IN THE MĀORI LAND COURT OF NEW ZEALAND TE … · The conservation covenant negotiations ... an unauthorised fee ... increase to enable the trustee to negotiate and pay out third

28 Te Waipounamu MB 37

IN THE MĀORI LAND COURT OF NEW ZEALAND

TE WAIPOUNAMU DISTRICT

A20130003080

UNDER

Sections 237 and 238, Te Ture Whenua Māori

Act 1993 and Sections 72 and 73, Trustee Act

1956

IN THE MATTER OF

Rowallan Block XIII Secs 1 and 5 Ahu Whenua

Trusts

BETWEEN

CATHERINE MARKS, ROBERT WILLIS and

ANDREW McPHERSON as Trustees of the

Rowallan Block XIII Secs 1 and 5 Ahu Whenua

Trusts

Applicants

AND

PETER DAVID ORBELL

Respondent

Hearing:

21 and 22 October 2013, 20 Te Waipounamu MB 224-309

(Heard at Wellington)

Appearances:

M Mabbet, for the applicants

A Gallie, for the respondent

Judgment:

20 February 2015

RESERVED JUDGMENT OF JUDGE S F REEVES

Copies to: Russell McVeagh, DX SX11189, Wellington Attention: Michael Mabbett: [email protected] McKay Mackie Lawyers, PO Box 125, Waipawa Attention: Andrew Gallie: [email protected]

mailto:[email protected]

mailto:[email protected]


Table of Contents

Introduction………………………………………………………………………. [1]

Factual background …………………………………………………………….. [13]

The SILNA policy…………………………………………………………. [14]

Te Rau Murihiku Whenua Māori…………………………………………. [17]

The conservation covenant negotiations…………………………………. [19]

The “negotiator’s fee” …………………………………………………… [21]

The logging trials…………………………………………………………. [25]

The Waikare Street property…………………… …………………………[33]

The 2011 application for review of the Trusts ……………………………... [38]

Events leading up to the filing of the current application……………….. [42]

Issues……………………………………………………………………………… [53]

Statutory jurisdiction…………………………………………………………… [54]

Relevant legal principles………………………………………………………… [59]

What were the circumstances of the “negotiator’s fee”?……………………… [63]

Discussion………………………………………………………………… [65]

Should the Court allow commission to Mr Orbell pursuant to s 72 of the Trustee

Act?………………………………………………………………………………. [73]

Discussion………………………………………………………………… [115]

Was the payment of $300,000.00 to Western Beech in breach of trust?……… [121]

Applicants’ submissions…………………………………………………… [122]

Respondent’s submissions………………………………………………… [131]

Discussion………………………………………………………………… [141]

Was the respondent’s use of the Waikare Street flat for his own benefit and in breach

of trust?………….…………………………………………………….………….[162]

Discussion………………………………………………………………… [168]

Can Mr Orbell claim relief under s 73 of the Trustee Act?........................... [180]

Submissions………………………………………………………………… [183]

Discussion………………………………………………………………… [188]

Result…………………………………………………………………………….. [200]

Orders……………………………………………………………………………. [205]


Introduction

[1] These applications concern two blocks of Māori freehold land; Rowallan Block

XIII Section 1 and Rowallan Block XIII Section 5 (“the Rowallan blocks”) which are

situated in west Southland and together comprise over 200 ha of native forest land.

[2] Both blocks were vested in owners under the South Island Landless Natives Act

1906 (SILNA) and are subject to the Rowallan Block XIII Section 1 and Section 5 Ahu

Whenua Trusts (“the Trusts”) formed in 1991. The blocks are also subject to a

conservation covenant with the Crown signed in 2003.

[3] The respondent in these proceedings, Peter Orbell, was sole trustee of the Trusts

from 1991 until his resignation in 2011, when the applicants Catherine Marks, Robert

Willis and Andrew McPherson were appointed as trustees.

[4] The applicants say that Mr Orbell has breached trust in three instances: by making

an unauthorised fee payment to himself; by making a gratuitous payment to a third party;

and by failing to pay rent for use of a residential property owned by the Trusts, for his

own benefit.

[5] The applicants seek orders that he repay the fee payment of approximately

$471,400.25 less out of pocket expenses, that he pay damages of $300,000.00 by way of

compensation for the payment to the third party and damages of $50,000.00 for loss of

rental income from the residential property. Interest is sought in respect of the

unauthorised fee payment only.

[6] Mr Orbell does not dispute payment of the fee, and acknowledges it was

unauthorised.

[7] He also does not dispute payment to a third party, Western Beech Limited

(“Western Beech”), of $431,799.75 and says $131,800.00 was paid for services provided

to the Trusts. He denies the payment of $300,000.00 was paid in breach of trust and he

says it was paid in settlement of a binding contract for future services.


[8] In relation to his use of the residential property owned by the Trusts, the

respondent denies breach of trust and says that he only used the property when in

Wellington on the Trusts’ business.

[9] Mr Orbell seeks relief pursuant to s 72 of the Trustee Act 1956 for the fee payment,

saying it was just and reasonable remuneration for the services he has carried out for the

Trusts and his level of success.

[10] It should be noted that in the event the Court sees fit to grant the respondent relief

under s 72, the applicants do not oppose granting him modest allowance for services as a

trustee. It is also accepted that he is entitled to receive his out of pocket expenses of

$46,317.00.

[11] Should the Court find Mr Orbell has acted in breach of trust in any of these

matters and is personally liable, he says he has acted honestly and reasonably and seeks

relief pursuant to s 73 of the Trustee Act.

[12] Following discussion with counsel at the commencement of the hearing on 21

October 2013, I replaced the application pursuant to s 68 of the Trustee Act 1956

(“Trustee Act”) with applications under ss 237 and 238 of Te Ture Whenua Māori Act

1993 (“TTWMA”) pursuant to s 37(3) of TTWMA. There was no objection by either

party to this course of action. All evidence was presented by affidavit and Mr Orbell was

cross-examined at the hearing.

Factual background

[13] To put the issues in context it is necessary to refer to the general background and

history of the Trusts as well as the recent relevant events. The following summary is

based on the chronology presented by the applicants’ counsel.

The SILNA policy

[14] In the early 1990s, the Crown initiated a conservation policy in respect of

indigenous forestry and negotiations were undertaken resulting in conservation


settlements with SILNA owners in relation to the Waitutu Incorporation and Stewart

Island blocks in 1996 and 1999.

[15] In 2002, the Crown initiated a formal SILNA forests policy to promote sustainable

management of the forests on a voluntary basis through conservation protection or

sustainable forest management under the Forests (West Coast Accord) Act 2000. Under

the policy, voluntary conservation protection was offered to owners of high priority

SILNA forests. This was to be achieved through creation of conservation covenants

under s 27 of the Conservation Act 1987 and s 77 of the Reserves Act 1977 in exchange

for covenant payments.

[16] The Rowallan blocks were identified as being in the high priority category.

Te Rau Murihiku Whenua Māori

[17] Te Rau Murihiku Whenua Māori (“Te Rau Murihiku”) was a group established in

April 1990 on behalf of owners of SILNA land to co-ordinate a response to the Crown’s

indigenous forest policy and to negotiate compensation. Mr Orbell was a committee

member of this group.

[18] Te Rau Murihiku held a hui with owners of the blocks on 29 August 1991 to

advise owners about negotiations with the Crown and to discuss the establishment of

trusts over the blocks and the election of trustees. Mr Orbell was nominated as trustee of

the Rowallan blocks to represent their interests in discussions about SILNA

compensation. He was subsequently appointed by the Māori Land Court as sole trustee

of the blocks on 20 September 1991.1

The conservation covenant negotiations

[19] In 1999 the Forests Amendment Bill was introduced to Parliament, which would

remove the exemption of SILNA land from the sustainable forests management regime

introduced in 1993. The Crown would now seek to assess compensation on the basis of

the conservation value of the land. This policy was initiated in 2002.

1 74 South Island MB 112-114.


[20] Between 1999 and 2003 Mr Orbell as sole trustee and representative of the Trusts

negotiated with the Crown for a conservation covenant in relation to the Rowallan blocks.

The key points in the negotiations are set out below:

On 22 July 1999, Mr Orbell was invited by the Ministry of Agriculture and Forestry

to attend a hui of SILNA landowner representatives and the Crown SILNA

negotiating team to discuss proposed voluntary moratoriums on logging of SILNA

land. Mr Orbell attended and agreed on behalf of the Trusts to enter into a

voluntary logging moratorium with a view towards continued negotiations with the

Crown;

On 28 March 2000, the Crown paid the Trusts $7,888.00 for a 12 month logging

moratorium on the land;

Negotiations with the Crown did not progress further in 2000 and Mr Orbell began

discussions with Graeme Muldrew of Western Beech, a specialist in indigenous

logging, about a logging trial to begin on the expiry of the logging moratorium.

