Knox Home Trust Board
[2016] NZHC 1944
•19 August 2016
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2016-404-1227
[2016] NZHC 1944
UNDER THE Charitable Trusts Act 1957 IN THE MATTER OF
An application for variation of trust under ss 32 and 33 of the Act
Plaintiff
IN THE MATTER OF
KNOX HOME TRUST BOARD
Applicant
Hearing: 18 August 2016 Appearances:
C C Mansell and R Collins for the Applicant
Judgment:
19 August 2016
JUDGMENT OF THOMAS J
This judgment was delivered by me on 19 August 2016 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:………………………….
Solicitors:
Martelli McKegg, Auckland.
KNOX HOME TRUST BOARD [2016] NZHC 1944 [19 August 2016]
[1]The applicant, the Knox Home Trust Board (the Board), has applied for orders:
(a)Approving the scheme varying the charitable purposes of the Knox Home Trust (the Trust) and extending and varying the powers of the Board under the Charitable Trusts Act 1957 (the Act).
(b)That the original trust deed dated 3 June 1911 and subsequent deeds of variation of the trust deed and orders of the Court be varied.
(c)That all reasonable costs and expenses are paid out of the Trust Fund.
[2]The grounds on which the application are made are that:
(a)It is impossible or impracticable or inexpedient to carry out the original purpose of the Trust;
(b)The administration of the property or income of the Trust could be facilitated by extending or varying the powers of the Board and varying the mode of administration of the Trust;
(c)The proposed purposes are charitable; and
(d)The proposed purposes are appropriate modifications to the terms of the original Trust.
[3]A number of affidavits in support of the application have been filed.
[4] The proceedings have been advertised in accordance with the requirements of the Act and there is no evidence of any opposition.
[5] I have received a report (the Report) from the Deputy Solicitor-General in exercise of the functions of the Attorney-General pursuant to a delegation under s 9C of the Constitution Act 1986. Pursuant to ss 35 and 56 of the Act and for the purposes of assisting the Court as to the matters of which it is required to be satisfied under s 56(1)(a), she reports that she is 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 the Court under Part 3 of the Act; that every proposed purpose is charitable within the meaning of 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 the Report.
[6] The original deed of Trust was executed on 3 June 1911 and vested property in the trustees to establish "a hospital or home for poor people suffering from incurable disease". The Trust was established from an endowment in the will of the late Elizabeth Knox. The Elizabeth Knox Home and Hospital was built in 1914.
[7] The new scheme would replace the Trust's current purpose with a newer, broader purpose, namely:
The Board shall hold the Trust Fund upon trust to build, furnish, maintain and carry on and provide for the upkeep of hospitals or homes primarily for poor people who are suffering from illness or disability, together with any other functions, services or activities that support that primary purpose.
[8] The new purpose moves away from focussing specifically on incurable disease, provides “primarily” instead of solely for the poor, and allows for activities which support the primary purpose. It also provides for an updated deed which includes additional powers.
The evidence
[9] The Elizabeth Knox Home and Hospital currently provides the following types of care:
(a)Rest home care for the elderly;
(b)Hospital care for the elderly;
(c)Care for young people suffering from physical disabilities;
(d)Day care for people living at home but who need social interactions or whose carers need a break;
(e)Respite care for those suffering physical disabilities but live at home;
(f)Palliative care for the terminally ill.
[10] The affidavit evidence identifies and discusses the following difficulties with the current Trust deed:
(a)The current purpose of the Trust is impracticable and inexpedient because of advances in medical treatment and the complexity of healthcare today.
(b)Today, the Elizabeth Knox Home and Hospital provides accommodation and medical care to elderly people and young people who live with disabilities. Care is provided to both fee-paying private residents and subsidised residents.
(c)The trustees wish to undertake other activities to support the primary purpose including providing care to the community in their homes.
(d)The trustees have found it difficult to administer the Trust with many variations to the deed, some of which have not been given Court approval.
(e)The trustees wish to update and clarify the powers of trustees.
[11] The original 1911 deed has been amended a number of times. Only two of five deeds of variation have been approved by the Court.
