Housing Choices v Attorney-General for the State of Victoria
[2024] VSC 107
•15 March 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2022 05242
BETWEEN:
| HOUSING CHOICES AUSTRALIA LIMITED (ACN 085 751 346) | Plaintiff |
| v | |
| ATTORNEY-GENERAL FOR THE STATE OF VICTORIA | Defendant |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 February 2024 |
DATE OF JUDGMENT: | 15 March 2024 |
CASE MAY BE CITED AS: | Housing Choices v Attorney-General for the State of Victoria |
MEDIUM NEUTRAL CITATION: | [2024] VSC 107 |
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TRUSTS – Charitable trust – Application for judicial advice – Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 54.02 – Application for order settling a cy-près scheme as the original purposes of the trust cannot be carried out or have ceased to provide a suitable and effective method of using the trust property – Charities Act 1978 (Vic), s 2 – Cy-près scheme approved, subject to a requirement that the plaintiff notify the defendant of any substantial change to the general purposes and objects of the trustee.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P D Reynolds of counsel | Corrs Chambers Westgarth |
| No appearance for the Defendant |
HER HONOUR:
Introduction and background
On 27 February 2024 I indicated that I would grant the application of Housing Choices Australia Ltd (‘HCAL’) for the approval of a cy-près scheme with respect to a non-profit residential facility in Geelong, Baxter Homes. My reasons for granting the application follow.
The Baxter Homes Trust (‘Trust’) is a charitable trust which was established by a deed executed on 20 June 1960 (‘Trust Deed’). The Trust Deed appointed five individual trustees of the Trust (‘original trustees’). On 21 September 1960, the original trustees became the joint registered proprietors of Baxter Homes, a property consisting of approximately 16 small individual dwellings.
By originating motion filed on 20 December 2022, HCAL issued the present proceeding. The Attorney-General for the State of Victoria (‘Attorney-General’) in her capacity as the supervisor of charities is the defendant. HCAL is a not-for-profit provider of affordable housing and is a registered housing association under the Housing Act 1983 (Vic). Pursuant to cl 2.1(a) of HCAL’s constitution adopted on 15 August 2022, HCAL’s purpose is to ‘provide affordable housing and related support to people in Australia who are disadvantaged through homelessness, disability, mental illness, ageing, low income or other factors’.
HCAL is the current trustee of the Trust and is now the registered proprietor of Baxter Homes. Mr James Henry is the general manager of property development of HCAL.
By an amended originating motion dated 7 March 2023, HCAL seeks:
(a) judicial advice pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’) that the original purposes of the Trust cannot be carried out, or alternatively, that the original purposes have ceased to provide a suitable and effective method of using the property available by virtue of the gift and with regard to the spirit of the gift;
(b) orders settling a cy-près scheme whereby HCAL ‘holds Baxter Homes, together with all other property and funds of the Baxter Homes Trust, for its general purposes and objects, for the benefit of the inhabitants of the State of Victoria;
(c) alternatively to the preceding paragraph, an order that the original purposes of the Trust be altered as follows:
(a)the words in cl 1 of the Trust Deed ‘aged deserving or infirm’ be altered to ‘aged or deserving or infirm’;
(b)the words in cl 1 of the Trust Deed ‘inhabitants of Geelong Victoria or its neighbourhood’ be altered to ‘inhabitants of the State of Victoria’; and
(c)the words in cl 3 of the Trust Deed ‘with the consent under its common seal of the Association’ be struck out.
(d) an order that the affidavit of Mr Henry dated 15 December 2022 and the exhibits to that affidavit remain confidential pursuant to rr 28.05(4) and 28A.06(1) of the Rules; and
(e) an order that the costs of this proceeding be paid out of the assets of the Trust.
By letter dated 5 April 2023, the Attorney-General indicated that she does not oppose HCAL’s application. The Attorney-General did not appear at the hearing on 27 February 2024, and has made no submissions with respect to the application.
