THE PROPRIETORS OF POTIKIRUA BLOCK INCORPORATION v TE KANI [2020] NZHC 3525 [22 December 2020]

THE PROPRIETORS OF POTIKIRUA BLOCK INCORPORATION v TE KANI [2020] NZHC 3525[22 December 2020]IN THE HIGH COURT OF NEW ZEALANDGISBORNE REGISTRYI TE KŌTI MATUA O AOTEAROATŪRANGANUI-A-KIWA ROHECIV 2013-416-153[2020] NZHC 3525BETWEEN THE PROPRIETORS OF POTIKIRUABLOCK INCORPORATIONPlaintiffAND RENATA TE KANI as administrator of theEstate of WAMOANA TE KANIDefendantOn the papersJudgment: 22 December 2020JUDGMENT OF MALLON J(Share adjustment)[1] I refer to my previous judgments in this matter.1 There remains to be resolvedwhat further orders if any this Court should make to regularise Renata Te Kani'sshareholding in Potikirua. The parties now agree that the Māori Land Court does nothave exclusive jurisdiction over the matter. Renata seeks that I make orders toregularise the position. Potikirua resists that.[2] By way of brief recap, Wamoana Te Kani held shares in Potikirua based on thevalue of land originally transferred to Potikirua by interests to whom she succeeded.Pursuant to an agreement reached between 1991 and 1992, some of that land fromwhich her shareholding was derived was transferred to Wamoana. That transfer wasregistered in 1993.2 The agreed consideration was that the shares Wamoana held inPotikirua would be adjusted to reflect that land to the value of $26,000 had been1 The Proprietors of Potikirua Block Incorporation v Te Kani [2019] NZHC 3200 [the substantivejudgment] and The Proprietors of Potikirua Block Incorporation v Te Kani [2020] NZHC 668 [theinterim judgment].2 Prior to the date the Te Ture Whenua Māori Act 1993 came into forcetransferred to her.3 However, no steps were taken by anyone to have Wamoana'sshareholding adjusted in accordance with this agreement.[3] On 30 June 2000 the Māori Land Court vested Wamoana's shares in Renatapursuant to the terms of Wamoana's will. This eventually triggered concern amongstPotikirua committee members about how the transfer of the land had come about.Following unsuccessful attempts to resolve the matter, and to have the Māori LandCourt determine the matter, Potikirua commenced a proceeding in this Court on9 October 2013. That proceeding sought an order for the return of the land or, in thealternative, an order vesting Renata's shares in Potikirua in itself.[4] On 24 November 2015 Potikirua passed a resolution to transfer all of Renata'sshares to itself. It purported to do so as security for the return of the land. The transferwas registered in the share register. Potikirua has not explained the legal basis onwhich it was able to do this.[5] My substantive judgment dismissed Potikirua's claim for the return of the landand held that an order vesting the shares in itself was not appropriate either. I said:[171] [T]here may be an argument that the transfer [of the shares] wasagreed and, as such, by s 41(7) of the Māori Affairs Amendment Act 1967, theshares were deemed to be held by the Incorporation on behalf of theshareholders. It was then for [Potikirua] to take the necessary steps to adjustthe shareholding in accordance with s 41(7) at the end of the next financialyear.[172] If that is correct, it is still open to [Potikirua] to make this adjustment.[6] I granted leave to the parties to make submissions as to whether orders couldbe made to resolve the matter in this way.[7] In the latest round of submissions Potikirua points out that the process unders 41(7) of the 1967 Act requires first that there be a transfer of shares in accordancewith the Māori Incorporations Regulations 1969. Specifically, Potikirua submits:3 See the substantive judgment at [137] explaining that the shareholdings in Potikirua were allocatedin proportion to the value of the land transferred to Potikirua as against the total value of the landheld. the process that the parties are most likely to have intended to use to giveeffect to the share dealing as part of the agreement was a share transfer inaccordance with ss 38(2) and 41(3)(a) of the 1967 Act. Those provisions werein force at the time of the oral agreement that the Court has found. Theyenabled the sale or transfer of shares from a shareholder to [Potikirua], to beeffected by the registration of a share transfer in the prescribed form.This means that the agreement required Wamoana to properly execute form 4of the 1969 Regulations and present it to [Potikirua]. If she had done so, shewould have entered on the form what the consideration for the share transferwas (namely, the transfer of the 29.7 ha of land from [Potikirua] to Wamoana)and the number of shares that were to be transferred.[Potikirua] would then have signed the form as transferee, if it reflected theoral agreement. Once [Potikirua] had signed and executed the transfer form,it could have registered the transfer of the shares from Wamoana to itself. Theshares would be deemed to be held on trust for the other shareholders rateably.Then, at the end of the financial year, the shares would have been removed ordeleted from the share register in accordance with section 41(7).Unless and until Wamoana prepared and presented the relevant share transferform, [Potikirua] would have had no legal authority to make an entry in theshare register under the oral agreement between the parties. As noted above,section 41(7) did not empower [Potikirua] to transfer the shares to itself in theabsence of the prescribed form being presented for registration.[8] I agree with these submissions. This is what was intended and what shouldhave happened.[9] Potikirua submits that this process can no longer happen because the 1967 Actwas repealed with effect from 1 July 1993. It submits this is because an agreement forthe transfer of shares is a transaction involving shares as personal property, not anagreement for sale of an interest in land. It submits that the transitional provisions inthe Te Ture Whenua Māori Act 1993 (the 1993 Act) apply only to allow the latter tobe completed as if the 1993 Act had not been passed. It then submits that the transfercannot take place under the comparable 1993 Act provisions because of the specificrequirements of that Act.4 It proposes that the Chief Judge of the Māori Land Courtbe asked to exercise the special powers conferred under s 44 of the 1993 Act, althoughonce again it acknowledges there are difficulties with this proposed course.