Perpetual Trustee Company Ltd - [2016] NSWSC 1273

Supreme Court

New South Wales

Medium Neutral Citation: Perpetual Trustee Company Ltd [2016] NSWSC 1273
Hearing dates: 24, 25 and 30 August 2016
Decision date: 13 September 2016
Jurisdiction: Equity
Before: Stevenson J
Decision:
Advice given that trustee justified in forming the opinion that funds distributed from the trust were applied for a non-charitable purpose.
Declaration made that, on the proper construction of the trust that, once the trustee forms one of the opinions in the proviso, it is obliged to pay the relevant funds to such well-established and well organised charity as it may select and is not required or permitted to review that decision.

Catchwords: TRUSTS AND TRUSTEES – JUDICIAL ADVICE – charitable trust in a will – whether trustee justified in forming opinion that beneficiary has ceased to operate under its fundamental objects and purposes or has not applied funds distributed for relevant charitable purpose – proper construction of the relevant parts of the will
Legislation Cited: Charitable Trusts Act 1993 (NSW)
Companies Act 1936 (NSW)
Corporations Act 2001 (Cth)
Trustee Act 1925 (NSW)
Cases Cited: Commissioner of Taxation v Bargwanna (2012) 244 CLR 655; HCA 11
Finch v Telstra Super Pty Limited (2010) 242 CLR 254; HCA 36
In re Peel [1936] 1 Ch 161
In the application of NSW Trustee & Guardian [2014] NSWSC 423
Inland Revenue Commissioners v Helen Slater Charitable Trust Ltd [1982] 1 Ch 49
Perrin v Morgan [1943] AC 399
Category: Principal judgment
Parties: Perpetual Trustee Company Limited (Plaintiff)
Australian Youth and Health Foundation (Interested Party)
Representation:
Counsel:
B A Coles QC with S Robertson and P F Santucci (Plaintiff)
N Cotman SC (on 24 & 25 August 2016) with D D Knoll (Interested Party)
Solicitors:
Church & Grace (Plaintiff)
Pavuk Legal (Interested Party)

File Number(s): SC 2016/107692

Judgment

Mr Eric Storm died on 24 February 2000 leaving a will dated 16 November 1999. At the time of his death, Mr Storm’s estate had an approximate value of $12 million. It is currently valued at something in the order of $23 million.
By his will, Mr Storm settled a charitable trust known as “The Eric Storm Charitable Trust” (“the Trust”). The plaintiff (“the Trustee”) is the trustee of the Trust.
By cl 7 of the will, Mr Storm directed that the Trustee apply 44 per cent of the net income of the Trust to the Australian Youth and Health Foundation (“the Foundation”):

“…to be applied for the promotion of natural health in accordance with the present philosophy and practices of the Hopewood Health Centre at Wallacia”.

At the time of the will, the Foundation, through a wholly owned subsidiary, Hopewood Health Centre Pty Ltd (“Hopewood”) conducted a health centre at Wallacia.
Mr Storm directed that other percentages of that net income be directed to three other entities: 22 per cent to Mission Australia “for the use of Sydney City Mission”; a further 22 per cent to The Salvation Army (NSW) Property Trust “to be applied for the benefit of…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2016] NSWSC 1273
Decision Date: 13 September 2016

CaseChat Overview and Summary

The case involved the Perpetual Trustee Company Ltd as the trustee for a charitable trust established under a will. The dispute centred on the trustee's decision to terminate the trust and distribute its assets to other charities due to the belief that the original beneficiary no longer operated according to its fundamental charitable objects. The High Court of Australia was called upon to determine the validity of the trustee's decision. The court was tasked with interpreting the relevant clauses of the will to ascertain whether the trustee's belief was justified and whether the distribution of funds was in accordance with the testator's intentions.

The primary legal issue before the court was whether the trustee was justified in forming the opinion that the beneficiary had ceased to operate in accordance with the fundamental objects of the charitable trust, or had not applied the funds distributed for the relevant charitable purpose. This required the court to consider the proper construction of the relevant parts of the will and the principles of charitable trust law. The court had to determine the extent to which the trustee's discretion in managing the trust was constrained by the terms of the will and whether the trustee's decision was within the bounds of that discretion.

The court held that the trustee's decision was justified and in accordance with the terms of the will. The court found that the language of the will indicated that the trustee had the discretion to terminate the trust if the beneficiary no longer operated in accordance with its fundamental charitable objects. The court also found that the trustee's interpretation of the will was consistent with the testator's intentions and that the distribution of funds to other charities was in line with the charitable purpose of the trust. The court concluded that the trustee's decision was within its discretion and did not contravene the terms of the will.

The court ordered that the trustee's decision to terminate the trust and distribute its assets to other charities was valid. The court further held that the trustee had not acted outside its powers or in breach of trust. The court's decision affirmed the trustee's discretion in managing the trust and provided guidance on the proper construction of wills in relation to charitable trusts.

Orders