Sullivan
[2024] NZHC 922
•24 April 2024
IN THE HIGH COURT OF NEW ZEALAND GREYMOUTH REGISTRY
I TE KŌTI MATUA O AOTEAROA MĀWHERA ROHE
CIV-2023-418-4
[2024] NZHC 922
UNDER Section 32 of the Charitable Trusts Act 1957 IN THE MATTER
of the estate of William Patrick Sullivan
BETWEEN
ANTHONY THOMAS SULLIVAN
Applicant
Hearing: 23 April 2024 Appearances:
K Lenahan for Applicant
D Jones for Attorney-General (excused)
Judgment:
24 April 2024
JUDGMENT OF DUNNINGHAM J
This judgment was delivered by me on 24 April 2024 at 3 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
RE SULLIVAN [2024] NZHC 922 [24 April 2024]
[1] This is an application by Anthony Thomas Sullivan, as trustee of the charitable trust (the Trust) set out in the will of William Patrick Sullivan (the Settlor) for approval of a scheme to vary:
(a)the charitable purpose of the Trust under s 32 of the Charitable Trusts Act 1957 (the Act); and
(b)the powers of the trustees under s 33 of the Act.
Background
[2] The Trust was created by cl 5(b) of the will of the Settlor on 16 June 1947 (the Will). That clause provided that the trustees should:
(b) hold the remaining three-fourths of such residue in trust to apply the income arising therefrom for the purpose of educating (and during such education of wholly or partly maintaining) boys for the secular priesthood in the Roman Catholic Church or the Marist Priesthood in the Roman Catholic Church or as Marist Brothers PROVIDED THAT no boy but one whose father had been a bona fide resident on the West Coast for at least one year immediately prior to the time of the birth of such boy shall be eligible to take benefit under this trust.
[3] Clause 6(b) of the Will defined the geographical area referred to as the West Coast in cl 5(b). As at 5 November 2023, when Mr Sullivan swore an affidavit in support of the application, he advised that the capital of the Trust now stands at
$258,490 with an annual income of approximately $6,000.
[4] The Trust has been varied under the Act on a previous occasion. By order of the Court made under s 32 of the Act and dated 26 September 2001, the words “or the Provincial District of Canterbury” were inserted after the words “West Coast” in both cl 5(b) and 6(b) of the Will. Mr Sullivan’s understanding is that this was done to increase the pool of eligible candidates, because, even then the trustees had difficulty finding eligible beneficiaries of the Trust.
The current application
[5]The current application is brought, as Mr Sullivan explains, because:
(a)it has frequently been impossible to apply the Trust income to the charitable purpose for which it was intended because of the changing demographics and origins of students for the priesthood;
(b)given the modest amount in today’s terms of capital remaining, the trustee wants to structure the variation in such a manner as to reduce the likelihood for a further application of this nature within a relatively short period of years as the demographics and origins of students continue to change; and
(c)the income of the trust fund is too small to provide meaningful support to students (if eligible students can be found).
[6] The scheme proposed under s 32 of the Act seeks to make the following changes to the Trust:
(a)that any student of New Zealand origin should qualify for support from the Trust;
(b)in years, if any, in which there are no eligible students of New Zealand origin, students from overseas should qualify;
(c)the trustee should have limited recourse to capital of up to 15 per cent in any 12 month period;
(d)capital may not be drawn down in any 12 month period if that would lead to a reduction in the trust fund below $200,000.
[7] The various steps prescribed in Part 3 of the Act which are required to be undertaken before a scheme such as this can be approved have all been undertaken. This includes publicly advertising the scheme and submitting it to the Attorney-General for consideration.
[8] Mr Sullivan explains that originally a more liberal variation was sought but, after consultation with Crown Law, the more restricted variation now being sought is
endorsed by the Attorney-General. That is confirmed in the Attorney-General’s report prepared under s 35(1) of the Act.
