Orewa Rotary Trust Board Incorporated
[2021] NZHC 2377
•10 September 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-001189
[2021] NZHC 2377
UNDER THE Charitable Trusts Act 1957 IN THE MATTER OF
an originating application under Part 19 of the High Court Rules pursuant to Part III of the Charitable Trusts Act 1957 for approval of a scheme of variation and the disposition of the assets of the Orewa Rotary Trust
AND IN THE MATTER OF
THE OREWA ROTARY TRUST BOARD INCORPORATED
Applicant
Hearing: On the papers Counsel:
G Jolliffe for the applicant
Judgment:
10 September 2021
JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie On 10 September 2021 at 3.00 pm
Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors/counsel:
Vicki Ammundsen Trust Law Ltd, Auckland
RE THE OREWA ROTARY TRUST BOARD INCORPORATED [2021] NZHC 2377 [10 September 2021]
Introduction
[1] The applicant, the Orewa Rotary Trust Board Incorporated, has applied under Part 3 of the Charitable Trusts Act 1957 (the “Act”) for approval of a scheme:
(a)disposing of the assets of the Orewa Rotary Trust to the Rotary Club of Orewa Incorporated Charitable Trust; and
(b)varying the way in which the assets can be administered by adopting the deed settling the Rotary Club of Orewa Incorporated Charitable Trust.
[2]The application is brought pursuant to ss 32 and 33 of the Act.
Factual background
[3] The late Ethel Lilian Lloyd was the wife of one of the Orewa Rotary Club’s charter members. Following her husband’s death, she continued to support the Club by contributing to its fundraising efforts.
[4] On 2 November 1988, Mrs Lloyd settled the Orewa Rotary Trust by deed (the “establishment deed”). She wanted to make provision for various charitable purposes (discussed below). She appointed the New Zealand Guardian Trust Company Ltd as trustee of the Trust and the Rotary Club of Orewa as the Trust’s administrator.
[5] Mrs Lloyd initially settled $10 on the Trust. The first major capital investment into the Trust came from the New Zealand premiere of a show known as “The Georgian Dancers”. Mrs Lloyd donated generously and the Trust was launched on 29 November 1988. Fundraising from the show and over the following years grew the Trust fund to approximately $49,000.
[6] In December 1994, the Trust purchased a property on the Hibiscus Coast highway in Silverdale. The property is known as the Orewa Rotary House. The purchase price was $160,000 plus ancillary costs of $5,250. The Trust put in $49,000, Orewa Rotary Club members gifted $19,750 to help fund the purchase and advanced
a further $26,500 by way of debenture. There was a mortgage advance from the New Zealand Guardian Trust Co Ltd of $70,000. Subsequently, much of the money secured by way of debenture was, on maturity, gifted to the Trust. In December 2004, the New Zealand Guardian Trust mortgage was repaid but Orewa Rotary Club members took out further debentures so that the Trust remained in debt until 2007. At that point it became debt free.
[7] The Trust was registered as a charitable trust on 30 June 2008, under number ORE27201. The Trust’s balance sheet as at 30 June 2019 records that the Trust has assets of $861,844, including Orewa Rotary House, which is included in the balance sheet at $760,000. More recent accounts were not made available to the Court.
[8] The Orewa Rotary Trust Board was incorporated on 22 January 2009. Also in 2009, the New Zealand Guardian Trust Ltd retired as the trustee of the Orewa Rotary Trust and the Rotary Club of Orewa, as the appointor under the establishment deed, appointed the newly incorporated Orewa Rotary Trust Board Incorporated as the new trustee.
[9] On 1 June 2020, another charitable trust – the Rotary Club of Orewa Incorporated Charitable Trust – was settled by the Rotary Club of Orewa. Although it is not expressly stated in the supporting affidavit, it seems that it is also registered as a charitable trust under number CC27201.
[10] The Orewa Rotary Trust Board Incorporated seeks to resettle the assets of the Orewa Rotary Trust on the Rotary Club of Orewa Incorporated Charitable Trust and thus adopt its trust deed. It says that the establishment deed needs to be replaced because the stated purposes set out in that deed are “overly broad”, there is conflict and confusion between the roles of the administrator and the trustee and because the establishment deed lack basic administrative provisions. The scheme of variation is intended to overcome those perceived difficulties.
The proposed scheme of variation
[11] As noted, the proposed scheme of variation involves resettling the assets of the Orewa Rotary Trust on the Rotary Club of Orewa Incorporated Charitable Trust and
substituting the 1 June 2020 trust deed settling the Rotary Club of Orewa Incorporated Charitable Trust for the establishment deed. The proposed substitution will change the terms on which the assets of the Orewa Rotary Trust as follows:
(a)by refining the charitable purpose;
(b)by removing the role of administrator;
(c)by specifying the trustees’ duties and appointments;
(d)by including a power permitting the trustees to vary the trust deed;
(e)by including other provisions, inter alia, relating to:
(i)the income and capital of the Trust;
(ii)the powers of the trustees;
(iii)the duties of the trustees; and
(iv)provisions as to delegation, remuneration, conflict of interest, indemnity and liability; and
(f)by putting in place general administrative provisions.
