K'aute Pasifika Trust

[2019] NZHC 2432

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2019-419-189

[2019] NZHC 2432

IN THE MATTER	of the Charitable Trusts Act 1957
IN THE MATTER	of the K’AUTE PASIFIKA TRUST

Hearing:	On the papers
Counsel:	DE McLay for K’aute Pasifika Trust
Judgment:	26 September 2019

JUDGMENT OF FITZGERALD J

[As to application for approval of a scheme under the Charitable Trusts Act 1957]

This judgment was delivered by me on 25 September 2019 at 4 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Nielsen Law, Hamilton (D Nielson)

Re K’aute Pasifika Trust [2019] NZHC 2432 [26 September 2019]

[1]                  The applicant, the K’aute Pasifika Trust (the Trust), seeks the approval of a draft scheme under the Charitable Trusts Act 1957 (the Act). In short, the Trust seeks:

(a)Amendment of its current constitution (adopted in 2012) to alter the objects of the Trust. The Trust’s objects currently limit it to work within the Waikato region; the Trust wants to expand its operations beyond that region;

(b)Approval of the 2012 constitution, which was adopted on the mistaken understanding that the Trust had the power to amend the constitution without recourse to the Court (in particular, the approval of cl 18, which will allow the Trust to make administrative changes to the constitution without further recourse to the Court);

(c)Approval of a 2004 constitution, which was also adopted on the mistaken understanding that the Trust had the power to amend the constitution without recourse to the Court; and

(d)Approval of all trustee appointments made since 2004 (under either the 2004 or 2012 constitutions), to regularise the business of the Trust.

Basis for application

Objects of the Trust

[2]                  The Trust was created by way of a constitution executed in 1999. That constitution (and all subsequent constitutions of the Trust) included a number of charitable objects, which provide the Trust will, inter alia:

(a)Promote unity and cooperation within the Pacific Island communities in Waikato towards a holistic healthy lifestyle;

(b)Promote traditional ways of healing for Pacific Island peoples;

(c)Improve services delivered to Pacific Islanders in the Waikato region;

(d)Provide a range of services and programmes to Pacific Island people in the Waikato region, in health, housing, employment, justice, immigration, and education, as well as social programmes;

(e)Operate primarily as a Pacific Islands health clinic (although not exclusively so);

(f)Advocate and liaise with Government Ministries, local government, services organisations and agencies on behalf of Pacific Island communities; and

(g)Operate with best practice, including by engaging experts, using quality assurance models, and undertaking continuous reassessment and evaluation of the Trust’s effectiveness.

[3]                  As is apparent, many of these objects are centred around the provision of services within the Waikato region. The Trust seeks to remove references to the Waikato and instead refer to providing assistance to “Pacific Island communities in New Zealand”.1 It advances two broad reasons why this change should happen:

(a)The Trust has expanded its operations to include initiatives beyond the Waikato region. For example, since 2013, it has been a member of the Aere Tai Collective, and is the lead provider for this network, which involves the delivery of services within the Midland Region. The Trust wants to continue to expand its operations and provide assistance to more Pacific communities but is currently constrained by the references to “Waikato” in its constitution.

(b)Sources of funding, in particular the Government, no longer fund single providers, but instead prefer to fund collectives which operate over larger geographical areas, like the Aere Tai Collective. Ms Karalus, the former CEO of the Trust, says in an affidavit sworn in support of the

1      For completeness, I note Ms Karalus’s affidavit sworn in support of the application discusses the possibility the Trust could operate beyond New Zealand, in the Pacific Islands. This proposal has not, however, been pursued by the Trust in the present application.

application that because of this change in funding policy, “I consider it unlikely that [the Trust] would be able to secure ongoing funding from its major funders to continue providing charitable services solely in the Waikato region.”

[4]                  Ms Karalus further deposes that the trustees of the Trust considered the creation of a second trust to cover regions outside of the Waikato region, instead of pursuing the current scheme. It was agreed that this was not practicable because of the expense and complexity involved in managing multiple trusts. I have considerable sympathy for that view.

Amendment issues

[5]                  While preparing the present application, the Trust realised there may be an issue with its constitutional arrangements. The 1999 constitution did not have a power of amendment. This, it seems, was overlooked when the constitution was amended by replacement with a new constitution in 2004.

[6]                  The problem was perpetuated when the 2004 constitution was again replaced in 2012, on the basis of an implied power of amendment arising from the 2004 constitution.

[7]                  Because the 1999 constitution did not have a power of amendment, the 2004 and 2012 constitutions arguably lack validity. The Trust accordingly seeks the Court’s retrospective approval of the 2004 constitution,2 and all trustee appointments made since that constitution came into power.

[8]                  Ms Wichman, a trustee of the Trust, has sworn an affidavit detailing the various constitutional changes and appointment of trustees over the years. She advises that after a number of internal disagreements about the constitution of the Trust, in 2011 the Trust sought legal advice and assistance with the drafting of a new constitution.

2      Although the 2004 constitution has been revoked, the Trust nonetheless seeks approval of it to address any potential legal issues arising from the actions of Board members following their adoption of the constitution.

This resulted in the constitution adopted in 2012 under which the Trust currently operates.

