Crowle Foundation v NSW Trustee & Guardian

[2010] NSWSC 647

CITATION:	Crowle Foundation v NSW Trustee & Guardian [2010] NSWSC 647
HEARING DATE(S):	16 June 2010
JUDGMENT DATE :	25 June 2010
JUDGMENT OF:	Ball J
DECISION:	1. That in respect of the gift referred to in clauses 9.10 to 9.12 of the will of the late Kathleen Mary Waugh made on 9 October 1991 (the Will), the second plaintiff be appointed trustee in place of the second defendant of the gift. 2. That in respect of the gift referred to in clauses 9.20 to 9.22 of the Will, the second plaintiff be appointed trustee in place of the second defendant of the gift.
CATCHWORDS:	CHARITABLE TRUSTS - identification of charitable purposes - TRUSTS AND TRUSTEES - appointment and removal of trustee by court - inherent jurisdiction - statutory jurisdiction - where property not yet vested in trustees - WILLS - Interpretation - Charitable bequest
LEGISLATION CITED:	Charitable Trusts Act 1993 (NSW) Disability Services Act 1993 (NSW) Disability Services & Guardianship Act 1987 (NSW) Trustee Act 1925 (NSW) Trustee Act 1925 (UK) Trustee Act 1898 (NSW) Trustee Act 1850 (UK)
CATEGORY:	Principal judgment
CASES CITED:	Challenge Foundation of New South Wales Ltd v Windgap Foundation Ltd [2002] NSWSC 1292 Fell v Fell (1922) 31 CLR 264 King v Perpetual Trustee Company Limited [1955] 94 CLR 70 Letterstedt v Boers (1884) 9 App Cas 371 Miller v Cameron (1936) 54 CLR 572 Monty Financial Services Ltd v Delmo [1996] 1 VR 65 Porteous v Rinehardt (1998) 19 WAR 495 Re Blanchard (1861) 3 De GF&J 137 Re Boyce (1864) 4 De GJ&Sm 205 Re Combs (1884) 51 LT 45 Re Henderson [1940] Ch 764 Re Hodson's Settlement (1851) 20 LJ Ch 551 The Estate of Roberts (1983) 20 NTR 13 Titterton v Oates (1998) 143 FLR 467
PARTIES:	The Crowle Foundation Limited (First Plaintiff) Achieve Australia Liited (Second Plaintiff) NSW Trustee & Guardian (First Defendant) The Challenge Foundation of New South Wales Limited (Second Defendant) Attorney-General of New South Wales (Third Defendant)
FILE NUMBER(S):	SC 2009/290249
COUNSEL:	G Blake SC (Plaintiffs) K Meek SC (First Defendant) P Hallen SC (Second Defendant) C Mantziaris (Second Defendant) Ms N Sharp (Third Defendant)
SOLICITORS:	ProLegis Lawyers (Plaintiffs) NSW Trustee & Guardian (First Defendant) Slater & Gordon (Second Defendant) Crown Solicitor's Office (Third Defendant)

- 1 -

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BALL J

25 JUNE 2010

2009/290249 CROWLE FOUNDATION LIMITED & ANOR v NSW TRUSTEE AND GUARDIAN & ORS

JUDGMENT

1 HIS HONOUR: These proceedings raise two issues. The first is the correct construction of charitable bequests made by the late Kathleen Mary Waugh (the testatrix) in her will. The second is whether the second defendant should be removed as the trustee responsible for administering those bequests and replaced by either the first or second plaintiffs.

2 The testatrix’s daughter, Michele Waugh, who was born in 1946, had Down Syndrome. In about 1956 or 1957, at the age of 10 or 11, she was moved into residential care at the Crowle Home located in Belmore Street, Ryde. She remained there for the rest of her life. She died in 2008 at the age of 62.

