Official Assignee v Honey
[2024] NZHC 2216
•8 August 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2020-485-317
[2024] NZHC 2216
UNDER the Insolvency Act 2006 IN THE MATTER
of the bankruptcy of Richard Edgar Anderson
BETWEEN
THE OFFICIAL ASSIGNEE
Applicant
AND
MARIA LAUREEN HONEY
Respondent
Hearing: 18 April 2024
Further evidence: 28 May 2024
Further submissions: 13 and 24 June 2024Appearances:
D M L Dingwall for Applicant
T N Hauraki and J P Ferguson for Respondent
Judgment:
8 August 2024
JUDGMENT OF ASSOCIATE JUDGE SKELTON
[1] Richard Anderson was adjudicated bankrupt on 20 November 2014. Mr Anderson is the great uncle of the respondent, Maria Honey.
[2] Several months prior to the bankruptcy, Mr Anderson and Ms Honey entered into an agreement for sale and purchase of a block of land (and house) at Matatoki, near Thames (the property), under which Mr Anderson sold the property to Ms Honey.
[3]The purchase price was $308,000, based on the rateable value. Ms Honey paid
$175,000 to Mr Anderson, which she borrowed from ANZ bank and which was
THE OFFICIAL ASSIGNEE v HONEY [2024] NZHC 2216 [8 August 2024]
secured by way of a mortgage against the property. The balance of the purchase price,
$133,000, was to be gifted by Mr Anderson.
[4] On the settlement date, being 7 October 2014, Mr Anderson (as Donor) and Ms Honey (as Donee) executed a Deed of Gift (Deed) which stated:
INTRODUCTION
A. The Donee owes the Donor the sum of $133,000 (“Debt”) being part of the purchase price of the property at 9477 State Highway 26, Matatoki, Thames.
B. The Donor is the uncle of the Donee. The Donor wishes to make a gift of
$133,000 to the Donee.
C. The Donor wishes to record the gift in this deed.
COVENANTS
1.In consideration of the natural love and affection the Donor holds for the Donee, the Donor gifts to the Donee the sum of $133,000 in repayment of the Debt.
2.The Donee accepts this forgiveness of the Debt.
[5]Mr Anderson was adjudicated bankrupt 45 days later.
[6] The Assignee asserts that the Deed was a ‘gift’ under s 204 of the Insolvency Act 2006 (the Act) because it was made within two years immediately before adjudication. The Assignee has taken steps to cancel the gift as an insolvent gift under s 206 of the Act.
[7] Ms Honey exercised her statutory right of objection to the Assignee’s cancellation notice with the effect that the gift was not automatically cancelled as against Ms Honey.
[8] The Assignee now applies for an order cancelling the irregular transaction under s 206(6) of the Act. The Assignee contends that if the Court is satisfied on the balance of probabilities that:
(a)the Deed was a gift;
(b)the gift was made by Mr Anderson to Ms Honey; and
(c)the gift was made within two years immediately before Mr Anderson was adjudicated bankrupt;
then the Court may cancel the gift as against Ms Honey.
[9] The Assignee contends that this would mean that Ms Honey would be placed in the position she would have been in had the Deed not been executed; that is, she would have been indebted to the Assignee (via Mr Anderson) in the sum of $133,000.
[10] The Assignee contends that the only issue to be determined is whether Mr Anderson’s forgiveness of Ms Honey’s $133,000 debt to him under the Deed was a ‘gift’ in terms of s 204 of the Act.
[11] Ms Honey contends that the situation in this case is much more nuanced. She says that the property is Māori freehold land under Te Ture Whenua Māori Act 1993 and the ancestral papakāinga (original home) of Ms Honey’s whānau. She says that the property has been held by the whānau and passed down for multiple generations.
[12] Ms Honey opposes the application on the basis that the gift was a koha in terms of tikanga Māori. Ms Honey submits that tikanga, including koha, is a system of values that operates to achieve ea (balance). She submits that therefore koha is not simply a ‘take’, there is always an obligation back. She submits that the obligations and responsibilities that flow from a koha relating to whenua (land) give rise to a broader cultural exchange of what might be viewed as ‘consideration’.
[13]In summary, Ms Honey submits that:
(a)Tikanga appropriately plays a role in the central question of statutory interpretation raised in this proceeding; that is, whether a koha is a ‘gift’ for the purposes of s 206 of the Act;
(b)The approach tikanga takes to gifting through koha is very different to that under the common law. When tikanga is considered it provides a
perspective that means it would be wrong to view the koha as a ‘gift’ for the purposes of the Act.
(c)It would be artificial to view the gift as separate to or unrelated to the broader transfer and purchase of the papakāinga, and tikanga colours the transaction in its entirety regardless of the instruments through which the arrangement was recorded.
(d)For these reasons, the gift was a koha and therefore not an insolvent gift for the purposes of s 206 of the Act.
Issues
[14]The issues to be considered are:
(a)whether the gift in this case should be recognised as a koha in terms of tikanga;
(b)if it is a koha, does that mean it is not a ‘gift’ for the purposes of ss 204 – 206 of the Act?
[15] Before addressing these issues specifically, I set out the statutory framework relevant to this case and introduce the respective positions of the parties, including summarising the expert evidence put forward by Ms Honey.
The statutory framework
[16]The Act deals with the concept of insolvent gifts in ss 204 – 205:
204Insolvent gift within 2 years may be cancelled
A gift by a bankrupt to another person may be cancelled on the Assignee’s initiative if the bankrupt made the gift within 2 years immediately before adjudication.
205Insolvent gift within 2 to 5 years may be cancelled if bankrupt unable to pay debts
(1)A gift by a bankrupt to another person may be cancelled on the Assignee’s initiative if—
(a)the bankrupt made the gift within the period beginning 2 years immediately before adjudication and ending 5 years immediately before adjudication; and
(b)the bankrupt was unable to pay his or her debts.
…
[17] The Act then sets out a procedure for cancelling irregular transactions in s 206, which relevantly provides:
206Procedure for cancelling irregular transactions
(1)The procedure set out in this section applies to the following irregular transactions:
(a)an insolvent transaction:
(b)an insolvent charge:
(c)an insolvent gift:
(d)a disposition of property to which subpart 6 of Part 6 (setting aside of dispositions that prejudice creditors) of the Property Law Act 2007 applies.
(2)The Assignee who wishes to cancel an irregular transaction to which this section applies must—
(a) file a notice with the court that meets the requirements set out in subsection (3); and
(b)serve the notice on—
(i)the other party to the transaction; and
(ii)any other party from whom the Assignee intends to recover.
…
(4)The irregular transaction is automatically cancelled as against the person on whom the Assignee has served the Assignee’s notice, if that person has not objected by sending to the Assignee a written notice of objection that is received by the Assignee at his or her postal, email, or street address within 20 working days after the Assignee’s notice has been served on that person.
(5)The notice of objection must state the reasons for objecting.
(6)An irregular transaction that is not automatically cancelled may still be cancelled by the court on the Assignee’s application.
