Karaka v Ngai Tai Ki Tamaki Tribal Trust
[2013] NZHC 589
•27 March 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-7664 [2013] NZHC 589
BETWEEN EMILY ANNE KARAKA First Plaintiff
ANDPETER GEORGE HENRY KARAKA Second Plaintiff (Discontinued)
ANDDEBORAH PACE Third Plaintiff
ANDNGAI TAI KI TAMAKI TRIBAL TRUST Defendant
CIV-2012-404-1507
IN THE MATTER OF an application for removal of trustees
BETWEEN STEPHEN MAXWELL NGEUNGEU ZISTER & OTHERS
Plaintiffs
ANDEMILY ANNE KARAKA First Defendant
ANDDEBORAH PACE Second Defendant
Hearing: 11, 12 March 2013
Counsel: S W M Piggin for Plaintiffs
K R M Littlejohn for Defendant
Judgment: 27 March 2013
JUDGMENT OF KATZ J
KARAKA V NGAI TAI KI TAMAKI TRIBAL TRUST HC AK CIV-2011-404-7664 [27 March 2013]
In accordance with r 11.5 High Court Rules
I direct the Registrar to endorse this judgment with a delivery time of 4.30 p.m. on 27 March 2013.
Solicitors: Robb & Brown, Auckland – [email protected]
Whaley & Garnett, Auckland – [email protected]
Copy to; S W M Piggin, Auckland – [email protected]
K R M Littlejohn, Auckland – [email protected]
Introduction
[1] The Ngai Tai ki Tamaki Tribal Trust (“Trust”) was incorporated in 1992 under the Charitable Trusts Act 1957.1 Its main purpose is to negotiate, on behalf of its iwi beneficiaries, a settlement with the Crown of historical Treaty of Waitangi claims.
[2] In November 2003, Emily Karaka and her brother Peter Karaka (who were both then trustees) applied to the Court for orders in respect of the management and administration of the Trust. Due to the serious state of disharmony between the then trustees, Heath J removed all of the trustees and appointed an interim trustee in their place.2
[3] The Trust remained under High Court supervision for almost six years, until
14 December 2009.3 On that date Heath J terminated the appointment of the interim trustees and confirmed the election and appointment of 12 iwi trustees, including Ms Karaka and her daughter Ms Pace. Peter Karaka, the second plaintiff, was also confirmed as a trustee. He later resigned and discontinued his part in this proceeding.
[4] The remaining nine trustees (“majority trustees”) confirmed by Heath J in December 2009 were James Brown (Chairman), Stephen Zister, David Beamish, Lawrence Beamish, Carmine Kirkwood, Billy Brown, Tipa Compain, Lucy Steele and Hiraina Whaanga.
[5] Difficulties in the relationship between Ms Karaka and her fellow trustees seem to have arisen almost from the outset. At a trustees’ meeting on 10 March 2010 the majority trustees purported to remove Ms Karaka as a trustee and also as a Treaty negotiator. Subsequently, on 6 May 2010, the majority trustees also resolved to
remove Ms Pace as a trustee.
1 The Trust’s current Deed is dated 9 February 2010.
2 Karaka v Ngai Tai Ki Tamaki Tribal Trust CIV-2003-404-6164, 8 March 2004, per Heath J.
3 Karaka v Ngai Tai Ki Tamaki Tribal Trust (No 7) CIV-2003-404-6164, 14 December 2009, per
Heath J.
[6] Ms Karaka and Ms Pace issued these proceedings against the majority trustees in November 2011. The majority trustees then filed separate proceedings against Ms Karaka and Ms Pace, which I heard at the same time. Both groups of trustees allege that the other group has acted improperly and should be removed as trustees. The trustees are at an impasse and can no longer work together constructively. They seek assistance from the Court to help find a way forwards which will enable the Trust to operate effectively and advance its important Treaty negotiations.
Issues
[7] The key issues I must decide are:
(a) Do grounds exist for the removal of Emily Karaka and/or Deborah Pace as trustees? If so, should the Court exercise its discretion to remove one or both of them as trustees?
(b) Was the Trust operating unlawfully between 10 March 20104 and 21
December 2011?5 If it was, how does that affect the validity of the Agreement in Principle (“'AIP”) that was entered into between the Crown and the Trust during this period?
