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Ponniah v Palmer [2012] NZHC 1574 (5 July 2012)

Last Updated: 27 July 2012


IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-7662 [2012] NZHC 1574

IN THE MATTER OF A Caveat No. 8876496.2 North Auckland

Land Registry

BETWEEN LAWRENCE PONNIAH AND JOHN PERA KAHUKIWA

Applicants

AND NORMAN PALMER AND NICOLAS VAN DIJK

Respondents

Hearing: 3 July 2012

Appearances: Mr P Revell for Applicants

Mr E J Werry for Respondents

Judgment: 5 July 2012

JUDGMENT OF ASSOCIATE JUDGE DOOGUE [Caveat not lapse]


This judgment was delivered by me on

05.07.12 at 4 pm, pursuant to

Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar


Date...............

Counsel:

Corban Revell, P O Box 21-180, Waitakere City – prevell@corbanrevell.co.nz

E J Werry, Barrister, P O Box 105-270, Auckland – ejwerry@gmail.com

PONNIAH AND Anor V PALMER AND Anor HC AK CIV-2011-404-7662 [5 July 2012]

[1] The applicants in this case are partners in a law firm, Corban Revell, which provided legal services to a group of persons in an apartment complex which was subject to weather tightness problems.

[2] Units 5, 7, and 8 in the complex were owned by a trust called the Livi Trust. A Mr Ivil was the settlor of the Livi Trust. The trustees of the trust were Mr Van Dijk and Mr Norman Palmer (“the trustees”).

[3] On 7 May the trustees executed a document entitled “Authority for representation and assessment”. The purpose of that document was to authorise the Weathertight Services assessor under the Weathertight Homes Resolution Services Act 2006 to enter the properties and carry out invasive testing. In the document which they signed, the trustees also nominated Mr B Ivil, as their representative “to bring and resolve a claim for the above complex”. The “above” complex was

15 Clearwater Cove, West Park Marina, Hobsonville.

[4] Proceedings were heard by the Weathertight Homes Tribunal commencing on

28 February 2011. Both of the trustees attended and gave evidence. The solicitors assisted the trustees to prepare their briefs of evidence and provided legal representation at the hearing. As far back as June 2008 the trustees had signed a Weathertight Homes Tribunal document which provided for owners to execute if they wished to appoint an agent, lawyer or representative to conduct the claim on their behalf. It was essentially an authority to act and it nominated, in the case of the trust, Mr Ponniah as the lawyer who would be acting.

[5] In general terms the evidence included statements by the trustees that Mr Ivil was the person who had negotiated terms of agreements with service providers for the remediation of the apartments and he was the person who interacted with the council and other involved parties on behalf of the trust. Mr Van Dijk who was asked about having signed certain documents described himself as being a “figure head” for the “principal Mr Ivil”. Mr Ivil who was the settlor of the trust also gave evidence.

[6] On the eve of the Weathertight Homes Tribunal proceeding, the applicants were concerned about the large amount of unpaid accounts already owing in respect of the representation they had provided. There was over $112,000 owing. A source of funds that Mr Ivil had hoped would provide them with funding to meet the accounts came to nothing. On 25 February 2011 Mr Ponniah, a partner in the law firm required execution of certain agreements to secure the law firm’s position.

[7] It appeared though that an agreement for legal services had not yet been signed. Corban Revell now required this to be done. As part of the arrangements they required, as well, the execution of a guarantee and accompanying agreement to mortgage the trust properties to pay for those services.

[8] There is a dispute about the surrounding circumstances with regard to the execution of these documents. What is clear is that the “agreement for legal services” and associated guarantee and agreement to mortgage was signed by Mr Ivil but not the trustees. The guarantor nominated in the agreements was described as “the Livi Trust”. Mr Ivil signed the guarantee as well. He too also signed the agreement to provide a mortgage over apartments that were owned by the trustees of the Livi Trust.

[9] Neither of the trustees signed the agreement for legal services, the guarantee or the agreement to mortgage.

[10] The trustees’ account of matters is that when they were at the offices of Corban Revell, for the purpose of preparation of their evidence for the impending Weathertight Homes Tribunal hearing, they were asked to execute the documents. Mr Van Dijk says that he was at the law offices on 25 February 2011 and as well he saw Mr Ivil and Mr Palmer there that day. He said he was asked to sign the documents. He said that as co-trustee, Mr Palmer, who had been present, left the offices saying that he was in a hurry and that he, Mr Van Dijk, did not discuss the applicants’ request for a guarantee. Mr Van Dijk said that he told Mr Ponniah that he was not prepared to sign the guarantee until he had spoken with his fellow trustee, Mr Palmer and also with Mr Ivil. He says that he told Mr Ivil that he was reluctant

to sign the guarantee. In the event he did not sign it. He said that neither he nor Mr

Palmer have ratified the decision of Mr Ivil to sign the guarantee.

