Dodds v Attorney General for NSW

[2003] NSWSC 1189

CITATION:	Dodds v Attorney General for NSW [2003] NSWSC 1189 revised - 16/12/2003
HEARING DATE(S):	09/12/03
JUDGMENT DATE:	9 December 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Barrett J
DECISION:	Orders under s.81 Trustee Act 1925
CATCHWORDS:	TRUSTS AND TRUSTEES - land held on trust for charitable purposes of hospital - proposal to turn to account and lease for term greater than allowed by applicable statute - clear benefits to medical research and charitable purpose - value of participation exceeds value foregone by sterilising ability to put land to alternative use during lease term
LEGISLATION CITED:	Saint Vincent's Hospital Act 1912 Trustee Act 1925
CASES CITED:	Clarke v Attorney General (unreported, NSWSC, 28 November 1994) Riddle v Riddle (1952) 85 CLR 202
PARTIES :	Elizabeth Anne Dodds, Helen Anne Clarke & Peter James Ferris as Trustees of St Vincent's Hospital, Darlinghurst - Plantiffs The Attorney General in and for the State of New South Wales - Defendant
FILE NUMBER(S):	SC 5576/03
COUNSEL:	Mr J T Gleeson SC/Ms T Wong - Plaintiffs Ms M Barbaro - Defendant
SOLICITORS:	Cutler Hughes & Harris - Plaintiffs I V Knight, Crown Solicitor - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BARRETT J

TUESDAY 9 DECEMBER 2003

5576/03 - ELIZABETH ANNE DODDS & ORS v ATTORNEY GENERAL FOR NSW

JUDGMENT

1 The plaintiffs are the present trustees of land the subject of the Saint Vincent's Hospital Act 1912. That Act deals in explicit terms with two parcels of land, one described in its first schedule and the other in its second schedule. The present application relates to land in neither schedule, being land which the trustees nevertheless acknowledge to have been acquired for what s.2 of the Act calls “similar purposes”, that is, purposes of use in connection with St Vincent's Hospital, Sydney. Section 2 of the Act is as follows:

“ Appointment of trustees
For the purposes of this Act the Superior-General for the time being of the Congregation of the Religious Sisters of Charity of Australia, the Sister Administrator for the time being of Saint Vincent’s Hospital, Victoria-street, Sydney, and the treasurer for the time being of the said hospital, shall be the trustees of all land now belonging to or used in connection with the said hospital or hereinafter to be acquired for similar purposes.”

2 The land in question forms part of the general St Vincent's Hospital site at Darlinghurst which also includes the two parcels specifically referred to in the Act. The trustees' acknowledgment that that land is within the contemplation of s.2 of the Act causes them to proceed on the basis that their power of leasing is confined to that conferred by s.6:

“ Power to lease land
(1) The trustees may, for any purpose of or connected with the hospital, from time to time lease any portion of the land described in the First or Second Schedule or acquired at any time by the trustees:
(a) for a term not exceeding 21 years, to a public or local authority constituted by or under an Act, or
(b) for a term not exceeding 10 years, to any other person.
(2) The trustees may give to the lessee of any lease under subsection (1) an option of renewal if the aggregate duration of the lease and any such renewal does not exceed the maximum term for which the lease might have been granted to the lessee under that subsection.
(3) Where land is not immediately required for use for any purpose of or connected with the hospital, the trustees may lease the land under subsection (1) for any other use.
(4) The trustees are not required to obtain a fair market rental in respect of any lease under subsection (1) to a public or local authority constituted by or under an Act.”

3 The trustees are participating in the development of a significant proposal in relation to the land in question which involves the grant of three leases, each for 90 years or, more precisely, in each case for an initial term of 31 years with successive options for the lessee to renew for a further 40 years and ultimately for a final period of 19 years. The grant of leases on that basis is beyond the powers arising under s.6.

4 One lease is to be in favour of St Vincent's Hospital Sydney Ltd, the company which operates the hospital, another to the Victor Chang Cardiac Research Institute Ltd and the third to those two companies together. These leases, if granted, will be granted pursuant to a contract yet to be made. The trustees apprehend that the making of the contract itself may have implications in relation to their statutory power of leasing on the footing that the agreement may be specifically enforceable so that the principle in Walsh v Lonsdale [1882] 21 ChD 9 may apply. The trustees therefore approach the court seeking an order under s.81 of the Trustee Act 1925 conferring on them power to enter into the agreement (the form of which has been settled) and to grant the three leases under it.

5 It is unnecessary to go into all details of the contractual provisions into which the trustees desire to enter. It is sufficient to say that they provide for the land in question to be developed as a research centre by way of joint enterprise between St Vincent's Hospital, the Victor Chang Institute and the Garvan Institute for Medical Research. The project's public importance is testified by the fact that the State Government is to make a financial contribution of $20 million towards it. Each of the participants I have mentioned is a recognised institution in the medical research field, the hospital itself, of course, having an obvious research aspect to its general operations and the other two being specialist organisations in the field of medical research.

