Kusabs v Staite
[2019] NZCA 420
•9 September 2019 at 2.30 pm
| IN THE COURT OF APPEAL OF NEW ZEALAND I TE KŌTI PĪRA O AOTEAROA |
| CA652/2017 [2019] NZCA 420 |
| BETWEEN | ANDREW MARUTUEHU KUSABS AND ORS AS TRUSTEES OF THE TUMUNUI LANDS TRUST |
| AND | PETER DANIEL STAITE AND ORS AS TRUSTEES OF THE WHAOA NO 1 LANDS TRUST |
| Hearing: | 30-31 October 2018 |
Court: | Cooper, Brown and Williams JJ |
Counsel: | M S McKechnie and A F S Vane for Appellants |
Judgment: | 9 September 2019 at 2.30 pm |
JUDGMENT OF THE COURT
A The appeal is allowed.
B The order for rectification of the Tumunui Lease is set aside.
CThere is no order for costs. If the Tumunui Trust wishes to revisit the issue of costs below, then that should be addressed in the High Court.
____________________________________________________________________
Table of Contents
Para No
Introduction [1]
Relevant facts [6]
The Blackler leases [8]
The Mills lease [11]
Proposed assignment of Mills lease to the Tumunui Trust [14]
The Tumunui Lease [21]
The first rent review [26]
High Court judgment [31]
The recall judgment [47]
Scope of appeal [55]
Parties’ submissions [59]
The Tumunui Trust’s submissions [59]
The Whaoa Trust’s submissions [62]
Rectification: relevant principles [66]
Discussion [69]
The pleadings [70]
The Judge’s initiative [71]
Mr Bamber [74]
Mr Edwards [76]
Mr Kusabs [84]
Evaluation of the witnesses’ evidence [87]
The Davys Burton letter of 16 November 1992 [90]
Subsequent conduct [101]
Conclusion [111]
Mr Moke [113]
Costs [119]
Result [120]
REASONS OF THE COURT
(Given by Brown J)
Introduction
The respondents, who are the trustees of an ahu whenua trust (the Whaoa Trust), own Māori freehold land at Reporoa comprising approximately 529 hectares known since 1982 as Rotomahana Parekarangi No 8 Block (the No 8 Block). On 16 February 1994 the Whaoa Trust executed a lease of the land in favour of another ahu whenua trust, the trustees of which are the appellants (the Tumunui Trust).
The lease (the Tumunui Lease) which, subject to rights of renewal, may run to 2032 provided for the payment of rent calculated as follows:
… at a yearly rental calculated on the basis of five dollars per centum of the capital value of the said land according to a special valuation carried out by Valuation New Zealand for the purpose at the expense of the lessee … provided always that for the purposes of such valuation there shall be deducted from the said capital value the value of all improvements made on or to the said land by the lessee or its predecessor since the 13th day of December 1961 and during the terms hereof by the lessee and subsisting at the date of valuation …
In a proceeding commenced in 2009 the Whaoa Trust sought rescission of the Tumunui Lease, contending that the involvement of Mr Edward Moke in its negotiation, who was a trustee of both trusts, was a breach of Mr Moke’s fiduciary duty of loyalty to the Whaoa Trust of which the Tumunui Trust had knowledge. The Whaoa Trust alleged that the terms of the lease were favourable to the Tumunui Trust and unfavourable to the Whaoa Trust both by reason of the duration of the lease and the rental (calculated in the manner referred to above) being significantly below market value.
Heath J in the High Court accepted that Mr Moke breached his fiduciary duty of loyalty to the Whaoa Trust by acting on both sides of the Tumunui Lease transaction and that his involvement had provided material assistance to the Tumunui Trust in the lease negotiations. However the Judge made a positive finding that Mr Moke was not responsible for what the Judge considered to be an error in the drafting of the rental provision. The Judge declined to order rescission of the lease but instead made an order for rectification of the lease to remove the words “or its predecessor since the 13th day of December 1961 and” (the primary judgment).[1]
[1]Staite v Kusabs [2017] NZHC 416 [Primary judgment] at [262(b)].
The Tumunui Trust appeals the order for rectification. It further contends that Mr Moke’s breach of fiduciary duty was not of such a character as to justify either rescission or rectification of the Tumunui Lease. The Whaoa Trust did not cross‑appeal.
Relevant facts
The Whaoa Trust’s claim raised a number of issues unrelated to the Tumunui Lease. The factual review in the High Court judgment was correspondingly extensive but the analysis below is confined to the facts material to the scope of the appeal.
The No 8 Block, located on State Highway 5 near Reporoa in the Central North Island, was formed as a result of a series of partition orders made by the Māori Land Court. Its original Māori land appellation was Rotomahana Parekarangi 3A3A3B2B2B. On 16 April 1956 the Māori Land Court partitioned the block to create 3A3A3B2B2B No 1 (comprising 174 hectares of native bush) and 3A3A3B2B2B No 2 (comprising 355 hectares mostly in pasture).
The Blackler leases
At that time the Māori Trustee was responsible for the administration of both the No 1 and No 2 Blocks. On 21 November 1962, with effect from 13 December 1961, the Māori Trustee leased both blocks to Mr John Blackler (the Blackler leases). One lease was for a term of 10 years with no right of renewal while the other lease was for 11 years with a right of renewal for a further 10 years. The rental for the renewed term was to be calculated as five per cent of the capital valuation less the value of improvements effected by the lessee during the lease as ascertained by a special Government valuation.
By December 1963 Mr Blackler had fallen into arrears of rent and rates. He was also alleged to have breached other covenants of the leases. The assembled owners resolved to transfer the Blackler leases to H Allen Mills Ltd and to vary the rental and the term. That resolution was confirmed by the Māori Land Court on 25 March 1964. H Allen Mills Ltd then acquired the Blackler leases.
On 19 May 1982 the Māori Land Court re-amalgamated the No 1 and No 2 Blocks and named the reconstructed block Rotomahana Parekarangi No 8 Block. The Court then vested the block in seven founding trustees under s 438 of the Maori Affairs Act 1953.[2] Mr Edward Moke was appointed by the Court as one of the trustees. The trust would be known as the Whaoa Trust. In November 1987 Mr Moke was elected chairman of the Trust.
The Mills lease
[2]It continues as an ahu whenua trust by operation of s 354 of the Te Ture Whenua Maori Act 1993.
On 18 October 1985 the Whaoa Trust and H Allen Mills & Son Ltd executed a lease (the Mills lease) in respect of the No 8 Block for a period of 21 years commencing on 13 December 1982. The rent for the first ten years was $22,000.00 per annum. For the next 11 years the following formula applied:
(b)For and during the next eleven (11) years of the said term a yearly rent calculated on the basis of five (5) dollars per centum of the capital value of the said land according to a special Government Valuation of the said land to be made at the expense of the Lessee as in the last month of the last of the said first ten (10) years or a yearly rent equal to the rental first hereinbefore mentioned whatever shall be the greater PROVIDED ALWAYS that for the purposes of such calculation there shall be deducted from the said capital value the value of all improvements made on or to the said land since the 13th day of December 1961 and during the term hereof by the Lessee and subsisting at the date of valuation[.]
The Mills lease also provided for a right of renewal of a further eight years with the rent to be calculated in accordance with a similar formula to that for the preceding 11 years.
On 8 December 1986 the Tumunui Trust was constituted by an order of the Māori Land Court under s 438 of the Maori Affairs Act.[3] The Court appointed Mr Edward Moke a founding trustee. He had disclosed to the Court that he was also a trustee of the Whaoa Trust. He remained a trustee of both trusts until his death in 2003.
[3]It continues as an ahu whenua trust by operation of s 354 of the Te Ture Whenua Maori Act.
H Allen Mills & Son Ltd continued to farm the land comprised in the Mills lease until 1989. On 2 February 1989 representatives of the Whaoa Trust met with Mr Mills who had indicated a desire to wind up his farming operation due to age. Around that time Mr Mills began to engage in discussions about the possible sale of the Mills lease.
Proposed assignment of Mills lease to the Tumunui Trust
During 1988 the Tumunui Trust contemplated the acquisition of farm land near Reporoa. In late March or early April 1989 a meeting was held attended by trustees of both the Whaoa Trust and the Tumunui Trust to explore the possibility that the Tumunui Trust might acquire the Mills lease. Mr Moke was present although the undated minute of the meeting refers only to his membership of the Whaoa Trust. The minutes of the meeting stated:[4]
…
Mr Hyland then explained the Tumunui Lands Trust’s position so far as it related to land leased by Mr Allen Mills from the Whaoa No. 1 Trust which was available for purchase. The asking price was $200,000 and the Tumunui Lands Trust had considered the purchase as a way of entering into the dairy farming arena. Costings had been done which showed that the leasehold payable to Mr Mills could be recovered over the 23 year term remaining but the goodwill that we would be prepared to offer was $150,000 with a maximum of $180,000.
The purpose of this meeting was [to] discuss with the Whaoa No. 1 Trust our intentions and to see if we could get an extension to the lease in the event of our offer being successful. The Trustees of the Whaoa No. 1 Trust were comfortable with Tumunui’s participation and would do everything in their power to assist. It was felt that Mr Mills was using all his business cunning to get a higher price than he was entitled to. However, Tumunui Lands Trust felt that it did have a value and our first reaction was $150,000.
[4]Mr Hyland was the Tumunui Trust’s farm adviser.
As the primary judgment records, no assignment of the Mills lease was ever executed. Instead the discussions about assignment “morphed into negotiations about the terms on which Tumunui Trust would take a new lease over the land”.[5] It is common ground that the Tumunui Trust went into possession of the farmland on 1 June 1989 and commenced work to convert the dry stock farm to a dairy unit. At that stage no formal lease arrangement had been completed.
