New Zealand Institute for Cancer Research Trust
[2020] NZHC 2048
•13 August 2020
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2020-412-000018
[2020] NZHC 2048
RE THE NEW ZEALAND INSTITUTE FOR
CANCER RESEARCH TRUST
Hearing: 29 July 2020 Appearances:
J W Cowan for the Applicant
Judgment:
13 August 2020
JUDGMENT OF NATION J
[1] The New Zealand Institute for Cancer Research Trust (the Trust)1 has applied under Part 3, Charitable Trusts Act 1957 (the Act) for approval of a scheme as to a trust created by deed and for approval of variations to the trust deed.
[2] The Trust was established by deed dated 28 November 1985 (the original trust deed).
[3] In summary, the essential purposes of the Trust as set out in the original trust deed are:
(a) establishing and maintaining an institute for cancer research;
(b) providing financial and administrative support to cancer research staff;
(c) encouraging and supporting collaborative cancer research; and
1 The Trust is not incorporated. The legal entity making the application is the New Zealand Guardian Trust Company Ltd as trustee of the Trust.
Re The New Zealand Institute for Cancer Research [2020] NZHC 2048 [13 August 2020]
(d) fostering and supporting the communicating and exchange of information of medical discoveries relevant to cancer.
[4] The Trust was established to initially support the late Dr Charles Goodall in his work with cancer research on his return to Dunedin. Not long after the Trust was established, Dr Goodall moved to Wellington. The establishment of the Institute was put on hold. The Trust has since elected to fund cancer research initially at the Malaghan Institute of Medical Research which was located at the Wellington campus of the University of Otago and, over more recent years, through providing funds for the Trust chair in cancer pathology at the Dunedin School of Medicine at the University of Otago.
[5] The core intention of the founders was to enhance the opportunities for world- class cancer related research, particularly in the Otago region. Contrary to what was anticipated when the Trust was formed, this has been facilitated without bringing into existence an “institute”.
[6] The trustee of the Trust was the New Zealand Guardian Trust Company Ltd, now Perpetual Trust Ltd trading as Perpetual Guardian (the Trustee). The Trustee consults with the Board of Advisory Trustees (the Board) currently comprising five members. The Trust is a registered charity under the Charities Act 2005.
[7] The original trust deed, particularly in its Schedule of Trustees’ Powers, is in a form commonly associated with family trusts.
[8] The Trustee and the Board initiated a review of the trust deed by Mr Stuart Walker of the law firm Anderson Lloyd. Mr Walker is also a member of the Board. His review revealed what he considered were certain shortcomings in the deed’s provisions, namely:
(a) the stated aims and purposes of the Trust are outdated;
(b) there are restrictive provisions dealing with the application of capital and income;
(c) the Trustee powers are not appropriate for a charitable trust;
(d) there is no power allowing for amendment of the trust deed;
(e) the restrictive qualifications required of the Board members; and
(f) lack of certainty around the respective roles of the Trustee and the Board.
[9] A proposed new trust deed has been approved by the Trustee and the Board. The Trustee seeks the Court’s approval to that new trust deed.
[10]The support from the Board is significant.
[11] With the proposed new deed, the Board will have the role of promoting the charitable purposes and activities of the Trust, including advising the Trustee in relation to the appropriate recipients for grants and such other matters as might be determined by the Trustee from time to time after consultation with the Board. The Board would not have to approve the expenditure of capital or the winding up of the Trust. With the proposed deed, the Trustee is to have the full and absolute power, subject to the provisions of the deed, to deal with Trust assets and decide how Trust funds should be administered and spent. The proposed obligation on the Trustee to hold the capital of the Trust fund and the income derived from it is subject to “the trustee exercising its power to wind up the Trust”.
[12] In contrast to the original trust deed, the Trustee would have a complete discretion as to how the income of the Trust would be applied for the charitable purposes of the Trust. With the original trust deed, the available income would have to be spent as the Board directs. With the proposed new deed, the Board would no longer have such authority or power. Their functions would include only “advising the trustee in relation to the appropriate recipients for grants”.
