McCaw Lewis Trustees (no.4) Limited
[2014] NZHC 2627
•28 October 2014
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
CIV-2013-419-886 [2014] NZHC 2627
IN THE MATTER of the Trustee Act 1956 IN THE MATTER
of McCaw Lewis Trustees (No. 4) Limited and Vazey Child Trustees (2001) Limited as trustees of the LJ Reynolds No.2 Trust Applicants
Hearing: 23 October 2014 Counsel:
DP Shore and EM Lonnberg-Shaw for applicants
DJ Taylor for the beneficiaries of the LJ Reynolds No.2 Trust- save for the Salvation Army
Judgment:
28 October 2014
JUDGMENT OF FAIRE J
Solicitors: McCaw Lewis Chapman, Hamilton
Gavin Boot Law, Hamilton (G Boot)
McCaw Lewis Trustees (No. 4) Limited [2014] NZHC 2627 [28 October 2014]
Table of Contents
Introduction ............................................................................................................[1] Directions and representation.................................................................................[2]
Background ............................................................................................................[3] Submissions on behalf of the applicants ................................................................[6] Submissions on behalf of the beneficiaries ..........................................................[10]
The law .......................................................................................................................
Principles of interpretation ..........................................................................[19] Analysis ....................................................................................................................[21] Orders .......................................................................................................................[25]
Introduction
[1] The applicants are the trustees of the LJ Reynolds No 2 Trust (“the Trust”). They seek a declaration that it is lawful for the trustees to make a distribution/s of income or capital, both interim and/or final, to the Mahi-a-Ngakau Trust. The Mahi- a-Ngakau Trust is a charitable trust. A distribution can only be made to it if it comes within the definition of “public charitable institution”, which is referred to as a class of discretionary beneficiaries under the Trust’s deed.
Directions and representation
[2] Associate Judge Doogue made orders giving directions as to service and representation. He appointed Mr David Taylor, barrister of Hamilton, to represent the beneficiaries named in the Trust. Mr Taylor appeared for those beneficiaries with the exception of one charity, the Salvation Army. The Salvation Army appointed counsel and solicitors to represent it. Counsel on behalf of the Salvation Army filed a memorandum advising that the Salvation Army neither supports nor opposes the orders sought in the statement of claim. The Salvation Army does not wish to appear or be represented at the hearing of the proceeding and will abide the decision of the Court.
Background
[3] The settlor of the Trust was the late Leonard John Reynolds. He, with New
Zealand Insurance Co Ltd were the original trustees.
[4] The relevant provisions of the trust deed provide:
1.THE Trustees shall stand possessed of the Trust Fund UPON THE TRUSTS following : -
(a) During the period (which is hereinafter called “the said period”) from the date hereof until a date fixed twenty-one (21) years from the date of death of Ada Mary Reynolds OR such earlier date as the Trustees may in their absolute discretion decide (hereinafter called “the date of distribution”) the Trustees shall stand possessed of the Trust Fund and the income thereof upon the following trusts : -
(i) UPON TRUST for the Trustees at their absolute and uncontrolled discretion at any time or times before the date of distribution and for so long as the Trustees shall in their absolute discretion think fit to pay or apply the whole or any part of the current net annual income and/or the whole or any part of the capital of the Trust Fund including any accumulations of income of the Trust fund as follows :
…
For the general purposes or for such special purposes as the Trustees may from time to time decide of any of the public charities following, that is to say : -
Either the MISSION TO LEPERS (N.Z.) at Auckland, or THE LEPERS’ TRUST BOARD INCORPORATED at Christchurch.
THE WAIKATO BRANCH OF THE NEW ZEALAND CRIPPLED CHILDREN SOCIETY INC, at Hamilton
THE SALVATION ARMY for the general purposes of “T HE
NEST ” at Hamilton or such other purposes as the Salvation
Army may determine
PRESBYTERIAN CHURCH OF NEW ZEALAND for the purpose of Child Sponsorship Plan or such similar project as the Church may from time to time determine,
OR any other public charitable institution which the Trustees at their absolute and uncontrolled discretion may decide. (emphasis added)
[5] The Mahi-a-Ngakau Trust was settled by the late Leonard John Reynolds one year after the Trust. It was originally called the LJ Reynolds Charitable Trust. Its original trustees were Mr Reynolds and the New Zealand Insurance Company. Its current trustees are Edith Heather Frances Thickpenny, Melissa Louise Gibson and Kenneth Franklin. It was registered under the Charities Act 2005 on 27 January
2011, and incorporated under the Charitable Trusts Act 1957 on 16 July 2012.