Variation of Trust Purposes
General principles
[12] The jurisdiction of the Court to vary the Trust is based on s 32 of the Act, which supersedes the common law doctrine of cy-pres. In Public Trustee v Attorney-General,
the Court referred to the equivalent jurisdiction under s 15 of the Religious, Charitable and Educational Trusts Act 1908, saying:1
Having regard to the terms of s 15, I do not think the approval of the scheme is hampered by any such limitation as is involved in the doctrine of cy-pres which the Court in the exercise of its general jurisdiction applies when turning the property over to a new charitable purpose. I find no such limitation expressed in the Act. All that appears to me to be required under s 15 is that the new purpose to which the property is applied is a charitable purpose within the meaning of Part III of the Act, without regard to its resemblance to the old purpose. No doubt the approximation of the new purpose to the old would not go unconsidered as an element in the matter of deciding upon the new purpose, but the Act does not appear to me to compel such approximation as the guiding principle.
[13]More recently in Re Tennant Hammond J said:2
As to the principles which govern an application of this kind, I last had occasion to consider same in Re the Estate of Rogers (Deceased) (High Court, Hamilton, M4/95, 19 May 1995). The general considerations were there set out at pp 7-10. The application must come within the statutory jurisdiction (which includes a necessity for the purposes to have been charitable at the date of settlement, see Re Beckbessinger [1993] 2 NZLR 362). Second, the substituted arrangements must be charitable as that term is understood in law. Third, 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. Fourth, 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.
[14] The meaning of “inexpedience” was considered in the case of Re McElroy Trust.3 The Court of Appeal held that inexpedient " ... in its present context is of the original charitable purpose or purposes having become unsuitable, inadvisable or inapt”.4 That term embodies a value judgment rather than simply an assessment of feasibility. It may remain possible and practicable to carry out the original purpose of a trust, but it may nonetheless have become inexpedient to do so.
Proposed scheme
[15] The proposed scheme expands the purpose from incurable disease to illness and disability generally.
1 Public Trustee v Attorney-General [1923] NZLR 433 (SC) at 442.
2 Re Tennant [1996] 2 NZLR 633 (HC) at 636.
3 Re McElroy Trust [2003] 2 NZLR 289 (CA).
4 At [14].
[16] The grounds cited by Ian Ross Newton McCormick, professor of medicine and member of the Board, in support of applying the funds in the proposed varied manner include:
(a)The types of incurable diseases suffered in 1911 are vastly different from the incurable diseases suffered today;
(b)In 1911, patients were required to remain in hospital because many of the incurable diseases were communicable;
(c)The incidence of these illnesses has diminished and the treatment of them has changed;
(d)A significant proportion of the residents at the Elizabeth Knox Home and Hospital now suffer different types of modern incurable diseases;
(e)The treatment of modern incurable diseases is very different to the treatment of incurable diseases prevalent in 1911. Medical practice has changed so that many people receive treatment in their own homes;
(f)It is now impracticable and inexpedient for the Trust to be restricted to providing care only in a hospital setting to people suffering incurable diseases only.
[17] From the evidence, I am satisfied it is now inexpedient to carry out the original purpose of the Trust because the kind of service envisioned in 1911 no longer exists in the same form today.
Updated purpose
[18] It is generally desirable for proposed variations to accord as closely as is reasonably possible to the terms of the original trust.
[19] The evidence satisfies me that the form of treatment of illness has changed significantly over the past century, and moved away from institutional care. It is
therefore appropriate for the new purpose to provide for hospitals or homes. I question whether the purpose might be better expressed as being for “hospitals and/or homes’. If the Board wishes to pursue such an amendment, leave is given to file a memorandum to that effect with the Court and the matter will be referred to me.
[20] The evidence satisfies me that there is no longer a service of the type envisioned by Elizabeth Knox. It is therefore reasonable to amend the purpose. I am satisfied that the amendment to expand beyond "incurable diseases" is appropriate in the circumstances and that “illness or disability” is an appropriate replacement for those with incurable diseases.
[21] The proposed purpose allows for "any other functions, services or activities that support that primary purpose".
[22] The evidence is that currently some care is provided in the community, and the Board wishes to provide more of such care in the future. Given the changing circumstances and that this remains only ancillary to the main purpose, this intention is reasonable. I am satisfied that the purpose can properly be extended to allow for services beyond the primary purpose.
The poor or primarily the poor?
[23] The proposed purpose extends the original purpose to provide that admission to the hospitals or homes will not be exclusively limited to those falling into the category of poor. The Deputy Solicitor-General in writing the Report considered in detail the question of whether it is inexpedient to maintain the activities of the Trust to those who are “poor”.
