Cornwall Park Trust Board

[2022] NZHC 2900

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2022-404-1293

[2022] NZHC 2900

IN THE MATTER OF	The Charitable Trusts Act 1957 and the Trusts Act 2019
AND
IN THE MATTER OF	An application by the Cornwall Park Trust Board, a charitable trust registered under the Charities Act 2005 as CC27112 with its address for service at 203 Greenlane Road West, Greenlane, Auckland, for an order to vary the trust deeds

Hearing:	19 October 2022
Counsel:	A E Murray for Applicant
Judgment:	4 November 2022

JUDGMENT OF PAUL DAVISON J

This judgment was delivered by me on 4 November 2022 at 4:30pm pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

DLA Piper, Auckland

Introduction

[1]    By an originating application dated 3 August 2022, the Cornwall Park Trust Board (the Board) applies pursuant to the Charitable Trusts Act 1957 (the Act) and the Trusts Act 2019 for an order that the Declaration of Trust dated 10 June 1901 (the Trust Deed), be varied by inserting two clauses which would enable the Board to indemnify the trustees personally, and/or the Board, against any loss or liability incurred in connection with the affairs of the Cornwall Park Trust (the Trust), and also to provide that the trustees shall not be liable for any loss suffered by the Trust other than losses directly attributable to a trustee’s dishonesty or wilful commission of a breach or breaches of trust.

[2]    The application was placed in the Duty Judge List on 19 October 2022. At the hearing the Board was represented by its counsel, Ms Murray, and although a notice of opposition dated 16 September 2022 had been filed by Mr Darryl Clarke, he did not make an appearance at the hearing, and the matter proceeded with brief oral submissions  being  made by Ms Murray in  support of the application, whereupon    I reserved my decision.1

The application

The additional clauses the Board seeks to have included in the Trust Deed

[3]    The Board applies for an order varying the Trust Deed by inserting the following two clauses:

(a)To be inserted as clause [XVIII]:

The trustees may indemnify, guarantee, insure and/or secure the trustees personally and/or the Trust Board against loss or liability incurred or undertaken on behalf of the trust and against any costs, losses or expenses in connection with the affairs of the trust, and in connection with the foregoing to charge the assets of the trust fund unless such loss or liability is attributable to the trustee’s dishonesty, wilful misconduct or gross negligence;

(b)To be inserted as clause [XIX]:

1      The Registrar notified and reminded both parties of the hearing date.

Trustee Liability

To the extent permissible by law, no trustees shall be liable for any loss suffered by the Trust from any cause whatsoever including a breach of the Trust, unless such loss is attributable directly to:

(i)the trustee’s dishonesty; and/or

(ii)wilful commission by him/her by any act known to be a breach of the trust.

Evidence in support of the application

[4]    In support of the application the Board has filed affidavits sworn or affirmed by:

(a)Ms Adrienne Young-Cooper, the Chairperson of the Board;

(b)Mr Roger Miller, a barrister and solicitor, Fellow of the New Zealand Trustees Association and former Chair of the Charities Registration Board; and

(c)Mr Christopher Richards, a Senior Executive Director at Aon New Zealand Ltd.

Ms Young-Cooper

[5]    Ms Young-Cooper explains that she joined the Board as a trustee in 2002 and was appointed as Chairperson in November 2019. There are presently four trustees including Ms Young-Cooper. The trustees are all volunteers who are not paid for their services and roles as trustees.

[6]    Ms Young-Cooper is a full-time independent director and member of the Chartered Institute of Directors, with extensive experience in corporate governance. She has previously held positions as the Chair and Member of Housing New Zealand Corporation; the Chair and Director of Hobsonville Land Company Limited; Deputy Chair and Director of Waterfront Auckland Limited; Chair and Director of Panuku Development Auckland Limited; and Deputy Chair and Director of Auckland Regional Transport Authority. As at 27 July 2022, the date of swearing her affidavit,

Ms Young-Cooper was the Chair and a Director of Auckland Transport, and Chair and Director of Queenstown Airport Corporation Limited.

