Campion Trust Fund
[2019] NZHC 147
•13 February 2019
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-000816
[2019] NZHC 147
UNDER THE CHARITABLE TRUSTS ACT 1957 AND IN THE MATTER
OF A CHARITABLE TRUST CREATED BY THE WILL OF KENNETH HENRY
CAMPION, LATE, OF CHRISTCHURCH, NOW DECEASED
AND IN THE MATTER
OF AN APPLICATION BY MICHAEL DAVID DEACON AND ROGER BEN SANDFORD AS
EXECUTORS AND TRUSTEES OF THE WILL OF THE LATE KENNETH HENRY CAMPION FOR APPROVAL OF A SCHEME UNDER THE CHARITABLE
TRUSTS ACT 1957
Applicants
Hearing: 11 February 2019 Appearances:
A C Hughes-Johnson QC for Applicants
Mr Brogden for the Canterbury District Health Board
Judgment:
13 February 2019
JUDGMENT OF GENDALL J
RE CAMPION TRUST FUND [2019] NZHC 147 [13 February 2019]
Introduction
[1] The applicants Michael Deacon and Roger Sandford (the Trustees) who are executors and trustees of the will of the late Kenneth Campion, bring this application to vary the charitable purposes of a trust established by the late Mr Campion’s will.
[2] The late Mr Campion died on 24 May 2006 leaving a will dated 9 February 2006. Pursuant to cl 5 of the will in relation to the residue of his estate, the late Mr Campion provided:
I GIVE DEVISE BEQUEATH AND APPOINT all the estate real and personal and of whatsoever kind and wheresoever situate of which I shall be possessed to which I shall be entitled or over which I shall have any disposing power at my death unto my trustees UPON TRUST to sell, call in and convert into money such part or parts thereof as shall not already consist of money and after payment from the proceeds thereof of my just debts, funeral, testamentary and administration expenses and all duties to stand possessed of the balance of the proceeds of such sale calling in and conversion into money together with such part of my set estate as shall already consist of money to hold the residue in the name of CAMPION TRUST FUND (“THE FUND”) in perpetuity to use the income for the benefit of Shirley Boys’ High School students.
A. I direct that the Shirley Boys’ High School and my Trustees follow the following guidelines in administering the Fund and financial assistance is preferably to be given to provide for the promotion of horticulture and similar activities and courses conducted by Shirley Boys’ High School. The Fund, could also enhance educational resources in the area of horticulture by providing suitable books, computer software and other relevant educational material. The Fund could also be available for payment of course fees, whether at Shirley Boys’ High School or elsewhere that may assist and advance the students in horticulture and similar areas of study.
B. The assistance referred to above may be extended to students who have studied those courses and have gone on to tertiary education, such assistance to be at the discretion of the Trustees.
C. On no account should the Trustees make any direct cash payments to Shirley Boys’ High School or any students.
D. My Trustees may carry forward unexpended income in any year to a future year or years. My Trustees may also set aside from income a reserve to meet fluctuations of income in future years and other contingencies. These powers are in addition to any other power or discretion my Trustees may have to carry forward income or to establish reserves.
E. Should the Trustees desire to distribute the capital and any accumulated income at some future date (preferably not before 20 years has elapsed from my death) then it is my wish that the balance of the fund be paid to
THE BONE MARROW TRANSPLANT SECTION at
CHRISTCHURCH HOSPITAL or if that is not in existence to a similar Organisation engaged in research into kidney disorders, oncology and prostate cancer.
[3] Between October 2010 and February 2011 the Headmaster (Mr Laurenson) of Shirley Boys’ High School (the School), the Chairperson of the School’s Board of Trustees and the Trustees corresponded extensively in relation to a proposal to effectively implement the terms of the Trust. The Trustees formed the view that Mr Campion’s intentions were that the residue of his estate was to be applied to provide for the promotion of horticultural or similar activities in courses conducted by the School and he envisaged that the income of the residue would be sufficient to provide funding for that purpose. It transpired, however, that there was insufficient space in the School grounds to build any new facilities without incurring considerable expense which the School could not afford at the time. The School was not well endowed financially and it had no extra funds that it could call upon for an initiative such as building new structures or refitting existing buildings. The Trustees and the School considered at the time that in order to fulfil Mr Campion’s wishes, capital expenditure was necessary to establish a classroom or a building in which horticulture could be taught at the School to the educational standard required.
