Healthcare Otago Charitable Trust
[2024] NZHC 1761
•2 July 2024
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2024-412-46
[2024] NZHC 1761
BETWEEN The Trustees of THE HEALTHCARE OTAGO CHARITABLE TRUST
Applicants
Hearing: 19 June 2024 Appearances:
R J M Sim for Applicant
Judgment:
2 July 2024
JUDGMENT OF DUNNINGHAM J
This judgment was delivered by me on 2 July 2024 at 9.30 am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
RE THE HEALTHCARE OTAGO CHARITABLE TRUST [2024] NZHC 1761 [1 JULY 2024]
Introduction
[1] This is an application by the trustees of the Healthcare Otago Charitable Trust (HCO Trust) under ss 32 and 33 of the Charitable Trusts Act 1957 (the Act), to vary the purposes and mode of administration of the General Medical Staff Fund Trust (GMSF Trust).
Background
[2] The background to the GMSF Trust is outlined in the affidavit of Paul Moodie, the Chair of Trustees of the HCO Trust. He explains that the terms of the GMSF Trust appear to have been first formalised in a declaration of trust dated 18 December 1940. However, that declaration states that the fund had been in existence “for many years past”.
[3] The declaration of trust for the GMSF Trust vested property in the trustees for the following purposes:
(i)in or towards any purpose to further educational facilities for students doing clinical work in the Dunedin Hospital or any other institution under the control of the Otago Hospitable Board;
(ii)in or towards the purchase or acquisition of any apparatus appliances or instruments that may be required for the education of students at the Dunedin Hospital or any other institution under the control of the Otago Hospital Board;
(iii)in or towards any other general purpose calculated to improve the working facilities of the Visiting Staff of the Otago Hospital Board.
[4] The declaration appointed the holders of the following positions as the trustees of the GMSF Trust:
(a)the Chairman of the Otago Hospital Board;
(b)the Chairman of the Finance Committee of the University of Otago; and
(c)the Chairman of the visiting staff of the Otago Hospital Board.
[5] On 23 November 1944 the above trustees and the Otago Hospital Board executed a deed and declaration of a Trust which provided for the GMSF Trust fund to be vested in the Otago Hospital Board to avoid the need to transfer GMSF Trust assets each time the holders of the trustee positions changed.
[6]Clause 3 of that deed and declaration of trust provided the following:
It is hereby agreed and declared that the Board shall hold the Fund and the securities and other assets comprising or representing the same and any other moneys from time to time accruing to the Fund for and on behalf of the Trustees and shall from time to time apply the same at the direction of the Trustees in manner provided for by clause 4 of the said recited Declaration of Trust.
[7] From 1944 onwards, the Otago Hospital Board and its successors have held and administered the GMSF Trust. In the same year, Healthcare Otago Ltd, which had taken over responsibilities from the Otago Hospital Board, established the HCO Trust as an umbrella trust to hold and administer a range of special purpose trust funds held by the Otago Hospital Board. The GMSF Trust funds, which at the time Mr Moodie prepared his affidavit totalled approximately $680,857, are one of the funds which are held and administered by the HCO Trust.
[8] The application is made by the trustees of the HCO Trust because, as Mr Moodie explains, none of the roles by which the GMSF trustees are defined now exist.
[9]The purpose of bringing the application is to:
(a)update the charitable purposes applying to the funds pursuant to s 32 of the Act, the original purposes having become impossible, impracticable or inexpedient to carry out; and
(b)rationalise the trusteeship of the GMSF Trust funds by bringing them fully within the HCO Trust pursuant to s 33 of the Act.
Difficulties with the purposes of the current GMSF Trust deed
Clause 4(b)(i)
[10] The purpose expressed at cl 4(b)(i) of the 1940 declaration of trust is to apply the trust income as follows:
…to further educational facilities for students doing clinical work in the Dunedin Hospital or any other institution under the control of the Otago Hospital Board.
[11] Mr Moodie explains that, in 1940, when the declaration of trust was made, the only students at Dunedin Hospital would have been undergraduates as post-graduate study would be undertaken overseas. However, post-graduate training can now be completed in New Zealand, and Dunedin Hospital employs many post-graduate students. Mr Moodie says it is this group, who work as junior medical officers, who are most able to benefit from grants from the GMSF Trust fund. The applicants propose amendment to this purpose to clarify that junior medical officers are included in the GMSF Trust purpose.
[12] The applicants also seek to replace reference to funding for “facilities” in this clause to funding for “opportunities”. The reference to “facilities” will be moved to what was previously cl 4(b)(ii). Mr Moodie explains that the restriction of funding to the supply of facilities is no longer appropriate. Much training takes place in existing public health facilities and being able to support education opportunities more generally would ensure the trust fund could be put to appropriate use.
