Tikipunga Protestant Children's Home

[2012] NZHC 3078

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2012-488-455 [2012] NZHC 3078

UNDER  The Charitable Trusts Act 1957

IN THE MATTER OF     Variation of a charitable trust created by a Deed of Conveyance dated 1 May 1925 and a Deed of Trust dated 13 March 1936

BETWEEN  TIKIPUNGA PROTESTANT CHILDREN'S HOME Applicant

Hearing:         19 November 2012

Counsel:         D Grindle and R Allen for Applicant

D Soper for Attorney-General

Judgment:      19 November 2012

(ORAL) JUDGMENT OF LANG J

[on application for approval of orders varying charitable trust]

TIKIPUNGA PROTESTANT CHILDREN'S HOME HC WHA CIV-2012-488-455 [19 November 2012]

[1] The Tikipunga Protestant Children’s Home is administered by the trustees of a charitable trust first established by a deed executed in 1925.  That deed has now been lost, and has been replaced by a further deed executed in 1936 (“the 1936 deed”). Under the 1936 deed, the name of the trust was altered to the North  Auckland Protestant Orphanage.

[2] The 1936 deed restricted the manner in which the trustees were to hold and deal with the assets of the trust as follows:

(c)       THE said piece or parcel of land described in the Schedule hereto shall not be disposed of by the Trustees by sale gift or exchange nor shall the Trustees have power to Mortgage the said land or to pledge the title deeds therefor or to lodge them as security in any way whatsoever but the Trustees may lease the same for any term of years not exceeding twenty-one years or on “Glasgow” leases at such rental and on such terms as the Trustees in their uncontrolled discretion may think fit and the moneys to be derived from such Leases shall after payment thereout of all necessary deductions costs of maintenance and otherwise be devoted to orphan and or destitute children who are being brought up in the Protestant Faith

...  the Trustees  ...  shall  hold the  said property ... upon  trust  for  and  as Trustees  of the North Auckland  Protestant  Orphanage  for the  benefit  of orphans and/or destitute children who must be brought up in the Protestant Faith.

[3] Subsequently, in or about July 1939, the trustees were incorporated as a Board under the legislation that preceded the Charitable Trusts Act 1957 (“the Act”).  In or about the same year, the trustees built a six bedroom dwelling on a 9.77 hectare property situated in Cork’s Road, Tikipunga.  Initially the trustees used the dwelling for the purposes prescribed in the 1936 deed.   By 1974, however, the home was being used not only to house orphans and destitute children, but also as a shelter for all children in need.

[4] The present trustees have applied to the Court for approval[1]  of a scheme that varies the terms of the trust in three respects.   The technical requirements of the legislation have been satisfied.  The proposed scheme has been advertised, and no objections have been received.   Counsel for the Attorney-General has also filed a

[1] Under s 53(3)(c) of the Act.

report confirming that the proposed scheme can properly be approved by this Court under Part 3 of the Act.

The proposed variations

The purpose of the trust

[5]      As noted above, the 1936 deed required the trustees to use the trust assets for the benefit of “orphan and/or destitute children”.  The trust’s principal asset is the Tikipunga property.  The present experience of the trustees, however, is that very few children can now properly be described as orphans (in the sense of having lost both parents), or destitute (in the sense of being in an extreme state of poverty).

[6]      The trust’s property now provides a place of shelter for needy children who are referred by various agencies, including Child Youth & Family, the courts and the police.  Generally speaking, these children are referred to the trust because they are at risk from a health or safety standpoint in their present home environment.

[7]      The 1936 deed also required the trust assets to be used for the benefit of

children “who are being brought up in the Protestant Faith”.

[8]      The Trustees seek to vary the trust so as to require the trustees henceforth to use the trust’s assets “for the benefit of children in need of care or assistance, providing short-term and long-term care as needed”.  The trustees thereby seek to widen the pool of needy children who may be accommodated at the trust’s property.

Trustees’ powers

[9]      The  1936  deed  also  placed  significant  restrictions  on  the  ability  of  the trustees to sell or mortgage the land or any part of it.  It provided:

(e)       THE Trustees shall not invest any moneys in any Mortgage of land or chattels but all such investments shall be made only in local Body Debentures or in Government Inscribed Stock and the Trustees shall have power to purchase such Debentures and Stock up to Five Per Cent over their face value and shall not be answerable for more than their face value upon maturity.

[10]     The restrictions imposed by this clause mean that the trustees are unable to generate sufficient income to pay the outgoings of the trust.  As a result, they have been forced to seek funding from other charitable organisations in order to make ends  meet.    In  addition,  they cannot  properly maintain  or upgrade  the existing buildings.   Furthermore, although the whole of the property is not needed for the purposes of the trust, the trustees have no power to sell surplus land in order to generate capital to enable them to maintain and improve the buildings they use to meet the objects of the trust.

[11]     The trustees therefore seek a variation of their powers so as to include:

Those general powers and indemnities as trustees as set out in Part 3 of the

Trustee Act 1956, and as set out in s 1 of the Act.

