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 leo@leowatson.co.nz

437 Aotea MB 4

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-

cop-shaun-keenan-jailed-for-46-theft-related-charges>

437 Aotea MB 5

on 20 August 2019 to three years and eight months imprisonment after pleading guilty to 46

charges of fraud.

[2] Peter Capper, a trust beneficiary, seeks the removal of the trustees and, inter alia,

restoration of the trust fund by the trustees personally. He alleges the trustees were

negligent in their oversight of the trust, sufficient not only to warrant removal, but for this

Court to make orders requiring the trustees to repay the money taken by Mr Keenan. Mr

Capper also seeks further orders which are beyond the jurisdiction of this Court.

[3] The trustees, current and former, accept that their conduct was, from time to time,

below the standard expected of a prudent fiduciary and they take responsibility for their

decisions. However, they submitted, for a number of important reasons articulated by their

counsel, that they should be granted relief from liability and should not have to reimburse

the trust for the losses that occurred as a result of Mr Keenan’s fraud.

Ngā take Issues

[4] The issues for determination are:

(a) Should the trustees repay the funds lost through fraud?

(b) Should the trustees be granted relief from liability?

(c) Would the trustees have been removed if they had not resigned?

(d) Should the trustees serve a period of ineligibility for appointment?

[5] A related issue, recipient third party liability, is also considered in this judgment.

He kōrero whānui Background

[6] The Ngāti Te Whiti Whenua Tōpū Trust was constituted on 19 March 2004 to

receive and hold land for Ngāti Te Whiti, following an application by the Minister in charge

of Treaty negotiations to revest land.2 The original interim responsible trustees were Shaun

Keenan, Chargn Keenan, Linda McCulloch, Grant Knuckey, Rongmaimira Biel and Edward

Tamati, with Peter Love appointed as interim advisory trustee.

2 138 Aotea MB 59-106 (138 AOT 59-106)

437 Aotea MB 6

[7] In 2014, the trust was amalgamated with another whenua tōpū trust, the Bayly Road

Trust (“BRT”), which also held land for Ngāti Te Whiti. The BRT was terminated and its

assets vested in the trust, the name of which was amended to the Puke Ariki Lands Trust

(“PALT”).3 Later, the PALT was partially terminated to allow an area of land to be set aside

as a Māori reservation for the purpose of a marae, and the trust name reverted to the Ngāti

Te Whiti Whenua Tōpū Trust (“the trust”).4 The Court also endorsed the apportionment of

$1 million from the trust for the Ngāmotu Marae project over the 2014 to 2015 and 2015 to

2016 financial years.

[8] At the commencement of these proceedings, the existing trustees were Perry

Cassidy, Kristin Katu, Peter Moeahu, William Gary Nicholas and Jack Cassidy.5

Ko te hātepe ture o te tono nei Procedural history

[9] An application for a review of the Ngāti Te Whiti Whenua Tōpū Trust was filed by

the Deputy Registrar on 4 July 2017, following media reports that significant sums of money

had been taken from the trust and an arrest made in connection with those allegations.6

[10] I issued directions for the trust’s audited accounts for the previous three years to be

filed, along with a report by the trustees identifying any anomalies or significant variances in

the accounts compared to previous years.7 The trustees’ report was to include a response to

the allegations concerning the trust and its funds. In addition, the trustees were directed to

file annual general meeting minutes for the previous three years and their trustee meeting

minutes for the previous 12 months. I signalled that the application was to be set down for

hearing in August 2017 and the trustees must attend and answer questions on their report.

[11] The report of the trustees was filed on 31 July 2017, together with the requested

financial accounts and trust minutes. A hui of beneficiaries was also held by the trustees on

5 August 2017.

3 316 Aotea MB 163-181 (316 AOT 163-181) 4 325 Aotea MB 17-23 (325 AOT 17-23) 5 343 Aotea MB 234-236 (343 AOT 234-236) 6 Deena Coster “Name suppression lapses for former cop accused of stealing from Taranaki hapū”

(13 July 2017) Stuff <www.stuff.co.nz/national/crime/94696646/name-suppression-lapses-for-

former-cop-accused-of-stealing-from-taranaki-hapu> 7 371 Aotea MB 155-156 (371 AOT 155-158)

437 Aotea MB 7

[12] In the intervening period, a notice of intention to appear and several other

documents were filed by trust beneficiary, Peter Capper, raising his concerns over the

administration of the trust and seeking the removal of all trustees.

