Grant v Yarra Glen & Lilydale Hunt Club Inc

[2006] VSC 482

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION
PRACTICE COURT

No. 9785 of 2006

JOHN NICHOLAS GRANT, ROBERT IAN KEABLE AND DAVID JAMES SIZER (AS TRUSTEES OF THE YARRA GLEN AND LILYDALE HUNT CLUB INC. INVESTMENT TRUST)	Plaintiffs
v
YARRA GLEN & LILYDALE HUNT CLUB INC.	Defendant

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JUDGE:	Mandie  J
WHERE HELD:	Melbourne
DATE OF HEARING:	30 November 2006
DATE OF JUDGMENT:	14 December 2006
CASE MAY BE CITED AS:	Grant v Yarra Glen & Lilydale Hunt Club Inc.
MEDIUM NEUTRAL CITATION:	[2006] VSC 482

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TRUSTS – interpretation of trust deed – incorporated association or Club created for the purpose of fostering fox-hunting and related sporting purposes – whether trust deed created trust for Club or for its purposes – consequences where purposes non-charitable.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Dr C Pannam, QC	O’Donnell Salzano Lawyers
For the Defendant	Mr A Broadfoot	Mallesons Stephen Jacques

HIS HONOUR:

1. The trustees of the Yarra Glen and Lilydale Hunt Club Inc. Investment Trust (“the Trust”), by originating motion filed 16 November 2006, seek answers to certain questions arising under a Deed of Trust dated 30 September 2005 (“the Trust Deed”) that created the Trust.  The essential question is whether the trustees are able to make payments to the Yarra Glen and Lilydale Hunt Club Inc. (“the Club”) in the circumstances referred to below.

1. The Trust Deed was entered into between the Trustees and the Club, an association incorporated under the Associations Incorporation Act 1981.  It appears from the recitals to the Deed that the members of the Club authorised the Committee of the Club to sell certain land owned by the Club and that the net proceeds of sale be invested.[1]  The Trust Deed further recites that the Club Rules had been amended to provide for the appointment of the Trustees who were to be responsible for the investment of the sale proceeds and such other monies of property as might be vested in them by the Club. 

   [1]The evidence shows that a portion of the Club’s land was sold and invested and the capital value of the Trust exceeds $1M and the net income for the period ending 30 June 2006 was nearly $69,000.

1. Paragraph 3 of the Trust Deed provides that all monies and any other property which might become vested in the Trustees:

“shall be held or controlled by them on trust for the Club and its purposes and for no other purpose it being expressly acknowledged by the Trustees that:

(a)The Statement of Purposes contained in the Rules of the Club are as follows:

‘To foster the sport of Fox Hunting in the State of Victoria, within the guidelines laid down from time to time by the Hunt Clubs’ Association of Victoria and to assist Junior Equestrian activities and to support Horse Sports generally.’

(b)     Rule 36 of the Rules of the Club provides as follows:

‘The Association is not carried on for the purposes of profit or gain to its individual members and is prohibited from making any distribution or dividend whether in money, property, or otherwise howsoever, to its members.’”

1. The Trust Deed goes on to provide for powers of the trustees and requires that they seek investment advice and take into account the investment policy adopted from time to time by the Committee of the Club.

1. Paragraph 6 of the Trust Deed provides:

“In each year the Trustees are to distribute and pay over to the Committee of the Club the Net Income derived from the investment of the Trust Funds.”

1. The Trust Deed goes on to provide, in paragraph 8, that the trustees shall only distribute to the Committee of the Club any part of the capital of the Trust Funds in accordance with a special resolution, voting upon which is confined to a limited class of members, and that amendments to the Trust Deed are also subject to the approval of such a special resolution of that class of members.

