When can the Court remove a Trustee of a Māori Land Trust?

The beneficiaries of a Māori land trust were very concerned about the behaviour of the trustees of the ahu whenua trust governing their land.  The trustees were failing to provide the financial reports they were required to provide, and had not set up a bank account for the trust. 

The beneficiaries sought legal advice about whether they could remove the trustees.

Section 240(1) of the Te Ture Whenua Māori Act 1993 gives the Māori Land Court the power to make an order to remove a trustee of a Māori land trust where (a) they have lost capacity to perform as a trustee, or (b) the trustee’s removal is desirable for the proper execution, or function, of the Trust and one of the following four criteria can be met:

1. The trustee repeatedly refuses or fails to act as a trustee; or
2. The trustee becomes an undischarged bankrupt; or
3. The trustee is a corporate trustee that is subject to an insolvency event; or
4. The trustee is no longer suitable to hold office because of the trustee’s conduct or circumstances.

Where the trustee does meet one of the above criteria, the Court needs to consider whether the actions of the trustee are significant enough that removal is necessary.

The Māori Land Court generally takes the position that removal is a serious action to take, and as such, breaches of trustee duties which are merely technical may not be sufficient grounds for the Court to remove the Trustee.

In a recent case, a Māori Appellate Court decision has set out the considerations to be taken into account:

1. The Court must first be satisfied that one or more of the four grounds for removal listed in section 240(1)(b) (above) has been met. That list is rigid.
2. One of those grounds is that a trustee is no longer suitable to hold office because of his or her conduct or circumstances. This ground is wide in scope. This wide-ranging scope is necessary to allow the Court to consider the range of conduct or circumstances that may result in a trustee being unsuitable to hold office.
3. Section 240(3) sets out examples of conduct or circumstances that mean a person may no longer be suitable to hold office as a trustee. The examples are a guide and do not form an exhaustive list.
4. If the Court is satisfied that one of the four grounds in section 240(1)(b) has been met, the Court must then consider whether removal is desirable for the proper execution of the trust. This involves an exercise of discretion, and the kaupapa of the Act, as set out in the preamble and sections 2 and 17, must be taken into account.
5. Despite the amendments to section 240 in 2020, the earlier principles concerning removal of trustees continue to apply, including:

• Removal is a serious step and is not undertaken lightly;
• The trustee(s) at risk must be properly notified in advance;
• Technical breaches of trust and governance instruments may not lead to removal unless the trust assets have been put at risk or there has been serious loss or wrongdoing; and
• Generally, the Court must be satisfied that there is evidence of real abuse, failure, or wrongdoing, and the absence of any tenable defence.

The Court of Appeal has also held that a prerequisite for removal of a trustee was not a simple failure or neglect of duties, but a failure to perform them satisfactorily.  Accordingly, an assessment of the trustee’s performance is essential when applying section 240.

The definition of ‘satisfactorily’ is measured against the principles of the Act, being the retention of Māori Land, the use and development of that land, control of the land by their owners and their representatives.

The core test in respect of the (iv) unsuitability requirement above is whether the acts or omissions meant that “trust assets have been put at risk or there has been serious loss or malfeasance (wrongdoing)”.

In the case above, the failure to set up a bank account and provide financial statements would likely meet this criteria, as those matters are key in administering a trust.

The removal and appointment of trustees of Māori land trusts is an important power of the Court, but it pays to take legal advice before applying to the Court to enforce this power.