CHETHAM & Ors (as trustees of Patuharakeke Te Iwi Trust Board) v MIGHTY RIVER POWER LTD [2014]

NZHC 3202 [12 December 2014]

IN THE HIGH COURT OF NEW ZEALAND

AUCKLAND REGISTRY

CIV-2014-488-000074

[2014] NZHC 3202

UNDER

the Judicature Act 1908

IN THE MATTER

of an application for an interim injunction

BETWEEN

JULIANE KATHRYN CHETHAM,

PATRICIA CATHERINE HEPERI,

JARAD AARON PAKI PITMAN,

GILBERT PATRICK HOLMES PAKI,

WILLIAM RAYMOND WASSELL, ANI

RAMARI PITMAN (as trustees of

Patuharakeke Te Iwi Trust Board)

Applicants

AND

MIGHTY RIVER POWER LIMITED

First Respondent

THE ATTORNEY-GENERAL

Second Respondent

Hearing:

1 December 2014

Appearances:

P J Tamatekapua and A S Castle for Plaintiffs

J Hodder QC and L Fraser for First Respondent

J R Gough and C C McKay for Second Respondents

Judgment:

12 December 2014

JUDGMENT OF VENNING J

This judgment was delivered by me on 12 December 2014 at 4.30 pm, pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar Date……………

Solicitors: Chapman Tripp, Auckland Crown Law, Wellington Copy to: P Tamatekapua, Auckland J Hodder QC, Auckland

Introduction

[1] Mighty River Power Limited (MRP) owns land at Marsden Point. It wants to

sell some of the land that it no longer has a use for. The Patuharakeke Te Iwi Trust

Board (PTB) has claims before the Waitangi Tribunal (the Tribunal) which are as yet

unresolved. The land MRP proposes to sell falls within the Tribunal’s Te Paparahi o

Te Raki inquiry district.

[2] PTB seeks injunctive relief halting the sale of the land by MRP until the

outcome of a hearing into the sale of the land is concluded and findings in relation to

PTB’s claims are made by the Tribunal. It also seeks declarations that the decision

by MRP to sell the land is inconsistent with the principles of the Treaty of Waitangi

(Te Tiriti o Watangi) (the Treaty) and that, in assisting in the sale, the Crown’s

actions are inconsistent with the principles of the Treaty.

[3] MRP and the Attorney-General consider that the PTB’s amended statement of

claim does not disclose a reasonably arguable cause of action. Nor is the relief

sought available to PTB. They seek to have the claims against them struck out.

Factual basis

[4] I take the following factual basis from the pleaded amended statement of

claim. PTB has a comprehensive claim before the Tribunal: WAI 745. It is

prosecuted in conjunction with WAI 1308, a claim specific to lands contained in

various Pukekauri and Takahiwai land blocks compulsorily acquired by the Crown.

PTB has filed an application for urgency with the Tribunal in relation to the sale of

the MRP land.

[5] The principal claims of PTB include:

(a) the confiscation of Te Poupouwhenua;

(b) the failure by the Crown to protect the land base of Patuharakeke.

[6] The background to the Te Poupouwhenua claim is:

– land at Te Poupouwhenua was confiscated by the Crown for an alleged

raid of a settler’s house at Matakana in 1844 by three Maori men;

– only one of the three Te Purihi Koukou had affiliations to Te

Poupouwhenua;

– the Crown failed to recognise the tikanga and kawa that the three men

were abiding by when they carried out their utu;

– the Crown failed to return the ceded land to the customary owners even

though the practice of imposing a land penalty was contrary to the

instructions of the Secretary of State for the colonies;

– instead of recommending compensation or return of the land the Crown,

through its agent, entered into negotiations for a new deed offering £10 to

give up claim to the land;

– the Crown failed to investigate relevant hapu affiliations and customary

interests in the land and failed to obtain from the owners of that land their

consent to the purchase;

– the Crown failed to set aside reserves within the area covered by the 1845

confiscation or within that area covered by the 1854 purchase, thereby

ensuring the dispossession and impoverishment of Patuharakeke;

– the Crown has never remedied the grievances of Patuharakeke in relation

to Te Poupouwhenua.

[7] In relation to the land base of Patuharakeke, the principal issues advanced

before the Tribunal are as follows:

– the Crown failed to carry out a survey of the block prior to the purchase

deed being signed in 1854;

– the Crown agent deliberately negotiated with the first people to come

forward as opposed to the right people;

– the price paid for the block was inadequate and amounted to six and a

half pence per acre for 15,100 acres;

– there were no reserves set aside as promised under the purchase deed;

– the Crown agent acted as translator and negotiator for the purchase;

– the pre-1865 purchase was carried out in haste without proper survey and

with uncertainty as to the terms.

