NZLII [Home] [Databases] [WorldLII] [Search] [Feedback]

New Zealand Law Commission

You are here:  NZLII >> Databases >> New Zealand Law Commission >> >> SP13 >> 4. Towards a legislative framework

[Database Search] [Name Search] [Download] [Help]

4. Towards a legislative framework

Underlying rationale

60 A MAJOR POLICY CHANGE in relation to Mäori land occurred with the

enactment of Te Ture Whenua Mäori Act 1993. The Preamble states:

... it is desirable to recognise that land is a taonga tuku iho of special significance to Maori people and, for that reason, to promote the retention of that land in the hands of its owners, their whanau, and their hapu, and to protect whai tapu, and to facilitate the occupation, development, and utilisation of that land for the benefit of its owners, their whanau, and their hapu ...

61 In part, this is achieved by the Mäori Land Court exercising a supervisory jurisdiction, ensuring that beneficial owners are protected from abuse on the part of those responsible for administering their assets.

62 This balance, between supervision and freedom to act according to one’s desires, is also well understood in the general law. For instance, company law provides a framework for the stewardship that managers exercise over the assets so vital to shareholders.

63 Here too, and in the same spirit, the Commission considers it is appropriate for Parliament to identify the core obligations that must, in some way, be addressed by groups when settling Treaty grievances with the Crown.

64 To achieve this, the Commission believes, it is appropriate for Parliament to enact legislation to create a model settlement entity, and a mechanism for members of a claimant group to decide whether, and to what extent, to adopt the model.[64]

Features of the framework

65 The Commission considers that any model entity created to receive and manage settlement assets must be fiduciary in character, have legal personality and possess or provide for the following features or functions:

• The capacity and powers of the entity.

• The core obligations identified, including:

– the interrelationship between the rights of members of the settlement entity and those responsible for managing the assets of it (principles of stewardship);

– the need to keep appropriate accounting and other records and to ensure that the records of the entity are audited and presented to members on an annual basis (transparency);

– the rights of members of the settlement entity, including the right to convene meetings and select the trustees or directors of the entity, and to vote on essential policy issues (accountability);

– rules that provide for resolution of disputes among members or between members and management (dispute resolution).

• Rules indicating how assets of the settlement entity are to be applied in the case of insolvency or winding up.

66 A more basic question, which cannot be answered in this paper, is with respect to the choices available to the group. For example, should the group be free to pursue alternative settlement structures, or must the group use the model entity proposed but be able to adapt the rules to suit their unique character?

Core obligations65

67 English law, from which New Zealand law has developed, has traditionally used equitable concepts of trusteeship and fiduciary obligations to ensure that assets held by one group of people on behalf of others are managed appropriately on behalf of the beneficial owners.[66]

68 While it has been said that the categories of fiduciary relationships are not closed,[67] accepted categories of fiduciary relationships are traditionally seen as those involving trust and confidence.[68]

69 Entities that were established to hold and manage the use of Mäori land after European settlement of New Zealand, were designed through adaptation of these concepts of trusteeship and fiduciary obligation.

70 In recent times the development of land has been undertaken, primarily, by trusts and incorporations. The most recent examples of trusts are to be found in section 438 of the Mäori Affairs Act 1953 and the Ahu Whenua Trust created under Part XII Te Ture Whenua Mäori Act 1993.[69] The incorporation model is now enshrined in Part XIII of Te Ture Whenua Mäori Act 1993.[70]

Principles of stewardship

71 In Hospital Products Limited v United States Surgical Corporation Mason J (as he then was) identifies the critical features of a fiduciary relationship:

... the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.[71]

72 Subject to any agreement between the parties to the contrary[72] as a matter of law:73

• A fiduciary must act in good faith and for proper purposes.

• Fiduciaries must not allow their own interests to conflict with those of the person on whose behalf powers or discretions are exercised; for example, fiduciaries must account for profits made if they use opportunities for personal benefit presented to them in their capacity as fiduciaries.[74]

• Where a fiduciary has a personal interest in a matter, with which they are dealing on behalf of another, the fiduciary must disclose the material facts to those on whose behalf they are acting. Failure to disclose can lead to a transaction, however favourable it may be to the beneficiary, being set aside at the instance of the beneficiary.