[7]    Ms Young-Cooper refers to and produces copies of the documents founding the Trust (collectively, the Trust Documents) namely:

(a)the Trust Deed dated 10 June 1901, by which Sir John Logan Campbell vested approximately 230 acres of land in the names of the initial trustees;

(b)a Declaration of Trust dated 30 March 1908 (the March 1908 Deed), by which Sir John Logan Campbell transferred a further approximately 145 acres of land to the trustees of the Trust; and

(c)a Deed dated 7 April 1908 (the April 1908 Deed) by which power was conferred on the trustees of the Trust relating to the land transferred to them by the March 1908 Deed empowering them to let or lease the land or any parts thereof on such terms and conditions as they considered expedient, and subdivide the lands into lots and in respect of those activities to expend money out of the income from Cornwall Park.

[8]    Ms Young-Cooper further explains that on 20 March 1963 the then trustees registered themselves under the provisions of the Act and incorporated the trustees as the Board. The provisions of the Trust Deed dated 10 June 1901 require the trustees to hold the Cornwall Park land described in the deed:

… upon trust as a place of public recreation and enjoyment for the people of the colony of New Zealand. And also for such public purposes for the general benefit of the people of New Zealand in the way of affording them recreation enjoyment pleasure and instruction and other similar benefits and advantages of that nature as the trustees shall from time to time consider best.

[9]    The Board manages the day-to-day operation and maintenance of Cornwall Park including such matters as:

(a)preparing an annual business plan for the park and commercial activities;

(b)facilitating and hosting public events, such as Park Life, and weddings;

(c)leasing and renting residential and commercial properties in and surrounding Cornwall Park to tenants, including: the Auckland Showgrounds; around 60 per cent of the St Cuthbert’s College grounds; and residential leasehold and freehold properties;

(d)purchasing of lessee interests and residential property surrounding Cornwall Park; and

(e)farming livestock in Cornwall Park.

[10]   Ms Young-Cooper notes that the Board is also a corporate trustee of the Sir John Logan Campbell Residuary Estate (the Residuary Estate Trust).

[11]   Ms Young-Cooper says that the Board manages almost $30 million of investment assets for charitable purposes. Cornwall Park receives almost four million visitors a year making it one of the most visited public facilities in Auckland. She notes that while the Trust Documents containing the powers of the Board primarily require the trustees to preserve, manage and develop Cornwall Park, they do not expressly provide the trustee members of the Board with the power to indemnify themselves from the Trust property, or protection against personal liability by means of insurance. Ms Young-Cooper says that it appears that such matters were not contemplated when the Trust Deed and subsequent Trust Documents were created over 100 years ago.

[12]   Ms Young-Cooper further explains that the trustees face potential personal liability when carrying out their role as trustees and acting on behalf of the Board. She says that the trustees are therefore vulnerable to claims being made against them by members of the public alleging that the trustees either as a Board or as individuals have acted in breach of their powers as contained in the Trust Deed and other Trust Documents. Ms Young-Cooper says that the demands on the Board and the trustees are increasing and increasingly complex. She notes that the Board’s obligations involve: leasehold property; residential rental property; commercial premises,

including eateries and the Auckland Showgrounds; and traffic management within Cornwall Park, all of which requires compliance with different legislation. And owning and managing those assets gives rise to a range of scenarios in which the trustees are exposed to risk. Ms Young-Cooper also notes that the Board employs a large number of staff as well as engaging contractors and working with volunteers, which gives rise to potential liability under health and safety legislation.

