Eliza White Board of Management [2019] NZHC 181 (15 February 2019)

Last Updated: 8 March 2019

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2018-409-000813 [2019] NZHC 181

IN THE MATTER	OF SECTIONS 32 AND 33 OF THE CHARITABLE TRUSTS ACT 1957
AND IN THE MATTER	OF THE CHARITABLE TRUST ESTABLISHED BY THE WILL OF ELIZA WHITE, LATE, OF CHRISTCHURCH
AND IN THE MATTER	OF AN APPLICATION BY ELIZA WHITE BOARD OF MANAGEMENT Applicant

Hearing:	11 February 2019
Appearances:	G M Brodie for Applicant
Judgment:	15 February 2019

JUDGMENT OF GENDALL J

Introduction

[1] This is an application by the Eliza White Board of Management (the Board), a charity incorporated under the Eliza White Orphanage Trust Act 1951, to vary the charitable purposes of a trust contained in the will and codicil of the late Eliza White (Eliza) and the Trust’s powers of administration under ss 32 and 33 of the Charitable Trusts Act 1957 (the Act).

RE ELIZA WHITE BOARD OF MANAGEMENT [2019] NZHC 181 [15 February 2019]

[2] Eliza’s will and codicil in question were both dated 10 March 1907 and she died in 1909.

[3] By her will which established the Trust, Eliza directed her Trustees to hold the residue of her real and personal estate on trust:

for the purpose of founding, building, equipping and maintaining two orphanages in or near Christchurch, one for the reception of destitute female orphan children and the other for the reception of destitute male orphan children, the orphanage for female children to be first established and the orphanage for male children not to be undertaken unless or until the trust estate of the testatrix shall be more than sufficient for the one first to be established...

[4] Her original bequest establishing this Trust was a large one of some £40,000 at the time which was estimated in 2002 to amount to $5 million. Eliza’s estate included commercial properties and from 1910 to the mid-1990s the Trustees invested the assets and income so that the Trust gradually accumulated more capital.

[5] In the mid-1930s the Trustees purchased a block of land and built a girls’ orphanage which was named St Joseph’s Orphanage in accordance with Eliza’s wishes. The Orphanage unfortunately, however, was not viable and by the 1950s all of the girls were transferred to another facility and the Orphanage building lay empty.

[6] At the time, the Trustees wanted the Orphanage to be able to accommodate boys. This required an amendment to the terms of the Trust and this amendment was effected by a Private Act of Parliament, the Eliza White Orphanage Trust Act 1951.

[7] The principal features of that Act were:

(a) To incorporate the Trustees of Eliza’s will as a Board;

(b) To fix the number of Trustees at five;

(c) To vest control of the Orphanage in the Roman Catholic Bishop of Christchurch;
(d) The Trustees were directed to pay the net income of the Trust to the Bishop to be applied for the purposes of the orphanage;

(e) If it became necessary to close the Orphanage the premises and chattels were to be transferred by the Bishop back to the Board; and

(f) The Orphanage was to be made available “for the reception of both female orphan children and male orphan children”.

[8] Following the passing of the Eliza White Orphanage Trust Act 1951, all of the land and other assets held by Eliza’s estate were transferred to the Roman Catholic Bishop of Christchurch to be held by the Bishop upon the Trusts and with the powers in Eliza’s will but as modified by this Act.

[9] The decades passed and by the late 1980s it seems the Orphanage had ceased to be viable and was closed down again. The land and buildings were sold and the Trustees again considered it necessary to seek a variation of the terms of the Trust. An application was made under Part 3 of the Act and on 6 July 1993 this Court (without objection by the Attorney-General) made the orders sought to the proposed scheme. This was to effectively amend the powers of the Trustees in administering the Trust to allow:

1. For the erection, purchase, lease or management of a residential facility or facilities on or near Christchurch for the care or benefit of children both male and female and the counselling and the training in parenting skills of their families whom the Board considers are in need of care due to poverty, ill health or other circumstances AND the Board in carrying out the terms of its trust shall:

(a) Give preference to the care of children and the counselling and training in parenting skills of their families who have a connection with the Roman Catholic Religion but children and their families of any other or no denomination may also be cared for and receive counselling and training in parenting skills and in caring for the said children who are in the Board’s facilities and in the counselling and training in parenting skills of their families emphasis shall be given to Catholic values.