The Southland District Council approved the plan and two trials were undertaken

by Western Beech in 2001;

In May 2002 the Crown wrote to Te Rau Murihiku advising that they sought to

contact each of the trusts involved about the Crown’s proposal to negotiate

conservation settlements with SILNA landowners. Mr Orbell sought a meeting

with Crown negotiator Allan McKenzie from the Department of Conservation

(“DOC”);

In June 2002, Mr Orbell met with Mr McKenzie to negotiate a conservation

covenant in respect of the Trusts’ land, and on 3 July 2002, a without prejudice

offer of a conservation package of $576,250.00 was made;

On 11 July 2002, Mr Orbell rejected that offer. The rejection letter includes a

calculation of the value of rimu timber on the Trusts’ land at $23 million;


On 29 October 2002, Mr McKenzie wrote to Mr Orbell with an offer to settle the

conservation covenant for $8,500.00 per hectare; a total of $1,970,095.00 plus

GST. The same per hectare offer was made to the Waitutu Incorporation who

rejected the offer, citing third party claims that may have resulted from any

covenant, such as any contracts entered into to manage sustainable forestry plans;

Mr McKenzie wrote to Mr Orbell on 22 November 2002 stating that he had

discussed the arrangements with “the other party concerned” (Western Beech/Mr

Muldrew), and the third party was willing to reconsider his position. Mr Muldrew

says he indicated to Mr McKenzie that he wanted a “substantial” settlement. Mr

McKenzie confirms that he did not ask for or receive details about the legal

relationship between the Trusts and Mr Muldrew;

On 11 February 2003, a letter was sent by Mr McKenzie to Mr Orbell informing

him that the Crown was prepared to consider an additional sum to assist with the

third party interest;

On 9 April 2003, Mr McKenzie sent a further letter stating that the negotiations

between the Crown and the Trusts had “reached a stage where the monetary limit

established by Ministers has been reached”, but that in view of third party interests

and the desirability of achieving a conservation outcome, the Government had

agreed to an increase. Full ministerial approval was confirmed in a letter dated 4

June 2003;

A meeting of the Trusts’ owners was held on 7 June 2003 at Napier. The minutes of

the meeting record that Mr Orbell outlined an offer of $1,970,095.00 with an

increase to enable the trustee to negotiate and pay out third parties, namely

solicitor, contractor and negotiator. The owners accepted the offer and requested

that Mr Orbell negotiate settlement of all third party interests. The minutes of the

hui do not record that the total consideration paid by the Crown to the Trusts was

$2,882,279.00 plus GST. Nor do they refer to the amounts proposed to be paid to

the third parties, or who those third parties were; specifically that the “negotiator”

was in fact Mr Orbell;


On 9 June 2003, Mr McKenzie wrote to Mr Orbell offering $12,500.00 per hectare,

a total of $2,882,279.00 plus GST. The offer letter noted that this comprised the

previous offer of $1,970,095.00, reflecting the October 2002 offer of $8,500.00 per

hectare, plus a further $912,184.00 to provide for the extinguishment of third party

interests namely contractor, solicitor and negotiator;

This offer was accepted by Mr Orbell on behalf of the Trusts and the covenant was

signed on 11 June 2003. The covenant states that the consideration was

$2,882,279.00 plus GST, if payable, and a cheque was made out to the Trusts for

this amount dated 9 June 2003. Separate cheques were made out to cover GST.

The “negotiator’s fee”

[21] Following the covenant payment the respondent paid himself a fee which he

referred to as the “third party negotiator’s fee”. Both parties accept the fee paid was

$471,400.25.

[22] Mr Orbell produced two documents he had prepared to show the extent of his

work: an undated “Trustee’s Timeline” setting out a synopsis of his activities in relation

to the blocks from 1969 to 1986, and a file-note dated July 2012 prepared for the

applicants summarising the work he carried out on behalf of the owners and beneficiaries

in the years 1972 – 2003. The respondent estimates approximately 15,000 hours of work

was undertaken with at least two-thirds of that time expended in the years 1972 – 1991,

prior to his appointment as trustee in 1991.

[23] He also produced a file-note dated 24 July 2003 of a meeting with his solicitor

Roy Peach, now deceased, and the Trusts’ accountant Ewan Gardiner. This was sent to

Mr Orbell by Mr Peach together with a letter dated 12 November 2003 and records

advice that the Trusts’ orders did not prohibit payment of trustees’ fees and allowed for

the costs of administration to be paid by the Trusts; that it was considered that the

respondent’s functions as a trustee and negotiator could and should be separated and he

was entitled to a fee as negotiator; and that it was for Mr Orbell to decide what was an

appropriate fee, but in terms of results and time, it should be substantial.


[24] It is accepted by the applicants that Mr Orbell carried out significant work prior to

1991 and then as a trustee culminating in the settlement with the Crown in 2003.

The logging trials

[25] Graeme Muldrew of Western Beech is a specialist in indigenous logging in the

Southland region and first approached the respondent in 1994 about the possibility of

logging on the Trusts’ land. Mr Muldrew provided an affidavit, dated 17 September

2013, but did not appear at the hearing and was not cross-examined.

[26] On 30 September 1998, Mr Muldrew wrote to Mr Orbell suggesting that the

Trusts begin a “Sustainable Forest Management Plan”. Under a heading “Suggested

Project” the letter sets out:

(a) The need for trials to determine the best methods of harvesting;

(b) That all activity with the project would need to be discussed and approved

by the respondent and Mr Muldrew would need a letter of authority from the

Trusts;

(c) An acknowledgement that there were no funds available to owners for the

plan and he viewed it as a long-term project which he would fund at his own

cost in order to get the plan under way;

(d) Mr Muldrew wished to be in the project for the long haul being at least 15

years and his fee would be $50,000.00 per annum as manager;

The letter concludes with the respondent being asked to “give these matters consideration

and I look forward to your reply”.

[27] Field work on the trials began in 1999, involving cutting a helicopter pad and

access track, and forest on the blocks was surveyed to develop a forestry management

plan.

[28] Colin Withnall QC was engaged to assist the Trusts in obtaining approval for the

plan. There was no evidence of the actual plan, but it appears from correspondence that

one was approved by the Southland District Council.


[29] Two trials were undertaken in mid to late 2001. The report on the trials, dated 2

December 2011, states that nine logs were felled in the first trial, milled and sold for

$35,838.92 incl GST, but there are no receipts or confirmation of this amount. In the

second trial 45 logs were felled, milled and sold by Western Beech to Select Timber for

$80,312.88 incl GST. After deducting expenses there was a small surplus for both trials of

$1,357.00, although Mr Muldrew appears not have charged for any of his time.

[30] On 14 June 2003 Western Beech invoiced the Trusts for $449,336.00, including an

amount of $300,000.00 for “surrender of Agreement”. The remainder was for “forest

management”. That amount was audited by Ewan Gardiner, and Western Beech was

subsequently paid $431,799.75.

[31] Mr Withnall does not recall advising the respondent about the contractual

relationship with Western Beech, but says he would have confirmed that an oral contract

can be binding and that there was some form of contractual relationship with Western

Beech. He did not provide any formal advice to the respondent about the contractual

relationship, settlement amount or documents. He was unaware that a settlement had

taken place and was subsequently surprised at the amount of the payment.

[32] The applicants accept that the amount of $131,799.75 was proper payment for the

logging trials in 2001 and some forestry management services including preparation of

the forestry management plan, but the balance of $300,000.00 is disputed.

The Waikare Street property

[33] In late 2005, the Trusts purchased a residential property in Waikare Street, Karori,

in Wellington as an investment. There are two dwellings on the property; the larger was

rented out, while the second, a flat, was used by Mr Orbell at various times between 2005

and 2012. No rental was paid at any time by him for use of the property. A trustee

resolution dated 28 October 2005 states that:

The self-contained residential flat on the property will be available for use by the beneficiaries

of the Trusts including the Trustee for the purposes of business on behalf of the Trusts to be

transacted in Wellington from time to time.


[34] There is no evidence that Mr Orbell ever disclosed the existence of the flat to

beneficiaries, or that beneficiaries used it.

[35] The respondent says that his intention was to leave the one bedroom flat vacant to

operate from when conducting business on behalf of the Trusts in Wellington. He gave

evidence that he discussed this with the Trusts’ solicitor Mr Swinburne prior to purchase

and was advised “there would be no problem” with this proposal. However there is no

file-note or correspondence to confirm this advice, and there is no evidence from Mr

Swinburne.

[36] Mr Orbell states he used the flat for 280 days or 40 weeks during the years 2005

to 2011 when in Wellington for purposes relating exclusively to the Trusts. He says the

work he was carrying out related to on-going successions to the blocks.

[37] The applicants say they only became aware of the flat when making arrangements

for sale of the property in 2012. From 16 July 2012 until the property was sold, the flat

was rented for $300.00 per week. On this basis the applicants say the flat could have

earned the Trusts’ additional income of up to $77,500.00 over 5 years.

The 2011 application for review of the Trusts

[38] Barbara Prescott, a beneficiary of the Trusts and sister of the respondent, filed an

application for review of trust dated 7 February 2011. The application sought a review on

a number of grounds, including failure to hold meetings with beneficial owners or consult

with them on trust matters, failure to file trust accounts, and general lack of transparency

on the part of the respondent in conducting trust business. Mrs Prescott ultimately sought

the appointment of a new trustee or trustees for the Trusts.

[39] The Court directed that Mr Orbell file a report for the beneficiaries on the

administration of the Trusts and full unqualified audited accounts for the Trusts. The

owners were notified of the application and of the hearing. The respondent filed a report

dated 26 July 2011. The report refers to the total amount of the conservation covenant

settlement as $1,970,095.00.


[40] The application was heard on 18 August 2011 at Wellington.2 The Court directed

that a meeting of owners take place with a full report on the Trusts’ activities since 2003

to be given and for owners to consider whether the Trusts should be varied in any way,

including whether or not additional trustees should be appointed.

[41] The owners’ meeting was convened at the Māori Land Court in Hastings on 3

November 2011. Robert Willis and Andrew McPherson were nominated as additional

responsible trustees. Mr Orbell then resigned and Catherine Marks was nominated as a

responsible trustee later in the meeting. Another Orbell, David Orbell was appointed as

an advisory trustee. The three current responsible trustees and advisory trustee were

appointed by the Māori Land Court on 1 March 2012.3

Events leading up to the filing of the current application

[42] By June 2012, the applicants were aware of concerns amongst beneficial owners

that approximately $900,000.00 of the Crown settlement had been paid to third parties.

There was concern this money had not been properly accounted for by Mr Orbell.

[43] The applicants became aware the total sum paid by the Crown for the

conservation covenant was $2,882,279.00. There was a letter from the Crown dated 9

June 2003 referring to this sum, noting that it included the October 2002 offer of

$1,970,095.00 plus a further sum to provide for the extinguishment of “third party

interests”. There were no clear records accounting for these payments including who the

payments had been made to, or how much had been paid to each party.

[44] On 11 June 2012, trustee Andrew McPherson sent an email to the respondent

requesting the settlement statement regarding third party payments. The respondent

advised by email on 19 June 2012 that there was no other settlement statement covering

this amount.

