April 2017 Māori Law Review

Fiduciary duty – a few remarks on Proprietors of Wakatū v Attorney-General [2017] NZSC 17

The Wakatū Decision: A Landmark Moment in New Zealand Law

Public lecture at Victoria University of Wellington, hosted by the New Zealand Centre for Public Law and the Māori Law Review and with the support of the Faculty of Law and Office of the Deputy Vice Chancellor (Māori).

20 April 2017

Dr Alex Frame (University of Waikato) illustrates some of the implications of the Supreme Court's recent decision in Proprietors of Wakatū v Attorney-General [2017] NZSC 17.

See also Kylee Katipo's article summarising the reasons given in the Supreme Court's decision and our summary article about the decision:

Fiduciary duty - Crown owed fiduciary duties to owners of Nelson tenths reserves - reasons - Proprietors of Wakatū - Kylee Katipo

Fiduciary duty – Crown owed fiduciary duties to owners of Nelson tenths reserves – Proprietors of Wakatū v Attorney-General - Martha Reilly 

Discussion

Introduction

My interest in exploring the development in Canada of a remedy for breach of fiduciary duty by the Crown in respect of First Nations peoples was first aroused by a 2001 engagement to advise in Fiji on the 1874 Deed of Cession and indigenous land rights generally. New Zealand lawyers are accustomed to using the Treaty of Waitangi as a starting point for inquiry into Māori rights vis à vis the Crown. As is well known, that Treaty, signed in Māori, stipulated some very definite conditions and protections as the price paid by the Crown for the acquisition of ‘kawanatanga’, and these have naturally become, and continue to be, the basis for many Māori claims. By contrast, in Fiji is found the Deed of Cession of 1874, signed only in English, which explicitly made the gifting of sovereignty to the Queen by Cakobau and the leading chiefs unconditional:

And whereas in order to the establishment of British government within the said islands the said Tui Viti and other the several high chiefs thereof for themselves and their respective tribes have agreed to cede the possession of and the dominion and sovereignty over the whole of the said islands and over the inhabitants thereof and have requested Her said Majesty to accept such cession, - which cession the said Tui Viti and other high chiefs, relying upon the justice and generosity of Her said Majesty, have determined to tender unconditionally... (emphasis added)

One approach for a legal adviser was therefore to ask whether this apparent vulnerability might itself contain the seeds of an alternative legal strategy. Could less be more? The open-hearted commitment of Cakobau and his fellow Chiefs to Queen Victoria and her representatives in 1874 seemed to indicate that the fundamental relationship was not intended to be a contractual bargain, but rather one of protection and trust. The question became whether such a relationship might in some respects be supervised and enforced by the courts of law: the trust concept - or analogy - and the concomitant fiduciary obligation to which it gave rise, became obvious possibilities to consider.[1]

The great obstacle in the way of those remedies was the judgment of Sir Robert Megarry (1910-2006) sitting as Vice-Chancellor in Chancery in the 1976 case of Tito v Waddell concerning the claims of the Banaba islanders against the administration of the phosphate exploitation of their land.  Sir Robert, who will be known to generations of law students as the author and editor of texts on land law and equity, adventurously took his court on a 3 week 'view' to the South Pacific to visit Banaba island. After sitting for 206 days, the Vice-Chancellor delivered a 100,000 word judgment adverse to enforcement of the relationship as a trust:

When it is alleged that the Crown is a trustee, an element which is of especial importance consists of the governmental powers and obligations of the Crown; for these readily provide an explanation which is an alternative to a trust. If money or other property is vested in the Crown and is used for the benefit of others, one explanation can be that the Crown holds on a true trust for those others. Another explanation can be that, without holding the property on a true trust, the Crown is nevertheless administering that property in the exercise of the Crown's governmental functions. This latter possible explanation, which does not exist in the case of an ordinary individual, makes it necessary to scrutinise with greater care the words and circumstances which are alleged to impose a trust.[2]

Sir Robert Megarry was sympathetic to the Banabans but held that the Crown's relationship to the islanders, whose land had been ruined by open-cast mining and export of its phosphate resources, was only a 'political trust' and did not create fiduciary duties enforceable by the Courts, but rather left it to the Crown to fulfil any obligations it may have incurred as best it could, according to its own assessment.