(b) Consider any proposals made to it from time to time by the Roman Catholic Bishop for the time being of the Diocese of Christchurch relating to the said residential facilities, the management thereof and the care of the said children (and the

religious education of those children in care who have a connection with the Roman Catholic Religion) and the counselling and training in parenting skills of their families and the decision of the Board to accept or reject the said proposals in whole or in part shall be final.

2. The Board shall invest the funds which it is holding from time to time in any investments authorised by law for the Investment of Trust Funds and shall apply the net income arising therefrom as follows:-

(a) The costs and expenses incurred by the Board in conducting its affairs;

(b) The accumulation of the balance pending the erection, purchase, lease or management of the residential facility/facilities referred to in paragraph (1) hereof;

(c) All costs and expenses relating to the residential facility or facilities referred to in paragraph (1) hereof, the management thereof and the benefit of the children being cared for therein and the counselling and training in parenting skills of their families;

(d) The Board shall have the power to resort to capital to meet any of the above expenditure and to accumulate any unspent income from time to time.

[10] In 1997 the Board purchased its first modern family home. It upgraded the building and funded the management of the facility by the Cholmondeley Home Board. The facility successfully provided long term care and protection for nine children under the care and protection of the Director General of Social Welfare.

[11] In 2001 another facility of a similar nature was opened. It soon became clear that the cost of running the homes was more than the Board’s resources could bear. By 2010 both had been sold. A smaller facility was then purchased but was closed in 2013 for similar reasons.

[12] Since 2013 the Trust has ceased to provide any direct services. It provided
$80,000 to Chomondeley Children’s Home as a contribution towards operating costs during the 2015 financial year. Otherwise, the trust’s assets are being invested and income is accumulating. The total assets are reported as $7,696,871, and income net of expenses of $232,515.

Rationale for application and difficulties faced by the Trust

[13] The essential thrust of the present application is to remove from the mandatory terms of the Trust the requirement that Trust capital and income is only to be applied for the purpose of providing residential accommodation. Instead, the Trustees wish to be in a position to apply both Trust capital and income for the general benefit of needy children and their families whom the Board considers are in need of care, support or assistance due to poverty, ill health or other circumstances. Essentially here the Board takes the view that the care model which the original purpose of the Trust was premised upon – providing a safe environment for children in the form of an orphanage for short term and longer term stays until more permanent accommodation is able to be found – is not fit for modern times. It seems that the experience of the Trust in providing residential accommodation has been that the costs involved in doing so far outweigh the benefits and, further, that the Trust is only able to support a very limited number of needy children in this manner. It is said there are real risks in funding the construction of a large residential facility and servicing the ongoing running and maintenance costs that would be required to enable the Trust to serve the needs of a growing group of at risk children.

[14] Accordingly, the position of the Board here is that it is no longer possible, practicable or expedient to carry out the purpose of providing residential childcare facilities. The Board says it does not intend to establish another residential facility.

[15] This view of the Board, it is said, is informed by a detailed strategic review report which it obtained from Shane Murdoch, a senior social worker and general manager of Cholmondeley Children’s Centre in Christchurch. This report concludes:

In my view the Eliza White Trust would continue to successfully achieve its original mission in this current environment by liquidating remaining fixed assets and evolving into a philanthropic trust...

Proposed variation

[16] With all this background in mind, the Board says in the present application that it considers it cannot realistically provide and maintain a viable residential facility for orphan children. As I have noted, it is of the view that its resources would be best
employed in providing support for needy children on a more general basis and this is the effect of the variation sought.

