IN THE MAORI LAND COURT OF NEW ZEALAND
TAKITIMU DISTRICT
11 Takitimu MB 86
(11 TKT 86)
A20090008507
A20090013665
A20090014152
Hearing:
UNDER
Sections 231, 289 and 240, Te Ture
Whenua Maori Act 1993
IN THE MATTER OF
Mohaka A4 Trust
BETWEEN
SAMUEL GEMMELL AND BESSIE
PHILLIPS
Applicants
1 Takitimu MB 72 dated 4 February 2010
5 Takitimu MB 7 dated 16 September 2010
6 Takitimu MB 201 dated 21 January 2011
7 Takitimu MB 126 dated 7 March 2011
9 Takitimu MB 169 dated 30 June 2011
11 Takitimu MB 1 dated 5 August 2011
(Heard at Hastings)
Appearances: Mr Davies for Samuel Gemmell
Neti Whatuira for the trustees in person
Bessie Phillips in person
Judgment:
9 September 2011
RESERVED JUDGMENT OF JUDGE LR HARVEY
Introduction
[1]
Three applications are currently before the Court.
First, Samuel Gemmell’s
application for partition. Second, Mr Gemmell’s application for review of trust. Third,
Bessie Phillips’ application for removal of trustees.
[2]
At the last hearing of this matter, Chief Judge Isaac directed that a general meeting
of owners be held and that all current trustees stand down to enable an election to take place.
He had previously ordered that the books of the trust be subject to independent audit and that
GEMMELL AND PHILLIPS MLC 11 Takitimu MB 86 9 September 2011
a report be presented to the Court as soon as possible. To that end, Mr Mayo of Tarrant Cotter,
accountants of Wairoa, was engaged to prepare a report. In the meantime, Mr Gemmell had
already arranged for a report to be prepared by Linda Smart, accountant of Christchurch.
[3]
Regarding Mr Gemmell’s partition application, Chief Judge Isaac directed that would
need to be considered in due course by the beneficial owners at a properly convened meeting.
[4]
The meeting of owners took place at Hastings on 4 August 2011. The convenor of the
meeting, a Mr Bennett, agreed to permit voting by shares and also for owners to vote using proxy
forms. The outcome of the election was that Joseph Duncan Gemmell, Joseph Gemmell, Samuel
Carter Gemmell, Padre Gemmell and Bessie Phillips were nominated as trustees.
[5]
The issue for determination is which of the nominees, if any, are suitable for
appointment as trustees taking into account all of the previous background and circumstances
relating to this trust. The review and the accounts of the trust along with the partition application
are also considered.
[6]
Given the history to the proceedings, I formally asked the parties whether or not they
consented to my continuing to hear the applications currently before the Court per section 38 of
the Act. When Ms Phillips queried whether or not it was simply for the day or in an ongoing
role, I confirmed that this would be a matter for Chief Judge Isaac but that there was the
possibility that I would continue to hear the proceedings until they were concluded. None of the
parties present objected to this course of action, apart from Ms Phillips who expressed concern
that I may lack familiarity with the cases before the Court.
Mohaka A4 Trust and Tauwhareroa Trust
Background
[7]
Mohaka A4 is a block of Māori freehold land comprising 528.8302 hectares. As at 27
September 2010 there were 38 beneficial owners holding 755.171 shares.
[8]
Mohaka A4 Trust is an ahu whenua trust established on 4 July 1996.1 The original
trustees were Paul Gemmell, Samuel Gemmell, Thomas Gemmell, Bessie Phillips, Nicky
Gemmell, Rihi Moore and Arthur Gemmell. The current trustees are Bessie Phillips, Claude
Gemmell, Neti Whatuira, Querida Rewi, Richard Gemmell, Rihi Moore and Steven
Gemmell.
1
(1996) 144 Napier MB 93 (144 NA 93).
11 Takitimu MB 87
Tauwhareroa Trust
[9]
According to the parties, Tauwhareroa Trust is a common law trust established by
the parents of the current trustees of Mohaka A4 Trust. According to a former trustee,
Arthur Gemmell, the Mohaka A4 trustees entered into a lease of the trust’s land with a third
party. As at the time of the lease the trust had not opened its own bank account and so at
least three of the trustees decided that the rent would be paid into the Tauwhareroa Trust’s
account. Arthur Gemmell also complained that Samuel Gemmell was given the task of
revising the trust order within six months but failed to do so. This then required, according
to Arthur Gemmell, payment of the rental belonging to Mohaka A4 to the Tauwhareroa
Trust.