[4] Regrettably these discussions were significantly disrupted, however, by the Canterbury earthquake sequence in 2010 and 2011. This caused severe damage to the School’s buildings and resulted in its temporary relocation.
[5] Understandably, it was not, it seems, until October 2016 that discussions recommenced and the current variation proposal was advanced.
Difficulties faced by the Trust
[6] In their present application the Trustees have identified a range of difficulties they have experienced in administering the Trust:
(a)The will provides for income only from the residue to be available to benefit the School. There is a direction too that the Trustees are not to make any direct cash payments to the School or to any students.
(b)Given that the deceased, Mr Campion, intended that the income from his estate residue would provide for the promotion of horticultural or similar activities in courses conducted by the School, envisaging that this income from the residue would be sufficient to provide funding for these purposes, problems have now arisen. It seems clear now that income is simply not sufficient to achieve these purposes.
(c)The School currently does not have any facilities which enable it to provide courses in horticulture and similar activities. Nor is the School in a financial position to establish those facilities on its own. In the absence of those teaching facilities the income of the Trust cannot be applied in the manner anticipated by the late Mr Campion.
(d)Currently, the Trust cannot otherwise support horticulture at the School as there is a restriction on making direct payments of cash to the School and its pupils.
(e)Otherwise it would be necessary that expenditure of a capital nature be made to establish a classroom or a building in which horticulture is able to be taught.
Proposed variation
[7] With these difficulties in mind the Trustees now seek orders under s 32 of the Charitable Trusts Act 1957 (the Act) for approval of an amended Scheme which they have outlined as follows:
(a)Prize fund:
The sum of $80,000 is to be paid to the School Board to establish a prize to be known as the Kenneth Henry Campion Prize for Horticulture Students. The prize fund is to be held on trust in perpetuity by the School Board and invested in a separate interest bearing term deposit. The interest on the deposit is to be paid into the bank account of the School Board on an annual basis to be used to fund the prize which is
to be awarded each year for outstanding achievement in horticulture or a similar subject. Awards are to be made to one or more students in years 11, 12 and 13 for academic achievement, practical ability and diligence. The awards are to be used to finance the advancement of future horticultural studies for the student in question either at the School or later at a tertiary institution. Interest not utilised in any year is to be reinvested in the prize fund term deposit account.
(b)Facility fund
The sum of $200,000 is to be paid to the School Board to be held on trust on the following terms:
(i)This facility fund is to be used to establish a horticultural facility to be known as the Kenneth Henry Campion Horticultural Facility (the Facility) at the new site of the campus for the School (Orua Paeroa) at QEII park where the School will be relocated in about 2019;
(ii)Part of the sum from the facility fund, estimated at $78,000, is to be used to establish a permanent tunnel house, shade house and irrigation system for the propagation and cultivation of horticultural plants. The buildings are to be used to augment the teaching of horticulture as part of a general science course for year 9 and 10 students and as a stand-alone subject for students in years 11, 12 and 13; and
(iii)The balance of the facility fund is to be held for the purposes of maintaining the permanent tunnel house, shade house and irrigation system and is to provide funds for the acquisition of suitable plants and accessories which are required for the facility (together “the School Trusts”).
(c)Should any of the School Trusts fail the funds relating to the Trust or Trusts which fail are to be used for the payment of School fees, whether at the School or elsewhere that may assist and advance students or former students of the School in horticulture and similar areas of study.
(d)Should the School Trusts at (c) fail, the funds are to be used and applied by the School for the purpose of assisting or advancing students in other areas of scientific study. If possible, in order to further horticultural endeavours.
(e)Hospital donation
The sum of $80,000 is to be paid to The Bone Marrow Transplant Section at Christchurch Hospital.
(f)Payment of costs and allocation of balance
After payment of costs and expenses (estimated at a maximum of
$30,000 plus GST) the balance of the Trust fund will be divided pro- rata into three portions (reflecting the sum set aside for the prize fund, facility fund and hospital donation) and those portions are to be applied to augment the funds used for each of those respective purposes.