[8] As a consequence, over a period of five months from February 1854 to July

1854 the Crown obtained the majority of the Patuharakeke land base, approximately

60,000 ha.

[9] In its statement of position and concessions dated 7 March 2012 before the

Tribunal the Crown has stated that it:

... also concedes that iwi living in the Whangarei and Whangaroa sub regions

of Te Paparahi o Te Raki inquiry are now virtually landless and the failure to

ensure that they retained sufficient land for their present and future needs

was a breach of Te Tiriti o Waitangi/Treaty of Waitangi.

[10] On 9 October 2004 PTB and MRP signed a Memorandum of Understanding

(MOU) to provide for their ongoing relationship.

[11] PTB and MRP met and discussed generally MRP’s proposal to sell land

owned by it on 20 December 2012, 18 March 2013 and 20 January 2014. On 18

April 2014 a message was sent to PTB that MRP would be selling the land in issue.

On 19 April MRP advertised, seeking expressions of interest in relation to the sale of

the land.

[12] The land that is for sale is held in seven lots as follows:

(a) Lot 1 Deposited Plan 152653 (NA91A/787); (“Lot 1”);

(b) Lot 2 Deposited Plan 465547 (NA620267); (“Lot 2”);

(c) Lot 9 Deposited Plan 55607 (NA9D/35) and Part Section 51 and

Section 52-53 Block VII Ruakaka Survey District (NA31D/1069);

(“Lot 3”);

(d) Section 30-32, 37 Survey Office Plan (159504); (“Lot 4”);

(e) Section 45 Block VII and Section 46 Block VII Ruakaka Survey

District and Section 34-35 Survey Office Plan 322547 (159507),

Section 21, 23-24 Survey Office Plan 322547 and Section 41 Block

VII Ruakaka Survey District (247490), Section 8 Block VII Ruakaka

Survey District (NA1034/280); (“Lot 5’);

(f) Section 26 Survey Office Plan 322547 (159505); (“Lot 6”);

(g) Part Section 39 Block VII Ruakaka Survey District and Section 28-29

Survey Office Plan 322547; (“Lot 7”).

[13] The land described as lots 1 and 2 has s 27B memorials on its titles.1 Lots 1

and 2 are not the subject of the injunction and declarations sought in the amended

statement of claim. The amended statement of claim only seeks relief in relation to

lots 3–7.

Legislative background to MRP’s current status

[14] In 1986 Parliament established a regime of state enterprises under which

companies were formed to acquire state trading undertakings.2 The State-Owned

Enterprises Act 1986 was passed on 1 April 1987. Electricity Corporation of New

Zealand Ltd (ECNZ) was a state-owned enterprise (SOE). Following reform in the

electricity market in the late 1990’s MRP was established in April 1999 and took

over ECNZ’s Marsden Point (and other assets).

1 State-Owned Enterprises Act 1986, s 27B.

2 New Zealand Maori Council v Attorney-General [2013] NZSC 6, at [32].

[15] Part of the National Party’s policy in the 2011 general election was the partial

sale of four state-owned enterprises, including MRP. When National was returned as

the major government party after the election the Government it formed had

Parliament pass the Public Finance (Mixed Ownership Model) Amendment Act 2012

which introduced a new Part 5A into the Public Finance Act 1989 to provide for

mixed ownership model companies (MOMS). Parliament also passed the State-

Owned Enterprises Amendment Act 2012 reconstituting MRP and three other SOEs

as MOMS.

[16] The New Zealand Maori Council sought to challenge the transfer of MRP

from the SOE regime to the MOM regime as unlawful and inconsistent with the

principles of the Treaty. The Waikato River and other rivers in respect of which

MRP had use rights were subject to longstanding claims by Maori under the Tribunal

process. The Tribunal had found that a number of the claims were well founded and

that Maori had rights in the nature of ownership in relation to certain waters.

Negotiations with the Crown for redress were continuing.

[17] The High Court found against the Council which then appealed directly to the

Supreme Court.3 The Supreme Court dismissed the appeal.

4

[18] Following the dismissal of the appeal approximately 49 per cent of the shares

in MRP were sold to the public. Fifty-one per cent was held by Ministers of the

Crown in accordance with the provisions of the Public Finance (Mixed Ownership

Model) Amendment Act 2012.5

PTB’s claim

[19] PTB raises two causes of action.

