Rae Beverly Adlam v John Tionga Savage and Others

• Jurisdiction: New Zealand
• Judge: Ellen France P
• Judgment Date: 22 September 2016
• Neutral Citation: [2016] NZCA 454
• Docket Number: CA223/2015
• Court: Court of Appeal
• Date: 22 September 2016

Between

Rae Beverly Adlam

Appellant

and

John Tionga Savage, Lawrence Te Aokahari Niao, Patrick Mayne Savage, Samuel Kelvin Barnes and Tamati Drawbridge as Trustees of the Matata Parish 39A 2A Ahu Whenua Trust

First Respondents

and

Helen Maria Savage and Raelyn Arihia Peita as Trustees of the Otonga Whanau Trust

Second Respondents

and

Huia Ann Pacey, John Tionga Savage, Lawrence Te Aokahari Niao, Regina Victoria Rintoul and Samuel Kelvin Barnes as Trustees of the Matata Parish 39A 2B 2B 2A Ahu Whenua Trust

Third Respondents

[2016] NZCA 454

Court:

Ellen France P, Randerson and French JJ

CA223/2015

IN THE COURT OF APPEAL OF NEW ZEALAND

Cross-appeal against a decision of the Māori Appellate Court (“MAC”) which set aside orders given by the Māori Land Court (“MLC”) directing the appellant trustee to account to a Trust for $11.2 million in profits and remitted the question back to the MLC to determine what portion should be disgorged — the appellant had abandoned her appeal — the appeal arose out of the development of two power stations on Māori freehold land — the power stations were located on a block of land known as the Bath block administered by the Bath Trust — the appellant was a trustee until removed — the appellant had established one power station companies — that company depended on a lease in its favour from the Trusts — the appellant had sold shares to the company for a profit of $11.2 million — whether the appellant should account to the Bath Trust for the profits or whether the MAC was right to remit the question back to the MLC to determine what portion of profits should be disgorged.

Counsel:

J R Billington QC and L M Van for Appellant

D G Hurd and D S Dowthwaite for First, Fourth and Fifth-named First Respondents

P J Andrew for First, Second and Fifth-named Third Respondents

JUDGMENT OF THE COURT

A The cross-appeals are allowed.

B The orders of the Maori Appellate Court revoking the decision of the Maori Land Court ordering Ms Adlam to account to the Matata Parish 39A 2A Ahu Whenua (Bath) Trust for the $11.2 million Geothermal Developments Ltd (GDL) profit and remitting the proceeding to the Maori Land Court to determine what portion of the GDL profit is the property of the Bath Trust are set aside (the first cross-appeal).

C The order of the Maori Land Court that Ms Adlam is to account to the Bath Trust in the amount of $11.2 million is reinstated.

D By consent, the order of the Maori Appellate Court remitting the quantification of interest on the TG2 royalties to the Maori Land Court is set aside (the second cross-appeal).

E By consent, interest on the TG2 royalties as at the date of the Maori Appellate Court judgment is fixed at $1,547,519.41.

F Ms Adlam must pay costs to the respondents (one set of costs for the first, fourth and fifth-named first respondents and one set for the first, second and fifth-named third respondents) for a standard appeal on a band A basis together with usual disbursements as follows. First, Ms Adlam must pay costs on this basis on the appeal up to the point of abandonment and (to the first, fourth and fifth-named first respondents only) on the second cross-appeal up to the point of agreement; and, secondly, Ms Adlam must pay costs on this basis on the first cross-appeal. We certify for second counsel.

G Costs in the Maori Appellate Court are to be revisited in light of this judgment.

REASONS OF THE COURT

(Given by Ellen France P)

Table of contents

	Para No
Introduction	[1]
Factual background	[9]
History of the proceedings	[19]
Maori Land Court	[19]
Maori Appellate Court	[23]
Was there an issue to be determined about the trusts' contributions to the GDL profit?	[25]
Ms Adlam's case	[25]
The respondents' position	[28]
Our assessment	[29]
Summary of conclusions	[48]
Result	[51]

Introduction

1 This appeal arises out of the development of two power stations on Maori freehold land at Kawerau in the Bay of Plenty.

2 The first of the power stations, known as TG2, was developed in the early 1990s. It is located on a block of land known as the Bath block. The second power station was commissioned in September 2008 by Geothermal Developments Ltd (GDL) a company established by the appellant, Rae Beverly Adlam. The GDL power station is also located on the Bath block but it draws its geothermal resource from a well known as KA24. The well is located on an adjacent block of land known as the Farm block.

