New Zealand Medical Education Trust (ex parte Perpetual Trust Limited)
[2022] NZHC 996
•12 May 2022
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE
CIV-2021-412-117
[2022] NZHC 996
UNDER the Charitable Trusts Act 1957 IN THE MATTER
of an application for approval of a charitable trust scheme for The New Zealand Medical Education Trust
EX PARTE
PERPETUAL TRUST LIMITED as trustee of The New Zealand Medical Education Trust
Applicant
Hearing: 11 May 2022 Appearances:
J Cowan for Applicant
Judgment:
12 May 2022
Reissued:
31 May 2022
JUDGMENT OF OSBORNE J
This judgment was delivered by me on 31 May 2022 at 4.15 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
RE THE NEW ZEALAND MEDICAL EDUCATION TRUST EX PARTE PERPETUAL TRUST LTD [2022] NZHC 996 [12 May 2022]
The Trust
[1] The New Zealand Medical Education Trust was established in 1973. It is a registered charity under the Charities Act 2005.
[2] The Trust has cumbersome provisions for the constitution of a Council with power to direct the Trustees how to distribute the income of the Trust. The Trust is required to have at least ten (and no more than 12) members of its Council, but Perpetual Trust Ltd (Perpetual) has been the sole trustee since March 2011.
[3] Perpetual applies for approval of a scheme under the Charitable Trusts Act 1957.
[4] The application is supported by a detailed affidavit of Brett James, Perpetual’s branch manager.
[5] The application was accompanied by a report of the Attorney-General, filed by the Deputy Solicitor-General, recording the Attorney’s satisfaction that the proposed scheme was appropriate and can be approved, with comment as to why that is so.1
[6] The scheme has been advertised as required both in the Gazette and in the Otago Daily Times.2
[7] One person, Gordon McNab, gave written notice of his intention to oppose the scheme.3 Beyond the simple notice of objection, Mr McNab has not provided any detail of grounds of objection. He did not file any evidence. He has not appeared at this scheduled hearing.
The facts
[8] The Trust was established by deed on 27 November 1973 (the Deed). It was established to mark the occasion of the centenary of the Otago Medical School. The
1 Report filed pursuant to s 35 Charitable Trusts Act 1957.
2 Pursuant to s 36 Charitable Trusts Act 1957.
3 Pursuant to s 37 Charitable Trusts Act 1957.
original trustees included Perpetual as well as two company directors, a lawyer, an accountant and a doctor.
[9] Supplemental deeds were entered into in 1975, 1983 and 1992, pursuant to powers of amendment under cl 18 of the Deed.
[10] Over the years, the individual original Trustees have either died or retired and have not been replaced. Since 30 March 2011, Perpetual has been the sole trustee of the Trust.
[11] The Trust was established for a number of related purposes that can be broadly described as promoting medical education and research.
[12] The Trust was established in 1973 with a corpus of $91,819.61. Its equity as at 31 December 2020 was $754,323, with $250,234 held in cash on account of accumulated surplus (income). The accumulated surplus would ordinarily have been used for grants and funding, something that has not been occurring by reason of the difficulties relating to the administration of the Trust.
[13] The principal difficulties in the administration of the Trust arise from the required size and make-up of the Council established under the Deed. Under the Deed (as amended) the Council of the Trust consists of five Deans of national medical schools or faculties; appointees of the Medical Association of New Zealand; the New Zealand Post-Graduate Medical Federation Inc; and the Royal New Zealand College of General Practitioners; a Chairman of the Trustees; and further persons appointed by the Trustees.
[14] Mr James deposes that the structuring of the Council is not practicable. Under the Deed, the ability to award and distribute grants lies within the power of the Council. The Council directs the trustees how to distribute income. Mr James deposes that it would be an understatement to say that it would be difficult to corral the required individuals into reforming a Council. Perpetual has concluded that the reformation of the Council is not practically achievable.
[15] Mr James further deposes that Perpetual has concluded that a council responsible for all decision-making as to distributions from the Trust is imprudent in light of modern governance practice including the legal obligations and duties specifically placed on trustees. Perpetual considers that an Advisory Board to replace the Council, with a role in making recommendations to the trustees, is the most appropriate way forward. Perpetual as trustee would then be free to make the final decisions on distributing trust income.
The Scheme
[16] The Scheme, as submitted to the Attorney-General, takes the form of the amended Charitable Trust Deed which was exhibited to Mr James’ affidavit. Mr James’ affidavit contained full information as to all the facts upon which it was proposed to vary the mode of administering the Trust.
[17]The material changes in the proposed Trust Deed involve:
(a)transferring the powers of the Council to the Trustees;
(b)appointing Perpetual as the (sole) Trustee for the time being;
(c)vesting the power of appointment and removal of trustees in the trustee for the time being; and
(d)replacing the Council with an Advisory Board (comprising special trust advisers) the concept, role and appointment of special trust advisers is provided for in s 74 Trusts Act 2019.
[18] Mr James deposes that Perpetual is the trustee of other charitable trusts utilising a similar Advisory Board model. He explains that the model works very well, striking a good balance between allowing efficient administration by the Trustee yet obtaining specialist input from interested parties to ensure that the purposes of the charitable trust are achieved in the best way possible. The adoption of the role of special trust advisers sits well with the recognition of the value of that role implicit in the Trusts Act 2019.
The statutory jurisdiction — s 33 Charitable Trusts Act
[19] Section 33 Charitable Trusts Act provides for a scheme to extend or vary powers of the trustees of a charitable trust if the administration of the property or income or the carrying out of the trust could be facilitated by such extension or variation.