The purpose of the Trust is set out in cl 1 of the Trust Deed, which provides as follows:
The said land and all improvements for the time being thereon shall be held UPON TRUST to permit the same to be forever held used occupied and enjoyed by aged deserving or infirm persons of either sex (relief or assistance for whom shall be charitable in the technical legal sense of the word ‘charitable’) inhabitants of Geelong Victoria or its neighbourhood and subject to rules regulations by-laws and provisions for the administration of the charity hereby established for the time being made framed and passed by the Committee for the time being of ‘The Geelong and Western District Ladies Benevolent Association’ incorporated under the Hospitals and Charities Act 1890…
Clause 3 of the Trust Deed provides as follows in relation to trust property:
It shall be lawful for us or other the trustees or trustees for the time being of this deed with the consent under its common law seal of the [Ladies Benevolent] Association to sell all or any part of the said land with the buildings and improvements thereon by public auction or by private contract and the net proceeds of any such sale shall be laid out in the purchase of land in Geelong aforesaid or its neighbourhood and in or towards the erection and equipment of suitable buildings thereon to be held by the trustees or trustee for the time being of this deed upon the trusts and with and subject to the powers and provisions herein declared and contained with reference to the said land.
Up until around the year 2000, the Ladies Benevolent Association managed Baxter Homes and some individual members of the Ladies Benevolent Association became trustees of the Trust. The Ladies Benevolent Association was never itself appointed as the trustee of the Trust. By a deed of appointment of new trustees and vesting agreement dated 30 September 1974, three individuals were appointed as trustees of the Trust in place of three of the original trustees who had died, and on 12 May 1998, they became the joint registered proprietors of Baxter Homes together with the surviving original trustees.
Given the declining number of members of the Ladies Benevolent Association, on 25 October 2001, a further deed was executed appointing St Laurence Community Services Inc to run the operation of Baxter Homes. Accordingly, St Laurence Community Services Inc was appointed as trustee of the Trust and on 1 November 2001 also became the registered proprietor of Baxter Homes.
On 21 August 2003, the Ladies Benevolent Association was deregistered.
In August 2016, St Laurence Community Services Inc merged with Karingal Inc, which led to the establishment of Karingal St Laurence Ltd, trading as genU. St Laurence Community Services Inc has not yet been wound up and remained the registered proprietor of Baxter Homes until 26 October 2022.
The residences at Baxter Homes were initially constructed in or around 1960, were each approximately 35 square metres, and are not accessible by individuals with significant physical disabilities.
On 27 June 2017, House Inspections Geelong undertook an inspection of Baxter Homes and prepared a building inspection report, which opined that the condition of the dwellings was below average, the incidence of major defects was high, the dividing walls did not comply with current regulations and were unlikely to be fire proof, and there were several deficiencies that could seriously affect the integrity of the existing structures. Accordingly, Baxter Homes required renovation works in excess of $860,000 to bring the property into an acceptable condition. Even with the recommended renovations, the residences would remain small in size and inaccessible for individuals with mobility issues.
On 28 May 2018, genU resolved to divest itself of Baxter Homes on the basis that the costs and risks of any redevelopment and ongoing restrictions, including those imposed by the charitable trust, were too great, and such a redevelopment would be difficult to achieve. On 24 September 2018, genU selected HCAL as its preferred community housing provider to redevelop Baxter Homes, and on 15 October 2019, genU and HCAL entered into a memorandum of understanding. The memorandum of understanding provides as follows:
(a) Baxter Homes would be transferred to HCAL;
(b) Baxter Homes would continue to be used for the purpose of social housing;
(c) HCAL would commence the redevelopment of Baxter Homes within three years;
(d) HCAL would fund all redevelopment expenses; and
(e) following the redevelopment of Baxter Homes, the number of social housing outcomes would be the same or greater than the number of existing housing outcomes.
