Proprietors of Potikirua Block Incorporation v Te Kani

[2020] NZHC 3525

IN THE HIGH COURT OF NEW ZEALAND GISBORNE REGISTRY

I TE KŌTI MATUA O AOTEAROA TŪRANGANUI-A-KIWA ROHE

CIV 2013-416-153

[2020] NZHC 3525

BETWEEN	THE PROPRIETORS OF POTIKIRUA BLOCK INCORPORATION Plaintiff
AND	RENATA TE KANI as administrator of the Estate of WAMOANA TE KANI Defendant

On the papers
Judgment:	22 December 2020

JUDGMENT OF MALLON J

(Share adjustment)

[1]    I refer to my previous judgments in this matter.1 There remains to be resolved what further orders if any this Court should make to regularise Renata Te Kani’s shareholding in Potikirua. The parties now agree that the Māori Land Court does not have exclusive jurisdiction over the matter. Renata seeks that I make orders to regularise the position. Potikirua resists that.

[2]    By way of brief recap, Wamoana Te Kani held shares in Potikirua based on the value of land originally transferred to Potikirua by interests to whom she succeeded. Pursuant to an agreement reached between 1991 and 1992, some of that land from which her shareholding was derived was transferred to Wamoana. That transfer was registered in 1993.2 The agreed consideration was that the shares Wamoana held in Potikirua would be adjusted to reflect that land to the value of $26,000 had been

1      The Proprietors of Potikirua Block Incorporation v Te Kani [2019] NZHC 3200 [the substantive judgment] and The Proprietors of Potikirua Block Incorporation v Te Kani [2020] NZHC 668 [the interim judgment].

2      Prior to the date the Te Ture Whenua Māori Act 1993 came into force

THE PROPRIETORS OF POTIKIRUA BLOCK INCORPORATION v TE KANI [2020] NZHC 3525

[22 December 2020]

transferred to her.3 However, no steps were taken by anyone to have Wamoana’s shareholding adjusted in accordance with this agreement.

[3]    On 30 June 2000 the Māori Land Court vested Wamoana’s shares in Renata pursuant to the terms of Wamoana’s will. This eventually triggered concern amongst Potikirua committee members about how the transfer of the land had come about. Following unsuccessful attempts to resolve the matter, and to have the Māori Land Court determine the matter,  Potikirua commenced  a proceeding  in  this Court on   9 October 2013. That proceeding sought an order for the return of the land or, in the alternative, an order vesting Renata’s shares in Potikirua in itself.

[4]    On 24 November 2015 Potikirua passed a resolution to transfer all of Renata’s shares to itself. It purported to do so as security for the return of the land. The transfer was registered in the share register. Potikirua has not explained the legal basis on which it was able to do this.

[5]    My substantive judgment dismissed Potikirua’s claim for the return of the land and held that an order vesting the shares in itself was not appropriate either. I said:

[171]    … [T]here may be an argument that … the transfer [of the shares] was agreed and, as such, by s 41(7) of the Māori Affairs Amendment Act 1967, the shares were deemed to be held by the Incorporation on behalf of the shareholders. It was then for [Potikirua] to take the necessary steps to adjust the shareholding in accordance with s 41(7) at the end of the next financial year.

[172]If that is correct, it is still open to [Potikirua] to make this adjustment.

…

[6]    I granted leave to the parties to make submissions as to whether orders could be made to resolve the matter in this way.

[7]    In the latest round of submissions Potikirua points out that the process under s 41(7) of the 1967 Act requires first that there be a transfer of shares in accordance with the Māori Incorporations Regulations 1969. Specifically, Potikirua submits:

3      See the substantive judgment at [137] explaining that the shareholdings in Potikirua were allocated in proportion to the value of the land transferred to Potikirua as against the total value of the land held.

… the process that the parties are most likely to have intended to use to give effect to the share dealing as part of the agreement was a share transfer in accordance with ss 38(2) and 41(3)(a) of the 1967 Act. Those provisions were in force at the time of the oral agreement that the Court has found. They enabled the sale or transfer of shares from a shareholder to [Potikirua], to be effected by the registration of a share transfer in the prescribed form.

This means that the agreement required Wamoana to properly execute form 4 of the 1969 Regulations and present it to [Potikirua]. If she had done so, she would have entered on the form what the consideration for the share transfer was (namely, the transfer of the 29.7 ha of land from [Potikirua] to Wamoana) and the number of shares that were to be transferred.

[Potikirua] would then have signed the form as transferee, if it reflected the oral agreement. Once [Potikirua] had signed and executed the transfer form, it could have registered the transfer of the shares from Wamoana to itself. The shares would be deemed to be held on trust for the other shareholders rateably. Then, at the end of the financial year, the shares would have been removed or deleted from the share register in accordance with section 41(7).

Unless and until Wamoana prepared and presented the relevant share transfer form, [Potikirua] would have had no legal authority to make an entry in the share register under the oral agreement between the parties. As noted above, section 41(7) did not empower [Potikirua] to transfer the shares to itself in the absence of the prescribed form being presented for registration.

[8]    I agree with these submissions. This is what was intended and what should have happened.

