Are trustees meeting their obligations?


Assessing whether a trustee is meeting their obligations is often misunderstood so lets look at the facts

The underlying issues with many trusts around the country are :

  • Is the trust been run properly
  • are the beneficiaries been informed
  • are the decisions really being made in the best interests of the beneficiaries
  • What do we do if we don't agree with what their doing
  • Etc.

There are a few overriding principles that may be hard to swallow but create the correct and lawful administration of Maori land trusts. Much like many other systems of law they do not fully acknowledge the processes of te ao Maori but they are never the less the yard stick used to asses competency of a trust or trustees to continue to administer the trust

1) The trust deed is the ultimate law on how your trust is operated as long as its content and instructions are legal and acceptable to the court.

2) The "trusts act 2019"

Direction from the Maori land court also outlines 11 principles of trusteeship and it is these that identify possible defined breaches of the obligations of trustees.

As a trustee you need to know:

  • what is being administered by the trust (any land or other assets of the trust)
  • the terms of trust (your powers and responsibilities under the trust order)
  • all the issues affecting the trust.

You must act lawfully and for a:

  • Māori land trust, you must act in accordance with the powers and responsibilities of the trust order
  • Māori Incorporation, you must act in accordance with the Māori Incorporations Constitution Regulations 1994
  • Māori Reservation, you must act in accordance with the Māori Reservation Regulations 1994.

  • You must be impartial in your approach and treat all beneficiaries with the same degree of fairness regardless of who they are or the number of shares they have.
  • Your decisions must be made in the best interests of all the beneficiaries or shareholders.

  • Any investments you make must be done in accordance with the powers you may have under your trust order or regulations, and need to be well thought out and prudent.

Diligence & prudence
  • You are required to act with the same care, diligence, prudence and good judgment expected of business people managing the affairs of others.

  • You can only delegate your responsibilities if your trust order or regulations allow, or to the extent allowable under the Trustee Act.
You are however able to employ professionals to assist the trust if required.

Act jointly
  • You must work together with any other trustees appointed for your trust. Whilst you can act by majority, you all share equally in any decisions made by the trust, good or bad.

Act without personal profit
  • You can't benefit personally from being a trustee. In some cases a trust order or regulation will allow a trustee to receive reasonable reimbursement for expenses they incur in their role as a trustee – they may also provide that a meeting fee or honoraria be paid.
  • Any meeting fees or honoraria need to be approved by us so we can ensure that you have the broad support of your beneficiaries or shareholders, and that the business of the trust can afford to make such payments.

Pay the right people
  • You must ensure that the funds received for the trust are applied for the benefit of the shareholders or beneficiaries of that trust.

Keep good accounts and records
  • You must keep good financial and administration records for the trust. Shareholders and beneficiaries may access records or any other information about the trust and you must be able to provide information upon request.

Declare conflict of interests
  • You must declare any real or potential conflicts of interest you may have in your role as a trustee. This includes any discussion or decision being made for the trust that could affect you personally, in which you have an interest or affects any employment or funds you may receive.
  • You should declare your conflict to the other trustees and not take part in any discussion or decision that could affect your interests.

Regular disclosure or contact with beneficiaries
  • You must keep your shareholders or beneficiaries regularly informed about the financial position and performance of the trust.
  • You should also undertake appropriate consultation about major policy issues affecting the trust or of any major undertakings that the trust may be looking to participate in.

With the above information and guidance you will be able to clearly define where a breach may have been committed.

The most acceptable process of forcing action is to itemize the clause in the trust deed and/or the principles and define the activities you believe are contrary to that item.

Contact the trustees (through the MLC if required) and request a meeting of owners to address the issues you have outlined.

If the meeting is called, ensure that it is correctly chaired and recorded. At this meeting the trustees should advise whether they view your issues as valid and canvas the other beneficiaries for their feedback on the issues. Either way they would need to address the  if, when and how  your issues will be dealt with.

If they refuse to have a meeting, your only option is to apply to the Maori land court to enforce the responsibilities of trust. In nearly all cases a judge will order the trustees to convene a beneficiaries hui in order to facilitate resolution but if the breach is major then the courts may take immediate action.

This is not a short process and not all breaches of trust are done with malice so it is important to remember our connection to each other when confronting issues. It is however important for our future generations to provide strong leadership within our trust in order to protect our whenua and provide opportunity for the beneficiaries.

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Monday, 20 May 2024

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