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1 180 Aotea MB 15 IN THE MAORI LAND COURT OF NEW ZEALAND AOTEA DISTRICT UNDER IN THE MATTER OF A A Sections 135 and 155, Te Ture Whenua Maori Act 1993 Ngarara West B3B - Confirm sale and change of status PROPERTY VENTURES LIMITED Applicant AND DENISE PARATA AND OTHERS Respondents Hearing: Counsel: Judgment: 2 August Aotea MB 140 (Heard at Wellington) Mr G H Takarangi for the Applicant Ms C Batt, for the Respondents 21 December 2006 RESERVED JUDGMENT OF JUDGE L R HARVEY Introduction [1] On a shareholding basis the majority owners in Ngarara West B3B wish to sell that block to Property Ventures Limited for $7.5 million. The sale is conditional on a change of status from Maori freehold to General land. The company has subsequently confirmed that, rather than cancelling the contract in the absence of a change of status order, it would consider other options. The company has now applied for confirmation of the resolution to sell and for a change of status. [2] The minority owners oppose the sale. While they accept that the majority owners have the ability to force a sale they maintain their objection. They further say that the company has no standing at present to prosecute the applications, as it is not the legal owner of the land. The minority owners also oppose a change of status.

2 180 Aotea MB 16 [3] The majority owners do not agree and say the company has the right to bring the applications on for hearing. [4] The two issues for determination are: (a) whether the company has standing to prosecute the two applications; and (b) have the tests for a change of status have been satisfied? Background [5] This land has been subject to earlier proceedings for termination of trust dealt with in my decision of 22 December 2003, 134 Aotea MB 20, an application for an injunction on 15 September 2004, 144 Aotea MB 105 and an application per section 45 of the Act. Therefore the background to the land and its ownership need not be repeated here. At the request of counsel for the applicant, I have confirmed that the evidence and submissions from all the earlier proceedings shall form part of the record for the present case. It should be noted that the land, located close to Paraparaumu near Wellington, despite its current condition, is nonetheless very valuable. [6] The relevant facts are that on 24 February 2006 a meeting of assembled owners of owners resolved by a vote of almost 96% on a shareholding basis to both sell the land and seek a status change from Maori freehold to General land. The meeting was publicly advertised and both resolutions were included in the notice. The land was offered for sale by public tender. The sale process included a right of first refusal in favour of the preferred class of alienees. At the conclusion of the process the company emerged as the only viable purchaser. Applicant's submissions [7] Mr Takarangi submitted that:

3 180 Aotea MB 17 (a) the company had standing to bring the applications as the holder of an equitable interest by virtue of the conditional contract it had entered in to with the majority owners - see Bevin v Smith [1994] 3 NZLR 648 and Bruce v Edwards [2003] 1 NZLR 515; (b) in any event, the majority owners had consented to both the sale and the status change and had further agreed to the representatives of the majority owners taking such steps as they deemed necessary to ensure the sale proceeded; (c) the land could be utilised more effectively as General land and that sale to the company would yield a significant financial return to all the owners in the land. Those owners have for many years seen little by way of return. The sale and status change would finally provide the majority owners in particular with significant capital to benefit themselves and their whanau; and (d) while the majority owners appreciated the cultural and historical associations of the minority owners, like themselves, to the land, nonetheless they were entitled to make decisions as to its future use. By overwhelming majority they had made their decision which required firstly the Court to simply confirm the alienation by way of sale and then to exercise its discretion in favour of the status change; [8] Counsel emphasised that the administration and management of the land had been an ongoing saga for all owners over many years. There had been little progress in the productive use and management of the land for the benefit of the owners during that period. Various proposals had come and gone but the short point was the owners had taken a decision to sell which they were entitled to make. [9] In the circumstances, the Court should exercise its discretion in favour of the change of status as to do otherwise might jeopardise the entire contract or at the very least force less attractive terms on all the owners.