[18]The Act then provides for retransfer of property or payment of value in s 207:
207Court may order retransfer of property or payment of value
(1)On the cancellation of an irregular transaction under which property of the bankrupt, or an interest in property of the bankrupt, was transferred the court may make an order for—
(a)the retransfer to the Assignee of the property or interest in the property; or
(b)payment to the Assignee of a sum of money that the court thinks appropriate, but the sum must not be greater than the value of the property or interest in the property when the transaction was cancelled.
(2)The court may make any other order for the purpose of giving effect to an order under subsection (1).
(3)An order under subsection (1) is in addition to any other rights and remedies available to the Assignee, and this section does not restrict those rights.
208Limits on recovery
The court must not make an order under section 207 against a person (A) if A proves that when A received the property or interest in the property—
(a)A acted in good faith; and
(b)a reasonable person in A’s position would not have suspected, and A did not have reasonable grounds for suspecting, that,—
(i)in the case of an insolvent gift, the bankrupt was, or would become, unable to pay his or her debts without the aid of the property that the gift is composed of; or
(ii)in the case of any other irregular transaction referred to in section 206(1), the bankrupt was, or would become, unable to pay his or her due debts; and
(c)A gave value for the property or interest in the property or altered A’s position in the reasonably held belief that the transfer of the property or interest in the property to A was valid and would not be cancelled.
[19] In this case, the Assignee is only seeking an order under s 206(6) of the Act cancelling the gift. The Assignee is not seeking retransfer of any property or payment of any sum of money under s 207 of the Act. The Assignee submits that this is because a gift by way of forgiveness of debt is not a transfer of property of the bankrupt or an interest in the property of the bankrupt for the purposes of s 207.1
[20] The term ‘gift’ is not defined in the Act. Under the Act’s predecessor, the Insolvency Act 1967, a ‘gift’ was defined as “any disposition made otherwise than in good faith and for valuable consideration”.2 In Official Assignee v Welch, Randerson
1 Official Assignee v Mayers [2012] NZHC 34 at [13]–[18].
2 Insolvency Act 1967, s 54(6).
J considered the meaning of ‘valuable consideration’ in the context of an undervalue transaction:3
It is clear from s 54(3) that the consideration relevant for the purposes of the subsection may be “money or money’s worth”. It follows that “natural love and affection” is not sufficient to constitute consideration for the purposes of s 54(3) – refer p 6 of the Court of Appeal decision in the present case. Nor indeed is it sufficient to constitute consideration in money or money’s worth for the purposes of the Estate and Gift Duties Act 1968: Commissioner of Inland Revenue v New Zealand Insurance Company Ltd [1958] NZLR 1077, 1090. As is pointed out in Adams and Richardson’s Law of Estate and Gift Duties (4th ed) para 2/76:
The phrase “consideration and money or money’s worth” does not include moral obligations which have never been held to constitute valuable consideration: Attorney-General v Chamberlain (1904) 90 L P. 581.
[21] This definition was not carried forward to the Act. In Official Assignee v Carrim, the Court held that:4
[38]The Act does not contain a definition of “gift” as used in ss 204-206. The term had been defined in s 54(6) Insolvency Act 1967 as “any disposition made otherwise than in a good faith and for valuable consideration”. The authors of Heath & Whale on Insolvency note the omission of a definition in the current Act:5 They suggest that all the current Act requires is that a transaction, to be a gift, must have the effect of bringing about the diminution in the value of the donor’s assets or otherwise reducing the value of the assets which would have been available to the Assignee. It would then become for the donee to raise any available defence under s 208 of the Act.
[39]That commentary has been accepted in this Court.6 I also adopt it as the correct approach.
Assignee’s position
[22] Mr Dingwall, for the Assignee, submits that having agreed to purchase the property at the purchase price of $308,000, Ms Honey paid $175,000 to Mr Anderson and became indebted to him for the balance of $133,000. He submits Mr Anderson’s right to recover that debt from Ms Honey was a chose in action that would have vested
3 Official Assignee v Welch [1998] 1 NZLR 201 (HC on remittal).
4 Official Assignee v Carrim [2017] NZHC 367 at [38]-[39].
5 Paul Heath and Michael Whale Heath & Whale on Insolvency (online looseleaf ed, LexisNexis) at [24.92].
6 The authorities cited are Official Assignee v Mayers, above n 1, at [12]-[13]; Official Assignee v Russell Bay Lodge Ltd [2013] NZHC 1940 at [33]; Official Assignee v Scott [2013] NZHC 2904 at [60]-[61]. More recently, see Official Assignee v Singh [2020] NZHC 180 at [24].
in the Assignee as an asset under s 101 of the Act upon his adjudication, but Mr Anderson’s forgiveness of that debt 45 days prior to adjudication extinguished the chose.
[23] Mr Dingwall submits that the effect of the Deed was a diminution in the value of Mr Anderson’s assets by the value of the forgiveness of debt, $133,000.
[24] Mr Dingwall submits that, but for the Deed: the Assignee would have been empowered to enforce the chose against Ms Honey; the repayment of the $133,000 would have been sufficient to repay all of Mr Anderson’s creditors in full; and Mr Anderson would have been eligible to apply for an annulment of his bankruptcy under s 309(1)(b) of the Act. However, as a result of the Deed, there have been no dividends paid to creditors, and the possibility of a dividend will only arise if the Court first grants the order sought by the Assignee.
[25] Mr Dingwall submits that forgiveness of a debt is a ‘gift’ under the Act.7 He submits that the present case is on “all fours” with the decision in Official Assignee v Singh.8 In that case, a vendor (Mr Narayan) sold a property to a purchaser (Mr Singh) which included a gift by the vendor to the purchaser of the value of the deposit,
$118,000, which also represented the value of Mr Singh’s equity in the property. As in this case, the gift was recorded by deed. The Court found the transaction to be an insolvent gift for the following reasons:9
(a)The described gift has the appearance of being part of an overall transaction by which Mr Narayan expressly transferred, for free, the owner’s equity in the property; and put $118,000 that would otherwise had been paid to him, out of reach of Inland Revenue and other creditors that could properly expect to be paid or to claim in his bankruptcy.
(b)The gift directly “extinguished” an asset of $118,000 and reduced the amount that would otherwise have been received by Mr Narayan for the purchase price upon transfer of the property to Mr Singh. It thereby reduced the amount available to pay Mr Narayan’s creditors by the same amount. This is further evident from the fact that while there are a number of claims against Mr Narayan’s bankrupt estate … there have been no recoveries to date.
7 See, for example, Official Assignee v Mayers, above n 1, at [13]; Official Assignee v Scott, above n 6, at [61]; and Official Assignee v Singh, above n 6, at [26].
8 Official Assignee v Singh, above n 6.
9 At [26].
[26] Mr Dingwall also submits that estoppel by deed applies to this situation. He refers to the Laws of New Zealand which states:10
At common law, estoppel by deed is a rule of evidence founded on the principle that a solemn and unambiguous statement or engagement in the deed must be taken as being binding between the parties and privies and therefore is not admitting any contrary proof.