Attorney-General’s report

[9]                  Ms Hardy, Deputy Solicitor-General, has filed a report for the Court on behalf of the Attorney-General.3 She concludes that the proposed scheme is sound and could be approved by the Court.

[10]              In relation to the amended trust objects, Ms Hardy agrees with the Trust that it would be impracticable and inexpedient to continue to restrict its charitable work to the Waikato region. She notes that the success of the Trust suggests it is an unnecessary and unhelpful fetter to restrict the Trust to the Waikato region when the Trust is able to assist and benefit Pacific communities more generally.

[11]              Ms Hardy also has no objection to the proposed amendment of cl 18, which would allow the Trust to amend administrative provisions of the constitution of its own accord.4

[12]              Nor does Ms Hardy object to the balance of the application: the retrospective approval of the 2012 constitution, the 2004 constitution, and the appointments of trustees since 2004. Having undertaken an analysis of the 2012 constitution, she considers the administrative provisions of the 2012 constitution provide a more comprehensive and logical administrative framework for the Trust and will facilitate the carrying out of Trust objects. She further considers ratification of trustee appointments and the 2004 constitution will regularise the Trust’s business and address any potential legal liabilities that may arise.

Law

[13]              Section 32 of the Act provides for the variation (by way of a Court approved scheme under Part 3 of the Act) of charitable trusts where their purposes have become

3      As protector of charities and as required by s 35 of the Charitable Trusts Act 1957. Ms Hardy exercises the function of the Attorney-General pursuant to delegation under s 9C of the Constitution Act 1986.

4      Citing Re Neil Barr Farm Forestry Foundation [2014] NZHC 2324 at [7]-[9].

“impossible or impracticable or inexpedient”. The Trust relies on inexpediency as grounds for variation in this case. The Court has previously held that a charitable purpose becomes inexpedient where it has become “unsuitable, inadvisable, or inapt”.5

[14]              Hammond J outlined the principles which guide the Court in an application under s 32 in Re Tennant.6 They relevantly provide:7

(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.

(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.

[15]              Although the Court has statutory powers under s 51 of the Trustee Act 1956 to appoint trustees, Ms Hardy, and Mr McLay, counsel for the Trust, suggest that the Court should instead rely on its inherent jurisdiction to retrospectively approve the appointment of trustees (on the grounds the language of s 51 seems specifically limited to “new” trustees). Ms Hardy and Mr McLay similarly suggest the retrospective approval of the 2004 and 2012 constitutions can be achieved through the exercise of the Court’s inherent jurisdiction.

[16]              The Court of Appeal in Clarke v Karaitiana confirmed the Court’s inherent supervisory powers over trusts:8

5      Re McElroy Trust [2003] 2 NZLR 289 at [14].

6      Re Tennant [1996] 2 NZLR 633.

7      At 636.

8      Clarke v Karaitiana [2011] NZCA 154, [2011] NZAR 370 at [38].

[38] The jurisdiction of the High Court in the field of trusts is both statutory and inherent. The inherent jurisdiction is derived from the Court's general supervisory powers in equity relating to the supervision of trusts for the welfare of beneficiaries. The inherent jurisdiction of the Court includes the power to enable it to act effectively within its jurisdiction. The Court may exercise its inherent jurisdiction even in respect of matters which are regulated by statute, so long as it can do so without contravening any statutory provision.

Discussion

[17]              In my view it is appropriate for the draft scheme to be approved as sought by the Trust. I say this for the following reasons.

[18]              First, it is clear the references to “Waikato” are restricting the Trust’s ability to both expand its operations and obtain funding. I am satisfied that given these issues, it is expedient in the sense discussed in Re McElroy to amend the object of the Trust.

[19]              Second, the central purpose of the Trust, that is, to assist Pacific communities, remains intact. The affidavit evidence also suggests that the Trust intends to continue to provide services to the Waikato. The variation is therefore a minimal alteration to the original objects of the Trust.

[20]              Third, although it is unfortunate a new constitution was introduced in 2004 without recourse to the Court, this was the result of a mistaken understanding as to the ability to amend the constitution. Given the passage of time and the introduction of a new constitution in 2012 (which has been endorsed in the Attorney-General’s report as providing a more comprehensive and logical administrative framework for the Trust), there is clearly a need to regularise the Trust’s operations. It is therefore appropriate to exercise the Court’s inherent jurisdiction and approve the 2004 and 2012 constitutions (and the trustee appointments made pursuant to them).

[21]              Finally, an affidavit sworn on behalf of the Trust confirms that the Trust’s application has been duly advertised both in the New Zealand Gazette and three times in the Waikato Times (as required under the Act).9 No opposition has been filed since notice has been given. Notice of the hearing of the application has also been given, and the matter has been called in open court.  No persons appeared to oppose the

9      Charitable Trusts Act 1957, s 36.

application. And, as noted, the Attorney-General, as protector of charities,10 raises no objection to the proposed scheme.

Result

[22]              I accordingly approve the scheme proposed by the Trust in these proceedings, and make orders in terms of those sought in the originating application dated 5 July 2019.

Fitzgerald J

10     Charitable Trusts Act 1957, ss 35, 58.