(c) Are the majority trustees in breach of an undertaking they gave on 2
August 2012 that the Trust Deed and Deed of Mandate would be strictly complied with going forward?
(d)Have the majority trustees misconducted themselves in the administration of the Trust? If so, should they be removed?
(e) Should I direct the holding of a trustee election and, if so, upon what terms?
4 The date that Ms Karaka and Ms Pace were unlawfully removed as trustees by the majority trustees.
5 The date that Ms Karaka and Ms Pace were restored as trustees, by consent.
[8] I will address each issue in turn.
Issue 1: Application to remove Ms Karaka and Ms Pace as trustees
Jurisdiction and threshold for removal
[9] The Court has an inherent jurisdiction to remove trustees in cases requiring such a remedy.6 All of the former trustees were removed by the Court in 2004 under its inherent jurisdiction.7 The discretion to remove is ancillary to the principal duty of the Court to see that trusts are properly executed. Where the continuance of a trustee would prevent that proper execution, that trustee may be removed.8
[10] In deciding to remove a trustee the Court must make a judgment based on a wide range of considerations. The overriding concern is the welfare of beneficiaries. The Court’s judgment must necessarily be largely discretionary.9
Allegations against Ms Karaka and Ms Pace
[11] The majority trustees apply to remove Ms Karaka and Ms Pace as trustees. It is alleged that they have conducted themselves as trustees unreasonably, imprudently, inappropriately and in breach of confidence. It is further alleged that they have frustrated the effective day to day operation of the Trust and the Trust’s relationship with other entities, and acted contrary to the interests of the beneficiaries of the Trust. The majority trustees claim that Ms Karaka and Ms Pace are disruptive, divisive, confrontational, irrationally argumentative and verbally abusive.
[12] Various other, more specific, allegations are made against Ms Karaka in particular. For present purposes I do not find it necessary to address the detail of
those allegations or make any formal findings regarding them. That is because it is
6 Noel Kelly, Chris Kelly & Greg Kelly, The Law of Trusts and Trustees (6th ed, Lexis Nexis, Wellington, 2005) at 17.7.5 and 17.8.3; Letterstedt v Broers (1884) 9 App Cas 371; Hunter v Hunter [1938] NZLR 520. Plumley v Plumley 3 MPC 139.
7 Karaka v Ngai Tai Ki Tamaki Tribal Trust CIV-2003-404-6164, 8 March 2004, per Heath J.
8 Noel Kelly, Chris Kelly & Greg Kelly, above n 7, 17.8.1.
9 Miller v Cameron [1936] 54 CLR 572 at 580-581; Hunter v Hunter [1938] NZLR 520 at 529; Letterstedt v Broers (1884) 9 App Cas 371; Ngati Kuri Trust Board v Neho & Ors HC Wellington CIV-2003-485-2776, 6 October 2006.
abundantly clear from the evidence before the Court that there has been a total breakdown in the relationship between Ms Karaka and Ms Pace on the one hand and the majority trustees on the other.
[13] All nine of the majority trustees have given evidence of the generally dysfunctional nature of the Trust and their inability to work with Ms Karaka and, to a lesser extent, Ms Pace. Relevant passages from the affidavits of the majority trustees include:
James Brown: My overriding concern as chair, and a beneficiary of the Trust, is to be able to manage the board so as to enable the Trust to achieve its primary objectives of settling the Ngai Tai ki Tamaki Treaty claims and restoring the mana of the iwi. While dissent and disruption within the board itself might not prevent that, where it threatens the ability of the board to function, or, as has frequently occurred in the past, spills out of the boardroom and threatens the very objectives being pursued, something needs to be done. Only by removing the defendants as trustees can I have confidence that the board can function effectively and with integrity to achieve its objectives.
Hiraina Whanga: For the Trust to do the best job possible for its beneficiaries as it progresses into negotiations with the Crown over its deed of settlement, it is important that we have kotahi tanga (unity) at the front line and I do not believe this will be possible with Emily Karaka remaining as part of the board of trustees. My experience of her over many years is that she creates rifts between people, rather than bridges, because of her strongly held views, the uncompromising manner in which she asserts them and her conduct when people do not agree with her.
Carmine Kirkwood: In order to finish the Treaty claims work and continue restoring the mana of the iwi, the board must stay intact and strong. I am strongly of the view that neither of those tasks will be achieved if Ms Karaka and Ms Pace remain as trustees.
