New Zealand Maori Council v Foulkes

[2014] NZHC 747

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2013-485-455 [2014] NZHC 747

UNDERthe Trustee Act 1956 and Judicature Amendment Act 1972 and Part 30 of the High Court Rules

IN THE MATTER OF       an application for review and for interpretation of the Trust Deed of the Crown Forestry Rental Trust

BETWEEN  THE NEW ZEALAND MĀORI COUNCIL

First Applicant

SIR EDWARD TAIHAKUREI DURIE Second Applicant

CLETUS MAANU PAUL Third Applicant

ANDANGELA JUNE FOULKES First Respondent

ALAN PAREKURA TOROHINA HARONGA

Second Respondent

ALEXANDER JOHN WILSON Third Respondent

FEDERATION OF MĀORI

AUTHORITIES Fourth Respondent

Hearing:                   3 March 2014

Counsel:                  M S R Palmer and F E Geiringer for Applicants

K P McDonald QC for First to Third Respondents

N Burley for Fourth Respondent D N Soper for Attorney-General G Illingworth QC amicus

Judgment:                9 April 2014

THE NEW ZEALAND MĀORI COUNCIL & ORS v FOULKES & ORS [2014] NZHC 747 [9 April 2014]

JUDGMENT OF WILLIAMS J

Three applications

[1]      The substantive proceeding in  this  matter raises  both  broad  and  focused questions in relation to the administration of the Crown Forestry Rental Trust (I refer to this body variously as the Trust or CFRT).  There is disagreement among trustees over the future direction of the Trust.  The substantive proceeding is set down to be heard in June this year.  In the meantime, an issue has arisen with respect to the role of the first respondent as chair of trustees.   A further issue has been raised with respect to the position of one of the Māori trustees. Applications are made under the Trustee Act 1956 (the Act) and resort is also had to this Court’s inherent jurisdiction.

[2]      On the first matter, the applicants argue that relations around the trustee table have  become  strained  and  the  chair  of  trustees,  Ms  Angela  Foulkes,  is  not discharging her chairmanship in an impartial manner.   The applicants seek the appointment of an independent non-voting chair.  The respondent trustees, including Ms Foulkes, oppose, arguing essentially that the chair is doing a fine job in very difficult circumstances.

[3]      On the second matter, the New Zealand Māori Council (the Council) and the trustees  Durie  and  Paul  –  the  trustees  aligned  with  the  Council  –  seek  orders removing Mr Alan Haronga as a trustee and replacing him with Mr Neville Baker. Further orders are sought appointing a list of alternative trustees able to step in if the appointed Māori trustees are conflicted on any agenda items.  The applicants say the Council  and  the  Federation  of  Māori  Authorities  (FoMA)  reached  a  series  of decisions in relation to the appointment and removal of both primary and alternate trustees.   They ask the Court to affirm these decisions with appropriate orders. FoMA opposes for reasons I will explain below.

[4]      There is a third ancillary application for costs under s 71 of the Act.  This is opposed by the respondent trustees.

[5]      Before addressing these applications, it is necessary to first traverse a little history and then the relevant facts.

History

[6]      The CFRT was established by deed in 1990 as part of the machinery resulting from the settlement of litigation between Māori interests represented generally by Sir Graeme Latimer and the Council (of which he was then chair) and the Crown over the Crown’s proposed sale of cutting rights in Crown-owned exotic forests.  Cutting rights could be sold but ground rent would be paid to the new Trust and the land would be subject to resumption by Māori claimants under the Crown Forest Assets Act 1989.  Under the settlement, the Trust would hold all rental payments in respect of the forests pending resolution of Treaty claims to the land beneath them.   The expectation was that the accumulated rentals relating to the claimed land would eventually pass along with the land to the claimants if their claims for resumption of such land succeeded before the Waitangi Tribunal, or revert to the Crown if they were not.

[7]      It  was  then  predicted  that  all  forestry  claims  would  be  resolved  by  the Waitangi Tribunal one way or the other within three years, and that in the meantime, interest on the accumulated rentals would be expended on funding claimant participation in the claim process.1

[8]      In hindsight, the three year assessment was hopelessly unrealistic.  Twenty- four years later, although real progress has been made, forestry claims remain on the Waitangi Tribunal’s books. And perhaps unexpectedly, the Trust has evolved into the primary funder of claimant participation in the processes by which they prosecute all of their historical claims.   Without the Trust’s interest based distributions, the historical settlements process would eventually grind to a halt.  For that reason, it is of the utmost legal, political and social importance that CFRT functions effectively,

efficiently and lawfully in discharging its obligations under its trust deed.

1      See Recital E to Crown Undertaking to Council and FoMA of 17 October 1989.

[9]      The Trust is a kind of Crown/Maori joint venture.  It has six trustees:2   three appointed by the Minister of Finance and three appointed by an entity referred to in

the deed as the “Māori Appointor”.3

Clause 6.2 of the Trust Deed describes the

Māori Appointor and its key power in these terms:

The power of appointment of Trustees to be appointed under Clause 5.3 shall be exercised by the New Zealand Maori Council and the Federation of Maori Authorities  Incorporated,  (the  “Maori  Appointor”)  subject  however  to clause 6.6.   The Trustees appointed under this Clause 6.2 shall be Maori Trustees.

[10]     Clause 6.6 is triggered if one or other of the Māori Appointor entities is

disestablished.  It has no relevance here.

