Tau
[2023] NZHC 2544
•13 September 2023
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2023-485-000534
[2023] NZHC 2544
UNDER the Trusts Act 2019 IN THE MATTER OF
an application to amend the Trust Deed for the Forestry Emission Unit Trust
BY
RAKIHIA TAHUMATĀ TAU PAUL FRANCIS MAJUREY BRONWYN DAWN KOROHEKE RAYMOND TAU HENARE ANNETTE TE IMAIMA SYKES LYNELL TUFFERY HURIA
as Trustees of the Forestry Emission Unit Trust
Applicants
Hearing: 8 September 2023 (by telephone) Appearances:
R Brown and G Dawson for the Applicants
Judgment:
13 September 2023
JUDGMENT OF WALKER J
This judgment was delivered by me on 13 September 2023 at 10.30 am Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
RAKIHIA TAHUMATĀ TAU [2023] NZHC 2544 [13 September 2023]
[1] The Trustees of the Forestry Emission Unit Trust (FEUT) have filed two applications dated 30 August 2023. The first application is an interlocutory application without notice for an order seeking permission to bring the proceeding by way of Originating Application. The second application is a proposed Originating Application without notice for an order pursuant to s 125 of the Trusts Act 2019 (the Act).
Background
[2] The affidavit of Bronwyn Dawn Koroheke filed with the applications sets out the origins of the FEUT. Ms Koroheke is the Chairperson of the FEUT. When the forestry sector was brought within the New Zealand Emissions Trading Scheme (ETS), owners of “pre-1990 forest land” were made eligible to apply for an allocation of New Zealand Units (carbon credits) to compensate for the fact that they would need to surrender NZUs if their land was deforested.
[3] The Crown held a significant amount of such pre-1990 forest land. Given the arrangements between the Crown and Māori reflected in the Crown Forest Assets Act 1989, there was the potential for this land (or part of it) to be transferred to iwi/Māori in settlement of historical claims for breach of Te Tiriti o Waitangi by the Crown.
[4] The FEUT was established by the Minister for Climate Change Issues on 19 April 2011 for the purpose of acting in the interests of the future owners of this pre-1990 forest land. The Trust Deed provides:
The Trust is established for the purposes of:
(b)Applying for an allocation of New Zealand Units in respect of Eligible CFL Land in accordance with the Act;
(c)holding on trust for the Beneficiaries any allocation of New Zealand Units in respect of Eligible CFL Land; and
(d)distributing the New Zealand Units to the Beneficiaries in accordance with clause 6.
[5]Eligible CFL Land is defined in the Trust Deed.
[6] The Trustees of the FEUT are appointed by the Minister of Climate Change as the Settlor of the FEUT. The Minister has seen fit to appoint the current Trustees of the Crown Forestry Rental Trust (CFRT) as Trustees of the FEUT because of the similar functions of the two Trusts and administrative efficiencies.
[7] In essence then, the FEUT is a Trust that looks after NZUs associated with eligible pre-1990 Crown forest licensed land until such time as the ultimate ownership of that land is determined through Treaty settlement processes.
Clause 6 of the Trust Deed
[8] Clause 6 of the Trust Deed requires that NZUs are distributed to beneficiaries as defined in the Trust Deed. That clause provides:
6.DISTRIBUTIONS
Distributions following transfer of Eligible CFL Land pursuant to a Treaty of Waitangi settlement
6.1As soon as reasonably practicable after Eligible CFL Land has been transferred to a Beneficiary pursuant to a Treaty of Waitangi settlement, the Trustees must:
(a)determine the number of New Zealand Units that the relevant Beneficiary is entitled to receive in respect of that land; and
(b)transfer the New Zealand Units received in respect of applications by the Trust to the relevant Beneficiary.
Distributions if Eligible CFL Land will not be transferred
6.2As soon as reasonably practicable after the Trustees are satisfied that, as a result of a Treaty of Waitangi settlement, Eligible CFL Land is not transferred to a person referred to in clause 6.1, the Trustees must:
(a)determine the number of New Zealand Units that the Crown is entitled to receive in respect of that land; and
(b)transfer the New Zealand Units received in respect of applications by the Trust to the Crown.
[9] Materially, clause 6.1 provides that NZUs must be transferred to iwi “as soon as reasonably practicable after the Eligible CFL Land has been transferred”.
