided in sub-clause (1), all appropriate steps shall be takento carry this into effect,21.3 If upon the winding up of the Trust after satisfaction of alldebts and liabilities there remain trust assets then these shallbe transferred and paid to the Bishop to be applied by him forthe purposes of the trusts herein contained21.4 When in the sole opinion of the Bishop it is impossibleimpractical or inexpedient to carry out the objects of the Trustor the amount available is inadequate to carry out thoseobjects then the assets of the Trust shall be transferred to theBishop and applied by the Bishop for the charitable apostolicand religious purposes of the Roman Catholic Diocese ofAuckland within New Zealand with particular priority beinggiven to the educational and spiritual needs of the CatholicMaori community[9] By the decree all assets of the Trust were transferred from the Trust Board tothe Bishop, including the occupancy agreement (referred to in the decree as "thelease").[10] Although there was the formal decree by the Bishop, the unchallengedevidence for the Bishop also establishes that agreement was reached between theBishop and the trustees that the occupancy agreement between the Trust and theBishop would come to an end, the Trust would cease to operate and be wound up, theBishop would meet the liabilities of the Trust, and a new entity would be establishedto take over operation of the boarding hostel.The mandate issue[11] Steps that were then taken by the trustees are determinative, against theclaimants, of the mandate issue. These steps are recorded in documents, and nochallenge has been made to the validity of the documents or to the steps taken asrecorded in the documents. In summary:(a) By written resolution made in March 2016 the trustees resolved toapply to the Registrar of Incorporated Societies for the Registrar tomake a declaration pursuant to s 26 of the Act that the Board bedissolved. The grounds recorded in the resolution were that the Boardwas no longer carrying on its operations and the Trust had no assets orliabilities. Of relevance to subsequent events is the fact that the trusteeswho signed the resolution included Murray Painting, Janice Smith, andRudy Taylor.(b) The chairperson of the board was Mr Painting. Mr Painting signed adeclaration, dated 26 April 2016, recording, amongst other things: theinsolvency of the Trust and the provision made by the Bishop to paythe Trust's debt; the fact that the Trust had no liabilities, creditors orassets; the determinations in the Bishop's decree; that the Trust was nolonger carrying on any operations; and the resolution to apply for adeclaration of dissolution along with the grounds upon which thatapplication was made.(c) On 29 April 2016, Hato Petera Ltd was incorporated to take overoperation of the boarding hostel. The three founding directors were MrPainting, Ms Smith and Mr Taylor.(d) On 1 May 2016 there was a hui at Hato Petera marae to explain towhanau what was happening. Mr Painting is described as the"facilitator/chairperson". Five of the six trustees who had signed theresolution for dissolution in March 2016 attended the hui, including MrTaylor. One of the entries in the minutes is as follows:CLARIFICATION OF CURRENT STATUS:- UPDATE1. As of Friday, 29th April, 2016 Te Whanau O HatoPetera Trust has been dissolved; No longer trading asTe Whanau O Hato Petera Trust.Reasons for the decision are recorded in the following paragraphs.(e) Notice of the Trust ceasing to operate and to be dissolved wasadvertised on 5 May 2016.(f) At the same time the Board and Hato Petera Ltd jointly wrote to 57creditors of and contracting parties to the Board to advise that the Trusthad ceased to operate on 29 April 2016 and Hato Petera Ltd was takingover operation of the boarding hostel.(g) In May 2016 the Bishop paid outstanding creditors of the Trust a totalof $155,000.[12] Hato Petera Ltd began operating the boarding hostel in or about May 2016.Neither an operational agreement nor a lease were ever entered into between thecompany and the Bishop because problems in the operation of the boarding hostelsoon developed. It is unnecessary to go into the detail. On 25 August 2016, followingadvice from the Ministry of Education, students were evacuated from the boardinghostel because of student safety issues, staffing issues, governance failures, andconflicts within Hato Petera Ltd. By letter dated 4 September 2016 the Ministry ofEducation suspended the licence required under statutory regulations for the operationof the boarding hostel. This notice was given to Mr Taylor, Mr Painting and Ms Smithas the directors of Hato Petera Ltd.