[5]Primary judgment, above n 1, at [57].
The Tumunui Trust wished to obtain an extension of the Mills lease for a further 20 or 21 years. A discussion paper dated 15 July 1989 was prepared in anticipation of a meeting of the trustees of both trusts. The Tumunui Trust proposal was for a term of 42 years from 1 June 1990 with rent reviews every seven years with the consequence that the lease would end on 31 May 2032.
The trustees of both trusts met on 15 August 1989 to discuss the proposed extension. A letter from the Whaoa Trust to Davys Burton (the Whaoa Trust’s solicitors) dated 16 August 1989 advised that the Whaoa Trust was agreeable to an extension of the lease for a period of 20 years. As the Judge noted, the letter was vague as to the precise basis on which rent would be calculated.[6]
[6]At [63].
On 21 August 1989 Mr Burton of Davys Burton sent a letter to Mr Chadwick of Chadwick Bidois, the Tumunui Trust’s solicitor, advising of his instructions to draw up a variation to the existing lease. The proposed terms included:
1. An extension or a right of renewal for 20 years — this has yet to be clarified.
2. Rental reviews every three years from, presumably, 13 December 1989.
3. The rentals will be based on the valuation of the property exclusive of lessee’s improvements.
Shortly afterwards Mr Burton sent a further letter providing clarification on point 1, namely that there was to be an extension of 20 years, not a right of renewal.
Mr Chadwick replied on 27 September 1989. Relevantly his letter stated:
1. The term of the present Lease is for 21 years from 13/12/82 plus a right of renewal for a further eight years (Clause 22) which means the term plus the renewal will expire on 12/12/2011.
2. My instructions are that the term of the Lease is to be extended by a further 20 years from 13/12/2011 and the three yearly rental reviews are to commence from that date and not 13/12/89.
3. My client Trust is in agreement with your paragraph 3, 4 & 5 of your letter of 21/8/89.
However no documentation was prepared to give effect to the extension of the Mills lease. Nevertheless the Tumunui Trust continued to occupy the land and began to expend considerable funds to progress the dairy conversion.
The Tumunui Lease
On 30 November 1990 Mr Burton wrote to the Whaoa Trust advising of concerns about the validity of the Mills lease. The letter said:
We have believed for some time that the present lease originally to H.A. Mills Limited is very likely not binding and valid. It appears not to have been noted by the Court under Section 233 or at any stage validated by an application to the Land Valuation Tribunal.
Mr Chadwick and the writer are in agreement that from all points it would be desirable to scrap the present lease and the variation once the new title boundary survey plan has been completed, then complete a new lease which can be registered (the present one cannot be registered as it is not in a registerable form) and at the same time then have the lease noted under Section 233 and an application made to the Land Valuation Tribunal for consent.
With reference to the proposed terms of the new lease Mr Burton sent to Mr Moke in his capacity as chairman of the Whaoa Trust a letter dated 16 November 1992. Given its prominence in the case we set out the content of the letter in full:[7]
[7]Unfortunately neither of the letters referred to in the opening paragraph were in evidence.
WHAOA NO 1 TRUST — LEASING TO TUMUNUI LANDS TRUST
We have had a reply from John Chadwick to our letter to Messrs Chadwick Bidois of 9 November and we are advised that the respective trustees have agreed that the new lease will be on the following terms:—
1. The initial term will be for 10 years from 13 December 1992 expiring on 12/12/2002.
2.The initial rental which is yet to be set will be on the formula terms set out on the current lease namely at 5% of the capital value of the land according to a special Government valuation to be obtained (at Tumunui’s expense) but excluding any capital improvements effected by the lessee.
3.In addition to the new term of 10 years commencing on 13 December next, there will be 3 rights of renewal of 10 years each.
4.The renewal terms of 10 years each from 13 December 2012 and 2022 respectively will each contain provision enabling the lessors to review the rental on the above terms every 3 years. This also means that the two 10 year terms from 13 December 1992 and from 13 December 2002 will not contain any interim rent review provisions except on the renewal dates themselves.
5.Two months prior to each renewal or review date Tumunui is to supply you with Management Plans for the land. This means at the present moment that Tumunui should be providing you with a Management Plan at this particular time.
6.Two weeks prior to Tumunui’s each annual general meeting, Tumunui is to supply Whaoa No 1 with specified agreed sections of its Annual Report.
Would you please advise us if your trustees confirm the above terms.
The current lease is for a term of 21 years from 13 December 1992 with rental for the first 10 years at $22,000.00 per annum and with a rent review due now and effective from 13 December 1992. That reviewed rental is to be calculated at 5% of a special Government valuation obtained by your trustees at Tumunui’s expense but excluding any improvements effected by the lessee. When the current lease ends on 12 December 2003 there is a right of renewal for 8 years.
In case it is of assistance we enclose herewith 6 copies of this letter for circulation among the trustees plus a spare copy for any reply to be endorsed thereon, and return to us.
A meeting of trustees of the Whaoa Trust was held on 3 December 1992 at Mr Moke’s residence. The minutes of that meeting recorded:
1. Endorsement of Terms
The chairman distributed copies of a recent letter to him by this Trust’s lawyer Mr Ross Burton, which set out the terms of the revised lease as previously agreed between the Tumunui and Whaoa No. 1 Trusts, to take effect from 13 December 1992, and asked for final confirmation by Whaoa No. 1.
This confirmation was implemented without dissent, by way of each and every trustee endorsing a spare copy of the letter, to be returned to him by E. Moke, as requested.
As we note in our discussion below,[8] a special valuation of the land was duly obtained from Valuation New Zealand and no objection was lodged to that valuation. Consequent upon that valuation Mr Burton advised the Whaoa Trust that the yearly rental for the first 10 years was $45,250 plus GST.
[8]At [103]–[109].
For reasons unknown the Tumunui Lease was not executed until 16 February 1994. The area leased was changed to 370.9 hectares as a consequence of a further survey undertaken in 1992 whereby the area of the leased farm block was 370.9 hectares and the area of the bush block, which was set apart as a Māori reservation and vested in the Ngāti Whaoa Māori Reservation Trust (the Reservation Trust), was 158.16 hectares.[9] The yearly rental for each of the first ten years was stated to be $45,250.00 payable by equal half yearly payments in advance. The rent renewal provision was as follows:[10]
26. THAT if the Lessee shall have paid the rent hereby reserved and duly and faithfully kept observed and performed all the covenants terms and conditions hereof on the Lessee’s part to be observed and performed then the Lessee shall have the right or option on giving to the Lessor three months prior notice in writing in that behalf to take and accept a renewal for the term hereby created for a further period of ten years from the expiration of the term hereby created at a yearly rental calculated on the basis of five dollars per centum of the capital value of the said land according to a special valuation carried out by Valuation New Zealand for the purpose at the expense of the lessee but such rental shall not in any case be less than that payable by the lessee during the expiring term provided always that for the purposes of such valuation there shall be deducted from the said capital value the value of all improvements made on or to the said land by the lessee or its predecessor since the 13th day of December 1961 and during the terms hereof by the lessee and subsisting at the date of valuation and such renewed lease shall otherwise be upon and subject otherwise to the like covenants conditions and restrictions as are herein contained and including this present right or option of renewal enabling the lease to be renewed for a further term of ten (10) years on and from the 13th day of December 2012 and the 13th day of December 2022 respectively and provided further that there shall be added at the end thereof the words “but excluding the present right or option or renewal” in the final renewal to the intent that the aggregate of the original term and of all renewals thereof (if exercised) shall in no circumstances exceed the period of forty (40) years from the 13th day of December 1992 provided further and it is agreed between the parties hereto that during each of the renewal periods of ten (10) years from the 13th day of December 2012 and the 13th day of December 2022 the renewal or renewed leases shall contain provision enabling the lessor to review the rental payable thereunder at the end of each three (3) yearly period from the commencement of the term as well as on the renewal of each such term and upon the same terms and conditions for fixing the rental on any renewal of lease as provided for herein as well as upon any renewal of lease.
The first rent review
[9]Compare the areas noted at [7] above.
[10]Emphasis added. The italicised words are those quoted at [2] above.
In November 2002 pursuant to s 201 of the Te Ture Whenua Maori Act 1993 the Whaoa Trust nominated Quotable Value Ltd to provide the special valuation required for the determination of the rental for a further term of the Tumunui Lease. The valuation, which for reasons unknown was not completed until 9 January 2004, specified as follows:
Capital value $3,700,000
Lessee’s improvements $2,035,000
Rental valuation $1,665,000On 2 August 2005 Mr Peter Staite was appointed a trustee of the Whaoa Trust and in due course became its chairman. He is a beneficial owner in both the Whaoa Trust and the Tumunui Trust. As his brief acknowledged, he had no direct knowledge of many of the activities of the Whaoa Trust prior to his appointment but he undertook extensive research into the historical records. He explained that on his appointment he was informed by an outgoing trustee that the rental from the Tumunui Lease was very low and the trustees could not understand how that had come about. The Judge described Mr Staite as the prime mover behind the litigation but having no first-hand knowledge of any of the material events in issue.[11]
[11]At [11] of the primary judgment, above n 1.