[10] This clause lies at the nub of the present application. There can often be a considerable delay between the settlement date on which historical claims of iwi are settled, and the transfer of at least the bulk of their settlement assets and of the legal title to CFL Land. Counsel submits that this delay can be for a period of several years normally due to administrative processes that need to be undertaken by the Crown in relation to the title. Ms Koroheke cites an example of the Ngāti Hinerangi settlement to illustrate this practical issue.
[11] On occasion, there have been specific provisions in settlement legislation to address this issue. Those provisions have the effect of overriding the requirements of clause 6.1 of the Trust Deed to permit NZUs to be transferred as soon as reasonably practicable after the settlement date. An example is s 165 of the Maniapoto Claims Settlement Act 2022.1
[12] This solution, while available, does not address the issue in respect of iwi who have already settled and in respect of which there are no such provisions in the settlement legislation. Ms Koroheke also deposes to the inefficiencies associated with the requirement to consult and work with Te Arawhiti to ensure such provisions are incorporated into settlement legislation.
[13] There are a number of undesirable impacts resulting from the current position, including that iwi may have to wait for a considerable period of time to receive the NZUs which form part of the value that they receive under their settlements with the Crown.
[14] The applicants therefore seek to amend the Trust Deed to address this issue and allow NZUs to be transferred as soon as reasonably practicable following the earlier of:
(a)the settlement date set out in the legislation under which Eligible CFL Land is to be transferred which is usually when accumulated rentals and other settlement assets are provided; or
1 See also s 104 of the Ngāti Kahungunu ki Wairarapa Tāmaki nui-a-Rua Claims Settlement Act 2022 and clause 200 of the Pare Hauraki Collective Redress Bill 2022 (220-1).
(b)the date on which Eligible CFL Land is actually transferred.
[15] This drafting is similar to the legislative solution described above with some added protection.
Why is this application brought?
[16] The issue now facing the Trustees is that the Trust Deed does not contain any provisions governing how it is to be amended. Neither does it give the Trustees or Settlor a power of variation.
[17] Ms Koroheke deposes that this is the same as the Trust Deed for the CFRT and that in the past the Trustees of the CFRT have successfully amended the Trust Deed by way of application to the High Court.2 This was achieved under the Trustee Act 1956 which has since been repealed and replaced by the Act.
Jurisdiction — Trusts Act 2019
[18] There is power in s 122 of the Trusts Act for the terms of a Trust to be varied, including to alter Trustees’ dispositive powers.3 Section 122 provides:
122 Variation or resettlement of trust by unanimous consent of beneficiaries
(1)A trustee may do either of the following on being required to do so by all of the beneficiaries who together hold all of the beneficial interest in the trust property, if the conditions set out in subsection (2) are satisfied:
(a)vary the terms of the trust:
(b)consent to the resettlement of the trust.
(2)The conditions for an action in subsection (1) are that—
(a)every beneficiary consents to requiring the variation or resettlement; and
(b)the trustee receives a request to vary the terms of the trust or resettle the trust from or on behalf of each beneficiary; and
2 Re The Trustees of the Crown Forestry Rental Trust [2018] NZHC 2519.
3 Nicola Peart (ed) Family Property (online ed, Thompson Reuters) at [TU122.04].
(c)if any of the beneficiaries is a beneficiary described in section 124(2), the court has made an order under section 124 approving the variation of terms or resettlement on behalf of that beneficiary; and
(d)the trustee has agreed to the proposal.
(3)In this section and in sections 124 and 125, variation includes a change to the scope or nature of the powers of the trustee.
[19] The present application focussed initially on the requirement of the unanimous consent of all “beneficiaries”. That is a defined term in s 9 of the Trusts Act. It provides:
A person who has received, or who will or may receive, a benefit under a Trust (other than a Trust for a permitted purpose) and includes a discretionary beneficiary.
[20] It is likely that in the case of the FEUT, the definition of beneficiary encompasses all iwi and other large natural groupings with historical claims that have not yet been settled and that may receive “Eligible CFL Land” as part of a Treaty settlement in the future.