[13] An initial judicial conference was held on 10 August 2017.8 The trustees attended,

and their report was presented and discussed, along with the issues concerning Mr Keenan.

At the conclusion of the conference, I indicated that an independent person would be

engaged to investigate the relevant trust matters and provide a report to the Court. Once the

report was filed and circulated, the parties were to be given an opportunity to provide

comment or objection and a further hearing would then be held. The further hearing was to

be set down for December 2017.

[14] On 18 August 2017, I issued an interim judgment regarding the future conduct of the

proceedings.9 By that decision, Spencer Webster, solicitor of Tauranga, was to be appointed

by the Registrar to prepare the independent report regarding the trust and the allegations of

misappropriation of funds. I set out specific questions the report was to address and issued

directions as to the filing of the report and the opportunity for input from parties. I also

raised the issue of a Beddoe application for the trustees and indicated that the appointment of

an independent trustee would be considered further.

[15] Leo Watson, solicitor of Napier, was subsequently appointed to act as counsel for

the trustees,10 and Pauline Lockett was appointed to assist as the Court’s witness and to act

as an interim independent trustee until further order of the Court.11

[16] A chambers conference was then held with the trustees on 12 October 2017, to

discuss lease issues and related matters raised by interested parties.12

[17] Following the granting of an extension, a draft report from Mr Webster was

eventually filed with the Court on 16 April 2018 and a hearing then held on 19 April 2018.13

At the hearing, it was noted that Shaun Keenan had advised he was holding several trust

documents, which could be relevant to Mr Webster’s investigation. The next steps regarding

progression to the filing of a final report by Mr Webster were discussed and directions were

8 374 Aotea MB 216-247 (374 AOT 216-247) 9 Deputy Registrar – Ngāti Te Whiti Whenua Tōpū Trust (2017) 374 Aotea MB 81 (374 AOT 81) 10 375 Aotea MB 12-13 (375 AOT 12-13) 11 378 Aotea MB 30-31 (378 AOT 30-31) 12 377 Aotea MB 67-78 (377 AOT 67-78) 13 384 Aotea MB 132-150 (384 AOT 132-150)

437 Aotea MB 8

issued for obtaining the relevant trust documentation from Mr Keenan. In addition, orders

were issued for the replacement of trustees in accordance with an election held on 16

December 2017.

[18] The final report of Mr Webster was filed on 16 October 2019 and a report of the

trustees was filed on 11 December 2019, following the holding of the trust’s annual general

meeting (“AGM”) on 14 September 2019. A judicial conference was then held on 12

December 2019.14 Ms Lockett spoke to the trustees’ report and directions were issued in

terms of the filing of further questions and evidence, and the timetabling of matters to a

substantive hearing where the report of Mr Webster would be addressed.

[19] A Beddoe application for protective costs was filed by Ms Lockett in December

2019 and that application was set down to be heard with the substantive application.15 The

hearing was to proceed in February 2020; however, the applications were adjourned for a

special sitting to be held in April 2020.16 A further adjournment was then necessary due to

COVID-19 alert level restrictions.17

[20] A judicial conference was held on 18 August 2020,18 followed by the substantive

hearing on 12 and 13 October 2020.19 At the hearing, evidence was presented by Mr

Webster concerning his independent report and the Court also heard evidence from current

and former trustees. The application for protective costs was also addressed. At the

conclusion of the hearing, I issued an order granting relief from liability in favour of the

current and former trustees (excluding Shaun Keenan) in relation to the costs of bringing and

defending the present proceedings. The application was then adjourned to a further hearing

for closing submissions.

[21] In the meantime, orders were issued on 20 November 2020 removing Ms Lockett as

the independent responsible trustee and appointing her instead as an advisory trustee.20 Ms

Lockett was also further engaged to assist the Court and her appointment as General

14 410 Aotea MB 223-235 (410 AOT 223-235) 15 Application A20190011195 16 412 Aotea MB 169-170 (412 AOT 169-170) 17 415 Aotea MB 161 (415 AOT 161) 18 420 Aotea MB 138-143 (420 AOT 138-143) 19 423 Aotea MB 38-149 (423 AOT 38-149) 20 423 Aotea MB 200-205 (423 AOT 200-205)

437 Aotea MB 9

Manager of the Ngāti Te Whiti Whenua Tōpū Trust was confirmed, to be reviewed in March

2021.21

[22] The final hearing was held on 14 December 2020.22 At the conclusion of the

hearing, I adjourned the application for a written decision to issue.

