Supreme Court New South Wales

• Medium Neutral Citation: Maxwell James Anthony Connery v Williams Business College Limited & Anor [2014] NSWSC 154
• Hearing dates: 3 & 20 September, 1 November 2013
• Decision date: 28 February 2014
• Jurisdiction: Equity Division
• Before: Slattery

Decision

See paragraph [79].

• Catchwords: EQUITY - trusts and trustees - charitable trusts - application for judicial advice - Charitable Trusts Act 1993, ss 5, 6, 10 and 13 - 1998 gift by will treated as void for uncertainty so 1999 Deed of Trust provides substitute trust arrangements - by 2013 substitute trust arrangements become unworkable - whether gift by will is void - whether gift exhibits a general charitable intention - whether cy-pres scheme should be ordered - whether the Attorney General should be ordered under Charitable Trusts Act, s 13 to establish a scheme to administer the funds dedicated to charitable purposes.
• Legislation Cited: Charitable Trusts Act 1993 (NSW), ss 5, 6, 10, 13(2); Trustee Act 1925, ss 63, 85
• Cases Cited: Attorney General (NSW) v Barr [1991] NSWCA 4; Attorney General v Coopers Co (1812) 34 ER 488; Attorney General v Foundling Hospital Governors (1793) 30 ER 514; Attorney General for NSW v Fred Fulham & Ors [2002] NSWSC 629; Attorney General (NSW) v Perpetual Trustee Co Ltd (1940) 63 CLR 209; Hunter Region SLSA Helicopter Rescue Service Limited v Attorney General for NSW (2000) WSC 456; Mills v Farmer (1815) 35 ER 597; NSW Trustee and Guardian v Attorney General in and for the State of New South Wales [2012] NSWSC 1282; Perpetual Trustees (WA) Limited v Riverwest Pty Limited [2004] WASC 81; Pocock v Attorney General (1876) 3 Ch.D. 342; Public Trustee v Attorney General of NSW (1997) 42 NSWLR 600; Re Coulthurst's Will Trust; Coutts & Co v Coulthurst [1951] 1 All ER 774; Thompson v Federal Commissioner of Taxation (1959) 102 CLR 315; Williams' Trustees v Inland Revenue Commissioners [1947] AC 447
• Texts Cited: Halsbury's Laws of Australia, Online Volume (at 28 February 2014), 75 Charities, 'Cy-pres schemes' [75-715]; Jacobs Law of Trusts in Australia, 7th edition, J.D. Heydon and M.J. Leeming, paragraph [1061].
• Category: Principal judgment
• Parties: Plaintiff: Maxwell James Anthony Connery; Defendant: Williams Business College Limited
• Representation: Counsel: Plaintiff: Mr C.E. Alexander; First Defendant: NSW Attorney General: Mr H. El-Hage; Solicitors: Plaintiff: Maxwell J.A. Connery, Connery Partners; Defendant: Peter John English, Surry Partners Lawyers
• File Number(s): 2013/69496
• Publication restriction: No.

Judgment

1 By his Amended Summons filed on 3 September 2013 Maxwell James Anthony Connery ("the Trustee"), in his capacity as trustee of the Dora Isherwood Trust ("the Trust"), seeks the Court's opinion and advice under s 63 of the Trustee Act 1925, whether he would be justified in paying the funds of the Trust either to the June Dally-Watkins Business Finishing College, or to Sydney Stepping Stone Inc. The Trustee, for whom Mr Alexander of counsel appears, also seeks an order that the costs of this application be paid out of the Trust's assets on the indemnity basis.

2 When these proceedings were first listed before the Court the Trustee also sought declarations and orders that the defendant, the Williams Business College Limited ("the College"), repay certain monies to Trust. This contested aspect of the matter was settled. On 20 September 2013 the Court made consent orders between the Trustee and the College for the payment of these outstanding monies and the costs of the contested proceedings.

3 As at September 2013 the Trust assets were: (1) $79,291.00 cash in a bank account; (2) $30,347.34 to be paid to the Trust by the College under the 20 September 2013 terms of settlement; and (3) future monies that the College may be required to repay to the Trust, to a maximum of $25,225,36.

The Involvement of the NSW Attorney General

4 The Attorney General of New South Wales contends that the Trust is a charitable trust and these are charitable trust proceedings within Charitable Trusts Act 1993, s 5. Mr El-Hage appeared on behalf of the Attorney General and made submissions in relation to the judicial advice application. The Charitable Trusts Act 1993, s 6 provides:

"6 Bringing of certain charitable trust proceedings to be authorised by Attorney General or by leave

(1) Charitable trust proceedings are not to be commenced in the Court unless:

(a) the Attorney General has authorised the bringing of the proceedings, or

(b) leave to bring the proceedings is obtained from the Court.

