Freemasons Hospital v Attorney General of Victoria
[2010] VSC 373
•20 August 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. S CI 2008 09804
IN THE MATTER of United Grand Lodge of Antient Free and Accepted Masons of Victoria
| FREEMASONS HOSPITAL (ACN 074 431 708) (AS TRUSTEE OF THE HOSPITAL FUND OF THE UNITED GRAND LODGE OF ANTIENT FREE AND ACCEPTED MASONS OF VICTORIA | Plaintiff |
| v | |
| THE ATTORNEY GENERAL OF THE STATE OF VICTORIA | Defendant |
---
JUDGE: | GARDINER AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 29 March 2010 | |
DATE OF JUDGMENT: | 20 August 2010 | |
CASE MAY BE CITED AS: | Freemasons Hospital v Attorney General of Victoria | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 373 | |
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr I. J. Hardingham Q.C. | Hall & Wilcox |
| Mr K. Lyons of Counsel | ||
| For the Defendant | Ms K. Rees of Counsel | Victorian Government Solicitor |
HIS HONOUR:
The plaintiff is the trustee of the Hospital Fund of the United Grand Lodge of Antient Free and Accepted Masons of Victoria (“Grand Lodge”). On 19 November 2008 it filed an originating motion seeking directions from the Court as to how it should apply the proceeds of sale of the Freemasons Hospital (the Hospital) which was sold in 2006 to a consortium comprising, among others, the Epworth Hospital. The proceeds of sale are approximately $20 million.
The sale of the Hospital came about by reason that those operating it faced increasing difficulty competing against private hospital conglomerates that owned and operated multiple campuses. In addition, the Hospital was servicing high levels of debt and it was resolved to sell it as a going concern to the consortium.
The application to the Court is required by reason that the establishment and subsequent development of the Hospital was in large part financed by levies and contributions from freemasons. Because of the terms of the constitution of Grand Lodge, the body by which freemasonry is constituted in Victoria, the plaintiff submits that an intention should be inferred that that part of the sale proceeds, which represents funds contributed by or at the direction of Grand Lodge, should revert to it to be applied for general masonic purposes. It is contended on behalf of the plaintiff that the majority of the cost of establishing the Freemasons Hospital was funded by Grand Lodge from levies imposed by it on freemasons who, together with other bodies associated with freemasonry, made donations for the purpose of establishing and subsequently developing the hospital.
The Attorney General, who has been named as a defendant and contradictor to the application by reason of the charitable aspect of the Hospital’s affairs, opposes this course and says that the proceeds of sale should be applied cy-près.
The plaintiff’s application was supported by two affidavits of Barry Reaper sworn 18 November 2008 and 9 July 2009. Mr Reaper is the secretary and a director of the plaintiff and holds the position of Grand Secretary of Grand Lodge. Mr Reaper was not cross-examined on his affidavits. The Attorney General did not rely on any affidavit material in opposition to the application.
The Constitution of Freemasonry in Victoria
In his affidavit of 18 November 2008, Mr Reaper describes the development of freemasonry in Victoria and the circumstances of the foundation and development of the Hospital. Because of the nature of this application it is necessary to consider that material in some detail.
Mr Reaper describes freemasonry as a worldwide fraternal organisation which may have been established by the stonemasons who constructed the cathedrals of the middle ages. They developed a strong moral code which included mutual care and support. In time there developed in England local groups or lodges of “free and accepted freemasonry”. The membership of the lodges was not restricted to stonemasons and a broad spectrum of society was admitted. In the eighteenth century, local independent lodges in England joined together to form what was called a Grand Lodge.
In Victoria, local lodges were established from about the time of European settlement. The English model was adopted and, at the end of the nineteenth century, the lodges combined to form the local principal lodge, Grand Lodge. Since then, Grand Lodge and the local or so-called subordinate lodges have been governed by the terms of the Constitution of Grand Lodge.
There are currently approximately 14,500 financial members of freemasonry in Victoria who belong to around 350 subordinate lodges. In addition, there are said to be many more freemasons who have resigned from their subordinate lodge and who are now unaffiliated freemasons. The number of freemasons reached its peak in the early 1960s, when there were approximately 118,000 financial freemasons.
Admission to freemasonry is governed by the Constitution. A candidate must be proposed and seconded by two Master Masons of twelve months standing. They must have personal knowledge of the candidate for not less than twelve months and be prepared to vouch for his character and fitness to become a freemason. Admission is determined by a ballot after an enquiry into the candidate’s character and qualifications.
The Constitution describes the philosophy and proceedings by which freemasonry is conducted. Its meetings take place privately and only those who are freemasons may attend. The deliberations of a lodge are secret as are the rituals of freemasonry. It is administered by a tightly controlled hierarchical body and its members are bound by a strict code.
Under the terms of the Constitution, the responsibility for governance of freemasonry in Victoria is placed in Grand Lodge. Grand Lodge is a body which includes the Grand Master, present and past Grand Officers and the Masters and Wardens of each Lodge in Victoria. The Constitution enables Grand Lodge to enact laws, rules and regulations for the governance of freemasonry and has the power to regulate matters relating to freemasonry, including the affairs of subordinate lodges. Grand Lodge has a main executive committee or board called the Board of General Purposes. The Board of General Purposes consists of the Grand Master, Deputy Grand Master, Grand Treasurer, Grand Registrar, Grand Secretary, President and six elected members whose responsibilities include finances, the administration of Grand Lodge, including communication between Grand Lodge and the subordinate lodges, and responsibility for the property of Grand Lodge.
Grand Lodge is financed by levies (called capitation charges) that are imposed on each subordinate lodge based on the number of its financial members. Grand Lodge sets these levies at different rates from time to time and the moneys raised have been applied for a number of purposes.
The major asset of Grand Lodge is the Dallas Brooks Centre in East Melbourne. Until its sale, its other principal asset was the Hospital. Generally, each subordinate lodge owns the masonic hall at which it meets.
One of the principal activities of freemasonry has been and continues to be philanthropy within the local community and this activity is carried on at subordinate lodge level. Although Grand Lodge is not a charitable organisation as such, it is involved in co-ordinating works of a philanthropic nature in three spheres, charities, an undertaking described as the Freemasons Task Force and health care.
Grand Lodge operates charitable trusts which include the Benevolent Fund, which benefits both freemasons and the community generally through charitable grants. The Freemasons Task Force provides relief at short notice at events such as bushfires and other calamities and conducts appeals for disaster and poverty relief. The Task Force is co-ordinated by Grand Lodge. The Freemasons Public Charitable Foundation, which benefits members of the general community, is independent of Grand Lodge.
The Royal Freemasons Homes, which is a major provider of aged care across Victoria for the general community, is owned and operated independently of Grand Lodge but retains close ties to freemasonry.
From 1937 until its sale in 2006, Grand Lodge or companies controlled by it, operated the Hospital and maintained close control over its day to day operations.