[27] Mr Dingwall submits that Ms Honey does not dispute the fact of the Deed. He submits that Ms Honey was not required to enter into the Deed by her bank as she claims. Rather, the bank only required a certificate of gifting which is not the same as a deed of gift. Mr Dingwall submits that the Deed was prepared by a firm of solicitors and both Mr Anderson and Ms Honey were represented by independent solicitors. In the circumstances, the parties freely chose to lay out exactly what they intended in the Deed. Therefore, Ms Honey is precluded from now asserting that the gift was anything else.11
[28] With regard to the intention of the parties, Mr Dingwall submits that it is not necessary to look any further than the Deed itself. He submits Ms Honey’s contention that the gift was a koha is not supported by any contemporaneous documents. Mr Dingwall refers to an email from Mr Anderson to Ms Honey dated 5 June 2014 which states:
The Mortgage amount needed to clear is $169,160.65. This clears the mortgage and any legal process against me.
I will gift the remainder of the house value to you. Using the Rateable Value of the property as the indicator.
[29] Mr Dingwall submits that, as between themselves, Mr Anderson and Ms Honey only ever referred to the gift as a gift. Mr Dingwall also refers to Mr Anderson’s affidavit evidence in which he explains the circumstances of the gift:
(a)The Property is Māori Freehold Land. It has been in my family for over 100 years. In September 2010, it passed to me after my brother died. It was mortgaged in favour of ANZ National Bank Ltd.
10 Colin Fraser Laws of New Zealand – Estoppel (online looseleaf ed, LexisNexis) at [63].
11 Mr Dingwall relies on Official Assignee v Carrim, above n 4, at [18]-[19] with regard to the application of estoppel by deed in the context of an insolvent gift.
(b)Before the Transaction, the Bank of New Zealand had started bankruptcy proceedings against me in relation to a debt I owed it. I had sought a top up of the mortgage on the Property through ANZ, but ANZ did not agree. I was unable to pay the debt to BNZ.
(c)Knowing that I would likely lose the Property if I were bankrupted, I entered into an arrangement with Maria where I would transfer the Property to her so that it was no longer in my name. Maria would borrow enough money from the bank to allow me to discharge the mortgage and pay my debt to BNZ. The plan was that:
(i)the Property would be transferred to Maria while I sorted out my financial problems;
(ii)I would continue living in the Property with my sons, continue paying (Maria’s) mortgage; and
(iii)In time the Property would be returned to me.
(d)…
(e)The Property was valued at $308,000. Maria couldn’t purchase at that price because she didn’t have enough money saved to obtain a mortgage at that level. To get around this, in the agreement for sale and purchase of the Property, I agreed to lend her $133,000 so that she could borrow $175,000, enough to discharge the existing mortgage and pay BNZ.
(f)Knowing that the arrangement was a tool to avoid bankruptcy, and to satisfy Maria’s lender, I signed a Deed of Gift forgiving the $133,000 debt owed to me by Maria.
(g)…
(h)Unfortunately, I was forced to pay another debt and didn’t have enough to pay BNZ. …
(i)After the transfer of the Property to Maria, Maria reneged on her agreement to allow me and my sons to continue living in the Property. I asked her to pay the $133,000 I had forgiven, but she refused and trespassed me from the Property.
…
[30] Mr Anderson goes on to state in his affidavit that he did not intend the money to be given as a koha within the tradition of tikanga Māori. He states that the arrangement was a “tool to avoid my bankruptcy while retaining my place of residence and in time having the Property returned to me”. He states that he never imposed or suggested any kind of obligation on Ms Honey in connection with the transaction, and he never suggested that she hold the amount of the gift, or the property, as kaitiaki (guardian). He states this was not part of the arrangement because the agreement was
that Ms Honey was going to be transferring the property back to him at some later stage, and he was to be living in the property, so he had the responsibility for looking after it.
[31] Mr Dingwall also notes that an application needed to be made to the Māori Land Court to transfer the shares in the property from Mr Anderson to Ms Honey under Te Ture Whenua Māori Act. Mr Dingwall notes that the order of the Māori Land Court dated 23 September 2014 records the consideration for the transfer of the shares includes “Gift of $133,000.00”. Mr Dingwall submits that it might reasonably be expected that the Māori Land Court would recognise and record a koha in the circumstances, if the gift had been presented to the Court as such.
Ms Honey’s position
[32] Ms Honey says that in May, 2014, she was told that Mr Anderson was experiencing financial difficulties and could not continue to pay the mortgage on the property, and the property was therefore in jeopardy. The only option the bank would support was for her to purchase the property. She understood and considered the gift under the Deed, as part of the purchase price of the land, to be a koha given the importance of the land to her whānau and the responsibilities and obligations that she was taking on as kaitiaki (guardian) of the property, both in retaining and maintaining the property and ensuring the land remains within the whānau.
[33] Ms Honey says that there has been a deterioration in the relationship with Mr Anderson since October 2014. She has not allowed Mr Anderson to occupy the property. A trespass order has been issued against him. The property is currently occupied by Ms Honey’s wider whānau members.
[34] Ms Hauraki, for Ms Honey, submits that the Court should take account of tikanga as a central part of the interpretative exercise required of s 206 of the Act. She submits that this is because, in summary:
(a)Tikanga, as the first law of Aotearoa New Zealand, needs to be considered where, as here, it is relevant to the circumstances and context of the case.12
(b)Tikanga forms part of the values of New Zealand’s common law,13 and generally legislation should be interpreted consistently with the common law where the words of the statute permit.14 Tikanga is to be taken into account in the common law where it has not been abrogated by statute.15
(c)Legislation should be interpreted consistently with Te Tiriti o Waitangi and, it is submitted, tikanga, as an implication of the guarantee in Article Two.16
(d)The papakāinga at the centre of the transaction has the status of Māori freehold land, and accordingly, is administered under Te Ture Whenua Māori Act. That Act recognises the intrinsic importance of land in tikanga, describing land as “a taonga tuku iho of special significance to Māori people”.17
[35] Ms Hauraki submits that the Act should be read in a manner that recognises and promotes tikanga. She submits that tikanga, particularly that relating to whenua and koha, should be carefully considered when interpreting the meaning of the words used in s 206.
[36] Ms Hauraki submits that, at tikanga, whenua possesses special significance; it is something to which Māori belong.18 She submits that it is very important context in this case that the broader transaction in which the gift took place related to papakāinga
12 Ellis v R [2022] NZSC 114, [2022] 1 NZLR 239 at [117].
13 Takamore v Clarke [2012] NZSC 116, [2013] 2 NZLR 733 at [94], [150] and [164].
14 The Legislation Design and Advisory Committee Legislation Guidelines: 2021 Edition (September 2021) at [5.3].
15 Te Ara Rangatu o te Iwi o Ngati te Ata Waiohua Inc v Attorney General [2018] NZHC 2886, [2019] NZAR 12.
16 See further Ellis, above n 12, at [98].
17 Te Ture Whenua Māori Act 1983, preamble.
18 Hirini Moko Mead Tikanga Māori, Living by Māori Values (Revised Edition, Huia Publishers, Wellington, 2016) at 289.
whenua of Ms Honey’s whānau. Ms Hauraki submits that tikanga pertaining to whenua and in particular, the tikanga of koha in relation to whenua, must colour the entire transaction.
