April 2017 Māori Law Review

Fiduciary duty – Crown owed fiduciary duties to owners of Nelson tenths reserves – reasons – Proprietors of Wakatū

Proprietors of Wakatū v Attorney-General

Supreme Court [2017] NZSC 17

28 February 2017

Kylee Katipo discusses the recent Supreme Court judgment in Proprietors of Wakatū v Attorney General, which ruled that the Crown owed fiduciary duties to the customary owners of the Nelson tenths reserves.

See also Dr Alex Frame's article explaining some of the implications of the Supreme Court's decision and our summary article about the decision:

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

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

Overview and result

The Supreme Court, by majority, has declared that the Crown owed fiduciary duties to reserve 15,100 acres for the benefit of the customary owners of the Nelson tenths reserves (Tenths) and, in addition, to exclude their pā, urupā and cultivations from the land obtained by the Crown following the 1845 Spain award about land in the northern South Island.  The Supreme Court has remitted the matter to the High Court to determine the extent to which the duties owed were breached and the issues of liability, loss and the appropriate remedies.

In addition the Supreme Court has unanimously found that Rore Pat Stafford, the second appellant, has standing to bring the claim on behalf of the class of customary owners.  The Court, by majority, dismissed the appeals by Wakatū Incorporation (Wakatū) and Te Kahui Ngahuru Trust (TKN) in relation to their standing to bring claims on behalf of the class of customary owners.

The Attorney-General was ordered to pay costs of $55,000 to Mr Stafford.  Costs awards in the Court of Appeal and High Court were set aside.

For details of the cases and legislation considered in the judgments see Fiduciary duty – Crown owed fiduciary duties to owners of Nelson tenths reserves – Proprietors of Wakatū v Attorney-General by Martha Reilly.

Background

In 2012 Clifford J dismissed an application by Wakatū for a declaration that the Crown had breached duties owed as a trustee or in equity relating to the Tenths.  In his decision Clifford J also held that Mr Stafford, Wakatū and TKN lacked standing to bring the claims on behalf of the class of the customary owners.

Wakatū appealed that decision.  The Court of Appeal unanimously held that the Crown owed no fiduciary duties to the plaintiffs or those they represented.  It was also unanimous in rejecting the claim that the Crown was a trustee for the Tenths.  The Court of Appeal determined that Mr Stafford has standing as a rangatira of the collective to bring the claims, but that Wakatū and TKN did not have such standing.  Further the Court of Appeal held that the Ngati Koata, Ngati Rarua, Ngati Tama ki Te Tau Ihu and Te Atiawa o te Waka-a-Maui Claims Settlement Act 2014 (Settlement Act) preserved the claim bought by Mr Stafford in both his personal and representative capacity.

Arguments on appeal

Wakatū, Mr Stafford and TKN appealed the Court of Appeal findings adverse to their claims, including the Court of Appeal’s finding on standing.  The core of the appellants’ claim was that the Crown acted in breach of trust or fiduciary obligations to the customary owners of the Tenths in failing to fulfil the terms of the 1845 award.

The Attorney-General cross-appealed the Court of Appeal’s declaration that Mr Stafford has standing to bring a claim on behalf of the customary owners.  The Attorney-General also contended that the Court of Appeal was wrong to hold that the appellants' claims to relief were not barred by the terms of the Settlement Act and argued that the proceedings should be barred due to lapse of time under the Limitation Act or under the equitable doctrine of laches.

Discussion

Whether the Crown held the tenths on trust or under a fiduciary obligation

In the High Court the arguments for the finding of a trust were rejected on the basis that the Crown was “acting as government” in its dealings with the New Zealand Company (the Company) and in the management of the Tenths.  Clifford J also rejected the fiduciary duties claim. The Court of Appeal upheld the findings of the High Court on these issues.

The Supreme Court, by majority, has declared that the Crown owed fiduciary duties to the customary owners of the Tenths.

Elias CJ decided the approach of the Supreme Court of Canada in Guerin v The Queen [1984] 2 SCR 335 was sufficient in the circumstances of the present case to constitute the Crown as a fiduciary and found that the former Māori proprietors had existing beneficial interests in the Tenths and occupation lands to which the Crown as legal owner was bound in equity to give effect.

Elias CJ reasoned that the alienation to the Crown of existing Māori property through the Land Claims Ordinance process was on terms which could only be fulfilled by the Crown. The Crown’s acceptance of the alienation to it on the terms of the award entailed an assumption of responsibility to act in the interests of Māori whose interests were surrendered.

Elias CJ went further to find that the Crown’s assumption of responsibility in respect of the Tenths also constituted it a fiduciary of those whose property interests were surrendered and opened the way to recognition of constructive trust on established equitable principles and by analogy with them.  Added to this Elias J found that the Crown’s dealings in managing the Tenths constituted it as a fiduciary.

