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Beneficiary rights, Charitable trusts, Charitable Trusts, Charities, Trusts, Variation

Amending charitable trusts to include powers of variation

There are a large number of charitable trusts in New Zealand.  The reason for this is not well understood: see How Charitable is New Zealand for some insight.

One of the issues that arises, perhaps more in New Zealand than elsewhere, due to the number of charitable trusts, is that the trustees are not always fully apprised of the responsibilities of office and how to correctly manage and administer a trust.  Many trustees on coming to terms with the deed of trust under which the charity is operated, may decided that a sensible solution to certain issues or concerns is to vary the terms of the trust.

However, where it is desirous to vary the terms of a charitable trust it is not always appreciated when it is necessary to get court approval to do so.  See Variation of Charitable Trust, which explains the legislative basis for this.

Another question to ask when seeking approval to a variation of a charitable trust, is can the variation include a power of variation so that further variation can be made without redress back to the court.  This was considered in  the Matter of the Neil Barr Farm Forestry Foundation. In this case the court was happy to approve a number of administrative variations all of which were satisfactory to the Attorney-General.  However, the court was less certain about the addition of a power of variation that could be exercised without referring the changes back to the court.  In this regard the court noted that:

[8] I discussed this aspect of the new provisions with Mr Kelly. He indicated that in his experience such provisions are now relatively common in deeds for charitable trusts. He advised that there is adequate protection against any unintended, or even intended, transformation of the charitable purposes, by virtue of the requirement that such amendments be limited to those that are administrative in nature, and the requirement that such changes be supported unanimously by all trustees.

[9] Accordingly, on reflection I am persuaded of the appropriateness of those provisions.

The solution was pragmatic.  It also highlights the need to consider the parameter of a proposed variation that will allow a power of variation to ensure it is appropriate in the context of a charitable trust.  It also highlights the need when drafting deeds of charitable trust to consider whether to include suitable powers of variation.

 

References:

  • In the Matter of the Neil Barr Farm Forestry Foundation [2014] NZHC 2324
  • Charitable Trusts Act 1957, s 33

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