[20] As noted by Paterson J in Re Melanesian Mission Trust Board, the threshold for a scheme submitted under s 33 is that:4
…it is necessary for this Court to be satisfied that the administration of the property or the carrying out of the trust “could be facilitated” by the variation sought. The ordinary or dictionary meaning of “facilitate” is “made easier, promoted, or helped forward”.
Discussion
The Scheme
[21] The Attorney reports that it is his view the arrangements under the Scheme will likely facilitate the trustees in the carrying out of the Trust charitable purposes. Furthermore, the Scheme will provide the trustees with the powers necessary to conduct the affairs of the trust in an effective way. The Advisory Board will have the necessary medical expertise to ensure that grants are made to appropriate candidates and organisations.
[22]My view of the Scheme accords with that of the Attorney.
[23] The restructuring in relation to the Advisory Board is an appropriate, indeed overdue, step in returning the Trust to a state in which its administration can be effective and its charitable purposes achieved.
Perpetual’s sole trusteeship
[24] Under the new deed, the power to appoint and remove trustees sits with the trustees for the time being. With effect from today, with Perpetual remaining for the
4 Re Melanesian Mission Trust Board (1998) 1 NZTR 8-003.
time being as sole trustee, it is Perpetual which will have the power of appointment. Mr Cowan, in answer to my enquiry at the hearing, indicated that Perpetual does not have a present intention to appoint further trustees.
[25] Mr Cowan has explained that it is normal practice for Perpetual to act as sole trustee in the large majority of cases where Perpetual is appointed as a trustee for a perpetual charitable trust. Mr Cowan referred to the broad range of matters, including investment management and financial and legal compliance, that Perpetual attends to each year through the course of the year. The implication is that it is more convenient that Perpetual, with its continuing involvement with and knowledge of those matters, is able to make the necessary trustee decisions of a trustee without adding the additional layer and cost of other trustees.
[26] That said, at the time the Trust was established it was the apparent intention of those who settled the Trust that Perpetual would have co-trustees. There is clearly no need in relation to a trust with a corpus of this size to contemplate a return to a trust board of the original numbers. That said, it would be consistent with the original structuring of the Trust that Perpetual for the time being have at least one co-trustee, if not more, from similar backgrounds to the original trustees (company directorship, accountancy, law and medicine).
[27] Having regard to the experience and standing of Perpetual and the relatively modest trust corpus in this case I conclude that the continuation of the sole trusteeship of Perpetual is nevertheless appropriate.
[28] What that removes from the original trust arrangements is the degree of scrutiny that co-trustees must exercise over matters of trustees’ remuneration. The concept of independent consideration of remuneration in no way points to a concern as to Perpetual’s approach to remuneration (the Court having no details in relation to that). Rather, it simply recognises that some independent, informed oversight is healthy and protective of the interests of the charitable objects.
[29] In response to these considerations, Mr Cowan took further instructions from Perpetual. He then indicated that Perpetual would consent to modification of the draft Deed to add remuneration review provisions which read:
When Perpetual Guardian or another trustee is the sole Trustee the Advisory Board may at any time refer a complaint in relation to remuneration of the Trustees to Financial Services Complaints Limited or a similar dispute resolution service the Trustee is a participant of for a binding decision as to the reasonableness of the Trustee’s remuneration.
If Perpetual Guardian or another trustee as the sole Trustee is not a participant in such a dispute resolution service the Advisory Board’s complaint in relation to remuneration shall be referred to an appropriately qualified independent reviewer for a binding decision as to the reasonableness of the Trustees remuneration.
[30] Mr Cowan explained that Perpetual as a business is signed up with Financial Services Complaints Limited as an independent arbitrator — that company has the power to investigate complaints made about fees and to make decisions binding on Perpetual. The additional provisions suggested by Perpetual effectively provide for that review process to be available to the Advisory Board or, if it is not, another form of review.
[31] The members of the Advisory Board will have an interest in independently scrutinising Perpetual’s annual remuneration because the payment of such remuneration has the effect of reducing the net income that would otherwise be available for distribution to charitable objects in any given year.
[32] I am satisfied that the additional clauses suggested by Mr Cowan will serve to preserve a measure of independent review of remuneration that was inherent in the original trust deed.
[33] The Court has power under s 53(c) Charitable Trusts Act to make an order approving a scheme with or without modification. In this case there will be the modification I have referred to. Readvertising of the scheme is not necessary.5
5 Re The New Zealand Institute for Cancer Research Trust [2020] NZHC 2048; [2020] NZHC 2600.
Orders
[34]I order:
(a)the applicant’s scheme for the variation of the powers of the trustees and the mode of administration of The New Zealand Medical Education Trust is approved, subject to the modification at (b) below;
(b)the new deed of the Trust shall contain these additional provisions:
When Perpetual Guardian or another trustee is the sole Trustee the Advisory Board may at any time refer a complaint in relation to remuneration of the Trustees to Financial Services Complaints Limited or a similar dispute resolution service the Trustee is a participant of for a binding decision as to the reasonableness of the Trustee’s remuneration.
If Perpetual Guardian or another trustee as the sole Trustee is not a participant in such a dispute resolution service the Advisory Board’s complaint in relation to remuneration shall be referred to an appropriately qualified independent reviewer for a binding decision as to the reasonableness of the Trustees remuneration.
(c)in particular it is declared that the terms of the draft “Charitable Trust Deed of The New Zealand Medical Education Trust” exhibited to the affidavit of Brett James sworn 2 December 2021, as modified by the order at (b) above, now constitute the Deed of Trust in relation to the said Trust and shall bear today’s date; and
(d)there shall be paid out of the trust fund a sum of $750 towards the costs of the Attorney-General.
Osborne J
Solicitors:
Anderson Lloyd, Dunedin
Copy to: Virginia Hardie, Deputy Solicitor-General G W C McNab
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