Re AM McClelland Estate
[2025] VSC 343
•17 June 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2024 03080
| IN THE MATTER of r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 | |
| - and - | |
| IN THE MATTER of ss 51, 63 and 71 of the Trustee Act 1958 | |
| - and - | |
| IN THE MATTER of s 2 of the Charities Act 1978 | |
| McCLELLAND ARTS LTD as trustee for AM McCLELLAND ESTATE (ACN 674 723 347) and Ors (according to the attached Schedule) | Plaintiffs |
| - and - | |
| ATTORNEY-GENERAL FOR THE STATE OF VICTORIA | Defendant |
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JUDGE: | Harris J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 25 March 2025 |
DATE OF JUDGMENT: | 17 June 2025 |
CASE MAY BE CITED AS: | Re AM McClelland Estate |
MEDIUM NEUTRAL CITATION: | [2025] VSC 343 |
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TRUSTS AND ESTATES – Trust created by terms of will – Bequest of real and personal property for creation of charitable trust for establishment and maintenance of art gallery and use of surrounding land for public educational purposes – Terms of trust include providing access to public free of charge - Bequest insufficient to fund building and ongoing maintenance of art gallery and all related activities - Charitable trust able to effect original purposes only with financial and other contributions from donors – Continuing operation of trust unsustainable without amendment to terms of trust – Variation of trust by way of cy-près scheme to enable continued operation of gallery, park and educational activities – Trustee Act 1958, ss 51, 52, 58 and 61 – Charities Act 1978, s 2.
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APPEARANCES: | Solicitor advocate | Solicitors |
| For the Plaintiffs | Mr C Scerri KC | Corrs Chambers Westgarth |
| For the Defendant | No appearance |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
The Trust.............................................................................................................................................. 2
Restructure plan............................................................................................................................ 6
The application................................................................................................................................... 7
The evidence....................................................................................................................................... 8
The Court’s powers under the Trustee Act 1958 and Charities Act 1978................................. 9
Vesting order – Legislative powers............................................................................................ 9
Vesting order – Analysis............................................................................................................ 10
Termination of custodian trusteeships.................................................................................... 12
Variation of Trust terms by way of a cy-près scheme........................................................... 13
Conclusion......................................................................................................................................... 20
HER HONOUR:
Introduction
On 24 November 1961, Ms Annie May McClelland died and bequeathed her estate of real and personal property for purposes that included the creation of a charitable Trust on terms identified in her Will.[1] The Trust’s purposes were broadly to establish a public art gallery to exhibit the art works of Ms McClelland including those of her late brother, Mr Harry McClelland, and for public educational purposes.[2] A stipulation of the Will was that the public be admitted to the gallery free of charge.[3]
[1]Affidavit of Lisa Maree Byrne affirmed 3 June 2024 (Byrne Affidavit), [22].
[2]Byrne Affidavit, [39].
[3]Byrne Affidavit [39], Exhibit LB-1, 37 (Last Will and Testament of Ms Annie May McClelland, clause ‘o’).
Probate of the Will was granted to the executors of Ms McClelland’s estate on 13 April 1962.[4] While working towards the establishment of the gallery, including the design and construction of a gallery building, the trustees organised art shows at Ms McClelland’s bequeathed properties. In 1971, the McClelland Sculpture Park and Art Gallery in Langwarrin opened on land bequeathed in the Will for the Trust’s purposes and has been operated by the trustees since that time.
[4]Byrne Affidavit, [23].
The evidence is that even when the Gallery was originally established, the assets of the Trust were not sufficient to fulfil the objectives of Ms McClelland’s bequest. Over time, the Gallery and its public education works have been supported both by private philanthropy, in particular from major benefactor Dame Elisabeth Murdoch, up until 2012, and from government grants. The trustees of the Trust have formed the view, having regard to the financial status of the Trust, that it is no longer feasible for the Trust to operate the Gallery and its public educational activities without charging the public for entry to the Gallery, and making certain other changes to the Trust required for the financial sustainability of its activities.
For this reason, the trustees sought orders to vary certain terms of the Trust by settling a cy-près scheme under the Charities Act 1978 (Vic), or pursuant to s 63 of the Trustee Act 1958 (Vic), or pursuant to this Court’s inherent jurisdiction.[5] They also sought certain related orders pursuant to the Trustee Act.
[5]Written Submissions of the Plaintiff dated 21 August 2024, [1].
The Attorney-General for the State of Victoria as defendant to the application[6] was served with the application and supporting affidavits and submissions. The Attorney-General informed the plaintiffs and the Court that the Attorney-General does not oppose the application for relief or the orders sought in the originating motion filed with the Court on 18 June 2024.[7]
[6]See, as to the role of the Attorney-General in representing the interests of the public in cases of charitable trusts, Re Ku-ring-gai Municipal Council v Attorney-General (1954) 55 SR (NSW) 65, 69-70.
[7]Letter dated 2 October 2024 from Victorian Government Solicitor’s Office to the Prothonotary, Supreme Court of Victoria. See also Email dated 7 October 2024 from solicitors for the plaintiff to representatives of the Victorian Government Solicitor and to the Court.
