Auckland City Mission Incorporated
[2024] NZHC 255
•21 February 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-002523
[2024] NZHC 255
UNDER The Charitable Trusts Act 1957 IN THE MATTER OF
The Whitney Trust
IN THE MATTER OF
An application by THE AUCKLAND CITY MISSION INCORPORATED
Applicant
Hearing: 14 February 2024 Appearances:
E S Scorgie and D G Maier-Gant for Applicant
Judgment:
21 February 2024
JUDGMENT OF ANDERSON J
This judgment was delivered by me on 21 February 2024 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules 2016.
.………………………….. Registrar/Deputy Registrar
Solicitors:
Chapman Tripp, Auckland
Re THE AUCKLAND CITY MISSION INCORPORATED [2024] NZHC 255 [21 February 2024]
Background
[1] The Auckland City Mission Inc1 is a charity incorporated in 1927. In 1933, Mrs Mary Ellen Whitney donated Whitneydale, a property in Campbells Bay, as a convalescent home, to assist the Mission to care for “the poor of Auckland”. The charitable trust2 was established on the terms of a deed dated 7 August 1933.3
[2] Now, 91 years later, the methods by which organisations like the Mission support the disadvantaged have changed. The Trust can better achieve its objectives if the Mission is permitted to sell the present Browns Bay property that it purchased in 1981 with the proceeds from an earlier sale of Whitneydale in 1976.4 The applicant intends to apply the funds to its new purpose-built supportive housing and social services facility in the centre of Auckland, HomeGround.
[3] To that end, the Mission applies to the Court for approval of a scheme under pt 3 of the Charitable Trusts Act 1957 to vary the charitable trust deed established by Ms Whitney under ss 32 and 33 of that Act.5 The Scheme provides for the applicant disposing of the property and income of the Trust for another charitable purpose and extending its powers as trustee to do this.
[4] For the reasons I outline below, I approve the Scheme. I am grateful for the Mission’s written submissions, which I have largely adopted in this judgment; and for the helpful oral submissions of Mr Maier-Gant, who presented the Mission’s application.
Requirements for approval of a scheme
[5] Part 3 of the Charitable Trusts Act provides a means through which the trustee of a charitable trust can seek and obtain court approval of a scheme that varies the trust deed and the powers of the trustee.
1 Mission.
2 Trust.
3 Trust Deed.
4 The legal title to the Trust’s assets is vested in the General Trust Board of the Diocese of Auckland as bare trustee for the applicant under the Auckland City Mission Statute 1971 (now the 2009 Statute).
5 Scheme.
[6]Specifically:
(a)A trustee may apply for a variation under the Act where it is impossible, impracticable, or inexpedient to carry out the relevant trust’s original charitable purpose.6
(b)The powers of trustees may also be extended or varied if to do so would facilitate the charitable purpose and the administration of the property, income or the carrying out of the trust.7
[7] The Court must not approve a scheme unless it is satisfied that it is a proper one, that it will carry out the desired purpose, and that it is not contrary to law, public policy or good morals.8
[8] Every proposed scheme must be submitted to the Attorney-General, together with supporting material, for the Attorney-General’s consideration and report.9 In applying for Court approval, there are also requirements as to public notification and advertising.10
Attorney-General’s report and notification requirements
[9] The Attorney-General supports the Scheme and has provided a report as required under s 35 of the Act.11
[10] The notification requirements of s 36 have also been met: the Scheme has been advertised in the Gazette and the New Zealand Herald. These advertisements were in the form approved by Lang J in procedural orders made in the proceeding apart from immaterial trivial changes.12 No responses have been received to the advertising.
6 Charitable Trusts Act 1957, s 32(1).
7 Section 33(1).
8 Section 56(1)(a).
9 Section 35.
10 Section 36.
11 Report of the Attorney-General dated 5 July 2023. The Attorney-General provided an updating report of 10 October 2023 issued after updated documents were provided but the 5 July 2023 report is the substantive document.
12 Re The Whitney Trust, ex parte Auckland City Mission Inc HC Auckland CIV-2023-404-2523, 1 November 2023 (Minute of Lang J).
