Maori Land Development

Monday November 11, 2013

Click here to read the article published in the New Zealand Law Journal.

In June 2012 the Associate Māori Affairs Minister Christopher Finlayson announced the appointment of a Review Panel to consider amending Te Ture Whenua Māori Act 1993 with a view to unlocking the economic potential of Māori land.  In the accompanying press release it was stated that Māori land consists of around 5% of the total land in New Zealand and recent reports suggested that up to 80% of this land was under-performing for its owners. The terms of reference for the inquiry charged the panel members with recommending how Te Ture Whenua Māori Act 1993 might be amended to " best support the owners of Māori land in reaching their aspirations."

The Review Panel reported back with a Discussion Document in March 2013. They put forward a range of recommendations for public submission. The recommendations suggested a range of amendments to Te Ture Whenua Māori Act 1993 which broadly had the objective of freeing up the ability of owners to make decisions about the development of Māori land.

In the past there have been other inquiries into improving the economic development of Māori land. In the last 5 years there have been two major Waitangi Tribunal inquiries that have dealt with this issue and made recommendations to the Government. Both the Central North Island and the Tauranga Tribunals found that many the historic problems that Māori have had with developing their land can be traced back to the Crown acting in breach of their Treaty of Waitangi obligations in undermining communal tribal authority over land by granting title to individual tribal members.  Both tribunals went on to recommend that the Government should address these treaty breaches by trying to address these difficulties, including providing direct assistance to owners of Māori land. To date the Government has not shown any indication of addressing these recommendations..

Against the background of recommendations that have been put forward to promote Māori land development by the Waitangi Tribunal and the Review Panel, this article attempts to analyse what types of law reform might provide the most efficient solutions to what has long been a significant problem for not only Māori but New Zealand Society as a whole.

Central North Island Inquiry

The Central North Island Inquiry ("CNI Inquiry") was held over 2006 and 2007 with the Tribunal's report delivered in 2008 ("CNI Report").  It was the largest inquiry ever undertaken by the Waitangi Tribunal.  It dealt with 120 claims within a region stretching from coastal Bay of Plenty inland to Lake Taupo and eastward across the Kaingaroa Plains.

The Central North Island Tribunal ("CNI Tribunal") considered a number of generic or "big picture" issues raised by the claimants.  A number of the issues and the subsequent findings by the CNI Tribunal related to Māori land development.

In the CNI Report the CNI Tribunal found that the historical problems with development of Māori land could largely be traced back to the Crown’s establishment during the 1860s to 1880s of a land title system under which the only way in which Māori could obtain title to their lands was through the Native Land Court issuing title in common to individual hapu members.  As such, the customary rights of hapu and other communal groups to control their lands was completely undermined (at 537 and 720).

The CNI Tribunal went on to find that as a result "in a legal and commercial climate hostile to the multiple ownership of land, Māori owners faced great difficulties in attempts to manage, use, and develop their land and resources, to raise finance, or to sell or lease land" (at 720). The CNI Tribunal noted that the scale of the problem caused by individualisation progressively worsened over time as European practices of allowing each individual child to succeed to their parents' land interests was followed by the Courts (at 720).

In line with previous Tribunal findings, the CNI Tribunal found that the Crown acted in beach of their Treaty obligations of active protection in individualising Māori land and as a result Māori had a "development right" to be provided with positive assistance in overcoming the resulting barriers to developing their lands (at 912).  The position taken by the Crown at the Inquiry was that it had historically accepted that it had these obligations but had over time taken steps to assist Māori to overcome these difficulties (at 720).

The Tribunal noted that the Stout-Ngata Commission report in 1905 recommended that management and finance support be provided to Māori land owners but it was not until the Māori land development schemes initiated in the late 1920s by Sir Apriana Ngata as Minister for Native Affairs that such assistance was given.  The CNI Tribunal noted that these schemes "side-stepped" the title problems by compulsorily placing areas made up of a number of multiply owned Māori titles under the control of Crown appointed managers.  The money spent on development was charged to the titles concerned.  Once the farm units were developed the object was to use any income to repay the loans then eventually return the lands to the owners with families established on the farming units. Even after Sir Apriana Ngata stood down as Minister for Native Affairs in 1932 successive governments continued placing Māori land into the schemes with land still being returned to owners in the 1990s (at 1209).

