Radford v Murdoch [2018] NZHC 276 (28 February 2018)

Last Updated: 20 March 2018

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2017-409-000958 [2018] NZHC 276

BETWEEN	MAUREEN ANNETTA RADFORD AND PETER WALLACE PHILLIPS Applicants
AND	PROFESSOR DAVID MURDOCH Respondent

Hearing:	26 February 2018
Appearances:	A D Marsh for Applicants No Appearance for Respondent
Judgment:	28 February 2018

_{JUDGMENT OF GENDALL J}

RADFORD v MURDOCH [2018] NZHC 276 [28 February 2018]

Introduction

[1] This is an application for either directions pursuant to s 66 of the Trustee Act

1956 or, alternatively, for orders varying a trust deed pursuant to s 64A of the Trustee

Act 1956.

[2] These matters relate to the McGee Fellowship Trust, a trust created by the will of the late Vera Mavis McGee dated 13 January 1999. The Applicants are the executors and trustees of the will and the Trust. The respondent is Professor David Murdoch, the Dean of the Christchurch Clinical School of Medicine of the University of Otago.

[3] Probate of the will of the late Ms McGee who died on 26 March 2000 was granted on 10 April 2000. Her will established the McGee Fellowship Trust and provided that the Fellowship Fund would be held on trust for research into neurological, respiratory and muscular wasting disorders, to enable a final year student to undertake research for a three month elective period. The award of the Fellowship, however, was not to exceed one award each year.

[4] The Applicants state that due to difficulties with the wording of the trust, the Fellowship has not been able to be awarded as often as the trustees and the Dean of the Christchurch Medical Schools would have liked. In fact, as an affidavit filed in support by the respondent confirms that, there have only been nine awards of the Fellowship since 2002. This is despite there being assets of the Fellowship of some

$700,000, according to the last draft financial statements which are before the Court.

[5] Accordingly, the Applicant Trustees (with the support of the respondent as

Dean of the Christchurch Medical School) have brought this application.

[6] Parties who may be affected by the substantive application before the Court are generally potential future beneficiaries under the Trust. In accordance with directions provided earlier by this Court, the respondent was served with this proceeding on 21 December 2017. In addition, an appropriate public notice was advertised in the Christchurch Press on 27 January 2018 and during the week of

15 January 2018 appropriate advertisements were prominently posted notifying the

present Application on three notice boards within the University of Otago, Christchurch School of Medicine Building at 2 Riccarton Avenue, Christchurch.

[7] No opposition to this application has been notified. Indeed, the Application, it seems, is supported by the respondent, Professor Murdoch, the Dean of the Christchurch Medical School.

Directions under s 66 Trustee Act 1956

[8] Turning now to the Application for directions noted at para [1] above, the first alternative relates to s 66 of the Trustee Act 1956. This provides:

66 Right of trustee to apply to court for directions

(1) Any trustee may apply to the court for directions concerning any property subject to a trust, or respecting the management or administration of any such property, or respecting the exercise of any power or discretion vested in the trustee.

(2) Every such application shall be served upon, and the hearing may be attended by, all persons interested in the application or such of them as the court thinks expedient.

[9] Before me, the Applicants contend that throughout they have attempted to apply an interpretation to the Fellowship that will best allow the funds it holds to be utilised in what they believe is both the best interests of the Trust and also consistent with the desires of the late Ms McGee. Now, the Applicants maintain that they seek directions confirming an interpretation of the Trust so that they are able to utilise the Fellowship funds in a slightly wider fashion so that the Trust can usefully continue and be effective.

[10] The provisions of the Fellowship contained in the will of the late Mrs McGee are set out at para 6 of the will:

6. Residue

I give the rest of my estate to my trustees on trust:

(a) To pay my debts and funeral expenses, estate’s administration expenses and any death duty payable on my dutiable estate.

(b) To hold the residue of my estate UPON T RUST to be invested with my said trustees on behalf of T HE CHR IST CHURCH CL IN ICA L

SCHOOL OF MEDIC IN E OF T HE UNIV ERS I T Y OF OTAGO (hereinafter called “the Clinical School”) as a separately identified fund to be known as T HE MCGEE FELLOWSH IP FUN D (hereinafter with its accumulation called “the said Fund”) which said Fund is to be invested by my trustees with full power to invest and change investments as if they were beneficially entitled such last mentioned power to include by way of description but not by way of limitation a power to invest in any first mortgage or contributory first mortgage of freehold land with the mortgage therein described being a solicitor’s nominee company or my trustees either alone or with contributors UPON T HE FURT HER T RUST S to apply the capital as well as the income from such investments for the following purposes and upon the following terms:

(i) The purpose of the research is into neurological respiratory and muscular wasting disorders.