[45] On 16 July 2012, trustee Robert Willis sent an email requesting the 2003 and 2004

accounts recording payments to third parties. The email mentions questions from Pat

2 8 Te Waipounamu MB 285-296.

3 14 Takitimu MB 83-88.


Prescott, the husband of Barbara Prescott. The respondent replied on 17 July 2012 that

the applicants were being drawn in to “something of a (one-sided) vendetta”, and

payments to third parties were:

[An] entirely separate negotiation being outside the scope of the trust’s settlement and

involving as it did other peoples’ personal financial affairs – I was/am very careful to keep

the Privacy Act in mind. I have looked through my records but I do not have copies of

accounts but am confident that the figures will be correct nevertheless. I agree with your

email response – eg. What possible advantage can there be to shareholders (or anyone else)

in resurrecting this matter? Why on earth he/they have chosen to raise this again after all

these years is beyond me. As you say – it would be a totally unnecessary distraction if we

have to waste time and spoil the day with more unpleasantness discussing this on 11th

August. In any case – what’s to discuss?

[46] The respondent supplied extracts from the 2004 accounts, which record only that

$471,605.00 was paid as “Actual negotiation third party costs” in relation to the

Rowallan Block XIII Section 1 Trust, and the same amount in relation to the Rowallan

Block XIII Section 5 Trust. The accounts do not contain any detail as to who the

payments were made to, or how much was paid to each person. An email from Robert

Willis to the respondent and Ewan Gardiner dated 19 July 2012, notes that Mr Orbell “is

unable to locate his 2003/2004 records due to recent shifts in house”.

[47] Robert Willis sent an email to Ewan Gardiner dated 26 July 2012 requesting

further information. Ewan Gardiner subsequently advised that the 2004 accounts had

been shredded.

[48] In July 2012, trustee Catherine Marks met with former Crown negotiator Allan

McKenzie to discuss the circumstances surrounding the amount paid by the Crown under

the covenant. He confirmed the total consideration paid to the Trusts for the conservation

covenant was $2,882,279.00. While the 9 June 2003 letter states that the increase of

$912,184.00 was to provide for extinguishing third party claims, the covenant clearly

states that the total $2,882,279.00 was paid to the Trusts in consideration for entering into

the covenant. There were no conditions in the covenant that third party payments must

be made out of these trust funds.


[49] On 24 July 2012, Catherine Marks phoned Mr Orbell to relay this information to

him, in particular that, as the full amount paid by the Crown as consideration for the

covenant was trust money, it should have been properly accounted for. Catherine Marks

states that he repeated his position that the increase of $912,184.00 was separate to the

covenant payment and was not trust money. The respondent stated that he had paid

himself around $300,000.00 for his work since 1991 and a similar amount to Graeme

Muldrew due to an agreement between them. He stated there was no written contract for

this payment. He also stated that he had been advised by his solicitor at the time that

these payments were fine. Catherine Marks requested further information in relation to

the payments. Mr Orbell provided some documents relating to the payment to Graeme

Muldrew, and later, the summary of the work he had undertaken since 1972.

[50] The applicants sent the respondent an email on 7 August 2012 outlining their

concerns that he had paid a large sum to himself without Court approval, that the legal

advice he sought to rely on did not reflect the correct legal position, and that a large sum

had been paid to Western Beech without any clear contract. The applicants stated they

wished to give him time to reply to their concerns and/or seek legal advice, as they had a

duty as trustees to seek direction from the Māori Land Court on these matters. The

applicants also informed Mr Orbell that they were planning to raise the issues at the

owners’ meeting on 11 August. No response was received.

[51] A meeting of owners was held on 11 August 2012 and Mr Orbell was in

attendance. The minutes of the hui show that the applicants explained the issues

concerning the third party payments to the owners and advised their intention to seek

direction from the Māori Land Court, and that owners would be kept informed of these

proposed proceedings. Mr Orbell told the meeting that in his view the money used to pay

him and Western Beech was not trust money.

[52] Following the owners’ meeting, and as part of arrangements for disbursement of

trust funds to owners, the applicants decided to put the Waikare Street property on the

market. It was at this point that they became aware that there was a second dwelling on

the property, which was first made available for renting on 16 July 2012.


Issues

[53] The specific issues requiring determination are as follows:

a) What were the circumstances of the “negotiator’s fee” payment?;

b) Whether the Court should allow commission to Mr Orbell pursuant to s 72 of

the Trustee Act;

c) Whether the payment of $300,000.00 to Western Beech was in breach of trust;

d) Whether Mr Orbell’s use of the Waikare Street flat was for his own benefit and

in breach of trust; and

e) Whether Mr Orbell should be granted relief from personal liability for any

breaches of trust pursuant to s 73 of the Trustee Act.

Statutory jurisdiction

[54] Under Part 12 of TTWMA the Māori Land Court has extensive jurisdiction in

relation to trusts in respect of Māori freehold land including ahu whenua trusts. Sections

237 and 238 set out the Court’s general jurisdiction:

237 Jurisdiction of court generally

(1) Subject to the express provisions of this Part, in respect of any trust to which this

Part applies, the Maori Land Court shall have and may exercise all the same powers

and authorities as the High Court has (whether by statute or by any rule of law or by

virtue of its inherent jurisdiction) in respect of trusts generally.

(2) Nothing in subsection (1) shall limit or affect the jurisdiction of the High Court.

238 Enforcement of obligations of trust

(1) The court may at any time require any trustee of a trust to file in the court a written

report, and to appear before the court for questioning on the report, or on any matter

relating to the administration of the trust or the performance of his or her duties as a

trustee.


(2) The court may at any time, in respect of any trustee of a trust to which this section

applies, enforce the obligations of his or her trust (whether by way of injunction or

otherwise).

[55] In Clarke v Karaitiana the Court of Appeal stated that aside from the inherent

jurisdiction of the High Court conferred on the Māori Land Court by s 237, the Court also

has wide supervisory and enforcement powers under s 238.4 The Court commented at

paragraph [38] that:

The jurisdiction of the High Court in the field of trusts is both statutory and inherent. The

inherent jurisdiction is derived from the Court’s general supervisory powers in equity relating

to the supervision of trusts for the welfare of beneficiaries. The inherent jurisdiction of the

Court includes the power to enable it to act effectively within its jurisdiction. The Court may

exercise its inherent jurisdiction even in respect of matters which are regulated by statute, so

long as it can do so without contravening any statutory provision.

[56] Additional guidance as to the approach to be taken was given in Naera v Fenwick

where the Court referred to its earlier decision in Rameka v Hall and observed that:5

[85] When considering a claim relating to breach of trust, the starting position is that trustees of

Māori land are under the same obligations as other trustees. Equitable principles such as the

duty of loyalty and good faith, the duty to act personally, and the duty not to profit apply

equally to Māori trustees. Those general principles may be modified, however, by the Act or by

the trust order. In Rameka v Hall the position was described by this Court as follows:

[19] … The trustees have obligations to the beneficiaries to administer the trust property

in accordance with general trust law, the requirements of the Trustee Act 1956 and the

provisions of the Act. In other words, trustees are subject to traditional trustee duties with

the statutory overlay of particular obligations arising from the context of ahu whenua

trusts.

[57] In examining the actions of the respondent I am exercising this Court’s inherent and

supervisory jurisdiction under sections 237 and 238 of TTWMA. Both he and the current

trustees have provided extensive information and evidence relating to the administration

4 Clarke v Karaitiana [2011] NZCA 154, [2011] NZAR 370 at [36].

5 Naera v Fenwick [2013] NZCA 353, referring to Rameka v Hall [2013] NZCA 203, [2013] NZAR

1208.


of the Trusts and Mr Orbell’s performance of his duties as trustee. I must now determine

if he breached his duties and whether relief should be granted.

[58] This Court’s jurisdiction to determine whether relief should be granted pursuant to

the Trustee Act is by virtue of s 237 of TTWMA.

Relevant legal principles

[59] The primary duty of a trustee is to discharge their fiduciary obligations by

following the terms of their trust order. This is reflected in s 223 of TTWMA which refers

to the general responsibilities of responsible trustees as:

(a) Carrying out the terms of the trust:

(b) The proper administration and management of the business of the trust:

(c) The preservation of the assets of the trust:

(d) The collection and distribution of the income of the trust.

[60] General trust law principles are relevant as well as the particular terms of the trust

order that applies to the trust. In Apatu v Trustees of Owhaoko C Trust the Māori

Appellate Court described the general duties of trustees as:6

a) A duty to acquaint themselves with the terms of trust;

b) A duty to adhere rigidly to the terms of trust;

c) A duty to transfer property only to beneficiaries or to the objects of a power of

appointment or to persons authorised under a trust instrument or the general law to

receive property such as a custodian trustee;

d) A duty to act fairly by all beneficiaries;

e) A duty of trustees to invest the trust funds in accordance with the trust instrument or

as the law provides;

f) A duty to keep and render accounts and provide information;

6 Apatu v Trustees of Owhaoko C Trust – Owhaoko C1 and C2 [2010] Māori Appellate Court MB 34

(2010 APPEAL 34) at [16].


g) A duty of diligence and prudence as an ordinary prudent person of business would

exercise and conduct that business as if it were their own;

h) A duty not to delegate his or her powers not even to co-trustees;

i) A duty not to make a profit for themselves out of the trust property or out of the

office of trust: Garrow and Kelly Law of Trusts and Trustees (sixth edition, pp 523-

582 inclusive).

[61] The applicants rely on established authorities: Re Mulligan,7 which sets out the

standard required of a trustee and Bristol and West Building Society v Mothew which

summarises the fiduciary principle of loyalty.8

[62] I now turn to consider the issues that have been raised in these proceedings.

What were the circumstances of the “negotiator’s fee”?

[63] The respondent has acknowledged he paid himself $471,400.25 as a “third party

negotiator’s fee” in June 2003. He now concedes that this payment was unauthorised and

ultra vires, and that he failed to seek directions from the Court.