[13]The proposed rewording of cl 4(b)(i) would read:
(i)…to further educational opportunities for students doing clinical work and junior medical officers in training in public health institutions in Otago.
Clause 4(b)(ii)
[14]The current wording of clause 4(b)(ii) allows the trust income to be applied:
In or towards the purchase or acquisition of any apparatus, appliances or instruments that may be required for the education of students at the Dunedin
Hospital or any other institution under the control of the Otago Hospital Board.
[15] Mr Moodie explains that as a consequence of health restructuring the reference to the Otago Hospital Board is out of date. The applicants seek to remove the reference to specific health entities in favour of the more generic term “public health institutions in Otago”. This is proposed on the grounds that public health structures are likely to continue to change during the life of the Trust and, by implication, this will remove the need for further amendments each time there is such a change during the life of the Trust.
[16]The proposed rewording of clause 4(b)(ii) would read:
To purchase equipment and provide educational facilities for the use of students doing clinical work and junior medical officers in training in public health institutions in Otago.
Clause 4(b)(iii)
[17] The applicants proposed deleting the third trust purpose in the 1940 declaration of trust, which is to use the trust income for:
…any other general purpose calculated to improve the working facilities of the visiting staff of the Otago Hospital Board.
[18] Mr Moodie explains that the term “visiting staff” is understood to refer to honorary staff who did not necessarily receive remuneration from the hospital. Such staff have been superseded by part-time staff who are remunerated at the same rights and accorded the same conditions as full-time staff. For this reason, this purpose is no longer required and the applicants propose deleting it.
Difficulties with the administration of the GMSF Trust
[19] The applicants also propose an administrative amendment under s 33 of the Act. Mr Moodie explained that the GMSF Trust fund is one of the funds held and administered by the HCO Trust, which serves as an “umbrella” trust for a number of charitable funds associated with the provision of public health in the southern region.
[20] The applicants seeks to insert a specific power into the GMSF Trust, allowing its trustees to transfer the funds of the GMSF Trust to the HCO Trust on the basis that those funds become a separate ongoing fund within the HCO Trust.
[21] While Mr Moodie believes that the GMSF Trust funds have continued to be used for the purpose for which they are held, in 2005 a question arose regarding the legality of the HCO trustees administering the GMSF Trust, noting that decisions in relation to distributions from the GMSF Trust should involve the holders of the three positions identified in the 1940 declaration. For a time following that, some distribution decisions were made by the three identified trustees, with the Chair of the General Medical Staff being identified as the nearest equivalent to the, by then, disestablished Chair of Visiting Staff position.
[22] However, Mr Moodie explains that, more recently, these arrangements have proved impractical and decisions have not been being made. Furthermore, with changes to the structure of New Zealand’s public health institutions and at the University of Otago, it is not possible to identify who should be considered trustees of the funds at all.
[23] The applicants therefore seek to vary the administrative arrangements of the GMSF Trust to facilitate decision making and to ensure the fund can be used as intended. Specifically, they seek to have the trustees of the HCO Trust confirmed as having full legal trusteeship for the GMSF Trust funds, including responsibility for approving distributions, subject to an obligation to consult with whatever person or body is reasonably considered representative, from time to time, of general medical staff in the Otago area.
[24] The scheme, therefore, proposes the transfer of full responsibility for the funds of the GMSF Trust to the HCO Trust, after which the GMSF Trust will be wound up.
The legal framework
The application for variation of the Trust under s 32 of the Act
[25]Section 32 of the Act relevantly provides:
(1) … 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
… 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.
…
(4) Subject as aforesaid, this section shall extend to cases where the charitable purpose affecting any property or income is defined by a scheme approved by the court under this Part or otherwise or approved by the Attorney-General under Part 4, and in any such case the original purpose or purposes may be restored, with or without modifications.
[26] In Re Tennant, Hammond J summarised the principles that govern an application for variation of charitable trusts as follows:1
(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.
[27] I am satisfied that the GMSF Trust purposes were charitable at the date of settlement as they are purposes for the advancement of education. With the amendments proposed, the purposes would remain charitable as they would provide further educational opportunities for students doing clinical work and junior medical
1 Re Tennant [1996] 2 NZLR 633 (HC) at 636.
officers training in public health institutions in Otago and providing for the purchase of equipment and the provision of facilities for use in their training.
