By
Robin Johnson1
Economists are interested in property rights because they underlie the whole process of exchange and commerce. I think it was Douglas North who said that without a well-enforced and well-specified system of property rights trade would never have developed as it did. Property rights in this sense include formal contracts, bonding of participants, guarantees, brand names, elaborate monitoring systems and enforcement systems that protect the individual but also to create security and confidence in commerce. He points out that the resources devoted to transacting are large (although small per transaction) but the productivity gains from trade are even larger. Security of land tenure is part of this system of property rights
The second matter of interest to economists is the nature of constitutional change. In a public choice sort of world, we like to go along with Buchanan (1975) and Dixit (1996) and believe that constitutions are made and developed in some kind of abstract and rarified atmosphere above day-to-day politics. Buchanan then warns us that our political masters in their every-day activities tend to beaver away at the edges of the constitutional rules and make fundamental changes almost by accident. Constitutional rules are important because it is in their framing that the operational rules are set for the conduct of commerce and in particular, the framing and definition of property rights.
Being educated at Lincoln College I was brought up to believe that the NZ land registration system and its Land Transfer Act had good property right characteristics that encouraged enterprise and investment. Maori owners of land could register their ownership in the same way and thus secure the benefits of exclusive and saleable title. There was obviously some Maori land ownership outside the registration system but it was not important.. With the advent of the foreshore and seabed debate in recent years I couldn?t see where the problem was as registered title gave to the majority of people the opportunity to have exclusive title when they wanted it and thus control over land use. Of course, the debate is about land ownership not covered by the Land Transfer Act and in particular rights to land on the foreshore and seabed which had historical associations with Maori food gathering and fishing.
In this paper I discuss the land registration system as it was introduced after the Treaty of Waitangi was signed and the provisions made for Maori land. I then discuss the nature of customary rights outside the registration system that had not been codeified in any thorough way over the last 164 years. It is these rights that the Waitangi Tribunal discusses in its Report on The Crown Foreshore and Seabed Policy (2004). It turns out that these views are largely based on the evidence of Dr Paul McHugh. I will therefore discuss what the debate on the foreshore and seabed contributes to the sanctity of property rights in NZ land and the emerging legislation in this field.
Torrens was a surveyor in the colony of South Australia and he devised the land registration system for the colony. The system was brought to NZ by Sir George Grey (who had been Governor of S Australia) and was adopted by the Crown for all its land purchases from the Maori. ?All property rights in NZ are derived from the Crown and title to land in private ownership is a mattter of public record. The creation of new rights and termination of existing rights in land is the function of the Land and Deeds Division of the Department of Justice, as is the keeping of the title records. Almost all privately held land is held under the land transfer system, presently embodied in the Land Transfer Act 1952. The principal features of the system are title by registration and guarantee of that title by the state? (NZ Yearbook 1993 p.302).
As I understand it, title changed hands in England at the time through legal agreements and not on public record though some of the colonists? suspicion of the system was related to feudal arrangements on estates and the clearances taking place in Scotland. The colonists aimed to get the solidest title to land they could devise so they would be protected for ever from landlords, bankers and moneylenders. The implications of this are quite profound. As land title does not change that often, the Torrens system turned out to a marvelously cheap and effective property rights system that really delivered the security of tenure it promised.
Scott (1989) identifies 6 descriptors of property rights that qualify their usefulness in exchange: duration; flexibility; exclusivity; quality; transferability; and divisibility. Duration conveys the idea a contract for a certain period of time, which may, for example, encourage investment in harvesting; Flexibility conveys the idea of discretion to adapt to change; Exclusivity conveys the idea of freedom from interference (legal or otherwise); Quality refers to legal protection and security; Transferability refers to the ability to sell the right or sub-contract the right; and Divisibility to an ability to subdivide or aggregate rights. Scott uses these descriptors to identify what might be called ?strong? and ?weak? systems of property rights as in, say, leasehold tenure of land.