[64] Mr Mabbett, counsel for the applicants submitted that as the payment was ultra

vires, it was in breach of trust, and the applicants seek repayment. They do not dispute

that Mr Orbell is entitled to out of pocket expenses of $46,317.00, and the total amount

sought to be repaid is $425,093.00.

Discussion

[65] Justice Heath in Karaka v Ngāi Tai Ki Tāmaki Tribal Trust (No.8) succinctly

summarised the general principle of trustees remuneration: 9

The general rule is that trustees act gratuitously; exceptions arise if remuneration is authorised

either by the Trust instrument or the Court.

7 Re Mulligan [1998] 1 NZLR 481 at 500.

8 Bristol and West Building Society v Mothew [1996] 4 All ER 698; [1998] Ch 1 (CA).

9 Karaka v Ngāi Tai Ki Tāmaki Tribal Trust (No.8) HC Auckland CIV-2003-404-6164, 15 March 2011, at

[48].


[66] The Trusts were settled with identical trust orders in 1991.10

The objects of the

Trusts are set out in clause 1(i) and (ii):

Subject to any express restriction set out in this order the object of this Trust shall be:

(i) to provide for the use, management and development of the land to the best

advantage of the beneficial owners

(ii) To represent the beneficial owners when appropriate on any matters relating to

the land in dealings, negotiations, projects, compensation claims, court or

tribunal proceedings or any matter whatsoever, with the Crown or its agencies,

State-owned enterprises, territorial or local authorities …(emphasis added)

[67] Further, the trust order does not authorise payment of trustee fees or other

remuneration, although clause 4 states:

The Trustees shall apply the revenues arising from the operations of the trust in paying

the costs of administration of the affairs of the trust and in furtherance of the objects of

the trust …

[68] The evidence shows that Mr Orbell did not properly inform beneficiaries or seek

their endorsement of the payment to him. One view of the evidence is that he sought to

disguise the true nature and recipient of the fee from beneficiaries by using purported

privacy concerns to avoid disclosing this information. There was also no evidence that

owners agreed that Mr Orbell should receive any payment as trustee, let alone one of the

nature and size at issue.

[69] Mr Orbell did not seek the Court’s authorisation of the payment neither did he

seek the Court’s direction. Following his resignation as trustee he delayed disclosing the

true nature and circumstances of the “negotiator’s fee” to the applicants until he had no

choice.

10

74 SI MB 112-114.


[70] He also says he relied on legal advice from Mr Peach that he could pay himself a

substantial negotiator’s fee. I will look further at the issue of legal advice in the

discussion of s 73 of the Trustee Act.

[71] Mr Orbell has breached trust by not acting gratuitously as he was required to by the

trust order or by seeking the Court’s authorisation. He also breached a number of

fundamental trustee duties by paying himself a substantial “negotiator’s fee” including

the duty to be familiar with the terms of trust, the duty to comply with the terms of trust,

the duty to preserve the trusts’ assets, the duty not to prefer his own interests over that of

the beneficiaries, and the duty to act diligently and prudently.

[72] The payment of the “negotiator’s fee” was ultra vires and in breach of trust and the

applicants are entitled to repayment subject to any relief granted to the respondent

pursuant to ss 72 and 73 of the Trustee Act.

Should the Court allow commission to Mr Orbell pursuant to s 72 of the Trustee

Act?

[73] The respondent seeks relief pursuant to s 72 of the Trustee Act and his counsel Mr

Gallie submitted that the “negotiator’s fee” was just and reasonable remuneration for the

work he had undertaken on behalf of the owners, both before and during his appointment

as trustee.

[74] I agree with the applicants’ submission that Mr Orbell has retrospectively attempted

to characterise the “negotiator’s fee” as trustee’s remuneration and then justify that

amount through application of s 72 of the Trustee Act.

[75] The negotiator’s fee was ultra vires and s 72 cannot be used to create an entitlement

that does not exist. Mr Orbell cannot be awarded the negotiator’s fee as just and

reasonable remuneration where there is no right to that payment.

[76] The Court has discretion to allow commission under s 72. I must determine whether

to exercise that discretion, and only then make a fresh assessment of what is just and

reasonable trustee remuneration using the mandatory criteria in s 72(1A).


[77] Section 72 of the Trustee Act states:

72 Commission

(1) The court may, out of the property subject to any trust, allow to any person who is or

has been a trustee thereof or to that person's personal representative such commission

or percentage for that person's services as is just and reasonable.

(1A) In considering under subsection (1) what commission or percentage is just and

reasonable the court shall have regard to the following circumstances, namely:

(a) the total amount that has already been paid to any trustee of the trust,

whether pursuant to the trust instrument or to any earlier order of the

court or to any agreement or otherwise;

(b) the amount and difficulty of the services rendered by the trustee;

(c) the liabilities to which the trustee is or has been exposed, and the

responsibilities imposed on him;

(d) the skill and success of the trustee in administering the trust;

(e) the value of the trust property;

(f) the time and services reasonably required of the trustee;

(g) whether any commission or percentage that might otherwise have been

allowed should be refused or reduced by reason of delays in the

administration of the trust that were occasioned, or that could reasonably

have been prevented, by the trustee; and

(h) all other circumstances that the court considers relevant.

(2) The court may make any such allowance at any time, and from time to time, before

or during the administration of the trust, or on the termination of the trust, and may,

subject to such terms and conditions as the court thinks fit, make any such

allowance in respect of services to be rendered by the trustee during any specified

period subsequent to the date of the order.

Services provided prior to appointment as trustee

[78] Mr Orbell has estimated that at least two thirds of his work in relation to the

Rowallan blocks took place prior to his appointment as trustee. Mr Gallie submitted that s

72 does not limit the Court to commission for services provided as a trustee but he could

not refer to any direct authority for that submission.

[79] He also relies on the Court of Appeal decision in Ngāi Tai ki Tāmaki Tribal Trust

v Karaka for the proposition that s 72 does not constrain the Court’s inherent jurisdiction

and it is open to the Court to examine the totality of the work performed and authorise

fees in addition to a commission granted under s 72.11

11

Ngāi Tai ki Tāmaki Tribal Trust v Karaka [2012] NZCA 268.


[80] Mr Mabbett in response submitted that as a matter of law, s 72 does not apply to

work performed other than as a trustee. The wording and the purpose of s 72 precludes

the inclusion of other work when assessing trustee remuneration.

[81] Counsel submitted that the limits to s 72 are clear and there is no reason why the

Court should exercise its inherent jurisdiction differently. He noted that the inherent

jurisdiction is in respect of supervising trusts, and it would go beyond that jurisdiction if

the Court were to award trustees remuneration for services that were not rendered to a

trust.

[82] Mr Mabbett was also unable to find any authority or examples where the Court has

exercised its inherent jurisdiction and allowed payment for services performed prior to

trusteeship or simply “in relation to” a trust. He submitted that even if the Court considers

it could award such payment it should not do so because Mr Orbell’s claim is too vague

for the significant amount involved, and his conduct has been disentitling.

[83] The Court of Appeal decision in Ngāi Tai is the leading New Zealand authority on s

72.12

The Court states at paragraph [35]:

Section 72 in particular provides for an allowance of such commission or percentage for the

trustee’s services as is just and reasonable out of property subject to the Trust:

And then at paragraph [40]:

We are satisfied that s 72 provides jurisdiction for the High Court to make an order for trustee’s

remuneration which need not be calculated as a commission or percentage of the trust estate.

The order is to be in a sum that is just and reasonable.

[84] I agree with Mr Mabbett that the wording of s 72 is unequivocal and services

must be performed as a trustee. The extracts from the Ngāi Tai decision referring to

“trustee’s services” and “trustee’s remuneration” support this interpretation. It is difficult

to see how the Court could read the section otherwise.

12

Ngāi Tai ki Tāmaki Tribal Trust v Karaka [2012] NZCA 268.


[85] The Court of Appeal also addresses the nature of “commission or percentage”

making it clear that trustee’s remuneration need not be calculated as a commission or

percentage of the trust estate, and should be in a payment, sum or fee that is just and

reasonable.

[86] The decision also discusses the Court’s inherent jurisdiction and confirms that this

is in addition to and not instead of the statutory authority in s 72. The Court goes on to

say:13

It is generally recognised that the Court has inherent jurisdiction to authorise, either

prospectively or retrospectively, remuneration or extra remuneration for a trustee: In re Duke of

Norfolk’s Settlement Trusts.

[87] This makes it clear that the inherent jurisdiction to grant additional remuneration

only relates to remuneration “for a trustee”. The reference to prospective or retrospective

remuneration is to the Court’s power to make orders in anticipation of a trust receiving

funds or where a trust has come into funds after trustee services have been provided.

[88] I conclude that the Court’s inherent jurisdiction to assess trustee remuneration is

only in respect of services provided as a trustee, and that I cannot look at the “totality” of

the respondent’s services in assessing what might be just and reasonable trustee

remuneration.

[89] I am satisfied that this Court has neither statutory authority nor inherent

jurisdiction to award remuneration to Mr Orbell for his services prior to becoming trustee

of the Trusts.

Services as a trustee

[90] I now turn to assess whether this Court should allow the respondent

remuneration for services provided during his trusteeship, and if so, how much.

[91] The overriding consideration under s 72 is that the payment must be just and

reasonable in all the circumstances. In making this assessment the Court must balance

13

Ngāi Tai ki Tāmaki Tribal Trust v Karaka [2012] NZCA 268 at [48].


two competing considerations: that the office of trustee is generally gratuitous and

beneficiaries must be protected from claims of trustees; and second, the importance to

beneficiaries that trusts be well administered and their interests advanced.

[92] I address counsels’ submissions by reference to the s 72 (1A) mandatory criteria.

Total amount paid to the trustee (s 72(1A)(a))

[93] I have already found that the respondent was not entitled to the “negotiator’s fee”

which must be repaid. He will retain the amount of $46,317.00 in respect of out of pocket

expenses.