Billy Brown: It is my honest view that for this progress to be sustained, the Trust needs to have Emily and Deborah removed as trustees to ensure that the board can continue to function effectively and successfully like it has for the past two years without their day to day disruptions.
Lawrence Beamish: The current board has worked very hard and very credibly to re-establish key relationships and financial credibility in the face of very challenging circumstances. Our engagement with the Crown Treaty settlement process has provided high level feedback with regard to the current governance and operations of our Trust board. We have been endorsed and congratulated at all steps along the way for the excellence of our conduct by all the appropriate authorities and our beneficiaries.
All of this good work is undermined and threatened by the continued presence of Emily Karaka and Deborah Pace as trustees, and the disruptive and dissenting behaviour they bring to the management of the affairs of the
Trust. They are simply uncontrollable when dissatisfied with the views of the majority of trustees and complain far and wide with major impact on the integrity of the Trust and the mana of Ngai Tai ki Tamaki.
David Beamish: Emily and Deborah’s rights as beneficiaries are beyond question and are supported by the plaintiffs, but their ability and suitability to sit on a governance board is totally questionable. Their costly, offensive and often intimidating behaviour [has] no place on a professional Trust board.
There is no doubt to me that for the Trust board to continue to function well and improve in the future, the first and second respondents need to be removed as trustees. This will enable a robust and focused trustees of nine trustees and their advisors to continue to administer the Trust and help transition the iwi into its bright future.
Stephen Zister: After years of trying to work with these two individual trustees I am convinced that they do not display any intention towards furthering the objects of the Trust as incorporated within the Trust deeds. Rather, the contribution from these two trustees is consistently contrary to the majority of the other trustees’ collective resolutions.
[14] The evidence of Lucy Steele and Tipa Compain, the remaining two trustees, was to similar effect.
[15] Ms Karaka’s evidence on the other hand was that, whatever the past differences with the majority trustees, she hoped that after the interim judgment given by the High Court on 7 August 2012 the trustees could move forward constructively and not resurrect personality issues “which are there, but which do not need to be if we work together in a business like way”. Her evidence was that dissenting views and inquiry are not tolerated by the majority trustees, who feel uncomfortable that she can hold her own in discussion and debate. Ms Karaka says that the majority trustees do not like being challenged and do not like her raising legitimate issues, including breaches of good governance. Ms Karaka’s view is that by seeking the removal of her and Ms Pace as trustees, the majority trustees are simply attempting to stifle legitimate debate and dissent within the trustee group.
[16] It is clear from the evidence that the current group of trustees is dysfunctional and cannot work together constructively. This is to the detriment of the beneficiary group (the iwi) going forwards. It could well compromise the ability of the Trust to conclude a deed of settlement with the Crown.
[17] Although Ms Karaka and Ms Pace appear to be the outliers, in that the other nine trustees are able to work effectively together, I am not satisfied that removing them as trustees at this stage is the best or fairest interim measure, particularly given the conduct of the majority trustees which I address further at [48]-[52] below. I therefore decline to make orders removing Ms Karaka and Ms Pace as trustees, prior to the trustee elections which I propose to direct take place by the end of July 2013 (as set out at [58] below).
Issue 2: Was the Trust operating unlawfully between 10 March 2010 and 21
December 2011? If so, how does that affect the validity of the AIP?
Was the Trust operating unlawfully between 10 March 2010 and 21 December 2011?
[18] On 29 November 2011 Ms Karaka and Ms Pace brought these proceedings, challenging their removal as trustees. A consent order was made on 21 December
2011 which acknowledged that Ms Karaka and Ms Pace continued to be trustees and should, amongst other things, be given proper notice of trust meetings.
[19] However, during the period when Ms Karaka and Ms Pace were unlawfully excluded as trustees, the majority trustees resolved not to hold board elections which were required to take place pursuant to the terms of the Trust Deed on or about 9
February 2011. At that election the two longest serving trustees should have stood down.10 They were, however, entitled to make themselves available for re-election.
[20] Despite these “irregularities” the majority trustees continued their Treaty negotiations with the Crown throughout 2011, culminating in the signing of the AIP in November 2011.
[21] It was essentially common ground that, due to these irregularities, the Trust was operating “unlawfully” during the relevant period. Ms Karaka and Ms Pace were entitled to be given notice of trustee meetings and to participate in Trust decision-making. The parties disagreed, however, as to the effect of such
irregularities on the validity of the AIP.