[13] As set out in the proposed deed, the proposed scheme of the Trust is for it to support, within New Zealand but principally in Dunedin, scientific research into the causes, nature, pathogenesis and treatment of cancer and related cancer diseases and conditions in humans. The most significant change to the scheme of the charity is that
the Trust’s support would no longer be to an “institute”. There is also no longer to be reference to the Trust’s support being for research as to cancer in humans and “other organisms”, as referred to in the original trust deed. The new deed would also permit the Trustee to apply both income and capital for the purposes of the Trust.
[14] Because there is no institute established by the Trust that engages directly with members of the public, it was not considered necessary to consult wider than with the Board. The changes will not, of themselves, negatively affect the parties who currently receive a direct financial benefit from the Trust because, with the proposed changes, they will still be able to benefit from the Trust. I accept the general public would not be negatively affected by the proposed changes as the Trust will continue to support cancer research, as it has since its inception.
[15] The scheme has been advertised in the New Zealand Gazette and in the public notices’ column of the Otago Daily Times in accordance with the requirements of s 36 of the Act. No opposition was received following advertising.
Proposed change to the scheme of the Trust
[16] The scheme, as provided for in the draft amended deed, was submitted to the Attorney-General in accordance with s 35 of the Act.
[17] A comprehensive report on the proposed scheme has been provided for the Attorney-General by Virginia Hardy, the Deputy Solicitor General (I refer to her report as being from the Attorney). The Attorney has reported that, with certain exceptions:
(a) they are satisfied the scheme is a proper one;
(b) it is not contrary to law or policy or good morals;
(c) the scheme can be approved by the court under pt 3 of the Act;
(d) every proposed purpose is charitable within the meaning of pt 3 and can be carried out; and
(e) the requirements of pt 3 have been complied with in respect of the scheme up to the date of his report.
[18] In the context of this application, the Court acknowledges the value and importance of the Attorney-General’s oversight role in respect of proposed changes to the scheme of a charitable trust, as provided for by the Act.
[19] As was identified by the Attorney and in submissions for the Trustee, s 32 of the Act provides for the variation of charitable trusts where their purposes have become “impossible or impracticable or inexpedient” to carry out. Inexpedience is a lower threshold than “impracticable”.2 Accordingly, inexpedience embodies a value judgement rather than simply an assessment of feasibility. The Attorney noted that, more recently, in the context of the replacement of trustees, the High Court has accepted that “expediency” (in the context of the court’s power to replace trustees under s 51 Trustee Act 1957) “is a lower threshold than necessity and imports considerations of suitability, practicality and efficiency”.3 The Attorney submitted, and I accept, this observation might equally be applied to s 32 of the Act.
[20] The Attorney agreed with the Trustee, based on the evidence before the Court, that it is inexpedient to now establish a cancer research institution. The variation sought, with the deletion of any reference in the proposed trust deed to the establishment, maintenance and support of such an institute, is in accordance with the fundamental purpose of the Trust (to support research into the causes, nature, treatment and prevention of cancer). The variation also reflects the manner the Trust has been funding research since its inception. The Attorney thus accepts the proposed variation in this respect accords as closely as is reasonably possible to the original purposes of the Trust.
[21] The original trust deed stated the trust fund was to be held upon trust to support and maintain the institute for the causes, nature, treatment and prevention of cancer and related diseases and conditions in humans and in other organisms. The Attorney advised the Court that the removal of the reference to “other organisms” is justified. The Attorney noted the evidence does not suggest the Trust has supported research of this nature nor is it likely to do so. The evidence provided indicates the founders of
2 Re McElroy Trust [2003] 2 NZLR 289 (CA).
3 Low Hock Peng v Rothschild Trust (Schweiz) AG [2017] NZHC 25, (2017) 4 NZTR 27-001, at [38].
the Trust were concerned with the prevention and cure of cancer in humans. Removal of the reference to “other organisms” will not prevent the Trust from supporting studies in relation to cancer in other organisms so long as such studies were pursued with the aim of better understanding, and so preventing or treating, cancers in humans.
