THE PROPRIETORS OF POTIKIRUA BLOCK INCORPORATION v TE KANI [2020] NZHC 668

THE PROPRIETORS OF POTIKIRUA BLOCK INCORPORATION v TE KANI [2020] NZHC 668 [1 April2020]IN THE HIGH COURT OF NEW ZEALANDGISBORNE REGISTRYI TE KŌTI MATUA O AOTEAROATŪRANGANUI-A-KIWA ROHECIV 2013-416-153[2020] NZHC 668BETWEEN THE PROPRIETORS OF POTIKIRUABLOCK INCORPORATIONPlaintiffAND RENATA TE KANI as administrator of theestate of Wamoana Te KaniDefendantOn the papersCounsel: J P Koning and D W Ballinger for PlaintiffN Weatherhead for DefendantJudgment: 1 April 2020JUDGMENT OF MALLON J(Share adjustment: interim judgment)Introduction[1] The plaintiff (Potikirua) brought a claim against the defendant (Renata TeKani) relating to a 29.7 hectare block of land registered in the defendant's name, asthe administrator of the estate of Wamoana Te Kani.[2] Potikirua contended the transfer of the land to Wamoana was unlawful andwithout consideration. It sought the return of the land on restitutionary grounds orunder the Contractual Remedies Act 1979. In the alternative, Potikirua sought an ordervesting in it absolutely the shares and accumulated dividends it held on behalf ofRenata or damages representing the current market value of the 29.7 ha block.[3] In a reserved judgment following the substantive hearing I found:1(a) The transfer of the land occurred pursuant to an agreement. The agreedconsideration was an adjustment of the shares held by Wamoana inPotikirua. This adjustment was to be on the basis that the transferredland had a value of $26,000 at the time of its transfer in 1993. Potikiruahad not made this adjustment but could have done so at any time afterthe transfer was registered.(b) The transfer of the land did not comply with the legislativerequirements under the Māori land legislation in force at the time.Nonetheless, Wamoana obtained an indefeasible title to the land and thein personam exception did not apply to Potikirua's claim.(c) In any event, Potikirua's claim to recover the land was brought too lateas was a claim for breach of the agreement by failing to pay theconsideration.(d) It was arguable that Wamoana had not breached the agreement withPotikirua. Rather, the transfer of shares (based on the agreed value ofthe land transferred to Wamoana) had been agreed and it was forPotikirua to adjust the shareholding at the end of the financial yearunder s 41(7) of the Māori Affairs Amendment Act 1967. It wasarguable that it was still open to Potikirua to make this adjustment.[4] I indicated that:(a) Potikirua's claim to Wamoana's shares in Potikirua were at best theproportionate value in shares that the transferred land represented asagainst Potikirua's total assets as valued in 1993. The audited 1993accounts provided a basis for this assessment to be made.1 The Proprietors of Potikirua Block Incorporation v Te Kani [2019] NZHC 3200.(b) It should be possible for an accountant to calculate the dividendsWamoana ought to have received if the share adjustment had been madein 1993, as against the amount she actually received, and for the excessto be deducted from her share of the retained dividends (based on whatshe would have been entitled to if the share adjustment had been made).(c) A fair way to resolve the dispute would be an adjustment to the sharesto reflect the value of the transfer of the 29.7 ha block, together with anadjustment to the dividends paid and payable to reflect the shareadjustment.(d) The parties were to have an opportunity to resolve the dispute in thisway. If they could not resolve the matter, they were to makesubmissions:2as to whether it is open to me to make orders directing anadjustment of the shares and dividends in the mannerdiscussed or whether some other form of relief is availableto regularise the share and dividend position.[5] Regrettably, the parties were unable to resolve the dispute in this manner. Theyhave filed submissions for my consideration.Submissions[6] Potikirua submits that I have jurisdiction to make further factual findingsbecause I have not issued a final judgment. It submits those factual findings would beas to the share adjustment that was intended in 1993. It submits I do not havejurisdiction to make a formal order or to enter judgment for the return of the shares toRenata because I have dismissed the plaintiff's causes of action and Renata made nocounterclaim for the return of the shares.