[13]   Ms Young-Cooper says that having regard to the increasing number and complexity of the responsibilities and functions undertaken by the trustees, the Board wishes to take steps to protect the trustees from personal liability arising from them carrying out their duties as trustees. She says that she and the other trustees consider that it would benefit the Trust if the Trust Documents are amended as proposed so as to allow the trustees to indemnify themselves from Trust property and/or to purchase trustees’ liability insurance, by:

(a)enabling the Board to attract and retain appropriately skilled professional trustees;

(b)allowing the trustees to carry out their functions and obligations as trustees with confidence and certainty, without the risk of incurring personal liability for their actions as trustees;

(c)protecting the trustees from and against unnecessary claims from members of the public or special interest groups; and

(d)ultimately, by facilitating the administration of the Trust’s property, assets and income, and carrying out the business and affairs of the Trust.

[14]   Ms Young-Cooper further notes that it is common practice for professional company directors and professional trustees to be provided with comprehensive indemnities and/or insurance to protect them from personal liability. She says that while there is nothing preventing her and her fellow trustees from arranging and paying for trustees’ liability insurance from their own funds, doing so would not solve the issue for future trustees, and the absence of such insurance cover could make it

difficult for the Board to attract suitably skilled persons to become trustees, and also restrict the performance of the Trust’s purposes. As the trustees are unpaid volunteers, the cost of paying for trustees’ liability insurance personally would be a financial burden on them.

Mr Richards

[15]   As noted above, the application is further supported by an affidavit of Christopher Richards of Aon New Zealand Ltd (Aon). Mr Richards leads Aon’s Professional Risks team in Auckland and he has extensive experience in this field having specialised in arranging professional indemnity insurance since 1990. He was requested by the Board to give evidence in support of the application as to the availability of appropriate insurance.

[16]   Mr Richards says that in his experience it is common for individuals in roles such as the trustees on the Board to have insurance protection, and that he would expect most professional trustees, as well as officers of corporate entities, to have the benefit of insurance, and thereby employ risk transfer mechanisms that facilitate the organisation’s commercial goals.

[17]   Mr Richards explains that liability claims against directors and trustees often arise many years after the actions occurred upon which the claims are based, and in order to manage that risk, insurers generally provide insurance for professional liability risks on a ‘claims made’ basis. As a consequence, the insurance policy which responds to a claim is that which is current at the time when the insured first becomes aware of it and notifies the insurer, not the policy in place when the event giving rise to the claim actually occurred.

[18]   Having considered the range of activities undertaken by the Board in the course of carrying out their role as trustees, Mr Richards says that there are several ‘claims made’ policies offered by insurers which may be suitable to provide appropriate protection to the trustees. He says that an appropriate scope of protection for the Board might be best achieved by arranging a Directors and Officers Liability Policy (D&O policy) providing cover to defend and settle claims arising out of alleged or actual breach of governance duties, together with additional D&O policies to provide a wider

scope of coverage. He explains that a D&O policy could provide the Trust with reimbursement coverage to meet any obligations that the Board may be under to indemnify the trustees, which would protect the Trust from the erosion of funds.    Mr Richards suggests that as the Board or trustees may be exposed to actions that arise out of the business activities of the Trust rather than the trustees’ governance, a Professional Indemnity (PI) policy would provide cover to the trustees and officers of the Trust to defend and settle claims arising out of alleged or actual negligence causing financial loss to a third party. Finally Mr Richards suggests that a Statutory Liability policy would provide cover to the Trust, its employees and the Board to defend and pay fines imposed and reparation ordered in respect of prosecutions arising out of an inadvertent breach of most New Zealand statutes.

[19]   Mr Richards says that Aon currently arranges a range of insurance protection for similar entities as the Board including: a facility established for ‘Not for Profit’ organisations which provides a ‘basket of coverage’ for a range of risks such as those referred to above. Other Aon policies include Associations Liability and Trustees Liability for organisations and trusts that require dedicated coverage response requirements that are not included within the other policies he has referred to.

Mr Miller

[20]   As noted above, the application is also supported by the affidavit of Mr Roger Miller, a barrister and solicitor and former Chair of the Charities Registration Board from its inception in 2012 until June 2021. He has extensive experience in the role of a trustee as reflected by being awarded the New Zealand Trustees Association 2020 Supreme Award of Trustee of the Year. Mr Miller has reviewed the Trust Documents and notes that they do not expressly provide the Board with the power to indemnify the trustees from the Trust property, or insure the trustees against potential liability arising from carrying out their duties as trustees and pay the premiums from the Trust property.

