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Tuuta v Ngati Mutunga O Wharekauri Iwi Trust [2014] NZHC 1666 (15 July 2014)

Last Updated: 18 July 2014


IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY



CIV-2013-485-006268 [2014] NZHC 1666

BETWEEN CHARLES EDWARD TUUTA Plaintiff

AND NGĀTI MUTUNGA O WHAREKAURI

IWI TRUST Defendant

Hearing: 2 July 2014

Appearances: M S Smith for the Plaintiff

J V Ormsby and G J C Carter for the Defendant

Judgment: 15 July 2014



JUDGMENT OF PANCKHURST J





The issues

[1] Ngāti Mutunga are the iwi of Wharekauri (the Chatham Islands). The defendant, Ngāti Mutunga o Wharekauri Iwi Trust (the Iwi Trust), is awaiting final sign off from the Office of Treaty Settlements as the entity mandated to represent the iwi for Treaty of Waitangi settlement purposes. Who should be the mandated representative has been a contentious issue for some years. It forms the essential background to this proceeding.

[2] However, the more immediate background is an endeavour by the plaintiff, Charles Tuuta, a member of the iwi, to seek election as a trustee of the Iwi Trust. In November 2012 he was nominated for election as a trustee. The following month Mr Tuuta’s nomination was rejected by the then-trustees on the grounds that his election would give rise to an irreconcilable conflict of interest. Mr Tuuta is on the

interim executive committee of Te Rūnanga o Wharekauri Rekohu Incorporated



TUUTA v NGĀTI MUTUNGA O WHAREKAURI IWI TRUST [2014] NZHC 1666 [15 July 2014]

Society (Te Rūnanga). Te Rūnanga is considered to be in competition with the Iwi Trust in seeking the mandate to represent Ngāti Mutunga. This is said to give rise to the irreconcilable conflict of interest.

[3] Mr Tuuta seeks two declarations. These are borne of the rejection of his nomination in 2012, but the declarations do not challenge that decision. Rather, they are forward looking, since Mr Tuuta proposes to seek election to the Iwi Trust Board at forthcoming elections. The declarations sought raise two issues:

(a) Whether in terms of the Trust Deed of the Iwi Trust a conflict of interest may be addressed prior to the election, or only after the election. Mr Tuuta contends that a pre-emptive rejection of a nomination before voting is impermissible, whereas the trustees of the Iwi Trust consider that early rejection of a nomination is appropriate, at least in the case of an irreconcilable conflict of interest.

(b) What process does the Trust Deed of the Iwi Trust require the trustees to follow in considering whether a trustee has a conflict of interest which prevents him/her from holding office?

[4] The proceeding invokes both the Declaratory Judgments Act 1908 and the equitable jurisdiction of this Court under Part 18 of the High Court Rules. The parties are also at odds concerning whether the claimed relief is appropriate, given the factual and other circumstances of the case.

Some further background

[5] For present purposes it is not necessary to delve into the recent history of the contest for the Ngāti Mutunga mandate in any detail. In the late 1980s the Māori Fisheries Commission was established with the intention that quota would be allocated to iwi throughout the country. Te Rūnanga was incorporated in 1988 as the entity to receive quota on behalf of Ngāti Mutunga. In due course quota were made available, and Te Rūnanga set about managing the asset for the benefit of the iwi.

[6] In March 1994, however, a rival entity was incorporated, the Ngāti Mutunga o Wharekauri Incorporated Society (the Society). Representation of the iwi in relation to a Treaty of Waitangi settlement became a bone of contention, with Te Rūnanga and the Society each seeking the mandate. The matter was further complicated when in October 1999 the Ngāti Mutunga o Wharekauri Trust (the Original Trust) was incorporated under the Charitable Trust Act 1957 to be the iwi’s mandated representative. But, dissention continued.

[7] In an endeavour to resolve the conflict an Agreement of Intent was signed on

12 September 2003. Te Rūnanga and the Original Trust were the parties to the agreement. The opening recitals stated:

Whereas The Ohu Kai Moana criteria requires a single Ngāti Mutunga entity as the iwi representative body for Chatham Island Ngāti Mutunga.

And

Whereas [Te] Rūnanga and [the Original Trust] agree that a single Ngāti Mutunga o Wharekauri organisation should be set up to replace the existing entities within a six month period.

