Laura & Alfred West Cottage Homes Inc v Attorney-General (SA) - [2018] SASC 19

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
LAURA & ALFRED WEST COTTAGE HOMES INC & ORS v ATTORNEY-GENERAL (SA)
[2018] SASC 19
Judgment of The Honourable Justice Bampton
26 February 2018
EQUITY - TRUSTS AND TRUSTEES - POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES - LIABILITY FOR BREACH OF TRUST - RELIEF FROM LIABILITY
EQUITY - TRUSTS AND TRUSTEES - POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES - MISCELLANEOUS OTHER POWERS, DUTIES AND LIABILITIES - POWER TO VARY TRUSTS
Application for relief from liability of actual or supposed breaches of trusts created for charitable purposes. Application for approval of a trust variation scheme in relation to the trusts.
HELD:
1. Application for relief from liability granted.
2. Application for approval of trust variation scheme granted.
Trustee Act 1936 (SA) s 60, s 66, s 67, s 69B, referred to.
Re de Vedas (deceased) [1971] SASR 169, considered.

LAURA & ALFRED WEST COTTAGE HOMES INC & ORS v ATTORNEY-GENERAL (SA)
[2018] SASC 19
Civil: Application

BAMPTON J:      The plaintiffs, Laura & Alfred West Cottage Homes Incorporated (“LAWCH”), Anglicare SA Housing Limited (“Anglicare SA Housing”) and Anglicare SA Limited (“Anglicare SA”), in accordance with s 60 of the Trustee Act 1936 (SA) (“the Act”) have made application for orders pursuant to s 67 of the Act and the powers of the Court in Equity:
1.Relieving LAWCH, Anglicare SA Housing and their present and past directors, officers and agents from all and any supposed or actual breaches of trust in relation to:
1.1.   the administration of the trusts of the residuary estate of William Alfred West (“the West Trust”);
1.2.   the administration of a scheme for the administration of the charity known as Ada Laycock Homes Incorporated (“the Laycock Charity”);
1.3.   the administration of the trusts of the residuary estate of Edith Charlotte Knox (“the Knox Trust”); and
1.4.   the administration of the affairs of LAWCH.
The plaintiffs also seek orders pursuant to s 69B of the Act approving a proposed Trust Variation Scheme for the future administration of the assets of the West Trust, the Laycock Charity, and the Knox Trust. I will refer to the West Trust, the Laycock Charity, and the Knox Trust as “the Trusts”.
The following affidavits are relied on in support of the application:
·Affidavit of Malcolm John McNeil sworn on 17 March 2016 (“the first McNeil affidavit”);
·Affidavit of Peter Sandeman sworn on 10 March 2016 (“the Sandeman affidavit”);
·Affidavit of Malcolm John McNeil sworn on 11 May 2017 (“the second McNeil affidavit”);
·Affidavit of Malcolm John McNeil sworn on 23 May 2017 (“the third McNeil affidavit”); and
·Affidavit of Raymond Gordon Frost sworn on 8 February 2018 (“the Frost affidavit”).
On 9 February 2018, I heard the plaintiffs’ submissions and submissions made on behalf of the Attorney-General. The Attorney-General represents the objects of charities and is a necessary party to any application to vary the purposes of a charitable trust.
The Attorney-General neither consents to nor opposes the orders sought.
As a preliminary issue, I heard submissions regarding Mr Matthew Retallick’s applications, FDN 8 and FDN 10.
In FDN 8, Mr Retallick sought leave to intervene in the proceedings and dismissal of the plaintiffs’ summons. In FDN 10, Mr Retallick repeated his application for leave to intervene and dismissal of the summons and further sought an order directing that an initial $20,000 be paid by the plaintiffs into a nominated solicitor’s trust fund to allow the immediate retaining of a solicitor and senior counsel to enable him to “properly assist the Court” in the matter.
Mr Retallick asserted that he was an interested person pursuant to s 60(2) of the Act, namely a person of a class that the Trusts are intended to benefit, or any other person who satisfies the Court that he has a proper interest in the Trusts. He explained that he does not own property, is on a pension and has no other funds and that he would satisfy the criteria to be approved as an applicant for housing by LAWCH. He submitted that he is a current member of the LAWCH Association and he was a member of the Board for five years from 2010 to 2015. He asserted that he had specific knowledge of matters that the plaintiffs had not revealed in their submissions. He also sought permission pursuant to s 66 of the Act as a person interested in the application to address the Court.