The first significance of the Wakatū decision of the New Zealand Supreme Court is that the Court has declined to adopt the Tito v Waddell approach, preferring that articulated by Canadian courts beginning with the Supreme Court of Canada in the 1984 case of Guerin v The Queen.[3] The idea that the Crown in its executive function could be the unilateral decider of its own obligations in respect of Māori claims is not a credible or defensible position. The reliance of indigenous owners on the beneficence of the Crown's discretionary control, the dominance of that control, and the unsuitability of the 'political trust' doctrine developed by Vice-Chancellor Megarry to meet the requirements of justice in those circumstances, are all elements in the judgments of Chief Justice Elias and her fellow Judges in Wakatū.

I had attempted in 2005 to schematise the effect of the Guerin case, and some of its subsequent applications in the Canadian courts, in what I called a 'profile of the remedy' as it might be adapted to the context of New Zealand law:

  1. Where either a true Trust or a ‘Trust-like’ relationship exists between the Crown and Māori, equity will detect and enforce a fiduciary relationship.
  2. For a trust-like relationship to be found the court must be shown specific circumstances (albeit coloured by the context of the general Crown/Māori relationship, including the Treaty of Waitangi), and a specific Māori legal interest which pre-dated the Crown’s intervention, over which the Crown has assumed a discretionary control.
  3. The remedy is unlikely to be available to constrain the Crown in its general administration of social services or the political system.
  4. Breach of the fiduciary duty will occur where the Crown has failed fully to disclose relevant matters, or has acted in breach of the rules against profiting or self-dealing, or has failed to act with ordinary diligence in protecting the plaintiff’s interests, or has permitted an exploitative bargain.
  5. The plaintiff must come to the Court ‘with clean hands’ and have commenced the proceedings within a reasonable time of either the acts or omissions complained about, or of the time when the Crown, having been made aware by the plaintiff of the complaint, has failed to provide redress.

Does the Guerin/Wakatū doctrine require a 'true trust' or does it apply a fiction?

It is important to recognise that there were some significant differences of approach among the four majority Judges on the Supreme Court in Wakatū. One of the most important involved the question whether the relationship between the Crown and Māori concerning the Nelson and other lands created a true trust, or only a 'trust-like' relationship. Although both paths led to imposition of a fiduciary obligation, the distinction may have significance for future applications of the precedent, and also possibly for the application of the Limitation Act 1950 and its exception concerning breach of trust. The Chief Justice tended to the true-trust view[4], but Justices Arnold and O'Regan expressly stopped short of that position, stating that:

We have concluded that the Crown did owe fiduciary duties to the original customary owners of the Nelson land purchased by the Company in 1839 in relation to the Tenths reserves and in relation to the Occupation lands. Adopting the general approach of the Supreme Court of Canada in Guerin... we do not determine whether there was an express or other form of trust as this was not the central focus of the appellants' argument before us and it is not an issue that required resolution for the purposes of the principal declaration sought.[5]

Justice Glazebrook in the New Zealand Supreme Court also had doubts whether the Wakatū facts created a true trust, or only a 'trust-like' relationship:

If I am wrong on the trust analysis, the narrative set out above would create obligations so close to those of a trustee that it is an inevitable conclusion that the Crown owed fiduciary obligations to the customary owners, both in regard to the Occupation lands and the whole of the tenths reserves...[6]

The differences among the New Zealand Supreme Court Judges mirrored those expressed by the Canadian Judges in Guerin. Dickson J had there stated:

It is my view that the Crown's obligations vis-a-vis the Indians cannot be defined as a trust. That does not mean, however, that the Crown owes no enforceable duty to the Indians in the way in which it deals with Indian land... This obligation does not amount to a trust in the private law sense. It is rather a fiduciary duty. If, however, the Crown breaches this fiduciary duty it will be liable to the Indians in the same way and to the same extent as if such a trust were in effect.[7]

The words 'as if' signal an entirely proper use of the device of 'legal fiction', the purpose of which the New Zealand jurist Sir John Salmond (1862-1924) had described as early as 1893 as being 'not to establish the truth, but to subvert it in the interests of justice'.[8] But the constructive exponent of legal fictions needs to be mindful of their utility as 'scaffolding' only, and of their limits. As the great common lawyer and Chief Justice of England, Lord Mansfield, put it in 1761:

But fictions of law hold only in respect to the ends and purposes for which they were invented; when they are urged to an intent and purpose not within the reason and policy of the fiction, the other party may show the truth.[9]

