Mitchell v Mitchell
[2017] NZHC 1759
•28 July 2017
IN THE HIGH COURT OF NEW ZEALAND ROTORUA REGISTRY
CIV 2017-463-0061 [2017] NZHC 1759
BETWEEN HAMUERA WALKER MITCHELL,
HOKIMATEMAI KAHUKIWA, PETER STAITE AND VERONICA BUTTERWORTH
Applicants
AND
TE KIRI WHERO EWA MAKARETA MITCHELL
First Respondent
MALCOLM TUKINO SHORT and ALEXANDER JAMES WILSON
Second Respondents
WARWICK MOREHU, RIMINI DENIS PAUL, KATARINA KEREMA, DONNA HALL
Third Respondents
TE KOTAHITANGA O NGATI WHAKAUE ASSETS TRUST
Fourth Respondent
TE MINITA WHANAKETANGA MAORI AND THE ASSOCIATE MINISTER OF TOURISM Fifth Respondent
THE NEW ZEALAND ARTS & CRAFTS INSTITUTE
Sixth Respondent
BRYCE MURRAY Seventh Respondent
Hearing: 25 July 2017 Counsel:
J P Kahukiwa and P M Hoskins for Applicants
E J Rushbrook and C M Marks for First, Second, Third and
Seventh Respondents
No appearance by or on behalf of Fourth Respondent
G Melvin and T Hocking for Fifth RespondentJudgment:
28 July 2017
JUDGMENT OF HEATH J
This judgment was delivered by me on 28 July 2017 at 2.30pm pursuant to
Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
MITCHELL v MITCHELL [2017] NZHC 1759 [28 July 2017]
CONTENTS
The application [1] Context [5] The issues [17] Analysis
(a) Introductory comments [21]
(b) The appointment issue
(i) The representative claimants’ position [24] (ii) Ms Kiri Mitchell’s status as a Trustee [26] (iii) Mr George Mutu’s status as a Trustee [41]
(c) The conflict issue [45] (d) The authority issue [57] Balance of convenience and interests of justice [61] Result [64]
The application
[1] This proceeding concerns the Maori Arts and Crafts Institute (the Institute), known as Te Puia. The Institute promotes Maori arts and culture. It is set within the Whakarewarewa thermal area in Rotorua. That land is currently under the legal ownership of the trustees of the Whakarewarewa Joint Trust (the Joint Trust). The Joint Trust was formed to protect the interests of those affiliated with Ngati Whakaue and Tuhourangi Ngati Wahiao iwi. While not directly in issue at this time, the underlying dispute involves beneficial ownership of the Te Puia business.
[2] Mr Hamuera Mitchell, Mr Hokimatemai Kahukiwa, Mr Peter Staite and Ms Veronica Butterworth (together, the representative claimants) each claim status as a beneficiary of the Joint Trust by virtue of their affiliation to three hapu of Ngati Whakaue: Ngati Hurungaterangi, Ngati Taeotu and Ngati Te Kahu o Ngati Whakaue. They have issued proceedings against persons who hold themselves out to be the Trustees (the Trustees) of the Joint Trust,1 Te Kotahitanga o Ngati Whakaue Assets Trust (the Assets Trust), the Minister of Maori Development, the Associate Minister of Tourism (the Ministers) and the Institute, to prevent them from executing a
document called an “Agreement to Introduce a Bill Vesting the Business of the
Maori Arts & Crafts Institute” (the Vesting Agreement), and taking steps to implement its terms.
1 There is a dispute about whether two of the “Trustees” (Ms Kiri Mitchell and Mr Bryce Murray)
held office as trustees at the time relevant decisions were made.
[3] The proceeding was filed on 18 July 2017. It was accompanied by a without notice application for an interim injunction to preserve the status quo pending determination of the substantive proceeding. In a Minute issued on 19 July 2017, I declined to deal with the application on that basis. I directed service on the other parties and fixed a timetable to enable the application to be heard on notice on 25
July 2017. An urgent decision on the interim relief application is required. The application is opposed by all respondents.
[4] Under the deed creating the Joint Trust (the Deed), the Assets Trust plays the role of appointor, in respect of trustees who are intended to protect and advance the interests of those associated with Ngati Whakaue.2 The Assets Trust does not oppose the application. On the basis of undertakings set out in a “notice of discontinuance” dated 24 July 2017, the representative claimants have agreed not to seek orders against the Assets Trust, on the interim injunction application. The substantive
proceeding remains on foot, so far as the Assets Trust is concerned.