Jurisdiction
[8] Sections 32 and 33 of the Act permit the terms upon which a charitable trust is administered to be varied provided the Court approves the proposed variation – under s 53(c) of the Act.
[9] Section 32(1) makes provision for the property of a trust to be applied for a charitable purpose or purposes other than those prescribed by the instrument creating the Trust, in this case Mr Campion’s will, where it has become “impossible or impracticable or inexpedient” to carry out the original purpose. The leading case on
the meaning of “inexpedient” is Re McElroy Trust.1 In that case the Court of Appeal found that the concept of inexpediency introduced a value judgment rather than simply an assessment of feasibility. The question is not whether the Scheme would be “better than the existing arrangements” but whether carrying out the original purposes are “inexpedient”. The general connotation of the word “inexpedient” was that the original charitable purposes had become “unsuitable, inadvisable or inapt”.
[10] In Re Tennant2 Hammond J summarised the principles governing an application for variation under s 32 as follows:
(a)The application must come within the statutory jurisdiction (which includes a necessity for the purposes to have been charitable at the date of settlement);
(b)The substituted arrangements must be charitable as that term is understood in law;
(c)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; and
(d)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.
[11] Section 33 of the Act permits the powers of the trustees of a charitable trust to be extended or varied, and the mode of administration of the trust to be varied, where the administration of the trust would be “facilitated” by that being done.
[12] In Re Twigger3 Tipping J in the High Court considered that there was an analogy between the duties owed by a trustee in promoting a Scheme under Part III of the Act and the duties of a trustee when exercising a power of appointment among a significant group of persons, or when selecting the objects of a discretionary trust:
In each case a choice or selection has to be made, albeit in differing circumstances, from a range of potential beneficiaries. In each case the trustee is under a duty to fulfil the intention of the settlor or testator as best he can. In each case in my view the trustee, to discharge his duties properly, should inform himself as fully as the circumstances permit of those who may fall within the qualifying class and measure their respective claims to be selected as beneficiaries. So it is then that by analogy with such duties of a trustee, as
1 Re McElroy Trust [2003] 1 NZLR 289 (CA).
2 Re Tennant [1996] 2 NZLR 633 (HC) at 636.
3 Re Twigger [1989] 3 NZLR 329 (HC) at 342.
exemplified in the Baden and Hay cases I consider a trustee in a Part III Scheme case should adopt the same sort of enquiries to find and select appropriate substitute beneficiaries from among those who may have any claim to qualify.
[13] Finally, s 56 of the Act provides that no Scheme shall be approved by the Court under Part III of the Act unless the Court is satisfied that:
The Scheme is a proper one, and should carry out the desired purpose or proposal, and is not contrary to law or public policy or good morals; that the Scheme can be approved under the part of this Act under which the approval is sought; that every proposed purpose is charitable within the meaning of that part of this Act and can be carried out; and that the requirements of that part of this Act have been complied with in respect of the Scheme.
[14] In focusing in the present case before me on whether the existing Scheme under the Trust is “inexpedient” to meet its charitable purposes I am satisfied here that, given the passage of time and the significant change in circumstances (including the change necessarily brought about for the School by the Canterbury earthquake sequence) this test is met for the Trust. There is not really any question as far as I see the position that the proposed purposes in the variation remain both charitable and in line with the late Mr Campion’s intentions to promote horticultural and similar activities and courses in the School. So far as the School purpose in the Trust is concerned, the late Mr Campion intended for his estate to benefit the students of the School by enabling the teaching of horticulture or similar activities to its students. Expenditure of a capital nature, I am satisfied, is now necessary in order to establish appropriate facilities from which horticulture can be taught. It is clear the amount which was otherwise available by way of income only was quite inadequate to carry out the School purpose of the Trust.
[15] Similarly, as to the hospital purpose of the Trust, the horticultural purpose having been achieved through the proposed variation, as I see it, there is no reason to delay now paying out the balance. Moreover, to delay paying out the balance, I am satisfied, would be likely to erode the capital through additional expenses over time.
[16] Turning now to the Re Twigger4 requirements I refer to at para [12] above, I am satisfied:
4 Re Twigger, above n 3.
(a)The Trust was charitable at the date it was settled on the death of Mr Campion. The proposed varied purposes, being to provide for the education of students in horticulture or similar areas and the advancement of The Bone Marrow Transplant Section at Christchurch Hospital, are similarly charitable purposes.
