IN RE CUTTEN (DECEASED) No. SCGRG-99-1172 Judgment No. S473

[1999] SASC 473

ANZ EXECUTOR & TRUSTEE CO LTD & ANOR v
TRUSTEES OF THE THOMAS SAMUEL & GEORGE EWING TRUST
[1999] SASC 473

Civil

1 PRIOR J      Trustees of an estate seek advice and directions pursuant to s 69 of the The Administration and Probate Act 1919.  By her Will, Ethel Margaret Ewing Cutten created the Ethel Margaret Ewing Cutten Foundation.  She left her residuary estate to her Trustees in perpetuity directing that the income from it be distributed to four named bodies in such proportions as the Trustees think fit.  In a subsequent clause of the Will the testatrix provided that if any one or more of those four named bodies should cease to exist, amalgamate with another organisation, change its name or, in the case of the three trusts named,
"cease to have the approval of the Commissioner of Taxation or a Deputy Commissioner of Taxation for the purposes of any of the sub-paragraphs of s 78(1)(a) of the Income Tax Assessment Act 1936 THEN in such case the gift of income ostensibly made ... to such Trust or Corporation shall not fail but shall be paid by my Trustees as from the date of such cessation amalgamation or change (as the case may be) to such organisation as my Trustees in their absolute discretion shall consider from time to time most nearly fulfils the objects that I intended to benefit provided that such organisation is in law charitable and in the case of the aforesaid trusts such organisation shall be approved by the Commissioner of Taxation or a Deputy Commission of Taxation for the purposes of any of the sub-paragraphs of s 78(1)(a) of the said Income Tax Assessment Act 1936."
2 The language used in the Will reflects misunderstanding of the provisions of s 78(1)(a) of the 1936 Act. That provision speaks of allowable deductions for gifts to funds, authorities or institutions in Australia including public benevolent institutions, public libraries, many named charitable bodies and "a public fund established and maintained under a will .... exclusively for the purpose of providing money, property or benefits to or for" those named in the sub-paragraph or for any of the purposes in the sub-paragraph. As to such public funds, there was a reference to the Commissioner of Taxation. He had to be satisfied that any monies paid or accrued to such a public fund could not be invested other than in a manner applicable to authorised trustee investments. Nonetheless it is fair to say that a practice has developed of seeking "an approval" from the Commissioner that a particular body would satisfy the criteria in s 78(1)(a) and thus have donations to it allowable deductions under the income tax laws.
3 The Thomas Samuel and George Ewing Trust is one of the four bodies named in the clause of the Will to whom the Trustees may apply the income from the Foundation.  The trust was constituted in March 1990 by the deceased.  She created it -
"for the purpose of providing money, property or benefits to or for funds, authorities or institutions approved by the Commissioner of Taxation or a Deputy Commission of Taxation for the purpose of any of the sub-paragraphs of s 78(i)(a) of the Income Tax Assessment Act 1936 or any amendment or re-enactment thereof or for the establishment of such funds, authorities or institutions".
4 The Deed constituting the Trust further provided that to the fullest extent permitted by law and the Commissioner of Taxation the Trustees of the Fund were to stand possessed of the Fund and or monies given to it to -
 "apply the net income of the fund for the improvement, maintenance and operation of the Fitzroy Public Library either by the acquisition of further books, the repair conservation and maintenance of existing books, the maintenance of the buildings shelving and other equipment used by the Library and other facilities provided by the Library, the promotion of Library services and in such other improvements and benefits to the Fitzroy Public Library as may from time to time be required or be considered desirable by the Trustees in their absolute discretion.". 
5 Evidence before the court discloses that soon after the Trust was established in 1990 the Commissioner of Taxation was asked to approve the Trust as a charitable trust.  However, no approval of the kind already referred to had eventuated by the time Mrs Cutten died. 
6 The questions now asked are:

1. Whether the Trustees are entitled to distribute any of the accumulated income of the Ethel Margaret Ewing Cutten Foundation to the Trustees of the Thomas Samuel and George Ewing Trust;

2. If no to that question, whether the Trustees are entitled to distribute any of the accumulated income of the Foundation to some charitable organisation not referred to in cl 20 of the Will;

3. If yes to the first question, must the charitable organisation be one to which gifts are deductible against income for the purposes of the Income Tax Assessment Act?

4. I think the first question can be answered in the affirmative on the simple ground that no approval of the kind referred to in the Will had been obtained when Mrs Cutten died in March 1991.  An approval of sorts had been sought but not obtained.  Thus the provision had no application to the Ewing Trust.  I agree with the submission put by the applicant Trustees and the Trustees of the Ewing Trust that in any event the clause of the Will is void for lack of certainty and precision.  Properly construed it is a condition subsequent and void for its lack of certainty and precision . 

5. I therefore answer the first question in the affirmative and say that it is unnecessary to answer the other two.

2