The CNI Tribunal assessed that many of the schemes were successful in ultimately returning to the owners viable working farms but they did not appropriately balance "development rights" in that owners had very little say in the developments on their lands.  Also some of the lands were kept within the schemes for many decades in an effort to repay the debts charged.  In this respect the CNI Tribunal observed that this often did not appropriately recognise that there were wider public benefits in developing the lands which may have warranted writing some of the debts off (at 1013-1014).

The Tribunal noted that the Hunn and Pritchard-Waetford reports in the 1960s initiated a change in government policy so that it came to be accepted that groups of Māori owners could successfully develop their land (at 787).  As a result, finance and management assistance was made available to multiply owned Māori land from 1966 through the Department of Māori Affairs under s460 of the Māori Affairs Act 1953 ("Māori Affairs Loans") (at 788).  These Māori Affairs Loans were discontinued in the 1980s at the same time as the withdrawal from land development schemes as part of the Government’s stepping away from active involvement in Māori economic enterprises (at 1029).

A further significant reform flowing from the policy shift at this time was that from 1967 the purposes of trusts established under s438 of the Māori Affairs Act 1953 was widened to enable trustees to facilitate the use and management of the land (at 784).  Following this the CNI Tribunal observed that there was a significant uptake in owners of Māori land applying to the Māori Land Court to have trusts and incorporations established over their land (at784).  The CNI Tribunal noted that the range and nature of the trusts and incorporations were further expanded by Te Ture Whenua Māori Act 1993 (at 791).

It was the CNI Tribunal's view (at 795) that:

… trusts and incorporations have been important tools for addressing crowded titles inherited from the Native Land Laws.  They have provided a form of corporate management that has allowed claimants to develop their land, all other factors such as access to finance being present.

The CNI Tribunal however noted that there was a continuing problem with trusts and incorporations with ownership fractionalisation, the often intrusive supervisory powers of the Māori Land Court (at 795), obtaining finance with the Government withdrawing from any involvement with providing finance itself and there being a continuation of the "longstanding and persistent prejudice of private lenders against lending on all forms of Māori land" (at 1041).

In the covering letter from the CNI Tribunal to the Minister of Māori Affairs dated 16 June 2008, it was noted that the barrier to Māori land development presented by the title system had not been removed and "[i]t is still necessary to establish effective bases for iwi and hapu in the Central North Island.". 

Tauranga Inquiry

The Tauranga Moana Inquiry ("Tauranga Inquiry") dealt with claimants in the Western Bay of Plenty.  The second stage of the Tauranga Inquiry covered the period from 1886 until the date of the hearings in 2006.  The Tauranga Moana 1886-2006 Report on Post-Raupatu Claims ("Tauranga Report") was delivered in 2010.

Chapter 3 of the Tauranga Report dealt with the particular issue of land development. Largely it adopted the findings of the CNI Inquiry as to the barriers faced by Māori with land development caused by the land title system (at 171). The Tauranga Report further made a number of observations on how the development issues presented themselves in the inquiry area. 

A success story noted in the Tauranga district were the application of the Māori Affairs Loans.  The Tribunal noted that during the 1970s and 1980s there were a number of instances when corporations and trusts applied for and were granted finance and management assistance to establish horticultural operations on their lands.  It was noted that these contrasted with the earlier land development schemes in that government officials only took control of the project for as long as required to get it established before they were handed back to the owners at which stage the loan balances were partially or entirely written off (at 210).  It was noted that these projects continued to run successfully with some of the commercial returns being directed to the social benefit of owners including providing employment, scholarships and pensions (at 209).

The Tauranga Tribunal noted with concern that since the Government stopped providing Māori Affairs Loans as part of its devolution process in the 1980s there was no longer any public finance for the development of Māori land. It noted that the Māori Affairs successor organisation Te Puni Kokiri only has limited programmes to provide training and mentoring in development but not for actually financing land developments (at 212). The Tauranga Tribunal also observed that Māori land owners continued to have difficulties accessing private finance (at 227).
 
