December 2016 Māori Law Review
Status of land – change of status to General land allowed – no preferred class of alienees – Farquhar
Farquhar - Palmerston North Māori Reserve Trust
Māori Land Court (2016) 358 Aotea MB 19 (358 AOT 19)
31 August 2016
An application was allowed to change the status of land from Māori Freehold land to General land. Trust obligations were varied also. The Court maintained no person fell within the Act's preferred class who would hold a right of first refusal. The Court's decision suggests that trustees acting in a commercially prudent manner will support changing the status of land away from being Māori Freehold land.
Download Farquhar - Palmerston North Māori Reserve Trust (178 KB PDF).
Overview and Result
|Status of land - change of status to General land allowed - identity of preferred class of alienees - commercially prudent to change from Māori Freehold land|
|Date||31 August 2016|
|Case||Farquhar - Palmerston North Māori Reserve Trust (178 KB PDF)|
|Citation||(2016) 358 Aotea MB 19 (358 AOT 19)|
|Court||Māori Land Court|
|Legislation cited||Te Ture Whenua Māori Act 1993 ss 4, 135, 137, 244.|
|Cases cited||Apaapa – Te Pura A No 17 Block (2010) 6 Waikato Maniapoto MB 1 (6 WMN 1), Wero Karena and Taupiri Paea Pita Karena Trust v Tamaar Taupiri Karena (2005) 102 WH 259- 269,|
|Overview and result||Application to change status of land held under an ahu whenua trust by the Palmerston North Māori Reserve Trust from Māori freehold land to general land under ss 135, 137 of the Act. Accompanying application to vary trust obligations. The Court stated that the facts relating to this application were unique because the trust's beneficiaries had no connection to the land in terms of tikanga Māori. The Court stated there were no members of the preferred classes who would otherwise have a right to first refusal on an application for alienation like this. None of the beneficiaries opposed the application. The Court also appeared to place weight on the fact that the land comprised commercial and commercial residential land as an apparent reason to distinguish this from other decisions about change of land status. Held; application allowed and status changed to general land owned by Māori. The Court found there were no preferred classes who could exercise a right to first refusal on this application for alienation. The trustees should be able to fulfill their obligation to act in a commercially prudent manner in relation to the land, including by changing the status of Māori land to general land. No particular plan should be required (disagreeing with the Court in Wero Karena and Taupiri Paea Pita Karena Trust v Tamaar Taupiri Karena). Alienation of the land was clearly desirable for the purpose of rationalisation of the trust's land base (s 137) and generating income from the commercial operation of the land. It would be substantially easier for the trustees to maximise returns if it were general land. The Trust impressed the Court as highly organised, efficient and conservatively managed deserving the ability to decide which land it will sell, which land it will keep and which land it will purchase (at (g)). All criteria of s 137 met. The trustees demonstrated a clear intention to purchase other land within their rohe with the proceeds of alienation, and there was considerable commercial advantage for the trustees in the Court granting the application. An order to rationalise land granted under s 137(2)(b), on condition that net proceeds of any land alienated must be held in trust for the purposes of acquisition of other land pursuant to the Trust's approved land acquisition plan.|
Relatively few background facts were given in the judgment. The reserved judgment was released 6 days after a single hearing held in Wellington on 25 August.
The trustees of the Palmerston North Māori Reserve Trust applied to change the status of Māori freehold land to general land (ss 135 and 137 of Te Ture Whenua Māori Act 1993 (the Act)). The trustees' primary motivation appears to be proposed changes to the Act (Palmerston North Maori Reserve Trust Annual Report, year ended 31 March 2016). The Court noted this but put this to one side (at ). The Trust's website discloses:
- The Trust is governed by a board of 10 Trustees who are elected by the beneficial owners.
- There are currently 910 beneficial owners with many other whānau involved through those beneficial owners.
- With total assets of $77 million (at 31 March 2014) "the beneficial owners have been achieving a very good economic return from their assets."
- The Trust currently owns a total of approximately 13 hectares of land in central Palmerston North and jointly owns another property in Wellington. (http://www.tekau.maori.nz/PalmerstonNorthMaoriReserveTrust/AboutUs.aspx)
Judge Savage noted (at ):
This application was discussed at a recent annual general meeting of the Trust and was overwhelmingly supported. No one appeared before me to oppose the application. The hearing before me was well attended and it was clear to me the beneficiaries were very concerned that this application succeed.
Application "somewhat unique"
 The application is somewhat unique. I know of no other occasion where this Court has been called upon to rule on an application in the circumstances of this case.
 The first unusual matter is that the beneficial owners of this trust have no historical relationship in terms of tikanga Māori with the land.
 The land was vested in what were called the people of Waiwhetu by a series of transactions prior to the commencement of the Native Land Courts in the mid nineteenth century. They received these lands in consideration of lands taken in the Lower Hutt and Wainuiōmata and have held them in one form or another ever since.
Judge Savage acknowledged that granting the application would have the effect of extinguishing the right to first refusal on an alienation held by people in the statutory preferred classes (s 4). But he continued, at ;
A unique effect of the facts in this case is that in terms of the definition of preferred class in section 2 of the Act there are no former owners who might have descendants who are members of hapū associated with the land.
This appears to attempt to distinguish this case from parcels of Māori freehold land that are owned by owners or by trustees where the beneficiaries have no historical relationship with the land in terms of tikanga Māori. Nevertheless, at some point the land was owned by hapū and there will be descendants of those hapū members. There is no indication in the judgment that the members of hapū traditionally associated with the land in modern-day Palmerston North were notified of the proposed alienation. By implication the judgment is clear they were not viewed as within the statutory preferred class of alienees. By further implication this means the Court interpreted the statutory preferred class of alienees as only arising where title to land was first determined by the Native Land Court or Māori Land Court.
The land subject to the application was described as "commercial land" and "commercial residential land" in Palmerston North. It appears this was mentioned in an attempt to distinguish the present case from other recent change of status decisions involving agricultural land or residential land. Other parcels of Māori freehold land are developed for commercial purposes and the significance of this point is not apparent.
The Court found there was no preferred class of persons with a first right of refusal over the proposed alienation that changing the status of land would amount to:
 The first matter to be considered is whether the Court can exercise its jurisdiction without any notice and in effect on an ex-parte basis in this case. This Court has always recognised that an application for change of status has the effect of destroying the right of first refusal under the Act and for that very reason notice must be given to the preferred class. There are many decisions in this regard and they are usefully listed and summarised by Judge Clark in Apaapa – Te Pura A No 171 . I accept that the preferred class is entitled to formal notification but the unique history of this matter means that there is no preferred class.
It is unusual to move so quickly over what has proved an essential consideration in other change of status applications, and without detail justifying this conclusion.
There is no explanation as to why tangata whenua were not within the statutory preferred class of alienees in this case or why this is restricted to land whose title was once determined by the Native Land Court or Māori Land Court.
The Judge noted that the beneficiaries of the Trust had no "relationship in terms of tikanga Māori with the land" and were not "members of hapū associated with the land". But this has been held immaterial in other situations where the beneficial owners of Māori freehold land were non-Maori with no relationship in terms of tikanga Māori with the land. Gibbs - Akura 3C1A3 (2015) 41 Takitimu MB 235 (41 TKT 235) is one recent decision of the Court declining an application to change status of Maori freehold land, in part because the Court did not accept the applicant's contention that the right of first refusal to the preferred class of alienees should not apply because the applicants did not belong to any hapū associated with the land. And Judge Ambler stated in Kemp – Otairi B2B (2010) 8 Taitokerau MB 216 (6 TTK 216), another application for change of status by non-Maori owners of Māori freehold land, at :
The right of first refusal is the trade-off or “social contract” which enables Māori freehold land to be sold. The purpose and utility of that right is not dependant on the ethnicity of the owner of the land at the time the land comes up for sale. Under the 1993 Act the ethnicity of the owner does not matter. What matters is that the PCA retain the opportunity to acquire Māori freehold land that is either currently owned by Māori or which was formerly owned by Māori.
Judge Ambler also cited Bruce v Edwards  1 NZLR 515 at :
The Māori Appellate Court said that “any order sought by (sic) the Court the effect of which could endanger the continued relationship with the land of whānau and hapū associated with it must be treated as being of grave concern”.
The right of first refusal is central to the kaupapa of the Act. It helps to achieve retention of Maori land by whānau and hapū associated with it. The ethnicity of the lands' owners and their lack of customary relationship with the land has been held irrelevant by the Court in previous change of status applications. This judgment does not grapple with that. On the facts, it appears there was no notification of the members of the hapū traditionally associated with the land.