On 26 June 2007, long after the two month objection period provided in s 208(3) of the Te Ture Whenua Maori Act, the Whaoa Trust lodged a notice of objection to the Quotable Value valuation. The Tumunui Trust was joined as a party in the proceeding before the Land Valuation Tribunal heard in Rotorua on 19 September 2008. The Tribunal’s decision dated 18 November 2008 recorded that the Whaoa Trust advanced argument on the meaning of that part of the rental provision relating to the excluded improvements:[12]
[39] Mr Koning, on behalf of the [Whaoa Trust], argues that the word ‘predecessor’ in this case in fact means predecessor in title. He says that as the original 1961 lease was not assigned or transferred to the Tumunui Trust, Tumunui Trust can only claim the value of any improvements made by itself during the subsistence of the lease. Indeed, referring to the definition in s 207(5) [of the Te Ture Whenua Maori Act], Mr Koning would add the words “during the subsistence of the lease” after the words “at any time”.[[13]]
[12]Staite v Quotable Value Ltd LVT Rotorua LVP7/07, 18 November 2008. The Whaoa Trust placed reliance on West Coast Settlement Reserves Lessees Association Inc v Valuation Appeal Committee for the West Coast Settlement Reserves [1997] 1 NZLR 413 (CA) and The Proprietors of Atihau‑Wanganui v Malpas [1979] 2 NZLR 545 (CA).
[13]Section 207(5) contains a definition of “improvements” which includes provision that following sale or tenancy of land certain categories of expenditure shall not be deemed to be improvements on the land.
The Tribunal rejected the Whaoa Trust’s argument:
[42] The situation between lessor and lessee in our case is different. This is not a case where the provisions of a general Act (the Valuation of Land Act 1951) give rise to unintended consequences. Here, the respective parties before this Tribunal negotiated this lease which provided that “the value of all improvements made on or to the said land by the lessee or its predecessor since the 13th of December 1961 be deducted from Capital Value.” In the absence of anything compelling to the contrary, the Tribunal concludes that the words in the lease mean what they say.
The following year the Whaoa Trust commenced its proceeding in the High Court. In addition to the causes of action seeking rescission of the Tumunui Lease the third amended statement of claim included complaints about the location of the boundary line between the area of farm land and the land which had been set apart as a Māori reservation[14] and alleged breaches by the Tumunui Trust of a right of way easement.
High Court judgment
[14]See [25] above.
We were informed that a substantial portion of the hearing in the High Court was devoted to the boundary issue. However the Judge reserved judgment on the boundary and easement issues, recording his view that they were best resolved by a combination of decisions of the Māori Land Court and the District Land Registrar.[15] Counsel advised that the parties have since agreed that all issues in relation to the Māori reservation are to be determined by the Māori Land Court.
[15]Primary judgment, above n 1, at [257].
The Judge summarised the Whaoa Trust’s claim in relation to the Tumunui Lease in this way:
[119] Mr Chesterman, for the Whaoa Trust, seeks relief against Tumunui Trust to remedy what he contends were breaches of Mr Moke’s duties as a trustee to the Whaoa Trust. He submits that Mr Moke breached his duty of loyalty to the Whaoa Trust by acting in a way that enabled another trust of which he was a trustee, the Tumunui Trust, to gain an inappropriate advantage. It is alleged that the Tumunui lease was granted on terms that were materially favourable to the Tumunui Trust and disadvantageous to the Whaoa Trust. A declaration is sought to recognise Mr Moke’s breaches. The primary relief sought is rescission of the Tumunui Lease. Alternatively, the Whaoa trust seeks an award of damages in an amount to be assessed, as against the Tumunui Trust.
[120] To support its claim for rescission of the Tumunui lease, the Whaoa Trust alleges that the Tumunui Trust has received property with knowledge that it was acquired through Mr Moke’s breaches of duties as a trustee. Alternatively, it seeks a restitutionary remedy for the alleged unjust enrichment to the Tumunui Trust, or any other remedy that this Court might think fit to order.
Observing that oral evidence about Mr Moke’s actions said to give rise to the claim of breach of trust was sparse, the Judge proceeded to make factual findings on the basis of the contemporary documents.[16] Among other things the Judge found that when the Tumunui Lease was negotiated Mr Moke participated in discussions as a trustee of both the Whaoa Trust and the Tumunui Trust. His participation was both during the course of meetings of each trust and, to an extent that the Judge could not determine with any specificity, in dealings with others outside the two trusts. Mr Moke’s involvement in these discussions provided material assistance to the Tumunui Trust in its negotiations with the Whaoa Trust. Mr Moke was also involved in discussions with both Mr Burton (acting for the Whaoa Trust) and Mr Chadwick (acting for the Tumunui Trust) when the lease document of 1994 was signed on behalf of both the Whaoa Trust and the Tumunui Trust.
[16]At [161] and [167(a)–(c)].
The Judge then stated:
[168] Although a new lease was entered into between the Whaoa Trust and the Tumunui Trust, the reason why that was done appears to be linked to a view expressed by the solicitors for each party about possible invalidity of the Mills lease. The need to take account of the value of improvements since the first lease of the No 8 Block was entered into in 1961, seems to have been an error. The contemporary correspondence does not support the notion that the Whaoa Trust and the Tumunui Trust intended to enter into a new lease on the basis that the Tumunui Trust was entitled to have the benefit of all improvements undertaken by both Mr Blackler and Mr Mills’ company when rental was assessed for the balance of the new term, which was not to expire until 2032.
[169] I make a positive finding that Mr Moke was not responsible for the error that occurred. That said, there remains a question whether the Tumunui Trust should be entitled to retain the benefit of the wrongly expressed rental formula, having regard to Mr Moke’s involvement in negotiations for the new lease on both sides of the transaction.
[170] On the basis of those findings, the prophylactic approach to fiduciary obligations requires me to find that Mr Moke was in breach of his duty of loyalty to the Whaoa Trust. It is plain that he was involved on both sides of the transaction, and arguably favoured the Tumunui Trust, with which he appears to have had stronger tribal affiliations.
Turning to the issue of relief the Judge recorded that Mr Moke’s personal representatives had taken no steps in the proceedings and, although his conduct was at the heart of the dispute, no financial remedy was sought against him.[17] However, observing that a declaration was necessary in order to provide a foundation for the primary claim for relief against the Tumunui Trust, the Judge made a declaration that Mr Moke was in breach of his fiduciary obligation of loyalty to the Whaoa Trust.[18]
[17]At [171].
[18]At [174] and [176].
The Judge considered that the trustees of the Tumunui Trust had actual knowledge that Mr Moke was acting as an agent for both the Whaoa Trust and the Tumunui Trust in the negotiations about the proposed Tumunui Lease.[19] He noted that on the basis of the principles laid down in Fenwick v Naera,[20] subject to questions of limitations or laches, any transaction entered into between parties involving a trustee with a conflict of loyalty between the two may, as a matter of discretion, be set aside by the court or some alternative and more appropriate remedy may be granted.[21]
[19]At [178].
[20]Fenwick v Naera [2015] NZSC 68, [2016] 1 NZLR 354 at [113]–[127].
[21]Primary judgment, above n 1, at [180].
The Whaoa Trust claimed that the nature of the breach of duty by Mr Moke and the extent of knowledge of his co-trustees of the Tumunui Trust justified an order rescinding the Tumunui Lease notwithstanding the passage of time since it was entered into. The rejoinder of the Tumunui Trust was that it was impossible to unwind the lease, particularly given the improvements to the land that had resulted in the dairy conversion undertaken by the Tumunui Trust. If rescission was refused the Whaoa Trust contended that its loss should be measured as the difference between the actual rent paid under the Tumunui Lease and the true market rent that would otherwise have been payable, together with an adjustment for rent reviews.[22]
[22]At [198].
The Judge proceeded to consider some of the valuation evidence, referring to several features of the evidence of Mr Larmer and Mr McLaughlin, both of whom were retained by the Whaoa Trust. The Judge did not appear to refer to the valuation evidence adduced by the Tumunui Trust. We say “appear” because the Judge referred to Mr McLaughlin as having “responded” to Mr Larmer and to his having disagreed with the evidence of Mr Larmer as to any financial loss caused to the Whaoa Trust by the particular terms of the Tumunui Lease.[23]
[23]At [199] and [202].
Mr Chesterman acknowledged that the judgment did not refer to the evidence of Mr Craven or Mr Tizard for the Tumunui Trust but submitted that it did not need to do so given his view that their evidence relevant to rectification was consistent with the Whaoa Trust’s experts. However we were left with a feeling of disquiet that what reads as an analysis surprisingly of only one side of the case may in fact have involved some confusion as to the parties by whom the valuers were retained.
The Judge’s discussion of the valuation evidence concluded in this way:
[202] Although disagreeing with evidence from Mr Larmer as to any financial loss caused to the Whaoa Trust by those terms, Mr McLaughlin accepted that there was no commercial basis or logic for adopting the rental formula from the Mills lease. He accepted that had two significant consequences:
(a)The first was that the Tumunui lease was “extraordinarily favourable to [Tumunui Trust] and extraordinarily onerous to [Whaoa Trust]”; and
(b)The rental formula, having regard to the term of 40 years conferred by the Tumunui lease was “well below market [rent] for a long period”.
In considering remedy the Judge took account of the fact that the Tumunui Trust was entitled to rely on a reasonable expectation that either an assignment of the Mills lease or a new lease would be granted in its favour from the time that it went into possession of the No 8 Block in 1989.[24] Hence he noted that, while difficulties arising from the need to unwind events of the past 23 years would not provide an insuperable hurdle to relief, an inappropriate benefit could be obtained by the Whaoa Trust were an order for rescission to be made without some compensation being awarded in favour of the Tumunui Trust.[25]
[24]At [203].
[25]The Judge observed the compensation could be ordered on the basis that the Whaoa Trust was deemed to have held its interest as a constructive trustee for the Tumunui Trust during the period that the rescinded lease was operative: at [204].