On 25 March 2025, I made the orders sought by the plaintiffs with some minor variations. The orders were made before the provision of reasons to enable measures for the financial stability of the Trust to be implemented as soon as possible. The following are my reasons for making those orders.
The Trust
The relevant terms of the Will governing the Trust in respect of the Gallery are as follows:
(c) To appoint a caretaker of all my paintings including those of my late brother Harry McClelland, books of art, manuscripts, records and mementos all such to be stor[ed] and kept at The Barn and Studio until the Gallery hereafter referred to is ready to receive them.
…
(e) To appropriate and deal with the land containing 40 acres known as Studio Park for the purposes hereinafter set out.
(f) To collect, realise in and get in all the remainder of my estate real and personal and to pay all debts liabilities, State probate and Commonwealth Estate Duties, testamentary and administration expenses and to hold the net proceeds as the residuary estate for the purposes hereinafter set out.
(g) To select such portion of the said 40 acres as would be suitable for establishing a charitable trust for public educational purposes by means of an Art Gallery and Cultural Hall with its drives, approaches, car parks, areas for picnic luncheons, caretaker's residence and the like and to fence the same off from the remainder of the said 40 acres.
(h) To build an Art Gallery and Cultural Hall on the land so selected to be known as the Harry McClelland Art Gallery and Cultural Hall (hereinafter called "the Gallery") and a caretaker's residence and establish such drives, approaches, car parks and other areas using for all such purposes not more than 25 per cent of the residuary estate.
(i) To establish, furnish, stock, repair, maintain, supervise, caretake the Gallery using for that purpose the income from the remainder of the residuary estate.
(j) To hang in the Gallery as part of its exhibits the paintings by [Harry McClelland].[8]
[8]See clarification of terms of Will at Byrne Affidavit, Exhibit LB-1, 189.
(k) To preserve in the Gallery in a room or rooms set apart for the purpose and safeguard and make available for students, research workers all my manuscripts, records and mementos of early Frankston or Melbourne or Australia or other countries.
…
(n) To enlist the assistance of the Council of the Shire of Cranbourne in the conduct care and management of the Gallery in such manner as to my Trustees shall seem necessary or desirable from time to time.
(o)To draw up Regulations for the conduct of the Gallery including hours of admission and its use generally and to ensure that the public are admitted free of charge and the use of the Luncheon Areas.
(p)To transfer the remainder of the 40 acres to the Shire of Cranbourne for the purpose of the Shire establishing and maintaining recreational areas and playing fields for the use of and enjoyment of the public to be called Studio Park the Shire undertaking under its Seal to so carry out the charitable purposes embodied in this paragraph.
…
(r)To appoint New Trustees
(s)To execute (if thought necessary or desirable) a trust deed to set up the charitable trusts contained in the Will as a Charitable Trust or to form a charitable association or non-profit making association pursuant to the provisions of the Companies Acts of the State of Victoria or otherwise establish a charitable trust or permanency.
The Trust is a charitable trust and is registered as a charity by the Australian Charities and Not-for-profits Commission.[9] It has deductible gift recipient status and is endorsed by the Commissioner of Taxation as a tax concession charity on the basis that it is a public art gallery and operates a fund listed on the former Register of Cultural Organisations.[10] The Trust does not operate for profit and the trustees of the Trust do not receive any financial gain from the Trust.[11]
[9]Byrne Affidavit, [42].
[10]Byrne Affidavit, [43].
[11]Byrne Affidavit, [45].
The original executors of the Will were appointed as trustees of the Trust, and prior to August 2012, all the trustees of the Trust were individual persons.[12] A company had also been incorporated in 1998 and registered as a charity to operate the Gallery, including to employ its staff. It was originally called the ‘McClelland Foundation Limited’ and later renamed ‘McClelland Sculpture Limited’.[13]
[12]Byrne Affidavit, [24]-[25].
[13]Byrne Affidavit, [49].
On 20 August 2012, the second plaintiff, McClelland Custodian Limited, was appointed custodian trustee to hold the real property then held by the Trust, being land (and the associated buildings and fixtures) located at 390 McClelland Drive, Langwarrin, Victoria 3190, which was property originally the subject of Ms McClelland’s bequest (the Original Property[14]) and property which had been acquired for the Trust at 360 Langwarrin Drive, Langwarrin, Victoria 3190, (the Pindara Property[15]). The Pindara Property comprises approximately 8.5 hectares of land that is adjacent to the Original Property, and has no buildings or other assets on it.[16] It was acquired with donated funds for the purpose of expanding the land available for the Trust’s outdoor sculpture collection and to secure a buffer for the existing sculpture park.[17] On 28 May 2024, the first plaintiff, McClelland Arts Ltd was appointed as Corporate Trustee of the Trust with the individual trustees of the Trust appointed its directors and shareholders.[18] The current application is made by the individual trustees, the custodian trustee and the Corporate Trustee (together, the Trustees) as well as McClelland Sculpture.
[14]Volume 11504 Folio 918.
[15]Volume 11240 Folio 543.
[16]Byrne Affidavit, [57].
[17]Byrne Affidavit, [171].
[18]Byrne Affidavit, [27].