Following a tender process run by HCAL in April 2020 and a subsequent assessment and approval process, HCAL appointed Kennedy Nolan Architects on 9 June 2020.
In December 2020, HCAL became aware of the Rapid Grants Round of the Social Housing Growth Fund (‘Rapid Grants Round’), which forms a part of the Victorian Government’s Big Housing Build program. The request for proposals to the Rapid Grants Round specified that the grants were only available to community housing agencies that are ‘a participating registered agency’ under the Housing Act 1983 (Vic). GenU is not a community housing agency, and as such, was unable to participate in the Rapid Grants Round. In the Request for Proposal, the government expressed a preference for proposals which allocated more than 75 percent of social housing dwellings to priority approved applicants.
On 18 March 2021, HCAL lodged a submission for funding under the Rapid Grants Round, proposing a tenancy profile comprising homeless people with support, people with special housing needs including residents aged 55 and over, and tenants drawn from a register of interest.
Homeless with support and special housing needs fall within the class of priority approved applicants, and thus together meet the 75 percent target for priority approved applicants preferred by the government.
As part of HCAL’s submission to the Rapid Grants Round, HCAL stated that it intended to apply for a cy-près order to vary the purposes of the Trust so as to include social and affordable housing not restricted to aged deserving or infirm persons as currently specified in the Trust Deed.
On 21 July 2021, HCAL entered into a funding deed with the Director of Housing (now known as Homes Victoria) concerning various projects, including Baxter Homes (‘funding deed’). Pursuant to the funding deed, HCAL is entitled to substantial funding for the redevelopment of Baxter Homes. The funding deed also includes the following relevant provisions:
(a) HCAL must provide accommodation in accordance with their tenancy profile and it is a trigger event if HCAL fails to do so; and
(b) it is a trigger event if HCAL fails to obtain a cy-près order permitting the transfer of Baxter Homes to HCAL and permitting the accommodation of persons within the tenancy profile.
By letter dated 24 June 2022, in response to a request by HCAL, Homes Victoria:
(a) waived the condition precedent requiring that HCAL show it has applied for a cy-près order prior to payment of the first and second instalments under the funding deed; and
(b) amended the trigger event so that HCAL must obtain the cy-près order only prior to construction being completed.
After the final resident of Baxter Homes vacated the premises in April 2022, by deed executed on 22 August 2022, St Laurence Community Services Inc retired as trustee of the Trust and HCAL was appointed as trustee. On 26 October 2022, HCAL became the registered proprietor of Baxter Homes. Construction began on 18 October 2022.
A letter was signed by HCAL on 16 December 2022 and by Homes Victoria on 19 December 2022 formalising the matters referred to in its letter of 24 June 2022.
Applicable principles
Section 2 of the Charities Act 1978 (Vic) provides as follows in relation to the application of the cy-près doctrine to charities:
2 Occasions for applying property cy près
(1)Subject to subsection (2), the circumstances in which the original purposes of a charitable gift can be altered to allow the property given or part of it 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; or
(b)where the original purposes provide a use for part only of the property available by virtue of the gift; or
(c)where the property available by virtue of the gift and other property applicable for similar purposes can be more effectively used in conjunction, and to that end can suitably, regard being had to the spirit of the gift, be made applicable to common purposes; or
(d)where the original purposes were laid down by reference to an area which then was but has since ceased to be a unit for some other purpose, or by reference to a class of persons or to an area which has for any reason since ceased to be suitable, regard being had to the spirit of the gift, or to be practical in administering the gift; or
(e)where the original purposes, in whole or in part, have, since they were laid down—
(i) been adequately provided for by other means; or
(ii)ceased, as being useless or harmful to the community or for other reasons, to be in law charitable; or
(iii) ceased in any other way to provide a suitable and effective method of using the property available by virtue of the gift, regard being had to the spirit of the gift.