Drawing attention to the fact that the Whaoa Trust’s prayer for any other relief that the Court saw fit left open the option of assessing whether a more appropriate remedy than rescission, damages or constructive trust was available, the Judge turned to consider the equitable remedy of rectification.[26] He observed that the advantages of rectification included its being one of the few exceptions to the general rule that oral evidence of the parties’ prior negotiations of a contract is admissible when determining a remedy and consequently he could take into account the entire factual record in determining if the remedy ought to be available.[27]
[26]At [205].
[27]At [206].
The Judge concluded that the circumstances of the case satisfied the requirements stated in Swainland Builders Ltd v Freehold Properties Ltd,[28] namely:
(1)the parties have a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified;
(2)an outward expression of accord;
(3)the intention continues at the time of the execution of the instrument sought to be rectified; and
(4)by mistake, the instrument does not reflect that common intention.
[28]Swainland Builders Ltd v Freehold Properties Ltd [2002] EWCA Civ 560, [2002] 2 EGLR 71 at [33].
The basis for that conclusion was as follows:
[209] The possibility that the Tumunui Trust would enter into a new lease arose because the solicitors had expressed concerns about whether the Mills lease was binding and valid. Mr Burton and Mr Chadwick formed a view that they should “scrap” the Mills lease and negotiate a new one. On 16 November 1992, Mr Burton wrote a letter that recorded that the Whaoa Trust and Tumunui Trust had agreed to the new terms. The relevant part of his letter reads:
2.The initial rental which is yet to be set will be on the formula terms set out on the current lease namely at 5% of the capital value of the land according to a special Government valuation to be obtained (at Tumunui expense) but excluding any capital improvements effected by the lessee.
[210] I am satisfied that the reference to an exclusion of capital improvements effected by the lessee, was intended to refer only to the Tumunui Trust. That follows from the fact that the solicitors were discussing a new lease, rather than an assignment of the Mills lease. The terms of Mr Burton’s letter evidences a common intention of the parties to that effect, and is also an outward expression of that accord.
[211] The letter invited Mr Moke to advise Mr Burton “if your trustees confirm the above terms”. The letter was circulated by Mr Moke at a meeting of the Whaoa Trust held at Mr Moke’s home on 3 December 1992. The minutes record that the terms were “implemented without dissent, by way of each and every trustee endorsing a spare copy of the letter”.
[212] I find that the trustees of the Whaoa Trust intended to enter into the new lease on the basis of the terms set out in Mr Burton’s letter. That is what had been agreed between the two trusts, as contracting parties. There is no evidence to suggest that this intention changed prior to the final execution of the Tumunui lease. Nevertheless, contrary to that common intention, the Tumunui lease continued to refer to capital improvements since December 1961. The relevant part of the Tumunui lease recorded:
… at a yearly rental calculated on the basis of five dollars per centum of the capital value of the said land according to a special valuation carried out by Valuation New Zealand for the purpose at the expense of the lessee but such rental shall not in any case be less than that payable by the lessee during the expiring term provided always that for the purposes of such valuation there shall be deducted from the said capital value the value of all improvements made on or to the said land by the lessee or its predecessor since the 13th day of December 1961 and during the terms hereof by the lessee and subsisting at the date of valuation …
(Emphasis added).
[213] Between the time that the Whaoa Trust endorsed the terms set out in Mr Burton’s letter and the final form of the Tumunui lease being executed, the words “or its predecessor since the 13th day of December 1961 and” had completely changed the meaning of the intended terms. That resulted in a significant advantage to the Tumunui Trust, and a significant detriment to the Whaoa Trust. On my reading of the evidence, that was never intended. At the very least, it was due to a common mistake of the parties that the final executed version of the Tumunui lease did not reflect the intended meaning of Mr Burton’s letter. It would be unconscionable for the Tumunui Trust to rely on that error to defeat the Whaoa Trust’s claims. On that basis, I am willing to make an order for rectification of the Tumunui lease.
[214] Although Mr Moke was not responsible for this aspect of the transaction, the Tumunui Trust plainly gained an inappropriate benefit from the terms of the lease that enabled improvements to the land undertaken by tenants between 1961 and 1992 to be taken into account in fixing the rent. Necessarily, the amount of the rent payable on review to the Whaoa Trust was likely to be significantly less with that provision in place. I can see no impediment to the grant of equitable relief by way of rectification, so as to cure the economic imbalance that has arisen out of the error. In doing so, I adopt the maxim: “Equity considers as done that which ought to have been done”.
[215] No prejudice arises as against the Tumunui Trust. The relief I shall grant does no more than to remove a benefit that the Tumunui Trust was never intended to receive.
(Footnotes omitted).
Consequently the Judge made an order in the following terms:[29]
(b)I make an order for rectification of the Tumunui lease to remove the words “or its predecessor since the 13th day of December 1961 and” from the Tumunui lease. The effect of that order is to require rental to be fixed in accordance with the formula in the lease but taking into account only improvements to the land made by the Tumunui Trust since the lease commenced, on 1 July 1992. A consequence of this order is that adjustments will need to be made to the rent fixed for earlier periods.
(Footnote omitted).
[29]Primary judgment, above n 1, at [262].
The reference to 1 July 1992 was an error which was raised with the Judge at a case management conference on 27 July 2017. In an oral judgment that day the Judge made an order under the slip rule substituting the date of 13 December 1992.[30]
The recall judgment
[30]Staite v Kusabs [2017] NZHC 1758 [Amendment judgment] at [5].
The terms of the rectification order had significant implications for the Tumunui Trust because between the date of its going into occupation in 1989 and the date of the commencement of the lease on 13 December 1992 it had incurred substantial dairy conversion expenditure. The order for rectification had the consequence that the rent would be fixed without deducting the value of those improvements.
Consequently at the case management conference on 27 July 2017 Mr McKechnie, counsel for the Tumunui Trust, raised with the Judge whether he had taken into account the fact that only improvements made from 13 December 1992 could be used to set rental payments. It being apparent that the Judge had not done so, the Tumunui Trust filed a formal application for recall which was determined in a judgment dated 22 September 2017 (the recall judgment).[31]
[31]Staite v Kusabs [2017] NZHC 2299 [Recall judgment].
The Judge granted the recall application, explaining:
[15] In this case, the order for rectification was made after I had made extensive findings of fact on the fiduciary duty breach. The date was important. It went to the heart of the question of what was the most equitable remedy. It involved an evaluation of the evidence presented to me, as well as application of legal principle.
[16] Although counsel made submissions on the possibility of a rectified lease when closing, they could not focus specifically on any particular terms, in the absence of factual findings that had not been made. That, together with the importance of the issue to Tumunui Trust and the risk that an inequitable result might otherwise have been reached, led me to the view that there are “very special reasons” why this aspect of my judgment should be recalled.
The Judge proceeded to review the reasoning in the primary judgment stating:
[25] After rejecting limitation defences raised by Tumunui Trust, I considered whether a remedy was justified. Relying on evidence from Mr Larmer, a registered valuer with more than 50 years experience in rural valuation and consultancy, who was called to give evidence by Whaoa Trust, I was satisfied “that a term of 20 years for the Tumunui Lease would have reflected an expected commercial outcome at the time of negotiation in the 1990s”, but “that an extension of 20 years from 13 December 2012 which resulted in an effective term of 40 years was not an expected commercial outcome”.
(Footnotes omitted).
Then, after reciting several paragraphs from [203] to [215] of the primary judgment, the Judge said:
[31] On reviewing my notes, I am satisfied that, in dealing with this issue, I placed considerable emphasis on the letter circulated on 16 November 1992 as establishing the parties’ intentions. In doing so, I used the date of 13 December 1992 as the starting date for assessing the value of improvements. I acknowledge that, in doing so, I overlooked the need to take account of those improvements undertaken by Tumunui Trust from the time it went into occupation of the land in 1989, to the deemed date of commencement of the Lease. As a result, I consider afresh what date should have been chosen in making that rectification order.
After reviewing again events from 1989 to 1992 the Judge concluded:
[42] On any view, the original arrangement for a 40-year lease was unusual. Neither of the parties to the Lease could have made an informed judgement as to the likely state of the market in 40 years’ time. They must be taken as having agreed their terms on pragmatic and commercial grounds. The only exception is the error that I held was made in recording the date from which improvements to the land could be taken into account for the purpose of fixing rents.
[43] Viewed in that context, it would be inequitable to direct Tumunui Trust to pay rent on the basis that the capital improvements relevant to the rent fixing clause exclude the work that it did between 1989 and December 1992. In my view, the letter from Mr Burton, in which he referred to improvements to the land was intended to refer to those undertaken by Tumunui Trust, whether before or after 13 December 1992, supports that position. …
Consequently the Judge made an order in substitution for that in [262(b)] of the primary judgment as follows:[32]
I make an order for rectification of the Tumunui Lease to remove the words “or its predecessor since the 13th day of December 1961 and” from the Tumunui Lease. The effect of that order is to require rental to be fixed in accordance with the formula in the lease but taking into account only improvements to the land made by the Tumunui Trust from the date the Tumunui Trust went into occupation of the land in 1989. A consequence of this order is that adjustments will need to be made to the rent fixed for earlier periods.
[32]At [46]; [262(b)] of the primary judgment is set out above at [45].
We observe that the substituted [262(b)] did not make any change to the manner in which the wording of the Tumunui Lease was amended. It simply amended the Judge’s explanation of what he considered was the effect of the amended wording.
Scope of appeal
The amended notice of appeal alleged various errors in relation to the grant of an order for rectification. It also contended that, having found Mr Moke in breach of his fiduciary duty as a trustee of the Whaoa Trust, the Court ought to have determined whether such breach should have resulted in the lease transaction being set aside and only then should the Court have considered whether some alternative remedy might be granted.
The judgment sought by the appellant on appeal was expressed in this way:
2.1A finding that the breach of fiduciary duty by Edward Moke was not of a character to require the setting aside of the lease transaction, and if it was, then the appropriate remedy was termination of the lease and not rectification.