The Gallery consists of the gallery building constructed specifically for the purpose of the Trust and which is set in 16 hectares of natural bushland in Langwarrin. The current Artistic and Executive director of the Gallery since 15 January 2018, Ms Lisa Byrne, who gave evidence in support of the application, describes the Gallery as being focused on the field of arts with nature and as championing a multidisciplinary approach to the development and presentation of art. It is the only public gallery dedicated to sculpture and spatial practice in Australia. The Gallery’s ongoing purpose is to ‘promote public understanding, education and the experience of sculpture and contemporary artistic practice connected to a unique Australian environment.’[19] To this purpose, it has an indoor and outdoor art collection, accommodates three small arts groups on the premises, hosts major public events in the land around the Gallery building and conducts innovative educational programs for various sectors of the public, including schools.
[19]Byrne Affidavit, [71].
The Gallery’s art collection has been acquired predominantly through donations, including the Federal Government Cultural Gifts Program and through fundraising led by Dame Elisabeth Murdoch, the former patron of the Gallery who raised funds to acquire new artworks. Dame Elisabeth Murdoch contributed millions of dollars to the Trust from its opening until her death in 2012. The Gallery has received other smaller sources of funding from donations and grants, including the Hugh Williamson Foundation, the Annamila First Nations Foundation and Visions of Australia, as well as grants from the Victorian Government and local government. The Gallery also has a gallery shop and café which earns some limited income. McClelland Sculpture also engages in a ‘sculpture loaning program’, however these loans are not a reliable source of funds to maintain the high costs of borrowing and displaying the sculptures in the Gallery.[20]
[20]Byrne Affidavit, [83].
These sources of funds are insufficient to cover the expenses involved in the maintenance by the Gallery of its art collection including the sculpture garden, maintenance of the 16 hectares of parkland around the gallery building, and the artistic, educational, community and broader cultural activities conducted by the Gallery which further the public educational purposes of the Trust.
It is for this reason that the plaintiffs seek an amendment to the terms of the Trust to allow the Trustees to charge admission fees for entry to the Gallery.
The current terms of the Trust do not allow the Trustees to acquire artworks for the Gallery.[21] For this reason the plaintiffs also seek powers to acquire sculptures and other artworks. The plaintiffs also seek amendments to the Trust terms to give the Trustees general powers of administration of the Gallery and the Trust property, including to borrow funds, and also to dispose of assets and land.
[21]Byrne Affidavit, [86].
Restructure plan
The current application also seeks orders with respect to the structure and governance of the Trust, having regard to the current complex governance structure involving the Corporate Trustee, the custodian trustee, and the individual trustees.
The Original Property was registered in the names of the individual trustees and the Pindara Property had been acquired in the name of the McClelland Foundation Limited in 2007. McLelland Custodian Limited was appointed as a custodian trustee to the Trust in 2012 by an order of the Governor in Council pursuant to s 71 of the Trustee Act. On 17 June 2013, the ownership of both properties was transferred to the custodian trustee, with the transfer of the Original Property being effected by order of this Court pursuant to s 51(2)(l) and (o) of the Trustee Act.[22]
[22]Byrne Affidavit, Exhibit LB-1, 168.
Due to regular changes to the individual trustees and the resulting difficulty in maintaining consistent governance and administration of the Trust, in August 2023 the Trustees passed a resolution to restructure the Trust. That resolution approved, in addition to the changes identified above with respect to financial sustainability:
(a) the appointment of a corporate trustee to act as the sole trustee of the Trust, with the individual trustees retiring and being appointed as directors of the corporate trustee;
(b) transfer to the corporate trustee all assets held by the custodian trustee; and
(c) transferring the assets held by the Trust and McClelland Sculpture to the corporate trustee.[23]
[23]Written Submissions of the Plaintiff dated 21 August 2024, [26].
The first stage of the restructure was effected upon the appointment of the first plaintiff as Corporate Trustee on 28 May 2024.[24] The plaintiffs now seek to address the position of the custodian trustee and the individual trustees, by transferring all remaining assets held by the Trustees, the custodian trustee and McClelland Sculpture to the Corporate Trustee, and to wind up the custodian trustee, McClelland Custodian Limited. The individual trustees may then retire. It is also proposed then to wind up McClelland Sculpture Limited.[25] The plaintiffs also seek to alter the name of the Trust which is currently the AM McClelland Estate, to ‘McClelland Arts Trust’, to better reflect the current functions and ongoing purposes of the Trust to make its purpose clear to current and prospective benefactors and stakeholders.[26]
[24]Written Submissions of the Plaintiff, [27].
[25]Byrne Affidavit, [92]-[96].
[26]Byrne Affidavit, [102]-[104].
The application
The application is made by the plaintiffs to seek the amendments to the Trust in order to facilitate financial sustainability, and to effect the remaining stages of the restructure,[27] seeking specifically the following substantive orders:
[27]Written Submissions of the Plaintiff, [28]-[30].
3. Pursuant to s 51(2)(o) of the Trustee Act 1958 (Vic) (Trustee Act) or alternatively, pursuant to s 71(4)(n) of the Trustee Act [the Original Property] and [the Pindara Property] is vested in the First Plaintiff.
