Security over Maori land - is it enforceable?

The High Court has considered the power of a Maori corporation to grant security over its land (being Maori land) to secure a loan entered into for a specific investment purpose.

In this case1, Matauri X Incorporation borrowed $3.2 million from Bridgecorp secured by a mortgage over its land at Matauri Bay to invest in a failed water bottling plant.

Matauri X claimed that the loan was not valid because the incorporation did not have the power to make the investment and did not follow its own authorising procedures when approving the loan and the mortgage.

Under section 253 of the Te Ture Whenua Maori Act 1993, full capacity was conferred on a Maori corporation, subject to statutory and any other limitations or restrictions contained in the order of incorporation that expressly limited the corporation's powers.

The court decided that the order of incorporation of Matauri X did not contain any such restrictions and concluded that the corporation did have the power to borrow money for the investment secured over the land and the corporation could not escape the consequences.

The court also found that there was no evidence that Bridgecorp was aware that the Management Committee of the corporation had not authorised the chairman and secretary to execute the necessary documents on its behalf. The corporation was therefore bound by the "indoor management" rule - persons dealing with it were entitled to rely on the normal assumptions that a corporate body would carry out its necessary internal procedures. To hold otherwise would impose a severe handicap on those dealing with Maori corporations.

In reaching its decision, the court also looked at two apparently contradictory objects of the Te Ture Whenua Maori Act 1993:

• to halt the dispossession, alienation and fragmentation of Maori land; and
  
  
• to place the destiny of Maori land in the collective hands of its owners and their duly appointed representatives.

The court stated that the retention of Maori land was not to be seen as an absolute - Parliament in this Act recognises Maori as adults capable of determining for themselves how to deal with their land.

A declaration was made that the mortgage was valid and enforceable.

1 Bridgecorp Finance Limited v Proprietors of Matauri X Incorporation (High Court, Auckland CIV-2003-404-3259, 17 December 2003, Fisher J)

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