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University of Otago Law Theses and Dissertations |
Last Updated: 25 September 2023
Does Aotearoa have Trust issues?
An Analysis of the Appropriateness of Trusts as Post-Settlement Governance Entities
Josh Meikle
A dissertation submitted in partial fulfilment of the requirements of the degree of Bachelor of Laws (Honours) at the University of Otago – Te Whare Wānanga o Ōtākou.October 2022
ACKNOWLEDGEMENTS
Thank you to Professor Jessica Palmer for your guidance, insights, and enthusiasm. Our meetings throughout the year to progress this project have always been a highlight and have been immensely helpful for guiding my thinking.
Thank you to Professor Nicola Peart, Mihiata Pirini, Leo Watson and Professor Jacinta Ruru for your advice and suggestions at a critical point in this dissertation coming together.
To my family, thank you for being there and supporting always, but particularly throughout the last six years that I have spent at this University.
Thank you to Seth for reading through this dissertation and providing helpful feedback.
To Georgia, Maya, Michaela, and everyone at 868 George, thank you for everything that you do and for being there throughout our law school journey.
Contents
Introduction
Iwi have effectively utilised the common law trust as a corporate structure for post-settlement governance entities (PSGEs). It is the most common legal corporate entity used for PSGEs,1 followed by bespoke statute-created entities.2 Trust law is based on value paradigms that can differ from those of tikanga Māori. Therefore, the trust may not be a perfect fit for the requirements of iwi when they establish and operate a PSGE.
Justice Williams has discussed the tension between the trust and tikanga Māori extrajudicially.3 He acknowledges the widespread use of trusts by Māori and suggests that this indicates a reasonably comfortable fit between the trust and tikanga.4 Nonetheless, he identifies potential areas of tension. Justice Williams describes three particularly relevant principles of tikanga, namely whanaungatanga, kaitiakitanga and mana, and compares them to key features and principles of trust law.5 He identifies tensions between trustee conflict of interest rules and whanaungatanga; the required certainty of beneficiary classes and whanaungatanga; and both mana and rangatiratanga and the lack of political dimension to the trust structure.6
This dissertation builds on Justice Williams’ paper by examining how compatible the trust is with what iwi require PSGEs to be. PSGEs are a unique subset of Māori corporations. They are established because of a Treaty of Waitangi settlement between the crown and ‘large natural groupings’ of Māori (almost exclusively iwi).7 They must conform to Crown requirements when being established,8 often act as the fulcrum of Crown engagement with an iwi,9 and hold or control the majority of an iwi’s assets. This dissertation further defines the core functions
1 The term ‘legal corporate entity’ is deliberately used. ‘Entity’ means a structure which is an independent unit that can interact with other persons. ‘Legal’ means valid in New Zealand law. ‘Corporate’ means the entity acts for a group of people.
2 Natalie Coates “Infusing Tikanga into Corporate Māori Governance Entities in the Current Legal Framework” in Robert Joseph and Richard Benton (eds) Waking the Taniwha: Māori Governance in the 21st Century (Thomson Reuters New Zealand, Wellington, 2021) 137 at 146.
3 Joseph Williams “Can we Trust tikanga?” (paper presented to Trusts Conference – 2021 A Trust Odyssey, Wellington, June 2021).
4 At 8.
5 At 3.
6 At 9.
7 Coates, above n 2, at 148.
8 Office of Treaty Settlements Ka tika ā muri, ka tika ā mua: Healing the Past, Building a Future (Wellington, 2015) at 67.
9 Jade Newton “Reconciling Traditional Forms of Māori Governance with Models of Western Corporate Governance” (2019) 6 PILJNZ 15 at 18.
and iwi10 requirements of PSGEs to assess whether trusts can effectively fulfil these requirements.
Chapter I introduces the concepts that underpin this dissertation. Chapter II discusses what is required of a PSGE’s legal corporate entity. This discussion focuses on iwi and Māori academic descriptions of these requirements where possible. Chapter III outlines a theoretical framework for analysing the limits of trusts. This framework is based on a modified proprietary theory of trusts consistent with the orthodox conception of trusts in New Zealand. Chapter IV assesses whether trusts can fulfil the requirements identified in chapter II. This analysis explores whether trusts can meet each requirement within the bounds of the theory of trusts outlined in chapter III and discusses any examples of the trust achieving these requirements. This analysis aims to identify where the trust, as currently conceived of in New Zealand, does not and cannot meet iwi requirements of PSGEs.
10 Because of the predominance of iwi as Treaty settlement claimant groups the term ‘iwi’ will be used throughout this dissertation to refer to groups that establish and benefit from PSGEs unless the context otherwise requires. The term iwi will mean both the relevant group as a collective and as connected individuals or sub-collectives with unique interests. The other terms in the literature that refer generally to the collective that PSGEs are established for include tribal group or tribe, and claimant group.
I Context
This dissertation understands New Zealand law as comprised of three distinct sources of law: the first, second and third law of Aotearoa. It seeks to determine under this framework where trust law as part of the second law of New Zealand is incompatible with the first law of Aotearoa in the context of PSGEs. Identifying these tensions provides a background for analysing how the third law may approach these incompatibilities.
The first law of Aotearoa is tikanga Māori.11 Tikanga is not directly equivalent to an English jurisprudential understanding of law. Tikanga derives from ‘tika’, which at a first level means ‘straight, direct, keeping a direct course’ and relates to ideas of what is right and correct. The word tikanga is the nominative of tika. It connotes a normal or usual way of being or acting. For PSGEs the most relevant meaning of tikanga is ‘authority, control, legal condition or criterion’.12
Durie describes tikanga as leading to behavioural norms which are regularly influenced by the values and principles of tikanga.13 Hirini Moko Mead says that the procedures of tikanga are ‘established by precedents through time, are held to be ritually correct, are validated by usually more than one generation and are always subject to what a group or individual is able to do...’14 From a contemporary practitioner’s perspective, Coates emphasises that what the principles of tikanga require must be worked out for each specific context.15 Through an English jurisprudential lens, these conceptions of tikanga cohere most with a Dworkinian understanding of law as both rules and standards that ‘do not function as rules, but operate differently as principles’.16
11 Joseph Williams “Lex Aotearoa: Mapping the Māori Dimension in Modern New Zealand Law” in Robert Joseph and Richard Benton (eds) Waking the Taniwha: Māori Governance in the 21st Century (Thomson Reuters New Zealand, Wellington, 2021) 537 at 538.
12 Richard Benton, Alex Frame and Paul Meredith (eds) Te Mātāpunenga: a compendium of references to the concepts and institutions of Māori customary law (Victoria University Press, Wellington, 2013) at 429.
13 Edward Taihukurei Durie Custom Law (Treaty of Waitangi Research Unit, Wellington, 2013) at 3.
14 Williams, above n 11, at 539.
15 Natalie Coates “How can we protect the integrity of tikanga in the Lex Aotearoa endeavour?” (2022 Law and Society Lecture, University of Otago, Dunedin, 22 September 2022).
16 R Dworkin ‘Is Law a System of Rules’ in Philosophy of Law (Oxford University Press, Oxford, 1977) 38 at 43 as cited in Jacobi Morris “Ko Wai Te Mana Whenua?” (LLB (Hons) Dissertation, University of Otago, 2020) at 8.
Māori communities across Aotearoa came from different waka and have their own unique histories. This means that tikanga Māori varies between communities.17 Nevertheless, Carwyn Jones suggests that it is possible to find within this diversity of tikanga ‘high-level dimensions of a constitutional tradition.’ He likens this to identifying unified constitutional dimensions between common law countries under the Westminster constitutional tradition.18
The principles underlying tikanga lead to what is the right thing to do in a particular context. Importantly, consistency with these principles is the basis of legal order rather than consistency with more rigid rules.19 Ngāti Whātua Ōrākei Trust v Attorney-General provides an example of this. 20 The case centred around whether the Court should grant a declaration that Ngāti Whātua Ōrākei has ahi kā and mana whenua over a particular area of land. These concepts relate to rights and responsibilities of authority over, and occupation of, land.21 The Court did not determine this question by applying rules of what does and does not amount to ahi kā and mana whenua but instead assessed evidence from a wide range of pūkenga experts in the application of the relevant tikanga.22
The second law of New Zealand is the law brought by the English. English law carried with it stronger notions of individual rights than the first law. This is demonstrated by cases like Entick v Carrington which emphasise individual civil liberties and the equality of those holding political power before the law.23 The second law came with conceptions of private property ownership that differ from Māori customary land tenure. A key tenet of second law property is free alienability.24
The second law also differs from the first law by relying more heavily on rigid rules. In contrast to the determination of ahi kā and mana whenua as described above, a second law dispute over
17 Williams, above n 11, at 538.
18 Carwyn Jones “Māori and State visions of law and peace” in Mark Hickford and Carwyn Jones (eds) Indigenous Peoples and the State: International Perspectives on the Treaty of Waitangi (Routledge, London, 2018) 13 at 15. 19 Durie, above n 13, at 4.
20 Ngāti Whātua Ōrākei Trust v Attorney-General [2022] NZHC 843.
21 Benton, above n 12, at 33 and 178.
22 Ngāti Whātua Ōrākei Trust v Attorney-General, above n 20, at [2].
23 Entick v Carrington [1765] EWHC J98; (1765) 95 ER 807 (KB).
24 Liam Remi McKay “Waka Umanga: Has the Government Missed the Boat on Māori Collective Assets Management? Rethinking New Zealand Law for the Post-Settlement Era” (LLM Thesis, University of Otago, 2012) at 1.
who has a right to occupy land centres around who has their name on the appropriate registers and the specific terms of legal instruments.
The signing of the Treaty of Waitangi/te Tiriti o Waitangi in 1840 represented the bringing together of these two systems of law. However, following this there was a lack of clarity over what this meant. Was this prioritising one law over another? Or was this a commitment to the independence of both? Over the 20th century, many of these questions did not arise in the courts because their refusal to acknowledge the Treaty and the role it had to play in forming a relationship between the two legal systems impliedly dismissed many of them.25
From the 1970s, the second law legal system began treating the first law differently. The courts rediscovered the Treaty of Waitangi, and Parliament started incorporating the Treaty and tikanga Māori into legislation. A key moment in this change was the enactment of the Treaty of Waitangi Act 1975 and the resulting creation of the Waitangi Tribunal. This led to the Treaty settlement process emerging in the 1990s.
The primary recognition of the first law has been through legislation, though more recently in decisions such as Takamore v Clarke there has been gradual recognition in the common law.26 Justice Williams describes the new version of law emerging from this as a third hybrid law with its own logic that exists alongside the first and second laws.27 The third law alternatively can be regarded as a system governing the interaction of legal systems comparable to international law. The first and second law continue to exist, grow, and interact. The third law is the body of rules and principles governing how this interaction happens. This dissertation adopts this latter conception of the third law.
25 Wi Parata v Bishop of Wellington [1877] NZJurRp 183.
26 Takamore v Clarke [2012] NZSC 116, [2013] 2 NZLR.
27 Williams, above n 11, at 549.
II PSGEs
The previous chapter established an understanding of distinct first and second law legal systems that this dissertation adopts. Its key consequence is that the first law can require something, and the second law may not necessarily be able to provide this because they are distinct systems. PSGEs sit at an intersection of these two systems. This chapter defines and analyses PSGEs core functions to derive requirements that the trust as a second law construct must fulfil.
A PSGE is a legal corporate entity that holds and manages settlement redress that the Crown transfers to an iwi as part of a Treaty of Waitangi settlement.28 They can also have a secondary purpose of serving as an external representative of an iwi. A PSGE must meet criteria set by the Crown before it may receive settlement redress. This includes requirements to be sufficiently representative, transparent, and accountable.29
Since 1989 the Crown has been entering into settlements with iwi to amend for past wrongs. Through the Treaty settlement process the Crown acknowledges and apologises for historic wrongs and provides redress. PSGEs primarily deal with redress. However, apology and redress are interlinked. Colonisation and breaches of the Treaty have had a negative economic and social impact on Māori and have deprived iwi of an economic base to sufficiently support themselves.30 Economic redress provides a means to re-establish an economic base.
Coates describes the Treaty settlement process as settling groups giving up their claims against the Crown in exchange for redress.31 Mutu views this requirement to give up claims against the Crown as a means by which the Treaty settlement process extinguishes the legal rights and claims of Māori.32 This is not mutually exclusive to the view that the Treaty settlement process aids iwi in gaining autonomy to advance economically, socially, culturally, and politically.33 Economic development can advance the exercise of tino rangatiratanga as a means of liberation
28 Kel Sanderson, Mathew Arcus and Fiona Stokes Functions and Costs of Operating a Post-Settlement Governance Entity (Business and Economic Research Limited, BERL 4560, December 2017) at 3.