[21] Consequently, the applicants submit, and I agree, that it is not practical to seek or obtain the consent of every beneficiary within that definition. Nonetheless, the Trustees have taken the following steps which are reasonable in all the circumstances:
(a)written to the iwi identified by the trustees as being currently affected by the issue. That is those whose settlement legislation has been passed, but whose NZUs have not been able to be transferred yet. As at the date of this application, the Trustees have obtained support from the majority of those iwi.
(b)sought and obtained support from the Ministry of Climate Change on behalf of the Crown (the residual beneficiary under clause 6.2 of the Trust Deed).
[22] To address this impracticality, the Trustees seek an order under s 125 of the Trusts Act, waiving the requirement for unanimous consent.
[23]Section 125 of the Trusts Act provides:
125 Power of court to waive requirement of consent to termination, variation, or resettlement of trust
(1)The court may waive the requirement that a beneficiary consent to the termination of a trust under section 121 or the variation or resettlement of a trust under section 122.
(2)An application for an order of waiver of consent may be made by—
(a)the trustees or any one of them:
(b)any person with a beneficial interest in the trust property.
(3)On an application for an order of waiver of consent, the court must take into account each of the following factors:
(a)the nature of any person’s interest in the trust property and the effect of the proposed order on that interest:
(b)the benefit or detriment that may result to any person with an interest in the trust property if the court makes or refuses to make the proposed order:
(c)the intentions of the settlor of the trust in settling the trust, if it is practicable to ascertain those intentions.
(4)The court must not make an order of waiver of consent if its effect would be to reduce or remove any vested interest in the trust property.
(5)An order of waiver of consent binds the person on whose behalf it is made and takes effect without any further step.
[24] The court must take into account each of the stipulated factors. In subs (4), the provision stipulates that the court must not make an order of waiver of consent if its effect would be to reduce or remove any vested interest in the trust property.
[25]I am satisfied by the evidence that:
(a)The order sought relates to a matter of timing only. It does not alter the substantive entitlement to the NZUs held by the FEUT which in effect “run with the land”. Rather than negatively affecting the nature of any person’s interest, it would mean those iwi entitled to NZUs as a result of their Treaty settlements with the Crown will be entitled to receive them at an earlier point in time.
(b)There is no detriment to any person with an interest in the Trust property should the orders be made.
(c)The support of the Minister of Climate Change has been obtained, as Settlor under the Trust Deed.
[26] Further support is found in the legislative history of s 125. The Law Commission Review in 2013 specifically envisaged use of the section to deal with situations where “there are numerous beneficiaries with a remote or negligible interest in a Trust”. It noted that in such situations it would be impractical and costly to require the personal consent of each.4
[27] Although I am satisfied that it is appropriate to make an order waiving the requirement of consent of all beneficiaries, I raised with counsel a second requirement of s 122. That is, that s 122(2)(b) provides that a condition to the exercise of the power under the section is that “the trustee receives a request to vary the terms of the trust or resettle the trust from or on behalf of each beneficiary.” Relatedly, s 125 makes no explicit mention of waiver in respect of this condition.
[28] The particular amendment to the Trust Deed sought in this application was not initially proposed by any of the iwi waiting to receive their NZUs from the Trust. Rather, it was proposed by the Trustees to address the issue which has arisen with letters of support obtained from the majority of currently affected iwi.
[29]I raised this with counsel at a telephone hearing convened for that purpose.
Counsel have provided a further memorandum responding to this issue.5
[30] Counsel submits that the power to approve the variation can be found in either a combination of ss 122, 124 and 125 of the Act or alternatively the Court’s inherent jurisdiction.
4 Law Commission Review of the Law of Trusts: A Trusts Act for New Zealand (NZLC R130, 2013) at [10.14].
5 Memorandum of counsel for the applicants following telephone conference on 8 September 2023 dated 12 September 2023.
[31]Counsel makes the following points:
(a)There is no requirement that a request under s 122(2)(b) take any particular form.
(b)There is nothing to suggest that a beneficiary cannot “request” a change initially proposed by a Trustee.
(c)The letters of support for the amendment can properly be seen as requests to amend the Trust Deed as there is no substantive difference between an iwi requesting an amendment and supporting an amendment proposed by a Trustee.