[10]
Mr Davies, counsel for Sam Gemmell, calculates that, through a number of
transactions involving rental payments and use of the Mohaka A4 rent, the Tauwhareroa
Trust owes the Mohaka A4 Trust approximately $22,000.00. Arthur Gemmell then claimed
that Sam Gemmell was given a loan of $10,000.00 from Tauwhareroa Trust which he has not
repaid. Sam Gemmell says that if his share of the rent from Mohaka A4 had been paid to
him personally and not to Tauwhareroa Trust then the loan he has would have been paid.
Evidence of the accountants
[11]
Mr Mayo and Ms Smart both gave evidence. They agreed in principle that there had
been receipt of Mohaka A4 rent by Tauwhareroa Trust which was not appropriate. Ms Smart
went further to state that Tauwhareroa Trust had received some tax benefit from these
transactions while Mohaka A4 Trust had not. In her opinion, the preferred solution was to
start again and to ensure that Mohaka A4 Trust received and paid its own tax separate from
Tauwhareroa Trust. Mr Mayo however did not agree and considered that it was preferable
that a negotiated solution be concluded rather than having to start from the beginning.
[12]
Ms Smart also stated that in effect what had occurred was that Tauwhareroa Trust
had received income to which it was not entitled under the terms of the Mohaka A4 Trust
order. In so doing she was agreeing with the proposition put to her by Mr Davies that the
Mohaka A4 Trust could only distribute income to its beneficiaries, namely the beneficial
owners, and not to any other person for trust.
11 Takitimu MB 88
Review of trust
[13]
Mr Davies submitted that the principal concern for the Court was whether or not
there had been proper treatment of trust income in light of the receipt of those funds by
Tauwhareroa Trust.
Counsel further submitted that receipt of such funds was
inappropriate and further, it was even more inappropriate for Mohaka A4 trustees to
make any payments to any party other than beneficial owners. Sam Gemmell had not
consented to his share of the rent money being paid to Tauwhareroa Trust. While he
acknowledged he did have a loan of $10,000.00 to Tauwhareroa Trust, had his share of
the rent been paid to him, then as foreshadowed, that liability would have diminished.
[14]
Ms Whatuira, as the outgoing chairperson, expressed concern that the lessee of the
land, a Mr John Emmerson, had now abandoned his lease. According to correspondence on
the Court file from his solicitors, the reasons given for abandoning the lease included:
(a)
prevention of access to the property;
(b)
assault;
(c)
wilful damage to property and/or improvements on the leased land;
(d)
use made of the land improvements by parties with no entitlement;
(e)
the deliberate removal of gates, cutting of chains, breaking of locks, and leaving
open gates to the main road resulting in stock wandering and consequent danger to
traffic with potential liability; and
(f)
the dangerous use and discharge of firearms, apparently in an attempt to intimidate
Mr Emmerson, which resulted in him being unwilling to allow any employee of his
to be on the property working alone.
[15]
The trust’s then solicitors had responded that they did not consider those
reasons sufficient grounds for abandoning the lease. The short point according to Ms
Whatuira was that the land was now vacant, not receiving an income and significant
loss was likely to be suffered by the owners as a consequence of actions by parties
unknown that had resulted in Mr Emmerson abandoning the land.
[16]
Ms Phillips in partial response stated that Mr Emmerson had in fact damaged
the land, had not maintained improvements that she and others had ma de to the land,
and should be made to remedy the breaches of the lease. Ms Phillips acknowledged
that she had previously occupied the land but had done so to improve it for the benefit
11 Takitimu MB 89
of the owners. She stated that she had DVD evidence to support her claims, which were
endorsed by her sister Mrs Rewi.
[17]
Ms Phillips also acknowledged that she had attempted to secure a lease of the land
but had not been successful. Despite that, she had continued to occupy and use the land for
a number of years. Mr Claude Gemmell, an existing trustee, stated that Ms Phillips did not
have the permission of the trustees to be on the land and in fact they were compelled to
obtain an injunction against her. She then appealed that decision unsuccessfully and had
costs awarded against her which were still unpaid at the time of the hearing.
Appointment of trustees
[18]
As foreshadowed, the meeting of owners took place on 4 August 2011 at Hastings.
Joseph Duncan Gemmell, Joseph Gemmell, Samuel Carter Gemmell, Padre Gemmell and
Bessie Phillips were nominated as trustees. The owners voted by shares and using proxies.
[19]
Mrs Whatuira objected to the use of voting by shares. She contended that the trust
had always voted by show of hands. In response both Sam Gemmell and Ms Phillips argued
that requests were regularly made at meetings of owners for voting by shares but the
chairperson had refused to accept such requests. In response, Mrs Whatuira claimed that the
only reason those advocating use of voting by shares were being so vocal is because they
wanted to partition the land which Mrs Whatuira and other owners opposed.
