Low

[2021] NZHC 3166

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-001135

[2021] NZHC 3166

UNDER

Rule 19.5 of the High Court Rules 2016

IN THE MATTER

of Incorporated Societies Act 1908

BETWEEN

ALEXANDRA AMANDA HILLAN LOW

Executor pursuant to Rule 14 of the

Blockhouse Bay and District Senior Citizens Association (Inc)

Hearing:

22 November 2021

Appearances:

K Davenport QC for the Executor

P J Magee for the Executive Committee of the Association

Judgment:

24 November 2021

JUDGMENT OF VENNING J

Application for Directions

This judgment was delivered by me on 24 November 2021 at 11.45 am, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date……………

Solicitors:           Davenports Law, Albany, Auckland

Thomson Wilson, Whangarei Counsel:  K G Davenport QC, Auckland

Re LOW, Executor to Blockhouse Bay and District Senior Citizens Assn (Inc) [2021] NZHC 3166 [24 November 2021]

Introduction

[1]    The Blockhouse Bay and District Senior Citizens’ Association (Incorporated) (the Association) has had its day. Once a vibrant organisation, it now only has 15 members. On 30 September 2019 all 14 of the members who attended a Special General Meeting resolved to wind up the Association and sell its only asset, a hall at 522 Blockhouse Bay Road. At the same time it was resolved that all surplus assets after payment of liabilities and expenses were to be vested in Ms Alexandra Low. Ms Low was appointed executor to manage the process of the distribution of the net assets on behalf of the Association in accordance with the rules of the Association (as amended) and the Incorporated Societies Act 1908 (the Act).

[2]    During the course of the winding up an issue has arisen between Ms Low and members of the Executive Committee of the Association (the Executive) as to how the net assets of the Association should be distributed.

[3]    Ms Low would like to give effect to the wishes of the Executive, but is concerned to ensure that any distribution is in accordance with the rules of the Association. Ms Low seeks directions from this Court to resolve the issue and to provide protection to her as Executor.

Background

[4]    The background to the Association is helpfully summarised in an article published in the local Blockhouse Bay Beacon of March 2020.

[5]    Originally incorporated in 1967 the Association aimed to provide a place where older people could gather for social events in the, then, isolated and underdeveloped Blockhouse Bay area. Through fund raising efforts and personal donations land owned by Auckland City Council at 522 Blockhouse Bay Road was purchased and a building constructed, which became the clubrooms for the Association in around 1973. The clubroom was a gathering place for the over sixties of Blockhouse Bay and surrounding District.

[6]    In September 2019 when it was resolved to wind up the Association, the members included Ted Dixon, Rangi Mitchelson, Sheila Hall and Ray and Lorraine Warren. Ted Dixon had become involved initially, as auditor for the Association, (a role he held for 33 years). His mother had been secretary of the Association. Rangi Mitchelson was the president and Sheila Hall was secretary. Lorraine Warren was the treasurer. All had dedicated enormous amounts of time and effort to the running of the Association and maintenance of the hall. More recently the hall had been a place for members to meet and play bowls and cards. It had also been used by various community groups for events.

[7]    Times have changed since 1967. Given the development in the area, Blockhouse Bay is no longer an isolated community. There is less need for a social hub for the elderly in the Blockhouse Bay area. Much of the work undertaken by the Association is now carried out by churches and other community groups. A community centre has also been established in Blockhouse Bay.

[8]    For all those reasons, and with a declining membership, maintaining the hall became difficult for the members. When the Auckland Council was not willing to continue to operate the hall for the purposes of the Association the decision was made to sell it and to apply the proceeds of sale for the community.

[9]    Ms Low holds the net proceeds of sale of the hall through another solicitor’s trust account. After the parties’ costs of this application it is expected there will be approximately $790,000 available for distribution.

Evidence

[10]   The evidence before the Court is by way of an affidavit from Ms Low and an affidavit by Rangi Mitchelson for the Executive.