[22] To the extent the new deed amends the purposes and scheme of the Trust, the Attorney thus advised that the proposed variation might be approved by the High Court. Insofar as the proposed deed does this, in setting out the charitable purposes of the Trust, it has the approval of the Court.
Proposed variation to the powers of the Trustee and the mode of administering the Trust
[23] The proposed amendments to the mode of administration of the Trust fall to be considered under s 33 of the Act. Section 33 provides that, where:
… 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, …
[24] The courts have interpreted “facilitated” to mean “made easier, promoted or helped forward”.4
[25] The Attorney advises the Court that “for the most part, the scheme proposed by the Trustee provides a more comprehensive and logical administrative framework for carrying out of the Trust as contemplated by s 33 and does not raise concerns”. There are however certain proposed variations the Attorney did not support, for reasons fully articulated in the Attorney’s report. The Attorney advised, in respect of those matters, the application for approval ought to be refused. Despite that opposition, the Trustee sought the Court’s approval for the proposed variations without modification to the draft considered by the Attorney.
4 Re Melanesian Mission Trust Board (1998) 1 NZTR 8-003 (HC) at 205, as applied in Re YMCA New Zealand Soldiers Great War Memorial Trust [2013] NZHC 2516 at [32]; Re Frank Sydenham Scholarship Trust [2012] NZHC 654 at [47]; and Re St Barnabas Roseneath Trust Board HC Wellington CIV-2011-485-1254, 3 August 2011 at [3].
[26]One such clause is the proposed new cl 19:
19.Winding up
19.1The Trust may be wound up at any time by the Trustee.
19.2In the event of the Trust being wound up and after all liabilities of the Trust have been discharged the Trustee shall transfer all remaining funds and assets comprising the Trust Assets to another organisation in New Zealand which is exclusively charitable and which has purposes similar to those of the Trust. The receipt of the treasurer or secretary or other proper officer of such regional trusts or organisations shall be a sufficient discharge to the Board and the Board will not be bound to further see the application of those funds and assets.
[27]There was no similar provision in the original trust deed.
[28]Another clause the Attorney objected to is the proposed cl 9.4. It reads:
Subject to the Trustee exercising its power to wind up the Trust, the Trustee will hold the capital of the Trust Fund and the income derived from it in trust in perpetuity:
(a) To pay all costs and expenses incurred in carrying out and achieving the purposes of the Trust;
(b) To retain as much income as the Trustee thinks fit as a reserve for any purpose authorised by this deed or by law;
(c) To pay or apply the income and/or the capital, or as much of the income and/or the capital as the Trustee thinks appropriate, for such charitable purposes of the Trust as the Trustee in its absolute discretion thinks fit, after considering advice from the Advisory Board. In doing so, the Trustee may further and promote any one or more of the charitable purpose(s) and need not treat each purpose equally.
[29] The Attorney objected to the proposed cl 9.4(c) because it introduced a general discretion for the Trustee to apply capital of the Trust for a charitable purpose of the Trust in contrast to cl 3 of the original trust deed which, in the Attorney’s submission, provided only for the application of income to such charitable purposes. The Attorney was concerned there was no limit on the exercise of that discretion that might ensure application of capital did not significantly reduce the capital to the extent the Trust could no longer operate. The Attorney argued that inclusion of cl 9.4(c) would create a risk of capital exhaustion that would be contrary to the founders’ intentions to create a perpetual trust.
[30] The Attorney considered the evidence “does not establish any pressing need for the introduction of this clause” and referred to evidence from the Trustee that the Trust’s “income generation is sufficient to meet its charitable needs”.
[31] For the Trustee, Mr Cowan suggested the ability to use capital for the purposes of the Trust would future-proof the Trust. The evidence from the Trustee is that “although in the Trust’s current state it is unlikely that capital would be applied for its charitable purposes, the Trust considers it prudent to have a provision that allows access to capital if necessary”.
