Link: Case Summary Document
Citation: [2012] NZHC 1952 (New Zealand High Court, Woolford J)
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.
Summary:
In this New Zealand case, the trustees of three trusts associated with Ngai Tuhoe (the Tuhoe people, a Maori tribal group), which are administered by the Tuhoe Charitable Trust Board, the Tuhoe Fisheries Charitable Trust Board and the Tuhoe-Waikaremoana Maori Trust Board, applied to vary the purposes and the mode of administration of those trusts. The effect of the application was to seek court approval to amalgamate the three separate trusts into one trust. This application was the start of the process, and required ratification by a 75% vote of a group meeting of the Tuhoe.
All three trusts had broadly similar objects and operated for the benefit of Ngai Tuhoe. The Ngai Tuhoe wished preferably to combine its separate asset management structures into a single post-settlement governance entity. As part of this process the Tuhoe wished to amalgamate those entities that carried out charitable activities for the benefit of the Tuhoe into one charitable trust.
The trustees were also concerned about the administrative difficulties involved in operating three separate trusts, particularly in relation to compliance costs under the Charities Act 2005, as well as in making investment and distribution decisions that benefited the whole iwi (people or nation).
The Charitable Trusts Act 1957 imposes certain responsibilities on the Attorney-General, who is traditionally referred to as the protector of charities. These responsibilities are delegated to the Solicitor-General in New Zealand. The Solicitor-General, on behalf of the Attorney-General, reports on, or approves, schemes to vary charitable trusts, and may appear as a party to charity proceedings and act for the beneficial interest to enforce charitable purposes. The Solicitor-General may also investigate the management and administration of charitable trusts in the public interest. In this case, the Solicitor-General submitted a report to the court which supported the amalgamation in most respects.
The Tuhoe-Waikaremoana Maori Trust Board is a body corporate constituted under section 9A of the Maori Trust Boards Act 1955, and holds its assets subject to the provisions of that Act. The charitable trust administered by the Tuhoe-Waikaremoana Maori Trust Board was established by a Declaration of Trust executed on 12 March 1982 (the 1982 Declaration) pursuant to section 24B of the Maori Trust Boards Act (the section 24B trust). The assets to which the 1982 Declaration relates are listed in the schedule to the Declaration and include the Tuhoe portion of the bed of Lake Waikaremoana, and some other trust lands held under the Te Ture Whenua Maori Act 1993. The section 24B trust is a registered charity.
The Tuhoe Fisheries Charitable Trust was established by deed executed on 16 August 2006, and is registered as a Board under the Charitable Trusts Act 1957. It was established in order to act as Tuhoe’s mandated iwi organisation in terms of the Maori Fisheries Act 2004 in relation to the Tuhoe’s fisheries settlement. The trust deed was based on a template document provided by Te Ohu Kai Moana, which is the entity established under the Maori Fisheries Act 2004 to distribute and administer fisheries settlement assets. The Fisheries Trust is a registered charity under the Charities Act 2005.
The Tuhoe Charitable Trust was established by a Deed executed on 31 July 2010. The settlors of this trust were the trustees of the Tuhoe Establishment Trust (since renamed the Tuhoe Trust), which was itself established with the intention of becoming Tuhoe’s post-settlement governance entity for the purposes of the settlement of Treaty claims. The Tuhoe Charitable Trust was established in order to carry out charitable activities which could not be undertaken by the Tuhoe Trust itself (which is a private trust). This trust is also registered as a Board under the Charitable Trusts Act 1957 and is a registered charity under the Charities Act 2005.
Variation of charitable trusts is dealt with by section 32 of the Charitable Trusts Act 1957. It provides that where any property or income is given or held upon trust, or is to be applied, for any charitable purpose, and it is ‘impossible or impracticable or inexpedient to carry out that purpose’, the property and income shall be disposed of for some other charitable purpose in the manner and subject to the provisions of Part III of the Act. Previous decisions of the High Court of New Zealand have held that those promoting a scheme under Part III of the Act should seek to substitute beneficiaries or purposes resembling, as closely as possible in the changed circumstances, those specified by the original settlor.
