Treaty trust challenged as funds pay for fees

The trustees of a Treaty settlement group clocked up fees of $109,000 each a year as the trust went broke and failed to pay rates and insurance on its only building, a court has heard.

A group of beneficiaries of the Mana Ahuriri Trust has applied to the Ma¯ori Land Court to have an independent trustee appointed to investigate the activities of the trustees. It’s the latest chapter in a longrunning dispute between the beneficiaries and trustees of the Napier-based trust, which is a post-settlement governance entity.

The trust signed a deed of settlement with the Crown in November 2016, which involved financial and commercial redress of about $19.5 million, and vesting of some properties to seven Napier hapu¯ who are represented by the trust. Concerns the Government has around the actions of the trust have meant the settlement bill is yet to be enacted in Parliament.

In the hearing before Judge Layne Harvey this week, lawyer for the beneficiaries Matanuku Mahuika outlined the group’s concerns.

There were various matters that should be of concern to the court and if the trustees were in breach they should be removed, Mahuika said.

Foremost of those concerns was the fact that the trustees had entered into contracts with themselves as contractors for services.

Those trustees were the chairman Piri Prentice and trustees Barry Wilson and Joinella Maihi-Carroll.

The open-ended contracts were entered into in November 2016 and entitled each of the contractors to charge up to $109,000 a year plus GST for their services.

Mahuika said the decision to enter the contracts was made by the trio and their fellow six trustees because they were deemed to have the only necessary skills and expertise to manage the process of settlement.

Judge Harvey said he could understand the need for expertise around the claim, but the tasks carried out by the contractors ‘‘did not appear to be under that framework’’.

‘‘It makes sense for a trust to have a manager of some description . . . I’m just not sure there needs to be three,’’ the judge said.

Mahuika said there had to be questions around spending so much on contractors when there was very little income or activity being undertaken by the trust.

There was ‘‘no evidence of review [of the contracts], or consideration of the necessity of those services or whether the amount being paid, given the trust’s circumstances, is fair and reasonable,’’ Mahuika said.

He traversed the details of financial statements between 2017 and 2020, pointing to the fact that the contractors’ fees over that period came to more than $1 million.

Over the same period the trust’s assets had diminished from $2.169m to $947,000, and $850,000 of the assets that remained was due to a revaluation of the trust’s only asset, a building.

Nearly all the trust’s income had been from the Ministry of Justice, with ‘‘no evidence from the accounts of any significant revenue streams from any other source to support the expenditure of the trust’’.

In the six months to June 2018 the trust’s total income was a little over $25,000. Over the same period the contractors were paid $385,000 between them – ‘‘That’s equivalent to 14 times the revenue the trust generated in that time,’’ Mahuika said.

‘‘The overall situation is that from a circumstance where the trust is waiting for settlement, when the majority of its income is coming from the Ministry of Justice, there is a deteriorating balance sheet kept afloat largely through revaluations of the trust’s sole property,’’ he said.

‘‘Can the trustees say that it is fair and reasonable to pay contract fees of $1.06m throughout that time? And at the very least is there not an obligation on the trustees to be considering the cost of those contracts and the relative benefit that is being obtained by the beneficiaries of the trust?’’

‘‘It makes sense for a trust to have a manager of some description . . . I’m just not sure there needs to be three.’’

Judge Layne Harvey

He pointed to the fact that in November 2019 the trust’s accountant raised concerns about an unpaid debt to the Inland Revenue Department and an insurance bill for the sole property of $4135, which had been due nine months earlier, meaning the building, valued at $1.5m was uninsured. Rates also had gone unpaid.

Mahuika acknowledged that the contractors had ceased collecting payment prior to February 2019 as there was insufficient funds to pay them.

He said the trust was ‘‘spending the settlement redress before it is even made’’ and in order to pay its bills the trust had to take out a loan of about $600,000.

Lawyer for the trust Michael Bate said the trustees had behaved responsibly and worked hard.

‘‘The trustees could have been said to have been in dereliction of their trust duties if they did nothing for the four years instead of getting on with the mahi of the trust,’’ he said.

The judge acknowledged the trust had duties to fulfil, but said most of the hard work had been done prior to settlement being reached and ‘‘it just surprises me that there seemed to be a need for the three contractors to still be on the payroll’’.

Bate provided a list of duties carried out by the contractors

The judge said: ‘‘There is a great long list of attending blessings and openings of various things, and I’m wondering if that’s really within the mandate of the trust intended to land the settlement? A lot of these things are undertaken on a voluntary basis by elders. Might it not have been better for the trustees to scale down their operations . . . ’’