Henderson v Brooking
[2025] NZCA 368
•28 July 2025 at 3 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA242/2023 [2025] NZCA 368 |
| BETWEEN | APIRANA HENDERSON AS TRUSTEE OF THE WHAREKAHIKA A47 TRUST |
| AND | ASHLEY BROOKING AS TRUSTEE OF THE WHAREKAHIKA A47 TRUST |
| Hearing: | 12 September 2024 |
Court: | Courtney, Thomas and Hinton JJ |
Counsel: | J P Kahukiwa for Appellant |
Judgment: | 28 July 2025 at 3 pm |
JUDGMENT OF THE COURT
AThe appeal is dismissed.
BThe farm management direction is set aside.
CIf seeking costs, the respondent is to file a memorandum within 10 working days of delivery of this judgment and further directions will follow.
____________________________________________________________________
REASONS OF THE COURT
(Given by Hinton J)
Table of Contents
Para No
Introduction
Summary of alleged breaches
History of alleged breaches and application to remove
Payment of $10,000
Farm management proposal
Petrol vouchers
Application for removal filed and efforts to resolve
Refusal to comply with consent direction
The insurance policy
Payment of $5,000
Lack of annual general meetings
Apirana Henderson declines to attend Māori Land Court teleconference
Relevant clauses of Trust Order
Statutory provisions and case law
Conflict of interest
Removal of trustees under the Act
The Māori Land Court decision of 20 April 2022
The Māori Appellate Court decision of 9 February 2023
Arguments on appeal
Implied term permitting trustee remuneration and self-dealing
Brothers not conflicted
Misapplication of s 240 — failure to take account of work done and cultural context
Issue One: Is there an implied term in the Trust Order permitting trustee remuneration and self-dealing?
Bases on which Apirana Henderson could legitimately receive payments
Section 227A of the Act
Clause 2 of the Trust OrderConclusion
Whether there is an implied term in the Trust Order permitting trustee remuneration and self-dealing
Issue Two: Were the Henderson brothers impliedly authorised to act on matters involving each other?
Issue Three: Was the removal of Apirana Henderson justified?
Test on appeal
General principles
Application to this case
Whether Apirana Henderson is no longer suitable to hold office
Whether the removal of Apirana Henderson is desirable
Farm management direction
Costs
Result
Introduction
On 20 April 2022 the Māori Land Court ordered that the appellant, Apirana Henderson, be removed as trustee of the Wharekahika A47 Trust (the A47 Trust) under s 240 of Te Ture Whenua Maori Act 1993 (the Act), primarily as a result of repeated breaches of his trustee duties.[1] That decision was upheld by the Māori Appellate Court.[2]
[1]Brooking v Henderson – Wharekahika A47 (2022) 110 Tairawhiti MB 238 (110 TRW 238) [Māori Land Court decision] at [114].
[2]Henderson v Brooking – Wharekahika A47 [2023] Māori Appellate Court MB 17 (2023 APPEAL 17) [Māori Appellate Court decision] at [42]–[43].
Under s 58A of the Act a party to an appeal to the Māori Appellate Court has a right of further appeal to this Court against all or part of the determination of the Māori Appellate Court. Apirana Henderson has exercised that right to bring a second appeal, to this Court.
The A47 Trust is an ahu whenua trust constituted by the Māori Land Court pursuant to s 215 of the Act, and governed by a trust order made by then Chief Judge Joseph Williams on 16 February 2000 (Trust Order).
Under the Act, the Māori Land Court has a special role to play in ahu whenua and other Māori land-based trusts. Ahu whenua trusts are constituted by the Māori Land Court where it is satisfied this would promote and facilitate the use and administration of the land in the interests of persons beneficially entitled to it — (referred to in this judgment as the “beneficial owners”).[3] The Court appoints the trustees and exercises broad supervisory powers, as will be apparent.[4]
[3]Te Ture Whenua Maori Act 1993, s 215(2). “Beneficial owners” is the correct term used to refer to beneficiaries of ahu whenua trusts under the Act and is the term used in the Trust Order.
[4]Section 222.
The A47 Trust was constituted over Māori freehold land, known as the Wharekahika A47 block (the A47 block). The trustees have legal ownership of and manage the land. The A47 block is over 1,174 hectares and located near Hicks Bay on the east coast of the North Island. As at 20 April 2022, there were 364 beneficial owners.[5]
[5]Māori Land Court decision, above n 1, at [2].
At all relevant times, the A47 Trust had six trustees: Apirana Henderson, his two brothers (Ned and Victor Henderson), Steuart McClutchie, Ashley Brooking and Rawiri Tuhiwai-Ruru.
Apirana Henderson was formally appointed as a trustee by the Māori Land Court in October 2015. He was elected chairperson in May 2016. Ned Henderson and Mr Tuhiwai-Ruru had been trustees since 16 February 2000; Victor Henderson and Mr McClutchie were appointed on 2 July 2007 and Mr Brooking (the original applicant for the removal of Apirana Henderson) was appointed along with Apirana Henderson in 2015.
In 2018, the trustees resolved to remove a long-standing lessee who was running a farm operation on the A47 block under a rental arrangement. It seems Apirana Henderson spent a lot of time arranging for termination of the lease.
Thereafter, Apirana Henderson did some fencing, cleared gorse and scrub and cleared blocked culverts on the A47 block, which we understand had been in a poor state for some time.
Between November 2018 and April 2021 Apirana Henderson sought, voted on and received payments and other benefits from the A47 Trust for the work he had done, despite objections from other trustees, and after receiving cautionary legal advice.
In December 2019, Mr Brooking applied to remove Apirana Henderson as trustee. The application was supported by Mr Tuhiwai-Ruru, and Te Aira Henderson, a beneficial owner.[6] It was opposed by Apirana Henderson, his brothers and Mr McClutchie.
Summary of alleged breaches
[6]We do not know whether Te Aira Henderson is related to the three Henderson trustees or not but presume not. As far as known, Te Aira Henderson and Mr Tuhiwai-Ruru remain in support.
The application for removal relied on facts which were largely uncontested. We summarise the key events below and then set out the relevant background in more detail:
(a)On 19 November 2018 Apirana Henderson participated in and voted for the payment of $10,000 to himself by the A47 Trust, the payment being made by a debtor of the A47 Trust.
(b)In 2019 Apirana Henderson promoted and obtained four signatures including his own, for the “Apirana Henderson Proposal” whereby he would occupy the house on the A47 block and receive payments from the A47 Trust, in exchange for his continued work on the farm. In June 2019, after the farm proposal was signed, Apirana Henderson took up residence in the house.
(c)On 18 May 2019 Apirana Henderson voted in favour of his receiving $200 in petrol vouchers from the A47 Trust.
(d)In December 2019, Mr Brooking filed the application to remove Apirana Henderson as trustee. A direction was made by the Māori Land Court by consent that all trustees resign. Apirana Henderson and three others refused to comply.
(e)In December 2020 Apirana Henderson arranged for the A47 Trust to pay for an insurance policy that in part covered his own assets.
(f)In April 2021, Apirana Henderson participated in and voted for payment of $5,000 to himself by the A47 Trust.
(g)In 2020 and 2021 the A47 Trust did not convene annual general meetings (AGMs). The matters set out above were also not approved in formal meetings of the trustees.
