Wai 45 Ngāti Kahu Remedies Report on the binding powers of the Waitangi Tribunal

Introduction

On 4 February 2013 the Waitangi Tribunal released the Wai 45 Ngāti Kahu Remedies Report (“report”). The report is focused on an application to the Waitangi Tribunal by Ngāti Kahu for binding recommendations or remedies, to the Crown to redress prejudice that it has caused Ngāti Kahu. The Inquiry and report are significant for Māori claimants and other interested parties as it is one of a few instances where the Tribunal has fully considered its unique jurisdiction to make recommendations which are binding upon the Crown in the context of the current Treaty claim landscape.

Background to the binding powers of the Waitangi Tribunal

The Waitangi Tribunal is a permanent commission of inquiry and its role is to hear claims by Māori against the Crown concerning breaches of the Treaty of Waitangi. The Waitangi Tribunal has the ability to find that claims are well founded and make non-binding recommendations to the Crown to compensate for, or remove the prejudice suffered by a claimant group.

In limited circumstances however, where a claimant group is held to have well founded claims, the Tribunal has the ability to make binding recommendations for the return of certain Crown owned lands to a claimant group. The lands available for resumption are Crown Forest Land that is subject to a Crown forestry licence and lands owned by a state-owned enterprise or a tertiary institution, or former New Zealand Railways lands that have a section 27B memorial (or notation) on the certificate of title advising that the Waitangi Tribunal may recommend that the land be returned to Māori ownership.

The Tribunal in the Ngāti Kahu Remedies Report described its power as “exceptional” as a recommendation that land be resumed will become binding on the Crown after 90 days, unless the Crown and the successful applicant negotiate a different arrangement.¹  The Tribunal also noted that its power grants the Tribunal “considerable discretion” with very little guidance as to how the powers should be exercised.²

In its 37 year history the Waitangi Tribunal has only once, in the Turangi Township Remedies Report in 1998, exercised its powers of binding recommendation. In this Inquiry the Tribunal made a binding recommendation that a discrete piece of land belonging to Ngāti Turangitukua be returned to the hapu.

Background to the Ngāti Kahu remedies application

Ngāti Kahu is an iwi from the top of the North Island. Their journey toward the settlement of their historic Te Tiriti o Waitangi claims spans over a 25 year period.

The historical claims of Ngāti Kahu and other Te Hiku iwi were considered by the Muriwhenua Inquiry between 1990 and 1994. The prejudice claimed by Ngāti Kahu was the loss of 70% of their ancestral lands by 1865, due to pre-Treaty (1840) land transactions to the Crown. Ngāti Kahu claimed that such early and severe land loss is the cause of significant and on-going damage to the economic and cultural well-being of Ngāti Kahu. Of particular importance is that the Ngāti Kahu claims were held to be well founded (the first requirement of a remedies application) in the Muriwhenua Land Report in 1997.

Since then the Crown has mandated five iwi, known as the Te Hiku forum, to participate in both individual and collective Treaty negotiations with the Crown. Three of those recognised iwi, Te Aupouri, Ngai Takoto and Te Rarawa have recently signed Deeds of Settlement with the Crown. However, in spite of over a decade of negotiation with the Crown, Ngāti Kahu has been unable to agree to a final settlement package.

Ngāti Kahu has twice sought to invoke the binding powers of the Waitangi Tribunal as an alternative pathway to achieve a Treaty Settlement. On the first occasion in 2007 the Tribunal directed that Ngāti Kahu and the Crown return to negotiations. These negotiations resulted in Ngāti Kahu and the Crown signing an Agreement in Principle in 2008.

Negotiations between Ngāti Kahu and the Crown again faltered and in July 2011 Ngāti Kahu sought to revive their earlier application. The application calls for the Tribunal to remedy the prejudice suffered by Ngāti Kahu for their well-founded pre-1865 Treaty of Waitangi claims through binding orders, among others, that the Crown return all resumable properties within the iwi.

Findings and recommendations

The current Tribunal affirmed that the Crown’s actions in the far north – so soon after the signing of the Treaty – have had lasting effects on Ngāti Kahu, who remain impoverished to this day. The Tribunal went on to say that the Crown is obliged to provide a significant package of redress to Ngāti Kahu to remedy the prejudice they have suffered. However the Tribunal did not go so far as to make the binding recommendations sought by Ngāti Kahu.

In reaching its findings the Tribunal says it was required to balance the circumstances in this case including (among others):

  • The complex interplay of customary rights in the area under consideration;
  • The Treaty settlements which have been agreed or are in the final stages of negotiation between other Te Hiku iwi and the Crown; and
  • That other neighbouring iwi and hapu have yet to be heard by the Tribunal or to enter direct negotiations with the Crown.³

Ultimately the Tribunal determined that an exercise of its binding powers was unwarranted in the circumstances of this case. The central consideration upon which the Tribunal declined to grant binding recommendations was the on-going relationship of the five Te Hiku iwi. On this point the Tribunal noted that:⁴

“A well-established Treaty principle has it that the Crown should not, in remedying the grievance of one group, create a fresh grievance for another group. The Te Hiku Forum was designed to arrive at lasting Treaty settlements that received the agreement of all Te Hiku iwi. Enduring Treaty settlements can only be achieved if iwi whose rohe border and overlap each other, and who possess entwined ancestral connections, can be reasonably satisfied with their respective outcomes. Settlements are between Treaty partners, but they cannot be safely achieved in isolation from others.”

The Tribunal did make a series of non-binding recommendations which it believes are comprehensive. The Tribunal believes that the recommendations provide for the restoration of the economic and cultural well-being of Ngāti Kahu. The recommendations include the return of a number of sites and suggestions for various governance arrangements that are intended to allow Ngāti Kahu to have a significant say in the administration of sites, as well as establishing relationships with local bodies and other institutions. The total settlement package recommended amounts to a commercial quantum of $42.518 million which falls well short of what was sought by Ngāti Kahu.

