Masterton District Council
[2024] NZHC 2140
•1 August 2024
IN THE HIGH COURT OF NEW ZEALAND MASTERTON REGISTRY
I TE KŌTI MATUA O AOTEAROA WHAKAORIORI ROHE
CIV-2024-435-000006
[2024] NZHC 2140
UNDER Part 3 of the Charitable Trusts Act 1957 and Part 19 of the High Court Rules 2016 IN THE MATTER
of a Scheme under Part 3 of the Charitable Trusts Act 1957 in respect of the Estate of ARTHUR POWYS WHATMAN
BETWEEN
MASTERTON DISTRICT COUNCIL
Applicant
Hearing: 15 July 2024 Counsel:
H P Harwood for Applicant
B and R Roydhouse, Objectors, in person
Judgment:
1 August 2024
JUDGMENT OF RADICH J
[1] In 1938, Arthur Whatman did a remarkable thing. He left a considerable block of land in Central Masterton, on a charitable trust, to house people who were sick or needy.1 The trust was varied by the Court in 1966 to enable a number of new houses to be built on the land for aged or needy people.
[2] A sizeable piece of the gifted land remains vacant. It is from this that the conundrum arises.
1 He had done a similarly remarkable thing in 1921 when he built 11 houses on land owned by him nearby, for returning servicemen.
RE MASTERTON DISTRICT COUNCIL [2024] NZHC 2140 [1 August 2024]
[3] There is an urgent demand for public housing in Masterton. The land could readily be used for that purpose. But the Council is not in a financial position to build public housing on the land. It could ensure that public housing is provided there if it could sell or lease the land, subject to appropriate covenants. However, an arrangement of that sort would be at odds with some of the terms of Mr Whatman’s trust.
[4] The Court has the power to adjust charitable purposes, to which a trust is subject, and to adjust the powers of trustees who hold trust property.
[5] The Masterton District Council is asking the Court to exercise those powers so that, without moving too far away from Mr Whatman’s intentions, they can be given ongoing effect through adjustments that would cater for those who are in need in the community today.
Background
Arthur Whatman’s will
[6] Arthur Powys Whatman owned and lived on a property on Ngaumutawa Road in Masterton, until his death in 1938. It was known as the Whatman Block and, on it, he built a large homestead known as the Panama Homestead.
[7] In his will of 25 January 1938, Mr Whatman provided for a number of legacies and for the establishment of charitable trusts. As relevant to this application, the trusts created may be described in the following ways:
(a)The trust land, with which this application is concerned, comprised an area of land on which the Panama Homestead was located2 and a large area of vacant that Mr Whatman had described in his will as “my non- residential trust realty”.3
2 A large homestead, occupied previously by Mr Whatman.
3 Mr Whatman’s will had provided for the erection of a house on a smaller area of his land for a couple to occupy during their lifetimes but that land became part of the Trust land again in 1963.
(b)The trust realty was bequeathed to the Wairarapa Hospital Board.
(c)The charitable trust created under the will involved the use of the Panama Homestead as a “convalescent or rest home” for people “who are sick, aged or needy” or “who are convalescent or recovering from sickness or ill health”.
(d)If available, any trust funds were to be used for erecting “further charitable institutions” on the trust land for the same charitable purposes.
(e)It was said in the will that “No part of [the] trust realty shall at any time be sold, let or leased”.
[8] The Board gave effect to the trust that was created by, in 1958, making the Panama Homestead available for occupation by aged or needy people.4 It does not appear to have carried out any further development of the trust land and, by 1963, it had incurred five years of losses in relation to the accommodation facilities at the Panama Homestead.
The 1966 variation
[9] By 1965, it had become impractical to use the Panama Homestead as a convalescent home for the sick and needy. Moreover, the income that was available was inadequate to give effect to the trusts that Mr Whatman had established. The Hospital Board applied to the Court, under the same provisions that are used for this application, to approve a scheme that would vary the trust’s charitable purposes and the powers of the trustees. It was a scheme that involved the sale of the whole of the Trust land and the transfer of the proceeds of sale (and of the perpetual annual income from the residue of the estate) to the Presbyterian Social Services Association to
4 Nothing was done with the bequest until 1958 because, as the Board put it when seeking revisions to the trust in 1965, it had difficulty in carrying out Mr Whatman’s directions in relation to the use of the trust property and because, at one point, the buildings were damaged by an earthquake. Up until that time, the Board had simply used the Panama Homestead as a residence for its secretary.
enlarge and maintain a home that the Association operated elsewhere in Masterton. The then residents of the Panama Homestead were to be transferred, as a part of the arrangements, to the Presbyterian Home and the new buildings at that home were to held on trust for similar purposes as those that had been prescribed by Mr Whatman.