Amendment to purpose
The present purpose
[11] The Trust Deed identifies the Trust’s purpose as being to appropriate, use, and maintain Whitneydale:
… in perpetuity for the purposes of and as a seaside convalescent Home for Poor Persons old and young of the City or Suburbs or surrounding districts of Auckland (and irrespective of the Religious Beliefs of such persons).
Approach to the variation
[12] The question is whether this purpose is “impossible or impracticable or inexpedient” to carry out within s 32. I adopt the summary of the case law from the Attorney-General’s report on the Courts’ approach to this test.
[13] In varying charitable trusts under s 32, the Court is exercising a statutory jurisdiction and is not bound by the common law doctrine of cy-près.13 However, the Courts have held those promoting a scheme should nonetheless seek to substitute beneficiaries or purposes resembling as closely as possible (in the changed circumstances) those specified by the original settlor.14
[14] In Re Tennant, Hammond J summarised the principles governing applications for variation of charitable trusts:15
The application must come within the statutory jurisdiction (which includes a necessity for the purposes to have been charitable at the date of settlement, settlement, see Re Beckbessinger [1993] 2 NZLR 362). Second, the substituted arrangements must be charitable as that term is understood in law. Third, in deciding whether to approve the substituted arrangements the new scheme should accord as closely as is reasonably possible in the changed circumstances to the terms of the original trust. Fourth, the Court will dispose of the property in such a way as will best serve the interests of those intended to be beneficiaries and the public. Fifth, other considerations arise if an opposing party puts forward an alternative scheme.
13 Public Trustee v Attorney-General [1923] NZLR 433 (SC) at 442.
14 See, for example Re Twigger [1989] 3 NZLR 329 (HC) at 342.
15 Re Tennant [1996] 2 NZLR 633 (HC) at 636.
[15] Inexpedience is a lower threshold than “impracticable”. In Re McElroy’s Trust, the Court of Appeal held “[t]he general connotation of the word ‘inexpedient’ in its present context is of the original charitable purpose or purposes having become unsuitable, inadvisable or inapt.”16 Accordingly, inexpedience embodies a value judgement rather than simply an assessment of feasibility. It may remain possible or practicable to carry out the original purpose of a trust, but it may nonetheless have become inexpedient to do so. In addition, more recently, in the context of the replacement of trustees, this Court accepted that “expediency” (in the context of the Court’s power to replace trustees under s 51 of the Trustee Act 1956) “is a lower threshold than necessity and imports considerations of suitability, practicality and efficiency.”17 This observation might equally be applied to s 32 of the Charitable Trusts Act.
Is the original purpose of the Trust “impossible or impracticable or inexpedient” to carry out?
[16] In some senses the purpose of the Trust was unable to be met from the outset in practical terms, due to lack of funds. While very generous, Mrs Whitney’s gift did not include funds for the operation and upkeep of a convalescent facility. The Mission has never had the funds to support a separate convalescent home alongside its other charitable services.
[17] This is borne out by what has occurred since. The evidence before me shows that the Mission found it near impossible to provide the intended convalescent service and attempts to find an alternative means of achieving the object of the gift failed. This led to the sale of Whitneydale in 1976 and the purchase of a Browns Bay property in 1981. Since that purchase, the Browns Bay property has been primarily rented as a short- or long-term holiday home for disadvantaged Aucklanders, but also occasionally for other purposes, such as a residence for various Mission staff, including the City Missioner and the Chaplain. Since 2000, the property has been rented under a periodic tenancy.
16 Re McElroy Trust [2003] 2 NZLR 289 (CA) at [14].
17 Low v Rothschild Trust (Schweiz) AG [2017] NZAR 288, [2017] NZHC 25 at [38].
[18] Combined with the practical problem of supporting use of the current property as a convalescent home, convalescent homes in the sense described in the original purpose are an obsolete service. They are no longer a feature of modern medical practice. As Ms Anne Trevelyan notes in an affidavit in support of this application, “the healthcare industry has moved away from ‘traditional’ treatments for illnesses and injuries.” As a result, convalescent homes are “no longer a significant part of the way healthcare is delivered in Auckland.” Rather, rest and recovery now tend to occur in a patient’s home, or a palliative care facility, instead of in a specialist convalescent home.