Mr Retallick’s applications were opposed by the plaintiffs and the Attorney‑General took no position. Mr Retallick has met with the Attorney‑General’s solicitors to convey his concerns. He informed me that he had been told by those solicitors that the matters he sought to bring to the attention of the Court were not relevant. He also stated that he intended to commence proceedings in the Magistrates Court.
Mr Retallick’s interest in the application rises no higher than that of a former member of the LAWCH Board.
Having heard Mr Retallick’s submissions, I was not satisfied that he was a person who had sufficient interest in the plaintiffs’ application to object to the orders sought pursuant to s 60 of the Act or address the Court pursuant to s 66 of the Act regarding the proposed Trust Variation Scheme. I am satisfied that his interests are adequately represented by the Attorney-General.
Background
The background to the application is set out in the affidavits relied on by the plaintiffs. Mr McNeil is the Chair of the LAWCH Board and has held that position since 13 May 2015. Mr Sandeman is the Chief Executive Officer of Anglicare SA and has held that position since November 2012. Mr Sandeman is also the Chief Executive Officer of Anglicare SA Housing, a wholly owned subsidiary of Anglicare SA. Mr Frost is the plaintiffs’ solicitor.
The key events and documents are set out in a summary chronology annexed to the plaintiffs’ outline of submissions. The plaintiffs’ application pertains to the past and future management of some 160 cottage homes throughout Adelaide which house some 280 tenants with an average tenant age of 74. The homes comprised the combined assets of the Trusts and other assets of LAWCH.
As conceded by the plaintiffs, contrary to the strict requirements of trust law, the Trusts were not separately managed according to the terms of the separate trusts, but managed as a single combined entity together with other assets of LAWCH pursuant to the provisions of the LAWCH constitution. Accordingly, relief is sought in respect of the actual or supposed breaches of the Trusts.
Anglicare SA Housing, a new trustee, was appointed in May 2017 to manage the assets of the Trusts in the future. It is submitted that Anglicare SA Housing has considerable experience in managing community housing assets and has never employed staff nor, as far as the plaintiffs can discern, has LAWCH.
Anglicare SA and its predecessors have provided tenancy services to LAWCH since 1958 and more recently to Anglicare SA Housing. From 1992, all financial, building maintenance and secretarial services have been provided by Anglicare SA or its predecessors. It is submitted that the approval of the Trust Variation Scheme sought will not alter the provision of these services.
The plaintiffs seek an order relieving the first and second plaintiffs from all breaches of trust in order to put matters right for the future and approval of the proposed Trust Variation Scheme to govern the future management of the trust assets.
The relief sought from supposed or actual breaches
The actual or supposed breaches with respect to the Trusts are deposed to in the first McNeil affidavit.
The actual or supposed breaches with respect to the West Trust are:
1.the sale of properties acquired with funds provided by the West estate or the income generated therefrom or for the purposes of the West Trust without the approval of the Supreme Court and where no power of sale was conferred upon the trustees by the will;
2.the demolition and redevelopment of those properties without the approval of the Supreme Court where no such powers were conferred upon the trustees by the will;
3.the failure of LAWCH to 1988 to keep separate accounts for the West Trust apart from accounts for the other activities of LAWCH;
4.the failure of LAWCH after 1988 to keep separate accounts for the West Trust apart from accounts of the Laycock Charity or the Knox Estate or the other activities of LAWCH;
5.the administration of the three Trusts and the other activities of LAWCH as one;
6.the letting of property acquired for the purpose of the West Trust to other bodies for their own respective purposes without the approval of the Supreme Court;
7.the failure to restrict the class of tenants (to the extent properties of the West Trust were identifiable) to members of the Church of England or the Anglican Church of Australia;
8.the use of property or the proceeds of sale of property the subject of the West Trust for the general purposes of LAWCH; and
9.the failure to identify particular properties held for the purposes of the West Trust.
The actual or supposed breaches with respect to the Laycock Charity are:
1.the class of tenants of the Glenelg property was not restricted to “elderly worthy and impecunious Church people” with preference to be given to parishioners of St Peter’s Church, Glenelg;
2.the real property the subject of the Laycock Charity was sold during the 1995 financial year and the proceeds applied to the general purposes of LAWCH without the approval of the Supreme Court;
3.following the sale of the Glenelg property the subject of the Laycock Charity, no property has been identified as being subject to the trust;
4.no separate accounts have been kept for the Laycock Charity since 1988;
5.the failure of LAWCH after 1988 to keep separate accounts for the Laycock Charity apart from accounts of the West Trust or the Knox Estate or the other activities of LAWCH;
6.the administration of the three Trusts and the other activities of LAWCH as one; and
7.the use of property or the proceeds of sale of property the subject of the Laycock Charity for the general purposes of LAWCH.