4. Pursuant to s 71(4)(m) of the Trustee Act, the custodian trusteeship of the Second Plaintiff is terminated.
5. Pursuant to s 2 of the Charities Act 1978 (Vic) …
(c)the original purposes of the Trust are varied by way of cy-près scheme as follows:
(i) the words in cl (o) “the public are admitted free of charge” altered to “the public are admitted, whether free of charge or for a fee to be determined by my Trustee/s from time to time”;
(ii) a new cl (v) is added with the words “to cause the charitable trusts contained in this Will to be known as ‘McClelland Arts Trust’”;
(iii) a new cl (w) is added with the words “to hire, purchase or otherwise acquire paintings, sculptures and other works of art for display at the Gallery as my Trustee/s shall deem necessary or desirable from time to time”;
(iv) a new cl (x) is added with the words “to receive donations of cash, sculptures and other arts, grants and other bequests to be applied for the purposes of McClelland Arts Trust and its activities as a charitable trust”;
(v) a new cl (y) is added with the words “to dispose of any asset or property of McClelland Arts Trust as my Trustee/s deem necessary or desirable, consistent with the administration of McClelland Arts Trust as a charitable trust for the promotion of arts and advancement of public education in arts”;
(vi) a new cl (z) is added with the words “to do anything my Trustee/s deem necessary or desirable to administer the McClelland Arts Trust and operate the Gallery, consistent with the administration of McClelland Arts Trust as a charitable trust for the promotion of arts and advancement of public education in arts”. [28]
[28]Plaintiff’s Proposed Orders dated October 2024.
The evidence
The plaintiffs relied on two affidavits of Ms Lisa Byrne, Artistic and Executive Director of the Gallery, affirmed on 3 June 2024 (first affidavit) and on 6 March 2025 (second affidavit). The first affidavit set out the background of Trust and the Gallery, as well as details of the restructure plan for the Trust and its current financial status. The second affidavit provided an update on the Trustees (being the retirement as trustee of the fourth and tenth plaintiffs as trustees) and an update of the Trust’s financial status and viability.
The Court’s powers under the Trustee Act 1958 and Charities Act 1978
It is first convenient to consider the specific orders sought in relation to the vesting of property in the Corporate Trustee and the termination of the custodian trusteeship, as part of the restructuring of the governance of the Trust.
Vesting order – Legislative powers
The application seeks a vesting order to vest the Trust property in the Corporate Trustee. The Trustees identify as the source of the power for those orders s 51(2)(o) of the Trustee Act, alternatively s 71(4)(n).
Section 51 of the Trustee Act allows for the Court to make vesting orders in certain circumstances and provides:
51 Vesting orders
(1) The Court may make an order, in this Act called a vesting order, which shall have effect as provided in section fifty-eight of this Act.
(2) A vesting order may be made in any of the following cases, namely—
…
(b) where a new trustee has been appointed out of court under any statutory or express power;
…
(o) where property is vested in a trustee and it appears to the Court to be expedient to make a vesting order.
Section 52 of the Trustee Act provides a broad discretion as to the circumstances in which the Court may make a vesting order and the nature of the vesting order the Court may make:
52 In whom property to be vested etc.
(1)Where the making of a vesting order is consequential on the appointment of a new trustee, the property shall be vested in the persons who, on the appointment, are the trustees.
(2)Where the making of such order is consequential on the retirement of one or more of a number of trustees, the property may be vested in the continuing trustees alone.
(3) Subject to the provisions of subsection (1) of this section, a vesting order may vest the property in any such person in any such manner and for any such estate or interest as the Court may direct, or may release or dispose of any contingent right to such person as the Court may direct.
…
Section 58 of the Trustee Act provides:
58 Effect of vesting order
…
(3) In the case of land subject to the operation of the Transfer of Land Act 1958 the land shall not vest until the appropriate recordings are made in accordance with the provisions of that Act.
Section 61 of the Trustee Act provides:
61 Vesting orders of charity property
The powers conferred by this Act as to vesting orders may be exercised for vesting any property in any trustee of a charity or society over which the Court would have jurisdiction upon action duly instituted, whether the appointment of the trustee was made by instrument under a power or by the Court under its general or statutory jurisdiction.
Vesting order – Analysis
I accept the plaintiffs’ submission that this Court should make orders vesting the Original Property and the Pindara Property in the Corporate Trustee. The underlying purpose of the Court’s power to make vesting orders is to ensure that the purpose of a trust, for which it was created, can be achieved.[29] The current complex structure of the Trust, including the multiple trustees, is unnecessarily impeding the efficient operation of the Trust activities.[30] I accept the submission that a vesting order of the nature sought would support the streamlining of the Trust’s operations, thereby promoting its efficient and effective administration.[31] It will promote the purpose of the Trust to vest the properties in the Corporate Trustee as part of the simplification of Trust governance. This is sensibly done by replacing the structure of the individual trustees, custodian trustee and Corporate Trustee all having trustee roles, with a single trustee, the Corporate Trustee.
[29]Re Purkiss [1999] 3 VR 223, 228 [16] (Warren J).
[30]Written Submissions for the Plaintiff, [45]-[49].