Te rīpoata a Spencer Webster The report of Spencer Webster

[23] As foreshadowed, Mr Webster was engaged to conduct an investigation and prepare

an independent report for the Court regarding the Ngāti Te Whiti Whenua Tōpū Trust and

the allegations of misappropriation of funds. In carrying out his investigation, Mr Webster

reviewed the relevant trust and Court documents available and held interviews with the

trustees and interested parties, including the trust’s accountants and the New Zealand Police.

[24] The initial report was filed by Mr Webster in April 2018 and, following an

opportunity given to the parties to provide further information and submissions, the final

report was filed in October 2019. The report addressed the administration of the trust, the

trust’s finances and matters surrounding the misappropriation of funds, and the specific

questions posed by the Court.

[25] At the substantive hearing, Mr Webster noted that the trustees appeared to have

acted for proper purpose and in support of the kaupapa of the trust and in that regard acted

honestly and in good faith. He found there was no evidence to suggest any of the trustees

colluded with Shaun Keenan or were involved in any wrongdoing of a criminal nature.23

Te whakahaerenga o te tarati - The administration of the trust

[26] In terms of the administration of the trust, Mr Webster identified a number of

general issues, which can be summarised as follows:

(a) The trustees permitted and endorsed a high degree of deference towards Shaun

Keenan. This appeared to be based on his former occupation as a policeman, his

21 A further election of trustees was held and an order issued on 23 April 2021 appointing

replacement trustees. See 431 Aotea MB 189-195 (431 AOT 189-195). The current responsible

trustees are Haydn Te Ruki and Linda McCulloch with Pauline Lockett and Perry Cassidy as

advisory trustees 22 426 Aotea MB 107-126 (426 AOT 107-126) 23 423 Aotea MB 38-149 (423 AOT 38-149) at 78

437 Aotea MB 10

affiliation to a well-known whānau within the hapū and the fact he seemed

competent and held a number of prominent roles within the hapū.

(b) The deference to Mr Keenan was difficult to understand, given the continued and

significant delays in relation to a number of trust matters, including providing

information, completing accounts and audits, completing contractual arrangements

and the marae project funding. His explanations to trustees and beneficiaries were

flawed and lacked credibility.

(c) A belief was held by the chairperson, and possibly other trustees, that the trustees

should not be involved in the management of the trust. The view was that the Chief

Executive Officer (being Mr Keenan) and staff had the responsibility of carrying out

the operations of the trust.

(d) The trust mostly functioned in the absence of any governance manual, policies or

key procedures. A governance manual was produced but not adopted and while the

trustees did utilise some policies or made policy decisions, this was on an “ad-hoc”

basis and the staff retained a broad authority to act, at times, unchecked. In addition,

issues relating to the trust’s finances, accounts, employment of staff and the marae

project, were areas where the trustees adopted a passive approach and requests for

information or action were not followed up.

(e) The trustees were distracted from the trust’s core roles and objectives. A strategic

plan was produced but was vague and, while there were annual plans, these also did

not appear to have a focus. The priorities set were the marae project and “wealth

creation”, however, matters discussed at meetings were wide ranging, which

appeared to impact the trustees’ ability to focus on their strategic priorities.

(f) Trustees appeared unsure of key details relating to the administration of the trust,

reflecting the concern that trustees were not making informed decisions as they did

not have accurate or full knowledge of the trust’s affairs.

(g) Following the amalgamation of trusts in 2014, the trustees only met five times over

2014 to 2015 period and there did not appear to be a clear plan to complete the

practical merger of the trusts. The bank accounts of the BRT remained open until

the funds were depleted in 2016.

437 Aotea MB 11

[27] The report also detailed specific administration issues relating to the engagement

and employment of Mr Keenan and other staff, the trust record-keeping, and the

amalgamation of the trusts.

[28] As to Mr Keenan’s employment, several matters of concern were detailed in the

report. He held a number of positions with the trust, both before and after the amalgamation

of trusts. Those roles included:

(a) Chairperson of the BRT;

(b) Property manager for the BRT;

(c) Marae project co-ordinator (after the trusts amalgamated to become the PALT);

(d) Original trustee of the current Ngāti Te Whiti Whenua Tōpū Trust; and

(e) The trust’s CEO.

[29] The issues raised in the report relate to the lack of proper process, lack of clarity and

lack of oversight of Mr Keenan’s various roles. There were delays in adopting job

descriptions, a lack of clarity around remuneration terms and confusion as to contractual

arrangements after the trusts were amalgamated. In terms of the CEO position, there was no

employment agreement in place prior to Mr Keenan being appointed and the basic terms of

his employment were not outlined. The trustees also allowed Mr Keenan to prepare his own

job description and contract, which was not finalised in the 18 months that he was in the role

prior to his termination.