[8] The terms of agreement provided that the executive body of the new entity would have an establishment membership drawn equally from Te Rūnanga and the Original Trust, and that during the transition period this body would establish the new entity structured in a manner to manage commercial, non-commercial and political issues, as well as claims issues. At the end of the six month transition period it was agreed there would be a hui for the election of an executive “for the

formalised Iwi entity”1 and to replace the establishment executive. A further duty of

the establishment executive was:2

To ensure the immediate needs of existing entities are finalised and terminated.

[9] The agreement led to the establishment of the defendant, the Iwi Trust, under a deed of trust dated 28 September 2004. Consistent with the terms of the Agreement of Intent, the Society and the Original Trust passed resolutions that they

be placed in voluntary liquidation. Earlier, the assets of the Society had already been

1 Agreement of Intent, cl 6.9.

2 Clause 6.11.

transferred to the Original Trust. Liquidators were appointed and, despite difficulties as a result of claims made against assets held by the Original Trust, the liquidators eventually obtained an order for distribution of the surplus assets to the Iwi Trust. Hence, as contemplated in the Agreement of Intent, the Original Trust was “terminated”.

[10] By contrast, Te Rūnanga began, but ultimately did not sign off on a decision to wind up its affairs and distribute its assets. Instead Te Rūnanga continued in existence, but seemingly did not comply with its obligations as an incorporated society. In 2008 Mr Tuuta’s sister, Evelyn Tuuta, filed a judicial review proceeding in which she sought the appointment of the Māori Trustee to effectively restore the Society to a state of effective administration.

[11] The application for judicial review was resolved by the making of consent orders on 1 April 2009.3 The first order was in the nature of a reference back to Te Rūnanga of the concerns raised in Ms Tuuta’s statement of claim, so that the Society could consider the concerns and “determine the steps to be taken to place [Te Rūnanga] in compliance with its Rules at the earliest practical time”. Further orders appointed the Māori Trustee to assist with this process, and directed the provision of a report by the Māori Trustee to a retired Judge of the Māori Land Court, Judge Hingston, who was appointed to chair a committee of Te Rūnanga until

such time as a new executive committee could be elected.

[12] The evidence as to the current situation of Te Rūnanga is somewhat sparse. Mr Tuuta deposed that the High Court orders made in April 2009 remain in effect. He explained that an interim Te Rūnanga committee was established and that he has remained a member of that committee to the present time. Mr Tuuta’s affidavit also refers to concerns that he holds about the way the Iwi Trust has functioned and confirms that he will again seek election as a trustee because he considers he can contribute to such concerns being addressed. The affidavit evidence does not explain why Te Rūnanga has not been wound up, nor does it clarify whether it still seeks the

mandate to represent the iwi.

3 Tuuta v Te Rūnanga o Wharekauri Rekohu Incorporated HC Wellington CIV-2008-485-2557,

1 April 2009,

When may a conflict of interest be addressed under the trust deed?

The factual background

[13] Mr Tuuta was born and raised in the Chatham Islands. He is registered as an adult beneficiary of the Iwi Trust. In November 2012 Mr Tuuta sought election as a trustee of the Iwi Trust to represent beneficiaries ordinarily resident in the North Island. Mr Tuuta has resided in the Wellington area for many years. Two of the seven trustees must be persons ordinarily resident in the South Island and the North Island as representatives of these areas.

[14] Mr Ward Kamo, the trust secretary of the Iwi Trust, swore an affidavit in which he explained the trustees’ concerns regarding Mr Tuuta’s nomination. He referred to the governance issues of Te Rūnanga, but also to the specific concerns that Te Rūnanga has continued to use iwi fishing quota for its own purposes and that it continues to seek the mandate to represent Ngāti Mutunga in competition with the Iwi Trust. This last concern, in particular, is considered to give rise to an irreconcilable conflict of interest.

[15] In March 2012 the trustees of the Iwi Trust resolved to remove a trustee on the grounds that her conduct had brought the name of the Iwi Trust into disrepute. While the decision was taken with reference to a number of issues, a central concern was that she was centrally involved in the formation of another trust which was to

seek the mandate to represent Ngāti Mutunga.4 Then-trustees of the Iwi Trust were

required to sign a declaration which included these statements:

I will neither support nor assist the Tangata Whenua o Wharekauri

Mandating Trust whilst I remain a trustee [of the Iwi Trust].