The Will

3 The testatrix died in 1994. By her will, which was made on 9 October 1991, she made a number of small specific bequests. She left the balance of her estate to the Public Trustee to be held on trust to provide for Michele. Clause 5.00 of the will provided:

“While my daughter Michele is in the day to day care of an institution other than a hospital, I give 40% of the trust income from time to time as a donation to that institution.”

That gift was expressed to be for the benefit of the institution “ to use as it sees fit in carrying on its charitable activities ”: clause 5.02. The rest of the trust income was to be applied for the benefit of Michele. Any amount not required for that purpose was to be accumulated and made part of the capital: clause 6.00. The trust was expressed to end on Michele’s death: clause 8.00. The will provided for a final distribution in the following terms:

“9.00 When the Trust ends I direct the Public Trustee to divide any remaining trust funds into enough parts to pay those of the following gifts which take effect. All parts are of equal value. (No parts are to be set aside for any gifts which do not take effect).
9.10 I give 1 part to The CHALLENGE FOUNDATION OF NEW SOUTH WALES if it still exists when the Trust ends.
9.11 This gift is made on trust for the charitable activities of the Crowle Home, (that is the Ryde Branch of the Foundation), whilever it is still in existence. Otherwise the Foundation may use it as it sees fit in carrying on its other charitable activities.
9.12 I direct my Trustee to pay this gift to the person authorised to receive money on the Foundation’s behalf. The responsibility to see that it is properly applied will then belong to the Foundation and not to my Trustee.
9.20 I give 1 part to the last institution, (other than a hospital), which cares for Michele before her death if it still exists when the trust ends. By “institution” I mean a home like the Crowle Home in which Michele is living now.
9.21 If that institution is the Crowle Home, this gift is made to the Challenge Foundation on the same terms as set out in 9.11.
9.22 If Michele was last in another institution this gift is made to that other institution on trust to use as it sees fit in carrying on its charitable activities and I direct my Trustee to pay it to the person authorised to receive money on its behalf. The responsibility to see that the gift is properly applied will then belong to that institution and not to my Trustee.”

The amount of the final distribution is approximately $1.4 million.

History of the Crowle Home and Challenge Foundation

4 The Crowle Home was established under the auspices of the second defendant (Challenge Foundation). Challenge Foundation was incorporated on 9 August 1951 as the Subnormal Children’s Welfare Association and was the successor to an unincorporated association of the same name. It changed its name to Challenge Foundation of New South Wales in 1984 and changed it again in 1993 to add the word “Limited”. It is a company limited by guarantee and has as its principal object the provision of support services to people with disabilities – particularly, intellectual disabilities. Before 1992, Challenge Foundation ran its charitable works through branches. Branches were local voluntary associations that carried on the activities of Challenge Foundation in their local area. The local branches were supported by Challenge Foundation in various ways and Challenge Foundation owned any property (including land) which was used by them.

5 In 1952, shortly after Challenge Foundation was incorporated, it was offered by the Crowle Estate a site at Ryde for the purposes of its charitable activities. Previously, the site had been used as a rehabilitation centre for delinquent boys. The site occupied approximately 4 acres. On it was the original residence, which had been built in 1902, a two story addition that provided dormitories that housed 20 boys, an assembly hall and memorial garden. It appears that, following its acquisition by Challenge Foundation, the site was run for the first 3 years by a management committee established by Challenge Foundation and known as the Crowle Home Management Committee. Challenge Foundation started a school and accommodation services for children who were intellectually disabled at the site. Those activities were funded by fees, fundraising and voluntary work.

6 In 1955, Crowle Home officially became the Ryde Branch of Challenge Foundation. The inaugural meeting of the branch, which was also referred to as the “Crowle Home branch”, was held on 5 August 1955. It was attended by the testatrix and her husband.

7 Over the next 20 years or so, the site was gradually developed. Additional accommodation was built; and the dormitory accommodation was largely changed to double and single share accommodation. A swimming pool was built and an oval established. A workshop was also established where the residents were employed doing tasks such as packaging and assembling goods, for which they were paid. In 1971, an administrative building known as Lacey House was completed.