[11]     According to cl 6.4, the Māori Appointor also has the power:

6.4.1    To remove any Maori Trustee at any time and from time to time;

6.4.2    To replace any Maori Trustee removed under 6.4.1; and

6.4.3    To appoint a new Maori Trustee at any time[.]

[12]     It was common ground that this meant the Māori Appointor could remove and replace any of its trustee at any time and without cause.  Clause 6.10 requires that,  where  the  powers  under  cl  6.4  are  exercised,  notice  of  any  appointment, removal or replacement must be given to every other trustee, and the Crown Appointor.

[13]     Clause 7 of the Trust Deed sets out the powers of the six trustees once appointed.   It is relatively spare.   Trustees must report annually to the Crown and Māori Appointors and account for rentals received, funds paid to claimants and funds invested.  The trustees may appoint a chairperson pursuant to cl 7.6 but such chair has no casting vote on any matter relating to the Trust fund.

[14]     Clause 7.7 requires that a majority vote in relation to a matter pertaining to the Trust Fund must comprise at least two trustees from each side.  As there is no

2      Clause 5 of the Trust Deed.

3      Clauses 5.2 and 6.1 respectively.

express bare majority provision in the Trust Deed, it seems all other decisions of the trustees must be unanimous.

[15]     There is more to the Trust Deed, but that is sufficient for present purposes.

[16]     I will deal first with the application to appoint an independent non-voting chair, then the application to remove and substitute trustees, and finally the application under s 71 for costs.

Stressed relationships: trustees

[17]     Since March 2011, the chair of trustees has been Angela Foulkes, a Crown trustee.  There is no question that she was validly appointed to that role by previous trustees.  She has been a trustee since 2003.  Two of the Māori Appointor trustees – Sir Edward Durie and Mr Maanu Paul now say that they have no confidence in her chairmanship.

[18]     Ms Foulkes has a background in leadership roles at a national level in the union movement, private, public, and not-for-profit sectors.  Sir Edward is a former Chief Judge of the Māori Land Court, chair of the Waitangi Tribunal and a former High Court Judge.   Mr Paul has an extensive background in leadership and governance roles within the Māori world both at national and local levels.

[19]     Sir Edward leads the charge.  He has filed six affidavits since the substantive proceeding was commenced in March 2013.  It is unnecessary to traverse all of the allegations made against the chair, CFRT staff and legal counsel in the course of those affidavits.  But insofar as relevant to this application, the impression one is left with by reading Sir Edward’s evidence is clear enough.  CFRT had been operating pursuant to long settled policies when Sir Edward took up his position, and he came to the view that the old order needed to be changed because it was variously:

(a)       in breach of the requirements of the Trust Deed;

(b)      aligned  to  an  unhealthy  degree  with  Crown  policy  rather  than claimant needs; and

(c)       inconsistent with tikanga Māori or sound policy.

[20]     Sir Edward said that he tried to get these issues discussed and debated at trustee meetings but was consistently stonewalled by a chair with a closed mind and too big a personal investment (not financial I might add) in the old order.

[21]     The  applicant  trustees  Sir  Edward  and  Mr  Paul  said  that  as  a  result, Ms Foulkes was unsuitable to continue in the chair’s role because she lacked the ability objectively to manage the trustees’ agenda and discussions.  They ask me to appoint an interim independent non-voting chair.

[22]     For her part, Ms Foulkes rejects these accusations.  She says in all her years in leadership and governance positions, she has “never before been the subject of the sort of allegations of bad faith and unfair dealing now made by Sir Edward.”  She strongly disagreed with his perspective.   On the contrary, she said, she had found Sir Edward “difficult to deal with”.   In support of Ms Foulkes, Mr Alan Haronga deposed that in his view Ms Foulkes has not acted unreasonably or unfairly in her dealings with Sir Edward.  Rather, he says, Sir Edward’s repeated allegations of bad faith against Ms Foulkes made her task more difficult.   Similarly, Crown trustee Wilson deposed that Ms Foulkes had been “extremely professional”.

[23]     Ms Foulkes, perhaps understandably, refrained from responding in detail to the allegations levelled against her.  She preferred to make her detailed response in the substantive proceeding in June, replying only in general terms to this application. What is abundantly clear however is that this application arises in the context of a serious breakdown in the comity one might be justified in expecting between trustees of  such  wide  and  long  experience,  engaged  as  they  are  in  governing  such  an important organisation.

[24]     In August of last year, and with the support of counsel, I referred the issue of whether Sir Edward had a conflict of interest with respect to a particular agenda item then due for consideration by the trustees as a group, to Sir Bruce Robertson for his opinion.  The parties agreed that such opinion would be accepted.  Sir Bruce found there was no conflict in the particular circumstances of that matter.

[25]     More significantly in  terms  of this  application, Sir Bruce was  moved  to record that a “toxic environment” had developed amongst trustees.   Just as importantly, counsel (or some of them at least) appeared to have been infected by the same problem.   The “chain of assertion and counter assertion” in successive memoranda of counsel during the course of Sir Bruce’s investigation, moved him to comment as follows:

The  stances  which  have  been  taken  both  as  a  matter  of  principle,  and because of deeply felt personal feelings, are all pervasive.

[26]     I can only say, with some sadness, that my own impressions are in accord with those of Sir Bruce. With that in mind I turn to the submissions.