[31]Written Submissions for the Plaintiff, [50].
The plaintiffs seek the vesting order pursuant to s 51(2)(o), alternatively s 71(4)(n), of the Trustee Act. Section 51(2)(o) refers to the circumstances in which ‘property is vested in a trustee and it appears to the Court to be expedient to make a vesting order’. It is not clear whether this section is intended to apply in circumstances where property is vested in one trustee and the intention is that the vesting order vest the property in a different trustee. However I am satisfied that the intention underlying this category of power to make a vesting order, that it is expedient to make the vesting order in these circumstances, is established. I am also satisfied that s 51(2)(b) would also empower the order. It provides for the Court to make a vesting order where a new trustee has been appointed out of court under any statutory or express power. The Corporate Trustee was appointed on 28 May 2024 by the existing trustees,[32] which is a circumstance within the scope of s 51(2)(b).
[32]Byrne Affidavit, [92]-[95]; the Will provides at clause (r) a power to appoint new trustees.
Section 71(4)(n) empowers the making of directions and orders that the Court considers appropriate if the custodian trusteeship is terminated. I am satisfied that the custodian trusteeship should be terminated by the Court, as discussed further below.[33] The fact that the custodian trusteeship will be terminated is a relevant matter making it appropriate that the property currently registered in its name be vested in the Corporate Trustee which is to be the sole trustee of the Trust. This section therefore also supports the order, with s 51(2)(b) being the primary source of power to make the vesting order.
[33]Written Submissions for the Plaintiff, [52].
Section 52(1) of the Trustee Act provide that where the vesting order is made ‘consequential on the appointment of a new trustee, the property shall be vested in the persons who, on the appointment, are the trustees’. It is consistent with the making of the vesting order following on from the appointment of the Corporate Trustee that the property be vested in the Corporate Trustee. The individual trustees would continue to be trustees at the time of the making of the order and the order does not provide for the property to vest also in the individual trustees. However section 52(2) provides that where the making of a vesting order is ‘consequential on the retirement of one or more of a number of trustees, the property may be vested in the continuing trustees alone.’ It has already been resolved that as part of the restructuring process, the individual trustees will retire when the order is made for the properties to be vested in the Corporate Trustee. In these circumstances I am satisfied that the vesting order is consequential on both the appointment of the new trustee, the Corporate Trustee, and the retirement of the individual trustees which has already been agreed as an integral part of the restructuring process.
In these circumstances I am satisfied that there is power to make the vesting order sought, and it is appropriate to make the order vesting the Original Property and the Pindara Property in the Corporate Trustee.
Termination of custodian trusteeships
Section 71 of the Trustee Act provides:
71 Appointment of certain corporations as custodian trustees
…
(2) For the purposes of this section approved corporation means any body corporate which—
(a) has been formed for the purpose of—
…
(ii)acting as trustee in respect of any trusts for the benefit of any body which has for or included in its principal objects the promotion of art science religion education charity or any other useful object; and
(b) applies its profits (if any) or other income in promoting all or any of such purposes; and
(c) is approved by Order of the Governor in Council published in the Government Gazette as a corporation which may be appointed custodian trustee pursuant to this section.
…
(4) The following apply if State Trustees or an approved corporation is appointed custodian trustee—
…
(m)the custodian trustee, a managing trustee or any beneficiary, may apply to the Court to terminate the custodian trusteeship;
(n) if the Court is satisfied that the custodian trusteeship should be terminated the court may make any orders and give any directions it considers appropriate.
The custodian trustee is an approved corporation under s 71(2) of the Trustee Act, as it:
(a)was formed to act as trustee for the Trust, which has included in its principal objects the promotion of arts and education;
(b) does not receive profits; and
(c) on 16 August 2012, was approved by Order of the Governor in Council published in the Government Gazette as a corporation which may be appointed custodian trustee pursuant to section 71 of the Trustee Act 1958.[34]
[34]Written Submissions for the Plaintiff, [54].
McClelland Custodian Limited was appointed as custodian trustee of the Trust by the trustees in August 2012.[35] The plaintiffs, including the custodian trustee, now seek an order that the custodian trusteeship be terminated under s 74(1)(n) of the Trustee Act. I am satisfied that in circumstances where the Corporate Trustee is trustee of the Trust, and the real and other property of the Trust is vested in it, there will be no utility in having a custodian trustee also appointed to the Trust. I am satisfied that it is appropriate to make the order terminating the custodian trusteeship.
[35]Byrne Affidavit, [62]; Exhibit LB-1, 45 (Deed of Appointment of Custodian Trustee).
Variation of Trust terms by way of a cy-près scheme
The cy-près doctrine is an equitable doctrine which has been given statutory recognition in Australia. The cy-près doctrine general law empowers the Court, where the original purposes of the trust are charitable, and had failed or would fail for impossibility or impracticability, to vary the trust by way of a scheme so that the charitable intention can be effected as nearly as possible to the manner originally intended.[36] The requirement of the purposes having failed for impossibility or impracticality at general law was interpreted strictly.[37]
[36]Melbourne Anglican Trust Corporation v Attorney-General (Vic) [2005] VSC 481, [20]-[21] (Gillard J).