29 Office of Treaty Settlements, above n 8, at 67.
30 Māori Marsden “Prognosis for the Socio-Economic future of Māoridom” in Te Ahukaramū Charles Royal (ed) The Woven Universe: Selected Writings of Rev. Māori Marsden (The Estate of Rev. Māori Marsden, Otaki, 2003) 119 at 133.
31 Coates, above n 2, at 146.
32 Margaret Mutu “Behind the smoke and mirrors of the Treaty of Waitangi claims settlement process in New Zealand: no prospect for justice and reconciliation for Māori without constitutional transformation” (2018) 14 Journal of Global Ethics 208.
33 Newton, above n 9, at 17.
from colonial domination.34 This suggests that PSGEs are an important part of an iwi’s future growth and autonomy.
The remainder of this chapter discusses the specific functions of PSGEs and the subsequent iwi requirements of a PSGE’s legal corporate form. These functions are categorised by their relationship to a PSGEs responsibility to (a) act for an iwi, (b) manage assets, (c) be an external representative voice, and (d) resolve disputes. Responsibilities (b) and (c) are the two core functions of a PSGE, whereas (a) and (d) are both essential elements to performing the two core purposes effectively. To identify and define iwi requirements, sources that directly represent the voices of an iwi or its members are prioritised, secondary sources that indirectly describe the requirements of iwi are critically applied, and sources describing solely Crown requirements for PSGE are excluded (except where they influence iwi requirements).
The requirements identified are defined to encompass the range of requirements different iwi may have of PSGEs. Because of this, some requirements are set at the outer bounds of what an iwi may require of a PSGE. It may be unlikely that the strongest form of a requirement will actually be present but analysing this stronger form in chapter IV makes it clear whether a range of less stringent requirements can be met.
A The PSGE Acting for an Iwi
A PSGE is established to be a servant of its relevant iwi. It exists to follow the interests of an iwi, rather than to direct those interests.35 This same principle applies to the governors of a PSGE and can be grounded in the concept of their mana. Mana is the source of a governor’s authority to act. It is multi-faceted and has differing interlinked sources beginning with mana atua, from the Māori spiritual realm.36 This is carried through ancestors from whom a person receives mana tūpuna.37 These forms of mana are whakapapa based, taking meaning from relationships between people. Mana whenua is related to rights over and associated with land,38 and mana tangata derives from actions and leadership that benefit the collective.39 The consent
34 Mason Durie Te Mana, Te Kāwanatanga: The Politics of Māori Self-Determination (Oxford University Press, Auckland, 1998) at 7-8.
35 Robert Joseph “Contemporary Māori Governance: New Era or New Error?” (2007) 22 NZULR 682 at 706.
36 Steven Kent “The Connected Space of Māori Governance Entities in the Current Legal Framework” in Robert Joseph and Richard Benton (eds) Waking the Taniwha: Māori Governance in the 21st Century (Thomson Reuters New Zealand, Wellington, 2021) 177 at 198.
37 Williams, above n 3, at 4.
38 Benton, above n 12, at 178.
39 Kent, above n 36, at 198.
of the governed is crucial to the exercise of mana tangata because it is an authority that is vested by the community.40 This means that to maintain the authority to act, the governors of the PSGE must maintain iwi confidence and act in what they understand to be iwi best interests. This differs from directing the interests of an iwi. A governor’s influence on defining iwi interests should be as a member of the iwi. This particularly limits the influence that non-iwi member governors should have. The important consequence of this is that PSGE governors may be required to be subservient to the iwi as a whole, or particular members, in some PSGE decision making.
The Crown also requires that PSGEs are representative of,41 and fully accountable to, iwi members in their decision-making.42 These requirements are different and less absolute than the prerequisites of mana. In practice they can be met by democratic elections of PSGE governors that all members of a Crown recognised claimant group can participate in.43 While this encourages governors of a PSGE to act in the interests of the iwi, it does not speak to the role that governors should have concerning iwi interests. The corporate form of a PSGE should be compatible with the requirements of mana.
Furthermore, a PSGE should also be able to benefit those it serves in the manner an iwi determines is most appropriate. Three requirements of this are discussed below: a PSGE must be able to (1) define its beneficiaries such that they align with the iwi preferred definition, (2) differentiate between beneficiaries in a manner consistent with an iwi’s tikanga, and (3) account for ancestors, existing and future beneficiaries in decision making.
The Crown requires that PSGEs adequately represents all claimant group members.44 For the purposes of a Treaty settlement, a claimant group needs to provide details of the names of iwi and hapū that are part of the group and their associated marae.45 How the claimant group subsequently defines members of each iwi or hapū for the purposes of benefitting from a PSGE is left to the claimant group itself.46
40 Williams, above n 3, at 4.
41 For clarity, this is different to requiring a PSGE to represent an iwi externally.
42 Office of Treaty Settlements, above n 8, at 67.
43 Sanderson, above n 28, at 22.
44 Office of Treaty Settlements, above n 8, at 67.
45 At 45.
46 PSGE members may differ from traditional understandings of membership of an iwi.
The Law Commission’s Waka Umanga report discusses approaches taken by iwi to identify the membership of PSGEs. The Law Commission produced this report in consultation with Te Puni Kōkiri, the Office of Treaty Settlements (now part of Te Arawhiti), Te Ohu Kaimoana, the Māori Land Court, the Ministry of Economic Development (now part of the Ministry of Business, Innovation and Employment), and Māori tribal and community leaders.47 The report is a summary by an independent Crown entity of the views of a select pool of Māori and Crown- associated consultees. It is not a perfect representation of the views of iwi, but it provides a high-level summary of the range of views of the iwi leaders consulted.
The two primary approaches to PSGE membership identified in the report are determination by descent and determination by active support.48 Determination by descent aligns with iwi’s determining their membership by whakapapa, the dominant contemporary approach to iwi membership.49 Determination by active supporters provides a way for iwi to protect cultural integrity by ensuring that those who benefit from and exercise rights relating to a PSGE adhere to their rules and customs. The Waka Umanga Report states that iwi should have the right to determine their membership and the appropriate balance between these approaches for their particular context.50 This means that a PSGE should be capable of defining its class of beneficiaries in both these ways.
The requirements of whanaungatanga will significantly influence who should benefit from a PSGE. This can come into conflict with a need to define beneficiaries. Whanaungatanga means relatedness-by-blood and is the Māori law of kinship.51 It is the principle characterising how relationships are formed with all aspects of the physical and spiritual world.52 Each individual is part of a network of whanaungatanga relationships.
Re Murihiku Lands is an example of a requirement that beneficial owners of Māori land blocks be precisely defined conflicting with whanaungatanga.53 It concerned the trustees of a trust responsible for managing multiply owned blocks of land in the Murihutu area. The Māori
47 Law Commission Waka Umanga: A Proposed Law for Māori Governance Entities (NZLC R92, 2006), at 22.
48 At 44.
49 Newton, above n 9, at 27.
50 Law Commission, above n 48, at 44.
51 Williams, above n 3, at 4.
52 Newton, above n 9, at 25.
53 Ngāitahu Maori Trust Board – Murihiku Lands [1982] Māori Appellate Court MB 1 (1981 APPEAL 5).
Appellate Court decided that it was not allowable for the trustees to cross-subsidise the development of these blocks when they had differing beneficial ownership. This was because trust law did not allow the land trusts to benefit people other than their defined beneficiaries. Justice Williams, writing extrajudicially, regards this as inconsistent with whanaungatanga because all the beneficiaries belonged to the same overall kin group and this rule required different sections of this group to isolate themselves from mutual whanaungatanga rights and obligations.54 The beneficiaries in this case were more precisely defined than would typically be the case for a PSGE, however it provides an example of the type of issues that may arise.
A PSGE should have sufficient flexibility in defining its beneficiaries to account for the requirements of whanaungatanga and an iwi’s determination of who should be a PSGE member.
PSGEs must act for all members of a claimant group, but they do not need to treat all members the same. There may be differences in members’ rights to benefit and vote. The Waka Umanga report distinguishes members that actively contribute and those that do not as groups to which a PSGE may owe different duties.55 As with determining claimant group membership, the Law Commission regards it as an iwi’s right to determine its membership rules. To be consistent with this, a PSGE should be able to accommodate the structure that an iwi determines is most appropriate. This requires that PSGEs can distinguish between different categories of beneficiary for the purpose of providing different benefits and rights to participate in decisions.
PSGE governors have an intergenerational responsibility rather than just a responsibility to manage assets for the benefit of currently existing beneficiaries. This responsibility comes from the requirements of tikanga and has been recognised in reports and literature discussing the role of PSGEs.
Kaitiakitanga is the starting point for understanding a PSGE governor’s obligations because it describes the core role they must fulfil. Kaitiakitanga is the obligation that comes with the mana
54 Williams, above n 3, at 9.
55 Law Commission, above n 47, at 44.
bestowed upon PSGE governors.56 It is a concept that has come to be associated with an ‘ethic of guardianship or trusteeship’.57 The concept is often, but not exclusively,58 used in the context of the environment and natural resources. The obligations of kaitiakitanga emerge from the framework of whakapapa binding together humans, their environment, and the spiritual realm.59 In binding people together, whakapapa importantly links people to their ancestors and future generations. This aspect of kaitiakitanga is particularly relevant to PSGEs because they exist solely to serve an iwi, a structure characterised by whakapapa. The intergenerational aspect of whakapapa leads to a responsibility for PSGE governors, as kaitiaki of an iwi’s assets, to consider and act in the interests of ancestors, current, and future generations. The legal corporate entity of a PSGE should be capable of accounting for these intergenerational interests.
Different iwi have different conceptions of what whanaungatanga requires of them with regard to future generations. The Waka Umanga Report recognises the need to safeguard the interests of current and future generations however, the Bill produced as a result of the report did not sufficiently provide for differing conceptions of the exact contents of this responsibility.60 The Law Commission regarded the common view amongst iwi groups to be that current generations are only entitled to the fruits of the land and that the land itself must be passed on to future generations in an improved condition.61 The Waka Umanga Bill included an implied duty to future generations.62 The Māori Committee Report on the Bill described this implied duty as having the potential to restrict the ability of governors to benefit current waka umanga members. The Committee recommended that the provisions leading to this implied duty be removed so that iwi wishing to use a waka umanga entity could determine whether this duty should apply, rather than Parliament imposing it on all waka umanga.63
PSGE entities should be able to accommodate any iwi’s specific view on the extent of responsibility to future and past generations. This means that the entity should be able to
56 Williams, above n 3, at 4.
57 Benton, above n 12, at 105.
58 At 108.
59 At 114.
60 Law Commission, above n 47, at 14.
61 At 45.
62 Waka Umanga (Māori Corporations) Bill (175-2), preamble.
63 Māori Affairs Committee Report on Waka Umanga (Māori Corporations) Bill (175-2) (8 September 2008) at 2.
account for the interests of ancestors and future beneficiaries in instances where an iwi requires this obligation to exist.
B The PSGE as a Manager of Assets
A PSGE serves an iwi by holding and managing settlement redress.64 This includes commercial and financial assets as well as cultural redress.65 The latter of these will be addressed in sectionII.C. To effectively hold and manage commercial and financial assets it is important that a PSGE develops and grows its asset base. This provides an iwi with a strong economic base which they can use to accomplish their goals and build future wealth upon. This needs to be balanced with making distributions to beneficiaries and for wider iwi purposes.
This section discusses the requirements of PSGEs that stem from their role as managers and distributors of assets. It addresses the need for PSGEs to serve both private purposes of iwi and human beneficiaries, and governance considerations.
PSGEs use their assets to benefit individuals and groups of iwi members directly, and to pursue wider iwi purposes. These asset uses stretch across the range of functions that legal entities may perform. In 2007 the Crown Forestry Rental Trust (CFRT) commissioned a report from Business and Economic Research Limited on the functions and costs of operating a PSGE.66 This report was prepared as an illustrative description instead of a comprehensive analysis of the sector.67 This report is not a direct representation of the views of iwi on what the functions of a PSGE should be, but it does provide descriptions of observed PSGE functions. The asset uses that the CFRT report identifies are:68
64 Sanderson, above n 28, at 3.
65 Office of Treaty Settlements, above n 8, at 67.
66 Sanderson, above n 28.
67 At 1.
68 At 20, 21, 36, 37, 38 and 40.
On one end of this spectrum of uses, distributions of assets to individual beneficiaries of a PSGE are a distribution in a sense traditionally contemplated by private law trusts. This is the distribution by a trustee of assets to a beneficiary for whom the assets have been held and managed. On the other end, the use of assets to pursue wider iwi goals, such as maintaining a marae or providing community healthcare, are closer to private purposes that may be pursued by a charitable trust or incorporated society.69
A PSGE should be capable of using its assets to pursue the goals listed above. Specifically, it should be capable of using assets to both directly benefit members and pursue private purposes.