(a) that the Crown is in breach of s 45Q Public Finance Act 1989 and the

principles of the Treaty; and

3 New Zealand Maori Council v Attorney-General [2012] NZHC 3338.

4 New Zealand Maori Council v Attorney-General, above n 2.

5 The actual figures are 48.22% and 51.78%.

(b) that MRP has acted contrary to the understandings set out in the

MOU.

Strike out principles

[20] Counsel are agreed the following principles apply to this strike out

application:

the pleaded facts are assumed to be true;

the causes of action must be so clearly untenable that they cannot

possibly succeed;

the jurisdiction is to be exercised sparingly and only in a clear case

where the Court is satisfied it has all requisite materials;

caution is to be exercised in an area where the law is developing; and

the fact that applications to strike out raise difficult questions of law

and require extensive argument does not itself exclude jurisdiction.6

[21] In addition, in the present case there is affidavit evidence including evidence

of the background to the MRP’s ownership of the land. That is taken from public

records of transfers and is not controversial. The Court can consider it.7

The applications to strike out

[22] PTB’s amended statement of claim pleads a number of matters of law. In

particular, under the first cause of action PTB pleads that:

The proposed sale of lots 3 – 7 is contrary to s 45Q of the Public

Finance Act in that as the majority shareholder of MRP the Crown is

acting in a manner inconsistent with the principles of the Treaty.

6 Attorney-General v Prince & Gardner [1998] 1 NZLR 262 at 267; and Couch v Attorney-

General [2008] NZSC 45 at [33]. 7 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA), at 566.

The Crown as majority shareholder of MRP is under an obligation to

act in a manner consistent with the Treaty and the sale is inconsistent

with those obligations.

The sale is contrary to ss 45Q and 45W of the Public Finance Act as it

would remove the land from jurisdiction of the Crown’s legal

obligations and all but remove the ability for the claimants to have the

land returned for any future Treaty settlement.

[23] MRP’s response is that it is a separate entity to the Crown. MRP is not

obliged to comply with the principles of the Treaty. The Crown’s majority

shareholding in MRP is irrelevant as the Crown is not able to direct the Board of

MRP.

[24] The Crown’s response is that there is no Crown action involved in the

proposed sales. The land is private land owned by MRP. The Crown has no ability

to direct MRP in respect of the sale. The suggestion the Crown has breached the

principles of the Treaty is misconceived. The Crown has not made any decision to

sell the relevant land.

[25] In relation to the second cause of action which is directed at MRP, PTB

pleads that MRP’s actions to proceed with the sale of lots 3–7 is contrary to the

understanding set out in the MOU between PTB and MRP. That MOU “stipulates a

process for how land with [Tribunal] claims on it should be dealt with”.

[26] MRP’s response is that the MOU is a document recording good will at a high

level but it does not create binding contractual obligations nor is it otherwise a

justiciable document which could support the relief sought.

Discussion

[27] Ms Tamatekapua submitted the Crown as majority shareholder of MRP is

obliged to act in a manner consistent with the Treaty. The proposed sale of lots 3–7

is contrary to s 45Q of the Public Finance Act as it is inconsistent with those

obligations.

[28] The submission conflates two separate issues, first the Crown’s obligations to

act in a manner consistent with the Treaty, and second, the Crown’s position as a

shareholder in MRP.

[29] Section 45Q of the Public Finance Act 1989 provides:

45Q Treaty of Waitangi (Te Tiriti o Waitangi)

(1) Nothing in this Part shall permit the Crown to act in a manner that is

inconsistent with the principles of the Treaty of Waitangi (Te Tiriti o

Waitangi).

(2) For the avoidance of doubt, subsection (1) does not apply to persons

other than the Crown.]

[30] The Crown is defined in Part 5A of the Public Finance Act 1989 as “means

Her Majesty the Queen in right of New Zealand”. In s 2 of the Act Crown or the

Sovereign is defined as:

Crown or [[the Sovereign]]—

(a) means [[the Sovereign]] in right of New Zealand; and

(b) includes all Ministers of the Crown and all departments; but

(c) does not include—

(i) an Office of Parliament; or

(ii) a Crown entity; or

(iii) a State enterprise named in Schedule 1 to the State-Owned

Enterprises Act 1986[[; or]]

[[(iv) a Schedule 4 organisation; or]]

[[(v) a Schedule 4A company; or]]

[[(vi) a mixed ownership model company[; or] ]]

[[(vii) an entity named or described in Schedule 6]]

MRP is clearly not Her Majesty the Queen and as a MOM it is expressly excluded

from the definition of Crown or the Sovereign in s 2. MRP is a separate legal entity

that operates as a company under the Companies Act 1993.