[37] Ms Honey has put forward expert evidence from Professor Thomas Roa, a Professor in the Faculty of Māori & Indigenous Studies at the University of Waikato. Professor Roa is a recognised expert in tikanga, whakapapa and Māori history. Professor Roa states:
While land and houses are often viewed from a Western perspective as mere assets or commodities that can freely be bought and sold, the importance of ancestral Māori land (and, in particular, papakāinga land) cannot be overstated. Māori have a deep and enduring relationship with their whenua (land) as acknowledged in the Te Ture Whenua Māori Act 1993. That Act expressly recognises that land is a taonga tuku iho (a treasure handed down) of special significance to Māori and promotes the retention of such land in the hands of its owners, their whānau, and their hapū. The land in question has the status of Māori freehold land under that Act and the Act imposes significant restrictions on alienation outside of the whānau or hapū group with customary interests in such land.
With the majority of ancestral land throughout the country no longer in Māori ownership (mostly due to a multitude of acts and omissions which have been repeatedly found by the Waitangi Tribunal to have directly or indirectly involved breaches of the Treaty of Waitangi and its principles by the Crown), the remaining small parcels of land which have been retained and occupied by Māori whānau over generations are highly treasured. Those who hold such papakāinga land in each successive generation have significant responsibilities not only to the land itself but also to the wider whānau in terms of retaining and maintaining the land.
[38] Professor Roa also gives evidence as to the fundamental principles of koha. He states that:
Koha is reciprocal. What I mean by that, is that there is an inherent responsibility in the carrier of the koha, through to the one receiving the koha that is being transferred or given.
The notion of “gift” tends to imply the concept of ownership. However, koha is not about a property right or the proprietary nature of what is the subject of the koha; which could be land, could be a taonga, or which could be something else of value in monetary terms or otherwise. What is fundamental to the tikanga of koha is the reciprocity in the relationship between the party giving and the party receiving and, in particular, the responsibility on the recipient that arises as an inherent part and consequence of the koha.
Importantly, that responsibility – as both a carrier and deliverer of a koha – does not sit with and is not dictated by the individuals concerned alone. It
arises from the relationship between the parties and from the nature and context of the koha in question. For example, if I personally gave a family taonga as koha to my mokopuna (grandchild) and did not stipulate or specify the obligations on my mokopuna upon them receiving that koha, there is nonetheless a broader responsibility that inherently goes with that koha and is assumed by (and in fact, as a matter of tikanga, imposed on) the recipient.
Giving the koha establishes that responsibility and it is one that cannot be simply or summarily discharged by the receiver. It creates a responsibility the nature and extent of which will endure depending on the nature and context of the koha. This is because there is a broader collective understanding about what is the responsible action once in receipt of (in my example above) the taonga or (in Ms Honey’s case) the papakāinga land as koha.
I would fairly observe that perhaps if there was no understanding by the recipient of the responsibilities in terms of tikanga that were being taken on then one could less likely view the “gift” as a koha. However, where the recipient, as in Ms Honey’s case, is acutely aware of responsibilities and obligations that arise from, or accompany, the koha, then the elements necessary for the recognition of that koha, in tikanga terms, are established.
The relational element is fundamental to koha. Once the koha has occurred, and that responsibility is taken on, the obligation sits with the holder of those responsibilities. The deliverer or giver of the koha cannot just waive the koha or the consequential obligations arising from the koha at that point.
A related principle to koha is utu. Utu is commonly understood as revenge, or the notion that when someone does something bad to you, you do worse. But it is not just that. It also regulates the appropriate response when someone does good to you; that is, you must do better. Primarily, utu is about the importance in the traditional Māori world of finding balance and equilibrium. In terms of koha, if you do not fulfil your obligations as receiver the deliverer can seek an utu. Utu is therefore part of the social controls and the tikanga involved in koha.
Ultimately, tikanga, including koha, is a system of values that operates to achieve ea (balance). A koha is therefore not simply a ‘take’, there is always an obligation back. The tikanga of koha is about bringing that dynamic to a balance and promoting harmony amongst the parties. Relationships in tikanga endure, potentially intergenerationally, and exist beyond the immediate transaction.
One final observation is that, in the context if Māori land, the obligations and responsibilities that flow from a koha relating to the whenua will inevitably deal with and impact relationships (both current and future) that go well beyond the individuals involved. One would not lightly reach a conclusion that tikanga had no relevance to a transaction involving Māori whenua, particularly when it involves intergenerational papakāinga land and the transfer and associated “gift” is between members of the whānau that whakapapa to the whenua.
[39]Professor Roa states that, in his opinion:
(a)the “gift” by way of transfer value (in monetary terms) that Ms Honey’s Uncle made as an element of the transfer of the papakāinga land to Ms Honey should be recognised as a koha in terms of tikanga; and
(b)Ms Honey has knowingly, and willingly, assumed a significant responsibility and obligation arising from the koha in terms of the ongoing retention and maintenance of the papakāinga land for the innate benefit of current and future generations of their whānau.
Second affidavit of Professor Roa
[40] Following the hearing, I convened a telephone conference with counsel with regard to Professor Roa’s evidence. I sought clarification as to the relevance of Mr Anderson’s evidence regarding his intentions as to the transfer of responsibilities as kaitiaki, and whether the underlying conflict of evidence between Mr Anderson and Ms Honey affects the fundamental requirement of reciprocity for a koha. I requested that Professor Roa make a further affidavit and I asked him to:
(a)Confirm that he had read and considered the affidavits of Mr Anderson and Ms Honey and taken that evidence into account in making his first and second affidavits.
(b)Explain whether the evidence of Mr Anderson is relevant to the conclusions reached in Professor Roa’s first affidavit, in particular Mr Anderson’s evidence that he did not intend the forgiveness of debt to be given as a koha in terms of tikanga as the arrangement was a tool to avoid his bankruptcy while retaining his place of residence; and that there was a verbal side agreement with Ms Honey (that he says has not been honoured) that he would remain living in the property and would in time regain ownership, so he was not intending that Ms Honey would, as part of the transaction, take on responsibilities as a kaitiaki of the property.
(c)Explain whether the conflict of evidence between Mr Anderson and Ms Honey affects the fundamental requirement of reciprocity in the relationship between the party giving and the party receiving the alleged koha.
[41] In his second affidavit, Professor Roa confirms that he read and considered the affidavit evidence of both Mr Anderson and Ms Honey in making his first affidavit.
[42] Professor Roa states that Mr Anderson’s views and/or intentions are of course relevant to the conclusions reached in his first affidavit. He states that the respective understandings of all parties is relevant to varying degrees in evaluating whether the elements of koha are established. However, he states that what is most critical in his opinion is what Ms Honey understood she was taking on. He states that where the recipient, as in Ms Honey’s case:
(a)is acutely aware of responsibilities and obligations that arise from, or accompany, the koha; and
(b)considers that she is taking on those obligations as an essential part of the transactions; and
(c)proceeds to act consistently with those obligations;
the elements necessary for the recognition of that koha, in tikanga terms, are generally established.