Context
[5] Before explaining the competing positions adopted by the parties, it is necessary to set out the context in which the dispute arises. Because of its complexity, my summary is somewhat longer than what otherwise would have been desirable for the purpose of an interim relief decision. In advance, I apologise to the parties if, in the short time available to me, I have not fully grasped some of the more nuanced aspects of their relationships.
[6] The Deed was executed on 29 August 2008. In its recitals, the Deed recorded that Ngati Whakaue and Tuhourangi Ngati Wahiao had reached agreements, both among themselves and with the Crown and the trustees of Te Pumautanga o Te Arawa Trust, “in relation to lands of the Whakarewarewa Thermal Valley and the [Institute], with those agreements being formalised in specified documents”.
[7] One of the documents was called a “Deed to Introduce Vesting Legislation in
Relation to Whakarewarewa Valley Land and Roto-a-Tamaheke Reserve between
2 See Clause 2.1(a)(i) of the Deed, set out at para [29] below
Ngati Whakaue, Tuhourangi Ngati Wahiao, the Crown and the Trustees of Te Pumautanga o Te Arawa Trust” dated 5 August 2008 (the Vesting Deed). The Deed recorded the terms on which the Joint Trust was to hold the land, pending determination of the identity of the beneficial owner/s of the Whakarewarewa Valley lands. The vesting of the lands was completed in 2010, by the Whakarewarewa and Roto-a-Tamaheke Vesting Act 2009.
[8] The Second Schedule to the Deed sets out a dispute resolution procedure to be invoked if there were a disagreement as to iwi or hapu entitled to beneficial ownership of the area comprising the Whakarewarewa Valley land. The Second Schedule envisaged four steps after initiation of any dispute. The first was negotiation; the second was mediation; the third was adjudication; and the fourth implementation. An Adjudication Panel (the Panel) was to be established if adjudication were necessary.
[9] The Panel was to comprise at least three independent persons appointed unanimously by the Trustees. In determining questions of beneficial ownership the Panel was required to “have regard to mana whenua and customary aspects of land tenure” in the pre-Native Land Court period. It was envisaged that the Panel would reach a decision which could be implemented promptly thereafter.
[10] Disputes did arise between Ngati Whakaue and Pukeroa Oruawhata Trust (on the one hand) and Tuhourangi Ngati Wahiao (on the other). The questions in dispute were referred to a Panel comprising Mr Bill Wilson QC, the late Mr Erima Henare and Mr Kevin Prime (the Panel). In a decision issued on 7 June 2013, the Panel determined that the lands should be apportioned equally between iwi of Ngati Whakaue and Ngati Wahiao. The determination was treated as an award for the purposes of the appeal provisions of the Arbitration Act 1996. Leave to appeal
against the decision was granted.3 The appeal was heard in this Court, in February
2016. Moore J dismissed the appeal.4 His judgment is currently the subject of a
3 Ngati Hurungaterangi v Ngati Wahiao [2014] NZCA 592. See also, on an application for leave to appeal to the Supreme Court, Ngati Wahiao v Ngati Hurungaterangi (2015) 22 PRNZ 448 (SC).
4 Ngati Hurungaterangi v Ngati Wahiao [2016] 3 NZLR 378 (HC).
reserved decision in the Court of Appeal. I was told by counsel that aspects of tikanga are in issue on the appeal.
[11] The ultimate outcome of the appeal process is relevant to the status of beneficiaries under the Deed.5 The term “Beneficiary” is defined by reference to periods of time. In the “Initial Period” the “Provisional Beneficiary” has beneficial ownership of the land. The term “Provisional Beneficiary” is defined as “the Claimants until such time as the [Trustees] have been notified in writing of the Final Beneficiary”. In that context, “Claimants” means interests associated with Ngati
Whakaue and Tuhourangi Ngati Wahiao respectively. The “Initial Period” ends when the “Final Beneficiary” is determined following either agreement among the claimants, or findings made by a Panel under the dispute resolution process, as to the beneficial owner/s of the lands.
