Joe Raynes Scholarship
[2025] NZHC 396
•5 March 2025
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2024-404-3130
[2025] NZHC 396
UNDER the Charitable Trusts Act 1957 IN THE MATTER
of an application for variation of trust under Part 3 of the Act
BETWEEN
JOE RAYNES SCHOLARSHIP
Applicant
Hearing: 25 February 2025 Appearances:
S McNulty for the Applicant
Judgment:
5 March 2025
JUDGMENT OF ROBINSON J
[Application for approval of a scheme]
This judgment was delivered by me on 5 March 2025 at 12:00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Jackson Russell, Auckland Crown Law, Wellington
RE JOE RAYNES SCHOLARSHIP [2025] NZHC 396 [5 MARCH 2025]
Introduction
[1] Joseph (Joe) Raynes was a successful hotelier from Dargaville. He died on 29 December 1937. In his Will dated 28 March 1934 (Will) he directed his trustees to set aside and invest 1,500 pounds and to use the income to grant scholarships to students at the Elam School of Art and Design in Auckland (Trust).
[2] After the second World War the Elam School of Art and Design was taken over by Auckland University. Since then, the Trust has provided scholarships – The Joe Raynes Scholarship – to students studying at Auckland University’s Elam School of Fine Arts.
[3] As of August 2023, the trustees of the Trust hold capital funds of $59,061. The fund does not generate sufficient income to enable the trustees to pay annual scholarships. Since 2012 only three scholarships have been awarded, each in the amount of $1,500. The trustees have not granted a scholarship since 2018. For the past four years, the Trust’s modest administration costs have exceeded its even more modest income.
[4] The trustees are incorporated as a Board pursuant to Part 2 of the Charitable Trusts Act 1957 (Act). Under the terms of the Will, they are restricted to using only the net income of the Trust to grant scholarships. The trustees may not use any of the Trust fund’s capital.
[5] The trustees have determined that it is impractical and inexpedient to continue to administer the Trust in the terms set out in the Will. They apply pursuant to Part 3 of the Act for approval of a scheme that would allow the trustees to distribute the Trust’s fund to The University of Auckland Foundation (Foundation), and then to wind up the Trust. The application is made under s 33, the provision of the Act allowing for the alteration of the mode of the Trust’s administration.
[6] The trustees have advertised their application for approval of the updated scheme in accordance with the advertising requirements set out in s 36 of the Act. The application is unopposed. The Attorney-General has prepared a report in accordance with s 35 of the Act and confirms that she supports the application.
The scheme
Trust terms
[7]The terms of the Trust are contained in clause 11 of the Will:
(b) My said trustees shall stand possessed of the paid sum of one thousand five hundred pounds and the investments from time to time representing the same UPON TRUST to apply the net income thereof in perpetuity for the promotion and encouragement of education in the art of drawing, painting and design at the Elam School of Art and Design in Auckland which said School of Art was established in pursuance of the provisions of the will of John Edward Elam late of Auckland Gentleman deceased but subject as hereafter mentioned and provided
…
(d) My said trustees shall out of the income of the trust fund in the first place pay all costs and expenses of or incidental in the management of the trust fund and the income thereof or the execution of any of the trusts or powers herein declared or contained relating to the trust fund
(e) Subject to preceding sub-clause (d) hereof the said income shall be applied in establishing and maintain a scholarship or scholarships each of which shall be called “The Joe Raynes Scholarship” of such annual value or values as my said trustees shall from time to time in their sole discretion fix and determine to be from time to time awarded in manner hereinafter provided to a student or students in drawing, painting or design at the said Elam School of Art and Design or to a student or students desiring to enter such School, and to be held and enjoyed as hereinafter provided.
(f) The said Scholarship of Scholarships shall be awarded at such intervals and as the result of such examination and in such manner and shall be held and enjoyed for such period and upon and subject to such terms and conditions as shall from time to time be prescribed by regulations to be made by my said trustees or in default of such regulations then as my said trustees shall determine and my said trustees may at any time revoke or alter any regulations made under this sub-clause and make new regulations in place thereof.