(b)The substituted purposes of establishing a horticultural facility at the School to enable the teaching of horticulture and a prize fund for exemplary horticulture students properly continue the purpose of advancing education. Similarly, the payment to The Bone Marrow Transport Section at Christchurch Hospital is also beneficial to the community.
(c)The proposed purposes of the variation I am also satisfied accord as close as reasonably possible, under the new changed circumstances this Trust faces, to the essential elements of the original purpose.
[17] In terms of s 35 of the Act, the proposed Scheme to vary the provisions of the Trust has been submitted to the Attorney-General. On 19 November 2018 an extensive and detailed report from the Attorney-General (dated 1 November 2018) was filed. This report dealt extensively with the issues to be addressed by the Court and concluded at para [22]:
Formal Report
22.Pursuant to sections 35 and 36 of the Charitable Trusts Act 1957 and for the purposes of assisting this Honourable Court as to the matters on which it is required to be satisfied in terms of s 56(1)(a) of the Act, I report, that I am satisfied that the said Scheme is a proper one and should carry out the desired purpose of the proposal and is not contrary to law or public policy or good morals; that the Scheme can be approved by this Honourable Court under Part III of the Act; that every proposed purpose is charitable within the meaning of the said Part and can be carried out; and that the requirements of the said Part have been complied with in respect of the said Scheme up to the giving of this report.
[18] Next, appropriate advertising of this application was achieved with advertisements in the New Zealand Gazette on 7 December 2018 and in the
Christchurch Press on 13 and 21 December 2018 and 10 January 2019. There was no opposition to this application or appearances by any other party relating to this application before the Court.
[19] Two final matters require consideration. The first is that cl 5(c) of the late Mr Campion’s will specifically states:
On no account should the Trustees make any direct cash payments to Shirley Boys’ High School or any students.
[20] On their face it would appear that some of the payments envisaged by the Trustees in the varied Scheme will be to the School or students. Notwithstanding this, the late Mr Campion’s will at cl 5(a) as it presently stands does provide for financial assistance to be provided to the School and students by allowing from the estate the provision of suitable books, computer software and other relevant educational material…” and “for payment of course fees…”
[21] I am satisfied therefore that the type of payments envisaged and that form the substance of the varied Scheme do not truly infringe the intent of cl 5(c) of the will noted above in light of the changed circumstances which prevail here.
[22] And lastly, it is noted that cl 1(iii) of the draft order makes provision for the application of the trust funds should the earlier stated Trusts fail. This re-drafted cl (iii) provides for the application of funds in terms of cl 5(a) of the will should any of the stated Trusts fail.
[23] A further catchall provision is provided for in the draft order at para 1(iv) by which it is intended to provide for a general power for the Trust funds to be used by the School for scientific purposes in the event that the stated Trusts should also fail. It is accepted that an application for scientific purposes would be as close as reasonably possible to the preferences of the late Mr Campion expressed in his will.
Result
[24] For all the reasons I have outlined above, this application before the Court succeeds. Approval to the variation Scheme under the Act is accordingly granted.
[25]Orders are now made as attached at Appendix A.
Costs
[26] The Trustees effectively here seek an order that costs in their favour are to be met from the funds held by the Trust. In addition, in accordance with the normal requirements of the Attorney-General, costs on providing their extensive report here of $750 are sought. Mr Brogden, who appeared as counsel before me for the Canterbury District Health Board confirmed, however, that the Board does not seek costs here.
[27] Costs orders to this effect are now made as outlined at [2] of the Orders attached.
...................................................