[12] Separate and distinct from determinations about ownership of the Whakarewarewa Valley lands is the question of beneficial entitlement to the Institute. Clause 3.1(d) of the Deed authorised the Trustees to establish “a replacement Te Puia entity” that would hold shares in that [entity] on behalf of … Ngati Whakaue and Tuhourangi Ngati Wahiao or any other person or group”. It also contemplated that the Te Puia business would be operated by that entity. Clause 3.1(d) is the provision under which the Trustees have acted in negotiating the
Vesting Agreement.6
[13] In an affidavit sworn on behalf of the Ministers, Mr Riki Ellison explained the ownership structure proposed by the Vesting Agreement. Mr Ellison is a consultant who, since October 2016, has worked (as part of the Crown-Iwi, Hapu, Whanau Maori Relations Team of the Ministry of Maori Development) on the proposal to vest the Institute’s business in iwi. He deposed:
[34] In summary, the Vesting Agreement proposes to vest the ownership of the [Institute’s] Business in the Te Puia | NZMACI Limited Partnership,
50 per cent of which would be owned by the Wahiao Tūhourangi o
Whakarewarewa Trust (a new body representing Wahiao Tūhourangi o
Whakarewarewa), 25 per cent of which would be owned by HTK Te Puia
Trust (a new body representing the Three Hapū) and 25 per cent of which
5 The relevant definitions are set out in cl 1.1 of the Deed.
6 Clause 3.1(d) is set out at para [57] below.
would be owned by POT, the existing body representing the owners of the
Pukeroa Oruawhata land. The two new bodies have yet to be established.
[35] The Vesting Agreement proposes that Te Puia | NZMACI Management Limited, the General Partner, and a wholly owned subsidiary of the Limited Partnership will manage the [Institute’s] Business on behalf of the owners. Shares in the business manager will be split in the same way as the ownership of the Limited Partnership.
[36] The agreement provides that directorships of Te Puia NZMACI Limited (the business manager) are similarly allocated. Wahiao Tūhourangi o Whakarewarewa will provide four directors, and the Three Hapū and POT each provide two. The Crown will appoint an independent Crown Representative as the Chairperson of the board for at least the first six years.
[37] In this way, although the ownership of the Whakarewarewa Reserves and the ownership of the [Institute’s] Business are independent of each other, the proposed model for the ownership of the [Institute’s] business reflects the decision of the Adjudication Panel in respect of the land vesting, among other considerations.
[14] The Institute is an incorporated body, established by s 4(1) of the New Zealand Maori Arts & Crafts Institute Act 1963. It operates the Te Puia business. Under that statute, the Institute is owned by the Crown.
[15] In broad summary, s 14 of the Act authorises the Institute to foster and promote all types of Maori culture, to train Maori in the practice of their arts and crafts, to arrange and conduct exhibitions of Maori arts and crafts and to develop and maintain areas in the Rotorua district or elsewhere as scenic or tourist attractions. The business has been successful. Presently, the Institute has assets valued at approximately $37 million, an annual turnover of approximately $21 million and returns a profit of approximately $6 million per year. Since 2014, proposals have been under active consideration to return the Institute to Maori ownership.
[16] Because the Institute’s ownership and operational structure is prescribed by statute, if the Crown were prepared to transfer the business to Maori ownership, legislation would be required to change the status quo. For that reason, the Vesting Agreement provides for the Ministers to introduce a Bill into Parliament to give effect to its terms. No binding agreement that the business be vested in any particular iwi or hapu can be reached without legislation. If a Bill were introduced into the House of Representatives, there would be an opportunity for those who had
views about the proposed transfer to make submissions to a Parliamentary select committee before enactment of any legislation.
The issues
[17] The primary concern of the representative claimants is that the Vesting Deed is directly linked to the Panel’s decision as to beneficial ownership of the Whakarewarewa Valley Lands.7 However, counsel for both the Trustees and the Ministers assured me that those parties accepted that the “Initial Period” is still in force, and any “Final Beneficiary” could not be established until after all appellate processes had been exhausted. The Vesting Agreement will be amended before execution to ensure that position is recorded accurately in it. Those assurances assuage any concern that the Vesting Agreement has pre-determined beneficial
ownership by reference to the Panel’s decision.
[18] A number of complaints are advanced in the Statement of Claim and the amended application for an interim injunction, but only three assumed significance at the hearing on 25 July 2017. All concern the question whether those who purported to act as the Trustees had power to embark upon the process that has led to the Vesting Agreement. In my view, lack of authority is the only basis on which an interim injunction could be issued to prevent the Trustees from signing the Vesting Agreement.