His Honour held that the court’s powers in relation to schemes under Part III of the Act allowed approval of amalgamations of the sort proposed in this case. He said (at [39]):
…cases show that the Court has jurisdiction under s 32 to make an order amalgamating multiple charitable trusts into a single trust, provided that the statutory conditions for variation of trust are met, that is, the applicants must still show that it has become inexpedient, impracticable, or impossible to carry out the original purposes of the individual trusts.
The applicants did not rely on impossibility but rather inexpedience and impracticability. They cited in support of this claim unnecessary administration costs, unnecessary investment risks, the need to keep separate iwi rolls with resultant confusion and frustration for iwi members, and the benefits of combining assets.
Case law showed that the Court of Appeal of New Zealand thought that the concept of inexpediency introduced a value judgement rather than simply an assessment of feasibility, and that the general connotation of the word was of the original charitable purposes having become unsuitable, inadvisable, or inapt. On this point, His Honour said (at [53]–[54]):
However, the Court also stressed that the test was not whether the scheme would carry out the purposes of the trust better than the existing arrangements. It was not a question of comparing the utility or expediency of the existing trusts as against the proposed scheme. The test was whether it was inexpedient to carry out the original purposes of the trust…. I am of the view that, in the present case, the duplication of administration and compliance costs, and the current inability to align investment strategies, pool resources and make joint distribution decisions, make it inexpedient for the three charities to continue separately.
His Honour took the view that the objects of the three trusts were very similar, and there would be no detriment in amalgamating them. The only amendment of objects required would relate to the trust being the mandated iwi organisation. On this point, His Honour said (at [57]–[58]):
I am, however, of the view that the objects of the Tuhoe Charitable Trust and of the Tuhoe Fisheries Charitable Trust are very similar. The purposes set out in the s 24B trust, while more detailed, are also in a similar vein. All three sets of objects are broadly concerned with benefiting Ngai Tuhoe in a charitable manner, whether through the promotion of health, education, social welfare, or other means. I also note that one of the existing purposes of the Tuhoe Fisheries Charitable Trust is to act as the mandated iwi organisation for Tuhoe, and that the amalgamated trust is also intended to function as Tuhoe’s mandated iwi organisation. As the s 24B trust and the Tuhoe Charitable Trust do not currently have any similar purposes, the amalgamation will involve a variation of their purposes to include the mandated iwi organisation purpose. In the circumstances, and given the legislative provision for the transfer of mandated iwi organisation status to another entity, I consider this amendment to be appropriate.
In addition, His Honour held that the three sets of beneficiaries were effectively the same. He said that although in the past there had been doubt over whether trusts for the benefit of iwi groups could be charitable, New Zealand law did now recognise trusts of that type as capable of being charitable. Although charitable trusts do not have individual beneficiaries, charitable trusts for the benefit of iwi groups were often expressed as being for the benefit of beneficiaries.
Overall, his conclusions were (at [72]):
(a) The purposes of the three existing trusts were charitable.
(b) The substituted arrangements under the proposed amalgamation were also charitable.
(c) The proposed changes appeared to accord as closely as is reasonably possible in the circumstances to the terms of the original trusts.
(d) The proposed amalgamation was appropriate and would serve the interests of the intended beneficiaries and of the public.
Therefore, the amalgamation proposal for the three trusts was approved.
The case may be viewed at: http://www.nzlii.org/nz/cases/NZHC/2012/1952.html
Implications of this case
In trust law, private trusts are trusts for persons and charitable trusts are trusts for charitable purposes. Therefore, charitable trusts usually lack beneficiaries unless they are for the benefit of a group of ‘ultimate beneficiaries’ who constitute a sufficient section of the community to meet the public benefit (as opposed to private benefit) test for charities. Maori trusts are akin to the latter type of charitable trust, where there are beneficiaries, but they are still classified as charitable trusts. In traditional trust law, classes of beneficiaries would not meet the ‘public’ benefit test if they were linked to the settlor by blood or family. However, New Zealand law recognises Maori trusts based on blood lines and family as charitable.