Gendall J
Solicitors:
MDS Law, Christchurch
Anthony Hughes-Johnson QC, Barrister, Christchurch
APPENDIX A
BEFORE the Honourable Justice (insert name)
day, the day of 2018
AFTER READING the originating application of the applicants for approval of a scheme under the provisions of the Charitable Trusts Act 1957, the affidavit of Michael David Deacon of Christchurch sub-editor in support, the draft order filed herein, the memorandum of Mr A C Hughes-Johnson QC of counsel on behalf of the applicants and the memorandum of the Attorney-General, AND UPON THE APPLICATION of Mr A C Hughes-Johnson QC, this Court orders:-
1.that the terms of the trust established by the will of the late Kenneth Henry Campion, formerly of Christchurch, retired and now deceased, be varied by amending clause 5 of the will relating to the disposal of the residue of the estate by deleting all words in clause 5 following after the words…
“…as shall already consist of money…”
and by substituting the following words…
“…to dispose of the residue presently held in the name of Campion Trust Fund (“the trust fund”) as follows…
(i)to pay out of the trust fund the sum of $80,000.00 to Shirley Boys’ High School to establish a prize to be known as The Kenneth Henry Campion Prize for horticulture students (“the prize fund”) to be held by the Shirley Boys’ High School Board of Trustees (“the Board”) in trust upon the following terms:
(a)the prize fund is to be held in perpetuity by the Board and invested in a separate interest bearing term deposit;
(b)the interest on the deposit is to be paid
into the bank account of the Board on an annual basis to be used to fund The Kenneth Henry Campion Prize which is to be awarded each year for outstanding achievement in horticulture or a similar subject. Awards are to be made to one or more students in years 11, 12 and 13, for academic achievement, practical ability and diligence. The awards are to be used to finance the advancement of the future studies for the student in question in horticulture, either at Shirley Boys’ High School or, later, at a tertiary education institution;
(c)any interest not utilised in any year is to be returned and invested in the separate interest bearing term deposit.
(ii)to pay out of the trust fund the further sum of
$200,000.00 to Shirley Boys’ High School (“the Facility fund”) to be held by the Board in trust in perpetuity upon the following terms:
(a)the Facility fund is to be used to establish an horticultural facility to be known as The Kenneth Henry Campion Horticultural Facility (“the Facility”);
(b)part of the above sum from the Facility fund is to be used to establish a permanent tunnel house, shade house and irrigation system for the propagation and cultivation of horticultural plants, with the intention that these buildings should augment the teaching of horticulture as part of a general science course for year 9 and 10 students and as a stand alone subject for students in years 11, 12 and 13;
(c)the Facility is to be established at the new site of the campus for Shirley Boys’ High School being Orua Paeroa, at the site of the park known as QEII Park;
(d)the balance of the Facility fund is to be held for the purposes of maintaining the
permanent tunnel house, shade house and irrigation system and to provide funds for the acquisition of suitable plants and accessories which are required for the Facility.”
(iii)That should any of the trusts referred to in substituted clauses (i) or (ii) be unable to be implemented for any of the stated purposes and thereby fail, the funds relating to the trust or trusts which fail are to be used and applied by Shirley Boys’ High School for the payment of course fees, whether at Shirley Boys’ High School or elsewhere that may assist and advance the students or former students of Shirley Boys’ High School in horticulture and similar areas of study, being a purpose specified in clause 5(a) of the will.
(iv)That should the trusts referred to in substituted clause
(iii) be unable to be implemented for any of the stated purposes and thereby fail, the funds relating to the trusts are to be used and applied by Shirley Boys’ High School for the purpose of assisting or advancing students in other areas of scientific study, if possible, in order to further horticultural endeavours.
(v)To pay out of the trust fund the sum of $80,000.00 to The Bone Marrow Transplant Section at Christchurch Hospital.
2.That all reasonable costs and expenses of and incidental to the preparation, perusal and advertising of this scheme and submission of it to the Attorney-General and to this Honourable Court (including a contribution of $750 to the costs of the Attorney-General) and any costs of the solicitors acting and counsel retained by them are to be paid out of the trust fund.
3.Any balance of the trust fund after payment of costs and expenses:-
(i)is to be divided pro-rata into three portions reflecting the sums referred to in the substituted clauses 5(i), (ii) and (v);
(ii)the additional portion held in respect of the trust fund
established in substituted clause 5(i) is to be paid to Shirley Boys’ High School and used to augment the funds held in respect of that trust;
(iii)the additional portion held in respect of the trust fund established in substituted clause 5(ii) is to be paid to Shirley Boys’ High School and used to augment the funds held in respect of that trust;
(iv)the portion held in respect of the funds referred to in substituted clause 5(v) is to be paid to The Bone Marrow Transplant Section at Christchurch Hospital.
By the Court (Deputy) Registrar
Dated this day of 2019 Sealed this
day of
2019
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