The Financial Markets Authority has provided a general definition of governance: 70 ‘Corporate governance comprises the principles, practices and processes that determine how a company or other entity is directed and controlled.’
This definition is adopted in this dissertation because it is a high-level definition that can describe governance practices within first and second law contexts.
Tikanga Māori underpins Māori governance practices. This is important for PSGEs because they are Māori organisations established to serve an iwi. Māori governance is core to how an iwi and its associated entities operate. Additionally, it has been suggested that for indigenous groups economic success is best advanced by governance structures that fit the culture of the
69 Charities Act 2005, ss 5 and 13, and Incorporated Societies Act 2022, s 8.
70 Financial Markets Authority “Corporate governance in New Zealand: principles and guidelines” (2018) at 4.
group instituting it.71 Kent has noted that most writers on Māori governance use a theoretical perspective based in non-Māori governance theory.72 This entails the application of general theories of governance to Māori contexts and the subsequent emphasis of some elements of the governance theory over others. This is the approach adopted in this dissertation because the majority of PSGE-specific governance literature takes this approach. However, Kent and others have worked to develop theories of governance sourced in mātauranga Māori that will shed further light if applied to PSGEs.
Dewes identifies four attributes of general sustainable governance that can be applied in a Māori context to provide insight into Māori governance practices:73
Dewes supports these factors with research from the Harvard American Indian Project on American Indian Development and discusses the applicability of these attributes in a New Zealand context.74 He highlights research which concludes that despite clear differences there are commonalities in the experiences under colonisation of the indigenous people of the USA, Canada, Australia, and New Zealand that make the application of these attributes valuable.75
71 Newton, above n 9, at 30.
72 Kent, above n 36, at 179.
73 Whaimutu Dewes “Governance options” (paper presented to the New Zealand Law Society “Governing and Running Māori Entities: Tribal development and law in the 21st century” Intensive Conference, Wellington, August 2009) 43 at 46.
74 The Harvard American Indian Project on American Indian Development has a reputation for high-quality research and respect from the First Nations that are part of the programme.
75 Dewes, above n 73, at 49.
(a) Culture
There is a difference between the cultural basis of second law and Māori governance which reflects the differing cultural underpinnings of English law and tikanga. Durie says that English law is mostly an example of ‘institutional law’ coming from superior sources of authority such as case law and statute. In contrast, tikanga is more a form of ‘custom law’, a law generated by social practice.76 This means that English law as it now exists in New Zealand as the second law tends to distinguish between the law and the values that undermine it, whereas there is less distinction between values, practices, and rules under tikanga.77 In new or complex situations the application of tikanga and its higher-level constant principles is much more contextual, requiring the insights of pūkenga and other tikanga experts.78
Second law and Māori governance reflect the approaches to rules and values in their corresponding legal systems. This is because the structures that support and define governance are legal. The greater reliance placed on concrete charters of rules in second law governance does not always align with a tikanga-driven approach to governance. Porima v Te Kauhanganui o Waikato Inc demonstrates the consequences of this.79 This case concerned Waikato-Tainui’s PSGE, Waikato-Tainui Te Kauhanganui Incorporated. The litigation emerged from a conflict between the entity’s rules and the decision to grant Te Arikinui the power to appoint members to the entity’s executive board, Te Arataura.80 Te Arikinui is regarded as the ‘spiritual and physical manifestation of Kīngitanga’,81 an important part of the identity and tikanga of Waikato-Tainui. The decision to grant Te Arikinui this power was made in response to a string of governance and management failures.82 It was consistent with the tikanga of Waikato-Tainui to go beyond the established rules and grant this power to Te Arikinui. Here stricter rules did not align with tikanga.
A further example of the underlying principles of tikanga being more important in Māori governance than consistency with rules is the discussion surrounding the suspension of Hone Harawira from the Māori Party’s parliamentary caucus in 2011. The Māori Party constitution
76 Durie, above n 13, at 4.
77 Joseph, above n 35, at 695.
78 Coates, above n 15.
79 Porima v Te Kauhanganui o Waikato Inc [2001] 1 NZLR 472 (HC).
80 At [31].
81 At [36].
82 At [28].
has rules that set out disciplinary procedures for members who fail to comply with the constitution. Harawira was suspended so that these procedures could be followed. While Harawira had allegedly breached the constitution, providing constitutional justification for the suspension, the Māori Party leadership justified the decision to suspend him on the basis that he had no regard for the kaupapa and tikanga of the party. Similarly, Harawira criticised the process he was subject to on the basis that it was not consistent with kaupapa Māori.83 For both the Māori Party leadership and Harawira the legitimacy of this decision and process rested on its consistency with higher-level principles of tikanga rather than strict rules.
It is important that PSGEs can accommodate tikanga practices in governance and that its legal form does not limit this. The following three factors identify specifically what this requires of PSGEs.
(b) Sovereignty
Dewes links sovereignty to the ability of a community to make their own decisions rather than be subject to those of external decision makers. In a PSGE context this relates to the guarantee of tino rangatiratanga in ko te Tuarua of Te Tiriti and has consequences for the limits of the powers of PSGE governors.
There is ongoing debate about the true meaning of Te Tiriti o Waitangi/The Treaty of Waitangi and whether Māori ceded sovereignty. The view that the Crown operates under is that the Treaty represents a cession of sovereignty to the Crown, which came with obligations owed by the Crown to Māori.84 Amongst these is the obligation to guarantee the tino rangatiratanga of Māori. This perspective underlies the Treaty Settlement process. The Crown’s assertion of sovereignty is evident from actions such as the Crown determining the criteria that PSGEs need to meet before settlement redress is transferred. The obligation to guarantee tino rangatiratanga is evident from Crown acknowledgements in Treaty Settlement legislation that it is a breach of the Treaty to have not upheld tino rangatiratanga in the past.85
83 Carwyn Jones New Treaty New Tradition: Reconciling New Zealand and Māori Law (Victoria University Press, Wellington, 2016) at 82.
84 Waitangi Tribunal Ko Aotearoa Tēnei: Te Taumata Tautahi (Wai 262, 2011) at 23.
85 Ngāti Kuri Claims Settlement Act 2015, s 9.
Tino rangatiratanga was considered in the Waitangi Tribunal’s Haumaru report to mean autonomy and self-government to the fullest extent possible.86 The Tū Mai Te Rangi report says that this includes the right of Māori to manage their own affairs in a way that aligns with their customs and values.87
PSGEs are separate from the iwi that they represent. They should avoid undermining an iwi’s ability to exercise tino rangatiratanga. There have previously been concerns that ‘corporate warriors’ as PSGE leaders will take over iwi and be seen to represent an iwi itself, rather than being the iwi’s servant.88 It should also be possible to structure a PSGE such that the risk of governors exceeding their appropriate authority can be mitigated. This particularly includes being able to delegate duties ascribed to a PSGE to others.89
(c) Institutional capability
PSGEs should be institutionally capable of carrying out their required functions. Dewes says that this requires stable decision rules, fair and independent mechanisms for dispute resolution (this is discussed in section II.D), and the separation of governance politics from day-to-day business and programme management.
Adopting stable decision rules requires the clarification of decision-making structures and frameworks. The PSGE’s intergenerational responsibilities mean that these decision-making frameworks must take a longer-term approach to business governance, which differs from the general short-term approach of second law corporate governance.90
Joseph also recommends the separation of governance and day-to-day management. He suggests that less than 50 percent of governors should also hold management positions.91 Maintaining a distinction aids in holding governance and management accountable for their decision-making. This distinction is particularly important in a PSGE context because governors are more often selected for their expertise in areas other than managing corporate entities.
86 Waitangi Tribunal Haumaru: The Covid-19 Priority Report (Wai 2575, 2021) at 43.
87 Waitangi Tribunal Tū Mai te Rangi!: Report on the Crown and Disproportionate Reoffending Rates (Wai 2540, 2017) at 26.
88 Law Commission, above n 47, at 38.
89 This aligns with the conclusion in section II.A.
90 Newton, above n 9, at 18.
91 Joseph, above n 35, at 687.
A further separation of the commercial and social arms of a PSGE is also advisable because the commercial and social aims of a PSGE can often be in conflict.92 Separating these functions means that both can be performed more effectively because governors and managers can focus on one function without the interference of the policies and approaches relevant to performing the other.
(d) Leadership
Effective leadership is important for any corporate entity. A board should have the requisite composition and capacity to accomplish its goals.93 In a PSGE context, boards need cultural and tikanga-based expertise alongside second law corporate expertise. Joseph similarly indicates that the composition of a board is important and that generally the appropriate size for a board is between five and nine directors.94
Many PSGE governors will be members of the iwi the PSGE represents and thereby a beneficiary of that PSGE. They will often also have, or create, ties with other iwi or groups that the PSGE is dealing with.95 This aligns with the importance of whakapapa and whanaungatanga as a source of mana, as well as the need to ensure that governance bodies have cultural awareness of iwi and constituent hapū. Alongside this, governors who are independent of the iwi will also often be appointed due to the impartial voice and skill sets that they bring, but the number of independent governors on a board can be less than in a second law commercial context.
PSGEs with a hapū-based governance system are an example of greater internal representation in governance. These carry the particular risk that representatives will focus on hapū specific interests at the expense of wider goals.96 The Crown policy of only negotiating Treaty settlements with ‘large natural groupings’ increases the risk that hapū specific interests will not align. This is because the policy puts hapū in a position where they must amalgamate into larger
92 Newton, above n 9, at 23.
93 At 22.
94 Joseph, above n 35, at 686.
95 Williams, above n 3, at 9.
96 Joseph, above n 35, at 702.
iwi groupings for Treaty settlements, and in doing so must put to the side their priorities in favour of the priorities of the larger grouping.97
A PSGE entity must be able to accommodate greater internal representation on governance bodies and the potential conflicts of interest that this may bring.
C The PSGE as a Representative Voice
Cultural redress in a Treaty settlement can include providing PSGEs with representative roles that allow iwi input on resource management and conservation matters in their rohe. The Crown and local authorities treat PSGEs as representatives of their iwi communities for this purpose. A PSGE entity should be capable of performing this role.98
There are four primary ways that Treaty settlement legislation provides roles and rights to PSGEs that enable engagement with the Crown and Crown-related bodies.99 These are (1) rights for iwi/PSGE interests to be considered, (2) statutory acknowledgement provisions, (3) requirements to consult PSGEs, and (4) roles allowing active participation of PSGEs.
Settlement legislation often provides for the consideration of PSGE or iwi interests in resource management and conservation matters. This is a limited form of engagement which creates a mandatory consideration for the Crown but does not frequently lead to substantive engagement with an iwi or PSGE. Sometimes this form of engagement directly references iwi interests, rather than their PSGE. Examples of this include requiring authorities to have regard to the values of an iwi,100 consultation obligations being triggered when a decision is likely to impact an iwi’s relationship with specific minerals,101 and requiring authorities to take into account the significance of a site to an iwi.102 Obligations on authorities relating to an iwi directly usually only require authorities to take account of a specific iwi interest for which they will already have some reference point. Requirements for an authority to consider less specific
97 Malcolm Birdling “Healing the Past or Harming the Future? Large Natural Groupings and the Waitangi Settlement Process” (2004) 2 NZJPIL 259 at 267.
98 When a PSGE is not best suited to be the primary iwi representative it should also be able to delegate these representative roles to the most appropriate iwi authorities. This point was discussed in section II.B.2.(b).
99 Representative rights and positions provided for in settlement legislation nearly always reference an iwi’s PSGE as opposed to the iwi itself. In some instances, a requirement to ‘consider the interests of...’ will reference an iwi itself.
100 Ngāti Tūwharetoa (Bay of Plenty) Claims Settlement Act 2005, s 103.
101 Ngāti Rangi Claims Settlement Act 2019, s 83.
102 Ngāti Whare Claims Settlement Act 2012, s 34.
interests more often reference an iwi’s PSGE. They are treated as the representative of the iwi in these instances.