An alternative formulation to Scott?s characteristics can be developed through the concept of attenuation (Quiggin 1986). Any limitation on the way property rights may be used constitutes attenuation. The ideal, unattenuated state, is approximated by private chattel ownership where the owner has completely free rights of use, exclusion of all others to any use, and complete alienation. The attenuation of property rights, in this view, will always reduce their value to the owner, and place restrictions of some sort on his flexibility of action. Attenuation is usually associated with government action such as regulatory limits on the freedom of action of an owner (in terms of use or sale for example). On the other hand, the key features of non-attenuated rights are complete specification, complete exclusivity, and full transferability (Dragun 1989). The Resource Management Act is an attenuating type of legislation.
Finally it is possible to define an efficient set of property rights (Hide 1987). If one takes into account all the costs of of negotiating rights, the costs of policing, the costs of establishment, and the costs of litigation (transaction costs), then the set of property rights which minimises these costs is an efficient set. The Torrens system of land registration is often quoted in this context as it provides very high security at low cost and hence is regarded as an efficient system of property rights (Johnson 1992). Poor design of a property rights system which leads to excessive litigation raises the transaction costs of a property rights system as a whole and causes a serious loss of economic efficiency (Johnson R (2003). Fisheries: Managing Property Rights).
According to the Yearbook, before European settlement all land was held by the various groups and tribes of the Maori people in accordance with their traditional customs and usage. The land remaining in this tenure is termed `Maori customary land?. By the Treaty of Waitangi, the right to purchase land from Maori was reserved to the Crown. Almost all of what had once been Maori customary land was converted to other forms of title by one or other of the following processes: (a) purchase or other acquisition by the Crown; (b) the issue of a Crown grant to a Maori owner on the recommendation of the Native/Maori Land Court; and (c) the issue of a freehold order by the Maori Land Court in favour of the Maori found entitled upon investigation of a title (this process was used instead of process (b) after the introduction of the land transfer systen to NZ). Both (b) and (c) became known as Maori freehold land. Maori may also own ‘general land’ by purchase or otherwise. Maori freehold land is subject to the jurisdiction of the Maori Land Court pursuant to the Maori Affairs Act 1953 and some general land owned by Maori is subject to certain provisions of that Act.
The Yearbook does not explain that some Maori land is commonly held in multiple ownership. Nor under certain legislation, Maori corporations can be set up to manage multiple-owned land, but may also have aquired registered title by purchase.
The Te Ture Whenua Maori Act 1993 (‘law for Maori land’) consolidated the various native land court statutes and established the Maori Land Court. The Maori Land Court and the Maori Appellate Court are constituted under the Act and have jurisdiction to hear matters relating to Maori land (Yearbook 2002). The foreshore and seabed report gives a full description of the jurisdiction of the Maori Land Court as it wished to examine whether its powers extended to the foreshore and seabed. The Marlborough iwi would have to seek a status order from the Court declaring the foreshore and seabed of their rohe (area) to be customary land.
For the purposes of the Act all land in New Zealand must have one of the following statuses:
‘Maori customary land’ is described in the Act as ‘Land that is held by Maori in accordance with tikanga Maori’ (s129(2)(a)). It is said to be a ‘residual’ category of property for it comprises all land not held or granted by the Crown (The Court of Appeal determined that it can include coastal land covered by water).
Upon application being made to it, the Maori Land Court has jurisdiction to determine and declare, by a status order, the particular status of any parcel of land (s131(1)). In the event of a status order being made, application can be made to the MLC to exercise its exclusive jurisdiction to investigate the title to the land and determine, according to tikanga Maori, the relative interests of the owners. The court may then define the area dealt with and make an order vesting it in such persons, or trustees, as it thinks fit. On the making of a vesting order, the land becomes subject to the Land Transfer Act and the order must be registered under the Act. The effect is that the land is vested as Maori freehold land, for an estate of fee simple in the owners or trustees named in the vesting order. Thus the process of vesting brings customary land into the general land tenure system, and allows its owners to exercise the usual rights of ownership.