[21]   Mr Miller says that it is now standard practice that trustees should obtain insurance to cover the risk of liabilities of the trustees and/or trust boards, and where authorised by the relevant trust deed, for the trust to pay the insurance premiums.

Having considered the proposed additional clauses which the Board seeks to have added to the Trust Deed, Mr Miller says that in his opinion the addition of the clauses is in line with the current standard practice for trustees to adopt, particularly for a trust of the size and scale of the Cornwall Park Trust.

The report of the Attorney-General — s 35 of the Charitable Trusts Act 1957

[22]   In accordance with s 35 of the Act the Board submitted the application and supporting documents to the Attorney-General. By report dated 20 July 2022, the Attorney-General advised that he supports the Board’s application for amendment of the Trust Deed, and at the conclusion of his report says:2

26.The threshold to be established under s 33 of the Act is only that the variation proposed would facilitate the carrying out of the Trust. The thrust of s 33 is to facilitate a charitable trust in carrying out the trust’s charitable purpose, enabling the trustees to deal with problems of administration they may face. …

27.Allowing the trustees to indemnify themselves from Trust property and/or to purchase trustees liability insurance will, in the Attorney- General’s view, likely facilitate the Trust and its trustees in the carrying out of the Trust’s charitable purposes.

…

30.It is now common practice for directors and professional trustees to be provided with comprehensive indemnities and/or insurance to protect them from personal liability. The Trusts Act 2019 applies to charitable trustees unless there is an express provision to the contrary. Part 4 of the Trusts Act provides for trustees’ powers and indemnities. Section 81 applies to charitable trustees and provides that a trustee is personally liable for an expense or liability incurred by the trustee when acting as a trustee but may be indemnified if the trustee acted reasonably on behalf of the trust. In such cases and where the trustee has paid the expense or discharged the liability out of the trustee’s own funds, the trustee is entitled to reimbursement from the trust property. In any other case, the trustee is entitled to pay the expense or discharge the liability directly from the trust property.

31.The amendments sought align with the common law and s 81 of the Trusts Act. Given the significant and varied assets that the Trust owns and manages, and the accompanying increasing and increasingly complex demands on the Trust, it is essential that the Trust can attract suitable, competent and professional volunteer trustees. Professional volunteer trustees, who can act confidently in pursuit of the Trust’s ultimate purposes will support the performance of the Trust’s ultimate

2      Footnotes omitted.

purposes being public recreation, enjoyment and other similar benefits and advantages of that nature as the trustees consider best.

Advertisement of the application

[23]   After the application was filed on 3 August 2022, and in accordance with s 36 of the Act, the Board arranged for the application to be advertised in the New Zealand Gazette and in the New Zealand Herald. The application was advertised in the New Zealand Gazette on 26 August 2022, and in the New Zealand Herald on 26 August 2022, 9 September 2022 and 26 September 2022. The notice advertising the application stated that it was to be heard in the High Court at Auckland at 10.00 am on Wednesday 19 October 2022.

[24]The advertisement included the following explanation:

The purpose of the Cornwall Park Trust was to hold land upon trust as a place of public recreation and enjoyment for the people of New Zealand. The relevant trust documents do not expressly provide the Cornwall Park Trust Board with the power to indemnify the Trustees, or to purchase insurance against potential liability, from the Trust’s property. The scheme proposes to amend the relevant trust documents to give the Cornwall Park Trust Board the ability to indemnify the trustees, or to purchase insurance against potential liability, from the Trust’s property.

Mr Clarke’s notice of opposition

[25]   Although Mr Clarke did not appear  at the hearing of the application  on     19 October 2022 it is nevertheless appropriate to refer to the contents of the notice of opposition he filed dated 16 September 2022. The grounds he relies on are set out in a letter dated 31 August 2022 which is attached to the notice of opposition and signed by Mr Clarke and eight other persons.