[27]    The applicants submit that it is within this Court’s inherent supervisory jurisdiction for me to temporarily remove Ms Foulkes as chair (but not as trustee) and  to  appoint  a  “neutral”  non-voting  chair.    The  applicants  concede  that  this approach is “imaginative” but not unprecedented.   They point to the decision of Randerson J in Attorney General v Ngati Karewa and Ngati Tahinga Trust4 and the successive decisions of Heath J in various iterations of Karaka v Ngāi Tai Ki Tamaki Tribal  Trust  in  which  those  Judges  took  a  hands-on  approach  to  resolving disharmony among trustees.5

[28]     The applicants here acknowledge that matters have not become as intractable in this case as they had in each of Karaka and Ngati Karewa.  Instead, a prophylactic step is proposed on a temporary basis until the difficulties the trustees currently face can be overcome through neutral facilitation.  The applicants pitched their case as an application within the Court’s inherent jurisdiction to ensure that trusts are properly executed or pursuant to s 49 of the Trustee Act as an appointment of an advisory

trustee.6

4      Attorney-General  v  Ngati  Karewa  and  Ngati  Tahinga  Trust  HC  Auckland  M2073/99,

5 November 2001.

5      There are eight separate decisions of Heath J in the Karaka litigation, demonstrating just how

‘hands-on’ the learned Judge was prepared to be.  Karaka v Ngāi Tai Ki Tamaki Tribal Trust HC Auckland CIV-2003-404-6161, 9 March 2004 is the first of them.  It is unnecessary to cite the other seven.

6      Reliance here was on Letterstedt v Broers (1884) 9 App Case 371 (PC).

[29]     Both the respondent trustees and FoMA opposed the application.   FoMA submitted that s 49 is not available because it contemplates the Court bringing in professional or specialist assistance by way of advisory trustees rather than a “peacemaker or facilitator” as proposed here.

[30]     In any event FoMA argued the cases generally set a significant threshold of dysfunctionality before the Court will intervene.   In this case, FoMA argued, the trustees have not yet demonstrated that they cannot work together.

[31]     The respondent trustees submitted that the appointment of a non-voting chair would in effect be a variation to the trust deed, and would require an application under s 64A of the Act.  They submitted further that CFRT is a charitable trust and in that circumstance, this Court’s inherent jurisdiction is even more limited than it is in relation to private trusts.

[32]     The respondents argued that the Court’s jurisdiction is essentially a “salvage” power.  In this case, CFRT is nowhere near that dire situation.  Rather, the trustees are engaged in a “philosophical” debate in which the court has no role.

My analysis

[33]     The cases cited, Karaka and Ngati Tahinga do show that successive courts have been prepared to bring trusts under effective judicial management where the circumstances warrant it.   But in both of those cases, the circumstances were dire indeed.  The trustees were grassroots, community leaders who were unable, as well as unwilling, to resolve their differences.  Their conflicts were longstanding, bitter and even physical on occasion.7

[34]     The case before me is a long way from that situation.  The trustees in dispute here are, all of them, highly experienced professionals with expertise in governance, policy, business, finance, Treaty claims, and law.   They are respected leaders of national standing.   And they administer a major national fund whose income is

directed at supporting New Zealand’s unique truth and reconciliation process.  This

7      See for example Karaka v Ngāi Tai Ki Tamaki Tribal Trust (No. 8) HC Auckland CIV-2003-404-

6164, 15 March 2011.

situation is a world away from that facing the two hapu based trusts that came before

Randerson and Heath JJ.8

[35]     Whether or not there is jurisdiction to intervene in the manner proposed by the applicants, I am satisfied that I should not.   To do so would be pre-emptive, premature, and possibly unhelpful.  As I have said, the CFRT trustees are leaders of their communities and in their chosen fields.  I accept that this means they will have healthy egos, strong opinions and will be used to getting their own way.  But I do not accept that they lack the wit and professionalism to work their way through the philosophical differences they bring to governance of this important trust.  I do not accept that it is time for this Court to intervene in the manner suggested.  Rather, it is time for the trustees to deploy the professionalism for which they were appointed. The transcript of comments of counsel at one particular meeting of trustees make it clear to me that they too (or at least some of them) are contributing in no small way to the ‘toxic environment’ afflicting this organisation.   That must stop.   Advisors need to take a problem solving approach to their role just as their principals must.

[36]   The first obvious point is that discussion will be required to air these philosophical differences in a structured and proper manner.  If there is any truth to the allegation that Ms Foulkes refuses to allow debate around the wisdom of the Trust’s longstanding funding policies, then that must be a matter of deep concern to this Court.  Whether that has happened in the past (and I do not know one way or the other) any such refusal would be quite unsustainable going forward.  Sir Edward and Mr Paul are new brooms duly appointed by the Māori Appointor.  They will expect to be doing some sweeping.  It is natural that they will want to challenge the status quo if they think there are problems with it.  Organisations need to engage with new ideas in order to remain effective.  Self criticism is useful.

[37]     The debate may or may not produce change, but it must be had.  And the participants must engage with minds able to be changed, even if they start from a particular position.   It is the duty of the chair to facilitate such discussion and to

implement any outcomes.  I accept that there are also issues of law that have not yet

8      I note that both Keane and Katz JJ had occasion to address the Karaka litigation more recently in Karaka v Ngāi Tai Ki Tamaki Tribal Trust [2012] NZHC 1966 and [2013] NZHC 589 respectively.

been resolved in the substantive applications and they may affect some policy approaches.  But that does not make all discussion on policy and philosophy around claimant  funding  impossible.     There  must  still  be  matters  capable  of  useful discussion.