[30] Despite this, the trust paid Mr Keenan four weeks salary in lieu of notice following

his termination. It also appears that Mr Keenan continued to be paid for his role as property

manager even after the trust became the Ngāti Te Whiti Whenua Tōpū Trust and he was

appointed CEO, despite the creation of the role being promoted as a way to prevent the

double payments to Mr Keenan. The trustees met with Mr Keenan in May 2017 and drew

up an agreement regarding arrangements for the repayment of $335,000.00 of trust funds

which had been received by Mr Keenan. However, no repayments were ever received.

[31] The report further noted that documentation for other staff engagement was not

properly completed and that an underlying issue for the trust was the lack of a robust record-

keeping system being instituted and enforced by the trustees.

437 Aotea MB 12

[32] With regard to the amalgamation of trusts, Mr Webster found the amalgamation was

not effectively or diligently carried out as there was insufficient evidence the trustees

considered or followed up the practical merger of the trusts. While the amalgamation had

been approved by the Court and certain assets of the BRT vested in the trustees, the general

land titles were not transferred, the financial statements for the BRT were not produced in a

timely manner, two IRD and GST numbers continued to be used for some time and the BRT

bank accounts were still operating well into 2016.

Ngā pūrongo pūtea o te tarati - The finances of the trust

[33] Mr Webster reviewed the annual accounts for the BRT and PALT for the years

2008-2012, along with a report recording the financial position of those trusts for 2013. He

also reviewed the annual accounts for the Ngāti Te Whiti Whenua Tōpū Trust for the years

2014-2017. A detailed analysis of those accounts is set out in the report.

[34] Mr Webster noted the following regarding the trust’s financial position:

(a) Overall, the accounts from 2014 reveal a downward trend in the current assets of the

trust and there were signs of this trend prior to 2014.

(b) The current assets and liabilities of the trust for the period 2013-2017 reduced by

approximately $500,000.00. The current assets calculation included the

“unconfirmed misappropriated” funds paid to Shaun Keenan or his company over

the 2015-2017 period, which, if taken out, show an even more revealing decline.

(c) The cash position of the trust over the 2014-2017 period declined significantly and

the administrative expenses from 2013-2017 increased significantly, exceeding the

income of the trust in the majority of those years. Although an increased

administration expense would be likely in the initial period following the

amalgamation of trusts, some economies of scale would then be expected. However,

three years after the amalgamation, the administration expenditure had increased

substantially and seemingly excessively.

(d) The marae development project, the misappropriation of funds and the

administration costs consumed nearly all of the trust’s available cash assets. While

one of those factors alone would not have had a significant impact on the trust’s

437 Aotea MB 13

financial position, the cumulative effects of them all resulted in near depletion of the

trust funds.

(e) The trustees also received fees and payments in the 2016 and 2017 years, further

contributing to the loss suffered.

(f) The trustees did not have sufficient information to make informed decisions on the

management of the trust’s resources. Finance reports were intermittent and those

that were did not contain all relevant information. Budgets were provided and

adopted, albeit well into each financial year, but without the accompanying relevant

financial information, were not useful. However, the reports did show the reduction

in the bank balances which should have been obvious to the trustees. The trustees

did not seek more detailed information until late 2015 and 2016, although it is

possible they were led by Mr Keenan to believe that grants would be made available

for the marae project, which may have lulled them into a false sense of security.

[35] In terms of the trust payment processes, the administration of these occurred in three

phases. Between April 2014 and mid-2015, the trust had a manual system undertaken by Mr

Keenan and Rita Rukuwai using cheques. Ms Rukuwai attended trustee meetings and

presented a financial report and list of specific payments for approval. Approvals were

recorded in some but not all meeting minutes and it is not clear whether the financial reports

covered payments from the BRT account, the cheque book for which was held by Mr

Keenan. Cheques had to be signed by two signatories and Mr Keenan remained a signatory,

despite trustee resolutions to the contrary. Mr Keenan instructed Ms Rukuwai around early

2015 that she would no longer be responsible for the financial report, which was taken over

by Mr Keenan and his brother, Chargn Keenan.

