Frank Sydenham Scholarship Trust
[2023] NZHC 2556
•13 September 2023
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2023-470-68
[2023] NZHC 2556
IN THE MATTER OF The Charitable Trusts Act 1957, Part 3 AND
IN THE MATTER OF
an application by the New Zealand Guardian Trust Company Limited, as trustee of the Frank Sydenham Scholarship Trust for orders approving a scheme to vary the trust
Hearing: 8 August 2023 Appearances:
K Catran for Applicant
Judgment:
13 September 2023
JUDGMENT OF JOHNSTONE J
This judgment was delivered by me on 13 September 2023 at 3.30 pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors:
Cooney Lees Morgan, Tauranga
SYDENHAM SCHOLARSHIP TRUST [2023] NZHC 2556 [13 September 2023]
[1] The applicant, the New Zealand Guardian Trust Company Limited (NZGT), as trustee of the Frank Sydenham Scholarship Trust (Trust), applies under ss 32 and 33 of the Charitable Trusts Act 1957 (the Act) to vary the Trust; in particular, by expanding the class of persons eligible for the scholarship and removing one of the trustees. It has prepared a scheme seeking to extend or vary the Trust’s powers, and to vary its mode of administration.
[2] As required by s 35 of the Act, the scheme was submitted to the Attorney-General. In exercise of the functions of the Attorney-General pursuant to a delegation under s 9C of the Constitution Act 1986, a Deputy Solicitor-General, Ms Hardy, prepared a report. The report confirmed that the Attorney-General is satisfied the scheme is a proper one, and that it should carry out the desired purpose. The Attorney-General considers the scheme can be approved by the Court under Part III of the Act, and that every proposed purpose is charitable within the meaning of the Act.
[3] Notice of the application has been given in the Gazette and in the Bay of Plenty Times, in accordance with s 36 of the Act. No notice of opposition has been received by either NZGT or the Trust’s solicitors.
Background
[4] The Trust was established under the will of Frank Sydenham dated 27 October 1972. Clauses 5 and 6 of the will established a trust offering scholarships to post-graduate students studying horticulture, agriculture or forestry (and associated fields) in New Zealand or overseas who are past pupils of state high schools in the City of Tauranga Boroughs of Mount Maunganui, Ōpōtiki, Te Puke and Whakatāne and Counties of Ōpōtiki, Tauranga and Whakatāne.
[5] Clause 14 of Mr Sydenham's will directed that the selection of applicants and the awarding of scholarships should be undertaken by a selection committee comprising seven members: the chairman was to be an officer of NZGT; one member a principal of the firm of solicitors to Mr Sydenham's estate, Jackson Reeves; and the other members appointed by the Chairmen of the Boards of Governors or School Committees of the schools whose past pupils are eligible for scholarships.
[6] The terms of the Trust were previously varied by this Court in 2012, after NZGT identified difficulties in finding suitable applicants and in respect of the composition and operation of the selection committee.1 The variation included:
(a)Reduction of the membership of the selection committee to three members, comprising the Trust Manager of NZGT’s Trust Department at Tauranga, a principal of the firm of solicitors to Mr Sydenham’s estate (Mr Reeves), and the Dean of the Faculty of Science and Engineering at the University of Waikato.
(b)Extension of the geographical catchment criteria for applicants, to include past students of state schools in the Bay of Plenty Region, being within the statutory boundary of the Bay of Plenty Regional Council.
[7] Stuart Thom, the solicitor advising the Trust, has sworn an affidavit outlining the reasons for the proposed variations. He deposes that the changes Wylie J authorised in 2012 have not remedied the underlying problem of insufficient applicants. For example, in 2021 and 2022 there was only a single award each year, despite efforts to raise awareness of the Scholarship. He deposes that the insufficient applicants problem can be remedied if the Scholarship is expanded:
(a)to cover New Zealand, with preference given to Bay of Plenty students or those intending to use their qualifications in the Bay of Plenty region or neighbouring areas; and
(b)to cover undergraduate degrees in horticulture, agriculture or forestry, or related fields, with preference given to post-graduate applicants.
[8] The expansion to undergraduate degrees will address the reality that many students choose to not pursue post-graduate study because an under-graduate qualification is generally sufficient to obtain employment in the relevant fields.
1 Re Frank Sydenham Scholarship Trust [2012] NZHC 654.
[9] Mr Thom deposes that, if the alterations to the candidate requirements are accepted, then it would be practical to remove certain provisions of the Trust document; in particular:
(a)the provision that the selection committee should include an academic panel member, the remaining professional trustees being equally capable of making assessments of standing under the adjusted criteria for scholarship awards; and
(b)certain obsolete terms.2
Variation of Trust — General Principles
[10] The purposes of a charitable trust or the mode of administration of a charitable trust can be varied under Part III of the Act.3
[11] The relevant principles applicable to a variation of trust under Part III of the Act are as follows:4
(a)The application must come within the statutory jurisdiction (which includes a need 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 trusts.
2 The changes are marked up in Exhibit H of the Affidavit of Stuart Thom and include removal of reference to “post-graduate” and “chairmen”.
