437 Aotea MB 3 I TE KOOTI WHENUA MĀORI O AOTEAROA I TE ROHE O AOTEA In the Māori Land Court of New Zealand Aotea District A20170004318 WĀHANGA Under Sections 67, 231, 238, 239 and 240, Te Ture Whenua Māori Act 1993 MŌ TE TAKE In the matter of Lot 1 DP 17494 Part Section 2345 New Plymouth (Old Railway Station) and Other Blocks I WAENGA I A Between ME And ME And DEPUTY REGISTRAR Te Kaitono Applicant PETER MOEAHU, PERRY CASSIDY, KRISTIN KATU, WILLIAM GARY NICHOLAS, JACK CASSIDY, LINDA MCCULLOCH, AND RITA RUKUWAI Ngā Kaiurupare Respondents PETER CAPPER Te Tangata Whaitake Interested Party Nohoanga: Hearings 14 December 2020, 426 Aotea MB 107-126 12-13 October 2020, 423 Aotea MB 38-149 20 August 2020, 420 Aotea MB 138-143 12 December 2019, 410 Aotea MB 223-235 19 April 2018, 384 Aotea MB 132-150 10 August 2017, 374 Aotea MB 216-247 (Heard at New Plymouth) Kanohi kitea: Appearances L Watson, for the trustees Peter Capper, in person Whakataunga: Judgment 10 September 2021 TE WHAKATAUNGA Ā KAIWHAKAWĀ L R HARVEY Judgment of Judge L R Harvey Copies to: L Watson, 342 Gloucester Street, Taradale, Napier 4112 [email protected]
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437 Aotea MB 3
I TE KOOTI WHENUA MĀORI O AOTEAROA
I TE ROHE O AOTEA In the Māori Land Court of New Zealand
Aotea District
A20170004318
WĀHANGA Under
Sections 67, 231, 238, 239 and 240, Te Ture
Whenua Māori Act 1993
MŌ TE TAKE In the matter of
Lot 1 DP 17494 Part Section 2345 New
Plymouth (Old Railway Station) and Other
Blocks
I WAENGA I A Between
ME And
ME And
DEPUTY REGISTRAR
Te Kaitono Applicant
PETER MOEAHU, PERRY CASSIDY,
KRISTIN KATU, WILLIAM GARY
NICHOLAS, JACK CASSIDY, LINDA
MCCULLOCH, AND RITA RUKUWAI
Ngā Kaiurupare Respondents
PETER CAPPER
Te Tangata Whaitake Interested Party
Nohoanga: Hearings
14 December 2020, 426 Aotea MB 107-126
12-13 October 2020, 423 Aotea MB 38-149
20 August 2020, 420 Aotea MB 138-143
12 December 2019, 410 Aotea MB 223-235
19 April 2018, 384 Aotea MB 132-150
10 August 2017, 374 Aotea MB 216-247
(Heard at New Plymouth)
Kanohi kitea: Appearances
L Watson, for the trustees
Peter Capper, in person
Whakataunga: Judgment
10 September 2021
TE WHAKATAUNGA Ā KAIWHAKAWĀ L R HARVEY Judgment of Judge L R Harvey
Copies to:
L Watson, 342 Gloucester Street, Taradale, Napier 4112 [email protected]
TABLE OF CONTENTS Hei kōrero tīmatanga ........................................................................................................................ [1] Introduction .............................................................................................................................................. Ngā take ............................................................................................................................................. [4] Issues ........................................................................................................................................................ He kōrero whānui .............................................................................................................................. [6] Background .............................................................................................................................................. Ko te hātepe ture o te tono nei.......................................................................................................... [9] Procedural history ................................................................................................................................... Te rīpoata a Spencer Webster ........................................................................................................ [23] The report of Spencer Webster .................................................................................................................
Te whakahaerenga o te tarati - The administration of the trust .................................................... [26] Ngā pūrongo pūtea o te tarati - The finances of the trust .............................................................. [33] Ngā pātai o te Kooti - The questions posed by the Court .............................................................. [40]
Te Ture ............................................................................................................................................. [50] The Law .................................................................................................................................................... Me whakahoki ngā kaitiaki i te moni i ngaro i te tinihanga - Should the trustees repay the funds
lost through fraud? ......................................................................................................................... [57] Ngā kōrero a Peter Capper - Submissions of Peter Capper .......................................................... [57] Ngā kōrero a Te Raumahora Hema - Submissions of Te Raumahora Hema ................................. [60] Ngā kōrero a Siobhan Lynch - Submissions of Siobhan Lynch ...................................................... [62] Ngā kōrero a ngā kaitiaki - Submissions of the trustees ................................................................ [64]
Te Ture ............................................................................................................................................. [67] The Law .................................................................................................................................................... Kōreroro .......................................................................................................................................... [73] Discussion ................................................................................................................................................ Me whakawātea ngā kaitiaki mō te hē - Should the trustees be granted relief from liability? [78]
Ngā kōrero a Peter Capper - Submissions of Peter Capper .......................................................... [78] Ngā kōrero a Te Raumahora Hema - Submissions of Te Raumahora Hema ................................. [81] Ngā kōrero a Siobhan Lynch - Submissions of Siobhan Lynch ...................................................... [83] Ngā kōrero a ngā kaitiaki - Submissions of the trustees ................................................................ [86]
Te Ture ............................................................................................................................................. [97] The Law .................................................................................................................................................... Kōreroro ........................................................................................................................................ [100] Discussion ................................................................................................................................................ Mehemea kāore ngā kaitiaki i rihaina, ka whakakorehia ā rātou tūranga e Te Kooti - Would the
trustees have been removed if they had not resigned? ............................................................... [124] Kōreroro ........................................................................................................................................ [125] Discussion ................................................................................................................................................ Me noho rāhui ngā kaitiaki mō he wā ki mua i te tuku kia tū anō? - Should the trustees serve a
period of ineligibility for reappointment? ................................................................................... [131] Ko te taumahatanga o ngā kaiwhiwhi - Recipient liability ........................................................ [134] Whakataunga ................................................................................................................................ [138] Decision ...................................................................................................................................................
Hei kōrero tīmatanga Introduction
[1] These proceedings began as a judicial conference before eventually expanding into a
review of the Ngāti Te Whiti Whenua Tōpū Trust and the enforcement of obligations of
trust. They centre on the theft of trust funds in the amount of $486,045.71 by a former
trustee and Chief Executive Officer of the trust, Shaun Keenan.1 Mr Keenan was sentenced
1 Ilone Hanne and Abe Leach “Former cop Shaun Keenan jailed for 46 theft related charges” (20
August 2019) Whanganui Chronicle <www.nzherald.co.nz/whanganui-chronicle/news/former-
Manunui No 1 4th Residue (2015) 334 Aotea MB 227 (334 AOT 227); and Pullar – Aperahama
Sullivan Whānau Trust (2017) 61 Tākitimu MB 45 (61 TKT 45) at [33] 26 Proprietors of Mangakino Township v Māori Land Court CA65/99, 16 June 1999; Hall v Opepe
Farm Trust (2010) 19 Waiariki MB 258 (19 WAR 258); Clarke v Karaitiana [2011] NZCA 154
underscored that a core principle of general application is that trustee investment law is
conduct rather than outcome based: 27
…[I]t is clear that a trustee is neither an insurer or guarantor of the value of a trust’s
assets and that the trustee’s performance is not to be judged by success or failure,
that is, whether he or she was right or wrong. While negligence may result in
liability, a mere error of judgment will not.
[54] He endorsed the proposition that prudent trustees have to consider both the yield of
income and capital appreciation in assessing potential investment opportunities. That
approach was followed in Re Mulligan.28 Pankhurst J emphasised that trustees have a duty
to act with due diligence and prudence in the discharge of their duties. In that case the
trustees breached the duty to invest prudently and the duty to act impartially as between a
life tenant and the residuary beneficiaries. It was also acknowledged that, where
appropriate, regard had to be had to the purpose for which the fund was established if a
different approach was contemplated.
[55] It is also well settled that where doubts exist as to the particular course trustees may
wish to take both generally and more specifically in the context of investments, then the
correct approach is to seek directions. Examples include Re Murray’s Trust,29 Re
Mulligan and Wong v Burt.30 In Hogg & Ors v Public Trust, Baragwanath J also identified
that a higher standard may be relevant where professional trustees are involved:31
As to the Public Trustee the question whether a trustee has acted prudently is to be
considered broadly. Relevant factors will include whether, as here, it is a
professional trustee which will be held to higher standards than an inexperienced lay
trustee…One consideration where the decision is difficult is whether the trustee has
applied to the Court for directions under s66 of the Trustee Act 1956 and if not why
not.