Elias CJ considered that the Crown’s obligations in the present case were amplified by the nature and extent of Māori property and its recognition in New Zealand from the first engagements of the Crown in the Treaty of Waitangi.

Elias CJ did not accept the suggestion made by Ellen France J in the Court of Appeal that the possibility of political redress through the Treaty of Waitangi Act 1975 is relevant to determining whether the relationship between the Crown and the Māori owners is properly treated in equity as fiduciary.  She instead found that the existence of a potential avenue for political redress cannot affect the claim in equity.

Elias CJ did not go as far as to suggest that there is a general fiduciary duty at large owed by the Crown to Māori.

Having found that the nature of the fiduciary obligations assumed by the Crown were the obligations of trust, Elias CJ considered that no formality was necessary to constitute a trust for the tenths reserves.  In addition Elias CJ considered that the Crown in its dealings with the tenths reserves constituted itself a trustee by reason of its own assumption of responsibility in relation to the reserves.  She considered that the Crown’s actions would have constituted the Crown a trustee in a private law sense.

Arnold and O’Regan JJ also adopted the Guerin approach.  They determined that the Crown assumed the Company’s obligation to allocate the Tenths and to manage them in the best interests of the original customary owners.  This was in addition to its own governmental responsibilities towards Māori.  In coming to that conclusion, Arnold and O’Regan JJ relied on clause 13 of the 1840 agreement between the Crown and the Company which drew a clear distinction between the Government’s role in ensuring that the Company’s commitments to Māori in respect of the reservation and management of land were honoured; and the Government’s role in making arrangements in respect of other lands for the benefit of Māori in the exercise of its general governmental responsibilities.  The judges acknowledged that, on the basis of Guerin, it could be argued that the Crown has fiduciary obligations to Māori arising from the Treaty of Waitangi and/or from the Crown’s right of pre-emption, but based the fiduciary duty in this case on the particular dealings between Māori, the Crown and the Company in relation to the Tenths, and expressed no view about the broader basis for such a duty.

All three judges agreed that the Crown’s decision to accept Commissioner Spain’s recommendations and allow the Company to obtain cleared title crystallised the Company’s obligations to Māori.  They reasoned that clearing native title and vesting the land in the Crown gave rise to fiduciary obligations to the customary owners.

In addition Elias CJ, Arnold and O’Regan JJ disagreed with the lower courts’ finding that the Crown was acting in a governmental capacity which was inconsistent with any fiduciary duties to Māori when it obtained the land cleared of native title.  Arnold and O’Regan JJ noted that the Crown took it upon itself to provide the promised consideration to the customary owners and in doing so was not called upon to balance the interests of settlers and Māori or to take any decision of a political or governmental nature.  They instead concluded that the Crown was simply performing, or ensuring the performance of, promises made to the original customary owners by the Company in the context of land sales.

Glazebrook J found that the Company intended that a trust be established upon alienation of the lands from the customary owners. The Crown agreed to take over the Company’s trust obligations.  As such there was sufficient certainty of intention to create a trust.  Glazebrook J also considered there to be sufficient certainty of object based on the reasons expressed by Clifford J.  Glazebrook J found that there was no issue as to certainty of subject matter in relation to the Tenths reserves that had already been surveyed and selected.  As far as the rural sections were concerned Glazebrook J determined that they were for a defined acreage (10,000 acres) within defined boundaries and there was a mechanism for selecting the property.

Glazebrook J determined that by entering into its agreement with the Company the Crown agreed to take on the Company’s trust obligations to the customary owners.  The Tenths were, as a result, excluded from Commissioner Spain’s recommended grant to the Company.  The Crown also had an obligation in respect of the occupation lands appropriated by the Crown to return title and possession to the customary owners.  Such obligations gave rise to a fiduciary obligation.

Glazebrook J’s analysis did not rely on any special fiduciary duty of the Crown in its dealings with the property of indigenous people. She accepted that the 1840 agreement could be described as a political compact, but considered that this did not mean that agreement did not create true trust obligations.  The Tenths were to be held for the benefit of the customary owners and the settlers had no claim on those reserves.  They were to be administered for the benefit of the customary owners and were thus not available for any general governmental purposes.

Young J in a dissenting decision concluded that the 1845 grant was devoid of effect and merely a set of recommendations.  Unless and until the grant was accepted and the development of the Nelson settlement proceeded in accordance with it, there could be no legally effective trusts.  Young J accepted that the reserves identified in the 1848 grant vested in the Crown and the Crown held the land in question on trust.  However, he considered the 1840 agreement as largely political in character but indicating clearly that land designated as reserves for the purposes of satisfying the promises of the Company to Māori would be held by the Crown as trustee.