[38]     The second obvious point is that compromise will be required.  This trust was intentionally structured so that progress would be by consensus among those representing the Treaty partners.  That is the reason for cl 7.7.  Trustees on both sides seem to have forgotten this.  And so, I venture, have their lawyers.  Sir Bruce noted this as have I.   Attitudes must change at both levels.   That is particularly so for trustees who find themselves in a minority.  Without compromise the future of CFRT looks bleak indeed. And hands-on judicial supervision may well become the last and only remaining option.   This Court will certainly not stand on the sideline while trustee conflict at CFRT brings the Waitangi Tribunal process to a standstill.  But I remain of the view that with trustees of the calibre of those involved in this Trust, compromise within the limits of the law ought to be not just possible, but likely.

[39]     I am not therefore prepared at this stage to make the orders sought.   I am however prepared  to  direct  that  the trustees  must  meet  as  a group  at  a special meeting of trustees to discuss their philosophical differences in relation to the management of CFRT.   I will leave it to the trustees to agree an agenda for that discussion.  But I direct that this meeting be facilitated by an independent third party or parties.

[40]     If  the  trustees  cannot  agree  on  the  identification  of  such  facilitator  or facilitators, then they should revert to me and I will make the appointment(s) necessary.  If the trustees cannot agree an agenda, then similarly, they should revert to me and I will impose one.  Beyond that judicial nudge, I am not prepared to go at this stage.

Stressed relationships: Māori Appointor

[41]     There is also relationship stress at a second level.   The two organisations comprising the Māori Appointor have been unable to agree on either replacing any of their  appointed  trustees  or  a  list  of  alternate  trustees.    Since  in  effect,  each

organisation has a veto over any selection of the other, progress has recently proved difficult to achieve.

Māori appointed trustees

[42]     Tenure for current Māori appointed trustees is as follows: (a)  Mr Haronga until 30 June 2014;

(b)      Sir Edward until 30 June 2015; and

(c)       Mr Paul’s tenure expired on 30 June 2013.  By order of 9 September

2013, I extended his tenure until the substantive applications in this proceeding were disposed of.

[43]     Also  in  September  last  year  I  appointed  the  following  interim  alternate trustees:

(a)       Mr Leith Comer for Mr Haronga;

(b)      Mrs Georgina Te Heuheu for Sir Edward; (c)   Ms Denese Henare for Mr Paul; and

(d)      I    appointed    a    further    fourth    interim    alternate    trustee    – Mr Simon Karipa.  This was in the event that the listed alternates also became unavailable due to conflict or other reasons.

[44]     Late last year, Ms Henare was appointed to the District Court Bench and a further alternate was called for to replace her.   Mr John Paki was appointed by Dobson J  on  4  November  2013.    There  was,  at  the  beginning  of  this  year,  an application to recall that order of Dobson J, but as I understand it, that application has now been abandoned.

[45]     Those alternate appointments were made in lieu of agreement between the Council and FoMA.  They were to ensure that the trustees could continue to transact the day-to-day business of the Trust.  This was an interim measure pending further discussions  between  the  two  organisations  and  (it  was  then  and  still  is  hoped) eventual agreement.

The January agreement

[46]     FoMA and the Council have been in discussions and/or mediation since last year in an attempt to break the deadlock over trustee appointments.  Two mediation hui were held in November and December 2013.   Sir Harawira Gardiner was the agreed  mediator.   They reached  agreement  in  December that  a panel  would  be appointed comprising five delegates from each organisation.  The panel’s job would be to thrash out an agreed list of primary appointments and alternates.   For that purpose, both sides agreed that their respective delegates would have the authority to bind the organisations they represented.

[47]     The  final  form  of  the  agreement  to  establish  the  panel  was  settled  on

23 January   2014.      That   memorandum   of   agreement   superseded   an   earlier arrangement between the organisations that had been in place since September 2011.

[48]     Clause 2 of the January agreement provides as follows:

2.1      The Māori Appointor shall comprise of 10 members being 5 from

the Council and 5 from the Federation.

2.2The  Executive  committees  of  the  Council  and  the  Federation respectively may replace members  in accordance with their  own rules and procedures.

2.3The Council and Federation may at any time agree upon a lesser number of members than 10.

2.4At  their  discretion  the  members  may  elect  a  chair  or  in  the alternative, the Council and Federation members may each appoint one  of their  number  as  chair, and the Co-Chairs  shall  share the chairing of each meeting as they shall agree.

2.5The members shall appoint a Secretary to co-ordinate meetings by direct communication with members and to keep regular communications with the Crown Forestry Rental Trust trustees or their officers or agents.

[49]     The duties of the Māori Appointor members are recorded in cl 4 as follows:

4.1The members’ primary commitment shall be to achieving the vision and purpose of the Māori Appointor, as given in clause 3 above or as amended from time to time.

4.2Members shall work together in accordance with tikanga (customary protocols), seeking consensus, and setting aside any distinctive preferences of their appointing body.

4.3Members shall not disclose how any individual voted or spoke on any matter or the content of any discussions on candidates or nominees.