[7] Potikirua submits that if I do not make factual findings or give directions, thenthe status quo would remain, namely that the 9,313.74 shares held in Potikirua wouldremain in Potikirua's name. It submits there would remain a live issue between the2 At [175].parties about the share and dividend adjustment. The Māori Land Court would thenhave jurisdiction to resolve the dispute. That jurisdiction arises under ss 18(1)(c) and37 of the Te Ture Whenua Māori Act 1993 (TTWM Act), which gives that Courtjurisdiction to determine any claim, whether at law or in equity, to the ownership orpossession of any interest in land. Shares in an incorporation are an interest in Māoriland under s 250(4) of the TTWM Act.[8] Potikirua submits the dispute could be referred to the Māori Land Court in twoways:(a) Potikirua could take steps of its own motion to adjust the shares (andconsequently the dividends) under s 41(7) of the Māori AffairsAmendment Act. If Renata disagreed with the adjustment, he couldchallenge the calculation and adjustment in the Māori Land Court; or(b) if Potikirua does not take any steps to adjust the shares and dividends,then Renata could bring a claim in the Māori Land Court for an orderthat some or all of the shares be returned to him.[9] Renata advanced two positions. Initially he submitted that I have jurisdictionto deal with the number of shares that should be returned to Potikirua. He submittedthis jurisdiction arose under r 11.2 of the High Court Rules 2016. This provides thata judgment may "deal with any question or issue; or order any inquiries or stepsthat the court considers necessary."[10] Renata submitted the Court should deal with the number of shares to bereturned to avoid unnecessary, time-consuming and costly further proceedings.Renata was prepared to see the issue resolved on the basis indicated in my judgment.He submitted the relevant figure in Potikirua's financial accounts was owners equityof $942,943 (rather than the land value of $593,000). Dividing that figure ($942,943)by the total number of shares in Potikirua (118,079) gives a figure of $7.985695 pershare. Dividing the agreed value of the transferred land ($26,000) by $7.985695 gives3,255.82 shares. That is the number of shares that should be retained by Potikirua.That would leave Renata with 6,057.92 shares (from a total of 9,313.74 vested in himas Wamoana's successor).[11] Renata calculated that retained dividends of $75,118.21 were due. This wasbased on 6,057.92 shares and estimated declared dividends of $12.40 per share. Thedeclared dividends were estimated because Renata considered the evidence to beinconsistent with advice from Potikirua's solicitors about this.[12] Renata's position changed subsequently. His counsel had realised that s 77 ofthe Te Ture Whenua Māori Act 1993 might be relevant. This provides that ordersmade by the Māori Land Court are conclusive after ten years. As the Māori LandCourt had vested 9,313.74 shares in Renata on 30 June 2000, it was submitted thatthere could now be no amendment to that order. As the holder of 9,313.74 shares itwas also submitted that Renata was entitled to all the dividends declared on theseshares since 30 June 2010. Renata submitted the Court should make a declaration tothis effect. He submitted the exclusive jurisdiction of the Māori Land Court did notexclude this Court's jurisdiction to make a declaration under the DeclaratoryJudgments Act 1908.My assessment[13] I turn first to Potikirua's submission that I do not have jurisdiction to make anorder or enter judgment on the appropriate adjustment of shares because I havedismissed Potikirua's claims and there is no counterclaim by Renata. I disagree.Potikirua's claims for a declaration and a return of the land were dismissed. Potikiruaclaimed in the alternative that Renata's shares vest in Potikirua absolutely. Inconsidering that alternative, it is open to the Court to consider whether Potikirua isentitled to some but not all of Renata's shares. I deferred giving judgment on thispending an opportunity for the parties to agree a resolution and to make furthersubmissions to the Court if they did not resolve the matter.[14] Nor do I consider Renata needed to counterclaim for the shares for the Courtto have jurisdiction over the issue of whether an order for a share adjustment shouldbe made. Wamoana's shares were vested in Renata pursuant to the Māori Land Courtvesting order. It was for Potikirua to show that it was entitled to some or all of thoseshares. I found that Potikirua and Wamoana agreed she would relinquish the portionof her shareholding that reflected her interest in the 29.7 ha block, on the basis thatthis block had a market value of $26,000 in 1993. It was for Potikirua to establish itsentitlement to this shareholding.