[10] The Board’s application to vary the trust in this way did not succeed. It might have if it was the only option. But the Council presented to the Court, at the hearing of the Board’s application, an alternative scheme which proposed the preservation of the property and its use for the provision of housing for those in need. With that in mind, Tompkins J declined the Board’s application on the basis that the proposed scheme involved selling the property contrary to the wishes of the deceased while the Council’s proposal showed that it was reasonably practicable to retain the property and to use it for the benefit of the aged and needy. The retention of the property and its use for charitable purposes was found to be more in accord with Mr Whatman’s intentions than the scheme the Hospital Board had proposed.5 Just a few months later, the Council’s scheme was approved by the Court and orders were made under the Charitable Trusts Act 1957 to give effect to it.
[11] The Council’s scheme involved the transfer of the trust land to it on the basis that it would within two years build 10 housing, or villa, units on the land suitable for the accommodation of aged and needy people and would administer the units in accordance with the Government’s pensioner housing policy. Other parts of the trust land were to be used for additional accommodation for aged or needy people. The Council did not have the power to sell or exchange the trust land without the Court’s further consent. Income from the trust land was to be used for its maintenance, improvement and development.
[12] Following the approval of the scheme, the Council built – between 1968 and 1988 – 44 housing units on the land, an area that became known as Panama Village. They are administered by the Council as a part of its senior housing portfolio.
[13] However, just as, in 1965, the Hospital Board was not in a position to give effect to Mr Whatman’s wishes, and the Council was, it is now the case that the
5 Re Estate of Arthur Powys Whatman SC Wellington, 16 July 1965 at 11.
Council itself is no longer in a position to give effect to those wishes and, for the considerable vacant land that remains to be available for use in line with Mr Whatman’s intentions, adjustments to the current arrangements are needed.
The need for a new scheme
[14] Several things are clear from the evidence. There is an urgent need for more public housing in the Masterton District. There are significant wait-lists for community housing. There is no Kainga Ora presence in Wairarapa. While new housing initiatives have been announced recently, they will not fully meet the need that exists.
[15] Equally, it is clear that the Council does not have the resources to build and operate further public housing without rate increases or deferring other important projects. The trust funds held under the 1966 scheme are insufficient to provide further public housing, now or in the future.
[16] As a part of the development of its 2021–31 Long-Term Plan, the Council included a proposal to make the vacant trust land available to another entity which had the ability to provide public housing there. It did so through the special consultative procedures in the Local Government Act 2002 which must be used in undertaking a Long-Term Plan process.6 Of the 61 submissions received on the Council’s proposals for the land, 21 supported them and 36 did not. Of those that did not, a majority were of the view that the Council should lease the land for public or senior housing (rather than sell it). But the primary take-out from the consultation as a whole was that new housing on vacant land was seen as a priority and that any new housing should not be solely for seniors.
[17] Because the Council does not have the resources to develop the land for housing purposes, this application is made under the Charitable Trusts Act to obtain approval from the Court for a replacement scheme for the land.
6 Sections 83 and 83AA of the Local Government Act 2002 as modified in the case of Long-Term Plan preparation by ss 93C and 93D – the most rigorous decision-making process provided by pt 6 of the Local Government Act.
The proposed scheme
[18]By way of summary, the scheme that is proposed by the Council seeks to:
(a)provide for the sale or lease of the vacant trust land subject to it being used for public housing (a term that is defined and set out below) with an appropriate encumbrance or covenant to that effect being placed on the appropriate titles;
(b)authorise the Council to apply the proceeds of sale or lease to the costs of funding the necessary infrastructure works to enable the development of public housing on the land and for any balance funds to be used for investment in the Council’s existing public housing stock, with priority for those balance funds to be applied to the existing Panama Village housing;
(c)modernise aspects of the 1966 Council scheme and remove provisions that are no longer relevant; and
(d)retain the existing charitable trust over the existing Panama Village with some minor wording adjustments.
[19]Under the scheme, the term “public housing” has the following meaning:
Public housing means housing for people who by reason of age, infirmity, disability and/or personal or financial circumstances are unable to meet their own accommodation needs in a safe and healthy manner, provided or subsidised by central or local government, a community housing provider, a charitable entity or a Wairarapa iwi entity.