[10] In essence, Renata accepts these submissions but says this Court, through theexercise of its declaratory relief jurisdiction, can correct the position. Renata submits4 Sections 164 and 264.that the vesting order made on 30 June 2000 became conclusive on 30 June 2010 butagrees with Potikirua that the Chief Judge could amend the order pursuant to s 44. Forthe purposes of an application to amend that order, Renata is prepared to accept thathis shares were subject to an equitable obligation in Potikirua's favour for shares tothe value of $26,000 as at 1993. Renata also submits that Potikirua has unlawfullyconfiscated his shares when it purported to transfer those shares to itself in November2015.[11] Whether s 41 of the 1967 Act is still available to effect the transfer of the sharesturns on the meaning of s 355 of the 1993 Act. It provides that:Where, before the commencement of this Act, an unconditional agreement hasbeen entered into for the sale of any Māori freehold land or consent has beenobtained to the subdivision of any Māori freehold land, the sale may becompleted and the subdivision may take place as if this Act had not beenpassed and any enactment repealed by this Act shall, notwithstanding itsrepeal, continue and be in force for the purpose of continuing and perfectingunder such repealed enactment the sale or subdivision.[12] It was a term of the agreement for the sale of the land to Wamoana thatconsideration be paid in the form of relinquishing shares to the value of $26,000. Thatconsideration was never paid. Potikirua could have made a demand that Wamoanatake the steps necessary for this to occur. If Wamoana failed or refused to take thesesteps, Potikirua could have sought specific performance so as to secure the transfer ofthe shares as agreed. Because these steps were never taken, it is arguable that the salehas not been completed (the payment of consideration via a share transfer remainsoutstanding) and that therefore the parties could take the necessary steps to effect thetransfer of the shares under s 41 of the 1967 Act.[13] However, there is a more straightforward course. It is clear that Potikirua wasnot entitled to transfer Renata's shares to itself as it purported to do in 2015. Potikiruadoes not assert otherwise. The transfer was accordingly unlawful. Renata remains thelawful owner of the shares. The shares registered in Potikirua's name pursuant to the24 November 2015 resolution are held on Renata's behalf and a constructive trustentitles Renata to their return. Section 265 of the 1993 Act, which provides specialrules as to when a Māori Incorporation can recognise that shares are held on trust applyexcept "as required by law". This enables Potikirua to recognise and give effect to theconstructive trust that arises here by operation of law. This provides an alternativeroute for the share position to be regularised.[14] Potikirua submits that the transfer from Renata to Potikirua could be correctedby Potikirua using its power to correct the share register conferred by cl 34 of sch 1 tothe Māori Incorporation Constitution Regulations 1994 (the 1994 Regulations).5 Itsubmits it is open to Renata to make an application to Potikirua for correction of theshare register. Clause 34 does not refer to a requirement for an application. In anycase, it is Potikirua that has unlawfully transferred the shares to it. It should now takesteps to correct the share register. In doing so, Renata acknowledges that Potikiruahas an equitable interest in shares to the value of $26,000. I note that, contrary toPotikirua's submissions, its equitable interest arises pursuant to the 1992/1993agreement entered into with Wamoana. This means that the consideration agreed to atthat time applies, not some alternative measure of value under the 1993 Act.[15] To assist with the necessary correction, I declare that:(a) Potikirua was not entitled to transfer Renata's shares pursuant to itsNovember 2015 resolution;(b) the purported transfer was without lawful authority and is invalid;(c) Renata is the legal owner of the shares purportedly transferred pursuantto the November 2015 resolution;(d) Renata is entitled to have the share register corrected;(e) in correcting the share register, Potikirua may give effect to theequitable interest it has in Renata's shares as acknowledged by Renata(arising pursuant to the agreement to sell the land to Wamoana in1992/1993); and5 The submissions referred to clause 24 but that appears to be a typographical error.(f) that equitable interest is to be determined on the basis of what wouldhave happened if the process outlined in [7] had been followed with thenumber of shares to be relinquished by Renata to reflect that the agreedvalue of the transferred land was $26,000 at the time it was transferred.[16] Once the share position has been regularised, Potikirua advises that itsaccountants have kept records of the outstanding dividends and will calculate theamount payable to Renata. Given that acknowledgement, I make no further ordersabout this.[17] Lastly, I again express the hope that the parties will now cooperate to resolvethis long outstanding matter in accordance with these declarations. I note thatPotikirua has taken the view that resolution cannot occur by agreement because theshares must be dealt with in accordance with the relevant legislation. It has taken theposition notwithstanding Potikirua's unilateral action in transferring Renata's sharesto itself. I acknowledge that rectifying the position needs to be done in a lawful way,but it has always been open to the parties to discuss and agree upon the appropriatelegal avenue for rectifying the matter and to cooperatively take those steps to enablethat to happen.Mallon J