[15] Potikirua passed a resolution on 24 November 2015 to transfer Renata's sharesinto Potikirua as security for the return of the land. The shares were subsequentlytransferred into Potikirua's name in its share register. The resolution does not refer tothe statutory provision that enabled Potikirua to transfer the shares to it. Further,Potikirua is not entitled to have the land returned to it, so the basis on which Potikiruapurported to transfer the shares no longer applies.[16] Section 38(1) of the Māori Affairs Amendment Act 1967 provides that sharesin a Māori incorporation are transferrable "in the manner and to the extent providedby this Part of this Act, and not otherwise howsoever." Section 38(5) provides thatshares may be transferred by an entry in the share register:(a) Pursuant to an order of the Court or any determination by theincorporation under section 86 of this Act; or(b) Pursuant to a resolution of the committee of management undersection 39 of this Act; or(c) As provided by sections 35 and 36 of this Act.[17] Section 38(10) provides:Nothing in this section or in any other section in this Part of this Act shall beconstrued to prevent or restrict the transferor and the transferee of any sharesin an incorporation from entering into any contract or agreement in respect ofany such shares which is subsidiary to the transfer thereof and which isotherwise permitted by law.[18] Section 41provides:41 To whom shares may be transferred(l) This section shall be read subject to the provisions of section 38 ofthis Act (as to the manner of transfer of shares) and the provisions ofsections 34 and 40 of this Act (as to restrictions on the transfer ofshares by reference to the number thereof).(2) No shares shall be sold or transferred by any shareholder to any personother than as provided by this section.(3) A shareholder may transfer his shares as follows:(a) To the incorporation; or(b) To any other shareholder; or(c) To the Maori Trustee, or to any other State Loan Department,or to the Crown; or(d) To the shareholder's spouse, child or remoter issue, brother,sister, parent, brother or sister of a parent, or to the child orremoter issue of a parent or of the brother or sister of a parent:Provided that for the purposes of this paragraph the illegitimacy ofany person shall not be deemed to affect the natural blood relationshipsubsisting between him and any other person.(4) Nothing in this section shall be construed to prevent or restrict atransfer of shares in any of the following cases:(a) The transfer of shares by the personal representative of adeceased shareholder to the persons entitled thereto under thewill or on the intestacy of the deceased shareholder:(b) The retransfer of any shares by the Maori Trustee or any otherState Loan Department or by the Crown to the shareholderfrom whom the shares were acquired or to his personalrepresentative.(5) A shareholder may make to the incorporation an offer in writing tosell his shares or any part thereof to the incorporation or to any personto be nominated by the incorporation (being a person to whom sharesmay be transferred in the accordance with this section), at a priceequal to the value thereof as fixed by the share valuer appointed undersection 60 of this Act and in the manner provided by that section. Anysuch offer shall remain open for acceptance by the incorporation or aperson nominated by it as aforesaid until the expiry of six months afterthe date of its receipt by the incorporation, when it shall lapse.(6) Upon the lapsing of any offer as aforesaid, the shareholder shall be atliberty to transfer his shares or any part thereof to any personwhomsoever, at a price not less than the price fixed therefor pursuantto subsection (5) of this section:Provided that this subsection shall not apply in any case where aresolution has been duly passed and confirmed under paragraph (a) ofsubsection (1) of section 40 of this Act.(7) All shares in an incorporation purchased or otherwise acquired by theincorporation shall be deemed to have been acquired on behalf of allthe remaining shareholders therein rateably and proportionately totheir respective shareholding, and shall be deemed to be held in trustaccordingly until the end of the financial year in which they wereacquired, at which time the total number of shares in the incorporationshall accordingly be reduced by the number of shares so acquiredduring the financial year.