4.4      Members shall be mindful of the confidential nature of the Māori

Appointor role at all times. (my emphasis)

[50]     The panel’s decision-making process is recorded in cl 5 in these terms:

5.1A  quorum  shall  consist  of  no  less  than  half  of  the  members appointed by the Council and no less than half of the members appointed by the Federation.

5.2Decisions shall be by consensus or if consensus is not achieved, by the majority view of members voting individually.  In the event of a tie, the Ayes and Noes shall each select one person to present the argument to the chair of either Te Taura Whiri or Te Putahi Paho or the Chief Judge of the Māori Land Court to make a determination which the members will then accept.

[51]     Clause 6 makes it clear that the task of the panel is to agree the appointment of trustees and alternate trustees.

[52]     The memorandum was signed by five members from each side comprising

(as it turned out) those members who would come to make up the panel itself. [53]  So in a nutshell, the agreement set out to achieve the following:

(a)       to authorise the panel to act as the Māori Appointor for the purpose of

selecting trustees;

(b)      to require the panel, in making its selections, to focus co-operatively

on accentuating mana Māori in the work of the Trust;

(c)      to  allow  the  panel  to  make  its  selections  independently  of  “any distinctive preferences” of either the Council or FoMA;

(d)      to ensure balance on the panel by requiring at least three members from either side be present at all times, and for them to participate in the panel’s deliberations.

[54]     The agreement also appended a standard form letter of appointment together with a draft trustee’s deed of acceptance.  Interestingly, the standard form letter was drafted so that each of the two appointing organisations would affix their seal to the letter, confirming the appointments made.

The February hui

[55]     There was, it seems, an attempt to hold the first meeting of the panel on the day the agreement was reached but one of the three Māori trustees, Alan Haronga, was unable to attend on that day.  The meeting was then set down for 8 February

2014.  The expectation seems to have been that the panel would meet, discuss and agree an approach to the day’s deliberations, interview the incumbents and then decide whether replacements should be made.

[56]     Background material was prepared by some of the participants.  Donna Hall, a Council delegate, prepared a paper on conflicts.  Two issues had given rise to the call  for  such  a  paper:  first,  Ms  Hall  is  the  wife  of  Sir  Edward  and  second, Ms Houpapa  was  apparently  a  recipient  of  CFRT  funding  in  her  own  right. Arawhetu  Gray,  a  FoMA delegate,  and  Donna Awatere-Huata  (for  the  Council) prepared a background paper containing an Appointor “Expectation Framework”. This was intended to be a draft guide for the panel in selecting Māori trustees.

[57]     The night before the hui, some FoMA representatives convened by phone to discuss a common approach to the next day’s discussions.  Three of the five FoMA delegates participated in that teleconference.  Two delegates, Jim Edwards and Pita Tipene, were not available.

[58]     The hui the next day was held at Waiwhetu Marae, Lower Hutt.

[59]     For  FoMA,  the  delegates  present  were  Traci  Houpapa,  Arawhetu  Gray, Maria Pera, Jim Edmonds and Pita Tipene.   For the Council, Donna Hall, Donna Awatere-Huata, Rudy Taylor, Toni Waho and Toro Bidois were present.   Also in attendance were Karen Waterreus, secretary of the Council, Te Horipo Karaitiana, FoMA’s chief executive, and Steven Michener.   The three incumbent trustees – Durie, Paul and Haronga – attended later in the afternoon to be interviewed by the panellists.  Mr Paul attended by phone, as his plane had apparently been grounded in Whakatane.  Mr Waho was asked to chair the meeting.

[60]     The hui was due to start at 10am but that was delayed so that the FoMA group could meet separately to further their discussions of the evening before, with all five delegates present.  Traci Houpapa said she told her group the party line (my phrase) would be that the Awatere-Huata/Gray prepared Expectation Framework should be rejected in its present form and no new appointments made that day.  Even Ms Gray apparently felt the report did not fairly represent her views despite the fact that she was identified as co-author.  Ms Houpapa’s view was therefore that the hui could only be the start of a longer dialogue.  Not all FoMA delegates agreed with this approach.  For example, Mr Tipene said in his affidavit that he expected at the outset to be able to make a final decision if necessary.

[61]     The material facts in relation to the meeting itself are not in dispute.  There are disagreements about the detail of conversations that took place but they do not go to the issues I must address.  Most of the meeting was recorded and a transcript later made, but there is no transcript of either the interviews with sitting trustees, or the panel’s selection deliberations at the conclusion of those interviews.  The absence of a record of those discussions does not matter.   There is no argument between the parties as to the actual result of the panel’s deliberations.  FoMA does not allege that there was any kind of irregularity at the meeting.  Rather, FoMA’s challenge is to the power of the panel to make decisions at all.

[62]     The minutes of the hui, confirmed by Mr Waho as chair, say:

Recording  stopped  when  the  three  Māori  trustees  were  present  in  the meeting.  Discussions about most items in the [Awatere-Huata/Gray] report took place.  The discussions were frank and each of the Māori trustees gave full and frank answers to questions from members of the Māori Appointor.

[63]     At  about  3pm,  Maria Pera of FoMA left  the hui  to  attend  an  important whanau birthday event.  At 4.05pm Ms Houpapa left together with Mr Karaitiana. Mr Karaitiana said that in the hour before he and Ms Houpapa departed there was discussion about removing Mr Haronga as a trustee, but Ms Houpapa made it clear that FoMA had no intention of supporting any move to remove any trustees.