The Waitangi Tribunal (WT) raises doubts about whether vesting necessarily follows the issue of a status order. In the Court of Appeal in the Marlborough Sounds case, there was some disagreement among the Judges about the inevitability of such a process (ibid p.64).
The Act defines ‘tikanga’ as ‘Maori customary values and practices’. WT interpret it as anything which involves every aspect of the elements themselves and how humans interact with them.(ibid p.1). Professor Mutu states that it can mean any rule, plan or method; custom, habit; anything normal or unusual; reason; meaning, purport; authority, control; and correct, right; and involves the widest range of Maori values (ibid p.1). We next turn to the introduction of ‘aboriginal title’ and its relation to customary title. In this aspect the tribunal was heavily guided by the evidence of Dr Paul McHugh.
‘Aboriginal title’ is a general term that describes various sets of customary rights, ranging from particular use rights (for example, to use a particular area of foreshore as a pathway) through to the fullest possible set of rights, equivalent to land ownership (ibid p.45). Important among the features of the common law doctrine of aboriginal title are that:
The Tribunal noted that the common law doctrine of aboriginal title has not been much applied in NZ (p.45). The Tribunal was concerned to establish the precise role of the MLC and the High Court. As a result of the Marlborough Sounds case, the way was opened by the courts for claims for customary rights to heard by both the MLC and the High Court.(p. 44). The Court of Appeal judges? view, contrary to the Crown?s view of the matter, was that the MLC had jurisdiction to determine the status of the foreshore and seabed. To reach their decision, the judges needed to consider the application in NZ of the common law docrine of aboriginal title (p. 43).
McHugh P [in his evidence to the tribunal] defines what he means by the terms ‘ownership’ and ‘rights’ and ‘aboriginal title’:
Ownership and rights: the term ‘ownership’ is treated here as synonymous with full fee simple title to land or full beneficicial ownership - the right, in other words, to exclude all-comers. I use the term ‘rights’ to describe lesser rights over land. ‘Ownership’ as the term is used below, is inherently exclusive. A particular ‘right’ such as a right to fish, may or may not be exclusive but it is specific and defined by reference to the activity. Typically someone hold ‘rights’ over land in the ownership of another person.
Aboriginal title: The term ‘aboriginal title’ has been used in the same sense that the Australians speak of ‘native title’. That is, I use it as a compendious term to describe a set of rights that runs notionally from full ownership to particular stand-alone rights. The term describes whatever interest it is that common law will recognise as being held by tribal peoples over a particular stretch of land or sea as a result of their aboriginal connection with that area. Where the aboriginal title is tantamount to ownership it can be described as ‘territorial aboriginal title’ and where it is not the term ‘non-territorial title’ can be used. Some use the term ‘customary rights’ instead of the label non-territorial, though where this happens it must be emphasised that the talk is of the common law breed of right rather than statutory jurisdiction of Te Ture Whenua Maori Act 1993 where the term ‘customary’ also appears (p.7).
McHugh goes on to say that the common law doctrine of aboriginal title provides a legal description of the property rights of indigenous tribal peoples upon the Crown's assertion of sovereignty over their territory. There is a common law presumption that those property rights have survived the acquisition of sovereignty. The doctrine is a legal rather than a historical one, in that it does not purport to describe a body of doctrinaire rules that were consciously applied by imperial officials and colonial functionaries during the nineteenth century. Rather, it is a modern-day judicial characterisation of certain historical facts through which extant aboriginal property rights receive legal protection in the courts, rather than through their historical agency of protection, the Crown itself.(p.7)[my emphasis]. Common law aboriginal title emerged, therefore, not as a historical truth, but as a legal doctrine concerned with identification and articulation of extant rights the protection of which public law was once (but no longer) content to leave to executive discretion (p.8).
So the Tribunal continues to refer to customary land as defined in the Te Ture Whenua Act encompassing all land not otherwise transferred to some other status. McHugh appears to be coming from the other direction and defining the property rights which the original inhabitants of all the land might still have. These may be territorial or non-territorial. They clearly include rights that overlap with the ownership of some other person [such as access or the right to fish]. McHugh further confirms that aboriginal rights are a judicial construction to meet the circumstances of the times i.e. to sort out forgotten or formerly non-utilitarian rights. The public and certainly myself have not grasped these implications.
How did these changes come about?. The WT (2004, p.30) shows the gradual changes of viewpoint which took place in successive cases in the treatment of the foreshore. From the 1860s the Crown had proceeded to extinguish Maori claims to the Hauraki foreshore by means of negotiation and then legislation. This set the precedent even though the claim to the foreshore was tested in the Native Land Court in the 1930s. The public stance of the Crown remained firm and the issue was eventually thought to have been settled by the Court of Appeal?s 1963 decision in the Re Ninety-Mile Beach case. Subsequent statutes continued to assume Crown ownership, without actually solving the underlying legal problems with the Crown's title2. These were revealed and the legal situation corrected by the Court of Appeal in Marlborough Sounds in 2003. [McHugh refers to this case as Ngati Apa].
Is it an underlying legal problem or a re-interpretation of the rules? The WT maintains that the High Court has always had aboriginal title jurisdiction (p.34). It has long been regarded as redundant in relation to the vast majority of land. In the case of land below the high water mark there was a general supposition before Marlborough that any customary rights in that zone had been extinguished when the customary rights to the contiguous dry land were extinguished. That supposition was bolstered by a belief in many quarters that the Crown owned the foreshore and seabed anyway as part of its perogative right. By overturning these suppositions and beliefs the Marlborough decision has revived the ability of the High Court to apply the doctrine of aboriginal title to land below the high water mark.
The Marlborough decision opened up the way for Marlborough iwi to apply to the MLC to claim customary rights to the foreshore. In the light of McHugh P it would have to be established whether these were territorial or non-teritorial rights. How would they be acted on and administered especially if there were conflicting owners?. Have leases a role? Can the status of such land be changed in a legal sense? What of exclusivity and transferability?
On the question of constitutional change I have mixed feelings. The issue appears to be so small and unimportant (especially as it has lain dormant for 164 years) and was never questioned for so long. Such foreshore rights would be hard to establish before the courts. On the other hand, the WT see it as the landmark decision as it opened up the Courts to new applications for change of right and use. And indeed the foreshore and seabed itself is very extensive around NZ. In this sense there is a constitutional implication in terms of a remedy for something being found and put right (according to something called aboriginal law). Whether the latter is acceptable to the majority has not yet surfaced or been tested! Perhaps it is the application of aboriginal law that is the main constitutional implication of the Court of Appeal decision in Marborough?
March 23 2004
The Hon Peter Dunne: Will the Minister consider that the term ‘customary title’ has caused some confusion?
The Hon Margaret Wilson: The term ‘title’ is of course understood within the land transfer system in a different way than it is understood within customary title jurisprudence under customary lore. It is true that confusion has arisen because of that.
March 24 2004
Dr Wayne Mapp: Will she rule out Maori customary title co-existing with Crown title given her statement yesterday that confusion has arisen because of the term ‘customary title?’
The Hon Margaret Wilson: The confusion has arisen because there are two systems to record land titles in New Zealand: the land transfer system and a separate system devised and run by the Maori Land Court. Underlying these two systems of land title, there are also common law rules relating to customary title, which is also known as aboriginal or native title. The term ‘title’ is often used interchangeably, but it does have different legal meaning.
In a statement on February 12 the Hon Michael Cullen reviews these same issues. I'll paraphrase them but they indicate that the Minister (or his speechwriters) endorse the WT and McHugh P. viewpoint:
‘The court did not say Maori owned the foreshore and seabed?’