[56] I adopt the reasoning of the judgments set out in the above discussion.
Me whakahoki ngā kaitiaki i te moni i ngaro i te tinihanga - Should the trustees repay
the funds lost through fraud?
Ngā kōrero a Peter Capper - Submissions of Peter Capper
[57] Mr Capper filed submissions early in the proceedings as an interested party claiming
to do so on behalf of Ngāti Te Whiti hapū. In his early submissions, Mr Capper sought the
27 Jones v AMP Perpetual Trustee Co NZ Ltd [1994] 1 NZLR 690 at 706 28 Re Mulligan [1998] 1 NZLR 481 29 Re Murray’s Trust [1967] NZLR 341 30 Wong v Burt [2005] 1 NZLR 91 at 99-100 31 Hogg & Ors v Public Trust (CIV-2003-443-24, 8 February 2008, HC, New Plymouth)
437 Aotea MB 20
removal of all trustees following a “vote of no confidence” in them, passed at a hui of the
Ngāti Te Whiti hapū in June 2017. Mr Capper alleged the trustees had breached the trust
order, had brought the hapū into disrepute, and had failed in their obligations as trustees due
to the misappropriation of trust funds by Mr Keenan.
[58] As to the trust’s internal processes, Mr Capper submitted that this had been a major
contributing factor in that the lack of proper administration processes and procedures
facilitated the fraud. He argued that the trustees failed to ensure that payments corresponded
with the proper bank accounts and that “red flags” should have been obvious when Mr
Keenan continually failed to provide account invoices. Mr Capper submitted this was a
clear reflection of the trustees’ lack of knowledge of their roles and responsibilities under the
trust order and as fiduciaries. Mr Capper also queried the prudence of the severance
payment made to Mr Keenan following discovery of the misappropriation and termination of
his employment, categorising it as a “travesty”, especially given his assertion there was no
employment contract in place.
[59] Mr Capper raised a number of further queries with trustee Mr Moeahu, Mr Webster
and the Court, and made several recommendations for further investigation and action, some
of which are outside the control of the Court. He sought an apology from the trustees, that
they be held accountable for their breaches of trust, and that the funds be reimbursed.
Ngā kōrero a Te Raumahora Hema - Submissions of Te Raumahora Hema
[60] Te Raumahora Hema filed submissions as a beneficiary of the trust, expressing her
dissatisfaction with the performance of the trustees and what she saw as a pattern of
behaviour of some of them. She gave a timeline of events that occurred within both the
Ngāti Te Whiti Hapū Society and the Ngāti Te Whiti Whenua Tōpū Trust to demonstrate the
lack of transparency and proper process amongst the trustees. She argued that the same
trustees continue to be re-elected and have been consistent in their behaviour since the
inception of the trust. However, those trustees sought to look after their own interests rather
than working towards the unity of the beneficiaries, a legacy which she says is deeply
ingrained and has brought the hapū into disrepute.
[61] Ms Hema also contended that the trustees should be removed and the election
process for the appointment of any new trustees be carried out independently, to ensure the
process was transparent and fair. She suggested proposed trustees should be suitably
qualified and without criminal convictions, and that professional training and development
437 Aotea MB 21
should be compulsory. Ms Hema further submitted that those trustees in office during the
period of misappropriation should offer a formal apology to the beneficiaries, should repay
to the trust the honoraria and trustee payments they received and should be ineligible to
serve as trustees again.
Ngā kōrero a Siobhan Lynch - Submissions of Siobhan Lynch
[62] Siobhan Lynch is a beneficiary of the trust and filed written submissions in support
of the application. She submitted that the trustees failed to meet their obligations under the
trust order and their obligations to the beneficiaries.
[63] Ms Lynch also argued that the former and current trustees should publicly apologise
to the beneficiaries for failing to protect the trust funds, should reimburse the trust for all
monies received for honoraria, travel and accommodation costs and for the full sum
misappropriated by Shaun Keenan. She also sought reimbursement by Mr Keenan’s wife of
the misappropriated trust funds that contributed towards the procurement of his property.
Ngā kōrero a ngā kaitiaki - Submissions of the trustees
[64] Mr Watson made submissions from the trustees’ collective position on the broad
legal principles relating to potential trustee liability. He did not seek to address the
apportionment of any such liability between various trustees but reserved the right of the
trustees to make further submissions on personal liability, if necessary.
[65] At the outset, the trustees expressed their deep and enduring sadness, hurt and
disappointment at the impact the criminal offending by Mr Keenan has had on Ngāti Te
Whiti descendants, on the kaupapa to build a marae, and on themselves and their whānau.
The evidence of Linda McCulloch captured this when she stated:32
Undoubtedly, Shaun Keenan’s dishonesty and betrayal has impacted us all. It seems
that in our own different ways, we have all experienced or displayed all the facets of
the grieving process. The repercussions of Shaun’s actions continue to affect our
Wairua and Wellbeing.
[66] Counsel submitted that there was no evidence of dishonesty, misappropriation or
other unlawful conduct of that nature by the former or current trustees. Rather, the focus of
the review was whether the trustees exercised their trustee responsibilities prudently and
32 423 Aotea MB 38-149 (423 AOT 38-149) at 134
437 Aotea MB 22
reasonably. In that regard, Mr Watson pointed to several matters arising from the
trusteeship of the trust which he submitted are relevant to the Court’s review of the trust.
Te Ture The Law
[67] Trustees of a whenua tōpū trust hold the land, money and other assets of the trust for
Māori community purposes, to be applied for the general benefit of the members of the
relevant iwi or hapū.33 The general functions of responsible trustees are set out in s 223 of
the Act, which records their responsibilities 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; and
(d) The collection and distribution of the income of the trust.
[68] The applicable trust order may add further obligations and general principles of trust
law also apply, including:34
(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;
(d) A duty to act fairly by all beneficiaries;
(e) A duty to invest trust funds in accordance with the trust instrument or as the law
provides;
(f) A duty to keep and render accounts and provide information;
(g) A duty to act diligently and prudently;
(h) A duty not to delegate his or her powers not even to co-trustees; and
(i) A duty not to make a profit for themselves out of the trust property or out of the
office of trust.
33 Te Ture Whenua Māori Act 1993, s 216 34 Rameka v Hall [2013] NZCA 203 at [29], citing Apatu v Trustees of Owhaoko C Trust –
Owhaoko C1 and C2 [2010] Māori Appellate Court MB 34 (2010 APPEAL 34) at [16]
437 Aotea MB 23
[69] It is settled law that where there is a breach of trust, liability extends to loss caused
directly or indirectly to the trust. In Rātima v Sullivan – Tataraakina C, the Court noted:35
[11] It is also trite law that the basic right of a beneficiary is to have the trust duly
administered in accordance with the trust instrument and the general law of trusts.
Where there is a breach of trust, liability extends to all loss caused directly or
indirectly to the trust estate, although there may be instances where there is a breach
of trust but no demonstrable loss and therefore no resulting liability. A trustee is
generally also fully liable for loss suffered by the trust property by the wrongful act
of a fellow trustee, as liability is joint and several, even if there are varying degrees
of blameworthiness.