(2) The Court is not to give such leave unless satisfied that the Attorney General has been given an opportunity to consider whether to authorise the proceedings or that the referral of the matter to the Attorney General is not appropriate because of the urgency of the matter or other good cause.

(2A) Any such authority or leave may also be given after charitable trust proceedings have been brought so as to enable the continuation of those proceedings.

(3) A person who does not otherwise have standing may bring charitable trust proceedings if authorised by the Attorney General to bring those proceedings.

(4) Nothing in this section applies to the bringing by the Attorney General, with or without a relator, of charitable trust proceedings or any other proceedings relating to a charitable trust."

5 "Charitable trusts proceedings" are defined in Charitable Trusts Act, s 5(1) to mean proceedings brought in the Court "whether by any trustee of a charitable trust or by any other person under the Court's statutory or general jurisdiction with respect to any breach or supposed breach of a charitable trust, or with respect to the administration of charitable trusts". Section 5(2) provides for a number of exclusions from this definition of "charitable trust proceedings" but none of those exclusions applies in this case. Section 3 of the Charitable Trusts Act defines "charitable trust" as "any trust established for charitable purposes and subject to the control of the Court in the exercise of the Court's general jurisdiction with respect to charitable trusts". All parties conceded and this judgment confirms that the Trust is a charitable trust and therefore these are charitable trust proceedings.

6 These proceedings were commenced without notice to the NSW Attorney General, and he did not authorise their commencement under Charitable Trusts Act, s 6(1)(a). But when the Court held a pre trial directions hearing between representatives of the Trust and the College the possible status of the proceedings as charitable trust proceedings was discussed. The Attorney General was then informed about the proceedings. He decided under Charitable Trusts Act, s 6 to authorise the bringing of the proceedings. This meant the Trustee did not have to apply for the Court's leave to bring the proceedings. The Attorney General then appeared and was joined as a defendant.

Creation of the Trust

7 The Will. Ms Dora Isherwood died on 17 April 1998 leaving her will dated 13 April 1998 ("the Will"), naming Mrs Margaret McEwan as her executor and the residuary beneficiary. The Will provided in clause 7:

"I give and bequeath my policy policy [sic] [policy number] from Westpac Income Plan to be used as a grant for students with financial difficulties enabling them to do the course to be overseen by Wilfred Hauser and Margaret McEwan"

8 Despite the terms of clause 7, I accept the Trustee's evidence that Margaret McEwan was not a teacher at the College nor had she ever taught at the College. Indeed Mrs McEwan was not a teacher and never taught at, oversaw or, in fact, had any contact with the College Mr Wilfred Hauser Williams was one of the principals at the College.

9 Shortly after Ms Isherwood's death it was not in issue that Senior Counsel advised Mrs McEwan that: (1) clause 7 of the Will is likely to be void for uncertainty, and therefore (2) the proceeds of the insurance policy would pass to Mrs McEwan as the residuary beneficiary. The Court requested and has seen Senior Counsel's opinion, which was the subject of a claim for client privilege. All that needs be said about the opinion is that it only addresses the issue of voidness for uncertainty, the issue for which it has been cited as authority and it goes no further.

10 But despite this obstacle Mrs McEwan wanted to carry out the overall objective of Ms Isherwood's primary testamentary intentions. So in an endeavour to fulfil Ms Isherwood's wishes, Mrs McEwan decided to forego any claim she may have over the insurance policy and to establish a trust over the policy proceeds.

11 The Trust Deed. On 2 December 1999 Mrs McEwan executed a Trust Deed ("the Trust Deed") creating the Trust. The Trust Deed provided (clause 2) that the Trust fund would consist of the insurance proceeds from Ms Isherwood's estate.

12 Clause 4 of the Trust Deed provided that the Trustee:

"shall hold the Fund [the insurance proceeds and the investments representing them] upon trust to apply the income or the capital thereof for the purposes of providing financial assistance to students in financial difficulties and undertaking studies at the Williams Business College".

13 The Trust Deed specified in more detail procedures to be followed for providing assistance to the College's students and for the better administration of the Trust.

14 The Trust Deed, clause 10 provided a mechanism for application of the Trust funds if administration/execution of the trust became "inconvenient or impracticable", as follows:-

"In the event that the Williams Business College ceases to exist or if, in the opinion of the trustee, the administration or the execution of the trust created by this deed becomes inconvenient or impracticable, the Trustee shall pay the Fund to such charitable body whose purposes, in the opinion of the Trustee, most closely approximate those of the Williams Business College, and so that the moneys forming the Fund shall be held upon trusts similar to those created by this deed. If, in the opinion of the Trustee, there is no such body, or payment to any such body in inconvenient or impracticable, the Fund shall be paid to Sydney Stepping Stone Inc of 227 Wardell Road, Dulwich Hill, NSW."