8 In 1978, the Education Department assumed responsibility for the operation of the school and constructed a new facility elsewhere. The Ryde Branch also developed occupational/sheltered workshop activities for persons who were intellectually disabled in an adjacent suburb.

9 In 1987, the Disability Services & Guardianship Act 1987 was passed. A long term objective of that legislation was to encourage as many disabled people to live a normal life in the community: s 4. A document recording the history of the Crowle Home reports in relation to 1987 that:

The long-term objective of the legislation was to have as many as possible of our residents and trainees in group home accommodation and working in supported employment. Naturally, this new Act caused a great deal of consternation and apprehension amongst Crowle parents, later to be dispelled in the minds of the majority.

10 In late 1992 and early 1993 Challenge Foundation went through a major reorganisation. It devolved responsibility for all management activities to individual branches. It encouraged those branches to incorporate and it transferred to each of those branches the property the branch had been using in connection with its activities. To that end, the first plaintiff (Crowle) was incorporated. Its Memorandum of Association states as one of Crowle’s objects “[t]o succeed to and carry on all the activities of hitherto carried on by Ryde Branch of the Challenge Foundation of New South Wales”. By a Deed dated 1 July 1993, Challenge Foundation transferred to Crowle the land upon which the Crowle Home stood and surrounding land and Crowle agreed to lease back to Challenge Foundation for a period of 99 years that part of the land (Lacey House) which Challenge Foundation used as its head offices.

11 In 1997, Challenge Foundation commenced proceedings against Crowle challenging the transfer of land. Those proceedings were dismissed by Bryson J on 9 May 2002: Challenge Foundation of New South Wales Ltd v Windgap Foundation Ltd [2002] NSWSC 1292.

12 In 2008 Crowle merged with the former Hornsby branch of Challenge Foundation. That branch had incorporated under the name Achieve Foundation Limited. The merger was implemented by the incorporation of a new company known as ACNewCo Limited and the implementation of schemes of arrangement by which Crowle and Achieve Foundation transferred their assets to ACNewCo Limited. Crowle remained in existence for the sole purpose of receiving any further bequests. On 10 February 2009, ACNewCo Limited changed its name to AC Foundation Limited and, on 3 December 2009, it changed its name again to Achieve Australia Limited (Achieve). It is the second plaintiff and is the entity that now owns and operates the Crowle Home.

13 Challenge Foundation, following the devolution of its branches, has continued in a much diminished form. It currently has 10 directors. Six of those were directors of Challenge Foundation at the time of the court proceedings between it and Crowle. A further two are children of two of those six. Three of the current directors were directors at the time of devolution and were opposed to it. The directors meet once every 4 months in a room at the Ryde RSL club. A number of them are based in Albury and that is where the organisation is centred. The Foundation has no paid employees or staff. Its principal activities are to provide a number of holiday homes and buses for use by people with disabilities. With two exceptions, it has not maintained any contact with Crowle since devolution. One exception, of course, is the litigation. The other exception is that there has been correspondence between the two organisations concerning the lease to Challenge Foundation of Lacey house. One issue raised by that correspondence concerns repairs to the building. Another is the amount Crowle should pay Challenge Foundation to buy out the remainder of the lease of Lacey House.

14 There have also been significant changes in the activities of Crowle since devolution. Those changes appear to have been driven by two main factors. The first is the change in policy which was introduced by the Disability Services & Guardianship Act 1987 and which was reinforced by the passing of the Disability Services Act 1993. That change in policy involved the adoption as a primary principle the principle that people with disabilities should, so far as possible, live in and be part of the community rather than live in institutional care. That change in policy has inevitably meant that Crowle has had to change the focus of the services it provides. In addition to residential care, it now provides community based accommodation, employment training and services and community access day services. The second factor that has caused Crowle to change its activities is the fact that many of the residents of Crowle Home have been there for most of their lives. When they arrived as children and as they developed into young adults, an important focus of the Home’s activities was to provide them with an education and activities that were suitable for persons of their age. Now, the average age of residents at the Home is 58 years. As a result, the care that they require is quite different. In a number of respects the buildings in which they are housed and the services that can be provided to them are no longer suitable for their needs. As a result of these two factors, the number of residents at the Home has gradually reduced so that there are now only 36 residents. In view of those changes, Achieve has begun examining the possibility of redeveloping the site at Ryde. Any redevelopment, however, is a number of years away.