[13] The caveat was lodged on 26 April 2017. The interest claimed is pursuant tothe occupancy agreement dated 12 July 2015.[14] The evidence for the claimants is from Mr Taylor. He says he is the electedchair of the Trust, having been elected in early 2015. It may be that Mr Taylor waselected chair in early 2015. However, the chair of the Trust from 2 December 2015was Mr Painting. In his first affidavit, in support of the application to sustain thecaveat, Mr Taylor said that the "trustees have recently been updated as can be seenfrom the record attached". He produced a copy from the New Zealand CompaniesOffice register of the particulars of officers and trustees of the Trust. This records thenames of eight trustees, all of whom are recorded as having been appointed on 2 July2017. There was a hui on 2 July, as noted below. Mr Taylor is recorded as"Trustee/Chairperson". Mr Taylor is the only person recorded as a trustee who hadalso been a trustee in March 2016 when the Trust passed the resolution for dissolutionand when it ceased operating.[15] In a second affidavit Mr Taylor responded to very detailed evidence that hadbeen given for the Bishop, and which included production of the documentssummarised above, recording the events leading to the resolution to wind up. MrTaylor, in his second affidavit, records his view on difficulties that had arisen in thegovernance of Hato Petera Ltd and his view, supported by a resolution passed bywhanau at a hui in September 2016, that the registration of Hato Petera Ltd "did notmeet the condition for the wind up of" the Trust because it was not endorsed by thewhanau.[16] Mr Taylor also produced minutes of a hui on 2 July 2017 called to elect newtrustees of the Trust. This records the purported election of seven of the eight personsrecorded in the public register as trustees appointed on 2 July 2017. Mr Taylor is notrecorded as a trustee appointed on that date, although he appears in the register ashaving been appointed on that date. Mr Taylor was recorded in the minutes as one oftwo remaining trustees on the Board, the other being Janice Smith. Ms Smith is notrecorded in the particulars of officers and trustees in the register. The evidenceindicates that the disagreement that occurred between the three directors of HatoPetera Ltd had Mr Painting and Ms Smith on one side and Mr Taylor on the other.Evaluation of the mandate issue[17] The onus is on the claimants to establish that they are the properly appointedtrustees of the Trust. The claimants' evidence for that proposition is, primarily, therecord of their appointment at the hui on 2 July 2017, coupled with the registration oftrustees purportedly appointed on 2 July 2017. The narrative of events positivelyestablishes that the claimants were not properly appointed as trustees and could not beproperly appointed as trustees. This was the effect of the unanimous resolution inMarch 2016 of the trustees for the winding up of the Trust and the facts that all assetsof the Trust had been transferred to the Bishop and the Trust had ceased to operate.There was also the resolution to apply to the Registrar for a formal declaration ofdissolution. It appears that that final step was not taken, but that does not alter theeffect of the March 2016 resolution having regard to the provisions in cl 21 of theTrust Deed. In particular, pursuant to cl 21.2, the only power left for any trustees,following the resolution, was for all appropriate steps to be taken to give effect to thedecision to wind up. All appropriate steps were taken, save for the lodging of theformal application with the Registrar. No trustee had power to take any other steps.In particular, no person, whether a trustee, or former trustee, or not, had any power tocall a meeting for appointment of trustees.[18] For the claimants, Mr La Hatte submitted that the fact that the names of thepurported new trustees are recorded in the register is "notice to the world that they aretrustees and therefore authorised to bring this proceeding". He submitted that that isthe effect of s 20 of the Act.[19] I do not agree. Section 20 has nothing to do with the validity of appointments.It is a standard provision, primarily for the benefit of third parties, declaring that actsof a person acting in good faith as a trustee shall be valid notwithstanding any defectthat may afterward be found in the appointment of the trustee. The validity ofappointments, or purported appointments, of the trustees depends on the provisions ofthe trust deed and the resolution of trustees in March 2016. It is not in issue that theresolution in March 2016 to wind up the Trust was a resolution of validly appointedtrustees and a valid resolution. Mr Taylor expressly acknowledged this fact, which isnot surprising as he was one of the trustees who voted to that effect.