[19] I confine my analysis to the issues on which I heard detailed oral submissions. I am satisfied that none of the subsidiary issues could raise the type of serious question to be tried required by the Court of Appeal’s leading decision on the grant of interim injunctions, Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd.8
[20] I summarise the three issues:
7 See para 37 of Mr Ellison’s affidavit, set out at para [13] above.
8 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129 (HC and CA) at
141.
(a) Were Ms Kiri Mitchell and Mr Bryce Murray each duly appointed Trustees of the Joint Trust during the time at which they were involved in decision-making in the process leading to initialling of the Vesting Agreement? (I call this the appointment issue)
(b)If Ms Kiri Mitchell were otherwise a validly appointed Trustee during that period, were decisions taken by the Trustees vitiated by a conflict of interest on her behalf? (I call this the conflict issue)
(c) If the Trustees were all validly appointed and no question of conflict arises, did cl 3.1(d) of the Deed authorise them to embark upon the process that led to initialling of the Vesting Agreement? (I call this the authority issue)
Analysis
(a) Introductory comments
[21] Because of the need for a prompt decision, I do not propose to rehearse fully the arguments advanced, both in writing and orally, by counsel for the various parties. Rather, I explain my reasons for reaching my conclusions on the three points I have identified.
[22] My approach is to consider the issues in turn, and to express my conclusions on each. I shall then consider whether a serious question arises for trial, where the balance of convenience lies, and, standing back, assess whether, in the interests of justice, an interim injunction should issue.9
[23] As all questions involve the interpretation of the Deed, an assessment of the relative strength of the competing arguments can be more readily achieved than, for example, in a case in which conflicting evidence exists that would need to be tested at a trial. Nevertheless, I am conscious that the Deed is a complex document. I am not to be taken as expressing final conclusions on its interpretation, given the urgency under which this case has been heard.
(b) The appointment issue
(i) The representative claimants’ position
[24] Mr Kahukiwa, on behalf of the representative claimants, submitted that Ms Kiri Mitchell has not been a Trustee since 27 November 2016. He contended that she had been validly replaced at a hui-a-hapu of the three hapu whose interests the representative claimants seek to protect. It is said that Ms Kiri Mitchell was replaced by Mr Hokimatemai Kahukiwa and Ms Veronica Butterworth, two of the representative claimants. The representative claimants also assert that Mr Bryce Murray was never validly appointed as a trustee.
[25] Two distinct questions are raised by those points. Different interpretation issues arise, and need to be considered discretely.
(ii) Ms Kiri Mitchell’s status as a Trustee
[26] With regard to Ms Kiri Mitchell’s status, I start by referring to the argument in opposition, put forward by Ms Rushbrook, on behalf of the Trustees. Her submissions considered the appointment provisions of the Deed. It is necessary to understand the structure of the appointment process in order to evaluate the submission made by Mr Kahukiwa.
[27] The First Schedule to the Deed sets out provisions relating to the appointment, retirement, removal, administration of the Trust and proceedings of the Trustees. Both Mr George Mutu and Ms Kiri Mitchell were initial trustees of the Joint Trust, whose appointment was expressly recorded in cl 1 of the First Schedule.10
[28] The scheme of the First Schedule is to ensure that the Ngati Whakaue interests and those of Tuhourangi Ngati Wahiao are each represented by four Trustees. For present purposes, there is no issue as to the status of Trustees appointed to represent interests associated with Tuhourangi Ngati Wahiao.
[29] Clause 2 of the First Schedule deals with the “power of appointment, reappointment or replacement of the Trustees”. As previously indicated, it is common ground that, until appeals are exhausted in respect of the Panel’s decision, the “Initial Period” remains relevant for the purpose of considering the appointment issue.11
[30] The process, in respect of the appointment, reappointment or replacement of
Trustees for the “Ngati Whakaue Interest” is set out in cl 2.1(a) of the Deed.