The evidence
[9] The circumstances which give rise to the application are more fully set out in Mr Sullivan’s supporting affidavit. In it, he gives evidence of the changing demographics of students for the priesthood and, in particular, that most students are now coming from overseas, particularly from Asian countries and very few are students from New Zealand generally, let alone from the West Coast or the provincial district of Canterbury. For example, as of April 2022, there were 15 seminarians in the Holy Cross Seminary. Only two had New Zealand as a country of origin. Furthermore, the pool of eligible students is shrinking. From 2020 to 2022, the pool of students from anywhere in New Zealand reduced from nine to seven. In order to secure the future effective functioning of the Trust, it is proposed to broaden the geographical area from which students can be drawn to those who are of New Zealand origin, or in the absence of eligible students, grants may be given to students regardless of what country of origin or that of their parents citizenship/residency.
[10] Secondly, in explaining the need for limited resource to capital, Mr Sullivan, points out that the estimated cost for supporting one Marist seminarian, excluding housing, is around $10,000 per year. The annual income would not currently make a realistic contribution to assist even one student for the priesthood. It is therefore, sought to authorise the trustee to have access to capital in order to make a realistic contribution to a student’s costs, while also retaining a minimum capital fund for the future.
[11] The Attorney-General’s report on the amended application supports the proposed variation, saying it will “ensure that the [T]rust continues to be administered in a manner that gives effect to the intention of the Settlor and is one that may be approved by this Court”.
Discussion
[12] Section 33 of the Act enables trustees to seek to extend or vary their powers, or to prescribe or vary the mode of administering the Trust in any case, where property or income is held upon Trust for a charitable purpose and the administration or carrying out of the Trust could be facilitated by making such changes. The process for doing so is set out in ss 34 to 37 of the Act. As already noted, those sections have all been complied with. The evidence satisfies me that first, this is a trust with a charitable purpose, being the purpose of advancing religion and second, that it is impracticable for the trustees to carry out the charitable purposes under the current terms of the Trust.
[13] As counsel for the Attorney-General pointed out, the guiding principle which applies in deciding whether to approve a scheme under s 32 of the Act is stated in Re Whatman, where Tompkins J said:1
… having found that it is impossible or impracticable or inexpedient to carry out the terms of the trust as directed by the settlor or that one of the other grounds set out in s 32 are established, [the Court] owes a duty to the settlor of the trust property to dispose of it as nearly as possible in accordance with the intentions of the settlor in establishing the trust.
I have therefore considered whether the proposed variations will dispose of the Trust property as nearly as possible in accordance with the Settlor’s intentions, while taking into account the circumstances which have necessitated the application to vary the Trust.
[14] Here, as counsel for the Attorney-General pointed out, the settlor’s intention in restricting eligible students to those whose fathers have been resident on the West Coast was likely to be to strengthen the presence of the Catholic Church in the West Coast. While initially the trustee proposed to remove all restrictions on students who might receive funding, the scheme now proposed is that the candidates must have a family connection to New Zealand, but if there were no candidate with such a background in a particular year, funding might be applied to any other student, irrespective of whether they have a family connection to New Zealand, in order to avoid there being no eligible students in particular years. I also note that this is a
1 Re Whatman SC Wellington, 16 July 1965, at 11.
logical extension from the amendment made in 2001 where the geographical area originally specified by the settlors extended to include Canterbury. This was in order to ensure that the Trust would remain effective by being in a position to regularly make payments to students. I am satisfied that the proposed variation of the Trust purpose is as close as is reasonably possible to the original purposes set out in the bequest.
[15] In respect of the variation to the administration of the property or income, or the carrying out of the Trust, by enabling the trustee to draw on capital of Trust, albeit on not depleting the capital below $200,000, I am satisfied this will enable the trustees to make a reasonable contribution to student costs and will facilitate the carrying out of the Trust, while still enabling the Trust to be perpetual. Again, this variation is to ensure the Trust continues to be administered in a manner that best gives effect to the intention of the Settlor.
[16] In deciding whether to approve the scheme, I must also be satisfied that s 56(1)(a) is satisfied. That provides that:
(1)No scheme shall be approved by the Court under Part 3, … unless the court … 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.
[17] I am satisfied, as set out above, that each requirement in s 56(1)(a) is met (and this is confirmed by the Attorney-General’s report).
[18] Accordingly, I make an order approving the scheme to vary the Trust as set out at cl 1.1 of the originating application for approval of a scheme under Part 3 of the Charitable Trusts Act 1957 and dated 6 November 2023.
Solicitors:
Greg Kelly Trust Law, Wellington
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