History of alleged breaches and application to remove
Payment of $10,000
In mid-2018 Victor Henderson proposed that Apirana Henderson should be paid $10,000, which it seems was for the part he played in removing the lessee and his work on the farm. The payment was made by Golden Grove Apiaries Ltd (which had an existing financial arrangement with the A47 Trust) because the A47 Trust’s bank account was not operational. Apirana Henderson drafted the resolution for trustees to sign. The resolution was signed on 19 November 2018 by trustees Ned Henderson, Mr McClutchie, Mr Brooking,[7] and Apirana Henderson himself. The decision to approve the payment was not made at a properly convened trustee meeting. Rather, Apirana Henderson gathered signatures individually. No prior consultation was undertaken with the A47 Trust’s beneficial owners nor was the payment authorised at a properly convened meeting of the beneficial owners. No independent legal or accounting advice was sought to determine whether the payment was permissible under the Trust Order.
Farm management proposal
[7]Mr Brooking said his signature was conditional on the payment being approved at a meeting of all beneficial owners. Mr Tuhiwai-Ruru said he was never consulted about the payment at all.
In early 2019, Apirana Henderson presented the trustees with a document headed “Apirana Henderson Proposal”. The five-page document was signed by four of the trustees (Mr McClutchie, Apirana and Ned Henderson and Mr Brooking) and dated 8 April 2019. The terms of it are not clear. What is clear is that it involved Apirana Henderson living in the house on the A47 block without a lease. It appears to involve a five-year commitment. Apirana Henderson was to receive reimbursement of what are listed as “expenses” of rates, petrol, internet, power and cell phone costs, which the proposal records total $15,340 per year. In addition, it would seem that he was to be paid, at least for fencing work, at a rate of $17 per metre for his time. It refers to there being “other jobs that need someone living on the farm to organise”. There is reference also to “[d]airy grazing paid 20th of each month $7 per head per week, 100 stock.” There is reference to equipment being needed for various work types. There are a number of uncertainties in the document. There are no specified obligations on his part. The farm proposal was essentially designed to make Apirana Henderson the farm manager, in addition to remaining chairperson of the A47 Trust.
It seems that after the farm proposal had been signed by the four trustees, it was emailed to the A47 Trust’s solicitor, Mr Leo Watson, who volunteered advice to Apirana Henderson shortly afterwards, by phone and in writing on 5 June 2019. Mr Watson explained that the trustees ran a risk of being held liable for personally benefitting from trust property. He recommended that the farm proposal be put to the beneficial owners generally to see if any other candidates came forward, and if there were multiple candidates Apirana Henderson should recuse himself. Mr Watson further advised that the consent of the A47 block beneficial owners should be obtained at an AGM, with time for feedback and comment. Finally, he advised that the A47 Trust should file an application to the Court for directions, explaining the need for remedial work to get the farm to the point where the A47 Trust could lease it out at market rates, and the need for Apirana Henderson to undertake this work and obtain a benefit from house rental. He said if the Court gave its approval Apirana Henderson would be protected from any later action against him.
It seems that the proposal was sent to some beneficial owners. The role was not advertised and no application for directions was made to the Māori Land Court.
Shortly afterwards, Apirana Henderson took up residence in the house on the A47 block, without any formal tenancy agreement. The outgoings on the house continued to be met by the A47 Trust. What happened to the rest of his proposal is not clear but it seems it was not implemented. We note that Apirana Henderson was still living in the house as at 20 April 2022, the date of the Māori Land Court decision.
Petrol vouchers
On 18 May 2019, Apirana Henderson obtained petrol vouchers valued at $200, which were paid for by the A47 Trust. He was involved in discussions concerning this expenditure and again voted in favour of the transaction, along with his brother Ned Henderson, Mr McClutchie and Mr Brooking.
Application for removal filed and efforts to resolve
Mr Brooking filed the application for removal on 9 December 2019. On receipt, the Māori Land Court directed that Apirana Henderson, as the chairperson of the A47 Trust, file a s 238 report,[8] which he did on 24 January 2020. This listed the hui that had been held, reported on activities and attached financial reports. On 31 January 2020 Deputy Chief Judge Fox (now Chief Judge) adjourned the application so the parties could seek legal representation. Several judicial conferences were conducted by Judge Wainwright who worked through various issues. None of the conferences resolved matters.
[8]Under s 238 of the Act the Court can require a written report relating to administration of the trust.
After Mr Hemi was appointed as counsel for Mr Brooking (and Mr Te Aira Henderson as beneficial owner),[9] the grounds listed for the application to remove were: failing to adhere to the Trust Order, failing to properly manage conflicts of interest, acting outside the authority of the Trust Order and causing the A47 Trust to become dysfunctional. Although there was evidence of dysfunction of the A47 Trust and that being Apirana Henderson’s fault, there was no finding in that regard. We proceed on the basis the latter ground was abandoned.
[9]We note that the notice of appeal and the appellant’s submissions before this Court refer to the respondent as the “Trustees of the Wharekahika A47 Trust”. This must be an error. Mr Hemi does not represent the trustees and his submissions refer to the “trustee”, that being Mr Brooking.
On 24 September 2020, Judge Wainwright appointed counsel to assist the A47 Trust to arrange for the resignation of all current trustees. The proposal was that resignations were to take effect as at the date when the Māori Land Court issued a new trust order and when it appointed new trustees, to be elected at an AGM. Mr Brooking and Mr Tuhiwai-Ruru were willing to resign in order for there to be a fresh election to move the A47 Trust forward. The three Henderson brothers and Mr McClutchie refused to resign at that point. Counsel appointed to assist the A47 Trust subsequently sought leave to withdraw.
Refusal to comply with consent direction
At a judicial conference on 10 November 2020, all trustees and their respective counsel confirmed they agreed with directions of Judge Wainwright that all trustees resign, a new trust order be worked through, and an election of new trustees take place at a properly convened hui. However, the three Henderson brothers and Mr McClutchie subsequently chose not to comply with the directions of the Court. A teleconference was set down for 26 February 2021.
The insurance policy
In December 2020, shortly following the above legal manoeuvres, and before the allocated teleconference, Apirana Henderson arranged for an insurance policy to be taken out covering trust assets. He also included his personal property under that policy. Despite objections raised by other trustees, he voted in favour of the policy being entered into. The assets owned by Apirana Henderson, covered by the policy, were two private vehicles, two trailers and a boat. Mr Brooking and Mr Tuhiwai-Ruru wrote to both the broker and Apirana Henderson on 14 and 15 December 2020 objecting and seeking correction of the policy cover. In April 2021, Apirana Henderson removed one vehicle, the boat and its trailer from the insurance policy. By August 2021, he acknowledged that his personal assets had been included in the A47 Trust’s insurance policy and had offered to reimburse the A47 Trust in the amount of $238.
Payment of $5,000
Also in December 2020, Mr McClutchie proposed a further payment of $5,000 be made from trust funds to Apirana Henderson for his services to the A47 Trust. This was supported by Victor and Ned Henderson. It was objected to by Mr Brooking who believed Apirana Henderson was behind it. The Māori Land Court decision records that Mr Brooking emailed the Court asking for a direction that the payment be stopped.[10] Apirana Henderson prepared a report in support of the payment. The payment of $5,000 was made in early April 2021.
Lack of annual general meetings
[10]Māori Land Court decision, above n 1, at [10(a)].
It is clear from the record that there were governance failures and trustee meetings became dysfunctional. There had been no AGM between 2019 and the Māori Land Court decision.[11]
Apirana Henderson declines to attend Māori Land Court teleconference
[11]At [23].
We noted earlier that after Apirana Henderson and others refused to comply with court directions that had been agreed, a teleconference was scheduled for 26 February 2021. The day before that teleconference Apirana Henderson informed the Māori Land Court he would not attend and he wanted a formal hearing. He also advised that Woodward Chrisp, solicitors, were no longer acting for himself, his brothers and Mr McClutchie.