4 180 Aotea MB 18 Submissions in opposition [10] Ms Batt submitted that: (a) the requirements of section 152 have been satisfied and accordingly the confirmation of sale as Maori freehold land may proceed; (b) the company had no standing to bring the application as it was not the owner of the land; ( c ) there is nothing in the Act to support a claim that the owners on the Court's record have ceased to be the owners simply because a conditional contract for sale has been executed. Ownership would pass on settlement of the purchase price but until that time the vendor retains ownership subject only to equitable interests pertained by the purchaser as a consequence of entering into the contract; (d) the law is uncertain on the point at which a purchaser's equitable interest comes into existence if the contract is conditional. ( e ) there was nothing to satisfy the Court that the land could be managed or utilised more effectively as General land; and (f) the minority owners wanted the land to remain as Maori freehold land. [11] Counsel contended that the application for a change of status should be refused. She also argued that the means by which the company could stand in the shoes of the beneficial owners was simply not present. Ms Batt implored the Court to dismiss the application for status change. The Law [12] Section 136(d) of the Act states:

5 180 Aotea MB 19 "Power to change status of Maori land owned by not more than 10 persons The Maori Land Court may make a status order under section 135 [ 1 of this Act where it is satisfied that... (d) The land can be managed or utilised more effectively as General land... ; " [13] The leading Maori Appellate Court authorities on status change are in re Part Orokawa - Lorna Cleave (1995) 4 Taitokerau Appellate MB 95; in re Maketu A2A - White (1999) 1 Waiariki Appellate MB 116; re Papamoa 2Al -Hoko (2003) 20 APWM 167 and in re: Orokawa 3B - Regeling (2004) 6 Whangarei Appellate MB 157 (6 APWH 157). The issue of status change has been considered most recently in the judgment in re: Wainui 2F4D - Craig (2006) 7 Whangarei Appellate MB 1 (7 APWHl). The salient legal principles distilled from these authorities that have relevance to the present case are: ( a) those with rights or interests in the land go beyond the beneficial owners themselves to whanau, hapu and descendants of owners; (b) land is a taonga tuku iho and should be retained within the kin group if possible; (c) owners should as far as possible be empowered to develop, manage and utilise and control their own lands; (d) status change for the sole purpose of securing a higher sale price is not a reason to grant such an order; (e) section 136 is to be read conjunctively. If the Court is dissatisfied that any of the criteria set out in that section have not been satisfied it need proceed no further; (f) notice must be given to the preferred class of alienees to give that group the opportunity to make submissions;

6 180 Aotea MB 20 (g) a change of status is possible but only in limited range of situations and each application must be considered as to its merits and particular circumstances taking into account the principles of retention and development; (h) an applicant's personal circumstances must always be taken into account when considering any application for a status change; [14] Then there are the important decisions of superior courts on the policy behind the Act particularly in the context of the principles of retention and development. In Valuer General v Proprietors of Mangatu incorporation [1997] 3 NZLR 641 Richardson P at page 649 makes it clear that the Act provides for alienation but only in limited circumstances: "The 1993 Act imposes very significant constraints on the sale of Maori freehold land, particularly sale to a purchaser who would seek to change its status from Maori freehold land to general land. Parliament could not have expressed the policy more clearly. Drawing on the Treaty of Waitangi and the special significance of land to Maori people the 1993 Act reflects as the primary objective to be applied throughout the legislation and by the Maori Land Court to the retention of Maori land by Maori and the use, development and control of Maori land by Maori. The machinery provisions allowing for alienation of land are directed and restricted to that end. There is no question of majority decisions of owners necessarily carrying the day. Any agreement of the owners is subject to the contingencies that the Maori Land Court may in exercise of its powers and responsibilities refuse to confirm the alienation or to change the status of the land. " [15] Further refinements of this fundamental principle can be discerned from the the High and.court of Appeal judgments, Edwards v Maori Land Court and Bruce v Edwards [2003] 1 NZLR 515. Ronald Young J considered the decision in Loma Cleave too restrictive given his view that the rights of the owners should not be entirely ignored. The Court of Appeal held that the members of the PCAs had a statutory right of first refusal if Maori freehold land was to be alienated. However it also stated that neither the entry into an agreement to sell if the status were changed, nor the change of status itself triggered the right to first refusal. Nonetheless that Court observed that since an order for change of status would bypass the right of first refusal and the restrictions on alienation, the PCAs should be given opportunity to make fully informed submissions before a status change application was dealt with.

