Rudman's city: Time to pull plug on trust litigation

And now for chapter 99 in the farcical saga of the Auckland Energy Consumer Trust, in which some Auckland city councillors make a last grab at $31 million which isn't theirs and certain trustees backtrack on their election promises ...

Three months ago the 269,000 customers of the electricity lines company Vector elected a new board of five trustees. All promised a quick payout of $150 million in back dividends. This money ($187.4 million before tax) represented dividends from 1998, 1999 and 2000 frozen by legal action from the Auckland, Manukau and Papakura councils. Last November, Justice Barry Paterson threw out the case.

For the councils, it was their fifth court defeat in a row over the trust money, but would they and their lawyers lie down? Manukau and Papakura yes, but not Auckland. Last Monday, as the appeal deadline loomed, the council's investment committee agreed to drag the issue off to the Court of Appeal.

What makes the litigants, led by deputy mayor Bruce Hucker and finance chairwoman Kay McKelvie, continue is hard to fathom. Dr Hucker says the council has independent legal advice that Justice Paterson's decision was "seriously flawed." He says he is acting to protect, "for future generations, the assets that belong to the city."

He is getting a bit ahead of himself. The assets of Vector do not become the joint property of the Auckland, Manukau and Papakura councils until 2073. They will inherit this windfall only because of the vagaries of the legal system.

In 1993, when the consumer trust was set up, it was established under the Perpetuities Act 1964. This required the trust, for reasons known only to Wellington legislators, to be terminated within 80 years. After that, the parliamentarians decided, this juicy asset would be uplifted from its true owners - the consumers - and handed over to the local politicians.

Dr Hucker's statement suggests he owns it already, which he doesn't.

The councils had tried to persuade the court to cut $31 million from the dividend pool on the grounds it was capital. They argued it was their duty to stop their future asset being frittered away. The judge agreed it was capital, but ruled that the trustees had every right to distribute it to customers if they wished.

I agree with Mayor Christine Fletcher and Chamber of Commerce chief executive Michael Barnett that it's time the council accepted defeat. The five court battles have cost ratepayers and trustees at least $5 million. The only ones prospering from this are the lawyers.

While the politicians are busy bolstering their lawyers' lifestyles, the trustees fluff around in total confusion. The leftish Powerlynk team, victorious at September's election, promised to change the way the annual dividend was distributed.

In the past, the dividend pot had been divided roughly two ways. The 236,000 residential customers got equal shares of their half, while the 33,000 businesses split up their half according to usage.

Powerlynk promised that all customers, big or small, business or residential, would get the same amount - in the case of the $150 million, somewhere around $600 apiece. But once elected, the three Powerlynk trustees, led by lawyer Karen Sherry, promptly disagreed.

For that, much credit must go to Citizens & Ratepayers trustee John Collinge, an ex-National Party chairman. Mr Collinge cast enough legal doubts on the equal-shares policy to have Ms Sherry's team-mates have second and third thoughts.

On Wednesday when the trustees are scheduled to meet at Ms Sherry's law firm, Davenports.

She has stirred the pot by inviting the public to this usually closed meeting, where she will present an opinion from John Katz, QC, supporting the equal-distribution policy. Ms Sherry says she expects her two Powerlynk team-mates to side with her to form a majority in favour of the proposal.

The problem is, any distribution will be on hold until the city council appeal is heard. That's unless Mrs Fletcher can persuade the full council to abandon the appeal when it meets on February 8.