[20]
Mr Davies submitted that an independent advisory trustee could assist the successful
nominees by providing information and advice to them on how to conduct themselves as
responsible trustees. He further contended that in due course such an advisory trustee could
be relieved of that role once the responsible trustees displayed the necessary experience
required for the position.
Discussion
[21]
The accounts and taxation position of Mohaka A4 Trust need to be satisfactorily
resolved as soon as possible. The future use and development of the land also needs to be
determined, sooner rather than later. While Ms Phillips claims it would be premature to
consider tendering the land for lease, I do not agree. The previous lessee paid rental in
excess of $30,000.00 per annum. That is income the trust can ill afford to lose, especially
when its tax position and other liabilities are not entirely clear.
11 Takitimu MB 90
[22]
More importantly, having carefully reviewed the numerous files that are in existence
for this land, due to the extensive history of the different sets of proceedings that the owners
and trustees have brought before this and the Māori Appellate Court, I am not confident that
the owners are sufficiently independent of the various issues challenging this trust at the
present time to administer and manage the land at this juncture in the best interests of all the
owners.
[23]
do not.
Sam Gemmell is seeking a partition. Some of the owners support him while others
Sam Gemmell has a claim against the trust for use of trust income to pay
Tauwhareroa Trust. Mrs Whatuira is a trustee of Tauwhareroa Trust and Mohaka A4 Trust.
Arthur Gemmell states that Tauwhareroa Trust is in no position to pay the claimed
$22,000.00 which Mr Davies, counsel for Sam Gemmell, contends is due.
[24]
Ms Phillips, another successful nominee from the general meeting of owners, is
currently a debtor to the trust with an unpaid award of costs due and owing following an
unsuccessful appeal against an injunction removing her from the land.
Given these
overlapping interests, which one might suggest amount to conflicts, it is difficult to see how
the interests of the owners might remain paramount.
[25]
I proposed to the parties that an independent trustee with a limited tenure of six to 12
months, supported by advisory trustees from the owners, may be appropriate to bring order
to the affairs of this trust. The transcript of the hearing will confirm that, despite initial
reservations, the majority of the owners present and the majority of the trustees present
supported the concept of an independent trustee supported by owner advisory trustees.
Interim independent trustee
[26]
I therefore appoint Wahiao James Gray of Rotorua, as sole responsible trustee for
Mohaka A4 for a period of 12 months or until further order of the Court. Mr Gray’s
particular responsibilities as sole trustee will include:
(a)
resolving satisfactorily the completion of the annual accounts for Mohaka A4 Trust
back to 2004 including treatment of any taxation liabilities;
(b)
attending to the completion of audits of the annual accounts for the last five years;
(c)
conducting public tenders for future use of the land;
(d)
convening a general meeting of owners for the purpose of considering Sam
Gemmell’s application for partition.
11 Takitimu MB 91
[27]
I have asked the respective nominees or their supporters to provide me with copies of their
résumés as soon as possible. This is to assist me in assessing whether or not the requirements of
section 222 of the Act have been complied with. On receipt of these documents I may then appoint
advisory trustees to assist the responsible trustee.
[28]
The trust order for this trust is out of date and needs to be reviewed. Mr Gray will also
include in the agenda for the next general meeting of owners a review of the trust order. I direct
him to use the Court’s standard wide powers ahu whenua trust order as a template for discussion
with the owners at the next general meeting.
[29]
Mr Gray is directed to attempt a reconstruction of the trust’s accounts based on the
available documents.
The position of Bessie Phillips
[30]
In its decision Horsfall v Marino – Repongaere Part 4G the Māori Appellate Court
removed a trustee from office due to the fact that the individual concerned owed a debt to the trust.2
In that case the Appellate Court was unequivocal in its view that being a debtor to a trust and
trusteeship is incompatible:3
In our view, the Appellant cannot remain a trustee of the reservation while the issue of the funds and
other benefits she received has not been resolved either by way of repayment or by way of the
beneficiaries agreeing to forgive the debt. The Appellant is in effect a debtor to the trust – in other
words, she is in an untenable position. In any event, no application for relief under the Trustee Act
1956 is presently before this or the Lower Court and none of the steps outlined in earlier authorities
have been followed by the Appellant at this junction. Ultimately, the Court’s supervisory
responsibility in relation to the trusts requires the necessary step of removing the Appellant.
[31]
Ms Phillips is a debtor to the Mohaka A4 Trust, with Desmond Brough, to the tune of
$5,847.53.4 That debt arises out of the award of costs made against Ms Phillips by the Māori
Appellate Court when her appeal against this Court’s decision for injunction was unsuccessful.
