Maori Land Court criticism of Ngati Hine Forestry Trust investments is tempered with a conclusion that the trust's approach to governance and management is generally sound.
The court's analysis came in a recent reserved judgment from Judge David Ambler after a court review in March last year focussed on the trustee's financial performance and strategic decisions.
The review was sought by the trustees in 2011 and came after concerns were expressed by some of the trust's 4255 beneficial owners, who have never received a dividend and have no prospect of getting one soon.
The 18-page judgment describes how the trust was formed in 1974 through the amalgamation of about 70 Maori freehold land titles and about 5500ha was leased and planted in pines in the 1980s.
Rental income increased over the years and when cash reserves reached $1.3 million in 2003, trustees decided to diversify trust assets. In 2004 $1.7 million was borrowed from Westpac to buy three kiwifruit orchards in Kerikeri, and a fourth orchard was bought with a further $1.7 million Westpac loan in 2006.
Also in 2006, $1.5 million borrowed from Housing NZ (HNZ) was used to buy and renovate 11 homes in Kawakawa and Moerewa.
In 2010 a further $2 million HNZ loan was used by the trust to build 10 houses in Kaikohe.
The court directed the trust to apply for a review required under section 351 of Te Ture Whenua Maori Act 1993 and when the application was first heard in 2011, the court appointed RHB Chartered Accountants of Tauranga to report on the trustees' financial performance, the prudence of investments and the trust governance and management. After a review hearing in March last year, the accountants concluded governance and management was appropriate. They painted a picture of an organised trust.
Judge Ambler said he had at that time reserved his decision on issues raised by the accountants and the beneficial owners. Now addressing these matters, he said the trust would be required to repay HNZ about $3.2 million over the next few years, which would add pressure to its ability to meet its forest and orchard obligations and further diminish the prospect of the beneficial owners receiving a dividend.
The judge said, in his view, the $2 million HNZ loan in 2010 was not prudent, requiring repayment from forest harvest proceeds needed for replanting.
He accepted trustees had acted honestly, saw no basis to terminate the trust and said the review had showed the trust's governance was generally sound.