On 17 July 2021 the Registrar was directed to give notice of the hearing scheduled for 6 August 2021 to all beneficial owners and parties for whom the Court had addresses.[12]
Relevant clauses of Trust Order
[12]At [13].
The clauses of the Trust Order relevant to the case are set out below:
2.The Trustees shall have power to use, occupy and manage the land vested in the Trustees and to that end to do all or any of the things which they would be entitled to do if they were the beneficial owners of the land PROVIDED HOWEVER:-
(a)That the Trustees shall have no power to mortgage or sell the land or any part thereof.
(b)That the Trustees shall not lease the land or any part thereof other than in accordance with the provisions of subclauses (n) or (p) of Clause 3 thereof.
(c)That forthwith upon the death or resignation of a Trustee the surviving Trustees shall apply to the Court for the appointment of another Trustee.
3.The Trustees shall have such powers and authorities as are necessary for the effective performance of the trusts herein contained including power:-
(a)To use occupy and manage the land or any part thereof for agricultural pastoral forestry or horticultural purposes, including the use of the land or any part thereof for the growing of permanent horticultural crops by the Trustees themselves or in conjunction with any other person or persons upon such terms for the growing utilisation or sale of the crop as the Trustees may consider appropriate.
…
(n)To grant licences to occupy to such individual equitable owners who wish to build dwellings on the land of such part or parts of the land for such purpose at such rent and subject to such covenants and conditions as the Trustees may determine.
…
4.The Trustees shall apply the revenues arising from the operations of the trust in paying the costs of administration of the affairs of the trust and in furtherance of the objects of the trust including:-
(a)Payment of the costs and disbursements of and incidental to the making and prosecuting of the application to this Court for this order or in making a refund to any person who may have paid the same.
(b) Payment of title charges, if any.
(c)Setting aside reserves for contingencies or capital expenditure or for retaining in an accumulated profit account any portion of such money which the Trustees shall think it prudent not to pay under the next succeeding subclause.
(d)Payment of so much of the residue from time to time as the Trustees may in their absolute discretion determine to the equitable owners in accordance with their several shares PROVIDED HOWEVER:-
(i)That the Trustees shall be at liberty to pay such money to the Maori Trustee for distribution to the equitable owners if the Maori Trustee is willing to do so, and
(ii)If the Trustees shall make any such distribution then the Trustees shall not make payment to any equitable owner whose share will be less than $5.00 but shall accumulate the amounts payable to that equitable owner until the amount so accumulated exceeds $5.00 and then pay the same to that equitable owner.
Statutory provisions and case law
Conflict of interest
Ahu whenua trusts must adhere to the requirements of the Act and the Trusts Act 2019, with the former overriding.
Sections 36 and 37 of the Trusts Act provide that a trustee must not make a profit from trusteeship and must not take any reward for acting as a trustee save for their right to be reimbursed for expenses. That is a codification of long-standing law that a trustee cannot “profit” from their position.[13]
[13]See Rochefoucauld v Boustead [1898] 1 Ch 550 (CA). The office of a trustee is gratuitous. As such, any benefit whatsoever out of their position as a trustee may be an unauthorised “profit”: see Deputy Registrar v Moeahu – Lot 1 DP 17494 Part Section 2345 New Plymouth (Old Railway Station) (2021) 437 Aotea MB 3 (437 AOT 3).
Section 227A of the Act provides that a contractor or employee of a trust can be a trustee, but also spells out clearly the strict duty on trustees to manage conflicts of interest and that participation in decisions that directly or indirectly benefit them personally is prohibited. The section provides as follows:
227A Interested trustees
(1)A person is not disqualified from being elected or from holding office as a trustee because of that person’s employment as a servant or officer of the trust, or interest or concern in any contract made by the trust.
(2)A trustee must not vote or participate in the discussion on any matter before the trust that directly or indirectly affects that person’s remuneration or the terms of that person’s employment as a servant or officer of the trust, or that directly or indirectly affects any contract in which that person may be interested or concerned other than as a trustee of another trust.
In Fenwick v Naera, the Supreme Court considered the principles relating to conflicts of interest and s 227A:[14]
[61] … We agree with the Court of Appeal that all trustees participating in decision making must “bring to bear a mind unclouded by any contrary interest”. Nor is it an answer that their fellow trustees all supported the transaction. Section 227A provides that a conflicted trustee must not “participate in the discussion” on a matter affecting his or her interests. The reason a conflicted trustee must not participate in discussions is to remove the risk that the other decision makers may be influenced (either consciously or subconsciously) by a person with divided loyalties.
[62] Equally, it is irrelevant that [the trustees] were not driven by personal financial considerations. That may have been so, at least at a conscious level. But it may not have been so subconsciously. Further, the beneficiaries were entitled to be assured that every trustee considering and voting in favour of the transaction did so without a conflict of interest and the risk of being influenced by that conflict (whether or not the person was in fact influenced).
[63] We agree with the Court of Appeal that the rules against conflicts and s 227A are designed with prophylactic effect – to avoid the appearance, and risk, of conflict. This applies both in terms of a conflicted trustee being influenced by the conflict (consciously or subconsciously) and of influencing fellow decision makers (again consciously or subconsciously).
[64] In addition, courts are not well placed to decide the existence and the extent of any influence. Contemporary evidence on such points is likely to be sparse, meaning trustees will be reconstructing the decision-making process with the benefit of hindsight, which could cause distortion. And, if an influence has been subconscious, by its very nature the trustees will not have been aware of it.
[65] As the Court of Appeal said, there were in this case means of avoiding the conflict issue. The conflicted trustees could have withdrawn from the discussions in accordance with s 227A(2). They could have applied to the Court to approve the transaction.
[14]Fenwick v Naera [2015] NZSC 68, [2016] 1 NZLR 354 (footnotes omitted).
Fenwick v Naera was relied on by the Māori Appellate Court in Pook v Matchitt – Matangareka 3B, where that Court also made findings regarding the appropriate management of trustee conflicts of interest, including, in that case, conflicts inherent in a sibling relationship:[15]
[60] It is well settled that a trustee may not profit from their office. Such a profit can be made directly or indirectly. Moreover, the owners are entitled to the benefit of trustee decision making untainted by any conflict between the trustees’ duty to them on the one hand and any personal considerations and interests on the other. While we have carefully considered Mr Bidois’ submissions on this point, we find little attraction in them. This is because the conflicts inherent in a sibling relationship fall squarely within the parameters identified by the Court of Appeal and the Supreme Court in the Naera v Fenwick line of cases. Added to that, in the case of one trustee John Butler is the compounding factor of spousal conflict. Neither of these conflicts were properly managed consistent with best practice.
[61] We agree with Judge Reeves that it was obvious that serious conflicts of interest existed in relation to the Butlers and that they were not properly managed. The evidence confirms that significant sums of trust funds were being managed by the trustees where three of them had a conflict due to them being siblings. Those three trustees should never have been involved in the decision making surrounding the affected transactions as they had a direct personal interest in the outcomes. They should have been excluded from all discussion concerning the affected agreements and should not have been present when the matters were being discussed. It is simply insufficient to ‘declare’ a conflict and to then remain in the meeting of trustees or to have close family members who were also trustees remain.
[15]Pook v Matchitt – Matangareka 3B [2019] Māori Appellate Court MB 167 (2019 APPEAL 167) (footnotes omitted) (emphasis added).
Fenwickv Naera recognised that general trust law applies to trusts established under the Act, to the extent that this is consistent with the Act’s scheme, purpose, context and wording.[16] Thus, the equitable duties imposed on trustees apply to trustees under the Act, including the duty of loyalty and its prohibition on trustees both having conflicts of interest and profiting from trust property.[17] Similarly, unless modified by the trust order, the default duties of the Trusts Act, which reflect the equitable duties owed by trustees, apply. Relevant default duties include the requirement on trustees to avoid conflicts of interest and to act for no reward, and the prohibition on trustees from profiting from their position as trustee.[18]
Removal of trustees under the Act
[16]Fenwick v Naera, above n 14, at [55] and [67].
