Drafting the deed for the Eastland Community Trust

With debate heating up on how the people of Gisborne and the East Coast could benefit most from the $308 million of capital in Eastland Community Trust and its ownership of local infrastructure, the man who drafted its deed, Michael Chrisp, wants to ensure this important debate starts from the right place — which is the trust deed and how it came about.

With debate heating up on how the people of Gisborne and the East Coast could benefit most from the $308 million of capital in Eastland Community Trust and its ownership of local infrastructure, the man who drafted its deed, Michael Chrisp, wants to ensure this important debate starts from the right place — which is the trust deed and how it came about.

The deed sets out three purposes: 1. To preserve capital, having regards to profits and losses and inflation.
2. To subsidise reticulation costs in the very few areas where lines power may not be economic. (The former power board was concerned that the push from government to be commercially focused might jeopardise some remote East Coast farmers).
3. To “support business, community and other initiatives which in the opinion of the trustees are likely to encourage or sustain economic growth” in the district.
Michael Chrisp

THERE seems to be some public confusion as to the way in which the Eastland Community Trust should use its assets within the district. This is not surprising. Those assets are now substantial and what happens from here on has the potential to affect many parts of our communal life. The social and economic needs here are acute and there is strong competition for funding. It is a debate that needs to be had.

A starting point for that debate must be the trust’s constituting document, the deed entered into in 1993, that defines the purposes for which it was created. As I was involved with the group that set up the trust, and its eventual draftsman, I thought it might be helpful to explain the circumstances under which it came into being. In doing so, however, let me be absolutely clear. I do not wish to make any comment about how the trustees should carry out their duties in the future. That is for them to decide according to the powers and duties given to them by the deed. I simply want to clarify how it came about that we have this trust in the form that it is.

What follows is complex and so let me give a broad description of the trust as it was finally agreed. This description will be amplified as we go along but if you keep this framework in mind, you will have a pretty good idea of what the trust is about.

The deed sets out three purposes:

■ To preserve capital, having regards to profits and losses and inflation.

■ To subsidise reticulation costs in the very few areas where lines power may not be economic. (The former power board was concerned that the push from government to be commercially focused might jeopardise some remote East Coast farmers).

■ To “support business, community and other initiatives which in the opinion of the trustees are likely to encourage or sustain economic growth” in the district.

The purposes of the trust are thus very wide. Basically, the trustees are required to encourage and sustain the economic growth of this community.

Here is the background. The processes that gave rise to the final scheme extended over the years 1988 to 1993, beginning with the government of the day setting up a task force to review the electricity generation industry so as to make it more competitive. It was a novel situation and throughout those five years the proposals kept changing, mostly as a result of fierce opposition to the initial proposals by existing elected power boards throughout the country.

Various legal structures were proposed and rejected until eventually the government stood back and virtually invited each district to decide for itself how it wished to proceed. Legislation was passed in 1992 requiring each board to submit an establishment plan setting out for government approval what each locality proposed.

The big question was as to who should own the assets following disestablishment of the elected power boards, and what mechanisms would be finally adopted.

Possible options at that stage were:

■ Private ownership of shares in a company, most likely allocated at no cost to existing consumers probably based on past electricity consumption

■ Private ownership with shares tradeable

■ Consumers through a business entity

■ Gisborne District Council.

But there had to be strong public support for any plan that was proposed, and the legislation required boards to consult in detail with their communities.

Many and urgent meetings were held. There was a real fear, echoed throughout the country, that these former power board assets, in our case valued at around $30 million, would simply be absorbed in the general funds of government or the local council. Our board was also concerned that any electricity consumer rebate scheme or consumer-based shareholding would mean that a substantial part of the potential fund would be lost to the district, as at that time Vesty’s Freezing Company and J Wattie Canneries were the major power users.

Eventually the board came up with an innovative plan to create a trust with very wide powers that would benefit the community at large, and set about the consultation process that the government legislation required.