[32] Mr Cowan stressed, if there is to be any withdrawal and expenditure of capital, it would still have to be for Trust purposes. He suggested the ability to use capital would allow the Trust to make one-off sizeable grants if an opportunity arose for such a grant to be of real benefit for the purposes of the Trust, for instance to fund particular research where there might be the opportunity of achieving a major breakthrough with greater financial assistance from the Trust. The ability to draw on capital could also be useful where a reduced return on investments might otherwise inhibit the Trust from continuing with the funding of research in ways the Trust has previously considered desirable.
[33] Mr Cowan also suggested it was not clear the original trust deed allowed only income to be used for Trust purposes. He suggested, in other cases, the High Court had allowed charitable trusts to draw on capital for trust purposes even though, in such cases, there might have been a theoretical possibility that the exercise of such a power could bring the trust to an end.
[34] Mr Cowan accepted that a power to wind up the Trust was not essential to the Trustee. He nevertheless submitted inclusion of such a power would avoid the need for the Trustee to have to come back to the Court for approval if a winding up of the Trust became necessary.
[35] I accept that, as a general principle, a charitable trust, once established, cannot be terminated or wound up as indicated by the Attorney.5
[36] As stated in Tudor on Charities, careful thought needs to be given to identifying the relevant charitable trust before seeking to apply this principle.6
[37] Wilberforce J in Re Roberts recognised an important limitation to the idea of perpetual existence when, with reference to Re Faraker, he said:7
Those words, that it is not competent for the court or the charity commissioners to bring an endowed charity to an end, seem to me not necessarily to apply to a case where the trustees of the charity are given express powers to terminate the charity.
[38]Likewise, a charity will also terminate if it no longer has funds:8
There is thus a distinction between a charity with a permanent endowment and a charity which has power to spend both income and capital. In the latter case, the charity trustees can terminate the charity by applying all its funds for the purposes set out in the governing instrument.
[39] As outlined for the Attorney, there are certain other circumstances in which a charity trust can be wound up but the two just mentioned are of relevance here. In cl
9.4 of the proposed deed, the Trustee wishes to include a clause giving the Trustee the power to spend both capital and income for the purposes of the Trust. They propose to include cl 19 which introduces a power to wind up the trust.
[40] Having carefully considered the terms of the original trust deed, I am satisfied this was a charitable trust established in perpetuity. I am also satisfied the original trust deed required capital to be held by the Trust for the purposes of the Trust and for only the income to be spent for the purposes of the Trust.
[41]The opening clause of the original trust deed stipulates:
5 National Anti-Vivisection Society v Inland Revenue Commissioner, [1948] AC 31 at 74; Re Faraker (1912) 2 Ch 488 (CA).
6 William Henderson, Johnathan Fowles and Julian Smith Tudor on Charities (10th ed, Sweet & Maxwell, 2015) at [21.023].
7 At [21.024]; Re Roberts [1963] 1 W.L.R. 406.
8 Tudor on Charities, above n 6, at [21.025].
1. THE Trustees shall hold the sum of $1,000.00 together with all other monies or property transferred to the trust UPON TRUST for the following aims and purposes: …
There is then reference to the aims and purposes of the Trust as previously discussed.9
[42] Clause 3 and its subclauses in the original trust deed stipulates that the income of the trust shall be dealt with:
(a) in payment of the costs of administration and management of the Trust;
(b) through the trustee advising the Board as to the remainder of the net annual income of the Trust;
(c) in payment or application of all or part of the remainder of net annual income as the Board should direct; and
(d) through accumulation of any remaining net annual income.
[43] Clause 7 of the original trust deed provides for there to be a Board of Advisory Trustees and stated:
THERE shall be a Board of Advisory Trustees which shall be responsible for the applications of balance of the net annual income of the Trust in accordance with the aims and purposes of the Trust.
[44] The original trust deed does not contemplate the Board being concerned with the application of capital from the Trust.