[8] As noted, the trustees may not use any of the Trust fund’s capital. However, the capital no longer generates sufficient income to meet the Trust’s purpose effectively. Nor does the Will provide the trustees with the power to wind up the Trust. Instead, the capital of the Trust is to be held in perpetuity.
[9] In his supporting affidavit, one of the trustees, Richard Wilson, explains that he and his co-trustees have determined that it is impractical and inexpedient to continue to administer the Trust pursuant to the terms of the Will. They apply to the Court for approval of a scheme that will, if approved, add the following clause:
11(k) In the event that the administrative costs of the Trust exceed the income earned in its most recent financial year, and the trustees decide that it is no longer practicable or desirable to continue to administer the trust fund in the manner set out in clauses 11(a) to 11(j) of the will of the late Joseph Raynes, the trustees may:
(a) After paying all liabilities, vest the entire remaining trust fund in the trustees of the time being of the University of Auckland Foundation upon condition that such funds are applied to the same charitable purposes as specified in clause 11 of the Will (although the mode of administration and powers of the officers of that charitable body in respect of such funds may be different from those under this trust). For the avoidance of doubt, the University of Auckland Foundation will have the power to distribute the capital of this trust; and
(b)Subsequently, wind up the trusts established by clause 11 of the Will.
[10] This additional clause will allow the trustees, after paying all liabilities, to vest the Trust fund in the Foundation and then wind up the Trust. It also provides that a condition of the vesting of the Trust funds in the Foundation is that the funds are to be applied to the same charitable purpose as currently specified in the Will, although the Foundation will have the additional power to distribute the Trust’s capital.
The University of Auckland Foundation
[11] The Foundation was established in 2002 to act as the steward and distributor of funds entrusted to it for various educational charitable purposes. These are usually, but not necessarily, associated with the University of Auckland. It is registered with Charities Services.
[12] The general manager of the Foundation, Paul Cunningham, explains in his supporting affidavit that it is not uncommon for the Foundation to receive gifts made on a condition that the funds are applied to specific charitable purposes. The Foundation Trust Deed allows the Foundation to receive and invest charitable donations on conditions that are stipulated by the donors.
[13] Under clause 4.3 of the Foundation Trust Deed, the trustees are to use and apply the income for any and all of its charitable purposes. “Charitable Purposes” are defined broadly at clause 2.1:
“Charitable Purposes” means every purpose that is charitable at law and in New Zealand and includes:
(a)the advancement of knowledge and the dissemination thereof by teaching and research;
(b)assisting Students to pursue a course of study at the University;
(c)the general advancement of the University.
[14] Clause 4.3 is subject to clause 5 which deals with specific donations to the Foundation, including donations where specific conditions are imposed on such gifts:
5.1Where the Trustees receive a Specific Donation they shall:
(a)apply that Specific Donation to the specified Charitable Purpose;
(b)separately account for all income and expenditure attributable to that Specific Donation; and
(c)in the administration of that Specific Donation apply the provisions of this Deed only to the extent that those provisions are not inconsistent with any specific provisions relating to the administration Specific Donation.
Legal principles
[15] The trustees apply to amend the mode of the administration of the Trust under s 33 of the Act. Section 33 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 of the 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 Trusts Act 2019 or any other Act or by law.
[16]The threshold test for the Court to allow an alteration is not high.1 In
Re Melanesian Mission Trust Board Paterson J observed:2
It is necessary for this Court to be satisfied that the administration of the property or the carrying out of the Trust ‘could be facilitated’ by the variations sought. The ordinary dictionary meaning of ‘facilitate’ is ‘made easier, promoted, or helped forward’.
The Attorney-General’s report
[17]In her report the Attorney-General concludes:
Pursuant to ss 35 and 56 of the Act and for the purposes of assisting this Court as to the matters of which it is required to be satisfied under s 56(1)(a) of the Act, I report that I am 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 by this Court under Part 3 of the Act; that every proposed purpose is charitable within the meaning of the Part 3 and can be carried out; and that the requirements of Part 3 have been complied with in respect of the scheme up to the giving of this report.
[18] Without qualifying these conclusions, the Attorney-General responsibly points out the following issues for the Court’s consideration:
(a)The scheme provides for the termination of the Trust after distribution of the Trust fund to the Foundation.