[17]At [67] and [69]–[72].
[18]Trusts Act 2019, ss 34 and 36–37.
On 6 February 2021, shortly before the Māori Land Court hearing, s 240 of the Act, which sets out the circumstances in which trustees can be removed, was amended to read:
240 Removal of trustee
(1)The court may at any time, in respect of any trustee of a trust to which this Part applies, make an order for the removal of the trustee, if it is satisfied that—
(a)the trustee has lost the capacity to perform the functions of a trustee; or
(b)the removal is desirable for the proper execution of the trust, and 1 or more of the following grounds for removal are met:
(i) the trustee repeatedly refuses or fails to act as trustee:
(ii) the trustee becomes an undischarged bankrupt:
(iii)the trustee is a corporate trustee that is subject to an insolvency event:
(iv)the trustee is no longer suitable to hold office as trustee because of the trustee’s conduct or circumstances.
(2)A trustee has lost the capacity to perform the functions of a trustee, for example, if the trustee—
(a)is subject to an order appointing a manager under section 31 of the Protection of Personal and Property Rights Act 1988; or
(b)has a trustee corporation managing the trustee’s property under section 32 or 33 of that Act.
(3)A person may no longer be suitable to hold office as trustee, for example, because of the following conduct or circumstances:
(a)the trustee is convicted of an offence involving dishonesty:
(b)it is not known where the trustee is and the trustee cannot be contacted:
(c)the trustee is prohibited from being a director or promoter of, or being concerned or taking part in the management of,—
(i)a company under the Companies Act 1993; or
(ii)an incorporated or unincorporated body under the Financial Markets Conduct Act 2013 or the Takeovers Act 1993.
The predecessor section, not operative in this case but under which the various legal principles had been developed, is set out below:
240 Removal of trustee
The court may at any time, in respect of any trustee of a trust to which this Part applies, make an order for the removal of the trustee, if it is satisfied—
(a)that the trustee has failed to carry out the duties of a trustee satisfactorily; or
(b)because of lack of competence or prolonged absence, the trustee is or will be incapable of carrying out those duties satisfactorily.
The Māori Land Court decision of 20 April 2022
We summarise the judgments of both the Māori Land Court and Māori Appellate Court in some detail because in our view the Māori Appellate Court applied an incorrect test on the appeal. The reasoning of the Māori Land Court therefore remains relevant.
The application to remove was heard by Judge Fox on 6 August 2021.
Apirana Henderson, by this stage represented by Mr Kahukiwa, accepted the Trust Order did not expressly authorise payments to trustees but argued that the Trust Order impliedly entitled a trustee to reasonable remuneration for personal trouble and loss of time incurred. The implied term was argued to arise particularly from cls 2–4 of the Trust Order.[19]
[19]Māori Land Court decision, above n 1, at [79]–[80].
The Judge said the starting point, as counsel both agreed, was that trustees were not paid for their role as trustees as a matter of right, unless there is provision in the trust order, or direction of the Court, neither of which applied.[20]
[20]At [90].
The Judge found that there was nothing in cls 2–4 permitting inferred authority to pay remuneration.[21] In particular, the power in cl 4 to pay costs of administration necessarily related to furthering the objects of the A47 Trust. Those objects had to be derived from the preamble and s 2 of the Act, both of which reference the principles of retention and utilisation.[22] She considered that neither of these objects required the payment of remuneration to trustees,[23] and went on to say:
[93] Furthermore, while s 227A(1) of the Act makes it clear that a trustee may be a servant or officer of the trust, or they may have an interest or concern in any contract made by the trust that is different to stating that they can pay themselves from the trust whenever they or their fellow trustees deem it appropriate and without some other form of contract for work. Thus, it is perfectly acceptable for A[pirana] Henderson to be a resident trustee on the land and to work the farm, but it is not acceptable for the trustees to then pay him unless subject to a work contract properly granted through due process or by direction of the Court.
[94] In addition, no trustee, including the respondent can:
vote or participate in the discussion on any matter before the trust that directly or indirectly affects that person’s remuneration or the terms of that person’s employment as a servant or officer of the trust, or that directly or indirectly affects any contract in which that person may be interested or concerned…
[21]At [91]–[92].
[22]At [92].
[23]At [92].
The Judge also rejected Mr Kahukiwa’s argument that, although appointed at different times, it must have been known to the Court that Victor, Ned and Apirana Henderson were brothers and that therefore there is a “necessarily implied authority for conflicts of interest prima facie arising from their close blood relationship”.[24] She held that “[t]here can be no implied authority to breach the limits of the law set out in s 227A(2)” of the Act.[25] Citing Pook, the Judge found that the three siblings should have been excluded from all discussion concerning the payments, the farm proposal and the insurance policy.[26]
[24]At [95].
[25]At [95].
[26]At [95], citing Pook v Matchitt – Matangareka 3B, above n 15, at [61].
Mitigating factors were acknowledged, being that the payments were suggested by other trustees, most of the trustees consented to them and there was demonstrable evidence of the work completed.[27] But against that, the Judge found that Apirana Henderson had participated in decision making contrary to s 227A as follows:
(a)In terms of the $10,000 sum, Apirana Henderson helped formalise Victor Henderson’s proposal to pay him $10,000; no meeting of trustees was convened; no direction of the Court was sought authorising the payment; Apirana Henderson obtained the majority of the other trustees’ signatures; and he signed the proposal himself.[28]
(b)In terms of the $5,000 sum, no meeting of the trustees was convened; the payment was made and received at a time when the application for removal was before the Court; no direction was sought from the Court authorising the payment; Apirana Henderson produced a report justifying the payment; and the majority of those who authorised the payment were his brothers and thereby conflicted.[29]
(c)Similar problems were associated with the farm proposal. While it had not been implemented, Apirana Henderson had been involved at all relevant times during decision-making over a proposal where he would be remunerated for work on the farm.[30]
(d)The payment of $200 for petrol was further evidence of the inability of the majority of trustees to properly manage potential conflicts of interest and a failure to implement proper trust procedures to ensure such conflicts did not occur. While the Judge accepted that Apirana Henderson was entitled to reimbursement, he and his brothers should not have participated in the decision to make the refund. That was a matter for the remaining trustees to determine.[31]
(e)In terms of the insurance payment, the Judge noted the active participation of Apirana Henderson in obtaining insurance coverage for the A47 Trust under which he knowingly added personal items not used for trust operations.[32] The Judge also took into account that Apirana Henderson had agreed to repay the A47 Trust for those personal items that were wrongly included in the insurance cover but this came after the fact and so again his participation and voting were contrary to s 227A of the Act.[33]
[27]Māori Land Court decision, above n 1, at [96].
[28]At [97].
[29]At [98].
[30]At [99].
[31]At [100].
[32]At [101]. The Judge referred to the applicant which seems to have been an error. We note Apirana Henderson claimed that some of his personal assets were used for the benefit of the A47 Trust to some extent.
[33]At [101]. Apirana Henderson did not offer to repay the A47 Trust until some seven months later.
The Judge therefore found that in addition to being in breach of s 227A, Apirana Henderson had been in breach of his duties as a trustee, including:[34]
(a)the duty to adhere rigidly to the terms of the A47 Trust;
(b)the duty not to make any profit from being a trustee and to act without being paid; and
(c)the duty not to exercise a power of a trustee directly or indirectly for the trustee’s own benefit.