[64]     There is debate between representatives on each side as to whether Ms Pera and/or Ms Houpapa were warned of the possibility that final resolutions would be put to the hui.   There was contention also as to whether that possibility was acknowledged by the departing FoMA representatives.  The truth of the matter, as I have said, does not matter.

[65]     After  the  departure  of  Pera,  Houpapa  and  Karaitiana,  eight  delegates remained – five from the Council and three from FoMA.  The meeting nonetheless remained quorate.   Clause 5.1 of the agreement required only that at least three delegates from each organisation be present.   The clause says nothing about maintaining equality of representation at all times.

[66]     The remaining delegates discussed the three trustees’ presentations in private session.  Mr Tipene’s evidence may well capture the dynamic of that discussion from the perspective of the three remaining FoMA representatives.  He said:

Over the last 12 months, I and many other Ngapuhi leaders have publicly blamed our funding problems upon two people – namely Sir Edward Durie and Maanu Paul.  This remained my firm belief when I attended the Māori Appointor’s hui on 8 February 2014.  However, after meeting with the three Māori trustees, Sir Edward Durie and Alan Haronga, and Maanu Paul by phone, my views changed.  During and after these interviews, I had a much greater understanding of their reasons for making these decisions.   As a consequence, I took part in a robust discussion with my Māori Appointor colleagues. After that discussion, I formed my view and voted accordingly.

[67]     A  resolution  was  put  to  remove  Mr  Haronga  and  to  replace  him  with Mr Neville Baker.  Mr Haronga is a qualified accountant, professional director and trustee.   He has been a trustee or director on major Māori land undertakings for many years.  Mr Baker is a former deputy secretary of Māori Affairs, Māori Trustee (the statutory rather than merely descriptive position) and former acting director of

the Waitangi Tribunal.  He is currently chair of the Port Nicholson Settlement Trust and the Waiwhetu Marae Trust.

[68]     The motion to remove Mr Haronga and substitute Mr Baker was carried unanimously by the eight remaining delegates.

[69]     The  January  agreement  made  much  of  the  commitment  of  the  two organisations  to  utilising  their  joint  role  as  Māori Appointor  to  enhance  “mana Māori” in the operation of CFRT.   The evidence is that Mr Haronga refused to embrace “mana Māori” as his primary objective as a trustee.   He suggested to panellists that there were potential inconsistencies between a mana Māori approach and the trustees’ overriding legal obligation to beneficiaries of the trust.  It appears that Mr Haronga cautioned panellists that in the event of conflict between these objectives, the trustees’ obligations to beneficiaries must always be paramount.

[70]     It may be that posing these two ideas as if they are inherently in counterpoise is analytically flawed.   It may be that trustees acting consistently with their obligations to beneficiaries will always enhance mana Māori in some fashion.  But these philosophical questions are not matters for me in this litigation.  Whether or not Mr Haronga was correct in his caution to the panel, they were unimpressed.

[71]     In all, five resolutions were put and passed unanimously. They were:

(a)       that Alan Haronga be removed as a trustee on CFRT effectively immediately;

(b)      that  Neville  Baker  be  appointed  as  a  Māori  trustee  on  CFRT

effectively immediately;

(c)       that John Tamihere, Peter Paraone, Paora Maxwell, Roimata Kirikiri, Raewyn Tipene, Roimata Minhinnick, Mavis Mullens and Patu Hohepa be approved as alternates;

(d)      that  Maanu  Paul  be  appointed  to  office  until  June  2015  and

Taihakurei Durie until June 2016; and

(e)       that if alternates are needed at Tuesday’s CFRT meeting, then they should be John Tamihere and Roimata Minhinnick with Paora Maxwell as a backup.

FoMA revokes

[72]     This outcome came as something of a surprise to those FoMA attendees who had  left  early.    When  Ms  Houpapa  heard  what  had  happened,  she  called  an emergency telephone conference of the FoMA executive.  It was held the following evening.  Nine joined the conference including all five FoMA panelists.  A majority resolution was passed as follows:

That the Federation of Māori Authorities revokes its support for the decision

made by the Māori Appointor group on 8 February 2014.

[73]     According to Mr Tipene, that resolution was carried five to four with all three

of the Māori Appointor delegates who remained at the hui voting against it.

[74]     There  matters  remain:  resolutions  passed  by  the  panel  and  subsequently rejected by one of the two Māori Appointor organisations.  The question for me is essentially whether I should, exercising such jurisdiction as I may have, affirm or reject the resolutions of the eight panellists.

Were the 8 February appointments valid?

Submissions

[75]     The applicants argue that the Council and FoMA were entitled to co-operate and make joint appointment decisions if they so wished.  They say the trust deed is silent on the question of how appointments should be made so that as long as the form of co-operation they agreed upon in the January agreement was consistent with the rules of each appointing body, the mechanism used was lawful and should be affirmed  by  this  Court.    Mr  Geiringer  submitted  that  Part  8  of  FoMA’s  rules permitted the formation of a “subcommittee or body under the proper control of the executive”.  The five members delegated to the panel were such a subcommittee, he argued. The decision was therefore valid and could not be revoked after the event.