The process for the adoption of a new scheme
[20] Under pt 3 of the Charitable Trusts Act, a scheme to adjust charitable purposes or the powers of trustees of charitable trusts is to be submitted in the first instance to the Attorney-General, together with a full set of relevant information.7 The Attorney-
7 Charitable Trusts Act 1957, s 35.
General is to report on the scheme and, once that is done, the trustees may apply to the Court for the approval of the scheme.8 The scheme is to be advertised9 and any person who wishes to oppose the scheme is to give written notice of their intention to do so.10
[21] Notices of opposition have been received by the Court from Christopher Blunden, Hamish Duncan and from Ray and Barbara Roydhouse.11 Mr and Mrs Roydhouse appeared, in support of their opposition, at the hearing of the application.
[22] In the documents filed in opposition, and in the submissions made to the Court by Mr and Mrs Roydhouse, concerns are expressed about:
(a)the proposed change of purpose of the trust from providing accommodation to the “aged or needy” to the provision of “public housing” as defined within the scheme;
(b)the proposed extension of the powers of trustees to enable the sale or lease of the vacant land, subject to a covenant that it will be used for the purpose of public housing;
(c)the prospect of public housing on the vacant land causing increased social problems and having adverse effects on the values of adjoining properties; and
(d)the Council’s decision under the Local Government Act to include a housing development of this sort in its Long-Term Plan.
8 Section 35(3).
9 Section 36.
10 Section 37.
11 Another notice of opposition – from Phillip and Lorraine Bartlett – was given to the Council but was not given to the Court as is required by s 37 of the Charitable Trusts Act. The Council takes no point about the failure to give a copy to the Court and I am content to waive compliance with the procedural requirement. There remains nothing on the Court file from Mr and Mrs Bartlett but the points they make are set out in evidence from the Council’s Chief Executive, Mr Fell, and are incorporated within the matters addressed in this decision.
Relevant provisions and principles
Section 32 – variations to charitable purposes
[23] Section 32 of the Charitable Trusts Act makes provision for circumstances in which adjustments are sought to be made to the charitable purposes that are specified in a trust instrument. The provision is in the following terms:
32Property may be disposed of for other charitable purposes
(1)Subject to the provisions of subsection (3), 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, or the amount available is inadequate to carry out that purpose, or that purpose has been effected already, or that purpose is illegal or useless or uncertain, 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.
[24] The threshold requirement in s 32 is that it is “impossible or impracticable or inexpedient” to carry out the original charitable purpose. In Re McElroy Trust, 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”.12 Accordingly, the term “inexpedience”, unlike the notion of impossibility, involves a form of value judgment. As is observed in the report of the Attorney-General on this application, it may remain possible or practicable to carry out the original purpose of a trust, but it may nonetheless have become inexpedient to do so. Moreover, as observed in the Attorney-General’s report (in the context of the replacement of trustees13) the Court has accepted that “expediency” involves “a lower threshold than necessity and imports considerations of suitability, practicality and efficiency”.14 It is an observation that might equally be applied to s 32.
12 Re McElroy Trust [2003] 2 NZLR 289 (CA) at [14].
13 Under s 51 of the Trustee Act 1957.
14 Peng v Rothschild Trust (Schweiz) AG [2017] NZHC 25 at [38].
[25] The principles governing an application for a variation of charitable trusts under s 32 were summarised by Hammond J in Re Tennant in the following way:15
(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.
Section 33 – variations to trustees’ powers
[26] Section 33 of the Act provides a power for the Court to extend the powers of trustees to enable them to better give effect to a trust. It is in the following terms:
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:
15 Re Tennant [1996] 2 NZLR 633 (HC) at 636 as adopted and applied, for example, in Re YMCA New Zealand Soldiers Great War Memorial Trust [2013] NZHC 2516 at [17], per Kós J, and Re Tikipunga Protestant Children’s Home [2012] NZHC 3078 at [16], per Lang J.
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.
[27] Section 33 is an enabling provision. It may be used when it “appears” that the administration of property held on trust “could be facilitated” by extending or varying the powers of the trustees. The language of the provision signals that the threshold is not high; a point emphasised by Paterson J in Re Melanesian Mission Trust Board when he observed that the Concise Oxford Dictionary defines “facilitate” as “made easier, promoted, or helped forward”.16
Sections 53 and 56 – approval of a scheme to provide for the variations
[28] Variations of the type that might be possible under ss 32 and 33 are presented to the Court through schemes, as discussed in [20] above.
[29] The Court’s power to approve a scheme comes from s 53, but, before doing so, it must be satisfied under s 56 that (among other things) “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” and that “every proposed purpose is charitable within the meaning of that part of this Act”.