(ii) The name of the award shall be T HE MCGEE FELLOWSHIP (hereinafter called “the Fellowship”).

(iii) The Fellowship is to enable a final year student to undertake the said research for the three month elective period provided in the final year of the medical course at the Clinical School or such other similar course as the Dean for the time being of the Clinical School may determine at his entire discretion.

(iv) The Fellowship is to be first offered at the Clinical School in the year following my death and thereafter on an annual basis whilst there are moneys available in the said Fund.

(v) The award of the Fellowship is to be made at the entire discretion of the Dean for the time being of the Clinical School or his successor to the present office of Dean as the case may be PROV IDED H OWEV ER and I express the wish that his choice of each student shall be made known to my Trustees at the commencement of the said research period.

(vi) The amount of the award during each year of the Fellowship and the subject for research within the field of care of neurological respiratory and muscular wasting disorders shall be at the entire discretion of the said Dean PROVIDED

HOWEV ER and I express the wish that part of the annual sum shall be expended on books and/or personal instruments for

the use by the said student and shall become the personal

property of the said student and part shall be used for the purchase of expendable materials for the said research

projects and should part be required to purchase research

equipment within the field of care of neurological respiratory or muscular wasting disorders then such research equipment shall become the property of the Clinical School.

(vii) The students awarded the Fellowship are not to exceed one each year and they are to carry out their research under the supervision of a delegated senior academic staff member of the Clinical School AND I EX PRESS the wish that a copy of

the report of each student at the conclusion of each research project be made available to my Trustees.

(viii) I declare that any receipt purporting to be signed by the said Treasurer or other proper officer of the Clinical School shall be sufficient discharge to my trustees in respect of the said bequest of residue.

[11] In the present s 66 Application for Directions the Applicants seek:

1. Directions pursuant to section 66 of the Trustee Act that:

1.1 Paragraph 6(b)(iii) of the Fellowship be interpreted by the Trustees as meaning that the Fellowship may be awarded to any final year student at the Clinical School (including any final year student in a nursing course, in a masters course, in a bachelor of biomedical sciences course, or any other such course that the Clinical School was responsible for.

1.2 Paragraph 6(b)(vii) of the Fellowship be interpreted by the Trustees as meaning that the Fellowships awarded are not to exceed an average of one each year for the duration of the Fellowship so that where the Fellowship has not been awarded in any year previously additional Fellowships shall be able to be awarded provided that over the duration of the Trust on average no more than one Fellowship shall be awarded per annum.

[12] The evidence before the Court in support of this application indicates that in the past the amounts awarded each year for the Fellowship tended to be in the region of $10,000 - $12,000 per award.

[13] As I understand the position, however, in each of the 2002 and 2005 years, despite the fact that the provisions of the Fellowship provided there to be only one award each year, there were in fact two awards made. Notwithstanding this, the Applicants indicate that a real issue for them has been that since 2007 they have not been able to make even one award in any following year up to the present. Accordingly, they contend that there are a number of very good reasons why the interpretation of the Fellowship they suggest should be applied here:

(a) They suggest first, that clearly the funds in the Fellowship were intended to be used for medical research. As matters currently stand, those funds are unable to be easily used. The Applicants maintain this cannot have been the intention of the settlor.

(b) Affidavit evidence before the Court confirms that there are currently funds of approximately $700,000 held by the Fellowship. Given a conservative investment return of 2.5 per cent per annum, the Fellowship is currently generating income of $17,500 per annum. This is against the previous average amount of the Fellowship’s annual awards over earlier periods being between $10,000 and $12,000. Thus, no issues over possible diminution of the capital of the Fellowship arise here.

(c) The Applicants have brought this application with the support of the current Dean of the Christchurch Medical School. The Application has been properly advertised in accordance with Court directions and details posted on prominent notice boards at the Christchurch School of Medicine. No one has objected to the Application being brought or granted.

(d) The directions and interpretation of the Fellowship sought by the Applicants do not prejudice the originally identified beneficiaries of the Trust. It is intended only to apply, failing situations where a final year medical student is able to be granted the Fellowship in any one year.