15 Counsel's advice. In August 2013 the course of the legal proceedings between the Trust and the College, the Trustee obtained counsel's advice in relation to the operation of Trust Deed, clause 10. Counsel's advice concluded that, in light of the recent matters which arose between the Trustee and the College, the Trustee had a basis to form an opinion that it was now "inconvenient or impracticable" to provide the students of the College with assistance pursuant to the Trust Deed, and that the alternative arrangements provided for in cl. 10 should apply.

16 Counsel's advice further pointed out that activating clause 10 will place the Trustee in a potential position of conflict of interest and duty. The Trustee is, and was when the Deed was executed, the Chair and Founder of Sydney Stepping Stone Inc, the potential default recipient of the Trust funds under clause 10. Counsel's advice concluded that because of that potential conflict, the Trustee should seek judicial advice in relation to the operation of clause 10. The Trustee now seeks that advice in these proceedings.

The Trust's dealings with the College

17 To fulfil the purposes of the Trust, on 11 September 2002 the Trustee entered into an administration agreement with the College ("the College -Trust Agreement"). The effect of the College-Trust Agreement was that: (1) the tuition fees of some of the College's students in financial difficulties would be paid by the Trust and accepted by the College at a discounted rate of 80 per cent; (2) over time those students would repay the Trust, through the College, the full amount of their fees. This scheme was thus designed to provide the Trust with a self-replenishing fund of money; it only had to pay 20 per cent less to the College than students would return to the fund over time.

18 The College-Trust Agreement provided that the College would assess the eligibility of its students for financial assistance from the Trust and then submit an application in respect of potentially eligible students to the Trustee for determination.

19 Once the Trustee approved a particular student for assistance from the Trust under the College - Trust Agreement, the Trustee would pay the reduced fees to the College. The scheme was given effect by the College entering into a separate agreement with each of the approved students (the Student-Trustee Agreement), which required the student to pay the full amount of the tuition fees back to the College, for the Trust, by instalments over a 2 year period.

20 The College - Trust Agreement required the College: (1) to deposit any student repayments into a separate bank account, and (2) to remit the balance of that bank account (together with any accrued interest) to the Trustee annually. The Trustee set up a new bank account, into which those annual payments were to be made.

21 The contractual relationship between the College and the Trustee worked well for about 7 years. Between 11 September 2002 and October 2009 the Trustee received and approved applications from the College's students who were in financial difficulties and paid the agreed 80 per cent of usual tuition fees. And the College annually remitted to the Trustee the accumulated student repayments of the full fees.

22 But then the College's repayments stopped. The Trustee soon realised that the annual repayments had ceased and in mid-2012 started to investigate. Between June 2012 and February 2013 the Trustee exchanged letters, emails and telephone calls with representatives of the College, requesting a reconciliation of the funds that had been received by the College from its students with the money the College had paid to the Trust.

23 It appears that the College with which the Trustee made the College - Trust Agreement was deregistered in January 2007. Unbeknown to the Trustee at the time, another entity, also styling itself the "Williams Business College" arose in its place, and the new College took over all the assets and liabilities of the former College. But the new College was less reliable in honouring the College - Trust Agreement.

24 After some delay, the College provided the Trustee with a reconciliation in December 2012, which suggested: (1) that the last annual payment from the College to the Trust had been made in September 2009; (2) that between September 2009 and December 2011 the College had received repayments of over $53,000 from students whose tuition fees were paid by the Trust; and (3) the College's reconciliation for 2012 was not yet available.

25 On 1 February 2013 the Trustee wrote demanding that the College deposit into the Trustee's designated account within 7 days the funds due for repayment for the period between September 2009 and 31 December 2012. When this did not occur, the Trustee commenced these proceedings to recover those funds. As has been explained, this aspect of the proceedings settled with the College paying the Trustee.

26 The Trustee explained in his evidence, and the Court accepts, that on the basis of these events he formed an opinion that it would be "inconvenient or impracticable" to provide the College's students with financial assistance in the future. He therefore obtained the counsel's opinion summarised above and began to search in conformity with Trust Deed clause 10 for a "charitable body whose purposes, in the opinion of the Trustee, most closely approximate those of the Williams Business College".

Current Assets of the Trust

27 As a result of the Trustee's efforts in pursuing the recovery of the Trust's assets from the College, an account can be given of the Trust's current assets, which are not large.

