Proprietors of Potikirua Block Incorporation v Te Kani

[2020] NZHC 668

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 668

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
Counsel:	J P Koning and D W Ballinger for Plaintiff N Weatherhead for Defendant
Judgment:	1 April 2020

JUDGMENT OF MALLON J

(Share adjustment: interim judgment)

Introduction

[1]    The plaintiff (Potikirua) brought a claim against the defendant (Renata Te Kani) relating to a 29.7 hectare block of land registered in the defendant’s name, as the administrator of the estate of Wamoana Te Kani.

[2]    Potikirua contended the transfer of the land to Wamoana was unlawful and without consideration. It sought the return of the land on restitutionary grounds or under the Contractual Remedies Act 1979. In the alternative, Potikirua sought an order vesting in it absolutely the shares and accumulated dividends it held on behalf of Renata or damages representing the current market value of the 29.7 ha block.

THE PROPRIETORS OF POTIKIRUA BLOCK INCORPORATION v TE KANI [2020] NZHC 668 [1 April 2020]

[3]In a reserved judgment following the substantive hearing I found:1

(a)The transfer of the land occurred pursuant to an agreement. The agreed consideration was an adjustment of the shares held by Wamoana in Potikirua. This adjustment was to be on the basis that the transferred land had a value of $26,000 at the time of its transfer in 1993. Potikirua had not made this adjustment but could have done so at any time after the transfer was registered.

(b)The transfer of the land did not comply with the legislative requirements under the Māori land legislation in force at the time. Nonetheless, Wamoana obtained an indefeasible title to the land and the in personam exception did not apply to Potikirua’s claim.

(c)In any event, Potikirua’s claim to recover the land was brought too late as was a claim for breach of the agreement by failing to pay the consideration.

(d)It was arguable that Wamoana had not breached the agreement with Potikirua. Rather, the transfer of shares (based on the agreed value of the land transferred to Wamoana) had been agreed and it was for Potikirua to adjust the shareholding at the end of the financial year under s 41(7) of the Māori Affairs Amendment Act 1967. It was arguable that it was still open to Potikirua to make this adjustment.

[4]I indicated that:

(a)Potikirua’s claim to Wamoana’s shares in Potikirua were at best the proportionate value in shares that the transferred land represented as against Potikirua’s total assets as valued in 1993. The audited 1993 accounts provided a basis for this assessment to be made.

1      The Proprietors of Potikirua Block Incorporation v Te Kani [2019] NZHC 3200.

(b)It should be possible for an accountant to calculate the dividends Wamoana ought to have received if the share adjustment had been made in 1993, as against the amount she actually received, and for the excess to be deducted from her share of the retained dividends (based on what she would have been entitled to if the share adjustment had been made).

(c)A fair way to resolve the dispute would be an adjustment to the shares to reflect the value of the transfer of the 29.7 ha block, together with an adjustment to the dividends paid and payable to reflect the share adjustment.

(d)The parties were to have an opportunity to resolve the dispute in this way. If they could not resolve the matter, they were to make submissions:2

as to whether it is open to me to make orders directing an adjustment of the shares and dividends in the manner discussed … or whether some other form of relief is available to regularise the share and dividend position.

[5]    Regrettably, the parties were unable to resolve the dispute in this manner. They have filed submissions for my consideration.

Submissions

[6]    Potikirua submits that I have jurisdiction to make further factual findings because I have not issued a final judgment. It submits those factual findings would be as to the share adjustment that was intended in 1993. It submits I do not have jurisdiction to make a formal order or to enter judgment for the return of the shares to Renata because I have dismissed the plaintiff’s causes of action and Renata made no counterclaim for the return of the shares.

[7]    Potikirua submits that if I do not make factual findings or give directions, then the status quo would remain, namely that the 9,313.74 shares held in Potikirua would remain in Potikirua’s name. It submits there would remain a live issue between the

2 At [175].

parties about the share and dividend adjustment. The Māori Land Court would then have jurisdiction to resolve the dispute. That jurisdiction arises under ss 18(1)(c) and 37 of the Te Ture Whenua Māori Act 1993 (TTWM Act), which gives that Court jurisdiction to determine any claim, whether at law or in equity, to the ownership or possession of any interest in land. Shares in an incorporation are an interest in Māori land under s 250(4) of the TTWM Act.

[8]    Potikirua submits the dispute could be referred to the Māori Land Court in two ways:

(a)Potikirua could take steps of its own motion to adjust the shares (and consequently the dividends) under s 41(7) of the Māori Affairs Amendment Act. If Renata disagreed with the adjustment, he could challenge the calculation and adjustment in the Māori Land Court; or

(b)if Potikirua does not take any steps to adjust the shares and dividends, then Renata could bring a claim in the Māori Land Court for an order that some or all of the shares be returned to him.

[9]    Renata advanced two positions. Initially he submitted that I have jurisdiction to deal with the number of shares that should be returned to Potikirua. He submitted this jurisdiction arose under r 11.2 of the High Court Rules 2016. This provides that  a judgment may “deal with any question or issue; or order … any inquiries … or steps that the court considers necessary.”