I am committed to supporting the [Iwi Trust] in its stated objective to progress the settlement by seeking mandate from the Iwi.

The trustee declined to sign the declaration and this was influential in relation to her removal.





4 The Tangata Whēnua o Wharekauri Mandating Trust.

[16] On 5 December 2012 Mr Ward telephoned Mr Tuuta and asked whether he was still an executive member of Te Rūnanga. Mr Tuuta confirmed that this was the case. On 10 December 2012 the Board met and resolved to “disqualify” Mr Tuuta’s nomination. This was confirmed in a letter dated 13 December 2012 and signed by Mr Ward as trust secretary. The letter referred to the removal of a trustee on account of her involvement in a competing organisation earlier in the year, and with reference to Mr Tuuta’s nomination stated:

The Trustees are satisfied you are an active and critical executive member of the Runanga. The Trustees are further satisfied that should your nomination be allowed to proceed, and you were successful, you would be placed in an irreconcilable conflict of interest of your duty to the Iwi Trust.

Accordingly, Trustees had disqualified your nomination.

An earlier paragraph referred to Te Rūnanga seeking a mandate from the iwi and “contesting with officials of the Crown, the right of the Iwi Trust to progress to mandate”.

[17] In this proceeding Mr Tuuta does not seek to challenge the merits or lawfulness of the 2012 decision, rather he seeks a declaration clarifying whether the trust deed enables the trustees of the Iwi Trust to reject a nomination in advance of the nominee’s election as a trustee.

The trust deed

[18] The trust deed by which the Iwi Trust was established is dated 28 September

2004, but the current version includes various amendments incorporated to

26 May 2010. It is a detailed document of over 70 pages, including six schedules.

[19] The introductory recitals refer to the longstanding grievances of Ngāti Mutunga arising from actions and omissions of the Crown. Such grievances were the subject of hearings before the Waitangi Tribunal between 1994 and 1996. The Tribunal issued a report in 2001, in which it recognised the need for a settlement between the Crown and Ngāti Mutunga. Hence, a further recital records that the trust deed creates the Iwi Trust “as the mandated iwi organisation of Ngāti Mutunga

o Wharekauri”. The deed is signed by “establishment trustees” who were approved

at a hui of the iwi held on 28 September 2004.

[20] The purpose of the Trust is defined in clause 6.1:

The Trust Fund shall be applied by the trustees towards any purpose or purposes that advances the cultural, social or economic standing of, or is otherwise beneficial to, any or all Ngāti Mutunga o Wharekauri, provided that such purpose or purposes are charitable under New Zealand law ...

The balance of clause 6.1 refers to improving the health and welfare, providing financial assistance to, and promoting education and vocational training of Ngāti Mutunga. Mr Kamo’s affidavit records that over the past decade the Iwi Trust has built an asset base of approximately $25m.

[21] Generally, the trust deed is drawn in conventional terms. For present purposes there is no need to refer to the terms of the deed in detail. The provisions of most relevance are those dealing with trustees in clause 11 of the deed, and the provisions for the election and removal of trustees in schedule 3, together with the provisions governing meetings in schedule 5.

[22] The trustees of most trusts are appointed by the settlor. The suitability of the candidate can be assessed before an appointment is made. By contrast, trustees of the Iwi Trust are elected, so that provisions governing the eligibility, election and suitability of trustees are required.

[23] Clause 11 of the deed governs the eligibility of trustees. Trustees are to be nominated and elected by registered adult beneficiaries in accordance with the provisions set out in schedule 3. Clause 11.4 is headed “Restriction On Trustees” and relevantly provides:

(1) A person shall not be permitted to be a Trustee if he or she: (a) is under eighteen years of age;

(b) is not a Registered Beneficiary who is, at the time of nomination and election, resident in the relevant Nomination Region in terms of clause 11.2:

(c) is bankrupt and or has within the last five years been adjudged bankrupt;

(d) is a person who has within the last 10 years been convicted of a criminal offence punishable by a term of imprisonment of two or more years;

(e) is a person who is, or has ever been, disqualified from being a director of a company registered under the Companies Act 1955 or the Companies Act 1993;

(f) is a person who is mentally disordered within the meaning of the Mental Health (Compulsory Assessment and Treatment) Act

1992; or

(g) is a person who is subject to a property order made under section 30 or section 31 of the Protection of Personal and Property Rights Act 1988.