Under rule 77 of the Constitution, Grand Lodge controls four funds namely (a) the General Fund; (b) the Building Fund; (c) the Benevolent Fund; and (d) the Hospital Fund.
The General Fund, which is the subject of Rule 79, consists of, among other things, “all moneys and other property of Grand Lodge which do not constitute a part of any other funds of the Grand Lodge”. The General Fund is required to be applied for the use and benefit of the Grand Lodge and its major asset is, as has been observed, the Dallas Brooks Centre. It is funded from capitation charges, rental from tenant lodges, rental from the Epworth Hospital (which now operates the Victoria Street campus formerly conducted by Freemasons Hospital), income from the Dallas Brooks Centre, investment income and administration charges levied on the other three funds. The moneys from the General Fund are used to meet the day to day administrative expenses of Grand Lodge.
Rule 83 requires the Building Fund to be applied for such purposes that may be determined from time to time by Grand Lodge, including the erection, repair, alteration, maintenance or extension of any building used for masonic purposes. The administrative and other expenses of the Building Fund are financed by capitation charges and from income derived from the investment of the proceeds of sale of masonic centres.
The Benevolent Fund is the subject of Rule 80. It consists of the contributions to that fund and is required to be applied for the benevolent and charitable purposes and objects as Grand Lodge determines under the Constitution or by general resolution. The Benevolent Fund is now self-sufficient but it was formerly funded from capitation charges.
The Hospital Fund is dealt with in Rule 81. It consists of the contributions to that Fund. Under the Constitution, the contributions to that fund are required to be applied for the purposes of the Hospital. Because of its central relevance to this application, it will be necessary to consider in greater detail the sources of those funds and the constitution of the boards carrying out the administrative functions of the funds, being the Board of Benevolence for the Benevolent Fund and the Hospital Board for the Hospital Fund.
Grand Lodge has three boards to administer the funds. Aside from the Board of General Purposes, there is the Board of Benevolence, which administers the Benevolent Fund, and the Hospital Board, which is the subject of rule 81A of the Constitution. That rule provides that the Hospital be controlled and managed by a board of management called the Hospital Board and, subject to a limit of $250,000 for capital expenditure, is entitled to use the Hospital Fund for the purposes specified in rule 81(2).
Rule 73 of the Constitution provides that all Grand Lodge’s property, including the Benevolent Fund, the Building Fund and the Hospital Fund vest in three trustees, collectively called Grand Lodge Trustees, for the use and benefit of Grand Lodge. Clause 75A of the Constitution provides that Grand Lodge may incorporate a company to act as the trustee of any fund or property of Grand Lodge and Grand Lodge Holding Ltd was incorporated on 24 January 1989 for that purpose.
The establishment of the Freemasons Hospital
In Mr Reaper’s affidavit of 18 November 2008, he deposes that in December 1927 Grand Lodge formally resolved to appropriate £12,600 from the Benevolent Fund to purchase 25 acres of land in South Road, Brighton, for the establishment of “a Freemasons’ Intermediate Hospital and Hostel for Aged and Infirm Freemasons or their wives and widows.”
In 1929, Grand Lodge resolved to build a 50 bed hospital on the Brighton land at a total cost of £87,600. This required the institution of an appeal to subordinate lodges to raise not less than £75,000. As part of that appeal, Grand Lodge proposed to contribute £5,000 per year over four years.
Because of the Great Depression, the appeal was not successful and, on 31 March 1931, Grand Lodge resolved to suspend the appeal until financial conditions improved. In 1933, Grand Lodge sold the Brighton land, apparently because the site was considered inappropriate. The proceeds of sale were returned to the Benevolent Fund and two properties were purchased for a total cost of £21,500 in East Melbourne. Those properties became the Clarendon Street campus. The records now available do not identify the source of the funds used to purchase the land in Clarendon Street but Mr Reaper states that it is likely that the purchase money came from the Benevolent Fund. It was decided to build a 60 bed hospital, with potential for further expansion at the Clarendon Street site and a new appeal was commenced in September 1934.
In the circular addressed to Victorian freemasonry in respect of the appeal, the cost of construction for the new hospital was estimated at £76,500. Of that sum, the records state that £29,561 had been collected by the previous appeal, including a grant of £20,000 from Grand Lodge, £23,000 had been promised by subordinate lodges (but only £9,000 had been received). To raise the balance, it was decided to appeal to individual members of subordinate lodges for donations over a three year period.
The records of Grand Lodge reveal that by June 1935, the cost of constructing and equipping the hospital had risen to £80,000, of which £44,000 was still required. It was observed that if each freemason in Victoria donated 2 shillings and sixpence a quarter for two years, £50,000 would be raised.
An amendment was moved to the Constitution in September 1935 to allow a levy to be imposed on lodge members to raise moneys for the establishment of the hospital in Clarendon Street.
The Great Depression continued and the appeal did not progress as well as expected. By December 1936, construction of the hospital had commenced and a deficit potentially as high as £40,000 loomed. The Board decided to immediately impose a levy of 5 shillings on each freemason per half year in March 1937.
Mr Reaper contends that the establishment of the Clarendon Street campus was sourced from £20,000 from the Benevolent Fund, with the balance being provided from appeals to or the imposition of levies on freemasons in Victoria.
The Clarendon Street campus opened in 1937 and initially only freemasons and their dependents were entitled to be admitted. It was only once persons with a masonic connection were accommodated at any given time that other patients were admitted. The position in this regard evolved over time as the number of freemasons declined and the laws and regulations in connection with the funding of hospitals changed to the situation that, by the late 1960s, most patients did not have masonic connections.
In September 1939, the Constitution was amended to allow for transfer from the Benevolent Fund to the Hospital Fund and a levy to be imposed on lodge members of 9 pence each quarter for the ongoing maintenance of the Clarendon Street hospital. That amendment, to rule 274 of the Constitution, remained in force until the 1970s and the funds made available by that means to meet the ongoing expenses of the hospital from 1944 to 1978 totalled in excess of $31 million. Other sources of funds required to meet the operating expenses of the Hospital came from charges to patients, funds raised by hospital auxiliaries and other donations and bequests. From the 1970s, funds from government sources and health funds were also received to fund operating costs.
Since the Clarendon Street site opened in 1937, there have been a series of capital improvements and extensions to it.
In 1953, Grand Lodge decided to expand the bed capacity at Clarendon Street from 63 to 111 beds, at an estimated cost of £140,000. The minutes of Grand Lodge of December 1953 note that the extensions would be funded from £60,000 from realising securities in the Hospital Fund account, £56,000 from the Freemasons Hospital Association and associated auxiliaries and a loan from the Benevolent Fund of £40,000 to the board of the hospital at an interest rate of 4 per cent. The minutes of Grand Lodge for December 1953 record that, at the time, the Hospital was making a trading loss which was being covered by the contribution of 3 shillings per annum levied on each affiliated freemason in Victoria.