The evidence
HCAL relied on an affidavit of Mr Henry dated 15 December 2022 (‘Mr Henry’s first affidavit’), a supplementary affidavit of Mr Henry dated 21 March 2023 (‘Mr Henry’s second affidavit’), and a further supplementary affidavit of Mr Henry dated 23 February 2024 (‘Mr Henry’s third affidavit’), as well as the exhibits to each of these affidavits.
In summary, Mr Henry’s first affidavit sets out the history of the Trust, the condition of Baxter Homes prior to the redevelopment, genU’s decision to divest itself of Baxter Homes, the funding of the redevelopment of Baxter Homes, and the terms of the funding deed.
Mr Henry’s second affidavit deposes to changes that have been made to the funding deed. Mr Henry’s third affidavit deposes as to further amendments that have been made to the funding deed.
HCAL’s submissions
HCAL filed written submissions in support of the relief claimed in the amended originating motion, which are summarised in the following paragraphs of these reasons.
HCAL identified the following the relevant principles in the application of the cy-près doctrine, which are extended by s 2 of the Charities Act 1978 (Vic):
Where the purposes of a charitable trust were initially possible, but have ceased to be so, the Court may settle a cy-près scheme to give effect ‘as near as possible’ to the intention of the settlor.[1] In such a case of ‘supervening’ impossibility, as opposed to initial impossibility (where it is impossible to carry out the purposes from the outset), it is not necessary to show that the settlor had a general intention of charity, over and above a particular intention of charity.[2]
Even at general law, ‘impossibility’ did not mean absolute impossibility. In Parker v Moseley, after reviewing a number of cases, Starke J said:
‘But I think it is true to say that in each case it was practically possible to carry out the trusts in accordance with the strict letter of the donor’s directions, but in each case the general charitable intention of the testator was ordered to be carried out cy-près.’[3]
[1]J D Heydon, M J Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Butterworths, 8th ed, 2016) [10-70].
[2]Ibid.
[3][1965] VR 580, cited in J D Heydon, M J Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Butterworths, 8th ed, 2016), [10-71]; Perpetual Trustee Company Ltd v Attorney-General of New South Wales (The Will of the Hon George Nesbitt) [2018] NSWSC 1456, [56] (Leeming JA).
HCAL referred to the decision in Free Serbian Orthodox Church Diocese for Australia and New Zealand Property Trust v Bishop Irinej Dobrijevic,[4] where Payne J considered s 9 of the Charitable Trusts Act 1993 (NSW), being the equivalent legislation in New South Wales, stating as follows:
Section 9 is engaged by three interacting criteria through which to consider the continuing utility of the original trust purposes:
(1) first, the notion of “wholly or in part”;
(2) secondly, a “suitable and effective method”; and
(3) thirdly, the requirement to have “regard to the spirit of the trust”.
It is textually clear that the requirements of s 9 involve a threshold lower than the general law cy-près requirement of impossibility or impracticality. The test is whether the original purposes of the trust have ceased to provide a suitable and effective method of using the property, in whole or in part, having regard to the “spirit of the trust”. The spirit of the trust is thus a broader conception than the original purposes of the trust. It is clear that the general law requirement for impossibility or impracticability of achievement of the trust purposes is no longer a condition precedent to the making of an order.[5]
[4](2017) 94 NSWLR 340.
[5]Ibid [196]-[197].
HCAL submitted that the Court should settle a cy-près scheme by reason of the following matters:
(a) the original purpose of the Trust cannot be carried out, at least in part, given that the Ladies Benevolent Association is now defunct. It is not possible to obtain the consent of the Ladies Benevolent Association and it has no regulations to govern the use of the property;
(b) the meaning of ‘aged deserving or infirm’ is ambiguous, particularly considering that the Trust Deed makes no use of commas even where this would be expected. There are multiple plausible interpretations of ‘aged deserving or infirm’ including:
(i) the persons must be aged, or deserving, or infirm;
(ii) the person must be aged, and they must also be either deserving or infirm; or
(iii) the person must be aged and deserving, or infirm with no age restriction.
