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• Introduction
• Approval Of The Settlement Entity
• Introduction To Contemporary Legal Entities

APPENDIX B - Legal entities currently in use
by Mäori

Introduction

B1 THIS APPENDIX describes the range of legal structures that are currently

available for use by Mäori for various purposes. The advantages and disadvantages of each structure are examined, and their respective suitability (or otherwise) for use as settlement entities is discussed.

Approval of the settlement entity

B2 While the structure of the kin group organisation is an issue for the group itself, it is undeniable that the relationship between beneficiaries of the assets to be transferred and those responsible for management of those assets must be carefully circumscribed. Both OTS and TOKM invest a great amount of time and resources on approving governance entities to ensure that suitable procedures are in place before the proceeds of the settlement are made available to the kin group. This is because:

... [e]nsuring that the governance structure meets these requirements also means that the Crown is meeting its responsibility to all New Zealanders to ensure that settlement assets are managed by and for those who will rightfully benefit from the claim. Those concerns are, of course, equally important to members of the claimant group who will want to see good management of their settlement assets.[143]

B3 The type of entities existing currently are:

• Mäori trust boards under the Mäori Trust Boards Act 1955;

• incorporated societies under the Incorporated Societies Act 1908;

• company structures under the Companies Act 1993;

• structures under Te Ture Whenua Mäori Act 1993;

• charitable trusts under the Charitable Trusts Act 1957;

• statutory bodies;

• trusts created (by Deed) for the particular purpose.

B4 Many of these entities do currently, and in the future will, form an integral part of any successful settlement group organisation, whatever model settlement entity is devised. To prosper commercially, and to provide social benefits to beneficial owners, the settlement entity will inevitably create and manage other such entities.

Introduction to contemporary legal entities

Mäori trust boards

B5 Between 1922 and 1953 ten Mäori trust boards were created by statute to receive and administer compensation paid by the Crown to settle a number of different grievances. The Mäori Trust Boards Act 1955 was enacted to standardise and improve the administration of these boards as well as to provide a template for future organisations to follow.

B6 The Minister of Mäori Affairs was given a number of supervisory powers over the administration of the assets, to the extent that the boards required ministerial approval to enter such basic transactions as purchasing land. These powers were said to be justified in protecting the rights of the beneficiaries and their interests in the administration of what were public funds. The enactment of this legislation was not without opposition, which focused primarily on the paternalistic nature of the statute – criticisms that have endured to this day.

B7 In 1994, the Mason Committee said (of the Mäori Trust Boards Act 1955) that it was enacted:

... solely for the benefit of the Crown ... [and] that the [Act] is an anachronism created during a considerable Mäori dependency and State paternalism.[144]

B8 Because section 32 of the Maori Trust Boards Act 1955 makes a board, ultimately, accountable to the Minister of Mäori Affairs, the use of a Mäori trust board as a vehicle for receiving settlement funds becomes undesirable from the point of view of both the Crown and the relevant settlement group.

B9 The boards have the advantage that, by virtue of their empowering legislation and initial certification by the Commissioner of Inland Revenue, they have charitable status. So long as the original trust deeds are flexible enough to allow assets to be added to the original trust, it is theoretically possible for settlement assets to be added to a Mäori trust board.

B10 However, in practice, the lack of accountability to beneficiaries means OTS would not give approval to a Mäori trust board being used as a governance entity for settlements, at least not without significant amendment to the empowering legislation. Both Tainui and Ngai Tahu, when undergoing Treaty claims, achieved charitable status for various arms of their operations through other means in the ensuing settlement legislation, winding up their trust boards created under the 1955 Mäori Trust Boards Act.[145]

B11 While there is interest from some of the groups currently negotiating settlements with the Crown, the Commission considers that the 1955 Mäori Trust Boards Act would require significant amendment to make it a suitable governance entity for the holding of Treaty settlements. The interest shown in this entity is based firmly on the charitable status of a trust board. The Commission suggests that any initiation of amendments to the 1955 Mäori Trust Boards Act to rectify the accountability problem discussed in paragraph B8 is likely to bring about an end to the tax advantages that are sought by the groups who are proposing the use of this structure as a settlement entity.

Incorporated societies

B12 Incorporated societies (like Mäori trust boards) have body corporate status that provides for perpetual succession and limited liability, and are governed by the Incorporated Societies Act 1908.

B13 However, one of the major disadvantages in the use of incorporated societies is that section 4(1) of the Incorporated Societies Act 1908 prohibits the pursuit of pecuniary gain as being an objective of the entity. This is a problem when one obvious goal of settlement groups is to grow their assets through commercial enterprise.

B14 Additionally, the relationship between, on the one hand, the society and its members, and on the other, between its members does not necessarily suit the settlement context. For instance, the rules of an incorporated society constitute a contract solely between the society and its members, although the members have no ties as between themselves. In the settlement context this relationship neglects the values of te ao Mäori, including concepts like whanaungatanga, manaakitanga and whängaitanga, amongst others.

B15 Also in the settlement context, there is the possibility of problems with respect section 4(2) of the Incorporated Societies Act 1908, which states that no application for incorporation shall be made except with the consent of a majority of the members of the society. In the context of Treaty settlements, there is the possibility of problems being encountered in this regard with respect to the ratification of the settlement entity.