28 According to the Trustee, as at 2 September 2013 the Trust's assets were:

(a) $79,291.20 in cash held in a Westpac Bank account;

(b) $30,347.34 to be paid by the College to the Trust on account of the repayment by the College of fees already received from students; and

(c) future funds that the College may receive from students under a College - Student Agreement, which are not anticipated to exceed $25,115.36.

29 The relatively small size of this fund means that the avoidance of unnecessary legal and administrative costs is a principal priority in considering schemes for its future administration.

The Trustee's Efforts to Find an Appropriate Charitable Body

30 Since the relationship with the College broke down, the Trustee has made efforts to find a "charitable body whose purposes, in [his] opinion, most closely approximate those of [that College]". After conducting internet searches in relation to potential eligible institutions, on 27 August 2013, the Trustee sent letters to four New South Wales colleges: explaining the objectives of the Trust; enquiring as to their charitable status and the nature of their activities, and; querying whether they need loans for students in financial difficulties. The Trustee received no responses to those letters.

31 In September and October 2013 in the absence of responses, the Trustee made further enquires to the four Colleges. On 26 September he sent follow up letters to each of the four selected colleges. Those letters explained in helpful detail the conditions on which the Trust previously provided student loans to the College, referred to the judicial advice proceedings, and repeated enquires as to the nature of the operation of the colleges and their possible need for student loans. Once again the Trustee received no response to those letters.

32 On 15 October 2013 the Trustee telephoned each of the colleges to check if they had received his letters. They had. Representatives of three out of the four colleges informed him over the telephone that they were either not interested in this student loan scheme, or that they were no longer operating. The representative of the June Dally-Watkins Business Finishing College indicated that she would discuss the matter further with the college's CEO and accountant, and then contact him.

June Dally-Watkins Business Finishing College

33 On 31 October 2013 the Trustee received a letter from Ms Margaret Whealy, the Financial Controller of the June Dally-Watkins Business Finishing College responding to his 27 August and 26 September letters. Ms Whealy indicated that her college would be willing to enter into an agreement with the Trustee in relation to the loans for students. But she explained that the June Dally-Watkins Business Finishing College would only be prepared to accept loans in an amount of 100 per cent of students' fees, and not 80 per cent, as had been the case in the Trustee-College Agreement.

34 The Trustee submitted that such an adjustment to the scheme, from the way that it had operated with the College may make it 'inconvenient or impracticable' for the Trustee to enter into an agreement with the June Dally-Watkins Business Finishing College. The Trustee's concern is, not surprisingly, that under this adjustment to the Scheme, the Trust fund (which is not large), would no longer be self replenishing and would therefore be likely to run down over time.

35 Ms Whealy's letter included information about the course the June Dally-Watkins Business Finishing College offers. It is referred to as a Certificate of Business Administration and involves a curriculum which is 70 per cent business studies and 30 per cent personal development. The course fee, when paid in full at the commencement of the year, is $15,500. Each student also incurs compulsory additional costs, such as enrolment fees, textbooks and other items, making an extra $2,050. These total fees of approximately $17,550 are significantly higher than the tuition fees paid by the Trust in relation to the College students (which are between approximately $4,500 and $10,500).

36 The Trustee gave evidence that as a result of his inquiries and his discussions with Ms Whealy he has now formed an opinion that payment of the Trust's founds to any of these four colleges would be "inconvenient or impracticable", within Trust Deed, clause 10.

Sydney Stepping Stone Inc

37 Sydney Stepping Stone Inc is referred to in clause 10 of the Trust Deed as an institution to which the funds of the Trust should be paid, if no body with purposes similar to the College can be found, or payment to any such body is inconvenient or impracticable.

38 Sydney Stepping Stone, which operates through a corporate entity and a trust, manages a house for homeless adolescents. The objectives of Sydney Stepping Stone, set out in its Mission Statement, include providing "adolescents with a stable and secure nurturing environment which encourages personal growth and development with the aim of empowering the individual to achieve responsible independence". In September 2013 it provided accommodation to 12 young people and maintained a mentoring program for 25 ex-residents.

39 The Trustee explained in evidence, which I accept, that the young people who reside in the Sydney Stepping Stone house come from dysfunctional families and have often had multiple placements in refuges and in foster care before receiving accommodation at the house. He further explained that one of the fundamental tasks of Sydney Stepping Stone staff is to encourage the residents to improve their education. For that purpose Sydney Stepping Stone has previously organised HSC tutoring for its residents and paid their TAFE or university tuition fees.