[9]    Potikirua submits that this process can no longer happen because the 1967 Act was repealed with effect from 1 July 1993. It submits this is because an agreement for the transfer of shares is a transaction involving shares as personal property, not an agreement for sale of an interest in land. It submits that the transitional provisions in the Te Ture Whenua Māori Act 1993 (the 1993 Act) apply only to allow the latter to be completed as if the 1993 Act had not been passed. It then submits that the transfer cannot take place under the comparable 1993 Act provisions because of the specific requirements of that Act.4 It proposes that the Chief Judge of the Māori Land Court be asked to exercise the special powers conferred under s 44 of the 1993 Act, although once again it acknowledges there are difficulties with this proposed course.

[10]   In essence, Renata accepts these submissions but says this Court, through the exercise of its declaratory relief jurisdiction, can correct the position. Renata submits

4      Sections 164 and 264.

that the vesting order made on 30 June 2000 became conclusive on 30 June 2010 but agrees with Potikirua that the Chief Judge could amend the order pursuant to s 44. For the purposes of an application to amend that order, Renata is prepared to accept that his shares were subject to an equitable obligation in Potikirua’s favour for shares to the value of $26,000 as at 1993. Renata also submits that Potikirua has unlawfully confiscated his shares when it purported to transfer those shares to itself in November 2015.

[11]   Whether s 41 of the 1967 Act is still available to effect the transfer of the shares turns on the meaning of s 355 of the 1993 Act. It provides that:

Where, before the commencement of this Act, an unconditional agreement has been entered into for the sale of any Māori freehold land or consent has been obtained to the subdivision of any Māori freehold land, the sale may be completed and the subdivision may take place as if this Act had not been passed and any enactment repealed by this Act shall, notwithstanding its repeal, continue and be in force for the purpose of continuing and perfecting under such repealed enactment the sale or subdivision.

[12]   It was a term of the agreement for the sale of the land to Wamoana that consideration be paid in the form of relinquishing shares to the value of $26,000. That consideration was never paid. Potikirua could have made a demand that Wamoana take the steps necessary for this to occur. If Wamoana failed or refused to take these steps, Potikirua could have sought specific performance so as to secure the transfer of the shares as agreed. Because these steps were never taken, it is arguable that the sale has not been completed (the payment of consideration via a share transfer remains outstanding) and that therefore the parties could take the necessary steps to effect the transfer of the shares under s 41 of the 1967 Act.

[13]   However, there is a more straightforward course. It is clear that Potikirua was not entitled to transfer Renata’s shares to itself as it purported to do in 2015. Potikirua does not assert otherwise. The transfer was accordingly unlawful. Renata remains the lawful owner of the shares. The shares registered in Potikirua’s name pursuant to the 24 November 2015 resolution are held on Renata’s behalf and a constructive trust entitles Renata to their return. Section 265 of the 1993 Act, which provides special rules as to when a Māori Incorporation can recognise that shares are held on trust apply except “as required by law”. This enables Potikirua to recognise and give effect to the

constructive trust that arises here by operation of law. This provides an alternative route for the share position to be regularised.

[14]   Potikirua submits that the transfer from Renata to Potikirua could be corrected by Potikirua using its power to correct the share register conferred by cl 34 of sch 1 to the Māori Incorporation Constitution Regulations 1994 (the 1994 Regulations).5 It submits it is open to Renata to make an application to Potikirua for correction of the share register. Clause 34 does not refer to a requirement for an application. In any case, it is Potikirua that has unlawfully transferred the shares to it. It should now take steps to correct the share register. In doing so, Renata acknowledges that Potikirua has an equitable interest in shares to the value of $26,000. I note that, contrary to Potikirua’s submissions, its equitable interest arises pursuant to the 1992/1993 agreement entered into with Wamoana. This means that the consideration agreed to at that time applies, not some alternative measure of value under the 1993 Act.

[15]To assist with the necessary correction, I declare that:

(a)Potikirua was not entitled to transfer Renata’s shares pursuant to its November 2015 resolution;

(b)the purported transfer was without lawful authority and is invalid;

(c)Renata is the legal owner of the shares purportedly transferred pursuant to the November 2015 resolution;

(d)Renata is entitled to have the share register corrected;

(e)in correcting the share register, Potikirua may give effect to the equitable interest it has in Renata’s shares as acknowledged by Renata (arising pursuant to the agreement to sell the land to Wamoana in 1992/1993); and

5      The submissions referred to clause 24 but that appears to be a typographical error.

(f)that equitable interest is to be determined on the basis of what would have happened if the process outlined in [7] had been followed with the number of shares to be relinquished by Renata to reflect that the agreed value of the transferred land was $26,000 at the time it was transferred.

[16]   Once the share position has been regularised, Potikirua advises that its accountants have kept records of the outstanding dividends and will calculate the amount payable to Renata. Given that acknowledgement, I make no further orders about this.

[17]   Lastly, I again express the hope that the parties will now cooperate to resolve this long outstanding matter in accordance with these declarations. I note that Potikirua has taken the view that resolution cannot occur by agreement because the shares must be dealt with in accordance with the relevant legislation. It has taken the position notwithstanding Potikirua’s unilateral action in transferring Renata’s shares to itself. I acknowledge that rectifying the position needs to be done in a lawful way, but it has always been open to the parties to discuss and agree upon the appropriate legal avenue for rectifying the matter and to cooperatively take those steps to enable that to happen.

Mallon J