[37]Melbourne Anglican Trust Corporation, [22]-[24] (Gillard J).
Section 2 of the Charities Act provides:
2 Occasions for applying property cy près
(1) Subject to subsection (2), the circumstances in which the original purposes of a charitable gift can be altered to allow the property given or part of it to be applied cy près shall be as follows—
(a) where the original purposes, in whole or in part—
(i) have been as far as may be 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 property available by virtue of the gift; or
(c) where the property available by virtue of the gift and other property applicable for similar purposes can be more effectively used in conjunction, and to that end can suitably, regard being had to the spirit of the gift, be made applicable to common purposes; or
(d) where the original purposes were laid down by reference to an area which then was but has since ceased to be a unit for some other purpose, or by reference to a class of persons or to an area which has for any reason since ceased to be suitable, regard being had to the spirit of the gift, or to be practical in administering the gift; or
(e) where the original purposes, in whole or in part, have, since they were laid down—
(i) been adequately provided for by other means; or
(ii) ceased, as being useless or harmful to the community or for other reasons, to be in law charitable; or
(iii) ceased in any other way to provide a suitable and effective method of using the property available by virtue of the gift, regard being had to the spirit of the gift.
…
Similar legislation exists in other State jurisdictions. The legislation is regarded as beneficial legislation which has the effect of broadening, from the original doctrine, the circumstances in which an amendment could be approved.[38] It is recognised, first, that the concept in s 2(1)(e)(iii) of the original purposes having ceased to provide a ‘suitable and effective method of using the property’ will extend to the circumstances where the original purposes, even if possible, are ‘inexpedient, uneconomic and inefficient’.[39]
[38]Hunter Region SLSA Helicopter Rescue Service Limited v Attorney-General of New South Wales [2013] NSWSC 1749, [37] (White J).
[39]Perpetual Trustee Company Ltd v Attorney-General (NSW) (The Will of the Hon George Nesbitt) (2018) 17 ASTLR 126, 146 [68] (Leeming JA).
In Free Serbian Orthodox Church Diocese for Australia and New Zealand Property Trust v Bishop Irinej Dobrijevic,[40] Justice Payne in the Court of Appeal of the Supreme Court of New South Wales was considering s 9 of the Charitable Trusts Act 1993 (NSW),[41] a section relevantly in similar terms to s 2(e)(iii) of the Victorian legislation. His Honour observed:
Section 9 is engaged by three interacting criteria through which to consider the continuing utility of the original trust purposes:
(1) first, the notion of “wholly or in part”;
(2) secondly, a “suitable and effective method”; and
(3) thirdly, the requirement to have “regard to the spirit of the trust”.
It is textually clear that the requirements of s 9 involve a threshold lower than the general law cy-près requirement of impossibility or impracticality. The test is whether the original purposes of the trust have ceased to provide a suitable and effective method of using the property, in whole or in part, having regard to the “spirit of the trust”. The spirit of the trust is thus a broader conception than the original purposes of the trust. It is clear that the general law requirement for impossibility or impracticability of achievement of the trust purposes is no longer a condition precedent to the making of an order.[42]
[40](2017) NSWLR 340.
[41]Section 9(1) states:
“The circumstances in which the original purposes of a charitable trust can be altered to allow the trust property or any part of it to be applied cy près include circumstances in which the original purposes, wholly or in part, have since they were laid down ceased to provide a suitable and effective method of using the trust property, having regard to the spirit of the trust”.
[42] Free Serbian Orthodox Church, 381-382 [196]-[197]. Justices Ward and Gleeson agreed.
The variations sought in this case relate primarily to the Trustees’ objective of giving effect to the purposes of the Trust on an ongoing basis, having regard to the difficulty of doing so with the existing financial resources of the Trust.
It is submitted that the original purposes of the Trust have, in material ways, ceased to provide a suitable and effective method of using the property available by virtue of the original gift, because the income available to the Trust if operating according to the original purpose of permitting admission to a gallery without charge, no longer provides a suitable and effective method of using the Trust property comprising the Gallery, surrounding parkland, and the artworks in the bequest.
The evidence as to the financial position of the Trust makes clear that the continued successful operation of the Gallery, surrounding sculpture park and the educational and related activities are not sustainable without some changes to the terms of the Trust to remove restrictions on the way the Trust can operate.[43] It is unnecessary to address the financial position of the Trust in any detail, but it is clear that there are pressures on the financial reserves funding the activities of the Trust.[44] The Trustees and the Gallery’s Artistic and Executive Director have taken various steps to improve the financial position of the Gallery, including efforts to raise funds as well as cutting operating expenses, but this is not sufficient to ensure the longer term sustainability of the Gallery and its activities. Recently in June 2024, the Trustees made the difficult decision to sell artworks at auction to improve cash flow and contribute to the cost of operations. Ms Byrne, the Artistic and Executive Director of the Gallery, gave evidence as to why selling artworks was not a sustainable financial solution. First, it is not desirable for the Gallery’s collection to be reduced, and it necessarily does not provide a long term solution. Secondly, it has attracted both disappointment from relatives of the original donors of works, and some reputational damage arising from a critical article in a national newspaper and other critical expressions of opinion about the sale.[45]
[43]Byrne Affidavit, [105]-[144]; Further Supplementary Affidavit of Lisa Maree Byrne affirmed 3 March 2025 (Further Byrne Supplementary Affidavit), [13]-[18].