In 1968, it was decided to further extend the capacity of the Hospital from 111 to 160 beds. A tender of $1.5 million was accepted for the works. The minutes record that $900,000 was raised from freemasons and from bequests, with the balance being financed by a loan of $750,000 which was to be repaid over 10 years. A large part of the $900,000 was apparently from a bequest to the Hospital from the estate of a deceased freemason, Mr Arthur Rowe.
In September 1968, the minutes of Grand Lodge make reference to a capitation charge under rule 274, which was then fixed at 30 cents per year and applied to reduce the charges to masonic patients at the Clarendon Street campus by 10 per cent. At that juncture, the Hospital was being funded by patient charges, capitation charges, masonic donations and bequests and monies raised from associated auxiliaries. Those also observe that at that time, 55 per cent of patients at the Hospital had no masonic connection and that the campus had made a loss which was offset by what was said to be “the wonderful efforts of all lodges and brethren … of the various auxiliaries, particularly our ladies’ auxiliaries; of the Founders and Life Governors of the Freemasons Hospital Association”.
The extensions initiated in September 1968 were completed in 1970 increasing the number of beds to 156 and the number of operating theatres to 4. Grand Lodge minutes of June 1978 record that the board of the Hospital had repaid the $750,000 borrowed for those extensions by June 1978.
In June 1978, it was decided to construct a new wing at Clarendon Street, called the Link Wing. The Link Wing was to be a four-storey building with facilities which included a musculoskeletal unit at an estimated cost of $2.25 million. The June 1978 minutes record that the board had in hand approximately $750,000 and a further $1.5 million had to be borrowed. An appeal, styled the “Freemasons Hospital Building Appeal”, was initiated to raise $500,000 to assist in funding the furnishing of the Link Wing, to make it workable following construction and to replenish Hospital funds and expedite the repayment of the loan of $1.5 million. For the first time, the funds were to be raised not only from freemasons but also from business and industry, government and members of the general community. Donations to the building appeal were to be tax deductible. The final report of the building appeal was prepared in September 1979 and stated that $542,299 was raised by the appeal, of which $429,989 came from masonic sources.
In 1999, an emergency department was built at Clarendon Street and opened the following year. The emergency department was financed by a $5 million commercial loan and its operating costs were provided for four years from the estate of George Adams. In 1991, radiotherapy bunkers were constructed and radiotherapy equipment was installed at a total cost of approximately $5 million. This was funded by an extension of the existing borrowings.
In 1985, Grand Lodge established a committee which ultimately recommended the development of a day care centre with a range of services on the site at 320 Victoria Parade adjacent to the Dallas Brooks Centre. Grand Lodge determined to build a day procedure centre and a women’s breast clinic which included operating theatres, research and treatment facilities, consulting suites and ancillary services. In 1991, a maternity unit commenced operating.
The genesis of the Victoria Parade campus was the subject of a meeting of the Board of General Purposes in April 1987, when it was resolved to proceed with the first stage of this development. The buildings at the Victoria Parade campus were funded by donations of $140,000 from the United Grand Lodge of Victoria, $341,000 from an appeal to members, $140,000 from the Freemasons Hospital Association, a contribution of $26,000 from the Founders and Life Governors Association and a loan of $72,000 provided by United Grand Lodge of Victoria. The balance was provided by a loan of $35 million obtained from the ANZ Bank.
In the mid-1990s, there were major changes to State and Federal government funding of hospitals and this required a restructure of certain parts of the Freemasons Hospital. This resulted in the corporate entity, the plaintiff in this application, rather than the Hospital board, assuming responsibility for the running of the Hospital. As a result of those changes, since that time until the sale, the land and buildings at Clarendon Street and the business of the hospital has been owned by the plaintiff as trustee for the Hospital Fund. The land at the Victoria Parade campus was (and continues to be) owned by Grand Lodge Holding Limited for the General Fund, with the buildings and business at the Victoria Parade campus being owned by the plaintiff for the Hospital Fund.
In his affidavit, Mr Reaper states that he believes that since about 1937, the Freemasons Hospital has been classified as a charity by the Commissioner of Taxation and subsequently is a deductible gift recipient for the purpose of receiving donations and bequests. A private ruling from the Commissioner of Taxation on 14 November 1995 granted an exemption from income tax to the plaintiff from the date of transfer of the business from the Hospital Fund of United Grand Lodge to the plaintiff. In the same ruling, the Australian Taxation Office advised that a certificate had been provided to allow for the deductibility of gifts.
The sale of the Freemasons Hospital
In mid-2004, Grand Lodge began examining options as to the means of selling the Hospital. The Hospital required a good deal of capital investment and was experiencing difficulty competing against private hospital conglomerates that owned multiple campuses with all the accompanying economies of scale. In addition, the Hospital carried a high level of debt which was difficult to service because of the pressure from lenders and the declining number of freemasons supporting it.
The consortium bought the land, buildings and business at the Clarendon Street campus from the Plaintiff as trustee of the Hospital Fund. It also purchased the building and business of the Hospital at the Victoria Parade campus. The land at the Victoria Parade campus was leased to the consortium, together with a right to purchase that land subject to certain planning conditions. In addition, the consortium purchased the land in the name of Grand Lodge Holding Limited at 99 – 103 Albert Street East Melbourne, which had been held as an asset for the hospital as trustee of the Hospital Fund.
On 22 December 2005, a series of agreements was entered into in respect of the implementation of the sale. Those agreements are detailed in paragraphs 72 and 73 of Mr Reaper’s affidavit. At settlement of the sale a total of $46,155,832 was received as follows:
1.The Clarendon Street campus - $12, 905,000
2.For the business of Freemasons Hospital - $9,075,000
3.For the medical centre at Victoria Parade campus - $22,700,000
4.For 99 – 103 Albert Street East Melbourne - $1,395,000
5.Interest on deposits - $82,807
6.Adjustments - $1,975
Of that sum of $46,155,832, funds were applied to discharge the liability for the indebtedness to National Australia Bank for the funds borrowed to establish the Victoria Parade Campus, for staff leave entitlements, long service leave and like matters, other liabilities of the Hospital and consultants’ fees. The details of the application of those funds is as follows:
1.Payment of a debt owed to the National Australia Bank Limited - $17,837,062
2.Fire upgrade works required to be carried out as a condition of the sale - $10,530,000
3.Staff entitlements, long service leave and other such liabilities - $5,390,240
4.A debt owed to a deceased estate - $562,265
A portion of the business sale proceeds was held by DLA Phillips Fox in escrow for 18 months as retention money against claims which might be brought by the consortium. That money was invested in a term deposit. No such claims were made prior to the expiration of the retention period and, in November 2007, those monies were paid to Grand Lodge.
As a result, the balance of the funds from the sale amounted to $19,836,265, which included those retention monies. Grand Lodge has invested those monies, which were paid into the Hospital Fund, in a number of different types of term deposits and securities.
Since the sale of the Freemasons Hospital to the consortium, neither Grand Lodge nor the Hospital has been involved in providing hospital or medical services to the community.
