RADFORD v MURDOCH [2018] NZHC 276

RADFORD v MURDOCH [2018] NZHC 276 [28 February 2018]IN THE HIGH COURT OF NEW ZEALANDCHRISTCHURCH REGISTRYCIV-2017-409-000958[2018] NZHC 276BETWEEN MAUREEN ANNETTA RADFORD ANDPETER WALLACE PHILLIPSApplicantsAND PROFESSOR DAVID MURDOCHRespondentHearing: 26 February 2018Appearances: A D Marsh for ApplicantsNo Appearance for RespondentJudgment: 28 February 2018JUDGMENT OF GENDALL JIntroduction[1] This is an application for either directions pursuant to s 66 of the Trustee Act1956 or, alternatively, for orders varying a trust deed pursuant to s 64A of the TrusteeAct 1956.[2] These matters relate to the McGee Fellowship Trust, a trust created by the willof the late Vera Mavis McGee dated 13 January 1999. The Applicants are theexecutors and trustees of the will and the Trust. The respondent is Professor DavidMurdoch, the Dean of the Christchurch Clinical School of Medicine of the Universityof Otago.[3] Probate of the will of the late Ms McGee who died on 26 March 2000 wasgranted on 10 April 2000. Her will established the McGee Fellowship Trust andprovided that the Fellowship Fund would be held on trust for research intoneurological, respiratory and muscular wasting disorders, to enable a final year studentto undertake research for a three month elective period. The award of the Fellowship,however, was not to exceed one award each year.[4] The Applicants state that due to difficulties with the wording of the trust, theFellowship has not been able to be awarded as often as the trustees and the Dean ofthe Christchurch Medical Schools would have liked. In fact, as an affidavit filed insupport by the respondent confirms that, there have only been nine awards of theFellowship since 2002. This is despite there being assets of the Fellowship of some$700,000, according to the last draft financial statements which are before the Court.[5] Accordingly, the Applicant Trustees (with the support of the respondent asDean of the Christchurch Medical School) have brought this application.[6] Parties who may be affected by the substantive application before the Courtare generally potential future beneficiaries under the Trust. In accordance withdirections provided earlier by this Court, the respondent was served with thisproceeding on 21 December 2017. In addition, an appropriate public notice wasadvertised in the Christchurch Press on 27 January 2018 and during the week of15 January 2018 appropriate advertisements were prominently posted notifying thepresent Application on three notice boards within the University of Otago,Christchurch School of Medicine Building at 2 Riccarton Avenue, Christchurch.[7] No opposition to this application has been notified. Indeed, the Application, itseems, is supported by the respondent, Professor Murdoch, the Dean of theChristchurch Medical School.Directions under s 66 Trustee Act 1956[8] Turning now to the Application for directions noted at para [1] above, the firstalternative relates to s 66 of the Trustee Act 1956. This provides:66 Right of trustee to apply to court for directions(1) Any trustee may apply to the court for directions concerning anyproperty subject to a trust, or respecting the management oradministration of any such property, or respecting the exercise of anypower or discretion vested in the trustee.(2) Every such application shall be served upon, and the hearing may beattended by, all persons interested in the application or such of themas the court thinks expedient.[9] Before me, the Applicants contend that throughout they have attempted toapply an interpretation to the Fellowship that will best allow the funds it holds to beutilised in what they believe is both the best interests of the Trust and also consistentwith the desires of the late Ms McGee. Now, the Applicants maintain that they seekdirections confirming an interpretation of the Trust so that they are able to utilise theFellowship funds in a slightly wider fashion so that the Trust can usefully continueand be effective.[10] The provisions of the Fellowship contained in the will of the late Mrs McGeeare set out at para 6 of the will:6. ResidueI give the rest of my estate to my trustees on trust:(a) To pay my debts and funeral expenses, estate's administrationexpenses and any death duty payable on my dutiable estate.(b) To hold the residue of my estate UPON TRUST to be invested withmy said trustees on behalf of THE CHRISTCHURCH CLINICALSCHOOL OF MEDICINE OF THE UNIVERSITY OF OTAGO(hereinafter called "the Clinical School") as a separately identifiedfund to be known as THE MCGEE FELLOWSHIP FUND(hereinafter with its accumulation called "the said Fund") which saidFund is to be invested by my trustees with full power to invest andchange investments as if they were beneficially entitled such lastmentioned power to include by way of description but not by way oflimitation a power to invest in any first mortgage or contributory firstmortgage of freehold land with the mortgage therein described beinga solicitor's nominee company or my trustees either alone or withcontributors UPON THE FURTHER TRUSTS to apply the capital aswell as the income from such investments for the following purposesand upon the following terms:(i) The purpose of the research is into neurological respiratoryand muscular wasting disorders.