2.2Further, a finding that the lease signed between the Whaoa No 1 Lands Trust and the Tumunui Lands Trust was not the subject of any common mistake and thus the equitable remedy of rectification was not appropriate. In consequence, the lease should have been upheld as it was signed off and remain unaltered, if not otherwise terminated.
2.3If the Court holds that the equitable remedy of rectification was appropriate, then an order requiring evidence and submissions of counsel as to the financial consequences to both parties of such remedy and a determination in the light of such evidence and submissions as to whether the equitable remedy of rectification was appropriate.
2.4Alternatively if the Court holds that there was a common mistake and that the equitable remedy of rectification was appropriate then in determining the fixing of the rent, the formula adopted should have provided that account be taken of all of the prior improvements effected by the previous lessees Blackler and Mills and all the improvements effected by Tumunui until the date when the Mills lease which had been assigned to Tumunui was to expire in December 2011.
As the Judge observed, a declaration of a breach of duty by Mr Moke was necessary to provide a foundation for the primary claim for relief against the Tumunui Trust, namely rescission of the Tumunui Lease.[33] However the Judge also recognised that Mr Moke was not responsible for what the Judge perceived to be a common mistake with reference to the terms of the rental provision in the Tumunui Lease.[34] Further, the breach of duty conclusion will not have a bearing on the prerequisites for the grant of rectification, although it might be relevant to the exercise of discretion.
[33]Primary judgment, above n 1, at [171].
[34]At [213]–[214].
Consequently, and as the appellants’ primary focus is the order to rectify the Tumunui Lease, we first address that issue.
Parties’ submissions
The Tumunui Trust’s submissions
Mr McKechnie submitted that the finding of a common mistake was erroneous. The rent fixing formula in the Tumunui Lease is very precise, referring both to “the lessee” and “its predecessor”, and expressly states the date when the Blackler leases commenced on 13 December 1961. He submitted that the clause would only have been prepared by Mr Burton in that manner if he knew he was making reference to the Blackler leases and the Mills lease.
Mr McKechnie argued that the Judge’s reference to contemporary correspondence was not an accurate description. There was only one letter relied on by the Judge, namely the letter from Mr Burton to the Whaoa trustees of 16 November 1992. There was no correspondence or advice anywhere in the evidence from the Tumunui Trust, either from the late Mr Chadwick or any of the trustees, that the terms recorded in Mr Burton’s letter had been agreed.
He further observed that the Judge had imposed a remedy upon the parties that neither had sought and that only limited submissions were made on rectification in the course of closing. He submitted that an inquiry should have been made as to the consequences of that remedy for both parties. The Tumunui Lease did not involve an economic imbalance and the Judge’s analysis of the valuation evidence was flawed, there being insufficient recognition of the benefits for the Whaoa Trust. Mr McKechnie sought a judgment that the rectification order be set aside or failing that a referral back to the High Court for evidence and submissions on the consequences of such remedy.
The Whaoa Trust’s submissions
Mr Chesterman first submitted that the decision to grant the equitable remedy of rectification involved the exercise of a discretion and that the appeal could not succeed as it failed to meet the high threshold for overturning a discretion[35] and for overturning findings of fact.[36] While acknowledging that rectification was not pleaded as a remedy, he submitted that this was not necessary and in any event the pleading provided scope for it.
[35]Citing Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].
[36]Citing Rae v International Insurance Brokers (Nelson Marlborough) Ltd [1998] 3 NZLR 190 (CA) at 198; and Henderson v Foxworth Investments Ltd [2014] UKSC 41, [2014] 1 WLR 2600 at [67].
In support of the Judge’s conclusion that there was a common mistake, Mr Chesterman refuted the argument that the Judge had relied on a single document being Mr Burton’s letter to the Whaoa Trust. He submitted that there was documentary, fact and expert evidence establishing an agreement that the rental clause only entitled the Tumunui Trust to deduct its own improvements. He drew attention to the exchange of correspondence between the two trusts’ solicitors in August and September 1989 with reference to a possible extension to the Mills lease where the expression “exclusive of lessee’s improvements” was used. He also referred to the evidence of Mr Edwards and Mr Kusabs, albeit to only one feature of each.[37]
[37]Mr Edwards was a trustee of the Whaoa Trust at the time of the lease negotiations. Mr Kusabs is the chairman of the Tumunui Trust.
Mr Chesterman’s submissions also addressed in considerable detail the valuation evidence in aid of his rejection of the Tumunui Trust’s challenge to the Judge’s conclusion about economic imbalance flowing from the perceived common mistake.
He submitted that where the grounds for rectification are established it is only in exceptional cases that relief will be refused on discretionary grounds. In any event he observed that the Tumunui Trust had the option of not renewing the lease in December 2022.
Rectification: relevant principles
As this Court explained in Hanover Group Holdings Ltd v AIG Insurance New Zealand Ltd rectification may be ordered where the parties have agreed a contractual arrangement but the terms in which the arrangement is recorded do not accurately reflect the agreed terms.[38] Oral evidence may be given to show that the recorded terms do not reflect the true agreement between the parties. The burden is on the party seeking rectification to show that there was a common intention which was not properly recorded. Evidence of subsequent conduct is admissible to show that the recorded terms do not reflect the agreed terms.
[38]Hanover Group Holdings Ltd v AIG Insurance New Zealand Ltd [2013] NZCA 442, (2013) 13 TCLR 702 at [30].
Hanover Group noted that in Chartbrook Ltd v Persimmon Homes Ltd[39] Lord Hoffmann approved the description in Swainland Builders Ltd v Freehold Properties Ltd of the ingredients of a rectification claim referred to above.[40]
[39]At [30], referring to Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38, [2009] AC1101 at [48].
[40]Swainland Builders Ltd v Freehold Properties Ltd, above n 28, at [33], set out above at [43].
After reference to those authorities this Court in Davey v Baker added:[41]
[40] It is suggested that a mistake in the interpretation of an instrument or in the legal consequences of entering into an instrument is regarded as insufficient to ground rectification; rectification is a remedy to ensure the instrument contains the provisions which the parties intended it to contain, and not those which it would have contained had the parties been better informed.[42] The remedy of rectification is strictly limited to a clearly established disparity between the words of the document and the intentions of the parties.
Discussion
[41]Davey v Baker [2016] NZCA 313, [2016] 3 NZLR 776.
[42]Francis Dawson “Rectification of voluntary settlements” (2014) 130 LQR 356 at 359.
For the reasons which follow we do not consider the remedy of rectification was properly available in the circumstances of this case.
The pleadings
The third amended statement of claim stated that the Tumunui Lease included among its terms:
Yearly rental to be calculated on the basis of five per centum of the capital value of the land but deducted from the capital value is the value of all improvements made on or to the land since 13 December 1961[.]
There was no suggestion that the term was included in error. Rather the complaint was that the lease was the consequence of a breach of fiduciary duty by Mr Moke to the beneficiaries of the Whaoa Trust. An order for rescission of the lease was sought on the following terms:
all improvements upon and to the land to revert to the Whaoa Trust without any payment required to be made by the Trust;
the rescission to take effect from 1 June being the end of the current dairy season at the time of judgment; and
for the period between 13 December 2011 and the date of rescission the Tumunui Trust to pay damages for loss of market rental.
The Judge’s initiative
It was the Judge who first floated the notion of rectification during the course of the hearing. He perceived that a problem had arisen from the manner in which the rent fixing provision of the Tumunui Lease had been drafted which enabled the value of improvements made to the land by the prior lessees, Mr Blackler and H Allen Mills Ltd, to be excluded. The purpose of the relief proposed was to ensure that the Tumunui Trust did not gain inappropriate benefits from an ability to have rent payments set by taking into account improvements to the land that had been made by earlier lessees and Whaoa Trust did not suffer any corresponding significant detriment.[43]
[43]Recall judgment, above n 31, at [5].
In the recall judgment the Judge explained:
[30] The central thesis underlying my judgment on relief was the need to provide an equitable solution which would not unjustly enrich Whaoa Trust nor unjustly prejudice Tumunui Trust. I chose rectification as the means to achieve that end because it seemed to me that the parties had acted under a misapprehension in signing a lease which enabled Tumunui Trust, for a period of some 40 years, to have the benefit of the Blackler/Mills improvements from 1961.
As he acknowledged at [31] of the recall judgment, the Judge placed considerable emphasis on Mr Burton’s 16 November 1992 letter in reaching his conclusions on rectification. He did not appear to place any weight on the evidence of witnesses who were signatories to the Tumunui Lease. However three such witnesses gave evidence, Mr Bamber and Mr Edwards for the Whaoa Trust and Mr Andrew Kusabs for the Tumunui Trust.
Mr Bamber
Mr Bamber’s evidence did not throw any light on the intended meaning of the rental valuation provision in the Tumunui Lease. Mr Bamber could not recall attending a joint meeting of the Whaoa and Tumunui Trustees about the extension of the Mills lease. Nor did he recall receiving any detailed advice from Davys Burton on the subject of the Mills lease. Indeed his brief recorded that when he signed the Tumunui Lease Mr Bamber did not understand that it was an entirely new lease. He thought it was an extension of the Mills lease.
It is apparent from Mr Bamber’s cross-examination that the Judge became concerned about the reliability of his memory. Eventually after a discussion between the lawyers and the Judge a position was reached whereby Mr Bamber was stood down. The primary judgment records the Judge’s assessment of Mr Bamber’s memory as understandably poor and his evidence (through no fault of his own) unreliable.[44]
Mr Edwards
[44]Primary judgment, above n 1, at [51].
