Samuel Marsden Collegiate School Trust Board

[2024] NZHC 1136

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2024-485-132

[2024] NZHC 1136

IN THE MATTER

of The Charitable Trusts Act 1957

AND

IN THE MATTER

of The Samuel Marsden Collegiate School Trust Board

SAMUEL MARSDEN COLLEGIATE SCHOOL TRUST BOARD

Applicant

Telephone conference:	8 May 2024
Counsel:	O C Gascoigne and B T Haddleton for Applicant
Judgment:	8 May 2024

JUDGMENT OF McHERRON J

[1]                 The Samuel Marsden Collegiate School Trust Board (the Applicant) applies for a variation of its Deed of Trust pursuant to s 33 of the Charitable Trusts Act 1957 (the Act).

Background

[2]                 Samuel Marsden Collegiate School (Marsden) is an independent girls’ school in Karori, Wellington. The Applicant is incorporated under the Act. It comprises the Chair and six trustees appointed by the (Anglican) Diocesan Trusts Board.

SAMUEL MARSDEN COLLEGIATE SCHOOL TRUST BOARD [2024] NZHC 1136 [8 May 2024]

[3]                 Under a deed of trust dated 28 August 1920 (the Land Trust Deed), the land in Karori on which Marsden is located was vested in the Applicant to be held on trust (together with other money arising or property held):

… for the purposes generally of any school or schools from time to time established conducted or maintained within the Diocese of Wellington by or under the authority of the Synod of the Wellington Diocese of the Church of the Province of New Zealand commonly called the Church of England or for any purpose connected with the imparting from time to time of education within the said Diocese under the authority of the said Synod…

[4]                 The applicant has considered a range of changes to Marsden’s operating and funding model to ensure its long-term  financial  viability.  A  five-year  strategy  (the Strategy) has recently been approved by the Applicant, which includes several initiatives, including to develop and implement an “NCEA+ curriculum”.

[5]                 To implement the strategy, the Applicant requires an injection of capital and an additional source of income. The Applicant has identified some of its land as potentially being surplus to Marsden’s requirements. The Applicant considers either selling or mortgaging certain parcels of land to be an appropriate additional income source.

[6]                 However, the Land Trust Deed only permits the net proceeds of any such sale or mortgage to be applied for the purposes of capital expenditure. As currently drafted, the Land Trust Deed does not permit land to be sold or borrowing secured against it to be used for operational expenditure.

The application

[7]                 Against this background, the Applicant seeks to amend the Land Trust Deed to enable land to be sold or borrowing secured against it for operational expenditure.

[8]                 The specific amendments to the Land Trust Deed sought in the application are marked up below:

2.    THE SAID parcel of land and any other hereditaments for the time being held under these presents may be used or dealt with and such moneys as aforesaid be applied in such manner in every respect for the purposes of any such school or schools or imparting of education as aforesaid as the Trustees

for the time being constituting the Trust Board shall from time to time in their discretion think fit.  PROVIDED ALWAYS  that no moneys arising from  the

sale or mortgages of the said parcel of land or of any other hereditaments for
 the time being held under these presents shall be applied otherwise than in the

way of capital expenditure.

…

3.   WITHOUT PREJUDICE to the generality of the foregoing trusts and powers the Trust Board may exercise the following specific powers: -

(a)     Power at any time or times to sell or mortgage the said parcel of land or any other hereditaments for the time being held under these presents or any part or parts thereof respectively.

(b)     Power to apply from time to time the net proceeds of any such sale or mortgage in the purchase of any hereditaments to be held on the trusts and with the powers herein declared and contained concerning the said parcel of land, or in erecting buildings or making substantial improvements on or to the said parcel of land or any other hereditaments for the time being held under these presents, or in paying off any incumbrances then existing on any such hereditaments or in the purchase of the goodwill of any school to be conducted or maintained under the authority of the said Synod or in the purchase of school furniture fittings or apparatus or otherwise in the way of capital expenditure (whether expenditure is capital or revenue in nature) for the purposes of any school or schools established conducted or maintained within the Diocese of Wellington by or under the authority of the said Synod or for any purpose connected with the imparting of education within the said Diocese under the like authority. PROVIDED ALWAYS that the amount of

the proceeds of any such sale or mortgage that the Trust Board applies to

revenue expenditure in any financial year is no greater than the value of  five

per cent of the total capital value of the Trust in that financial year, AND
 PROVIDED  ALWAYS  that any income earned on the proceeds of any such

sale or mortgage can be applied in full to revenue expenditure.

Advertising

[9]                 The Applicant has complied with the advertising requirements contained  in  s 36 of the Act by giving notice of the application in the New Zealand Gazette and The Post.

Application is unopposed

[10]              Counsel for the Applicant advises that it has received no notice of any opposition to the scheme and so the application proceeds on an unopposed basis.

Basis for the application and orders sought

[11]              Section 33 of the Act permits the Court to approve the variation of the powers of the trustees of a charitable trust 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…”.

[12]              This threshold test has been described as “not therefore high”.1 That is clear from the ordinary dictionary meaning of “facilitated” as “made easier, promoted, or helped forward”.2

[13]              According to s 56(1)(a) of the Act, the Court may only approve a scheme applied for under s 33 if 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:

[14]              The Applicant submits that the application meets the s 33 threshold, complies with s 56, and should be granted as:

(a)The Applicant and the Board of Management of Marsden consider that it is in the best interests of the current and future students of Marsden to allow:

(i)surplus lands to be sold in order to raise revenue that may be applied to implement the Strategy, refresh the school campus, and improve the educational and extra-curricular offerings provided to Marsden students. Some of the anticipated expenditure would be capital in nature, but some would be operational in nature.

