RMH South Island Trust
[2022] NZHC 1295
•2 June 2022
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2021-409-000538
[2022] NZHC 1295
IN THE MATTER of the Charitable Trusts Act 1957 IN THE MATTER
of a charitable trust, known as RMH SOUTH ISLAND TRUST, also known as RONALD MCDONALD HOUSE SOUTH ISLAND
AND
an application, by RMH SOUTH ISLAND TRUST, a registered charitable trust, for an order approving a scheme under s 35(2)
Charitable Trusts Act 1957 Applicant
Hearing: 28 March 2022 Appearances:
A Foote and S Caradus for Applicant
G W C McNab (Objector) In Person – By way of AVL
Judgment:
2 June 2022
JUDGMENT OF EATON J
This judgment was delivered by me on 2 June 2022 at 3 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
RE RMH SOUTH ISLAND TRUST [2022] NZHC 1295 [2 June 2022]
Introduction
[1] The RMH South Island Trust (the Trust) applies to the Court for approval of a scheme of variation under s 35(2) of the Charitable Trusts Act 1957. The Trust is otherwise known as Ronald McDonald House South Island and is a charitable trust.
[2] The Trust is licenced to use the “Ronald McDonald House” name. That licence is issued and administered by RMH Global, headquartered in Chicago, Illinois. In 2015, regional Ronald McDonald House trusts in Auckland and Wellington merged into the national Ronald McDonald charity in New Zealand, RMHC NZ. RMH Global is no longer willing to licence the Trust to operate but remains supportive of the brand being used in a single harmonised New Zealand operation.
[3] The proposed scheme will allow the Trust to transfer its operations, staff, funds and assets into RMHC NZ.
The Trust
History
[4] In 1974, the daughter of an American football player, Fred Hill, was being treated for leukaemia in Philadelphia. For a three-year period, Mr Hill and his family camped outside the hospital on chairs and benches, surviving on makeshift meals out of vending machines. Mr Hill observed other families facing a similar predicament. He and team-mates raised funds for a temporary residence for families of children who were being treated at the hospital. The local McDonald’s advertising agency launched a St Patrick’s Day milkshake to raise funds to purchase a house near the hospital for families of sick children.
[5] Within five years, 10 additional houses opened and by 1984 local communities had founded another 60 houses. As at today, there are more than 377 Ronald McDonald House programmes in 45 countries around the world.
[6] Ronald McDonald House Charities (RMHC) was settled on 28 September 1989. It was settled to fund and promote the establishment of local Ronald McDonald Trusts and helped to establish Ronald McDonald Houses in Auckland, Christchurch
and Wellington. RMH Charities was deregistered as a charitable trust on 31 December 2016.
[7] The Trust was formed in 1999 when the Child Cancer Foundation Canterbury Accommodation Trust (CCFCAT) joined with Ronald McDonald House Charities. It is a charitable trust under Part 3 of the Charitable Trusts Act. It is governed by a Deed of Trust dated 20 April 1999 and is managed by a board of nine trustees.
[8] The Trust operated as part of the global RMHC network of Ronald McDonald House Charities around the world. The global network is administered by RMH Global out of Chicago.
[9] The Trust provides accommodation to the families of children afflicted by cancer and other serious illnesses primarily through the Ronald McDonald House in Christchurch.
Objects
[10]The objects of the Trust are outlined in cl 4 of the Deed as follows:
4.OBJECTS OF THE TRUST
4.1The objects for which The Trust is established are as follows:
a.To own, lease or take a licence to occupy the Property, and to establish and manage on that Property a Ronald McDonald House to provide accommodation and associated facilities for the support of families with children suffering from cancer or other life-threatening conditions and who are undergoing treatment at facilities in the Canterbury Region.
b.To provide facilities in the Property and elsewhere to create an environment that is supportive of the families of children suffering from cancer or other life-threatening conditions whilst undergoing treatment.
c.To encourage members of the public to participate in the work of the Trust.
d.To do all such other acts and things as are incidental to and will further promote the attainment of the objects of the Trust or any of them, specifically excluding however the practice of medicine, PROVIDED THAT nothing in this Deed will
authorise any object that is not charitable at law in New Zealand.