[43] Professor Roa states that it does not matter that Mr Anderson says he did not intend to transfer obligations at tikanga. He states that the obligations that attach to whenua, and ancestral Māori whenua in particular, are innate obligations that do not need to be made explicit and rarely are.
[44] Professor Roa emphasises that the required reciprocity does not sit with and is not dictated by the individuals concerned alone. It arises from the relationship between the parties and from the nature and context of the koha in question. Professor Roa states that, in terms of Māori freehold land, as Te Ture Whenua Māori Act reflects, the fundamental constraints that exist in terms of alienation, which is limited to those with whakapapa connections to the whenua, reflects the enduring importance of such whenua where the current legal owners are seen in tikanga terms as kaitiaki for both current and future generations. Professor Roa states that an important element of
reciprocity in this case is that Ms Honey is sharing the papakāinga with other members of the broader whānau.
[45] Professor Roa also states that, in his opinion, the recording of the transaction in a deed of gift has very little bearing on whether the transaction should be regarded as a koha. Professor Roa suggests that this is an example of the collision of tikanga and ture (law), and illustrative of the broader difficulties of applying tikanga within a system and worldview that often requires engagement with blunt mechanisms and instruments that do not fully capture the nuances of tikanga. He opines that the ture could not override the koha in terms of tikanga if it is accepted that the necessary elements are established.
[46]I now turn to consider the specific issues identified above at [14].
Should the gift be recognised as a koha?
[47]Ms Hauraki submits that the gift was a koha for the following reasons.
[48] She submits that Ms Honey’s intention was only ever to keep the papakāinga in her whānau, and she understood she was the only person in a position to do this. Ms Hauraki submits that this is confirmed in correspondence from Ms Honey’s lawyer to Mr Anderson prior to the transfer which states:
The application to the Maori Land Court should be no more than a formality. The land effectively will be transferred from one member of family to another member for the sole intended purpose of preserving the family homestead for the benefit and use of the family.
Maria advises that all of the family members interested in this matter have consented to the proposal and those consents are available to be filed with the Maori Land Court on application being made to it for consent to the transfer.
[49] Ms Hauraki submits that, in these circumstances, the koha was accepted by Ms Honey in good faith. She submits that the koha was reciprocal; in accepting the koha in good faith, Ms Honey took on the corresponding burdens and obligations to protect and retain the papakāinga as a taonga for her wider whānau. These obligations were both tangible (she took on a mortgage) and intangible (as kaitiaki). Ms Hauraki submits that there was, therefore, some form of consideration. The obligations were
not mere “moral obligation[s] which have never been held to constitute valuable consideration”.19
[50] Ms Hauraki submits that Ms Honey has, as a matter of fact, exercised her responsibilities as kaitiaki of the papakāinga on behalf of her whānau. Ms Honey does not reside at the papakāinga; it is currently occupied by her wider whānau members.
[51] Ms Hauraki submits that it is largely inconsequential whether the koha was recorded by way of deed of gift or certificate of gifting. That is because there is an obvious cultural dimension.20 Ms Hauraki submits that the broader cultural context within which the Deed was entered into is relevant and must inform the proper interpretation of the Deed and the question of koha. She submits that the Deed does not stand alone. It is part of the broader sale and purchase of the papakāinga by Ms Honey to protect the papakāinga for her whānau. Ms Hauraki submits that the Deed is imbued with the values and customary practices relevant to the transaction such that, while it may not be written within the four walls of the document, tikanga nonetheless provides a lens through which to view the document.
[52] Ms Hauraki submits that the evidence of Mr Anderson that there was no koha is not determinative as to whether the transaction can be viewed as a koha. On the basis of the evidence of Professor Roa, Ms Hauraki submits that the more fundamental question is what Ms Honey understood her obligations to be and, on the evidence in this case, the elements necessary for the recognition of the koha in tikanga terms are established.
[53] Ms Hauraki also submits that there is, in any event, evidence that Mr Anderson understood that Ms Honey’s offer to purchase the papakāinga was for the purpose of retaining and protecting it for the whānau acknowledging their long-standing connections with the land. She refers to Mr Anderson’s statement of affairs given to the Assignee which states that:
So in order to keep the house within the family as it has been for over 100 years my grand niece approached me and offered to buy the property, where
19 Attorney-General v Chamberlain [1904] 90 L P 581 as cited in Official Assignee v Welch [1999] 1 NZLR 201 at 4.
20 Ms Hauraki refers to Deng v Zheng [2022] NZSC 76; [2022] 1 NZLR 151 at [78(d)].
upon I could settle the Debt. The plan was for me to continue to pay the mortgage and in time have the house returned to me.
[54] Mr Dingwall’s submissions with regard to whether the gift should be recognised as a koha are summarised above.21 Mr Dingwall also submits that Professor Roa’s views in his first and second affidavits should not be relied on and fail to address what is actually in dispute in this proceeding.
[55] Mr Dingwall submits that Professor Roa conflates the transfer of land with the gift. He submits that the sale and purchase of the land for the purchase price of
$308,000 is separate from the Deed recording the gift. The Assignee seeks to cancel the Deed not the transfer of the land. Mr Dingwall submits that conflating the land with the gift allows Professor Roa to introduce evidence of the significance and intrinsic value of the land and suggest that Ms Honey’s consideration for the gift (or the “obligation back”) is her retention and maintenance of the land for current and future generations. Mr Dingwall submits that the Deed records that the consideration was “natural love and affection” which is not sufficient for insolvency purposes. He submits that the parties are bound by the Deed and estopped from claiming that the gift was actually a koha.
[56] In response, Ms Hauraki submits that it is clear from the agreement for sale and purchase and the Māori Land Court vesting orders that the koha was a critical component of the broader sale and purchase of the property. Both documents record that the consideration included the gift of $133,000. She submits that the koha is intertwined with the transfer of the land and the significant and intrinsic value of the land to tangata whenua is highly pertinent to considering the koha.
[57] Mr Dingwall submits that it is difficult to reconcile Professor Roa’s views with regard to whether Mr Anderson’s intentions are relevant. He submits that Professor Roa acknowledges that Mr Anderson’s views and/or intentions are “of course relevant”, but then states that it does not matter that Mr Anderson did not intend to transfer obligations at tikanga. Mr Dingwall submits that the relevance of Mr Anderson’s intent to gift cannot be divorced from his intent not to transfer
21 At [22]–[31].
obligations at tikanga. If Mr Anderson intended to gift (as he says he did), then his accompanying intent not to transfer obligations to Ms Honey at tikanga cannot be disregarded.
[58] In response, Ms Hauraki submits that Professor Roa’s evidence is that the tikanga obligations which attach to whenua are innate obligations within the whānau connected with the whenua. She submits that, accordingly, Mr Anderson’s view as to whether he intended to transfer obligations at tikanga does not, in and of itself, establish whether those obligations were transferred or provide a complete answer as to whether the necessary elements of koha are established. Ms Hauraki submits that Professor Roa’s expert view is that what is most critical is what Ms Honey understood she was taking on as an intrinsic part of the transaction.