Background concerning Michele

15 Michele was first enrolled at Crowle Home as a “day girl” in about 1955 at the age of 9. She had an IQ of between 30 to 55 and fell in the moderate range of intelligence. For that reason she could not be totally self-sufficient. When Michele was about 10 or 11 years old, she was put into full-time care at the Crowle Home. The testatrix and her husband visited Michele on occasions. They also met once every couple of months with Ms Seach, who was the principal of the Crowle Home school from 1955 to 1978 and who was Michele’s teacher.

16 Ms Seach, who gave evidence but who was not cross-examined, said that the testatrix was concerned about what would happen to Michele on her death. The testatrix thought highly of the Crowle Home and on many occasions she said to Mrs Seach that she never wanted Michele to leave the Home, that Michele received wonderful care there and that that was her home. She expressed concern about what would happen if Michele were put into the community to live and she asked Mrs Seach not to allow that to happen.

17 Following the testatrix’s death in 1994, Ms Seach, together with the manager (Residential) of Crowle Home, became solely responsible for Michele’s welfare. Ms Seach gave evidence that Michele broke her hip in about 2007 and had to have an operation. Michele never fully recovered from that operation and contracted pneumonia. As I have said, she died in 2008. There is no dispute that she was a resident of Crowle Home at that time.

Construction of the Will

18 The principles that are applicable to the interpretation of a will are not in dispute. There are two which are particularly relevant in the context of this case. The first is that the words of a will must be construed in the context of the will as a whole: Fell v Fell (1922) 31 CLR 264 at 273-4 per Isaacs J. The second is that, in construing the words of a will, it is permissible to take into account all the surrounding circumstances known to the testator or testatrix: King vPerpetual Trustee Company Limited [1955] 94 CLR 70 at 78-9.

19 In this case, the testatrix divided the gift of her residual estate into two parts. The gift of each part was to take effect when the previous trust for the benefit of her daughter came to an end as a consequence of her daughter’s death: cls 8.00 and 9.00. There is no dispute that each of the two gifts was for charitable purposes. The dispute concerns which entity was appointed as trustee to administer the charitable trusts created by those gifts and the charitable purposes for which those gifts can be used.

20 It seems clear that the testatrix was conscious of the distinction between Challenge Foundation and the Ryde Branch of the Foundation; and that she was conscious that, at the time that she made her will, the legal entity which owned the Crowle Home was Challenge Foundation and that the Ryde Branch was not itself a separate legal entity. It was for those reasons that she gave the first part of her gift to Challenge Foundation and went on (in clause 9.11) to state the purpose for which the gift was made. It is clear that the Challenge Foundation continues to exist. Consequently, in my view, the gift in clause 9.10 is to it as trustee of the charitable trust established by clause 9.11.

21 The plaintiffs sought to avoid the conclusion of the previous paragraph by arguing that clauses 9.10 and 9.11 should be read together. Read in that way, the plaintiffs maintained that the reference to the Challenge Foundation must be read as a reference to Challenge Foundation so far as it is carrying on its charitable activities through the Ryde Branch. Since the charitable activities of the Ryde Branch are now carried on by Crowle (or, more accurately, Achieve), the reference to the Challenge Foundation must be read as a reference to Crowle or to Achieve. I do not accept that submission. In my opinion, it ignores the clear words of clause 9.10. It also ignores the fact that the gift was to Challenge Foundation for its own purposes in the event that the Crowle Home ceases to exist.

