A board member of an  Iwi Post Settlement Governance Body (“PSGE”) found himself in a difficult situation recently. Considering himself to be an honest and unbiased person, he was not worried by the fact that he had taken part in discussions before the board regarding a proposal which could see his wife’s consultancy business receiving a contract with the PSGE.  It was clearly the most cost effective offer for the PSGE, so why should it matter?

It was subsequently brought to the PSGE’s attention that the procedure followed by the board was in breach of its deed of trust.  This is because the undisclosed circumstances created a conflict of interest which needed to have been declared by the board member.  Furthermore, as a result of the conflict of interest the board member should not have taken part in the discussion or vote on the decision to award the contract.

The process exposed the PSGE to great risk.  In particular, if the decision was implemented by the PSGE the board faced the risk of the decision being challenged and overturned by the Court.  It also placed the board member at risk of being removed from the board for breaching the rules of the trust deed.

Fortunately, after realising the error, the board was able to rescind the original decision and restart the process from scratch.  In the circumstances the remaining board members decided to not consider the proposal from the wife's consultancy business to avoid any allegations of bias.

This example illustrates how crucial it is that all board members are aware of and comply with the rules of the PSGE as set out in the trust deed.

Failure to comply with the rules covered by the trust deed can have drastic consequences.  The above situation could have been easily avoided by the board members being familiar with the rules set out in the trust deed.

If you have any queries about complying with your PSGE trust deed please contact Peter Johnston on 0800 729 529.