YMCA New Zealand Soldiers Great War Memorial Trust

[2013] NZHC 2516

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2013-485-2961

[2013] NZHC 2516

UNDER

Charitable Trusts Act 1957

IN THE MATTER

THE YMCA NEW ZEALAND SOLDIERS GREAT WAR MEMORIAL

TRUST, a charitable trust created by a deed of trust dated 22 June 1934

IN THE MATTER

of an application by THE NATIONAL COUNCIL OF YMCAS OF NEW

ZEALAND INCORPORATED, having its office in Wellington, the trustee of the said trust, for the approval of a scheme under s35(2)

Hearing:	24 September 2013
Counsel:	J Scragg with M E Byczkow for Applicant
Judgment:	25 September 2013

JUDGMENT OF THE HON JUSTICE KÓS

[1] A memorial becomes a millstone. Soldiers subscribe funds to build the YMCA a memorial hall in gratitude for welfare services provided to them in the Great War. A trust deed is entered. A hall is built in Petone, in the Hutt Valley.  Now there is no longer a Petone YMCA. Or a Hutt Valley one. The hall falls into disuse in the 1960s. Later it is leased out. But it needs seismic and other maintenance work. Almost a century after the Great War’s end, the trustee sells the building. The proceeds are retained. But the trust is for the purpose of erecting a memorial hall. None now is needed.

[2] Now the trustee applies for approval of a scheme under Part  3  of  the Charitable Trusts Act 1957 (the Act).  It says the intended charitable purpose of the

The YMCA New Zealand Soldiers Great War Memorial Trust [2013] NZHC 2516 [25 September 2013]

trust can no longer be achieved. It seeks to vary the existing terms of the trust, and substitute a new trustee.

Background

[3] In the Great War of 1914-1918 the Young Men’s  Christian Association (YMCA) provided invaluable welfare assistance to soldiers of the First New Zealand Expeditionary Force. Libraries, cinemas and canteens were established at camps and hospitals, particularly on the Western Front and in London and Paris. In the recently published biography of New Zealand’s most prominent (and able) officer in that conflict, Major-General Sir Andrew Russell, the author says:[1]

By now, however, the [YMCA] was also helping to improve the living conditions of the troops. As the New Zealand Division pulled out from its mauling on the Somme, Russell asked the YMCA’s first director, Jim (later Sir James) Hay, to provide some basic services as the Division returned to the north of France by train. The trip would take nearly three days, which meant that the men, huddled together and covered with cattle wagons, would have nothing to eat or drink for the best part of 24 hours. Russell asked that YMCA staff meet each troop train at specific points on route and provide each man – nearly 20,000 of them – with hot cocoa and a packet of biscuits.

It was duly done, and afterwards Russell told Hay that he would make available whatever labour he required to set up YMCA facilities across the Division. In less than a month the YMCA was providing the men with canteen, library and letter-writing facilities from a network of huts and marquees, as well as games, literary competitions and concerts. Lectures by well known public speakers were also provided, for Russell was well aware the stultifying effects of prolonged trench warfare could have on men’s minds.

[1] J Vennell The Forgotten General (Allen & Unwin, Sydney, 2011) at 144. Guy Russell was described by Dr Chris Pugsley, our leading military historian, as “the one military commander of genius that New Zealand produced in the twentieth century”.

[4]  Such services engendered gratitude. At the end of the war the sum of £1,200 was raised by soldiers of the 1st NZEF occupying the Rhineland after the Armistice. It was given to the YMCA:

… for the purpose of erecting in the Dominion of New Zealand a Memorial Building in recognition of the work of the New Zealand branch of the [YMCA] during the Great War.

The YMCA received the money on informal trust on that basis. That trust was unspecific as to location. Until the funds could be applied in the way intended, they were held for the YMCA by General Russell, Mr Hay and a Mr Hemery. In 1933, at the request of the National Council of the YMCA, these gentlemen purchased a plot of land in Cuba Street, Petone, in the Hutt Valley. At that stage interest had swelled the fund to £2,085. The land cost £400.

[5] The present deed establishing the trust is dated 22 June 1934. The trust is called the YMCA New Zealand Soldiers Great War Memorial Trust. In that deed the sole trustee, the National Council of the YMCA, declares that it now holds the land:

… for the purpose of erecting thereon a Memorial Building suitable generally for the work and purposes of a [YMCA] ...

and with the balance funds to be applied to the costs of construction and fitting out. So the present deed is restrictive. It provides for the memorial building to be used by the Hutt Valley YMCA, or, in default, any other YMCA carrying out activities in the former Borough of Petone. It contains no alternative means of fulfilling the original charitable purpose. Nor does it contain any power of sale.

[6]   The building was completed in 1935 and used as a YMCA community centre for the following 30 years. It was leased to another community group in May 1983. It is unclear what the building was used for between the mid-60s and 1983. Evidently it was not a community use. No Hutt Valley Branch of the YMCA has existed since 1983.

[7] The building had become expensive to maintain. Seismic work was needed. Rent received was all spent on that work. The memorial had become a millstone.