22 The next question is for what purposes the gift can be used. The answer to that question turns on whether the Crowle Home is still in existence. If it is, the gift is for its charitable activities. There is, however, a subsidiary question and that is what precisely the testatrix meant by “the charitable activities of the Crowle Home”.

23 The plaintiffs argued that “Crowle Home” should be interpreted in clause 9.11 to mean the entity that operated the Home. In support of that conclusion, they relied on the words in that clause that are in parentheses. Those words, according to the plaintiffs, provided a definition of “Crowle Home”, at least in the context of that clause. According to the plaintiffs, “Crowle Home” simply means the Ryde Branch of the Foundation. I do not accept that submission. In my opinion, the testatrix used the expression “Crowle Home” to refer to the collection of activities and resources that together made up the organisation or establishment known as the Crowle Home. The Crowle Home was a recognised institution at the time that the testatrix made her will and was one with which she was very familiar. It was the activities of that institution that the testatrix sought to benefit. This conclusion is reinforced by clause 9.20. By that clause, the testatrix gave the second part of her gift to the last “institution” (other than a hospital) that cared for Michele before her death. She went on to say that by “institution” she meant a “home like Crowle Home in which Michele is living now”. In this clause, the testatrix is clearly using “Crowle Home” to refer to the institution and not an incorporated or unincorporated entity. It would be odd if she had intended to use it in a different sense in clause 9.11.

24 The conclusion of the previous paragraph is supported by the surrounding circumstances and other clauses of the will. It is clear that the testatrix thought highly of the institution that cared for Michele. Indeed, it appears from what she said to Ms Seach that she was concerned that that institution might not continue to exist; and part of that concern appears to have been related to changes in the law that were designed to encourage disabled people to be placed in community housing. The likelihood is that it was the activities and facilities of that institution (that is, the activities and facilities that had benefited Michele) that the testatrix sought to benefit. She was not seeking to benefit whatever activities the entity that owned or operated that institution happened to be engaged in – at least, not while the institution itself continued to exist. That conclusion is reinforced by clause 5.00 of the will. Under that clause, the testatrix gave 40% of the income of the trust created by the will during Michele’s lifetime to the institution that was responsible for Michele’s day to day care (other than a hospital). It is difficult to see why the focus of the testatrix’s gift would be different following Michele’s death than it was during Michele’s life; and the focus of the gift during Michele’s life was clearly the institution, not the activities of the entity that was responsible for running it.

25 There can be no doubt that the Crowle Home as an institution continues to exist. It is the institution that continues to provide residential care and ancillary services to intellectually disabled people at the Ryde site. Consequently, it is for the charitable purposes of that institution that the gift made by clause 9.11 must be used.

26 It is accepted that the Crowle Home was the last institution that cared for Michele before her death. It follows that clause 9.21 of the will applies and that the second gift made by the testatrix is also to the Challenge Foundation on the same terms as the first gift.

27 The last issue in this context is what precisely is meant by “the charitable activities of the Crowle Home”. The plaintiffs suggested that, because the testatrix equated the charitable activities of the Crowle Home with those of the Ryde Branch of the Foundation, the activities of the Crowle Home must include any activities of Crowle (or more accurately now, Achieve) as the successor of the Ryde Branch. They argued that conclusion was reinforced by the legislative regime, which is part of the surrounding circumstances in which the will must be interpreted. As I have indicated, a prime objective of the relevant legislation is to encourage disabled people to live in the community rather than in residential care. The plaintiffs say that it follows from that that the gift should not be construed as being limited to the provision of residential care.