Consistent with the authority of Repongaere I cannot see how Ms Phillips can remain or be
appointed a trustee while the debt is unpaid. Ms Phillips, like all of the trustees, was directed to
stand down from the trust by Chief Judge Isaac in a previous direction. I understand that all of the
trustees accepted that position and made themselves available for re-election at the annual
general meeting held on 4 August 2011. Should Ms Phillips pay the costs awarded against
her then the position can be reviewed.
2
3
34 Gisborne Appellate Court MB 98 (34 APGS 98).
Ibid at 102.
4
(2010) Māori Appellate Court MB 425 (2010 APPEAL 425) at [35].
11 Takitimu MB 92
[32]
As I have said, I have taken it from the previous direction of Chief Judge Isaac and the fact
that the trustees submitted themselves for re-election that they accepted his direction that they
should stand down. Moreover, given the conduct of the trustees to date, and in particular regarding
the use of the trust income by Tauwhareroa Trust, the failure to deal with the tax position of
Mohaka A4 Trust and the failure to have proper accounts prepared, there is sufficient evidence
before the Court to justify removal under section 240 of the Act in any event.
[33]
For completeness, given this change to the trusteeship, unless there are relevant grounds
for further consideration, and in the absence of further submissions, I see no reason why Ms
Phillips application for removal should remain before the Court. Ms Phillips has 30 days from the
date of this judgment to provide the Registrar with a submission on why her application for
removal of trustees should not be dismissed given the appointment of Mr Gray as sole responsible
trustee.
Application for partition
[34]
The principles concerning partition have been affirmed in recent times by the Māori
Appellate Court in a series of decisions including Whangawehi,5 Matakana6 and Anewa.7
[35]
From my brief assessment of the Court file, there has been no formally convened general
meeting of owners to consider the partition application. In part, this is because Sam Gemmell has
not yet provided a detailed map to that forum for their consideration. Consequently, the terms of
section 288 and 289 of the Act could not have been met in the context of sufficiency of notice,
opportunity for discussion and support. Moreover, as I pointed out at the hearing, there are no
submissions before the Court or evidence in support as to whether or not the partition is
“necessary” in accordance with the Māori Appellate Court authorities and the full bench of the
High Court in Brown v Māori Appellate Court.8
[36]
In any case, Mr Davies acknowledged that the partition application was still a work in
progress. Sam Gemmell did likewise when he submitted the draft partition plan to the Court for
consideration at the hearing on 5 August last. I direct the case manager to provide Mr Davies with
copies of the Appellate Court decisions referred to previously. I have already directed the
responsible trustee to convene a general meeting of beneficial owners to consider, amongst other
things, the application for partition. No doubt Mr Davies and Sam Gemmell will wish to ensure
5
6
7
8
Hammond – Whangawehi (2007) 34 Gisborne Appellate Court MB 185 (34 APGS 185).
Ngatai v Charmaine - Matakana 1A7A (2007) 21 Waikato-Maniapoto Appeal MB 147 (21
APWM 147).
Whaanga v Niania – Anewa Block (2011) 2011 Māori Appellate Court MB 248 (2011 APPEAL
248).
[2001] 1 NZLR 87.
11 Takitimu MB 93
they have complied with the principles set down in those Appellate Court authorities prior to
the convening of the general meeting of owners.
[37]
The application for partition is accordingly adjourned sine die until such time as Mr
Davies confirms it is ready to proceed to further hearing. Leave is reserved for Mr Davies or
any other party to apply for further directions at any time.
Decision
[38]
Wahiao James Gray of Rotorua is appointed sole responsible trustee by way of
replacement per s239 of Te Ture Whenua Maori Act 1993 for a period of 12 months or until
further order of the Court. Mr Gray is required to undertake the tasks set out in paragraph
[26] above. Mr Gray is to provide monthly progress reports to the Court which the case
manager will distribute to all owners for whom the Court holds addresses.
[39]
Those persons seeking appointment as advisory trustees are to submit their résumés
to the Court within 21 days from the date of this decision. Once in receipt of those
documents further orders for appointment of advisory trustees may be made.
[40]
The application for review of trust is dismissed.
[41]
The application of Sam Gemmell for partition is adjourned sine die. Counsel is
directed to the authorities of the Māori Appellate Court on partition referred to above. The
application for partition can, subject to the Court’s availability, be brought on for hearing
with 21 days notice to all affected parties.
[42]
Ms Phillips has 30 days from the date of this decision to file any further submissions
regarding her application for removal of trustees.
Failing a satisfactory response the
application may be dismissed.
Pronounced at 4.05 pm in Rotorua on Friday this 9th day of September 2011
L R Harvey
JUDGE
11 Takitimu MB 94