(e) The Applicants emphasise that this is not simply a case of them seeking to avoid having to exercise their obligations under the Fellowship. They say the Application is properly brought and that they genuinely seek the Court’s directions in this situation in order that the Fellowship can function on a proper basis which it has not been able to do over the last 10 years.

[14] Although from the authorities it is clear that trustees cannot surrender obligations to exercise discretions from time to time, because they depend on circumstances which may change and the Court itself would have to be informed of these changes, in this instance, I am of the view that the directions sought by the Applicants here are appropriate. This is a case where the jurisdiction under s 66 of the Trustee Act 1956, which is intended essentially for private advice by the Court to

trustees where they are in doubt as to the propriety of actions that may be contemplated, is appropriately engaged. This does not here relate to past actions or hypothetical situations, but genuinely to interpretation matters for the future of the Fellowship.

[15] In Melville v NRMA Insurance NZ Limited¹ reference was made to a situation where the Court’s assistance was sought on points of minor importance arising in the administration of a trust. The present situation is not entirely dissimilar. No substantial factual disputes or allegations of breach of trust arise here. The matters at issue are purely questions of interpretation.

[16] The proposed amendment to para 6(b)(iii) of the Fellowship noted at [11] above simply makes clear that an award can be made to any final year student at the Clinical School (which is to include a final year student in a nursing course, a masters course, a bachelor of biomedical sciences course and/or any other such course that the Clinical School is responsible for). In a sense, this is in line with what the current Fellowship Trust provision provides when it states that it is to enable “a final year student” to undertake the research in the “medical course at the Clinical School or such

other sim il ar course as the Dean for the ti me being o f the C li nical S chool ma y

_{determi ne at hi s enti re di screti on ”. (Emphasis added)}

[17] Turning now to para 6(b)(vii) of the Fellowship, currently this states:

The students awarded the Fellowship are not to exceed one each year...

The proposed interpretation direction sought is simply that this is to mean that:

Fellowships awarded are not to exceed an average of one each year for the duration of the Fellowship so that where the Fellowship has not been awarded in any year previously additional Fellowships shall be able to be awarded provided that over the duration of the Trust on average no more than one Fellowship shall be awarded per annum.

(Emphasis added)

[18] In my view, the directions sought are entirely appropriate here. No doubt, a concern of Ms McGee in establishing the Fellowship was that it was able to run for

¹ Melville v NRMA Insurance NZ Limited (HC) Wellington, Wild J, 17 April 2002, CP70/01.

some years whilst the fund continued and was not to be exhausted by a bunch of awards being made in one particular year. The direction sought does not fall foul of this intention. In my view, it will enable a measured and proper continuation of the Fellowship for the purposes it was intended.

[19] For all these reasons, the Application before me for directions under s 66 of the

Trustee Act 1956 succeeds.

[20] The directions sought in the Application which I outline at para [11] above will follow.

[21] This disposes of the present application.

Variation of the Fellowship Trust

[22] As I have noted above, in the alternative, the Applicants sought orders under s 64A of the Trustee Act 1956 for an effective variation of the Fellowship Trust Deed. Given my decision on the s 66 application there is no need to address this alternative remedy under s 64A Trustee Act 1956. There is no need here for any amendment to be made to vary the provisions of the Trust. Notwithstanding this, I express the preliminary view that had it not been appropriate to address this matter under s 66, orders varying the Trust Deed under s 64A may very well have been appropriate here.

Result

[23] For all the reasons outlined above, the Application for directions pursuant to s 66 of the Trustee Act 1956 succeeds.

[24] Orders and directions are now made pursuant to s 66 that:

(a) Para 6(b)(iii) of the Fellowship be interpreted by the Trustees as meaning that the Fellowship may be awarded to any final year student at the Clinical School (including any final year student in a nursing course, in a masters course, in a bachelor of biomedical sciences course or any other such course that the Clinical School was responsible for).

(b) Para 6(b)(vii) of the Fellowship be interpreted by the Trustees as meaning that the Fellowships awarded are not to exceed an average of one each year for the duration of the Fellowship so that where the Fellowship has not been awarded in any year previously additional Fellowships shall be able to be awarded provided that over the duration of the Trust on average no more than one Fellowship shall be awarded per annum.

[25] If there may be any issue as to costs this can be the subject of memoranda to follow.

...................................................

Gendall J

Solicitors:

Saunders Robinson Brown, Christchurch