The Tribunal’s recommendations are non-binding in nature, which means that the parties will be required to come to an agreement before a settlement is enacted. The Tribunal believes that it has provided a solid platform and specific direction to the parties about redress that should be made available to Ngāti Kahu, so as to allow a settlement to be achieved. The Tribunal concluded that its recommendations are to the Crown, “It is the Crown’s honour, not that of Ngāti Kahu, that must be restored by putting right the harm it has caused by serious breaches of the Treaty prior to 1865”.⁵

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


  1. Waitangi Tribunal, Wai 45 Te Runanga o Ngāti Kahu Remedies Report (4 February 2013), 3
  2. Waitangi Tribunal, Wai 45 Te Runanga o Ngāti Kahu Remedies Report (4 February 2013), 5
  3. Waitangi Tribunal, Wai 45 Te Runanga o Ngāti Kahu Remedies Report (4 February 2013), 5
  4. Waitangi Tribunal, Wai 45 Te Runanga o Ngāti Kahu Remedies Report (4 February 2013), xiv
  5. Waitangi Tribunal, Wai 45 Te Runanga o Ngāti Kahu Remedies Report (4 February 2013), 171

Limited partnerships

Limited partnerships seem to be growing in popularity. The Limited Partnerships Act was passed in 2008, so the structure is no longer something new. There are now over 500 registered, and they seem to be increasingly used as a business vehicle. There are a number of advantages to limited partnerships (as well as disadvantages), and they can usefully be used in a range of situations. But they must be used critically. As the use of a limited partnership structure becomes more common, further issues – what we could call ‘second generation issues’ – are likely to arise. This article briefly outlines what limited partnerships are, before considering when they are most useful, when they are not useful, and the key issues that need attention for those forming or considering a limited partnership structure.

Limited partnerships

Each limited partnership (properly abbreviated as ‘LP’ not ‘LLP’) is governed by the Limited Partnerships Act 2008. An LP consists of a general partner, and at least one limited partner. The general partner is essentially the manager of the partnership, while the limited partners are the investors in the partnership. The limited partners cannot be involved in the management of the partnership, though the Act contains various “safe harbours” which make it relatively easy to structure arrangements so that the limited partners can do so in a permissible way – for example, by making the general partner a company, and the limited partners (or their associates) directors of that company. Because of potential liabilities on the general partner, the general partner is often a company.

A limited partnership is a legal entity separate from its partners. In this way, it is like a company, which has a legal identity separate from its shareholders: both a company and an LP can enter into contracts, sue others, be sued, and so on, without the investors behind the entity being personally liable. However, a limited partnership has very different tax implications from those that apply to a company. A company pays tax in its own right. A limited partnership, on the other hand, does not pay tax in its own right. Rather, the individual partners pay tax on profits, and gain the benefit of any losses (up to the amount of their committed capital – a similar arrangement to a look-through company (LTC)).

Why have a limited partnership?

Tax drives the establishment of most limited partnerships – though sometimes they seem to be driven by being something new and different. The good reasons for setting up an LP include:

  • Tax: Where investors in a joint venture are on different tax rates (for example, an iwi charity forming a property development joint venture with a private trust), then a limited partnership allows each investor to pay tax on profits at its own rate (zero per cent for the charity; 33 per cent for the private trust), rather than the JV company paying its own tax. Similar issues might apply when a New Zealand and Australian investor are doing business together.
  • Tax (mark 2): Where significant losses are expected upfront (as might be the case with a forestry venture, or a dairy conversion), the LP structure allows losses to be used by the limited partners personally, rather than remaining in the company. This can be very tax advantageous to investors.
  • Streamlining: We used to see partnerships of loss attributing qualifying companies, or LAQCs (now look through companies, or LTCs), for tax efficiency. Though it has an inherent degree of complexity, a limited partnership is less cumbersome than these kinds of structures, and has fewer restrictions on ownership than an LTC.
  • Overseas investment: This is perhaps the real reason for limited partnerships being established as a legal structure: to attract overseas investment. How? Because the structure is well understood overseas, and because an overseas investor can be taxed at his/her home rate, rather than the New Zealand company tax rate.
  • Confidentiality: This is often underrated as an advantage. The name of the limited partnership and the identity of the general partner are a matter of public record. The identity of the limited partners must be disclosed to the Registrar, but is not a matter of public record. With a company, the names of shareholders must be disclosed; with a limited partnership, investors’ names can remain hidden.
  • Liability as between investors: This is perhaps a less well-known point. In a company, directors owe duties to shareholders and to the company. Shareholders can also owe duties to each other, particularly in a ‘quasi-partnership company’, where the shareholders are a close-knit group with expectations of trust and confidence, where they work in the business together, and (usually) where there are restrictions on share transfers. These duties can be those of utmost good faith (fiduciary duties) – a step above contractual duties. Under the Limited Partnerships Act, partners can expressly provide that they do not owe fiduciary duties to each other, thereby limiting their legal risks as between each other.
When not to have a limited partnership (1)

There are negatives to any business structure. The key negatives for a limited partnership include:

  • Complexity: A limited partnership is inherently more complicated than, say, an ordinary company – and an ordinary company, with its director duties, shareholder remedies, and creditor rights, is often more complex than many people recognise.
  • Time: A company is easy to set up, while a limited partnership is not. A limited partnership is also not well suited to a situation where you want a new entity fast and cheap. A detailed limited partnership agreement is compulsory, and registration can take some time. The costs involved in setting up and registering a limited partnership are much higher than for a company.
  • Involvement: Conceptually, the limited partnership structure is based around a division between management and investment – between the general partner and the limited partners. If all investors want to be actively involved in the business, then a limited partnership is not really the ideal structure. It may still be usable, but conceptually the fit is wrong. For this reason, limited partnerships are better suited to hands-off, passive investors than they are to hands-on businesses, such as professional service firms. I don’t think limited partnerships are right for most professional service firms, or your average small business where Mike and Jim both want employment, ownership, and control in the business. A standard company is generally better.
When not to have a limited partnership (2)

There are some reasons for a limited partnership that people think are good, but that can really be bad:

  • Tax: Tax can be a good reason. But should tax drive all commercial decision making? Of course not.
  • “They sound cool/different/trendy”: So did finance companies, once upon a time. There should be good commercial reasons for having a limited partnership structure, not just because it sounds more intriguing than an ordinary company.
Key issues needing attention

Governance and exit strategies are two critical points that often go largely unconsidered in limited partnership agreements. As limited partnerships become more common, it is important – essential – that advisers become more sophisticated about them. It is too easy for limited partnership agreements to be based on templates unsuited to the parties and their situation.

For example, where there are only two limited partners, exit strategies need to be very different than if there are six or 10 limited partners. Do they have roughly the same resources, if A needs to buy B out? Or will B always win a ‘bidding war’ between the two? If B breaches the agreement, what will A do? Should A have the ability to pay out B over a period of time, rather than immediately? What if A and B fall out and simply cannot agree on a decision requiring a resolution of the limited partners? The answers to these kinds of questions need to be tailored, and a standard template pre-emption clause won’t do the trick.

Again, where there are only two limited partners, do they need an advisory committee? This appears in many templates, but is it really necessary? What if there are four or five limited partners? Is it any more necessary then?