[20] Mr La Hatte also appeared to argue that the winding up of the Trust, pursuantto the March 2016 resolution, was conditional upon other objectives being achievedand, in particular, a successful take over of the operation of the boarding hostel by anew entity. On this premise he submitted that, because Hato Petera Ltd had notsucceeded, or because of the subsequent argument that the incorporation of HatoPetera Ltd had not been approved by whanau, the Trust somehow was revived. Thatcertainly reflects the position of Mr Taylor and his supporters. But it is an untenableargument in light of the uncontested evidence recorded in the earlier narrative.Whatever the causes of the failure of Hato Petera Ltd, the incorporation of thecompany to assume management of the hostel was the course plainly agreed to by theproperly appointed trustees. There is no evidence that the winding up of the Trust wasconditional in any way – on the success of Hato Petera Ltd or otherwise.[21] For these reasons the claimants had and have no "mandate". Their purportedappointment as trustees of the Trust and subsequent actions as purported trustees arenullities.Is there a caveatable interest?[22] Given the preceding conclusions it is not strictly necessary to determinewhether the interest claimed in the caveat is a caveatable interest. I will neverthelessrecord why I am satisfied that there is no caveatable interest.[23] As earlier recorded, the estate or interest claimed in the caveat is the occupancyagreement between the Trust and the Bishop. Mr La Hatte argued that the occupancyagreement amounted to an unregistered lease and that the interest of a lessee under anunregistered lease is a caveatable interest. It is unnecessary to consider that issue.This is because the occupancy agreement, whatever its true nature, plainly came to anend as a consequence of the decision of the Bishop, recorded in his decree dated 31December 2015, to transfer the occupancy agreement to himself. He had the power todo so. There has been no challenge to the validity of the Bishop's decree.[24] In addition, the caveat itself is invalid. Mr Taylor has argued that it is a caveatlodged in the name of the Trust and that the authority came from the trusteespurportedly appointed on 2 July 2017. But the caveat had been lodged over twomonths before, on 26 April 2017. To seek to sustain this caveat in these circumstancesis, or at least comes close to, an abuse of process. This conclusion is reinforced by astatement of Mr Taylor at the end of his second affidavit, when he said:Our goal in this proceeding was to bring the Bishop to the table again to startthe discussions about revival of the school and the boarding hostel. Schoolnumbers have dropped dramatically largely because the hostel was closed. Sothe future of the school is very much at risk, and we hope that the caveat willserve to remind the respondent Bishop of our interest in further discussions.[25] The objective may be reasonable, but the means is not. There is no justificationfor caveating a title to land in order to encourage the owner of the land to enter intonegotiations. And there is no justification for using Court processes in this way.Result[26] The claimants' application is for an order sustaining caveat no. 10765875.2.Another caveat, claiming an interest pursuant to the occupancy agreement, was lodgedby the claimants. This point was discussed at the end of the hearing, following whicha consent memorandum was filed recording the agreement of the parties that theoutcome of the application in respect of the nominated caveat will also apply to theother caveat. The order in the next paragraph is in accordance with that agreement.[27] There is an order dismissing the claimants' application to sustain caveat no.10765875.2 and caveat no. 10765875.1. In consequence those caveats lodged againstCertificates of Title NA79C/263, NA51D/931 and NA26B/813 are to lapse.[28] The respondent is entitled to costs. If the respondent seeks costs, and is unableto reach agreement with the claimants, a memorandum for the respondent is to be filedand served by 2 March 2018 and any memorandum for the claimants in opposition isto be filed and served by 16 March 2018.________________________________Woodhouse J