Submissions on behalf of the applicants
[6] Mr Shore drew attention to the following matters:
(a) The late Mr Reynolds, relying on the power of appointment provided by the following part of cl 1(c)(ii) of the Trust’s deed, namely:
At the expiration of the said period the Trustees shall stand possessed of such of the capital of the Trust Fund as may then remain and the then unapplied or unappropriated income (if any) UPON TRUST for the beneficiaries but excluding therefrom the wife of the settlor, the said Ada Mary Reynolds, the said Alice Carlson, widow, and the said Gladys Trenberth, widow, in such shares as the settlor may either by deed or by will appoint, or failing such appointment then in the following shares:
…
made specific provision in a Will executed on 26 February 1996. His Will, which is the subject of a grant of probate on 2 July 1999, provided in cl 10 as follows:
PURSUANT to the power of appointment vested in me by clause 1(c)(ii) of the Deed of Trust dated 25 March 1965 made between myself as settlor and THE NEW ZEALAND INSURANCE COMPANY LIMITED and myself as the trustees which Trust Deed settled the trust known as L.J. REYNOLDS NO.2 TRUST I direct that o n the final distribution of the trust fund that the trust fund be paid and transferred to the trustee for the time being of the trust known as the L.J. REYNOLDS CHARITABLE TRUST being the Trust settled by the Deed of Trust dated 1 March 1966.
(b) The L.J. Reynolds Charitable Trust was renamed the Mahi-a-Ngakau
Trust in September 2012;
(c) The late Mr Reynolds executed a document dated 29 March 1996, which is a memorandum addressed to the trustees of the Trust, in which he expressed his wishes as to how he wanted the income of the Trust to be dealt with for any period prior to final distribution.
[7] Although the power of appointment in the Trust’s deed is limited to unapplied/unappropriated income, Mr Shore submitted that the document at least gives some guidance as to Mr Reynolds’ intentions so far as the future beneficiaries of the Trust would be. He submitted that unless Mahi-a-Ngakau Trust was a potential beneficiary of the Trust, the late Mr Reynolds would not have expressed such a bequest in his Will. Further, had it been in existence at the time the Trust’s deed was drawn, it would have been included as a beneficiary.
[8] He submitted that the term “public charitable institution” should be interpreted in its entirety and in a commonsense manner. He said it would be wrong to consider each word in isolation. He submitted that the key and consistent theme was that the beneficiary be charitable. He submitted that a general non-technical approach should be taken in the interpretation of “public charitable institution” and that the phrase should be read as “charity”. He submitted that any distinction based on “public” versus “private” charities is not sustainable. In short, if a trust is deemed to be charitable it must be public. He submitted there is no persuasive argument that the late Mr Reynolds would have only wished to benefit high profile charities. The main charities were simply ones which he may have had some affinity to, or were of particular relevance at the time.
[9] He submitted that the applicants wished to give effect to the late Mr Reynolds’ intention and that included the power to distribute to the Mahi-a- Ngakau Trust.
Submissions on behalf of the beneficiaries
[10] Mr Taylor submitted that there exists no conflict of interest in his acting for all of the beneficiaries named in the trust. He summarised the position as follows:
7.1All of the individuals I have had communication with accept it as highly unlikely that the trustees would, in making distributions, transfer significant monies to private individuals. They do hope that if their personal circumstances were necessitous, that they might receive financial help from the trusts. I am sure they would. They do not otherwise anticipate any benefit for themselves personally.
7.2Everyone respects the wishes of the late Mr Reynolds, most feel, to a greater or lesser degree, that it was his money and they are quite content to see his philanthropic wishes carried out respective of the consequences for them either as private individuals or as a charity, in the case of the charities.
