Charitable Trustees Profiting at the Expense of Charities

Reports of Court cases often provide useful, quick lessons on basic principles of society and charity law.  That is the case of the recent High Court decision in Prasad v Parai [2012] NZHC 2858.  The decision establishes no new important principles, but it illustrates a number of implications for charitable trustees where they act unlawfully. Mr Prasad was a trustee and the general manager of a charitable trust.  He appealed a District Court decision that he should account to the trustees of the trust for profit of approximately $47,000 Mr Prasad had made on the sale of a property that Mr Prasad purchased, using trust funds of $43,000 to pay the deposit. Charitable trustees will not be permitted to profit personally at the expense of a charity The Prasad judgment contains a number of statements which have wider application than just to the facts of that case: “[23] I acknowledge that the letter of authority (backdated to 1 October 2008) could amount to the Trust ratifying the purchase of the property by giving a belated authority for its purchase but by then, the Trust could not purchase it because it had been on-sold.  I cannot see how the Trust could ever properly ratify Mr Prasad’s use of the funds to purchase a property when it did not know all the details of the purchase, including the fact the property was not available for it to own, that it had already been on-sold by Mr Prasad for a profit that he kept for himself.  Nor can I see how a charitable trust could ever properly authorise conduct that amounted to...