[10]   Renata submitted the Court should deal with the number of shares to be returned to avoid unnecessary, time-consuming and costly further proceedings. Renata was prepared to see the issue resolved on the basis indicated in my judgment. He submitted the relevant figure in Potikirua’s financial accounts was owners equity of $942,943 (rather than the land value of $593,000). Dividing that figure ($942,943) by the total number of shares in Potikirua (118,079) gives a figure of $7.985695 per share. Dividing the agreed value of the transferred land ($26,000) by $7.985695 gives 3,255.82 shares. That is the number of shares that should be retained by Potikirua.

That would leave Renata with 6,057.92 shares (from a total of 9,313.74 vested in him as Wamoana’s successor).

[11]   Renata calculated that retained dividends of $75,118.21 were due. This was based on 6,057.92 shares and estimated declared dividends of $12.40 per share. The declared dividends were estimated because Renata considered the evidence to be inconsistent with advice from Potikirua’s solicitors about this.

[12]   Renata’s position changed subsequently. His counsel had realised that s 77 of the Te Ture Whenua Māori Act 1993 might be relevant. This provides that orders made by the Māori Land Court are conclusive after ten years. As the Māori Land Court had vested 9,313.74 shares in Renata on 30 June 2000, it was submitted that there could now be no amendment to that order. As the holder of 9,313.74 shares it was also submitted that Renata was entitled to all the dividends declared on these shares since 30 June 2010. Renata submitted the Court should make a declaration to this effect. He submitted the exclusive jurisdiction of the Māori Land Court did not exclude this Court’s jurisdiction to make a declaration under the Declaratory Judgments Act 1908.

My assessment

[13]   I turn first to Potikirua’s submission that I do not have jurisdiction to make an order or enter judgment on the appropriate adjustment of shares because I have dismissed Potikirua’s claims and there is no counterclaim by Renata. I disagree. Potikirua’s claims for a declaration and a return of the land were dismissed. Potikirua claimed in the alternative that Renata’s shares vest in Potikirua absolutely. In considering that alternative, it is open to the Court to consider whether Potikirua is entitled to some but not all of Renata’s shares. I deferred giving judgment on this pending an opportunity for the parties to agree a resolution and to make further submissions to the Court if they did not resolve the matter.

[14]   Nor do I consider Renata needed to counterclaim for the shares for the Court to have jurisdiction over the issue of whether an order for a share adjustment should be made. Wamoana’s shares were vested in Renata pursuant to the Māori Land Court vesting order. It was for Potikirua to show that it was entitled to some or all of those

shares. I found that Potikirua and Wamoana agreed she would relinquish the portion of her shareholding that reflected her interest in the 29.7 ha block, on the basis that this block had a market value of $26,000 in 1993. It was for Potikirua to establish its entitlement to this shareholding.

[15]   Potikirua passed a resolution on 24 November 2015 to transfer Renata’s shares into Potikirua as security for the return of the land. The shares were subsequently transferred into Potikirua’s name in its share register. The resolution does not refer to the statutory provision that enabled Potikirua to transfer the shares to it. Further, Potikirua is not entitled to have the land returned to it, so the basis on which Potikirua purported to transfer the shares no longer applies.

[16]   Section 38(1) of the Māori Affairs Amendment Act 1967 provides that shares in a Māori incorporation are transferrable “in the manner and to the extent provided by this Part of this Act, and not otherwise howsoever.” Section 38(5) provides that shares may be transferred by an entry in the share register:

(a)Pursuant to an order of the Court or any determination by the incorporation under section 86 of this Act; or

(b)Pursuant to a resolution of the committee of management under section 39 of this Act; or

(c)As provided by sections 35 and 36 of this Act.

[17]Section 38(10) provides:

Nothing in this section or in any other section in this Part of this Act shall be construed to prevent or restrict the transferor and the transferee of any shares in an incorporation from entering into any contract or agreement in respect of any such shares which is subsidiary to the transfer thereof and which is otherwise permitted by law.

[18]Section 41provides:

41       To whom shares may be transferred

(l)This section shall be read subject to the provisions of section 38 of    this Act (as to the manner of transfer of shares) and the provisions of sections 34 and 40 of this Act (as to restrictions on the transfer of shares by reference to the number thereof).

(2)No shares shall be sold or transferred by any shareholder to any person other than as provided by this section.

(3)A shareholder may transfer his shares as follows:

(a)To the incorporation; or

(b)To any other shareholder; or

(c)To the Maori Trustee, or to any other State Loan Department, or to the Crown; or

(d)To the shareholder’s spouse, child or remoter issue, brother, sister, parent, brother or sister of a parent, or to the child or remoter issue of a parent or of the brother or sister of a parent:

Provided that for the purposes of this paragraph the illegitimacy of any person shall not be deemed to affect the natural blood relationship subsisting between him and any other person.

(4)Nothing in this section shall be construed to prevent or restrict a transfer of shares in any of the following cases:

(a)The transfer of shares by the personal representative of a deceased shareholder to the persons entitled thereto under the will or on the intestacy of the deceased shareholder:

(b)The retransfer of any shares by the Maori Trustee or any other State Loan Department or by the Crown to the shareholder from whom the shares were acquired or to his personal representative.

