Mark von Dadelszen: High Court amending charitable trusts

by 24 Jan 2014
Those who establish charitable trusts often impose conditions reflecting their personal background and preferences.  Such was the case with the David Cummings Medical Trust (see Re Radich [2013] NZHC 2944, 7 November 2013).  Mr Cummings had a Scottish heritage and having suffered injuries on the Western Front during WWI was impressed with the care he received from doctors who had studied at Edinburgh University.  He established the trust to provide financial support for New Zealand medical graduates wishing to pursue post-graduate medical studies at Edinburgh University.  In more recent years applications had dwindled, with the last application being in 2010 for limited assistance.  The trustees sought approval for amended purposes, to allow study at any overseas university, and to allow computer-based and distance learning from overseas universities (including Edinburgh University).

Part 3 Charitable Trusts Act 1957
 
Part 3 of the Act allows charitable trustees to seek approval to amend a charitable trust by proposing a “scheme” for the High Court’s approval.  Section 56 of the Act provides that, for Part 3 Applications, the Court must be 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 …”  The section is also relevant to the Attorney-General’s approval of Part 4 Applications.
 
The Re Radich decision in conveniently and succinctly summarises the statutory tests in section 56 for approval (all being satisfied in that case):
 
  • Is it impossible, impracticable or inexpedient to carry out a trust’s original purpose?
  • Is the proposed new trust (in the Re Radich case, or lesser amendments in other case) a charitable purpose?
  • Will the new trust adhere as closely as reasonably possible to the intentions of whoever created the trust?
  • Does the Attorney-General support the application or what is his view?
 
Out-of-date charities
The Re Radich decision illustrates how charities whose purposes have passed their “use-by” date can be varied, but the costs of doing so may prove a hurdle for charities that are not financially well-endowed.

This is one of a series of notes on societies and charitable trusts by Mark von Dadelszen, a Hastings lawyer and author of Law of Societies, 3rd Edition, 2013.  Mark’s email address is mark.vondadelszen@bvond.co.nz.