Jeffery Lin as executor of the estate of Emerald Cynthia Wolff Michaelson v Schubert - [2019] WASC 212

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   JEFFERY LIN as executor of the estate of EMERALD CYNTHIA WOLFF MICHAELSON -v- SCHUBERT [2019] WASC 212
CORAM:   MASTER SANDERSON
HEARD:   9 MAY 2019
DELIVERED          :   20 JUNE 2019
FILE NO/S:   CIV 1104 of 2019
BETWEEN:   JEFFERY LIN as executor of the estate of EMERALD CYNTHIA WOLFF MICHAELSON
Plaintiff

AND

SYDNEY SCHUBERT
First Defendant

MARIANA MEILINK
Second Defendant

ATTORNEY GENERAL OF WESTERN AUSTRALIA
Third Defendant

Catchwords:

Charitable trusts - Failure of charitable bequest - Whether clear charitable intent - Turns on own facts

Legislation:

Associations Incorporation Act 2015 (WA)
Charitable Collections Act 1946 (WA)
Charitable Trusts Act 1962 (WA)
Wills Act 1970 (WA)

Result:

Finding of clear charitable intent

Category: B

Representation:

Counsel:

Plaintiff	:	Mr A P Hershowitz
First Defendant	:	Mr M Curwood
Second Defendant	:	In Person
Third Defendant	:	Ms M J Elliott

Solicitors:

Plaintiff	:	Greenstone Legal
First Defendant	:	Arns & Associates
Second Defendant	:	In Person
Third Defendant	:	State Solicitors Office

Case(s) referred to in decision(s):

Cancer Council of Western Australia v Attorney General (WA) [2016] WASC 297
Melba Support Services Inc v Bell [2014] VSC 425
Price v Attorney General for Western Australia [2014] WASC 430
Re Coulson [2014] VSC 353
Royal National Agricultural and Industrial Association v Chester (1974) 3 ALR 486
Taylor v Princess Margaret Hospital for Children Foundation Inc [2012] WASC 83

MASTER SANDERSON:

Emerald Cynthia Wolff Michaelson (Mrs Michaelson) died on 8 August 2017. On 17 October 2017 probate of the will of Mrs Michaelson dated 5 November 2009 was granted to the plaintiff. The plaintiff was the executor appointed under the will. In the will Mrs Michaelson made various bequests to individuals and entities and bequeathed 40% of the residue of her estate to her son, the first defendant, Sydney Schubert, and bequeathed 60% of the residue of her estate to the Jewish Community Appeal of Western Australia (JCAWA). The bequest to the JCAWA has failed and the plaintiff makes application for approval of a scheme to vary a charitable trust. The application is made under s 15 of the Charitable Trusts Act 1962 (WA) (the Act). The real question in this case is whether, there having been an initial failure of a gift, there can be discerned a general charitable intention.
The relevant facts were not in dispute. What follows is taken largely from the submissions filed on behalf of the plaintiff.[1] Some years ago a Jewish community appeal organisation was formed by members of the Jewish community living in Perth to enable donors to make a single donation to that organisation rather than to make one or more separate donations to individual Jewish communal organisations. As a fact, the JCAWA entity was never registered in Western Australia but was registered under the name Jewish Community Appeal Inc (JCA). The JCA was the registered name of the organisation most people referred to as JCAWA. There has never been a legal entity which matches precisely the description in the will of 'Jewish Community Appeal of Western Australia'.
[1] Plaintiff's outline of submissions filed 25 March 2019.
The circumstances in which the will was drawn are set out in an affidavit of the plaintiff sworn 18 January 2019.[2] The plaintiff is a solicitor. He first met Mrs Michaelson in August or September 2009. He met her at her home in Dianella. Mrs Michaelson told the plaintiff she wanted to sign a new will. She gave him a copy of her then existing will which was dated 28 December 2005. The plaintiff took instructions from Mrs Michaelson on the changes she wished to make to her previous will. She asked him if he would be the executor of her estate. He agreed. She told him that she found the division of her estate in her previous will into fractions of 180 to be too cumbersome. She wanted to state the amount of each bequest she wished to make to specified beneficiaries and then leave the balance of her estate to residual beneficiaries in stated percentages. A new will was duly drafted and was properly executed on 5 November 2009.
[2] Affidavit of Jeffery Lin sworn 18 January 2019.
In her previous will Mrs Michaelson bequeathed 20/180^th of her estate to the JCAWA. The plaintiff says when the will was drafted the name of JCAWA was taken directly from the previous will with one minor inconsequential amendment. The plaintiff did not check to ensure that JCAWA was the registered name of that entity. However, according to the plaintiff at the time the will was drawn he, and many other Jewish people living in Perth, were familiar with an entity which was commonly referred to as the JCAWA.
The plaintiff says that in his discussions with Mrs Michaelson prior to her signing the will she had a clear understanding of the way in which the JCAWA operated (or as both she and the plaintiff thought the non‑existent entity operated). The plaintiff says Mrs Michaelson was particularly interested in the Jewish youth and the student groups. It was not until after Mrs Michaelson's death the plaintiff became aware that there was not and never had been an organisation or entity registered under the name of JCAWA.
Based upon the above it is clear that the misdescription of the entity to which the residual estate was to go was misdescribed by an accident or oversight. There can be no doubt had it been pointed out to Mrs Michaelson the organisation JCAWA did not exist but rather the umbrella body was JCA she would have authorised the plaintiff to amend her will accordingly and the matters at issue in this application would not have arisen.
There is a further complication. There is no doubt the JCA was not registered with the Australian Charities and Not For Profit Commission and became subject to the provisions of the Associations Incorporation Act 2015 (WA). The JCA distributed the donations it received to the selected communal organisations during the years 2003 to 2014. No distributions were made in 2015 and 2016. A final distribution was made in 2017. In 2017 the committee of the JCA decided it was not viable for the JCA to continue and the committee should take steps to terminate its operations. The registration of the JCA was cancelled 27 days before Mrs Michaelson's death.
The effect of all of that is not only does the gift to the JCAWA fail because that organisation has never existed but the organisation which was its obvious replacement did not exist as at the date of death of Mrs Michaelson. That leaves two possibilities. First, the JCA bequest fails and the 60% of Mrs Michaelson's estate devolves upon Mr Schubert the remaining residuary beneficiary pursuant to s 26(1)(g) of the Wills Act 1970 (WA). The alternative is that the property the subject of the bequest be disposed of for some other charitable purpose in accordance with a scheme approved under the Act.
It is against that background that the plaintiff made application to the court for the following orders:
1.The terms of the charitable trust established by the Will of Emerald Cynthia Wolff dated 5 November 2009 ('the Will') be varied as follows:
In clause 6(b) by deleting the words
'to the Jewish Community Appeal of Western Australia'
And substituting the following words:
'upon trust and applied in accordance with the terms of the Michaelson‑JCA Trust Deed towards Jewish organisations, youth groups, associations (incorporated and unincorporated), co‑operatives and other Not For Profit entities which have charitable objects for the benefit of members of the Western Australia Jewish Community'.
2.The Trustee give effect to this scheme by executing a trust deed, the Michaelson‑JCA Trust Deed, which is in accordance with the terms of the unsigned 'Deed Establishing the Michaelson‑JCA Trust' dated 31 October 2018 and which was submitted to the Attorney General.
3.The Trustee's and the Attorney General's reasonable expenses of and incidental to:
a)preparing and advertising the scheme; and
b)obtaining approval for the scheme (including any fees charged under section 10(1a))
be paid out of, and be charged on, the trust property.[3]
[3] Originating summons filed 21 January 2019.
It is convenient at this point to consider the legislative framework. Section 7(1) of the Act provides in effect that where any property or income is given or held on trust or is to be applied for any charitable purposes and it is impossible, impracticable or inexpedient to carry out that purpose then the property and income shall be disposed of for some other charitable purpose or a combination of such purposes in accordance with the scheme approved. Section 7(1) of the Act expressly excludes any requirement of a general charitable intention but it is to be read subject to s 7(3) of the Act. Section 7(3) provides effectively that s 7(1) shall not operate to cause any property or income to be disposed of as provided in subs (1) if, in accordance with any rule of law, the intended gift thereof would otherwise lapse or fail and the property or income would not be applicable for any other charitable purpose.
As was submitted by the plaintiff, on its face s 7(3)(a) of the Act requires a consideration of the rules of law that may result in a lapsing or failure of a charitable trust. Relevantly, one rule of law by which a charitable trust may lapse or fail is where there is an initial failure such that the purpose of the trust is impossible or impracticable to meet. This court has held that the rule of law as to a general charitable intention is however preserved: see Taylor v Princess Margaret Hospital for Children Foundation Inc [2012] WASC 83 [53]. A scheme is not to be approved by the court or the Attorney General unless the court is satisfied that the scheme is a proper one that should carry out the desired purpose or proposal and is not contrary to law or public policy and its proposed purpose is charitable and can be carried out: s 18 of the Act.
The plaintiff's submission approached the matter in this way. There will be an initial failure if the purpose cannot be carried out at the time of the testator's death because of impossibility or impracticability. Examples of an initial failure include where an institution intended to be benefited closed down prior to the testator's death and where an entity never existed. That, it is said, is this case.
It was submitted as a consequence of the cancellation of the JCA the Attorney General has reached the view that if the court determines the gift to the JCAWA/JCA was for a charitable purpose the achievement of the purpose in cl 6 of Mrs Michaelson's will is impracticable or inexpedient to carry out within the meaning of s 7(1). The manner in which the court determines whether there is a general charitable intention adopts a well‑known test. It is a matter of construction of the will taking into account factors such as the level of particularity of the bequest and whether there are other charitable gifts and how the residue is to be applied. Furthermore, in determining whether the donor's gift was directed to a charitable object the court will have regard to the traditional categories of charitable purposes set out by the Court of Appeal which include the relief of poverty, the advancement of education, the advancement of religion and other objects beneficial to the community.
It was the plaintiff's submission a consideration of the terms of the will and the previous will which expressly contemplate other charitable gifts as well as a consideration of the objects of the JCA should compel the court to the conclusion that the gift to the JCAWA/JCA was directed towards charitable purposes. That view is supported by the Attorney General. The purposed scheme accords closely with Mrs Michaelson's intention that the Jewish community organisations benefit from the application of the gift. On that basis it was said the scheme ought be approved.
At the hearing of the application the first defendant appeared by counsel and made submissions in opposition to the orders sought by the plaintiff. Counsel did not take issue with the plaintiff's submission that the reference in the will to the JCAWA should be construed as being a reference to the JCA: see par 12 of the first defendant's submissions.[4] Counsel noted that where a person or entity named as a beneficiary in a will has ceased to exist at the date of death of the testator, a gift to that person or entity lapses although there are exceptions to this rule when the gift is for a charitable purpose.[5] At common law a gift to a non‑existent institution must lapse unless the testator had a general charitable intention that enables the gift to be applied.[6] This is the doctrine of cy‑pres. Counsel submitted the doctrine of cy‑pres been replaced in this jurisdiction by the statutory regime in the Act. However, the former rule of law that a gift will lapse in the absence of a discernible charitable intention continues to apply for the purposes of the Act: see Cancer Council of Western Australia v Attorney General (WA) [2016] WASC 297 [53].
[4] First defendant's outline of submissions filed 12 April 2019, par 12.
[5] First defendant's outline of submissions filed 12 April 2019, par 14.