40 The Trustee disclosed in his evidence that he is the chair and founder of Sydney Stepping Stone Inc. Mrs Margaret McEwan, the executrix of Ms Isherwood's will and party to the Trust Deed was also for some years on the committee of Sydney Stepping Stone Inc. Sydney Stepping Stone Inc. was incorporated in 1989 and has since that time managed a house for homeless adolescents. Although it was initially targeted at adolescents between the ages of 14 and 18 years, it currently intends to extend its objects to include young people between the ages of 14 and 20 years.

41 The Sydney Stepping Stone Inc.'s structure may be shortly explained. On or about 6 August 2003 Sydney Stepping Stone Inc. resolved to enter into a declaration of trust to create the Stepping Stone Trust (known as the Foundation), which has five trustees. These trustees own two properties in Dulwich Hill on trust pursuant to the Foundation's Trust Deed. Sydney Stepping Stone Inc. remains the operational arm for the foundation, being a company limited by guarantee, which provides the services for young people who reside at the two properties. The Foundation also has deductive gift recipient status.

Parties' Submissions

42 When the application for judicial advice was first presented to the Court the Trustee merely sought the Court's assistance in the interpretation and application of clause 10 of the Trust Deed. He asked the Court: (1) to confirm whether or not he had properly formed an opinion, supported by counsel's advice, that any further payments to the College were 'inconvenient or impracticable'; and, (2) to advise him to whom he should now pay the Trust funds.

43 But the Attorney General raised antecedent issues in relation to clause 7 of the Will. Mr El-Hage submitted that before the Court interprets Trust Deed, clause 10, it must first resolve two antecedent questions: (1) whether clause 7 of the Will was void for uncertainty, and if so, (2) whether clause 7 expressed a general charitable intention, which was impossible or impractical to carry out.

44 That the Trustee did not address the legal effect of clause 7 of the Will in initial submissions is understandable. He assumed that that clause was void for uncertainty, based on advice received almost 15 years ago from Senior Counsel. This advice was given before the Trust was established and when the Trustee was still acting as a legal advisor of the executor, Mrs McEwan. On the basis of that advice Mrs McEwan and the Trustee executed the Trust Deed; and the Trust came into existence and has operated for the last 15 years.

45 The Attorney General submitted that if the Court concludes that clause 7 of the Will was not void it could: (1) seek to implement the testator's intention by retrospectively approving the last 15 years of operation of the Trust as a cy pres scheme operating on terms described in the operative provision of the Trust Deed, (2) excuse a breach of trust, if any, resulting from the execution of the Trust Deed; and (3) regulate the future dealings with the Trust fund either by establishing a cy pres scheme or ordering the Attorney General to establish such a scheme pursuant to Charitable Trusts Act, s 13(2).

46 The questions that the parties' submissions presented to Court are therefore:

(1) Is clause 7 of the Will void for uncertainty?

(2) If the answer to question 1 is in the negative, whether clause 7 exhibits a general charitable intent?

(3) If the answer to question 1 is yes, whether the Trustee would be justified in either paying the fund to June Dally-Watkins Business Finishing College or to another charitable body, or alternatively to Sydney Stepping Stone.

47 The Court will answer each of these questions.

(1) Is Clause 7 of the Will Void for Uncertainty?

48 The parties were less at issue about the question of whether clause 7 of the Will was void for uncertainty, than they were about whether the clause discloses a general charitable intention.

49 Charitable trusts are not held void for uncertainty of objects if there is a clear indication of the general purpose of charity: in this respect charitable trusts are treated more favourably by the law than private trusts: Jacobs Law of Trusts in Australia, 7th edition, J.D. Heydon and M.J. Leeming, paragraph [1061]. Trusts which may otherwise fail as private trusts will nevertheless be given effect if it is clear that a testator has expressed an intention to give to charitable purposes: Pocock v Attorney General (1876) 3 Ch.D. 342 and Mills v Farmer (1815) 1 Mer 55 at 95; (1815) 35 ER 597.

50 In my view, if clause 7 is not to be given effect on the basis that it expresses a general charitable intention, then it would be void for uncertainty. I agree with Senior Counsel's advice to this extent. The clause has many difficulties.

51 A will must be incapable of any clear meaning before it will be voided for uncertainty: NSW Trustee and Guardian v Attorney General in and for the State of New South Wales [2012] NSWSC 1282 (at [30] and [31]) and Perpetual Trustees (WA) Limited v Riverwest Pty Limited [2004] WASC 81.

52 But leaving aside issues of general charitable intention, it is difficult to resist the conclusion that clause 7 is incapable of any clear meaning. First, the Trustee now cannot establish (and could not at the time of the Trust Deed) that there were any courses taught at the College that were or were "to be" "overseen" by Mr Hauser and Mrs McEwan. All that can be said is that the testator, Ms Isherwood was a teacher at the College for 50 years. But Mrs McEwan's participation in the execution of the Trust Deed in December 1999, reciting as it did Counsel's advice that clause 7 of the Will was uncertain, is compelling evidence that there was no extrinsic evidence available at the time of Ms Isherwood's death to give sensible meaning to these words.