[19] In addition, the Browns Bay property is now located far from the Mission’s other services, which are mainly based in Auckland Central. It would be costly to adequately supervise guests using the facility because of its distance from the Mission’s headquarters. The Browns Bay property is a three-storey townhouse, with steep staircases between floors. These staircases are a hazard for disabled patients, elderly patients, and very young children.
[20] Consequently, the Trust assets have for many years not been capable of achieving the intent of the gift. While the current assets have been preserved, they are delivering little practical benefit to the community in any sense.
[21] I am satisfied that the purpose of the Trust is “impossible or impracticable or inexpedient” to carry out.
Proposed amended purpose
[22] The applicant wishes to see the present unsatisfactory situation resolved, and the Trust assets used for a purpose which achieves as closely as it is able the original charitable intent, as well as seeing those assets used to support an activity of genuine benefit to those most in need in Auckland. It seeks variation of the Trust’s purpose such that it is:
… for the purposes of the healing Auckland City Mission HomeGround building to care for Poor Persons old and young of the City or surrounding districts of Auckland (and irrespective of the religious beliefs of such persons) including those suffering or recovering from ill health, addiction, the effects of poverty, trauma, or adversity.
These purposes include paying costs relating to the construction, fit-out and maintenance of the HomeGround building, as well as the operational costs of the detox centre, the general practice for addressing the needs of the poor, the rooftop gardens used by residents, and other communal living spaces.
[23] The proposed purpose would enable the Mission to sell the Browns Bay property and apply the proceeds and accumulated rental income to the HomeGround development.
Comparison with original purpose
[24] I accept the Mission’s submission that the Trust’s original purpose has three underlying themes:
(a)supporting the Mission’s activities and purpose;
(b)helping disadvantaged and struggling Aucklanders gradually recover from illness or ill health, denoted by the word “convalescent”; and
(c)having a “bricks and mortar” character, directly linked to the place where those in need are assisted.
[25] I agree that the proposed purpose accords as closely as is reasonably possible with these original purposes. It is linked to the Trust’s three essential elements. The Mission will work toward gradually improving HomeGround residents’ health which includes those “suffering or recovering from … addiction, the effects of poverty, trauma, or adversity.” This treatment is generally provided to Aucklanders who are struggling, chronic rough sleepers or who are in crisis. Additionally, by devoting the Trust funds to the HomeGround building, the gift retains its “bricks and mortar” character. I also accept Ms Trevelyan’s observation that:
… residential social detox and supporting housing with co-located healthcare services for poor persons old and young like those that HomeGround offers are the closest modern equivalent to convalescent homes.
[26] In particular, HomeGround provides apartment accommodation with security and social services support for up to 80 Aucklanders in need, including 40 formerly
chronic rough sleepers (being those without shelter who have lived on the streets, in public spaces, or in temporary motels for over a year, with one or more medical issues).
[27]HomeGround offers a range of healing services including:
(a)a medical centre;
(b)social and medical detox facilities;
(c)counselling spaces;
(d)a pharmacy;
(e)a communal dining room;
(f)activity rooms for therapeutic arts (like carving, sculpture, art, and drama);
(g)a quiet whānau room for contemplation and reflection; and
(h)a rooftop garden with a sea view for contact with nature and communal gathering.
[28] The Mission could use the Trust funds for the overall cost of the building, or towards many projects at HomeGround, including the social detoxification floor, or the rooftop floor.
[29] I am satisfied that using funds released from the sale of the Trust’s property for the HomeGround development accords as closely as is reasonably possible with the Trust’s original convalescence purpose. Those services will continue to be provided by the Mission, which was the charity selected by Mrs Whitney as the vehicle of her choice for provision of the convalescence services contemplated.
Variation of trust powers
The jurisdiction to vary
[30] Section 33 of the Charitable Trusts Act provides that a court may extend, vary or prescribe trustees’ powers, or the mode of administering the trust, where it could facilitate the administration of the trust’s property, income or carrying out the trust. The courts have interpreted “facilitated” to mean “made easier, promoted or helped forward”.18
[31]The Mission applies to insert the following further powers into the Trust Deed.