Commercial lawyers have become quite used to dealing with these issues in the context of shareholders’ agreements. It is now essential for limited partnership agreements to reach the same levels of customisation. As headings, we could ask:

Governance
  • Are limited partners also shareholders and directors in the general partner company? Do they want to be?
  • Is an advisory committee really necessary? What will it add to the governance of the limited partnership?
  • What decisions are fundamental to the limited partnership (eg the line of business the limited partnership undertakes)? What influence do limited partners have? What role do limited partners have in decision making?
Exit strategies
  • How will A exit the limited partnership? Is there a standard pre-emption provision, or something more detailed (Russian Roulette; Drag-Tag; etcetera)? Will A find his/her own buyer, or sell out to another limited partner? Can A require B (or B and C) to buy out A’s limited partnership interest?
  • Will payment be immediate or staggered?
  • If another limited partner joins, will the agreement remain in place, or be renegotiated to take into account what might be different governance arrangements?
  • If A sells his/her limited partnership interest, is A also required to leave the general partner company?
  • What warranties is A providing on exit?
Contribution
  • If the limited partnership is to borrow money, what bank guarantees will be required?
  • Are limited partners obliged to provide these?
  • Are limited partners required to contribute work to the limited partnership? How are these obligations documented? Do they fall within the safe harbours of the Act?

This list is far from exhaustive, but I believe there are many limited partnership agreements that have been signed up with only cursory attention to issues of governance, exit, and contribution.

Sale of an LP interest

It is still early days of course, and it seems there are (so far) many more limited partnership agreements than there are agreements for the sale of an interest in a limited partnership. These too require more detailed attention, in terms of sale price, valuation, timing, settlement obligations, and warranties. The negotiation of warranties on departure from a limited partnership may well come to vex an increasing number of lawyers.

The sale of a limited partnership interest bears a familial resemblance to the sale of shares in a company, but the two are of course quite distinct, and need to be documented in very different ways.

Conclusion

Limited partnerships are an increasingly common, but still immature, business structure. In the world of ‘Limited Partnerships 2.0’, advisers need to look beyond what a limited partnership is, and beyond the use of templates, into second-generation questions like:

  • Why use a limited partnership?
  • When? When not?
  • What model of governance best suits this limited partnership?
  • What is the best model of funding?
  • What exit strategies should be put in place?
  • How will I document my exit from this LP?

Increasingly, parties to a limited partnership will be better served by customised and tailored arrangements. These should take into account the points raised above, and many others besides. Otherwise, those entering into limited partnership arrangements may get more confusion, and less clarity, than they bargained for – and the 2.0 issues will be ones of concern and loss, rather than opportunity and prosperity.

If you would like further information please contact Laura Monahan on 07 958 7479.

Update on the Building Amendment Bill (No 4)

The Building Act 2004 recently had an overhaul with the Building Amendment Act 2012 coming in to force in March. The next major changes to the Act are expected via the Building Amendment Bill (No 4), although it is unknown at this point when the Bill is likely to come in to force.

The Bill seeks to introduce a number of changes to the Act, however, it is considered most significant for its introduction of more comprehensive consumer protection mechanisms, such as pre-contract disclosure by building contractors of certain information, imposed minimum contractual terms for residential building contracts over a certain value (to be prescribed by regulation) and implied warranties and remedies for breach.

The Local Government and Environment Committee has recently released its report on the Bill, suggesting that it be passed with a number of amendments to clarify issues identified in submissions. Some of the key recommendations are set out below.

Responsibilities of product manufacturers

The Committee has recommended that responsibilities of product manufacturers be included in the Act alongside the responsibilities of other parties, (such as designers and builders). If this occurs, product manufacturers would be liable if a product does not comply with the building code when they have said that it will comply, “if installed in accordance with the technical data, plans, specifications, and advice prescribed by the manufacturer”.

The aim in defining responsibilities of certain parties involved in the construction of residential properties is to reduce council liability so that they are less risk averse and the building consent process is less bureaucratic. It is unlikely to have the desired effect, however, given the longstanding rules regarding joint and several liability. Under those rules consumers can often recover the total amount of any claim from the council and leave the council to pursue other liable parties for reimbursement. So, regardless of a council’s overall liability, they are still exposed, (at least initially), for the total amount of any claim.

Form and content of disclosure information

The Committee has recommended that clauses be included in the Bill containing more detail regarding the form and content of checklists and disclosure information to be provided by a building contractor in certain circumstances. These requirements are essentially to assist consumers with what to consider before entering into a residential building contract. As well as reasonable recommendations, (such as a builder’s skills, experience and legal status), the recommendations also include a builder’s dispute history, and, if a limited liability company, the role and ‘business history’ of each director.

Although it is easy to see the rationale for disclosing this type of information, (i.e. to uncover any “skeletons in the closet”), the recommendations are considered to be too broadly drafted. If they are prescribed without further limitation, full disclosure will be required, regardless of relevance, which, particularly with business history, could mean a lot of unnecessary information having to be disclosed.

Minimum contractual terms

As well as the minimum requirements for residential building contracts over a certain value to be in writing and dated, the committee has recommended that further detail be included in the Bill regarding the minimum contractual terms that might be prescribed by regulation. The recommended clauses state that the terms might include the process for varying the contract, the payment process and dispute resolution.

The committee has also clarified that the minimum terms will not override existing contracts or interfere with parties’ freedom to contract. However, the latter cannot really be said to be true given that the minimum terms will apply by default if the prescribed information is not included, even though that might have been the intention.

Clarification of other matters

The suggested amendments also clarify the following:

What work is covered by the consumer protection provisions?

Design work and work carried out by a subcontractor for a head contractor is not covered.

What type(s) of contract(s) can be cancelled for breach of one of the implied warranties?

Only residential building contracts can be cancelled as opposed to contracts for sale.

What are the available remedies for breach of one of the implied warranties?
  • Remedial work by the contractor, or, if they won’t/don’t/are unable to carry out the work;
  • Remedial work by another contractor; or
  • Cancellation of the contract.
Law Commission review

Other issues were also raised in submissions that the Government does not intend to address in the Bill. These include joint and several liability in the construction industry and whether a mandatory home warranty insurance scheme should be introduced. These issues have been referred to the Law Commission for review.

If you would like further information please contact Daniel Shore on 07 958 7477.

Franchise disputes: When things do not go to plan

Purchasing a franchise usually provides the comfort of an established brand and structured business system. It does however come at a cost, both to buy into the system and with on-going marketing levies and royalties.

Like any business however, there is uncertainty and risk and when things do not go to plan, often the Franchisor is the first port of call.

What goes wrong?

As with any business, you can be impacted by the economic climate, but there are also a number of other complications which can occur between a Franchisor and Franchisee. Common issues which may arise include:

  • The business does not meet the projections provided by the Franchisor at the outset;
  • The marketing fund does not provide any real benefit;
  • The impact of another Franchisee opening nearby;
  • The Franchisor refusing to renew for a further term;
  • The Franchisor issuing one or more default/breach notices.
What can be achieved?

