Public Trustee (Dean Hudson Memorial Fund Trust) v Attorney-General (SA) - [2019] SASC 20

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
PUBLIC TRUSTEE (DEAN HUDSON MEMORIAL FUND TRUST) v ATTORNEY-GENERAL (SA)
[2019] SASC 20
Judgment of The Honourable Justice Hinton
28 February 2019
CHARITIES - ADMINISTRATION AND CONTROL BY COURT - GENERALLY
CHARITIES - CHARITABLE GIFTS AND TRUSTS - IN GENERAL - CONSTRUCTION - ASCERTAINMENT OF OBJECTS - GENERALLY
Application made by the Public Trustee pursuant to s 69B of the Trustee Act 1936 (SA) seeking orders approving a trust variation scheme in relation to the Dean Hudson Memorial Fund Trust (the Trust) or, in the alternative or in addition to, a scheme for the administration of the trust.
The Trust was established in 1960 for the purpose of generating income for the purchase of books for the Dean Hudson Memorial Library at the Adelaide Boys High School, now Adelaide High School. The terms of the Trust did not allow for the expenditure of the corpus. The Public Trustee considered that the annual income generated by the Trust was no longer sufficient to pay for books. The schemes the Public Trustee sought would allow for the expenditure of the corpus and income generated for the benefit of Adelaide High School as determined by the Governing Council. The Attorney-General supported the application.
Held, refusing the application, the proposed variation to the trust deed does not accord, as far as reasonably practicable, with the spirit of the Trust in that the proposed variation provides an alternate purpose to which trust monies may be applied that is not limited to the advancement of students of Adelaide High School by contributing to the body of information and knowledge to which they may have access in the course of their schooling.
Trustee Act 1936 (SA) ss 59B, 69B, referred to.
Andrews v M’Guffog (1886) 11 AC 313; Baptist Churches of South Australia Inc v Attorney-General (SA) [2018] SASC 14; In Re J W Laing Trust [1984] 1 Ch 143; Oldham Borough Council v Attorney-General [1993] Ch 210; Public Trustee (G.D. Butler Medal Trust) v Attorney-General (SA) [2019] SASC 21; Re Willenhall Chapel Estates (1865) 2 Dr & Sm 467; 62 ER 698, considered.

PUBLIC TRUSTEE (DEAN HUDSON MEMORIAL FUND TRUST) v ATTORNEY-GENERAL (SA)
[2019] SASC 20
Civil
HINTON J:
Introduction

This is an application by the Public Trustee pursuant to s 69B of the Trustee Act 1936 (SA) (the Act) seeking orders approving a trust variation scheme in relation to the Dean Hudson Memorial Fund Trust (the Trust), a charitable trust of which the Public Trustee is and has been trustee since 1960, and, in the alternative or in addition, a scheme for the administration of the Trust. It transpires that the trust corpus is no longer sufficient to generate an income capable of supporting the Trust purpose being the purchase of books for the library at Adelaide High School. The schemes sought will allow for the expenditure of the corpus and income generated for the benefit of the school as determined by the Governing Council where the terms of the Trust do not do so.
For the reasons that follow I would refuse the application.
The Dean Hudson Memorial Fund Trust
On 20 July 1960 John Maxwell Mayfield, for and on behalf of the Dean Hudson Memorial Committee, and the Public Trustee executed a deed containing four clauses, the recitals of which included the following:
AND WHEREAS the Committee has decided to set aside moneys out of the fund as a separate fund to be invested and the income thereof used for the purchase of books for the Dean Hudson Memorial Library at the Adelaide Boys High School at Adelaide aforesaid AND WHEREAS the Committee has prior to the execution of these presents resolved to set aside the sum of FIFTY FOUR POUNDS (£54:0:0) on account of such separate fund and proposes setting aside further money, out of the said fund for the same purposes, AND WHEREAS the Committee has requested the Public Trustee to receive and hold the said sum of Fifty Four Pounds (£54:0:0) and such further sum or sums as the Committee shall resolve to so set aside UPON TRUST for the purposes and with and subject to the powers and directions hereinafter declared and contained.
