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Charitable trusts, Charities, Trusts Act 2019, Variation

The spirit of philanthropy

Muir J’s opening observation in Re Hugh Green Trusts is that “The spirit of philanthropy is no better demonstrated in New Zealand than by the Green family.” Matters involving the Hugh Green Trust and the Hugh Green Property Trust (the Trusts), came before the court for directions pursuant to section 133 of the Trusts Act 2019 that the trustees can take the proposed steps and an application under section 124 of the Trusts Act approving the proposed variations of the Hugh Green Trust on behalf of unborn and future and/or unknown beneficiaries.

What was intended to be achieved was set out at [6] as follows:

There is a certain synergy with what was proposed in Consolidation practical and expedient, which related to a scheme in respect of two charitable trusts, although on a somewhat larger scale.

As set out at [9] the restructure proposal cannot proceed. As set out at [9]:

Motivation behind the restructure are set out in [23] as follows:
Importantly at [24] it is noted that “[Hugh Green] recognised the burden and demotivating influence of extreme intergenerational wealth.”

Blessing application


Section 133 of the Trusts Act, is substantially similar to section 66 of the Trustee Act 1956, which was repealed by the Trusts Act. As noted at [31]:

The case in hand proceeded on the basis that the proposed decision is “truly momentous”

In deciding whether to make the directions sought, the court asks (as set out at [33]):

The trustees in the case in hand confirmed that the decision had been made and that the decisions were reasonably open to them. The trustees also noted at [43] where the exercise of the powers might be questioned:

With respect to the variation, the legal principles are set out at [58] and [59]:

The relevant principles were summarised in Gavin v Gavin by Mander J as follows:

Importantly s 124 of the Trusts Act differs from its predecessor section 64A of the Trustee Act as previously as noted at [61] “… the the court could not approve variations that were detrimental to the beneficiaries’ interests. Under the new Act benefits and detriments are factors to be taken into account alongside the nature of the interest and the settlor’s intentions.”

That said, as noted at [62]:

Position of unknown, unborn and minor beneficiaries of the trusts

This aspect of the decision warrants particular consideration as it clearly canvasses the fact that potential detriment is inevitable, but is not necessarily a barrier to what has been proposed by the trustees. See [67] to

The court was highly satisfied with the submissions made regarding the unborns, unknown and minor beneficiaries. Seemingly in large part due to the high degree of contingency and remoteness, but also noting the following grounds of the restructure, which:

Although it was accepted that there was a significant diminishment of contingent interests by the inclusion of the charitable Foundation the court concluded in a cogently reasoned judgment that the orders sought should be made.

Also see Covich v Barbarich another recent decision regarding and application for directions under section 133 of the Trusts Act,

References:

  • Re Hugh Green Trusts [2021] NZHC 2184
  • Trusts Act 2019, sections 124 and 133
  • Trustee Act 1956 (repealed), ss 64A, 66
  • Gavin v Gavin [2021] NZHC 550
  • Covich v Barbarich [2021] NZHC 2159

Discussion

One thought on “The spirit of philanthropy

  1. Do you think the Courts will take a more generous approach to s124 applications under the new section (inclusion of benefit and deterinent as guiding factors?). I have not seen a case where an application under s64A or s124 has been declined in any event (even under s64A). Will be interesting to see how it unfolds.

    Posted by mary foley | November 22, 2021, 1:38 pm

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