2.1 For the Initial Period:
(a) The Ngati Whakaue Interest shall have the power to appoint, re-appoint and replace the trustees who are numbered one (1) through four (4) of the Trustees more particularly as follows:
(i) Until such time as a Ngati Whakaue Hui a Iwi resolves otherwise, the trustees numbered one (1) and two (2) shall be appointed by the trustees of the Te Kotahitanga O Ngati Whakaue Assets Trust for and on behalf of those individuals who fall within paragraph (a) of the definition of the Ngati Whakaue Interest; and
(ii) Until such time as a Ngati Whakaue Hui a Iwi resolves otherwise, the trustees numbered three (3) and four (4) shall be appointed by the trustees of the Pukeroa Oruawhata Trust for and on behalf of those individuals who fall within paragraph (b) of the definition of the Ngati Whakaue Interest;
[31] The reference to “the Trustees” who are “numbered one (1) through four (4)” arises out of cl 1 of the First Schedule. The names of four persons are set out as the initial Trustees who were appointed to represent Ngati Whakaue interests:
Trustee 1 George Mutu
Trustee 2 Te Kiri Whero Ewa Makareta Mitchell
Trustee 3 Malcolm Tukino Short
Trustee 4 Alexander James Wilson
[32] The remaining Trustees were given the numbers 5–8, but they were appointed to represent the interests of Tuhourangi Ngati Wahiao. No further reference need be made to them.
[33] On my reading of cl 2.1(a)(i), the default position is that Mr Mutu and Ms Kiri Mitchell were the original appointees, but any reappointment and replacement of them was to be made by the Assets Trust, as the body given the power of appointment for the Ngati Whakaue interests. That default position is displaced if “a Ngati Whakaue Hui-a-Iwi” resolves otherwise.12 The term “Ngati Whakaue Hui-a-Iwi” is defined by cl 1.1 of the Deed to mean:
Ngati Whakaue Hui a Iwi means a publicly advertised hui of the Ngati
Whakaue Interest called by Te Kotahitanga O Ngati Whakaue Assets Trust; (Emphasis added)
[34] Any reappointment or replacement of Mr Mutu and Ms Kiri Mitchell, as Trustees 1 and 2, was to be made “on behalf of those individuals who fall within paragraph (a) of the definition of the Ngati Whakaue interest”.13 The definition of Ngati Whakaue interest (which includes the paragraph in issue) is set out in cl 1.1 of the Deed:
Ngati Whakaue Interest means:
(a) The three (3) hapu of Ngati Hurungaterangi, Ngati Taeotu me Ngati Te Kahu o Ngati Whakaue and more particularly those individuals who are descended from one or more of the listed persons by name and by hapu as set out in the decision of the Native Land Court in respect of Whakarewarewa No 3 Block and dated 24th October 1893 at 28 ROT 124-166;
(b) Those individuals who are descended from one or more of the 295 listed owners by name and by hapu as set out in the decision of the Native land Court in respect of the Pukeroa Oruawhata Block, of which the Arikikapakapa Block forms part, and dated the 27th April
1882 as represented by the trustees of Pukeroa Oruawhata Trust;
[35] Ms Rushbrook makes two points in relation to the alleged replacement of Ms
Kiri Mitchell at the Hui-a-hapu held in November 2016:
(a) First, she submits that a “hui-a-hapu” that is directed to those with affiliations to the three hapu on whose behalf the representative claimants have brought this proceeding is not “a Ngati Whakaue hui- a-iwi” as defined in cl 1.1 of the Deed. Accordingly, there is no power to replace an existing trustee at such a hui.
(b)Second, in any event, no valid hui-a-iwi could be held at which a resolution to appoint or replace could be passed, unless called by the Assets Trust.14
[36] Mr Kahukiwa submitted that the Deed must be read in light of the tikanga of the three hapu. He submitted that it was necessary to imply into cl 2.1(a)(i) a requirement that a hui-a-hapu of the three hapu ought to be held to determine whether existing Trustees ought to be reappointed, or replaced.
[37] While I accept that it might be arguable that the definition of “Ngati Whakaue Interest”15 is limited to the three hapu on whose behalf the representative claimants seek to act, I consider that it is not seriously arguable that the 27
November 2016 hui was of a type at which a Trustee could be replaced or reappointed.
[38] There is no evidence before the Court that the November 2016 hui-a-hapu
was called by the Assets Trust. Indeed, Mr Hamuera Mitchell’s evidence is that the
27 November 2017 hui was called through a notice placed in the Rotorua Daily Post on 16 November 2016, at the instigation of himself, Mr Hamuera Mitchell, Mr Hokimatemai Kahukiwa, Mr Peter Staite and Mr John Kahukiwa. The advertised panui stated that the purpose of the hui was to select “replacements for George Mutu and Kiri Mitchell … as the 2 representative trustees of [the three hapu] to the … [Joint Trust]”.