Against this background the Tauranga Tribunal concluded that "to avoid breaching the principles of active protection, mutual benefit and equity, the Crown needs to find some way of assisting Tauranga Māori to realise their aspirations for holding on to their land and developing it" (at 228). In this regard the possibilities of the suspensory or interest free loans or encouraging assistance through existing banks was suggested (at 227).

Review Panel Discussion Document

The Government has to date not provided any formal response to the Māori land development recommendations of either the Central North Island or Tauranga Waitangi Tribunal Inquiries. Specifically, the Waitangi Tribunal reports were not mentioned when, in June 2012, the Government appointed the Review Panel to look at a how Te Ture Whenua Māori Act 1993 can be changed to improve ability of owners to develop Māori land.

The Discussion Document produced by the Review Panel in March 2013 contains a number of key recommendations. Firstly, that with the exception of sales, all other decisions regarding Māori land require only the support of 50% of 'engaged owners' - who have demonstrated their commitment to ownership by actively being involved in participating in the voting process.  Secondly, that if there are no 'engaged owners' then external administrators be appointed (and possibly funded by the Government). Thirdly, that governance rights and obligations of Māori land owning trusts and incorporations be more aligned with the law applying to trusts and incorporations in general. Fourthly, that civil dispute type settlement conferences and mediations be used to address owner disputes. Fifthly, that there be a minimum level of fragmentation of individual interests, or a restriction on voting rights for those interests falling under a minimum interest.

It can be seen that a general theme of the recommendations was that the rights of Māori land owners to develop their land should be freed up to be closer to those of general land owners, and if the Māori land owners still do not ‘engage’ then control of the land should be taken away from them.

In this regard, the recommended suggested freeing up of owner’s rights may be more apparent then real. As it is, Māori land trustees and incorporation boards have the same types of rights and obligations that general trustees and company directors have. Specifically, they have a similar scope to make major decisions concerning the land. Under Te Ture Whenua Māori Act 1993 (s150A and s150B) there are requirements to obtain minimum levels of owner support for some 'alienations' (sales – 75%, long term leases – 50%, but minimum for mortgages). However, these are similar to the 75% shareholder support requirements for 'major transactions' (including sale or charge involving more then half of a company's assets) under the Companies Act 1993 (s129). The suggested lowering of the thresholds to be those of 'engaged owners' will, under Te Ture Whenua Māori Act 1993, ultimately only effect decisions concerning long term leases (and even then raise potentially contentious issues as to how 'engaged owners' are determined).

There have also been earlier government inquiries which have made similar recommendations with limited results. For example, the Hunn and Prichard-Waetford reports made recommendations to free up restrictions on Māori land in 1960s. Many of these recommendations were implemented in the Māori Affairs Amendment Act 1967, including changing the status of land owned by four or more owners or owned by incorporations to general land. But after meeting general opposition from Māori these amendments were largely reversed in 1974. There has also been past measures to take control away from 'unengaged' owners, including placing land under Māori Land Boards (which later became the Māori Trustee) in the early 20th century, and early Māori land development schemes. As noted by the CNI Tribunal with regard to the Māori land development schemes, this approach tended to suffer from lack of owner input, as well as lack of focus and enthusiasm from the eternal administrators.

Discussion

Amongst the recommendations of the Waitangi Tribunal and the Review Panel there is a range of suggested solutions to the issue of Māori land development. These range from the Waitangi Tribunal recommendations that the Government provide direct assistance to owners to carry our development, to the expert panel suggesting that the answer lay in freeing up some of the protective legislation surrounding Māori land ownership so that they are treated more like general land interests.

In trying to assess what type of approach would be more likely to lead to improved Māori land development, some of the expert evidence presented during the CNI Inquiry can be seen as being relevant.

In particular, the evidence presented at the Inquiry by the historian Alan Ward. Professor Ward observed that the policy of the New Zealand colonial government of individualising Māori land title promoted national economic development by facilitating the introduction of the market economy based upon rights to deal with individual property. However, Ward also observed that the experience of Māori reflected the historical trend of indigenous peoples, in that even if they retained some of their land they still tended to become economically marginalised.