In clause 1 of the deed the Public Trustee acknowledged receipt of the £54 and declared that the sum would be held along with any further sums received from the Committee on trust to be invested in investments authorised by law for the investment of trust funds by trustees so far as it were practicable but otherwise to be invested through the Public Trustee’s Common Fund. Clause 2 provided:
The PUBLIC TRUSTEE shall pay the income derived from the investments made in accordance with paragraph 1 hereof to the Headmaster for the time being of the Adelaide Boys High School at Adelaide aforesaid during the month of November of each year or at such other time or times as shall be arranged between the Public Trustee and the said Headmaster for the purchase of such books as the said Headmaster shall in his absolute discretion select for the Dean Hudson Memorial Library at the said Adelaide Boys High School.
Clause 3 provides that upon payment made in accordance with clause 2 being received by the Headmaster the Public Trustee’s responsibility for the funds paid over ceases. Clause 3 also relieves the Headmaster of any obligation to account to the Trustee for the expenditure of the money paid in accordance with clause 2. Clause 4 permits the Public Trustee to deduct from the trust monies (comprised of both the corpus and income earned) costs associated with the maintenance of the Trust including the payment of remuneration to the Public Trustee relative to the operation of the Trust, the cost of stamping the trust deed, and any other legal costs and disbursements incurred.
The Application
In an affidavit affirmed in support of the application the Public Trustee advises that the value of the trust corpus as at 14 June 2017 was $129.99. In the 2015-2016 financial year the trust corpus generated an income of $2.55.
The Public Trustee also advises that the Adelaide Boys High School, as it was known in 1960, has ceased to exist. In 1976 the Adelaide Boys High School amalgamated with the Adelaide Girls High School to become Adelaide High School. Since the amalgamation the Public Trustee has made payments under the Trust to the Adelaide High School. The last payment was made in 2000 in the amount of $10.68.
The Public Trustee considers that the annual income generated by the trust corpus is insufficient to pay for books. She notes that the terms of the Trust do not allow for the expenditure of the corpus. The Public Trustee considers it highly unlikely that the income generated by the corpus will increase in the future sufficient to achieve the trust purposes. Consequently, she has consulted the Department of Education and Child Development and the Adelaide High School. The present application is the outcome of that consultation.
In a second affidavit the Principal of the Adelaide High School, Ms Cezanne Marie Green, advises that the Dean Hudson Memorial Library no longer exists and that the School is of the view that, given the low income generated by the trust corpus, the Trust should be wound up and the corpus and any income earned thereon should be paid to the school for its use.
In the circumstances the Public Trustee seeks an order approving a trust variation scheme varying the Trust to include an additional clause, proposed clause 5, in the following terms:
In the event that the annual income of the trust is insufficient to purchase books for the Dean Hudson Memorial Library, the balance of the trust, including both capital and income, shall be paid to the Governing Council of the Adelaide High School for use of the benefit of the school as the Governing Council may decide.
The Attorney-General supports the application. That the Trust is a charitable trust is not in dispute.
The changes that proposed clause 5 would effect
The Trust is one for the advancement of education. Its primary purpose may be characterised as fostering the education of students attending Adelaide Boys High School (now Adelaide High School) by funding the purchase of books for the school library each November or at such other time or times arranged between the Public Trustee and the Principal (the primary purpose). Secondary to this is the intention that the trust corpus generate the income necessary to achieving the primary purpose (the secondary purpose).
Proposed clause 5 is in the nature of a gift over. If the primary and secondary purposes cannot be achieved, the corpus and any income are to be given to the Governing Council and applied for the benefit of the school.
Three observations may be made about proposed clause 5. First, where the Trust is intended to continue in perpetuity, the proposed clause contemplates the Trust coming to an end in that, where the Trust stipulates that only the income earned on the trust corpus may be applied to the purposes of the Trust, proposed clause 5 contemplates the trust corpus being spent. Second, where the Trust stipulates the purpose as the purchase of books for the library by the Principal, the proposed clause contemplates the application of the corpus and income as the Governing Council may decide. Third, proposed clause 5 does not alter the primary purpose as opposed to providing for an alternative where the primary purpose can no longer be achieved in accordance with the terms of the Trust in addition to declaring how the trust property is to be applied in pursuance of that alternate purpose.
