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Trustees’ duties and Te Ture Whenua Maori Act 1993: best intentions won’t cut it!

A recent unsuccessful appeal against an order removing trustees of an ahu whenua trust under the Te Ture Whenua Maori Act 1993 has illustrated the importance of awareness of, and adherence to, trustees’ duties.

The Court of Appeal upheld a decision to remove the trustees based on breaches of their responsibilities in relation to three transactions:

  1. The purchase of a mussel farm which lost several million dollars;
  2. The lending of money by three trustees to an entity on an unsecured basis, and the guarantee of the borrower’s debts of $10 million, that resulted in a judgment against those trustees in their personal capacities for approximately $4.5 million; and:
  3. The lending of $4 million without receiving any security for the loan.

The Court held that the trustees had committed serious of breaches of their duties by failing to manage and administer trust business properly, in particular to preserve trust assets. The appellants were out of their depth and removal was held to be the appropriate response.

This case is an apt reminder that as a trustee, you must be familiar with, and in compliance with, all trustees’ duties. Subject to the special requirements of Te Ture Whenua Maori Act 1993, these are the same for those as any trustee. For trustees of Maori land, the duties are:

  • To acquaint yourself with the terms of the trust deed or order;
  • To adhere to the terms of the trust;
  • To act impartially and fairly to beneficiaries;
  • To exercise the care, diligence and skill that a prudent person would in the same situation;
  • Not to delegate your duties without appropriate express authorisation;
  • To act jointly (or possibly by majority in some situations in the case of responsible trustees);
  • To pay trust funds to the right persons;
  • To keep proper accounts and to provide information; and
  • Not to remunerate yourself unless specifically authorised.

It is important to remember that these duties will apply whether you are new as a trustee or highly experienced in the area. Being well-intentioned is not sufficient.

If you wish to know more about trustees’ duties, please contact us.