1      Re Bartels [2017] NZHC 104 at [32].

2      As applied in Re Melanesian Mission Trust Board HC Auckland M1140/98, 24 September 1998.

(ii)land to be used to secure overdraft facilities for operational purposes.

(b)The current provisions of the Land Trust Deed restrict the Applicant’s ability to:

(i)apply any sale proceeds of land in aid of the anticipated operational expenditure; and

(ii)use land to secure overdraft facilities for operational purposes, to the detriment of current and future students of Marsden and the achievement of the charitable objects of the Land Trust Deed.

(c)The proposed amendments to the Land Trust Deed would facilitate the administration of the Trust and allow for the better achievement of the charitable objects of the Land Trust Deed and of the Applicant in the circumstances as they present today.

(i)The prohibition on use of land to secure borrowing, where the funds generated by that borrowing might be applied for operational expenditure, is out of date with modern banking practice.

(ii)It also places unnecessary restrictions on the freedom of operation of the Applicant to use its available resources (including land which it considers to be surplus) in order to develop, grow and run the operations of Marsden in the manner it considers to be the most appropriate and desirable.

(iii)A rigid distinction between income and capital is inconsistent with the modern approach to trustee management of assets, liabilities, income and expenditure, as evidenced in the terms of ss 60–61 of the Trusts Act 2019.

(d)The proposed amendments to the Land Trust Deed contain sufficient restrictions to protect against risk of the Trust assets being exhausted.

(e)The application does not vary in any way the charitable objects of the Land Trust Deed. The Applicant respects the purpose for which the land was gifted in the Land Trust Deed and brings this application in the honest and good faith belief that the proposed amendments are consistent with the charitable objects of the Land Trust Deed.

(f)The Applicant considers that an annual cap of five per cent of the total capital value of the Trust on the use of proceeds of any such sale or mortgage applied to operational expenditure is appropriate and reasonable to reflect the purpose for which land was gifted in the Land Trust Deed.

(g)The current provisions of the Land Trust Deed require that the Applicant obtain the approval of the Synod of the Wellington Anglican Diocese prior to any sale of land held by the Trust. No change is proposed to this safeguard.

(h)The application comes with the support of the Anglican Diocesan Council, which considered a draft version of the proposed variations to the Land Trust Deed now before the Court and passed a motion approving those draft variations.

(i)The Court’s approval of the application would be consistent with earlier decisions of this Court in which the Court has approved applications under section 33 to vary the terms of a trust deed, where the proposed variations facilitate the administration of the trust and make no significant difference to the purpose or charitable objects of the trust.

Attorney-General’s report

[15]              The Scheme was submitted to the Attorney-General in accordance with s 35 of the Act. Crown Law, acting under delegated authority,3 has issued a report confirming that the proposed variation to the terms of the Land Deed Trust are appropriate, subject to a possible ambiguity in the drafting.

[16]              The possible ambiguity that Crown Law’s report identifies is with the amendment to clause 3(b) (set out above at [8]). In short, it is unclear whether the income on sale proceeds would form part of the five percent total of trust funds that may be applied to expenditure in any single year. If not, Crown Law expresses concern that it could increase the risk of capital exhaustion:

For example, were the trustees to realise all trust assets and place the proceeds in an interest-bearing account, the trustees would (on this latter interpretation) be able to spend five per cent of the proceeds per annum on operational expenses, plus all interest earned. The present-day value of the proceeds would be eroded as the interest — which would usually mitigate the effects of inflation — would be spent, at the same time as the trustees continue to draw down the capital.

[17]              Crown Counsel raised this issue with the Applicant, which confirmed its intention that the income on sale or mortgage proceeds would form part of the five percent total of trust funds that may be applied to expenditure in any single year. However, the Applicant did not (at that time) wish to amend the originating application to clarify this.

Telephone conference

[18]              As the memorandum and affidavit evidence filed with the application did not address the potential ambiguity identified by Crown Law, I requested a telephone conference with counsel for the Applicant. At the telephone conference, Mr Gascoigne confirmed the following alternative wording for the amendment to clause 3(b) would meet the Applicant’s wishes:

3      Constitution Act 1986, s 9C.

(b) Power to apply from time to time the net proceeds of any such sale or mortgage and any income earned on the proceeds of any such sale or mortgage in the purchase of any hereditaments to be held on the trusts and with the powers herein declared and contained concerning the said parcel of land, or in erecting buildings or making substantial improvements on or to the said parcel of land or any other hereditaments for the time being held under these presents, or in paying off any incumbrances then existing on any such hereditaments or in the purchase of the goodwill of any school to be conducted or maintained under the authority of the said Synod or in the purchase of school furniture fittings or apparatus or otherwise in the way of capital expenditure (whether

expenditure is capital or revenue in nature) for the purposes of any school or schools established conducted or maintained within the Diocese of Wellington by or under the authority of the said Synod or for any purpose connected with the imparting of education within the said Diocese under the like authority.

PROVIDED ALWAYS that the amount of the proceeds of any such sale or

mortgage that the Trust Board applies to revenue expenditure in any financial

year,  including  any  income  earned  on  the  proceeds  of  any  such  sale or

mortgage, is no greater than the value of five per cent of the total capital value
 of the Trust in that financial year.

Assessment

[19]              For the reasons advanced by the Applicant, as outlined above, I consider that the variations to the Land Trust Deed will facilitate the carrying out of the Trust and meet the requirements of s 56(1)(a) of the Act.

Result

[20]              The variations to the Land Trust Deed as set out in the originating application, but as amended above at [18] in respect of clause 3(b), are approved.

Costs

[21]I make orders:

(a)that the Applicant pay the Attorney-General $750 in relation to the provision of her report;

(b)that the reasonable costs of the Applicant arising out of the current application may be met from the funds of the Trust.

McHerron J