Mr Reaper concludes his affidavit by contending that, having regard to the predominant contribution made by freemasons to the building and development of the Freemasons Hospital since the 1920s, Grand Lodge should be permitted to use the sale proceeds as it sees fit under the Constitution, including promoting the interests and objects of Victorian freemasons generally.
Mr Reaper’s affidavit of 9 July 2009 sets out the evolution of the constitution of Grand Lodge, more particularly those provisions which deal with the various Funds administrated by Grand Lodge. Reference was made to the 1927 Constitution where there was reference to two such funds, the Benevolent Fund and the General Fund. A levy was imposed on each lodge for contribution to the Benevolent Fund, exacted at an amount for each member.
The constitution was amended in 1935 to provide for the exaction of a contribution of £1.10 for the “Hospital and Hostel Fund for the Masonic Intermediate Hospital”.
A further amendment to the constitution was made in 1939 when it was resolved that the Hospital should be made a Board of Grand Lodge. The constitution acknowledged the existence of four Grand Lodge Funds being the General Fund, the Benevolent Fund, the War Relief Fund and the Hospital Fund. A specific rule dealt with the management of the Freemasons Hospital and provided that the Board of the Hospital be deemed to be a Board of Grand Lodge.
As I have observed, Mr Reaper was not cross-examined on his affidavits. It was not suggested by Counsel for the Attorney General that any part of the affidavits was implausible or inadmissible or should otherwise not be accepted and I will proceed on the assumption that the content of the affidavits was not controversial.
The Plaintiff’s submissions
The plaintiff contends that because the funding of the establishment and the development of the Hospital was almost entirely from levies and other contributions from freemasons and by reason of the terms of the Constitution, the Court should infer an intention that the sale proceeds representing the funds contributed by or at the direction of Grand Lodge should revert to Grand Lodge to be applied for general masonic purposes.
Dr Hardingham, senior counsel for the plaintiff, developed his submissions in large part by reference to the decision of Brereton J of the Supreme Court of New South Wales in the decision The Cram Foundation v Corbett Jones.[1] He submitted that Brereton J’s decision collected and considered the relevant principles and authorities.
[1]Unreported decision of the Supreme Court of New South Wales Equity Division No. 2437/05 [2006] NSWSC 495.
Dr Hardingham began his submissions with the statement of the general principle that property which is the subject of an absolute gift to charity, once vested, remains with the charity forever. A cy-pres scheme will be directed if the particular charity or purpose to which it is given subsequently fails. This is so regardless of whether or not the donor had a general charitable intention. As such, he stated that if the Court was to decide that the various transfers to the hospital were absolute dedications to charity in perpetuity, then if the Hospital ceased to be the Freemasons Hospital, its assets sold and, after payment of its liabilities, was liquidated into $20 million in cash, the plaintiff would be required to formulate a proposal for a cy‑pres scheme so that such a fund could be applied to a charity with similar aims and objectives.
However, Dr Hardingham submitted, a gift or dedication to charity may in some circumstances be limited, that is, not absolute and in perpetuity. The limitation may be such that, upon the occurrence of a certain event, the funds which are the subject of the gift or dedication will revert to the donor.
Such a limitation may take one of two forms. The first is a gift which is determinable upon the occurrence of a particular event, what Dr Hardingham described as a determinable dedication. Such a gift or dedication is limited in duration, until the occurrence of a particular event. In the context of the present proceeding, it would be exemplified by a dedication to the Freemasons Hospital for so long as that Hospital was a masonic charity run by freemasonry in Victoria under the auspices of Grand Lodge.
Alternatively, it may be a conditional gift or dedication, being an absolute gift but subject to conditions subsequent. In the current context, it would take the form of a dedication to the hospital in perpetuity but if the Hospital ceased to be under the control of Grand Lodge, then the gift or dedication terminates and the original donor can reassert entitlement.
These two categories, sub‑classes of long‑term dedications to charity which are limited, were considered in Cram[2] where Brereton J stated:
A gift of property until the occurrence of some specified event which may never occur may be construed as a determinable fee simple, or as a conditional fee simple. A determinable fee is one which will automatically determine on the occurrence of the specified event (which may never happen), whereas a conditional fee is one which has attached to it a condition upon satisfaction of which (if ever) the grantee’s estate is cut short, the essential distinction being that the determining event in the determinable fee itself sets the limit for the estate first granted, whereas a condition subsequent is an independent clause added to a limitation of a complete fee simple absolute which operates, if satisfied, to defeat it; thus in a determinable fee, the limiting circumstance is integral to the formulation of the duration of the estate, whereas in the conditional fee, the limiting proviso operates to cut short the estate before it reaches its normal span … . (emphasis added)
[2]At paragraph 56.
Brereton J went on to explain the difference between the two interests at [57] (omitting citations):
Although the distinction has been called “absurd”… , “extremely artificial”, and even “little short of disgraceful to our jurisprudence”, there is in law a great difference … . As has been seen the distinction is of significance for the application of the rule against remoteness of vesting, when the specified event may occur after the expiry of the perpetuity period. There are other important differences: whereas occurrence of the specified event automatically determines the fee in the case of a determinable fee… , in the case of a conditional fee it merely gives rise to a right of re-entry and unless and until that right is exercised, the fee continues … . And where the condition in a conditional fee is void, the grant becomes unconditional, whereas if a determinable grant is invalid, it is destroyed in its entirety … .
[58] The logical and consensual difference between the two, namely that in the case of a determinable fee, the donor is defining and limiting what is being given, whereas in the case of a conditional fee, the donor is attempting to create a right, upon occurrence of the event, to take back what is otherwise given absolutely, was explained by Gummow J in Cabouche v Ramsay (1993) 119 ALR 215 (at 227.02-18):
… a distinction must be drawn between the grant of an absolute interest with a condition subsequent which attempts to terminate the interest and the grant of a determinable interest. The distinction, in the words of Professor Williams in his article ‘The Doctrine of Repugnancy” (1943) 59 LQR 343 at 352, is between a grant to A but if he alienates then to B, where the gift over is void, and a grant to “A until he alienates, and then to B, where the gift to A comes to an end if he purports to alienate it”.
Criticism has been levelled at this doctrine on the grounds that distinctions such as this are purely semantic: see for example the article by Professor Williams. However, the two cases described above are logically distinct and the difference between them is well settled and fundamental. In the first case the donor is attempting to take back something which he has given absolutely, something which is beyond his power. In the second case, the donor is merely defining the nature of that being given. It is necessary in each case to construe the instrument creating the proprietary interest in question to determine into which category the interest falls.
At [60] Brereton J cites words and expressions which may be indicative in determining whether the subject grant is a determinable fee or a conditional fee:
Typically, words included in but qualifying the grant … such as ‘while’, ‘during’, ‘as long as’, and ‘until’ create a determinable fee, whereas separate clause of defeasance – such as ‘provided that’, ‘on condition that’, ‘but if’, or ‘it it happens that’ operate as a condition subsequent …
Although these formulae may not be compelling – and the best guides, if available, are the name put to the interest in the document which creates it, and the consequences spelt out in it as flowing from the specified event (reverter to the grantor being indicative of a determinable fee, whereas a right of re‑entry is indicative of a conditional fee) … they are too well established to be disregarded as significant indicators when they are all that is available. [citations and references omitted].