(b)Although the Will only allows the trustees to grant scholarships out of the income of the Trust, the proposed variation would allow the Foundation, once the Trust fund has been transferred to it, to distribute the capital of the Trust.
Termination of the Trust
[19] It is a general rule that a charitable trust cannot be terminated or wound up.3 Where the passing of time or changing circumstances have rendered it impossible or difficult to carry out the trust as originally intended, generally the trustees cannot
1 Re Bartels [2017] NZHC 104 at [32].
2 Re Melanesian Mission Trust Board HC Auckland M1140/98, 24 September 1998.
3 National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31 (HL) at 74; Re Auckland City Mission [2024] NZHC 255 at [33].
terminate the trust, but instead are under a duty to apply to the Court for a variation of the trust’s purposes or mode of administration under the Act.4
[20] However, amalgamation provides an exception. In circumstances where a power to wind up a trust is conditional on a successful transfer of all of the trust’s funds to another trust, and those funds are still being applied for the same purpose, the insertion of a power to wind up the merging trust will not infringe on the principle against termination.5 That would be the case if the proposed variation to the Trust were to be allowed.
Income and capital
[21] The proposed variation would allow the Foundation, once the Trust fund has been transferred to it, to distribute the capital of the Trust. This is contrary to the terms of Mr Raynes’ Will which only allowed for the distribution of income. As Mr Wilson explains in his affidavit, this has meant that although the Trust holds capital, there has been insufficient funds to award a scholarship for over five years; and only three scholarships, each of $1,500, have been awarded since 2012. Nevertheless, to allow the Foundation to distribute the Trust capital has the potential to exhaust the fund. As noted, it runs contrary to the original terms of the Trust and, potentially, the general principle that a charitable trust is not to be terminated by the Court.
[22] The applicants and the Attorney-General point out that the Court has approved a similar scheme in the past although it is not clear whether, on that occasion, this particular issue was drawn to the Court’s attention.6
[23] The Court also refused to make such a variation in an application where it did not consider that there was sufficient evidence that the proposed variation was needed to facilitate the carrying out of the trust.7 The Court considered it “entirely speculative” whether the trustee would need to exercise the powers that it proposed to
4 Re Auckland City Mission, above n 3, at [33].
5 Re Trustees of the Health Care Otago Charitable Trust [2024] NZHC 1761 at [40], citing William Henderson, Jonathan Fowles and Gregor Hogan Tudor on Charities (11th ED, Thomson Reuters, London, Online ED) at [21-040].
6 Re The Elam Trust for Art and Design Board HC Auckland CIV-2017-404-1935, 16 October 2017.
7 Re New Zealand Institute for Cancer Research Trust [2020] NZHC 2048 at [59].
insert.8 The Attorney-General had objected to that variation for the same reason.. He reported that the evidence “[did] not establish any pressing need for the introduction of this clause”, and referred to evidence from the trustee that the trust’s “income generation is sufficient to meet its charitable needs”.9
[24] The present case is different. The Trust’s financial performance since 2012 shows that it generates insufficient net income to be carried out in accordance with its charitable purpose. Given the size of the fund, this is unlikely to change. I accept that it would better facilitate that charitable purpose if the trustees were empowered, subject to the other terms of the Trust, to distribute the Trust’s capital as well as its income.
Approval
[25] I am satisfied it is appropriate to approve the scheme to vary the mode of administration of the assets of the Trust.
[26] The Foundation will apply the Trust fund for the same charitable purposes as those specified in the Will. I agree with the Attorney-General that by distributing the funds to a larger charitable trust, and also allowing the Foundation to distribute the Trust capital, the charitable purpose of the Trust and granting of scholarships will be better facilitated.
[27] Once the Trust fund has been distributed to the Foundation, it will have no remaining assets. As the Attorney-General noted, there is nothing to suggest that the Trust is the recipient of ongoing requests or donations. In those circumstances the Trust will serve no purpose and I am satisfied that the trustees should have the power to wind it up.
8 At [57].
9 At [30].
Result
[28] The application for approval of the scheme under s 33 of the Act is granted. I make orders in terms of paragraph 1.1 and 1.2 of the Applicant’s Originating Application dated 26 November 2024.
Robinson J
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