The second form of engagement through statutory acknowledgement provisions is also a limited form of engagement. Statutory acknowledgements are granted over Crown-owned land of significance to an iwi.103 They require local councils and authorities who approve resource consent applications to have regard to the statutory acknowledgement when deciding whether PSGE governors (usually trustees) are affected persons for the purpose of the application.104 The Environment Court and Heritage New Zealand Pouhere Taonga have similar obligations. They also often require entities to provide PSGEs with a summary of resource consents that impact the statutory acknowledgement land.105 This form of representation also recognises the PSGE as the primary representative of an iwi. It is more likely to lead to direct engagement than a right to consideration of interests, though it does not require actual engagement with the PSGE in the first instance.
The third form of engagement is the requirement for authorities to consult PSGEs. An example of this is the requirement for the New Zealand Conservation Authority or a Conservation Board to consult with a PSGE when making decisions relating to land subject to an overlay classification.106 The purpose of an overlay classification is primarily to trigger this obligation. A requirement for consultation has also been linked to other events, including the withdrawal of protocols,107 exercising powers concerning minerals,108 reclassification of Crown-owned reserve sites,109 and the making of decisions that relate to a significant river.110 This is a stronger form of engagement and requires PSGEs to actively take on a representative role.
The fourth form of engagement is the active participation of PSGEs, usually within resource management and conservation regimes. There are three common ways that this happens. First, an iwi may have the right to prepare and submit a planning instrument that authorities must
103 Office of Treaty Settlements, above n 8, at 122.
104 Hineuru Claims Settlement Act 2016, s 35–38.
105 Raukawa Claims Settlement Act 2014, s 28.
106 Ngāti Hauā Claims Settlement Act 2014, s 48
107 Ngāti Rangi Claims Settlement Act, s 22.
108 Section 83.
109 Section 101.
110 Section 112.
consider. Often this will relate to an area,111 or specific resources in an area.112 Second, provisions may be included that create partnership agreements,113 create joint advisory committees,114 or appoint PSGE governors to forums.115 These are all instances of direct representation in decision-making. Third, provisions may transfer powers that authorities would otherwise hold.116 This may be a full transfer of powers or a right to appoint members of a decision-making body, such as a panel that hears resource consent applications.117 This is the most direct form of participation.
A PSGE entity should be capable of performing the roles associated with these four forms of engagement. This section has focused on PSGE interactions with the Crown and Crown agencies. Interactions between PSGEs and other third parties are not a discrete section of this dissertation; however, relevant discussion is included in section IV.A.
D Dispute Resolution
Establishing fair and independent dispute resolution mechanisms is part of developing effective institutional capability.118 In general, the effective resolution of disputes is also considered an aspect of good governance.119 Many PSGEs currently have provisions for the management of disputes in their charters.120 This section discusses the need for tikanga consistent dispute resolution processes and the role of the courts in these processes.
Dispute resolution processes in PSGE charters often incorporate tikanga Māori. This may be at a general level where a specific dispute resolution process is laid out but is subject to an object that requires tikanga to be advanced. It may also be more explicitly incorporated into the process, such as through a requirement that a mediator is skilled in tikanga-based dispute resolution.121 Each iwi will have their own specific tikanga around dispute resolution, but two high-level principles that are relevant are mana and utu.
111 Ngāti Toa Rangatira Claims Settlement Act 2014, s 146.
112 Te Rarawa Claims Settlement Act 2015, s 119.
113 Hineuru Claims Settlement Act, pt 2, subpt 1.
114 Ngāti Toa Rangatira Claims Settlement Act, s 162. 115 Ngāti Manawa Claims Settlement Act 2012, s 104. 116 Ngāti Rangi Claims Settlement Act, s 97.
117 Ngāti Kuri Claims Settlement Act, s 67.
118 Dewes, above n 73, at 46.
119 Joseph, above n 35, at 685.
120 At 700.
121 Central North Island Forests Land Collective Settlement Act 2008, sch 2, cl 6(7).
As previously discussed, mana is a complex concept with many different aspects. Preserving an individual's mana is important.122 Dispute resolution in a PSGE context should seek to preserve and restore the mana of all involved. Utu is to ‘make response, whether by payment, blow, or answer.’123 It is a concept of reciprocity and is linked to mana. With a loss of mana there is a need to obtain utu.124 This applies to situations where disputes arise. Utu is a concept that can only operate with human intervention.125 This means that a process is needed to resolve disputes to ensure the restoration of mana, because this restoration will not happen without intervention. Each iwi will have their own preferred process for this.
Because PSGEs are legally second law entities, they are subject to the jurisdiction of the courts. The courts can be an effective recourse for members without, or who have exhausted, alternative methods to resolve disputes. However, the courts tend to prioritise the second law over the first law. This is particularly an issue in instances where there is a lack of incorporation of tikanga Māori into PSGE processes, because in such instances there is no second law consistent imperative to look to the first law as a framework to resolve an issue. Hefferan supports the view that judicial review of PSGEs is undesirable.126 She presents four reasons why PSGEs should not be subject to judicial review. Her arguments can be applied generally to court involvement in PSGE-related disputes.
First, she argues that judicial review of PSGEs infringes on tino rangatiratanga.127 This is because the judicial review of PSGEs runs against a presumption that iwi have the right to govern their own affairs. General court involvement in PSGE disputes also undermines iwi self-governance in this way. However, this argument applies less strongly to court involvement in disputes between iwi and third parties. In these instances, it may not be possible for the iwi and the third party to resolve a dispute without an adjudicator external to the iwi. An example of this is the recent case Ngāti Whātua Ōrākei v Attorney-General.128 In this instance Ngāti
122 Benton, above n 12, at 156.
123 At 467.
124 At 473.
125 At 475.
126 Gina Hefferan “Post-Settlement Dispute Resolution: Time to Tread Lightly” [2004] AukULawRw 9; (2004) 10 Auckland U L Rev 212.
127 At 226.
128 Ngāti Whātua Ōrākei Trust v Attorney-General, above n 20.
Whātua Ōrākei chose to seek a court declaration to resolve a dispute between iwi over mana whenua rights.
Second, Hefferan argues that litigation is inefficient in a PSGE context. This is because disputes are often political and involve complex cultural questions that do not align with pre- existing heads of judicial review and because parties are typically in a continuing relationship, so litigation and its fallout are inappropriate.129 This latter part of this point generally applies to adversarial dispute resolution methods. Like the previous argument, this applies most strongly to internal disputes or disputes between parties that will remain associated.
Third, judicial review is focused on judging the correctness of decision-making processes. Courts generally do not have sufficient expertise in tikanga Māori to assess issues to which it relates.130 The presentation of tikanga evidence may partly mitigate this, but this remains an issue in instances of conflicting evidence. A lack of court expertise in tikanga is a relevant concern in any instance where questions of tikanga arise, not just judicial review. While this argument applies to some third-party relationships, it does not apply to any relationship between a PSGE and a third party that is entirely based in the second law.
Fourth, she argues that the justiciability of an issue involves assessing whether judicial review is appropriate, having regard to constitutional and democratic constraints.131 Previously councils have been deferred to because they are elected representatives and constitutionally should be deferred to in most instances. This approach could be applied to iwi decision-making bodies, including PSGEs, based on the courts upholding Treaty principles. This argument applies to any situation where the court reviews a PSGE decision-making process.
These four arguments suggest that the court’s role in regulating disputes involving PSGEs should be limited, particularly if these are internal disputes.
E Summary of Requirements
The sections above conclude what the core purposes of a PSGE require of its legal corporate structure. The requirements emerge from the interaction of these purposes with both first law
129 Hefferan, above n 126, at 227.
130 At 228.
131 At 229.
and second law norms. This reflects the PSGEs position at an intersection of these systems. The requirements are summarised in table 1 below:
|
Role
|
Functions
|
Requirements of PSGEs
|
|
Act for an iwi
|
Iwi servant
|
Ensure that governors of a PSGE are servants of an iwi. This includes
subservience to non-governors in some decision-making instances.
|
|
Defining PSGE beneficiaries
|
Definition of beneficiaries by descent.
|
|
|
Definition of beneficiaries by a standard of active engagement with an
iwi.
|
||
|
Differing between classes of beneficiary
|
Differentiation between classes of beneficiary for the purpose of providing
differing rights to participate in decisions and benefit
from settlement
redress.
|
|
|
Intergenerational interests
|
Inclusion of intergenerational interests in decision making.
|
|
|
Manage assets
|
Serving private purposes and human beneficiaries
|
Application of PSGE assets to both beneficiaries and private
purposes.
|
|
Governance
|
Separation of PSGE governance and management.
|
|
|
Separation of PSGE commercial and social activities.
|
||
|
Boards have cultural and tikanga-based expertise and second law corporate
expertise.
|
||
|
Regulation of some functions and activities in line with tikanga
principles, as opposed to strict rules.
|
||
|
Culturally fitting governance structure.
|
||
|
Clear decision-making structures that meaningfully incorporate the voices
and authority of relevant iwi members that are not PSGE
governors.
|
||
|
Accommodation of internal representation on boards and the potential
conflicts of interest that this may bring.
|
||
|
Representative voice
|
Acting as a representative
|
Effectively acting as an external representative of an iwi, particularly in
relation to resource management and conservation.
|
|
Resolve disputes
|
Tikanga consistent dispute resolution
|
Incorporation of tikanga into dispute resolution.
|
|
|
Interaction with the courts
|
Limited reliance on courts to resolve internal disputes.
|
|
Meaningful recourse to courts for PSGE members and iwi when a PSGE’s
dispute resolution mechanisms have failed.
|
III The Trust
The previous chapter identified what the core purposes of a PSGE require of its legal corporate form. This chapter describes trusts and their theoretical basis. This provides the background for the next chapter to analyse whether trusts can meet each PSGE requirement while remaining within their theoretical limits.
A An Appropriate Theoretical Approach
This dissertation focuses on the extent to which the second law is changing to accommodate the first law. This means that an appropriate theory of trusts should be consistent with the second law but comparable to the first law. The theory adopted by this dissertation conceptualises trusts as underpinned by both property and obligational concepts.
To be consistent with the second law, a theory should articulate its understanding of trust law in terms of concepts native to the second law system.132 This criterion reflects an assumption that the reasons judges give to justify their interpretation of the law reflect the concepts they are actually using. The obligational and proprietary concepts employed in the theory this dissertation adopts meet this criterion because trust cases discuss trust law in these terms.133
A theory should also fit the legal content of trust law.134 This includes the minimum features required for a trust to exist and how trust law applies to different persons like the settlor, trustee, beneficiaries and third parties. These features are identified in this section.
B Description of the Trust
The trust is a fiduciary relationship between the trustees and beneficiaries.135 This is characterised by minimum requirements that must be met for a trust to exist and an ‘irreducible core’136 of duties demanded of trustees. In New Zealand these requirements and duties come from the common law and the Trusts Act 2019 (the Trusts Act).
132 Stephen A Smith Contract Theory (Oxford University Press, New York, 2004) at 24.
133 Law Commission Review of the Law of Trusts: A Trusts Act for New Zealand (NZLC R130, 2013) at 68.
134 Smith, above n 132, at 7.
135 Trusts Act 2019, s 13.
136 Armitage v Nurse [1998] Ch 241 (CA) at 253.
For a trust to come into existence, a settlor must express a certain intention to create a trust, identify the trust property, and identify the trust’s beneficiaries.137 These three requirements were created in the common law and are restated in the Trusts Act.
Deeds of trust establishing PSGEs do not often explicitly identify the settlor of the trust,138 but each time assets are transferred to a PSGE this is the settling of a new trust, on the same terms as the PSGE trust deed, with the transferor as settlor. This includes the Crown transferring settlement redress. Because there is often no clearly identified original settlor and because subsequent settlors like the Crown are not afforded powers under PSGE trust deeds, modern developments in trust law relating to the legitimate extent of ongoing settlor powers are unlikely to have direct relevance to PSGEs, except potentially for subsidiary trusts.139
A trust is not a legal entity in and of itself; it cannot hold the trust property for the beneficiaries. This is the role of the trustees, and the trust commences when the trustees hold the trust property.140 Upon commencement, the trustees are subject to duties associated with corresponding beneficiary rights.141 When discussing breaches of trustee duties Tipping J identifies three different kinds of duties:142
The second category of fiduciary duties are obligations to be loyal and act on behalf of the beneficiaries with respect to the trust property. This includes the duty to act in good faith, to not make unauthorised profit from the trust, to not place themself in a position where their interests conflict with those of the beneficiaries, and to not act in the interests of a third person
137 Trusts Act, s 15.
138 There are some exceptions. The trust deed for Ngāti Kuri identifies the previous trust used for settlement negotiations as the settlor.