Of course, in the circumstances under consideration here, we do not have the advantage of a written instrument which can be construed to ascertain whether the subject dedication was a dedication in perpetuity, a determinable dedication or a conditional one. I shall return to consideration of this issue below.
Dr Hardingham submitted that the dedication to the Hospital in these circumstances, being a Freemasons hospital, was in the nature of a determinable dedication and that when the determining event occurred, that is, when freemasonry ceased to operate the Hospital, the proceeds of sale of the Hospital should revert to Grand Lodge. This is to be contrasted with the position if the dedication or gift is characterised as a condition subsequent, where the condition subsequent is broken and the donor has a right of re‑entry on condition broken. In those circumstances, the disposition does not automatically come to an end. The donor has to assert its right to re‑enter on condition broken.
Dr Hardingham’s submissions then turned on to a consideration of how the rule against perpetuities applied in these circumstances. At common law, the rule against perpetuities requires that, at the time of the gift, it must be possible to say that all non‑vested interests must vest if at all within the perpetuity period. If it is possible for them to vest outside the perpetuity period, the non-vested interests are void. Under the common law, which applied in Victoria prior to the introduction of the Perpetuities and Accumulations Act in 1968, the perpetuity period is “a life in being plus 21 years”.
In Cram, Brereton J analysed in detail the question of whether the grantor’s possibility of reverter upon termination of a determinable fee is a vested interest. Because of the facts in Cram, Brereton J had to consider the common law position in this regard prior to the introduction of the Perpetuities Act 1984 (NSW). He stated[3]:
The common law rule against perpetuities (or, as the authors of Jacobs Law of Trusts, 6th ed at [1081], call it, the rule against remoteness of vesting) is that a future interest in property must vest, if at all, within the perpetuity period of “a life or lives in being” and 21 years thereafter. Under this rule, a gift over conditional upon an event which need not necessarily occur within the perpetuity period is void … . Thus, where there is a gift for charitable purposes with a gift over to a non‑charitable purpose, on the fulfilment of a condition which may occur outside the perpetuity period, the gift over is void, and the initial gift for charitable purposes is regarded as absolute and unconditional … .
[3]Cram at [30] – [42] at 30.
Brereton J then went on to consider the position in regard to perpetuities and limited or determinable gifts. He stated at [31]:
However, there are conflicting views as to whether, where there is a limited or determinable gift (as distinct from a conditional gift – a distinction to which it will be necessary to return ) a grantor’s possibility of reverter is subject to the rule against perpetuities. It has been submitted that I should hold that the possibility of reverter is also subject to the perpetuity rule, but I have concluded that it is not.
[32] First, the view that the rule against perpetuities does not apply to the grantor’s possibility of reverter is sound in principle. The rule against perpetuities is concerned with the creation, and not the duration or termination, of interests, and does not invalidate a limitation which provides that an interest shall or may cease at a future date outside the perpetuity period … . If a determinable fee terminates, then there will be an interest of which the settlor has not disposed. Any beneficial interest of which a settlor fails to dispose remains in the settlor under a resulting trust, ab initio, even if it is uncertain when, if ever, it will take effect … .
[33] Secondly, although several cases suggest that the perpetuity rule is applicable to the grantor’s possibility of reverter, on examination their reasoning is not compelling.
His Honour then surveyed a number of authorities which have held that the rule against perpetuities did apply to determinable gifts but, for the reasons he explains, he declined to follow them. He then went on to consider several authorities that supported the proposition that the perpetuities rule did not apply to the grantor’s possibility of reverter on termination of a determinable fee outside the perpetuity period. He concluded at [42]:
Accordingly in my opinion, principle and the balance of authority favours the view that, at common law, the grantor’s possibility of reverter upon termination of a determinable fee is a vested interest, and is unaffected by the rule against perpetuities … [Under the Perpetuities Act, a possibility of reverter under a determinable interest is subject to the rule against perpetuities: s 14(2)].[4]
[4] Section 16 of the Victorian Perpetuities and Accumulations Act (1961) contains an identical provision.
Dr Hardingham then moved on to a consideration of the question of whether an interest which reverts at the end of a determinable interest is vested or contingent. If, as the plaintiff contended, the situation under consideration here was a determinable dedication, once the determining event occurred and Grand Lodge was entitled to the assets, those assets would be considered to be vested so that the rule of perpetuities did not apply.
On the application of Brereton J’s analysis in Cram , it seems clear that if what has occurred amounts to a conditional interest, it would be void on an application of the rule against perpetuities under both the common law and under the Perpetuities and Accumulations Act. The whole dedication would be regarded as free from any conditions subsequent by reason of it being void and, being an absolute dedication to charity , be susceptible to cy-pres.
Dr Hardingham however submitted that the circumstances under consideration here are that of a termination of a determinable interest and the right of reverter is vested. Because of this it is not subject to the rule against perpetuities.[5]
[5] In Ford and Lee’s Principles of Law of Trusts at [7410] the authors agree with Brereton J’s approach in Cram that at common law the possibility of reverter following on from a determinable fee is vested and not subject to the rule against perpetuities.
If the moneys dedicated by Grand Lodge to the establishment and development of the Hospital were the subject of a dedication which was determinable on the cessation of masonic control of the Hospital then, Dr Hardingham submits, Grand Lodge can reclaim when the dedication is determined by such cessation.
Dr Hardingham then considered the application of the Perpetuities and Accumulations Act 1968. Section 16(1) of that Act resolves the common law controversy as to whether the possibility of a reverter on the determination of a determinable interest is subject to the rule against perpetuities and provides that such an interest is subject to the rule. The Act commenced operation on 10 December 1968 and has no retrospective application. Section 16(1)(a) provides that the rule against perpetuities shall apply:
(a)to a possibility of reverter in land on a determination of a determinable fee simple; in which case if the fee simple does not determine within the perpetuity period it shall thereafter continue as a fee simple absolute; …
Section 16(1)(b) provides:
The rule against perpetuity shall apply –
(b)to a possibility of a resulting trust on the determination of any other determinable interest in property; in which case if the first interest created by the trust does not determine within the perpetuity period the interest it creates shall thereafter continue as an absolute interest; …
Section 16(1)(c) confirms the common law position in respect of conditions subsequent and provides that the rule shall apply:
(c)to a right of entry for condition broken, the exercise of which may determine a fee simple subject to a condition subsequent and to an equivalent right in the case of property other than land; in which case, if the right of entry or other right is not exercised within the perpetuity period, the fee simple shall thereafter continue as an absolute interest and any other such interest in property shall therefore continue free from the condition.