[6] Price v Attorney General for Western Australia [2014] WASC 430 [13].
Although the principles set out by counsel for the first defendant differ slightly from the formulation put by counsel for the plaintiff, there is no real difference between the parties. It was the first defendant's position that in this case there was no discernible general charitable intention in Mrs Michaelson's bequest.
It was counsel's submission the bequest to the JCA was not a gift for charitable purposes.[7] Counsel gave five reasons justifying that conclusion. First, it was said the JCA was not at any time registered as a charity with the Australian Charities and Not‑For‑Profits Commission. Second, it was not at any time the holder of a licence for the collection of money pursuant to s 6 of the Charitable Collections Act 1946 (WA). Third, the JCA had, according to subrule 3(1)(a) of its Rules of Association, the object of 'raising funds as agent for and on behalf of sporting clubs, charitable organisations, youth groups and other not‑for‑profit organisations within the Western Australian Jewish Community'. Fourth, according to subrule 3(1)(b) of its Rules of Association, the JCA's committee was at liberty to select which communal organisations should receive funds 'on such terms and conditions as they may determine from time to time'. Finally, the JCA had a history of distributing funds to community organisations, some of which were charitable organisations and some of which were not.
[7] First defendant's outline of submissions filed 12 April 2019, par 26.
Each of these matters requires some consideration. The first two, while being relevant to the overall determination of whether there was a charitable purpose, are not in and of themselves decisive. The question is the real purpose of the organisation: see Re Coulson [2014] VSC 353 [26]; Melba Support Services Inc v Bell [2014] VSC 425 [46]. In determining this case I have had regard to the fact the JCA was not registered for charitable purposes and that seems to me to be a factor against finding a general charitable intent. But it is a fact of very limited significance. There was no evidence suggesting the lack of registration in any way impacted upon the way in which the JCA conducted its affairs.
The remaining three grounds can be taken together. Counsel submitted the JCA could distribute funds to entities that were not by their nature charitable, and furthermore, that is what had been done.
Appearing as attachment JL5 to the plaintiff's affidavit is a schedule of entities to which the JCA made distributions. Some are obviously charitable in nature. For instance, the 'Jewish Community Services' and the 'Menora Charity Fund'. However, some are not. For instance, distributions were made to 'WA Maccabi' which is a sporting organisation. Perhaps more significantly, distributions were made to 'The Maccabean', a newspaper which is produced for the benefit of, and which circulates within, the Jewish community in Western Australia. While it does not appear to be a profitable enterprise it can in no way be identified as a charity.
Counsel pointed out that a trust for the promotion of sport is not in and of itself a trust for charitable purposes. Even if such gifts have side effects which advance charitable purposes, they are not charitable where the promotion of such purposes is not the direct and necessary object of the bequest: see Royal National Agricultural and Industrial Association v Chester (1974) 3 ALR 486. On this basis it was said that when the actual activities of the JCA were looked at in their totality it could not be said that it was a general charitable intention.
With respect, I think it is possible in this case to ascertain a clear charitable intention. First, there is the evidence of Mr Lin. He is unequivocal in what he says about Mrs Michaelson's wishes. She wished to benefit charities. Second, there is the evidence as to the basis upon which the JCA was established. It was an umbrella organisation for donations which were to be used for a charitable purpose. Finally, there is the fact that the majority of distributions appear to have been made for a charitable purpose. I accept some distributions were made to organisations which would not necessarily qualify as charitable. But the question is whether there was a general charitable intent and I am satisfied that is the case.
The second defendant did not appear at the hearing but she was notified the hearing was to take place. She sent a series of emails to the court which I have regarded as submissions. With respect, it appears she has not quite understood the nature of the matters at issue in this application. While I have taken into account her submissions they do not add anything to the comprehensive submissions filed on behalf of the first defendant.
The third defendant filed submissions which supported those made by the plaintiff. I need not go through these submissions in detail. Essentially they acknowledge the difficulties occasioned by the structure of the JCA and the fact that distributions were made to entities which were not by their nature charitable. However, the third defendant has come to the conclusion there is a general charitable intention evidenced by the distribution based upon the evidence which was filed and the nature of the bulk of the distributions made by the JCA.
In the circumstances, I am satisfied that there is a clear charitable intent evidenced by the distributions made in the will. The scheme proposed in the originating summons seems in all respects to be a proper method of dealing with the difficulties that have arisen. Subject to hearing further from counsel, I propose to make orders in terms of the originating summons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DG
Associate to Master Sanderson
25 JUNE 2019