139 Modern developments include Clayton v Clayton [2016] NZSC 29, [2016] 1 NZLR 551, JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2017] EWHC 2426 (Ch), Webb v Webb [2020] UKPC 22, and Brkic v White [2021] NZCA 670.
140 Trusts Act, s 15.
141 Jessica Palmer “Theories of the Trust and What They Might Mean for Beneficiary Rights to Information” [2010] NZ L Rev 541 at 542.
142 Bank of New Zealand v New Zealand Guardian Trust [1999] 1 NZLR 664 at 687.
without consent.143 The distinction between these duties is relevant to establishing whether there has been a breach of trust and what is an appropriate remedy. Breach of the first category of property-based duties usually requires a loss of the trust property or damage to the trust property. It gives rise to remedies against both the trustee and third parties (provided they are not a bona fide purchaser). The second and third categories when breached do not give rise to proprietary remedies against third parties.
The Trusts Act identifies five mandatory trustee duties. The first two relate to compliance with the specific obligations of the trust. They are to know the terms of the trust,144 and to act in accordance with the terms of the trust.145 The next two restate the core fiduciary duties of the trustee to act honestly and in good faith,146 and act for the benefit of the beneficiaries.147
The fifth duty is to exercise powers for proper purpose.148 This cannot be clearly linked to common law conceptions of the irreducible core of trustee duties. The duty captures the fiduciary duty to not benefit third parties and more generally prohibits the fraudulent or excessive use of a power. It is unclear whether this duty provides the courts with the option to intervene when a power has not been used outside the scope of its terms, but where there is instead a defective decision-making process, such as a trustee failing to consider relevant considerations when exercising a power.
There are other aspects of trust law that relate to the core of what a trust is. The most important for this dissertation is the relationship between beneficiaries and third parties regarding trust property. When a trustee transfers property to a third party in breach of trust, the beneficiary can trace their equitable interest into this property giving rise to a proprietary claim to the property. A third party will take free of this claim only if they are a bona fide purchaser for value.
143 Bristol and West Building Society v Mothew [1996] EWCA Civ 533; [1997] 2 WLR 436 (CA) as cited in Law Commission Review of Trust Law in New Zealand: Introductory Issues Paper (NZLC IP19, 2010) at 37.
144 Trusts Act, s 23.
145 Section 24.
146 Section 25.
147 Section 26.
148 Section 27.
Trust law is flexible, and the core of the trust may vary with changes in how it is used.149 Historically the trust was primarily a conveyance tool, but its contemporary treatment is as more of a legal relationship for holding property. This is a fundamental shift in the application of trusts and has shifted how they are conceived of in the law. The core aspects of the trust discussed above reflect its contemporary conception, but these could change in the future with the right shift in legal context. This is reflected in the Trusts Act. Section 5(8) clarifies that the Act is not a code and is intended to be complemented by the common law and equity. As the common law changes, the principled basis of trusts may change. This could particularly be the case with the gradual incorporation of tikanga into the common law as discussed in chapter I. The theory outlined in the next section explains trust law as it is in New Zealand today.
C The Trust as a Proprietary and Obligational Construct
Many trust theorists adopt an approach which bases trust law on either proprietary or obligational concepts. This section describes a theory of trusts as a combination of both proprietary and obligational concepts, as advocated by writers such as Palmer150 and Jaffey.151 It is clear the trust deals with property in the form of the trust property and that the trust instrument creates obligations that the trustee must follow. What requires interpretation is the nature of the relationship between the trustee and the beneficiary and whether this interpretation explains the core characteristics of trusts. To understand a combined theory of trusts it is necessary to lay out the strengths and shortfalls of the proprietary and obligational explanations independently.
The proprietary theory regards the trust as ‘a structured transfer of property from the settlor to the beneficiaries’ via the medium of a trustee.152 The trustee has legal ownership of the trust property while the beneficiary has the ultimate beneficial ownership.153 This amounts to the allocation of different parts of what it means to be an owner of property between the two parties, namely the right to control the property to the trustee and the right to benefit to the beneficiary.154 The obligations that the trustee owes to the beneficiary stem from the latter’s
149 Law Commission Review of Trust Law in New Zealand: Introductory Issues Paper (NZLC IP19, 2010) at 38.
150 Palmer, above n 141.
151 Peter Jaffey “Explaining the Trust” (2015) 131 L.Q.R. 377.
152 James Penner “Exemptions” in P Birks and A Pretto Breach of Trust (Hart Publishing, Portland, 2002) 241 at 261.
153 Patrick Parkinson “Reconceptualising the Express Trust” (2002) 61(3) CLJ 657 at 658.
154 Jaffey above n 151, at 387.
beneficial ownership.155 Because the proprietary approach conceives of the trust as a structured transfer of property it requires that there be identifiable trust property.
The proprietary theory of trusts can explain many aspects of the trust. Notably this includes the rule in Saunders v Vautier,156 now restated in the Trusts Act,157 that allows beneficiaries acting jointly to wind up the trust,158 the requirements for identifiable trust property and beneficiaries,159 that third party claims against trustees do not attach to trust property,160 and that a trustee may recover trust property from third parties when they are the recipient of an unauthorised transfer of trust property (provided they are not bona fide purchasers for value).161
There are some aspects of trusts that the proprietary theory cannot fully explain. In the case of a discretionary trust the discretionary beneficiaries are regarded as only having a hope or expectation of benefitting from the trust rather than a right to any trust property until a distribution is made.162 Discretionary beneficiaries still have the same rights against third parties, but they nonetheless lack any concrete right to benefit. In this instance trust law does not require that particular property is vested in a particular beneficiary.163
The proprietary theory also cannot fully explain the particular standards of trustee duties, such as the duty to act honestly and in good faith,164 and to not breach the trust for reason of gross negligence on the part of the trustee.165 These duties are additional in the sense that they do not flow from a conception of the trust as a transfer of property.166
Generally obligational theories conceive of the trust as the voluntary assumption by the trustee of an obligation to carry out the trust. The trustee owns the trust property, and the trust relationship is a personal right of the beneficiary to the performance by the trustee with respect
155 Penner, above n 152, at 261.
156 Saunders v Vautier [1841] EngR 629; (1841) 4 Beav 115 at 116[1841] EngR 629; , 49 ER 282 (Ch).
157 Trusts Act, s 121.
158 Palmer, above n 141, at 546.
159 Trusts Act s 15.
160 Palmer, above n 141, at 550 and Jaffey, above n 151, at 379.
161 Jaffey, above n 151, at 389.
162 Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 (PC) at 713.
163 Palmer, above n 141, at 548.
164 Trusts Act, s 25.
165 Sections 40 and 41.
166 Palmer, above n 141, at 551.
to the trust property.167 This is contractual in a broad sense given that it is consent-based, and it aligns with features of contract law relevant to trusts as highlighted by Langbein, being the voluntary assumption of duties and party autonomy over terms.168
As with the proprietary theory, the obligational theory can explain many areas of trust law. Uniquely it explains discretionary trusts because an obligational view only requires the trustee to assume obligations to deal with the trust property in a particular way. An obligational theory of trusts can also justify standards of care that are higher than those that would flow from a purely proprietary theory, though in doing so it does not give a full explanation of the content of these obligations.169
However, the obligational theory cannot cohesively explain the beneficiaries’ rights against third parties such as a trustee’s creditors or recipients of unauthorised transfers of trust property. This is because under an obligational theory the beneficiary only has a personal right of performance against a trustee.170
Neither the proprietary nor obligational theories of trusts can separately provide a full picture of trust law. Palmer regards the proprietary theory of trusts as core to what a trust is171 and says that it can account for trustee duties that are of a custodial nature.172 These duties align with Tipping J’s duties relating to the care and preservation of trust property.173 Palmer then regards the obligational conception of trusts as providing a basis for particular standards of care that must be reached by the trustee as a custodian of property.174 These align with Tipping J’s fiduciary and ‘skill and care’ duties.
167 Jaffey, above n 151, at 378.
168 John H Langbein “The Contractarian Basis of the Law of Trusts” (1995) 105 Yale LJ 625 at 650.
169 Palmer, above n 141, at 552.
170 Jaffey, above n 151, at 379.
171 Specifically, a proprietary theory that takes for a broad conception of what is property and that only requires that trust assets be beneficially applied to another (rather than requiring a beneficiary to beneficially own the property).
172 Palmer, above n 141, at 553.
173 Bank of New Zealand v New Zealand Guardian Trust, above n 142, at 687.
174 Palmer, above n 141, at 553.
In reaching a similar conclusion Jaffey regards the creation of the trust as involving the two separate legal events of:175
This conception provides a clear legal genesis for each set of trustee duties.
This mixed conception of the theoretical basis of trusts provides the fullest explanation for trust law. It also fits with the reasoning of the courts in trust cases being rooted in both proprietary and obligational concepts.176 There is no contradiction between the two underpinnings of trust law in this theory because the influence of each of the conceptions is distinct. They emerge from different legal events and lead to compounding, rather than overlapping, legal duties.
175 Jaffey, above n 151, at 393.
176 Law Commission, above n 133, at 68.
IV Theoretical Analysis of Whether the Trust can Overcome these Issues
This chapter analyses whether the trust can meet each of the requirements from chapter II. It is structured with requirements relating to the same area of trust law grouped together. Six areas of trust law are discussed. The areas where there is the most tension between trust law and the requirements are discussed first.
A Conflicts of Interest
The duty to avoid conflicts of interest is a default duty in the Trusts Act.177 This means that it can be modified and excluded by the trust terms or another Act.178 The exclusion of this duty would allow trustees to act while they have conflicts of interest. PSGE deeds of trust do not typically exclude this provision and instead provide that interested trustees must not take part in decisions they are interested in. This instead modifies the default duty for trustees to act unanimously.179
Exclusion of the duty to avoid conflicts of interest does not absolve trustees of responsibilities to act for the benefit of beneficiaries and exercise powers for proper purposes.180 These restrict trustees from acting in pursuance of other interests. An interested trustee acting in a transaction is at greater risk of breaching one of these duties if something goes wrong.
There are two particularly important ways that PSGE trustees may have interests that conflict with these duties:
The first is an expected consequence of PSGEs representing iwi, which are made up of hapū, sometimes with differing interests. There are two relevant ways that an interest in a hapū may
177 Trusts Act, s 34.
178 Sections 5 and 28.
179 Section 38.
180 Sections 26 and 27.
181 This relates to the requirement that a PSGE can accommodate internal representation.
182 This relates to relationships between PSGE trustees and non-Crown third parties, as flagged in section II.C.
manifest. The first is a general interest a trustee may have due to being a member of a constituent hapū. As the hapū making up an iwi are beneficiaries of the PSGE, the trustee’s interest does not engage the duty to avoid conflicts of interest. This is because their interests align with those of a particular group of beneficiaries. It instead engages the duty of impartiality between beneficiaries.183 This is also a modifiable duty that is subject to the terms of the trust. For PSGEs with hapū-based governance structures explicitly included in their trust deed, trustees are often appointed as representatives of particular hapū. This implies that to some extent they will be partial to the interests of that hapū. If so, this expected partiality is a modification of the duty of impartiality, particularly if there is balanced representation from the constituent hapū.
The second way that a hapū interest may manifest is through a financial or otherwise beneficial interest in a legal entity associated with a hapū, such as an ahu whenua trust, which is not a beneficiary of the PSGE. In this instance, the duty to avoid conflicts of interests is engaged. Naera v Fenwick is an example of this.184 The Court took a strict approach to applying the no- conflict duty in the context of a Māori land trust. Because of this, the beneficial interests that two trustees had in other trusts that they were dealing with breached the no-conflict rule, and transactions involving these trusts were voidable.185 The risk of trustee actions being set aside in instances where they have conflicting beneficial interests can be managed by PSGE trust deeds either excluding the no-conflict duty or excluding interested trustees from the transactions they are interested in, as described above. This does not fully align with whanaungatanga, which regards working with connected kin groups and others with which trustees may have strong political and economic relationships as the norm.186 While the law of trusts does not prevent these connections from existing, it does require trustees to step out of interested decision making if the relevant default trustee duties are not modified.
