126 Whangarei MB 36

IN THE MAORI LAND COURT OF NEW ZEALAND TAITOKERAU DISTRICT

Hearing:

Judgment:

IntI'oduction

A20060016581

UNDER Section 135, Te Ture Whenua Maori Act 1993

IN THE MATTER OF Whirinaki 3B8Bl - Change of Status fi'om Maori fi'eehold land to General land

MERCIA MORUNGA Applicant

A20060027543

AND UNDER Section 214, Te Ture Whenua Maori Act 1993

IN THE MATTER OF Whirinaki 3B8Bl - Constitute a Whanau TnIst

27 September 2007 (Heard at Kaikohe)

16 July 2008

MERCIA MORUNGA Applicant

RESERVED JUDGMENT OF JUDGE D J AMBLER

[I] The Court has before it two applications by Mercia Morunga. The first application

is to change the status of Whirinaki 3B8Bl ("the land") from Maori fi'eehold land to

126 Whangarei MB 37

General land pursuant to section 135 ofTe Ture Whenua Maori Act 1993 ("the Act"). The

second application is to establish a whanau tmst in respect of the land and was only

brought in anticipation of the COllli granting a change of status on the condition that the

land simultaneously vest in a whanau tmst (under what is commonly known as a "Whata

order").

Backgl'OIDld

[2] The land is Maori freehold land and comprises 7.3855 hectares. It is registered

under CFR62480. Mercia is the sole owner. Her father, A1ihur Wynyard, gifted the land

to her in 1999. Arthur Wynyard lives in the family home on the land. At the time of the

gifting of the land the COlllt recorded the atTangement as follows (90 WH 298):

"Orders are now made vesting the interests of Arthllr Grant Wynyard in the abovementioned blocks in his doughier Mercia Greta Wynyard. Order accordingly.

There are family IInderstandings recorded in the minlltes of the hearing on 27 Jllly 1999 ~!lhich include .'!rthur Wynyord's continuing a life interest in the d)),p. //;ng fllv l its s(!rtinn; that Mercia will carry alit her father's wishes as to proviSIOn on the landfor others of his children and the olltstancling debt evidenced by deed dated 7 December 1999. "

[3] Mercia filed a letter in SUppOtt of the application in the following tenllS:

"[ am the sale owner of Whirinaki 3E8EI being 7.3855 hectares. [have had the land sllrveyed at considerable cost and it now has a separate CT nllmber. (inc/llded).

[now wish to have the title changedfrom Maorifreehold land to General land. The reason for this being that it isfor the pllrpose ofllsing ilfor secllrity to get a bank loan.

[ do intend bllilding afamily home for myself and my immediate family.

[ also hope to be able to pllrchase another small home giving my father Arthllr Wynyard a life time interest.

[ do 110t intend to sell the property.

The other members of my family are aware of my intentions and are in favollr of it.

[ lookfonvard to afavollrable resllit."

;,)

126 Whangarei MB 38

[4] The application first came before me on31 August 2006. Mercia appeared with her

father. She sought the change of status as the banks told her that the title of the land

needed to change to General land before they would accept it as valid mortgage security.

She also explained that she was seeking to use the equity in the land to buy another

property. She was happy to vest the land into a whanau tnlst with a "Whata order" if the

Court required it.

[5] I adjoumed the application and directed Mercia to provide written evidence from

her bank. confirming that it will lend if the status of the land is changed and for her to give

notice of the application to the preferTed classes of alienees ("PC A"), which had not yet

taken place.

[6] The application next came before me on 22 November 2006. By this time Mercia

had also filed an application to constitute a whanau tnlst and had given the appropriate

public notice to the PCA. There was no appearance by any members of the PCA either in

support or in opposition to the application.

[7] Mercia produced two letters to the Comt.

[8] First, there was an undated letter from Wizard Home Loans III Kerikeri to the

following effect:

"[ have been approached by Mercia Monmga to provide her lVithfinance to facilitate the pllrchase of a property, IInforhlllately [ cannot help her this time as her land is not 011 a freehold title, hence we can't lise her -land to secllre this loan, IIntil she has her land transferred to aJreehold title I am IInaMe to provide her with the finance she is reqlliring. " (sic)

[9] Second, there was a letter fi-om Mrs Aileen Peel, the branch manager of ASB Bank,

Kaikohe, dated 20 November 2006 to the following effect:

"[ wish to infom, YOIl that wilh Ihe cllrrent lille this property is 'lilder we may not be able 10 assist YOIl with any borrowings until it is transferred.

if YOIl reqllire fllrther infonl/alion please do not hesitate to contact me. "

[l0] Unfortunately, neither letter addressed whether the Maori freehold status of the land

meant it was unable to be used as mortgage security. The letter fi·OJll Wizard Home Loans

was patently incorrect as the land does have fi·eehold title (and a certificate of title). I

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126 Whangarei MB 39

decided that I needed to hear from the ASS branch manager herself and issued a sununons

for her to attend COUlt.