[44]Further Byrne Supplementary Affidavit, [13]-[18].
[45]Further Byrne Supplementary Affidavit, [20]-[26].
Turning to the ‘spirit of the gift’, this requires an assessment of the basic intention of the gift.[46] It is submitted by the plaintiffs that the ‘spirit of the gift’ by Ms McClelland can be identified from the following bolded words of the Will which created the Trust:
[46]Melbourne Anglican Trust Corporation, [29]-[32]; Free Serbian Orthodox Church, 385 [218]; Varsani v Jesani [1999] Ch 219.
(g)To select such portion of the said 40 acres as would be suitable for establishing a charitable trust for public educational purposes by means of an Art Gallery and Cultural Hall with its drives, approaches, car parks, areas for picnic luncheons, caretaker’s residence and the like and to fence the same off from the remainder of the said 40 acres.
(h)To build an Art Gallery and Cultural Hall on the land so selected to be known as the Harry McClelland Art Gallery and Cultural Hall (hereinafter called ‘the Gallery’) and a caretaker’s residence and establish such drives, approaches, car parks and other areas using for all such purposes not more than 25 per cent of the residuary estate.
(i)To establish, furnish, stock, repair, maintain, supervise, care take the Gallery using for that purpose the income from the remainder of the residuary estate.
…
(o)To draw up Regulations for the conduct of the Gallery including hours of admission and its use generally and to ensure that the public are admitted free of charge and the use of the Luncheon Areas.
…
(s)To execute (if thought necessary or desirable) a trust deed to set up the charitable trusts contained in the Will as a Charitable Trust or to form a charitable association or non-profit making association pursuant to the provisions of the Companies Acts of the State of Victoria or otherwise establish a charitable trust or permanency.[47]
[47]Written Submissions for the Plaintiff, [75].
I broadly agree with the plaintiff that the spirit of the gift conferred by Ms McClelland is encompassed by these emphasised aspects of the terms of her Will. The spirit of the gift was that it be used to establish a charitable trust for public educational purposes to be served primarily by the establishment of a gallery for the display of art, on the Original Property in Langwarrin, which gallery is to be open for the enjoyment of the public without cost.
I would identify one additional element of the spirit of the gift, as it requires in my view an amendment to the proposed cy-près scheme. That is that the gift emphasises the desire of Ms McClelland that the public be able to enjoy the grounds of the parkland in the Original Property. The bequest refers at clauses (g) and (h) of the Will to the use of the relevant part of the land by the public and for that purpose its maintenance with drives, car parks and spaces for picnic luncheons. By clause (o) it is required that there be access not only to the Gallery but also to the ‘Luncheon Areas’ of the land free of charge. The spirit of the bequest reflects not only Ms McClelland’s appreciation of art and desire to establish an art gallery for enjoyment by the public, but also of the qualities of the Original Property which make it suitable for the public to visit, have picnics, and appreciate the natural environment.
I accept that the entirety of the original purposes for the Trust as expressed in the terms of the Will have ceased to provide a suitable and effective method of using the property available by virtue of the gift, within the meaning of s 2(1)(e)(iii) of the Charities Act. In particular, the purpose of providing entry to the Gallery and services to the public without some cost cannot continue to be a suitable method of preserving the land and the Gallery for the benefit of the public and to serve educational purposes.
The elements of the cy-près scheme are essentially to recognise certain specific powers of the new sole corporate trustee to acquire sculptures, paintings and other works of art, and to receive gifts and bequests of cash, sculpture and other artistic works. Perhaps more significant, it also includes a variation to alter that part of the Trust terms in clause (o) which refers to the public being ‘admitted free of charge’, to provide ‘the public are admitted, whether free of charge or for a fee to be determined by the Trustee/s from time to time’. I regard the first set of variations which enhance the trustee’s powers to acquire artworks and to receive gifts, donations and bequests as entirely desirable and consistent both with the original purposes and with the spirit of the gift. The new power to charge the public for admission to the Gallery and surrounding park is also consistent with the gift insofar as it is necessary to ensure the financial sustainability of the Gallery and Trust activities.
The cy-près scheme also contains express powers to dispose of any asset or property of the Trust (insofar as it is necessary or desirable and consistent with the administration of the Trust as a charitable trust for the promotion of the arts and advancement of public education). This is also consistent with the need for the new trustee to have mechanisms to ensure the financial sustainability of the Trust and thus the continuing operation of the Gallery and its associated purposes.
I regard this amendment also as appropriate, subject to a qualification relating to that aspect of the spirit of the gift to which I referred above, namely the preservation of the Original Property on which the Gallery is situated, for the enjoyment of the public. I do not regard it as falling within the scope of a cy-près scheme for this Trust to approve any variation which would empower the trustee to dispose of the Original Property, given its significance to the gift and its basic intention to ensure that it remain available for the public to appreciate, use and enjoy. The proposed power of disposal of assets or property of the Trust is qualified by the requirement that any disposal be consistent with the administration of the Trust as a charitable trust for the promotion of the arts, would not be consistent with the sale of the art gallery building and immediate surrounds which were established, and have operated successfully, for the purpose of the promotion of the arts. However that qualification may not be an adequate restriction to ensure that the Original Property on which the gallery building is located is retained by the Trust and made available to the public. I consider that to make the scheme consistent with the spirit of the Trust, it is appropriate to exclude from the power of disposal any power to dispose of the Original Property.