The Executor’s position

[11]   Ms Low considers that the surplus funds must be applied to the best advantage of the community of Blockhouse Bay and surrounding District in continuity of purposes for which the Association was formed. In her view that means she must have

regard to the objectives of the Association. Ms Low considers the Well Foundation, a foundation associated with the Waitemata District Health Board best meets those objectives.

[12]   Ms Low would also propose a modest donation to the Blockhouse Bay Walking Group and, if there were sufficient funds left over, she would provide cards’ and bowls’ groups an amount equal to hall hire costs for the next five years.

Executive Committee’s position

[13]   The Executive consider that the funds can be applied more generally “to the best advantage of the community”. The Executive considered that the funds could be applied towards the purchase of an ambulance to be used by St John Ambulance in the area, the purchase of a vehicle for the local community patrol, and a contribution towards Age Concern.

[14]   In addition, in his affidavit, Mr Mitchelson also raised the possibility of supporting the Green Bay Community Centre, a local community shuttle and Hospice West Auckland.

[15]   Ms Low has reservations as to whether grants to those entities are authorised by and in compliance with the objects of the Association.

[16]   If the funds are to be distributed as the Executive wish, then Ms Low seeks protection of the directions of this Court confirming and approving the distributions. For those reasons she has brought this application.

[17]   The application is not formally opposed as such although members of the Executive are represented by Mr Magee. His firm has provided an opinion which supports their wish to distribute funds to St John and community patrols.

[18]   I record my appreciation for the responsible way counsel Ms Davenport QC for Ms Low and Mr Magee for the Executive approached the matter and for the assistance they have given the Court.

Issues

[19]The application gives rise to two principal issues:

(a)the interpretation of the relevant provisions of the Association’s rules and sections of the Incorporated Societies Act 1908; and

(b)application of that interpretation to the proposed grants to the various entities discussed in the evidence before the Court.

Interpretation of the rules

[20]   As a creature of statute and its rules the Association (and a person in Ms Low’s position as executor of its assets) may only act in accordance with its objects and rules.

[21]   Section 27 of the Act confirms that when an Association is put into liquidation or wound up voluntarily, as in this case, its surplus assets after payment of all costs, debts and liabilities are to be disposed of in the manner provided by its rules.1

[22]   The principles applicable to the construction of legal documents generally apply to construction of the Association’s rules. Their meaning is to be ascertained by considering what the rules would convey to a reasonable person having all the background knowledge reasonably available.2 They are to be fairly construed as a whole and the intention derived from a reasonable interpretation of the language used. They should be construed so as to give them reasonable efficacy and a workable construction.3

[23]   The objects must be construed in a fair and reasonable way. Things that are reasonably incidental to them may be considered as within the Association’s powers. In Walker v Mt Victoria Residents Association Inc Richardson J suggested that it was

1      Incorporated Societies Act 1908, s 27(1).

2      Attorney-General of Belize v Belize Telecom Ltd [2009] 2 All ER 1127 (PC); Ord v Calan Healthcare Properties Ltd [2005] 2 NZLR 96 (CA); and Body Corporate 198900 v Bhana Investments Ltd [2015] NZHC 1620 at [42]–[43].

3      The Egyptian Salt and Soda Company Limited v The Port Said Salt Association Limited (Egypt) [1931] AC 677; and Black White and Grey Cabs Limited v Fox [1969] NZLR 824 (CA) (even though the case concerned a company’s articles of association).

perhaps arguable that the breadth of ss 4 and 10 and the provisions of s 19 of the Act required or at least allowed a broader approach in the wider public interest by contrast with the more strict approach taken to the vires of the actions of a company.4

[24]   In the present case the particularly relevant rules are the objects, the membership criteria and the rules providing for winding up (as amended):

2. OBJECTS:

(a)To provide citizens of 60 years of age and over, irrespective of status or creed, with a centre for social and useful activities.

(b)To encourage and foster the spirit of friendship and goodwill and to carry the frankness, freshness, and enthusiasms of youth into later years.

(c)To encourage and foster social pursuits with the object of maintaining mental and physical health.