3 Both the Bath block and the Farm block are administered by separate Ahu Whenua Trusts, known as the Bath Trust and the Farm Trust respectively, although there is commonality in the beneficial ownership and in the trustees between these two trusts. The first, fourth and fifth-named first respondents (the first respondents) comprise three of the four surviving trustees of the Bath Trust. The third respondents are trustees of the Farm Trust.

4 Ms Adlam was a trustee of the Bath Trust until her suspension from that office by the Maori Land Court in 2008 and then her removal in 2014. Ms Adlam was not a trustee of the Farm Trust. She received just over $2.44 million in royalties from the TG2 power station. In 2010 Ms Adlam made a profit of $11.2 million from the GDL power station when she sold her shares in GDL.

5 Proceedings were brought in the Maori Land Court to recover the money Ms Adlam received from the GDL power station. 1 When the matter came to be heard in the Maori Land Court in October 2012, Ms Adlam admitted she had acted in breach of her duties as trustee of the Bath Trust.

6 Judge Coxhead in the Maori Land Court concluded that no claim had been properly pleaded by the Farm Trust against Ms Adlam for breach of fiduciary duty. 2 The hearing in the Maori Land Court accordingly focused on the quantum Ms Adlam owed to the Bath Trust in relation to the two power stations. The Maori Land Court ordered Ms Adlam to pay the Bath Trust the sum of $2.44 million in relation to the TG2 power station and to account to the Bath Trust for the sum of $11.2 million in relation to the GDL power station. The Judge also dealt with the quantification of interest on the sum relating to the TG2 power station.

7 Ms Adlam appealed. The Maori Appellate Court set aside the order requiring Ms Adlam to account for the $11.2 million and remitted the matter back to the Maori Land Court to determine what portion of the profits should be disgorged to the Bath Trust. 3 The Maori Appellate Court also remitted the question of the quantification of interest back to the Maori Land Court.

8 Ms Adlam appealed to this Court against other orders made by the Maori Appellate Court and the first respondents cross-appealed. Prior to the hearing, Ms Adlam abandoned her appeal. At the hearing, it was agreed the first respondents' second cross-appeal, on the quantification of interest relating to the TG2 power station, could be allowed by consent. Accordingly, the issue for determination on

this appeal is whether Ms Adlam should account to the Bath Trust for the $11.2 million in profits or whether the Maori Appellate Court was right to remit the question back to the Māori Land Court to determine what portion should be disgorged

Factual background

9 We can deal briefly with the TG2 power station given there is no dispute about that. As the submissions for the first respondents record, the TG2 power station utilises geothermal wastewater supplied from what was the Kawerau Pulp and Paper Mill. Under a lease between the Bath Trust and Bay of Plenty Energy Ltd, who operates the power station, an access fee was payable to the Bath Trust along with royalties on the power produced. The TG2 power station began to operate in October 1993. From that point until 2008 Ms Adlam received, as trustee of the Bath Trust, fees and royalties totalling over $3.5 million. She appropriated this money for her benefit. After deducting GST and other taxes, it is common ground Ms Adlam received the sum of $2,440,149 from the TG2 project.

10 As we have foreshadowed, the GDL power station was also built on the Bath Trust land. It uses geothermal energy from the well on the adjoining land owned by the Farm Trust. The energy was piped from that well across the lands of both the Farm Trust and the Bath Trust with wastewater from the process taking the reverse course before being reinjected into the ground on the property of the Farm Trust. The power station and the pipeline across the two blocks of land are shown on the map that is attached as Appendix 1.

11 The GDL power station was developed by a company called Orda 9 Inc (ORDA9), a subsidiary of an Israeli company Ormat Technologies Inc (Ormat), in conjunction with GDL. Ms Adlam was initially the sole shareholder and director of GDL. This power station project depended on a lease granted by the Bath Trust and the Farm Trust in favour of GDL.

12 To understand the manner in which Ms Adlam profited we need to note that in September 2005 Ms Adlam entered into sale and purchase and shareholder agreements with ORDA9. As the Maori Appellate Court recorded, under those agreements Ms Adlam agreed to sell shares in GDL to ORDA9 but she kept an option to repurchase the shares once the power station was completed. 4 The sale and purchase agreement was conditional on various matters including Ms Adlam providing evidence to ORDA9 that GDL had an agreement to lease the land on which the project was to be built. Ms Adlam later reported that the lease had been signed by both the Bath and the Farm Trusts. The lease was noted in the Maori Land Court on 28 September 2006. 5

13 On 7 May 2007 Ms Adlam transferred 49 per cent of the shares in GDL to ORDA9. After the power station was built, on 23 February 2009, Ms Adlam transferred the remaining shares in GDL to ORDA9. About a year later, on 13 January 2010, Ms Adlam entered into an...