[76]     FoMA argued that the 8 February decisions were invalid because the January agreement amounted to an unlawful fetter on the power of appointment and removal vested in the Māori Appointor.   The Māori Appointor is, according to the deed, FoMA and the Māori Council.   It is not a jointly appointed panel.   While, it was

argued, the panel was a useful preliminary step towards appointment, any decision of the panel had then to be ratified by the two separate organisations in accordance with the Trust Deed. This second step had not been completed.

[77]     Grant Illingworth QC appeared as amicus to represent claimant groups in general, they being beneficiaries in a broad sense, of CFRT funding.  He argued that on a proper construction of the deed, the power of appointment was not delegable to the panel.  Mr Illingworth cited the Judicial Committee’s advice in TMSF v Merrill Lynch Bank & Trust Co Ltd on appeal from the Court of Appeal of the Cayman Islands.9

[78]     The essence of the Committee’s view was that where a trust deed contained a specific delegation power then that power is effective.  In addition, where the powers in the trust deed are so wide that they tend to amount to ownership, then a power to delegate can be read into the constituting deed.   That, as it turned out, was the position on the facts before their Lordships.  But where the donor reposes personal trust  and  confidence  in  the  donee  of  the  power  to  exercise  the  donee’s  own judgement and discretion, then the power so given cannot be delegated unless the

trust deed expressly allows it.10

[79]     It is important to note that the TMSF decision related to the powers of a trustee  not  the  powers  of  an  appointor  as  in  this  case.    To  meet  that  concern, Mr Illingworth also pointed to the judgment of Gilbert J in Carmine v Ritchie.11

Carmine  related  to  the  removal  of  a  trustee  by  specifically  designated  trustee

appointors under a clause in a family trust deed.

[80]     Mr Illingworth argued that Gilbert J found that the appointors in that case exercised fiduciary powers when appointing or removing trustees, and that those

powers had to be exercised in the best interests of beneficiaries.12

9      TMSF v Merrill Lynch Bank & Trust Co Ltd [2011] UKPC 17; [2011] 4 All ER 704.

10     At [51]–[53].

11     Carmine v Ritchie [2012] NZHC 1514.

12 At [66].

[81]     Mr Illingworth said the combined effect of the TMSF and Carmine decisions was  that  powers  of  appointment  and  removal  of  trustees,  being  personal  and fiduciary in nature, and requiring the exercise of judgement, could not be delegated without express authority under the trust deed.  The panel’s decisions were therefore invalid.

[82]   For the respondent trustees, Kristy McDonald QC made no substantive submissions on the application, considering that the issue at hand was a matter between the constituent groups of the Māori Appointor.  She nonetheless adopted Mr Illingworth’s submissions and submitted that this Court should declare the purported appointments invalid, the panel having no authority to make them, and direct further that the duly authorised representatives of each of the two organisations reconvene and make such appointments as can be agreed based on a proper process within each organisation.

Analysis

[83]     Drawing now on both the context of this case and the submissions of counsel, it seems to me that the following first principles are applicable:

(a)      The technical settlor of this trust is Her Majesty, but in truth the CFRT is a unique trust created out of Treaty litigation and political compromise.     The   respective   roles   of   the   Crown   and   Māori Appointors  is  reflective  of  the Treaty partnership  that  created  the Trust.

(b)      Where pursuant to a trust instrument, a trustee is appointed to exercise judgement and discretion, then, in the absence of an express power of delegation, the settlor will be taken to have intended the power to be exercised personally by the donee.

(c)      Where a trust instrument vests in a named party other than a trustee, the power to appoint or remove trustees, that power carries fiduciary obligations and can only be exercised for the benefit of the trust’s beneficiaries.

(d)      All of that is subject to the terms of the trust instrument whether expressed or implied.  The essential question is what can the settlor can be taken to have intended with respect to the exercise of the power in question.

[84]     In this case, the trust deed says only that the selections are to be made by the Council and FoMA acting together as the Māori Appointor.   It says nothing about how the Māori Appointor should go about making them.   This means the TMSF decision is not directly on point.  It focuses on the decisions of trustees and so does not speak directly to the delegability of functions vested in non-trustees under a trust instrument.  But the Judicial Committee’s reasoning applies by analogy, in the sense that the donor of the power to appoint is likely to have expected the appointor under the  deed  to  exercise  judgement  and  discretion.     The  political  and  litigation background that led to the trust’s creation very much supports such a conclusion. FoMA is likely to have been specifically chosen by the parties to the Crown forestry litigation in 1989 (FoMA was not a party) because it represented those entities administering Māori land blocks – especially Māori forestry blocks.

[85]     I agree too with Gilbert J in Carmine that appointors are bound to act in the best interests of beneficiaries when performing that function.  As always, the real issue is not whether that principle of general application applies, but what it means on these facts.

[86]     In the context of this case, I must reluctantly conclude that the decision of the panel has no validity.  I say I am forced reluctantly to that conclusion because at one level it can be said that the Council and FoMA reached an agreement over how they would  resolve  their  present  stalemate.    Two  rounds  of  mediation  had  failed  to produce actual selections.  But they had succeeded in producing a process to which both organisations appeared to have made a real commitment.   Equity, or at least fairness, it might be said, would hold FoMA to its bargain.