[36] Between mid-2015 to mid-2016, payments were processed by Mr Keenan and Ms

Rukuwai, mostly by way of internet banking. The financial reports presented to trustees

were more of an overview and no payment schedules were submitted. Instead, Mr Keenan

held the invoices for the marae project and would load payments via internet banking to be

approved by Ms Rukuwai. Ms Rukuwai did not always see invoices associated with the

payments as Mr Keenan would promise to show her the invoices subsequently, but often did

not. Invoices and payments for non-marae matters were handled by Ms Rukuwai who

would load payments for approval by Mr Keenan. The flaw in the system was that the

person approving on internet banking would only see the payee and not the recipient bank

account.

437 Aotea MB 14

[37] From September 2016, after concerns about the trust’s payment processes were

raised, the trustees took a more hands-on role, including monitoring expenditure and the

bank accounts. Invoices were checked and collated by trust staff for approval by the

trustees, and later the Audit and Risk Committee. If approved, invoices would be paid by

staff using internet banking.

[38] In terms of those payments made to Mr Keenan or the company he owned with his

wife, SJK Associates Ltd (“SJK”), the report highlighted the following:

(a) Mr Keenan and Ms Rukuwai signed cheques on the basis that Mr Keenan would

provide the paperwork later. He did not provide the invoices and the accountants

had to obtain copies of the invoices from the suppliers. It was once the invoices

were provided that the anomalies were discovered. The cheque butts recorded the

name of one of the trust’s legitimate suppliers, but the cheques were made out to

Shaun Keenan or SJK.

(b) When the trust utilised internet banking from May 2015, Mr Keenan would load a

payment under the name of one of the trust’s suppliers but would substitute his own

bank account for that of the suppliers. There is no paperwork for these transactions,

other than bank statements.

(c) From April 2014, Mr Keenan was receiving payments for property management

services and the marae project co-ordination. In February 2015 he was appointed as

the trust CEO and continued to receive two payments: his CEO salary and the

property management fee. The property management fee was paid out of the BRT

account, the cheque book for which was held by Mr Keenan. The signatories were

Mr Keenan, Ms Rukuwai and Wiki Keenan.

(d) Mr Keenan also had access to the trust’s credit card, which was in Ms Rukuwai’s

name. He used this for trust expenses and would provide receipts and invoices to

Ms Rukuwai.

[39] The report contended that with proper governance and management, the financial

decline of the trust was avoidable. Mr Webster reiterated the lack of enforced policies and

procedures and the absence of a robust financial record-keeping system. While the

misappropriation of funds was a significant factor, this was only one factor, and the

expenditure of the trust exceeded the income too often. The trustees were also dealing with

437 Aotea MB 15

too many issues, some of which were not strategic, and as a result they did not adequately

consider their financial position. Payment approvals were made without reference to

budgets or year-to-date figures and the overall budget and marae budget were often not

aligned. The report argued it appeared that the trustees forged ahead before having the

proper governance fundamentals in place.

Ngā pātai o te Kooti - The questions posed by the Court

[40] As foreshadowed, several questions were posed by the Court for Mr Webster to

address in his investigation, specifically regarding the misappropriation of trust funds and

the actions of the trustees during that period. Responses to those questions were provided in

the report and that information is summarised below.

[41] The report noted that the information from the NZ Police was that funds were first

misappropriated in 2012 from both the BRT and Ngāti Te Whiti Whenua Tōpū Trust. While

it was originally thought there might be transactions dating back to 2010, in the end

convictions were entered for transactions from 2012. The misappropriation from these trusts

continued until 2016.

[42] The trustees began to uncover matters in July to August 2016. Peter Moeahu and

Ms Rukuwai discovered various anomalies after gaining access to the trust’s accounting

programme, Xero, when Mr Keenan was on leave. A teleconference of the trustees was then

convened on 4 August 2016 to discuss concerns regarding the management of the trust,

including $1.5 million of unaccounted spending from the Trust’s accounts. Ms Rukuwai

then worked with accountants BDO to provide detail on the unaccounted expenditure, and it

was during that process that the payments to Mr Keenan and SJK were discovered.

[43] Mr Moeahu presented a report to trustees on 25 September 2016, outlining payments

to Mr Keenan for which an explanation was sought. The report noted it was likely that the

trustees became more fully aware of the extent of payments to Mr Keenan in February to

April 2017. During that time, large payments to SJK of $40,000.00 and $46,000.00 were

discovered, which were recorded as being for the trust’s architects. Ms Rukuwai was to

undertake a review of transactions back to 2014. The trustees then took steps to confront Mr

Keenan. By May 2017, trustees were aware of the concerns that payments made to

“suppliers” were paid to Mr Keenan or SJK. The trustees resolved to take proceedings

against Mr Keenan on 27 May 2017. A complaint had been laid with Police by that time.