(ii) The name of the award shall be THE MCGEE FELLOWSHIP(hereinafter called "the Fellowship").(iii) The Fellowship is to enable a final year student to undertakethe said research for the three month elective period providedin the final year of the medical course at the Clinical Schoolor such other similar course as the Dean for the time being ofthe Clinical School may determine at his entire discretion.(iv) The Fellowship is to be first offered at the Clinical School inthe year following my death and thereafter on an annual basiswhilst there are moneys available in the said Fund.(v) The award of the Fellowship is to be made at the entirediscretion of the Dean for the time being of the ClinicalSchool or his successor to the present office of Dean as thecase may be PROVIDED HOWEVER and I express the wishthat his choice of each student shall be made known to myTrustees at the commencement of the said research period.(vi) The amount of the award during each year of the Fellowshipand the subject for research within the field of care ofneurological respiratory and muscular wasting disorders shallbe at the entire discretion of the said Dean PROVIDEDHOWEVER and I express the wish that part of the annual sumshall be expended on books and/or personal instruments forthe use by the said student and shall become the personalproperty of the said student and part shall be used for thepurchase of expendable materials for the said researchprojects and should part be required to purchase researchequipment within the field of care of neurological respiratoryor muscular wasting disorders then such research equipmentshall become the property of the Clinical School.(vii) The students awarded the Fellowship are not to exceed oneeach year and they are to carry out their research under thesupervision of a delegated senior academic staff member ofthe Clinical School AND I EXPRESS the wish that a copy ofthe report of each student at the conclusion of each researchproject be made available to my Trustees.(viii) I declare that any receipt purporting to be signed by the saidTreasurer or other proper officer of the Clinical School shallbe sufficient discharge to my trustees in respect of the saidbequest of residue.[11] In the present s 66 Application for Directions the Applicants seek:1. Directions pursuant to section 66 of the Trustee Act that:1.1 Paragraph 6(b)(iii) of the Fellowship be interpreted by theTrustees as meaning that the Fellowship may be awarded toany final year student at the Clinical School (including anyfinal year student in a nursing course, in a masters course, ina bachelor of biomedical sciences course, or any other suchcourse that the Clinical School was responsible for.1.2 Paragraph 6(b)(vii) of the Fellowship be interpreted by theTrustees as meaning that the Fellowships awarded are not toexceed an average of one each year for the duration of theFellowship so that where the Fellowship has not beenawarded in any year previously additional Fellowships shallbe able to be awarded provided that over the duration of theTrust on average no more than one Fellowship shall beawarded per annum.[12] The evidence before the Court in support of this application indicates that inthe past the amounts awarded each year for the Fellowship tended to be in the regionof $10,000 - $12,000 per award.[13] As I understand the position, however, in each of the 2002 and 2005 years,despite the fact that the provisions of the Fellowship provided there to be only oneaward each year, there were in fact two awards made. Notwithstanding this, theApplicants indicate that a real issue for them has been that since 2007 they have notbeen able to make even one award in any following year up to the present.Accordingly, they contend that there are a number of very good reasons why theinterpretation of the Fellowship they suggest should be applied here:(a) They suggest first, that clearly the funds in the Fellowship wereintended to be used for medical research. As matters currently stand,those funds are unable to be easily used. The Applicants maintain thiscannot have been the intention of the settlor.(b) Affidavit evidence before the Court confirms that there are currentlyfunds of approximately $700,000 held by the Fellowship. Given aconservative investment return of 2.5 per cent per annum, theFellowship is currently generating income of $17,500 per annum. Thisis against the previous average amount of the Fellowship's annualawards over earlier periods being between $10,000 and $12,000. Thus,no issues over possible diminution of the capital of the Fellowship arisehere.(c) The Applicants have brought this application with the support of thecurrent Dean of the Christchurch Medical School. The Application hasbeen properly advertised in accordance with Court directions anddetails posted on prominent notice boards at the Christchurch Schoolof Medicine. No one has objected to the Application being brought orgranted.(d) The directions and interpretation of the Fellowship sought by theApplicants do not prejudice the originally identified beneficiaries of theTrust. It is intended only to apply, failing situations where a final yearmedical student is able to be granted the Fellowship in any one year.