(d)To encourage and provide opportunities for the continued utilization of the skills and experience of older citizens in the service of the community.

(e)To encourage and foster the ideals of service to citizens of a like age as a basis for assisting those less fortunate;

(f)To support and co-operate with any other organization or Authority, either local or national, in promoting or advancing the abovementioned objects.

(g)To raise funds by such lawful means as to the Association shall seem proper, including borrowing and giving security therefor.

(h)To organise and sponsor social functions for the attainment of any of the foregoing objects.

(i)Generally to invest, control and dispose of the funds and property of the Association as may be deemed advisable to carry out or achieve any or all of the foregoing objects;

(j)Generally to do all such things as are incidental or conducive to the attainment of the aforementioned objects.

3. MEMBERSHIP:

(a)        Ordinary members:-

All citizens of 60 years of age and over, [of] good character, resident in the Blockhouse Bay or adjoining districts, who have been

4      Walker v Mt Victoria Residents Association Inc [1991] 2 NZLR 520 (CA).

nominated and seconded by two Ordinary Members, and whose membership has been approved by the Executive.

In the case of married couples where one is 60 years of age or over and the other is under 60 years of age, then both are eligible for full membership.

…

13. DISSOLUTION:

(a)The Association may be voluntarily wound-up, by a resolution passed by the majority of the ordinary members of the Association present and voting at an annual general meeting or special general meeting of the Association called for such purpose;

(b)Notice of such meeting shall be no less than 10 working days;

(c)The surplus assets of the Association shall be dealt with in accordance with clause 14 of these Rules.

14. WINDING UP OF ASSOCIATION:

(a)In the event of the Association being wound-up and in order to provide for the continuity of purpose for which the Association was formed, all surplus assets after payment of Association liabilities and expenses (net assets) of winding up shall be vested in the person of Ms Alexandra Low, Principal of Alexandra Low & Associates, so that she can manage the process on behalf of the Association in accordance with the rules of the Association (as amended) and the Incorporated Societies Act 1908;

(b)The net assets on winding up shall be applied to the best advantage of the community of Blockhouse Bay and the District.5

[25]   As noted, Ms Low considers that she must have regard to the objects in clause 2 and the membership criteria in clause 3 both as to age and locality which define the beneficial class so that the purposes and the distribution must be targeted to the beneficial class. Any benefit to other persons must be ancillary. As she notes, the Association is not a charity.

[26]   The Executive consider Ms Low is not obliged to strictly adhere to the specific objects of the Association as set out in clause 2 of the rules or to exercise her powers of disposal solely for the benefit of persons aged 60 years or over who are residents within the boundary of Blockhouse Bay. They take the view, expressed in Mr Magee’s

5      Clauses 13 and 14 were amended at the Special Meeting at which it was voted to put the Association into liquidation.

firm’s opinion, that, broadly the objects in clause 2 provide for the Association to benefit the social, health and wellbeing of citizens of 60 years and over within the Blockhouse Bay community, including by the encouragement of social pursuits and service to the community. The objects do not however prevent incidental benefits to other members of society. In particular, clause 2(f) is relied on, which provides one of the objects is to “support and co-operate with any other organisation or authority either local or national in promoting or advancing the … objects.” The Executive consider grants to the community patrols and St John Ambulance for example would be consistent with clause 14 in particular.

[27]   While clause 14(b) refers to the net assets being applied to the “best advantage of the community of Blockhouse Bay and the District” which lends support to the view expressed on behalf of the Executive, I consider that general wording must be informed by the introductory words of clause 14(a) which refer to providing “for the continuity of purpose for which the Association was formed …” the surplus assets are vested in Ms Low so that she can manage the process on behalf of the Association “in accordance with the rules of the Association and the Incorporated Societies Act 1908”. That wording takes the reader back to the purposes for which the Association was formed and requires consideration of the objects and membership criteria.