53 Secondly, there is no evidence of communication between Ms Isherwood and Mrs McEwan about any proposed course. In short the problem with clause 7 is that it describes a grant of funds to students of a non-existent course to be taught by two persons who were given no instructions about the course and had no identified plans for such a course themselves. Therefore, aside from issues of general charitable intention, I agree with Senior Counsel's opinion that clause 7 would be void for uncertainty.

(2) Does Clause 7 Exhibit General Charitable Intent?

54 The Attorney General submits that the Court can conclude that clause 7 of the Will exhibits a general charitable intention to establish a trust for the advancement of education and/or for the relief of the poor. The Trustee takes issue with this on several grounds: whether a trust was intended at all; and, whether the clause benefits the community as a whole or a section of the community.

55 The applicable legal principles may be shortly stated. Little is required to establish a general charitable purpose. As a general principle, Courts will lean in favour of charity, and upon the failure of a specific gift, Courts will be ready to infer a general intention on the part of the will maker to provide a gift to charity; "little is required in the language of the will for a court to treat a wider purpose as the object of trust": Attorney General (NSW) v Barr [1991] NSWCA 4 at 3 per Kirby P ("Barr"). As Barr's case suggests there are at least four factors regularly examined in a will or other instrument in examining the support for the inference of a general charitable intention. These are set out in Barr at [5]; but as Kirby P explained at [6] the matter is still one of general impression:

"5. Depending upon the circumstances, the following considerations have been identified as sometimes supporting an inference of a general charitable intention on the part of the will-maker:

(a) if the failed gift is expressed in a way which suggests a charitable intention; see Hope JA, above, 554;

(b) if the failed gift is made in association with a number of other gifts, undoubtedly charitable, which succeed; see In Re Spence (above) 485;

(c) if the whole estate is left to a charity which fails; see In Re Fingers Will Trusts [1972 ] Ch 286, 296 (Reginald Goff J); and

(d) if admissible circumstances support the conclusion that the will-maker did not intend to benefit the relatives (see Goff J (above)).

6. In the end, the court's function involves judgment, assessment and impression upon reading the will. The decision is not wholly susceptible to reasoned exposition. This point was made by Sir Robert Megarry V-C in In re Spence (above) at 488-9. In commenting on what he took to be a "puzzling" decision of the English Court of Appeal in In re Lucas [1948] Ch 424, his Lordship said:

'I say what I say with all due humility, and a ready recognition that the fault may be an inability on my part to see what is plain to others; but, though humble, I remain puzzled.'"

56 Clause 7 clearly indicates a general purpose of charity. First its language echoes charitable concepts: the policy was to be used "as a grant for students" [emphasis added]. Secondly, the relief of poverty is clearly implied by the description of the students of those "with financial difficulties"; and, a purpose may qualify for the relief of poverty even though the persons who may benefit may not be completely destitute: Re Coulthurst's Will Trust; Coutts & Co v Coulthurst [1951] 1 All ER 774; (1951) Ch 661 at 666. Thirdly, the advancement of education is inferred from the testator's use in clause 7 of the words "enabling them to do the course" and describing them as "students". This is a matter of assessment and impression upon reading the Will, but a powerful factor in this case is the testator's identification and blending of the two heads of charitable purpose, the relief of poverty and the advancement of education.

57 The Trustee's submissions against this conclusion are not persuasive.

58 First, the Trustee questions whether a Trust was ever intended because of clause 7's failure to separate legal and equitable interests, by vesting the Fund in the name of the Trustee. But this point is not an answer to a contention that clause 7 exhibits a general charitable intention. The Fund was vested in Ms McEwan's name as Ms Isherwood's executor. And, provided the charitable intention is clear, even if a mode in which it is to be carried into effect is not supplied by the instrument, the Court will remedy the deficiency: Attorney General (NSW) v Perpetual Trustee Co Ltd (1940) 63 CLR 209, Dixon and Evatt JJ at 223-8.

59 The Trustee's second argument was that clause 7 does not benefit the community as a whole: Thompson v Federal Commissioner of Taxation (1959) 102 CLR 315 at 321-4. The question is really whether the objects of the trust are such that the benefit to the public in general must necessarily result from their execution as well as being beneficial to the community in a way the law regards as charitable: Williams' Trustees v Inland Revenue Commissioners [1947] AC 447.