[31] I note that in Te Heu Heu Tuwharetoa Maori Trust Board v Attorney-General

Robertson J concluded that to treat SOEs and their subsidiaries as being part of the

Crown for the purposes of s 9 of the State-Owned Enterprises Act would not accord

with the philosophy of the Act.8 But in any event s 45Q(2) could not be clearer. The

constraint on the Crown in s 45Q(1) not to act in a manner inconsistent with the

principles of the Treaty does not apply to MRP.

[32] Ms Tamatekapua submitted that through the majority shareholding of the

Ministers of the Crown MRP was still subject to the principles of the Treaty. But in

New Zealand Maori Council v Attorney-General9 the Supreme Court confirmed that

under s 45Q only Crown action must be Treaty-compliant. The Court also confirmed

the obligation under subs (1) does not apply to the MOMS or to the directors of

those companies.10

[33] The short point is that MRP is not the Crown and, as such, s 45Q(1) does not

apply to it.

[34] I turn to whether the Crown, through its majority shareholding in MRP, can

nevertheless direct the Board. That proposition is fundamental to PTB’s first cause

of action against both MRP and the Crown.

[35] The Supreme Court also considered the position of the Crown as majority

shareholder in a MOM such as MRP in the New Zealand Maori Council case:

[135] Crown ownership and control of the power-generating companies

will undoubtedly be diminished by privatisation. Once the power-generating

companies become mixed ownership companies and have private

shareholders, they will have to be run in a way which is consistent with the

rights of the minority shareholders and directors will be required to act in a

manner which is in the best interests of the company concerned. The

important features of the way in which State enterprises operate, including

their relationship with shareholding Ministers, were stressed by the Privy

Council in the Broadcasting Assets case. They will no longer be present.

This means that privatisation might preclude or limit the possibility of some

options for redress which would otherwise be possible: for instance, the

“shares plus” proposal, or royalty regimes which are particular to the State

8 Te Heu Heu & Tuwharetoa Maori Trust Board v Attorney-General [1999] 1 NZLR 98.

9 New Zealand Maori Council v Attorney-General, above n 2.

10 Above n 2, at [41].

enterprise power-generating companies, or reparation out of the water assets

of the State enterprise.

(footnotes omitted)

[36] The Supreme Court has therefore confirmed that MOMs such as MRP must

be run in a way consistent with the rights of minority shareholders. Directors will

have to act in the best interests of the company. As such the business and affairs of

MRP must be managed by or under the direction and supervision of the Board.11

As

a company there are certain fundamental obligations in relation to the control and

stewardship of the company.

[37] A company is separate to its shareholders: Saloman v A Salomon & Co Ltd.12

The principle established in Automatic Self Cleansing Filter Syndicate v

Cuninghame13

that there is a limit on the powers of shareholders to direct the Board

was approved and confirmed by the Court of Appeal in Black White and Grey Cabs v

Fox.14

In Automatic Self Cleansing Filter Syndicate v Cuninghame the directors of a

registered company refused to carry out a sale agreement resolved upon in general

meeting, relying upon the articles of association which delegated all powers of

management to them. The members of the company argued that the articles were

subject to the general rule that agents must obey the directions of their principal but

the United Kingdom Court of Appeal decided that the resolution of the general

meeting was a nullity and that the directors could ignore it.

[38] As the Court of Appeal confirmed in Black White and Grey Cabs, the Court

in Automatic Self Cleansing Filter Syndicate established the principle that a

company is an entity distinct from its shareholders and its directors. Some of its

powers may, according to its articles, be exercised by directors. Certain other

powers may be reserved for the shareholders in general meetings. If powers of

management are vested in the directors they and they alone can exercise those

powers. The only way in which the general body of the shareholders can control the

exercise of the powers vested by the articles in the directors is by altering their

articles or, if opportunity arises under the articles, by refusing to re-elect the directors

11

Companies Act 1993, s 128. 12

Saloman v A Salomon & Co Ltd [1897] AC 22 (PC). 13

Automatic Self-Cleansing Filter Syndicate Co v Cuninghame [1906] 2 Ch 34. 14

Black White and Grey Cabs v Fox [1969] NZLR 824, at 831.

of whose actions they disapprove. They cannot themselves usurp the powers which

by the articles are vested in the directors anymore than the directors can usurp the

powers vested by the articles in the general body of shareholders.

[39] MRP’s decision to sell lots 3–7 is the type of decision which the Board of a

company has authority to make. It is the type of decision the Supreme Court

recognised as being made by the Board of a MOM in accordance with general

company law principles. The Crown Ministers, even though they may hold a

majority shareholding in MRP cannot direct the Board otherwise.

