Cultural Imperatives in Not-for-Profits

Cultural principles and philosophical considerations in Not-for-Profits

Neither the Incorporated Societies Act 1908 nor the Charitable Trusts Act 1957 make any provision for the governance or management of not-for-profits to take into account cultural principles or philosophical considerations. Such principles and considerations, however, are very frequently reflected in the purposes of such entities and also in the detail of the constitutions and subsidiary documents.

The Law Commission, in a 2001 paper, Māori Custom and Values in New Zealand Law (at [3]-[5]), suggested that “tikanga” be used to describe the rules developed by indigenous societies. Whether and how that issue has been taken into account in the Commission’s current pending report into the Incorporated Societies Act 1908 is not yet known.

Tension between tikanga and legal principles

Those advising Māori and other ethnic or religious entities often encounter the tension between the underlying motivation for an entity and the “law of the land.”

The recent Court of Appeal decision in Rameka v Hall [2013] NZCA 203 (featured in the last issue of this magazine, Removing honest and well-intentioned trustees for incompetence, Anthony Grant, page 9), is a classic and instructive illustration of the tensions that can and do arise between legal principles relating to not-for-profit governance and tikanga, and other cultural principles and philosophical principles.

Rameka v Hall [2013] NZCA 203

Two minority trustees appealed unsuccessfully against a Māori Appellate Court decision removing them as trustees of the Opepe Farm Trust under section 240, Te Ture Whenua Maori Act 1994. This ahu whenua trust was created under section 215 of the Act in respect of Maori freehold land, with farming as its core business. The two appellants were removed as trustees by the Maori Land Court and the three other trustees resigned. That Court found that the trustees had failed in their duties to be prudent and protect the trust’s assets (involving losses of several million dollars and unsecured loans of millions of dollars, all made without protecting the trust’s position or seeking professional advice).

Te Ture Whenua Maori Act 1994

The Court of Appeal judgment clearly acknowledges the purposes and objectives of the Act:

[15] The Preamble to the Act emphasises, amongst other things, the desirability of promoting the retention of land in the hands of its owners, their whanau and their hapu. The relevant part of the Preamble states:

“And whereas it is desirable to recognise that land is a taonga tuku iho of special significance to Maori people and, for that reason, to promote the retention of that land in the hands of its owners, their whanau, and their hapu, and to protect wahi tapu: and to facilitate the occupation, development, and utilisation of that land for the benefit of its owners, their whanau, and their hapu: And whereas it is desirable to maintain a Court and to establish mechanisms to assist the Maori people to achieve the implementation of these principles.”

[16] Section 2(1) provides that the provisions of the Act are to be interpreted in a manner that “best furthers the principles set out in the Preamble”. Section 2(2) again emphasises the importance of promoting the retention, use, development, and control of land by Maori owners.

[17] Section 17 sets out the general objectives of the Act. Section 17(1) states that in exercising its jurisdiction and powers under the Act, the Maori Land Court’s primary objective is to promote and assist in:

“(a) [t]he retention of Maori land and General land owned by Maori in the hands of the owners; and
(b) [t]he effective use, management, and development, by or on behalf of the owners, of Maori land and General land owned by Maori.”

Maori land trustees have the same obligations as other trustees

The Court’s judgment then states:

[19] The Act provides that these objectives are to be achieved by the appointment of responsible trustees as the legal owners of the trust assets. The trustees have obligations to the beneficiaries to administer the trust property in accordance with general trust law, the requirements of the Trustee Act 1956 and the provisions of the Act. In other words, trustees are subject to traditional trustee duties with the statutory overlay of particular obligations arising from the context of ahu whenua trusts.

[27] There is no real dispute about the applicable principles. As Judge Harvey observed, “[i]t is trite law that the paramount duty of trustees is to obey their terms of trust”.

Failure to obtain professional advice

In Rameka the Court of Appeal dealt with this issue as follows:

[77] The appellants emphasise that the motivation for the Tauhara land purchase was cultural, that is, to achieve a return of land of cultural significance. Mr Maniapoto put it in this way:

“[T]he land was never purchased with profitability as the primary motive. … The people at the northern end of the lake, the Hikuwai people, had pleaded with the trustees to make this purchase.”

[78] We acknowledge there are tensions for trustees in this situation. The views of the owners, as the appellants correctly emphasised, are important. But that does not mean that it was prudent to proceed without having obtained some advice about how they were going to service the debt incurred in such a significant transaction especially where the evidence showed that Mrs Rameka, at least, could not explain that. As the courts below have found, the motivation to regain land of cultural significance does not displace the duties on the trustees to act prudently. Judge Harvey put the point well when he said, albeit in the context of Mangamawhitiwhiti:

“[105] Much was made of the return of haukainga land for cultural and historic reasons. That desire is both understandable and laudable. Where owners have lost land through various means over time there is often a strong wish to recover such lands, especially those areas with iconic significance and where the opportunity presents itself for such restoration. But those objectives cannot override the trustees’ principal duties of protecting the existing assets of the trust and their duty to act prudently.”

[79] We agree with the concurrent findings of the Courts below that failure to obtain professional advice concerning this significant transaction was a failure to carry out the trustee duties satisfactorily.

In response to the submission that “that the courts have not sufficiently recognised the special nature of the trust under the Act with the focus on the protection of land for whanau and their hapu and the kinship character of relationships involved in such trusts,” the Court of Appeal concluded that:

[90] We agree that there is a need for caution before a trustee is removed. The issue of removal cannot be determined by viewing each relevant factor in isolation from others. The Maori Land Court must consider the bigger picture which may involve examining the history of the trust as well as each trustee’s performance.

[91] We accept that the appellants were in a difficult position being appointed as responsible trustees to a trust when the male members were so well-established in their role. Further, at times the two women did not get the full information about what was happening. They made their decision about the purchase of Tauhara North, for example, without knowing the full story about Mangamawhitiwhiti. However, responsible trustees are just that; and they must comply with their legal obligations.

Postscript

In another recent Court of Appeal case, Mason v R [2013] NZCA 210, the appellant (charged with murder and attempted murder) sought to be dealt with in accordance with tikanga Māori. He was unsuccessful, but the case is another illustration of the tension between general law and tikanga Māori.

This is one of a series of articles on societies and charitable trusts (originally published in the NZ Lawyer magazine) by Mark von Dadelszen, a Hastings lawyer and author of Law of Societies, 3rd Edition, 2013. If any reader has examples of issues that have arisen or questions about societies or charitable trusts that might be a suitable subject for one of these articles please contact Mark at mark.vondadelszen@bvond.co.nz.