3 It has been held that when the statutory jurisdiction is available, the Court may not exercise its inherent jurisdiction — Re Palmerston North Halls Trust Board [1976] 2 NZLR 161 (SC). The Court of Appeal has however more recently left open the question of whether or not this
decision is correct — Alacoque v Roache [1998] 2 NZLR 250 (CA).
4 Re Tennant [1996] 2 NZLR 633 (HC).
(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.
[12]Section 32(1) of the Act provides as follows:
32Property may be disposed of for other charitable purposes
(1) Subject to the provisions of subsection (3) of this section, in any case where any property or income is given or held upon trust, or is to be applied, for any charitable purpose, and it is impossible or impracticable or inexpedient to carry out that purpose, or the amount available is inadequate to carry out that purpose, or that purpose has been effected already, or that purpose is illegal or useless or uncertain, then (whether or not there is any general charitable intention) the property and income or any part or residue thereof or the proceeds of sale thereof shall be disposed of for some other charitable purpose, or a combination of such purposes, in the manner and subject to the provisions hereafter contained in this Part of this Act.
(Emphasis added)
[13] A scheme under s 32 cannot be approved unless it is established that it is “impossible, impracticable or inexpedient” to carry out the purpose of the trust. “Impossible” and “impracticable” have a plain meaning. “Inexpedient” was added as a criterion by the Religious Charitable and Educational Trusts Amendment Act 1928 to cover situations where, although neither impossible nor impracticable to carry out the purpose, it would be inexpedient to do by virtue of it having become unsuitable, inadvisable or inapt.5
[14] In varying the purpose of a charitable trust under s 32 of the Act, the Court is exercising a statutory jurisdiction. Section 32 and Parts 3 and 5 of the Act together achieve in New Zealand what was previously achieved by the equitable doctrine of cy-près. This doctrine permitted funds in a charitable trust, where the intended purpose of the trust had become impossible or impracticable, to be applied by the Court to objects that were as near as possible to the original intention of the donor. The Act supersedes the doctrine of cy-près.6
5 Re McElroy Trust [2002] 3 NZLR 99 (HC) at [14]; and St John of God Health & Elder Care Services Trust Board v Little Sisters of the Poor (NZ) Trust Board HC Napier CIV 2007-441-628, 11 August 2008.
6 Public Trustee v Attorney-General [1923] NZLR 433 (HC); Re McElroy Trust [2002] 3 NZLR 99 at [15]; affirmed in Re McElroy Trust [2003] 2 NZLR 289 (CA); and St John of God Health & Elder Care Services Trust, above n 5, at 20.
[15] Part III of the Act does not make a cy-près approach mandatory. However, the Court has held that 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.7
[16]Section 33 provides as follows:
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 of this Act:
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 Trustee Act 1956 or any other Act or by law.
[17] The jurisdiction under s 33 of the Act is intended to deal with problems of administration faced by charitable trustees in giving effect to the intended purpose.8 As was noted by Paterson J in Re Melanesian Mission Trust Board,9 the threshold for a scheme submitted under s 33 is as follows:
[I]t is necessary for this Court to be satisfied that the administration of the property where the carrying out of the trust “could be facilitated” by the variation sought. The ordinary or dictionary meaning of facilitate is “made easier, promoted, or helped forward”.
[18] The Court’s jurisdiction in respect of schemes is set out in s 53. Inter alia, it may hear and determine all matters relating to a scheme. There are, however, restrictions on the approval of any scheme. Relevantly, s 56 of the Act provides as follows:
56 Restrictions on approval of schemes
7 Re Twigger [1989] 3 NZLR 329 (HC) at 342.
8 Re Keeley (deceased) HC Hamilton M 316/81, 27 July 1982 at 12.
9 Re Melanesian Mission Trust Board HC Auckland M 1140/98, 24 September 1998 at 7.
(1)No scheme shall be approved by the Court under Part 3 of this Act, or by the Court or the Attorney-General under Part 4 of this Act, unless the Court or the Attorney-General is satisfied—
(a)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:
Analysis
[19]I deal first with the proposed change to the class of scholarship candidates.
[20] Section 32 can only apply where property or income is given or held for any charitable purpose.
[21] Justice Wylie previously held the purpose of the trust was charitable.10 I agree. Broadly speaking, the original purpose of the trust was to promote and encourage post-graduate study in horticulture, agriculture or forestry, or in related fields. That purpose was plainly charitable.
[22] Before the Court can approve a scheme of arrangement seeking to alter the purposes of a charitable trust, it must be satisfied that it is “impossible or impracticable or inexpedient to carry out” the existing purpose.
[23] I am satisfied on the basis of Mr Thom’s affidavit evidence that the original (and existing) charitable purpose has become “impossible or impracticable or inexpedient to carry out”. It is clear, given the low number of successful applicants in recent years, that the class of potential candidates is too narrow. As matters stand, the funds cannot be distributed. This frustrates the charitable purpose. Moreover, the funds are so seldom distributed that income from term deposits has been in excess of
$150,000.