[59] Mr Dingwall submits that Professor Roa does not demonstrate how Mr Anderson receives a benefit from the Deed and equally he does not demonstrate how that results in a benefit to Mr Andersons’s creditors. Mr Dingwall submits that because Ms Honey feels obliged to retain and maintain the land for future generations does not fundamentally change the nature of the Deed. The natural love and affection that the donor holds for the donee cannot be regarded as consideration for insolvency purposes.22
[60] In response, Ms Hauraki submits Professor Roa’s evidence is that reciprocity does not sit with, and is not dictated by, the individuals concerned alone. She submits that Mr Anderson need not directly or personally benefit from the koha because, as a matter of tikanga, he did not hold all the rights and interests in the whenua to the exclusion of others, and the reciprocity element is satisfied because of the innate benefit to the broader whānau.
Assessment
[61] In Ellis, the Supreme Court stated that in considering tikanga issues there are a number of methods or procedures available to the Court. Justice Williams stated:23
22 Above at [20].
23 Ellis v R, above n 12, at [273].
[273] How then should the courts receive assistance about tikanga relevant to disputes before them? I am aware that the orthodox approach is to treat the proof of “foreign” law as a question of evidence and to call experts to give such evidence. I suspect the evidential approach was simply a convenient and efficient way of getting unfamiliar material before the judge who had then to apply it. But I confess to being somewhat uncomfortable with its application to indigenous law. In this country, there are multiple available techniques for assisting courts to understand and, if necessary, apply tikanga. Mātanga may be appointed as independent experts reporting directly to the High Court under r 9.36 of the High Court Rules 2016; the wānanga process, as adopted in this case, may be pursued; or where required, experts can be called by the parties to give evidence about both the relevant tikanga and how it should apply. But the courts are no longer entirely tikanga-naïve. Some specialist jurisdictions deal with tikanga regularly – ether because of the nature of their work or their controlling statutes, and we are at a stage in our development where lawyers are increasingly likely to have had some exposure to the Treaty of Waitangi and tikanga in legal education if not in practice. In some contexts it may be sufficient simply to refer to learned texts or reports of the Waitangi Tribunal. We must, after all, recognise that the issues in the particular case as well as the time and the resources of the parties, will not always require or permit more elaborate procedures.
[62]Justice Glazebrook stated:24
[125] It is important to acknowledge, however, that the methodology used in this case will not be suitable or even possible for all or even for many cases. The best approach will be contextual, depending on the issues, the significance of tikanga to the case as well as matters of accessibility and cost. In simple cases where tikanga is relevant and uncontroversial, submissions may suffice. In other cases, a statement of tikanga from a tikanga expert may be appropriate. Another mechanism is for the relevant court to appoint independent expert witnesses or pūkenga. I also note that, where questions of tikanga arise in the High Court, that Court may state a case and refer it to the Māori Appellate Court, with the decision binding the High Court.
[63] In the present case, Ms Honey has put forward the expert evidence of Professor Roa on the tikanga issues. The Assignee has not adduced any expert evidence in response.
[64] As discussed above, Professor Roa has confirmed his opinion that the gift by way of transfer value (in monetary terms) that Mr Anderson made as an element of the transfer of the property to Ms Honey should be recognised as a koha in terms of tikanga.
24 At [125]. See also Te Aka Matua o te Ture | Law Commission He Poutama (NZLC SP24, 2023) at [8.105]–[8.125].
[65] However, as referred to above, there is a significant underlying conflict of evidence as between Mr Anderson and Ms Honey and the issue of whether the gift is a koha is controversial. This is an originating application under pt 19 of the High Court Rules 2016 which is intended to provide a relatively speedy and inexpensive mechanism for a miscellany of applications which need to be made to the Court under specific statutory provisions.25 Evidence is usually given by affidavit without cross- examination, although cross-examination may occur.26 The procedure is not intended to resolve significant evidential controversies. In this case, neither party has sought to cross-examine any of the other party’s witnesses, so the evidence of Mr Anderson, Ms Honey and Professor Roa is untested. The Assignee, while not producing an expert to respond to Professor Roa, has raised a number of issues with Professor Roa’s evidence and does not accept his conclusions.
[66] In the circumstances, I do not consider that I can properly determine whether the gift should be recognised as a koha in terms of tikanga. I have given some consideration to whether it is necessary to employ another mechanism for proper determination of this tikanga issue. For example, I could appoint an independent expert witness or pūkenga to review and respond to the evidence of Professor Roa,27 or I could state a case and refer it to the Māori Appellate Court.28
[67] Ultimately, for the purposes of determining this application, I do not consider it is necessary for me to employ any other mechanism to determine the issue of whether the gift should be treated as a koha in terms of tikanga. That is because, as discussed below, I have reached the view that, even if the gift in this case is recognised as a koha, it is still a ‘gift’, and therefore an insolvent gift, for the purposes of ss 204 and 206 of the Act.
If the gift is recognised as a koha, does that mean it is not a ‘gift’ under the Act?
[68]In Ellis, Glazebrook J stated with regard to legislation and tikanga:29
25 Manchester Securities Ltd v Body Corporate 172108 [2015] NZCA 29 at [15].
26 High Court Rules 2016, r 19.14.
27 Rule 9.36.
28 Te Ture Whenua Māori Act 1993, s 61.
29 Ellis, above n 12, at [98] (footnotes omitted).
[98] The first point is that the application of tikanga in the common law can be limited or excluded by statute, although that requires an unambiguous statutory provision. This does not give the full picture however. It is generally accepted that there is a presumption that statutes are to be interpreted consistently with Te Tiriti as far as possible. Because the tino rangatiratanga guarantee in Article Two is generally taken to import Māori rights to live by and benefit from tikanga, it has been argued that it follows that statutes should be interpreted consistently with tikanga as far as possible.
and with regard to when and how tikanga will need to be considered:30
[117] As an overall comment, tikanga will need to be considered where it is relevant to the circumstances of the case. It will not have to be considered in cases where it is not relevant or where consideration of tikanga will not or cannot assist, such as when it would be contrary to statute or contrary to binding precedent. In terms of the usual common law method, prior authorities on tikanga will be useful in ascertaining when tikanga may be relevant in future cases.
[118] In some cases, tikanga and its principles may be controlling for example, where Treaty principles and/or tikanga have been incorporated into statute in a manner that makes them so, or where the factual context justifies it. In other cases, tikanga principles or values may be relevant considerations alongside other relevant factors. Tikanga may be relevant to explain the social and cultural framework for the actions of Māori parties. In still other cases tikanga principles and values may have an influence on the development of the common law. They can also provide a new vocabulary or new way of thinking about new concepts of law or a new intellectual framework for those concepts.
[119] Challenging issues may arise where there may be a difference between the process or result indicated by tikanga principles and that under the current common law. Such issues may arise due to the traditionally more individualistic nature of the common law and the more relational and communitarian perspective of tikanga. That does not necessarily mean the two are irreconcilable or necessarily by default sit in opposition. The methodology of resolving any differences will need to be worked through on a case by case basis.
[69]Justice Williams stated in considering tikanga and the common law:
[265] The result is that tikanga will be relevant when the facts suggest it is and the common law has not otherwise excluded it. Alternatively, picking up the last question above, it may be relevant where the common law in a particular area is developing, and such development would benefit from a consideration of relevant tikanga principles.