[8] In 2004 the trustee decided that the original intent of the trust was no longer being met.  Two solicitors advised that the building could be sold and the funds used for other YMCA community purposes. In March 2006, the building was sold. Subsequently two Queen’s Counsel took a different view and advised the bringing of the present application for Court approval of a scheme. The land and building had of course been sold to a bona fide purchaser, and that much is that.  There is no doubt

everyone acted in good faith at the time of sale. The question now is as to the application of the funds. Some $430,000 or so.

[9] The trustee council now holds the proceeds from sale on trust. It seeks changes to the trust deed to allow the capital and income of the trust to be used for purposes of the YMCA in a manner that recognises its work during the Great War. It does not wish to buy another building. It does not consider the funds would be sufficient for that purpose. However should the original purpose (i.e. the memorial building) become once more possible, practicable and expedient then the trustee would endeavour to fulfil it.

[10] The  trustee applicant draws a distinction between the  original charitable purpose, noted in [4], to recognise the work of the New Zealand branch of the YMCA during the Great War, and the way in which the deed provided for that to be fulfilled, through a specific memorial building. It submits that the latter can be changed without materially changing the overall charitable purpose. That may be so, although there can be no doubt the original purpose contemplated use of the trust’s funds on a memorial building somewhere in New Zealand.

[11]   The trustee applicant submits that the purpose can be fulfilled by means such as erecting a memorial, establishing an educational trust, or acquiring assets for youth work programs. It seeks the flexibility and discretion to apply trust capital and income to such ventures as it sees fit, to fulfil what it sees as the trust’s original purpose.

Application

[12] The applicant therefore seeks orders varying the terms of the trust by substituting a new deed of trust, pursuant to ss 32 and 33 of the Act:

(a)to preserve the original charitable purposes but not requiring them to be fulfilled in the same way as originally provided;

(b)replacing the National Council as the trustee with the National Board of the National Council of Young Men’s Christian Associations of New Zealand; and

(c)varying the powers of the trustees to administer the trust by the provision of powers of investment found in contemporary charitable trusts in New Zealand.

Statutory framework

[13]     Section 32(1) of the Act states:

... [i]n 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 of this Act.

[14]     Section 56(1)(a) of the Act states the requirements for approving a scheme of this nature:

(1)    No scheme shall be approved by the Court under Part 3 of this Act, or by the Court or the Attorney-General under Part 4 of this Act, 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 of this Act and the Attorney-General has not dispensed under section 50 of this Act with the holding of a meeting of contributors, that the scheme is designed to give effect to the resolution of the meeting of contributors.

Attorney-General’s report

[15] The Attorney-General has fulfilled the s 56 reporting requirement, and is satisfied the Scheme is a proper one and should carry out the desired purpose. He recommends approval of the scheme under part 3 of the Act. The Attorney’s report states:

[41] On the basis of the evidence made available to me by the applicant, I agree it is at least inexpedient at present for the Trust to erect and maintain a building in recognition of the work of the New Zealand branch of the YMCA during the Great War.

[42] Moreover, on the evidence I have seen, the change in  purpose embodied in the proposed new deed accords as closely as is reasonably possible to the terms of the original Trust.

[43] I also consider that changes to the administrative provisions of the Trust will facilitate the carrying out of the Trust in terms of s 33 of the Charitable Trusts Act 1957.

Issues

[16]    This application raises four issues.

[17]    The first three arise under s 32 of the Act:

(a)Issue 1: Is it “impossible or impracticable or inexpedient” to carry out the trust’s original purpose, that is the erection of a memorial building at that site?

(b)Issue 2: Is the new trust deed is directed to charitable purposes?

(c)Issue 3: Are the new purposes sufficiently close to the charitable purposes in the original trust deed?[2]

If these are all answered in the affirmative, the Court may then permit the disposal of the capital and income of the trust in a way as will serve the best interests of those

intended to be beneficiaries, and the public. [3] Here, by approving a new trust deed, with new purposes.

[2] Re Twigger [1989] 3 NZLR 329 (HC); Re Tennant [1996] 2 NZLR 635 (HC).

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

[18] The fourth issue concerns the suitability of the proposed revision of administrative arrangements of the trust, as sought in [12](b) and (c) above. That falls for consideration under s 33.

Issue 1: Is it impossible or impracticable or inexpedient to carry out the trust’s original purpose?

[19] The original purpose and the means by which it would be fulfilled cannot be separated. The trust deed clearly states that the form of recognition would be a memorial building at that site, and that is central to the constitution of the trust and its purpose.

[20] The site has been sold to a bona fide purchaser. It is now impossible or impractical to erect a memorial building on that site. Even if a wider view is taken, I accept that application of the trust’s fund to another memorial building would be inexpedient. The Court of Appeal has interpreted “inexpedient” in this context as meaning “unsuitable, inadvisable or inapt”.[4]

[4] Re McElroy Trust [2003] 2 NZLR 289 (CA).

[21] The Attorney-General’s view is that it is inexpedient for the Trust to erect and maintain a building, because of the deterioration of the original Petone building, the expense of maintaining it, and the fact that it was not being used to deliver YMCA programs. It is inexpedient to erect a new building because the trust funds are insufficient for that purpose. And especially because the YMCA has no need for one.