[39] In my view, the decisive point is that the hui was not called by the Assets
Trust. In those circumstances, I am not satisfied that a seriously arguable case has
been advanced to support the proposition that Ms Kiri Mitchell was replaced as a Trustee at the 27 November 2016 hui. The purported replacement of Ms Kiri Mitchell by other persons is of no legal effect.
[40] For the purposes of this decision, I treat Ms Kiri Mitchell as having the status of a Trustee throughout the period during which negotiations for the Vesting Agreement were conducted on behalf of the Joint Trust.
(iii) Mr George Mutu’s status as a Trustee
[41] Mr Mutu’s replacement by Mr Murray raises a different issue. It is common ground that Mr Mutu failed to attend meetings of the Joint Trust for a period in excess of six months. Clause 5.4 of the First Schedule to the Joint Trust Deed sets out one of the circumstances in which a Trustee will cease to hold office. It provides:
5. Term of Office: A Trustee will cease to hold office if that Trustee:
…
5.4Failure to Attend: fails to attend a meeting of the Trustees for a period of 6 months;
[42] In my view, cl 5.4 is a self-executing provision. In other words, if a Trustee has not attended a meeting of Trustees for six months, his or her office is immediately vacated, by operation of the Deed. That creates a vacancy that must be filled, in accordance with cl 2.1(a)(i) of the First Schedule to the Deed.16
[43] I am satisfied that the evidence establishes that the Assets Trust (as appointor) replaced Mr Mutu with Mr Murray. The legal position is that a vacancy was created through the cessation of Mr Mutu’s position as a Trustee, and the Assets Trust had power under cl 2.1(a) of the First Schedule to the Deed to replace him with Mr Murray.
[44] In those circumstances, I am satisfied that Mr Murray was validly appointed. There is no seriously arguable case to the contrary.
16 Clause 2.1(a) of the First Schedule is set out at para [29] above.
(c) The conflict issue
[45] Mr Kahukiwa contended that Ms Kiri Mitchell had a conflict of interest as a Trustee, flowing from initialling the Vesting Agreement. He contended that she ought not, as a conflicted Trustee, to have participated in the decision-making process leading up to the initialling of the Vesting Agreement.
[46] Mr Hokimatemai Kahukiwa has given evidence that Ms Kiri Mitchell is the major shareholder within the Pukeroa Orua Whata Trust and suggests that she stands to gain substantially from any decision that gives an interest in the Institute to that ahu whenua trust.
[47] Counsel for the representative claimants relied on the decision of the Supreme Court in Fenwick v Naera17 to support his submission that the conflict vitiated decisions of the Trustees in relation to the Vesting Agreement. In that case, the Supreme Court held that the “duty of loyalty” and the “prohibition on Trustees (and other fiduciaries) from having conflicts of interest” was “a central tenet of the fiduciary relationship” which was owed by trustees of an ahu whenua trust, in the same way that it applies to trustees of any other type of trust.18
[48] The justification for the “no conflict rule” was explained by Lord Herschell in Bray v Ford.19 In a passage cited with approval by the Supreme Court,20 Lord Herschell said:
It is an inflexible rule of a Court of Equity that a person in a fiduciary position, … is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict. It does not appear to me that this rule is, as has been said, founded upon principles of morality. I regard it rather as based on the consideration that human nature being what it is, there is danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than duty, and thus prejudicing those whom he was bound to protect. It has, therefore, been deemed expedient to lay down this positive rule.
(Emphasis added)