60 Here, it can readily be seen that execution of what the testator had in mind must necessarily result in benefit to the public. Clause 7 does not place any limitations upon candidates for enrolment at the College who may benefit from the gift from the "grant" other than that they are "students with financial difficulties". The text of the clause clearly demonstrates an intention to benefit any member of the public who chooses to take up this educational opportunity.

61 Moreover, the Charitable Trusts Act, s 10 makes the Trustee's present argument a difficult one. Charitable Trusts Act, s 10 provides as follows:

"Requirement for general charitable intention of donor

10

(1) This Part does not affect the requirement that trust property can not be applied cy pres unless it is given with a general charitable intention.

(2) However, a general charitable intention is to be presumed unless there is evidence to the contrary in the instrument establishing the charitable trust."

62 The clause 10 presumption is not concerned with whether the intention is charitable, but whether it is general as distinct from particular: Public Trustee v Attorney General of NSW (1997) 42 NSWLR 600 at 609 per Santow J. At common law there is no presumption in favour of a general as opposed to a particular charitable intention. But clause 10 alters the common law in this respect. Nothing in clause 7 or 9 in my view displaces the statutory presumption, if its assistance is required, that the clause displays a general charitable intention.

(3) Where Should the Fund be Paid and the Effect of Clause 10 of the Trust Deed

63 As clause 7 of the Will exhibits a general charitable intention the Court will consider the effectuation of the charitable trust by means of a scheme. The present case attracts the Court's jurisdiction to order a cy-pres scheme because it is impossible to effectuate the Trust in question according to its terms due to initial impossibility. Given the lack of definition of any proper identification of the course that the testator contemplated to be overseen by Mr Hauser and Mrs McEwan in clause 7, this was a case of initial impossibility.

64 The Court's jurisdiction to settle such schemes in relation to the carrying out of a charitable trust was well described in Hunter Region SLSA Helicopter Rescue Service Limited v Attorney General for NSW (2000) WSC 456 ("SLSA Helicopter Rescue") at [2]-[3].

"[2] In the first matter, the summons in terms asks that leave "be granted to the plaintiff to amend the terms of the trust". Once a charitable trust is created, it is well established that neither the donor nor the trustee may amend its terms: IVA Scott on Trusts (4th ed, 1989) s367.2; Tudor on Charities (8th ed, 1995) 446 - 447; Baldry v Feintuck [1972] 1 WLR 552. However, there is a long-standing jurisdiction in the Court to settle schemes in relation to the carrying out of charitable trusts. That jurisdiction is stated as follows in 4 Halsbury's Laws of Australia tit Charities [75-645] as follows:

'A charitable gift does not fail because there is an uncertainty as to the mode of carrying out the gift. In numerous cases of gifts for charitable purposes it is necessary to fill in a number of details where the testator or donor has not described his or her wishes in clear terms. In such cases the gift does not fail; the court fills in the details of the testator or donor's charitable intention by means of a scheme.'

And see The Diocesan Trustees of the Church of England in Western Australia v The Solicitor-General (1909) 9 CLR 757 at 763; Kytherian Association of Queensland v Sklavos (1958) 101 CLR 56 at 68 - 71; Verge v Somerville [1924] AC 496 at 507 - 508; Re Robinson. Besant v The German Reich [1931] 2 Ch 122 at 128 - 129; Re Gott. Glazebrook v University of Leeds [1944] Ch 193 at 197; Re Pieper, deceased; The Trustees Executors and Agency Co Ltd v Attorney-General (Vic) [1951] VLR 42 at 44 - 45; In re Ingram [1951] VLR 424 at 430.

[3] The type of scheme most commonly encountered is the cy-pres scheme. A cy-pres scheme is appropriate and necessary where the instrument creating the trust evinces a charitable purpose but it is impossible to apply the gift to carry out the purpose, for instance, where the gift specifies an institution or particular object which does not exist or the nominated institution declines the performance of the trust. The Court will then give effect to the intention of the donor as closely as possible (cy-pres): Royal North Shore Hospital of Sydney v The Attorney General for New South Wales (1938) 60 CLR 396. But the cy-pres scheme is only one subspecies of the genus scheme, and schemes other than cy-pres schemes may be implemented where there is lack of clarity as to the particular objects, or where there are no trustees, or where there is not proper machinery for the management and control of the trust property, or regulating its distribution and application. In giving those instances, I am not intending to be exhaustive."

65 The Court has a broad discretion in the administration of charitable trusts through cy-pres schemes: Attorney General for NSW v Fred Fulham & Ors [2002] NSWSC 629 at [18] and [83].

66 Although the need for a cy-pres scheme arose shortly after Ms Isherwood's death the executor did not then approach the Court about the validity of clause 7 or the implementation of a cy-pres scheme. Instead the Trust Deed was executed following the receipt of legal advice. In substance by the Trust Deed, the Trustee sought to initiate informal "cy-pres scheme" with respect to funds gifted under clause 7.