(5)A shareholder may make to the incorporation an offer in writing to sell his shares or any part thereof to the incorporation or to any person to be nominated by the incorporation (being a person to whom shares may be transferred in the accordance with this section), at a price equal to the value thereof as fixed by the share valuer appointed under section 60 of this Act and in the manner provided by that section. Any such offer shall remain open for acceptance by the incorporation or a person nominated by it as aforesaid until the expiry of six months after the date of its receipt by the incorporation, when it shall lapse.

(6)Upon the lapsing of any offer as aforesaid, the shareholder shall be at liberty to transfer his shares or any part thereof to any person whomsoever, at a price not less than the price fixed therefor pursuant to subsection (5) of this section:

Provided that this subsection shall not apply in any case where a resolution has been duly passed and confirmed under paragraph (a) of subsection (1) of section 40 of this Act.

(7)All shares in an incorporation purchased or otherwise acquired by the incorporation shall be deemed to have been acquired on behalf of all the remaining shareholders therein rateably and proportionately to their respective shareholding, and shall be deemed to be held in trust

accordingly until the end of the financial year in which they were acquired, at which time the total number of shares in the incorporation shall accordingly be reduced by the number of shares so acquired during the financial year.

(8)No transfer of shares in contravention of this section shall be registered.

[19]   The parties do not suggest that ss 35, 36, 39 and 86 of the Act assist. As I see it, the legislation meant the transfer to Potikirua could only be made pursuant to an agreement with Renata, or with Wamoana when she was alive (s 48(3)(a)). Further, Potikirua was not entitled to enter the transfer of Renata’s shares in its share register without a Court order (s 38(5)(a)).

[20]   The next question is whether I have jurisdiction to make orders over the shares. Renata submits the Māori Land Court has exclusive jurisdiction (outside of this Court’s declaratory jurisdiction). However, s 18 of the TTWM Act 1993 does not say the Māori Land Court’s jurisdiction is exclusive. I do not understand Potikirua to have suggested this. Rather, Potikirua suggested only that the Māori Land Court could determine a dispute over the number of shares Renata would relinquish pursuant to the agreement with Wamoana.

[21] If the Māori Land Court’s jurisdiction is not exclusive, it might be open to me to make an order directing Potikirua to reduce the shares in accordance with s 41(7) and to transfer Renata’s shares (as determined) back to him. At this stage I have Renata’s submissions on how many shares he would retain (at [10] above) but I do not have them from Potikirua. The dividends due to Renata will follow from the share adjustment. Again, I have Renata’s submissions about that (at [11] above), but I do not have Potikirua’s submissions. Further, I am not sure that Renata’s calculation takes into account that Potikirua’s total shares will reduce by the shares that represent the

29.7 ha block, and accordingly his remaining shareholding in Potikirua will rateably and proportionately reduce to reflect this.

[22]   Finally, I do not have Potikirua’s response to Renata’s submission that it is now too late to alter the shareholding because of the order made by the Māori Land Court in 2000.

[23]   In the circumstances, I consider it is appropriate to provide the parties with a further opportunity to make submissions on the following matters:

(a)Does the Māori Land Court have exclusive jurisdiction over the appropriate share adjustment following the transfer of the 29.7 ha block? Why or why not?

(b)Does this Court have jurisdiction under the Declaratory Judgments Act 1980? Why or why not? Should this jurisdiction be exercised? Why  or why not?

(c)Is it accepted that the purported transfer of Renata’s shares to Potikirua is contrary to ss 38 and 41 of the Māori Affairs Amendment Act 1967? If not, why not?

(d)Is it accepted that the share position can be adjusted by Potikirua under s 41(7)? If not, why not (apart from the scope of s 77 of TTWM Act)? If so, can and should the Court give directions about this? If so, on what basis? Does the Court need further evidence? What is Potikirua’s response to Renata’s calculations in [10] and [11] above?

(e)Does s 77 of the TTWM Act preclude a share adjustment? Why or why not?

[24]   Given the current COVID-19 emergency, and the difficulties parties may have in obtaining instructions and providing submissions at this time, I allow eight weeks from the date of this judgment for these submissions. Leave may be sought to extend this period should that be necessary.

[25]   It may then be necessary to convene a further hearing to address any questions or further issues that may arise. Because of the COVID-19 emergency, the hearing may not take place for some time. In the meantime, I urge the parties to attempt to resolve this matter once and for all in a fair manner. With goodwill on both sides, that should be possible in the spirit of what was agreed with Wamoana in 1992/1993. If

this can be achieved, the parties will not have to incur the further costs of legal submissions and another hearing.

[26]   I note that Renata seeks substantial costs for his success on the substantive hearing. I also note the parties have agreed that Potikirua will file a response to the claim for costs within ten working days of the share and dividend adjustment being resolved and a direction has been made to this effect.

Result

[27]   Directions are made in accordance with [23] and [24]. The parties will be advised of a date for the further hearing in due course.

Mallon J