437 Aotea MB 16

[44] While there was now better information on the amounts misappropriated by Mr

Keenan, the report noted that it was unlikely the full amount would be known. The focus of

the investigation was on the substantial amounts in terms of contract payments and the

thefts. The Police also only focussed on larger transactions. However, there were other

areas, such as travel and accommodation and reimbursements, that could also have involved

misappropriation. The report records the following regarding the misappropriated amounts:

(a) The amount of $22,240.34 was received by Mr Keenan or SJK in overpayments for

marae project co-ordination and property management services. It is likely that he

also received additional payments that were not authorised by the trustees; however,

the amounts could not be quantified.

(b) The amount recorded by accountants BDO as unconfirmed misappropriated funds

paid to Mr Keenan or SJK totals $406,604.30. This is made up of $333,906.66

purportedly for trust suppliers, which was directed to his personal or company

accounts; $54,055.12 of payments without any supporting documents; and

$18,588.52 of unverified payments. While this amount is less than the amount for

which Mr Keenan was convicted of theft, the BDO records only date back to 2014.

(c) Of the $486,045.71 for which Mr Keenan was charged by Police and convicted of

theft, only $475,046.21 of that related to the BRT and Ngāti Te Whiti Whenua Tōpū

Trust. On further investigation of the detail, Mr Webster calculated that $69,063.38

related to the BRT from 2012-2013 and $405,802.83 related to the Ngāti Te Whiti

Whenua Tōpū Trust from 2012-2016.

[45] In his investigation, Mr Webster noted problems with the production of the trust’s

financial statements, audited accounts and the holding of AGMs. Several of the Court’s

questions related to the actions of the trustees on these matters.

[46] The 2014 annual accounts for PALT were presented to beneficiaries at the AGM on

27 July 2014, however, there were significant delays with the auditing of the BRT accounts.

Mr Keenan advised the beneficiaries and trustees of the delay at the 2014 AGM and from

that time on the matter was continually recorded in the list of action items in trustee meeting

minutes. The trustees received explanations from Mr Keenan throughout 2014 to 2015,

which they accepted at face value and considered plausible. They had no suspicions or

concerns and did not make further prudent enquiries with Mr Keenan or the trust’s solicitors,

accountants or auditors.

437 Aotea MB 17

[47] Even so, Mr Webster found the explanations of Mr Keenan were flawed and lacked

credibility, particularly as they occurred over a considerable period of time. It was not until

July to August 2016 that the trustees started to make their own enquiries regarding the

delays and other matters before Mr Keenan’s employment as CEO was terminated at the end

of 2016 and the trustees eventually attended to the audit of the accounts in 2017.

[48] The report found there was some evidence that the trustees took prudent steps to

improve the governance and management of the trust and its finances from 1 April 2015 to

31 March 2016. This included limiting the financial authority of the CEO to $5,000.00 for

budgeted items; engaging BDO accountants to assist with the wealth creation project, which

resulted in the implementation of the Xero accounting system; using internet banking instead

of cheques; and having a contractor develop policies and procedures for trustee sign-off.

However, the report also highlighted several matters that needed to be balanced against

those actions. These related to the paucity of policy and procedure; failures of the trustees to

demand bank account information and complete financial reports; and failures to

communicate directly with the trust’s accountant, auditor, solicitor and Mr Keenan over

delays to auditing accounts, trust amalgamation matters and marae building plans and

funding. The engagement of contractors and staff was also too informal, with no proper

process for approval of payments.

[49] The trustees acknowledged that the audited PALT accounts for 2014 were not filed

and that an AGM was not held in 2016, as required by the trust order. They advised that the

failure to file the accounts was an oversight, as they expected Mr Keenan to file them, and

they did not convene the 2016 AGM based on the advice of Mr Keenan and the fact the

accounts were not finalised. The trustees were not prepared to hold the AGM without the

accounts and hoped the delay of the AGM would prompt Mr Keenan and other staff to

resolve the uncompleted accounts. The report noted that the trustees were aware of their

obligations, but the marae project was all encompassing. They did not seek legal advice

regarding the auditing delays or their failures to hold an AGM in 2016 and provide annual

accounts to meetings in 2014, 2015, and 2016. They considered it was their responsibility to

resolve the issues and did not consider the assistance of a lawyer was justified.