(2) Subject to clause 11.4(3), an Employee of the Trust or Director of an AHC [Asset Holding Company] or other Corporate Entity may be nominated for election as a Trustee, but if elected must forthwith resign his or her position as an Employee or Director as the case may be.

(3) Where provided for in the constitution of an AHC or other Corporate Entity, the Trust may appoint up to two Trustees as Directors of such AHC or Corporate Entity provided that at no time may the Trustees comprise more than 40% of the total number of Directors of any AHC or Corporate Entity.

[24] Clause 11.6 provides for the removal of trustees, namely by a special resolution if the trustee in question “commits an act or omission, which brings the name of Ngāti Mutunga o Wharekauri or the Trust or any Corporate Entity into disrepute”, becomes ineligible on any of the grounds specified in clause 11.4 or refuses or becomes unable to act as a trustee.

[25] Schedule 3 contains the machinery provisions for the election and removal of trustees. Trustees are to be elected at the annual general meeting or at a special general meeting.5 They are elected for a three year term,6 and on a rotational basis in

that the terms of individual trustees are appropriately staggered.7 Both postal votes

and votes cast in person at the relevant meeting determine the outcome of an election,8 with beneficiaries entitled to cast a vote for one nominee in respect of each

position that has fallen vacant.9



5 Deed of Trust, schedule 3, cl 1.3.

[26] Clause 2.4 headed “Nomination Form” provides:10

Nominations for election to the office of Establishment Trustee under this Schedule must be in writing on the Nomination Form from time to time prescribed by the Trust which must:

(a) contain details of the Nominee’s full name, address and contact

number;

(b) include a declaration signed by the Nominee that:

(i) declares that the Nominee is not a person who is precluded from holding office as a Trustee on the basis of one or other of the matters specified in clause 11.4 of the Trust Deed;

(ii) declares that the Nominee is resident in terms of clause 11.2 of the Trust Deed in the Nomination Region for which he or she has been nominated; and

(iii) authorises the Secretary to make enquiry of relevant persons, authorities and records to confirm any aspect of the Nominee’s declaration;

(c) be accompanied by a brief Curriculum Vitae containing details of experience relevant to the role of Trustee; and

(d) be counter-signed by two (2) Adult Registered Beneficiaries.

[27] Votes are counted by an independent returning officer,11 who is required to provide a written declaration confirming the number of votes cast, the number rejected as informal and the votes received by each nominee for each nomination region.12 Such declaration is to be forwarded to the Trust within 10 business days of the vote.13

[28] Meetings are governed by schedule 5, clause 9.1 of which provides:

Except as otherwise provided in this Trust Deed, all matters before the Trust may be resolved by a simple majority vote of Trustees.

By contrast, a special resolution must be approved by 75% or more of the trustees entitled to vote at the meeting, and notice of the intention to propose a special resolution must be given 20 business days prior to the meeting.14 Further, while the

quorum for a meeting of trustees at which only ordinary resolutions are to be



10 Although the clause refers to the election of “establishment” trustees, it was common ground that

considered is 50%,15 the quorum for a meeting at which special resolutions are to be considered is 75%.16

[29] Schedule 5 also deals with conflicts of interest. Clause 11 relevantly provides:

11. Conflicts of Interest

11.1 An “Interest” exists for a Trustee when:

(a) the Trustee is or may be or becomes a director, officer, employee or trustee with any company, partnership, organisation, group or trust with which the Trustee is transacting or dealing in his or her capacity as Trustee;

(b) the Trustee is a party to, or will derive a material financial benefit from a matter;

(c) the Trustee has a material financial interest in another party to the matter;

(d) the Trustee is a director, officer or trustee of another party to, or person who will or may derive a material financial benefit from, a matter, not being a party that is wholly owned, or in the case of a Trust controlled, by the Trust or any Corporate Entity;

(e) the Trustee is transacting or dealing as Trustee with himself or herself in another capacity;

(f) the Trustee is the parent, child or spouse of another party to, or person who will or may derive a material financial benefit from, the matter; or

(g) the Trustee is otherwise directly or indirectly materially interested in the transaction.