(11] The applications were next heard on 18 January 2007. Mrs Peel, the ASB Bank

branch manager, attended. She explained that she had only dealt with Mercia in respect of

a general enquiry and that Mercia had not made a formal application for finance. More

impoltantly, she confilmed that the ASB Bank does accept Maori fi·eehold land as valid

mOltgage security. Mrs Peel also spoke of her perception that the COllIt had to approve a

mOltgage of Maori fi·eehold land. I explained to her that that was not the case, and that all

that happened was that the Registrar issued a Certificate of Confirmation before the

mOltgage was registered.

(12) Having heard fi·om Mrs Peel it was clear that Mercia needed to complete an

application for finance with the ASB Bank to see if the status of the land was in fact a

problem. The hearing was fllIther adjourned to await the outcome of that application.

indicated that I would then deal with the matter in Chambers.

[13] On 14 May 2007 Mercia contacted the Case Manager to advise that the loan

application had been declined for financial reasons . I then set both applications down for a

filrther hearing and directed the Case Manager to request Mercia to provide written

confirmation from the ASB Bank of the reason for its deci sion to decline finance and for

her to advise whether she was pursuing any other avenues for finance.

[14] A filrther hearing took place on 24 September 2007. Prior to the hearing Mercia

filed a letter from the ASB Bank that confirmed that the loan was not approved as she did

not meet the bank's lending criteria due to an adverse credit history and her being unable to

meet the bank's servicing criteria.

(15] At the hearing I asked Mercia whether she was pursuing any other banks for

finance. She indicated that she had spoken to Westpac and Kiwi Bank, but that was over

12 months ago. She suggested that they too would not lend against Maori fi·eehold land. I

asked whether either bank was prepared to set out their position in writing. She did not

know but did not take up the 0ppoltunity to pursue them thrther.

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126 Whangarei MB 40

[16] I reserved my decision. I regret not dealing it earli er, having indicated I would give

it priority.

The Law

[17] I have recently summarised the law in relation to applications to change status in

Waiwhatawhata 1A2B6 Lot 1 DP 168554 (2008) 125 Whangarei MB 294-307. I adopt the

law as set out in that deci sion.

Discussion

[18] I approach the application in the two steps contemplated by the Act.

(19] First, there is the question of satisfaction of section 136. The only issue is whether

section 136(d) is satisfied. In my view it is not.

[20] Mercia brought the application because she understood the banks would not lend

against Maori freehold land. However, as the evidence demonstrates, the only bank

Mercia fomlally approached, the ASB Bank, will lend against Maori fi'eehold land.

Furthermore, the bank declined to lend to Mercia because of her personal financial

circumstances and not because of the status of the land. Therefore, the status of the land is

not the reason why Mercia calUlot obtain a loan.

[21] The evidence of other banks refusing to lend against Maori fi'eehold land is simply

not sufficient. Applications must be supported by ''jilll and cogent evidence" and must be

tested to a reasonable level in evidence. The evidence fi'om Wizard Home Loans did not

assist Mercia and, in fact, demonstrated a complete lack of understanding of Maori

fl-eehold title. Mercia's suggestion that Westpac and Kiwibank will not lend against Maori

fi'eehold land is not supported by any direct evidence from the banks and, at least in respect

of Westpac, is contraty to the COllli' s experience that Westpac will lend against Maori

freehold land.

[22] I conclude that section 136(d) has not been satisfied. Had the status of the land been

the cause of Mercia not being able to get a home loan I would have exercised my

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126 Whangarei MB 41

discretion to grant the change of status, though conditional on vesting the land in a whanau

tmst with provisions requiring the tmstees to return the status of the land to Maori freehold

land when the home loan had been repaid.

[23] It leaves me to make a couple of general points about the application to change

status.

[24] First, it is disappointing that some banks and financial institutions continue to

demonstrate ignorance about Maori fi'eehold land. There is no reason why Maori fi'eehold

land cannot amount to sufficient mOligage security. Where the land is solely owned and

there is a certificate of title it is a rela1ively straightforward process to apply to the

Registrar for a Cetiificate of Confirmation in respect of the motigage and to then register

the mOligage. Where the mortgagee is required to realise its security by way of a

mortgagee sale, the process is no more complex than for General land as a mOligagee sale

is by definition not an "alienation" (section 4(c)(vii) of the Act) and therefore not caught

by the alienation restrictions of the Act.

[25] Second, owners of Maori fr eehold land who apply to change status because banks

say they will not lend to them camlOt simply rely on the initial rebuff of fi'ontline bank

staff. On more than one occasion senior bank staff have told me in Couti that their

fi'ontline staff get it wrong in telling customers that the bank will not lend against Maori

fi"eehold land. Land owners must thoroughly test the issue by formally applying for

finance. FUlthermore, if the status of the land is the reason why the bank will not lend then

the bank needs to explain that in writing in very clear terms. The Court cannot rely on

vague or informal or hearsay comments.

[26] The application to change status is dismissed. Consequently, as the application to

establish the whanau trust was contingent upon a change of status that application is also

dismissed. I direct that the filing fee on the whanau tmst application be reimbursed to the

applicant.

/J

p .

2008.

126 Whangarei MB 42

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