[11] To meet these objects the Trust currently operates three programmes in the South Island, being the Ronald McDonald House in Christchurch (26 bedrooms), Ronald McDonald Family Room at Southland Hospital (four bedrooms) and the recently opened Ronald McDonald Family Room at Christchurch Hospital (three bedrooms). The Trust provides a home for more than 1,200 families a year with the aim of reducing the stresses of everyday life so families can focus on the wellbeing of their child. The Trust has provided over 140,000 bed nights to more than 9000 families.
[12] The Trust has 20 employees and relies heavily on volunteers who in 2019 contributed more than 17,000 hours in support of families at the Trust’s houses.
[13] For its funding, the Trust is reliant on grants, fundraising, donations and bequests. The Trust currently holds total equity of approximately $18 million with minimal liabilities. The primary assets are property, plant and equipment valued at $9 million. The largest asset is the 26 bedroom property at 33 Cashel Street. The Trust also holds $9 million in investments to be utilised to expand programmes available in other centres in the South Island. There are no plans to expand operations in Christchurch and while the Board wishes to expand into other centres it does not believe the Trust is the appropriate vehicle.
The Licence
[14] The Trust operates pursuant to a licence agreement with McDonald’s Corporation and the national chapter organisation for New Zealand, RMHC NZ. Pursuant to that licence:
(a)The Trust has the non-exclusive right to use the trademark “Ronald McDonald House” and associated branding.
(b)Any planned development, expansion or outreach programme must be endorsed by RMHC and approved in writing by RMHC.
(c)The licence expires on 31 December 2021 unless terminated earlier.1
(d)All funds raised using the RMHC trademarks, and otherwise raised in the name of “Ronald McDonald House”, must be used only in connection with Ronald McDonald House Charities and its programmes, which obligations survive termination of the licence.
(e)Upon termination of the licence for any reason the Trust must immediately discontinue use of RMH marks and take all steps to remove those marks from the premises and elsewhere.
[15] RMH Global are unwilling to extend the licence or grant any further licences to the Trust pending merger discussions between the Trust and RMHC NZ.
The proposed scheme
[16]It is proposed clause 4 of the Trust be deleted and substituted as follows:
4.OBJECTS OF THE TRUST
4.1The objects for which the Trust is established are as follows:
a.To transfer all funds, resources and facilities to RMHC NZ;
b.To receive gifts and bequeaths and transfer those to RMHC NZ; and
c.To do all other things that are necessary or desirable to achieve RMHC NZ’s charitable objects within the South Island area.
[17]Consequential amendments to the Trust Deed are to:
(a)Insert in the “Definition” section of the Deed at cl 1, sub-para 1.6:
1.6 “RMHCNZ” means Ronald McDonald House Charities New Zealand Trust, a Charitable Trust Board established under the Charitable Trusts Act 1957 (registration number CC50543).
(b)Insert into the “Powers” section of the Deed at cl 5.1:
1 A limited extension was granted to allow this application and judgment.
g. To do all things necessary to give effect to the Trust’s Memorandum of Understanding with RMHC NZ, including but not limited to signing documents, transferring property (with or without consideration), assigning rights and obligations, transferring all funds, resources and facilities held at any time (including future funds, resources and facilities) by the Trust to RMHC NZ.
Objector
[18] The application was duly advertised. A single objection was received from Gordon McNab. Mr McNab’s notice of objection did not particularise his objection. He appeared remotely at the hearing. On the morning of the hearing, he emailed the court with a synopsis of his objection and attached the Russian Sanctions Act 2022 and the Russian Sanction Regulations 2022. Mr McNab expressed concern that oligarchs might have a propriety interest in the Ronald McDonald brand and that the proposed variation might fall foul of the very recently enacted Russian Sanctions Act and Regulations.
[19] At the hearing Mr McNab shifted his grounds of objection. He described Ronald MacDonald as a modern day “Pop Eye the Sailor Man” in American culture. He expressed the view the Ronald MacDonald brand was now “frozen in time” and in any event was irrelevant to New Zealand. Mr McNab suggested the expiry of the current licence provided a good opportunity for the Trust to break free from the shackles and dictates of an American conglomerate. Mr McNab contended it was inappropriate in 2022 that a New Zealand charitable trust should be effectively controlled by American interests.