‘The question was ‘whether the jurisdiction of the MLC extended to the foreshore and seabed’ or whether indigenous rights had been extinguished’
‘The court left open whether the claimants could establish customary property rights....’
‘The Te Ture Act was intended to apply to dry land only and is incapable of recognising a property right that does not lead to fee simple title..’
‘McHugh attested that the NZ courts would most likely be swayed by comparable overseas cases and would find that the common law cannot recognise exclusive ownership of the foreshore and seabed’.
‘McHugh also stated that while there could be no exclusive ownership, he also stated that he believed there might be substantial Maori rights over the F and S’.
‘As with rights of way, they place an obligation on the owner of land to make provision for the interests of other parties’
‘And like any other property right they must be exercised in a context of other, competing rights belonging to other individuals and to the public’.
As I see it, the Minister is asking what kind of property right framework will accommodate proven customary rights in the presence of other rightholders?
The solution first offered to the WT for its deliberations in January 2004 proposed to vest the foreshore and seabed in the people of New Zealand in the form of a ‘public domain’. It would take away the current jurisdiction of the High Court and the MLC in relation to Maori customary rights. It would not transfer land to a fee simple basis as it clashed with open access requirements. Te Ture does not provide enough guidance for the special juridical space of the F and S. There will be a statutory regognition of a right to reasonable and appropriate access. A newly created Commission would grant a new form of customary title. Those who hold title will be entitled to participate in management and decision making processes in relation to coastal marine areas. Commercial development of an activity covered by a customary right will be possible.(ibid pp.85-7).
When announced in late April, the new proposals were:
Public domain was introduced in August 2003 as a new legal concept and was going to provide for the land to be vested in all New Zealanders with full rights of access. This would prevent any new claims for ownership. In December 2003 it was said at the WT that customary title would sit alongside the public domain title. This would allow more development prospects for Maori and would entitle Maori to some say in management. Finally coalition requirements forced a name change to Crown ownership for the new category of `land ownership?. [Jane Clifton says in The Listener ‘United demanded that the term ‘public domain’ be left in the legislation, because by its legal reading, this would prevent future governments from parcelling up bits of coastline to favoured tribes to grease the wheels of future Treaty settlements’].
Customary rights has been changed to ‘ancestral connections’ said to imply a more guardianship role for Maori. They will still have to be established before the Courts. Once established they open the way for a say on coastal management and decision making.They could also be used to negotiate with Government for redress if their claim would have amounted to territorial ownership The roving commission and the 16 regional working parties disappear.
It seems to me that the claim for greater title to the foreshore and seabed has been completely denied. It was never certain that many claims would succeed. The 2003 High Court decision had only opened the way for the claims to be tested. What seems to have been extinguished is the right of access to the Courts rather than any greater title to particular pieces of land.
I am not clear how co-existing rights (as described by McHugh P.) will be managed. In the House, Cullen seemed to be saying that Government will ‘redress’ any Maori who without the legislation would have been strong enough to prove a claim on the foreshore and seabed. ‘The Crown will enter into good faith discussions as to how proposals for partnership can proceed in the future in those cases-which will be relatively rare-where a territorial customary right might have been recognised’.
As for the land registration system, it will not be required to perform any additional tasks unless Maori seek to change the status of existing general land owned by them. There hardly seems any incentive to have to do this. As for sharing management of the foreshore and seabed this presumably puts Maori up against the local bodies and the RMA (ACT saw powers of veto developing in this area). This is where the argument over Marlborough coastline started after all.
On constitutional change, it appears that the Crown ownership arrangement virtually reverts to the status quo. The land transfer arrangements remain the same. Of some constitutional significance however are the proposals for redress which could have wider implications down the line.