[45] It was suggested for the Trustee that the Trustee’s power to deal with the trust fund, as set out in the Schedule of Trustees’ Powers, is consistent with the Trustee having a power to expend capital as well as income. The Schedule of Trustees’ Powers includes:
GENERAL UNRESTRICTED POWER
THE INTENTION OF THE SETTLOR is that the trustees have and may in their discretion exercise the fullest possible powers in relation to the trust fund and the persons who are or may be interested in it, and that they may do everything they think desirable notwithstanding that it is something which
9 At [3] of this judgment.
they would not normally have power to do in the absence of an express power or an order of the Court.
THE SETTLOR THEREFORE DECLARES that the trustees may in their discretion do any-thing pertaining to the trust fund which they think fit as if they owned it absolutely.
[46] These clauses do not vary the terms of the trust as apparent from the body of the original trust deed and particularly the clauses earlier referred to. It is apparent from the Schedule of Trustees’ Powers that the schedule is a document normally associated with family trusts and not for a charitable trust, as was established here. The power apparently bestowed on the Trustee the ability to do anything to the trust fund as if it owned it. This was at odds with the intention of the parties to the original trust deed to establish a charitable trust with the obligations that the Trustee had to deal with the trust fund for the particular charitable purposes set out in the deed and in accordance with the Act. The Trust was not established by a “settlor” but by “the founders”. These were six named people who included doctors, research scientists and lecturers associated with the University of Otago.
[47] My interpretation of the original trust deed is also consistent with the way it has been administered since the Trust was establishment.
[48] In 1993, an updated trust deed was adopted by the founders of the Trust and the NZ Guardian Trust as trustee. As the Attorney noted, there was no power in the original trust deed to amend the original trust deed. The purported amendments were not put before the court in a scheme for approval under the Act. The purported amendments were of no legal effect. But, in that amended deed, the trustee was not given the power to spend capital and income for the purposes of the Trust. That amended deed provided for only the income of the Trust to be dealt with in the same terms as with the original trust deed. The Board was to be responsible only for the application of the balance of net annual income in accordance with the aims and purposes of the Trust.
[49] The amended deed did not purport to bestow on the Trustee a power to wind up the Trust. Nevertheless, it did state that, upon the winding up of the Trust, the net trust fund, after settlement of the affairs of the Trust and payment of debts, was to be
transferred “to such one or more Charitable Trusts for charitable purposes which include among their main objectives Cancer Research …”. That clause was consistent with the founders’ intentions to establish a trust to operate in perpetuity.
[50] One of the original founders, Professor Broughton, swore an affidavit in support of the current application. He has been a member and chair of the Board since 26 November 1985. In his affidavit, he described how the Trust had operated since its establishment and the way it has assisted with cancer research, initially in association with Dr Goodall, then through Malaghan Institute of Medical Research in Wellington and, more recently, through the establishment of a chair in cancer pathology at the Dunedin School of Medicine and the funding of a post-doctoral fellowship for a doctor who has made a significant research contribution in association with the chair in cancer pathology. In his affidavit, Professor Broughton said, “[i]n the very long term, as the capital base continues to grow, [the Trust] may be able to look at further extending funding for cancer research”. There was no suggestion in his affidavit that the Board expected the Trust would use capital in funding such research. There was no indication that the Board had any intention of winding up the Trust.
[51] It appears from the evidence that the Trust has benefited from significant legacies or other gifts which were likely made with the expectation that the Trust would continue in perpetuity. The capital of the Trust has grown to nearly $9.5 million as at 30 November 2019.
[52] Mr Cowan drew support for the proposed changes from both the High Court and the Attorney-General’s approval of the changes to the scheme of a charitable trust in the case of Re Bartels.10
[53] In Re Bartels, a trust, in terms of its trust deed, arguably was required to retain and acquire properties and interests in properties for the purpose of furthering its charitable objectives. The trustees considered that holding its funds in property was not the most efficient way of furthering the trust’s purposes. They wished to be able to sell land and transfer properties to a new trust. The trustees sought the Court’s approval to change its trust deed, in part to include a general power to distribute
10 Re Bartels [2017] NZHC 104, [2017] NZAR 411.
capital. In that case, the original trust deed had specific restrictions on the use of the trust’s capital. The High Court accepted there was at least uncertainty as to the ability of the trustees to make capital distributions to any other charitable trust. The trust sought the Court’s approval of a new clause enabling the fund to make donations or distributions from either income or capital to other organisations in New Zealand which were exclusively charitable and which had purposes similar to those of the trust.