[94] I agree with the applicants’ submission that Mr Orbell has retrospectively attempted

to characterise this fee as trustee’s remuneration and seek to justify that amount through

application of s 72.

[95] The respondent has not received any other trustee remuneration.

Amount and difficulty of the services (s 72(1A)(b))

[96] Mr Gallie made the following submissions:

(a) The respondent was sole trustee from the date the Trusts were established

until his resignation and it was through his efforts that the Trusts were able

to conclude negotiations with the Crown in difficult circumstances where

Crown policy was changing;

(b) He documented the many hours of work put into achieving settlement for

the Trusts as per the objects of the Trusts and achieved a very good outcome

which was acknowledged with a motion of thanks by the owners;

(c) He successfully carried out logging trials which had the dual effect of

bringing the Crown back to negotiations and laying a foundation for future

logging income if negotiations were unsuccessful;


(d) As sole trustee he was solely responsible for decisions relating to the

negotiations, including the increase he achieved for the final settlement, and

subsequently how the trust assets were utilised;

(e) But for the respondent’s efforts there would not have been a settlement, or

even trusts, and it was his work and commitment that enabled the

beneficiaries to receive the benefit of the settlement

[97] Mr Mabbett submitted that the applicants do not necessarily oppose trustee

remuneration for Mr Orbell but the size and nature of the Trusts means that any

commission assessed by the Court should be small and notional only. He made the

following submissions:

a) Mr Orbell is not a professional negotiator, and no evidence was produced of

what a professional negotiator would have charged in similar circumstances;

b) He has not particularised in detail the work undertaken for the Trusts, and it

is difficult to assess the validity of his claim of 15,000 hours with the brief

summaries provided;

c) At the time the respondent paid himself, the Trusts’ assets comprised the

land and the covenant payment and the gross payment comprised nearly

one-fifth of the Trusts’ assets;

d) The Trusts’ have a number of less well-off owners and are not a commercial

operation;

e) He acknowledged that negotiation was part of his role as trustee and not an

additional role;

f) Although it is accepted that the logging trials put pressure on the Crown to

settle, the evidence shows the Crown was likely to do so in any event;

g) He should not take credit for the increase in the covenant payment when

almost all of that was paid out to himself and Western Beech.


Liabilities to which the trustee is or has been exposed and the responsibilities imposed on

him (s 72(1A)(c))

[98] As a sole trustee the respondent was solely responsible for all decisions during his

trusteeship.

[99] There was reference to the potential risk of prosecution from the logging trials

undertaken in 2001 but most of the financial and regulatory risk was borne by Western

Beech as a result of the arrangements between the respondent and Mr Muldrew for the

logging trials.

[100] Mr Orbell did not receive any payment for his out of pocket expenses until the

Crown settlement. There is no dispute that he should retain that portion of the fee

payment.

Skill and success of the trustee in administering the trust (s 72(1A)(d))

[101] Mr Gallie referred to the respondent’s professional background as a financial and

business manager which he was able to bring to bear in his role as trustee.

[102] The applicants state that Mr Orbell is not a professional negotiator; that the Crown

was likely to settle in any event; and negotiation was part of his role as trustee and that he

also benefits from the settlement as an owner.

[103] I am satisfied that the Trusts were able to settle with the Crown through the

respondent’s persistent efforts in an uncertain political environment. He had the foresight

to use the logging trials in 2001 to put pressure on the Crown to negotiate as well as lay a

foundation for future logging income for the Trusts if the settlement did not proceed.

[104] The settlement achieved was modest but satisfactory for the size of the Trusts and

number of beneficiaries, but the benefits of settlement were substantially reduced by the

payments made by Mr Orbell to himself and Western Beech.

Value of the trust property (s 72(1A)(e))


[105] Prior to the settlement with the Crown, the only asset of the Trusts was the land. On

settlement the Trusts received $2,882,279.00 from the Crown. The respondent

subsequently made payments totalling $903,200.00 to himself and Western Beech.

Time and services reasonably required (s 72(1A)(f))

[106] The respondent’s file-note dated July 2012 contains a general description of the

matters he attended to in the period 1972 to 2003 with a global time estimate of 15,000

hours. There are no time records but he states in the file-note:

Hours per year varied but there were periods of intensified activity throughout – eg Roadway

application 1980s – RMWM negotiations 1990s – Western Beech Ltd involvement and

Covenant negotiations 2000s.

By my estimation I spent approximately 15,000 hours over the course of my involvement

through to the point of settlement equating to around 9 hours a week on average with at least

two thirds of this being expended prior to my work as trustee.

[107] Mr Mabbett criticised the lack of detail in Mr Orbell’s account of the time he

spent on the Trusts’ business including the lack of more detailed time records given the

amount of the fee he paid himself. There was no evidence about appropriate hourly rates

for professional trustees or negotiators.

[108] The file note from the respondent’s solicitor Mr Peach, dated 24 July 2003,

recorded that in terms of results and time, “a substantial fee was warranted” though it is

not clear whether this referred to time spent prior to becoming a trustee, or what

“substantial” meant in terms of quantum. Mr Orbell’s affidavit of 21 May 2013 also gives

further insight into how he calculated an appropriate amount for the “negotiator’s fee”.

[109] I can only assess remuneration in respect of trustee services, and I acknowledge

that the respondent worked hard as sole trustee to manoeuvre the Trusts towards

settlement with the Crown. However nine hours spent every week from 1999 to 2003

seems excessive though I accept there would have been periods of intense activity.

[110] I note that as an owner trustee Mr Orbell also benefits from the Trusts in addition

to any trustee remuneration, and as made clear by the High Court in Karaka v Ngāi Tai ki


Tāmaki Tribal Trust (No.8) he cannot expect to receive the same level of remuneration as

a professional trustee.14

Should remuneration be refused or reduced because of delays in the administration of the

trust that could reasonably have been prevented by the trustee (s 72(1A)(g))

[111] There was no suggestion of any material delays in administration of the Trusts by

the respondent.

Other relevant circumstances (s 72(1A)(h))

[112] Mr Mabbett submitted that Mr Orbell’s conduct should disentitle him from

receiving trustee remuneration, or alternatively that any award should be discounted to

take account of such conduct.

[113] It is well established that a breach of trust does not necessarily disentitle a trustee

to remuneration and I must carefully weigh his conduct against the benefits of his work

for the Trusts.15

[114] Mr Gallie also submitted that it is open to the Court to include the cost of Mr

Orbell’s use of Waikare Street as trustee remuneration for the purposes of s 72. I consider

that the use of the flat is a personal benefit to Mr Orbell and as such cannot be included in

an allowance for trustee’s services even if it can be quantified, as it is not within the

meaning of trustee remuneration as defined in s 72.

Discussion

[115] After carefully weighing the matters set out in s 72, I consider it is just and

reasonable to allow Mr Orbell a modest amount of trustee remuneration for his trustee

services over 11 years as a sole trustee which culminated in settlement with the Crown

and the compensation package.

14

Karaka v Ngāi Tai Ki Tāmaki Tribal Trust (No.8) HC Auckland CIV-2003-404-006164, 15 March 2011. 15

Boardman v Phipps [1967] 2 AC 46, [1966] 3 All ER 721 and Ngāi Tai ki Tāmaki Tribal Trust v Karaka

[2012] NZCA 268.


[116] I do not disregard his conduct in relation to the unauthorised fee payment and

other matters. Such conduct is not necessarily disentitling and I have weighed that against

the benefits to the trust of Mr Orbell’s trusteeship.16

[117] Mr Mabbett submitted that a reasonable honorarium for a trustee of a trust this

size is at most $2,000 – $3,000 per year, and trustee remuneration should reflect that.

[118] The High Court in Karaka v Ngāi Tai ki Tāmaki Tribal Trust (No.8) stated that (as

a starting point) trustees who are owners should act gratuitously, but that modest

remuneration may be granted in appropriate circumstances.17

In that case Justice Heath

awarded an owner trustee with a fairly short and modest tenure an amount of $3,000.00

as a notional payment not based on any professional rates.

[119] In Tauhara North No 2A, 2B and 2C,18

Judge Savage declined to grant ex gratia

payments to trustees equating to $2,000.00 per year of service where trustees were

already paid $300.00 to $400.00 per meeting, and also received honoraria of $28,000.00

per year. This is different from the present case, as those trusts had $200 million of assets

and substantial income from electricity generation, and their trustees already received

substantial remuneration.

[120] In weighing all these matters I consider the appropriate trustee remuneration to be

$3,000.00 per annum inclusive for both Trusts for each year of the respondent’s 11 year

tenure as trustee from 1991 to 2011. This is a modest allowance of $1,500.00 per annum

per trust amounting to $33,000.00 and Mr Orbell is also entitled to receive his out of

pocket expenses of $46,317.00; a total of $79,317.00. These amounts will be deducted

from the amount he will have to repay to the Trusts.

Was the payment of $300,000.00 to Western Beech was in breach of trust?

16

Boardman v Phipps [1967] 2 AC 46, [1966] 3 All ER 721. 17

Karaka v Ngāi Tai ki Tāmaki Tribal Trust (No.8) HC Auckland CIV-2003-404-006164, 15 March 2011. 18

Trustees of Tauhara North No 2A, 2B and 2C Blocks –Tauhara North No 2A, 2B and 2C (2011) 40

Waiariki MB 240 (20 WAR 240); and Tauhara North No 2A, 2B and 2C (2011) 35 Waiariki MB 266 (35

WAR 266).


[121] The applicants seek compensatory damages for the $300,000.00 payment to

Western Beech. In making the payment ostensibly in settlement of a binding contract for

future forestry management services Mr Orbell was exercising the power to contract as

set out in the Trusts’ orders.

Applicants’ submissions

[122] The applicants say that there was a contract with Western Beech for the logging

trials completed in 2001 and they do not dispute the payment of $131,800.00 in that

regard.