73 Where an entity manages, as well as holds, assets on behalf of another, appropriate standards of care are necessary.[75] It is debatable, however, how far trustees are under a duty of care. Millett LJ, for example, agrees that “trusts must be performed honestly and in good faith for the benefit of beneficiaries”,[76] but does not accept that trustees are necessarily subject to duties of skill and care, prudence and diligence.

74 However, a fiduciary obligation may always be turned or enhanced to meet particular needs. For example, in Berlei Hestia (NZ) Ltd v Fernyhough,[77] Mahon J, in considering a case involving directors appointed by corporate shareholders, concluded that:

... [as] a matter of legal theory as opposed to judicial precedent, it seems not unreasonable for all the corporators to be able to agree on an adjusted form of fiduciary liability limited to circumstances where the rights of third parties vis-à-vis the company will not be prejudiced.[78]

75 Members of a settlement group will need to determine the circumstances in which those responsible for the stewardship of the assets should be liable to beneficial owners.


76 Transparency is necessary in order to maintain the accountability of managers for their actions. This is achieved by requiring appropriate disclosure of information to beneficial owners so that they can decide whether the managers have dealt adequately with their assets.[79] It has been said that “sunlight is the best disinfectant”.

77 Thus, when promoters of a company wish to solicit investments from members of the public they must make full disclosure under the provisions of the Securities Act 1978 and related regulations. Where a company trades its shares on a stock exchange or solicits funds from the public the circumstances surrounding that company must be totally disclosed.

78 Where a large group of people have a common interest in the enterprise, but do not trade their shares,[80] as is the issue being discussed in this section, a case can be made for more limited disclosure to those with a direct interest. Equally, consideration will need to be given as to how such information can be disclosed as inexpensively as possible.


79 How should those responsible for the stewardship of assets be held accountable for their actions by the owners of the assets? A number of techniques are employed in New Zealand law to deal with this issue, and a mix of these may be required.

80 In company law, duties can be imposed by statute upon those responsible for stewardship of assets. A company director in New Zealand is required to comply with the obligations imposed by the Companies Act 1993.[81] Directors are given power to manage the business and affairs of a company[82] but, in return, owe duties:

• To act in good faith and in what the director believes to be the best interests of the company.[83]

• To exercise powers for proper purposes.[84]

• To comply with the Companies Act 1993 and the constitution of the company.[85]

• Not to agree to the business of the company being carried on in a manner likely to create a substantial risk of serious loss to creditors.[86]

• Not to agree to the company incurring an obligation unless the director believes at the time on reasonable grounds that the company will be able to perform the obligation when it is required to do so.[87]

81 In addition, it is necessary for directors to ensure that proper accounting records are kept;[88] if the company is subsequently placed in liquidation a director may be held personally liable for its debts if accounting records have not been kept.[89]

82 It will be important that the means used to achieve accountability do not impede the exercise of sensible commercial judgment, or cause concern to lenders, either of which might reduce the extent to which economic empowerment of Mäori, through Treaty settlements, can occur.

Voting rights

83 Voting rights can be used to avoid oppressive action by those responsible for stewardship of assets or abuse of management rights,[90] but can also be problematic.

84 The risk of voting rights is that they may be used to impede commercial and economic development. And, what voting rights are, or ought to be, can be contentious. As Judge Savage noted in Re Proprietors of Mangakino Township Incorporated and Pouakani No 2:

Some may argue for one man one vote and others for voting by shares. Both have only dubious validity in Mäori tradition. They are both the logical consequences of individualisation of title and ownership by this court. The very idea of voting and majority rule whether by number or shares has doubtful validity in Polynesian tradition. In a legal sense also, the voting is of doubtful use. Voting by beneficiaries is not orthodox in general trust law. It has been grafted on to the Trust system by this court to make this structure conform to an extent with the Incorporation mode and to give owners the opportunity to have their say. The result however except in some very special circumstances does not decide anything. Voting is a device for making the views and the strengths of those views known to the trustees and the court. It gives the owner a venue and structure for discussion. One only has to look at the trust order in this particular case. There is provision for voting by show of hands and the use of proxy. The trust order is however silent as to what may be voted on and the effect of that vote. The trustees must make the decisions of trust business and cannot be dictated to by the owners. They cannot delegate their decision making responsibility to a vote at a meeting of owners. This is particularly so in that there are unlikely to be all the owners at the meeting and the trustees have a duty to all of the owners and not just those present at the meeting. In fact owners present at meetings of trusts such as this rarely represent by share or number more than a very modest proportion.[91]

85 The Commission considers it essential that those groups who undertake the next phase of consultation, gather information that incorporates the wishes of various Mäori communities on the question of voting.

86 There is already a broad acceptance within Mäori society of the rules that govern Mäori incorporations[92] and trusts,93 and the Commission does not advocate any one particular answer.[94] But, as an illustration, the Commission notes the following ways in which voting rights might be addressed within the constitution of a settlement entity:[95]

• Each person, who can whakapapa to a common tipuna within the settlement group, to have one vote.[96]

• Appointment of a representative shareholder to hold that share for a particular iwi, hapü, marae, or whänau and to exercise that vote equally with other representative shareholders.

• Appointment of a representative shareholder to hold the share on behalf of a particular iwi, hapü, marae or whänau but with differential voting rights existing as between different kin groups within the settlement group.

• The use of particular tribal tikanga to establish rights: an example being the support of Kingitanga within the Tainui tribe.[97]

87 These examples show the diverse ways in which various settlement groups could organise their affairs. Such a degree of flexibility is to be encouraged. It is for members of the settlement group to establish the rights that they wish to exercise. By doing so they exercise te tino rangatiratanga.

88 In the case of representative shareholders, it will be necessary to define how they are to be accountable to those they represent. The rules may also need to spell out whether, and how, members of the particular iwi, hapü, marae or whänau may, or can, dictate or recommend to representative shareholders how they may, or can, vote.[98]

Dispute resolution

89 The Commission considers that a mechanism to resolve disputes between members of the settlement group, and between members and those responsible for stewardship, is essential, and should be in place well in advance of any dispute (including types of dispute other than those involving ‘significant transactions’.[99])

90 The dangers of not resolving disputes can be real, as some commentators have noted:

... the Mäori community in question must be able to deal with internal disputes through its own processes. By providing for a dispute resolution process within the constitution, the tribe has available a binding mechanism that is competent to deal with the substantive issues and matters of tikanga. At the very least the body may act as a filter, perhaps avoiding the recent situation in Waikato where more than 9 statements of claim (and amended statements of claim) were filed by both sides within three months time, each relating to meeting procedure at different tribal meetings.[100]

91 Nor is litigation, as a means of solving intra-kin group disputes, usually the most efficient or durable approach to take. Speaking about a number of judgments arising out of intra-kin group dispute in relation to Treaty settlements,[101] Judge Wainwright has noted:

... [i]n none of the cases that I have referred [to] was the litigation successful either in a legal or political sense. I think it is plain that, even if parties to disputes like these were able to fit their problems into legal boxes, litigation is hardly ever going to be a good option. First, there is a problem I have already identified, which is that fitting the issues into the legal boxes may, and in my view, probably will, obscure the real issues. But, perhaps more importantly, it also sours relationships. Litigation is a ‘winner takes all’ strategy. The corollary is that it creates losers. This makes it entirely inappropriate for resolving conflict within kin groups, or even between kin groups, who cannot escape having an ongoing relationship. In such situations, a means of resolving disputes that leaves the mana of the parties intact is infinitely preferable.[102]

92 Several issues with respect to dispute resolution are of first importance, and will need to be examined in detail during the next phase of developing the framework for a model settlement identity:

• What types of dispute should be subject to the process? What types should not? Who is to decide this question?

• What level of dispute will require recourse to the dispute resolution mechanism?

• How will this dispute resolution mechanism work?