Trustees’ qualifications

[12]     The 1936 deed requires the five trustees of the trust at any given time to comprise one trustee from each of the Anglican, Methodist, Baptist, Presbyterian and Congregationalist denominations.

[13]     This restriction no longer reflects the current makeup of the New Zealand Christian community.    The Methodist, Presbyterian and Congregationalist denominations have now been amalgamated into a single church,[2]  and no longer exist separately.  For that reason the trustees seek approval to the following variation of this requirement:

The trustees shall at all times consist of at least five competent persons who shall as far as practical be comprised of religious persons affiliated with main faith Christian churches.

Jurisdiction

[2] The Uniting Churches.

[14]     Sections 32 and 33 of the Act permit the terms upon which a charitable trust is administered to be varied provided the Court approves the proposed variation.[3]

[3] Under s 53 (c) of the Act

[15]     Section 32(1) provides for the property of a trust to be applied for a charitable purpose or purposes other than those prescribed by the instrument creating the trust. This may occur inter alia where it has become “impossible or impracticable or inexpedient” to carry out the original purpose.

[16]     In  Re  Tennant,  Hammond  J  summarised  the  principles  governing  an application for variation under s 32 as follows:[4]

[4] Re Tennant [1996] 2 NZLR 633 (HC) at 636.

(a)       The application must come within the statutory jurisdiction (which includes a necessity for the purposes to have been charitable at the date of settlement)

(b)      The substituted arrangements must be charitable as that term is understood in law

(c)       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

(d)       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.

[17]     Section 33 permits the powers of the trustees  of a charitable trust to be extended or varied, and the mode of administration of the trust to be varied, where the administration of the trust would be “facilitated” by that being done.

[18]     In Re Melanesian Mission Trust Board[5] Paterson J noted:

It is necessary for this Court to be satisfied that the administration of the property or the carrying out of the trust “could be facilitated” by the variation sought.   The ordinary dictionary meaning of “facilitate” is “made easier, promoted, or helped forward”.

[5] Re Melanesian Mission Trust Board HC Auckland M1140/98, 24 September 1998.

[19]     As  counsel  for  the  Attorney-General  points  out,  the  present  application engages both s 32 and s 33.  The proposal to widen the trust’s purposes is governed by s 32, whilst the proposals relating to the broadening of the trustees’ powers to deal with the trust property falls within s 33.

Decision

(a)      For the benefit of children in need of care and assistance providing short- term and long-term care as needed.

[20]     I have no difficulty in approving this variation.  As counsel for the Attorney- General points out, this Court has held that those promoting a scheme that varies the beneficiaries or purposes of a trust should seek to substitute beneficiaries or purposes resembling as closely as possible, in the changed circumstances, those specified by the original settlor.[6]

[6] Re Twigger [1989] 3 NZLR 329 (HC) at 342.

[21]     In my view, children who are in need of care and assistance comprise an admirable substitute in modern times for the class described in the deed as “orphan and/or destitute children”.  I therefore approve this proposed variation.

(b)      Trustees’ powers

[22]     I have no difficulty, either, in concluding that it is appropriate to grant this aspect of the application, albeit with one modification.   As presently framed, the proposed variation gives the trustees a blanket power to sell and/or mortgage the trust’s assets.  It seems to me, however, to be a core requirement of the 1936 deed that the trustees will devote a particular property to the trust’s purposes.   For that reason I am not prepared to approve a blanket power permitting the trustees to sell that part of the trust’s property which is currently used to meet the principal purpose of the trust.

[23]     Counsel for the trustees explains that the trustees propose to continue using the existing buildings and curtilage for the purposes of the trust.   They seek the power to sell, if necessary by undertaking a subdivision, land that is surplus to the

trust’s direct requirements.

[24]     I accept that the sale of surplus land is an appropriate means by which the trustees may realise capital with which to maintain and improve the dwelling.  In the absence of any proposal to replace the existing dwelling with a comparable facility, however, I do not consider the trustees should be permitted to sell it.   I therefore grant approval for the proposed variation but modify it so that the power of sale shall only apply to land other than the existing dwelling and curtilage.   I leave it to counsel  for  the  trustees  to  frame  an  order  reflecting  this  aspect  of  the  Court’s decision.

(c)      The composition of the trustees

[25]     The  fact  that  three  of  the  prescribed  denominations  have  now  been amalgamated into a single church renders this aspect of the trust deed impossible to comply with.  I consider the proposed variation to be sensible.  This is that at least five competent persons shall be appointed as trustees, and that those persons shall, as far as practicable, be comprised of religions persons affiliated with main faith Christian churches.

Result

[26]     Subject to the modification I have identified, the application for approval is accordingly granted.   Counsel for the trustees is to file a draft order as soon as possible.

Costs

[27]     The trustees  do  not  require an  order for  costs  in  their favour.    I direct, however, that costs in the sum of $500 are to be paid from the trust’s assets to the

Attorney-General.

Lang J

Solicitors:

Webb Ross McNab Kilpatrick, Whangarei

Crown Solicitor, Whangarei