[40] Ms Tamatekapua sought to argue that, given MRP was formerly an SOE and

as an SOE was subject to the obligations recognised in the SOE case,15

the same

obligations carried through to MRP as a MOM.

[41] Ms Tamatekapua referred to press releases of the Minister of Finance on 15

February 2012 and the comments of the Minister for State-Owned Enterprises when

introducing the Mixed Ownership Model Bill to Parliament for its first reading and

particularly the statement by the Hon Tony Ryall (Minister for State Owned

Enterprises):

The Government has made it clear we are not walking away from our Treaty

obligations. We held 10 consultation hui throughout the country, and we

listened with an open mind. As a result of the consultation, section 9 of the

State-Owned Enterprises Act has now been transmitted into the legislation

with the clarification that private shareholders are not affected. Maori and

all other New Zealanders will have their interest protected through the

Resource Management Act, which these companies must comply with. They

are still there.

[42] The Supreme Court confirmed in New Zealand Maori Council v Attorney-

General16

that the Court of Appeal’s recognition in the SOE case that s 9 stated a

fundamental principle guiding the interpretation of legislation which addressed

issues involving the relationship of Maori with the Crown must form the basis of

approach of New Zealand Courts to subsequent legislation.

15

New Zealand Maori Council v Attorney-General [1996] 3 NZLR 140 (CA) (Commercial Radio

Assets’ case). 16

Above n 2.

[43] Section 45Q(1) is in identical terms to s 9 of the State-Owned Enterprises

Act. In the SOE case the Court of Appeal confirmed that, while s 23 of the State-

Owned Enterprises Act empowered the transfer of Crown assets (and liabilities) to

the SOEs, such transfer did not entitle any person to terminate, alter or in any way

affect the rights or liabilities of the Crown and the SOE under any Act or agreement.

However all of this presupposes there are existing rights or liabilities in relation to

land or other assets.

[44] Importantly, the obligations referred to and discussed in the SOE case arose

when the land in issue was transferred by the Crown to the SOE. Sections 27A-D of

the State-Owned Enterprises Act deal with Maori land claims and provide for

resumption of land transferred to SOEs by the Crown on the recommendation of the

Tribunal and for memorials to be entered on titles to land subject to claims.

[45] However, as noted, lots 3–7 are not subject to memorials under s 27B. The

evidence is clear. MRP (or at least its predecessor in title), acquired the land in lots

3–7 from private owners. The land was not transferred to or vested in ECNZ from or

by action of the Crown.17

[46] When ECNZ obtained ownership of the land while it was an SOE it did so by

acquiring the land from private owners. The land held by MRP and described as lots

3–7 is private land. Private land is defined in the Treaty of Waitangi Act as:

Private land means any land, or interest in land, held by a person other

than—

(a) The Crown; or

(b) A Crown entity within the meaning of the Public Finance Act 1989.

As noted MRP is not the Crown, and nor is it a Crown entity. Crown Entity under

the Public Finance Act has the same definition as in s 7(1) of the Crown Entities Act

2004. MRP is not a Crown Entity in terms of that definition.

[47] Section 6(4A) of the Treaty of Waitangi Act 1975 precludes the Tribunal from

recommending the return to Maori ownership of any private land except if the land

17

Affidavit of Duncan David Annandale sworn 5 September 2014 at paras 4–6.

was transferred to an SOE under s 23 of the State-Owned Enterprises Act or vested

in it by notice in the Gazette s 24, or by Order in Council s 28. None of those

provisions apply.

[48] Essentially for the same reason s 45W of the Public Finance Act 1989 does

not assist the PTB’s argument either. It provides:

45W Certain provisions of State-Owned Enterprises Act 1986 and other

enactments continue to apply

(1) Sections 22 to 30(1) of the State-Owned Enterprises Act 1986, the

provisions listed in subsection (2), and any Order in Council made at

any time under any of those provisions continue to apply to a mixed

ownership model company, despite it ceasing to be a State

enterprise, as if—

(a) the company were a State enterprise and a company named

in Schedule 2 of the State-Owned Enterprises Act 1986; and

(b) the Minister of Finance and the Minister responsible for that

company were the shareholding Ministers for the company.

(2) The provisions are—

(a) the definition of State forest land in section 2(1) and sections

24(1) and (6), 24B(4) to (6), and 61(2) of the Conservation

Act 1987:

(b) section 11 of the Crown Pastoral Land Act 1998:

(c) sections 8A to 8H of the Treaty of Waitangi Act 1975.] ]

[49] In the present case, s 45W does not apply to the land in Lots 3–7, the subject

of PTB’s amended statement of claim. Section 45W(2)(a) and (b) are not applicable.