1. The principal activity of the Club is to hunt foxes with horses and hounds.  The Club, and its predecessor unincorporated association, was for many years a member of the Hunt Clubs Association of Victoria (Inc.) (“the HCAV”).  The HCAV has a detailed code of rules for fox-hunting (“the HCAV code”) and the HCAV rules provide for enforcement of the HCAV code by way of a disciplinary tribunal.  The rules of the HCAV were amended on 19 April 2006 to provide that any Hunt Club that made application for or became approved by the Bureau of Animal Welfare as an “approved hunting organisation” pursuant to the Code of Practice for the Welfare of Animal Hunting (Revision 1) or any revised Code made under or pursuant to the provisions of the Prevention of Cruelty to Animals Act 1986 should not be eligible for or continue to hold any form or class of membership of the HCAV.  The Club had previously obtained the approval of the Bureau of Animal Welfare to become and it remains an “approved hunting organisation” pursuant to the said Code of Practice for the Welfare of Animal Hunting.  As a result, HCAV revoked the Club’s membership and it remains ineligible to be a member of HCAV. 

1. It is to be noted however that the Club has adopted a code of rules for fox-hunting which substantially mirror the provisions of the HCAV Code. 

1. As a result of the revocation of the Club’s membership of the HCAV, the trustees became and are concerned as to whether it is still proper for them to pay the net income of the Trust Funds to the Club under paragraph 6 of the Trust Deed or, to put it another way, whether it would be a breach of paragraph 3(a) of the Trust Deed to pay any income of the Trust to the Club while the Club is not a member of the HCAV.  The trustees have been advised by senior counsel that they have no legal authority to make any payments to the Club out of the Trust Funds unless the trustees can be satisfied that any such payments will only be used for the purposes of assisting junior equestrian activities and supporting horse sports generally, and that the trustees are not entitled to make payments to the Club out of the Trust Funds if those payments are to be used to defray the Club’s expenses associated with fox-hunting.  No income has been paid to the Club since May 2006 and the Club has demanded that the trustees resume payment thereof.

1. It was submitted on behalf of the Club that the Trust Deed created a trust for a specified beneficiary, namely the Club, and that beneficiary was absolutely entitled to the net income from the Trust Funds pursuant to paragraph 6 of the Trust Deed.  The view that the trustees were prevented from making any payment to the Club for the purposes of its fox-hunting activities depended, so the Club submitted, upon the assumption that the words “on trust for the Club and its purposes and for no other purpose” created a trust for purposes as well as, or in conjunction with, a trust for the Club itself, or a trust for the Club limited to the purposes as defined in the Club’s Statement of Purposes.  However, so the Club submitted, if the Trust Deed did create a trust for the purpose of fostering the sport of fox-hunting such a trust would be for a non-charitable purpose[2] and hence invalid.  The trustees were therefore not legally bound to apply the funds for that purpose even if the Deed should be so construed.

   [2]Citing Peterborough Royal Foxhound Show Society v IRC [1936] 2 KB 497.

1. There are two possible views that may be taken of the effect of the Trust Deed.  The first view is that the Trust Deed creates a trust in favour of the Club as the named beneficiary with an absolute entitlement to the annual net income derived from the investment of the Trust Funds and an entitlement to the capital of the Trust Funds subject to the mechanism provided for in paragraph 8 of the Trust Deed.  The second view is that the Trust Deed creates a trust in favour of the Club but that any payment of income (or for that matter of capital) to the Club is impressed with a trust limiting the application of the proceeds of payment to the purposes of the Club at the date of the Trust Deed.

1. It seems to me to be relevant to take into account, in choosing between these two characterisations of the trust created by the Trust Deed, whether the purposes of the Club are, in law, charitable or non-charitable.  That is because it would be preferable to avoid an interpretation impugning the Deed and, if the purposes are non-charitable, then the trust for such purposes would be invalid.

1. In that regard, it seems to me to be clear, that the purposes of the Club, as extracted into paragraph 3(a) of the Trust Deed are all non-charitable purposes.  The fostering of the sport of fox-hunting is not a charitable purpose.[3]  Nor is a gift either “to assist Junior Equestrian activities” or “to support Horse Sports generally” charitable in nature.  It is well established that a trust for mere sport or recreation is not, without more (such as an express educational element), a trust for a charitable purpose.[4]  It is also well accepted law in Australia that (with certain limited exceptions not relevant here) a trust for non-charitable purposes is void or ineffective. 

   [3]See Peterborough Royal Foxhound Show Society v IRC [1936] 2 KB 497, 502. I also note that in In re Thompson [1934] Ch 342 there was a gift to a legatee to be applied in such manner as he should in his absolute discretion think fit towards the promotion and furtherance of fox-hunting. Clauson J accepted that the gift was non-charitable in nature but, perhaps anomalously, did not invalidate the gift.