[28]   In general terms the objects of the Association have two dominant themes. First the Association is for the benefit of over sixties living in Blockhouse Bay and the surrounding District. Next, the objects are to support such members in social and useful activities, encourage friendship and goodwill, encourage and foster social pursuits, maintain mental and physical health, encourage opportunities for the use of the skills and experiences of older citizens in service of the community, encourage and foster the ideals of service as a basis for assisting those less fortunate, and generally, all such things as may be incidental or conducive to the attainment of the above.

[29]   I do not consider that clause 2(f) expands the principal objects. It is not a standalone object in itself but rather, is an example of a means of achieving the preceding purposes at clauses 2(a) to (e). Clause 2(f) confirms that the Association can support such local or national organisations if that support will promote or advance the principal objects. Similarly, the remaining clauses 2(g) to (i) enable the

Association to carry out activities to achieve the principal objects. Clause 2(j) is a catch all provision.

[30]   On the interpretation point, therefore, I am rather more closely aligned with Ms Low’s approach than the Executive’s, although I bear in mind the comments of Richardson J in the Walker v Mt Victoria Residents Association Inc case that a broader approach to what might satisfy those objects is appropriate.6

[31]   I consider the appropriate direction to be that Ms Low is to disburse the funds held by her generally in accordance with the objects and membership criteria of the Association to the best advantage of the community of Blockhouse Bay and District.7 However, in applying that direction, a liberal approach is appropriate so that the general theme of supporting members’ mental and physical health is not constrained by the requirement it be solely associated with “social pursuits” for instance.

The grants

[32]   I turn to discuss the proposed grants. Mr Magee advised during the hearing that the community patrols’ organisation was no longer operating so that was no longer pursued by the Executive. That leaves consideration of St John, Age Concern, the Green Bay Community Centre and the West Auckland Hospice as proposed by the Executive and the Well Foundation and Blockhouse Bay Walking Group suggested by Ms Low. In addition, there appears agreement that some funding should be available for the hall hire to support cards’ and bowls’ events. In identifying the recipients I consider it will be administratively simpler and more cost effective if larger grants are made to a limited number of organisations.

[33]   I understood from Ms Davenport and Ms Low that the net figure referred to above of $790,000 should be available after payment of the costs of the application and Mr Magee’s costs in representing the Executive Committee.

6      Walker v Mt Victoria Residents Association Inc, above n 4.

7      In this context, District includes New Lynn.

St John

[34]   The Executive still maintains its support for St John. Attached to Mr Mitchelson’s affidavit was an updated proposal from St John regarding the funding of an ambulance. It notes the cost of a fully kitted out ambulance with essential equipment such as a resuscitation kit, carry chair, scoop stretcher, intensive care paramedic kits, suction unit, power-load stretcher, radio, ICT system and mobile data terminal was $242,255.00. Ms Low was concerned that the proposed grant for St John was not sufficiently aligned to the Blockhouse Bay community or targeted to the membership criteria of over 60. On the basis of earlier information provided St John indicated the ambulance could be based at New Lynn but could not give a commitment it would be for any longer than three years.

[35]   Support of St John, which is obviously a national organisation, can be aligned with the object of maintaining the physical health of over 60 year olds in the District. While St John of course provides general assistance to people under 60 as well, it has to be acknowledged that people over 60 tend to require more emergency medical assistance than others. In the year from July 2018 to June 2019 for example, the ambulance responded to 1,110 incidents in Blockhouse Bay and 871 people were transported to the most appropriate treatment centre. A significant number were GP referrals, patients with breathing problems, chest pains, or falls, all of which are ailments which the elderly often suffer from.

[36]   The funding of an ambulance which would be marked as provided by the Association would be a tangible benefit to residents of Blockhouse Bay and District who would otherwise qualify as members of the Association. I consider that funding of $250,00 for the provision of an ambulance in the course of the winding up under clause 14 to be within the spirit of the preceding rules and objectives of the Association.