[20] Mr McNab was granted leave to file further submissions in support of his objection by 1 April 2022. He subsequently advised the Registrar he had been unable to file further submissions as directed but would do so. No further submissions have been filed.
[21] I do not consider the objection to have merit. The Trust board are best placed to determine whether the Ronald MacDonald brand has charitable appeal in New Zealand.
Statutory framework
[22]Section 32(1) of the Act states:
32Property may be disposed of for other charitable purposes
(1)… 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.
[23]Section 33 of the Act provides:
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.
[24] Section 56(1)(a) of the Act states the requirements for approving a scheme of this nature:
56 Restrictions on approval of schemes
(1)No scheme shall be approved by the court under Part 3, or by the court or the Attorney-General under Part 4, unless the court or the Attorney- General is satisfied—
(a)that 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; that the scheme can be approved under the Part of this Act under which the approval is sought; that every proposed purpose is charitable within the meaning of that Part of this Act and can be carried out; and
that the requirements of that Part of this Act have been complied with in respect of the scheme:
(b)in any case where approval is sought under Part 4 and the Attorney-General has not dispensed under section 50 with the holding of a meeting of contributors, that the scheme is designed to give effect to the resolution of the meeting of contributors.
Legal principles
[25] In varying trusts under s 32, the Court is exercising a statutory jurisdiction and is not bound by the common law doctrine of cy-pres.2 However, the courts have held the proposed variation of a scheme should seek to substitute beneficiaries or purposes resembling as closely as possible in the changed circumstances those specified by the original settlor.3
[26] In Re Tennant Hammond J summarised the principles that govern an application for variation of charitable trusts as follows:4
The application must come within the statutory jurisdiction (which includes a necessity for the purposes to have been charitable at the date of settlement, see Re Beckbessinger [1993] 2 NZLR 362). Second, the substituted arrangements must be charitable as that term is understood in law. Third, 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. Fourth, 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.
[27] In Re McElroy Trust the Court of Appeal held that the “general connotation of the word ‘inexpedient’ in its present context [of s 32 of the Act] is of the original charitable purpose or purposes having become unsuitable, inadvisable or inapt”.5 In Peng v Rothschild Trust (Schweiz) v AG, “expediency” in the context of the Court’s power to replace trustees under s 51 of the Trustee Act 1956 was held to be “a lower threshold than necessity and imports considerations of suitability, practicality and efficiency”.6
2 Public Trustee v Attorney-General [1923] NZLR 433 (SC).
3 Re Whatman (1965) 1 NZTR 0-004 (SC) at [11]; Re Twigger [1989] 3 NZLR 329 (HC) at 342.
4 Re Tennant [1996] 2 NZLR 633 (HC) at 636.
5 Re McElroy Trust [2003] 2 NZLR 289 (CA) at [14].
6 Peng v Rothschild Trust (Schweiz) AG [2017] NZHC 25, [2017] NZAR 288 at [38].
[28] Inexpedience is therefore a lower threshold than “impracticable” or “impossible” under s 32(1) and embodies a value judgment rather than simply an assessment of feasibility. It may remain possible or practicable to carry out the original purpose of the Trust, but it may nonetheless have become inexpedient to do so.
[29] Section 33 of the Act permits the variation of trustee powers to facilitate the administration of the trust. This engages a lower threshold than that prescribed by s 32.
Attorney-General’s report
[30] The Attorney-General has completed a report pursuant to s 56 of the Act and recommends approval of the Scheme under Part 3 of the Act. The report states:
33.In light of the end of the licence issued by RMH Global, the Attorney- General is satisfied that the Trust’s current purpose is impossible or impracticable or inexpedient to carry out. The proposed amendments to the Trust Deed to enable the merger of the Trust with RMHC NZ and the transfer of assets over at least the next 10 years will, in the Attorney-General’s view, likely facilitate the Trust Board and its Trustees in carrying out the Trust’s charitable purposes.
34.Without the licence from RMH Global, the Trust would be unable to benefit from the Ronald McDonald House brand and consequent funding and fundraising benefits.
35.RMHC NZ has similar charitable purposes to the Trusts and the means of achieving its charitable purposes are broadly the same as the Trust, save it operates at a national level.