Nor does s 45W(2)(c) apply because the land in lots 3–7 was acquired from private

landholders. The land in Lots 3–7 was not transferred to ECNZ or MRP as an SOE

or vested by notice in the Gazette or by Order in Council.

[50] As the Supreme Court noted in the New Zealand Maori Council v Attorney-

General case:

[134] The memorial regime under s 27A of the State-Owned Enterprises

Act and the continuing operation in relation to mixed ownership companies

of the resumption procedures provided for under s 27B of that Act is

significant protection for land interests. …

but only where the provisions of s 27A–27D apply to the land. There are no such

memorials in relation to lots 3–7.

[51] Counsel also referred to the recent decision of Joseph Williams J in Ririnui v

Landcorp Farming Ltd.18

In that case the Judge discussed and applied the Duomatic

principle.19

The principle as established by Buckley J is:20

... where it can be shown that all shareholders who have a right to attend and

vote at a general meeting of the company assent to some matter which a

general meeting of the company could carry into effect, that assent is as

binding as a resolution in general meeting would be.

The Duomatic principle has been followed and applied in Levin v Ikiua and

Nicholson v Permakraft (NZ) Ltd.21

In the case of Ririnui the Judge extended the

principle to find that there was power in the shareholding Ministers of Landcorp to

intervene to prevent the sale if to allow it would have been to permit a breach of the

principles of the Treaty.

[52] However, an important and fundamental distinction between Landcorp’s

position in the the Ririnui case and MRP’s position in the present case is that

Landcorp was an SOE. The shareholding Ministers held 100 per cent of the shares.

MRP is a MOM operating under the rules and principles that apply to such

companies, as recognised by the Supreme Court in the above passage from New

Zealand Maori Council v Attorney-General. The shareholding Ministers do not own

all the shares. There is a related important and relevant qualification to the

Duomatic principle that applies. The decision ratified by the majority has to be one

that could be passed at a general meeting of all shareholders and all shareholders

who have the right to attend and vote must assent to it.

[53] The Ririnui case is also distinguishable on the basis that the land in that case

was subject to a s 27B memorial and further, there was a protocol in place between

Landcorp and the Office of Treaty Settlements addressing the issue of whether land

could be cleared for sale. Neither of those factors are present in this case.

18

Ririnui v Landcorp Farming Ltd [2014] NZHC 1128. 19

Re Duomatic Ltd [1969] 2 Ch 365 (CHD). 20

At [124]. 21

Levin v Ikiua [2010] NZCA 509, [2011] 1 NZLR 678; and Nicholson v Permakraft (NZ) Ltd

[1985] 1 NZLR 242 (CA).

[54] In summary, in the present case:

(a) MRP is not subject to s 45Q Public Finance Act;

(b) the shareholding Ministers of MRP cannot direct the Board;

(c) the decision to sell lots 3–7 was a decision taken by MRP, not the

Crown;

(d) the land in lots 3–7 is private land for the purposes of the Treaty of

Waitangi Act. It is not subject to a s 27B memorial;

(e) the Tribunal cannot make any recommendation for the return of lots

3–7 to Maori ownership.

[55] It follows that there is no basis upon which the pleaded claim that the

proposed sale by MRP of lots 3–7 is contrary to s 45Q can succeed against MRP.

[56] For the same reasons, PTB’s claim against the Attorney-General cannot

succeed. As the proposed sale of lots 3–7 does not involve any Crown action or

decision and the Crown cannot direct MRP in relation to the sale there can be no

arguable breach by the Crown of the principles of the Treaty arising out of the

proposed sale.

[57] There is no basis upon which the Court could make a declaration that, in

assisting the sale of lots 3–7, the Crown’s actions are inconsistent with the principles

of the Treaty. The Crown has no role in the sale of private land owned by MRP as a

MOM. The Crown has not “assisted” in the sale at all.

The Memorandum of Understanding (MOU)

[58] In its second cause of action PTB relies on the MOU between MRP and PTB.

It submits that MRP’s intended sale is contrary to the understanding recorded in the

MOU, and, in particular, in relation to how it stipulates the process for dealing with

land with Tribunal claims should be dealt with.

[59] The relevant clauses of the MOU relied on by PTB are:

1.1 Patuharakeke is Tangata Whenua of Poupouwhenua (otherwise

known as Marsden Point) which is located within the rohe of

Patuharakeke ... . Patuharakeke exercises Mana Whenua ... and

Mana Moana ... in relation to it. ... The interests of the parties with

respect to this Memorandum relate to Poupouwhenua.