[12] The Courts have imposed liability in three ways:
(a) A duty to account to the beneficiaries for the assets administered by the trustee;
(b) An obligation to put the trust estate in the same position as if the breach of trust
had not been committed; and
(c) A requirement to make good the loss of trust property caused by the wrongful
act or omission
[70] As foreshadowed, it is settled law that a core duty of prudent trustees is to maintain
the assets of the trust. It is also well settled that while the trustees must exercise the care,
diligence and skill of a prudent person in charge of the affairs of others, they are not the
guarantors of the trust fund where they invest prudently after considering any expert advice
that they may have received.36
[71] For completeness, given the allegations made against the trustees, a related issue is
the necessity for trustees to observe the non-profit and non-conflict rules, where the interest
and duty of a trustee must not be put into conflict.37 As a fiduciary, a trustee cannot permit
any conflict between personal interests and the trustee’s duties to the beneficiaries:
Boardman v Phipps.38 Moreover, trust beneficiaries are entitled to trustee decision making
untainted by any conflict between the trustees’ duty to them on the one hand and any
personal considerations and interests on the other.39
35 Rātima v Sullivan – Tataraakina C (2017) 64 Tākitimu MB 121 (64 TKT 121) (footnotes
omitted) 36 See in re Whitely (1886) 33 Ch D 347; Learoyd v Whitely (1887) 12 App Cas 727. The orthodox
rule is that when trustees are considering the beneficiaries’ interests the crucial interest is
usually, but not exclusively, financial: Cowan v Scargill [1985] Ch 270. See also JD Heydon
and MJ Leeming Jacob’s Law of Trusts in Australia (8th ed, LexisNexis, Sydney, 2016) at [18]-
[11]. 37 New v Jones (1833) 1 Mac & G 668n; Bray v Ford [1896] AC 44 at 51 38 Boardman v Phipps [1967] 2 AC 134, [1966] 3 All ER 721 39 Re Thompson’s Settlement [1986] Ch 99 at 115
437 Aotea MB 24
[72] Allied with the trustees’ non conflict or self-dealing rule is the duty not to profit
from their office: Robinson v Pett.40 It is well settled that trustees must also act gratuitously
and are not entitled to reimbursement for their time unless this is expressly authorised in the
terms of trust or by the Court.41 In addition, it will be a breach of fiduciary duty regardless
of whether the profit is made directly or indirectly: Rochefoucauld v Boustead.42 A profit
made honestly or dishonestly will still amount to a breach of fiduciary duty. It will also be a
breach where the profit is made by a third party, including by the spouse or children of the
trustee: Willis v Barron.43 Where trustees profit from their role they must then account to
the trust for the unauthorised retention of trust capital: in re Macadam.44
Kōreroro Discussion
[73] Cases in this Court where current or former trustees have been required to refund
monies taken or lost from a trust usually concern instances where:
(a) Fees and expenses have been taken that were excessive or without authority or
both;45
(b) Trustees have incurred legal costs in circumstances where they had been found to
have been in breach of their duties without the protection of a Beddoe order;46
(c) Trustees have retained funds received by a trust for their personal use in
circumstances where it was both inappropriate and a breach of trust to do so;47 or
(d) Trustees have retained trustee property for their personal use without payment or
disclosure to the beneficiaries or consent of the Court.48
[74] None of the above situations apply in the present case. Despite the allegations of Mr
Capper and others, there is no evidence of fraud or collusion or other untoward misconduct
40 Robinson v Pett (1734) 3P Wms 249 41 Barrett v Hartley (1866) LR 2 Eq 789 42 Rochefoucauld v Boustead [1898] 1 Ch 550 (CA) 43 Willis v Barron [1902] AC 271 (HL) 44 Re Macadam [1945] 2 All ER 664 45 Waipapa 9 (1995) 67 Taupō MB 10 (67 TPO 10); Tauhara Middle 4A2B2C Block – Opepe
Farm Trust (1996) 68 Taupō MB 27 (68 TPO 27); Tupe Snr v Everton – Mananui No 1 4th
Residue Ahu Whenua Trust (2015) 334 Aotea MB 227 (334 AOT 227); Rātima v Sullivan –
Tataraakina C (2017) 64 Tākitimu MB 121 (64 TKT 121) 46 Hall v Opepe Farm Trust (2014) 104 Waiariki MB 54 (104 WAR 54); Rātima v Sullivan –
Tataraakina C (2017) 64 Tākitimu MB 121 (64 TKT 121) 47 Adlam v Savage [2016] NZAR 1393 48 Rātima v Sullivan – Tataraakina C (2017) 64 Tākitimu MB 121 (64 TKT 121)
437 Aotea MB 25
of a similar kind on the part of the former trustees that I can discern from the material
currently before the Court. The degree of sophistication that Mr Keenan applied to defraud
the trust, in particular, altering the account details on creditor payments was, as the auditors
acknowledged, not something that would usually be assessed during a routine audit. Put
another way, the evidence is that not even the auditors were able to detect what Mr Keenan
had been doing because of the level of deceit involved.
[75] Neither is this a case of poorly performing investments as occurred in the Opepe
Farm Trust proceedings culminating in the Court of Appeal judgment Rameka v Hall.49 In
this case, the trustees, understandably, relied on the information given to them by Mr
Keenan, a former Police sergeant, and the CEO of the trust, a former trustee himself. The
question is when should the trustees have been alerted to Mr Keenan’s fraud and whether
their responses were reasonable? That issue is considered in the context of relief from
liability discussed later in this judgment.
[76] In my assessment, this was not a case of wilful blindness to the point of reckless
indifference on the part the former trustees. While there was certainly elements of their
maladministration of the trust that understandably attracted adverse comment, that in itself
did not amount to misconduct to such a degree that would require making good the losses to
the trust as a consequence of deliberate and sophisticated fraud on the part of Mr Keenan.
At the relevant times, his excuses for delays in providing audited annual accounts appeared
plausible. Yet, there came a point where his continuing blandishments moved from
reasonable excuses to obfuscation and deliberate concealment of his nefarious activities.
[77] In summary, I am not satisfied that the trustees’ misconduct in terms of their
oversight of the trust assets and Mr Keenan were so wilful, wanton, reckless and terminally
incompetent to require them personally to repay the funds that were, in the end, stolen from
the trust through the criminal conduct of Mr Keenan. More to the point, even if the annual
accounts had been audited and filed in accordance with the terms of the trust order, that
would have not resulted in the detection necessarily of Mr Keenan’s dishonesty. I therefore
decline to order repayment by the former trustees of the funds lost because of Mr Keenan’s
fraud. What might have assisted in that detection, however, may have been the timely
pursuit of the lack of annual accounts by the former trustees. Had they pursued this issue
with more determination, via their accountants and auditors, in the absence of reasonable
explanations from Mr Keenan, then the possibility that they may have been able to uncover
49 Rameka v Hall [2013] NZCA 203
437 Aotea MB 26
what he had been doing might have been arguably more likely. That issue is considered in
more detail in the following section of this decision.
Me whakawātea ngā kaitiaki mō te hē - Should the trustees be granted relief from
liability?
Ngā kōrero a Peter Capper - Submissions of Peter Capper
[78] Following the completion of Mr Webster’s report, Mr Capper filed further
submissions. He concurred with the report’s findings but questioned its limited scope,
highlighting that the misappropriation investigation dated back to 2008, yet the report only
dealt with the period from 2012 to 2016. He also noted that the Police forensic audit report
dated back to 2002, although he queried its independence. Mr Capper asserted that the
trustees were under a “cloud of suspicion” for their possible role in the misappropriation by
Mr Keenan and argued that the trustees ignored certain “red flag events”, either intentionally
or otherwise. He submitted that this was a breach of the trustees’ duty to act in the best
interest of the beneficiaries and was a failure of their due diligence.
[79] Mr Capper also referred to information he received that Mr Keenan had two
previous dishonesty charges filed against him while employed as a Police officer, one of
which he was convicted for in approximately 2011. Mr Capper contended that the Police
had allowed Mr Keenan to resign from his position rather than be terminated and were
effectively “covering up” his conviction. He argued that if the information had been known
it would have rendered Mr Keenan ineligible to become a trustee and CEO.
[80] In addition, Mr Capper pointed to other matters he considered as failures of the
trustees, such as the decision to prioritise “wealth creation” over the marae project, the
alleged damage done to the trust’s relationship with its Rangiatea Māori education tenants,
and the failure of the trustees to grow the asset base of the trust during their tenure.
Ngā kōrero a Te Raumahora Hema - Submissions of Te Raumahora Hema
[81] Ms Hema submitted that there were several anomalies apparent from the Webster
report and the trust meeting minutes. The trustees failed to oversee expenditure and relied
on oral accounts of Mr Keenan at hui, leaving Mr Keenan and Ms Rukuwai to execute most
of the trust operations. A good administrator would have followed up on invoices and
accounts and Ms Hema questioned why anomalies in the finances were not picked up earlier
and whether Ms Rukuwai was able to fulfil her role properly. She also noted that Mr
437 Aotea MB 27
Moeahu had made decisions and passed several motions regarding trust finances without
ever sighting the accounts or the evidence of the financial position of the trust.