10 Re Frank Sydenham Scholarship Trust, above n 1, at [52], citing Whicker v Hume (1858) 11 ER 50 (HL) and Public Trustee v Commissioner of Stamps (1907) 26 NZLR 773 (SC).
[24] The Scholarship’s catchment is too small. Mr Thom’s affidavit indicates that the relevant school area would make up about 3,800 school leavers. Even if the Scholarship were extended to undergraduate degrees, it is highly unlikely, given the specialist areas of study required of applicants, that this pool of students would meet the quota of Scholarships each year.
[25] Similarly, if the Scholarship were extended to a nation-wide catchment, but were to remain restricted to post-graduate study, it is highly unlikely the quota would be met. This is because students with under-graduate qualifications are able to obtain employment in the relevant fields.
[26] I am accordingly satisfied that the proposed variations will not affect the charitable purpose of the trust and that each variation is necessary. The underlying charitable purpose — which is to encourage study in horticulture, agriculture or forestry, or in related fields — is preserved, if not enhanced, by the variations. If preference were not to be given to Bay of Plenty and/or post-graduate candidates, there might be a risk that the proposed variations would undermine, or unacceptably modify, the original purpose of the charitable trust. However, as preference will be given to these classes of candidates, I am satisfied that any such risk is overcome.
[27]I now turn to the proposed variations under s 33 of the Act.
[28] I am satisfied that the removal of the academic panel member is appropriate. The change to the catchment area and the inclusion of under-graduate applicants as potential Scholarship recipients obviates the need for an academic panel member. The proposed removal would streamline the selection process, and in terms of s 33 of the Act “facilitate[e]” the administration of the Trust.
[29] Finally, in terms of s 56 of the Act, I accept that the Attorney-General, based on his report provided by Ms Hardy, is satisfied of the matters in s 56.
Conclusion
[30] I have considered each of the variations proposed by the trustee. I am satisfied that I have jurisdiction to approve the proposed scheme under s 53 of the Act. The
requirements of the Act have been complied with. The scheme is proper and will serve to carry out the desired charitable purpose. It is not contrary to law or public policy or good morals. It can be approved under Part III of the Act, and the proposed extended purpose is charitable within the meaning of the Act. I am also satisfied that the proposed charitable purpose can be carried out with the variation in place.
[31] Accordingly, I adopt the following draft order provided by counsel approving the scheme of variation in terms of Part III of the Act:
1.That the trust established by the will of Frank Sydenham known as the Frank Sydenham Scholarship Trust be varied in accordance with the Scheme of Variation presented in the application in terms of Part 3 of the Charitable Trusts Act 1957 by:
(a)widening the geographical catchment area to include the whole of New Zealand by deleting the words "within the Bay of Plenty Region, being within the statutory boundary of the Bay of Plenty Regional Council" in clause 6 and substituting the following"
"in the whole of New Zealand with preference to past pupils of State Colleges, State Secondary Schools or State District Schools as at present existing or becoming established at any time hereafter whether before or after the date of my death in the Bay of Plenty Region, being within the statutory boundary of the Bay of Plenty Regional Council, or students from outside that region who intend to utilise the outcome of their studies in the Bay of Plenty region or neighbouring areas";
(b)widening the scope of scholarships to include undergraduate study, by
(i)deleting the words “post-graduate” in clauses 5(b) (two references) 7(a) (one reference), 13 (3 references) and 14 (one reference), and at the end of clause 5(b) adding the words “with preference for suitable applicants wishing to undertake post-graduate study”;
(ii)in clause 8 deleting the words “who have attained degrees in horticulture or agriculture or forestry at any University in New Zealand the British Isles Canada or Australia. My Trustee shall have the power to determine at its own discretion any question which may arise as to whether a qualification obtained at a University overseas is to be regarded by the Selection Committee (hereinafter defined) as a degree and whether the institution at which the qualification was obtained is to be regarded as a University to the intent that the standard of the overseas qualifications and overseas institutions shall approximate to the standards of degrees and Universities respectively in New Zealand” and replacing them with the words "who wish to undertake tertiary study for
degrees whether at bachelor level or post-graduate level in horticulture or agriculture of forestry (or related topics)";
(c)amending the constitution of the Selection Committee by reducing it to two members by:
(i)deleting the word “three” in clause 14 and substituting the word “two”;
(ii)in clause 14, after the words "Jackson Reeves or its successor" adding the words “appointed by the principal or principals of that firm or its successor”;
(iii)in clause 14, deleting the words “One member of the said committee will be the Dean, or his representative, of the Faculty of Science and Engineering at the University of Waikato, or such representative as the Trustee in its discretion appoints”; and
(iv)in clause 14, after the words “resigns or is replaced by” adding the words “my Trustee”, and amending the following sentence so that it begins “the selection committee does" before the words "not have to meet ...”;
(d)in clause 14, deleting all references to “the said Chairmen”, “either the said Chairmen or'”, “the said Chairmen or”, “the Chairmen or” and “by the said Chairmen”; and
(e)in clause 15, deleting the words “the said Chairmen and”.
2.All reasonable costs and expenses of the preparation and advertising of the scheme and submission 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 solicitors acting and counsel be paid out of the trust fund.
Johnstone J
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