6 The object of the proposed contract and ancillary arrangements is that the three institutions together should undertake particular activities within a new facility on the land, with each having an opportunity to derive benefit from its collaboration with the others and from the separate but related activities of the others. The particular benefits to St Vincent's Hospital from the perspective of its general work are deposed to in the affidavit of Dr Breit, co-director of the Centre for Immunology, a research institute of the hospital and the University of New South Wales, and Ms Foley, the hospital's chief executive officer. A summary of the advantages deposed to by them is set out in written submissions handed up by Mr Gleeson SC who appeared for the trustees on the hearing of the application. I quote paragraph 35 of those written submissions:

“The Precinct development is considered to be vital to the successful future of the Hospital. A full exploration of the benefits to the Hospital of the Precinct development is provided in the affidavit of Samuel Norbert Breit affirmed 3 November 2003 ( ‘Breit Affidavit’ ), and paragraphs 29-36 of the Foley Affidavit. These can be summarized as:
(a) creation of a ‘critical mass’ of scientists, working together in close proximity, which will enhance scientific outcomes: para 10(a) of Breit Affidavit;
(b) achievement of cost efficiencies through sharing of high cost infrastructure and avoiding duplication of services: para 10(b) of Breit Affidavit, para 36(e) of Foley Affidavit;
(c) provision of an environment in which innovative basic research concepts can be translated into direct diagnosis and treatment of patients, resulting in improvements in patient care: paras 10(c), 11(b) of Breit Affidavit;
(d) improvement in staff recruitment, because the best and brightest medical and auxiliary staff would be attracted to come and work at the Hospital: para 11(e) of Breit Affidavit; and
(e) improved financial standing of the hospital resulting from increased revenue from clinical trials, increased royalties on intellectual property, and additional donations and grants: paras 11(c), 11(d), 11(g) of Breit Affidavit.”

7 These intangible advantages to the hospital, the furtherance of whose charitable purposes lie at the heart of the trustees' responsibilities, are thus both clear and significant.

8 Valuation evidence has also been led to deal with more tangible aspects of the impact of the proposals. I refer to the evidence of Mr Smith of Colliers Jardine. On that, it is sufficient to say that, according to the valuer, the value to the hospital of the occupancy rights to be derived through the committing of the land to the project and the implementation of the project (including the leases) exceeds the assessed quantum of the financial detriment entailed in sterilisation of the asset in the sense of inability otherwise to turn it to account for the term of up to 90 years. I should add that this is so whichever of the two possible ways of proceeding is adopted, one involving one area of land and the other a different area of land, with the choice between the two and the precise allocations among the parties, depending upon which is chosen, to be made in accordance with processes and procedures set out in detail in the contractual documents.

9 This last aspect raises a point to which brief reference should be made. Every last detail of the leases is not yet settled but, as I have said, the contract creates machinery for them to be fixed. The power sought by the trustees, if granted, will accordingly include, by implication, a power to participate in the contractual process which will give final shape to the arrangement, including the leases – being, I emphasise, a power that is not at large but circumscribed by the contractual terms and the contractual machinery.

10 The breadth of s.81 of the Trustee Act as a means of enabling trustees to do so things beyond their express powers, where it is beneficial to the trust property for them to do so, has long been acknowledged. The section directs the court's attention to the question whether the proposed action is expedient in the management or administration of the trust property, the statutory criterion of expediency being, as described by Dixon J in Riddle v Riddle (1952) 85 CLR 202, "a criterion of the widest and most flexible kind". Williams J observed that the section "is couched in the widest possible terms" and that the sole question is "whether it is expedient in the interest of the trust property as a whole that such an order should be made" with "expedient" being understood as meaning "advantageous", "desirable" or "suitable to the circumstances of the case.” Williams J also said:

“Section 81 authorises the court to step in whenever it is of opinion that sound practical business considerations make it expedient that trustees should have administrative powers in addition to or overriding the powers derived from the trust instrument or the general law.”

11 In Clarke v Attorney General (unreported, NSWSC, 28 November 1994), a case involving the Saint Vincent's Hospital Act 1912 and the development of part of the trustees’ land for the purposes of the Garvan Institute, Young J pointed to the necessary processes of judicial analysis:

“The word ‘expedient’ in the section has not been precisely defined, nor should it be. It is, however, clear that the section is couched in the widest possible terms and the court should approve schemes where it is desirable to extend the trustee’s powers: Riddle v Riddle (1952) 85 CLR 202 and Perpetual Trustees WA Ltd v AG (1992) 8 WAR 441 … [I]t seems to me that if one can be sure that there is a benefit to the hospital from the arrangement that clearly outweighs any detriment, then it is expedient to approve of the arrangement, notwithstanding that the arrangement may be an unusual one.”

12 In the present case, the trust property is land held upon a charitable trust for hospital purposes. The management and administration of the property therefore entail pursuit of activities directed towards patient care and treatment in the broadest sense including, obviously, medical research directed towards possible improvement in such care and treatment. The benefits that will flow to St Vincent's Hospital and its activities from the land in question being committed to this project, from the point of view of enhancing the hospital's opportunities to obtain beneficial results from collaboration in research activities, are made clear by the evidence. The only detriment is loss of the trustees' ability to turn the land to account in some other way during the period of 31 years and possibly 71 years or 90 years in total for which the land is being committed to the project. The valuation evidence shows that the balance in that respect favours the trustees' participating in the project. The evidence shows, and I find, that the steps the trustees propose to take with respect to land subject to s.2 of the Act, viewed in their entirety, entail benefits to the charitable purposes of the hospital that outweigh the detriments involved. It is therefore “expedient” in the management and administration of the trust property that they should have the additional powers they seek so that they may properly take those steps.

13 The Attorney General has been made a defendant and was served with the trustees' application. The Attorney General has appeared by his solicitor, Ms Barbaro, to consent to the making of the orders sought by the trustees.

14 I make orders 1 and 2 in the amended summons filed in court today.

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Last Modified: 12/17/2003