[82] Ms Hema further noted that Mr Moeahu passed a motion to make “wealth creation”
a priority in 2016 instead of the marae. She submitted that the trustees were not transparent
regarding the marae project and the beneficiaries were consistently led to believe the marae
was starting its build. However, it turned out that the finance needed for the marae project
had never been secured and the trust funds had instead been misappropriated.
Ngā kōrero a Siobhan Lynch - Submissions of Siobhan Lynch
[83] Ms Lynch argued that she had reservations at the outset that the whenua tōpū trust
was being established without a sufficiently clear strategic direction and measurable action
plan. She stated that she faced difficulties trying to secure detailed information from the
trustees, particularly regarding the process for appointing Mr Keenan as property manager
and marae project co-ordinator, and on the progress of the marae project. Ms Lynch
contended that many beneficiaries lacked confidence in the trust and that questions went
unanswered, and AGMs were not held.
[84] Ms Lynch submitted that the report of Mr Webster exposed scores of inadequacies,
a lack of accountability, deficient processes, insufficient record keeping and many
anomalies. She argued that Mr Keenan was “handsomely remunerated” as CEO without any
formally agreed and signed terms and conditions. He was then able to misappropriate sums
of money simply because he could, and the “soft inhouse accounting measures granted him
enormous leeway to please himself without the need for accountability”. She did not accept
the suggestion that Mr Keenan was persuasive and influencing or that he was trusted
because of his history as a policeman, submitting that such sentiment “should never enter the
business roundtable”. In addition, Ms Lynch noted that the Police had failed to disclose Mr
Keenan’s record of dishonesty as a policeman and did not release a thorough forensic report.
She further asserted that Mr Keenan procured a property using the misappropriated trust
money, which his wife continues to live comfortably in while Ngāti Te Whiti has no marae.
[85] Ms Lynch also did not consider the trustees were lay trustees but rather had a wide
range of skills, experience and knowledge and had served on other trusts and hapū boards.
She contended that, despite this, they failed to act prudently because they granted Mr
Keenan unlimited authority with no consequences.
437 Aotea MB 28
Ngā kōrero a ngā kaitiaki - Submissions of the trustees
[86] Mr Watson submitted that a necessary consideration was the relative complexity of
the trust amalgamation, which was the task facing the trustees when they first took office.
He noted that seven entities were in play at that time, including five which came within the
trustees’ jurisdiction, being Ngāti Te Whiti Whenua Tōpū Trust; BRT; PALT; Ngāmotu
Māori Reservation Trust; and Waahitapu Māori Reservation Trust. The overlapping
strategic aims of these entities created complexity and uncertainty, particularly with regard
to who had oversight for what. The trustees acknowledged they could have done better in
terms of governance and oversight and there were areas where improvement was needed.
However, Mr Watson submitted that the evidence of the trustees and accountants illustrated
the broader context and the complex tasks facing the trustees at the time of the
amalgamation. These included:
(a) The preparation of accounts;
(b) Establishing a strategic direction, including a unified vision among the various Ngāti
Te Whiti stakeholders and entities;
(c) Establishing new policies and procedures and a new financial reporting system;
(d) Consolidating the register of beneficial owners;
(e) Transferring assets from the amalgamated trusts;
(f) The marae development project and relationships with external funders and
stakeholders;
(g) Wealth creation so that the marae development and trust assets could be self-
sustaining; and
(h) Legacy issues, including building maintenance, leases and employment and
administration needs.
[87] In terms of the audited accounts, the trustees acknowledged the delay was not
reasonable and they should have done more to make demands of the auditors and
accountants. However, they submitted that the broader context does establish important
mitigating factors. Counsel noted that when the order of amalgamation was issued by the
Court in 2014, it was directed that the two trusts would operate until the end of the 2014
financial year and prepare their financial statements for approval prior to the transfer and
437 Aotea MB 29
receipt of assets. The trustees considered it was therefore the responsibility of the BRT and
PALT to finalise their own audited accounts and transfer assets and not the responsibility of
the Ngāti Te Whiti Whenua Tōpū Trust.
[88] While the PALT completed their audited accounts in July 2014, the BRT only
completed their unaudited accounts in November 2015. The delay was the BRT, which at
the time was overseen by Shaun Keenan and where misappropriation was also occurring.
When it became clear that the trustees needed to step up, they relied on Shaun Keenan to
make demands of the accountants and auditors. They argued they were entitled, for a
reasonable period of time, to place their trust in the most senior management role to attend to
the day to day financial issues apparently causing the delays. The trustees ultimately did go
around Mr Keenan to make progress on the accounts and they were audited in August 2017.
[89] Counsel also submitted that the evidence shows an audit would not have picked up
the misappropriation. This is because the audit of both the PALT and BRT accounts (when
eventually completed) were passed without detecting the significant misappropriation of
funds, and neither of the “management letters” raised such issues. Further, accountants
Pauline Lockett and Gaylene Findlay gave evidence that an audit is not normally a forensic
analysis of the accounts and it would be unusual for an audit process to seek to triangulate
payments to the extent needed to detect Mr Keenan’s scheme. Mr Webster acknowledged
that the failure to have audited accounts for two years was not the cause of the fraud.
Counsel also noted that this was not a case whereby the trustees stood to gain personally
from delays in the finalisation of the accounts.
[90] With particular regard to the misappropriation by Mr Keenan, counsel submitted
that a relevant factor is that the misappropriation was undertaken by the most senior
management position within the organisation, an ex-policeman of considerable standing and
reputation in the community. He highlighted that the crux of the Court inquiry is a balance
of the extent to which the trustees were prudently able to rely on Mr Keenan being honest as
against them being required to “second guess” him. Mr Watson argued it was reasonable
that the CEO was the main point of contact with the accountants and auditors, that he was
responsible for developing the trustee packs and financial reporting that was disclosed to
trustees, that he could decide which of his staff should be present at trustee meetings, and
that he was in a position to control the flow of information and could influence how the
minutes of trustees’ decisions and comments were recorded.
437 Aotea MB 30
[91] Mr Watson further submitted that the first time the trustees became aware of “red
flags” was in July 2016 and there was no actual misappropriation of funds after that time.
When the “red flags” did appear, the trustees took proactive steps to bypass Mr Keenan, seek
answers, and ultimately deal with the losses they uncovered. The trustees acted as quickly
as they could in the developing situation and acted reasonably in seeking repayment from
Mr Keenan, involving BDO to forensically analyse all transactions, and in raising the matter
with Police.
[92] Counsel challenged the list of deficiencies set out in Mr Webster’s report with
regard to financial controls and submitted as follows:
(a) There were financial procedures in place for the processing of accounts;
(b) The trustees did ask for bank account information and financial reports;
(c) The trustees did communicate directly with the accountants, in the context of
bringing Xero into the operation and when Peter Moeahu approached the
accountants in 2016;
(d) The trustees did raise questions with Mr Keenan about the delays to the audited
accounts and were given explanations which would be reasonable to a lay trustee;
(e) The trustees did request and were provided information on the marae development
project. The evidence from Pauline Lockett was that the project was well
developed, including the designing and contesting phrases;
(f) The trustees were entitled to rely on professional advice, including the lawyer
working on the transfer of BRT properties to the Ngāti Te Whiti Whenua Tōpū
Trust;
(g) The “loose” terms of service in the contracts for Mr Keenan overlooks the fact that
all of the key terms were in place and the work of the CEO was being undertaken;
(h) There were policies and procedures to approve payments to Mr Keenan. However,
it is unreasonable to suggest that financial controls could be robust enough to
prevent actual fraud; and
(i) The Audit and Risk Committee was established as a governance review mechanism
and was a proactive step by the trustees to address the deficiencies they were
noticing.
437 Aotea MB 31
[93] Mr Watson noted there was extensive evidence presented on the process undertaken
to employ Mr Keenan and the terms of that engagement. Counsel contended that it was
probable at law that Mr Keenan would be regarded as an independent contractor, however,
he questioned whether that mattered in the sense of risk or loss to the trust. The trustees
were aware of their obligation to have a written agreement of some nature in place and the
agreement exchanged between the parties had all the key terms, including a comprehensive
job description. Mr Keenan was undertaking tasks usually associated with his job as CEO
and throughout his tenure submitted invoices for payment, which were paid by the trustees.