[28] Having considered the affidavit of Mr Moodie, I am satisfied that it is either impossible, inexpedient or impracticable to carry out the existing trust purposes and the proposed amendments to the GMSF Trust purposes remain as close as possible, in the changed circumstances, to the purposes of the original GMSF Trust.
[29] I also note that the report of the Attorney-General prepared under ss 35 and 56 of the Act concurs with those conclusions.
The application for an alteration to the administration of the trust
[30]Section 33 of the Act relevantly provides:
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.
[31] As was noted in Re Melanesian Mission Trust Board, the threshold for a scheme submitted under s 33 requires the Court:2
… to be satisfied that the administration of the property or 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”.
[32] As the report by the Attorney-General notes, the proposed transfer of assets of the GMSF Trust to the full trusteeship of the trustees of the HCO Trust, merges the GMSF Trust with the HCO Trust.
2 Re Melanesian Mission Trust Board HC Auckland M1140/98, 24 September 1998.
[33] Consistent with the view of the Attorney-General, I am satisfied the administration of the GMSF Trust would be facilitated or helped forward by the merger. The specified positions to be held by the trustees of the GMSF Trust no longer exist. There is a need to provide for the identification of trustees for the GMSF Trust in order for it to issue grants. The HCO trustees propose that they be required to consult “with such person or body as the [HCO Trust] from time to time recognise[s] as representing general medical staff practising [sic] in public health institutions in Otago” in order to be sure they know what would best support students doing clinical work and medical officers in training in public health institutions in Otago.
[34] Given the assets would be moved to the full trusteeship of the HCO Trust, albeit with the assets to be held as a separate fund, it is necessary to ensure the HCO Trust has the power to continue to administer the fund for the purposes identified. In that regard, one of the purposes of the HCO Trust under cl 3(e) is to administer funds for:
Such health related purposes that may be specifically directed by donors to the Trust or such health related purposes as may already attach to funds donated to and held by the Trust.
[35] Furthermore, under clauses 10(e) and (f), the Trustees of the HCO Trust are granted the following powers:
(e)to seek and receive conveyances, transfers, gifts, devises, donations and bequests of property (but with power nevertheless to accept or decline) and to hold the same or the proceeds of the sale thereof upon the trusts to which the same are subject but otherwise subject to the terms and provisions of the Trust and in the event of any property being received by the Trust subject to reservations, trusts, liabilities or obligations, nevertheless to accept and hold such property subject thereto and further, to make such provision from or payments out of the Trust Fund and take any other action in respect of the same;
(f)to set apart any portion of the Trust Fund as a sub-trust, a special endowment or for a special purpose or under any special or distinguishing name for such a term and upon such conditions as may by law be allowed and to apply to each such portion together with any accretions to it for the endowment or other purpose for which the same was set aside or for any other purpose authorised by this Deed;
[36] Accordingly, I am satisfied that if the GMSF Trust funds are transferred to the trusteeship of the HCO trustees, these provisions would allow the GMSF Trust funds
to be held for the narrower purposes of the original trust, albeit as amended under s 33 to reflect the current circumstances.
[37] The Attorney-General points out that there is a difference between the trustee investment power in the original GMSF declaration of Trust and the investment power in clause 9 of the HCO trust deed. Clause 4(a) of the GMSF declaration of trust authorises trustees to invest the funds “from time to time in the manner provided by law for the investment of trust funds with liberty to vary the investments from time to time as they may think proper”. Clause 9 of the HCO trust deed gives HCO trustees “all the powers of investment vested in the Trustees by law” and power to invest in “real or personal property of any nature whatever in New Zealand or elsewhere.”
[38] As the report for the Attorney-General notes, the provisions are similar but to the extent the HCO deed investment power could be considered to be wider, that is acceptable.
[39] The report for the Attorney-General also notes that the HCO trustees propose to wind up the GMSF Trust once the fund is vested in the HCO trustees. It is pointed out that, generally, when trustees wish to wind up a charitable trust, but lack the power to do so, they must apply to the High Court for approval of a scheme for application of the funds for other charitable purposes under s 32.3
[40] However, merger or amalgamation provides an exception.4 Thus, as the Attorney-General concludes, where trustees seek a power to wind up conditional on a successful transfer of all the trust funds to another trust, the insertion of a power to wind up the merging trust will not infringe the principle against termination.
[41] The final issue raised by the Attorney-General’s report is that the HCO trust deed contains power for the HCO trustees to wind up the HCO Trust at any time. Clause 6 provides:
… On such winding up the Trustees will pay or apply such of the capital, income and receipts of the Trust Fund, as may then remain towards the furtherance of such of the objects of the Trust as the Trustees determine.