Discussion – variation of purposes
Impossibility, impracticability or inexpediency of carrying out the trust’s purposes
[30] As mentioned in the introductory paragraphs in this decision, the Council’s application has come about because it does not have the funds to provide further housing on the vacant land. While some of the objectors say that a development of this sort should be funded by the Council itself, as the Council’s Chief Executive, Mr Fell, has explained, the costs of building 25 units on the site would be in the order of over $10 million and the Council is not in a position to raise that sort of money unless it was to increase rates or defer other important projects. In addition, the limited charitable funds held by the Council under the scheme that was approved in 1966 are
16 Re Melanesian Mission Trust Board HC Auckland M1140/98, 24 September 1998.
insufficient to fund further public housing on the land and other funding initiatives are not available. As a local authority, the Council cannot, for example, access the income-related rent subsidy under the Public and Community Housing Management Act 1992.
[31] As a result, proper effect is unable to be given to Mr Whatman’s wishes which, viewed with a contemporary lens, would seek to address the acute need for public housing that has developed.17
[32] Mr Fell has described in his evidence the nature and extent of the shortage of public housing in the Masterton District. He has referred to the way in which, recently, Kainga Ora has opened community housing on two sites and is expecting to open another three sites this year. Another local organisation, Trust House, is proposing to add 120 homes to its stock by 2031. But, as Mr Fell has explained, all of this is not enough to meet the considerable demand.
[33] Accordingly, it is sufficiently clear that, in terms of s 32’s opening words, it is now impracticable or inexpedient for the purpose of the trust to be met. It is, to draw from the discussion in [24] above, not suitable, practicable or efficient for the current form of stalemate to continue; particularly where options exist.
[34] While, then, the threshold for the application of s 32 is met, the more fundamental issue turns on whether the scheme is a proper one and should be approved. That, in turn, requires each of the charitable purpose variations that are sought to be considered.
Potential variation in the trust’s purpose
[35] In her report on the proposed scheme, the Attorney-General said that she does not regard the proposed change from the provision of housing for the “aged or needy” to the provision of “public housing” (as defined within the scheme) to be a change of purpose. I agree with that conclusion and with the submission for the Council that the changes under this head can best be described as a modernisation of language.
17 As discussed further in [35]–[39] below.
[36] The trust’s purpose has not changed. While contemporary housing will differ from the “further charitable institution or institutions” that Mr Whatman had thought might be built, the variation will help achieve a similar end for the “needy”. Those who are “needy” are part and parcel of the description, in the definition of “public housing”, of those who will benefit from the scheme; those who could not afford their own accommodation needs “by reason of age, infirmity, disability and/or personal or financial circumstances”.
[37]The charitable purpose of the trust remains firmly in place.
[38] Mr and Mrs Roydhouse asked me to think carefully about Mr Whatman’s wishes and whether they would really have extended to accommodate a change of this sort. They said that, while a focus on housing for the elderly might be appropriate, public housing – in a broad sense – is not.
[39] I did appreciate the perspective of Mr and Mrs Roydhouse and their focus on Mr Whatman’s wishes. However, as discussed, I see Mr Whatman as having wished, through the trust he created, to provide housing for those in need, whatever the reason for their need. This aspect of the proposed variation does not change that.
Proposed variation to enable the vacant trust land to be sold or leased
[40] The terms of the scheme would enable the Council to sell or lease the vacant trust land for public housing purposes. That is a change to the provision in the terms of trust, referred to in [7] above, that requires no part of the trust realty to be sold or leased.
[41] The change that is proposed under this head is not a change in the charitable purposes of the trust. As discussed already, the purposes have not changed. Rather, it is a change in the trustee’s powers and in the way in the way in which the trust is to be administered.18 The variation is, as I see it, a means by which the fundamental purposes of the trust can now be achieved.
18 A position the Attorney-General has described, in her report, as being at least arguable – at [37].
[42] Crown Law has discussed with the Council whether public housing might be provided through a variation that would allow only for the leasing of the land. I had a similar discussion with counsel at the hearing. While the Council remains willing to explore leasing options (which the proposed scheme accommodates), the stark reality is that, in the absence of a sale, it is questionable as to whether the Council would have sufficient funding for the upgrades to local infrastructure that would be necessary for the vacant land to be developed. If that infrastructure can be provided, there is a greater prospect of a public housing provider being prepared to develop the land.