[34]At [102].
The Judge turned to consider whether, given the breaches she had found, Apirana Henderson ought to be removed as a trustee under “[t]he new enactment of s 240”.[35] She recorded that the relevant provision permitting removal was s 240(1)(b)(iv), that is, where the trustee is no longer suitable to hold office because of their conduct or circumstances.[36] The Judge observed that this provision necessitated a wide-ranging approach, to allow the Court to consider the range of conduct or circumstances that may result in a trustee being unsuitable to hold office.[37] The examples outlined in s 240(3), set out above at [32], were, in the Judge’s view, not an exhaustive list.[38] The Judge stated:
[112] Once I am satisfied one of the grounds in s 240(1)(b) has been met, I then have to consider whether removal is desirable for the proper execution of the trust. That involves an exercise of discretion. In exercising that discretion in this Court, I have to take into account the kaupapa of the Act as set out in the Preamble, ss 2 and 17.
[35]At [109].
[36]At [68] and [110].
[37]At [110].
[38]At [111].
Despite the amendment of s 240, the Judge considered earlier principles concerning removal still applied.[39]
[39]At [113].
Taking all of those matters into account, the Judge concluded it was desirable to remove Apirana Henderson as a trustee under s 240(1)(b)(iv), having regard to the repetitive nature of the breaches of trustee duties, supported by his siblings.[40] She said:
[114] … He is now effectively the manager of the farm operations, a trustee, and the chairperson of the trust who, with his siblings, control the trust’s assets. While that is a situation that can normally be managed without conflicts occurring, the nature of decision making by these trustees indicate they are unlikely to change should the respondent remain a trustee and chairperson of the trust. Effectively, to leave the situation as it is, places the assets of the trust at risk.
[40]At [114].
The Judge concluded that Apirana Henderson had breached his duties as trustee and it was desirable he be removed.[41]
[41]At [115].
However the Judge also directed that the trustees adopt Apirana Henderson’s farm proposal by employing him as a farm manager for five years. She made that direction because all the trustees except Mr Tuhiwai-Ruru, agreed Apirana Henderson’s work on the farm had improved farm operations.[42] The Judge issued further directions including that the Registrar of the Court was to work with the remaining trustees to conduct an AGM and to facilitate a new election to replace the trustees, with all trustees to consider retiring and standing for re-election, except for Apirana Henderson.[43]
The Māori Appellate Court decision of 9 February 2023
[42]At [115].
[43]At [118].
Apirana Henderson advanced similar arguments on appeal to the Māori Appellate Court — namely that the Trust Order impliedly authorised payments to trustees and that he and his brothers were entitled to participate in the trustee discussions and vote to approve payments to him.[44] In the alternative, he argued that if there was no implied power to pay trustees then a doctrine of “equitable accounting” should apply to determine the extent to which the payments made to him were reimbursements of expenses he incurred on behalf of the A47 Trust.[45] Finally, he argued that the Māori Land Court misdirected itself by finding he had breached his trustee duties and s 227A of the Act, and he disputed that there were sufficient grounds to remove him as a trustee.[46]
[44]Māori Appellate Court decision, above n 2, at [3].
[45]At [10].
[46]At [3].
The Court found against Apirana Henderson on the first ground for similar reasons to the Māori Land Court, adding that applying the normal rules of contractual interpretation, implication of a term was simply not necessary.[47] The equitable accounting argument was also rejected.[48]
[47]At [13] and [14(d)], citing Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [116].
[48]Māori Appellate Court decision, above n 2, at [17]. The equitable accounting argument was not advanced in this Court, and so we do not comment on this further.
The Court went on to say that, given there is no implied power to pay trustees, Apirana Henderson was in breach of trust and there was no need to consider whether the payments were properly authorised.[49] However, if there were a power to pay trustees it would still have to be exercised properly and prudently, and for the reasons given by the Māori Land Court it was not. In particular, Apirana Henderson was actively involved in promoting and approving the payments and they were authorised without a trustee meeting or directions from the Court.[50]
[49]At [18].
[50]At [19].
The Court considered that the appointment of sibling trustees did not waive any expectation on those trustees to manage conflicts arising due to their familial relationships. First, the Court said the duty to avoid conflicts is a default duty in the Trusts Act that cannot be negated by implication and secondly, the Māori Land Court is not required to inquire into and would be unlikely to know whether trustees were siblings.[51]
[51]At [21].
The Court then considered s 240 of the Act and said it involved the exercise of a discretion, with the result that appeal rights are limited.[52] It set out the Māori Land Court’s analysis of the new wording of s 240 in previous decisions of that Court.[53] It noted also that the new s 240 closely mirrors the wording in s 105 of the Trusts Act, which provides for the removal of trustees.[54] The Court then said that both the question of whether a trustee is no longer suitable to hold office and the question of whether it is desirable to remove the trustee involve an exercise of discretion, emphasising that the latter test involves desirability not necessity.[55]
[52]At [23].
[53]At [28], citing Gray v Paikea – Otara 5D2 (2022) 252 Taitokerau MB 210 (252 TTK 210), Wynyard v Waata – Manawakore C1 and D (2022) 247 Taitokerau MB 4 (247 TTK 4), Nikora v Trustees of Tuhoe – Tuhoe Te Uru Taumatua Trust (2021) 252 Waiariki MB 157 (252 WAR 157), Rihari v Auckland – Takou (2021) 240 Taitokerau MB 42 (240 TTK 42) and Bloor v Karaitiana – Runanga 2E (2021) 259 Waiariki MB 286 (259 WAR 286).
[54]Māori Appellate Court decision, above n 2, at [33].
[55]At [35] and [37]–[38].
Further, the Court noted:
[42] We see no error in the approach taken by the Māori Land Court. The Court thoroughly assessed the relevant conduct and circumstances of Apirana Henderson and identified the aspects of that conduct and circumstances that would render him no longer suitable to hold office as a trustee. The Court identified three breaches of trustee duties and a breach of s 227A of the Act. Although the Court did not expressly say so, it is trite that by breaching these duties, the Court considered Apirana Henderson as no longer suitable to hold office as a trustee. …
Finally, the Court concluded that, given the reasons the Māori Land Court gave for removal being desirable were open to the Court on the facts, after taking into account all relevant considerations and no irrelevant considerations, and the decision not being plainly wrong, it must therefore stand.[56]
Arguments on appeal
[56]At [43].
The appellant’s submissions largely recapitulated the arguments unsuccessfully advanced in the Māori Land Court and the Māori Appellate Court. We set out their three key points below.
As Mr Hemi, for the respondent, supported the decisions and reasoning of the lower courts, there is no need to summarise his argument.
Implied term permitting trustee remuneration and self-dealing
First, Mr Kahukiwa submitted it was wrong for the Māori Appellate Court to find there was an absolute bar on trustees being remunerated for their work as trustees. Entitlement to remuneration can be expressly or impliedly authorised. Mr Kahukiwa accepted there was no express right, but submitted that a term should be implied into the Trust Order, allowing the trustees to remunerate themselves. He said such a term can be implied for the following reasons:
(a)The Trust Order lacks a section setting out the purpose of the A47 Trust, which would thus need to be implied. This sets a “precedent” for further implied terms.
(b)In the absence of a specific purpose provision, the purpose of the A47 Trust is that set out in s 215 of the Act. Section 215(2) provides that the purpose of an ahu whenua trust is to facilitate and promote the use and administration of the land in the interest of the owners. He said this also suggests that the land would need to be managed, including by clearing, and if in terms of the Trust Order the trustees are expected to do the hard work of clearing the land, they ought to be compensated for that work.