1.2 Patuharakeke maintains its unique relationship with Poupouwhenua.

This relationship represents mana and mauri to Patuharakeke as

Tangata Whenua of Poupouwhenua and is important to their identity.

...

...

1.8 [MRP] endeavours at all times to conduct its activities and

operations with careful regard to the economic, social,

environmental and cultural interests of all those affected by its

actions and to do so in ways that are economically efficient,

environmentally sensitive and socially responsible. Its desire is to

conduct itself in accordance within these principles in all of its

dealings with Patuharakeke.

1.9 [PTB] and [MRP] herewith record their earnest intention and

commitment to building a strong, balanced, enduring, and mutually

beneficial working relationship with each other that is characterised

by openness and honesty, that reflects the association of

Patuharakeke with Poupouwhenua and which facilitates the activities

of [PTB] and [MRP] within Poupouwhenua.

[60] Ms Tamatekaua criticised Mr Hodder QC’s submission on behalf of MRP that

MRP supports “in principle” Patuharakeke’s mana whenua and mana moana over the

land while arguing it did not create any binding relatonship as disingenous and

contrary to the terms of the Memorandum. She submitted PTB maintained MRP was

in breach of cl 1.8 by prioritising economic interests over cultural interests.

[61] Mr Tamatekapua also criticised the lack of consultation before the sale. She

noted that effectively the alienation of land in the rohe through Crown action had

resulted in less than two per cent of the land remaining and the Crown’s failure to

ensure sufficient land was retained was a breach of the Treaty.

[62] However, for PTB to have an arguable claim for relief based on the MOU it

has to be arguable that the MOU creates binding contractual obligations or is

otherwise a justiciable document.

[63] The effect of an MOU in any particular case will depend on the terms of the

MOU in issue. As the Court of Appeal observed in Wing Hung Printing Co Ltd v

Saito Offshore Pty Ltd22

the issue is whether, read as a whole, the document can be

construed as intending to create an immediately binding contractual relationship.

[64] The importance of an intention to create legal relations as a foundation for a

contractually binding obligation was set out by Blanchard J in Fletcher Challenge

Energy Ltd v Electricity Corporation of New Zealand Ltd:23

[53] The prerequisites to formation of a contract are therefore:

(a) An intention to be immediately bound (at the point when the

bargain is said to have been agreed); and

(b) An agreement, express or found by implication, or the means

of achieving an agreement (eg an arbitration clause), on

every term which:

(i) was legally essential to the formation of such a

bargain; or

(ii) was regarded by the parties themselves as essential

to their particular bargain.

A term is to be regarded by the parties as essential if one party

maintains the position that there must be agreement upon it and

manifests accordingly to the other party.

[65] The MOU does not contain the features identified in the above passage. Ms

Tamatekapua noted that cl 9.1 provided that the PTB undertook it was duly

authorised to enter the MOU and to be bound by its terms. Clause 9.1 confirmed

authority to enter the MOU. It does not support an argument that it was intended to

create enforceable legal rights or obligations. Clause 9.2 goes no further than

recording MRP’s signatory was authorised to enter the MOU. Further, even if the

parties agreed to be bound by the terms of the MOU, that rather begs the question

what the terms were and the effect of those terms.

22

Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd [2010] NZCA 502, [2011] 1 NZLR 754

(CA). 23

Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR

433 at [53].

[66] As Mr Hodder submitted, there are indicators in the MOU that it was

intended to be no more than a relational document. For example, at cl 3.3(viii) it

refers to a review of the state of the relationship at three yearly intervals.

[67] Read as a whole and in context, the MOU is a document which is expressed

at a high level of relationship without detailed obligations. It does not show any

intention to create legal relations or enforceable rights.

[68] The MOU is aspirational but without creating legally enforceable obligations.

Clause 1 provides general background to the parties’ background and relationship

culminating in cl 1.9, which is at a high level of generality. Clause 2 confirms the

aspirational nature of the document. Clause 3 recognises that the parties are engaged

in the way they will deal with each other and notes that they will give practical effect

to the principles of the Treaty. However, as noted, the Waitangi Tribunal Act, which

is the vehicle for giving effect to claims arising from the Treaty, expressly excludes

private land from consideration.

[69] Clause 4 records that the MOU does not operate to prevent PTB from making

submissions or being a party to resource consent processes being undertaken by

MRP, in other words preserving PTB’s ability to object to actions by MRP.

[70] Clause 5 provides for the parties to work together and establishes a working

party.