[43] Importantly, any sale or lease of the vacant trust land would, under the proposed scheme, be subject to it being used for public housing (as defined in the scheme) with an appropriate encumbrance or covenant to that effect being placed on the record(s) of title to the land. In this way, the potential for the land to be able to be used to house those in need in accordance with Mr Whatman’s wishes can be unlocked.
Proposed variation to enable proceeds from the sale or lease to be used for investment in the Council’s existing housing stock
[44] A component of the proposed scheme would authorise the Council to apply the proceeds of the sale or lease of the vacant trust land to the costs of funding the necessary infrastructure works to enable the development of public housing there, and for any balance funds to be used for investment in the Council’s existing public housing stock, with priority for those balance funds to be applied to the existing housing at Panama Village. In s 32 terms, this change would see the transfer of charitable funds “for some other charitable purpose”.
[45] Mr Fell has explained that the Council has 74 senior housing units that it rents at below market rates. The units are available to rent to those aged 60 years, who are receiving a permanent benefit and who have an asset limit of $25,000 for a single person and $35,000 for a couple. Applicants must not have owned a house in the last five years. In this way, the provision of surplus funds will be exclusively for the elderly who fit broad criteria of poverty. That is consistent with the charitable purpose of the trust.
[46] The difference here is that Mr Whatman sought to provide public housing at a particular location – his own land – whereas this aspect of the scheme would achieve similar outcomes elsewhere in Masterton.
[47] I agree with the Attorney-General that the expenditure of trust funds on public housing in the Masterton District is a purpose that is closely aligned with Mr Whatman’s original intentions and with the purposes of the trust, as redefined by the Court in 1966.
Discussion – variation of powers
[48] Alongside these adjustments to the charitable purposes of the trust, the Council seeks to modernise aspects of the 1966 scheme and to remove provisions that are no longer relevant. The changes go hand-in-hand with the charitable purposes that have been considered already. They facilitate the administration and overall operation of the trust in changed circumstances. In this sense, there is considerable overlap between the application of ss 32 and 33. The changes in the powers of the trustees that are proposed all facilitate the administration of the property or income of the trust and, accordingly, are in order under s 33.
Residual points in opposition to the scheme
[49] The primary points of objection have been addressed in the discussion of the changes in the trust’s charitable purposes and in the related powers of its trustees.
[50] Beyond those points, the objections are focused, not on the requirements of ss 32, 33 and 56 of the Act, but more broadly on the decision of the Council, in exercising its powers under the Local Government Act 2002, to include a housing development of this sort in its Long-Term Plan.
[51] However, this proceeding is not about the exercise by the Council of its powers under the Local Government Act to develop a Long-Term Plan. That is not a decision- making process that can be revisited in this proceeding under the Charitable Trusts Act.
[52] A particular concern, addressed by Mr and Mrs Roydhouse during the hearing, was the effects they see social housing as having on the community and their preference for the land to be used exclusively to house those in their senior years. Mr and Mrs Roydhouse explained the way in which they purchased their property, adjacent to the vacant trust land, in 2021 on the basis of an understanding, obtained from talking with Council officers, that the vacant trust land would not in fact be built on. They have concerns about the adverse effect that social housing on the vacant trust land might have on the value of their property.
[53] Their concerns are understood but they are not points that fall within the scope of the matters that the Court may take into account under the provisions and authorities that govern the exercise of the Court’s powers under the Charitable Trusts Act.
[54] The focus, in essence, is on whether the proposed scheme is something that will in changed circumstances give effect to charitable purposes – and their delivery – that resemble as closely as possible those that were intended by the settlor.
[55] I am satisfied that the proposed scheme will do that. It will enable the tree that Mr Whatman planted in 1938 to bear new fruit.
Conclusion under s 56
[56] In the language of s 56, the scheme is a proper one, it will carry out the desired purpose or proposal, it is not contrary to law or public policy or good morals, it can be approved under pt 3 of the Act, every proposed purpose is charitable within the meaning of that part of the Act19 and can be carried out, and the requirements of that part of the Act have been complied with.
19 The term “charitable purpose” is defined in Charitable Trusts Act, s 2. Purposes of relieving the aged or poor are fundamentally charitable purposes: D V Bryant Trust Board v Hamilton CC [1997] 3 NZLR 342.
Outcome
[57] I make an order under s 53 of the Charitable Trusts Act approving the “scheme under pt 3 of the Charitable Trusts Act 1957” that is attached as annexure A to the Council’s originating application of 16 April 2024.
Radich J
Solicitors:
Simpson Grierson, Wellington for Applicant
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