The analysis in the second example of hapū-related interests applies to trustee connections with fully distinct third parties. When the trustee’s connection is beneficial in nature, the above analysis applies, and the trustee will need to step out of decision making if the default no- conflict duty is not modified. If the connection is solely political or professional in nature then
183 Trusts Act, s 35.
184 Naera v Fenwick [2013] NZCA 353.
185 At [102].
186 Williams, above n 3, at 9.
it will not engage the no-conflict rule, especially if a PSGE trust deed sets up clear definitions on what is considered a conflict.187
B Trustee Control
The trustee’s right to control the trust property is reflected in the Trusts Act which states that a requisite characteristic of an express trust is that ‘a trustee holds or deals with the trust property’.188 Four of the identified requirements of a PSGE (in Table 1) may present a challenge to the trustee’s control of the trust assets as traditionally understood:
The first two requirements entail some subservience by the trustee. They relate to limits in the trust deed on a trustee’s control. The third and fourth requirements relate to delegation by the trustee of their powers.
Limits on the trustee’s control can be a strong, moderate, or weak limit. A strong limit arises when a power that directly influences the operation of the PSGE is vested in a non-trustee iwi member. A moderate limit arises when a trustee must consider certain principles or the views of non-trustee iwi members, that are not directly related to the beneficiaries, when exercising a power. These are mandatory considerations, but the trustee is not required to act consistently with these considerations if they have a reason not to. A weak limit exists when a trustee must consider certain principles or the views of non-trustee iwi members when exercising a power but at their discretion may include these in their decision making. The difference between a weak and a moderate limit is that the trustee may act inconsistently with considerations without a reason under the weak limit.
187 “Deed of Trust of Te Manawa o Ngāti Kuri Trust” (2013) Ngāti Kuri Trust Board Incorporated
<ngatikuri.iwi.nz>, cl 15.1.
188 Trusts Act, section 13.
None of these limits necessarily undermine the trust when employing the mixed theoretical framework proffered in chapter IV. The weak or moderate limits place further bounds on a trustee’s decision-making process but do not override the trustee’s right and responsibility of control. Existing limits in trust law operate in much the same way, such as requirements to prudently invest and to exercise reasonable care and skill.189
The strong limit can also be consistent with a mixed theory of trusts, provided the power granted to the non-trustee does not amount to direct control of the trust property nor impose directives such as to benefit non-beneficiaries that are inconsistent with trust purposes.190
Trust deeds have long contained delegations of powers to non-trustees.191 The boundaries of this practice have been explored in New Zealand in Clayton v Clayton where the Supreme Court, in obiter, entertained the notion that a trust may not be valid if a settlor were to retain such broad powers that it cannot be said that they have disposed of the trust property in favour of another.192 For a trust to benefit the beneficiary, a settlor must depart from the beneficial ownership of their property.
Because the trust must benefit the beneficiary, a strong limit allowing a third party to defeat the interest of the beneficiaries would also be inconsistent with the trust. In contrast, powers that require a trustee to use the trust property to accomplish a broader objective that is nevertheless consistent with the overall purpose of the trust or to require them to manage parts of the trust property in a certain way may not offend.193 It remains to consider whether any of the general objectives of the PSGE overstep this boundary.
Decision-making for an iwi may rest somewhere other than or in addition to the trustees because of the requirement that trustees are servants of an iwi. PSGEs should uphold the iwi’s decisions as to iwi interests. This may mean non-trustees have powers such as to set investment targets or direct PSGE priorities, such as directing trustees to establish a scholarship or develop particular sites owned by the trustees. Even if a trustee is bound to follow directives, this power
189 Trusts Act, ss 29 and 30.
190 See for example Kain v Hutton [2008] NZSC 61, [2008] 3 NZLR 589 (SC) where a transfer made by trustees was ruled to be fraud on the power because it benefitted non-beneficiaries.
191 Note that this is different from a trustee choosing to delegate their own powers.
192 Clayton v Clayton [2016] NZSC 29, [2016] 1 NZLR 551 at [124].
193 Jeff Kenny, Tanya Speight and Katrina Wood “Protectors/Guardians and Company Trustees” (paper presented to Trusts Conference – 2021 A Trust Odyssey, Wellington, June 2021) 37 at 74.
would not exceed the theoretical bounds of a trust if the directives benefit the beneficiaries or advance trust purposes. This still allows the trustee to ‘hold and deal’ with the trust property. It is similar to a trust end date by which a trustee must distribute the trust property.
Per requirement two, an iwi may want to ensure that trustees pay particular attention to non- trustee iwi members or principles when making decisions. Many measures to achieve this fall within the moderate or weak categories of limits and are accordingly consistent with trust law and theory. This includes requirements for trustees to act in accordance with tikanga, or the inclusion in trust purposes of specific tika.194
Two examples of non-trustee say in PSGE affairs are the Ngāti Tūwharetoa Fisheries Charitable Trust, which provides for a Kaumātua Committee which determines disputes relating to tikanga; and the Deed of Trust of Ngāti Hauā Iwi Trust which provides for the input into trust affairs by the Tumuaki of the Kīngitanga by the following rights to:195
These rights stop at the point where the rights of a trustee would typically begin.
Many PSGE trust deeds also include provisions that require major transactions or changes to a trust deed to be approved by a special resolution of the beneficiaries.196 This is a check on the trustee’s powers. Checks like this are consistent with trustee control of trust property because they still require the trustee to initiate the vote.
The limits on trustee control from requirements one and two are consistent with trust law, provided that the limits do not lead to actions that are inconsistent with the beneficiary’s interest.
194 “Deed of Trust of Ngāti Hauā Iwi Trust” (16 September 2016) Ngāti Hauā Iwi Trust <ngatihauaiwitrust.co.nz>, cl 2.4.
195 Clause 4.1.
196 Ngāti Kuri Trust Deed, above n 187, cls 2.5 and 26.
Requirement three provides that there should be a distinction between governance and management. PSGEs and other large trusts commonly employ managers to perform the day- to-day task of managing assets.197 This coheres with trust law because governance functions remain with the trustees and these typically include the trustee’s mandatory duties.
Section 67 of the Trusts Act limits trustee delegation of powers. Trustees are not allowed to delegate powers that relate to the distribution, use, or possession of trust property.198 This reflects that the obligation to carry out the terms of the trust is personal to the trustees, it cannot be enforced against non-trustee parties. This is a partial limit on the separation of governance and management. Trustees will need to ultimately approve non-trustee dealings with the trust property.
Requirement four provides that commercial and social activities should be separate. Many PSGE have achieved this by creating subsidiary companies to manage the commercial operations.199 Trustees transfer assets to these subsidiary companies in exchange for shares that become the trust property.200 The shares provide both income and capital value. Trustees maintain sufficient control of commercial operations via voting rights held by the trustees for the benefit of the beneficiaries. Under this arrangement, the directors of the subsidiary company can focus freely on commercial performance and maximising shareholder value while the PSGE can apply the income from the shareholding to other purposes.
Trust law can meet requirements three and four through these two approaches to delegating trustee powers.
C Certainty of Objects
Certainty of objects is core to the trust. Since the 1970s, the standard of what amounts to sufficient certainty of objects has been relaxed. The House of Lords in McPhail v Doulton201
197 See for example “Ko Wai Mātou / Our People” Tūwharetoa Settlement Trust <https://www.tst.maori.nz/about- the-trust/our-people/>.
198 Trusts Act, s 67(2).
199 See for example “Te Rūnanga o Toa Rangatira Annual Report” (3 November 2021) Te Rūnanga o Toa Rangatira <ngatitoa.iw.nz>.
200 Companies Act 1993, section 35.
201 McPhail v Doulton [1970] UKHL 1; [1971] AC 424 (HL).
established that objects are sufficiently certain if beneficiaries can be identified by particular criterion defining the class of beneficiaries,202 rather than by a complete list of beneficiaries. Re Denley’s Trust Deed (Re Denley) is then a further modification of certainty of objects that amounts to the creation of a unique private purpose trust.203 This case concerned a trust holding land ‘for the purpose of a recreation or sports ground primarily for the benefit of the employees of the company and secondarily for the benefit of such other person or persons (if any) as the trustees may allow to use the same...’ While this was a widely defined class of beneficiaries, the Court found that the beneficiaries could be ascertained at any point, so the trust was enforceable. These two cases set the boundaries within which a PSGE’s objects must be defined.
Five requirements relate to certainty of objects:
Trusts can meet requirements one and two. In both instances, beneficiaries are sufficiently ascertainable. Beneficiaries are commonly defined by descent in family trusts. This includes future descendants. Definition by active engagement with an iwi presents a similar scenario to Re Denley because the beneficiaries are defined by their relationship with a corporate entity. Provided there is some measure of active engagement, then the beneficiaries are ascertainable.
More complex considerations for defining beneficiaries, such as the tikanga of an iwi relating to whāngai relationships,204 can be accommodated for by a PSGE maintaining a register of members.205 Committees can then be appointed tasked with deciding applications to be
202 This was for both discretionary trusts and powers of appointment (i.e. trusts without substantial discretion).
203 Re Denley’s Trust Deed [1969] 1 Ch 373.
204 Ngāti Hauā Trust Deed, above n 194, cl 1.1.
205 See for example “Trust Deed establishing Te Runanganui o Ngati Porou” (January 2010) Te Runanganui o Ngati Porou <ngatiporou.com>, sch 1.
included in the membership register.206 PSGEs with such a committee often appoint iwi members with expertise in the whakapapa and tikanga of the iwi.
Trust law also accommodates the third requirement so long as the way classes of beneficiaries are distinguished is a legitimate approach to defining trust objects. Trusts often have multiple classes of beneficiaries. An example of this are trusts where there are beneficiaries with life interests and others with a residual interest.207
The remainder of this section discusses requirements four and five.
Re Denley concerns a trust with private purposes that ultimately benefit a class of beneficiaries. The courts have been willing to allow these private purpose trusts, but the Trusts Act may not. Section 13 of the Act provides that trust property must be dealt with for ‘beneficiaries or for a permitted purpose’. ‘Permitted purpose’ can be interpreted as including purposes permitted by the common law. Section 5 of the Act supports this interpretation. It provides that the Act is complemented by the common law. However, this interpretation is yet to be tested.
It has been argued that private purpose trusts are consistent with the mixed theoretical framework.208 A hybrid-purpose trust with both Re Denley private purposes and conventional beneficiaries would also be theoretically consistent. It is composed of two theoretically consistent types of trust. Their unification does not change this consistency.
PSGEs are employing this hybrid-purpose trust model. Many have purposes relating to beneficiaries and wider purposes. For example, the Ngāti Hauā Trust Deed has purposes of both ‘the promotion amongst Ngāti Hauā of the educational, spiritual, economic, social and cultural advancement of well-being of Ngāti Hauā’209 and ‘the maintenance and establishment of places of cultural or spiritual significance to Ngāti Hauā’.210 The former fits the classic requirement for a trust to benefit beneficiaries, whereas the latter bears more similarity to the trust purpose in Re Denley.
206 Schedule 1, cl 4.
207 Re Mulligan [1998] 1 NZLR 481 (HC).
208 Palmer, above n 141, at 547.
209 Ngāti Hauā Trust Deed, above n 194, cl 2.4 (b).
210 Ngāti Hauā Trust Deed, above n 194, cl 2.4(c).
The second law supports these forms of trust if the interpretation of the Trusts Act argued for above is correct. Even if it is not, these PSGE have nonetheless been accepted as legitimate within the second law. Settlement legislation acknowledges the existence of specific PSGEs, some of which have adopted this approach. This provides a statutory confirmation of the structure of these PSGEs.211
Trustees must consider the interests of all identifiable beneficiaries, including future persons. How the trustees consider and weigh these interests can be specified in the trust deed, otherwise a default duty of impartiality applies.212
Whether PSGE trustees can advance the interests of ancestors is less clear.213 The specifics of what this requires will significantly differ with tikanga and context. This section therefore approaches this discussion at a theoretical level. Two ways to meet this requirement are treating ancestors as beneficiaries or requiring the trust to pursue a private purpose advancing their interests.
Current trust law contains no precedent for deceased persons being trust beneficiaries.214 This is inconsistent with the proprietary nature of trusts. Property requires a thing and a person who owns that thing.215 Conventionally a deceased person is not recognised as having legal personhood. The understanding that a beneficiary has a proprietary interest in the trust property does not admit deceased persons as beneficiaries.
However, New Zealand law may be shifting on this point. In Ellis v R, the Supreme Court recently allowed for the continuation of legal proceedings despite the death of the appellant. 216
211 This would then be a specific modification of trust law rather than an approach that applies to all varieties of trusts.