It was therefore clear the agreement was binding on the parties, was treated by them as such,
and it did not need to be signed for that to be the case. It was also not unusual for a CEO to
be heavily involved in drafting; however, it had not been simply “rubber-stamped” by the
trustees but negotiated. Counsel submitted there was no clear evidence that the lack of a
signed agreement led to any loss.
[94] On the matter of wealth creation and financial performance, Mr Watson refuted the
comments of Mr Webster that the trust was losing money regardless of the misappropriation
due to the trustees “rushing in”, not being methodical and not acting reasonably, and that
they were spending the money they had before they had any other money in the bank.
Counsel submitted that it was reasonable for the trustees to have paid someone to undertake
strategic planning, to access professional advice and drive it forward. Further, Ms Findlay
gave evidence that although the cash assets were declining, the asset of the marae
development was increasing. The trust had secured $1 million to be set aside for the project
and the marae development costs of $854,000.00 were pre-approved within the budget and
spent on appropriate items. Counsel further referred to Ms Findlay’s analysis of the income
and expenditure of the trust, which noted:
(a) The decrease in current assets (mainly cash) is primarily explained by reference to
the marae development costs and the significant decrease in revaluation of land and
buildings;
(b) The consolidated loss of $385,681.00 for the five-year period from 2013-2017 was
made up of the Keenan misappropriation;
(c) The expenses did fluctuate between $150,000.00 to $221,000.00 per annum (putting
aside misappropriation and one-off expenses) and the 2017 expenses were similar to
2014; and
437 Aotea MB 32
(d) The expenditure on marae development has been itemised but not yet apportioned to
the marae asset. In other words, while there is no physical building on the site, the
preparatory, design and consenting work is an asset of the trust.
[95] On the issue of trustee relief from liability, Mr Watson noted that it had been
acknowledged by Mr Webster that the trustees had acted honestly, and the key issue was
therefore whether the trustees acted reasonably. He submitted that the trustees accepted it
was not reasonable that the audited accounts for the 2014 and 2015 years were delayed until
2017. Counsel argued that, if the Court was to find this to be a breach of trust, the broader
circumstances lead to a conclusion that the trustees had acted “reasonably”, in the sense that
there was a reason for the delay. He referred to the following factors:
(a) It was not malicious or malevolent and the trustees were not seeking to deceive
beneficiaries or to profit from the breach;
(b) The trustees were being given assurances to explain the delays by a “fraudster” and
it was the trustees being deceived;
(c) The trustees have been publicly held to account by their beneficiaries, through the
Court process and in the media;
(d) The trustees have been the face of the deception of Mr Keenan and have had to front
on behalf of their whanaunga as “victims” in the Keenan criminal proceedings; and
(e) The evidence is tenuous at best that an earlier audit would have made much tangible
difference to detecting the misappropriation that was occurring.
[96] Accordingly, Mr Watson submitted that it was fair for the trustees to be excused for
not seeking Court directions and for the breach of trust.
Te Ture The Law
[97] Section 131 of the Trusts Act 2019 provides:
131 Court may relieve trustee from personal liability
(1) The court may relieve a trustee who is or may be personally liable for any
breach of trust from personal liability for the breach if it appears to the
court that—
(a) the trustee has acted honestly and reasonably; and
(b) the trustee ought fairly to be excused for the breach of trust.
437 Aotea MB 33
(2) The court may relieve the trustee in whole or in part.
[98] This provision replaces the former s 73 of the Trustee Act 1956, which similarly
provided that relief could be granted to a trustee who acted honestly and reasonably and who
ought fairly to be excused for the breach of trust and for omitting to obtain the directions of
the Court. An important decision concerning the application of s 73 is Wong v Burt, where
the Court of Appeal stated:50
[57] In our view, this is not a case in which the trustees can claim the protection of s
73 of the Trustee Act 1956. The expression “honestly and reasonably” is
conjunctive. It was not merely unreasonable - it was downright foolish - to proceed
to implement a scheme of this kind knowing that it could come under critical legal
scrutiny, as being an allegedly unlawful device. There may well be cases in which
trustees are entitled to put to one side a quite untenable proposition. But with all due
respect, in this case, patently, the appropriate course to have followed would have
been to obtain directions under s 66 of the Trustee Act 1956. This case would never
have come about had that course been followed.
[99] For the trustees to claim relief, they must establish all the elements contained in s
131 of the Trusts Act 2019. The onus is on the trustees and, while the Court has a wide
discretion to grant relief and the extent of any such relief, that remedy is not given lightly.51
Kōreroro Discussion
[100] The essential question is whether the trustees acted honestly and reasonably and
should therefore be excused from liability for the breach of trust. Another possibility is that
a breach of trust may be found to have occurred but without any personal liability attaching
to the former trustees due to relevant mitigating circumstances, including the application of
any limitation clause in the trust order. For this trust, the relevant provision is cl 11 of the
current trust order.52 Then there is the principle that trustees are entitled to be indemnified
out of the assets of the trust were the loss has been caused by anything other than their wilful
default or complicity in a reckless or fraudulent breach of trust. A leading case on trustee
liability is Armitage v Nurse where some of the forms of breach and the consequences were
outlined by Millet LJ:53
50 Wong v Burt [2005] 1 NZLR 91 51 Tauhara Middle 4A2B2C – Opepe Farm Trust (1996) 68 Taupō MB 27 (68 TPO 27); Moeahu v
Winitana – Waiwhetu Pā No 4 (2014) 319 Aotea MB 166 (319 AOT 166) at [26]; Rātima v
Sullivan –Tataraakina C (2015) 41 Tākitimu MB 102 (41 TKT 102); and Tata v Martin –
Waiwhakaata 3E 4C Lot 2A (Hiiona Marae) [2020] Māori Appellate Court MB 166 (2020
APPEAL 166) 52 325 Aotea MB 17-23 (325 AOT 17-23) 53 Armitage v Nurse [1997] 2 All ER 705. See also Spread Trustee Company Ltd v Hutcheson
[2011] UKPC 13
437 Aotea MB 34
Breaches of trust are of many different kinds. A breach of trust may be deliberate or
inadvertent; it may consist of an actual misappropriation or misapplication of the
trust property or merely of an investment or other dealing which is outside the
trustees’ powers; it may consist of a failure to carry out a positive obligation of the
trustees or merely a want of skill and care on their part in the management of the
trust property, it may be injurious to the interests of the beneficiaries or be actually
for their benefit. By consciously acting beyond their powers as for example in
making an investment which they know to be unauthorised the trustees may
deliberately commit a breach of trust but if they do so in good faith and in the honest
belief they are acting in the interests of the beneficiaries their conduct is not
fraudulent...
[101] Following his investigation, Mr Webster noted several areas of concern relating to
the trustees’ actions and conduct in terms of the administration and finances of the trust. As
he outlined in his report, the trustees acted with a high level of deference towards Mr
Keenan, which he noted was difficult to understand given the continuing and significant
delays in completing accounts and audits and contractual arrangements, which included the
marae project funding. Mr Webster underscored that, eventually, his explanations to trustees
and beneficiaries became flawed and lacked credibility. Mr Webster also identified that the
chairperson of the trust and possibility others took the view that the trustees should not be
involved in the management of the trust.
[102] Compounding this attitude was the reality, according to Mr Webster, that the trust
functioned largely without any governance manual, policies or procedures in place, that they
appeared to be at times distracted from their core responsibilities, and that they spent some
time on the issue of “wealth creation”. Mr Webster also highlighted the amalgamation of
trusts in 2014 and the unsatisfactory aspects of that merger, in particular, that there did not
appear to be a clear plan in place and that the BRT did not produce the documents necessary
to conclude the amalgamation in a timely manner. Added to those problems, was the fact
that the BRT account was still operating in 2016 when it should have been closed.
[103] Regarding Mr Keenan’s employment, Mr Webster underscored that it was obvious
there were a number of overlapping and potentially conflicting positions that Mr Keenan
occupied, including chairperson of the BRT, property manager for the BRT, marae project
co-ordinator for PALT, original and current trustee of Ngāti Te Whiti Whenua Tōpū Trust
and the trust’s chief executive. Mr Webster’s point was that there appeared to be too many
overlapping roles with a lack of proper process, clarity and oversight of Mr Keenan. He also
pointed out that there was a lack of clarity around terms and confusion as to Mr Keenan’s
personal contracting arrangements following amalgamation. His role as chief executive was
also less than satisfactory in terms of proper process and having the correct documents in
place.