The actual or supposed breaches of trust of the Knox Trust are:
1.the class of tenants has not been restricted to “indigent women of the better class”;
2.the Trust Deed dated 21 June 1988 was executed without the approval of the Supreme Court and in circumstances which would appear not to have justified its execution;
3.from 21 June 1988 no separate accounts of the Knox Trust were kept by LAWCH;
4.the failure of LAWCH after 1988 to keep separate accounts for the Knox Trust apart from accounts of the Laycock Charity or the West Trust or the other activities of LAWCH;
5.the administration of the three Trusts and the other activities of LAWCH as one;
6.the use of property or the proceeds of sale of property the subject of the Knox Trust for the general purposes of LAWCH.
The plaintiffs say, as deposed to in the Sandeman affidavit, that the Board of LAWCH became aware during 2013 and 2014 of supposed breaches of trust administered by LAWCH. I accept the submission that it is neither reasonably practicable nor even possible to unravel the numerous breaches and reconstruct the accounts and the financial and asset positions of LAWCH and the three Trusts having regard to the second McNeil affidavit and the Frost affidavit. Exhibited to the Frost affidavit is a letter from Ernst & Young dated 22 June 2017 detailing the expense in undertaking an exercise of essentially reconstructing the balance sheets of the Trusts.
It is clear that if the orders sought are not made, further breaches of trust will necessarily occur. I accept that it would be impossible to correctly identify what income, sale proceeds or other capital receipts, liabilities, items of expenditure or funding received should be applied to any particular Trust or LAWCH. There is no doubt that continuing uncertainty would result in difficult legal issues and wasted costs that would be at the expense of trust assets. As contended by the plaintiffs this is compounded by the additional difficulties arising from the uncertain terms of the three wills which created the Trusts, for example, persons in “reduced circumstances”, “members of the Church of England”, “elderly worthy and impecunious Church people”, and women “of the better class”.
The LAWCH Board considered that it was unable to embark on further capital expenditure without approval of a Trust Variation Scheme permitting the expenditure of monies which may be the subject of one or more of the particular Trusts administered by LAWCH. The Chairman’s Report in the LAWCH Annual Report for 2015 deposed to in the first McNeil affidavit details the circumstances leading to the making of this application.
I accept that there is nothing to suggest that any of the members of the LAWCH Board acted other than honestly. It was submitted that most of the Board members were practising members of the Anglican Church, were volunteers and received no payment for their services other than for reimbursement of expenses properly incurred in their role as Board members.
It is conceded that there is a long and concerning history of breaches. However, there has been no dishonesty, bad faith or wilful misapplication of the trust funds and, as acknowledged by counsel for the Attorney-General, once the LAWCH Board became aware of those breaches, it acted expeditiously to find a way through and correct the situation, culminating in the making of this application.
In the circumstances, I am satisfied that an order be made under s 67 of the Act relieving the first and second plaintiffs from all breaches of trust in order to put matters right for the future.[1]
[1] Dal Pont, Law of Charity (Lexis Nexis, 2010), [14.41], citing Re de Vedas (deceased) [1971] SASR 169 at 192 (Wells J).
Approval of the Trust Variation Scheme
I accept that the intertwining of the affairs of the Trusts and of LAWCH make it impossible to identify the particular properties which are the subject of the three Trusts.
The plaintiffs’ solicitors have corresponded with the Attorney-General’s advisors in an attempt to ensure that the proposed Trust Variation Scheme preserves the spirit of the original Trusts. Accordingly, clauses 3.5 and 5.4 to 5.7 of the proposed Trust Variation Scheme provide that:
1.the name of the trust created by the Scheme shall be “The Laura and Alfred West Trust” (clause 3.5);
2.the trustee shall identify and name not less than five community housing units as the “Ada Laycock Homes” (clause 5.4);
3.the trustee shall identify and name not less than six community housing units as the “Knox Homes” (clause 5.5), priority being given to persons are or include women who are needy or disadvantaged (clause 5.6);
4.the trustee shall give priority in respect of all units (other than the Knox Homes and the units funded under the National Rental Affordability Scheme which formed part of the non-Trust assets of LAWCH) to persons who at the time of the offer are or who include baptised members of the Anglican Church (clause 5.7).