Ward's overarching thesis was that in order to improve outcomes for indigenous peoples there needs to be an attempt to identify a reasonable balance between "the social relationship and values attaching to the land and the goals of economic development". In this respect Ward considered that with Māori there was a failure to achieve this balance.

In Ward's opinion, perhaps the best approach to a balanced development of Māori land was contained within the Native Land Act 1862. This provided for title to be given to a tribe who would then work with officials in deciding how tribal estate would be applied to a variety of uses, including sale, lease or licence. In Ward's view, this would have led to a gradual opening up of land for development including transfer of holdings to individual Māori farmers and their families. Ward considered that the reason why the colonial government replaced this regime with one premised on individualisation of title was that they wanted quicker progress towards the free holding of land to settlers.

The policy adopted of individualisation of title was seen by Ward to be both economically and socially disastrous for Māori. Not only did it undermine traditional communal society but "planned development was virtually impossible". In Ward’s view, it was the “worst of both worlds”.

Ward observed that at present the traditional role of the tribal authorities overseeing the use of land by individuals and sub-groups is effectively currently undertaken by the Māori Land Court. For example, in determining succession, overseeing and monitoring administration of trusts and incorporations, determining partitions and particular use rights.

Ward suggested that a way for the Government to improve the situation with Māori was to facilitate a role for an overlaying tribal structure to administer lands, under which institutions representing sub-groups and individuals can directly utilise the land in a meaningful way. Ward envisaged that this could involve the overarching tribal structure allocating and providing a secure basis for use rights to whanau and individuals (or modern day equivalents such as trusts and incorporations) and making decisions on the long term future of the lands, such as sales, leases and other alienations.

Ward’s thesis can be understood on the basis that, with land control historically being transferred from communal tribal authorities to a number of individual owners, there was typically no longer anyone with sufficient motivation to co-ordinate and drive land development. Although individual owners would often attempt to take on the task, the fact that they would be required to put in time and resources which may benefit other owners more than themselves, would often mean that the co-ordination efforts would be less then optimal.

Apart from the Māori Land Court example given by Ward, it can be seen that another instance of land development being co-ordinated by a tribal authority substitute, can be found in the various government schemes involving the direct management of Māori land development. For example,  the Māori development schemes and the Māori Affairs loans.

In this regard, the Māori Affairs loans were probably more successful because the owners chose the type of development, whereas the Māori development schemes usually involved a development model chosen and imposed by the Government with little owner input (which, at least during the earlier period, was the family dairy farm model driven by Apriana Ngata). 

This all suggests that going forward, there is rationale for the Government to get back involved with working with owners of multiply owned Māori land in assisting to manage development projects. As with the Māori Affairs loans, this would involve the Government agencies assessing the development suggested by the owners to see if it was feasible, and if it was providing personnel and resources necessary to get the development to an operational level.

There is also an argument for building capacity in organisations that can exercise a form of tribal authority, as suggested by Ward. This may require making specific provision for legal entities designed for this purpose. For instance, the types of entities suggested by the Law Commission in their 2006 report Waka Umanga: A Proposed Law for Māori Governance Entities, and subsequently provided for in Labour Government's Waka Umanga Bill 2007, which to date has not been passed through to legislation.

In this regard, of relevance is the recommendations of the expert panel that the Government consider funding the Māori Trustee or post settlement entities to take control of land where there are no ‘engaged owners’. As note above, the success of this type approach would tend to suffer from lack on owner input. However, if this type of assistance was provided to work with 'engaged owners' then it may offer more promise.

Other evidence of relevance from the CNI Inquiry was given by Gary Hawke, Professor of Economic History at Victoria University. He observed that multiple owners having a cultural attachment to land often do not want to risk foreclosure by putting the land up for security. Further, even if they are willing to do so, they have had difficulty in accessing finance in the open market because the perception of lenders is affected by protective measures against foreclosure on the land. He also points out that Māori are disadvantaged by being less educated and experienced in economic management which would further detrimentally affect the perception of lenders. In these circumstances Hawke states that historically "the Crown was necessarily faced with striking a balance between providing protection and facilitating access to finance".