93 Modern commercial contracts often state the process to be followed when parties to the contract cannot agree. Usually, the process requires the parties to negotiate in good faith, and to cooperate in a process that can involve negotiation, mediation, arbitration and adjudication. The Commission considers that such a dispute process needs to be identified in this present context.

94 Ordinarily, the law requires an impartial person to resolve disputes, by reference to judicial authority. But, in this context, members of the settlement group, in whom others repose confidence, may be better placed by reason of their knowledge of relevant tikanga to make decisions affecting the group if consensus has not been reached.

95 A mixture of both could ultimately provide a solution. For example, it may be possible to use a neutral arbiter (that is, a judicial officer) with knowledge of tikanga along with those who are part of the settlement group, or who have specific knowledge of the tikanga of the group (that is, one or more pükenga[103]).

96 The two main options with respect to dispute resolution are:

• A domestic tribunal set up and run by the settlement group themselves; and/or

• Empowering the Mäori Land Court to determine issues sitting with pükenga using mediation, and perhaps, in the last resort, adjudication processes.[104]

A domestic tribunal

97 A domestic tribunal could be constituted solely of members of the settlement group. Pükenga, having knowledge of the tikanga of the settlement group or relevant kin group, and appointed by the members, would enjoy both legitimacy and confidence.

98 From a public law perspective, however, a relationship with the group might be thought to disqualify pükenga, and there will be a need to confirm that decisions should not be set aside on that ground alone. Such an approach would better accord with Mäori customary practices.

The Mäori Land Court

99 An alternative, which would avoid the issue of disqualification, would be to empower the judges of the Mäori Land Court to sit with pükenga to resolve disputes. Such decisions might be deemed to be final, subject only to judicial review on grounds of illegality, irrationality, or flawed process.

100 Judges of the Mäori Land Court now have the further power under Te Ture Whenua Mäori Act 1993 to mediate solutions to representation issues.[105] As Judge Wainwright has noted:

... [s]ometimes the mediator will be an outside appointee, and sometimes a judge. Those Mäori Land Court judges not already experienced in mediation are currently undergoing training in anticipation of the change ... As far as a suitably qualified mediator is concerned, filling the job description is a tall order in anyone’s terms. The perfect candidate will be a person fluent in two cultures and two languages, with legal training and advanced skills in mediation ... To be candid, such people probably do not yet exist, although some come close ... However, I am confident that with training and experience – especially experience – a core of experts will emerge.[106]

101 While this option cannot be a panacea for all settlement disputes, the Mäori Land Court offers skills and expertise on Mäori issues that are hard, if not impossible, to find elsewhere.[107] Consultation will be needed to determine what kind of disputes might be referred to mediation, and in what circumstances.

Public law issues

102 It is possible that judicial review could lie in respect of either decisions that detrimentally affected a particular segment of the kin or settlement group, or those where there had been procedural unfairness:

• The range of administrative agencies amenable to judicial review has broadened progressively over the years, and extends to incorporated bodies and unincorporated domestic bodies.[108]

• A decision is reviewable if it is “in substance public” or has “important public consequences” and the presumption of reviewability strengthens where individuals are left without any other redress.[109]

• There is an emphasis in the relevant legislation on Treaty principles.[110]

• A public law element is present where a settlement group is involved in the co-management of some natural resource, a type of redress common to settlements.

103 However, there are good reasons why it is undesirable, in principle, for the decisions of a settlement group, once settlement has been effected, to be reviewed by the High Court:

• As a matter of principle it is appropriate that members of the settlement group should determine how their assets are to be used.

• It is open to members of the group to provide, in the constitution of their settlement entity, for alternative dispute resolution processes to ensure that members are not left without redress.

• Few judges of the High Court have sufficient experience in issues of tikanga, or in the social dynamics of a kin group, to engender public confidence in the outcome of any such review.[111]

104 The Commission considers that decisions made by a forum created by the constitution of a settlement entity should only be reviewable against the principles of natural justice, for non-compliance with the powers conferred by the constitution, and to prevent irrationality.

NZLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback