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Summary of Supreme Court water rights case

April 2013

Background

Early last year, the Māori Council filed an urgent claim with the Waitangi Tribunal seeking a recommendation that the Crown not proceed with the proposed partial sale of state-owned enterprises (SOEs). After the hearing had been split into two parts, one urgent stage and one second stage full review of Māori interests in water, the Tribunal’s urgent response in August 2012 concluded that Māori have interests in water in the nature of ownership.

The application

As a result of the Tribunal recommendations, the Crown undertook some (rather limited) consultation with Māori on the proposed “shares plus” concept. After a couple of hui held around the country, the Crown concluded that its capacity to recognise Māori rights to water and to provide redress in relation to the same would not be impaired by the proposed sale. 

In response, the Māori Council filed an application for judicial review in the High Court seeking declarations that the Crown’s proposed Order in Council to convert the SOEs to Mixed Ownership Model companies (MOMs), whose shares can be owned by persons other than the Crown. In essence, the Council submitted that the selling of shares to an MOM would breach the principles of the Treaty because it would prejudice Māori claims to water (in that it would be contrary to s 9 of the State owned Enterprises Act 1986 and s 45Q of the Public Finance Act 1989, which protect “the principles of the Treaty” in relation to Crown actions). 

High Court decision

The Council and the additional applicants were unsuccessful in the High Court, where Ronald Young J held in December 2012 that because the sale of shares will be achieved by primary legislation, it could not be questioned/investigated by a High Court in relation to whether the action complies with the principles of the Treaty. 

Supreme Court decision

The case went straight to the Supreme Court which held that the proposed sale of the shares was in fact reviewable by the Court and that the Court should ensure that the proposed sale is consistent with the principles of the Treaty (therefore disagreeing with Ronald Young J). The Supreme Court further held that in spite of the decision being reviewable, the partial privatisation of Mighty River Power would not impair to a material extent the Crown’s ability to remedy any Treaty breach in respect of Māori interests in the River. The main reasons for this were:

  • Partial privatisation of Might River Power is, in the Supreme Court’s opinion, not equivalent to a “disposal of property or interests” in the river held by the Crown. Rather, the rights will continue to be held by the Crown as the Crown will continue to be a majority shareholder in the company; 
  • Whilst the Waitangi Tribunal describes the ownership interest guaranteed by the Treaty in terms of use and control, the Supreme Court believes that this may be more easily achieved through regulation of “water use” which is currently being reviewed by the Crown. In addition, various settlements between the Crown and certain iwi have indicated a willingness of the Crown to consider extending Māori authority in connection with specific waters (if the iwi/hapū can show an interest/connection). In summary, the Supreme Court held that the significance of “ownership interest” in waters needs to be assessed against any opportunities currently under consideration for real and actual authority by Māori in relation to waters of significance; 
  • The Supreme Court also relied on the Crown’s claims that if required to settle claims by offering shares that had already been sold, it would be able to do so by buying them back. As such, the Supreme Court held that the Crown will retain an appropriate level of capacity to offer Māori shares (which brings with it a certain level of influence); and 
  • Whilst the Supreme Court was willing to accept that the privatisation may limit the scope of the Crown to provide some forms of redress which may be theoretically possible, when assessing whether this amounts to “a material impairment” and when taken into account the relevant factors (refer below), the Supreme Court was not persuaded that such an impairment would arise from the proposed sale of shares. 

In terms of the relevant factors to assess, the Supreme Court in particular looked at and took into account the following: 

  • The assurances given by the Crown that it would not seek to rely on the changed status of the power companies to suggest any diminution in the claimed rights of Māori but rather, would continue to exercise its Treaty obligations and ensure that future legislation dealing with the status change includes a provision reflecting the concepts of Section 9 of the State Owned Enterprises Act 1986 (which upholds the principles of the Treaty);
  • The extent to which theoretical redress-options are likely to be plausible; 
  • The capacity of the Crown to provide equivalent and meaningful redress even if shares are sold; and 
  • The proven willingness and ability of the Crown to provide such redress (particularly relying on previous settlements with Māori in relation to specific waters).

What does it mean for Māori?

The Government has now launched its plans to sell Mighty River Power and shares of other SOEs are due to follow in due course. So what does this loss mean for Māori, and was it in fact a “loss”? 

Lawyers have argued that some of the Supreme Court’s comments have opened a few doors for Māori to make further claims. For instance, the Court noted that a case might be brought on the basis that subsisting customary rights may be affected by partial privatisation which justifies a halt to the asset sales (bearing in mind that the applicants would be faced with the same difficulty in showing that the such a sale would amount to a “material impairment” in spite of the undertakings/assurances from the Crown noted above). 

Further, the fact that the Crown made certain assurances and undertakings in relation to the changed status will, according to existing case law, create a legitimate expectation that the Crown will act in accordance with those assurances (and failing to do so could give rise to a successful challenge in Court). 

In summary, while the Māori Council failed to stop the sale of Mighty River Power shares, they did in fact succeed on a point of principle, namely that the Crown is bound to comply with the principles of the Treaty before deciding to sell the shares. When seen in light of the assurances given by the Crown (which due to the Supreme Court’s reliance on the same effectively puts the Crown “on notice” of the need to stand by its word) it is clear that while the Crown may have won the battle, the war is very much still “on track” for Māori. The Government is no longer free to implement the asset sales freely and without consideration for Māori rights to water but rather has to abide by the “concessions” made in the Supreme Court. 

If you would like further information please contact Aidan Warren on 07 958 7426.