[17] Specifically, the Board proposes that the purposes of the Trust and the powers of the Board of Trustees in administering the Trust should be now amended to the following:

PURPOSE

1. The Trustees shall hold the assets of the trust fund comprising all lands, investments and moneys (hereinafter referred to as ‘the Trust Fund’) exclusively in, for or towards any charitable purpose or purposes promoting the education, health, welfare, wellbeing, recreation and benefit of any child or children and their families or whanau residing or located in the Roman Catholic Diocese of Christchurch whom the Board considers are in need of care, support or assistance due to poverty, ill health or other circumstances as the trustees in their absolute discretion shall determine. The trustees shall give a preference to members of the Roman Catholic Church or organisations, trusts, companies or other legal entities which have a connection with the Roman Catholic Church.

POWERS

2. The trustees shall, in the administration, management and in the investment of the Trust Fund, and in exercising their discretion to achieve the objects and purposes of the Trust have all the rights, powers and privileges of a natural person, and subject to the provision of this Scheme of Variation may deal with the Trust Fund as if the trustees were beneficially entitled to it, and may exercise all or any of the following powers, discretions and functions in addition to all other powers conferred by law:-

(a) Vary the Trust by providing such additional or supplementary powers as may be considered necessary or desirable for the proper administration thereof, providing however, that no alteration or variation shall be made to the objects or purposes of the Trust or be inconsistent with the charitable nature and purpose of the Trust;

(b) Notwithstanding anything herein contained or implied, no power or reservation, expressed or implied, in this Scheme of Variation, shall authorise the trustees to do or suffer any act which does not further the charitable purposes of the Trust and the declaration of the charitable objects and purposes in this Scheme shall at all times be paramount so as to exclude any act or omission which is or may be deemed to be not in accordance with such objects or purposes.

3. The provisions hereof, including the reconstituted terms of trust and prescription for their administration, shall be given effect as being in

substitution for all previous deeds, trust and schemes herein, to the intent that the said provisions shall entirely replace all previous provisions.

Jurisdiction

[18] 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 – under s 53(c) of the Act.

[19] Section 32(1) makes provision 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 where it has become “impossible or impracticable or inexpedient” to carry out the original purpose. The leading case on the meaning of “inexpedient” is Re McElroy Trust.¹ In that case the Court of Appeal found that the concept of inexpediency introduced a value judgment rather than simply an assessment of feasibility. The question is not whether the scheme would be “better than the existing arrangements” but whether carrying out the original purposes are “inexpedient”. The general connotation of the word “inexpedient” was that the original charitable purposes had become “unsuitable, inadvisable or inapt”.

[20] In Re Tennant² Hammond J summarised the principles governing an application for variation under s 32 as follows:

(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; and

(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.

¹ Re McElroy Trust [2003] 1 NZLR 289 (CA).

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

[21] Section 33 of the Act 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.

[22] In Re Twigger³ Tipping J in the High Court considered that there was an analogy between the duties owed by a trustee in promoting a scheme under Part 3 of the Act and the duties of a trustee when exercising a power of appointment among a significant group of persons, or when selecting the objects of a discretionary trust:

In each case a choice or selection has to be made, albeit in differing circumstances, from a range of potential beneficiaries. In each case the trustee is under a duty to fulfil the intention of the settlor or testator as best he can. In each case in my view the trustee, to discharge his duties properly, should inform himself as fully as the circumstances permit of those who may fall within the qualifying class and measure their respective claims to be selected as beneficiaries. So it is then that by analogy with such duties of a trustee, as exemplified in the Baden and Hay cases I consider a trustee in a Part III Scheme case should adopt the same sort of enquiries to find and select appropriate substitute beneficiaries from among those who may have any claim to qualify.

[23] Finally, s 56 of the Act provides that no scheme shall be approved by the Court under Part III of the Act unless the Court is satisfied 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.

Amendment of the purpose of the Trust

[24] As I have noted above, in terms of s 32(1) of the Act, before the Court can approve a scheme varying the charitable purposes of a trust it must first be satisfied that it has become “impossible, impracticable or inexpedient” to carry out the original purposes. The Board here argues that this is clearly the case.