[11] Mr Palmer’s evidence is that there was a discussion about the trust giving a guarantee at some point when he was in the applicants’ offices in February 2011. Mr Palmer said he, too, was at the offices for the purposes of signing a brief of evidence. He said that Mr Ponniah requested him to sign the guarantee while he was at the offices. He said that Mr Ivil was present at the offices but Mr Van Dijk had just left. He further said that he, Mr Palmer, was in a hurry as he had another meeting to go to. He says that when he was asked to sign the guarantee:

I explained to Mr Ponniah that I was not comfortable about doing such a thing.

[12] Mr Ponniah said that throughout the firm’s retainer concerning the weathertight homes dispute Mr Ivil was the person that he and other members of the firm had dealt with and “I understood him to be duly authorised to act as agent and to represent the trustee”. He agreed that Mr Ivil had signed the agreement for services and also the agreement to provide a mortgage. He said that he gave a copy of the agreement for legal services etc to Mr Palmer. Mr Palmer, he says, was made aware of the agreement and the security that Mr Ivil was considering on behalf of the trust and in my presence he, presumably Mr Palmer, reconfirmed the authority that “we already understood Mr Ivil had to make decisions binding the Livi Trust” . He said that Mr Palmer had no time to read the documents, he was running late for another meeting and he would leave it to Mr Ivil to decide and sign if he considered it appropriate. As to Mr Van Dijk, Mr Ponniah he says he did not have any discussions with Mr Van Dijk at all in relation to the guarantee document. He says that Mr Van Dijk did not attend the office on 25 February 2011 when the exchange that he said occurred.

[13] Mr Ponniah said that in addition to considering Mr Ivil being the “agent for

the trustees of the Livi Trust” he considered that:

Both Mr Palmer and Mr Van Dijk conducted themselves in a manner consistent with affirming this agency.

[14] Payment of the accounts for legal services not having been received, the applicants’ lodged caveats against the relevant titles which are identified in paragraph 1 of the Notice of Originating application dated 29 November 2011. The application is made in reliance on s 145A of the Land Transfer Act 1952.

[15] The notice of opposition to the application says that the guarantee/security upon which the applicants’ rely was signed by Mr Ivil who had no authority to execute the guarantee on behalf of the trustee respondents. Further, the notice of opposition stated that the respondents specifically refused the applicants’ request to provide a guarantee and nor did they ratify the guarantee document which Mr Ivil signed.

[16] So far as the evidence is concerned, I will approach my decision on the basis that for the purposes of this application, the facts are to be assumed to be as Mr Ponniah deposes them to be.

[17] It has not been established to an arguable level, even on the basis of the account that Mr Ponniah puts forward, that the trustees expressly authorised Mr Ivil to make the decision about entering into the security agreement and then executing it. While he says that Mr Palmer gave such an authority, he does not suggest that Mr Van Dijk did.

[18] This raises two issues which I will discuss on the balance of the judgment. The first is the necessity for unanimity on the part of trustees if they are to be bound to a contractual arrangement. The second concerns whether the trustees would have had any authority to authorise Mr Ivil to execute a mortgage over the trust property. That involves a consideration of the related concept of delegation of powers by the trustees.

[19] It appears that the applicants do not base their case upon an express delegation to Mr Ivil but rather that they base it on an argument that because of the part that Mr Ivil played in initiating and controlling the litigation process and in the course of that giving instructions to the law firm then to that extent, he must have implicitly been given authority by the trustees to grant a mortgage securing the fees.

That being so, the only way in which the trustees’ property could have been validly secured was if Mr Ivil had the necessary authority to enter into arrangements binding the trustees and providing a charge over their property. This argument assumes that not only was there authority but that the authority emanated from both trustees. I will assume for the purposes of argument that a unanimous authority can be created by such implicit means.