As Lon Fuller proposed:

to obtain an understanding of any particular fiction we must first inquire: what premise does it assume?[10]

So, what is the premise of the fiction that a particular arrangement made by government should be treated as if a trust? Perhaps it is that where government has taken dominant control of an asset in circumstances where a second party with a rightful claim to the asset is assured of and relies on a selfless, transparent, and beneficial management of the asset in its interests, justice demands that the law will assist the second party to enforce that expectation in the same way as if the arrangement were a trust. The demands of justice are symmetrical even where the underlying facts may be less so. As Fuller says:

Even in the case of the crudest and most obvious fictions it is possible that the fiction may proceed from purely intellectual considerations. The judge, whose mental operations have been outlined, was not thinking of fooling others, nor was he carried away by an emotional desire to preserve existing doctrine. Neither was he considering the 'convenience' of preserving current notions. Indeed, he may have been acutely aware that his own fiction would introduce inconvenience and obscurity into the law. He was simply seeking a solution for the case which was intellectually satisfying to himself. And that solution turned out to involve a forcing of the case into existing categories, instead of the creation of a new doctrine.[11]

A leading modern commentator on fiduciary obligations, Paul Finn, sees the fiduciary principle as an instrument fitting into a trio of public policy concepts:

a three-tiered hierarchy of standards of protective responsibility which are available, potentially, for the regulation of conduct in voluntary or consensual relationships. These, in ascending order of intensity, I will describe as 'the unconscionability standard', 'the good faith standard', and the 'fiduciary standard'.[12]

Sir John Salmond put the matter in this way:

The purpose of trusteeship is to protect the rights and interests of persons who for any reason are unable effectively to protect them for themselves. The law vests those rights and interests for safe custody, as it were, in some other person who is capable of guarding them and dealing with them, and who is placed under a legal obligation to use them for the benefit of him to whom they in truth belong.[13]

The Doctrine of Laches

Etymology points us towards the meaning of the legal term 'laches' and the equitable defence it provides - it comes to us from the French lacher - meaning to let go. The long-running Webster Claim concerned an American citizen's supposed pre-Waitangi purchases of land from Maori. It finally came before the Anglo-American Pecuniary Claims Tribunal in Washington in 1925. Roscoe Pound, Dean of the Harvard Law School, was a member of the Tribunal, and, as I discovered when studying the Pound papers in the Special Collections room at Harvard in 1993, almost certainly the writer of the Tribunal's final decision - which appears almost verbatim in his handwriting in the papers[14]. One of the preliminary arguments in the Webster Claim was that it was barred by an 1853 Treaty between the United States and Great Britain purporting to settle all then-outstanding disputes, which included the Webster claim. Dean Pound made this observation in the course of argument on the preliminary point:

You are familiar with the famous case of Broderick's Will [US 1875] in the Supreme Court of the United States, where Broderick went away to Australia, I think it was, and the United States Supreme Court said that all of Broderick's business in California could not wait until he woke up over in Australia, just like Rip van Winkle, after his long sleep, and came back to find out what had been done with it. Could Webster's affairs all not remain in status quo while he is wandering around, or must he bestir himself actively to find out what has happened? [15]

I have been tempted to continue Pound's playful analogy and dub this general reluctance of courts to favour revisitation of old claims, which the passage of time and apparent neglect of the claimants are likely to have caused the world to regard as settled, the 'Rip van Winkle principle'. In fact, as comparison of two Cook Islands appeals to the Privy Council in London in 2012 reveals, it turns out to be:

no more than a general judicial predisposition, which can be outflanked by other considerations, such as the emergence of new information, the position of third parties, the deep context of the legal order in which the decision is to be made, and the demands of justice.[16]

The sensitivity of the 'Rip van Winkle principle' to these issues - or looked at in another way, the unpredictability of its application - is shown by the results in the two recent Cook Islands cases in the Privy Council. In the Baudinet case the court declined to 'correct' an alleged error in a land court minute book from 1903, stating that:

Even if the Board was satisfied that a slip probably had occurred, the Board would in such circumstances have been disinclined to exercise the discretionary power available... There must be a time when ancient claims come too late.[17]

However, in the Tumu case, heard in London in the same week, the Privy Council directed that a 1912 court order be amended to include names wrongly omitted. Their Lordships stated that:

Under a land law system which makes freehold native land generally inalienable... and which excludes the acquisition of title by prescription, lapse of time becomes less significant in the exercise of discretion.[18]

Both cases involved the lapse of more than a century, and yet in the one case time was fatal and in the other not.