The difficulty which invariably exists is that the Franchise Agreement is heavily weighted in favour of the Franchisor. The vast majority of Franchise Agreements will have disclaimers to try and avoid any potential liability, particularly in relation to financial projections.

Despite this, we can often negotiate on behalf of our clients to ensure their investments are protected and/or their losses are minimised. What can be achieved often depends on:

  • The wording of the Franchise Agreement (including obligations of “good faith”);
  • The paper trail with the Franchisor;
  • Whether other Franchisees will support the position;
  • How concerned the Franchisor is about public relations.
What should you do?

The starting point is to talk to your Franchisor. Ultimately the Franchisor wants you to do well as it is a reflection on their business model and your success results in a financial return to them. Depending on their response, there are a number of strategies to escalate the issues if necessary. Things to bear in mind from the outset:

  • Take legal advice sooner rather than later. It is important from an early point that you have an understanding of your legal position and the potential consequences if you get the process wrong;
  • Remember it is a relationship business. Once damaged, the relationship between the Franchisee and Franchisor is difficult to repair;
  • Manage the paper trail and assume anything put in writing could be relied upon later;
  • Be mindful of how you may have contributed to the issues. Have you complied with procedures. Have you accepted feedback from the Franchisor?
  • Determine whether other Franchisees are facing the same issue/s. There is power in numbers and also the ability to share costs.
Summary

Overall, your Franchisor should be there to help. Regardless of the reasons, the failure or success of a Franchisee reflects on the brand and, in turn, the ability of the Franchisor to sell more franchises and maintain a sustainable and profitable model.

Daniel is a Director in our Dispute Resolution Team and can be contacted on 07 958 7477.

Disqualification order under the Charities Act

Introduction

Are you an officer of a charity? Perhaps you are on the committee of the local swimming club, or a trustee of a charitable trust. If so, you need to be aware of the increased attention being paid to charitable officers.

The Charities Act 2005

The Charities Act 2005 (the Act) is a relatively recent development in charities legislation. The Act established a Charities Commission, now called the Charities Board (the Board) with the function of promoting public trust and confidence in the charitable sector. The Board encourages good governance and management practices, by providing educational material and other help to enable organisations to be more effective. To perform these functions, the Board has wide powers under the Act. In June 2012, the Board (then the Charities Commission) made its first significant order disqualifying an individual from being an officer of a charitable entity for a period of three years. The Board found that Mr Smyth engaged in conduct that amounted to “serious wrongdoing” under the Act.

Serious wrongdoing

The Act sets out that serious wrongdoing is:

  • An unlawful or a corrupt use of the funds or resources of the entity; or
  • An act, omission, or course of conduct that constitutes a serious risk to the public interest in the orderly and appropriate conduct of the affairs of the entity; or
  • An act, omission, or course of conduct that constitutes an offence; or
  • An act, omission, or course of conduct by a person that is oppressive, improperly discriminatory, or grossly negligent, or that constitutes gross mismanagement.

The Act also provides that the Board may, if it has removed an entity from the charities register, make an order disqualifying an officer from being an officer of a charity for a period of up to five years.

A person must not state or imply that an entity is registered under the Act when that entity is not registered. Every person who does so may be liable for a fine not exceeding $30,000.

Decision of the Board

After an extensive investigation, the Board found that Mr Smyth had engaged in a number of activities that were breaches of the Act, constituted serious wrongdoing, could mislead the public, and erode the public’s trust in the charitable sector. These included:

  • Using a false name on behalf of a registered charity;
  • Stating that the false name held status as a trustee of a registered charity;
  • Listing the false name as a primary contact on another entity for which Mr Smyth was trustee, and that sought registration with the Board;
  • Posting six online auctions, indicating that the auctions were on behalf of a registered charity when in fact, the charity had been deregistered;
  • Posting a further online auction after receiving a formal warning not to engage in such conduct;
  • Failing to respond to notices sent by the Board without reasonable excuse;
  • Failing, significantly and persistently, to attend to the Trust’s administrative duties and its obligations under the Act to the point the Trust was being grossly mismanaged.

Mr Smyth was disqualified from being an officer of a charity for a three year period.

Comment

It is clear from the facts that Mr Smyth was actively involved in breaches of the Act: he was not an “innocent victim” of the Board. What this case does show is that there are real consequences for those involved with charities (or non-charities, as the case may be).

Tips to avoid disqualification

We recommend all charities adopt the following practices:

  • Be familiar with your rules and follow them;
  • Keep accurate records of all meetings and correspondence;
  • Consider engaging an administrator to assist with compliance;
  • File annual returns under the Act;
  • Do not ignore communication from the Board.

If you would like further information please contact Jessica Middleton on 07 958 7436.

The water ownership debate

How to determine ownership of water has recently become a highly controversial and much debated topic.  Indeed the media has largely focused its reporting around the question: can water be “owned”, and if so, how should we determine who is entitled to it?

Unsurprisingly, the discussion has stirred up intense emotion in both camps.  So why is this such an sensitive subject?  One explanation is that water is quickly becoming a scarce and highly valuable natural resource and therefore, it is turning into a tradable commodity.  These days, control of water translates into income, earnings or simply put – money.

However, the issue of ownership is of course not a new topic, nor is it specific to New Zealand.  In fact, the rights of Indigenous people in a general sense has heated up in the last decade or so, culminating in the adoption by the General Assembly of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) in 2007 (which New Zealand affirmed in 2010).  On top of that, there are numerous examples of other nations facing the same dilemma, some of which extend as far back as 200 years.

The purpose of this article is to put the water ownership-debate into perspective.  It examines key historical and comparative developments from New Zealand and overseas, some of which are based on recent publications on this topic, and informs the reader of how this debate has evolved.

Differing concepts

It is important to understand that the Western world’s relationship to water differs greatly to that of Māori.  As can be understood from the media emphasis in the recent debate, the Westernised legal view of water focuses on common access and regulation of usage.  The Māori view however focuses on the life force, or mauri, of water.  In the Māori world, all water bodies such as rivers, lakes or streams have always been highly valued for spiritual and cultural reasons, for the simple reason that they are living beings and/or ancestors.  Therefore, access to water was always jealously guarded and controlled by iwi/hapū.  Others could only travel through, fish in or otherwise use the water body with the permission of the tribe who held mana over that particular body.  Tribal identity as a whole was (and still is) intimately linked to geographical landmarks, which includes freshwater resources.