Consultation was extensive. Eighteen thousand reply cards were sent to power consumers setting out the options — 20 percent of those were returned, with 70 percent favouring the trust option. Fifteen public meetings were held throughout the district that extended from Potaka in the north to the top of the Whareratas and west to Matawai and Motu. Submissions were invited from a large number of local organisations and businesses. A public hearing was held at which submissions, both written and oral, were made by Gisborne District Council, Federated Farmers, local iwi, Watties, the Gisborne Chamber of Commerce and many others.

It was clear from this careful process that a large majority of respondents favoured the trust model. A draft deed, setting out the purposes of a potential trust, was then prepared and circulated widely. After some further amendments, the final document was incorporated in the establishment plan which was then given government approval. The name of the new trust was the Eastland Energy Community Trust.

On May 3, 1993 a vesting order was made vesting the assets of the former Poverty Bay Electric Power Board in the Eastland Energy Community Trust.

It has obviously come as a surprise to some current readers of The Gisborne Herald that the Eastland Community Trust (the word “Energy” was dropped from the trust’s name in 2004) was not designed especially for the benefit of power consumers — except in the very limited case of uneconomic reticulation — in spite of the source of the initial endowment having come from the assets of the former Poverty Bay Electric Power Board.

That was one of the options at the time but not the one that this community finally chose. The community clearly wanted to have a facility that benefited the district as a whole. “The District” is described in the deed as “the district of the Gisborne District Council as defined in the Local Government (Gisborne Region) Reorganisation Order 1989”.

Some of the current confusion arises from a misreading of the term “beneficiary” as it is contained in the deed. The reason for its inclusion in that form was to meet certain legal requirements.

Let me explain.

A rule of law applies to this type of trust that requires the deed of trust to identify, in each individual case, who is entitled to be considered as a beneficiary and who is not. The categories can be large or small, so long as it can be made certain who is in and who is not. If this rule is breached the trust may be void for uncertainty, a lawyer’s worst nightmare.

There is no problem with the ultimate capital of the trust. This will vest in Gisborne District Council when the trust is wound up on a date that can be no later than 2073 under current trustee law.

But the idea was that the trustees would have a discretion to use the annual income very widely within the district to carry out the purposes of the trust.

This posed something of a drafting problem. The real beneficiary is the district and its people, but how to express this without making the trust void for uncertainty?

The solution was to create a pool of individuals using official district records.

So we have:

■ Those on the residential electoral roll — currently approximately 33,000 individuals

■ Registered ratepayers (including those jointly-listed) — approximately 35,000 in the city and 13,000 rural, a total of 48,000

■ Consumer connections to Eastland Network (currently 20,677).

The first two categories are mostly individuals. The third comprises individuals, corporates, businesses, clubs and other institutions including the major power consumers, Juken Nissho and Cedenco.

All are included in the term beneficiary.

Of course there will be some overlapping beneficiaries but by no means always. For example, in a home there might be a breadwinner who is the only registered power user, joint ratepayers, and maybe other adults, relatives, elderly, or otherwise, all entitled to vote. They are all included by definition and are part of a much larger group that the trustees are bound to consider in exercising their various discretions.

It is understood that the trustees may soon extensively review the activities of the trust and actions that they might take in the future. This is then the time for informed public debate, and it is hoped that trustees will be helped by members of this community to identify those areas where the trust can really make a difference to its life and well-being.

I want to conclude this account by acknowledging the work of the late RS (Bob) Briant, a former chairman of Eastland Energy Limited, whose vision and passion for this district has been largely responsible for this tool we have been given, a tool that has the potential to significantly influence the continued health and welfare of all who live here.

THERE seems to be some public confusion as to the way in which the Eastland Community Trust should use its assets within the district. This is not surprising. Those assets are now substantial and what happens from here on has the potential to affect many parts of our communal life. The social and economic needs here are acute and there is strong competition for funding. It is a debate that needs to be had.