10 Drawn by ballot, given that a number of trustees were elected simultaneously.
Validity of the AIP
[22] The AIP sets out a basic outline of the proposed settlement between the Crown and Ngai Tai ki Tamaki. An explanatory guide to the Treaty negotiation process, which was annexed to one of Ms Karaka’s affidavits, noted that AIPs tend to be considered and formally approved by the mandated body (in this case the Trust) or its sub-committee. They are not ratified by the iwi, although they are publicly available documents on which the iwi can comment to the mandated body (the Trust).
[23] The guide further notes that the AIP is intended to record all matters of redress, with the further negotiations leading to a deed of settlement generally focused on providing the full detail as to the nature and scope of the redress set out in the AIP. The guide notes, however, that there have been instances where the nature and scope of some redress in deeds of settlement is wider in both scope and nature than that contemplated in the relevant AIP.
[24] Clause 10.1 of the AIP states that the document is entered into on a “without prejudice” basis and that it is “non-binding” and “does not create legal relations”. Further, pursuant to clause 10.2, either the Crown or the Trust may terminate the AIP by 20 working days notice to the other.
[25] Ms Karaka and Ms Pace submitted that the AIP is void and of no legal effect. The reason the issue is significant is that, in Ms Karaka’s view, the AIP does not include all the matters of potential redress which she believes it should. She is particularly concerned that it does not include within its scope certain land at Homestead Drive, Maungarei. Ms Karaka says that land is of substantial cultural significance and importance to the iwi and should therefore be included in the AIP.
[26] The majority trustees submitted that the AIP was, at most, voidable. The implications of the iwi now potentially reneging on a document negotiated with the Crown at considerable length and in good faith are potentially serious. The Trust (and the iwi) would likely lose credibility with the Crown. Any loss of confidence by the Crown in the Trust as a credible negotiating partner could have serious
implications for future negotiations. The majority trustees say further that they did negotiate with the Crown in relation to the Maungarei land. However other iwi have also expressed interest in that land, so the Crown cannot offer it exclusively to Ngai Tai ki Tamaki at this stage. The Crown will need to work through the conflicting claims to the Maungarei land.
[27] Given that the AIP is non-binding, not intended to create legal relations and without prejudice, the issue of whether it is void or voidable appears to be somewhat academic. The AIP already is of no legal effect. Its significance appears to be more symbolic (as a statement of the good faith intentions of the parties) rather than strictly legal.
[28] Further, I would not be willing to rule that the AIP (assuming it does have some legal effect) is invalid and void in the context of a dispute between two groups of trustees in proceedings where the Crown is not a party. The Crown is the counterparty to the AIP and is entitled to be heard on any application to rule it invalid or void.
[29] For example, I note that it would be open to the Crown to argue that any issues of invalidity would be met by ss 19 or 20 of the Charitable Trusts Act 1957. The Crown could also seek to rely on the common law rule known as the “indoor management rule.” That rule, as stated in Royal British Bank v Turquand11 is that a person dealing with a company is entitled to assume that the company’s internal requirements have been complied with and that the company’s officers were acting lawfully. The indoor management rule has been held to apply equally to other incorporated bodies, including incorporated trusts,12 societies and incorporated
industrial unions.13
11 Royal British Bank v Turquand (1856) 6 EL & BL 327; 119 ER 886.
12 Dorchester Finance Ltd v Ngauhuia Ltd HC Auckland CIV-2009-404-2529, 8 February 2010.
See also Bridgecorp Finance Ltd v Proprietors of Matauri X [2004] 2 NZLR 792 (HC), a case which involved consideration of s 27 of Te Ture Whenua Maori Act 1993, which is effectively a statutory codification of the indoor management rule.
13 Progress Advertising (NZ) Ltd v Auckland Licensed Victuallers Industrial Union of Employers
[1957] NZLR 1207 at 1212, 1213; Crossley v Auckland Local Bodies Labourers IUW (1988) 2
NZELC 96, 489.
[30] It would place a substantial burden on the Crown to have to fully investigate the internal procedures of the Trust at every stage of the negotiation process. The Crown could argue, with some force, that it is entitled to assume that the Trust’s internal procedures and processes were adhered to and the trustees who it negotiated with were validly appointed or elected and had authority to enter into the AIP on behalf of the Trust (as the mandated body for the iwi).