437 Aotea MB 35
[104] Curiously, Mr Webster noted that, despite all of the challenges the trust was then
facing, Mr Keenan was paid four weeks salary in lieu of notice following his termination.
Given that Mr Keenan eventually agreed to refund money he had taken from the trust, which
never happened, it seems unusual that the trustees felt duty bound to honour whatever
arrangement they had with him, as a contractor or as an employee or both. Unless they had
been provided with advice to do so, it seems inexplicable that the former trustees saw fit to
pay what was essentially a “final pay” to Mr Keenan under the circumstances.
[105] Inexplicably, it also appeared that Mr Keenan continued to be paid for his role as
property manager even after he had become the chief executive of the Ngāti Te Whiti
Whenua Tōpū Trust, which was contrary to the intention of the creation of the latter role.
Added to those woes was the fact that Mr Keenan, understandably, as chief executive, had
access to the trust’s credit card. This too was the responsibility of the former trustees, to
ensure these arrangements had been properly concluded following the amalgamation. The
short point according to Mr Webster was that there was a lack of a robust record keeping
system which hampered subsequent efforts to obtain clarity around Mr Keenan’s conduct.
[106] In terms of the trust’s finances, as identified, during the period 2014 to 2017 the
cash position of the trust declined significantly while administrative expenses exceeded the
income of the trust in the majority of those years. Mr Webster pointed out that while an
increase in administration was likely, during the initial period following amalgamation,
some economies of scale would have been expected. Mr Webster also reported that the
marae development project, misappropriation of funds and administration costs consumed
nearly all of the trust’s available cash assets. He also made the point that the trustees
received fees and payments in the 2016 and 2017 years further adding to the loses. More
importantly, Mr Webster emphasised that the trustees did not have sufficient information to
make properly informed decisions given that finance reports were deficient and would not
always contain the necessary information needed for sensible decision making. While the
reports were in many ways unsatisfactory, Mr Webster noted that it should have been
obvious to the trustees, however, that the bank balances were reducing.
[107] Further, in terms of the financial processes, Mr Webster identified that the key flaw
in the payment process once internet banking was utilised was that the approver would only
see the payee and not the recipient bank account. By September 2016 the trustees began to
take a more direct role in the processing of payments. Yet despite that, there were still flaws
in the system because of Mr Keenan’s dishonesty. For example, Ms Rukuwai would sign
cheques with Mr Keenan on the basis he would provide supporting documentation but did
437 Aotea MB 36
not do so, yet nothing was done to ensure the process was properly carried out. As
mentioned by Mr Webster, while the check butts recorded names for the trust’s creditors, the
cheques were made out to Mr Keenan or SJK. From May 2015 Mr Keenan would load the
payment under the name of a trust creditor but would substitute his own bank account or that
of SJK without supporting documentation. It is also telling that at one time Mr Keenan
remained a signatory contrary to a trustees’ resolution.
[108] As foreshadowed, Mr Webster’s overall opinion was that with governance and
management the financial decline of the trust was avoidable. Yet it was not until the period
July to August 2016 that the trust was able to gain access to Xero while Mr Keenan was on
leave. The teleconference on 4 August 2016 discussed $1.5 million of unaccounted
spending from the trust’s accounts. Despite this, between February and April 2017, $86,000
in two payments were made to SJK and by that time, or soon thereafter, the Police became
involved. Had the trustees maintained proper oversight of the amalgamation process, then
the dishonest issuing by Mr Keenan of these two payments might have been avoided.
[109] In response, Mr Watson argued that the situation was complex involving several
legal entities and their amalgamation and that the Court should consider important
mitigating factors. The formers trustees contended that they were entitled for a reasonable
period of time to rely on the statements of Mr Keenan, given, I apprehend, that they had no
fore knowledge of any dishonest intent or conduct on Mr Keenan’s part was, Mr Watson
submitted, reasonable for the trustees to rely on Mr Keenan and his explanations.
[110] More importantly, Mr Watson argued that the evidence confirms that an audit would
not have detected Mr Keenan’s fraud. This is because he submitted both the PALT, and
BRT accounts were passed without detecting the significant misappropriation and none of
the management letters raised any such issues. Added to that was the evidence of Ms
Lockett and Gaylene Finlay that an audit is not usually a forensic analysis of the accounts.
Mr Watson underscored that Mr Webster acknowledged the failure to have the accounts
audited for two years was not the cause of the fraud. As foreshadowed, Mr Watson also
challenged the list of issues identified by Mr Webster set out in paragraphs [89] to [92]
above.
[111] In my assessment, as I indicated at the hearings, it was not reasonable for the
trustees to accept Mr Keenan’s assertions beyond a two-year period that annual accounts
were not available. While I acknowledge Mr Moeahu’s evidence that the former trustees
tried to make progress on this issue, any prudent trustee would understand that the
437 Aotea MB 37
preparation of audited accounts does not take the whole of the next financial year to
complete.54 If any trustee is presented with the excuse that audited accounts are not
available after a year since the balance date has passed, then they should seek urgent
directions of the Court. Put another way, it was not reasonable for trustees to be told in 2016
that the 2014 accounts were not available because of the accountants or the auditors without
some form of confirmation from the auditors. That said, I acknowledge that lay trustees,
especially those with limited experience of the responsibilities around preparing and filing
audited accounts, may not have fully appreciated that when the failure to prepare and file the
accounts has exceeded 12 months since balance date, then something is likely to be awry.
[112] However, even Ms Lockett, the independent trustee, acknowledged that the failure
to produce accounts was not reasonable, while noting the challenges of the change to the
trust’s financial management system:55
P Lockett: I agree with you it is not reasonable. I guess I was just trying to put the
context around what may have been happening with the trustees with the move into
Xero, the loading in of the back information which would have caused time delays
which in the end really was a good thing to do because they started to get their head
around the information and actually discover that things were not right.
The Court: Sure. We can push it forward to 1 April 2016, no accounts. So
everything you have just said is now compounded because a year later there are still
no accounts.
P Lockett: That is correct. To be honest I do not think they were finalised until I
came on board.
The Court: Yes, so you would agree with me that that is unreasonable.
P Lockett: It is unreasonable. There were draft sets of financial statements. I am
not sure when they were available, but there weren’t audited sets of financial
statements.
[113] In addition, in answer to questions from Mr Watson, Ms Lockett also made the point
that at the time the BRT and PALT became amalgamated, there were challenges with that
process and there was also the issue of Mr Keenan being in control of the process:56
L Watson: I have used the phrase CEO, but even prior to the CEO position being
formalised, when Mr Keenan was in this role of Marae Project coordinator and also
property manager, there was no-one above him in the change [stet] of command was
there in terms of management?
P Lockett: No.
L Watson: So really the trend that I have described about him being in control of
these processes was applicable whether he was wearing the Marae Project hat or the
CEO hat.
54 423 Aotea MB 38-149 (423 AOT 38-149) at 64-65 55 423 Aotea MB 38-149 (423 AOT 38-149) at 132 56 423 Aotea MB 38-149 (423 AOT 38-149) at 128
437 Aotea MB 38
P Lockett: Correct. I would also just like to add that we need to remember that the
misappropriations occurred in both the Bayley [stet] Road Trust and the Puke Ariki
Land Trust and that the systems and processes from the Puke Ariki Land Trust
flowed through into the Ngāti Te Whiti Whenua Tōpu Trust, and my understanding
was that while it was a manual process it was actually reasonably robust in that Rita
was required to put all of the invoices together. She was required to take those to a
trustee’s meeting and the trustees were to see them, or at least the chairperson was to
see them and a report was to be produced for the trustee’s meeting which outlined
the payments that had been made and the balances in the bank accounts. So some of
the financial reports that are part of the bundle of documents show that, I think
except for the attachment of actual invoices. From the trustee’s perspective, the
ones that came through from PALT, in their minds they may have thought well we
had robust processes in PALT, we have got a clear audit report, we are now moving
into the Ngāti Te Whiti Whenua Tōpu Trust, we cannot perceive there are any red
flags anywhere, we have set up the same systems and processes, we have confidence
in that person and in those processes.