[20] However, I do not accept that it is established to even an arguable level that assuming that the trustees authorised Mr Ivil to initiate legal procedures with respect to the units that they owned, that they thereby further authorised him to give a security over their properties to secure the obligations that they thereby incurred under the legal services agreement. That is to say, if nothing else is established other than that a party authorises an agent to instruct a lawyer to provide legal services on his/her behalf, that cannot on its own give rise to an implied further authority to give a security over the client’s property. Those considerations apply quite independently of whether it is a trustee or non-trustee who is said to have been given the implied authority.

[21] If I am wrong in that regard, I go on to consider the question of whether Mr Ivil could bind the trustees in the way that the applicants’ claim he did having regard to the contents of the Deed of Trust under which the trustees were appointed.

[22] Mr Revell accepted that the relevant principal authority in this area was that of Niak v MacDonald. That case is authority for the proposition that all trustees must, unless a recognised exception applies, concur in the exercise of the powers conferred on them with respect to the trust estate. They must be unanimous. Unless the trust deed says otherwise, the act of a majority cannot bind the dissenting minority.[1] The principles were stated in Hansen v Young as follows:[2]

[31] As a general rule a trustee may not delegate his or her functions as a trustee. That prohibition extends to a purported delegation to a co- trustee: Niak v MacDonald [2001] 3 NZLR 334 (CA) at 338, para [16]. In that case this Court concluded that s29(2) of the Trustee Act

does not empower trustees to delegate powers on a general basis: rather, it is an empowering section which enables trustees to appoint agents to implement decisions once the trustees have, in accordance with the powers conferred upon them, made the appropriate decisions: at 338, para [16]. Paterson J, delivering the judgment of this Court, continued:

Delegation is, however, allowed where such delegation is specifically permitted by the trust instrument, is specifically permitted by statute, or is practically unavoidable and is usual in the ordinary course of business and the particular agent is employed in the ordinary scope of his or her business

– see Garrow and Kelly’s Law of Trust and Trustees (5th ed, 1982)

at 256. ...

[23] Mr Revell submitted that the first exception as he called it, stated in the Niak case applied and that delegation to an agent was permitted by the trust deed in this case. He relied upon paragraph 7 of the deed which is the following effect:

9. ...

...IT IS DECLARED that the trustees shall have absolute and uncontrolled power... in the management of the Trust fund ...[and] IT IS DECLARED the Trustees shall have power to do all or any of the following things either alone or jointly or in common with any other person persons... namely:

(r) To enter into ...any guarantees by the Trustees alone or together with any other person...

(v) To employ...such managers servants agents...as the Trustees may think fit...And... instead of acting personally to employ any person...to do any act of whatsoever nature relating to the trusts...

(hh) To do all things as the Trustees think to be in the interest of the beneficiaries... (including by way of illustration and not of limitation):

(iii) The giving of any guarantee either alone or jointly with any other person...and in support of such guarantee to give security over the Trust fund or of any real or personal property comprised therein.”

[24] Mr Werry for the respondents submitted that the reference to the word “alone” in clause 7 did not mean that one trustee or the other could act on his own. He submitted:

10. For the purposes of this application, 7(v) would appear to allow the trustees to appoint Mr Ivil to execute the guarantee and security documents but only after the trustees either alone or jointly or in common with any other person had made that decision.

[25] I agree with that submission. The power is one to be exercised by the trustees (plural) either on their own or jointly or in common with any other person/s. However, there is no evidence that the trustee agreed to delegate execution of the securities to Mr Ivil. There is certainly no evidence of such a unanimous express delegation. I also agree with the following submission which Mr Werry made:

13. Even if Mr Ponniah’s evidence is accepted (which it would have to be for the purposes of this application) that Mr Palmer left it to Mr Ivil to decide and sign, the Trust deed does not allow that decision to be made by Mr Ivil without first the consent of the other trustee, Mr Van Dijk. All Trustees must concur in the exercise of powers conferred on them with reference to the trust estate. Unless the trust deed says otherwise the act of a majority cannot bind the dissenting minority. [ see Law of Trusts and Trustees, Garrow & Kelly; p507 para:19.3.8]

[26] As to unanimity, I intend to be guided by what Hammond J said about the principal of non-delegability of trustees’ powers in his judgment in Rodney Aero Club Inc v Moore: [3]

The Authority for this fundamental principle of non-delegation is to be found, at an appellate level, in Luke v South Kensington Hotel Co (1879) 11

Ch D 121 (CA). That was a case relating to a mortgage foreclosure. The then

Master of the Rolls, Sir George Jessel, and James and Bramwell LJJ were quite clear that the act of (even) a majority of a group of trustees cannot bind

a dissenting minority, or the trust estate. To bind a trust estate, the particular

act must be the act of all of the trustees.