As contended by the plaintiffs’, the circumstances governing the provision of community housing have substantially evolved since the creation of the three Trusts by wills executed in 1926, 1929 and 1950. Consequently, the proposed Trust Variation Scheme encompasses the common management of the Trust assets with the other assets transferred from LAWCH to Anglicare SA Housing.
It is submitted that this will make it easier to attract higher levels of government funding and commercial lending for the provision of community housing than if LAWCH continued as a separate body. If LAWCH continued as a separate entity the undesirable complication may occur whereby LAWCH would be competing in competitive community housing tenders against Anglicare SA Housing, another organisation associated with the Anglican Church.
The provisions of the Scheme require the assets of the three Trusts to be managed, taking into account the provisions and the spirit of the three original Trusts, by a new trustee, Anglicare SA Housing. Mr McNeil deposes in his second affidavit that the Board of Anglicare SA Housing is professionally run and not comprised of volunteers. This change in management will enable the winding up of LAWCH.
Conclusion
I dismiss Mr Retallick’s applications FDN 8 and FDN 10.
The plaintiffs make this application to put matters right for the future in the interests of the beneficiaries of the Trusts. As submitted, if the uncertainty continues, there will be increased costs that will fall on the trust assets and that will be a detriment to the beneficiaries.
Having regard to the submissions made and the detailed affidavit evidence, I am satisfied that, pursuant to s 67 of the Act and the inherent jurisdiction of the Court, Laura and Alfred West Cottage Homes Incorporated (“the Association”) and Anglicare SA Housing Limited, together with their present and past directors, officers and agents should be relieved from all and any supposed or actual breaches of trust in relation to the Trusts.
Further, I am satisfied that the affidavit evidence establishes that in all of the circumstances the trust property could be more effectively used if combined with the other property applicable for similar purposes and administered jointly with that property pursuant to s 69B(1)(c) of the Act. I am satisfied pursuant to s 69B(1)(d)(ii) that it is not reasonably practicable, having regard to the changes in the circumstances that have taken place since the constitution of the Trusts and other relevant factors identified in the affidavit evidence, to acquire trust property in strict accordance with the original purposes
I am satisfied that the proposed scheme is justified in all of the circumstances and it properly accords with the spirit of the original Trusts.
Accordingly, I make the orders sought in the summons filed 4 April 2016 in terms of the draft minutes of order marked “A”, initialled by me and dated 22 February 2018 as follows:
1.That pursuant to s 67 of the Trustee Act 1936 and pursuant to the inherent jurisdiction of the Court and all other powers thereunto enabling Laura and Alfred West Cottage Homes Incorporated (“the Association”) and Anglicare SA Housing Limited together with their present and past directors, officers and agents be and are hereby relieved from all and any supposed or actual breaches of trust in relation to:
1.1.   The administration of the trusts of the residuary estate of William Alfred Augustus West who died on the 3^rd day of July 1929 (“the West Trust”);
1.2.   The administration of the scheme for the administration of the charity known as Ada Laycock Homes Incorporated approved by this Honourable Court by Order made on 10 November 1988 in Matter No. 1813 of 1988 (“the Laycock Charity”);
1.3.   The administration of the trusts of the residuary estate of Edith Charlotte Knox who died on the 2^nd day of December 1926 (“the Knox Trust”); and
1.4.   The administration of the affairs of the Association.
2.That pursuant to s 69B of the Trustee Act 1936 and pursuant to the inherent jurisdiction of the Court, the Trust Variation Scheme set forth in the Schedule hereto in relation to the West Trust, the Laycock Charity, the Knox Trust and any and all remaining assets and undertaking of the Association held for the purposes of the Association and in relation to which Anglicare SA Housing Limited is the new Trustee (including but not limited to the land referred to in the Annexure to the Trust Variation Scheme) be and is hereby approved and that the said Trust Variation Scheme be carried into effect.
3.That the plaintiffs are hereby authorised to give effect to such provisions of the Memorandum of Agreement (annexed to the draft minutes) between them dated 16 October 2015 as remain to be performed unless the parties agree that any of them are no longer required to be performed.
4.That the costs of the plaintiffs of and incidental to this application and the preparation of the scheme be adjudicated (or agreed) as between solicitor and client and paid out of the trust assets.