28 I do not accept that gift is as broad as the plaintiffs suggest. It is clear from the words in parentheses in clause 9.11 that the testatrix equated the charitable activities of the Crowle Home with the charitable activities of the Ryde Branch of the Foundation; and that fact may shed light on the precise purposes that the testatrix intended to benefit. However, I do not think that it follows from that that the testatrix intended to benefit any charitable activities that happened to be carried on by the successor to the Ryde Branch. The likelihood is that the testatrix was aware of the change in policy introduced by the Disability Services & Guardianship Act 1987. But I do not think that it follows from that that the testatrix intended her gift to give effect to that policy. Her conversations with Ms Seach suggest otherwise. In any event, in my opinion clause 9.11 makes it clear that what the testatrix intended to benefit were the charitable activities of the Crowle Home. There is no reason why that gift must be construed narrowly. The fact that the testatrix equated those activities with the activities of the Ryde Branch suggests the opposite. Those activities include all activities that benefit residents of the Home (whether or not they benefit others). But the gift is not for the purposes of benefiting the activities of Achieve generally.

Should the second defendant be replaced as trustee?

29 The court has power to remove or to replace a trustee as part of its inherent power to see that trusts are properly executed: Letterstedt v Broers (1884) 9 App Cas 371 at 386. The power to remove or to replace a trustee is also conferred by statute. Sections 7 and 8 of the Charitable Trusts Act 1993 (NSW) gives the court power to appoint or to remove a trustee in the event of misconduct, mismanagement, incapacity and the like. It has no application in this case. However, the power to appoint or to replace a trustee is also conferred by s 70 of the Trustee Act1925 (NSW). Relevantly, that section provides:

“(1) The Court may make an order for the appointment of a new trustee or new trustees either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.
(2) The appointment may be made whenever it is expedient to appoint a new trustee or new trustees, and it is inexpedient difficult or impracticable so to do without the assistance of the Court.
(3) In particular and without prejudice to the generality of any other provision of this section, the Court may make an order for the appointment of a new trustee in substitution for a trustee who is convicted of a serious indictable offence, or is a bankrupt, or being a corporation is in liquidation or is dissolved.
(4) In the case of any trust for a charity the Court may make an order for the appointment of a new trustee on such evidence of the trust as the Court deems sufficient.”

30 It is clear from subs 70(4) that s 70 applies to charitable trusts.

31 There are some authorities in relation to similar provisions in other States and Territories which suggest that the power conferred by s 70 can only be exercised where the relevant trustee consents: see Titterton v Oates (1998) 143 FLR 467; Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 76. These authorities rely on a number of 19^th century English decisions to the same effect: see, for example, Re Blanchard (1861) 3 De GF&J 137; Re Combs (1884) 51 LT 45; Re Hodson’sSettlement (1851) 20 LJ Ch 551. For discussion, see Porteous v Rinehart (1998) 19 WAR 495.

32 In my opinion, the 19^th century English decisions are not relevant to the interpretation of s 70. They were decided under s 32 of the Trustee Act 1850 (UK). That section (and, for that matter, s 25 of the Trustee Act 1898 (NSW), which was the predecessor of s 70) did not contain an equivalent provision to subsection 70(3). That provision lists particular examples of where the court may exercise its power under s 70. Those examples are clearly intended to be a subset of the circumstances described in subs (2). They include cases where the trustee may well not consent to be removed. But if the subset is not subject to the requirement of consent, the class of which the examples are a subset cannot be either. That conclusion is supported by the decision in Re Henderson [1940] Ch 764. That case concerned s 41 of the Trustee Act 1925 (UK) which replaced s 32 of the Trustee Act 1850 (UK) and which is in similar terms to s 70 of the Trustee Act 1925 (NSW). In that case, Bennett J thought that the particular examples set out in the section of when a trustee could be removed made it clear that consent was not required.

33 The legislative test and the test the court applies in exercising its inherent jurisdiction are expressed in different terms. Section 70 applies wherever it is expedient to appoint a new trustee or new trustees and it is inexpedient, difficult or impracticable to do so without the assistance of the court: subs 70(2). On the other hand, the question that must be asked when the court exercises its inherent jurisdiction is what is in the best interests of the beneficiaries and the administration of the trust. As Dixon J (with whom Evatt and McTiernan JJ agreed) explained in Miller v Cameron (1936) 54 CLR 572 at 580-1:

“The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In decision to remove a trustee the Court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary.”