B16 It may not be wise to have the Registrar of Incorporated Societies having an administrative role in the settlement of Treaty assets, pursuant to the powers given them under the Incorporated Societies Act 1908. If any authorising body is to be utilised it should be one that has experience in dealing with Mäori issues.

Company structures

B17 Company structures offer flexibility, clear rules regarding management, governance, reporting and accounting, and well-established rules on the obligations of office-holders and others to the company and the shareholders.

B18 However, the holding of individual share allotments in an entity is inappropriate for settlement structures, given that the settlement is for the benefit of a collective group, rather than for individuals.

B19 Irrespective of practical difficulties in the issuing of share allotments to beneficiaries present and future, individualisation of communal assets has long been seen as a major problem that inhibits Mäori kin group economic and social development.

B20 The negative effect of the historical role of the Native Land Court in individualising title to communal lands is well documented.[146] While raupatu (confiscation) was one of the more insidious Crown acts of the past, equally destructive was the effect of land tenure reform on the Mäori social order. As the Waitangi Tribunal has noted with respect to the raupatu of Taranaki land:

The confiscation of tribal interests by imposed tenure reform was probably the most destructive and demoralising of the forms of expropriation. All land that remained was individualised, even reserves and lands returned. No land was thus passed back in the condition in which it was taken; it came back like a gift with an incendiary device. This land reform, so clearly contrary to the Treaty when done without consent, made alienations more likely, undermined or destroyed the social order, jeopardised Mäori authority and leadership, and expropriated the endowments to which hapu, as distinct from individuals, were entitled.[147]

B21 It was not officially recognised, until the enactment of Te Ture Whenua Mäori Act in 1993, that land was a taonga tuku iho[148] (a gift handed down through the generations) and that the Mäori Land Court should exercise its jurisdiction in a manner that would assist and promote the retention and development of Mäori land.[149]

B22 The company structure will most likely have a role in any successful kin group organisation. However, like incorporated societies, the company framework is unable to take account of significant Mäori values, with participation based upon individual shareholding and individual rights.

Te Ture Whenua Mäori Act 1993

B23 Structures under the Te Ture Whenua Mäori Act 1993, while providing a high level of beneficiary participation, can also prove to be unwieldy in a commercial context, and only relate to Mäori customary or Mäori freehold land, not to other assets.

B24 Given that the types of redress available to claimant groups often include cash, agreements with local authorities for co-management of resources and the like, the structures under Te Ture Whenua Mäori Act 1993 are inadequate.

B25 While amending Te Ture Whenua Mäori Act 1993 is a possibility, several groups have specifically excluded assets transferred to them as part of a Treaty settlement from being covered by the Act.[150] This suggests some wariness in the Mäori community about the ability of the Act to deliver, in some circumstances, tangible benefits to Mäori.

B26 Additionally, anecdotal evidence suggests that it is often difficult to obtain credit to improve and develop Mäori land held under Te Ture Whenua Mäori Act 1993, which is likely to hinder the economic development of Mäori groups who are gaining settlement.

Charitable trust boards

B27 Charitable trust boards can also be registered as bodies corporate and may attain charitable status if the public benefit test can be satisfied. However, there is some uncertainty in New Zealand law whether or not the public benefit test can be met by a trust where the beneficiaries are determined by a blood or contractual relationship.[151] The current government, as part of the review of the rules affecting charitable organisations, has identified this uncertainty.[152] If the law is reformed as proposed, more Mäori entities may be able to apply to gain a ‘charitable’ tax exemption.

B28 However, this entity can also be cumbersome in a commercial context and any assets that form part of the charitable trust must continue to be utilised for charitable purposes in the event of the entity being wound up. This requirement may create the potential for the alienation of settlement assets associated with the ‘charity’.

B29 While a charitable trust may be utilised in parts of the kin group organisation to administer benefits to kin group members, its use as a settlement entity is not a suitable option.

Private statutory recognition

B30 Ngai Tahu is the only settlement group to utilise the statutory body through their private statute Te Runanga O Ngai Tahu Act 1996. This has given Ngai Tahu an efficient legal personality that has contributed to the continued success of the iwi.

B31 However, the number of current and future settlements and busy government legislation programmes hinders the possibility of enactment of successive private statutes for every settlement group. Current government policy and practical legislative considerations seem to preclude this option for the future.

Trusts

B32 The current settlement vehicle of choice is the trust, albeit in circumstances where legislation states specifically that the rule against perpetuities does not apply.

B33 There are substantial costs involved in creating trusts for the holding of Mäori assets from Treaty settlements. While the price is less for the Crown, for each successive settlement group going through the process it is an extremely time-consuming and expensive business.

B34 Additionally, as the Commission’s preliminary paper, Some Problems in the Law of Trusts, noted:

... trusts are today used, and some would say at times misused, for purposes some of which were undreamt of when the current rules were settled, and that in this as in so many other contexts the time is well overdue for the law to catch up with what is actually happening in the world.[153]

The Commission would suggest that this is indeed the case with respect to settlement assets. Trusts have been used primarily because they are less offensive to the groups involved in the settlement process than any other legal instrument, rather than because they fulfil the needs of Mäori and the Crown in a comprehensive manner.