The Court next considered the subsequent requirements for a change of status application. Section 137 of the Act provides:
137 Power to change status of Maori land
(1) The Maori Land Court may make a status order under section 135(1) where it is satisfied that—
(a) the legal estate in fee simple in the land is vested in a Maori incorporation or the trustees of a trust constituted under Part 12; and
(b) the title to the land is registered under the Land Transfer Act 1952 or is capable of being so registered; and
(c) the alienation of the land is clearly desirable for the purpose of a rationalisation of the land base or of any commercial operation of the Maori incorporation in which or the trustees in whom the legal estate in fee simple in the land is vested; and
(d) the rationalisation referred to in paragraph (c) will involve the acquisition of other land by the Maori incorporation in which or the trustees in whom the legal estate in fee simple in the land is vested; and
(e) the quorum and voting requirements imposed by regulations made under this Act in relation to the resolution necessary to authorise the alienation referred to in paragraph (c) are impractical.
(2) Where the Maori Land Court makes, in accordance with subsection (1), a status order under section 135(1), the status order may be made conditional on the net proceeds of the alienation of the land—
(a) being applied towards—
(i) the purchase of a specified piece of land; or
(ii) the improvement of any specified piece of land owned or to be purchased by the Maori incorporation or the trustees; or
(iii) both; or
(b) being held in trust for the purposes of the acquisition of other land pursuant to a land acquisition plan approved by the court or for the purposes of the improvement of land pursuant to a land improvement plan approved by the court; or
The Court confirmed the land is vested in trustees of a trust under part 12 of the Act and the title to the land is registered under the Land Transfer Act 1952 or is capable of being so registered.
Assessment of the rationalisation proposal was less clear with the Court stating (at ):
 I then pass to the provisions of section 137 of the Act which require that;
a) The land is vested in the trustees of a trust constituted under part 12 of the Act. This requirement is met.
b) The title to the land is registered under the Land Transfer Act 1952 or is capable of being so registered. This requirement is met.
c) Whether the alienation of the land is clearly desirable for the purpose of a rationalisation of the land base or any commercial operation in which the trustees in whom the legal estate in fee simple is vested is a matter that I must now consider. From my description of the land it will be clear that the trustees of this large commercial operation outside their rohe will have to make substantial changes to maximise their return.
d) In some cases they will want to sell, in some cases they will want to use lands as security, and in some cases they will want to lease. If the land is general land it is clear to me that their task will be substantially assisted and their returns will be substantially increased.
e) A number of cases have stated that an applicant must demonstrate that specific plans for the land can be more effectively achieved if the land were general land. In a judgement of Chief Judge Williams he considered what rationalisation meant and followed a dictionary definition:
to eliminate unnecessary equipment, personal or processes from (a group of business, factory etc) to make it more efficient.
f) I do not accept that this is an appropriate definition in the circumstances of this case and prefer a definition from the 10th Edition of the Concise Oxford Dictionary namely:
reorganise (a process or system) in such a way to make it more logical and consistent.
g) I do not accept for the purposes of this case that a specific plan is required. This is a highly organised efficient and conservatively managed trust which has to have the ability to act in a nimble manner in deciding in what land it will hold, what land it will sell and what land it will purchase. It clearly needs to be rationalised in that sense. I also do not accept that a trust such as this needs to come back to the Court again and again with a specific plan in relation to each specific block of land.
h) Whether the rationalisation referred to will involve the acquisition of other land by the trustees is a matter which I must consider. This trust has a “land for land” policy that I will refer to further which meets this requirement.
i) The quorum and voting requirements are completely unworkable for this trust in relation to obtaining authority to authorise alienations as referred to in section 137 (1) (c) of the Act. This requirement is met. This trust could never meet the voting thresholds for an alienation.
The suggestion that some trusts will gain prior and general approval so that they can act in a commercially nimble manner is one that will be of interest to many other trustees of Māori freehold land. Perhaps anticipating this, the judgment asserts that it is not intended as a precedent (at ).
Finally the Court undertook the exercise of weighing up whether to exercise discretion in favour of the application. While this is set out in a separate part of the judgment it is noticeably different from other recent decisions declining applications to change the status of land away from Māori freehold land in terms of engaging with the kaupapa of the Act. The kaupapa and retention objectives mean sale of land is not an objective. The weight of jurisprudence is to the effect that what is proposed has to be distinctive or extraordinary. Here the fact that beneficial owners own land in another group's rohe and the trust's commercial objectives appear to be the principal reasons advanced to support meeting that high test.