Jurisdiction
[12] The application is brought pursuant to ss 32 and 33 of the Act. Relevantly, they provide as follows:
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.
…
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:
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.
[13] Section 32 deals with the disposal of property held upon trust for a charitable purpose. In Re Tennant,1 Hammond J set out the principles governing an application under s 32:
(a)the application must come within the statutory jurisdiction (which includes the necessity for the purposes to be charitable at the date of settlement);
(b)the substituted arrangements must be charitable as that term is understood in law;
(c)the new scheme must 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.
1 Re Tennant [1996] 2 NZLR 633 (HC) at 636.
Other considerations will arise if an opposing party puts forward an alternative scheme, but this is not relevant in the present context.
[14] Section 33 deals with administrative problems faced by charitable trustees in giving effect to the intended charitable purpose. The threshold for a scheme of variation under s 33 is that the Court must be satisfied that the administration or carrying out of the Trust could be facilitated, in the sense of being made easier or promoted or helped forward, by the variation sought.2
[15]Here, the application has been advanced under both sections.
Procedural issues
[16] Section 35 of the Act requires that the scheme for which approval is sought must first be submitted to the Attorney-General, together with full information as to all the facts upon which it is proposed to make the disposition set out in the scheme and copies of any instruments necessary to explain the scheme which has been prepared.
[17] Here, the scheme and various documents explaining the scheme were made available to the Attorney-General. The Attorney-General has filed a report with the Court dated 10 May 2021. I discuss aspects of this report below.
[18] Section 36 of the Act requires that before any application can be considered by the Court, notice of the application must be given once in the Gazette and at least three times, within an interval of not less than six days between any two insertions, in a newspaper circulating in the judicial district in which the office of the Court in which the application has been filed is situated. The first notice has to be published not more than three months and not less than one month before the date proposed for consideration of the scheme by the Court. Every notice must give particulars of the scheme, state the date proposed for the hearing of the application and require any
2 Re Melanesian Mission Trust Board HC Auckland M1140/98, 24 September 1998 and see Re YMCA Zealand Soldiers Great War Memorial Trust [2013] NZHC 2516 at [32]; Re Frank Sydenham Scholarship Trust [2012] NZHC 654 at [47]; Re St Barnabas Roseneath Trust Board HC Wellington CIV-2011-485-1254, 3 August 2011 at [3].
persons desiring to oppose the scheme to give written notice of his or her intention to do so to the Registrar, the trustees and the Attorney-General not less than seven clear days before the date fixed for the hearing of the application.
[19] The application was allocated a hearing date of 18 August 2021. Notice of the application was published in the New Zealand Herald, a newspaper circulating in Auckland. The application had been filed with the Registry of the Court in Auckland. Notice was published on 14, 20 and 26 July 2021 and in the Gazette on 14 July 2021. There is an affidavit of service on the file.
[20] No notices of opposition have been filed or served on the applicant or the Attorney-General.
The charitable purpose
[21]The establishment deed recorded that Mrs Lloyd desired to make:
… provision for the social wellbeing, relief of suffering, education and public benefit of the residents of the Rodney County (with particular emphasis and reference to the Hibiscus Coast area of the Rodney County) including those suffering from sickness or a need of educational support or maintenance (in cases where there is insufficient financial resources for the potential beneficiary) and for any community purpose.
Funds were settled on the Trust for these purposes. The establishment deed went on to provide that the trustee could pay or provide all or part of the net annual income and the trust capital to the administrator to be applied by the administrator for the stated purposes “… and in the interests of social welfare as defined by Section 61A of [the Act]”. If any or all of the stated purposes was not, or ceased to be, a charitable purpose, then such purpose or purposes thereupon ceased to be a purpose of the trust deed.
[22] There is no statutory definition of what constitutes a charitable purpose. In order to be charitable, a purpose must broadly be for the relief of poverty, the advancement of education or of religion, or other purposes beneficial to the
community.3 Trusts for recreational or leisure purposes can also be charitable.4 Any charitable trust must also be for a public purpose, for the public benefit and capable of being controlled by the Court if necessary.
[23] I am satisfied that the purposes set out in the establishment deed at the time of settlement were charitable. Mrs Lloyd was seeking to promote social wellbeing, including the relief of suffering and sickness and education. Relieving such suffering as there may be amongst the residents of Rodney County was obviously beneficial to that community.
[24]I am also satisfied that the proposed substituted purposes are charitable.
[25] The object and purpose of the Rotary Club of Orewa Incorporated Charitable Trust set out in the June 2020 charitable trust deed are as follows:
The Objects and Purposes of the Trust shall be every charitable purpose, whether it relates to the relief of poverty, the advancement of education, or any other matter beneficial to the community.