(c)Clause 3(a) of the Trust Order provides that the trustees may personally grow crops on the land, which would suggest that self-profit is permissible. To grow crops the trustees must also be authorised to clear the land, which in turn leads to an implication they can be paid for that work.
(d)Aligned with this argument, Mr Kahukiwa invoked the cultural context of Māori land and trusteeship, and tikanga Māori, submitting that traditional leadership roles included active participation in the stewardship of ancestral land. Mr Kahukiwa argued that Apirana Henderson’s work was consistent with this ethos and with the principle of tino rangatiratanga, supporting the case that his actions were not only permissible but honourable within the Māori framework of land governance. He suggests this implied authorisation is “consistent with the tikanga that Rangatira themselves worked the land”.
While it is not clear, Mr Kahukiwa seemed to argue on the same bases, that a trustee is entitled to pay themselves from the trust fund, thereby circumventing the normal approval process and related duties.
Brothers not conflicted
Secondly, Mr Kahukiwa submitted that even if Apirana Henderson were excluded from participating and voting for the payments he received, his brothers should not have been. He argued, as he had before, that the Māori Land Court must have known the three Henderson trustees were related to each other when it appointed them as trustees, and thus impliedly authorised them to act on matters involving each other. He submitted further that the appointment of siblings as trustees should not automatically trigger a presumption of impropriety. Rather, the Court should have required evidence of actual self-interest or divided loyalty beyond familial ties. He said no such evidence was proffered; accordingly the finding of conflict on the part of the brothers was unfounded.
Misapplication of s 240 — failure to take account of work done and cultural context
Mr Kahukiwa submitted, as a consequence of the above, that Apirana Henderson did not breach the terms of the Trust Order and in any event, the lower courts misapplied s 240 of the Act in concluding that his removal was justified.
He contended that s 240 must be applied with a view to promoting the A47 Trust’s proper functioning, rather than as a punishment. The work Apirana Henderson undertook substantially advanced the A47 Trust's purpose and was beneficial to the landowners. The payments received were modest and related to operational needs, such as clearing scrub and maintaining the property. Consequently, Apirana Henderson’s conduct should not have been characterised as a breach sufficient to justify removal. Rather, the focus should have been on the welfare of the beneficial owners and whether his continuation in office would jeopardise the A47 Trust’s proper administration. In failing to weigh the benefit derived from his efforts and in disregarding principles of “unjust enrichment”, the Court erred in its evaluative judgment under s 240.
As a result, Apirana Henderson sought orders overturning his removal. He contended that the Māori Appellate Court erred in its interpretation of the Trust Order, its application of conflict rules, its assumptions about familial conflict and its legal approach to trustee removal. He maintained that the payments made to him were lawful, beneficial, and consistent with the obligations of trustees under the Act, and that his removal was therefore unjustified.
Issue One: Is there an implied term in the Trust Order permitting trustee remuneration and self-dealing?
It is important to note that under s 5(4) of the Trusts Act, all default duties, and relevantly here, ss 36 and 37, may be modified by the express or implied terms of a trust, that leaving open at least the possibility of Mr Kahukiwa’s argument. To the extent the Māori Appellate Court suggested otherwise, we disagree.
An ahu whenua trust is an express trust. Ordinarily the terms of an ahu whenua trust will be found in the express terms of the relevant trust order. There is no express term in the Trust Order permitting trustee remuneration, nor is such argued.
Before considering the argument in favour of an implied term, we address the other bases on which Apirana Henderson could legitimately receive payments.
Bases on which Apirana Henderson could legitimately receive payments
Section 227A of the Act
Both the Māori Land Court and the Māori Appellate Court proceeded on the basis that s 227A of the Act applied generally to the payments and benefits Apirana Henderson received from the A47 Trust. Under that section an employee or contractor of an ahu whenua trust can become a trustee. Logically that would apply in reverse. A trustee with an employment contract would obviously be entitled to payment. We note that is not payment for “acting as a trustee”,[57] and it requires a contract to be made with the trust, whether written or oral. However, the payments and benefits at issue in this case were not made pursuant to any such contract, nor was that argued. The Apirana Henderson Proposal was too vague to constitute a contract, it was signed by him as a trustee, not in his proposed additional role of “farm manager”, and it did not cover the payments at issue. Apirana Henderson himself says his proposal was not implemented.[58] The result is that s 227A of the Act does not apply to these payments and benefits. Rather, the receipt of these payments and benefits was in breach of the default duties of the Trusts Act and the related fiduciary duties, unless these are impliedly modified by the Trust Order.
[57]Payment of trustee fees as such would require a provision in the Trust Order or an order of the Court, sensibly the former.
[58]We note that, as stated above, parts of the proposal were in fact implemented, including Apirana Henderson moving into the house on the A47 block.
As noted above, a trustee can also be reimbursed pursuant to ss 36 and 37 of the Trusts Act for expenses incurred on behalf of the trust. That would only cover the petrol payment, which would still require proper authorisation from the trustees.
Clause 2 of the Trust Order
The Māori Land Court Judge seemed to consider that in terms of cl 2 of the Trust Order, a trustee could “use” the house on the land. She said Apirana Henderson could live on the land but could not be paid.[59] The point was not argued before us but we disagree. At the least, what the Judge suggested would only be possible if there were a lease in place. Clause 2 simply empowers the trustees to use the assets of the trust for purposes of their trusteeship, not for their personal benefit.
Conclusion
[59]Māori Land Court decision, above n 1, at [93].
As none of these express provisions apply, which is implicitly accepted by Mr Kahukiwa’s submission, we turn to consider the argument that Apirana Henderson was entitled to the payments and benefits he received by a term implied into the Trust Order.
Whether there is an implied term in the Trust Order permitting trustee remuneration and self-dealing
We accept as a matter of principle that it would be possible for such a term to be implied.[60] But there is no doubt that no such term can be implied here.
[60]See Trusts Act, s 5(4).
First, also as a matter of principle, just as terms are not readily implied into contracts, they are not readily implied into trust deeds.[61] We agree with the finding of the Māori Appellate Court that implying a term into the Trust Order to allow for a power to pay trustees is unnecessary.[62] In fact, given the various payments and benefits were said to be in exchange for work, but absent a contract, we consider implication of a term would not only be unnecessary, it would run contrary to s 227A.
[61]See Bathurst Resources Ltd v L & M Coal Holdings Ltd, above n 47, at [116].
[62]Māori Appellate Court decision, above n 2, at [14(d)].
Secondly, Apirana Henderson relies on cls 2–4 of the Trust Order, but there is nothing in these clauses that would justify an implied term. Clause 2 gives the trustees power to use, occupy and manage the land but it says nothing about remuneration. In terms of cl 3, the trustees are entitled to grow crops on the land. We agree it is implicit that the trustees would be entitled to clear the land, however we do not consider they would be personally entitled to the crops. As we have said already, these clauses are giving the trustees the right to use the land and associated assets in their capacity as trustees, not in their personal capacity. Even if an individual trustee were entitled to crops they had grown, that is a very different matter to saying a trustee has an implied right to receive payment for their work. In fact, cl 3(a), if interpreted in that way, might indicate that the drafter of the Trust Order expressly turned their mind to permissible “trustee” benefits which would militate strongly against implied permission for trustee remuneration.
Mr Kahukiwa draws a parallel between an implied power for trustee remuneration and rangatiratanga. Given the limited and unclear submissions from Mr Kahukiwa on this point, we cannot discern any relevant comparison here. A rangatira is clearly different to a trustee who must adhere to the terms of the trust under which they are appointed, and comply with the duties imposed on them. The fact that rangatira were known to themselves work the land (and take crops) is not relevant to whether there is an implied authorisation for remuneration of a trustee in the Trust Order.