Whilst Māori did not go as far as exert ownership (in a legal sense) over the water, the exercise of mana and control over stretches of rivers and/or lakes can be likened to that of ownership as defined by settlers.

International protections

As has happened with most fundamental and profound declarations proposed by the UN, the UNDRIP has since its adoption been the subject of much debate and criticism.  Supporters have raised concerns about what effect a non-legally binding and “toothless” document will have, whereas others have condemned the declaration for failing to ascertain a clear, universal principle making it unworkable in Western democracies established under constitutional governments.

While UNDRIP does not determine principles confirming Indigenous ownership of water, Article 25 recognises that:

Indigenous peoples have the right to maintain and strengthen their distinctive spiritual relationship with their traditionally owned or otherwise occupied and used lands territories, waters and coastal seas and other resources to uphold their responsibilities to future generations in this regard. (Author emphasis)

However you choose to interpret the reference to “waters and coastal seas”, it is unarguably a momentous assertion of some form of right to such resources for all Indigenous peoples. The question then becomes – how should it be implemented?  Given the relatively recent adoption of UNDRIP, it is a question that largely remains to be answered through the actions of the many nations that have chosen to accept (in some shape or form) the rights outlined by the declaration.

There are a number of other international instruments that aim to protect or affirm rights to water in its various forms.  For example, the United Nations Millennium Declaration (setting out the Millennium Development Goals) aspires to reduce by 50% the 1 billion people lacking access to clean drinking water by 2015, the Rio Declaration on Environment and Development declares that States should recognise and duly support Indigenous peoples’ identity, culture and interests in environmental management, and Agenda 21 observes that some Indigenous peoples may require greater control over their lands, self-management of their resources, participation in development decisions affecting them, and participation in the establishment or management of protected areas.

There is however no single international, legally-binding document or treaty which ensures the protection and recognition of Indigenous peoples’ right to water (whether through ownership or other means).  For now, UNDRIP is the most far-reaching attempt in ensuring such a right and time will tell whether this declaration will be able to deliver on the many expectations it has given rise to.

Around the world

New Zealand is by no means the only country faced with objections from its Indigenous population when it comes to water resources.  The issue is as old as colonisation and has been the topic of negotiations and Court cases for centuries.

United States of America

In the U.S., most Native American Indian tribes were (and to an extent, still are) highly dependent on salmon.  The result of this dependency is that retention and control over water has always been critical to the preservation of the traditional Indian lifestyle.

In 1908, the U.S. Supreme Court determined one of the first Court cases relating to recognition of a tribal water right in Winters v United States 207 U.S. 564 (1908).  The dispute in Winters was set in the inland U.S., a semi-dry and sparsely populated landscape which was inhabited by a number of Indigenous tribes who relied on what the ecosystem had to offer for food and shelter.  In 1888, two of the tribes entered into The Fort Belknap Treaty with the U.S. Government whereby a 640,000 acre reservation was established along the Milk River, the intent being that the tribes would take up agriculture.

In the years following the Treaty, it became evident that the River was incapable of meeting the water demands of both Indians and non-Indians.  Unsurprisingly, a dispute arose with the matter ultimately being brought before the Courts.  The U.S. Supreme Court held that while the Treaty made no mention of water rights, it was inconceivable that the Indians would have given up so much land (millions of acres in fact) without also intending to reserve sufficient water resources to survive, seeing how agriculture in this landscape was heavily reliant on active irrigation.

Three canons/rules of construction which U.S. Courts use to interpret treaties between the U.S. Government and Indian tribes formed the basis for the decision:

  • The tribes owned all resources pre-treaties and therefore, any rights not explicitly granted to the U.S. by the treaties were presumed retained by the tribes.
  • Treaties were to be construed as the tribes would have understood them at the time as opposed to according to some technical, legalistic interpretation.
  • Because the treaties were written in English, any ambiguities were to be resolved from the standpoint of the Indians.

The Winters doctrine gave rise to extensive litigation in subsequent decades, some of which resulted in what has been described as successful and modern settlement agreements relating to recognition of tribal water rights. While different in content, the common denominator for these agreements is the creation of modern tribal governmental estates which allow tribes to work in cooperation with the U.S. Government and, in some cases, single-handedly run tribal natural resource management programmes.

Australia

While tribes in the U.S. and New Zealand have largely underpinned their claims to tribal water rights on treaties, the situation in Australia is very different.  Given the lack of enforceable treaty rights, Australian Aboriginal tribes have faced considerable challenges in seeking recognition for Indigenous involvement in natural resource management.  In a general sense, Indigenous rights in Australia are often regarded as “second order rights” which are assessed only after other, more concrete rights, have been taken into account and guaranteed through legislation.

In spite of this, some movement towards recognising Aboriginal customary law has been made, initially through the release of the Australian Law Reform Commission report The Recognition of Aboriginal Customary Laws in 1986.  The report advocated “functional recognition” of customary law, aimed at ensuring recognition on a case-by-case basis whilst avoiding a “freezing” of Indigenous rights systems through static and universalistic legislation.

The densely populated south-eastern region of Australia has served as a focal point for recent water management initiatives, largely due to major droughts and ensuing over-appropriation of the Murray-Darling River.  The main developments were the introduction of the National Water Initiative in 2004 and the enactment of the Water Act 2007 (Cth).

While the purpose of these developments was not to ensure recognition of Indigenous water rights, the Initiative at least provides an inter-governmental framework for Indigenous access to water.  In addition, the principles of cultural heritage values in water were incorporated in the Water Act, which focuses on addressing environmental degradation, water shortages and water quality issues.  However, while the Act provides for Indigenous involvement in water planning processes, critics have expressed concerns that this is just one of a dozen principles without any internal priority structure.  In particular, while tribal participation in the process is guaranteed, there is nothing in the Act which expressly requires substantive recognition of Indigenous interests in water.

New Zealand developments

As outlined by Linda Te Aho in her recent article Ownership and governance of water (NZLawyer, Issue 195), claims to ownership of waterways by Māori are far from new.  Rather, New Zealand has seen a number of settlements between the Crown and iwi/hapū relating to management and governance of water in the last century.  However, all of these negotiated arrangements have, from the Crown’s perspective, been based on the doctrine of publici juris (water is common to all who have access to it and is not capable of being owned by anyone).  As such, it is not surprising that Māori claims to water have remained unresolved to this day.

In light of the above and as a response to the proposed sale of power-generating SOEs, the New Zealand Māori Council filed a claim with the Waitangi Tribunal in February 2012, seeking recommendations regarding the determination of Māori claims to water.  After the urgent hearing in June, the Tribunal released The Interim Report on the National Freshwater and Geothermal Resources Claim (Wai 2358, 24 August 2012), noting that Māori presented conclusive evidence that hapū and iwi had customary rights and authority over water bodies (as distinct from land) in 1840, which could be likened to that of “ownership” in English law.  This in turn provides Māori with residual proprietary rights today.