[26]   The letter contains the following explanation of the basis of the opposition to the application:

The trustee’s [sic] application and scheme proposal would in our opinion unreasonably protect the trustees from the personal and financial accountability of their decisions at a particularly convenient time when such decisions are under a very high level of public scrutiny and carefully being tested in this very High Court, together with a very active and growing chorus of disconcerted Auckland residents of Cornwall Park whom themselves are questioning the validity of various lease decisions from the Trustees.

We believe that these trustees should be accountable in every way for their decisions (prior and future) and should face any subsequent ramifications of such decisions without the benefit of insurance or indemnity protection whatsoever, just as their Trustee predecessors have successfully managed for generations.

Discussion

[27]Section 33 of the Act provides:

33Extension of powers or alteration of mode of administration of trust

In any case where it is made to appear that any property or income is given or held upon trust, or is to be applied, for any charitable purpose, and the administration of the property or income or the carrying out of the trust could be facilitated by extending or varying the powers of the trustees or by prescribing or varying the mode of administering the trust, the powers of the trustees may be extended or varied, and the mode of administering the trust may be prescribed or varied, in the manner and subject to the provisions hereafter contained in this Part: provided that nothing in this section shall restrict the powers that are or may be conferred on the court or the trustees by or under the Trusts Act 2019 or any other Act or by law.

[28]   An applicant seeking an order extending or varying the powers of the trustees must demonstrate that the administration of the trust and the carrying out of its charitable purpose “could be facilitated” by the proposed amendments to the terms of the trust. To “facilitate” something is to make it easier, or to assist and promote its progress.3

[29]In Butterfield v Public Trust Kós P writing for the Court of Appeal explained:4

[20]      It is one of the fundamental rights of an honest express trustee that costs and expenses properly incurred in the administration of the trust are compensable out of the assets of the trust. As Danckwerts J explained in Re Grimthorpe:5

It is commonplace that persons who take the onerous and sometimes dangerous duty of being trustees are not expected to do any of the work on their own expense; they are entitled to be indemnified against the costs and expenses which they incur in the course of their office; of course, that necessarily means that such costs and expenses are properly incurred and not

3      Oxford English Dictionary (online ed, Oxford University Press), definition of “facilitate” meaning “[t]o make (an action, process, etc.) easy or easier; to promote, help forward; to assist in bringing about (a particular end or result).”

4      Butterfield v Public Trust [2017] NZCA 367, [2017] NZAR 1439 at [20].

5      Re Grimthorpe [1958] Ch 615 (Ch) at 623. See also Turner v Hancock (1882) 20 Ch D 303 (CA) at 305.

improperly incurred. The general rule is quite plain; they are entitled to be paid back all that they have had to pay out.

[21]      The proposition is so fundamental that it need not be justified. It is a right, probably proprietary in nature, recognised by equity as an incident of trusteeship. The right is to an indemnity for reasonable costs and expenses incurred in the administration of the trust. …

[30]   It is clear from a reading of the Trust Documents that they do not contain any express provision or provisions authorising the trustees to indemnify themselves from the Trust assets, or authorising them to insure themselves against the risk of personal liability for actions carried out as trustees of the Trust. It is also quite clear from the evidence that it is now “standard practice” for professional trustees having extensive responsibilities for the management and administration of substantial assets which involve commercial activities and employer responsibilities to obtain insurance in respect of personal liability as individual trustees or as a trust board for liability arising from carrying out their role and responsibilities as trustees.