36.The merger with RMHC NZ will allow the facilities and programmes currently run by the Trust to continue uninterrupted …
37.Rather than proceed as it has done, the Board could have wound up the Trust and directed its assets to RMH NZ, without applying to this Court under the Charitable Trusts Act. Instead it has sought a variation under the Act to allow the Trust to continue in modified existence, to minimise the risk that gifts and bequests will fail. In the Attorney’s view this is an appropriate way to achieve the objects the Board seeks …
[31]As regards geographical ring-fencing, the report concludes:
40.In the Attorney-General’s view there are sufficient protections in place to ensure funds and assets raised by the Trust for the provision of services in the South Island to remain primarily for the provision of services in the South Island, while maintaining flexibility in operation.
Analysis
[32] Ms Foote, on behalf of the applicant submits, and I agree, that the name “Ronald McDonald” is both synonymous with, and essential for the Trust to operate a “Ronald McDonald House”. The operation of a “Ronald McDonald House” lies at the heart of the Trust. I accept the Trust’s objects will become inexpedient, if not impossible, if the use of that name is prohibited, as I find it will be on expiration of the licence.
[33] I have considered the current charitable objects with the RMHC NZ objects. I agree the objects are similar. The Trust operates at a regional level, and the RMHC NZ at a national level. The national trust is focussed on the accommodation of sick children and their families while they are receiving hospital treatment and on fundraising to support and achieve that purpose.
[34] It is clear the objects of the Trust have a regional flavour. While the name of the Trust is the RMH South Island Trust, the only location mentioned in the Trust’s object clause is Canterbury. However, the Trust is not prevented from providing services outside of Canterbury, as the object clause allows for the provision of services in the Christchurch property “and elsewhere”. The Trust engages in activities at the Southland Hospital. It is clear it was intended the assets would be applied in the South Island.
[35] The proposed merger with RMHC NZ creates a risk of funds that were raised for the purpose of activities in the South Island being applied elsewhere in New Zealand.
[36] Geographic focus was considered by Williams J when determining the merger of RMH Wellington with RMHC NZ.7 RMH Wellington required that certain clauses be included in RMHC NZ’s trust deed to ensure the local focus was maintained notwithstanding the centralised operations.
7 Re Ronald McDonald House Wellington Trust Board [2015] NZHC 2073.
[37] Ms Foote submits the primary protections for the regional character are the terms of a Memorandum of Understanding (MOU) agreed between RMHC NZ and the Trust. The MOU records:
(a)RMHC NZ will continue to provide services to the South Island, including allocating $10.1 million of funds (currently held by the Trust) towards existing and planned programmes in the South Island.
(b)The Trust’s assets will be secured for use in the South Island for the medium term. Any unallocated South Island funds may be used for other RMHC NZ purposes after six years from the date of amalgamation.
(c)There will be representatives from the Trust’s Board on the RMHC NZ Board for a minimum of two terms after amalgamation – that is, six years.
(d)A South Island task force will be established within RMHC NZ, chaired by a trustee of the Trust.
[38] Further clauses in RMHC NZ’s Trust Deed provide for the protection of regional considerations when other RMH branches and charitable organisations merge into RMHC NZ. Those clauses were inserted into RMHC NZ’s Deed during RMHC NZ’s amalgamation with the RMH Wellington Trust in 2015.8
[39] I am satisfied that the regional flavour objects of the Trust will be appropriately preserved.
Outcome
[40] I am satisfied that upon expiry of the licence the Trust’s charitable purposes will become impossible, impractical or expedient to carry out. The variation sought by the Trust will both efficiently and suitably give effect to the original charitable
8 Re Ronald McDonald House Wellington Trust Board, above n 7, at [24].
purpose of the Trust. In my view, there are adequate protections to recognise the geographical focus of the Trust’s objects. The proposed consequential amendments are appropriate. I find the scheme of variation is proper and necessary and I make an order in terms of the application.
[41]I direct the applicant to pay costs to the Attorney-General in the agreed sum of
$750.00.
...................................................
Eaton J
Solicitors:
Duncan Cotterill, Christchurch
Copy to:
The Attorney-General, Wellington Objector – G W McNab, Christchurch
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