[123] But the applicants submitted there was no contract for future forestry management

services and Mr Orbell’s primary motivation for the payment of $300,000.00 was his

sense of loyalty to Mr Muldrew. He acknowledged in his comments to the Court that he

felt a moral obligation to pay Mr Muldrew because of his loyalty and assumption of

financial risk and risk of prosecution for logging activity. The applicants say this was

irrational and inconsistent with his duty of loyalty to the beneficiaries.

[124] The applicants say the following further factors weigh against a contract:

a) There is no written agreement for future forestry services;

b) The only documented reference to the on-going role of “forestry manager” is

expressed by Mr Muldrew as a “wish”;

c) There is no real evidence of an oral contract either. Mr Muldrew has expressed

an opinion in his affidavit but provided no evidence, and was not cross-

examined. Mr Orbell’s ‘evidence’ is in fact submission and he has been unable

to give any account of when, where and how the agreement was entered into;

d) Given Mr Muldrew’s evidence about the terms of the contract, those matters

were put to Mr Orbell in cross-examination who differed materially as to the

terms of the contract. It is in both individuals’ interests to assert the existence of

the contract, but they are unable to agree as to its terms;


e) It is acknowledged that there was a limited contract for logging trials only, and

the applicants accept that the $131,800.00 payment is sufficient compensation

for what was in effect a negotiating strategy;

f) No logging took place between October 2001 and July 2003 when the covenant

payment was made. If there really was a contract for logging and forestry

management services, why was there no activity by Mr Muldrew in this period?

[125] It was submitted that the evidence shows there was no contract for future forestry

management services and the logging trials were only ever intended as a negotiating

tactic to keep the pressure on the Crown to settle.

[126] Mr Mabbett submitted that even if the Court considers there was a contract, the

settlement payment was irrational because Mr Orbell was reckless in entering into such a

contract. It is inconceivable that a trustee acting in the best interests of his beneficiaries

would enter into a long-term contract worth either $500,000.00 in the evidence of Mr

Orbell, or upwards of $750,000.00 in the submission of Mr Muldrew.

[127] It was submitted that Mr Orbell accepts he did not take proper legal advice on

this payment. Even though his evidence is that he discussed the issue generally with Mr

Withnall QC, he did not get his sign-off which would have been the prudent course of

action.

[128] It was submitted there is no evidence of any negotiation of quantum which is

unusual given there was no written contract and logging had ended two years previously.

In those circumstances a pay-out of $300,000.00 is very high considering the Trusts’

assets.

[129] Counsel referred to Mr McKenzie’s evidence that the Waitutu Trusts declined to

pay Mr Muldrew out, and the Crown indemnified them for the costs of defending any

such claim. If Mr Orbell had made enquiries he would have known this given his

membership of Te Rau Murihiku.


[130] It was submitted that even if the Court considers there was a contract with Mr

Muldrew, it was reckless of Mr Orbell to have entered such a contract, and to have paid

out such a significant amount without proper negotiations or substantive legal advice.

Respondent’s submissions

[131] Mr Gallie submitted there is sufficient evidence for the Court to find that on the

balance of probabilities a commercial agreement existed between the respondent and Mr

Muldrew.

[132] Counsel submitted there is sufficient information as to the terms of that

agreement for the Court to find that a contract existed, and the payment for

extinguishment of that contract was reasonable in the circumstances and not reckless.

[133] Counsel concedes that a written contract would have been preferable, but the

evidence shows that a contract can be inferred on the facts. There is the letter from Mr

Muldrew to Mr Orbell of 30 September 1998, setting out the “Suggested Project”. There

is also the letter from Mr Muldrew to the respondent dated 29 March 2001, which does

not directly state that there is a contract but suggests there is some sort of working

partnership.

[134] It is submitted the respondent’s own notes from that period clearly indicate that he

considered that a contract existed which had to be taken into account in the negotiations

for the covenant. Counsel submits that the notes show that Mr Orbell considered that the

Trusts would have obligations to extinguish Mr Muldrew’s interests if the covenant was

signed. The notes are consistent with Mr Muldrew’s statements that a minimum ten-year

fixed-term agreement existed.

[135] Mr Gallie submits that Mr McKenzie’s affidavit states that he spoke with Mr

Muldrew “to find out if he would be prepared to settle any claim and he indicated that he

would be”. Mr Muldrew’s letter to the respondent following the logging trials, dated 2

December 2001, clearly envisages ongoing relations with the Trusts, and the affidavit of

Colin Withnall confirms that he understood there to be some form of contractual

relationship. Counsel pointed to a letter from Mr Withnall to the Southland District


Council, dated 17 August 2000, in which he states that he is “writing to advise that Mr.

Orbell has instructed his contractor Mr. G. Muldrew to proceed with harvesting of timber

from SILNA lands”.

[136] Counsel also pointed to the letter from Western Beech to the respondent, dated 2

August 1996, in which Mr Muldrew introduces himself and sets out the possible

commercial opportunities, including a joint venture on a 50:50 share of income in which

Western Beech would prepare the sustainable management plans for a straight fee with no

other commitment.

[137] Counsel submitted that the requisite elements of a binding contract can be gleaned

from this evidence. It can be inferred that the reason the project never went further than

the trials was that the Crown negotiations were underway, and the project was put on hold

pending the outcome of the negotiations.

[138] Mr Gallie submitted it is the respondent’s evidence that when he entered into

negotiations with Mr Muldrew, there were no negotiations with the Crown on the table, it

was a matter of sourcing an income from the land, and there were no other options

available at that time. It was only when the Crown realised that logging was a real

possibility that negotiations got underway.

[139] Counsel submits that the essential elements of a contract have been made out, and

the essential element was that it was for a ten-year period. Whether the contract was

worth $50,000.00 per year or $75,000.00 per year over ten years, the settlement payment

made to Mr Muldrew was considerably less than these amounts.

[140] Counsel argues that the applicants highlight the $300,000.00 figure paid for

surrender of agreement as their concern. However, counsel submits that the $300,000.00

encapsulated not only Mr Muldrew’s expectation that he would otherwise have earned

$500,000.00 or $750,000.00 over the relevant period, but also extinguished a claim for

costs that had not been met in relation to the rimu sales. Counsel states that this is clear

from the invoice provided by Mr Muldrew for that settlement payment.


Discussion

[141] It is accepted by the applicants that Mr Orbell contracted with Western Beech to

carry out the logging trials which took place in 2001 and associated services such as

preparation of the sustainable forest management plan and application which was

necessary to obtain the consents for the logging. Those services were carried out, and

payment of $131,800.00 for that work is not disputed.

[142] The first issue is whether there was a binding contract for future forestry

management services. For an agreement to be binding the terms must set out with

sufficient certainty the obligations the parties have committed to. The Court of Appeal in

Wellington City Council v Body Corporate 51702 (Wellington) said:19

… for there to be an enforceable contract, the parties must have reached consensus on all

essential terms; or at least upon objective means of sufficient certainty by which those terms

may be determined. Those objective means may be expressly agreed or they may be implicit in

what has been expressly agreed. Taking price as an example, for a contract to be enforceable

the parties must have agreed upon the price, or at least they must have agreed upon some

objective means of sufficient certainty whereby the price can be determined by someone else,

or by the Court. If the price is left for later subjective agreement between the parties, the

contract is not enforceable.

[143] The question here is whether there was sufficient certainty of key terms. In

discussing the leading decision of Fletcher Challenge Energy Ltd v Electricity

Corporation of New Zealand Ltd the authors of Law of Contract in New Zealand

commented:20

Exactly what will be needed will vary according to the agreement in question, but it is

suggested that at the very least the contract must state, or provide a means for ascertaining, the

parties to the contract, the subject matter of the contract and the consideration for it, the

conduct amounting to performance which is required of either party and the time within which

performance is to occur. Failure to provide such essential terms will mean there is no sufficient

certainty and no contract.

19

Wellington City Council v Body Corporate 51702 (Wellington) [2002] 3 NZLR 486 (CA) at 495. 20

Burrows, Finn and Todd Law of Contract in New Zealand (4th

ed, LexisNexis, Wellington 2012) at 93,

discussing Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2

NZLR 433 (CA).


[144] Mr Orbell’s evidence is that Graeme Muldrew contacted him in 1996 to express

interest in logging the Rowallan blocks. This meeting was followed up by a letter from

Graeme Muldrew dated 2 August 1996 which sets out “a brief outline of the way in

which we would see an operation working and the background to Western Beech Ltd”.

There is no evidence that matters progressed further at this time by negotiation or

otherwise, or that an agreement was struck.

[145] Mr Orbell then gives evidence of a further meeting in September 1998 following

which he says he engaged Mr Muldrew. He refers to another letter from Graeme Muldrew

of 30 September 1998 “recording his proposal following our meeting”. In that letter Mr

Muldrew sets out a “Suggested Project” in general terms although he does propose that

he be appointed as forest manager for a fee of $50,000.00 per annum for at least 15 years.

[146] It is possible there was a “hand-shake” agreement of some sort, but there is no

evidence of any negotiation, or any correspondence or file-notes recording that they had

agreed any of these terms. Possibly they agreed to agree, but again there is no evidence

they ever finalised the important details of consideration, term, and performance.

[147] Mr Orbell also relies on his letter of 1 January 1999 authorising Mr Muldrew to

go onto the blocks “for the purposes of carrying out such preliminary works necessary for

the lodging of a sustainable forest management plan application”, as evidence of their

contractual relationship. However I view that letter as evidence of the arrangements

leading up to the logging trials in 2001, not a long-term contract.

[148] Mr Muldrew’s evidence differs from the respondent’s in several material respects.

Firstly he says he entered into contractual relations with the respondent in 1994 to

develop and implement a sustainable forestry plan and to act as manager of the plan on an

on-going basis. He says the terms of that agreement were:

a) Western Beech would fund upfront and at its own risk the costs relating to

the sustainable forestry management plan;


b) Costs of the logging trials including planning, approvals and

implementation would be met from initial production output;

c) From the point in time that the plan moved into full production, Western

Beech would be the forestry manager for a minimum of 10 years at

$75,000.00 per annum.