[54] The Court referred to and accepted evidence that, in the particular way that trust operated, the retention of property curtailed its ability to operate effectively as a service provider and likewise exposed its assets to risk. The Court noted that, consistent with the purposes of the trust, it continued to provide residential support services. Its intention was that it should be assisted in those objectives by the proposed distributions. Those distributions included distributions of capital. The Court noted that the Attorney concurred in that objective. The Court accordingly approved, under s 32, a variation of the trust deed to expressly permit the trust to make donations or distributions from capital to other organisations in New Zealand which were exclusively charitable and had similar purposes to those of the trust.
[55] In seeking to vary the terms of the Trust to allow both the expenditure of capital and the winding up of the Trust, the Trustee here is seeking to change the fundamental basis on which the Trust was established. I accept the threshold for satisfying the Court that a change to the terms or conditions of a charitable trust would facilitate the administration of the trust is not high. Nevertheless, and in contrast to the circumstances in Re Bartels, there is no evidence that the proposed variations in cl 9.4 and cl 19, which the Attorney objects to, would facilitate the carrying out of the Trust.
[56] It was apparent from counsel’s submissions and the affidavit filed on behalf of the Trustee that the Trustee is seeking a variation to permit expenditure of capital and/or the winding up of the Trust because such flexibility is common with contemporary charitable trust deeds. The variations would allow the Trustee to apply capital or wind up the Trust without having to seek the approval of the High Court.
[57] At this stage, it is entirely speculative as to whether the Trustee would need to exercise the powers it would have if the relevant clauses are included in the proposed
deed. In that way, the situation the Trustee and the Court are concerned with can be distinguished from the circumstances which justified the changes sought and approved in Re Bartels.
[58] Inclusion of the relevant clauses would potentially pose a risk to the in perpetuity continuance of the Trust. The proposed cl 9.4(c) introduces a general discretion for the Trustee to apply the capital of the Trust to charitable purposes. As the Attorney points out, the deed provides for no limitation on that discretion that might ensure the application of capital did not significantly reduce the capital to the extent the Trust could no longer operate. Neither the terms of the original Trust nor the proposed amendments establish any general obligation on the Trustee to act so as to ensure the ongoing viability of the Trust. The Trust could be wound up or capital spent in a manner that could risk capital exhaustion.
[59] Consistent with the Attorney’s objections, I am accordingly not satisfied that the proposed cl 9.4, with its reference to the Trustee having a power to wind up the Trust and the power of the Trustee to apply the capital of the Trust to the charitable purpose of the Trust, are needed to facilitate the carrying out of the Trust for its stated charitable purposes.
[60] I am also not satisfied that a variation to the trust deed, so as to permit the Trustee to wind up the Trust, is needed to facilitate the carrying out of the Trust for its stated charitable purposes.
[61] I accordingly decline approval of cls 9.4 and 19.1 as they are in the proposed deed.
Power to amend the trust deed
[62] The Trustee also seeks to obtain the Court’s approval to clauses that would allow the Trustee to amend any provisions of the deed. This power is set out in part 17 of the proposed new deed:
17.Alterations and additions
17.1The Trustee may resolve to amend any provisions of this Deed. This clause is subject to clause 17.2.
17.2No amendment may be made to the Trust Deed in any respect which would have the effect of causing the Trust to cease to be a charitable trust or to amend the Purposes.
17.3Notwithstanding anything set out in clauses 17.1 or 17.2 the Trustee shall amend this Deed to comply with the Tax Act and the Charities Act.
[63] The evidence from the Trustee acknowledged the current deed contains no power of variation but said:
Today, charitable trust deeds will typically contain such a power, subject always to ensuring that no variation is permitted which would be in breach of any law or which would cause the trust to cease to qualify as a charity.