Mr Edwards was elected a trustee of the Whaoa Trust in April 1988 and was formally appointed by the Māori Land Court on 9 February 1989. On the subject of the signing of the Tumunui Lease his brief stated:
38On around 16 February 1994, we signed the final lease between the Whaoa No. 1 Trust and the Tumunui Trust (“the Tumunui Lease”).
39Prior to the signing of the Tumunui Lease, I commented at a trustees’ meeting that the terms of the lease were too favourable to Tumunui. I believed the rental was too low and the lease term was too long. John Price responded by saying that there were shareholders who had shares in both the Whaoa No. 1 Trust and in the Tumunui Trust and that these shareholders would receive a double benefit from the lease. Mr Moke supported this statement.
40I responded that not all were beneficiaries of both Trusts and asked why the Tumunui Trust should be favoured and not the Whaoa No. 1 Trust. Edward Moke acknowledged this but responded that it did not matter which Trust was favoured as the shareholders would benefit regardless. I accepted that this was the way things were done in a Maori Trust.
In the course of additional evidence-in-chief the following exchange occurred:
Q.So this is a letter of 16 November 1992 from Davys Burton and they represented the [Whaoa] trust at the time, do you recall Mr Edwards?
A.I know Davys Burton did yes, that’s correct.
Q.And it’s to Mr Moke and if you turn to page 1644 you’ll see that that’s a minute of 3 December 1992 recording a meeting that was held at Mr Moke’s house where the trustees agreed to the terms of the lease?
A.Yes.
Q.And it says there under number (1) endorsement of terms that the chairman distributed copies of a letter from Mr Ross Burton which sets out the terms of the revised lease. Do you see that?
A.Yes, yes, I’m with you.
Q.Now if we turn back to this Davys Burton letter which is at 1642 and refer to the paragraph 2 — 1642, sorry, have you got 1642?
A.Yes, I am, sorry.
Q.Paragraph 2 refers to the rental formula in the lease being 5% of capital value but excluding any capital improvements effected by the lessee.
A.That’s correct.
Q.My question is do you recall receiving any advice that the lessee would also be able to exclude improvements carried out by Mr Mills dating back to 1961?
A.No, it was not an understanding whatsoever.
The last response was the aspect of Mr Edward’s evidence to which Mr Chesterman drew attention.[45]
[45]See [63] above.
In cross-examination Mr McKechnie first touched on the issue of the rental formula by reference to a letter from Mr Price, the secretary of the Whaoa Trust, to Mr Burton dated 16 August 1989:
Q.… You see the second paragraph where it says, “Whaoa No. 1 trustees are agreeable to an extension of the lease for a period of 20 years?”
A. Yes.
Q.And that’s what was finally signed off in 1994 Mr Edwards, wasn’t it?
A. Yes.
Q.And it also records the conditions attached to the extension of the lease and under (1), “The rental will be based on land values and not in a share of the milk fat prices.” Do you not recall that?
A.No. I, I do recall the rental being as it was and the formula.
He returned to the point in this way:
Q.Did you not say a moment ago Mr Edwards that you recall there being agreement that the rental should be fixed by reference to land values?
A.I did not say “we should,” that is what it was. That is what we did in trust with the trust meeting.
Q.So the Whaoa trustees agreed that that’s what they —
A.Yeah well that’s all we only talked about.
The Judge then intervened:
THE COURT:
Q.I think the evidence you’re thinking of Mr Edwards says, as I recall it, that the rental was going to be on the same formula as per the Mills lease. I think that’s right is it?
A.That is correct.
Q.Yes.
At a later point Mr McKechnie moved to the subject of the meeting of 3 December 1992 on which Mr Edwards had been led in examination-in-chief:
Q.That is a record of the meeting of the Whaoa No. 1 Lands Trust I gather at Mr Moke’s home, is that right?
A.That would be correct.
Q.On the 3rd of December 1992 and it records that the chairman distributed copies of a recent letter to him by the trust’s lawyer Ross, Mr Ross Burton. Look back to page 1642 and 1643 please. Clearly that is the letter referred to I suggest?
A.Yeah.
Q.Do you recall that letter being distributed to you and your fellow trustees?
A.Yes, I think so.
Q.And the minutes on page 1644 record that the chairman distributed copies of a recent letter to him by his trusts — sorry by this trust’s lawyer, Mr Ross Burton, which set out the terms of the revised lease as previously agreed between Tumunui and Whaoa No. 1 Trusts to take effect from 13 December 1992 and asked for final confirmation by Whaoa No. 1 and it then records this confirmation was implemented without [dissent]. Do you see that paragraph?
A.I do.
Q.By way of each and every trustee endorsing a spare copy of the letter to be returned to him, that’s Mr Burton, by Mr Moke’s [request].
A.Yes.
Q.Do you remember signing that off?
A.Yes.
Q.Can you see any record there in those minutes of your expressing any concern about the terms of the lease?
A.No.
Q.And that was the sole business of that meeting, wasn’t it?
A.The signing.
Q.Going through Mr Burton’s letter and considering the terms?
A.Yeah, yeah.
…
Q.Can you Mr Edwards point to any records of the Whaoa No. 1 Trust before the signing of the lease in 1994 in which you are recorded as having expressed concerns or reservations about the form and terms of the lease?
A.It will be in our minutes somewhere. I did comment on the low, the length of the term and it will be in our minutes as well as the low price.
Q.Well what I’m suggesting to you is that the material that you referred to earlier where you may have raised those matters was years later and I’m asking you if you can point to anything before the lease was signed off in 1994 which records your having any concerns about the terms of the lease?
A.It may not — I may not have put it forward as a minute but it would’ve gone through in discussion time I can assure you. But the thing is we were under the umbrella that was put to us that we were lucky to get a tenant initially.
The cross-examination concluded with questioning about the advice received that a new lease was required because of validity concerns about the Mills lease:
Q.… Now the position that arose out of all of this Mr Edwards was that Whaoa and Tumunui agreed that there would be a new lease between those parties and not simply an assignment of the lease from H Allen Mills to Tumunui. That’s what came of this wasn’t it?
A.I, I can’t honestly tell you because we had a backseat role and we left John Price and Edward Moke to do all the negotiations for the Tumunui Lease.
Q.This letter’s written by your lawyer, the Whaoa No. 1 Land Trust lawyer?
A.That may be so.
Q.Do you have no recollection of what happened as a result of this advice?
A.No, I don’t. I know Ed — well I trusted Edward and John to handle it in the best interests of the trust.
Q.Did you trust Mr Burton?
A.Yeah.
Q.Do you now say that the trust you placed in Mr Burton was somehow misplaced?
A.Yes, I could say that because we actually had him as Whaoa No. 2, as our legal representative for Whaoa No. 2 and we actually sacked him.
Q.I’m asking you about Whaoa No. 1 Lands Trust?
A.Well I can’t comment on it because I don’t know how far Edward and John took it.
Q.Well with respect Mr Edwards we all know how far it was taken, a new lease was entered into that was directly from Whaoa to Tumunui. That’s what became of this wasn’t it?
A.Well —
Q.Do you follow me?
A.Yeah but I can’t speak with any authority because I didn’t have anything to do with the lease agreement between [Tumunui] and Whaoa.
Q.Mr Edwards you signed it?
A.Yes.
Q.I showed it to you before?
A.And I, I sign —
Q.Are you telling the Court you signed it without understanding what it was about?
As this juncture the Judge intervened:
THE COURT:
No he didn’t say that at all Mr McKechnie, please.
MR MCKECHNIE:
I beg your pardon.
THE COURT:
What the witness has said throughout his evidence is that he was relying upon Mr Moke and Mr Price, he knew that there was a solicitor acting, he wasn’t involved in the negotiations, he did see an[d] discuss the correspondence from time to time but he did not have any involvement until he actually signed the lease.
THE COURT:
Q. Mr Edwards, does that summarise that?
A.Very well, thank you Your Honour, very well. And if you would like me to comment further on that, when it was changed over from Mr H Allen Mills to [Tumunui], that original lease agreement, I said to the trustees, “I shouldn’t sign this piece of paper should I,” because I have not been officially a trustee and I was told by the chairman of the day, Mr Edward Moke and Mr John Price that I had to sign that document because the blimmin, the trustees had to go through as one body.
CROSS-EXMINATION CONTINUES: MR MCKECHNIE
Q.There’s nothing in your written brief about that is there?
A.No.
Q.Did you take it up with Mr Burton?
A.No.
Q.Why not?
A.Well I took it as A okay. I accepted Mr Moke’s and Mr Price’s explanation of that.
Q.Well following up on what His Honour asked you a moment ago, Mr Edwards why did you sign this lease if you claim that you had reservations about it?
A.I was one — I may have been one — well I was one party of the whole lot but we still had it in our head that we had to get a tenant for that bit of dirt.
The cross-examination terminated at that point. There was no re-examination.
Mr Kusabs
Mr Kusabs’ brief did not address the terms of the Tumunui Lease in detail but the topic was explored in cross-examination:
Q.You would’ve heard the evidence and read the briefs of Mr Edwards and Mr Bamber —
A. Yeah.
Q.— who said that they received no information from Mr Moke about his Tumunui Trust meetings and the content of them and what was going on?
A.I believe they also said they weren’t at meetings but start counting up the numbers and I think somebody was there.
Q.Mr Larmer’s evidence on the length of the lease issue was that at around this time it was public knowledge with those dealing with Māori land that there were concerns over long-term leases and he referred to the 1991 report from the Waitangi Tribunal, the Marshall report, and he said that anyone at this time, around 1990/1991 would’ve known about these issues and would’ve known about this at the time this lease was being entered into. Mr Kusabs were you aware of the public debate around long-term leases of Māori land at this time?
A.Not really.