A starting point for that debate must be the trust’s constituting document, the deed entered into in 1993, that defines the purposes for which it was created. As I was involved with the group that set up the trust, and its eventual draftsman, I thought it might be helpful to explain the circumstances under which it came into being. In doing so, however, let me be absolutely clear. I do not wish to make any comment about how the trustees should carry out their duties in the future. That is for them to decide according to the powers and duties given to them by the deed. I simply want to clarify how it came about that we have this trust in the form that it is.

What follows is complex and so let me give a broad description of the trust as it was finally agreed. This description will be amplified as we go along but if you keep this framework in mind, you will have a pretty good idea of what the trust is about.

The deed sets out three purposes:

■ To preserve capital, having regards to profits and losses and inflation.

■ To subsidise reticulation costs in the very few areas where lines power may not be economic. (The former power board was concerned that the push from government to be commercially focused might jeopardise some remote East Coast farmers).

■ To “support business, community and other initiatives which in the opinion of the trustees are likely to encourage or sustain economic growth” in the district.

The purposes of the trust are thus very wide. Basically, the trustees are required to encourage and sustain the economic growth of this community.

Here is the background. The processes that gave rise to the final scheme extended over the years 1988 to 1993, beginning with the government of the day setting up a task force to review the electricity generation industry so as to make it more competitive. It was a novel situation and throughout those five years the proposals kept changing, mostly as a result of fierce opposition to the initial proposals by existing elected power boards throughout the country.

Various legal structures were proposed and rejected until eventually the government stood back and virtually invited each district to decide for itself how it wished to proceed. Legislation was passed in 1992 requiring each board to submit an establishment plan setting out for government approval what each locality proposed.

The big question was as to who should own the assets following disestablishment of the elected power boards, and what mechanisms would be finally adopted.

Possible options at that stage were:

■ Private ownership of shares in a company, most likely allocated at no cost to existing consumers probably based on past electricity consumption

■ Private ownership with shares tradeable

■ Consumers through a business entity

■ Gisborne District Council.

But there had to be strong public support for any plan that was proposed, and the legislation required boards to consult in detail with their communities.

Many and urgent meetings were held. There was a real fear, echoed throughout the country, that these former power board assets, in our case valued at around $30 million, would simply be absorbed in the general funds of government or the local council. Our board was also concerned that any electricity consumer rebate scheme or consumer-based shareholding would mean that a substantial part of the potential fund would be lost to the district, as at that time Vesty’s Freezing Company and J Wattie Canneries were the major power users.

Eventually the board came up with an innovative plan to create a trust with very wide powers that would benefit the community at large, and set about the consultation process that the government legislation required.

Consultation was extensive. Eighteen thousand reply cards were sent to power consumers setting out the options — 20 percent of those were returned, with 70 percent favouring the trust option. Fifteen public meetings were held throughout the district that extended from Potaka in the north to the top of the Whareratas and west to Matawai and Motu. Submissions were invited from a large number of local organisations and businesses. A public hearing was held at which submissions, both written and oral, were made by Gisborne District Council, Federated Farmers, local iwi, Watties, the Gisborne Chamber of Commerce and many others.

It was clear from this careful process that a large majority of respondents favoured the trust model. A draft deed, setting out the purposes of a potential trust, was then prepared and circulated widely. After some further amendments, the final document was incorporated in the establishment plan which was then given government approval. The name of the new trust was the Eastland Energy Community Trust.

On May 3, 1993 a vesting order was made vesting the assets of the former Poverty Bay Electric Power Board in the Eastland Energy Community Trust.

It has obviously come as a surprise to some current readers of The Gisborne Herald that the Eastland Community Trust (the word “Energy” was dropped from the trust’s name in 2004) was not designed especially for the benefit of power consumers — except in the very limited case of uneconomic reticulation — in spite of the source of the initial endowment having come from the assets of the former Poverty Bay Electric Power Board.

That was one of the options at the time but not the one that this community finally chose. The community clearly wanted to have a facility that benefited the district as a whole. “The District” is described in the deed as “the district of the Gisborne District Council as defined in the Local Government (Gisborne Region) Reorganisation Order 1989”.