[32] They also submit that the Court’s power to waive the requirement of consent in s 125 must apply to both sections 122(2)(a) and (b) otherwise s 125 could not do any work. There is force to this submission since a beneficiary who does not consent to a variation or resettlement under s 122(2)(a) could not logically have requested to vary the terms of the Trust under s 122(2)(b). It is consistent also with:
(a)the text of s 125(1) which refers to s 122 rather than s 122(2)(a) specifically; and
(b)the intended operation of ss 122 and 125 signalled by the Law Commission report.
[33]This is also consistent with the approach in other cases.6
[34] Additionally, I consider that s 124 of the Act is engaged because there is or may be iwi who may acquire a beneficial interest at a future date. Where a Trust has beneficiaries who fall within the protective provisions of s 124, an application under both s 122 and s 124 will be required. That section does not impose additional
6 Trustees Executors Ltd v Nichols [2023] NZHC 43; Re Jury [2022] NZHC 568 at [30]–[34] and [38].
requirements so nothing material turns on this.7 However, the position in terms of the orders made is different. The Court under s 124 makes the order varying the terms of the Trust, rather than the trustees. Orders made under s 122 merely enable the trustees to proceed with variation using the power conferred on them by s 122.
[35] In summation, I am satisfied that jurisdiction to make the order sought is found in a combination of ss 122, 124 and 125 of the Act.
[36] Counsel submits as a fall-back that the Court retains its inherent jurisdiction to order variation of the Trust Deed if Parliament has left a gap. The breadth of the inherent jurisdiction was explained in the following terms by Isac J in Re Setter:8
Implicit in Parliament’s approach is a rejection of the underlying premise in Chapman v Chapman, that is, that a Court cannot vary a trust where it would be beneficial to do so. If the inherent jurisdiction takes its lead from the Court’s statutory jurisdiction, it seems a more coherent approach under the 2019 Act may be to avoid strained constructions of the statutory language regarding variations to trust and to look to the inherent jurisdiction in appropriate cases to fill any gaps left by Parliament (to the extent any such evolution of the inherent jurisdiction is consistent with the statute).
[37] I accept the articulation of the Court’s inherent jurisdiction and am satisfied that, should it be necessary, employing it in this case would be consistent with the policy and intent of the combined sections 122, 124 and 125 of the Act.
The originating application
[38] High Court Rule 19.5 authorises the court to permit a proceeding to be commenced by an Originating Application. Rule 19.5(2) provides that the court’s permission may be sought to proceed without notice. A number of types of proceedings to which these rules apply are then set out but the court has the ability to permit the use of this procedure in other proceedings. The touchstone is the interests of justice.
7 See Talijancich v Talijancich [2021] NZHC 753. Although the application did not rely on s 124 originally, I accept that the applicants may rely on it by way of de facto amendment.
8 Re Setter [2021] NZHC 1603.
[39] I am satisfied on the basis of case law that it is appropriate and in the interests of justice to grant leave to commence this proceeding by way of Originating Application. My reasons may be shortly stated:
(a)There is no need for an exchange of statements of claim and defence are not needed to better define the issues;
(b)It is unlikely that any interlocutory procedures would be needed to resolve issues;
(c)The issues relate to administration of a Trust.
Outcome
[40] Is clear to me that the use of the Originating Application procedure is the one most conducive to securing just, speedy and inexpensive determination of the issue presented in the application. Similarly, the fact that the application is to be determined on a without notice basis is justified given the nature of the proposed amendment and the steps taken by the Trustees to seek approval of affected parties to the extent possible.
[41] Accordingly, I am satisfied that it was appropriate that this application be brought on a without notice basis.
[42] I am further satisfied that it is appropriate to grant the orders sought to enable variations of the Trust Deed. Being satisfied that it is in the best interests of the persons beneficially interested now or in the future under the Trust for this Court to permit amendment in the manner set out in the application, and I make the following orders:
(a)granting leave for the applicants to proceed by way of without notice Originating Application;
(b)waiving the requirement for the unanimous consent of beneficiaries that ordinarily applies under s 122 of the Trusts Act 2019 in order to
facilitate a variation to clause 6.1 of the Trust Deed for the FEUT under that section with immediate effect; and
[43] pursuant to s 124 of the Trusts Act 2019, approving the variation of the Trust Deed proposed by the Trustees in the terms set out in schedule 1 of the Originating Application.
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Walker J
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