(c) of the above possible interpretations, (ii) and (iii) are more probable given that a trust for aged persons, with no qualification that they be deserving or infirm, would not be a valid charitable trust;
(d) HCAL was able to obtain funding for the redevelopment of Baxter Homes by proposing a particular tenancy profile (described in paragraph 18 of these reasons). The proposed tenancy profile does not meet either of (ii) or (iii) of the possible interpretations of ‘aged deserving or infirm’. As the funding deed includes a trigger event if HCAL fails to provide accommodation in accordance with its tenancy profile, or if HCAL fails to obtain, prior to the completion of the construction, a cy-près order which allows it to provide accommodation in accordance with the tenancy profile, the impact of HCAL’s non-compliance with the deed would be catastrophic to the redevelopment project. HCAL would be in breach of the funding deed and this would allow Homes Victoria to remove the Baxter Homes project from the funding deed and recover the funding already paid to them; and
(e) the cy-près scheme proposed by HCAL would guarantee that HCAL remains compliant with the funding deed, and would provide HCAL with maximum flexibility in using the trust property. In accordance with cl 2.1(a) of HCAL’s constitution, its purposes are to ‘provide affordable housing and related support to people in Australia who are disadvantaged through homelessness, disability, mental illness, ageing, low income or other factors’. As such, HCAL’s purposes closely align with the purposes of the Trust and the proposed alteration to the charitable purpose would comply with the spirit of the gift.
If the Court were not minded to settle a cy-près scheme for HCAL’s general purposes and objects, HCAL submitted that the original purposes of the Trust set out in the Trust Deed should be varied as follows:
(a)the words in cl 1 ‘aged deserving or infirm’ be altered to ‘aged or deserving or infirm’;
(b)the words in cl 1 ‘subject to rules regulations by-laws and provisions for the administration of the charity’ be struck out;
(c)the words in cl 1 ‘inhabitants of Geelong Victoria or its neighbourhood’ be struck out; and
(d)the words in cl 3 of the Trust Deed ‘with the consent under its common seal of the Association’ be struck out.
HCAL submitted that without the variations set out in (b) and (d) of the preceding paragraph, it would be impossible to carry out the purposes of the Trust. Further, the removal of the restriction that the Trust benefit the residents of Geelong or its neighbourhood would allow HCAL to flexibly utilise charitable funds elsewhere in Victoria in the event that funding is not made available for Geelong residents alone. HCAL recognises that a trust simply for aged persons would not be a valid charitable trust. HCAL referred to the decision of Walsh J in Downing v Federal Commissioner of Taxation,[6] in support of the proposition that ‘aged’ as set out in variation (a) in the above paragraph, would refer to aged persons in need. While this would allow HCAL to comply with the terms of the funding deed, HCAL noted that this approach would likely limit their ability to apply for future funding and may mean that Baxter Homes loses out to other projects in the future.
[6](1971) 125 CLR 185 [193]-[194].
HCAL referred to the decision of White J in Hunter Region SLSA Helicopter Rescue Service Limited v Attorney-General of New South Wales (‘Hunter Region’) where his Honour stated that s 9 of the Charitable Trusts Act 1993 (NSW), is ‘remedial and beneficial legislation and not to be narrowly construed’.[7] In Hunter Region, White J approved a cy-près scheme in anticipation of the original purposes of the trust ceasing to provide a suitable and effective method of using the trust property. In that case, the plaintiff would not have been able to make a compliant tender for a contract to provide helicopter emergency services unless its areas of operation were expanded, which would have had a devastating impact on its operation, and funds dedicated to the charitable purposes would go to waste. On a similar basis, HCAL submitted that the spirit of the gift would be better served by settling a scheme consistent with HCAL’s general purposes.
[7][2013] NSWSC 1749 [37].