[31] In any event, there appears to be no compelling reason to declare the AIP invalid at this stage. As set out at [58] below, I propose to direct that trustee elections be held within the next few months. If the newly elected trustees wish to disavow the current AIP they are entitled to terminate it on 20 business days notice to the Crown, pursuant to clause 10.2 of the AIP. Alternatively, as noted above, it appears that the Crown is willing to look at additional areas of redress (not specifically covered in the AIP) in appropriate cases. That is also an avenue that could be explored if the newly elected trustees are concerned that the current AIP does not cover all appropriate matters of redress. Determining whether to proceed with the current AIP, renegotiate it or terminate it is a matter which is appropriately left in the hands of a validly elected Trust board, rather than the Court.
Issue 3: Are the Trust and majority trustees in breach of their 2 August 2012 undertaking to comply strictly with the terms of the Trust Deed and Deed of Mandate?
The 2 August 2012 undertaking
[32] At a Court hearing before Keane J on 2 August 2012 the majority trustees undertook that they would comply strictly with the Trust Deed and Deed of Mandate going forward. The majority trustees also undertook that they would only remove Ms Karaka as one of the four appointed negotiators in strict accord with the process set out in the Deed of Mandate.
[33] Ms Karaka and Ms Pace assert that the undertaking was subsequently breached in the following ways:
(a) The trustees did not appropriately review, and give directions, advice and terms of reference to the negotiators as required by the Deed of Mandate; and
(b)The trustees removed Ms Karaka as a negotiator in September 2012, with immediate effect.
Approach to interpretation of the Deed of Mandate
[34] The Deed of Mandate is not a contractual document in the normal sense. The use of the word “deed” is a misnomer. Like the AIP, it is a specialised document, based on a Crown template unique to the Treaty settlement arena.
[35] In particular, the first stage of the Treaty negotiation process is for a claimant body to secure a mandate from the Crown, recognising that body (in this case the Trust) as the entity which has the authority to represent the claimant group in negotiations. Deeds of Mandate are not contracts between the Crown and the claimant entity. They are not signed by the Crown. Rather the Crown recognises the mandate of a claimant entity, on the basis set out in a Deed of Mandate which that entity has signed and submitted to the Crown.
[36] In February 2010 the Crown formally recognised the Trust’s mandate to negotiate on behalf of Ngai Tai ki Tamaki. The Deed of Mandate does not, however, create enforceable legal obligations between trustees. If it were not for the undertakings given by the majority trustees in August 2012, Ms Karaka and Ms Pace would likely have no legal basis to seek to “enforce” the Deed of Mandate.
[37] It is therefore necessary, when interpreting the Deed of Mandate, to take into account that it is not a contract in any sense, and certainly not a contract between the trustees. It was not intended to create formal legal relations, but rather to provide the Crown with “comfort” that the Trust is a credible negotiating partner with appropriate procedures and processes in place to ensure accountability at both a Trust and iwi level. Accordingly, an overly legalistic technical analysis of the document is not particularly helpful in the context of attempting to resolve a dispute
between trustees. Rather, it is necessary to take a pragmatic and flexible approach to interpretation of the document, with reference to its underlying purpose.
Review and supervision of negotiators
[38] The first alleged breach is that the trustees did not appropriately review, and give directions, advice and terms of reference to the negotiators, as required by the Deed of Mandate.
[39] The majority trustees’ undertaking was given on 2 August 2012. There were subsequent board meetings on 23 August 2012, 24 September 2012, 2 November
2012 and 16 January 2013. Ms Karaka and Ms Pace submitted that during this period Treaty negotiations continued. For example there was dialogue regarding the terms of the historical account for inclusion in the deed of settlement. However, limited information was provided to the Trust Board regarding this work and few (if any) directions were given to the trustees as to how to approach their task.
[40] The majority trustees’ response was, in part, that to rely solely or primarily on the written record as an accurate reflection of the full dialogue which occurred between the trustees and the negotiators (all of whom were themselves trustees) overlooks the cultural context, including the strong focus on verbal communication (korero) rather than putting everything in writing. The majority were of the view that there was an appropriate level of dialogue with the negotiators by the rest of the trustees during the relevant period.