212 Trusts Act, s 35.
213 The inclusion of this requirement in this dissertation is an example of defining the limits of what a PSGE may be required to do as widely as may be conceivably required. Through discussing this requirement, it demonstrates also whether any less stringent requirements can be met.
214 There are instances of grave maintenance being an allowable purpose for a trust, but this amounts to a type of private purpose.
215 Roger Cotterrell “Power, Property and the Law of Trusts: A Partial Agenda for Critical Legal Scholarship” 14 Journal of Law and Society 77 at 82.
216 Ellis v R [2020] NZSC 89.
The Court released its reasoning at the same time as the publication of the judgment for the substantive appeal.217 Tikanga was not the Court's primary reason for continuing the appeal, but the Court reaffirmed the understanding that the common law is influenced by tikanga.218 This case continues the judicial understanding that tikanga is part of and influences the common law.219 Under this influence it is conceivable that notions of legal personhood may change over time.
The incorporation of the interests of ancestors is more likely allowable in trust law as a private purpose. As discussed in the above section, PSGEs have adopted trust models that include private purposes. While this requirement can theoretically be accommodated, explicit examples of this are lacking.
D Extending Trustee Duties
The Trusts Act includes mandatory and default trustee duties that can be part of any trust. The terms of the trust can define further duties.220 The requirement that PSGE trustees act as external representatives of an iwi can impose such duties. The discussion in section II.C demonstrated how this often takes the form of representative roles that the trustees undertake. This section analyses how trust law treats these roles.
There are two ways that trust deeds require trustees to undertake representative roles.221 First, this may be a duty imposed by the trust deed. An example of this is the Ngāti Whātua Ōrākei Trust Deed which contains an incidental purpose that requires the trustees to ‘be the representative of the collective interest of Ngāti Whātua Ōrākei and the legal representation of Ngāti Whātua Ōrākei in relation to that collective interest’.222 Secondly, the duty to perform the role may come from settlement legislation but be incorporated as a trustee obligation by a general requirement that trustees operate the trust as the PSGE for their particular settlement.223
217 Ellis v R [2022] NZSC 114.
218 At [19], [108]-[110], [171]-[174], [257]-[259] and [279].
219 Takamore v Clarke, above n 26, at [94].
220 Trusts Act, s 5(7).
221 If a trust deed does not incorporate a duty to undertake these roles, then trustees will still be required to perform these roles by legislation. In this instance, judicial review would be the primary check on their decision-making. This dissertation does not explore this scenario and is instead confined to instances involving trust law.
222 “Trust Deed for Ngāti Whātua Ōrākei Trust” (2020) Ngāti Whātua Ōrākei <ngatiwhatuaorakei.com>, cl 2.4(e).
223 “Te Nehenehenui Trust Deed” (July 2021) Te Nehenehenui <tenehenehenui.iwi.nz>, cl 2.5(e).
It is possible that in some instances these roles could be treated as personal powers of a trustee with no fiduciary fetters. However, it is more likely that trustees performing these representative roles will be required to act for the benefit of the beneficiaries, either by the trust deed or by operation of law. This can be in tension with the political aspects of these roles and limit the trustee’s ability to be an effective representative. There are two particular examples of this.
First, a trustee performing a representative role may act counter to the interests of beneficiaries in a specific instance with the intention of advancing beneficiary interests in some wider way. For example, a trustee may support a resource management application that practically disadvantages their iwi in some way because it advances another project that would provide greater benefit to the iwi. If this project is then not fully realised for other reasons, it is unclear whether trust law would find that the trustee has breached their duties. The risk of a breach may discourage strategic decision-making that on average would lead to more effective use of a representative role.
Second, an opportunity for an iwi to receive financial benefit through a PSGE may come with a more principled harm to an iwi. In this instance, it is not entirely clear what is in the interests of the beneficiaries. This uncertainty may stymie decision-making or introduce considerations into the decision-making process that should not be relevant.
These two scenarios are not likely to arise frequently and can be mitigated by taking measures like seeking a mandate from the beneficiaries or seeking directions from the court.224 Additionally, there are provisions in the Trusts Act which allow the court to take into account investment strategies in proceedings for breach of trust.225 This allows for the consideration of how trustees may strategically use representative roles or how they may be committed to exercising rights associated with a role in accordance with particular value frameworks.
While political nature of representative roles can be in tension with the requirement that trustees act in the interests of beneficiaries, the proffered scenarios are likely to be infrequent and can be mitigated by other elements of trust law.
224 Trusts Act, s 133.
225 Section 128.
E Governance Structure
Trust law imposes a minimum level of structure upon trusts. Past this, the terms of the trust may provide for more complex governance structures. These structures can create further complications that trust law needs to manage. Three requirements relate to governance structures of PSGEs. These are:
This section will discuss the first and second requirements. The third requirement is met because trust deeds can be drafted to include reference to broader principles when making decisions. The specific issues arising from more flexible standards are discussed in more depth in section IV.F, in the specific context of tikanga-based dispute resolution processes.
Trust law meets the first requirement because the only limits on the selection of trustees are that the appointed trustee must not be a disqualified person and that powers of appointment must be exercised in good faith.226 This means that iwi can design systems of trustee selection that ensure trustees have an appropriate range of experience. However, ensuring a range of trustee experience may not be the first priority when designing trustee selection systems. Systems may be designed with other important priorities in mind, like the democratic participation of the PSGE member base or the guaranteed representation of all hapū in an iwi. This can result in the appointment of trustees along lines other than ensuring a breadth of trustee experience.
Two evident approaches can be taken to address this. First, to meet short-term needs a trust deed may provide for the appointment of committees or special trust advisors that can provide the necessary expertise to trustees. The trust deed of the Ngāti Kuri Trust provides an example of this. Cl 4.1 allows for the appointment of a Kaunihera Kaumatua to advise on matters relating
226 Trusts Act, ss 94 and 96.
to tikanga, reo, kawa, korero and whakapapa of Ngāti Kuri. Second, to ensure that long-term needs are met, a PSGE can provide for the development of skills within their iwi. This can be accomplished through directly supporting the professional development of iwi members.
The key limit trust law places on governance structures is the requirement that the trustee holds and deals with the trust property. How trustees are chosen, the limits on their exercise of powers, and who else may have powers is extremely flexible and can be shaped by the culture of the beneficiaries. An example of an iwi’s culture shaping a trust’s governance structure is Te Uru Taumatua of Tūhoe. Te Uru Taumatua is based around tairapara. These are Tūhoe management systems whereby hapū in different parts of Te Urewera govern themselves and respond to issues within their region. Trustees of Te Uru Taumatua are selected through these tairapara.227 This exemplifies the preservation of traditional iwi governance structures alongside and within a PSGE that has the responsibility for the management of collective assets of an iwi.
Trusts are in tension with culturally consistent governance structures because it relies on the second law concept of private property. The trust represents the second law's closest structure to true collective ownership, but still rests on private property because trustees ultimately still hold individual legal title to the trust property. Doctrines within trust law that focus on the wishes of the settlor as the driving force of trustee obligations are less consistent with collective ownership and tikanga than a ‘beneficiary-focused’ view of the trust.228 The theory described in chapter III is a ‘beneficiary-focused’ theory. It is consistent with the view that after the act of settlement, the settlor no longer has a special place in the trust relationship, subject to reserved powers. Trust deeds for PSGE reflect this focus. They focus on defining the relationship between the PSGE and the iwi-member beneficiaries. Often the deeds do not explicitly identify the trust settlor, and if powers are granted to people who are not trustees, it is not because they are the settlor of the trust.
227 Rawinia Higgins “Tūhoe-Crown settlement – Te Wharehou o Tūhoe: The house ‘we’ built” (2014) Māori LR. 228 Isaac Hikaka and Natalie Coates “Tikanga and Trusts” (paper presented to Trusts Conference – 2021 A Trust Odyssey, Wellington, June 2021) 193 at 197.
F Dispute Resolution
Not all dispute resolution requirements of a PSGE engage trust law. The availability of meaningful recourse to the courts for PSGE members concerns wider second law issues. This is briefly discussed in the second part of this section. Otherwise, two requirements engage trust law:
The first requirement can be met by including dispute resolution procedures in the terms of the trust and drafting these as the first point of call in the case of internal disputes. The Trusts Act includes further provisions that limit the need for PSGEs to rely on the courts. The Act seeks to make alternative dispute resolution (ADR) more accessible for trust-related disputes by providing that ADR may be used to settle disputes at the agreement of the parties involved even when the trust deed does not provide this,229 and allowing the court to appoint representatives for beneficiaries who are unascertained or lack capacity.230 These measures expand the range of second law dispute resolution options available for trust disputes and decrease reliance on the courts. ADR processes, particularly mediation, are preferable generally because they often are faster and less expensive than court proceedings. They are also preferable in a PSGE context because they are more flexible and can be shaped to the requirements of the disputing parties. This may involve establishing rules of conduct for a mediation that ensure tikanga-consistency or engaging kaumātua or other iwi authority figures as mediators.
The second requirement focuses on the nature of the dispute resolution procedures. This is addressed below.231
229 Trusts Act, s 143.
230 Section 144.
231 This discussion provides a specific example of the incorporation of tikanga into PSGE processes, as flagged in section IV.E.
Iwi establishing PSGEs have significant flexibility when drafting dispute resolution processes in their trust deed. This section discusses three approaches that iwi have taken when incorporating tikanga into dispute resolution.
First, some provisions broadly require disputes to be resolved in accordance with tikanga. Such provisions acknowledge tikanga as the form of law used for resolving disputes.232 These provisions are more common in agreements and arrangements entered into by PSGEs than their trust deeds. Trust deeds generally have more prescriptive processes. A broad reference to tikanga allows for the tikanga relevant to a particular dispute to be worked out, but this also carries a perceived risk of uncertainty. This is only a perceived risk because although tikanga does not manifest as codified rules, there are other points of certainty in its application to different scenarios.233 Nonetheless, corporates that only operate under second law systems may not be willing to include broad references to tikanga in agreements.
Second, some entities have established kaumātua committees to resolve or advise on disputes relating to particular matters. Section IV.B.1 gave the example of the Ngāti Tūwharetoa Fisheries Charitable Trust referring disputes to a Kaumātua Committee, and section IV.E.1 discussed the role of the Kaunihera Kaumatua in the Ngāti Kuri Trust Deed. Both these examples limit the types of disputes that the committee will address. Within these particular disputes, tikanga is incorporated in a way that directly maintains the authority of those who traditionally determine the application of tikanga.
Third, many PSGE trust deeds have codified dispute resolution processes. In designing these, iwi can incorporate tikanga processes and principles. A codified process provides certainty for those maintaining relationships with the PSGE but limits the application of tikanga. Dynamism is a core part of tikanga as a legal system. Its application is context dependent, resting on principles and past examples of application. The codification of dispute resolution processes is in tension with this.
232 Coates, above n 2, at 140.
233 At 141.
Trust law itself is flexible and allows for a variety of different approaches to the incorporation of tikanga into PSGE dispute resolution processes. The above three processes have different strengths and fit some contexts where PSGEs operate better than others. Factors outside trust law will be the key drivers of what processes are possible and how effective they will be.
Trusts are under the supervisory jurisdiction of the courts. The court may review trustee decisions on the application of a beneficiary,234 and have the power to vary or extend trustee powers.235 This means that once dispute resolution processes in a trust deed run out and ADR approaches are exhausted, the courts will be responsible for resolving disputes.
It is beyond this dissertation to discuss whether the court’s jurisdiction over PSGEs is appropriate. However, when matters do end up in the courts, it is important that this recourse is meaningful for those involved and appropriate to the circumstances. The quality of the judicial decision making should fit the cultural context of the iwi associated with the PSGE. This discussion is also beyond this dissertation; however, the remainder of this section notes some of the ways that the wider second law is changing to be more appropriate for PSGE- related disputes.
First, there has been a growing trend of courts engaging pūkenga.236 There are specific provisions for this in the Marine and Coastal Area (Takutai Moana) Act 2011 providing that the court may obtain the advice of a pūkenga for questions of tikanga.237 More recently the evidence of pūkenga has been a critical part of general trials that touch on tikanga sourced concepts, like mana whenua.238 The option of appointing independent pūkenga to advise the court has also been considered.239
Secondly, the High Court also has the option to refer cases to the Māori Appellate Court. The Māori Appellate Court generally consists of justices with greater expertise in tikanga than the general courts.