[114] Overall, it would appear that the present case has involved a perfect storm of factors
that conspired against the former trustees to bring them to their present position today. First,
they would have displayed the enthusiasm understandable for new custodians of tribal
governance for Ngāti Te Whiti. The amalgamation of trusts presented the opportunity to,
amongst other things, realise the dream of a hapū marae and therefore a place to stand for
the uri of Ngāti Te Whiti within their own tribal rohe. As Mr Nicholas explained:57
Historically the lands of Ngāti Te Whiti have sheltered refugees of iwi conflict and
eventually Pākehā settlement of New Plymouth. Ngāti Te Whiti leadership and
elders were prominent throughout the most significant negotiations of Te Atiawa’s
contemporary history. This was particularly so in the context to the signing of Te
Atiawa Settlement of historical claims under Te Tiriti o Waitangi.
The role and leadership of Peter Moeahu and Wikitoria Keenan in the Te Atiawa
Settlement were critical. The support from Ngāti Te Whiti people was the
foundation of their leadership roles. In fact, the majority of Te Atiawa hapū
supported their leadership. I recall the support given to them both by our kaumatua
such as Rangikotuku, Harry, Micky, Ngaraiti, Mahau, Grant, and my brothers and
sisters of Ngati Te Whiti. This included endorsing the hosting of the signing of the
settlement at Rangiatea.
The central place of Ngāti Te Whiti and Te Atiawa within New Plymouth city was
buoyant and welcomed. The dream to establish a marae for Ngāti Te Whiti on the
waterfront started to become a reality. Ngāti Te Whiti families had been deeply
affected by colonisation and the subjugation of our tino rangatiratanga within our
own lands, as the pākeha settlement took control of everything. Ngāti Te Whiti had
struggled to regain unity, and there emerged a reliance on the building of our marae
to achieve this.
[115] Arguably, that enthusiasm and goodwill would have been a factor in each individual
trustees’ approach to their role with the Ngāti Te Whiti Whenua Tōpū Trust. I speculate that
such enthusiasm, in the circumstances of this case, may have also impacted on the level of
57 423 Aotea MB 38-149 (423 AOT 38-149) at 47
437 Aotea MB 39
trust and deference they showed towards Mr Keenan. Mr Moeahu, however, rejected the
suggestion that he showed Mr Keenan any undue deference.58
[116] Second, Mr Keenan and his wider whānau were well known within Ngāti Te Whiti
and Te Atiawa generally. They had as a group built a positive reputation for leadership and
engagement in tribal affairs and some of that undoubtedly rubbed off on Mr Keenan.59 For
example, his sister, the late Wiki Keenan, had a central role in the affairs of Ngāti Te Whiti
and Te Atiawa. Added to that was the fact that he was at relevant times not only an
employee of the New Zealand Police but held leadership roles. That too would have added
to his reputation as someone who would behave with impeccable integrity and
unquestioning honesty. Mr Keenan’s profession and reputation in the community would
have impacted on the way that the trustees related to him and, as Mr Webster identified, the
extent to which they accepted his explanations as plausible, based on the respect they had for
him and his wider whānau. Mr Perry Cassidy acknowledged it this way:60
The Court: You have heard throughout the course the last couple of days and
previous that the trustees, not unreasonably, placed a high level of trust in Keenan
because of his background, his experience and his reputation. You heard all that?
P Cassidy: Yes. May I say Your Honour, I have been associated with this person
for 20 years. I have respected him and the family in a big way. I have supported
everything to do with the support from our family, my mum, my grandfather, they
have all followed the same path. I respect that and I hope to continue that. But the
followers of the same people including the families out there, the Keenans, they are
in the same position as Shaun’s family. I am only just talking of them, there are
others. You gave me the opportunity to in 2014 to think about being a part of this
journey. I never at that time Your Honour, which I have addressed with you when I
was first sworn in, you said the first thing you were going to ask of me was the first
question of the order, the next time we meet, but that is how important it is for me to
take part of the oath for that work that’s put forward to our beneficiaries and not just
for that, my own family too. So yes, I have great respect towards the trust.
[117] Third, the amalgamation of the trusts, at a practical level, was untidy. The lack of
prompt finality and follow up to the amalgamation process resulted in further opportunities
for dishonest conduct on the part of Mr Keenan. Put another way, while the most rigorous
and transparent processes will never eliminate the risk of fraud, deficient and unprofessional
processes will surely increase the opportunities for malfeasance and misconduct. That, in
part, is what occurred here. One example is how Mr Keenan was left a signatory for the
58 423 Aotea MB 38-149 (423 AOT 38-149) at 63 59 As Mr Nicholas put it, at 423 Aotea MB 48 (423 AOT MB 48): “So Shaun Keenan took up
those tasks of accumulating the funds for the marae using the existing channels and information.
His regular reports back to beneficiaries and the board suggested he was succeeding. Shaun
Keenan was an experienced contributor to iwi development. He had a solid reputation within
the community and came from the trusted Keenan whanau. He had the experience the skills and
it was a continuation of his earlier roles." 60 423 Aotea MB 38-149 (423 AOT 38-149) at 137
437 Aotea MB 40
BRT contrary to a trustees’ resolution, which should not have occurred. The assets of the
BRT would, after all, form part of the corpus of the Ngāti Te Whiti Whenua Tōpu trust. In
addition, that Mr Keenan had been double paid, in effect, while chief executive, simply
compounded the extent of his deceit.
[118] In any event, I accept that the former trustees acted honestly. I also acknowledge
their own admissions, the majority of them, that not all of their conduct was reasonable.61 In
particular, the point made earlier, that it was not reasonable to accept excuses for the delay
in preparing the 2014 accounts in 2016. That said, I acknowledge that the former trustees
genuinely believed at the time that their conduct was reasonable and that with the benefit of
hindsight and in response to my questions, they accepted that it was not. However, in such
circumstances, it could be argued that what was not reasonable was the failure of the trustees
to seek directions.
[119] Yet even then, it is not difficult to understand the approach of the trustees in the
sense that the trust had been before the Court and Mr Keenan, along with several trustees,
had appeared in 2014 at the amalgamation hearing where the audits were discussed.62 At
that time, Mr Keenan indicated that the accounts were being delayed because of issues with
the accountant and the auditor. Mr Moeahu gave evidence that on more than one occasion
the trustees sought to find answers and challenged the responses they were receiving from
Mr Keenan as to the ongoing delays.63 Moreover, as Mr Webster acknowledged, the failure
to complete the audits did not cause or result in the fraud and would not have detected that
embezzlement even if the audits had been completed on time. I consider that a significant
mitigating factor in the context of these proceedings, that even if the trustees had prepared
the audited accounts on time, that alone would not have detected Mr Keenan’s fraud.
[120] I therefore accept that, in the circumstances of this case, the former trustees acted
honestly and believed that, at the relevant times, they were acting reasonably and
responsibly. The counter point is that the trustees should have asked more questions
especially in the context of incomplete and insufficient financial reporting from time to time
and regarding the preparation of the accounts. It is simply unacceptable for trustees to rely
on the blandishments of a paid employee that, after two years, annual accounts have not
been finalised and audited. They should also have made sure that the situation of Mr
61 423 Aotea MB 38-149 (423 AOT 38-149) at 133-138 62 316 Aotea MB 163-181 (316 AOT 163-181). At the previous review, Wiki Keenan appeared 63 423 Aotea MB 38-149 (423 AOT 38-149) at 63-70
437 Aotea MB 41
Keenan “double dipping” did not arise by the simple expedient of following up actions like
ensuring he was not still a signatory of BRT.
[121] While I also acknowledge the trustees’ point that they considered the BRT and
PALT should have concluded their own affairs, nonetheless, given the overlaps in trustees
and the close connections within the Ngāti Te Whiti tribal community, it is not an answer to
pass the responsibility back to those entities because those delays impacted on the ability of
the Ngāti Te Whiti Whenua Tōpū Trust to operate effectively. In fairness, Ms McCullough
did say that the trustees used their best endeavours, in effect, to progress the issue and had
no reason to doubt the honesty or integrity of Mr Keenan:64
In regards to the amalgamation of Bayly Road Trust and the Puke Ariki Land Trust,
there were outstanding matters that the Bayly Road Trustees needed to complete in
order to obtain completed Audited Accounts. It was an understanding that Bayly
Road Trust Accounts would remain independent of the Ngāti Te Whiti Whenua Tōpu
Trust until this occurred. As Chairperson of Ngāti Te Whiti Whenua Tōpu Trust at
that early phase, I regularly enquired of Shaun Keenan and Wikitoria Keenan as to
the status of these Bayly Road Trust accounts. It got to the point that when I entered
the office of the Trust, both of them would initiate this issue with me, and I was
given reassurances by both that this matter was being progressed. I had no reason at
that stage to doubt either of their integrity.