[22]     I agree, and have nothing to add to that analysis. [23]  The answer to Issue 1 is “Yes”.

Issue 2: Is the new trust deed directed to charitable purposes?

[24] “Charitable purpose” is defined in the Act somewhat unilluminatingly: “Charitable purpose means every purpose which in accordance with the law of New Zealand is charitable”.[5] It is more specifically defined for the purposes of Parts 1, 2 and 4 of the Act. But this application concerns only Part 3. In the Charities Act 2005, Parliament adopted the long-established classifications of  “charitable purpose”: relief of poverty, the advancement of education or religion, and any other matter beneficial to the community.

[5] Charitable Trusts Act 1957, s 2.

[25]    The revised trust deed would provide these purposes:

4.1Recognise the purpose of the Original Trust Deed was to erect or purchase a Memorial Building in recognition of the work of the New Zealand branch of the YMCA during the Great War that was suitable for the use and purposes of the YMCA. This purpose was achieved, however over time that purpose became impossible, impracticable and inexpedient, and the building was sold with the resulting proceeds held on Trust.

4.2Use the capital and income of the Trust for the use and purposes of the YMCA in a manner that recognises the work of the New Zealand branch of the YMCA during the Great War in accordance with the Trustee powers set out in clause 6 hereof. However, should  it become possible, practicable and expedient for the purposes of the Original Trust Deed to be fulfilled, the Trustees may endeavour to realise this purpose.

[26] The National Council is itself a registered charity. So are most of  the constituent member YMCAs. I am satisfied that the original purpose for the YMCA received the soldiers’ gift was charitable in nature, responding to the charitable services provided by the YMCA during the Great War. The new purposes respect the original purpose to commemorate those charitable services, but without the unnecessary constraint of doing so in the form of a particular building on a particular site.

[27]   The Attorney General is content that the modification is sufficiently directed to charitable purposes, and so am I.

[28]     The answer to Issue 2 is “Yes”.

Issue 3: Are the new purposes are sufficiently close to the charitable purposes in the original trust deed?

[29] There are notable differences between the varied purposes and the original bequest. While the cy-près doctrine does not apply, the new trust must still adhere as closely as reasonably possible, in the altered circumstances now applying, to the terms of the original trust.[6]

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

[30] The varied purposes will serve the interests of the same class of beneficiaries, being YMCA members and those who benefit from its activities. However, the trustee’s discretion is much wider. It simply requires the capital and income to be used for the purposes of the YMCA in a way that recognises the work of the New Zealand branch of the YMCA during the Great War. This would allow the trust property to be used for whatever purpose the trustee sees as fit, as long as that recognises in some way the contribution of the YMCA to that war effort. It has been suggested that this could take the form of an educational scholarship, a physical memorial or a youth work programme. These are far removed from the original purpose of a memorial building. However, the intentions of the soldier donors must primarily have been recognition and commemoration, and whether that takes the form of a physical building or a memorial scholarship, the wishes of the original donors will be met as best they can in today’s world.

[31]     The answer to Issue 3 is also “Yes”.

Issue 4: Do the proposed administrative changes facilitate the trust’s activities?

[32]  Section 33 of the Act provides that where the administration of trust property or income, or the carrying out of a charitable trust, can be facilitated by extending or varying the powers of the trustees, or by varying the mode of administering the trust, the Court may approve that variation. As Paterson J noted in Re Melanesian Mission Trust Board:[7]

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

variations sought.  The ordinary dictionary meaning of “facilitate” is “made easier, promoted or helped forward”.

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

[33] The first change is that set out in  [12](b) above: replacing the National Council as trustee with the National Board of the National Council. The reason for that is that the National Council meets only once annually. The National Board meets quarterly.  It is seen as more suited to carrying out the duties of trusteeship and good governance. I approve that change, as it will facilitate the work of the trust.

[34] The second variation proposed was that set out in [12](c) – adding powers of investment found in contemporary charitable trusts in New Zealand. I have looked at the relevant clauses of the new trust deed, as has the Attorney. The Attorney found that these changes would facilitate the carrying out of the trust in terms of s 33. I agree. The new provisions are orthodox and appropriate, and I approve them.

[35]     The answer to Issue 4 is “Yes”.

Result

[36]    The application is granted. Specifically, orders are made as follows:

(a)The trust established by the original trust deed is varied by the substitution of a new deed of trust as annexed to the affidavit of Richard Lee Charles Odom, filed in support of the present application.

(b)The current trustee is replaced by the National Board of the National Council of the Young Men’s Christian Associations of New Zealand.

(c)The trust property shall be disposed of and administered  in accordance with the new trust deed in (a).

(d)The National Board of the National Council of the Young Men’s Christian Associations of New Zealand is authorised to execute the new trust deed.

(e)Costs of this application will be met from the trust’s funds.

(f)Leave is reserved to apply for any further directions necessary to carry these orders into effect.

Stephen Kós J

Solicitors:
Duncan Cotterill, Wellington