17 Fenwick v Naera [2016] 1 NZLR 354 (SC).
18 Ibid, at para [70] per Glazebrook J giving the judgment of a majority of the Supreme Court.
19 Bray v Ford (1896) AC 44 (HL) at 51.
20 Fenwick v Naera [2016] 1 NZLR 354 (SC) at para [72].
[49] In Staite v Kusabs,21 I discussed Fenwick v Naera in some detail. In summarising its effect, I said:
[146] I distil the following principles from the Supreme Court’s decision in
Fenwick v Naera:
(a) The rationale for the self-dealing rule is to remove “the fruits of temptation” that a trustee might otherwise have, as an incident of human nature, to seek personal advantage, to the disadvantage of those for whom he or she acts as a trustee.22 This is based on “fiduciary law’s traditional prophylactic approach”.23
(b) To give effect to that principle, it is unnecessary to consider whether the same outcome would have resulted if the breach of the fiduciary duty of loyalty had not occurred.24 The rationale that lays behind the prohibition on self-dealing justifies such “an inflexible rule”.25
(c) In the context of an ahu whenua trust, because of the statutory overlay in respect of a trust established by a Court order, the remedy of rescission of the transaction in issue is not automatic. Rather, it will be for the Court hearing the breach of fiduciary claim to determine what (if any) remedy is appropriate in the circumstances.26
(Footnotes retained)
[50] Notwithstanding strong judicial support for the strict application of fiduciary duties of loyalty owed by trustees to a trust, there is no doubt that the “no-conflict rule” can be relaxed if the relevant trust instrument so provides.27 In that regard, Ms Rushbrook referred me to cl 7 of the First Schedule to the Deed.
[51] Clauses 7.5, 7.6 and 7.7 of the Deed contain provisions dealing with conflicts of interest. In contrast to provisions within some trust orders made by the Maori Land Court in respect of ahu whenua trusts (in which the consent of that Court may
be required to cure a conflict), there are some circumstances in which a Trustee of
21 Staite v Kusabs [2017] NZHC 416.
22 Generally, see Robertson v Robertson [1924] NZLR 552 (SC) at 553 and Fenwick v Naera
[2015] NZSC 68, [2016] 1 NZLR 354 at para [73].
23 Fenwick v Naera [2015] NZSC 68, [2016] 1 NZLR 354 at para [73].
24 Ibid.
25 Bray v Ford [1896] AC 44 (HL) at 51, per Lord Herschell. None of the remaining members of the House of Lords (Lord Halsbury LC, Lord Watson, Lord Macnaghten and Lord Shand) disagreed with that proposition.
26 Fenwick v Naera [2015] NZSC 68, [2016] 1 NZLR 354 at para [125].
27 Albeit in a more general context, see the judgment of a plurality of the Supreme Court, given by
Blanchard J, in Stevens v Premium Real Estate Ltd [2009] NZSC 15 at para [72].
the Joint Trust may continue to make relevant decisions even though some form of conflict exists that might otherwise fall foul of the “no-conflict rule”.28
[52] Clause 7.5 deals with the circumstances in which disclosure of a conflict must be made. Clause 7.6 contains a definition of “Interested Trustee”, the subject matter of the conflict provision. However, cl 7.7 provides an exception to those general provisions, stating:
7.7Interests in common with iwi, Hapu and Whanau: Notwithstanding clauses 7.5 and 7.6, a Trustee will not be interested in a matter where that Trustee is a member of the Ngati Whakaue Interest or of the Tuhourangi Ngati Wahiao Interest and where his or her interest is not different in kind from the interests of other members of either of those two iwi interest groups.
[53] I gave leave for the Trustees to file an affidavit in response to that of Mr Hokimatemai Kahukiwa, on the topic of Ms Kiri Mitchell’s alleged conflict of interest. I did so because his affidavit was filed at the hearing, and raised a point that the Trustees had not had the opportunity to meet. On 26 July 2017, I received an affidavit of another of the Trustees, Mr Malcolm Short, responding to Mr Hokimatemai Kahukiwa’s affidavit.
[54] Mr Short’s affidavit was based on a search of the records of the Pukeroa Oruawhata Trust; more particularly Ms Kiri Mitchell’s shareholding in it. He accepts that Ms Kiri Mitchell holds a significant interest but points out that benefits of holding shares in an ahu whenua trust do not equate to those held “in a company in terms of value and ability to transfer”. In particular, Mr Short refers to “significant limitations on share transfers” which impact on the value of the asset held by a shareholder.
[55] Clause 7.7 is directed to interests which are “different in kind” from those of other members of the two iwi interest groups, Ngati Whakaue or Tuhourangi Ngati Wahiao. The definition of “Ngati Whakaue Interest” includes a reference to those
“individuals who are descended from one or more of the 295 listed owners by name
28 Compare Staite v Kusabs [2017] NZHC 416, at paras [158] and [159], which discusses provisions of relevant Trust Orders in that case. In the context of those orders, consent of the Maori Land Court was required for a conflicted trustee to be involved in the decision-making process.
and by hapu” set out in a decision of the Native Land Court of 24 October 1893 in respect of the Pukeroa Oruawhata Block, which is part of the Whakarewarewa Valley lands.29 Also, it is significant that the Pukeroa Oruawhata Trust was a co-claimant with Ngati Whakaue in the adjudication claim, and that it supported the stance taken by that iwi.30
[56] While a conflict may be arguable, I consider that the better approach is to regard a person falling within that part of the definition of “Ngati Whakaue interest” as one who does not have an interest that is “different in kind” from others who fall within that definition. Necessarily, four Trustees are aligned to Ngati Whakaue and four to Tuhourangi Ngati Wahiao, Ms Kiri Mitchell’s interest is no “different in kind” from any of her co-trustees.
