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Charitable trusts, Eden Refuge Trust, Trustee liability

Variation of Charitable Trust

About half of all New Zealand registered charities are trusts.  Some settled on carefully considered terms, some not so much.

The problem when a Charitable Trust needs amendment as it cannot fulfil its original purposes (no matter how arcane) is that unlike discretionary family trusts, charitable trusts cannot necessarily be varied by the trustees at their discretion.  Instead the trustee may need to apply for approval of a scheme of amendment under Part 3 of the Charitable Trusts Act 1957.

Where this is the case, the first step is for the trustee to obtain the Attorney General’s approval.  This is required as it is not possible in the circumstances of a charitable trust, to obtain the beneficiaries’ approval.

Assuming the Attorney General consents to the scheme, which could for example provide for the adoption of a new deed of trust, the next step is to obtain the consent of the High Court to the proposed variation.  To address this the questions for determination by the court will be:

  • Is it “impossible or impracticable or inexpedient” to carry out the trust’s original purpose.  Example – in the case of a memorial trust – is it no longer possible to erect a memorial at the relevant site?
  • Where a new deed of trust is put forward – is the new trust deed is directed to charitable purposes?
  • Are the new purposes (whether pursant to a new deed or a new clause or rules in an existing deed) sufficiently close to the charitable purposes in the original trust deed?

Where the court is satisfied that the proposed scheme is required and appropriate; the final question to determine the matter is whether “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”  Where this is the case the Court may approve that variation.

Variations to charitable trusts settled by will are addressed in the same manner: see The New Zealand Guardian Trust Company Limited where the trustee sought variations of a charitable trust settled by will so that the trustee could more practically realise the testator’s wishes regarding the care of cats and education about the same.

Variation of charitable trusts is a technical area and care is requried to determine when the input of the Attorney General may be required.  Where a trustee or a professional adviser fails to appreciate the correct mechanism for amending a charitable trust the consequences can be extreme.  See commentary on the Eden Refuge Trust case.

The point of this blog is not to provide answers, so much as to indicate what questions need to be asked and when professional assistance should be sought.

References:

  • The YMCA New Zealand Soldiers Great War Memorial Trust [2013] NZHC 2516
  • The New Zealand Guardian Trust Company Limited [2014] NZHC 2120
  • Charitable Trusts Act 1957, s 33, 32, 56
  • Re Melanesian Mission Trust Board HC Auckland M1140/98, 24 September 1998.

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