7 180 Aotea MB 21 [16] Counsel for the applicants also cited Brown v Maori Appellate Court [2001] 1 NZLR 87. In that decision the court observed that there was no policy in the Act requiring non Maori to retain Maori freehold land and that the prospect of an eventual sale after partition was not fatal to such an application. [17] The reasoning of those judgments is adopted in this decision. Discussion [18] A review of the earlier proceedings concerning this land discloses a history of rancour between the owners. Claims and counter claims of undue influence, coercion, bad faith and simple greed punctuate the minutes of the various hearings. The chasm between the minority and majority owners appears permanent as each group obdurately turns its face from the other. I am aware that at least one of the hui of owners resulted in violence between siblings connected with the land and charges of assault being laid. The minority owners have fought the proposed sale at every turn, in at least three sets of separate proceedings before me. [19] The minority owners plead that the land retains its status as Maori freehold land. They assert that this particular block has deep cultural and historical significance to the owners, their whanau and hapu. They claim that it is the last parcel of land in the Ngarara West blocks of any size left to the owners and accordingly, must be afforded special significance by the Court. If it were possible, they would strongly prefer that the land not be sold at all but rather be held in some form of trust for the benefit of the present and future owners. [20] The majority owners are equally adalnant that the land belongs to them and that as absolute owners they wish to exercise their rights to sell. To secure the best possible price they seek a status change to General land. [21] Most of these issues are irrelevant to the present application. Given that there is no discretion regarding confirmation of the resolution to sell, I need only consider two principal questions: firstly, does the present applicant have standing to prosecute

8 180 Aotea MB 22 the applications? Secondly, if the answer to the first question is yes, has the applicant satisfied section 136 to enable a change of status to be granted? [22] In assessing these two matters I must also take into account the Preamble, the dual principles of retention and development, and the general objectives of the Act. Standing to prosecute the applications [23] The essence of Ms Batt's arguments is that the applicant could not have become the sole owner of the land entitled to prosecute a change of status application simply by entering into the contract. The company she contends is a party to a conditional sale and purchase agreement. Whatever equitable rights it mayor may not possess, it is not a right to stand in the shoes of the legal owners and to apply for a status change as the sole owner of the land. The owners of the land are those persons listed in the ownership schedules held in the records of the Court. Any amendment to the ownership can only be effected by court order. As at the time of filing of the applications, the owners in the land are the 45 individuals listed. The directors of the company are not included in that list, and could not,be until an appropriate order issues from the Court and that could not occur until settlement. [24] I accept that there is considerable force in counsel's arguments opposing the claim by the company as to standing. Section 37(1) of the Act provides that "any person" having an "interest" in a matter is entitled to bring an application. The company is a legal person and by virtue of its entry into the conditional sale and purchase agreement it has acquired an interest. It is clear that an order cannot be made as to status change unless the Court is satisfied as to the requirements of section 136, including that the land be owned by less than ten persons. This is provided for in section 135(2). [25] But this is qualified by section 135(3) which enables an order to be made conditional on the registration of any instrument. It would thus allow for the perfecting of title so that compliance with section 136(1)(a) can be achieved. While this is not an orthodox approach, I am prepared to entertain the application on this basis. My answer to the first question therefore is yes. In any event, the majority

9 180 Aotea MB 23 owners have given the mandate to complete the sale to their representatives who could easily stand in the shoes of the company with an amendment to the proceedings per section 71 of the Act. Status change [26] The minutes of the 24 February meeting of assembled owners record counsel's statement that without a change of status the contract would be at an end. Mr Takarangi made the point emphatically that without a status change the sale would not proceed: "It is not possible to sell and retain the status of the land as Maori land. If the change in status is not agreed by owners and not approved by the Court the sale will not proceed. " [27] That said, Mr Henderson, the managing director of the company gave evidence that even if the change of status application was unsuccessful, that did not necessarily mean an end to the contract. This was a change in his original evidence, at paragraph 12 of his brief. When asked to explain the change by counsel Mr Henderson stated, 173 Aotea MB 152: HMr Henderson: The adjustment just reflects probably a more considered view of our position in regard to the current contract and the fact that we wouldn't necessarily not continue with the contract but would be happy to review our position at that point in time should those circumstances arise. Mr Takarangi: So just going over that, upon confinnation of the contract being made and if the status application was declined that wouldn't mean you wouldn't necessarily not continue, you'd just review it? Mr Henderson: That's correct." [28] Then during cross-examination, Mr Henderson makes the point again that a failure to achieve a change of status was not necessarily fatal to the contract, 173 Aotea MB 152: HMs Batt: And just in respect of paragraph 12 1f you did decide to conijnn the contract as Maori fieehold land, which I understand to be your evidence, then would it be your intention to then apply for a status change?" Mr Henderson: We'djust look at all our options at that point in time.