Addressing the balance of the appellant’s specific points, there is clearly no significance in the lack of a purpose clause. As Mr Kahukiwa acknowledges, that simply means that the purpose of the A47 Trust is as set out in s 215 of the Act, which does not advance the argument. The lack of a specific purpose clause does not set a precedent for implication of terms generally.
Nor is it significant that under s 215, the purpose of an ahu whenua trust is to promote use of the land. Neither that provision nor any other, requires the trustees to do the work of clearing the block. It is standard practice for trustees to spend time carrying out work on various activities as part of their honorary role. Neither the section itself, nor the carrying out of work leads to an implication that trustees are entitled to remuneration for work they have carried out.
We add here that Apirana Henderson’s case appeared to extend beyond a right to remuneration — to an implied right of self-dealing. This argument was not clearly articulated. We take it to be that, in reliance on the same submissions, he was entitled to pay himself and reward himself out of the trust assets, without authorisation from the trustees, let alone approval of beneficiaries or a court direction.
If this is the argument, it is plainly wrong. We have found that there was no power for the trustees voting as a whole (in the absence of an employment or other contract) to make the payments made to Apirana Henderson. It would follow that there was no power for Apirana Henderson to do so on his own cognisance. All of the points made above apply here. It would be an extraordinary proposition to imply from the right to grow crops, the right for a trustee to help themselves to the trust fund. That would fly entirely in the face of long-standing common law and statutory principles, including those clearly articulated by the Supreme Court in Fenwick v Naera in the passage quoted earlier.
For the above reasons we agree with the findings in the courts below that there was no express or implied term permitting receipt of remuneration or self-dealing by Apirana Henderson. The payments and benefits he received were therefore made without proper authority. This extends to his use of the house and receipt of outgoings. Apirana Henderson accepts that his farm proposal was not implemented, yet the benefits were, without any lease or employment contract in place. The exception is the reimbursement for petrol; however, as noted above, this payment was still made without proper authorisation.
Even if the trustees were empowered to authorise the various payments and other benefits provided to Apirana Henderson, the more significant point is, as the Māori Land Court and Māori Appellate Court found, he was in clear breach of his trustee duties by participating and voting on each of the occasions where he received a benefit. We discuss this further below at [93]–[106].
Issue Two: Were the Henderson brothers impliedly authorised to act on matters involving each other?
Both courts considered Apirana Henderson’s brothers were acting in conflict, along with Apirana Henderson himself.
Apirana Henderson submits that because he and his brothers were appointed by the Māori Land Court, and that Court is directed to appoint trustees only if, pursuant to s 222(2)(b) of the Act, it is satisfied that such an appointment would be broadly acceptable to the beneficial owners, the Court must be taken to have known of the fraternal relationship. Therefore the Court authorised them to act, even in conflicts of interest between themselves.
We consider the question of whether Apirana Henderson’s brothers were conflicted or not, is of little relevance to this case. There is no application to remove them, or other relief sought against them. Nor would we consider it appropriate, in this case at least, to take into account breaches by Apirana Henderson’s brothers in deciding whether he should be removed as a trustee. The nature of the relationship between the three siblings is relevant to whether removal of Apirana Henderson is “desirable”, but that is a different matter which we address below.
For that reason we do not consider it appropriate to make findings as to whether the two Henderson brothers were in breach of their duties as trustees. We nevertheless touch briefly on this issue.
We note that Apirana Henderson’s main argument that his brothers were not conflicted turned on assumed knowledge of the Māori Land Court of their relationship, that being allegedly tantamount to authority for them to act in conflict of interest. We have no way of knowing whether the Māori Land Court judges making the appointments knew of the relationship, and we would very much doubt that was the case. It is notable that both of the lower courts rejected that submission. The brothers were appointed at very different times (one in 2000, one in 2007 and one in 2015) and no doubt by different judges. Also, as we understand it there are over 5,000 ahu whenua trusts — which would militate against the assumed knowledge relied upon.
In any event, such assumed knowledge on the part of the Māori Land Court in itself would clearly not lead to an inference that the brothers could vote on any matter where they are in conflict. That would be a wholly unjustified leap in logic.[63] First, it would not be expected that there would be regular occasions where a trustee would stand to personally benefit from trust decisions. This case strikes us as unusual in that respect. Secondly, any proposal involving a conflict could still be passed by a majority of the balance of the trustees without the siblings’ participation.[64]
[63]We nonetheless note that the language used by the Māori Land Court in addressing this argument was in our view inappropriate.
[64]See Te Ture Whenua Maori Act, s 227.
However, we do not rule out the possibility that, for somewhat different reasons, brothers may not be automatically conflicted.
Both Mr Hemi and the courts below relied on Fenwick v Naera and Pook. Fenwick v Naera did not involve siblings. In Pook, where two sibling trustees stood to benefit from significant forestry contracts, the Māori Appellate Court found that they were in breach of duty. That could not be questioned, but that finding did not turn on their status as brothers. A third brother, who had no direct interest in the contracts, was also held to be in breach of duty. That finding seems to have been based on an assumption that a sibling would be indirectly benefited by their siblings receiving a benefit.[65]
[65]Pook v Matchitt – Matangareka 3B, above n 15, at [60]–[62].
The assumption made in Pook is understandable given the Supreme Court’s broad interpretation of s 227A(2) and the facts of Pook itself. However, testing against the language of s 227A(2), which reflects the common law position,[66] we question whether it can be generally assumed in a trust such as this that a sibling is “directly or indirectly” interested in another sibling receiving a payment or benefit. In this case there is no evidence of, nor would we assume, a “direct” interest. And we question what indirect interest siblings would have, beyond one of sibling loyalty. If that were to mean that they were conflicted and could not vote on a transaction benefitting another sibling, then the same could apply, particularly in the context of an ahu whenua trust, to another trustee who is, for example, a close friend or a loyal follower (such as Mr McClutchie) or a more distant relation. Given these trusts are likely hapū-based there may be many trustees who are related or closely connected, as borne out by the appointment of three siblings both here and in Pook.
[66]While s 227A(2) of the Act does not apply here (as noted above), this section frames our analysis as a codification of longstanding equitable principles of conflicts of interest: see Fenwick v Naera, above n 14, at [54].
We leave that point for a case where it is directly at issue but thought it important we make these comments, as Mr Kahukiwa faced heavy criticism on this issue in the Māori Appellate Court. While we do not agree with his main argument, the point that siblings are not automatically conflicted may have some validity.
As with Issue One above, it may be that Apirana Henderson’s argument was intended also to extend to not being conflicted himself (or that duty being waived) by virtue of the triple sibling appointments. If that is his argument, it is plainly wrong. It runs squarely in the face of his duty to avoid conflicts of interest,[67] and the Supreme Court’s judgment in Fenwick v Naera. There is simply no question that Apirana Henderson was conflicted in all the respects found by the Māori Land Court (and more) and that is the key hurdle he faces in this case.
Issue Three: Was the removal of Apirana Henderson justified?
Test on appeal
[67]Trusts Act, s 34.
The Māori Appellate Court treated the Māori Land Court’s judgment as being entirely an exercise of discretion. That was incorrect. Whether a trustee is suitable to hold office is not a matter of discretion. We have come to our own view on this issue in accordance with Austin, Nichols v Stichting Lodestar.[68]
General principles
[68]Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [4]–[5] and [16].
Removal was ordered under s 240(1)(b)(iv) of the Act.[69] The test for removal under s 240(1)(b) is a two-step process.[70]
[69]Māori Appellate Court decision, above n 2, at [34].
[70]See for example Wynward v Waata – Manawakore C1 and D, above n 49, at [19] and Gray v Paikea – Otara 5D2, above n 49, at [21].