Dr Hardingham submitted that the provisions of the Act have no application in this instance by reason that at the time of the hospital’s establishment, the contemporaneous documentation was such as to indicate that what was occurring was a dedication to charity in the nature of a determinable dedication. At that time, in the 1930s and prior to the introduction of the 1968 Act, the common law applied and on an application of Brereton J’s reasoning in Cram, the possibility of reverter following on from a determinable interest is not subject to the common law rule against perpetuities. As to events after 1968, Dr Hardingham contended that they did not affect the initial dedication. He stated that, while they may have increased the capital value and extent of the hospital, they did not, to use his expression “have a life of their own” and they should not be considered to be discrete dedications the subject of separate determinable gifts. The Hospital as an institution should be treated as a complete enterprise dedicated to charity on a determinable basis.
Dr Hardingham’s submissions then referred to the characterisation of the dedication and the relevant factors to be taken into account. In that regard, he referred to the decision of the High Court in Attorney‑General of the State of Queensland v Corporation of the Lesser Chapter of the Cathedral Church of Brisbane.[6] In that case, the Chapter, which was the body administering the Church of England Cathedral, purchased land adjacent to the cathedral in Brisbane in order to prevent that land being acquired by persons who would use it for undesirable commercial development. A hospital, called the Pyrmont Hospital, was located on what was described as the Pyrmont land which was purchased and the hospital premises was then rented by the Chapter to an order of Church of England nuns. In 1918, the Council of the Diocese of Brisbane resolved to create a memorial to those who had served and died in the First World War. In 1919, the diocese resolved that the memorial should take the form of a reconstruction of the Pyrmont Hospital and that other property be acquired for the improvement of the site.
[6](1977) 136 CLR 353. (The Brisbane Cathedral case)
An appeal for funds for the hospital was conducted by the diocesan council and synod and £52,000 was raised from the public between February 1919 and November 1922. Additional funds were borrowed and the new hospital, called St Martin’s Hospital, was erected using the funds raised by the public appeal and the additional borrowings. The nuns conducted the hospital from 1922 until it closed in 1971. In 1920, the Chapter resolved that the Pyrmont land be appropriated for the purposes of the hospital. Additional lands were purchased to provide a larger site for the hospital at around the same time. The financial records did not maintain a clear distinction between the hospital’s accounts and the Cathedral’s accounts but it appeared that the hospital account met some part of the cost of the acquisition of the additional land. The Chapter remained responsible for the building fund debt which was repaid by May 1941.
Over the passage of time, it became impracticable to continue to operate the hospital and the synod resolved to close the hospital and establish a geriatric hospital elsewhere, partly funded from monies accumulated from the running of the hospital. The Attorney‑General for Queensland contended that the Chapter held the land adjacent to the Cathedral together with the hospital buildings on trust to conduct a hospital and sought a declaration in that regard and an injunction restraining the Chapter from dealing with the land except for that purpose. The Attorney General contended the hospital property accumulated as a result of the conduct of the hospital was held upon the hospital trust. The Chapter sought a declaration that it was impracticable to continue to run the hospital and sought an order that a cy-pres scheme should be directed for the use of all the funds.
The Chapter contended that there was a determinable dedication for only so long as the hospital could be conducted on the land and when it could no longer be so conducted the lands went back to the Lesser Chapter for its own purposes.
The principal judgment is that of Jacobs J, who considered two questions.[7] The first was whether the hospital was a separate charity, that is, was there a separate dedication of the land to an independent charity. He stated[8]:
It therefore becomes necessary to determine whether the corporation has wholly parted with its beneficial interests in the land in favour of the charitable object, St Martin’s Hospital, so that the lands are held in trust for that object. If it has not wholly parted with its beneficial interest, then it is necessary to determine what, if any, interest the charity has had in the land upon which its funds have been expended. This question concerns mainly the Pyrmont lands and the Frascati lands. On both the hospital buildings have been erected. The funds were originally raised in order to rebuild on the Pyrmont lands. They were not raised in order to purchase the Pyrmont lands. The latter were to be provided by the Lesser Chapter. There is no clear evidence that the whole beneficial interest in the lands was intended to be transferred outright to the charity St Martin’s Hospital. On 26 October 1920 the Chapter resolved that the site known as Pyrmont be appropriated for the purpose of the St Martin’s Hospital. An amount of £3958.11.10 was debited shortly afterwards to the hospital account and an amount of £4,000 owing to the AMP Society was later debited to the Hospital Account. Although an inference might be open that the whole beneficial interest in the land was intended to be transferred from the purposes of the Cathedral to the purposes of the hospital, it is slender evidence upon which to conclude that the Lesser Chapter who in its capacity as trustee of Cathedral property intended unconditionally to relinquish in favour of the hospital trust all interest in the land. The Cathedral had a very great interest in ensuring that the Pyrmont lands were used only for the purposes of St Martin’s Hospital being conducted upon that site. It had originally purchased the old hospital for the primary purpose of protecting the cathedral against commercial development in such close proximity. In these circumstances, despite the entries in the accounts it would be unsafe to draw the inference that the intention was to transfer the beneficial interest absolutely from the charitable object which was the Cathedral to the charitable object which was the hospital.
[7]At p.370.
[8]At p.373.
In the context of the present application, Dr Hardingham posed the question: was it the intention of freemasonry to transfer the enterprise which is the Hospital out of freemasonry forever and absolutely in perpetuity to a totally separate charity, namely the charity called Freemasons Hospital which operated initially out of the East Melbourne, Clarendon Street campus and later at both campuses. He contended that there was no such intention. He made reference to the decision of Jacobs J where he stated[9]:
There was however an appropriation of the land for the charitable object, St Martin’s Hospital, for a limited duration, the limit being until St Martin’s Hospital should cease to be conducted upon the site. There is nothing in law to prevent an appropriation of lands for charitable purposes of limited duration, with a reverter to the donor, conveyor or assignor as the case may be. … It seems that the intention may be inferred from the circumstances. In my opinion the circumstances of the appropriation of the Pyrmont Hospital site for the purposes of the new St Martin’s Hospital pursuant to the resolution of the Lesser Chapter passed in October 1920 lead to the conclusion that upon a failure of those purposes the site should revert to the Cathedral. [emphasis added].
[9]919770136 CLR 353 at 374.
Dr Hardingham submitted that while there were factual differences to those under present consideration, the principle was the same. He submitted that another significant feature of the Brisbane Cathedral case was that the moneys which were the subject of the proceeding were originally raised from the public in totality and yet the High Court had no compunction in saying that, irrespective of the fact that the rebuilding of the hospital was funded by a public appeal, the whole enterprise should revert to the donor, i.e. the Cathedral, upon the happening of the determining event. He emphasised that the High Court did not require an inquiry as to whether any of the moneys had to be paid back – on the occurrence of the determining event the enterprise reverted to the donor. Dr Hardingham submitted that where, as in the present case, where the evidence is that the funds for the very large part had been raised by internal levies and appeals to freemasons, this is a powerful reason that it should revert to their governing body.