In the case of a charitable trust, the focus, of course, must be on whether the objectives of the trust are opposed to the continuation of the trustee, since a charitable trust has no beneficiaries.

34 Although the legislative test and the test identified by Dixon J appear to be expressed in different terms, the difference is more apparent than real. The question of what is expedient cannot be answered in the abstract. It must be answered having regard to the particular objects that are sought to be achieved by the exercise of power. In the case of s 70, those objects are the objects referred to by Dixon J: see Re The Estate of Roberts (1983) 20 NTR 13 at 17 per O’Leary J; Porteous v Rinehardt (1998) 19 WAR 495 at 507 per White J. There is no practical differences between what is expedient to attain those objectives and what the court should, in the exercise of its inherent power, do to attain them.

35 In my opinion, Challenge Foundation should be replaced by Achieve as the trustee. That is so whether the power is exercised under s 70 of the Trustee Act 1925 or in the exercise of the Court’s inherent jurisdiction. I say that for two broad reasons.

36 First, in my opinion, it would be conducive to the efficient administration of the trusts if Achieve were the trustee. It appears from the evidence that Challenge Foundation itself has not considered how it would administer the trusts. However, Mr McDonald, who is chairman of Challenge Foundation, gave evidence that what he would expect is for the Crowle Home to prepare an application to Challenge Foundation for the expenditure of any money the subject of the trusts. That application would be supported by relevant information and would be considered by the Board of Challenge Foundation at one of its meetings. The likelihood is that a similar application would be made by the management of the Crowle Home to the Board of Achieve as the owner of the Crowle Home.

37 Mr McDonald did not explain what he would expect to happen if the Board of Challenge Foundation disagreed with a particular proposal. Presumably, however, it would be necessary for the two organisations to meet so that Challenge Foundation could explain its objections with a view to reaching an agreement on whether the proposed expenditures should be made and what modifications to any proposal might be acceptable to Challenge Foundation. In my opinion, this approach is likely to lead to considerable overlap and delay. It is also likely to place an administrative burden on those responsible for operating Crowle Home in circumstances where they would be better off directing their time and resources to the activities of the Home and the welfare of its residents.

38 The approach that would need to be followed if Challenge Foundation were to remain as the trustee appears to be particularly inappropriate where only small sums of money are sought by Crowle Home. The inefficiencies that the approach involves might be justified where large sums of money are involved or where Challenge Foundation has particular expertise or where it is clear that that is what the testatrix intended. However, none of those factors is present in this case. Although the bequest is a substantial one, I do not think it is so large that an additional layer of bureaucracy is justified to ensure that the money is properly applied. The Board of Challenge Foundation has no particular expertise in evaluating how best the money should be spent. Indeed, given the lack of contact between the Crowle Home and Challenge Foundation since 1993, Challenge Foundation is likely to have very limited knowledge of the current needs of Crowle Home. It is true that the testatrix appointed Challenge Foundation as the trustee. However, she did that at a time when Challenge Foundation was the legal entity that owned the relevant assets and the legal entity that had the closest connection to the activities of Crowle Home. She could not have known at the time that she made her will that things would change in the way that they have.

39 Secondly, if Challenge Foundation were to remain as the trustee, I think there is a significant risk of conflicts in the future. Those potential conflicts are of two main types. First, there appears to be a significant degree of friction between the management of Crowle Home and Challenge Foundation. That friction has arisen as a consequence of the litigation and the differences of opinion in relation to Lacey House. It is likely to have its genesis in the fact that a number of the current directors of Challenge Foundation were opposed to the devolution of its branches. At best, that friction is likely to affect the efficient administration of the trust. At worst, it may lead to serious disagreements that may result in further litigation and a consequent diminution of the trust assets. The second source of potential conflict arises from the possibility, albeit small, that some time in the foreseeable future Crowle Home will cease to exist. In that case, it seems likely that the gift would revert to Challenge Foundation. That possibility may affect Challenge Foundation’s attitude to the administration of the trust. It may be reluctant to agree to the expenditure of money in the hope that, some time in the future, that money will become available for its own purposes. The conflict in this case is not between the management of the two organisations but between Challenge Foundation’s duties as trustee and its own interests.