234 Trusts Act, s 126.
235 Section 130.
236 Coates, above n 15.
237 Marine and Coastal Area (Takutai Moana) Act 2011, s 99. 238 Ngāti Whātua Ōrākei Trust v Attorney-General, above n 20. 239 At [93].
Finally, there has been a trend of inviting intervenors such as Te Hunga Rōia Māori o Aotearoa in cases where questions of tikanga arise. This has allowed for more effective consideration of how tikanga applies to different contexts.
This dissertation has been confined to issues for PSGEs within trust law. As this section highlights, there are likely to be further challenges to PSGEs in other parts of the second law. This is an area that has significant potential for future research.
V Conclusion
This dissertation has derived requirements that a PSGE needs to meet to effectively fulfil their core purposes for an iwi and has analysed whether trusts can meet these. This revealed that trusts can meet these requirements most of the time but often with caveats. It was shown that conflicts of interest resulting from greater internal representation can be accommodated, so long as default trust duties are modified; trustee’s powers can be limited, so long as the interests of the beneficiaries are not defeated by this limit; traditional governance structures can be incorporated, but only if trustees still ultimately own the trust property. These caveats exist where the requirements, which are influenced by the norms of the first law, engage with the fundamental second law principles that underly trusts. If an iwi wishes to exceed the limits that these caveats create, there will need to be context specific modifications to trust law, or a fundamental change to its underpinnings.
While the trust has served well as a structure for PSGEs it is not a perfect fit. The Waka Umanga Bill was an attempt in the past to create a more appropriate entity for Māori corporate governance, but this was resisted because of its prescriptive approach and Crown origins.240 Hikaka and Coates have suggested a different approach for the future. In light of the growing influence of tikanga on the common law, they suggest that tikanga could itself create a more useful second law accepted property-ownership model.241 Any such developments should be approached with an eye for maintaining the integrity of tikanga. The task of the third law will be to manage this change.
240 Sacha McMeeking “Transforming Iwi Organisations – How Insights into Hybrid Organisations Can Help” in in Robert Joseph and Richard Benton (eds) Waking the Taniwha: Māori Governance in the 21st Century (Thomson Reuters New Zealand, Wellington, 2021) 389 at 395.
241 Hikaka, above n 228, at 202-203.
VI Bibliography
A Cases
Bank of New Zealand v New Zealand Guardian Trust [1999] 1 NZLR 664.
Brkic v White [2021] NZCA 670.
Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694 (PC).
Clayton v Clayton [2016] NZSC 29, [2016] 1 NZLR 551.
Ellis v R [2020] NZSC 89.
Ellis v R [2022] NZSC 114.
Kain v Hutton [2008] NZSC 61, [2008] 3 NZLR 589 (SC).
Naera v Fenwick [2013] NZCA 353.
Ngāitahu Maori Trust Board – Murihiku Lands [1982] Māori Appellate Court MB 1 (1981 APPEAL 5).
Ngāti Whātua Ōrākei Trust v Attorney-General [2022] NZHC 843. Porima v Te Kauhanganui o Waikato Inc [2001] 1 NZLR 472 (HC). Re Mulligan [1998] 1 NZLR 481 (HC).
Takamore v Clarke [2012] NZSC 116, [2013] 2 NZLR.
Wi Parata v Bishop of Wellington [1877] NZJurRp 183.
Armitage v Nurse [1998] Ch 241 (CA).
Bristol and West Building Society v Mothew [1996] EWCA Civ 533; [1997] 2 WLR 436 (CA).
Entick v Carrington [1765] EWHC J98; (1765) 95 ER 807 (KB).
JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2017] EWHC 2426 (Ch).
McPhail v Doulton [1970] UKHL 1; [1971] AC 424 (HL).
Re Denley’s Trust Deed [1969] 1 Ch 373.
Saunders v Vautier [1841] EngR 629; (1841) 4 Beav 115 at 116[1841] EngR 629; , 49 ER 282 (Ch).
Webb v Webb [2020] UKPC 22.
B Legislation and Bills
Central North Island Forests Land Collective Settlement Act 2008. Charities Act 2005.
Companies Act 1993.
Hineuru Claims Settlement Act 2016. Incorporated Societies Act 2022.
Marine and Coastal Area (Takutai Moana) Act 2011.
Ngāti Hauā Claims Settlement Act 2014. Ngāti Kuri Claims Settlement Act 2015. Ngāti Manawa Claims Settlement Act 2012. Ngāti Rangi Claims Settlement Act 2019.
Ngāti Toa Rangatira Claims Settlement Act 2014.
Ngāti Tūwharetoa (Bay of Plenty) Claims Settlement Act 2005. Ngāti Whare Claims Settlement Act 2012.
Raukawa Claims Settlement Act 2014. Te Rarawa Claims Settlement Act 2015. Trusts Act 2019.
Waka Umanga (Māori Corporations) Bill (175-2).
C Books and Chapters in Books
Carwyn Jones “Māori and State visions of law and peace” in Mark Hickford and Carwyn Jones (eds) Indigenous Peoples and the State: International Perspectives on the Treaty of Waitangi (Routledge, London, 2018) 13.
Carwyn Jones New Treaty New Tradition: Reconciling New Zealand and Māori Law (Victoria University Press, Wellington, 2016).
Edward Taihukurei Durie Custom Law (Treaty of Waitangi Research Unit, Wellington, 2013).
James Penner “Exemptions” in P Birks and A Pretto Breach of Trust (Hart Publishing, Portland, 2002) 241.
Joseph Williams “Lex Aotearoa: Mapping the Māori Dimension in Modern New Zealand Law” in Robert Joseph and Richard Benton (eds) Waking the Taniwha: Māori Governance in the 21st Century (Thomson Reuters New Zealand, Wellington, 2021) 537.
Māori Marsden “Prognosis for the Socio-Economic future of Māoridom” in Te Ahukaramū Charles Royal (ed) The Woven Universe: Selected Writings of Rev. Māori Marsden (The Estate of Rev. Māori Marsden, Otaki, 2003) 119.
Mason Durie Te Mana, Te Kāwanatanga: The Politics of Māori Self-Determination (Oxford University Press, Auckland, 1998).
Natalie Coates “Infusing Tikanga into Corporate Māori Governance Entities in the Current Legal Framework” in Robert Joseph and Richard Benton (eds) Waking the Taniwha: Māori Governance in the 21st Century (Thomson Reuters New Zealand, Wellington, 2021) 137.
R Dworkin ‘Is Law a System of Rules’ in Philosophy of Law (Oxford University Press, Oxford, 1977) 38.
Richard Benton, Alex Frame and Paul Meredith (eds) Te Mātāpunenga: a compendium of references to the concepts and institutions of Māori customary law (Victoria University Press, Wellington, 2013).
Sacha McMeeking “Transforming Iwi Organisations – How Insights into Hybrid Organisations Can Help” in in Robert Joseph and Richard Benton (eds) Waking the Taniwha: Māori Governance in the 21st Century (Thomson Reuters New Zealand, Wellington, 2021) 389.
Stephen A Smith Contract Theory (Oxford University Press, New York, 2004).
Steven Kent “The Connected Space of Māori Governance Entities in the Current Legal Framework” in Robert Joseph and Richard Benton (eds) Waking the Taniwha: Māori Governance in the 21st Century (Thomson Reuters New Zealand, Wellington, 2021) 177.
D Journal Articles
Charles Rickett “The Classification of Trusts” (1999) 18 NZULR 305
Gina Hefferan “Post-Settlement Dispute Resolution: Time to Tread Lightly” [2004] AukULawRw 9; (2004) 10 Auckland U L Rev 212.
Jade Newton “Reconciling Traditional Forms of Māori Governance with Models of Western Corporate Governance” (2019) 6 PILJNZ 15.
Jessica Palmer “Theories of the Trust and What They Might Mean for Beneficiary Rights to Information” [2010] NZ L Rev 541.
John H Langbein “The Contractarian Basis of the Law of Trusts” (1995) 105 Yale LJ 625 Malcolm Birdling “Healing the Past or Harming the Future? Large Natural Groupings and the Waitangi Settlement Process” (2004) 2 NZJPIL 259.
Margaret Mutu “Behind the smoke and mirrors of the Treaty of Waitangi claims settlement process in New Zealand: no prospect for justice and reconciliation for Māori without constitutional transformation” (2018) 14 Journal of Global Ethics 208.
Patrick Parkinson “Reconceptualising the Express Trust” (2002) 61(3) CLJ 657. Peter Jaffey “Explaining the Trust” (2015) 131 L.Q.R. 377.
Robert Joseph “Contemporary Māori Governance: New Era or New Error?” (2007) 22 NZULR 682.
Roger Cotterrell “Power, Property and the Law of Trusts: A Partial Agenda for Critical Legal Scholarship” 14 Journal of Law and Society 77.
E Government Materials
Financial Markets Authority “Corporate governance in New Zealand: principles and guidelines” (2018).
Māori Affairs Committee Report on Waka Umanga (Māori Corporations) Bill (175-2) (8 September 2008).
Office of Treaty Settlements Ka tika ā muri, ka tika ā mua: Healing the Past, Building a Future
(Wellington, 2015).
F Reports
Kel Sanderson, Mathew Arcus and Fiona Stokes Functions and Costs of Operating a Post- Settlement Governance Entity (Business and Economic Research Limited, BERL 4560, December 2017).
Law Commission Review of the Law of Trusts: A Trusts Act for New Zealand (NZLC R130, 2013).
Law Commission Review of Trust Law in New Zealand: Introductory Issues Paper (NZLC IP19, 2010).
Law Commission Waka Umanga: A Proposed Law For Māori Governance Entities (NZLC R92, 2006).
Waitangi Tribunal Haumaru: The Covid-19 Priority Report (Wai 2575, 2021). Waitangi Tribunal Ko Aotearoa Tēnei: Te Taumata Tautahi (Wai 262, 2011).
Waitangi Tribunal Tū Mai te Rangi!: Report on the Crown and Disproportionate Reoffending Rates (Wai 2540, 2017).
G Dissertations and Theses
Jacobi Morris “Ko Wai Te Mana Whenua?” (LLB (Hons) Dissertation, University of Otago, 2020).
Liam Remi McKay “Waka Umanga: Has the Government Missed the Boat on Māori Collective Assets Management? Rethinking New Zealand Law for the Post-Settlement Era” (LLM Thesis, University of Otago, 2012).
H Speeches and Conference Papers
Isaac Hikaka and Natalie Coates “Tikanga and Trusts” (paper presented to Trusts Conference
– 2021 A Trust Odyssey, Wellington, June 2021) 193.
Jeff Kenny, Tanya Speight and Katrina Wood “Protectors/Guardians and Company Trustees” (paper presented to Trusts Conference – 2021 A Trust Odyssey, Wellington, June 2021) 37.
Joseph Williams “Can we Trust tikanga?” (paper presented to Trusts Conference – 2021 A Trust Odyssey, Wellington, June 2021).
Natalie Coates “How can we protect the integrity of tikanga in the Lex Aotearoa endeavour?” (2022 Law and Society Lecture, University of Otago, Dunedin, 22 September 2022).
Rawinia Higgins “Tūhoe-Crown settlement – Te Wharehou o Tūhoe: The house ‘we’ built” (2014) Māori LR.
Whaimutu Dewes “Governance options” (paper presented to the New Zealand Law Society “Governing and Running Māori Entities: Tribal development and law in the 21st century” Intensive Conference, Wellington, August 2009) 43.
I Internet Resources
“Deed of Trust of Ngāti Hauā Iwi Trust” (16 September 2016) Ngāti Hauā Iwi Trust
<ngatihauaiwitrust.co.nz>.
“Deed of Trust of Te Manawa o Ngāti Kuri Trust” (2013) Ngāti Kuri Trust Board Incorporated
<ngatikuri.iwi.nz>.
“Ko Wai Mātou / Our People” Tūwharetoa Settlement Trust <https://www.tst.maori.nz/about- the-trust/our-people/>.
“Te Nehenehenui Trust Deed” (July 2021) Te Nehenehenui <tenehenehenui.iwi.nz>.
“Te Rūnanga o Toa Rangatira Annual Report” (3 November 2021) Te Rūnanga o Toa Rangatira <ngatitoa.iw.nz>.
“Trust Deed establishing Te Runanganui o Ngati Porou” (January 2010) Te Runanganui o Ngati Porou <ngatiporou.com>.
“Trust Deed for Ngāti Whātua Ōrākei Trust” (2020) Ngāti Whātua Ōrākei
<ngatiwhatuaorakei.com>.
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