Dr Hardingham’s submissions culminated in a consideration of three questions which he contended the present application gives rise to. The first is whether the dedications made by Grand Lodge should be characterised as an absolute dedication to charity or a limited or qualified dedication. He stated that this involves considerations of whether a totally separate charity, freestanding perpetual and independent, was intended to come into existence when the hospital was founded or, on the contrary, was it intended to be an adjunct of freemasonry for such time until masonic control ceased. If it was intended to be an absolute dedication to charity, then such dedication has vested and a cy‑pres scheme is required to be proposed.
Secondly, if it is a limited or qualified dedication to charity, should it be characterised as a determinable gift or a conditional gift? If it is a determinable gift, Dr Hardingham submits that it should be characterised as such from the outset of the hospital enterprise, in which case there are no perpetuities consequences. If it is a conditional gift, it fails by reason of perpetuities considerations, both at common law and under the statute. In that event, a cy‑pres scheme is required. Thirdly, consideration is required as to the effect on the rule against perpetuities as modified by the 1968 Act.
As to the first issue, Dr Hardingham submitted that in these circumstances there was no absolute dedication to charity. The moneys which were raised by appeals and levies, he submitted, were dedicated to the establishment and development of a masonic hospital, that is, one closely controlled either directly or indirectly by Grand Lodge. Dr Hardingham contended that the evidence did not point to the establishment by Grand Lodge of a separate freestanding charitable institution when the Hospital was created. Rather, from its establishment until its ultimate demise as an enterprise it was controlled by Grand Lodge or by entities very closely associated with it. The Hospital was funded by freemasonry by way of levies and appeals and it was run by freemasons on land acquired by Grand Lodge. From the time of foundation of the Hospital it was managed by a board of Grand Lodge, it was held on trust first by Grand Lodge trustees and subsequently by the plaintiff which is a company controlled by Grand Lodge. All aspects of the Hospital’s activities were under the control of Grand Lodge and this situation prevailed until the hospital ceased operations and was sold. Dr Hardingham submitted that the circumstances of the Freemasons Hospital have close similarities to those considered by the High Court in the Brisbane Cathedral case. In that case, as here, it was held not be intended to be an absolute dedication for all time in perpetuity to charity, rather it was a determinable arrangement. It could not be said to be a conditional dedication. Jacobs J in the Brisbane Cathedral case held that there was a duration involved in the use of the Pyrmont land for the use as a hospital for a limited duration. Similarly, he contended that the dedication by freemasonry when the hospital was established was implicitly limited for the period in which freemasonry operated the hospital.
The Submissions of the Attorney‑General
The Attorney‑General submitted that the funds the subject of this application should be applied cy-près. Ms Rees of counsel, who appeared on behalf of the Attorney‑General, submitted that the whole of the proceeds are impressed with a charitable trust and that the funds were intended to be outright gifts which were not, as Dr Hardingham would have it, limited in time or by any condition.
She developed her submissions by reference to the various Minutes of meetings of Grand Lodge commencing with those of the meeting of June 1929, contending that those minutes betrayed an intention in that regard. At that meeting, the discussion included the establishment of an intermediate hospital at the Brighton land. By the expression “intermediate” hospital it was meant a hospital of the type which was not a free hospital, nor was it a private hospital with a high fee structure.. The Minutes stated that “an intermediate hospital provided for those of limited means and who could only afford small fees. A great many men were of limited means, and they could not afford to pay the fees demanded in a private hospital. It was to meet these cases that it was proposed to provide a hospital where men could pay about three guineas a week. At the same time consideration would be given to those men who could not pay that amount.”
Ms Rees submitted that these Minutes revealed that the intention was to provide hospital care for needy freemasons, that is, for the relief of poverty and that it did not matter in that context that the target population for such relief was a designated section of the public, i.e. freemasonry. Ms Rees submitted that nothing in the Minutes for the period which has ensued indicated that there has been any change in that intention when the various events which have been described above occurred, such as the sale of the Brighton land, the purchase of the Clarendon Street land and the construction of the Hospital.
Ms Rees then made reference to the Minutes of the September 1933 meeting of Grand Lodge at which the purchase of the Clarendon Street land was referred to. She submitted that there was no suggestion in those minutes that the initial purpose for the purchase of the Brighton land, that of providing an intermediate hospital to which only freemasons and their wives would be admitted, had evolved into some other purpose by the time that the Clarendon Street land was purchased.
There then ensued the construction of the hospital with the initial buildings, then the extensions funded by grants, loans, subscriptions, levies, appeals to members, bequests, a public appeal and borrowings in relation to operational costs. Ms Rees submits that these funds were all obtained and given absolutely for a specific charitable purpose and no limitation as to time or otherwise was expressly or implicitly imposed. Ms Rees submitted that the meetings of Grand Lodge were carefully minuted and that some of those deliberating at those meetings were legally qualified people. She states that those Minutes are silent on what was to occur should the hospital cease to operate and, she submitted, if there was any limitation as to time or purpose of the type contended for by Dr Hardingham, it would be expected that there would have been some reference to this in the Minutes.
Ms Rees then made reference to section 2 of the Victorian Charities Act 1978 which deals with the occasions for applying property cy-près. Section 2 provides relevantly:
2.Occasions for applying property cy-près
(1)Subject to sub-s(2), the circumstances in which the original purposes of a charitable gift can be altered to allow the property given or part of it to be applied cy-près shall be as follows –
(a)where the original purposes, in whole or in part –
(i)have been as far as may be fulfilled; or
(ii)cannot be carried out, or not according to the directions given and to the spirit of the gift;
(2)Sub-section (1) shall not affect the conditions which must be satisfied in order that property given for charitable purposes may be applied cy-près, except in so far as those conditions require a failure of the original purposes.
Ms Rees says that in the present case within the context of s 2 of the Charities Act, the original purpose has been fulfilled. Ms Rees then surveyed a number of authorities which she said stood for the general principle that where a fund has been given in trust for and devoted to charitable purposes, the fund cannot be resumed for private purposes but rather must remain forever to be used for charitable purposes even though the particular charitable purposes fail.
Those cases, which are set out at paragraphs 19 to 21 of the Attorney‑General’s revised outline of argument are not in my view apposite for application in these circumstances. In general terms, they involved organisations such as hospitals and fire brigades and the relevant funds under consideration were raised from the public, that is to be contrasted with the position here where for the main part the subject funds have been sourced from the members of freemasonry and applied to the hospital which until it ceased operating was administered by freemasons.
Ms Rees, in response to Dr Hardingham’s submission that what has occurred in these circumstances is in reality a single dedication which occurred prior to the introduction of the Victorian perpetuities legislation, contended that the Minutes of Grand Lodge reveal that there was not such a single dedication, rather over the years there have been a number of steps to fund extensions, expansions and improvements. For this reason, she contends, the issue of perpetuities cannot be avoided.