[41] By the time of the August 2012 undertaking the broad ambit and scope of the redress to be included in the proposed settlement had already been agreed with the Crown, as set out in the November 2011 AIP. Accordingly, although considerable further work is no doubt required to convert this into a formal deed of settlement, the negotiators must be well aware of the broad scope of their mandate.
[42] The obligation to provide directions and advice to the negotiators must be applied in a pragmatic and flexible way. The onus is on Ms Karaka and Ms Pace to establish a breach of undertaking in relation to this issue, on the balance of
probabilities. To find that an undertaking given to the Court and other parties to litigation has been breached is a very serious matter. A Court will not make such a finding lightly. On the evidence before me I am not satisfied that a breach of the undertaking has been established in relation to this particular issue.
Trustees’ resolution of 24 September 2012 for removal of Ms Karaka as a negotiator
[43] The second alleged breach of the undertakings was the majority trustees’
removal of Ms Karaka as a negotiator in September 2012, with immediate effect.
[44] Clauses 5.9 and 5.10 of the Deed of Mandate provide as follows:
5.9Negotiators will be replaced, removed or appointed by resolution of the Trust. The trustees who are also negotiators will not participate in decisions relating to their removal, replacement or appointment as a negotiator.
5.10The Trust has developed a dispute resolution process if a dispute should arise in relation to the replacement, removal or appointment of negotiator(s). The following process will be followed by the trustees:
(a) the trustees shall firstly attempt to resolve the matter “kanohi kit e kanohi” and in accordance with the tikahanga of [the Trust];
(b) if the approach in (a) above does not resolve the dispute the trustees shall suggest the appointment of a mediator to try and resolve the dispute;
(c) if the approach in (b) is not successful, the trustees shall refer the matter to the [Trust] monthly hui-a-iwi which will determine the dispute. The ruling, by resolution, at the [Trust] hui-a-iwi will be final and binding on the trustees.
[45] Ms Karaka alleges that, correctly interpreted, the Deed of Mandate envisages that the removal of a negotiator would only take effect when the dispute resolution process (which culminates in consideration at a hui-a-iwi) has been completed. The majority trustees on the other hand submitted that the removal of a negotiator is effective immediately upon the relevant resolution being passed. I prefer the latter interpretation. It is the Trust that holds the mandate to negotiate. The Trust is responsible for the appointment and removal of negotiators. If a negotiator disagrees with a removal decision he or she has, in effect, a right of appeal to the iwi as a
whole. The iwi may either uphold the Trust’s decision or overturn it. Unless and
until it is overturned, however, the trustees’ decision stands and is effective.
[46] The interpretation advanced by Ms Karaka and Ms Pace would result in a negotiator who has lost the confidence of the mandated negotiating body (the Trust) remaining in place until such time as a dispute resolution and hui process has been completed. This could take many months, as it appears to have done in this case. In cases of gross misconduct by a negotiator, negotiations would have to be placed on hold. The Trust mandate would be frustrated in the meantime, potentially contrary to the interests of the beneficiaries. Further, it may not necessarily be immediately apparent whether a trustee intends to challenge their removal. They may wish to consider the matter and take advice. No time limits are set out for this to occur. This could lead to considerable uncertainty during the intervening period.
[47] I therefore find that the undertaking was not breached by the removal of Ms
Karaka as a negotiator in September 2012 with immediate effect.
Issue 4: Application to remove the majority trustees
[48] Ms Karaka and Ms Pace allege that the majority trustees have misconducted themselves in the administration of the Trust in a variety of ways. The most obvious example is their unlawful removal of Ms Karaka and Ms Pace as trustees. They also cancelled the trustee election in February 2011, in breach of the requirements of the Trust Deed. Further, following the consent orders in December 2011 (acknowledging that Ms Karaka and Ms Pace continued to be trustees) the majority trustees continued to fall short in their obligations to Ms Karaka and Ms Pace. They referred to them as “suspended trustees” and failed to provide them with full information.
[49] Ms Karaka and Ms Pace also raised concerns regarding the majority trustees’ “continual factional approach and the fostering of a state of disharmony, contrary to the primary duty to act unanimously and for all trustees to concern themselves in and be involved in Trust decisions and deliberations”.