11.2 Notwithstanding paragraph 11.1, no Trustee will have a conflict in a matter where his or her Interest is not different in kind from the Interests of other Beneficiaries in the matter.

11.3 Every Trustee must disclose all potentially relevant Interests he or she has, or may have, in relation to any transaction being considered by the Trust and:

(a) every interest so disclosed shall be recorded in the minutes of the meeting at which the disclosure is made; and

(b) any Interest so disclosed will not be considered to constitute a conflict of interest in relation to a transaction or matter under consideration by the Trustees unless a majority of them present at the relevant meeting in person or by telephone resolve that it does constitute such a conflict; and

(c) where a majority of Trustees have resolved that a conflict

exists for a Trustee, that Trustee (the “Conflicted Trustee”)

15 Schedule 5, cl 8.5.

must not take part in any deliberations or proceedings, including voting or other decision-making or be counted in the quorum present, relating to the Conflict, and the paragraphs in this Schedule will be deemed to be varied accordingly; and

(d) if the Conflicted Trustee contravenes paragraphs (a) and (b) of this paragraph, his or her vote or other decision will not be counted, and neither will the Conflicted Trustee be counted in the quorum present at the meeting, and the paragraphs in this Schedule will be deemed to be varied accordingly.

The balance of the clause empowers the chairperson to require a conflicted trustee to leave the meeting and also to adjourn the meeting until the conflicted trustee does so.17

Dispute resolution

[30] Clause 20.1(a) of the deed provides that any Beneficiary may raise with the

Trust:

any complaint that the conduct or intended conduct of the Trust or a Trustee

... under this Trust Deed is or has been or will be contrary to the provisions

of this Trust Deed or otherwise injurious to the Trust or to Ngāti Mutunga ...

or to any Beneficiary or group of Beneficiaries.

Such complaints or disputes are to be submitted in writing to the Secretary18 and, if not withdrawn or resolved through discussions within 30 business days, shall be dealt with under one of three specific dispute resolution processes.19

[31] Clause 20.7 of the deed governs the resolution of disputes by reference to a disputes committee, which is empowered to conduct a hearing and reach a final decision. Mr Ormsby submitted that the present issue is a dispute, and Mr Tuuta was bound to invoke the disputes process established under the deed. This alone was reason enough to decline to make the declaration sought by him.

[32] I do not accept this submission. Clause 20.7, headed “Disputes Committee”, provides that “where the complaint or dispute relates to a matter under this

Trust Deed ... the complaint or dispute shall be referred to the Trust”.20 The Trust

17 Schedule 5, cls 11.4 and 11.5.

18 Clause 20.3.

19 Clause 20.4.

20 Trust deed 20.7(1).

shall appoint a disputes committee consisting of three trustees having the necessary skills and expertise to deal with the particular complaint or dispute.21 The committee has a discretion concerning how the complaint is dealt with, provided the requirements of natural justice are met.22 And, clause 20.10 provides:

Subject to the provisions of any relevant Act or rule of law, any findings and decision of ... the Disputes Committee on any complaint, dispute or appeal as the case may be shall be final and binding on the parties including the Trust.

[33] What constitutes a “complaint” or “dispute” is not defined in clause 3 of the deed, the interpretation section. However, the nature of a complaint is spelled out in clause 20.1(a) (see [30]). In a sense the present issue does concern conduct of the trustees said to be contrary to the provisions of the trust deed, namely the trustees’ decision in December 2012 to reject Mr Tuuta’s nomination for then-pending elections. However, Mr Tuuta does not challenge that decision; rather, he seeks clarification of a point of construction.

[34] That construction issue is not, I think, suited to resolution by a disputes committee. It is unlikely that there will be three trustees who have the “necessary skills and expertise” to resolve the point of construction. Moreover, the terms of clause 20.7(3) convey that the stuff of complaints/disputes to be dealt with by a disputes committee will concern conduct, in relation to which there will be a need for evidence to be heard and for natural justice requirements to be met, so that a determination can be reached. That is not this case.