40 Mr Hallen SC, who appeared for Challenge Foundation, submitted that it was premature to replace Challenge Foundation as trustee for these reasons. They may or may not come to fruition and, until they do, no change should be made. In my opinion, this submission has considerable force where there is some good reason for Challenge Foundation to remain as trustee or where the testatrix was conscious of the potential for conflict but nonetheless appointed it as the trustee: see Monty Financial Services Ltd v Delmo [1996] 1 VR 65 at 83. But, in my opinion, neither of those considerations apply in this case. The only reason Mr McDonald could give for Challenge Foundation remaining as trustee was the possibility that part of the gift may eventually revert to it. However, in my view, that possibility is remote – as Mr McDonald conceded. In view of that, I do not think that any weight should be placed on it. Nor do I think that any real weight should be placed on the fact that the testatrix chose Challenge Foundation. As I have said, she did so in circumstances that are far different from those that now prevail.

41 There was some suggestion during submissions, although it was not seriously pursued, that the court may not have power to replace a trustee when, as in this case, the trust property has not actually vested in the trustee. There appears to be no authority directly on point. Halsbury’s Laws of Australia para [430-3360], relying on Re Boyce (1864) 4 De GJ & Sm 205; 46 ER 896, suggests that the power exists in the case of the statutory jurisdiction. Re Boyce did concern a contingent gift to a trustee, which vested on the death or remarriage of the testator’s wife. However, in that case the application brought under s 32 of the Trustee Act 1850 (UK) to replace the trustee appointed by the testator (who had become of unsound mind) was not brought until after the testator’s wife had died. By that time, the property must already have vested. Nonetheless, in my opinion, where, as here, the trust has clearly been established and it is simply an administrative matter to transfer the trust assets, there is nothing to prevent the court from replacing a nominated trustee either in the exercise of its powers under s 70 of the Trustee Act1925 or as part of the court’s inherent power to see that trusts are properly executed. The trust has been established and the trustee has been appointed. It is those events which attract the operation of s 70 or of the inherent power of the court, not the vesting of the property. In some cases, it may be clear that no property will ever vest. In those, there may be no utility in appointing a new trustee and, for that reason, the court may, in the exercise of its discretion, decline to appoint a new trustee. But that is not this case.

42 In my opinion, the appropriate replacement for Challenge Foundation is Achieve, since it is now the entity that owns and operates the Crowle Home. Ms Bryce, who is the Chief Executive Officer of both Achieve and Crowle, gave evidence of how Achieve would apply the bequests. She said that they would be used to address needs arising from a lack of staff, building maintenance and access concerns, the aging of persons accessing the services of the Home, the shortage of funding from government authorities and the setting up of a respite program. Ms Bryce was cross-examined by Ms Sharp, who appeared for the Attorney-General, to determine whether those purposes related to the activities of the Crowle Home. Ms Bryce’s responses suggested that they may not all do so. However, I do not think that this is a reason not to appoint Achieve as the trustee. There is no reason to suppose that the Board of Achieve (or Ms Bryce, for that matter) will not use the bequests for the “activities of the Crowle Home” as that expression has been explained in this judgment.

Orders

43 For these reasons, I make the following orders:

1 That in respect of the gift referred to in clauses 9.10 to 9.12 of the will, the second plaintiff be appointed trustee in place of the second defendant of the gift.

2 That in respect of the gift referred to in clauses 9.20 to 9.22 of the will, the second plaintiff be appointed trustee in place of the second defendant of the gift.

44 I will hear the parties in relation to costs.