In regard to the unallocated reserves, Young J considered that given the Crown did not accept the 1845 grant and never took title under it no trust existed.  Once the 1845 grant was rejected, the critical actions taken by Governor Grey were in part referable to his role under the 1841 Ordinance and the Royal Prerogative.  Under both he had responsibilities to look to the interests of Māori, but these were of a public law character and the governor was, in particular, required to balance the interests of the New Zealand Company with those of Māori.

Whether the appellants have standing to bring these proceedings?

The Supreme Court unanimously agreed that Mr Stafford has standing to bring the claim on behalf of the class of customary owners.  The Court accepted that as a beneficiary Mr Stafford also had a personal right to bring an action for breach of trust or fiduciary duty.

Elias CJ considered that Mr Stafford’s kaumatua status permitted him to bring the representative claim without obtaining a representative order.  Glazebrook J also found that as a rangatira and a beneficiary of the trust Mr Stafford has sufficient standing.  Arnold and O’Regan pointed out Mr Stafford is not a kaumatua for all members of the collective group, but nonetheless acknowledged his significant historical role in the claim and court proceedings as a leader.  The judges considered a flexible approach to facilitating the issue was preferable in this case.  Young J did not agree.  He considered Mr Stafford to have standing in his personal capacity only and considered that any claim by Mr Stafford to have breaches of trust or fiduciary duty made good in financial terms was one advanced on behalf of those who would benefit by such making good. In his view it was thus precluded by s 25(7) of the 2014 Settlement Act.

By majority the Supreme Court found that Wakatū and TKN did not have standing to bring the claim.  Arnold, O’Regan and Young JJ concluded that Wakatū was not a successor trustee and the beneficiaries of Wakatū were not exactly the same as those of the customary owners of the Tenths.  They also found that TKN did not gain representative status merely because its beneficiaries are members of the class for whom the claims are advanced.  Elias CJ and Glazebrook J disagreed and were in a minority on this point.  They considered that both Wakatū and TKN had sufficient interest to bring a claim on behalf of those beneficially entitled.

Whether the claims are barred by the Limitation Act or face an equitable defence

The Supreme Court, by majority, held that Mr Stafford’s claims are not barred by the Limitation Act 1950 to the extent that they are within the terms of s 21(1)(b) of the Act because they seek to recover from the Crown trust property either in the possession of the Crown or previously received by the Crown and converted to its use.

Elias CJ determined that the Crown was acting as a trustee when land was vested in it following the Spain award and the assets of trust were converted to the use of the Crown.  Elias CJ considered that there was evidence that the Crown did not give effect to the awards, used land for its own purposes and failed to get in unallocated reserves.  Glazebrook J agreed and found that either an “express trust” or “express trust by analogy” existed; therefore the claim was not barred in terms of fiduciary obligations because the Crown acted as a trustee de son tort.  Arnold and O’Regan JJ agreed with the reasoning of Elias CJ and Glazebrook J.  Given Young J’s finding that the Crown was not a trustee and did not owe fiduciary obligations to the Nelson tenths reserves in respect of the unallocated reserves and excluded lands he determined that the claims were barred by the Limitation Act.  Young J considered that though the actions may have been wrongful this did not make the Crown a trustee.

In addition the Supreme Court, by majority, held that the Court was not in a position to determine the applicability of the equitable defence of laches and remitted the issue to the High Court to determine once the facts as to breach and possible prejudice have been found.

Whether the claims are barred by the Settlement Act 2014

The Supreme Court found by majority that Mr Stafford’s claims are not barred by the 2014 Settlement Act.  Elias CJ agreed with Ellen France J in the Court of Appeal that there is no distinction in s 25(7) of the Act between claims to which the plaintiffs are entitled in their own right and those which they advance on behalf of others.

Elias CJ considered that the text and purpose of s 25(7) did not affect the scope of the specifically preserved claim which, in its terms, is not confined to any interest Mr Stafford might have personally.

Glazebrook J found against a narrow interpretation of the provisions of the 2014 Settlement Act and concluded that the Act’s provisions were passed with the full knowledge of the representative nature of the proceedings.  She did note however that there should be consideration of the fact that there is no double recovery between the Settlement and this claim.

Arnold and O’Regan JJ also found that the claim was not barred by the 2014 Settlement Act, finding that it was Parliament’s intention to preserve the private law claim despite the settlement and that the provisions of the Act preserving the claim must be meaningful and not just an empty gesture.

Young J disagreed with the majority and concluded that the 2014 Settlement Act preserved Mr Stafford’s claim in his personal capacity only and not as a representative for others.

Author: Kylee Katipo

Kylee is of Waikato/Tainui descent and is currently working as Research Counsel for the Māori Land Court. Kylee graduated from the University of Waikato in 2003 with a LLB. She is currently studying towards a master’s degree in Indigenous Studies through the University of Otago.