According to an advertisment in the Dominion Post on May 4 the organisers of the Hikoi 2004 believed that:
On May 1st (Dominion Post) Mrs Turia is quoted as saying ‘the policy will extinguish Maori rights to the foreshore and seabed rights held in trust for their children and grandchildren’.
Retired District Court judge Ken Hingston says on April 26 (Dominion Post) the Government has followed Zimbabwe president Robert Mugabe by interfering in the judicial process and confiscating land from the citizens without compensation. “I ask ‘is it fair to take foreshore and seabed only from Maori?’ Pakeha and corporates who now hold foreshore and seabed title keep theirs ”.
All these positions appear to rest on the proposition that the right to some kind of title to the foreshore and seabed land will be diminished by the proposed legislation. It is not full title but a recognition of earlier customary rights. Iwi will still be able to go to the Maori Land Court to get a declaration of their ancestral connections. Where these are recognised they will bring Maori more ability to participate in decision making. The Hingston point about fairness relates to titles protected by the land registration system as compared to customary rights which haven't been tested nor registered all this time3.
Buchanan, J.M. (1975), A Contractarian Paradigm for Applying Economic Theory, American Economic Review, 65 225-30.
Dixit, A.K. (1996), The Making of Economic Policy: A Transactions Cost Politics Perspective, Cambridge Mass., MIT Press.
Dragun, A.K. (1989), Property Rights and Institutional Design, Workshop on Economics of Institutional Change, Australian Agricultural Economics Society, Lincoln University.
Hide, R.P. (1987), Property Rights and Natural Resource Policy, Studies in Resource Management No 3, Lincoln University.
Johnson R.W.M. (1992), Resource Management, Sustainability and Property Rights in New Zealand, Australian Journal of Agricultural Economics 36, No 2 August.
Johnson R.W.M. (2003). Fisheries: Managing Property Rights, New Zealand Agricultural and Resource Economics Society Conference, Blenheim.
McHugh, P.G. (2004), In the matter of the Treaty of Waitangi Act and in the matter of an Application for an urgent enquiry into Foreshore and Seabed issues, WAI No 1071, dated 13 January 2004.
Quiggin, J (1986), Common Property, Private Property and Regulation: the Case of Dryland Salinity, Australian Journal of Agricultural Economics 30, 103-117.
Scott,A. (1989), Evolution of Individual Transferable Quota as a Distinct Class of Property Right, in The Economics of Fishery Management in the Pacific Islands Region, edited by Campbell, Menz and Waugh, ACIAR Bulletin No 26, Australian Centre for International Research, Canberra.
Waitangi Tribunal (2004), Report on The Crown Foreshore and Seabed Policy, Legislation Direct, Wellington.
1) Consulting Economist, Wellington (johnsonr@clear.net.nz). Roger Falloon has helped me focus on one or two issues in this paper.
2) John Martin points out to me that Sir Apirana Ngata had some notion of these loose ends (See R Walker, He Tipua: The Life and Times of Sir Apirana Ngata,Penguin Books, 2001, pp 139-40). In November 1908, Ngata spoke to a Fisheries Bill in the House noting that fishing places along the coast were well recognised, and handed down from father to son. `They do not claim exclusive fishing rights along the coast, but they do claim that the Government recognise, even at this late stage, their exclusive right to certain of these fishing grounds??. `..we want a recognition by the State that certain rights were given to Maori people by the Treaty of Waitangi to fisheries?. No action was taken on his suggestion.
3) Bob Edlin (Independent 19 May) notes that there is some doubt as to the exact number of private properties exempted from the proposed legislation. Ministers have said there are just 59 private titles in the foreshore itself; Land Information says there are 13500 privately owned parcels of land below the mean high water springs mark. Officials say that there are about 50 privately owned parcels below mean high water mark; `A much larger number (12243) also encroach on the foreshore but only between the mean high water mark and the mean high spring [tide] mark?. So there! These titles are of course protected by the Land Transfer Act 1952.