The Well Foundation

[37]   The Well Foundation is directed at funding a kare project for elderly people. The programme involves a comprehensive assessment by a GP practice nurse to identify specific health concerns and issues, a tailored patient centred care plan with

focus on home and/or community support or interventions and flexible care co- ordinated by local GP practice nurses, and, if necessary, and hospital admissions occur, transition of care support after discharge by the general practitioner and practice nurse team. It will also support access to community programmes for older people, such as Cognitive Impairment Pathway, Falls Prevention programme, Advance Directives/Advance Care Plans, Palliative Outcomes Initiative, and Primary Mental Health initiatives. The project is delivered through existing general practice care teams.

[38]   The proposal advanced by the Well Foundation is based on assistance over five years which would enable the delivery of the care project for 200 people over a five year period. It seeks funding of $702,600.00.

[39]   I share the Executive’s concerns at the size of the grant sought. However, the proposal is otherwise consistent with the objects of the Association and Ms Low confirmed that the project was scalable. Given the limited number of members of the Association at present and the limited amount of funding available for distribution, if the funding was scaled to address the needs of a cohort of 100 people over a five year period, and was thereby reduced by a half, the funding would be appropriate. That would support a grant to the Well Foundation of $350,000.00 for that purpose. I agree with Ms Low that the objects of the Well Foundation are a good match for the objects of the Association. The Executive’s other concern was the identification of the general practices proposed to be used. That is a matter that can be addressed by Ms Low with the Well Foundation in making the grant.

The Green Bay Community House

[40]   Mr Mitchelson also referred to the possibility of the Green Bay Community House. However, as Mr Magee acknowledged, that is essentially a community centre for all ages, and it provides a wide range of classes for young and old. While it does provide some assistance for those people within the membership age group, that is not its primary focus. There are more deserving organisations.

West Auckland Hospice/Age Care

[41]   West Auckland Hospice is on the Te Atatu Peninsula. It provides symptom and pain management, spiritual works, social work, art and music therapy, physiotherapy, aromatherapy, massages of various types and counselling, together with a range of group programmes. The services it offers are primarily to the membership age group and are consistent with the Association’s objectives. Ms Low notes it meets the objectives but she also notes it receives Government support and donations.

[42]   Age Care is also a registered charity. It proposes a pilot of a local area co-ordinator in Blockhouse Bay and immediate suburbs in response to the needs of isolated older people to support them to engage in the community. It would link older people into social and other activities, provide social opportunities for them and support mental and physical health. It seeks $180,000.00 over three years. Ms Low has a number of concerns about Age Care, including that it has high administrative costs.

[43]   Despite Ms Low’s reservations I consider the proposals from both the Hospice and Age Care align with the objects of the Association. It seems to me that the Hospice and Age Care are equally worthy causes. It may not be possible to support both. Whether one or other or both are supported is a decision I leave for Ms Low in consultation with the Executive. The sum of $180,000.00 is to be applied to either one or the other or split between the two, not necessarily equally.

Blockhouse Bay Walking Group

[44]   The Blockhouse Bay Walking Group has 60 members aged between 60 and into their nineties. This group can be seen to provide important social interaction combined with physical exercise. A one-off donation of $5,000 could help with that community fellowship and aligns well with the membership criteria and objectives 2(b) and (c).

Bowls’ and Cards’ hall hire

[45]   On the above figures that would leave sufficient to make provision of bowls’ and cards’ hall hire costs for a number of years. There may well still be a surplus over and above that.

[46]   I confirm the distributions referred to above are approved by the Court and if there is a surplus left, a pro rata distribution of any balance remaining as between the major beneficiaries would be appropriate.

Summary

[47]   In summary, on the above basis, the Court approves the following grants as being within the broad objects and rules of the Association:

St John  $245,000

Well Foundation  $350,000

West Auckland Hospice and/or Age Care to a total of          $180,000 Blockhouse Bay Walking Group  $5,000

Hall hire to support Cards/Bowls      )

Surplus  )  $10,000

Total:  $790,000

Leave

[48]   Leave is reserved in the event that any issues arise as to the implementation of the above orders/directions.

Costs

[49]   I understand it is unnecessary to make any order for costs. It is agreed that Ms Davenport and Mr Magee’s costs are to be paid from the funds held and Ms Low is entitled to her costs as executor.

Venning J