TRUSTEES’ SPECIFIC POWERS
3.Without prejudice to any of the Trustees’ express or implied powers under this deed and at law, the Trustees will have the following specific powers, and may exercise them either alone or with any other person or persons. These powers are not an exhaustive source or description of the specific powers of the Trustees:
To sell real and personal property
3.1To sell any real or personal property forming part of the Trust fund, including, without limitation, allowing all or part of the purchase price to remain on loan, with or without security and with or without payment of interest, or to be payable by instalments.
Winding up
3.2To wind up the Trust if the Trustees have exhausted all of the income and capital of the Trust fund by paying, applying or appropriating that income and capital toward the purpose of the Trust.
3.3On the winding up or dissolution of the Whitney Trust, to the extent that there are surplus assets, the Trustees must give or transfer all surplus assets after the payment of costs, debts and liabilities:
(a)to some other charitable organisation or body within New Zealand having similar objects to the Trust; or
(b)for some other charitable purpose or purposes within New Zealand.
18 Re Melanesian Mission Trust Board HC Auckland M1140/98, 24 September 1998, as applied in Re YMCA New Zealand Soldiers Great War Memorial Trust [2013] NZHC
2516 a [32]; Re Frank Sydenham Scholarship Trust [2012] NZHC 654 at [47]; and Re St Barnabas Roseneath Trust Board HC Wellington CIV-2011-485-1254, 3 August 2011 at [3].
Acknowledging donor
3.4To use the residue from the Trust fund for a plaque or similar permanent memorial recording that work fulfilling the Trust’s purpose was funded by the kindness and generosity of the late Mary Ellen Whitney.
[32] Clause 3.1 providing for the sale of Trust assets is an acceptable variation, given the circumstances of the proposed amendment: the property presently held by the Trust does not and cannot fulfil the Trust’s purposes as discussed above. Allowing the sale of Trust assets accords with the purpose of the Court’s jurisdiction under the Act.
[33] As to the provisions for winding up in proposed cls 3.2 and 3.3, it is a general principle that a charitable trust, once established, cannot be terminated or wound up.19 Where the passing of time or changing circumstances mean it becomes impossible or difficult to carry out the trust as originally intended, generally the trustees cannot terminate the trust, but instead are under a duty to apply to the Court for a variation of the trust’s purposes or mode of administration under the Act.20
[34] The purpose of the Court’s jurisdiction under the Act to vary trusts is to enable trustees to continue applying funds to charitable purposes where the original purposes have become impossible, impracticable or inexpedient to fulfil, and not to terminate the trust.21
[35] There are some limited exceptions to the principle that a charitable trust cannot be wound up that are outlined in Tudor on Charities:22
(a)Where the trust is set up in such a way that its property is applied for charitable purposes for a limited duration, and the trustees are given express powers to terminate.
19 See National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31 (HL) at 74.
20 Society of St Vincent de Paul v Wanganui Ozanam Villa Trust [2007] NZAR 77 (HC) at [47]-[48].
21 Re Utterson-Kelso (deceased) [2016] NZCA 556, [2017] NZAR 84 at [78]–[79].
22 William Henderson and others Tudor on Charities (Thomson Reuters, London, 2023) at [21.049].
(b)Where a charitable trust no longer has funds, it will terminate. This can only occur in the case of a charity that has the power to spend both income and capital.
(c)Where the objects of the charity are dependent on the existence of a particular institution or premises. If that institution closes down or the premises are no longer available, the trust will terminate (unless there is evidence of some general charitable intention on the part of the settlor that might save the trust from lapsing).
[36] In the present context, neither the terms of the original deed or the proposed amendments establish any general obligation on the Trustee to act so as to ensure the ongoing validity of the Trust. It is a situation where the original purpose cannot be furthered. I have concluded above that the purpose should be varied to enable the Trust property to be sold to apply the proceeds to a closely associated purpose. Provision for the ability to apply income and capital of the Trust fund is needed to advance that purpose.
[37] It is contemplated that by application of the funds to the HomeGround development, the Trust fund will be exhausted and hence lead to the winding up of the Trust. In practical terms, the Mission will be using the Trust funds ongoing as applied to further that development.