[64] The Attorney objects to the proposed cl 17 on the basis it fails to limit the power to ensure it is not used to vary the deed to allow the application of the Trust’s capital for charitable purposes. The Attorney advised that, if the Court does not approve a variation to the Trust that would permit the Trust to use capital, then there should also be a consequent amendment to the proposed cl 17.2 to ensure no amendments are made that could subsequently bring about a change which the Court has refused.
[65] Mr Cowan submitted, with a prohibition against any amendment which could cause the Trust to cease to be a charitable trust or any amendment that could amend the purposes of the Trust, the power to amend could apply only to changes that might be made as to administrative matters.
[66] I do not however accept that such a limitation would be inherent in the proposed new cl 17. Were the Trustee to amend the trust deed to permit the Trustee to apply capital or income from the Trust for the purposes of the Trust or to provide for the Trustee to have the power to wind up the Trust, the inclusion of such powers would not, of themselves, have the effect of causing the Trust to cease to be a charitable trust. Only the exercise of such powers would have such an effect. I agree with the Attorney’s objection to this clause as drafted.
[67] I observe that, in other cases where the High Court has approved the inclusion of a clause providing a power to amend the trust deed, the Court has noted that the clause had the approval of the Attorney-General, was limited to the administration of the Trust and included important mechanisms for the protection of the Trust.11
[68] Given the Attorney’s objection and the Court’s decision not to approve the proposed change as to the ability to expend capital or wind up the Trust, cl 17 should be amended. The power to amend should be limited in such a way as to ensure there will be no change to the trust deed which could allow the Trust to be administered or managed in a way that would jeopardise the ongoing viability of the Trust.
The end result
[69] It will be apparent from all the above that the Court is not able to approve the whole of the proposed deed as sought by the Trustee.
[70] I accept however it is foreseeable that, in certain particular circumstances that might arise, either through a reduction in the income available to the Trust or because a particular avenue of cancer research might require funds in excess of the income available, the purposes of the Trust might well be promoted through the Trustee being able to make capital available to meet such expenses.
[71] The capital in the Trust has grown significantly through regular bequests, legacies and donations. That is apparent from the accounts for the Trust which were in evidence. Its income is, in comparison, relatively modest. Its annual expenditure from income ranged from $129,000 to $242,000 in the years ending 30 November 2009 to 30 November 2019.
[72] It would also facilitate the carrying on of the Trust if the Trustee could use capital to a limited extent, that would not prejudice the ongoing viability of the Trust, without having to seek approval of the Court. In the report, the Attorney suggested the risks of capital exhaustion might be obviated if the proposed clause was to include reasonable limits on the Trustees’ ability to draw on capital. The Attorney suggested
Re Bartels, above n 10; Re Brooks [2015] NZHC 950; Re Neil Barn Farm Forestry Foundation
[2014] NZHC 2324; Royston Hospital Trust Board v Attorney-General [2015] NZHC 1753.
that, if the proposed cl 9.4(c) were to be amended so as to provide that any drawing of capital should only be up to a certain percentage of the capital in a particular year, or that capital drawn upon was not to reduce the remaining capital below a certain amount, such a clause might be sufficient to safeguard the ongoing viability of the Trust.
[73] The Attorney advised that such possible amendments had been discussed with the Trust’s legal advisors but were not acceptable. As has happened, the Trust sought the Court’s approval of the proposed clauses without any such safeguards. With the Court not approving cl 9.4 as drafted, the Trustee might well wish to reconsider its position regarding both cl 9 and cl 17.
[74] I accordingly reserve leave for the Trustee to come back to the Court with an application for approval of amended clauses that might meet the concerns of the Attorney and the Court as referred to in this judgment. Any such application is to be filed no later than 5 October 2020.
[75] In the meantime, and by consent, I order that the Trustee is to pay to the Attorney the sum of $750 for costs incurred in connection with these proceedings to this date.
Solicitors:
Anderson Lloyd, Dunedin Crown Law.
3