Consideration
Section 69B provides:
69B—Alteration of purposes of charitable trust
(1)The purposes for which property is required or permitted to be applied in pursuance of a charitable trust may be altered by a scheme (a trust variation scheme) approved under this section in any of the following circumstances:
(a)     where the original purposes, in whole or in part—
(i)     have been as far as possible 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 trust property; or
(c)     where the trust property could be more effectively used if combined with other property applicable for similar purposes and administered jointly with that property; or
(d)     where it is not reasonably practicable having regard to—
(i)     the value of the trust property; or
(ii)changes in circumstances that have taken place since the constitution of the trust; or
(iii)any other relevant factor,
to apply the trust property in accordance with the original purposes; or
(e)     where the original purposes, in whole or in part—
(i)     have been adequately provided for by other means; or
(ii)    have ceased to be charitable purposes; or
(iii)have ceased to provide a suitable and effective method of using the trust property.
(2)References in this section to the original purposes of a charitable trust shall be construed, where the purposes for which the trust property is required or permitted to be applied have been altered or regulated by a scheme or otherwise, as referring to the purposes for which the property is for the time being required or permitted to be applied.
…
(6)If the relevant authority is satisfied, on application under this section, that the variation of the terms of a trust variation scheme—
(a)     accords, as far as reasonably practicable, with the spirit of the trust; and
(b)     is justified in the circumstances of the particular case.
the relevant authority may approve the trust variation scheme and the approved scheme prevails over inconsistent provisions of a relevant instrument or declaration of trust.
In Public Trustee (G.D. Butler Medal Trust) v Attorney-General (SA) I said:[1]
… the power to approve a trust variation scheme is contained in s 69B(3). The circumstances that must exist before the power may be exercised are set out in ss 69B(1)(a)-(e). That is, s 69B(1) conditions the power conferred by s 69B(3). If any of the circumstances set out in s 69B(1) are found to exist the power conferred by s 69B(3) is enlivened, however, such power may only be exercised if the requirements of s 69B(6) are also satisfied. Section 69B(6) contains two requirements. They are cumulative. With respect to the first requirement, the “spirit of the gift” was held in In Re Lepton’s Charity to “be equivalent in meaning to the basic intention underlying the gift, that intention being ascertainable from the terms of the relevant instrument read in the light of the admissible evidence”. It follows that in determining the spirit of the gift one will have regard to the class or classes of beneficiary, the location, time or circumstances in which gifts are to be made to the beneficiaries, and the nature of the benefit intended to be achieved. With respect to the second requirement, it must always be borne in mind that the primary responsibility of this Court in the administration of charitable trusts is to give effect to the trusts as laid down by the settlor or testator. Thus, if a trust variation scheme is to be made the circumstances must be of sufficient cogency to justify the alteration bearing in mind the settlor’s original intentions. Accepting this, a variation will not be justified on the basis of mere expediency or because the trust assets could be used more beneficially for a different purpose.
Something more needs be said about the power to approve a trust variation scheme under s 69B(3). Section 69B(1) makes plain that a trust variation scheme may do no more than alter the purposes for which property is required or permitted to be applied in pursuance of a charitable trust. It does not empower the Court to alter machinery provisions. …
[footnotes omitted]
[1] [2019] SASC 21 at [18]-[19].
In the present case the gift over contained in proposed clause 5, as I have expressed above, provides for an alternate basis upon which the trust property is to be applied in the event that the primary purpose of the Trust cannot be achieved. However, it also declares how the trust property is to be applied to that alternate purpose.
I accept the evidence of the Public Trustee that the annual income generated by the trust corpus is insufficient to support the primary purpose of the Trust. I also accept the opinion that the income generated by the trust corpus is unlikely to improve in the foreseeable future to an extent where it can once again support the primary purpose of the Trust. Accepting this, in my opinion the original purpose of the Trust (being the primary purpose) can no longer be carried out in accordance with the directions contained in the Trust nor in accordance with the spirit of the Trust.[2] Further, I am satisfied that it is not reasonably practicable having regard to the value of the trust property to apply the trust property in accordance with the original purposes of the Trust[3] and that it is not reasonably practicable, having regard to changes in circumstances that have taken place since the constitution of the Trust, to apply the trust property in accordance with the original purposes of the Trust.[4] It follows that I am satisfied that the power to approve a trust variation scheme is enlivened.