Conclusion

As we know, part of the legislative rationale for the creation of our Supreme Court was the determination to develop our legal system and common law in accordance with our own conditions and traditions in Aotearoa/New Zealand.[19] Perhaps the journey of the Guerin doctrine to our shores may be seen as the combination of a judicial role in assessing and enforcing equity, independent of the Treaty of Waitangi, in at least some historical Crown dealings with Māori interests, with a flexible and pragmatic recognition that the passage of time may sometimes have affected the modalities of redress.

Notes

[1] The result of these explorations was an article titled ‘The Fiduciary Duty of the Crown to Maori: Will the Canadian Remedy Travel?’ Waikato Law Review, Vol. 13 (2005) 70-87 in which I ventured to suggest that the Canadian Guerin doctrine might indeed travel.

[2] Megarry V-C, in Tito v Waddell [1977] 1 Ch 106, at 211.

[3] Guerin v The Queen [1984] 2 SCR 335, 13 DLR (4th) 321, also [1986] LRC (Const.) 840.

[4] Chief Justice Elias in Wakatū, see for example [393]-[397], [401], and [454].

[5] Justices Arnold and O'Regan, in Wakatū, [726].

[6] Justice Glazebrook, in Wakatū, [588].

[7] Dickson J, in Guerin, at pp 864 and 865. Justice Wilson on the other hand found an actual trust, see p 361.

[8] Salmond, The First Principles of Jurisprudence, Steven & Haynes, London, 1893, p.85. Quoted in Alex Frame, ‘Fictions in the Thought of Sir John Salmond’, Victoria University of Wellington Law Review, Vol 30, No.1, (1999), 159-175, at p 164.

[9] Lord Mansfield CJ in Morris v Pugh (1761) 3 Burr 1242, 1243. Quoted in Lon Fuller, Legal Fictions, Stanford University Press, 1967, p 51, note 4.

[10] Lon Fuller, Legal Fictions, Stanford University Press, 1967, p 53.

[11] Lon L. Fuller, Legal Fictions, Stanford University Press, 1967, p 68.

[12] Paul Finn, Fiduciary Obligations: 40th anniversary republication with additional essays, Federation Press, 2016, p 310. Sir Anthony Mason says in his introduction that the 1977 edition has the distinction of being the book most frequently stolen from the Squire Library in Cambridge!

[13] Salmond, Jurisprudence, 7th ed, Sweet & Maxwell, London, 1924, p 285.

[14] Roscoe Pound Papers, Special Collections, Harvard Law School, MS Box 181, Folder 6.

[15] Roscoe Pound, US National Archives, Washington, RG76, Entry 221, Case 31, Env. 43. Rip van Winkle was a character in a short story published by Washington Irving in 1819.

[16] Alex Frame, ‘Cook Islands Appeals in the Privy Council’, [2013] NZLJ 132.

[17] Baudinet v Tavioni [2012] UKPC 35, 43.

[18] Descendants of Utanga and Arerangi Tumu v Descendants of Iopu Tumu [2012] UKPC 34.

[19] Supreme Court Act 2003, s 3(1)(a).

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Author: Alex Frame

Professor Frame has had an extensive career in the legal profession through his academic work with Victoria University, where he was Senior Lecturer until 1988, and as a barrister specialising in Constitutional Law in the South Pacific and Treaty of Waitangi issues. His biography of the New Zealand jurist, Sir John Salmond (1862-1924) – Salmond: Southern Jurist - won the EH McCormick Prize at the Montana New Zealand Book Awards in 1996 and the Legal Research Foundation's JF Northey Prize for the best legal publication in New Zealand in the same year. Professor Frame was first appointed to a Chair in Te Piringa - Faculty of Law at the University of Waikato in 2005 and was from then until June 2007 concurrently Director of Te Matahauariki Research Institute. With the completion of the Institute's contract with the Foundation for Research Science and Technology in 2007, and of the project of compiling Te Matapunenga: A Compendium of References to the Concepts and Institutions of Maori Customary Law, Professor Frame has returned to practice as a barrister in New Zealand and the Pacific Islands.