Castledine Gregory Law and Mediation

Court rejects PBC standing to remove trustee of native title charitable trust

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The Supreme Court of Western Australia in Ngarluma Aboriginal Corporation RNTBC v the Attorney-General of Western Australia [2014] WASC 245 recently found that the Ngarluma Aboriginal Corporation RNTBC  (the PBC) did not have standing under s 93 of the Trustees Act 1962 (WA) (the Trustees Act) or at common law to seek Court orders for the removal and appointment of a new trustee of a charitable trust. The PBC is a registered native title body corporate which holds on trust the native title rights and interests of the Ngarluma People of the West Pilbara.

 

Background

An Indigenous Land Use Agreement (ILUA) between subsidiaries of Rio Tinto Limited and the PBC provided for the payment of compensation monies into two trusts: a discretionary ‘direct benefits’ trust, and a charitable trust. A corporate trustee, Ngarluma Tharndu Karrunga Maya Limited (NTKML) was established as trustee for both trusts. The PBC was the sole shareholder of NKTML and operated its bank account on NTKML’s behalf. The PBC agreed, under a sub-fund agreement with NKTML, to allocate compensation monies under the ILUA to the trusts.

 

When the relationship between NTKML and the PBC broke down over the management of trust monies, the PBC sought to appoint new directors to NTKML at a special general meeting in February 2014. NTKML secured an injunction to stop the meeting by arguing that the notification and consultation requirements under the NTKML constitution and Corporations Act 2001 (Cth) had not been satisfied (Ngarluma Tharndu Karrungu Maya Limited v Ngarluma Aboriginal Corporation [2014] WASC 79). Notification and consultation was not limited to the PBC as the sole shareholder, but extended to the Ngarluma People in accordance with Ngarluma decision making processes.

 

In March 2014, the terms of office of the existing NTKML directors expired and no replacements were appointed, leaving the trusts without administration. Under the ILUA, compensation was redirected to a ‘preservation account’, and the PBC was forced to bear the costs of administering the trust without access to those funds. While a custodian trustee was in place, it could only act in accordance with the instructions of two NTKML directors in disbursing funds, not the instructions of the PBC.

 

The PBC sought to have the trustee removed and replaced by a new trustee on an interim basis, pending the appointment of new directors to NTKML and its reappointment as trustee. The PBC filed the application in the WA Supreme Court under s 93 of the Trustees Act on the basis that it was ‘beneficially interested in the trust property’ of the trusts.

 

Key Findings

Allanson J found that it was consistent with the Court’s powers under s 77 of the Trustees Act (the Court’s power to appoint a new trustee where it is expedient and in the interests of beneficiaries to do so), and its inherent jurisdiction to ensure the proper administration of trusts, to appoint a new trustee. Allanson J accepted that it would be impracticable to do so without the assistance of the Court and was necessary to ensure the proper administration of the trust. His Honour considered that the interim position proposed by the PBC would preserve the ability of the Ngarluma People to be consulted in respect of any new directors to be appointed to the NTKML Board and any future reappointment of NTKML as trustee.

 

The Court’s ability to make the orders sought by the PBC were, however, subject to the standing of the PBC to bring the application.

 

Allanson J found that the PBC had standing under s 93 of the Trustees Act to seek the removal and appointment of a new trustee in respect of the discretionary ‘direct benefits’ trust because it was named as a beneficiary of that trust.  However, the PBC did not have standing in respect of the charitable trust because it was not ‘beneficially interested’ in the trust property as a charitable trust is for a purpose, not a person, and does not have beneficiaries. Provisions of the charitable trust deed which enabled the PBC to receive benefits from the charitable trust did not give rise to a beneficial interest of the PBC in any part of the trust property.

 

While s 21 of the Charitable Trusts Act 1962 (WA) (Charitable Trusts Act) enables any person to seek orders relating to any property, money or income of a charitable trust, as an exception to the common law position, Allanson J found that these orders do not extend to the removal or appointment of a trustee. Only the Attorney-General can apply to the Court to remove a trustee of a charitable trust.

 

The decision indicates that there may be risks for PBCs, native title claim groups or other persons or corporations in allocating moneys payable under agreements to charitable trusts. It raises broader questions concerning the efficacy of charitable trusts in managing native title compensation payments if it prevents effective oversight by the community it is there to serve.

 

If charitable trusts are to be maintained, this risk could be mitigated by designing trusts to give the PBC, registered applicants for native title claims, or other relevant persons powers to remove and appoint new trustees, subject to any relevant tax considerations. In the absence of express provision being made in trust deeds, those seeking the removal of a trustee would need the cooperation of the Attorney General to secure that outcome.  Care also needs to be taken in designing sub-fund agreements and the powers reserved to PBCs as funding bodies in respect of the use of those funds, should this conflict with any use intended under a native title agreement.

 

For further information, please contact Maria Lamattina and Emily Wilson at Castledine Gregory.