[122] In any event, because the Ngāti Te Whiti Whenua Tōpū Trust was going to be the
recipient of the assets of PALT and BRT, any delays would inevitably have an impact on the
future operations of the Ngāti Te Whiti Whenua Tōpū Trust. At the very least, the trustees
could have sought directions and assistance from the Court to find a remedy to the then
delays.
[123] In summary, my conclusion is that the former trustees should be granted relief from
liability, as set out above, for the trust funds stolen by Mr Keenan, but as to their own costs
at the time when they clearly were not fulfilling their duties to the extent a prudent trustee
may have done, then there is an argument that they should refund to the trust the fees they
received during the relevant period of Mr Keenan’s fraud. I am also concerned about the
payment in lieu of notice made out to Mr Keenan. While I note Mr Watson’s reference to
advice being received, it may be that, to put the point beyond doubt, further evidence and
submissions by way of memoranda will be appropriate on this issue.65 I therefore invite
submissions from the former trustees as to whether they consider it is appropriate for them to
refund the trust the fees they received during the years that Mr Keenan defrauded the trust.
To avoid doubt, for the reasons set out above, the former trustees are granted relief from
64 423 Aotea MB 38-149 (423 AOT 38-149) at 134 65 423 Aotea MB 38-149 (423 AOT 38-149) at 124-125
437 Aotea MB 42
liability for the funds lost by the theft of Mr Keenan from the Ngāti Te Whiti Whenua Tōpū
Trust.
Mehemea kāore ngā kaitiaki i rihaina, ka whakakorehia ā rātou tūranga e Te Kooti -
Would the trustees have been removed if they had not resigned?
[124] Section 240 of the Act (as amended) provides:
240 Removal of trustee
(1) The court may at any time, in respect of any trustee of a trust to which
this Part applies, make an order for the removal of the trustee, if it is
satisfied that—
(a) the trustee has lost the capacity to perform the functions of a
trustee; or
(b) the removal is desirable for the proper execution of the trust, and 1
or more of the following grounds for removal are met:
(i) the trustee repeatedly refuses or fails to act as trustee:
(ii) the trustee becomes an undischarged bankrupt:
(iii) the trustee is a corporate trustee that is subject to an
insolvency event:
(iv) the trustee is no longer suitable to hold office as trustee
because of the trustee’s conduct or circumstances.
(2) A trustee has lost the capacity to perform the functions of a trustee, for
example, if the trustee—
(a) is subject to an order appointing a manager under section 31 of the
Protection of Personal and Property Rights Act 1988; or
(b) has a trustee corporation managing the trustee’s property
under section 32 or 33 of that Act.
(3) A person may no longer be suitable to hold office as trustee, for example,
because of the following conduct or circumstances:
(a) the trustee is convicted of an offence involving dishonesty:
(b) it is not known where the trustee is and the trustee cannot be
contacted:
(c) the trustee is prohibited from being a director or promoter of, or
being concerned or taking part in the management of,—
(i) a company under the Companies Act 1993; or
(ii) an incorporated or unincorporated body under
the Financial Markets Conduct Act 2013 or the Takeovers Act
1993
Kōreroro Discussion
[125] It would have been untenable to justify the former trustees remaining in office
beyond the terms that they served, had they not resigned following the revelation of the full
extent of Mr Keenan’s fraud. Given the calamitous impact that it has had on the trust and
A Trustee removed from office in accordance with an application under Order
7(b) shall not be entitled to be re-elected as a Trustee for a period of not less
than six (6) years following his or her removal.
[129] To avoid doubt, the former trustees were not removed for cause. They resigned. If
they had remained in office, as I have set out above, they would have been removed for
cause.68 Therefore, and in the absence of specific submissions, my preliminary view is that
cl 7 cited above does not apply. The effect of this interpretation is that at the next election of
trustees, any of the former trustees could stand for re-election. Whether the beneficiaries
would re-elect them is another question entirely. The point here is that I do not consider, in
the absence of further submissions, that cl 7 is intended to cover the situation where a trustee
resigns before they are removed from their position as a trustee.
[130] My conclusion is that there was sufficient evidence before the Court at the time of
the resignations to justify the removal of the trustees for cause per s 240 of the Act. As set
out below, I also consider that, despite such a finding, the matter of whether they could be
re-elected and then reappointed would be a question for a future meeting of trust
beneficiaries to consider in due course, now possessed of all the relevant facts surrounding
the Keenan fraud. Put another way, while I find that, unless they had resigned, they would
have been removed, that in itself will not preclude the former trustees from standing for re-
election.
Me noho rāhui ngā kaitiaki mō he wā ki mua i te tuku kia tū anō? - Should the trustees
serve a period of ineligibility for reappointment?
[131] In the case Rātima v Sullivan - Tataraakina C Trust, the issue of terms on
ineligibility for reappointment was considered against a background of proven trustees’
failure and incompetence, as articulated by counsel in the following terms:69
[136] Ms Bennett asked the Court to note the following:
(a) The failure of the former trustees to comply with directions;
(b) The continued insistence of the former trustees in taking fees they are not
entitled to;
(c) Attempts to blame actions on administrators;
(d) Raising of fallacious defences that are not supported by evidence;
(e) Misleading the responsible trustee in relation to the bridge; and
68 This is also in contrast to the situation in Taueki v Procter - Horowhenua 11 Lake Block (2020)
415 Aotea MB 1 (415 AOT 1) where a finding of removal for cause was made, had the trustees’
application for reappointment following an election not been dismissed 69 Rātima v Sullivan - Tataraakina C Trust (2017) 64 Tākitimu MB 121 (64 TKT 121)
437 Aotea MB 45
(f) Asserting matters in indemnification not raised with Mr Armstrong thereby
engaging in the Court process in bad faith.
[132] As a result, various terms of ineligibility were imposed:70
[142] After careful reflection, and taking into account the submissions of the parties,
I consider it appropriate that some period of ineligibility for appointment should be
imposed. The breaches of trust identified in my principal judgment, coupled with the
orders for reimbursement contained in this decision, make it untenable for any of the
former responsible trustees, apart from Messrs Rātima and Sullivan, to occupy the
office of trustee for this important land, certainly in the short to medium term. I also
note that there is also Appellate Court authority for the proposition that any person
who is a debtor to a trust cannot remain in that office.
[143] On the matter of permanent ineligibility, I consider that this outcome is an
unduly harsh and arguably oppressive response to the failures set out in my earlier
decision. While the breaches of trust are of such a severity as to warrant both
removal and repayment of certain sums, I do not consider that the former trustees’
conduct was so egregious, outrageous or wanton as to justify the unprecedented step
of permanent prevention from ever standing for office as a custodian for this seminal
tribal asset.
[133] In accordance with the conclusions reached above, I decline to impose a term of
ineligibility for re-appointment. If, however, following the receipt of submissions from the
former trustees and any trust beneficiary, my preliminary view changes, then further
directions will be issued on the point. In summary, if any party persuades the Court that the
preliminary interpretation of cl 7 above is incorrect and cl 7(d) comes into effect, the result
will be the ineligibility by operation of the trust order for any former trustee to be re-elected
for six years. Alternatively, if, having received submissions, my preliminary view is
affirmed, then any trust beneficiary may file a further submission on the issue of ineligibility
for appointment. It should go without saying that the former trustees are entitled to file a
further submission on this issue if they wish.
Ko te taumahatanga o ngā kaiwhiwhi - Recipient liability
[134] Recipient liability arises when a third-party stranger has knowingly received trust
property and dealt with it in a manner inconsistent with the trust.71 In Tata v Martin –
Waiwhakaata 3E 4C Lot 2A Block (Hiiona Marae), the Māori Appellate Court referred to
the principles of recipient liability as follows:72
[52] …The starting point is a factual analysis of the recipient’s state of mind. A
leading authority for categorising constructive knowledge is Baden v Société
70 Ibid (footnotes omitted) 71 Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Brookers, Wellington, 2009) at
[13.4.4] 72 Tata v Martin – Waiwhakaata 3E 4C Lot 2A Block (Hiiona Marae) [2020] Māori Appellate