[24] It is clear that Ms Knox's primary concern was the alleviation of poverty. I note that, in her will, in addition to the bequest for a home or hospital, Ms Knox paid legacies to a number charities associated with poverty such as the "Door of Hope for friendless and fallen women", the Salvation Army, the Little Sisters of the Poor, the Helping Hand Union for the benefit of the poor, the Central Mission for the benefit of the poor, to the Presbyterian City Mission, the Widows and Orphans of Ministers Fund, the Maori Mission Fund and various others organisations including multiple homes
and orphanages. She also set aside a significant sum for a night shelter for homeless men. Ms Knox stipulates in her will that the trustees may decide alternatively to pay the sum over to the authority responsible for the Auckland Hospital who would then apply the money to the said purpose. She also stipulates that her bequest should not relieve the taxpayer.
[25] The provision of social welfare and public assistance for medical care has changed significantly over the last century. The Home does not means test its residents but the evidence from the chief executive, Ms Robyn Woodward, states that 55 -60% of residents receive a full residential care subsidy. Eligibility for a residential care subsidy is based on one's assets and income. A person may qualify if they have assets valued at $218,423 or less. New residents can only be admitted to the home after being assessed as Rest Horne or Hospital category in accordance with the requirements of the funding authorities, that is, the District Health Boards. All Hospital residents receive at least some funding irrespective of capacity to pay. The majority of Knox residents are assessed by the DHB as being at "hospital" level.
[26] Ms Woodward says that only 12 of the rest-home residents are full private payers and the free access to services regardless of the capacity to pay is possible because the premium room rates cross subsidise the care of residents who are unable to pay. She says this is critical given current levels of government funding. The chairman of the Board, a chartered accountant, states that bed occupancy is imperative to maintain the economic viability of the Trust.
[27] The chief executive says that those in need are not turned away on the basis of inability to pay. The Home goes to great lengths to enable speedy admission of vulnerable elderly. She says that if the only room available were a premium room, then that room will be provided to that person, even if they are not paying the cost of it, on the understanding they will later be moved to the next available room not attracting premium rates.
[28] The chief executive further says that the Board and management team "are very aware of the purpose for which the Trust was established by Elizabeth Knox and the importance of providing care to everyone, irrespective of their ability to pay”.
[29] I am satisfied that the proposed variation of the Trust's purpose is an appropriate variation both in principle and in practice in light of evidence provided. It is reasonable that the hospitals or homes may provide for a small number of people who do not fall within the category of “poor people”.
[30] The proposed variation requires the fund to be used primarily for poor people. I am satisfied the trustees are ensuring and continue to ensure that the services provided fan within the amended purpose and focus primarily on the poor.
Variation of Trust Administration
[31]Section 33 of the Act 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 incumbent with 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.
[32] 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.
[33] The proposed scheme would make a range of changes to the Trust's administration including:
(a)Modernising trustee powers and discretions including introduction of full powers of a natural person in the administration and management of the Trust fund;
(b)Modernising the procedural provisions relating to matters such as appointment and removal of trustees, and trustee meetings;
(c)A power to delegate trustee powers to any person or committee;
(d)Limitation of liability and indemnity of trustees;
(e)Provisions dealing with interested trustees;
(f)A power to modify any part of the deed by unanimous resolution provided such variation is consistent with the charitable purposes of the Trust;
[34] 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.
Powers and discretions
[35] I consider trustee powers according with a modern commercial environment are necessary to allow the Trust to act with sufficient certainty and confidence. Warwick Peacock notes for example that the original deed does not permit the Board to obtain a mortgage against Trust land. This has meant the Trust has used other assets as security and borrowing costs have been higher.
Procedural provisions
[36] I accept the proposed amendments are simply clarifications as to procedure or encourage administrative efficiency.
Power to delegate
[37] I accept this power would help forward the administration of the Trust. The clause includes limits on delegations, including that the power to delegate cannot be delegated.
Liability and indemnity
[38] I accept that this clause is orthodox and consistent with general law on trustees' liability.
Power to amend the trust deed
[39] A power to modify any administrative aspect of the scheme is also appropriate. There will generally be little reason for the Trust to incur the cost and delay of
amending non-contentious aspects of its deed through an application to this Court under the Act.
[40] The proposed clause contains important limits. Amendments cannot change the Trust's current charitable objects. There is a procedural requirement that amendments can only be made by unanimous resolution.
[41] I am satisfied the changes proposed will in my view likely facilitate the Trust Board and its trustees in the carrying out of the Trust’s charitable purposes.
Result
[42]For the reasons given, the application is granted.
[43] All reasonable costs and expenses of the application are to be paid out of the Trust Fund.
Thomas J
0
0
1