This view of the law appears also to be the view of contemporary treatise writers: see Petitt, Equity and the Law of Trusts (1993) p 359; Underhill and Hayton, Law Relating to Trusts and Trustees (15th ed, 1995) p 634.

The unanimity rule is a corollary to the non-delegation principle. For, if trustees cannot delegate, it must follow that they must all perform the duties attendant upon the execution of the trust. There is no such thing in trustee law - at least absent a provision in the trust instrument - for some such concept as a ``managing trustee'', or suchlike. Both in theory and in practice, the settlor requires several persons to execute the office, and to watch over each other.

[27] Even if the facts as asserted by Mr Ponniah are correct in that Mr Palmer was agreeable to a delegation of the power to grant the security to Mr Ivil, that does not assist the applicants.

[28] Mr Revell further referred to cl 7(v) of the Trust Deed in the following terms:

14. In that light, the provisions of the power to delegate set out in paragraph 7(v) takes on special significance. The more mechanical delegation to managers and professionals are set out, but the subclause goes further. It goes on to say:

AND generally at their uncontrolled discretion instead of acting personally to employ and pay any person firm company or corporation to do any act of whatsoever nature relating to the trusts hereof including the receipt and payment of money without being liable for loss incurred thereby ...

[29] Mr Revell submitted that:

a) ... it is difficult to conceive how such a power of delegation could be more widely drawn, and yet the subclauses to clause 7 described above require that to be treated as the least of the powers of delegation intended by the trust deed.

b) Accordingly it is submitted that in terms of the principles discussed in paragraph 19.5.10 of Garrow and Kelly Law of Trusts and Trustees

6TH ed, the power of delegation, including decision making are in fact

“specifically permitted by the trust instrument”.

[30] In my view the power to employ agents etc contained in cl 7(v) does not empower the trustees to delegate to an agent the right or authority to make submissions about such primary matters as whether a charge should be given over the Trust’s property. Such a power is similar to a power to dispose of or alienate the Trust’s property. I do not agree that cl (v) can be construed to mean that it entitles an agent of the trustees to make such decisions in place of the trustees themselves.

[31] There was therefore no power in the trust deed to delegate to Mr Ivil the power to make a decision about executing the agreement, the mortgage and the guarantee.

[32] Mr Revell further submitted that the execution of the security agreement was justified as part of the third class of exceptions to the non-delegation rule which was recognised in Hansen v Young.[4] I do not agree that any of the qualifying indicia identified in Hansen are present. There is no basis at all to conclude that a delegation of this kind to Mr Ivil was required because it was “practically unavoidable”. The trustees were residents in New Zealand. They could be contacted

readily enough. They in fact called at the offices of the applicants as Mr Ponniah has suggested. As well, I do not agree that this type of delegation would be usual in the ordinary course of business. The problem is that Mr Ivil does not belong to a recognised occupational group (such as the stock and station agents referred to in cl

7(v) of the Trust Deed) which would provide some basis for assessing what, if any usual authority, an agent of that kind would normally possess. Nor is there any evidence, that even looking at the course of dealing between Mr Ivil and the trustees, such a delegation was in the ordinary course of business. There is no evidence that this had ever happened before. I certainly would not be prepared to conclude that it was a usual incident of the relationship between a settlor of a trust[5] and the trustees that the settlor would retain a power to execute securities over the trust property.

[33] I therefore reject all of the grounds which Mr Revell put forward as justifying the execution of the agreement to mortgage as part of a purported delegation of the trustees’ powers.

[34] For those reasons, I am of the view that the applicants have no entitlement to lodge a caveat against the titles to the property described in the originating

application. The application pursuant to s 145A is therefore dismissed.

[35] The parties should confer on the matter of costs and if unable to agree are to file memorandum not exceeding four pages on each side within three weeks of the

date of this judgment.

J.P. Doogue

Associate Judge


[1] Law of Trusts and Trustees, Garrow and Kelly, 6th Ed, at [19.38].

[2] Hansen v Young [2004] 1 NZLR 37 (CA).

[3] Rodney Aero Club Inc v Moore [1998] 2 NZLR 192 at 196.
[4] Hansen v Young [2004] 1 NZLR, 37 at [31].
[5] Mr Ivil was the settlor of the trust in this case.


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