[35] Mr Ormsby also argued that Collinge v Kyd23 supported the Trust’s approach. The case concerned whether an elected trustee to an electricity lines company was afflicted by “material interest”, such that a ruling of the chairperson that he must abstain from a vote was “final and conclusive”. Paterson J closely analysed the merits of the ruling, concluded that Mr Collinge did have a material interest and found no need to rely upon the clause whereby the chairperson’s ruling on this issue

was deemed final and conclusive.


21 Clause 20.7(2).

22 Clause 20.7(3).

23 Collinge v Kyd [2005] 1 NZLR 847 (HC).

[36] If anything, I regard the case as unhelpful to the Iwi Trust’s position. As noted, the Judge did consider the merits, but more importantly it seems to me that the process adopted in Collinge was in keeping with the approach contended for by Mr Tuuta. That is, Mr Collinge was not precluded from becoming a trustee because of a familial financial interest, or the circumstance that he was elected to represent a particular interest group. Rather, he was elected and whether Mr Collinge was afflicted by a conflict of interest was left to be assessed on a transactional basis, as voting upon a specific transaction was about to proceed. But I do regard the decision in Collinge as helpful in relation how a conflict is to be defined in a context such as the present.

The arguments

[37] Mr Smith contended that the structure of the deed confirms that conflicts of interest are to be declared, and managed, in the context of trustee decision-making upon discrete issues. Clause 11 of schedule 5 (see [29]) both defines interests and provides the mechanisms for their disclosure, and management. By contrast, the nomination process is governed by clause 2.4 of schedule 3, including a requirement that nominees declare that they are not “precluded from holding office as a Trustee on the basis of one or other of the matters specified in clause 11.4 of the Trust Deed”. Counsel pointed out that preclusion in terms of clause 11.4 was dependent upon objective criteria – age, residence, bankruptcy and the like.

[38] Counsel also placed reliance upon clause 11.4(2), whereby an employee of the Iwi Trust or a director of an associate company may be elected as a trustee “but if elected must forthwith resign his or her position as an Employee or Director as the case may be”. Hence, disqualification occurs following election, and only if the conflicted trustee does not resign his/her other position. Mr Smith submitted that this method of approach was preferable, because it ensured that trustees who may be candidates for re-election were not called on to vote on the rejection of a nomination. Instead, the fate of the conflicted trustee was decided post his/her election, and by trustees not afflicted by self-interest. This, Mr Smith argued, made good sense.

[39] Mr Ormsby took a quite different approach. He pointed out that in 2012

Mr Tuuta was contacted and asked whether he remained a committee member of Te Rūnanga. He did, and would not confirm his willingness to resign from this position. This gave rise to an irreconcilable conflict, because a central purpose for Te Rūnanga’s existence is to seek the mandate to represent Ngāti Mutunga when obtaining the mandate is a core function of the Iwi Trust. For Mr Tuuta to become a trustee, when he was committed to and a member of a rival entity, simply invited the likelihood of an initiative for his removal from office for bringing the name of the

Iwi Trust into disrepute.24 Mr Ormsby suggested it would have been a “charade” to

allow Mr Tuuta’s nomination to proceed when he had an irreconcilable conflict of

interest.

[40] Counsel also made submissions concerning an irreducible core of obligations owed by a trustee to the beneficiaries of a trust. My attention was drawn to clause

4.2 of the deed, whereby trustees of the Iwi Trust “have all the same fiduciary duties and obligations as normal trustees”. It followed, in Mr Ormsby’s submission, that it was inescapable Mr Tuuta laboured under an actual and irreconcilable conflict. No sensible purpose was to be served by his election as a trustee while his allegiance to Te Rūnanga continued.