[2]    Trustee Act 1936 (SA), s 69B(1)(a)(ii).
[3]    Trustee Act 1936 (SA), s 69B(1)(d)(i).
[4]    Trustee Act 1936 (SA), s 69B(1)(d)(ii).
I turn to the application of s 69B(6). That necessitates further consideration of the primary purpose of the Trust. In The Rivals, R B Sheridan wrote:[5]
Madam, a circulating library in a town is as an ever green tree of diabolical knowledge! — It blossoms throughout the year! — And depend on it, … that they who are so fond of handling the leaves, will long for the fruit at last.
[5] Richard Brinsley Sheridan, The Rivals (Printed for A Millar, W Law and R Carter, London, 1797) 16.
The greater a library’s holdings the greater the access that library users have to knowledge, opinion and storytelling. Access to those things both educates and promotes thinking, leading, in turn, to advancement. Considerations of this sort and the desire to advance the students at Adelaide Boys High School as a means of memorialising, I presume, Dean Hudson, motivated the Dean Hudson Memorial Committee to settle the Trust. The beneficiaries of the primary purpose were confined to library users. The benefit was, as I have indicated, the expansion of the holdings of the library to which the beneficiaries had access. If this is right, I do not think that proposed clause 5 accords, as far as reasonably practicable, with the spirit of the Trust. The proposed clause permits the Governing Council of the School to apply the trust property to any purpose provided it is one that benefits the School. The class of beneficiary is expanded beyond library users in reflection of the fact that the purpose or purposes to which the trust monies may be applied is expanded beyond the purchase of books for the library. In a sense almost any expenditure by the Governing Council could be said to foster education in that it is an expense incurred in the course of the conduct of a school, but I do not think that, for example, the allocation of the trust monies to the school maintenance budget, as the Governing Council could do, can be said to accord as far as reasonably practicable with the spirit of the Trust. For these reasons I consider the spirit of the Trust to be the advancement of the students by contributing to the body of information and knowledge to which they may have access in the course of their schooling.
There is no evidence before me suggesting that the School no longer has a library. Whilst the Dean Hudson Memorial Library may cease to exist, I very much doubt that the School has no library. If this is right, a variation scheme that saw the trust property spent on the holdings of the library, whether that be in the form of hard copy books or electronic resources, strikes me as the sort of alternative consistent with the spirit of the Trust. Further, such a scheme would in my view be justified having regard to the money value of the trust corpus and the ability of that corpus to generate income.
So concluding provides reason enough to reject the application. However, in the event that an application is made to amend the application or a fresh application is made, I make plain that I do not consider it fatal that either the variation proposed or that postulated would permit the expenditure of the corpus and, ultimately, spell the end of the Trust. Having regard to Baptist Churches of South Australia Inc v Attorney-General (SA),[6] In Re J W Laing Trust,[7] and Oldham Borough Council v Attorney-General[8] it may be that the power to order a scheme having such effect is not to be found in s 69B[9] but rather the inherent power to impose an administrative scheme or s 59B; however, I am unaware of any authority or statutory provision that serves as an immoveable obstacle to such course. Indeed Re Willenhall Chapel Estates[10] and Andrews v M’Guffog[11] are to the contrary.
[6] [2018] SASC 14.
[7] [1984] 1 Ch 143.
[8] [1993] Ch 210.
[9] See also Tasmanian Perpetual Trustees Ltd v Attorney-General (Tas) [2017] TASSC 32.
[10] (1865) 2 Dr & Sm 467; 62 ER 698.
[11] (1886) 11 AC 313.
The significance of this issue lies in the test to be applied in determining whether to grant the application. Under s 69B a variation scheme cannot be approved unless the criteria contained in ss 69B(1) and (6) are satisfied. Under the cy-prés doctrine the original purpose must be impossible or impracticable. And under s 59B of the Act and in the exercise of the inherent power to impose an administrative scheme the Court must be satisfied that it is expedient to make the desired scheme. In the circumstances of this case, it is likely that any and all of those tests will be satisfied, however, for the reasons I have given it is unnecessary to reach a concluded view.
Conclusion

I refuse the application. I will hear the parties further as to the orders to be made.