10 180 Aotea MB 24 Ms Batt: So you may consider developing this land as Maori rreehold land? Mr Henderson: That is a possibility. " [29] As the Maori Appellate Court has stressed in the Wainui 2F4D judgment, the impact of a change on status from the preferred class of alienees cannot be underestimated, 7 Whangarei Appellate MB 7 (7 APWH 7): "The most significant effect of status change in this case would be to remove the perpetual statutory right of first refusal reserved to PCA members. The principles as set out in the preamble and sections 2 and 17 make it clear that this nght is of the greatest importance. In a sense the social contract implicit in the Act's principles is an acceptance that sales by Maori land-owners can continue but only on condition the nght of re-acquisition by whanau, hapu and descendants is also acknowledged. In this way the property nghts of land-owners and collective interests of the kin group are reconciled. Put another way, the introduction by the legislature, of a first nght of refusal, strikes a balance between land-owner control or tino rangatiratanga on the one hand and hapu interest in a collective taonga toku iho on the other... in our view the removal of that protection should only be allowed where the application in some mature way outside the ordinary run of cases. That must be so, because to adopt any other approach would be to undermine the very careful balance between owners and the wider kin group to which we have referred. " [30] The Appellate Court then went on to consider a series of arguments, not dissimilar to the present, including the issue of price, sole ownership of the land, the lack of offers from the PCAs, the failure to utilise the land for many years and the appellant's age. I reproduce the reasoning of the Appellate Court on these arguments in full, 7 Whangarei Appellate MB 8-10 (7 APWH 8-10): ''[24] The argument that a change ofstatus produces better prices, while often true, is no reason to change status. That would be the case on every proposal to alienate Maori land. If price were a valid argument the effect would be to remove the interest of the wider kin group so carefully protected in the Act in the ordinary run of cases. In any event as we have said, there was no hard evidence on the question in the Court below. [25] SiII1l1arly the fact that the appellant is the sole owner of the block cannot be a reason to change status since a key principle in the Act requires a balancing between the interests of the wider kin group and the landowner. In fact sole ownership would tend to strengthen the claim of the hapu to a nght of repurchase in our view. Nor can the fact that the appellant is a whangai and not by blood a member of the original landowning hapu take the appellant's case any further. First as a matter of tikanga, she is by adoption a member of the hapu even if not by blood. Second, her standing as a whangai makes it all the more important to protect PCA nghts. [26] Counsel argued in addition that the hapu had made no offer to purchase the land and, given its value, were unlikely to do so in the near future. While we can see the