3 Society of St Vincent De Paul v Wanganui Ozgnam Villa Trust [2007] NZAR 77 HC at [47].
4 Citing Tudor on Charities, at [21]-[040].
[42] The Attorney-General points out that this would mean if the HCO Trust were to be wound up, the HCO trustees could decide to pay the total GMSF fund to any of the health-related objects specified in clause 3 of the HCO trust deed, meaning ultimately the GMSF Trust could be wound up by its trustees, even though winding up by trustees is not authorised by the original GMSF declaration of trust.
[43] The Attorney-General does not express this to be an impediment to approving the proposed transfer of the fund, noting that the objects in clause 3 of the HCO trust deed are still health-related purposes but simply raises this point for the Court to consider. Alternately, it is suggested that, in approving this application, the Court could direct that clause 6 does not apply to the GMSF Trust fund and that, if the purposes of the GMSF can no longer be met, a separate application is to be made to the Court under s 32 of the Act for directions about what should happen to the GMSF.
[44] I discussed this issue with Mr Sim at the hearing. He expressed the view that, first, it is unlikely that the HCO Trust will be wound up and, if they did, they could be relied upon to ensure the funds were applied to the more limited range of health-related objects in the GMSF Trust. Alternatively, the transfer could be effected subject to a proviso that, on a winding up under clause 6, that in the case of funds from the GMSF the trustees will pay or apply such of the capital income and receipts of the GMSF Trust as may then remain towards the furtherance of such objects that it is held on trust for.
[45] Having considered both the Attorney-General’s report and the submissions of the applicants, the safest cause of action (and noting that Mr Sim submits that it is unlikely the HCO Trust would be wound up), I consider it appropriate to direct that clause 6 does not apply to the GMSF Trust fund and, that if the purposes of the GMSF Trust fund can no longer be met, a separate application is to be made to the Court under s 32 of the Act for directions about what should happen to the GMSF Trust fund.
[46] Accordingly, I am satisfied that it is appropriate to approve the proposed trust scheme but with the additional amendment to clause 2(a) of the scheme by adding the words “and on condition that clause 6 of the Healthcare Otago Charitable Trust Deed does not apply to the GMSF Trust fund so that, if the purposes of the GMSF can no
longer be met, a separate application is to be made to the Court under s 32 of the Charitable Trusts Act 1957 for directions about what should happen to the GMSF Trust Fund.”
Orders
[47]I order:
Proposed Change to Purposes — Section 32
1.It is proposed that the purposes of the General Medical Staff Fund Trust (“the GMSF Trust”) be amended by deleting the words:
To apply the income from time to time accruing or accrued from the said assets as follows —
(i)In or toward any purpose to further educational facilities for students doing clinical work in the Dunedin Hospital or any other institution under the control of the Otago Hospital Board;
(ii)In or towards the purchase or acquisition of any apparatus appliances or instruments that may be required for the education of students at the Dunedin Hospital or any other institution under the control of the Otago Hospital Board;
(ii) In or towards any other general purpose calculated to improve the working facilities of the Visiting Staff to the Otago Hospital Board.
And replacing them with the following words:
To apply the income from time to time accruing or accrued from the said assets as follows —
(i)To further educational opportunities for students doing clinical work and junior medical officers in training in public health institutions in Otago; and
(ii)To purchase equipment and provide educational facilities for the use of students doing clinical work and junior medical officers in training in public health institutions in Otago.
Alteration of Mode of Administration — Section 33
2.It is proposed that the Mode of Administration of the GMSF Trust be amended by, and immediately upon, the Court’s approval of the Scheme by:
(a)the assets of the trust being deemed to have transferred to the full trusteeship of the trustees of The Healthcare Otago Charitable Trust with those trustees to hold them as a separate fund within and upon the terms of The Healthcare Otago Charitable Trust with the income therefrom to be used for the amended purposes set out in clause 1 of this Scheme on the basis that distributions from the fund shall be made only following consultation with such person or body as the trustees of the Healthcare Otago Charitable Trust from time to time recognise as representing general medical staff practising in public health institutions in Otago and on condition that clause 6 of the Healthcare Otago Charitable Trust Deed does not apply to the GMSF Trust fund so that, if the purposes of the GMSF can no longer be met, a separate application is to be made to the Court under s 32 of the Charitable Trusts Act 1957 for directions about what should happen to the GMSF Trust Fund.
(b)the GMSF Trust being wound up.
[48] The Trust is to pay the Solicitor-General $750 on account of the costs of the Attorney-General’s report.
Solicitors:
Gallaway Cook Allan, Dunedin
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