Hawke noted that the Government had intervened in other instances to address the perceptions of private lenders. For example, he noted that through the Advances to Settlers Act 1894 the Crown effectively underwrote overseas loans which would be on-lent to individual settlers in situations where the overseas lenders would not have had sufficient information to satisfy themselves as to the security of the settler borrowers.

It can be argued that the same rationale can be seen to be applied for the Māori land development schemes and the later Māori Affairs loans. These government measures can be seen as being taken on the basis that there was a public interest in bringing land into production which was not being financed by the market because of the perception of private lenders.

One cannot see the situation with private financiers being reluctant to loan money to Māori land owners immediately improving. Even if the co-ordination of development is improved by the type of measures discussed above, the problems in raising finance stemming from the cultural importance of the land causing concerns about foreclosure will linger.

The root of the problem appears to be that the private finance market, as it has developed in New Zealand, is geared around land developers being willing to risk their land by putting it up for security for loans. Finance providers are generally reluctant to consider other forms of security, such as taking security over leases or long term income streams. Such alternatives would tend to involve a longer term commitment to loan recovery than allowed by their much shorter term performance guidelines.

Given these problems with development, a standard economic analysis response may be that Māori should sell their land to others who see more value in the land as a development proposition. However, the difficulty often arises because Māori value the land more – not less – than others. So any such sale will not necessarily result in a net societal gain.

The reality is that there has been and continues to be a market failure in the provision of finance for the development of Māori land that calls for the type of balanced policy response discussed by Hawke. In this regard, history suggests that the Government providing the finance itself under certain conditions can result in successful outcomes. With both the Māori land development schemes and the Māori Affairs loans, the Government was willing to provide finance with the security that it would have a long term involvement with the development to secure repayment.

If the Government was prepared to provide such assistance, history would suggest that the Māori land development schemes approach of attempting to retain complete control over the land until the loans are repaid suffers from the long term lack of owner input into the development. Instead, leaving the land largely under owner control but with a residual right to take a charge over income from the land, would seem to be a better option.

Another factor that perhaps should be taken into account in assessing the appropriate balance of government involvement in Māori land development are the Crown's treaty obligations. Hawke, at the conclusion of his evidence, reflected that: “It is not at all easy to see what was the appropriate balance of paternalism and recognition of autonomy as the Crown considered it’s Treaty obligations.” In assessing the correct balance, it can argued that the public benefit in addressing current and past breaches of Treaty obligations should be taken into account.

The Waitangi Tribunal has found that the Crown acted in beach of their Treaty obligations of active protection in individualising Māori land and as a result Māori had a "development right" to be provided with positive assistance in overcoming the resulting barriers to developing their lands.  The fact that the Government wrote off some of the balance of Māori land development and Māori Affairs loans can be seen as being attempts to acknowledge that the loan schemes were in part an attempt to remedy these past wrongs of the Crown. This factor would also supports an argument that with any assistance provided by the Government, be it in the form of managing the developments or providing finance, discounts from market rates in general may be warranted.

Conclusion

Overall, an optimal approach to promoting Māori land development may involve the Government providing direct assistance to owners, as recently recommended by the  Waitangi Tribunal. This type of approach could involve the Government: assisting with the management of land development, supporting and resourcing modern alternatives for tribal authorities, directly providing long term finance, and writing down some of the management costs and loans to take into account the benefit of remedying past Treaty breaches.

By contrast, the recommendations of the Government-appointed Review Panel, to the effect of freeing up the ability of owners of Māori land to make decisions about development (and if they still do not ‘engage’ then taking control of the land should be taken away from them), may not offer the same potential for success.

As argued by Alan Ward, successful development of Māori land requires more than just opening up to market forces. There also needs to be a balancing of cultural values. The barriers to development faced by owners Māori land are in many respects not removed by treating them the same as owners of general land. For instance, this may not address the problems with co-ordinating efforts of large groups of owners and the cultural barriers to putting the land up for security for loans.

By instead, adopting more of balanced approach allowing for economic development of Māori land while at the same time maintaining cultural connections, could provide the ‘best of both worlds’ for Māori and society as a whole.


Michael Sharp
Partner, Holland Beckett

 

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