(e) The Applicants emphasise that this is not simply a case of them seekingto avoid having to exercise their obligations under the Fellowship.They say the Application is properly brought and that they genuinelyseek the Court's directions in this situation in order that the Fellowshipcan function on a proper basis which it has not been able to do over thelast 10 years.[14] Although from the authorities it is clear that trustees cannot surrenderobligations to exercise discretions from time to time, because they depend oncircumstances which may change and the Court itself would have to be informed ofthese changes, in this instance, I am of the view that the directions sought by theApplicants here are appropriate. This is a case where the jurisdiction under s 66 of theTrustee Act 1956, which is intended essentially for private advice by the Court totrustees where they are in doubt as to the propriety of actions that may becontemplated, is appropriately engaged. This does not here relate to past actions orhypothetical situations, but genuinely to interpretation matters for the future of theFellowship.[15] In Melville v NRMA Insurance NZ Limited1 reference was made to a situationwhere the Court's assistance was sought on points of minor importance arising in theadministration of a trust. The present situation is not entirely dissimilar. Nosubstantial factual disputes or allegations of breach of trust arise here. The matters atissue are purely questions of interpretation.[16] The proposed amendment to para 6(b)(iii) of the Fellowship noted at [11]above simply makes clear that an award can be made to any final year student at theClinical School (which is to include a final year student in a nursing course, a masterscourse, a bachelor of biomedical sciences course and/or any other such course that theClinical School is responsible for). In a sense, this is in line with what the currentFellowship Trust provision provides when it states that it is to enable "a final yearstudent" to undertake the research in the "medical course at the Clinical School or suchother similar course as the Dean for the time being of the Clinical School maydetermine at his entire discretion". (Emphasis added)[17] Turning now to para 6(b)(vii) of the Fellowship, currently this states:The students awarded the Fellowship are not to exceed one each yearThe proposed interpretation direction sought is simply that this is to mean that:Fellowships awarded are not to exceed an average of one each year for theduration of the Fellowship so that where the Fellowship has not been awardedin any year previously additional Fellowships shall be able to be awardedprovided that over the duration of the Trust on average no more than oneFellowship shall be awarded per annum.(Emphasis added)[18] In my view, the directions sought are entirely appropriate here. No doubt, aconcern of Ms McGee in establishing the Fellowship was that it was able to run for1 Melville v NRMA Insurance NZ Limited (HC) Wellington, Wild J, 17 April 2002, CP70/01.some years whilst the fund continued and was not to be exhausted by a bunch ofawards being made in one particular year. The direction sought does not fall foul ofthis intention. In my view, it will enable a measured and proper continuation of theFellowship for the purposes it was intended.[19] For all these reasons, the Application before me for directions under s 66 of theTrustee Act 1956 succeeds.[20] The directions sought in the Application which I outline at para [11] above willfollow.[21] This disposes of the present application.Variation of the Fellowship Trust[22] As I have noted above, in the alternative, the Applicants sought orders unders 64A of the Trustee Act 1956 for an effective variation of the Fellowship Trust Deed.Given my decision on the s 66 application there is no need to address this alternativeremedy under s 64A Trustee Act 1956. There is no need here for any amendment tobe made to vary the provisions of the Trust. Notwithstanding this, I express thepreliminary view that had it not been appropriate to address this matter under s 66,orders varying the Trust Deed under s 64A may very well have been appropriate here.Result[23] For all the reasons outlined above, the Application for directions pursuant tos 66 of the Trustee Act 1956 succeeds.[24] Orders and directions are now made pursuant to s 66 that:(a) Para 6(b)(iii) of the Fellowship be interpreted by the Trustees asmeaning that the Fellowship may be awarded to any final year studentat the Clinical School (including any final year student in a nursingcourse, in a masters course, in a bachelor of biomedical sciences courseor any other such course that the Clinical School was responsible for).(b) Para 6(b)(vii) of the Fellowship be interpreted by the Trustees asmeaning that the Fellowships awarded are not to exceed an average ofone each year for the duration of the Fellowship so that where theFellowship has not been awarded in any year previously additionalFellowships shall be able to be awarded provided that over the durationof the Trust on average no more than one Fellowship shall be awardedper annum.[25] If there may be any issue as to costs this can be the subject of memoranda tofollow....................................................Gendall JSolicitors:Saunders Robinson Brown, Christchurch