8.On that basis, although there is a diverse range of beneficiaries and to some extent of attitude, no conflicts of interest exist.
[11] I agree and proceed on that basis.
[12] Mr Taylor then considered the issue raised by this proceeding. He submitted that the settlor’s intention was to include not merely charitable organisation, but those which were sufficiently similar in nature and type to the charities named in the Trust’s deed. He submitted that the named charities have certain things in common which the Mahi-a-Ngakau Trust does not.
[13] These are:
(a) they are all front line service providers of charitable works, “so, doers not funders”;
(b) they all have a high public profile throughout New Zealand; and
(c) they all raised funds directly from the public.
[14] The Mahi-a-Ngakau Trust, by contrast, is not a front line service provider. It has no public profile. It does not seek to raise funds from the public. He categorised it as a “private charitable trust”, and not a “public charitable trust”.
[15] Mr Taylor submitted that the Mahi-a-Ngakau Trust is not therefore within the meaning of “other public charitable institution”. That is because of the application
of the edjusdem generis rule and because otherwise the Court must treat the word “public” as having no meaning, when interpreting the Trust’s deed. He submitted that the Court should be slow to do this.
[16] He submitted there are sufficient points of difference between the Mahi-a- Ngakau Trust and the other named charities. That, he submitted, shows that it is not close enough in nature and type to the organisations identified in the Trust’s deed to come within the meaning “other public charitable institution”.
[17] He submitted that if the words “other public charitable institution” are taken as being words independent of the named charities then that ignores the context in which the words appear and the intention of the settlor.
[18] For the above reasons, Mr Taylor submitted that the Court should not make the declaration sought by the applicants.
The law
Principles of interpretation
[19] Similar principles apply to the construction of trust deeds as apply to the construction of contracts.1 Clifford J set out the principles in Bulley v Attorney General (affirmed by the Court of Appeal2):3
…it is now well settled in New Zealand that questions of contractual interpretation are to be approached on the basis of the principles set out in Investors Compensation Scheme Ltd v West Bromwich Building Society, as originally adopted by the Court of Appeal in Boat Park Ltd v Hutchinson, and as subsequently confirmed by the Supreme Court in such cases as Wholesale Distributors Ltd v Gibbons Holdings Ltd and Vector Gas Ltd v Bay of Plenty Energy Ltd. As Tipping J observed in Vector:
“The ultimate objective in a contract interpretation dispute is to establish the meaning the parties intended their words to bear. In order to be admissible, extrinsic evidence must be relevant to that question. The language used by the parties, appropriately interpreted, is the only source of their
1 New Zealand Mäori Council v Foulkes [2014] NZHC 1777 at [71]; Bulley v Attorney-General at
[48].
2 Proyer v Bulley [2013] NZCA 559.
3 Bulley v Attorney-General [2012] NZHC 615.
intended meaning. As a matter of policy, our law has always required interpretation issues to be addressed on an objective basis. The necessary inquiry therefore concerns what a reasonable and properly informed third party would consider the parties intended the words of their contract to mean. The court embodies that person. To be properly informed the court must be aware of the commercial or other context in which the contract was made and of all the facts and circumstances known to and likely to be operating on the parties' minds. Evidence is not relevant if it does no more than tend to prove what individual parties subjectively intended or understood their words to mean, or what their negotiating stance was at any particular time. ”
[footnotes omitted]
[50] In Vector, five separate judgments were given reflecting differing views amongst the Court on various aspects of contract law. In Trustees Executors Ltd v QBE Insurance (International) Ltd the Court of Appeal has provided, given that difference of views, some helpful comments on the Vector decision:
“The majority of the judges in Vector adopted the approach in Investors Compensation whereby the language the parties have used must be read in the context of the document as a whole and the surrounding circumstances. Under that approach, the wider background and circumstances should always be considered, even if there is no ambiguity or other interpretive difficulty with the words used by the parties. Evidence of background circumstances is not, however, relevant if it does no more than tend to prove what individual parties subjectively intended or understood their words to mean or to prove what a parties' negotiating stance may have been at a particular time.