The charitable trust deed goes on to provide as follows:
4.1The objects of the trust are:
4.1.1To promote the improvement of literacy and numeracy on the Hibiscus Coast through:
(a)The provision of resources to kindergartens, schools and other educational institutions
(b)The provision of scholarships and prizes for academic achievement
(c)Providing assistance to other organisations working to improve literacy and numeracy
4.1.2To improve the Hibiscus Coast community through services and fundraising projects to meet:
(a)Needs of the aged, ill or infirm
3 Income Tax Special Purpose Commissioners v Pemsel [1891] AC 531 (HL) and see Scottish Burial Reform & Cremation Society Ltd v Glasgow Corporation [1968] AC 138 (HL). See also the definition of charitable purpose in s 5(1) of the Charities Act 2005 and Molloy v Commissioner Inland Revenue [1981] 1 NZLR 688 (CA).
4 Charitable Trusts Act 1957, s 61A.
(b)Needs of those affected by poverty
(c)Public health needs
4.1.3To promote continued education and the development of vocational skills in the Hibiscus Coast community through:
(a)The provision of further education course and or support to higher or alternative learning institutions.
(b)The provision of vocational skills training and or support to vocational training institutions
4.1.4To improve any of the following in the Hibiscus Coast community:
(a)Amenities used by the public including public halls, libraries, museums, parks and gardens, sporting and pool facilities
(b)Social rehabilitation resources
4.1.5To promote and support community purposes and social wellbeing in the Hibiscus Coast community through:
(a)The provision of assistance to the community in times of disaster
(b)The encouragement of participation and inclusion in the community on a non-partisan basis
4.1.6To provide assistance to other charitable organisations in the area with similar objects.
4.2The Trust’s objects will only be carried out in and for the benefit of charitable purposes in New Zealand.
[26] I agree with the Attorney-General that it is possible to broadly co-relate the charitable purposes set out in the establishment deed with the general and specific purposes set out in the June 2020 charitable trust deed. I am not however persuaded that the purposes set out in the June 2020 charitable trust deed accord as closely as is reasonably possible in the changed circumstances to the terms of the establishment deed.
[27] This requirement was discussed by Tipping J in Re Twigger5 and the Judge’s observations were approved by the Court of Appeal in Trustees of the McElroy Trust v Objectors.6
[28] Here, there is only one changed circumstance. Rodney County was (according to the Attorney-General’s report) disestablished in 1989 and the Rodney District in 2010. What was the Rodney District is now part of Auckland Council.7 As I understand it, there is now a Rodney ward, but according to the Attorney-General’s report, this ward excludes the Hibiscus Coast. The Hibiscus Coast is now in the Albany ward of Auckland Council.
[29] There is nothing in the affidavit filed in support of the application to establish what geographical area was covered by Rodney County. Clearly, Mrs Lloyd wished to provide generally for the residents of Rodney County, with particular emphasis and reference to the Hibiscus Coast area of the Rodney County. The wording in the establishment deed suggests that Rodney County was larger than the Hibiscus Coast area. The charitable purposes set out in cl 4.1 of the 2020 charitable trust deed focus on the Hibiscus Coast community. While the Attorney-General considered that the proposed limitation to the Hibiscus Coast community is a sensible reflection of Mrs Lloyd’s intention, without further evidence in this regard, I cannot be so satisfied.
[30] Further, and contrary to submissions made for the applicant, I cannot see that the charitable purposes set out in the establishment deed are overly broad or that they are unworkable. I agree with the Attorney-General in this regard. Nor can I see that there is any impossibility, impracticality or inexpediency which precludes simply repeating the charitable purposes set out in the establishment deed in a new trust deed if a new deed is thought to be necessary.
[31] It appears from the affidavit filed in support by one of the trustees, Mr Balasundran, that the 2020 charitable trust deed reflects a standard Rotary Club trust
5 Re Twigger [1989] 3 NZLR 329 and see Re Goldwater (deceased) [1967] NZLR 754 at 755; Public Trustee v Attorney-General [1923] NZLR 433; Re Keeley (deceased) HC Hamilton M316/81, 27 July 1982.
6 Trustees of the McElroy Trust v Objectors [2003] 2 NZLR 289 (CA) at [14].
7 Local Government (Tamaki Makaurau Reorganisation) Amendment Act 2010, s 35.
deed with amendments to more properly align with the establishment deed. While the trustees may well consider that this is desirable, it is not enough to establish impossibility, impracticality or inexpedience, even within the wide meaning given to those words in the case law.
[32] Unfortunately, the Court only has power to approve or reject the scheme as submitted. It has no power to amend it. Accordingly, and for the reasons I have set out, the application to approve the application to approve the scheme of arrangement is declined.
[33] The applicant also sought an order that all reasonable costs and expenses of preparing the scheme, advertising the same, submitting it to the Attorney-General and reasonable solicitor and client costs should be met out of the funds held by the trustee of the Orewa Rotary Trust. In my judgment, such an order is appropriate. I request counsel to file a memorandum setting out the costs claimed, and I will then certify for that amount if I am satisfied that it is reasonable.
Wylie J
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