By: N/A
Published: 11/03/2013
On the 28th of February 2013 the Supreme Court found that the Crown's intended proposal to restructure the state-owned asset Mighty River Power was not inconsistent with the principles of the Treaty of Waitangi. The Court concluded that the proposal would not materially impair the Crown's capacity to remedy any Treaty breach in respect of Maori interests in water. 

The State-Owned Enterprises Amendment Act 2012 removes Mighty River Power from Schedule 1 and 2 of the State-Owned Enterprises Act 1986 and inserts it into Schedule 5 of the Public Finance Act 1989 as a "mixed-ownership model" company. Unlike state-owned companies, mixed-ownership companies are not required to be exclusively owned by the Crown. The Crown has announced its intention to bring the legislation into effect and offer 49 per cent of the shares in Mighty River by initial public offering in the first quarter of 2013.

The appellants claimed that the Crown's proposed actions would be unlawful as they were inconsistent with both s 9 of the State-Owned Enterprises Act 1986 and s 45Q of the Public Finance Act 1989, both of which require the Crown to act consistently with the principles of the Treaty of Waitangi. It was argued the Crown's proposal would prejudice Maori Treaty claims to interests in the waters used by Mighty River Power for the generation of electricity.1

There were five issues argued on appeal: 

1. Whether the proposed sale of shares in Mighty River Power reviewable for consistency with the principles of the Treaty.

The appellants argued that the prospective sale of shares would be an exercise of statutory powers under Part 5A of the Public Finance Act and the rights of shareholding Ministers under s 22(3) under the State-Owned Enterprises Act. It was therefore subject to the requirements of consistency with Treaty principles.

 The Crown argued directly against this, submitting that the Crown was not exercising its rights under the Public Finance Act or the State Owned Enterprises Act because these provisions simply restricted the extent to which the Crown could exercise its rights to own and sell shares under the common law and the Companies Act 1993. Therefore, as the sale did not invoke either Act, the Crown's prospective sale did not "trigger" the Treaty clauses.

The Supreme Court followed and confirmed the approach taken in the Court of Appeals "landmark" decision in the 1987 SOE case. 2  In 1987 the Court recognised s 9 as "a fundamental principle guiding the interpretation of legislation which addresses issues involving the relationship of Maori with the Crown". That judgment utterly rejected a narrow approach to the interpretation of Treaty clauses. The Supreme Court found that the seamless transition of s9 to s 45Q made clear the parliamentary intention that s 45Q must receive "equivalent significance" to s 9. Accordingly, the Supreme Court concluded that all Crown actions in relation to the ownership of mixed ownership model companies are subject to s 45Q.3

2. Whether Cabinet's decision to bring into effect the State-Owned Enterprises Amendment Act was reviewable.

The Court found it unnecessary to determine separately whether the Proposed Order in Council to bring the legislation into effect was also to be reviewed for consistency with treaty principles.

3. Whether the proposal was in breach of s 64 of the Waikato- Tainui Raupatu Claims (Waikato River) Settlement Act 2010?

Section 64 requires engagement with Waikato-Tainui where the Crown, a Crown entity, a state enterprise, or a mixed ownership model company disposes of an interest in the Waikato River. The Court found that the Crown was not in breach of s 64 as it still held an interest in water and was therefore not disposing of its interest.

4. Whether the consultation undertaken by the Crown following the Freshwater Report was adequate.

The Court held that the consultation following the Waitangi Tribunal's Freshwater Report4 was not inadequate. The Court highlighted the fact that the scope and speed of the process was in accordance with the Waitangi Tribunal's Freshwater recommendations, affirming it was appropriate for the wider range of issues to be discussed in the second stage of the inquiry. Further, the Court found that just because the Crown ultimately rejected the Waitangi Tribunal suggestion of 'shares plus' as inappropriate, this did not mean that pre-determination in the consultation process could be inferred.