[25] Material provided by the Board to the Court appears to support the view that, like many long established charitable trusts with a particular emphasis on the provision

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

of residential accommodation, the present Trust purposes need to be varied to allow wider use of the Trust capital without the constraint of the requirement to support residency. Those materials suggest that it has become difficult to provide a single means for making available temporary or permanent safe and secure accommodation facilities for needy children. That evidence also seems to show that the cost of providing accommodation for vulnerable children, which is suggested to be at a level of $80,000 to $100,000 per child per year, must mean that very few children can be assisted and the Trust itself could become at risk by overstepping unless some change to its fundamental purpose is instituted.

[26] With these matters in mind which I accept, I am satisfied that the test in s 32 of the Act that it would be unsuitable, inadvisable or inapt (that is “inexpedient”), for the Board to continue to operate a residential home for the purposes of providing short term or long term care for children in need, is met. The intended change to the purpose of the Trust, in my view, is appropriate here.

[27] And turning now to the Re Twigger⁴ requirements I refer to above, I am satisfied:

(a) The Trust and its original purpose to provide two orphanages was charitable at the dates of settlement and its earlier variation.

(b) The substituted purpose of providing “for or towards any charitable purpose or purposes promoting the education, health, welfare, wellbeing, recreation and benefit of any child or children and their families or whanau...whom the Board considers are in need of care, support or assistance due to poverty, ill health or other circumstances” is clearly charitable. In the past the provision of important services to children has been considered charitable – see Re Potter Masonic Trust.⁵

(c) The proposed purpose of the variation accords as closely as reasonably possible under the new changed circumstances the Trust now faces to

⁴ Re Twigger, above n 3.

⁵ Re Potter Masonic Trust (HC) Auckland 16 July 2008 CIV-2008,404-1880, Harrison J.

the essential elements of the original purpose. The original Trust Deed benefitted orphaned or destitute children. The proposed amendment takes into account the modernisation of State care of disadvantaged children and allows the Trust to provide charitable benefits to those children without having to provide primary accommodation itself. I am satisfied, too, the widened purposes of the proposed variation accord with Eliza’s wishes in three important respects:

(i) The Trust Fund may only be used for charitable purposes;

(ii) To benefit children; and

(iii) Preference is given to Roman Catholic Church affiliated parties.

I accept therefore that the amended purpose is a similar and appropriate substitute and will enable the Trust to continue to meet the needs of such disadvantaged children.

Amendment to the mode of administration of the Trust

[28] As I have noted above, jurisdiction under s 33 of the Act exists which permits the mode of the administration of the Trust to be varied where the administration of the Trust would be “facilitated” by that being done. Clearly this is intended to deal with problems of administration faced by charitable trustees in giving effect to the intended purpose of the Trust.

[29] In Re Melanesian Mission Trust Board⁶ the Court held that “facilitate” here means to make easier, promote or help forward. The threshold under s 33 is therefore less stringent than that applied to variations to the charitable purposes outlined in s 32 of the Act.

[30] The question is always whether extending the Board’s powers in a case such as the present to enable it to vary the Trust, but not in a manner which does not further

⁶ Re Melanesian Mission Trust Board (HC) Auckland M 1140/98, 24 September 1998.

the charitable purpose of the Trust, would make easier or promote the administration or carrying out of the Trust.

[31] In the present case the Board seeks the addition of a general power to vary the Trust from time to time for administrative purposes without the need to apply to the Court for a formal variation each time. This power could only be exercised, however, where the alteration or variation is not to the objects or purposes of the Trust and is not inconsistent with the charitable nature and purpose of the Trust.

[32] The threshold for variations under s 33 of the Act requires only that it be established the variation proposed would facilitate the carrying out of the Trust. With this in mind I am satisfied it is appropriate here to give the Trustees power to vary the Trust for administrative purposes to avoid the expense of a scheme in the future. The proposed clause, in my view, is sufficient to ensure the Board could not use such a power to vary the charitable purposes of the Trust without first submitting a variation to the Court for approval. I conclude that this variation sought by the Board is also appropriate here.