While it usually makes sense to start with the words of the contract and then move to the context of the contract before considering the wider background and circumstances, there is no presumption in favour of ordinary meaning. A meaning that may appear, when devoid of external context, to be plain and unambiguous, may not ultimately be what the parties intended when considered against all the relevant circumstances. As was noted by Tipping J in Vector, any initial view of the meaning must be provisional only and the reader must be prepared to accept that the provisional meaning may be altered once context has been brought to account. ”
[footnotes omitted] (emphasis added).
[20] Evidence of subsequent conduct can be admissible to construe a contract:4
4 Wholesale Distributors Ltd v Gibbons Holdings Ltd [2007] NZSC 37, [2008] 1 NZLR 277 at
[62] – [63].
…properly focused and limited evidence of post-contract conduct will often be capable of shedding more light on contractual meaning than a lot of the pre-contractual material which is said to bear on that meaning. Post-contract evidence that logically indicates that at the time they contracted the parties attached a particular meaning to the words in dispute can be good evidence that a later attempt by one party to place a different meaning on those words is unpersuasive.
Even if the meaning suggested by the post-contract conduct is not the most immediately obvious objective meaning, the parties’ shared conduct will be helpful in identifying what they themselves intended the words to mean. That, after all, must be the ultimate determinant. If the court can be confident from their subsequent conduct what both parties intended their words to mean, and the words are capable of bearing that meaning, it would be inappropriate to presume that they meant something else.
Analysis
[21] The settling of the Charitable Trust one year after the No 2 Trust is extrinsic evidence that is not relevant to interpreting what the term “public charitable institution” means because a reasonable and properly informed third party considering the meaning of “public charitable institution” would not have that information. It was not part of the context at the time. The settling of the second trust is not relevant to what meaning the settlor of No 2 Trust intended his words to mean. I accept Mr Taylor’s submission in this respect as being correct.
[22] I accept Mr Taylor’s submission that Mr Reynolds’ Will and Memorandum of Wishes are arguably also irrelevant on the same basis. They are evidence of what the late Mr Reynolds may have subjectively intended the phrase “other public charitable institutions” to mean. However, when I apply the guidance of the Supreme Court in Wholesale Distributors Ltd v Gibbons Holdings Ltd I am less inclined to the view that Mr Reynolds’ subsequent Will and Memorandum of Wishes logically indicate that at the time the No.2 Trust deed was drawn the late Mr Reynolds attached a particular meaning to the words “other public charitable institutions”.
[23] I turn to look specifically at the Trust Deed. I accept the applicant’s submissions that the term “public charitable institution” should be interpreted in its entirety and in a commonsense manner. When I asked Mr Taylor if he could provide a set of condition precedents which might distinguish charities which did not fall within the classification “public charitable institution” he properly acknowledged
that he could not give such a detailed description. He also acknowledged that he could find no authority which distinguished charitable trusts on the one hand as being “public” and on the other as being “private”. That is not surprising. The reasons are well put by the learned authors of Garrow & Kelly Law of Trusts and Trustees as follows:5
All charitable trusts must have some ‘public’ as distinct from ‘private’ purpose. Thus, a gift for a ‘private charity’ would not be a charitable trust although, of course, it might be quite valid as a private trust if the object to be benefited were certain and it otherwise complied with the requirements for private declared trusts.
[citations omitted]
[24] I therefore reach the conclusion, on the basis that there has been no contest at all as to the status of the Mahi-a-Ngakau Trust as being a charity, that that trust falls within the category of potential beneficiaries as defined in cl 1(a) of the Trust’s deed. It follows that the applicants are entitled to the declaration they seek.
Orders
[25] I order that it is lawful for the applicants, as trustees of the LJ Reynolds (No.2) Trust to make a distribution/s of income or capital (interim and/or final) to the Mahi-a-Ngakau Trust.
[26] Counsel confirmed that there are no outstanding issues relating to costs and, for that reason no orders are made.
JA Faire J
5 Greg Kelly and Chris Kelly Garrow and Kelly, Law of Trusts and Trustees (7th ed, LexisNexis, Wellington, 2013) at 12.12.
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