[38] In all these circumstances, I consider that the limited winding up provision proposed by Mission is consistent with principle and consequently supportable. The provision for a plaque is also appropriate.
Conclusion
[39] I am satisfied that the procedural and substantive requirements for approval of the Scheme have been met.
(a)Advertising has been undertaken as required.
(b)The Attorney-General has reported on and supports the Scheme.
(c)The proposed variation is as close as is reasonably possible to the original purposes set out in the Trust Deed and is one that should be approved by the Court.
(d)I am satisfied that the Scheme is a proper one that will carry out the desired purpose, is not contrary to law, public policy or good morals.
(e)The varied trustee powers will facilitate the charitable purpose and the administration of the property, income and carrying out of the Trust.
[40] I am also satisfied that, as is usual, it is appropriate to order that the applicant pay out of the Trust fund a sum of $750 towards the costs of the Attorney-General.
[41] Finally, while not a part of the legal analysis, I record that the Mission has made efforts to ascertain the views of Mrs Whitney’s living descendants and they are firmly in support of the Scheme.
[42] Accordingly, the Scheme is approved in accordance with the Mission’s amended orders as follows:23
[43]First, replacing paragraph two of the Trust Deed with:
WHEREAS MARY ELLEN WHITNEY of Auckland the wife of Cecil Arthur Whitney of Auckland in New Zealand Gentleman was the owner of the lands set out in the Schedule hereto and was desirous of settling the same in trust to be appropriated used and maintained for the purposes of and as a seaside convalescent Home for Poor Persons old and young of the City or surrounding districts of Auckland (and irrespective of the Religious beliefs of such persons) including those suffering or recovering from ill health, addiction, the effects of poverty, trauma, or adversity AND WHEREAS the Society expressed its willingness to accept the said property upon and subject to such public and charitable trusts uses and purposes AND WHEREAS the said Mary Ellen Whitney thereupon transferred the said property to the Society and the Society declared that it held the said property subject to the above-mentioned public and charitable trusts uses and purposes.
23 The amended application filed on the day of the hearing was in the same terms as the previous application except for a non-material clarifying change to the third paragraph to change the word “intends” to “is authorised”.
However, the original settled property was unable to be used for this intended purpose and was sold. The Society purchased a new property which it continues to hold, along with the proceeds of the use of that property, subject to the trust.
The Society is authorised to sell the currently held property and apply the trust’s total funds for the purposes of the healing Auckland City Mission HomeGround building to care for Poor Persons old and young of the City or surrounding districts of Auckland (and irrespective of the religious beliefs of such persons) including those suffering or recovering from ill health, addiction, the effects of poverty, trauma, or adversity. These purposes include paying costs relating to the construction, fit-out and maintenance of the HomeGround building, as well as the operational costs of the detox centre, the general practice for addressing the needs of the poor, the rooftop gardens used by residents, and other communal living spaces.
[44]Second, inserting the following as paragraph three of the Trust Deed:
TRUSTEES’ SPECIFIC POWERS
3.Without prejudice to any of the Trustees’ express or implied powers under this deed and at law, the Trustees will have the following specific powers, and may exercise them either alone or with any other person or persons. These powers are not an exhaustive source or description of the specific powers of the Trustees:
To sell real and personal property
3.1To sell any real or personal property forming part of the Trust fund, including, without limitation, allowing all or part of the purchase price to remain on loan, with or without security and with or without payment of interest, or to be payable by instalments.
Winding up
3.2To wind up the Trust if the Trustees have exhausted all of the income and capital of the Trust fund by paying, applying or appropriating that income and capital toward the purpose of the Trust.
3.3On the winding up or dissolution of the Whitney Trust, to the extent that there are surplus assets, the Trustees must give or transfer all surplus assets after the payment of costs, debts and liabilities:
(a)to some other charitable organisation or body within New Zealand having similar objects to the Trust; or
(b)for some other charitable purpose or purposes within New Zealand.
Acknowledging donor
3.4To use the residue from the Trust fund for a plaque or similar permanent memorial recording that work fulfilling the Trust’s purpose was funded by the kindness and generosity of the late Mary Ellen Whitney.
Anderson J
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