[87]     But in the end, the controlling document must be the Trust’s deed.  Clause 6.2 says the Māori Appointor is the Council and FoMA.  In the case of FoMA that means its executive. The headnote to cl 8 of FoMA’s rules provides that:

The powers of the Federation are vested in the Executive …

[88]     The default position must be that when the executive speaks, FoMA speaks. Although there is a certain logic in Mr Geiringer’s submission that however FoMA makes its selections, the actual human selector will be in receipt of some form of delegation, I do not think that is a correct analysis in this case.  When the parties to the settlement in 1989, through the settlor, identified FoMA as half of the Māori Appointor, they must logically be taken to have meant the authorised voice of FoMA in  the ordinary course  of its  business.   According to  FoMA’s  rules,  that  is  the executive.

[89]     Here, the executive must be taken to have deputed five of its number to join a joint panel.  If there was specific power at all to do that, it is to be found in cl 8(c) of FoMA’s rules, in which the executive is empowered:

To appoint any person, sub-Committee or body under the proper control of the Executive to carry out any specified tasks or duties, and to terminate any such appointment from time to time.

[90]     That in short, is a power to delegate a task otherwise within the executive’s gift under cl 8 to another.  That other need not be necessarily a subcommittee of the executive.   It can be an entirely unrelated body or organisation, but in all cases is subject to the “proper control” of the executive.   In truth the panel seems to have been a mix of an executive subcommittee and a person or body external to FoMA’s structure.  It was a hybrid developed as a compromise process when the parties fell into difficulty over selections.

[91]     The January agreement also uses language of delegation.  Clause 2.1 records an agreement to reconstitute the Māori Appointor in these terms:

The Māori Appointor shall comprise of (sic) 10 members being five from the council and five from the Federation.

[92]     In other words, the parties to the agreement seem to have intended that the

Māori Appointor would no longer be the Council and FoMA.

[93]     Meanwhile, cl 4.2 makes it clear that panel members must act independently of their parent bodies:

Members shall work together in accordance with tikanga (customary protocols), seeking consensus, and setting aside any distinctive preferences of their appointing body.

[94]     Whether that clause amounted to a breach of cl 8(c) of the FoMA rules is not a matter I need to resolve.  But there must be a question about whether the panel was within the proper control of the executive given its overall make-up and the cl 4.2 directive for real independence.  There are probably good arguments both ways.  But there can be no question, in my view, that in the January agreement, the Council and FoMA decided to create a third party as a mechanism for working around their impasse.   That they could not do.   It contravened the deed’s requirement that the Council and FoMA must make the decision.

[95]     There is power under s 51 of the Act and this Court’s inherent jurisdiction to remove  and  substitute  trustees  independently  of  any  agreement  between  them. Section 51 cannot apply because it depends upon the trustee in question being unable

or unwilling to continue in that role.13   The Court’s inherent jurisdiction is probably

wider.14

But it seems to me inappropriate to remove and replace a trustee who has

conscientiously fulfilled his duties and who is not the subject of any allegation of misfeasance.   The debate among Māori Appointor organisations over appropriate approach and philosophy for trustees is a matter for those organisations to resolve. And it is clear to me that, despite the 8 February hui, it is not yet resolved.  It is not appropriate at all for this Court to pre-empt the outcome of that debate (difficult though it is) by appointing new trustees.  That is simply not this Court’s role except,

perhaps, as an absolute last resort, as I have said, we are nowhere near that point yet.

[96]     I stress that these conclusions are quite unaffected by the subsequent change of heart at executive level in FoMA.  The correct legal position would have been the same whether the executive supported the panel’s selections or not.   In the final analysis, while the result will come as a disappointment for the Council and those FoMA panel members who supported the panel’s selections, little would have been

gained by the selection of trustees by means of a process that made the appointments

13     In Re Hodgson’s Settlement (1851) 20 LJCh 551 and generally discussion in Andrew Butler

Equity and Trusts in New Zealand (2nd ed, Brookers, Wellington, 2009) at 122.

14     At 122.

themselves questionable.   It is better to have clarified that question now than to discover the mistake later and perhaps have to unpick trustee decisions.

[97]     It follows that Mr Haronga remains in position as a trustee and the purported appointments of Mr Baker and the list of alternate trustees are declared to be invalid and of no legal effect.  The trustees and alternates are those listed at [42]-[44] of this judgment.

[98]     Sadly this must take the Council and FoMA back to the drawing board on all appointments.  Although a longer conversation between the organisations will now be required, I trust that the parties are able to find a new consensus capable of ratification at governance level in both organisations.

Costs

[99]     The applicant trustees apply for costs as a charge on the estate under s 71 of the Trust Deed Act.  The respondent trustees are opposed.  They say that the dispute over the appointment of Mr Baker is a matter between the Council and FoMA, and the trust fund should not be available.  They say in any event that the applications call in aid the court’s inherent jurisdiction so that s 71 of Act does not apply.  Their opposition is somewhat undermined by the fact that it was the respondent trustees who applied for an order to cover the costs of the dispute resolution process between

FoMA and the Council last year.15

[100]   I have still to deal with the respondent trustees’ applications with respect to Woodward Law’s costs on earlier work.  It seems wise to address the matter of costs at the same time in that judgment.

Disposition

[101]   In respect of the application to appoint an independent chair, I make the orders set out at [39]-[40]. That application is otherwise dismissed.

15     New Zealand Māori Council v Foulkes & Ors HC Wellington CIV-2013-485-455, 4 December

2013 at [14].

[102]   In respect of the application to remove and substitute or appoint trustees, the application is dismissed.

[103]   The application for costs under s 71 is further reserved.

Williams J