[50] The majority trustees frankly acknowledged the force in some of these criticisms. They accepted that there was no power in the Trust Deed for them to remove Ms Karaka and Ms Pace as trustees. They also accepted that they had no power to cancel the February 2011 trustee elections. In addition they acknowledged that their conduct following the December 2011 consent orders fell short of the required standards. The majority trustees submitted, however, that, in giving the undertakings to the Court in August 2012, they made a commitment to do better. They say that they have.
[51] There is no doubt that the majority trustees have fallen significantly short of the standards expected of trustees in a number of respects. They acknowledge as much. They clearly had a strong view that removing Ms Karaka and Ms Pace from the Trust Board (and keeping them off) would address the disharmony issues within the Trust. To achieve this end they adopted means which were not permissible under the Trust Deed.
[52] Against this I observe that there can be no question that the majority trustees are deeply committed to advancing the key objective of the Trust, which is to progress and hopefully finalise Treaty negotiations with the Crown. They have undertaken a very significant amount of work over the last two or three years and have achieved much.
[53] Immediate removal of the majority trustees would paralyse the Trust and leave it without a quorum. Such a course would not be in the best interests of the beneficiaries, which must be my guiding consideration.
[54] In all of the circumstances of this case it is my view that a trustee election is the best way forward. The real issue before me is whether, taking into account the conduct of both trustee groups, that election should be a “clean sweep” election for all the trustee positions. In the alternative, I could require only the two longest standing trustees to stand down, which reflects the process set out in the Trust Deed. I therefore now turn to consider the basis on which a trustee election should be held.
Issue 5: Should a trustee election be directed and, if so, on what terms?
[55] Both groups of trustees made it clear that they are not seeking a “paternalistic” solution from the Court. For example, the there is no appetite for any independent trustees to be appointed. Rather, the trustees have requested the Court to facilitate a process which recognises the vital role of the iwi in helping to resolve the current impasse.
[56] The reality, accepted by all 11 of the current trustees, is that the present group of trustees is dysfunctional. It seems clear that they cannot work together constructively. This has serious implications for the very important work the Trust has ahead. The Trust’s aim is to conclude a deed of settlement with the Crown, to the benefit of all of the Trust’s iwi beneficiaries. The ability to conclude such negotiations is likely to be seriously compromised if the current impasse cannot be resolved.
[57] Given the number of irregularities and breaches of the Trust Deed which have occurred (including the absence of a trustee election in 2011) it is my view that a “clean sweep” election is the best way forward, with no trustees being disqualified from re-election. Such an election will squarely place responsibility on the iwi as a whole to determine the best way forward and (hopefully) elect a group of trustees who they believe can work constructively together to conclude a deed of settlement with the Crown. There is obviously a risk that the same group of trustees could be re-elected, in which case the newly elected board is likely to also be dysfunctional. However, that risk cannot be eliminated if a paternalistic solution (for example Court appointed trustees) is to be avoided.
Result
[58] I order that:
(a) A trustee election is to be held on or before 31 July 2013, either at the Annual General Meeting (AGM) of the Trust or at a Special General Meeting (SGM) convened for the purpose.
(b)All of the trustees are removed from office, effective immediately prior to the election taking place. All of the trustees are eligible for re-election.
(c) The election is to take place in accordance with the provisions of the
Trust Deed, save as qualified by these orders.
(d) Only beneficiaries aged 18 years or over are entitled to vote. (e) The following time periods in the Trust Deed are truncated:
(i)The time period in clause 8.3(e)(i) of the Trust Deed is truncated to one month;
(ii)The time period in clause 8.3(3)(ii) of the Trust Deed is truncated to six weeks; and
(iii) The time periods in clauses 8.3(e)(iii) and 8.3(g) of the Trust
Deed are truncated to 14 days.
(f) The powers in clause 8.3(f)(v) are not to be exercised in relation to the
2013 trustee elections.
(g)The AGM or SGM shall be chaired by an independent person to be agreed by the parties, with leave to apply to the Court to make the appointment if agreement cannot be reached. All meeting arrangements shall be as decided and directed by the independent chairperson. The independent chairperson may appoint an independent returning officer or others, to assist.
(h)Pending the trustee election Treaty negotiations with the Crown may continue but shall not be concluded. In particular any proposed deed of settlement with the Crown is not to be put to the iwi beneficiaries at the same AGM or SGM at which the trustee elections take place (or prior to that AGM or SGM).
(i) Leave is reserved to apply to the Court in relation to any matters
arising out of this judgment or these orders.
Katz J
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