67 But the Court has controlling power over all charities: Attorney General v Foundling Hospital Governors (1793) 30 ER 514 at 517. A trustee of the charitable trust cannot apply trust funds cy-pres on the trustee's own volition: Attorney General v Coopers Co (1812) 34 ER 488 and Halsbury's Laws of Australia, [75- 715].

68 The Attorney General does not suggest that the Trustee's failure to approach the Court and to instead administer the Trust Fund by means of the Trust Deed was a breach of trust. For that reason the matter has not been debated before the Court and the Court will make no findings about it. What is clear is that the Court would excuse any such breach of Trust under Trustee Act, s 85. Mrs McEwan and the Trustee both acted unselfishly to try and effect a charitable purpose and acted reasonably on the advice of Senior Counsel

69 This reasoning means that it is not necessary to consider the operation of the Trust Deed, clause 10, as the Trustee has sought in his application for judicial advice. The Attorney General submits that in any cy-pres scheme approved by the Court, clause 10 should be removed, and that as the selection of alternative charitable schemes is a matter which will remain under the supervision of the Court. I agree with the Attorney General's submissions about the appropriate orders of the Court, it has not in the result been necessary to consider the operation of clause 10.

70 What is to be done about the past? I accept the Attorney General's submission that the Court should make an order approving a cy-pres scheme in accordance with the operative provision of the Trust Deed but excluding the recitals in clause 10 with effect from 2 December 1999. Such an order would include specific approval of the operative provisions of the Trust Deed as the mechanism by which the scheme is implemented. The approach is similar to that which was taken in SLSA Helicopter Rescue at [2], [6] and [9], where the Court made orders approving an existing administrative scheme, where there were doubts "about the nascence of the scheme". The Trustee has no interest in opposing the validation of his past conduct.

71 But what about the future? The Attorney General seeks either the approval of clause 10 of the Trust Deed as part of the cy-pres scheme but subject to (i) a requirement that the Trustee obtain approval of the Attorney General before gifting the monies to another comparable educational institution, and (ii) the removal of reference to Sydney Stepping Stone Inc. because its objects are not those of an educational institution.

72 The Attorney General's alternative submission is that the Court should make an order for a scheme under Charitable Trusts Act, Pt 4, s 13(2). Such a scheme will be established with the input of the plaintiff.

73 The Trustee counters this by submitting that the Court should approve this cy-pres scheme for the future which would include the re-drafting of clause 10 in a way that ensured it operated only for "the purposes of furthering the education of the charitable objects of Stepping Stone Inc.".

74 The Attorney General should establish a scheme under Charitable Trusts Act, s 13(2) in this case, for the following reasons. First, in my view no special priority should be given to the Trust Deed or clause 10 in the future management of these funds. After all, the Trustee was, although well-intentioned, conducting an unauthorised scheme for the management of this charitable trust. Clause 10 in those circumstances assumes no special priority in the Court's considerations.

75 Secondly, the corpus of the fund is now little over $100,000 and after legal costs will no doubt be less than that. Charitable Trusts Act, Pt 4 is specifically designed to accommodate the needs of smaller trusts under $500,000: Charitable Trusts Act, s 14.

76 Thirdly, any scheme for which the Attorney General is responsible under Charitable Trusts Act, s 13(2) would have the Trustee's input.

77 But one residual aspect of clause 10 may be relevant to the Attorney General's construction of a s 13(2) scheme. Although it is not necessary for the Court to decide the question in these reasons, it may be of assistance in the construction of such scheme to nevertheless find, as I do, that the Trustee has advanced quite sufficient evidence to support the conclusion that such trusts as were created by the Trust Deed have by now become "inconvenient or impracticable" within clause 10 of the Trust Deed. The Trustee's unsatisfactory dealings with the College and enquiries of other Colleges are quite sufficient to reach this conclusion.

Conclusion and Orders

78 The Court has found that clause 7 of the Will is void for uncertainty. But it exhibits a general charitable intention. The circumstances are appropriate for the implementation of a cy-pres scheme covering the period between December 1999 and the present by reference to the terms of the Trust Deed minus clause 10. And for the future an order will be made under Charitable Trusts Act, s 13(2) for the Attorney General to establish a scheme for this Fund. Because of the way that the argument developed between the parties these reasons have not directly answered the questions the Trustee has posed. So I will direct the parties to formulate short minutes of order to give effect to these reasons, including if they wish any draft directions to the Attorney General under Charitable Trusts Act, s 13(2).

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Decision last updated: 28 February 2014