Te Ture The Law

[50] Section 231 of Te Ture Whenua Māori Act 1993 provides:

437 Aotea MB 18

231 Review of trusts

(1) The trustees or a beneficiary of a trust (other than a kai tiaki trust)

constituted under this Part may apply to the court to review the terms,

operation, or other aspect of the trust.

(2) There can be no more than 1 review of a trust within a period of 24

consecutive months.

(3) The court may, on any review,—

(a) confirm the trust order for the trust without variation; or

(b) exercise its powers under section 244; or

(c) terminate the trust if the court is satisfied that there is a sufficient

degree of support for termination among the beneficiaries.

[51] Section 238 is also relevant, it provides:

238 Enforcement of obligations of trust

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

written report, and to appear before the court for questioning on the report,

or on any matter relating to the administration of the trust or the

performance of his or her duties as a trustee.

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

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

of injunction or otherwise).

[52] The Court has extensive supervisory powers in relation to trusts and deploys that

jurisdiction when it is appropriate to do so.24 When conducting a review of trust, regard will

be had to a trust’s performance and the competence of its trustees. While the Court will

generally concentrate on matters of governance and policy rather than the day-to-day

operational issues of the trust, where warranted, matters of operational management may

require review, particularly where there is an apprehension of risk to the assets of the trust or

a serious allegation requiring inquiry.25 In carrying out a review, the Court can invoke,

where necessary, any of the armoury of powers available to it under the Act in relation to

trusts, such as for the enforcement of obligations under s 238 or the removal of trustees

under s 240.26

[53] A particular duty in the context of the present case, is the duty of trustees to properly

invest trust funds prudently. In Jones v AMP Perpetual Trustee Co NZ Ltd, Thomas J

24 Proprietors of Mangakino Township v Māori Land Court CA65/99, 16 June 1999. See also

Rātima v Sullivan - Tataraakina C Trust (2017) 64 Tākitimu MB 121 (64 TKT 121) 25 Corrigan – Ngatihine H2B (2014) 71 Taitokerau MB 72 (71 TTK 72); Tupe Snr v Everton –

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

at [36]; and Rameka v Hall [2013] NZCA 203

437 Aotea MB 19

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

437 Aotea MB 43

the understandable outrage, trauma and dismay experienced by trust beneficiaries, based on

the evidence before the Court, I consider that the trustees would have been removed for

cause had they not resigned.

[126] This is what occurred in Rātima v Sullivan - Tataraakina C Trust case and with the

Opepe Farm Trust case, Rameka v Hall, where in the latter example, a majority of trustees

resigned before the conclusion of the proceedings while two trustees obdurately refused to

stand down.66 Ultimately, those trustees were removed and their subsequent appeals to the

Māori Appellate and Court of Appeal were dismissed. That is not the case here. The former

trustees wisely accepted the advice to stand down which was a sensible approach.

Moreover, it is also relevant to observe in this context that, along with Mr Keenan (and

justifiably so in his case), the former trustees have been subject to the odium of public

exposure, humiliation and ridicule as a result of Mr Keenan’s fraud and as a reflection on

their individual reputations.

[127] Doubtless, this will have affected their personal and professional standings not only

within Ngāti Te Whiti and Te Atiawa, but within the wider tribal and regional community of

Taranaki. Some would say that such a result is just in the circumstances for their failings as

responsible trustees. Even so, and while I have been critical of the former trustees failures to

properly administer the trust in a manner that should have been expected, nonetheless, as the

evidence confirms, even if the accounts had been audited and filed, the fraud of Mr Keenan

would not have been detected.

[128] Taking into account all of these factors, I should make one point clear. Clause 7(b)

of the current trust order states:67

(b) A trustee may be censured or removed

Any Trustee that acts in a manner that brings or is likely to bring into

disrepute the Trust may, by resolution passed by a majority of not less than

75% of the other Trustees, be formally censured or be made the subject of an

application to the Court for removal from office.

(c) Censure or removal to be notified

The censure or application for removal of a Trustee in accordance with this

Trust Order shall, together with reasons, be reported to the beneficial owners

of the trust at the next annual general meeting of the trust following such

censor or removal.