Report of the Attorney-General

[33] In terms of s 35 of the Act, the proposed scheme to vary the provisions of the Trust has been submitted to the Attorney-General. An extensive and detailed report from the Attorney-General dated 18 October 2018 was filed and is before the Court. This report dealt extensively with the issues to be addressed by the Court and concluded at para [42]:

42. Pursuant to ss 35 and 56 of the Act, and for the purposes of assisting the Court as to the matters in which it is required to be satisfied under s 56(1)(a) of the Act, I report that I am satisfied that the proposed scheme is a proper one and should carry out the desired purpose or proposal, and is not contrary to law or policy or good morals; that the proposed scheme can be approved by this Court under Part 3 of the Act; that every proposed purpose is charitable within the meaning of Part 3 and can be carried out; and that the requirements of Part 3 have been complied with in respect of the scheme up to the giving of this report.

Advertising

[34] Next, appropriate advertising of the present application has been achieved here. Appropriate advertisements were placed in the New Zealand Gazette on 29 November 2018 and in the Christchurch Press on 1, 8 and 15 December 2018. There was no opposition lodged to this application, nor were there any appearances before me by any other party relating to the application.

Result

[35] For all the reasons I have outlined above, this application before the Court succeeds. Approval to a variation of the Trust in accordance with the scheme outlined at para [17] above is accordingly granted.

[36] Orders are now made as attached at Appendix A.

Costs

[37] The Board here effectively seeks an order that costs in their favour are to be met from the funds held by the Trust. In addition, in accordance with the normal requirements of the Attorney-General, costs on providing their extensive report here of $750 are sought. These costs orders sought are appropriate.

Costs orders to this effect are now made as outlined above.



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

Gendall J

Solicitors:

Geoffrey Brodie, Barrister, Christchurch

APPENDIX A

An order is made that the Trust contained in the will and codicil thereto of the Late Eliza White both dated the 10^th March 1907 Probate of which was granted in the Supreme Court of New Zealand on the 9^th December 1909 and the powers of the Trustee in administering the trust be amended to the following:-

“PURPOSE

1. The trustees shall hold the assets of the trust fund comprising all lands, investments and moneys (hereinafter referred to as ‘the Trust Fund’) exclusively in for or towards any charitable purpose or purposes promoting the education, health, welfare, wellbeing, recreation and benefit of any child or children and their families or whanau residing or located in the Roman Catholic Diocese of Christchurch whom the Board considers are in need of care, support or assistance due to poverty, ill health or other circumstances as the trustees in their absolute discretion shall determine. The trustees shall give a preference to members of the Roman Catholic Church or organisations, trusts, companies or other legal entities which have a connection with the Roman Catholic Church.

POWERS

2. The trustees shall, in the administration, management and in the investment of the Trust Fund, and in exercising their discretion to achieve the objects and purposes of the Trust have all the rights, powers and privileges of a natural person, and subject to the provision of this Scheme of Variation may deal with the Trust Fund as if the trustees were beneficially entitled to it, and may exercise all or any of the following powers, discretions and functions in addition to all other powers conferred by law:-

(a) Vary the Trust by providing such additional or supplementary powers as may be considered necessary or desirable for the proper administration thereof, providing however, that no alteration or variation shall be made to the objects or purposes of the Trust or be inconsistent with the charitable nature and purpose of the Trust;
(b) Notwithstanding anything herein contained or implied, no power or reservation, expressed or implied, in this Scheme of Variation, shall authorise the trustees to do or suffer any act which does not further the charitable purposes of the Trust and the declaration of the charitable objects and purposes of the Trust and the declaration of the charitable objects and purposes in this Scheme shall at all times be paramount so as to exclude any act or omission which is or may be deemed to be not in accordance with such objects or purposes.

3. The provisions hereof, including the reconstituted terms of trust and prescription for their administration, shall be given effect as being in substitution for all previous deeds, trust and schemes herein, to the intent that the said provisions shall entirely replace all previous provisions.