5. Whether the proposed sale of shares in Mighty River Power was inconsistent with the principles of the Treaty.

Clearly, this was the pivotal issue of the judgment. The Supreme Court applied the test adopted by the Privy Council in the Broadcasting Assets case. In that case the test was used to determine whether the proposed transfer of assets to a State enterprise would breach s 9 of the State- Owned Enterprises Act. The Court held that this occurs if the Crown proposals will "in the foreseeable future impair, to a material extent, the Crown's ability to take reasonable action which it is under an obligation to undertake in order to comply with the principles of the Treaty". To decide what is a material impairment requires the Court to make a "contextual evaluation". What this means is that while Crown obligations are constant, the protective steps which it is reasonable to take change depending on the situation which exists at the time.5

The key contextual factors considered by the Court in this case were:
  1. treaty claims against the lands of the Mixed Ownership companies would not be affected;
  2. the current power-generating infrastructure and its significance for the wider New Zealand economy;
  3. while partial privatisation would limit the 'shares plus' proposal6, the views of the Waitangi Tribunal in its Freshwater Report recognised that the shares could only ever be a 'proxy' for the waters in which interests and rights are claimed.
  4. the extent to which Maori interests are being recognised in reform of the law relating to the governance and management of water. In particular, the Court emphasised the current Fresh Start for Fresh Water initiative and the second part of the Waitangi Tribunal's Freshwater inquiry. These reviews will assess Maori interests in the creation of property rights or changes to the regulatory regimes governing water use.
  5. crown acknowledgement that Maori have interests and rights in relation to particular waters, albeit not to the extent of full ownership. This includes acknowledgments and assurances given by Ministers that Maori claims to water will not be prejudiced by the sale and that the Crown will not be deterred from making Treaty reparation by the change in ownership.
  6. the current legislative and social landscape which includes substantial recognition of Maori interests in relation to water in the Resource Management Act and legislation settling historic claims.
The Court was prepared to accept that the proposal may limit the ability for the Crown to provide some forms of redress, particularly the 'shares plus' proposal. However, the Crown could provide equivalent and meaningful redress through alternatives. Therefore, the Court was not persuaded that a material impairment arises from the proposed sale of shares.

This paves the road for the Crown's well-publicised policy of partial privatisation. However, the judgment also sends "judicial signals" to the Crown about its expectations regarding the recognition of Maori interests in water. The decision emphasises the assurances and contemporary track record of the Crown that it will provide redress for Treaty breaches. Concurrently, the Court founded their decision on the basis that that equivalent redress could be delivered more directly through change to the regulatory system and specific settlements. The message seems to be quite clear - the ball is the Crown's court.


1 Use of these waters for power generation is permitted through the acquisition of a 'grant' under the Resource Management Act 1991.
2 New Zealand Maori Council v Attorney-General [1987] 1 NZLR 641
3 Given this conclusion, the Court did not feel obliged to address submissions regarding s 22(3).
4 Waitangi Tribunal The Stage 1 report on the National Freshwater and Geothermal Resources Claim (Wai 2358, 2012)
5 New Zealand Maori Council v Attorney General [1994] 1 NZLR 513 at 517
6 A concept that emerged from the Waitangi Tribunal's Freshwater Report. It involves the creation of a special class of share with special voting or other rights, which would be vested in Maori claimants.

Download article in PDF format



 Security code

Wynn Williams Christchurch
Level 5, Wynn Williams House, 47 Hereford Street, Christchurch 8013, New Zealand.
PO Box 4341, DX WX11179, Christchurch 8140.
+64 3 379 7622
+64 3 379 2467
Wynn Williams Auckland
Level 11, AIG Building, 41 Shortland Street, Auckland 1010, New Zealand.
PO Box 2401, Shortland Street, Auckland 1140.
+64 9 300 2600
+64 9 300 2609
Top

This page is best viewed in an up-to-date web browser with stylesheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so. The latest version of Firefox, Safari or Google Chrome will work best if you're after a new browser.