[149] Mr Muldrew’s evidence is problematic. He did not attend the hearing and was

not cross-examined. He makes a number of assertions and expressions of opinion in his

evidence which differ materially from Mr Orbell’s evidence and are not supported by

contemporaneous documents. To this extent his evidence must have less weight.

[150] The inconsistencies between Mr Orbell, Mr Muldrew, and the documents concern

the essential terms of the alleged contract, in particular when agreement was reached,

including the year, the amount of consideration, and the term of the agreement.

[151] I do not accept Mr Gallie’s submission that whether the consideration was

$50,000.00 or $75,000.00 was not an essential element of a contract. He also submitted

there was a term of 10 years but that is not clear from the evidence either, with Mr

Muldrew saying variously “at least fifteen years or more” and also “a minimum period of

10 years”.

[152] Is there sufficient certainty about the terms of a long-term agreement for forestry

management services? Mr Muldrew’s correspondence certainly expresses an intention to

contract. But again there is no evidence of any negotiations, discussion or fine-tuning the

proposal, or when and how final agreement or terms were reached. There is no evidence

the proposal was accepted by Mr Orbell aside from the assertions of both parties that the

agreement existed. Even though it benefits both parties to assert the existence of the

contract they differ as to its key terms. Importantly there is nothing contemporaneous in

writing from the respondent.

[153] Other factors also persuade me that a binding contract was not finalised. Mr Gallie

submitted that when the respondent engaged with Western Beech he was focussed on

establishing a long-term logging operation on the blocks and the Crown was not a factor.


The evidence, in particular Mr Orbell’s memorandum to the applicants dated July 2012

setting out the background to the negotiations, paints a different picture. He states at

page 2:

In 1996 I was approached by … Western Beech Ltd … Aware of my circumstances they were

nevertheless prepared to take the risks and absorb the costs of establishing a sustainable plan

and operation for our Rowallan blocks. So it was that I gradually developed a strategy based

upon convincing the Crown that unless they were prepared to come up with some “money on

the table” by way of compensation for loss of opportunity due to amendments to the Forests

Act that took away SILNA owners’ exemption from restrictions to clear-felling then I would

commence logging. At this point Govt policy and legislation was acting against us and Western

Beech were extremely concerned … as prosecutions were occurring elsewhere. Against this

background of obstruction and outright hostility we carried out two logging trials sacrificing 50

odd trees. This exercise was carried out through Western Beech Ltd’s own company at a loss of

over $100,000 and that liability problem spurred me to continue pressure on the Crown during

negotiations to come up with another separate amount of money to cover these third party costs

… My strategy was successful. The felling of those trees brought the Crown back to the table.

[154] This shows the respondent’s primary focus was settling with the Crown and the

logging trials were part of that strategy. For this reason it is rationally difficult to

understand why the respondent would at the same time enter into a binding commitment

likely to cost the Trusts in the realm of $500,000.00 to $750,000.00. There is also no

evidence of any further activity by Western Beech from 2001 to when Trusts settled with

the Crown.

[155] The memorandum shows Mr Orbell was concerned at the level of risk assumed by

Western Beech. His claim that Western Beech lost over $100,000.00 on the trials is used

as the reason for seeking additional settlement funds from the Crown, not the loss of a

long-term contract. However, the evidence shows that Western Beech did not charge for

their time in the logging trials, but the timber was sold and the trials showed a small

surplus. Subsequently the undisputed payment of $131,800.00 settled all obligations

arising from the logging trials.

[156] There is little evidence in support of the $300,000.00 payment except as a

“goodwill” payment for the risk taken on by Western Beech and their part in the success

of the negotiating strategy. This is consistent with Mr Orbells’s response to a question


from me, that he felt a moral obligation to Mr Muldrew given the risk he taken on and his

loyalty.21

[157] Mr Withnall’s evidence that (had he been asked) it was likely he would have

confirmed some form of contractual relationship between Mr Orbell/the Trusts and Mr

Muldrew’s interests, is consistent with a contract for the logging trials only.

[158] When asked by me during his cross-examination why he had not obtained

substantive legal advice about the payment given the quantum and uncertain obligations,

Mr Orbell responded that he was used to doing things himself, and had a pretty good idea

of offer and acceptance and the law of contract.22

He acknowledged that in hindsight it

might have been better to have had such advice.

[159] To conclude this point, I am not satisfied there is sufficient evidence to establish

that a binding agreement for future forestry management services was reached, nor that

there was sufficient certainty of its key terms as described in the Fletcher Challenge

decision, in particular consideration, performance and term.23

[160] It follows that I find the respondent’s conduct in making the payment to Western

Beech in purported settlement of such agreement was reckless, imprudent, and a breach

of trustee’s duties including loyalty to beneficiaries.

[161] Given this conclusion, I am not required to determine whether the respondent’s

conduct in entering such contract was reckless.

Was the respondent’s use of the Waikare Street flat for his own benefit and in

breach of trust?

[162] Mr Mabbett submitted that it was unnecessary for the respondent to have a

Wellington flat to undertake the Trusts’ business, and it could have easily been brought up

to rental standard and tenanted. Counsel submitted that it was a breach of Mr Orbell’s

21

20 Te Waipounamu MB 263. 22

20 Te Waipounamu MB 270. 23

Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433 (CA).


duty as trustee to make prudent use of trust funds and his fiduciary duty to act in the best

interests of the beneficiaries.

[163] The applicants’ complaint is that the Trusts’ investment property could have

earned additional income for the Trusts of approximately $300.00 per week from the date

of purchase to the date of sale, an amount of up to $77,500.00 less management fees.

[164] The applicants accept it may not have been possible to rent the flat for $300.00

per week since 2005, and there may be an issue of quantum. Counsel for the applicants

accepts that the burden rests with them in this respect and submits that the Court might

discount the amount sought as damages to $50,000.00.

[165] Mr Gallie says there is no evidence that the respondent preferred his own interests

over those of other beneficiaries. He says Mr Orbell only used the flat when he was in

Wellington on Trusts’ business and it should be a question of balancing the amount of

time the respondent says he used the flat for trust business with the cost of staying in a

hotel, and whether that was a prudent use of trust property.

[166] Counsel submits that there is no evidential basis for the applicants’ claim for

$50,000.00 of lost rental. The house was bought in 2005, and the respondent resigned as

trustee in 2011. In that time, the respondent submits he used the flat for around 280 days

on Trust’s business.

[167] Counsel submits that if the Court finds that there was financial loss to the Trusts

in Mr Orbell’s use of the flat that s 73 of the Trustee Act should apply. The criteria of s

73 are met as he acted honestly and reasonably. He was doing the best he could to invest

the Trusts’ money, and if that was a breach, it should be excused.

Discussion

[168] The covenant with the Crown was signed in 2002 and the Trusts purchased the

Waikare Street property in 2005 as an investment. The larger dwelling was rented out and

there was a trustee resolution that the flat would be available for beneficiaries’ use. But


there is no evidence that the beneficiaries were ever notified of this and Mr Orbell in

effect had exclusive use of the flat until he resigned as a trustee.

[169] Mr Orbell says he used the flat for approximately 280 days (or 40 weeks) between

2005 and 2011. It is difficult to understand why the respondent says it was necessary to

spend that amount of time in Wellington on the Trusts’ business. This seems excessive

given that the Trusts settled with the Crown in 2002 and the level of activity required as

trustee should have been significantly less from that time.

[170] The respondent says he was largely undertaking research for successions and

provided copies of correspondence which indicates the work he was involved in. The

blocks are in the South Island as is the Māori Land Court registry for that district.

Correspondence to the respondent is addressed to his Hawkes Bay address, and several of

the correspondents are from the Māori Land Court in Hastings and Christchurch, and the

Ngāi Tahu Whakapapa Unit in Christchurch.

[171] I accept the occasional visit to Wellington may have been necessary for research

at the National Library or meetings, but the time claimed is excessive. The respondent

has been able to advise the Court of the days he spent in Wellington, but there is no

account or time record of the work undertaken in this time.

[172] I do not accept it was necessary for the respondent to use the flat to the extent

claimed for Trusts’ business. As an investment property the flat should have been

available to earn additional income for the Trusts. Mr Orbell could have made alternative

arrangements for accommodation when he had genuine reason to be in Wellington on

Trusts’ business. I find that the use of the flat was a personal benefit and not necessary to

further the objects or administration of the Trusts’.

[173] In my assessment Mr Orbell should have spent no more than a quarter of the time

claimed in Wellington on Trusts’ business. That is 70 days or 10 weeks between 2005 and

2011, as opposed to 280 days or 40 weeks, and is a generous allowance for the type of

work the respondent says he was undertaking.


[174] As an indication, if Mr Orbell had instead claimed out of pocket expenses for

accommodation and travel costs of $200.00 per day for 70 days that would have

amounted to $14,000.00; a substantially smaller amount than the applicants now claim

for lost income.

[175] The applicants estimated that the Trusts’ loss could amount to $77,500.00. The

basis for this claim is set out in Catherine Marks’ affidavit dated 9 April 2013, where she

refers to the rental agreement for the flat dated June 2012.

[176] The applicants accepted it may be difficult to prove this quantum of loss as it may

not have been possible to obtain $300.00 per week since 2005. For this reason the

applicants have limited their claim for damages to $50,000.00 for loss of rental income in

the period 2005 to 2012.

[177] To provide some context to the Trusts’ claim I have used 5 years or 260 weeks

purely as a rough guideline (as opposed to 7 years). The rental income for the flat was

$300.00 per week in 2012 but I will assume $250.00 per week for half the period. The

rental income for 130 weeks at $250.00 per week is $32,500.00, and 130 weeks at

$300.00 is $39,000.00 with a total income of $71,500.00. If I deduct a 6 per cent

management fee of $4,290.00 that brings the estimated actual loss calculation to

$67,210.00.

