The Supreme Court’s recent decision in Nikora v Kruger [2024] NZSC 130 has conjured up a revolutionary new principle of property law. According to our highest court, land can be beneficially owned by the dead. This startling proposition emerges from the Court’s efforts to expand the Māori Land Court’s jurisdiction over tribal trusts.

At issue was whether the Māori Land Court could supervise Tūhoe’s Treaty settlement trust. The trust, Tūhoe – Te Uru Taumatua (TUT), was established in 2009 to receive and manage Treaty settlement assets. Like other post-settlement governance entities, it was set up as a fully discretionary trust, giving trustees broad powers to manage assets for tribal development.

The appellant wanted the Māori Land Court to intervene in a dispute over trustee appointments. But there was a jurisdictional hurdle. The governing legislation, Te Ture Whenua Māori Act 1993, only gives the Māori Land Court jurisdiction over “General land owned by Māori” - defined as land beneficially owned by “a Māori or by a group of persons of whom a majority are Māori.”

TUT, like other discretionary trusts, has a clear legal structure. The trustees must exercise their powers for the benefit of the discretionary beneficiaries. Those beneficiaries - in this case, tribal members - have no fixed beneficial ownership interest. They have only a right to be considered for distributions.

For the Court of Appeal, the analysis was straightforward. Since no living person had beneficial ownership of TUT’s land, the Māori Land Court lacked jurisdiction. Orthodox trust law principles led inevitably to this conclusion.

But our Supreme Court was not to be deterred by well-established legal principles. Having acknowledged that no beneficiary had ownership rights in TUT’s land, the Court manufactured a remarkable fiction: long-dead tribal ancestors could satisfy the beneficial ownership requirement.

The Court’s reasoning flies in the face of fundamental principles of property law. While trust law recognises limited exceptions where trusts can exist without living beneficiaries (notably charitable trusts), the general principle remains clear. When someone dies, their property cannot remain in their ownership. It must pass either through survivorship, trust succession, or estate administration. These rules reflect the practical reality that property rights must be exercisable by the living.

Yet the Court ignored these basic principles. The logical impossibility of beneficial ownership by the dead in a trust where no beneficiary has ownership rights created an unbridgeable gap.

The Court attempted to span this logical chasm by relying on concepts of collective tribal ownership in tikanga Māori.  But however culturally significant tikanga concepts may be, they cannot cure fundamental contradictions in trust law.

These concerns with the Court’s reasoning are not merely theoretical. The Court’s disregard for basic principles of property law creates profound practical problems.

Consider the position of trustees. How can they exercise powers for the benefit of beneficial owners who are deceased? The law of trusts provides clear principles for trustees dealing with living beneficiaries. But it offers no guidance when beneficial ownership supposedly vests in ancestors who died centuries ago. While the collective rights of discretionary beneficiaries are already complex and often uncertain, the Court's reasoning effectively creates a form of perpetual trust that defies orthodox trust law principles.

The problems for third parties are equally concerning. Property and trust law have developed over centuries to provide certainty in commercial dealings. When someone dies, we know their property must pass to the living through well-established legal mechanisms. But the Court’s novel form of perpetual ancestral ownership undermines this certainty. How can parties assess ownership rights or conduct due diligence when orthodox principles no longer apply?

These practical problems are particularly acute for post-settlement governance entities. These trusts manage hundreds of millions of dollars of tribal assets. They enter into commercial arrangements, borrow money, and make investments. Their trustees need clear rules about their obligations. Their commercial partners need certainty about who they are dealing with.

Yet the Supreme Court seems unconcerned with such practical realities. Instead, it has prioritised expanding the Māori Land Court’s jurisdiction through a form of judicial sleight of hand.

The Court attempts to justify its approach by suggesting it better aligns with tikanga principles of collective tribal ownership. But this misses the point. The issue is not whether tikanga concepts of ownership differ from Western legal concepts - they clearly do. The issue is whether the Court can ignore basic principles of property and trust law by invoking tikanga.

Moreover, the Court’s approach may actually undermine tribal autonomy. Post-settlement governance entities were deliberately structured as discretionary trusts to give tribes flexibility in managing settlement assets. The Court’s reasoning introduces uncertainty about the nature of tribal members’ rights and trustees’ obligations that could hamper effective tribal governance.

The decision exemplifies a troubling trend. As detailed in the Initiative’s recent report, “Who Makes the Law? Reining in the Supreme Court”, our highest court increasingly substitutes its own preferences for clear statutory language and established legal principles.

It is one thing for courts to develop the common law incrementally to address novel situations. It is quite another to invent forms of property ownership that defy both fundamental legal principles and practical reality. When courts do this, they are not just making law – they are making it up.

The Court might respond that its approach promotes broader access to justice by expanding the Māori Land Court’s jurisdiction. While reasonable people might disagree about whether Parliament intended to exclude discretionary trusts from that Court’s jurisdiction, the solution to any perceived gap in jurisdiction lies with Parliament, not judicial invention.

Instead, Parliament carefully defined the Māori Land Court’s jurisdiction. It limited oversight to land beneficially owned by living Māori - a limitation the Supreme Court has now effectively written out of the statute through judicial overreach.

This matters beyond the immediate context of tribal trusts. When our highest court is prepared to ignore fundamental legal principles to achieve its preferred outcome, no area of law is safe. Today, it is beneficial ownership by the dead. Tomorrow? Who knows what other legal principles the Court might either discard or invent?

The problem is not just that the Court’s reasoning is hard to comprehend. The decision undermines the certainty and predictability required by the rule of law. Our legal system depends on courts applying clear rules consistently. When they instead engage in judicial make-believe, they harm the very foundation of ordered liberty.

Parliament has several options for addressing this judicial adventurism. Most directly, it could amend Te Ture Whenua Māori Act to clarify that “beneficial ownership” means exactly what trust lawyers have always understood it to mean - ownership rights exercisable by living persons.

But the problem runs deeper. The decision reveals structural weaknesses in our constitutional arrangements that invite judicial overreach. As recommended in “Who Makes the Law?” Parliament should consider broader reforms to restore proper boundaries between the judiciary and legislature.

These could include amending the Senior Courts Act to define more precisely what Parliament means by the “rule of law.” The definition should emphasise the formal characteristics required of laws - that they be clear, prospective, and capable of being complied with. This would help constrain courts from treating the rule of law as a licence for judicial innovation.

Parliament could also tighten the rules courts must follow when interpreting statutes. The Legislation Act should explicitly require courts to interpret statutory words according to their natural meaning at the time of enactment. This would prevent courts from effectively rewriting legislation through creative interpretation based on their views of “modern” social values.

Either way, Parliament needs to reassert its constitutional role as our primary lawmaker. When courts depart from orthodox legal principles as dramatically as the Supreme Court has in Nikora, Parliament must be prepared to legislate to restore sense and certainty to the law.

The integrity of our legal system depends on it. We cannot have a functioning commercial system - let alone effective tribal governance - if our Supreme Court wilfully disapplies fundamental principle of property and trust law. Legal certainty is not a luxury. It is essential to the rule of law itself.

To read the full article on the LawNews website, click here.