In response to the extensive public criticism for accepting the claim, the Tribunal commented as follows in the cover letter of Interim Report:

In our view, the recognition of the just rights of Māori in their water bodies can no longer be delayed.  The Crown admitted in our hearing that it has known of these claims for many years, and has left them unresolved. The issue of ‘ownership of water’ was advanced by the Crown as a deal breaker but it need not be. Māori do not claim to own all water everywhere.  Their claim is that they have residuary proprietary interests in particular water bodies.

Since the Government announced that it was refusing to offer Māori any special shareholding or engage in further negotiations with Māori to recognise water rights, the Māori Council has decided to seek injunctive relief via an application for judicial review in the High Court.  The hearing has been set down for 26 November 2012 and will take place in Wellington.

Conclusion

Water is fundamentally different from other more fixed resources, such as land.  This article has traced a range of historic and international developments in respect of water rights.  The next steps in New Zealand are unknown – but we are better placed to take them if we understand the context in which they exist.

If you would like further information please contact Renika Siciliano on 07 958 7429.

Body corporate management rights

The law relating to body corporate management contracts remains in a state of flux. Two recent cases provide some clarity, but also invite further questions – and some criticism. This article outlines these cases, and points to the importance of form over substance where management rights are concerned.

ABCDE – the background

ABCDE Investments Ltd & Ors v Van Gog & Ors [2012] NZHC 1131 (24 May 2012) involved a 23-unit complex in Mt Maunganui called “The Terraces”. Units 1-22 were for holiday accommodation, with unit 23 the manager’s unit. Each holiday unit was subject to an encumbrance. The decision concerned a range of instruments: body corporate rules; a management agreement entered into by the body corporate; the encumbrance; and letting agreements.

The Court held that the body corporate rules had purported to be amended before the unit plan was deposited and the body corporate created. Therefore, following Fifer Residential Ltd v Gieseg (2005) 6 NZCPR 306 (HC), the amended rules had never been properly adopted and were invalid. The Court did not proceed to consider the validity of specific rules.

The management agreement entered into by the body corporate primarily granted the manager exclusive letting service rights. The Court determined that entering into the management agreement was beyond the powers of the body corporate (ultra vires), as the amended rules which might have authorised the agreement were invalid, and the agreement was not authorised by the default body corporate rules. Again, the Court did not consider whether specific clauses were unenforceable and should be struck out, as occurred in Russell Management Ltd v Body Corporate 341073 (2008) 10 NZCPR 136 (HC).

The Court did not explore the letting agreement very far, but noted it was an annexure to the management agreement, and was to link individual owners into the exclusive letting service arrangements. More attention was instead given to the encumbrance. This instrument was registered over units 1-22, and provided for a letting service in favour of the manager as encumbrancee.

ABCDE – the encumbrance

The encumbrance was treated as a mortgage, and interpreted following the general contractual principles set out in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL) and Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] 2 NZLR 444 (SC), including attention to context. In this respect, the Court held that the amended rules, though invalid, were an important part of the context, and could be used as a guide to interpretation of the encumbrance. The Court also looked to Gibbons Holdings Ltd v Wholesale Distributors Ltd [2008] 1 NZLR 277 (SC), and held that subsequent conduct was a useful guide to interpretation. I have criticised this approach in a forthcoming article in the Conveyancing Bulletin.

However, the Court’s finding was that the encumbrance was to be read in light of the other documents, and bound the 22 holiday-unit owners to exclusive letting rights through the manager. So while a contract for the sale of exclusive letting rights may not be enforceable (see Atrium Management Ltd v Quayside Trustee Ltd [2012] NZCA 26, discussed in “What’s Wrong with Management Rights”, NZLawyer, issue 182, 20 April 2012), following ABCDE, an encumbrance providing for exclusive letting rights will be.

And this finding seems correct. A unit owner can encumber a unit title as he or she wishes, and the encumbrance will bind future owners. A body corporate, on the other hand, has quite limited powers, and cannot enter into arrangements that encumber or restrict unit owners’ rights in the same way. In this sense, form is clearly more important than substance. So exclusive letting rights set out in an encumbrance will be enforceable, while those set out in a body corporate management agreement will not be. But while I can agree with the finding, I do not agree with all the reasoning, as the Conveyancing Bulletin article sets out in more detail.

Sentinel Management – the background

Body Corporate 396711 & Anor v Sentinel Management Ltd [2012] NZHC 1957 (8 August 2012) goes a step further, considering broader issues relating to management agreements, their enforceability, and section 140 of the Unit Titles Act 2010. In Sentinel Management, a 30-storey complex in Takapuna comprised 117 apartments and a number of retail shops. The body corporate and Ansley – one of the unit owners – claimed that a management agreement between the body corporate and Sentinel (as manager) was unenforceable. Ansley had signed an agreement to purchase his unit in December 2003, though titles did not issue until February 2008. Shortly after the titles issued, amended body corporate rules were registered, and later that year, the shares in Sentinel were sold to Freestone, which had been involved in arranging management services for Sentinel.

The claim against the enforceability of the management agreement was brought on a number of grounds, each of which will be discussed in turn. By way of background, the agreement was for a 10-year term, with two rights of renewal of 10 years each, and the management fee itself was not under challenge.

Sentinel Management – the usual claims

The body corporate rules were challenged, but held to be enforceable on the basis of the “unanimous assent” rule set out in Bobbie Pins Ltd v Robertson [1950] NZLR 301 (SC), with the Court noting that no particular formalities were required for unanimity.

The Court held that some provisions of the management agreement were ultra vires, and should be severed from the remainder of the agreement, essentially on the basis set out in Russell Management. In this sense, it is important to note that ‘building management services’ (an acceptable arrangement for a body corporate) were treated differently from ‘letting services’ (not an acceptable arrangement for a body corporate).

Sentinel Management – the novel claims

The Court then considered several more complex – and previously largely unconsidered – issues.

The first of these was that a constructive trust arrangement was created by the agreements for sale and purchase, and that Sentinel had dishonestly assisted a breach of that trust. While the Court accepted that an equitable interest passed from a vendor to a purchaser when an agreement was entered into (see Bevin v Smith [1994] 3 NZLR 648), this was not the same as a trustee-beneficiary relationship, nor did it impose full trustee-type duties. There was no breach of duty, and there was also no dishonest assistance.