11 180 Aotea MB 25 appellant's concern at being beholden to a group who cannot afford to buy her out, the Act establishes a perpetual right of first refusal. In this sense~ the whanau and hapu referred to in the preamble and s2 are entities whose existence is indefinite in time. The financial means of the current generation of pea cannot be detenninative. [27} That brings us to the combined effect of the appellant's age and the fact that the land has been un-utilised for a long time and is likely to remain so at least for the lifetime of the appellant without some change in the status of the land. [28} In our vie~ this combined circumstance is distinctive and does take the application outside the ordinary run of cases. We accept that, due to the appellant's age~ finance to develop and utilise the land is effectively unobtainable. The appellant must be entitled to benefit trom the land and if the effect of maintaining the entire title as Maon' treeho1d land is to prevent that outcome, then some relief is warranted. We do not consider however that the circumstances of this case justify a change of status over the whole block. As we have said, the removal of the pea's first right of refusal is not to be granted lightly. It follows that if a change is to be granted it must be strictly proportionate to the allowable objective. In this case the sale as Genera11and, ofa portion of the block sufficient to fund development on the remainder may perhaps be justified, but a subdivision of the entire land into 30 lots with the retention of only one lot calls into question the credibj1ity of the argument that sale is absolutely necessary to enable utj1isation on the remainder. In fact it may tend to demonstrate that the real motive for sale is to maximise the cash retum. It would invite the conclusion that retention of a small piece~ if it OCCUlTed at all, was nothing more than a ruse to achieve that. WhJ1e maximising cash retum is perfectly justifiable as a commercial objective, it is clearly not a purpose capable of justifying the removal of the pea's rights." [31] During the hearing I referred Mr Henderson to at least one example of a successful property development in what has become the major shopping area of Rotorua over Maori freehold land. While Mr Henderson was not aware of this example, one of his concerns it would appear, was the attitude of banks and financiers to the use of Maori freehold land as security for a commercial development. He did say though that he had only referred the matter to the company's usual financiers and had not tested the market. [32] The reluctance of banks to loan on Maori freehold land is a phenomenon not unknown to the Court. Indeed, it is regularly raised as a reason for refusal to finance particularly the building of dwellings on Maori freehold land. However, the records of the Court confirm that banks can and do lend using Maori freehold land as security - more so where the commercial development of the land is contemplated. Examples include farming and viticulture, commercial property, retirement village join ventures, geothermal power development and foreign property purchasing. At

12 180 Aotea MB 26 least one bank even has a division devoted to lending opportunities with Maori landowners. [33] So what might be regarded, at best, as a potential difficulty for the raising of development finance cannot be considered a sound reason for permanently expunging the rights of the PCAs. There must be other important considerations present before such a step can be contemplated, taking into account the particular circumstances of this case. As Mr Henderson acknowledged, the company has not ventured beyond its usual parameters in terms of finance at this stage. The claim that the status needs to be changed over the entire block to support lending for developing the land is premature. [34] A failure to achieve status change at this juncture would not, as I understood Mr Henderson's evidence, result in cancellation of the contract. Equally importantly, there is no evidence before me that should the change of status application be declined the owners will receive a significantly reduced sale price for the land. In any case, as the Appellate Court has held maximising cash return does not justify removing the rights of the PCAs unless there are compelling reasons to so do. [35] The short point is that Mr Henderson by his evidence makes it plain that if a status change were not granted, the company would consider its options including continuing with the development of the land as Maori freehold land. Partition and status change of part of the block to assist in the financing development of the balance as outlined in the Wainui decision is a possible option in these circumstances. There may be others and they too can be fully explored by the company when considering its position. [36] While in the words of Ronald Young J, the wishes of the owners are not to be entirely ignored, the right of reacquisition of collectively owned land must also be acknowledged particularly in a case where the alienation has been so fiercely contested from the moment sale was first proposed. In summary, I am not persuaded that the land can be managed or utilised more effectively as General land. The application for a change of status is dismissed.

13 180 Aotea MB 27 Sale confirmed as Maori freehold land [37] I see no reason why the clearly expressed desire of the majority owners to sell must be delayed. Even counsel for the minority owners accepted that the sale had been approved and there was no jurisdiction to refuse confirmation. The majority owners wish to sell the land and the Act makes provision for a sale to occur. By an overwhelming majority on a shareholding basis the owners have endorsed the proposal to sell. They also provided a mandate to their representatives to take such steps as were necessary to effect the sale. Ascertaining and giving effect to the wishes of the owners is an important consideration for the Court. F or the avoidance of doubt the resolution of the meeting of assembled owners for the sale of the land to Property Ventures Limited is confirmed. The order for confirmation of the resolution is conditional on the registration of a transfer to the purchaser within two months from the date of this decision. Decision [38] The order for confirmation of a resolution of owners to sell the land to the applicant is granted. The application for a change of status from Maori freehold to General land is dismissed. [39] There will be no order as to costs. Pronounced at?.3s- ~pm in /lyhfrnganui on tho D~CEMgER- 2006