(d) The authority issue
[57] Whether the Trustees had authority to embark upon the process that has led to the Vesting Agreement turns on the proper interpretation to be given to cl 3.1(d) of the Deed. It provides:
3.1 Principal purposes: The Trust is established for the Beneficiary to:
…
(d) Establish a replacement Te Puia entity: Incorporate, or assist in the incorporation of, a company, or other suitable legal entity, that is able to take on the business known under the style and brand as “Te Puia” and which occupies part of the Lands, and to hold shares in that company on behalf of the Beneficiary, Ngati Whakaue and Tuhourangi Ngati Wahiao or any other person or group;
….
[58] Clause 3 of the Deed sets out the purposes of the Trust. Of the five listed purposes in cl 3.1, four are directed to issues involving the land itself. However, cl 3.1(d) specifically deals with the establishment of a replacement Te Puia entity.
[59] In my view, it is not seriously arguable that in negotiating the Vesting
Agreement, the Trustees were acting contrary to cl 3.1(d). They had the right to
assist in the incorporation of an entity able to take on the business operated by Te Puia and to hold shares on behalf of Ngati Whakaue and Tuhourangi Ngati Wahiao “or any other person or group”. They negotiated an agreement to achieve that end.31
[60] While it is seriously arguable that the phrase “other person or group” must be limited to one associated with one or other of the iwi, I have no doubt that those whose interests are set out in the Vesting Agreement fall into that category. They reflect those interests whom the Panel determined were entitled to share equally in the Whakarewarewa Valley lands.
Balance of convenience and interests of justice
[61] I deal together with the questions of balance of convenience and interests of justice. As I have found there is no seriously arguable case under the three heads of claim advanced by Mr Kahukiwa, on behalf of the representative claimants, the balance of convenience and the overall interests of justice plainly lie in favour of the Trustees and the Ministers. There is no basis on which an interim injunction could be issued, in those circumstances.
[62] In my view, while recognising that other factors point in the same direction, there are two compelling reasons why no relief should be granted:
(a) First, the Trustees have taken considerable care in the consultation process to ensure a ballot has been held to gauge the strength of support of those with affiliations to both Ngati Whakaue and Tuhourangi Ngati Wahiao. The result of the ballot demonstrates significant support for the actions taken by the Trustees.
(b)Second, if the Vesting Agreement were signed, it would still be open for the representative claimants to make submissions to a select committee before any statute is enacted in consequence.32 As to
timing, I was advised by Mr Melvin, for the Ministers, that it is
31 See extracts from the affidavit of Mr Ellison, set out at para [13] above.
unlikely a Bill will be introduced before the General Election scheduled for 23 September 2017.
[63] My conclusion that the interests of justice favour dismissal of the interim injunction application is informed by what counsel for the Trustees told me about changes that would be made to the Vesting Agreement to reflect the fact that the “Initial Period” contemplated by the Deed still applies.33 I expect that to occur before the Vesting Agreement is signed.
Result
[64] For those reasons, the application for an interim injunction is dismissed. I did not hear from counsel on questions of costs, so they are reserved.
[65] I direct the Registrar to allocate a case management conference for the substantive proceeding on the first available date after the time set by the High Court Rules for the filing of a statement of defence expires. Counsel shall file memoranda for that conference no later than three working days in advance. They shall include proposals to deal with questions of costs. While the Judge presiding over the case management conference is likely to be someone other than me, it will be for him or her to determine whether to refer the question of costs back to me for determination. That Judge may, however, make directions as to the filing of written submissions for that purpose.
[66] I thank counsel for their assistance. I recognise the difficulties inherent in preparing for a full hearing of an interim injunction application of this type at such
short notice.
P R Heath J
Delivered at 2.30pm on 28 July 2017
Solicitors:
Corban Revell, Auckland Russell McVeagh, Wellington Crown Law, Wellington
Papageorgiou Law Office, Wellington
Counsel:
F Geiringer, Wellington
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