(d) Effective removal

66 Rātima v Sullivan - Tataraakina C Trust (2012) 18 Tākitimu MB 75 (18 TKT 75); Rameka v

Hall [2013] NZCA 203 67 325 Aotea MB 17-23 (325 AOT 17-23)

437 Aotea MB 44

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

Court MB 166 (2020 APPEAL 166) (footnotes omitted)

437 Aotea MB 46

Générale pour Favoriser le Développement du Commerce et de I’Industrie en

France SA where Gibson J outlined five categories of knowledge:

(a) Actual knowledge;

(b) Wilfully shutting one’s eyes to the obvious;

(c) Wilfully and recklessly failing to make such inquiries as an honest and

reasonable person would make;

(d) Knowledge of circumstances which would indicate the facts to an honest

and reasonable person; and

(e) Knowledge of circumstances which would put an honest and reasonable

person on inquiry.

[53] In Equiticorp Industries Group Ltd (in stat man) v The Crown, Smellie J

endorsed the first three categories of imputed knowledge set out in Baden and

determined that it was unnecessary to decide whether other forms of constructive

knowledge were also sufficient. This was also the approach taken by the Māori Land

Court when Judge Armstrong decided he did not need to resolve whether the

categories of constructive knowledge in Baden should be adopted, as this case fell

squarely within the first three categories.

[54] English authorities have increasingly focussed on the unconscionability of the

retention of property as the essence of a claim of knowing receipt, and this approach

was adopted by the Court of Appeal in McLennan v Livaja:

[38] A claim for knowing receipt, however, depends on the tainted

circumstances of receipt of property. Liability will arise where it is

unconscionable for the recipient to retain it because of the recipient’s state of

knowledge in respect of the fact that the transfer involved a breach of

fiduciary obligations owed by the transferor.

[39] Different High Court judgments have described the basis for knowing

receipt as either unconscionability or unjust enrichment, a divergence

possibly arising from the nature of the remedy applied in such cases. This in

turn has led to differing conclusions as to the level of knowledge required to

establish liability.

[40] We consider that the correct basis for knowing receipt is

unconscionability. We prefer to characterise the liability incurred on a finding

of knowing receipt as a personal liability to account in equity to the

beneficiaries by restoring the property lost by the unconscionable receipt. The

core duty of that liability is to restore misapplied assets, or their equivalent,

to the beneficiaries.

[135] In that judgment, the Appellate Court went on to affirm the decision of the Māori

Land Court that a recipient third party, namely a sister and daughter of two of the trustees,

was required to refund the trust the monies she had been paid by the trust for work that, it

had been asserted, was undertaken by the third party for the benefit of the trust.

[136] Given the allegations surrounding the claims of property purchase by Mr Keenan

and his wife, it may be necessary for the current trustees to obtain legal advice as to what

steps, if any, might be available to the trust in its efforts to seek recovery of funds that

belonged to the trust and that might have found their way into the hands of third party

recipients. That is a matter for the trustees to consider, on the securing of proper advice in

due course. While that pathway might eventually bear no fruit, it is important for the

437 Aotea MB 47

trustees to at least turn their minds to the issue, acting prudently and reasonably, in order to

respond meaningfully to any trust beneficiary concerns in this context. In any event, this is a

matter for the trustees.

[137] One final point. For completeness, as foreshadowed, I note that Mr Capper made

numerous allegations and sought various “remedies” in his written and oral submissions.

While I acknowledge the persistence and fervour of his arguments in seeking answers for the

events surrounding the Keenan fraud, a number of the outcomes he seeks fall outside the

jurisdiction of the Court and therefore cannot be taken any further.

Whakataunga Decision

[138] The application for relief from liability for the trust funds lost as a result of the theft

of Shaun Keenan is granted.

[139] The former trustees are invited to file submissions within one month from the date

of this judgment as to whether they should refund the trustees’ fees they received during the

period when Mr Keenan undertook the theft of trust funds and whether they are liable to

refund the trust for the final payment in lieu of notice made to Mr Keenan when his

employment was terminated. Once in receipt of any submissions, then further directions or

orders may be issued.

[140] The former trustees and any trust beneficiary is invited to file a submission on the

interpretation of cl 7 of the trust order regarding the ineligibility or otherwise of former

trustees to stand for re-election where their circumstances fall within the terms of cl 7. Once

in receipt of any submissions, further directions or orders may be issued.

[141] If the Court’s preliminary interpretation of cl 7 is affirmed, following receipt of any

submissions, then any former trustee or trust beneficiary may file a submission on whether

any former trustee should be required to serve a period of ineligibility for re-appointment.

These orders are to issue immediately, per r 7.5, Māori Land Court Rules 2011

Ka pānuitia te whakataunga i te Kooti a te tekau karaka o te rā 10 o Hepetema i te tau 2021. Pronounced at 10.00am on this 10th day of September 2021.

L R Harvey

JUDGE