The second was for breach of a duty by a promoter, drawing on the analogy of the equitable duties owed by a promoter of a company to that company. The Court agreed that a promoter had fiduciary duties. Further, the New South Wales Supreme Court in Community Association DP No 270180 v Arrow Asset Management Pty Ltd & Ors [2007] NSWSC 527 had held a developer owed fiduciary duties to a body corporate; the Court noted that this decision had not been applied in New Zealand, and found the comparison of a developer to a promoter “novel”. Because of its other findings, the Court held it did not need to consider this issue, but it commented that it believed a developer was in a fiduciary position in relation to the body corporate.

The third issue was that the management agreement was an unconscionable bargain. On this issue, the Court held that the body corporate did not suffer any disability or disadvantage. Rather, the Court determined that there was an equality of bargaining power that meant this cause of action must fail.

Sentinel Management – section 140

We then turn to the nuclear option – a claim under section 140(5) of the Unit Titles Act 2010, which allows a “service contract” between a body corporate and another party for a term of more than one year to be terminated if it is “harsh or unconscionable”. This was the first case to consider this provision.

First, the Court held that the provision applied to all relevant management agreements, whether entered into before or after the commencement of the Unit Titles Act 2010 on 20 June 2011. Looking to the words “harsh or unconscionable”, the Court noted that neither Select Committee comments nor the use of the phrase in other statutes provided much guidance.

The Court considered “oppression”, “unconscionability”, and “unfairness”, and held that something more than unfairness was involved for section 140 to apply: rather, there must be something close to “outrageousness”, involving an intrusion upon unit owners’ rights or the functioning of the development. The words “harsh or unconscionable” could also be read separately.

The Court then drew on three points to find that the management agreement in this case was “harsh or unconscionable”: the combination of ultra vires clauses; the potential length of its term; and the different termination rights applying to the body corporate and manager. Having been found to be harsh or unconscionable, the agreement was terminated. While this caused disadvantage to Freestone, the Court noted that Freestone was involved in setting up the management agreements, and was an author of the management-rights scheme.

Lessons

Sentinel Management provides useful guidance on section 140(5), and on challenges to management agreements generally. However, the Court came close to inviting an appeal (at [271]), and I understand ABCDE is to be appealed as well.

Looking to the two cases, the reasoning in Sentinel Management appears sounder. However, it is significant that the Court drew on a combination of points, rather than any single point, in finding the contract harsh or unconscionable. The term of the agreement, the ultra vires provisions, and the difference in termination rights were all relevant, as was the knowledge of the manager’s shareholder. Things might be different in other cases involving (say) an innocent purchaser of the management rights, congruent termination rights, and a shorter term. In this sense, while Sentinel Management provides some general guidance, it could also be seen as quite fact specific. But for now, it is the best statement of law we have, and these cases reinforce some simple lessons:

  • ‘Building management services’ are different from ‘exclusive letting services’.
  • Exclusive letting rights set out in a body corporate management agreement will be unenforceable.
  • Exclusive letting rights secured against individual titles by an encumbrance will be enforceable.
  • A management agreement with a long term, ultra vires provisions, and incongruent termination rights will be harsh and unconscionable, and subject to a termination order under section 140 of the Unit Titles Act 2010.
  • But these same provisions in an encumbrance will not be subject to section 140, and will stand.

A simple conclusion can be stated: “don’t mess with unit owners’ rights through the body corporate”. Rather, “mess with their titles instead”. Because, where the enforceability of management rights is at issue, form matters more than substance.

If you would like further information please contact Dale Thomas on 07 958 7428.

Expiry of real property exemption

Introduction

The Financial Markets Authority has allowed the Securities Act (Real Property Proportionate Ownership Schemes) Exemption Notice 2002 (the Exemption Notice) to expire, with effect from 1 October 2012. This will have implications for property syndicates and their potential investors.

Real property proportionate ownership schemes

The Exemption Notice applied to proportionate ownership schemes, or property syndicates, which allow investors to “pool” their funds in order to purchase a commercial property that might otherwise be out of the investor’s financial reach.

Property syndicates have seen a resurgence in popularity in recent years, partially due to the collapse of finance companies. Property syndicates generally promise high returns and appeal to those who want to invest in real estate but do not want the responsibility of managing a property.

The previous position

Prior to the expiry of the Exemption Notice, issuers that fell within the class exemption were not required to prepare a registered prospectus and investment statement, or appoint a statutory supervisor. These issuers could instead simply provide potential investors with an “offeror’s statement” (similar to an investment statement) and a recent valuation of the target property.

Financial Markets Authority decision

The Financial Markets Authority made the decision to allow the Exemption Notice to expire largely due to the risks involved in syndicated property investments. Potential investors should have access to information sufficient that they can assess these risks and make an informed decision as to whether or not to invest.

The Financial Markets Authority has indicated they will refuse to grant specific exemptions along the lines of the Exemption Notice in the future.

What now?

With the expiry of the Exemption Notice, property syndicate promoters and issuers will now have the following main options:

  • Register a full prospectus with the Companies Office, prepare and distribute an investment statement and appoint a statutory supervisor. This may prove costly and time-consuming, but sound legal advice would ensure the issuer is fully compliant with securities legislation.
  • Apply to the Financial Markets Authority for a specific exemption tailored to their particular circumstances. However, given the Authority’s indication that it will not grant specific exemptions to syndicates in the future, such an application is unlikely to be successful barring extraordinary circumstances.
  • Structure the offer so that securities are only offered to excluded or exempted persons. Using this option will severely limit the number of people to whom offers may be made.
Conclusion

Securities law is an area that is fraught with risk, and can carry hefty penalties for non-compliance. Any person looking to offer securities to the public, or who is unsure whether their offer is to the “public” or not, should seek legal advice to ensure they are fully compliant before proceeding.

Laura is an Associate in our Commercial Team and can be contacted on 07 958 7461.

Buying a property by mortgagee sale: What you need to know as a potential purchaser

Introduction

Difficult economic times have led to an increase in the number of properties being sold by mortgagee sale.

The most common instance of a mortgagee sale is where a Bank exercises its power of sale where the owners of a mortgaged property have failed to pay their bank loan. For simplicity, in this article the mortgagee is referred to as “the Bank.”

It is important to note that even where the Bank sells a property as mortgagee, the Bank never becomes the owner of the property. This leads to an unusual situation where the Bank is selling property that it does not own or control. Because of this, there is additional risk placed on the purchaser. If you are interested in buying, bidding or submitting a tender on a property being sold by a Bank as mortgagee, it is important you are aware of the risks set out in this article.

This information is provided as a general guide, not an exhaustive list and circumstances will vary depending on the particular property and agreement involved. If you require further information on your particular situation, please seek specific legal advice.

Do your research and preparation

Mortgagee sale properties are most commonly sold by auction or tender. If you intend to bid/tender on a property, you need to do your planning and research about the property before the auction or tender closing date.