[266] The common law is structurally more sensitive to the context of the case than is legislation, so even if there appears to be no space for tikanga to apply, it may be also necessary to ask whether space should now be made. Resolving this question will involve the application of ordinary common law
30 Ellis, above n 12, at [117] – [119] (footnotes omitted).
reasoning. That is, considering whether the particular context of the case renders the leading authority distinguishable on the point or justifies adjustment of the relevant principle.
[267] The more difficult task is in determining the weight the relevant tikanga principle should carry in the determination. Should it be the controlling rule or principle or merely an ingredient in a more multi-layered analysis? Again, the best guide will be context. A dispute taking place entirely within Te Ao Māori or one in which the disputants’ expectations are that tikanga should be the controlling law is likely to be resolved according to tikanga, whether it is resolved by the community or by the courts. This is for example how the Native (and later Māori) Land Court awarded customary title between competing hapū. On the other hand, a dispute taking place at the point of intersection between Te Ao Māori and the wider community is likely to require careful weighing of common law and tikanga principles according to facts and the needs of the case. This is the kind of controversy that is more likely to come to the courts. Here tikanga will be an ingredient in a broader analysis in which the common law has already developed relevant rules or principles that must be taken into account. The significance of any contest between these competing considerations (if in fact they are in competition) will depend on the case. This considering and weighing of sometimes incommensurable principles will be familiar to environmental and family lawyers, among others.
[70] In Wairarapa Moana Ki Pouākani Inc v Mercury NZ Ltd, the Supreme Court emphasised the importance of context in considering the relevance of tikanga to the facts of each particular case:31
[74] All that said, we take the view that in tikanga, as in law, context is everything. It is dangerous to apply tikanga principles, even important ones, as if they are rules that exclude regard to context. …
[71] The present case takes place within the context of insolvency and the Act. It is not a dispute that takes place entirely within Te Ao Māori or where it can be expected that tikanga should be the controlling law. I consider this is a case where tikanga is properly an ingredient in a broader analysis in which the relevant statutes and common law have already developed rules or principles that must be taken into account.
[72] In this case, the term ‘gift’ is not defined in the Act. However, as noted above, it is accepted, on the basis of expert commentary supported by case law, that a transaction is a ‘gift’ for the purposes of the Act if it has the effect of bringing about
31 Wairarapa Moana Ki Pouākani Inc v Mercury NZ Ltd [2022] NZSC 142 at [74].
the diminution in value of the donor’s assets or otherwise reducing the value of the assets which would have been available to the Assignee.32
[73] Ms Hauraki submits that on the face of it a koha is not a ‘gift’. This is because a koha is not simply a ‘take’, there is a reciprocal obligation exchanged. She submits that the tikanga of koha is about bringing that dynamic to a balance and promoting harmony amongst the parties. She submits that those relationships in tikanga endure, potentially intergenerationally and exist beyond the immediate transaction. Ms Hauraki submits that, as a consequence, the obligations and responsibilities that flow from a koha relating to the whenua deal with and impact relationships (both current and future) that go well beyond the individuals involved. She submits that, in that sense, there is “a broader cultural exchange of what might be viewed as ‘consideration’”. She submits that while this consideration may not reflect “real value” or monetary value at all, there is an exchange of obligations and responsibilities which has consequences at tikanga for all parties subject to the koha, and these might be intergenerational.
[74] Mr Dingwall submits that no tikanga value or principle associated with koha has been identified that would require koha to be treated differently from or excluded from the insolvent gift regime under the Act. Given that “natural love and affection” has not been recognised as consideration for the purposes of that regime, it is equally incompatible with the creditor protection policy underlying the regime to treat a koha as consideration.
[75] A relevant case in the context of insolvency is Bamber v The Official Assignee.33 In that case, Kathleen and Bruce Bamber were adjudged bankrupt over a debt that they owed to the Tahorakuri Trust at Reporoa near Taupō. Their property vested in the Assignee following an order of the Māori Land Court annulling an earlier transfer to a whānau trust. The Bambers refused to vacate the property. On 27 July 2022, the Assignee obtained a possession order under s 152 of the Insolvency Act in the District Court. The property was general freehold land. The Bambers appealed the decision. One of their arguments was that it was contrary to tikanga
32 See above at [21].
33 Bamber v The Official Assignee [2023] NZHC 260.
Māori that they should be removed from what had been their papakāinga in order to satisfy a debt owed to the Tahorakuri Trust. Instead, they submitted that the issue should be referred to mediation so that, in accordance with tikanga, they could attempt a resolution of the matters outstanding between them and the Trust. The issue for determination was whether tikanga Māori was relevant to the issuing of orders under s 152 of the Insolvency Act. Justice Harvey held that:
[44] …I am not persuaded that any additional (oral) evidence on tikanga would have made a material difference to the outcome. For example, Mr Hohepa’s evidence references concepts including tino rangatiratanga, co- operation, partnership, “unfettered and absolute chiefly powers”, and Mrs Bamber’s “unqualified exercise of her paramount authority regarding her housing situation”. This is language more commonly applied in the treaty/Te Tiriti context rather than bankruptcy proceedings, let alone in terms of tikanga. It is difficult to see how those terms and concepts are relevant to the order made under s 152(2) of the Insolvency Act, taking account of the facts in this case.
…
[46] More importantly, even if she were a member of the various iwi and hapū of Te Arawa … that cannot defeat s 152 of the Insolvency Act. In short, tikanga, given the facts of this case, cannot be applied in the manner proposed to effectively override the applicable statute. This conclusion is consistent with the Supreme Court’s decisions in Ellis and Pouākani. This is because s 152(2) is simply a procedural mechanism by which the Assignee is entitled to take certain steps to secure the bankrupt’s estate for the benefit of the creditor – in this case a Māori land trust where Mrs Bamber retains through her whānau trust, an ownership interest. ...
[76] With regard to Bamber, Ms Hauraki submits that it is not Ms Honey’s submission that tikanga overrides the Act. Rather, she submits that tikanga must reasonably inform the interpretation and application of the Act where tikanga, as it is here, is relevant to the transaction alleged to be subject to the Act. Ms Hauraki submits that it is not the case that koha will be relevant every time the Court considers whether a gift is insolvent under s 206 of the Act. This will largely turn on the facts and will need to be determined on a case by case basis.
[77] Ms Hauraki also seeks to distinguish Bamber on the facts. She submits that significantly, in Bamber, the land in question was not Māori freehold land. It therefore did not have the same status as the papakāinga in the present case or attract the full protections of Te Ture Whenua Māori Act. She submits that, as noted by Harvey J,
the principal distinction between owners of general land and Māori freehold land is the connection by whakapapa to each other and to the land spanning generations.34
[78] Further, Ms Hauraki submits that the Bambers’ bankruptcy arose from a debt they owed to a Māori land trust which they were found to have essentially defrauded. She submits there was evidence before the Court that the Bambers had done everything they could to avoid payment of the debt. They were therefore seeking to rely on tikanga to avoid responsibility for their own debt. Ms Hauraki notes that as this Court has found in another context, tikanga cannot be used as a shield from your own wrongdoing.35 Ms Hauraki submits that by contrast, Ms Honey has at all times acted honestly and in good faith regarding the transaction.