   [4]See In re Nottage [1895] 2 Ch 649, 655-6; Strathalbyn Show Jumping Club Inc. v Mayes (2001) 79 SASR 54, 68–73, per Bleby J, and cases therein cited. See generally Dal Pont, Charity Law in Australia in Australia and New Zealand (OUP, 2000) 143-146.

1. I therefore think that the first view referred to above, that the Trust Deed simply creates a trust in favour of the Club as an incorporated entity and not a trust for any purposes, is to be preferred.  Paragraph 3, despite the reference to purposes, expressly creates a trust “for the Club” and paragraph 6 mandates the distribution and payment to the Committee of the Club of the net income of the Trust Funds.

1. I will however also consider the position on the assumption that (contrary to my view) the second view is correct, and that the Trust Deed creates a trust for the Club but impressed with a trust for its purposes.  There is obviously a good deal to be said for that interpretation given the language of paragraph 3 of the Trust Deed “and its purposes and for no other purpose” etc.  

1. In RSL Veterans’ Retirement Villages Ltd v NSW Minister for Lands,[5] there was a Crown grant of land to “the War Veterans’ Home” (a corporation) on trust for use as “the site for War Veterans’ Home (sic) and for no other use trust or purpose whatsoever”.  That gift was held to be a gift to the corporation on trust for its purposes as a corporation.  It was held that, having regard to the language used, the objects of the trust were limited to the objects of the corporation at the time of the grant and not its objects from time to time.  It could not have been intended that the trust have been for whatever objects the corporation, having an indefinite existence, had from time to time.  In that case, the objects of the corporation at the time of the grant were indisputably charitable in nature so no question of invalidity arose.

   [5][2006] NSWSC 1161.

1. Likewise it is certainly arguable in the present case that there is a trust in favour of the Club but a trust that requires all payments to the Committee thereunder to be applied to the Club’s purposes existing as at the time of the Trust Deed.

1. If that be the correct interpretation of the Deed then, in my opinion, the purposes being non-charitable, the trust would to that extent be ineffective,[6] as counsel for the Club submitted.  In my opinion, it would follow, in that event, that the trust was simply constituted as a trust for the Club, without any supervening restrictions.  I should add, although this was not investigated in argument, that if the consequence of this interpretation was that the trust wholly failed, there would have to be a resulting trust over the Trust Funds in favour of the Club, as settlor under the Trust Deed.

   [6]See Leahy v Attorney-General (NSW) [1959] AC 457, 478-9 (Privy Council).

1. If, contrary to the views that I have expressed above, there is under the Trust Deed a valid trust for the purposes, inter alia, of fostering the sport of fox-hunting, or if there is some other kind of fiduciary or contractual obligation imposed upon the Club under the Trust Deed, I do not think that the Club’s fox-hunting activities fall foul of such trust or obligation.  That is because in my opinion the Club, by adopting and adhering to a code of rules for fox-hunting that substantially mirrors the HCAV code, is continuing to foster the sport of fox-hunting “within the guidelines laid down from time to time” by the HCAV.  I do not think that the reference to “guidelines” requires that the Club should remain a member of the HCAV or subject to its disciplinary processes for the trustees to be entitled to continue their payments to the Committee.  The word “guidelines” points if anything to a code of conduct and, as I have said, the code adopted by the Club mirrors that applied by the HCAV.  However I do not think that this issue arises.

1. For the foregoing reasons it was ordered as follows:

1.In lieu of the relief sought in the originating motion filed 16 November 2006, order and declare that the plaintiffs, being the trustees of the Yarra Glen and Lilydale Hunt Club Inc. Investment Trust (“the Trust”), are required to pay the net income of the Trust to the defendant the Yarra Glen and Lilydale Hunt Club (“the Club”), notwithstanding the events referred to in the affidavit of John Nicholas Grant sworn 15 November 2006 filed herein, and that the plaintiffs are obliged to make such payment to the Club in circumstances where the Club is no longer a member of the Hunt Clubs Association of Victoria.

2.The costs and expenses of the plaintiffs and of the defendant of and incidental to this proceeding be paid from the Trust.