Q.You will have also heard the detailed evidence about the lease provision, the rental provision within the lease Mr Kusabs and you’re aware now that what happens is that Tumunui when calculating its rental deducts all of the improvements carried out by Mr Mills dating back to — or he took it on 1964 but dating back to 1961, and it continued to deduct Mr Mills improvements right through to 2032. Now Mr Larmer’s evidence was the value of those improvements were somewhere in the region of $5000 per hectare bring a total of around $2 million, 5% of which reflects about $100,000 per annum in rental. Tumunui purchased the lease from Mr Mills which contained this rental provision and the lease that Tumunui purchased expired at its later state in December 2011, correct. Why do you say that Tumunui should be able to — well what reason do you say, or logic, or commercial sense is there in Tumunui continuing to benefit from Mr Mills improvements all the way to 2032?
A.That was the deal we struck.
Q.Do you agree that it amounts to a huge benefit for Tumunui being able to continue to deduct Mr Mills’ improvements right through to 2032?
A.I’m not a valuer but that was the deal we struck and we kept to it. It was a carryover from the original 23 year lease that was assigned to us.
Q.And what about your Tumunui’s own improvements?
A.Yeah.
Q.I just took you to the document where —
A.Yeah.
Q.— your adviser said that the cost would be recovered with the 23 year term plus there was a profit, so on what basis do you say that 40 year, Tumunui should continue to deduct all of its improvements for another 20 years to 2032?
A.As I say that was the deal [we] struck. I can’t say anything else. We struck a deal and we kept to it.
Q.Right.
A.And we’re all happy at the time.
The Judge also questioned Mr Kusabs on this issue:
Q.No, no the proposition I’m putting to you is simply this that in terms of reliance on the Mills’ improvements when you bought the Mills’ lease you expected to have the benefit of those through to the end of that lease which was December 2011?
A.Yep.
Q.You did not expect to have anything beyond that unless negotiated?
A.That’s right.
Q.And your position is well we were entitled to and did negotiate a new lease which enabled us to claim the benefit of those improvements through to 2032?
A.That’s right.
Q.So it’s a simple commercial analysis from your point of view?
A.Exactly, yeah.
Q.Yes.
The issue was touched on in re-examination in this way:
Q.[While] we’re talking about the rental formula you were asked towards the end of your cross-examination about the inclusion of improvements. Was there ever, to your recollection, any discussion between the trustees of Tumunui and the Whaoa Farm Trust about whether the improvements effected by Mills and Blackler would be carried through into the rental formula for the new lease to Tumunui?
A.No.
That was the item of Mr Kusabs’ evidence to which Mr Chesterman referred.[46]
Evaluation of the witnesses’ evidence
[46]See above at [63].
Mr Kusabs was resolute that the Tumunui Trust intended that the Tumunui Lease was to carry over the relevant clause from the Mills lease. In his words that was the deal struck. As his response to the Judge indicated, the Tumunui Trust’s view reflected the fact that such was its entitlement under the Mills lease until 2011. On the basis of Mr Kusabs’ evidence there could not be said to be a common intention that the Tumunui Lease should have contained a provision different from that in the Mills lease.
Mr Edwards’ evidence on the issue of the exclusion of the Mills improvements was inconsistent. His response to a leading question in examination-in-chief was at odds with his later response to the Judge.[47] Significantly however his evidence in both his brief and under cross-examination was consistent concerning his reservations about the terms of the Tumunui Lease and that he gave voice to those concerns. The fact that he held those views and expressed them is consistent with his having an appreciation of the effect of the Tumunui Lease but reluctantly having agreed to sign it.
[47]Compare the answer to the last question in [77] to the response to the Judge at [80].
Putting aside Mr Bamber as a material witness, it follows in our view that the evidence of those who were signatories to the lease in fact points to a common intention that the lease arrangement was accurately reflected in the terms of the Tumunui Lease. However because of the significance which he attached to contemporary documentation in the form of the Davys Burton letter of 16 November 1992 the Judge appears not to have taken any of this evidence into account in reaching his conclusion on the issue of common intention.
The Davys Burton letter of 16 November 1992
For convenience we set out again the sentence which the Judge considered to be the relevant part of Mr Burton’s letter:
2. The initial rental which is yet to be set will be on the formula terms set out on the current lease namely at 5% of the capital value of the land according to a special Government valuation to be obtained (at Tumunui’s expense) but excluding any capital improvements effected by the lessee.
The words following the phrase in brackets were italicised in the judgment.[48]
[48]Primary judgment, above n 1, at [209]: see [44] above.
At [210] of the primary judgment the Judge concluded that the italicised phrase was intended to refer only to the Tumunui Trust. He considered that this interpretation followed from the fact that a new lease was under discussion rather than an assignment of the Mills lease.
There might be force to such reasoning in a situation where an earlier lease has expired and a fresh replacement lease is under negotiation. However in our view it does not follow, in circumstances where a new lease is being contemplated only because an existing lease of substantial future duration is perceived to be of questionable validity, that the terms of the two leases should be different. A relevant factor in that analysis is the period of “overlap” between the existing and replacement leases. In this particular case the relevant formula providing for the exclusion of capital improvements would have continued to apply for up to 19 years until 2011. There was no reason why the Tumunui Trust should wish to abandon that benefit.
It is also important to recognise the function of the sentence upon which the Judge focussed. It is a statement that the initial rental of the new lease will be calculated by reference to the formula in the existing Mills lease, a formula which it proceeds to record prefaced by the word “namely”. The Judge interpreted the final (italicised) phrase as a variation of or departure from the statement of the formula in the existing lease. However the phrase is equally capable of being construed simply as one part of the description of the formula in the existing lease, albeit paraphrased in the interests of brevity. That construction is more consistent with the evidence we have reviewed above.
Such an interpretation gains support from a further passage in the letter to which the Judge did not refer in his reasoning on this issue. The penultimate paragraph addressed the existing lease in this way:[49]
The current lease is for a term of 21 years from 13 December 1992 with rental for the first 10 years at $22,000.00 per annum and with a rent review due now and effective from 13 December 1992. That reviewed rental is to be calculated at 5% of a special Government valuation obtained by your trustees at Tumunui’s expense but excluding any improvements effected by the lessee. When the current lease ends on 12 December 2003 there is a right of renewal for 8 years.
[49]The reference to the lease commencing on 13 December 1992 was an error. The commencement date was 13 December 1982.
The phrase “effected by the lessee” again appears. However it is plain that in this instance it is employed as a convenient shorthand for the actual wording of the Mills lease, namely “made on or to the said land by the lessee or its predecessor since the 13th day of December 1961 and during the terms hereof by the lessee and subsisting at the date of valuation”.
We do not consider that there is any logical reason for treating the phrase “effected by the lessee” as conveying different meanings in different parts of the same letter. The use of the phrase in the second instance is plainly as part of the description of the Mills lease formula. The sentence in which the phrase was first used is identifying the Mills lease formula as the applicable method of calculation of the initial rental under the new lease. The structure of the two descriptions is the same.
In our view in each description the phrase “effected by the lessee” was adopted as an abbreviated description of that part of the Mills lease formula which referred to the excluded capital improvements. We do not agree that the words which the Judge italicised were intended to serve the different purpose of recording a variation of or amendment to the Mills lease formula.
Furthermore we note that in both paragraphs Mr Burton referred to improvements effected by the “lessee”, but advised that the cost of the valuation would be for “Tumunui’s expense”. If the Judge’s interpretation was correct, then one might have expected that in his earlier sentence Mr Burton would have referred to “Tumunui” rather than “the lessee”.
For these reasons we consider that the letter upon which the Judge placed such reliance is at best equivocal on the issue of common intention. Hence, even if that were the only evidence of common intention, we do not consider that the Whaoa Trust would have satisfied the burden of proof of establishing the requisite common intention to support a claim for rectification. In fact the oral evidence which we have discussed points clearly in the opposite direction, a conclusion which is not undermined by the November 1992 letter given its inherent ambiguity.
We do not consider that the reference in Mr Burton’s earlier letter of 21 August 1989 to “exclusive of lessee’s improvements” detracts from this conclusion.[50] It was written in the context of a proposed variation of the Mills lease some three years prior to the events in question. The Whaoa Trust’s secretary, Mr Price, had sent a letter dated 18 July 1989 to Mr Burton advising that the Whaoa Trust had agreed to the transfer of the Mills Lease to the Tumunui Trust. The subsequent letter from Mr Price to Mr Burton dated 16 August 1989 addressing an extension of the lease to be transferred referred to rental being based on land values, not on a share of milk fat prices.[51] Given that its function was to record instructions received in the letter of 16 August 1989, we incline to the view that the point of emphasis in the third item of Mr Burton’s letter of 21 August 1989 was land valuation as the basis for rental, and not the source of the improvements to the land.
Subsequent conduct
[50]At [18] above.
[51]At [17] above.
As earlier noted Hanover Group recognised that evidence of subsequent conduct is admissible to show that the recorded terms do not reflect the agreed terms.[52] Evidence of subsequent conduct can be relied on both in support of and in opposition to an application for rectification. In Chartbrook Lord Hoffmann stated that evidence of subsequent conduct may have evidential value.[53] Similarly in Rectification: The Modern Law and Practice Governing Claims for Rectification for Mistake the post‑transaction evidence proposition was expressed in these terms:[54]
Evidence of communications and conduct subsequent to the execution of the document which it is sought to rectify is admissible in a claim for rectification as throwing light on the true intentions of the parties at the time of execution. But the court must be careful to ensure that the evidence received relates to the parties’ original intention, and not to any later, and different, intention.