Further, HCAL submitted that confidentiality orders should be given the nature of documents disclosed in the affidavit material and exhibits, such as the funding deed and tender documents. HCAL submitted that, for example, the funding deed is a confidential and commercially sensitive document given that it includes a submission to the government regarding the formation of a tenancy profile, and given that HCAL is in competition with other social housing organisations to obtain funding from the government.
Consideration
In my view, the original purposes of the Trust have ceased to provide a suitable and effective method of using the property available by virtue of the gift, regard being had to the spirit of the gift. Pursuant to s 2 of the Charities Act 1978 (Vic), I am satisfied that the original purposes of the Baxter Homes Trust should be altered. The Ladies Benevolent Association is a defunct organisation, and the meaning of ‘aged deserving or infirm’ is ambiguous. Further, I note that the reference to ‘aged deserving or infirm’ does not necessarily align with contemporary social and economic conditions which affect which demographic groups may be in particular housing need, now or in the future. By way of example, the term may not encompass families fleeing domestic violence.
I also note that the cy-près scheme proposed by HCAL would guarantee its compliance with the funding deed, and I accept that the consequences of the refusal of HCAL’s application in this proceeding would be significant. Given that HCAL’s purposes outlined in its constitution closely align with the purposes of the Trust, the proposed alteration to the charitable purpose of the Trust would serve the spirit of the gift.
Accordingly, I agree that the original purposes of the Trust should be varied by way of cy-près scheme so that HCAL holds Baxter Homes, together with all other property and funds of the Trust, for its general purposes and objects, for the benefit of the inhabitants of the State of Victoria.
During the course of the hearing of HCAL’s application, there was some discussion as to what mechanism could be employed to ensure that the gift is administered in accordance with HCAL’s general purposes and objects. HCAL observed that HCAL is a registered charity and a registered participating social housing organisation, and as such, it is unlikely that it would ever evolve into an organisation which does not align with the spirit of the cy-près scheme. To mitigate against such a risk, and in the interests of allowing greater flexibility in the administration of the Trust, it is my view that the cy-près scheme should be subject to a requirement that HCAL notify the Attorney-General of any substantial change to HCAL’s general purposes and objects, and orders have been made to that effect.
As for the confidentiality orders sought by HCAL, counsel for HCAL conceded that not all of the exhibits to Mr Henry’s first affidavit might be considered confidential, such as the trust deed of the Trust. Following the conclusion of the trial and on a further review of the materials, counsel for HCAL provided an updated schedule of exhibits to be deemed confidential communications. These documents are associated with the funding agreement and the tender process, and as such, I agree that the documents in question are confidential and should not be made publicly available.
Accordingly, I will make the following orders:
1. The original purposes of the charitable trust established by a deed of indenture dated 20 June 1960 between Ramsay Alexander Cook and others (the Baxter Homes Trust) have ceased to provide a suitable and effective method of using the property available by virtue of the gift, regard being had to the spirit of the gift.
2. The original purposes of the Baxter Homes Trust be varied by way of cy-près scheme so that the plaintiff holds the property described in Certificate of Title Volume 08241 Folio 248 and Certificate of Title Volume 06453 Folio 478 (known as Baxter Homes), together with all other property and funds of the Baxter Homes Trust, for its general purposes and objects, for the benefit of the inhabitants of the State of Victoria, subject to a requirement that the plaintiff notify the defendant of any substantial change to its general purposes and objects no less than 90 days prior to any such change taking effect.
3. Pursuant to rr 28.05(4) and 28A.06(1) of the Rules:
(a) the affidavit of James Richard Henry filed on 20 December 2022 and the pages of the exhibit thereto set out in Schedule A; and
(b) the affidavits of James Richard Henry filed on 21 March 2023 and 23 February 2024 and the exhibits thereto;
remain confidential to the parties and to any future trustee of the Baxter Homes Trust, subject to further order of the Court.
4. The plaintiff’s costs of the proceeding be paid out of the assets of the Baxter Homes Trust.
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