[79] While there are differences between Bamber and the present case, there are also similarities. In Bamber, the Bambers had attempted to transfer the property to their whānau trust, the Bamber Whānau Trust, but following a rehearing in the Māori Land Court, the transfer was annulled, and the property vested in the Assignee. In the present case, the evidence of Mr Anderson (the bankrupt), although contested by Ms Honey, is that the transaction was a tool to avoid his bankruptcy while retaining his property within his whānau so that ultimately it could be returned to him. In Bamber, Harvey J found that tikanga could not override the Act particularly because the relevant provision was simply a procedural mechanism by which the Assignee was entitled to take certain steps to secure the bankrupt’s estate for the benefit of the creditor. That is essentially the case here. Section 206 of the Act is a procedure for cancelling irregular transactions which the Assignee is seeking to use to cancel the Deed potentially for the benefit of Mr Anderson’s creditors, who will otherwise receive nothing.
[80] Ms Honey emphasises the fact that the property in this case is Māori freehold land under Te Ture Whenua Māori Act. In this regard, it seems to me that s 343 of Te Ture Whenua Māori Act is particularly relevant. This section provides:
343 Maori land available in bankruptcy
34 At [47].
35 Doney v Adlam [2023] NZHC 363 at [105]–[107].
(1)On the application of the Official Assignee acting in respect of the estate of any person adjudged bankrupt after 1 April 1968, the court may make an order vesting in the Official Assignee the beneficial freehold interest of the bankrupt in Māori freehold land owned by the bankrupt whether solely or in severalty or jointly with any other person or persons.
(2)Any application under this section shall be dealt with by the court without notification or appearance of any person, and, subject to the provisions of this section, the court shall make the order sought as a matter of course.
…
(5) Notwithstanding the provisions of the Insolvency Act 2006, the Official Assignee shall not have power to sell any such beneficial freehold interest entered in Māori freehold land to any person other than a person to whom the bankrupt could have alienated it in accordance with the provisions of Part 7 of this Act.
[81] This section provides for the Assignee to apply for a vesting order in respect of Māori freehold land owned by a bankrupt, although the order is to be made “as a matter of course”. The Assignee shall not have the power to sell the beneficial freehold interest except in accordance with pt 7 of Te Ture Whenua Māori Act which requires that the property must first be offered to prospective purchasers or donees in one or more of the preferred classes of alienees,36 comprising:37
(a)children and remoter issue of the alienating owner;
(b)whanaunga (relative) of the alienating owner who are associated in accordance with tikanga Māori with the land;
(c)other beneficial owners of the land who are members of the hapū associated with the land;
(d)trustees of persons in any of (a) to (c); and
(e)descendants of any former owner who is or was a member of the hapū associated with the land.
36 Te Ture Whenua Māori Act, s 147A.
37 Section 4.
[82] This allows the Assignee to sell the land for the benefit of creditors but strikes a balance between the protection of interests in Māori freehold land and the claims of creditors of the bankrupt. This balance was recognised by the Court of Appeal in Kiwi v Commissioner of Police.38 The Court found at [111] that the purpose of the Te Ture Whenua Māori Act is to strike a balance between protection of interests in Māori freehold land and claims of third parties in respect of that land. The Court specifically referred to the vesting in the Official Assignee of Māori freehold land owned by a bankrupt, and its subsequent sale subject to the restrictions on voluntary alienations.
[83] An owner of Māori freehold land who is concerned that they are going to be adjudicated bankrupt and that the land will be lost might, in the months prior to the adjudication, gift the land to a preferred alienee (whānau or hapū member) under s 147A of Te Ture Whenua Māori Act. The effect of this gift, even if it is recognised as a koha at tikanga, would be to avoid the Assignee applying for a vesting order in respect of that property after the adjudication, and then selling the property for the benefit of creditors.
[84] This example raises a contest between the creditors of the bankrupt and the alienee. In my view, this contest must be resolved in favour of the creditors. If the gift is a koha, the alienee may have taken on obligations, for example as a kaitiaki of the whenua, but there has still been a diminution or reduction in the monetary value of the bankrupt’s assets available to the Assignee and creditors. I do not consider that Ms Honey has identified any tikanga principle that would require that the gift in this example, even if recognised as a koha, not be treated as a ‘gift’ for purposes of cancellation under s 206 of Act. As submitted by Ms Hauraki based on Professor Roa’s evidence, the giver of the koha need not directly or personally benefit from the koha; the reciprocity element, or “broader cultural exchange of what might be viewed as ‘consideration’”, goes well beyond the individuals involved and is satisfied by the “innate benefit to the wider whānau”. Therefore, the gift in the example, even if recognised as a koha, primarily serves to protect the wider whānau’s interests in the land and defeats the creditor protection policy underlying the Act and the policy of balance underlying s 343 of Te Ture Whenua Māori Act. Such a gift
38 Kiwi v Commissioner of Police [2023] NZCA 106.
should be cancelled under s 206 of the Act. Equally, in terms of tikanga, it is difficult to see how a state of ea (balance) could be achieved by excluding the koha of the bankrupt’s whenua from cancellation under the Act, thereby ignoring the interests of the bankrupt’s creditors.
[85] In the present case, the property has only been partially gifted to Ms Honey. However, in my view the same analysis applies as for the example above. If the property had not been transferred to Ms Honey prior to bankruptcy, then the Assignee could have obtained a vesting order and sold the property in accordance with pt 7 of Te Ture Whenua Māori Act, including a right of first refusal for prospective purchasers who are hapū or whānau, and potentially recovered the full value of the property for creditors. Instead, Mr Anderson’s creditors have not received any repayment, and the possibility of repayment will only arise if the Deed is cancelled.
[86] It is important to emphasise that I am only in this judgment dealing with an application to cancel the Deed. I am not dealing with any application by the Assignee for retransfer of the property or recovery of the $133,000. The Assignee is not seeking an order under s 207 of the Act, and the limits on recovery under s 208 of the Act are therefore not in issue.39 In this regard, I note, without making any comment, that Ms Honey has raised the following observations regarding any claim by the Assignee for recovery of the debt in the event the Deed is cancelled:
(a)She submits that tikanga will be relevant to the question of relief and/or enforceability of the debt as tikanga underpins the entire transaction.
(b)She submits there is a question as to the value of the gift given that the only independent valuation of the property that was completed at the time of the transfer confirmed that the value of the property was
$48,000 less than the rating valuation.
39 See above at [19].
Result
[87] The Deed of Gift dated 7 October 2014 is an insolvent gift under s 204 of the Insolvency Act 2006 and is cancelled as against Ms Honey under s 206(6) of that Act.
[88] I have not heard from the parties on costs. The parties should endeavour to agree costs. However, if agreement cannot be reached then memoranda may be filed (not exceeding three pages, excluding costs schedules) and costs will be determined on the papers.
Associate Judge Skelton
Solicitors:
Insolvency & Trustee Service, Christchurch for Applicant Kāhui Legal, Wellington for Respondent
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