Analysis

[41] To my mind the equitable principle that a fiduciary is not to put himself/herself in a position where his/her interest and duty conflict is non- contentious. Here, there may be a slight relaxation to the stringency of the rule, in that the test is one of “material” interest and because there is deemed to be no conflict where a trustee’s interest “is not different in kind from the Interests of other

Beneficiaries”.25

[42] In Collinge, Paterson J concluded that a material interest provision relaxed the stringency of the rule to some degree. He said this:26



24 Deed of Trust, cl 11.6(1).

25 Schedule 5, cl 11.2.

26 Collinge, above n 23, at [60].

If an interest, whether held directly or indirectly, is insignificant, not relevant, of no consequence or not pertinent to the decision being made, then it may be held not to be a material interest. While the provision is a relaxation of the equitable rule of law, it is not, in my view, a major relaxation of the rule. The rule, as noted by James LJ in Parker v McKenna (1874) LR 10 Ch 96:

“is an inexorable rule, and must be applied inexorably by this Court, which is not entitled, in my judgment to receive evidence, or suggestion, or argument as to whether the principle did or did not suffer any injury in fact by reason of the dealing of the [fiduciary.] The rule exists for reasons of policy, namely to avoid the remotest risk of a fiduciary being swayed from his duty of loyalty to his principle by his own self interest”.

The relaxation allowed by clause 15.1, in my view, is to cover those situations where there is no possibility of the trustee being swayed by his duty to the Trust by his direct or indirect self interest.

I adopt these observations.

[43] In this case, however, I am not asked to evaluate a conflict of interest. Rather, the concern is when and how a conflict may be addressed. And, the issue is forward-looking, in that Mr Tuuta seeks clarification on account of his intention to seek election in the 2015 elections. These circumstances give rise to a complication.

[44] Mr Ormbsy pointed out that nomination forms may be prescribed by the Trust from time to time27 and that, accordingly, candidates may be required to confirm that they are not involved with a rival organisation, such as Te Rūnanga. Indeed, at the hearing a copy of the nomination paper to be used for the 2014 elections was tendered. In addition to confirming their non-disqualification under clause 11.4 of the deed, candidates must state they are “not acting under the direction

of any other person or entity, or by agreement with any other person or entity”. Whether this requirement will flush out allegiances considered to give rise to an irreconcilable conflict of interest, as in this instance, is not for me to say. But, the fact remains that the Iwi Trust may prescribe a different nomination form for 2015. This calls in question the utility of granting a declaration.

[45] That the Trust can require candidates to complete a nomination form containing questions relevant to eligibility implies that there is a power to reject a

nomination in light of the answers supplied. However, clause 11.4 of the deed (see

27 Deed of Trust, schedule 3, cl 2.4.

[23]) defines who “shall not be permitted” to become a trustee. The disqualifying criteria are all objectively determinable, being age or residence related, or status related as the result of some type of official act. This calls in question whether the nomination form can only prescribe questions concerning objectively determinable disqualifying criteria.

[46] Based on the nomination form as it was drawn in 2012, I am in general agreement with the argument advanced by Mr Smith. Put shortly, the eligibility restrictions on trustees in clause 11.4 do not cover a conflict of interest of the kind levelled against Mr Tuuta. Nor did the 2012 nomination form require candidates to disclose their involvement with rival organisations.

[47] Rather, a conflict of interest arising from an association with Te Rūnanga was of a nature to be dealt with under clause 11.1(g) of schedule 5, a catchall provision applying where a trustee was “otherwise directly or indirectly materially interested in the transaction”. And, the existence of such an interest was to be assessed post-election and when a specific transaction was under consideration. The scheme of the trust deed reflects this approach.

[48] Should I make a declaration based on this conclusion? I think not. Mr Tuuta seeks guidance in relation to a future election, not vindication in relation to the events of 2012. The ability of the Trust to amend the nomination form by including an objectively defined criteria concerning rival entities suggests to me that a declaration would be of no, or limited, utility.

What process is to be followed in dealing with a conflict of interest?

The declaration sought

[49] On the basis of his analysis of the relevant provisions of the trust deed, Mr Smith submitted that the trustees were required to ask, and answer, a number of questions in dealing with a conflict of interest. These were:

Question 1: What is the conflict of interest which is problematic?

Question 2: Does the conflict of interests arise from the trustee’s position as

an Employee of the Iwi Trust or as a Director of an Asset Holding Company

or other Corporate Entity associated with the Iwi Trust? If it does, then clause 11.4(2) of the Trust Deed requires the trustee to “forthwith resign his or her position as an Employee or Director as the case may be”. If it does not, then the Iwi Trust needs to ask and answer the following further questions:

Question 3: Into which one or more of the seven categories in paras (a) to (g) of the definition of “Interest” in clause 11.1 of Schedule 3 of the Trust Deed does the situation fall? If it falls into none of these categories, there is no disqualifying conflict of interest.