Some of the current confusion arises from a misreading of the term “beneficiary” as it is contained in the deed. The reason for its inclusion in that form was to meet certain legal requirements.

Let me explain.

A rule of law applies to this type of trust that requires the deed of trust to identify, in each individual case, who is entitled to be considered as a beneficiary and who is not. The categories can be large or small, so long as it can be made certain who is in and who is not. If this rule is breached the trust may be void for uncertainty, a lawyer’s worst nightmare.

There is no problem with the ultimate capital of the trust. This will vest in Gisborne District Council when the trust is wound up on a date that can be no later than 2073 under current trustee law.

But the idea was that the trustees would have a discretion to use the annual income very widely within the district to carry out the purposes of the trust.

This posed something of a drafting problem. The real beneficiary is the district and its people, but how to express this without making the trust void for uncertainty?

The solution was to create a pool of individuals using official district records.

So we have:

■ Those on the residential electoral roll — currently approximately 33,000 individuals

■ Registered ratepayers (including those jointly-listed) — approximately 35,000 in the city and 13,000 rural, a total of 48,000

■ Consumer connections to Eastland Network (currently 20,677).

The first two categories are mostly individuals. The third comprises individuals, corporates, businesses, clubs and other institutions including the major power consumers, Juken Nissho and Cedenco.

All are included in the term beneficiary.

Of course there will be some overlapping beneficiaries but by no means always. For example, in a home there might be a breadwinner who is the only registered power user, joint ratepayers, and maybe other adults, relatives, elderly, or otherwise, all entitled to vote. They are all included by definition and are part of a much larger group that the trustees are bound to consider in exercising their various discretions.

It is understood that the trustees may soon extensively review the activities of the trust and actions that they might take in the future. This is then the time for informed public debate, and it is hoped that trustees will be helped by members of this community to identify those areas where the trust can really make a difference to its life and well-being.

I want to conclude this account by acknowledging the work of the late RS (Bob) Briant, a former chairman of Eastland Energy Limited, whose vision and passion for this district has been largely responsible for this tool we have been given, a tool that has the potential to significantly influence the continued health and welfare of all who live here.

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Sonya Smith - 1 month ago
"The purposes of the trust are thus very wide. Basically, the trustees are required to encourage and sustain the economic growth of this community."
So where and when does the Wairoa District feature? As per the recent Waihi Dam debacle where the trust's business came at significant cost to your neighbouring community . . . Are Wairoa and its people overlapping beneficiaries? Is Wairoa capital needing preservation, or being outside the Gisborne District are we only to be thought of in regard to profits and losses and inflation?

Footnote from Ed: Wairoa people are not beneficiaries of Eastland Community Trust because they were not served by the Poverty Bay Electric Power Board from which ECT originated.
Eastland Network Ltd bought Wairoa's electricity distribution network and the Waihi hydro-electric power plant in 1999.




winston moreton - 30 days ago
Hang on Ed. Is that correct? Beneficiaries of the Trust include anyone connect to Eastland Network Ltd. I am pretty sure Wairoa folk are, and I cannot find anything in the Deed of Trust that limits beneficiaries to people connected in 1993. One of the biggest beneficiaries of the Trust, the Eastland Network Charitable Trust, was set up after 1993.

Footnote from Ed: Only those network customers who live in the district administered since 1989 by Gisborne District Council, which shares the same boundaries as the original Poverty Bay Electric Power Board. The two relevant definitions in the trust deed are:
"Beneficiary" means a natural person domiciled in the district and any other person (whether
corporate or unincorporate) conducting an activity or carrying on business in the district.
And:
"The district" means the district of the Council as defined in the Local Government (Gisborne
region) Reorganisation Order 1989.

winston moreton - 30 days ago
The Editor is correct. I see there are 5 discrete parts to the clause 1.3 definition of beneficiary. It was 1.3(v) that I mistakenly thought let Wairoa residents share but the preamble to the clause defeats my interpretation. Nonetheless, for pragmatic purposes, the Eastland Group could be directed by the trustees to lower their tariffs to all consumers which would achieve the desired result.

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