First, the court must assess whether one of the prescriptive grounds in s 240(1)(b) has been met, in this case whether Apirana Henderson is no longer suitable to hold office, none of the other grounds being applicable.
Secondly, the court must determine whether removal, in terms of the opening words of s 240(1)(b) is “desirable for the proper execution of the trust”. Unlike the first step, this does involve an exercise of discretion. Broader considerations can be taken into account at this point including, in this case, the mitigating factor of Apirana Henderson’s hard work and the exacerbating factor of his apparently close relationship with three of the remaining five trustees.
We consider that the primary focus under the first limb must be on the actions of Apirana Henderson, not on the actions of other parties. The question is whether he is no longer suitable, not whether his brothers or anyone else is. Also, it does not follow that if a trustee is in breach, they should be removed. Although breach of duty will likely be the key focus under s 240(1)(b), the provision is neither governed by, nor limited to breach of duty. In addition, “suitability” is not limited by the examples in the subsection, as argued by Mr Kahukiwa. These are clearly non-exhaustive.
In terms of the second limb, as the Māori Appellate Court emphasised, the question is whether removal is “desirable” not whether it is necessary.[71] The inquiry can be wide-ranging and may extend beyond Apirana Henderson’s own actions. In many respects the two limbs may overlap.
[71]Māori Appellate Court decision, above n 2, at [38].
We also agree with the Courts below that the question of whether to remove, and the Court’s discretion, should still be guided, as those Courts identified, by broader principles set by this Court and the Māori Appellate Court under the previous s 240, including:[72]
(a)removal is a serious step and is not undertaken lightly;
(b)technical breaches of trust and governance instruments may not lead to removal unless the trust assets have been put at risk or there has been a serious loss or malfeasance; and
(c)generally, the court must be satisfied that there is evidence of real abuse, failure, or malfeasance and the absence of any tenable defence.
[72]Māori Land Court decision, above n 1, at [65]; and Māori Appellate Court decision, above n 2, at [28(e)]. See Boon v McQueen – Waiwhakaata 3E6 Section 4B2 Trust (2021) 214 Waikato‑Maniapoto MB 1 (214 WMN 1); Rameka v Hall [2013] NZCA 203, [2013] NZAR 1208; Naera v Fenwick [2013] NZCA 353; and Fenwick v Naera, above n 14.
However, these are guidelines only.
Application to this case
Whether Apirana Henderson is no longer suitable to hold office
Apirana Henderson has not succeeded in challenging the findings of breach made by Judge Fox, and upheld by the Māori Appellate Court. Those findings stand and we agree that he repeatedly breached his duties as a trustee in the way set out by the Māori Land Court and summarised at [43] and [44] above. As we have said, there was a further breach in taking up residence, with outgoings paid. The breaches are not “technical”. Although involving modest sums of money, the breaches all involve repeated use of trust assets for Apirana Henderson’s personal “profit”. They were not inadvertent, and continued despite objections being raised and in the face of contrary or at least cautionary legal advice. Most significantly, in each case Apirana Henderson promoted and voted on transactions in his favour, in each instance being clearly in a position of conflict, and despite objections from other trustees in respect of the later transactions.
Even after the application for removal was filed, Apirana Henderson arranged the insurance policy, where the A47 Trust insured his own assets, and also participated in the further $5,000 payment. The breach regarding the insurance policy, although involving a minor sum, was particularly concerning in context. We also note and consider significant Apirana Henderson’s disregard of court orders obtained by consent that he resign as a trustee and that a new election be held,[73] and his lack of co‑operation with the Māori Land Court in the early stages of this proceeding.
[73]We recognise he was not alone in this regard.
Most concerning is Apirana Henderson’s dogged approach to doing things his own way. He does not accept the rules applicable to trustee conduct. We consider this goes beyond a lack of understanding and there is no excuse for his conduct. As Mr Brooking said in his evidence, quoted by the Māori Land Court, Apirana Henderson has never been interested in clearly setting out issues around conflicts of interest to avoid what occurred. That would:[74]
… risk the position he is in now which he is happy to maintain. The trust provides him a place to live, pays for all his expenses and pays him money. He is in control of everything, or at least in a position to influence everything and these are also things he gets a personal benefit from.
[74]Māori Land Court decision, above n 1, at [24].
We do not agree that the Māori Land Court gave insufficient weight to the work Apirana Henderson had done on the A47 block, this being argued in mitigation. The work done is relevant to whether Apirana Henderson should be removed, but it cannot justify a back-door entitlement to remuneration or justify Apirana Henderson repeatedly promoting resolutions himself and voting in his own favour. To take that approach would effectively impose on the trustees and the beneficial owners an open‑ended “management contract” at the discretion of Apirana Henderson, his brothers and Mr McClutchie. Rather, and appropriately, while finding that Apirana Henderson’s repeated breach of his trustee obligations, and apparent lack of understanding of those obligations, posed a genuine risk to the A47 Trust assets and rendered it desirable that he be removed, Judge Fox also directed that he be appointed as farm manager for five years. This recognised his genuine contribution to the A47 block. We consider that was a clever solution by the Judge. Tellingly, Apirana Henderson rejected that opportunity, his counsel reiterating that rejection in this Court.
Ultimately, regardless of what work Apirana Henderson may have done, the breaches of duty are unfortunately blatant and repeated. They showcase a complete failure to understand the obligations of a trustee, or if understood, to meet those obligations. Given the legal advice received, the breached consent order and the nature of the arguments repeatedly advanced on his behalf, we can only conclude as stated above that Apirana Henderson does not accept the duties imposed on him as a trustee.
In all of these circumstances we agree with the courts below that Apirana Henderson was no longer suitable to hold office as a trustee in terms of s 240(1)(b)(iv).
Whether the removal of Apirana Henderson is desirable
We also agree that Apirana Henderson’s removal is desirable largely for the same reasons as above. In addition, to leave him in place with the obvious consistent and ongoing support of his brothers and Mr McClutchie, notwithstanding his clear breaches of duty, gives him/them the required majority and a carte blanche. Whether that card is played is not the point. As the Māori Land Court put it, that would leave Apirana Henderson as effectively the farm manager and chairperson of the A47 Trust, who together with his siblings in effect control the trust assets. To leave that situation as it is, not only places the assets of the trust at risk but locks up control and use of the A47 block in a way that runs clearly counter to the appointment process and the best interests of the beneficial owners.
Farm management direction
The farm management direction was made in April 2022. Mr Kahukiwa advised us that Apirana Henderson is not interested in taking up that role alone. As no other submissions were made on that matter, we take it that the direction has lapsed. In any event the Apirana Henderson Proposal was too uncertain to be capable of implementation in that form. We set it aside. If either of the parties wish to revisit that matter, they must refer any proposed agreement to the Māori Land Court for approval.
Costs
The respondent is eligible for costs. Both parties received special aid in the Māori Land Court and the Māori Appellate Court such that costs remained where they fell in those courts. We were advised that Apirana Henderson remained on special aid in this Court but the respondent was not. Our understanding is special aid falls into a different category to legal aid in terms of the Court’s ability to order costs.[75] If the respondent is seeking costs, a memorandum should be filed within 10 working days of delivery of this judgment and further directions will follow.
Result
[75]Taueki v Horowhenua 11 (Lake) Māori Reservation Trust – Horowhenua 11 (Lake) [2019] Māori Appellate Court MB 652 (2019 APPEAL 652).
The appeal is dismissed.
The farm management direction is set aside.
If seeking costs, the respondent is to file a memorandum within 10 working days of delivery of this judgment and further directions will follow.
Solicitors:
Corban Revell, Auckland for Appellant
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