[178] Alternatively, if I deduct the trustee’s reasonable use of the flat (estimated 10

weeks; 5 weeks at $250.00 and 5 weeks at $300.00) from $71,500.00, the result is

$68,750.00. These calculations give some rough context to the applicants’ claim of

$50,000.00 for loss of income.

[179] The respondent breached his trustee duties to make prudent use of trust funds and

his fiduciary duty to act in the best interests of the beneficiaries by using the flat for his

own benefit. Alternatively I find his use of the flat for Trusts’ purposes was excessive and

unreasonable. The Trusts have suffered loss of income as a result and the respondent must

pay damages by way of compensation to the Trusts.


Can Mr Orbell claim relief under s 73 of the Trustee Act?

[180] The respondent has breached trust in the following respects:

a) The “negotiator’s fee” was ultra vires and a breach of trust;

b) There was no contract with Western Beech for future forestry management

services, and the respondent acted recklessly and in breach of trust by

paying $300,000.00 to Western Beech;

c) The respondent’s use of the Waikare Street flat was excessive and/or for his

own benefit, and was a breach of trust resulting in financial loss.

[181] Section 73 of the Trustee Act states:

If it appears to the court that a trustee, whether appointed by the court or otherwise, is or may

be personally liable for any breach of trust, whether the transaction alleged to be a breach of

trust occurred before or after the commencement of this Act, but has acted honestly and

reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the

directions of the court in the matter in which he committed the breach, then the court may

relieve him either wholly or partly from personal liability for the same.

[182] The issue now is whether Mr Orbell should be granted relief from personal liability

for the breaches of trust pursuant to s 73.

Submissions

[183] Mr Gallie submitted that Mr Orbell has all times acted honestly and there have

been no allegations of dishonesty from the applicants in respect of his conduct. He

emphasised his many years of hard work on behalf of the owners and beneficiaries

including the years before he became trustee. He also stressed the level of success

achieved by the respondent in achieving the settlement with the Crown.

[184] Counsel submitted that Mr Orbell has acted reasonably. In hindsight his decision

in relation to the “negotiator’s fee” was unwise but he was acting in reliance on legal


advice from Mr Peach. He also discussed the contract with Western Beech with Mr

Withnall prior to the settlement payment, though accepts that wasn’t substantive legal

advice. Mr Orbell’s use of the Waikare Street flat was for Trusts’ purposes.

[185] Mr Gallie asks the Court to weigh Mr Orbell’s years of service against a couple of

unwise decisions and find that overall he has acted reasonably and the Trusts have

benefitted from his trusteeship. The Court should exercise its discretion to grant him

relief from personal liability.

[186] Mr Mabbett for the applicants made a number of submissions:

a) The Court must consider whether the trustee has acted honestly and

reasonably, and if so whether it is fair for the trustee to be excused for the

breach of trust and for failing to seek directions from the Court, and then the

Court has a discretion whether to grant relief;

b) The Court is required to have regard to the circumstances at the time the

trustee had to act and the facts known, or the facts that ought to have been

known, by the trustee at that time.

c) Section 73 of the Trustee Act is of no application to the repayment of the

negotiator’s fee because it was ultra vires and made by the respondent to

himself. If funds are available those should be repaid;24

d) If the Court considers that s 73 might apply to the negotiator’s fee, even if

the respondent was honest, he was at least reckless and certainly not

reasonable;

e) Mr Orbell’s reliance on legal and accounting advice is insufficient because

he never sought appropriate legal advice and appears to have been

“covering himself” while avoiding asking the Trusts’ lawyers obvious

questions. The applicants also referred to the decision in National Trustees,

24

Wong v Burt [2005] 1 NZLR 91 (CA), at [50].


Executors, and Agency Company of Australasia v General Finance Agency

and Guarantee Company of Australia;25

f) There was lack of proper disclosure to the beneficiaries and trustees of the

nature and size of “third party” payments. The respondent may have

complied with limited legal disclosure requirements through filing of

accounts, but he did not communicate transparently with the beneficiaries

at the June 2003 meeting, and delayed fully disclosing to the applicants

until he had no choice;

g) Mr Orbell has enjoyed the benefit of the “negotiator’s fee” since 2003 and

has made no attempt to repay the Trusts. He only reluctantly conceded the

payment was ultra vires immediately prior to the hearing. He has not

assisted in any claim against Western Beech; and

h) The respondent had the benefit of his exclusive use of the Waikare Street

flat with no attempt to pay the Trusts any amount in lieu of lost income.

[187] In summary, counsel for the applicants submits that even if the Court finds the

respondent acted honestly, he did not act reasonably, so does not qualify for relief under s

73 of the Trustee Act, and in any event his conduct is not of the kind that should be

excused.

Discussion

[188] This Court has considered the question of whether to grant relief under s 73 in

Tauhara Middle 4A2B2C (Opepe Farm Trust) and Hall v Opepe Farm Trust.26

[189] In the Tauhara decision Judge Savage was critical of trustees who used trust funds

inappropriately despite relying on legal advice. He found that it was the trustees’

responsibility to establish they had acted honestly and reasonably, and in such

25

National Trustees, Executors, and Agency Company of Australasia v General Finance Agency and

Guarantee Company of Australia [1904-7] All ER Rep Ext 1650, [105] AC 373. 26

Tauhara Middle 4A2B2C (Opepe Farm Trust) (1996) 68 Taupo MB 27 (68 TPO 27); and Hall v Opepe

Farm Trust (2010) 19 Waiariki MB 258 (19 WAR 258).


circumstances they should apply for directions, and if they fail to do so, they must be

excused for that omission if s 73 relief is to be granted.

[190] Judge Harvey in the Opepe decision found that the trustees had acted honestly, but

given the advice they had received and the duties they owed, their conduct was not

reasonable. The decision not to grant relief under s 73 was upheld in both the Māori

Appellate Court and Court of Appeal.27

[191] The respondent relies on the submission that he took legal advice in relation to the

“negotiator’s fee” and the Western Beech payment to support the contention his

subsequent conduct was reasonable. However the legal authorities are clear that a party

cannot stand behind legal advice and it is the trustee’s responsibility to establish their

actions are honest and reasonable.

[192] In both instances legal advice consisted of informal conversations with legal

advisors, with advice given “off the cuff”. Mr Withnall has no recollection or record of

having given advice about the settlement with Western Beech. Mr Peach forwarded a file-

note of a conversation about the negotiator’s payment, but I do not regard that file-note as

substantive legal advice. In both instances it appears to me that the respondent looked for

quick advice that would support his intended actions as opposed to obtaining substantive

legal opinions in order to inform his actions.

[193] The other matter of concern is that Mr Orbell did not seek directions from the

Court prior to the payment of substantial amounts of the Trusts’ funds to himself and

Western Beech. An application for directions could have been dealt with by the Court

relatively quickly and at low cost.

[194] This conduct demonstrates his failure to act reasonably and openly in relation to

the proposed payments in the lead-up to and immediately following the Crown

settlement. Purported privacy concerns and hints at a family vendetta were a smoke-

screen to justify his efforts to obscure what he should have known were dubious

payments.

27

Rameka v Hall – Opepe Farm Trust (2011) Māori Appellate Court MB 535 (2011 APPEAL 535);

Rameka v Hall [2013] NZCA 203, [2013] NZAR 1208.


[195] Mr Gallie submitted that his client had made “a couple of unwise decisions” and

asked the Court to weigh those against his years of service to the Trusts. On balance

while I accept that Mr Orbell acted honestly, I do not accept that his conduct has been

reasonable given his duties as trustee.

[196] Overall I do not consider it would be fair to the beneficiaries to excuse the

breaches of trust given the loss of trust funds. The respondent was also remiss in failing

to seek direction from the Court and has not offered any excuse for that failure.

[197] In exercising my discretion whether to relieve Mr Orbell from personal liability I

note he has had the benefit of the “negotiator’s fee” for more than 10 years. I am not

aware that he has offered to repay these funds, or otherwise assist the applicants to

recover other losses.

[198] I have some considerable sympathy for the position Mr Orbell now finds himself

in. There is no doubt he provided years of service to the owners and then the

beneficiaries. But he developed a sense of entitlement and misplaced loyalty which led to

lack of judgment and injudicious decision-making in relation to the payments and use of

the flat. If there had been other trustees to share the decision-making there might have

been a different result, but that is purely conjecture.

[199] I am not prepared to grant Mr Orbell relief under s 73 of the Trustee Act from

personal liability for the breaches of trust he has committed.

Result

[200] The “negotiator’s fee” was ultra vires and a breach of trust, and the respondent

must repay $471,400.25 less agreed out of pocket expenses of $46,317.00.

[201] Pursuant to s 72 of the Trustee Act an allowance of $33,000.00 is made to the

respondent for services as trustee of the Trusts.

[202] There was no contract with Western Beech for future forestry management

services, and the respondent acted recklessly and in breach of trust by paying

$300,000.00 to Western Beech.


[203] The respondent’s use of the Waikare Street flat was in breach of trust resulting in

financial loss to the Trusts.

[204] There is no relief granted under s 73 of the Trustee Act.

Orders

[205] The following orders are made:

a) The sum of $425,083.25 is to be repaid to the applicants;

b) Trustee remuneration is fixed at $33,000.00 to be deducted from the amount to be

repaid to the applicants;

c) An award of $300,000.00 is made as compensatory damages for the payment to

Western Beech Ltd;

d) An award of $50,000.00 is made as compensatory damages for the use of the

Waikare Street flat;

e) Interest pursuant to s 24B Te Ture Whenua Māori Act 1993 is to be paid in the

amount of $392,083.25 from 30 July 2003 at the rate of 5 per cent up to the date

of judgment.

f) Costs are reserved.

[206] A copy of this decision is to go to all parties.

Dated at Christchurch this 20th day of February 2015.

S F Reeves

JUDGE

Documents

IN THE MĀORI LAND COURT OF NEW ZEALAND TE … · The conservation covenant negotiations ... an unauthorised fee ... increase to enable the trustee to negotiate and pay out third