[71] Importantly cl 6 records that nothing in the MOU is intended to prejudice or

compromise or to have any effect or relationship to, any Treaty claim by PTB:

The parties acknowledge that such claims are matters between [PTB] and the

Crown and remain unaffected by any term or provision or action undertaken

or benefit conferred in accordance with the terms of this MOU.

[72] Clause 7 provides for confidentiality; cl 8 for intellectual property; and cl 9,

the clause relied on by Ms Tamatekapua acknowledges that the parties had authority

to enter the agreement and in the case of PTB, to be bound by its terms. The

document is general in the extreme and does not exhibit an intention to create any

binding or enforceable obligations.

[73] The effect of a MOU must also be determined by its context. Even where

MOUs are used alongside existing or intended formal legal relationships they are

often not binding. They are typically negotiated or settled and contain statements

committing the parties to co-operate to resolve disputes by discussion. Each party

recognises the other’s objectives and so forth. The authors of Cheshire and Fifoot

Law of Contract suggest that it is a sensible inference that such an agreement is

merely an expression of sentiments of co-operation rather than legally enforceable

guarantees of co-operation.24

In the present case there is no other relationship or

contract between the parties.

[74] In the case of letters of intent or letters of comfort, which may more readily

be found to create binding obligations between the parties, the Court has generally

held that the critical issue is not so much whether the letter of comfort was intended

to create legal relations but rather whether there was any relevant promise which had

been made and not kept: Kleinwort Benson Ltd v Malaysia Mining Corporation

Bhd, and Bank of New Zealand v Ginivan.25

[75] While PTB refers to the breach of cl 1.2 by MRP’s actions diminishing

Patuharakeke’s mana whenua over the land I accept Mr Hodder’s submission that cl

1.2 merely describes Patuharakeke’s cultural relationship with the relevant land and

does not impose any obligations on either party. Importantly cl 2.1(3) makes it clear

that MRP’s support in principle is “consistent with MRP’s ownership of the Marsden

Power Station”. Ownership in this context must include the rights incident to

ownership which include the right to sell.

[76] Next, while PTB alleges that MRP has breached cl 1.8 by placing economic

interests ahead of cultural interests, again there is no binding imperative in cl 1.8.

None of the interests are given paramountcy by the clause. Nor does cl 1.9 give rise

to any enforceable obligations that would support the relief sought.

24

N Seddon, R Bigwood and M Ellinghaus Cheshire and Fifoot: Law of Contract (10th

ed,

LexisNexis, Australia, 2012) at [5.16]. 25

Kleinwort Benson Ltd v Malaysia Mining Corporation Bhd [1988] 1 All ER 714; and Bank of

New Zealand v Ginivan [1991] 1 NZLR 178.

[77] Although it is strictly unnecessary to consider the point, I note Mr Hodder’s

alternative submission that, even if cl 1.9 was to give rise to an obligation to be open

and honest, the applicants’ own evidence is that MRP was open about their desire to

sell the properties from at least March 2013. Ms Chetham in her affidavit evidence

for the plaintiffs says:

29. While MRP were open about their ultimate desire to sell the

properties, our understanding was that the focus was on moving the

smaller fragments along Marsden Point and Sime Roads. In an

email following the March 2013 meeting, the MRP Land Access

Manager stated that he would “be advising you of our sales progress

over the next few months, but reiterate that we will not be moving

on any sale of the core power station site at this stage”.

30. In January this year at our last meeting with MRP there were mixed

messages about their sales agenda, signalling they may begin to look

at selling more properties over the course of the year.

31. At this meeting we enquired whether this land had been land-banked

and made clear that we still had interests in it. We received the reply

that MRP had approached the Office of Treaty Settlements but were

advised the land was not needed as there was “plenty of land

available for settlement in the area”.

32. It was therefore a shock to receive voice mail and electronic mail

notification on Good Friday this year (19 April 2014) from [MRP’s]

representative stating that the lands known as Marsden A and B (and

indeed all remaining MRP titles in our rohe) would be listed for sale

on the open market the following day.

[78] I conclude there is no basis upon which the Court could make a declaration of

the nature sought that the decision of MRP to sell lots 3–7 is inconsistent with the

principles of the Treaty as evidenced by the MOU. The MOU does not create any

binding obligations and none of its clauses support PTB’s allegatons of breach by

MRP of such obligation.

Result

[79] PTB’s claims against MRP and the Attorney-General are struck out.

[80] Costs are reserved. If costs are sought and cannot be agreed, counsel may

file a memorandum. Any such memorandum is to be referred to me.

__________________________

Venning J