[52]Hanover Group Holdings Ltd v AIG Insurance New Zealand Ltd, above n 38, at [30]. The authority cited for this proposition was John Burrows, Jeremy Finn and Stephen Todd Law of Contract in New Zealand (4th ed, LexisNexis, Wellington, 2012) at [10.6.1] which in turn cited Westland Savings Bank v Hancock [1987] 2 NZLR 21; M’Cormack v M’Cormack (1877) 1 LRI 119; and Dormer v Sherman (1966) 110 Sol Jo 171 (CA).
[53]Chartbrook Ltd v Persimmon Homes Ltd, above n 39, at [65].
[54]David Hodge Rectification: The Modern Law and Practice Governing Claims for Rectification for Mistake (2nd ed, Sweet & Maxwell, 2016) at [10–29]. Among the authorities cited from
[10–30]–[10–39] include instances where rectification was granted or declined.
In the present case events occurred essentially contemporaneously with the agreement to enter the new lease which we consider are pertinent to the issue of common intention.
The Tumunui Lease provided for a special Government valuation to be obtained. After recording the fact that all the trustees agreed with the lease proposed in Mr Burton’s letter of 16 November 1992, the minutes of the meeting of the Whaoa Trust on 3 December 1992 proceeded to address the issue of the special Government valuation. The minutes of the meeting stated:
2. Special Government Valuation
One item in the above letter reminded that the rental for the agreed initial term of ten years has not yet been set, as this is to be calculated at 5% of the capital value of the leased land as determined by a special Government valuation to be obtained by Whaoa No. 1 Lands Trust at Tumunui Land Trust’s expense but excluding any value of improvements effected by the lessee.
The meeting instructed the secretary to call on Valuation New Zealand (former Government Valuation Department) on the morrow, to provide necessary information and press for the valuation to be done as soon as possible.
On 14 December 1992 Valuation New Zealand sent to Davys Burton particulars of the special valuation made for the purposes of s 249A of the Maori Affairs Act in respect of the relevant land. The valuation stated:
(c) The value of improvements which are not to be taken into account for the purpose of revising the rent
$1,095,000 (d) Total value of all other improvements on the land
$ 175,000 (e) The unimproved value of the land $ 730,000 (f) Capital value of land $2,000,000
The valuation listed the nature and separate values of improvements as follows:
Lessee
$
Lessor
$Total
$Dwelling (1)
112 square metres6,000 29,000 35,000 Garage (1) 500 500 Dwelling (2)
90 square metres40,000 40,000 Garage (2) 4,000 4,000 Cowshed 122,000 122,000 Implement Shed 6,300 6,300 Implement Shed 6,700 6,700 Woolshed 5,000 5,000 Haybarn 3,000 3,000 Haybarn 2,500 2,500 Haybarn 2,500 2,500 Manure Bin 7,500 7,500 Layout 500 500 1,000 Yards (Sheep) 1,000 1,000 (Cattle) 1,000 1,000 Tracks 33,000 33,000 Water supply 53,000 1,000 54,000 Airstrip 5,000 5,000 Effluent Ponds 5,000 5,000 Crossings 10,000 10,000 Power 15,000 5,000 20,000 Fencing 56,000 9,000 65,000 Development 710,000 130,000 840,000
It is apparent from the record that the improvements attributed to the lessee included not merely the expenditure by the Tumunui Trust but all the improvements made during the period of the Mills lease. For example an earlier inspection in May 1974 recorded that a new dwelling and double garage had been erected along with a new 2000 bale haybarn and a first class airstrip. A subsequent valuation in June 1979 recorded that a major development programme had been undertaken over the past few years and that large amounts of capital had been spent. It stated:
There are two cottages on the property plus woolshed and three haybarns, all buildings in good order for their age.
It is apparent from the minutes of the Whaoa Trust meeting of 26 January 1993 that Mr Burton forwarded copies of the Valuation New Zealand report to the Whaoa Trust. The minutes of that meeting recorded:
1. E Moke reported that the land valuation of Lot 2 Rotomahana — Parekarangi 8 had been agreed to by Tumunui Lands Trust and was carried out by Valuation New Zealand on 13 December 1992. He distributed copies of the valuation report received by the trust’s lawyer, Mr Ross Burton, from the Managing District Valuer.
This document itemises the nature and separate values of improvements assigned to either lessee or lessor, which are open to objections by either party within a time limit imposed by section 245 of the Maori Affairs Act 1953. No objections were forthcoming from trustees present.
In summary:
Improvements not applicable to rent revision $ 1 095 000
All other improvements $ 175 000
Unimproved value $ 730 000 __________
Capital value of the land $ 2 000 0002. The chairman also distributed copies of a covering letter from Mr Burton, which pointed out that the agreed formula for the ten years commencing 13 December 1992 is to be 5 % of the capital value of the land but excluding capital improvements effected by the lessee, i.e. 5 % of $905 000, which is $45,250 per annum plus GST.
A subsequent portion of the minutes under the heading Investment Options recorded that Mr Moke suggested that with the virtually doubled rental over the next decade the Whaoa Trust could confidently explore opportunities for augmenting income.
It is apparent that the special Government valuation obtained in pursuance of the rental formula in the Tumunui Lease listed all the previous improvements, not merely those made by the Tumunui Trust. That valuation (which excluded the value of all the previous lessee improvements) was accepted without challenge by the Whaoa Trust. As the minutes of the 26 January 1993 meeting record, the financial consequences of the valuation were spelt out in the letter from Mr Burton but no objection was made by the Whaoa Trust. On the contrary, the resultant rental figure appears to have been noted with approval.
In our view these events which occurred so close to the agreement to enter into the new lease are a further significant factor which is inconsistent with the asserted common intention which was advanced as the foundation for the order for rectification.
Conclusion
As Rectification: The Modern Law and Practice Governing Claims for Rectification for Mistake notes, notwithstanding the language used in some of the earlier authorities, it is now established that the standard of proof required in a claim for rectification is the same as in all civil proceedings, namely on the balance of probabilities.[55] The point is also made that cogent evidence is required to counteract the evidence of the parties’ intention provided by the signature of the document itself.[56] There is a hint of that approach in this Court’s statement in Davey that the remedy of rectification is strictly limited to a clearly established disparity between the words of the document and the intentions of the parties.[57] However as Leggatt J (as he then was) recognised in Tartsinis v Navona Management Co the evidential weight of a document may clearly vary according to the circumstances.[58]
[55]Hodge, above n 54, at [10–08].
[56]At [10–08].
[57]Davey v Baker, above n 41, at [40].
[58]Tartsinis v Navona Management Co [2015] EWHC 57 (Comm) at [86].
In our view a court ultimately has to decide whether, bearing in mind that the onus of proof is on the party seeking rectification, it is satisfied on the balance of probabilities and in the light of the evidence as a whole that a document should be rectified.[59] Having considered all the evidence discussed above we are not satisfied that the parties had a common intention that the rental provision in the Tumunui Lease should have been in the revised form which the Judge composed. We allow the appeal on that ground.
Mr Moke
[59]Oceanic Village Ltd v Shirayama Shokusan Co Ltd [1999] All ER (D) 545. Neuberger J adopted that approach notwithstanding his recognition that it can be said with considerable force that the onus of proof is often of much more significance in rectification actions.
Our conclusion on the issue of rectification suffices to dispose of the appeal. Hence it is unnecessary to engage with the further issue of whether there was a breach of duty by Mr Moke of such a character as to justify the Tumunui Lease being set aside. As noted, there was no cross-appeal against the refusal to grant rescission of the lease.
Furthermore, as the Judge noted, Mr Moke’s personal representatives took no steps below but abided the Court’s decision;[60] nor did they participate in the appeal. Save for the declaration, no remedy was sought against Mr Moke.
[60]Primary judgment, above n 1, at [171].
The Judge evidently saw the issue of breach of fiduciary duty as a prerequisite to the grant of relief. Given the intimate nature of Mr Moke’s involvement in the Tumunui Trust decision-making process it was inevitable that the issue was traversed. That said, it appears that Mr Moke was motivated by honourable intentions in the belief that both the beneficial owners of the Whaoa Trust and the beneficiaries of the Tumunui Trust would benefit from the Tumunui Lease.
He was not alone in that view. In a letter in 1989 by the Whaoa Trust’s secretary Mr Price, instructing Mr Burton to proceed with the Tumunui Lease, it was said:
There is a close association between the owners of Tumunui and Whaoa Trusts. We can attend the regular meetings held by the former. Those who have taken advantage of attending those meetings will know that the Tumunui Trust is a very competent manager of its affairs and is very experienced in looking after our property in terms of the lease. We have a great deal of confidence in the Tumunui Trust and believe their involvement with the Whaoa Trust will bring about a consolidation of Māori interests that will have commercial benefits.
As Mr McKechnie pointed out, Mr Moke’s beneficial interests in the trusts were not substantial: a percentage shareholding of 0.11314 in the Tumunui Trust; and about 1.94% in the Whaoa Trust and the Reservation Trust combined. There can be no credible suggestion that he was motivated by personal gain.
However the fiduciary duty issue is not relevant to the basis on which we determine this appeal. Hence it is unnecessary for us to revisit the grant of the declaration which was not resisted by Mr Moke’s personal representatives. We simply record these matters to place the finding in context.
Costs
The Tumunui Trust has succeeded on its appeal and prima facie is entitled to costs. However Mr McKechnie diplomatically suggested that it would be appropriate in all the circumstances that there be no costs award to either party on the appeal and that each meet their own costs. We accede to that request.
Result
The appeal is allowed.
The order for rectification of the Tumunui Lease is set aside.
There is no order for costs. If the Tumunui Trust wishes to revisit the issue of costs below, then that should be addressed in the High Court.
Solicitors:
Le Pine & Co, Taupo for Appellants
Koning Webster, Papamoa for Respondents
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