The Royston Hospital Trust Board v Attorney-General

[2015] NZHC 1753

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

CIV-2015-441-53 [2015] NZHC 1753

UNDER

The Charitable Trusts Act 1957

IN THE MATTER OF

An application under Part III of that Act for approval of a Scheme of Charitable Trust

BETWEEN

THE ROYSTON HOSPITAL TRUST BOARD

Applicant

AND

HER MAJESTY'S ATTORNEY- GENERAL FOR NEW ZEALAND Respondent

Hearing:	On the papers
Counsel:	G D Clews for Applicant
Judgment:	29 July 2015

JUDGMENT OF KEANE J

This judgment was delivered by me on 29 July 2015 at 10.30am pursuant to r 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Gifford Devine, Hastings

THE ROYSTON HOSPITAL TRUST BOARD v ATTORNEY-GENERAL [2015] NZHC 1753 [29 July 2015]

[1]      In  1953  the  Royston  Hospital Trust  was  settled  to  own  and  operate  the Royston Hospital, a private hospital in Hastings.   Shortly after the trust was incorporated under the Charitable Trusts Act 1957:

… for the purposes of a private hospital primarily intended for the reception of paying patients but with a right to the Trustees to receive a limited number of non-paying patients …

[2]      Until 1993 the hospital was owned and operated by the Board consistently with that charitable purpose.  Then on 15 March 1993 the Board entered into a joint venture with local medical practitioners.   They incorporated Royston Hospital Limited, in which the Board took half the shares, to purchase the hospital and develop its amenities and services consistently with the Board’s charitable purposes. On 14 August 1997 a scheme was approved amending the Board’s objects, powers, authorities and discretions.

[3]      In January 2006, in response to changing conditions in health care and the need to sustain the hospital, the Board approved a proposal to amalgamate RHL with a publicly listed company, Wakefield Health Limited, in which it took shares. Wakefield then assumed responsibility for the hospital, subject to agreements Wakefield then entered into with the Board.

[4]      In 2012, to protect its Wakefield investment, and its indirect interest in the hospital, the Board invested, alongside private interests, in a joint venture to acquire the majority interest in Wakefield, advanced through a joint venture company, Austron Limited, in which it took 41.24 per cent of the shares.  Wakefield was then renamed Acurity Health Group Limited.

[5]      In July 2014, to protect its indirect investment in Acurity, the Board joined in a bid  for the minority shares  by Connor  Health  Care  Limited,  then  a  minority shareholder, owned by Evolution Health Care Limited.   In approving that bid the Commerce Commission required Austron to take almost 90 per cent of the shares in Connor; and the Board’s interest remained confined to its Austron shareholding.

[6]      As a result of these transactions, the Board has ceased to own any direct or indirect interest in the hospital and, for reasons I will mention shortly, applies for an

order approving a scheme freeing itself from its original purpose, which assumes a continuing interest in the hospital, to enable it to engage in a wider range of health services in the Hawkes Bay under the name The Royston Health Trust Board.

[7]      This application has been advertised without evoking any objection and the Attorney-General considers that the variations the Board seeks to its purposes and powers are justifiable and appropriate.  I agree.

Trust purposes

[8]      Section 32 of the Charitable Trusts Act 1957 enables the charitable purposes on which property is held to be varied where the original purposes, as is the case here, have become impracticable or inexpedient.

[9]      The new purposes, like the old, must be charitable purposes, and, as the cases say, the old purposes are not formally limiting.  The new purposes must, however, “accord as closely as is reasonably possible in the changed circumstances to the terms of the original trust” and “best serve the interests of those intended to be

beneficiaries and the public”.1

[10]     I am satisfied, firstly, that the original purposes have become impracticable and inexpedient:

(a)      The Board no longer owns the hospital and has ceased to hold shares itself in the owner of the hospital, Acurity Health Group, and the hospital is only one of a number of hospitals owned by Acurity.

(b)To protect the value and utility of its assets, it is likely that the Board will have to sell some or all of its indirect interests in Acurity and will not be able to insist on Acurity shareholders supporting the hospital in a manner consistent with the 1997 scheme.

(c)      The Board does not have, and will not obtain from a sale of its interest in Acurity, the ability to re-purchase the hospital or to maintain it as

1      Re Tennant [1996] 2 NZLR 633 at 636.

the law requires, especially as to seismic strength, or to continue the medical and surgical services it offers.

[11]     I am satisfied equally that the varied charitable purposes that the Board seeks to have approved are closely consistent with its original purposes, although no longer linked to a particular hospital facility.  Under the scheme the Board would:

For the benefit of the people and community of Hawkes Bay, … promote,

support, maintain or procure:

(a)       Hospital  services,  including  services  delivered  in  or  through  the

Royston Hospital; (b)     Health services; (c)       Health research; (d)          Health education;

(e)       Professional learning and development for health practitioners;

(f)       Assistance to and co-operation with the Hawkes Bay District Health Board or any successor entity, Whakawateatia, in the provision of its services.

[12]     Under these varied purposes, I agree with the Attorney-General, the Board will be freed to assist in the Hawkes Bay with a wider range of complementary services, extending beyond the care of the acutely ill to preventive and ongoing care, and to related services, consistent with its original purposes.

Administrative powers

[13]     Section 33 permits the powers of a charitable trust to be extended or varied, and thus the way in which is to be administered equally, as long as that will “facilitate” the carrying out of the purposes of the Trust; that is to say will promote those purposes and make them easier to accomplish.2

[14]     Under the scheme  proposed, as  the Attorney-General  says,  the  trust  will obtain powers more in keeping with the commercial complexities with which it has been confronted since it entered into the second joint venture in 2006.   The only

power, which calls for comment, is that enabling the Board to pay trustees for their services, including professional services.

[15]     This is a material change.  The 1997 scheme only allowed trustees to be paid their costs and expenses.   However, the reality is that to engage trustees with the expertise essential, the Board must be able to pay them for their services, extending to professional services, when that is essential; a reality that is increasingly recognised.3

Orders

[16]     For  those  reasons  I  approve  the  scheme  proposed  under  Part  III  of  the

Charitable Trusts Act 1957.  The costs of and incidental to the application are to be paid out of the fund administered by the Board, as are those of the Attorney-General.

P.J. Keane J