Ms Rees pointed to the authorities which state that the common law rule against perpetuities does apply in respect of situations where there is a termination of a determinable gift. In particular she made reference to the decision of Bennett V‑C in Hopper v Corporation of Liverpool[10] where it was held that the possibility of a reverter of a determinable fee simple was subject to the rule against perpetuity. The effect of this was that the gift for charitable purposes in that case was regarded as absolute and unconditional. Bennett V‑C stated at 215 of the report:
I cannot but think that if the rule against perpetuities applies to the possibility of revert on a fee simple subject to a condition which may or may not happen, it must equally apply to the possibility of reverter on a fee limited to determine on an event which may or may not happen.
[10](1944) 88 SJ 213.
In addition, she relied on the Tasmanian decision of Zeeman J in Sieminski Pty Ltd[11] and textbooks on the subject.[12] As she properly conceded, however the decision in Hopper was considered and criticised by Brereton J in Cram.[13] In my view, I much prefer the reasoning detailed analysis and conclusion of Brereton J in Cram on this point.
[11][1990] Tas R 236 at 247.
[12]Maurice and Leech, Perpetuities, 212 note 70; Theobald on Wills, 16th ed at 44-39.
[13]At [35].
Ms Rees confronted the central submission of Dr Hardingham, that the process over the years whereby the hospital was founded and improved, rather than being an absolute gift were in the nature of a determinable gift and, with the cessation of the hospital’s activities and its sale, the gift has determined and should revert to freemasonry. Of course, unlike the situation in much of the case law, there is no singular formal written document constituting the terms on which the Hospital was founded and operated. The consideration of the question therefore involves an analysis of the events surrounding the foundation of the Hospital and its continued funding.
Such an approach was taken in the Brisbane Cathedral case in the decision of Jacobs J where, as here, the Court was required to assess the intention of the donor, in that case the Chapter. At p 373 Jacobs J stated (following the passage cited at paragraph 86 above)
There was however appropriation of land for the charitable object, St Martins Hospital, for a limited duration, the limit being until St Martins Hospital should cease to be conducted upon the site. There is nothing in law to prevent an appropriation of lands for charitable purposes of limited duration, with a reverter to the donor, conveyor or assignor as the case may be. See Bankes v Salsbury Diocese and Council of Education Incorporated. It seems that the intention may be inferred from the circumstances. ….. In my opinion the circumstances of the appropriation of the Pyrmont Hospital site for the purposes of the new St Martins Hospital pursuant to the resolution of the Lesser Chapter passed in October 1920 lead to the conclusion that upon a failure of those purposes the site should revert to the Cathedral.
In his submissions in reply, Dr Hardingham took issue with the characterisation of the charitable trust in this instance being a trust for the relief of the poor. In this regard he pointed to the Minutes generated at or about the time of the foundation of the Hospital where reference was made to the statement that any freemason could go into the Hospital as could the spouses of freemasons. He said that here is no issue that the Hospital was charitable in nature, rather the question for consideration was whether it was a perpetual dedication to charity which subsisted independently and separately from the donor or rather was that a charity for a finite period of time. In respect of Ms Rees’ submissions that the moneys were never expressed to be given for a determinable period of time and that they were given outright, pointed to the passages of the Brisbane Cathedral case which I have extracted above.
In response to the criticism by Ms Rees of the submission made in respect of the “single dedication” issue, Dr Hardingham said that each of the various stages by which the hospital was financed by levies and appeals, all those money raising activities were aimed at promoting the original project, i.e. the foundation of the Hospital. He stated that the materials exhibited in the form of the minutes all point to the foundation of a charitable organisation but one implicitly dedicated to charity for a finite period of time, that is, while Grand Lodge or freemasonry is in charge of and operating it. During the period leading up to the foundation of the Hospital, Dr Hardingham submitted, the documentation indicates that it is consistent with a limited disposition in favour of a charity, that is, so long as freemasonry is in a position to administer the hospital. In this regard he pointed out the fact that the lands were purchased from funds in the Benevolent Fund, the construction costs were all paid by the lodges and members through their levies and appeals and, perhaps most significantly, were financed from sources all internal to freemasonry.
Conclusion
In my view, the evidence in these circumstances points to a conclusion that the Hospital, from its establishment, was the subject of a determinable gift of the type that Dr Hardingham contends for. From its foundation, the Hospital was administered under the auspices of freemasonry through a board of Grand Lodge and, subsequently, by the plaintiff through its board, which was intimately associated with freemasonry. An examination of the evidence in the minutes exhibited to Mr Reaper’s affidavits reveals a very high degree of control exercised by freemasonry over the Hospital’s activities and its financial affairs throughout the nearly 70 years it operated. I consider that when one has regard to the surrounding circumstances when one is trying to assess the intention here, it was intended that if freemasonry through Grand lodge for one reason or another no longer operated the Hospital because it became impracticable to do so, the “gifts” of freemasonry in Victoria which funded the Hospital’s foundation and its continued expansion would revert to whence it came, i.e. Grand Lodge. Throughout the history of the Hospital, freemasonry maintained close control of its affairs and, until quite late in the piece was practically the sole source of finance for its capital and there was no intention to permanently relinquish the dedication in the manner contended for on behalf of the Attorney-General. While freemasonry has its philanthropic aspects, it is a closed organization with very prescriptive rules and codes and this was exemplified by the close superintendence by Grand Lodge over the years that the Hospital operated. This points in my view to an intention that should the Hospital venture cease operations and be wound down that the net proceeds should return to Grand Lodge.
As to the “single dedication” issue, I consider that it is impracticable and artificial to consider the position as being anything other than a single dedication, which was augmented from time to time by Grand Lodge as circumstances required by appeals and loans in the way described.
I prefer the careful analysis of Brereton J in Cram on the issue of the applicability of the perpetuities rule to determinable gifts. It is recent Australian authority from a respected equity judge. Brereton J considers this most difficult question, analyses all the relevant authorities and concludes that the perpetuities rule does not apply at common law to determinable gifts. The “single dedication” in this case occurred prior to the introduction of the Victorian legislation in 1968 and the Act therefore has no application. As such, I consider that the funds being the net proceeds of sale should revert to Grand Lodge.
The plaintiff’s originating process poses several questions and I answer them as follows.
1.“In the events that have happened how should the plaintiff apply the moneys standing to the credit of the Freemasons Hospital Fund United Grand Lodge as a consequence of the sale of the Freemasons Hospital in 2006.” Answer: Such money should be paid into the General Fund.
2.“Without prejudice to the generality of question 1, should the plaintiff account to the trustee of the General Fund of Grand Lodge for all or part, indicating which part of the moneys, if you say yes to question 1.” Answer: The plaintiff should account to the trustee of the General Fund for all of such moneys.
3.In so far as question 2 is answered no should the plaintiff present a scheme for the application of the moneys cy-pres to the Court for approval – Not applicable.
4.In so far as questions 2 and 3 are answered no, how otherwise should the plaintiff apply the moneys? – Not applicable.
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CERTIFICATE
I certify that this and the 31 preceding pages are a true copy of the reasons for judgment of Associate Justice Gardiner of the Supreme Court of Victoria delivered on 20 August 2010.
DATED this 20th day of August 2010.
Isabelle Smith
Associate