Question 4: Even though it falls within one or more of the seven categories in paras (a) to (g) of the definition of “Interest” in clause 11.1 of Schedule 3, is the Interest “different in kind from the Interests of other Beneficiaries in the matter”, in terms of clause 11.23 of Schedule 3? If it is not, there is no disqualifying conflict of interest.

Question 5: Even though it falls within one or more of the seven categories in paras (a) to (g) of the definition of “Interest” in clause 11.1 of Schedule 3, and the Interest is “different in kind from the Interests of other Beneficiaries in the matter” in terms of clause 11.2 of Schedule 3, can the “Interest” be managed in terms of the conflicts of interest provisions in clause 11.3 of Schedule 5 by the trustee’s recusal from decision-making in relation to particular transactions or matters? If it can, the conflict of interest does not prevent the trustee from holding office (and from also holding another office.)

Mr Tuuta sought a declaratory order approving the five questions, and requiring that written reasons also be provided for any determination upon a trustee’s conflict of interest.

[50] Counsel also made submissions on a related issue, whether the conflict provisions of the deed comprise a code, or whether fundamental common law principles concerning the fiduciary obligations of trustees must also be imported and recognised. I do not, however, regard this issue as contentious. As previously noted, clause 4.2 of the deed imposes upon the Iwi Trust trustees “all the same fiduciary duties and obligations as normal trustees”. It follows that the fiduciary duties and obligations are those spelled out in the deed, as supplemented by the equitable principles applicable to fiduciaries.

Analysis

[51] In his oral submissions Mr Ormsby indicated that he had little quarrel with the five question formulation, as far as it went. However, he submitted that clause

11.6 of the deed provides for the removal of trustees, and that it could be utilised in relation to an irreconcilable conflict of interest. Clause 11.6 provides:

Removal of Trustee

A Trustee may be removed from office by Special Resolution if that person: (1) commits any act or omission, which brings the name of Ngāti

Mutunga o Wharekauri or the Trust or any Corporate Entity into

disrepute; or

(2) becomes ineligible to hold the position of Trustee on account of one or other of the grounds specified in clause 11.4; or

(3) refuses or is unable to act in his or her capacity as a Trustee. (emphasis added)

[52] This argument demonstrated a marked difference of approach. Mr Smith’s concern is to clarify the operation of the conflict of interest provisions in clause 11 of schedule 5. Mr Ormsby was effectively disinterested in this question, as the Iwi Trust’s concern is with removal of a trustee who is considered to be fundamentally conflicted (or rejection of their nomination at the pre-election stage). In the result, I doubt that there is an issue of construction requiring the intervention of this Court.

[53] The interpretation of clause 11 of schedule 5 is essentially non-contentious on the one hand, while utilisation of clause 11.6 of the deed to remove a trustee for his/her inability to act is an intensely factual question on the other. I accept it is arguable that an irreconcilable conflict of the kind asserted in relation to Mr Tuuta could provide grounds for removal. But, all will depend upon the factual circumstances. And, if the Iwi Trust becomes the mandated entity to represent Ngāti Mutunga in finalising a settlement with the Crown, an argument of this kind should become moot.

[54] In these circumstances I am again of the opinion that a declaration should not be made. The subject matter of the declaration sought by Mr Tuuta is non-contentious, while the Trust does not seek declaratory relief in relation to the issue of concern to it, and nor would relief be appropriate.

Conclusion

[55] For the reasons given, I decline to grant declaratory relief.

[56] Costs are reserved. My tentative view is that costs should lie where they fall. In saying this, I am in part influenced by a final thought.

[57] I have found this proceeding very sad. For the last 25 years the entity to represent Ngāti Mutunga in settlement negotiations with the Crown has been a bone of contention. Yet, hearings before the Waitangi Tribunal were completed in 1996, and a report recognising the existence of grievances was issued by the Tribunal in

2002. Twelve years on the entity to be the mandated representative of the iwi is still unresolved. It is time to draw a line in the sand, agree upon the mandate and apply the iwi’s resources to achieving a settlement. There is a desperate need for litigation of this kind to cease.







Solicitors:

Langford Law, Wellington

Wynn Williams, Christchurch

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