Plans to
exploit geothermal resources at Tikitere near Rotorua are on the back burner
after the Supreme Court ruled a joint venture agreement be referred back to the
Maori Land Court because one trustee voting in favour had a conflict of
interest. This ruling affects business
decisions being made by the over 5500 ahu whenua trusts holding
communally-owned Maori assets. English
law took centuries to create rules governing conflicts of interest within general
business relationships; clear rules are yet to be developed for the special
characteristics of Maori business.
The Tikitere Trust was set up in 2003. Trustees have power to develop its 32
hectares as a geothermal tourist park along with authority to establish a
geothermal power station. Tikitere
Geothermal (owned by the Tikitere Trust) was set up as a business vehicle to
exploit commercial possibilities in the area.
Arguments over a 2008 joint venture agreement between Tikitere and two
neighbouring Maori Trusts have been rumbling through the courts with seven
beneficiaries of Tikitere Trust objecting to the joint venture. The Trust has over 1200 beneficial owners. At a meeting of Tikitere Trust beneficiaries,
members voted against the proposed joint venture by a margin of fifty votes: 89
against; 39 for.
The joint venture’s validity was challenged in
the Supreme Court on the grounds that three of the Tikitere Trust trustees had
failed to protect the interest of beneficiaries by allowing their personal
interests to conflict with their duties as trustees. Equity expects trustees to exercise
single-minded loyalty. Any hint that a
trustee may benefit personally will see courts overturn the trustee’s
decision. This is problematic within
Maoridom; familial links run deep.
The Supreme Court ruled one Tikitere Trust
trustee did have a disqualifying conflict of interest when agreeing to the
joint venture. She holds approximately
two per cent of shares in the Tikitere Trust, personally owns some five per cent
of shares in a second trust which is party to the joint venture and her family
hold at least 20 per cent of shares in that second trust. She should not have been involved in
negotiating and signing the joint venture.
She had a marked personal interest in the outcome.
The general rule is that the courts cancel any
contract tainted by a trustee’s conflict of interest. The Supreme Court ruled that cancellation was
not the only outcome with ahu whenua trusts.
The Te Ture Whenua Maori Act governing ahu whenua trusts supports Maori
control of Maori assets. Inevitably,
trustees will be beneficiaries. The
Court ruled that the tenor of the Act is for the Maori Land Court to make a
pragmatic decision when faced with a trustee’s serious conflict of
interest. This may involve replacement
of those trustees who have a conflict enabling an earlier business decision to
be considered afresh.
Fenwick
v. Naera – Supreme Court (20.05.15)
15.051