We recommend that you look at:

  • Arranging finance for the purchase. If you are successful at auction, you will be required to pay a deposit (usually 10% of the sale price) on the fall of the hammer on the auction day. With a tender, you are usually required to submit a deposit with the tender;
  • Get a certificate of title search for the property. This will show you any interests relating to the property, which may include caveats, charging orders or other encumbrances registered on the title for the property;
  • Get a LIM Report from the relevant local Council, particularly to ensure that any buildings on the property are permitted and have code compliance certificates; and
  • Depending on the type of property being purchased, it may also be prudent to get a valuation, builders report, geotechnical report or other relevant information.

We recommend you talk to your lawyer before making an offer on a mortgagee sale property. Often the agreement is prepared as being “unconditional” which means that after you sign or win the auction/tender, you are bound to complete the purchase and have no rights to cancel.

No warranties

As mentioned above, there is additional risk placed on you as the purchaser because the Bank is not the owner or occupier of the property being sold.

With a mortgagee sale, the standard vendor warranties in a “normal” sale and purchase agreement are deleted. The Bank cannot and will not promise that the property, house and chattels will be in good condition because the Bank is not in a position to control this.

Chattels on the property

Chattels are “movable property” – i.e.: items which are not attached to land and are owned by the owners of the property (for example stove, dishwasher, carpet, curtains, light fittings etc). In a standard sale and purchase deal, chattels are included as part of the sale for practicality purposes.

A mortgagee sale agreement will not include any chattels on the property, because the Bank has no right to sell these. Often the chattels are left on the property, but there is the risk that the property owner could remove the chattels before you take ownership of the property.

The Bank is not required to provide you with keys for the property on settlement. We recommend that you change the locks after you take ownership of the property to ensure that the property is secure.

Risk of damage after agreement signed

The period between when you sign the unconditional agreement or are successful at auction or tender up to the settlement date (the day you complete the purchaser and take ownership of the property) is the “danger period”.

The risk of damage to the property passes to you on the agreement becoming unconditional, the fall of the hammer at auction or the tender is accepted. In some cases, the owners of the property or tenants might still be living at the property at the date the agreement is signed, which they are entitled to do until the settlement date.

The owners of the property can become upset by the sale of the property by the Bank. In some cases, the owners have stripped or caused intentional damage to the property. As the Bank does not warrant that the property will be in a good state of repair on settlement, any damage caused in this interim period is at your risk.

You should arrange insurance for the property from the date the agreement is signed. You will need to disclose to your insurer that the property is being purchased by mortgagee sale.

No vacant possession

A similar risk applies to possession of the property. Although you may purchase the property on a specific date, the Bank will not promise you that the property will be vacant on that date.

If the owner or tenant is living at the property on the settlement date, you will still be required to complete the purchase in accordance with the agreement. In some cases, a disgruntled former owner or tenant may refuse to leave the property or cause damage in the interim. If this occurs, it will be your responsibility to remove the owner or tenant from the property, at your cost.

Talk to your lawyer

As outlined above, buying a property by way of mortgagee sale can be a time-consuming and risky process. We recommend you speak to your lawyer about the risks and any particular issues relating to the specific property before you sign an agreement. Doing the relevant investigations before auction/tender can be costly if the purchase does not proceed, but the benefits of being informed far outweigh the cost of being “trapped” in an agreement to buy an unsuitable property.

If you would like further information please contact Kerri Schofield on 07 958 7423.

Water law: The fresh water debate – recognition of indigenous peoples’ rights to water

In recent weeks, the media has revelled in a very public debate about Māori rights to water. Do Māori have rights to water? If so, who should determine the rights and how? And perhaps most importantly for some, how will such rights affect non-Māori?

The topic is both contentious and controversial. And while the Waitangi Tribunal has now publically recognised that Māori do indeed have residual proprietary rights to water (which will need to be further determined), this is by no means a new debate. Nor is it specific to New Zealand.

The issue of Indigenous peoples’ rights to water has been an internationally debated topic in most (if not all) colonised nations for around 200 years. Countries like America, Canada, Australia, Peru, Chile and Colombia have all had to face appeals from its Indigenous population that they have a right to fresh water, generally based on their long, cultural and intricate connection to the water itself, as well as the lands surrounding it.

On a national level, just about every settlement agreement between the Crown and iwi/hapū have specifically excluded the issue of rights to water, all with a clear intention that it would be negotiated and dealt with “in the future”.

The main trigger for the (rather intense) discussions is the same all over the world: water is quickly becoming a sparse and highly valuable resource, and as water is turning into a tradable commodity, disputes over who owns it are heating up.

The New Zealand Māori Council filed a claim in the Waitangi Tribunal in February 2012, claiming that Māori have residual proprietary rights to fresh water. It based its claims on the pre-Treaty control by Māori of fresh water resources, as well as the Treaty of Waitangi itself. The Council sought recommendations that (1) the claims to water were well founded, (2) that Māori be compensated for past use, loss of rights to profit and payment for future use, and lastly, (3) a return of all available land used for production of hydro-electricity or (failing that) a substantial shareholding interest in power-generating state-owned companies. In addition to that, the Council filed a separate claim seeking the halt on the sale of power generating state owned enterprises (SOEs).

After an urgent hearing in June, the Tribunal released an interim report in late August wherein it concluded/recommended that:

  • The sale of 49% shares in power-generating SOEs would compromise the Crown’s ability to provide recognition of Māori rights to water in case a breach is proven;
  • The relevant duty under the Treaty is the duty of “active protection”, which would be breached if the sale went ahead; and
  • A national hui should be held in order to determine a way forward.

As was widely reported, the Government refused to convene a national hui. Reiterating the common law doctrine of publici juris (meaning that no one owns water and that it is common to all people), the Government noted that there was no point discussing Māori water rights on a general or national level. In spite of this, a hui was organised by Te Arikinui Kiingi Tuheitia (the Māori King), which took place on 13 September 2012 in Ngaruawahia. Around 1,000 people from throughout the country attended the hui and a resolution was passed calling on the Crown to negotiate with Māori on this issue prior to selling any shares in state-owned power companies or initiating any individual iwi/hapū negotiations on water rights.

The Government will now engage with Māori in a series of “consultation hui” in order to discuss and debate the Waitangi Tribunal’s concept of “shares plus”. These shares were suggested by the Tribunal as a way to give Māori a stake in SOEs which the Government plans to partially sell. These sessions are by invite only and at this point in time, the Government has identified just under 20 iwi and hapū as being affected by water used by the SOEs the Crown is looking to put on the market.

If you would like further information please contact Renika Siciliano on 07 958 7429.

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