[31]   The trustees must be able to proceed with confidence and in the knowledge that they are and will be indemnified from and against any personal liability arising from carrying out their functions as a trustee if they are to administer the Trust and carry out its charitable purposes. In the contemporary commercial environment in which the affairs of the Board are conducted, it is prudent and appropriate for professional trustees to enjoy the reassurance that they are insured against the risk of personal liability for their actions and decisions as trustees, not only as regards any claims made against them, but also for the legal costs involved in defending any claims that may be brought. The substantial scale of the commercial activities of the Board and the value of the assets of the Trust, place the trustees in a position equivalent to that of professional directors of large corporations and companies. The trustees of the Board are all volunteers and provide their time and expertise to the Trust without receiving payment for their services. And although they are entitled to be indemnified against any costs and expenses incurred in the course of carrying out their role as trustees, they cannot be expected to do so without the reassurance of appropriate trustee insurance by which they can transfer the risks associated with the possibility of claims being made against them to an insurer.

[32]    As Ms Young-Cooper says, in the absence of appropriate insurance for the trustees it will in the future be extremely difficult if not impossible to attract appropriately qualified professional people to accept appointment as trustees. The nature of this difficulty is amplified by the fact that despite the significant responsibilities upon the trustees, the position is voluntary and unpaid. It is in the interests of the Trust to be able to appoint and retain appropriately skilled and experienced professional trustees and the ability to obtain trustee liability insurance in conformity with current standards of corporate governance is a measure that will clearly facilitate the administration of the Trust and the carrying out of its charitable purposes.

[33]   I am satisfied that the proposed additional clauses sought to be added to the Trust Deed will facilitate the administration and promote the purposes of the Board by enabling the trustees to arrange appropriate trustee liability insurance, and pay the premiums for the insurance from the Trust’s funds. The proposed clause which provides that no trustees shall be liable for any loss suffered by the Trust unless caused by the trustee’s dishonesty and/or wilful commission of an act known by them to be a breach of the Trust, is consistent and complementary with the power to arrange trustee liability insurance.

[34]   The matters raised by Mr Clarke for himself and the other signatories to the letter dated 31 August 2022, in my view provide support for the application for amendment of the Trust Deed, by demonstrating the nature of the opposition to measures which have been taken and are being taken by the Board and its trustees in relation to its commercial activities. Irrespective of the merits of the matters raised in the notice of opposition, it is clear that as a result of the opposition to the Board’s proposals regarding the future use of the Auckland Showgrounds, and the issues raised in other legal proceedings involving the Board, the trustees are increasingly conscious of the risk that their actions and decisions may lead to claims being made against the Board.

[35]   This context and the opposition expressed by Mr Clarke and the other signatories shows how the Board’s activities and decisions as regards the Trust properties and commercial interests can lead to it becoming involved in legal

proceedings with a risk of claims being made against the Board and the trustees. It is just such situations that the Board seeks to address by being able to obtain insurance against trustee liability.

[36]   Moreover, the statement in the notice of opposition suggesting that the trustees should be held accountable for their decisions, and should face the consequences of their decisions without the benefit of insurance or indemnity protection, in the same manner as their predecessors, does not amount to a cogent reason why the Court should decline the Board’s application.

[37]   The contemporary commercial, legal, and social context in which the present trustee members of the Board have responsibility for preserving and administering the affairs of the Trust, are far removed from what  could have been contemplated by  Sir John Logan Campbell when he established the Trust in 1901. These days the inclusion of provisions in trust deeds enabling professional trustees to obtain trustee liability insurance which is paid for by the trust, is commonplace and in accordance with sensible and prudent commercial practice. The situation whereby the volunteer trustees of the Board have carried out their increasingly complex responsibilities and functions as trustees without the benefit and reassurance provided to them by trustee liability insurance need not continue in circumstances where the applicant has shown that appropriate amendments to the Trust Deed will enable the Board to align itself in terms of trustee insurance with sound, sensible, and prudent commercial practice, and thereby facilitate the administration of the Trust and its charitable purposes and objectives.

Result

[38]   The application for an order that the Deed of Trust dated 10 June 1901 be varied by inserting the clauses set out in Appendix A of the Notice of Originating Application dated 3 August 2022 (and in paragraph [3] above), is granted and I make an order pursuant to s 53 of the Act approving the proposed amendment of the Trust Deed by the addition of the proposed clauses.

Paul Davison J