(8) No transfer of shares in contravention of this section shall beregistered.[19] The parties do not suggest that ss 35, 36, 39 and 86 of the Act assist. As I seeit, the legislation meant the transfer to Potikirua could only be made pursuant to anagreement with Renata, or with Wamoana when she was alive (s 48(3)(a)). Further,Potikirua was not entitled to enter the transfer of Renata's shares in its share registerwithout a Court order (s 38(5)(a)).[20] The next question is whether I have jurisdiction to make orders over the shares.Renata submits the Māori Land Court has exclusive jurisdiction (outside of thisCourt's declaratory jurisdiction). However, s 18 of the TTWM Act 1993 does not saythe Māori Land Court's jurisdiction is exclusive. I do not understand Potikirua to havesuggested this. Rather, Potikirua suggested only that the Māori Land Court coulddetermine a dispute over the number of shares Renata would relinquish pursuant tothe agreement with Wamoana.[21] If the Māori Land Court's jurisdiction is not exclusive, it might be open to meto make an order directing Potikirua to reduce the shares in accordance with s 41(7)and to transfer Renata's shares (as determined) back to him. At this stage I haveRenata's submissions on how many shares he would retain (at [10] above) but I do nothave them from Potikirua. The dividends due to Renata will follow from the shareadjustment. Again, I have Renata's submissions about that (at [11] above), but I donot have Potikirua's submissions. Further, I am not sure that Renata's calculation takesinto account that Potikirua's total shares will reduce by the shares that represent the29.7 ha block, and accordingly his remaining shareholding in Potikirua will rateablyand proportionately reduce to reflect this.[22] Finally, I do not have Potikirua's response to Renata's submission that it is nowtoo late to alter the shareholding because of the order made by the Māori Land Courtin 2000.[23] In the circumstances, I consider it is appropriate to provide the parties with afurther opportunity to make submissions on the following matters:(a) Does the Māori Land Court have exclusive jurisdiction over theappropriate share adjustment following the transfer of the 29.7 hablock? Why or why not?(b) Does this Court have jurisdiction under the Declaratory Judgments Act1980? Why or why not? Should this jurisdiction be exercised? Whyor why not?(c) Is it accepted that the purported transfer of Renata's shares to Potikiruais contrary to ss 38 and 41 of the Māori Affairs Amendment Act 1967?If not, why not?(d) Is it accepted that the share position can be adjusted by Potikirua unders 41(7)? If not, why not (apart from the scope of s 77 of TTWM Act)?If so, can and should the Court give directions about this? If so, onwhat basis? Does the Court need further evidence? What is Potikirua'sresponse to Renata's calculations in [10] and [11] above?(e) Does s 77 of the TTWM Act preclude a share adjustment? Why or whynot?[24] Given the current COVID-19 emergency, and the difficulties parties may havein obtaining instructions and providing submissions at this time, I allow eight weeksfrom the date of this judgment for these submissions. Leave may be sought to extendthis period should that be necessary.[25] It may then be necessary to convene a further hearing to address any questionsor further issues that may arise. Because of the COVID-19 emergency, the hearingmay not take place for some time. In the meantime, I urge the parties to attempt toresolve this matter once and for all in a fair manner. With goodwill on both sides, thatshould be possible in the spirit of what was agreed with Wamoana in 1992/1993. Ifthis can be achieved, the parties will not have to incur the further costs of legalsubmissions and another hearing.[26] I note that Renata seeks substantial costs for his success on the substantivehearing. I also note the parties have agreed that Potikirua will file a response to theclaim for costs within ten working days of the share and dividend adjustment beingresolved and a direction has been made to this effect.Result[27] Directions are made in accordance with [23] and [24]. The parties will beadvised of a date for the further hearing in due course.Mallon J