Finally, the cy-près scheme proposes to provide a name for the Trust established by the Will, being ‘McClelland Arts Trust’. This is entirely appropriate given Ms McClelland’s gift as the origin of the Trust, and her desire, also expressed in her Will, to have the works of her brother, Harry McClelland, kept by the Gallery. It is important and within the spirit of the gift that the Trust’s activities continue to be recognised as being enabled by Ms McLelland for purposes connected with her family and recognition of her brother’s work.
Conclusion
For the above reasons, it was appropriate to approve the cy-près scheme proposed by the plaintiffs, subject to the exception of any power to sell the Original Property. I also proposed minor alterations to the language of certain proposed variations. The proposed amendments were provided by the plaintiffs to the solicitors for the Attorney-General who communicated that the Attorney had no objection to the scheme as altered following the hearing. It was appropriate in the circumstances of this application, made for the benefit of the continuance of the Trust, that the costs of the proceeding be paid from the Trust assets.
I therefore made orders to approve the cy-près scheme, and the related orders, in the following terms:
THE COURT ORDERS THAT:
1. Pursuant to r 45.05(2)(a) of the Supreme Court (General Civil Procedure) Rules 2015, that compliance with rr 5.03(1) and 8.02 of the Rules is dispensed with.
2.Pursuant to r 45.05(2)(b) of the Rules, the plaintiffs are authorised, nunc pro tunc, to commence this proceeding by originating motion in Form 5C.
3. Pursuant to s 51(2)(b), and/or alternatively, s 51(2)(o) of the Trustee Act 1958 (Vic) (Trustee Act), the property described in Certificate of Title Volume 11504 Folio 918 and the property described in Certificate of Title Volume 11240 Folio 543 is vested in the First Plaintiff.
4. Pursuant to s 71(4)(n) of the Trustee Act, the custodian trusteeship of the Second Plaintiff is terminated.
5. Pursuant to section 2 of the Charities Act 1978 (Vic), in circumstances where the original purposes of the charitable trust established by a grant of probate of the Will of Annie May McClelland on 13 April 1962, including the purpose identified in clause (o) of the Will, being:
(o) To draw up Regulations for the conduct of the Gallery including hours of admission and its use generally and to ensure that the public are admitted free of charge and the use of the Luncheon Areas,
have ceased to provide a suitable and effective method of using the property available by virtue of the gift, regard being had to the spirit of the gift, the original purposes of the Trust are varied by way of cy-près scheme, as follows:
a. the words in cl (o) “the public are admitted free of charge” are altered to “the public are admitted, whether free of charge or for a fee to be determined by my Trustee/s from time to time”;
b. a new cl (v) is added with the words “to cause the charitable trusts contained in this Will to be known as ‘McClelland Arts Trust”;
c. a new cl (w) is added with the words “to hire, purchase or otherwise acquire paintings, sculptures and other works of art for display at the Gallery as my Trustee/s shall deem necessary or desirable from time to time”;
d. a new cl (x) is added with the words “to receive donations of cash, sculptures and other artistic works, grants and other bequests to be applied for the purposes of McClelland Arts Trust and its activities as a charitable trust”;
e. a new cl (y) is added with the words “to dispose of any asset or property of McClelland Arts Trust (other than the land known as 390 McClelland Drive, Langwarrin, Victoria, being the land described in Certificate of Title Volume 11504 Folio 918) as my Trustee/s deem necessary or desirable, consistent with the administration of McClelland Arts Trust as a charitable trust for the promotion of arts and advancement of public education in arts”;
f.a new cl (z) is added with the words “to do anything my Trustee/s deem necessary or desirable to administer the McClelland Arts Trust and operate the Gallery, consistent with the administration of McClelland Arts Trust as a charitable trust for the promotion of arts and advancement of public education in arts”.
6.Pursuant to rr 28.05(4) and 28A.06(1) of the Rules, the sections marked ‘[CONFIDENTIAL]’ in the affidavit of Lisa Maree Byrne dated 3 June 2024 and the further supplementary affidavit of Lisa Maree Byrne dated 3 March 2025, and the documents in the confidential exhibit “LB-2” to the affidavit of Lisa Maree Byrne dated 3 June 2024, and in the confidential exhibit “LB-4” to the further supplementary affidavit of Lisa Maree Byrne dated 3 March 2025, remain confidential to the parties and to any future trustee of the Trust, subject to further order of the Court.
7. The plaintiffs’ costs of this proceeding be paid out of the assets of the Trust.
SCHEDULE OF PARTIES
| S ECI 2024 03080 | |
| BETWEEN: | |
| McCLELLAND ARTS LTD as trustee for AM McCLELLAND ESTATE (ACN 674 723 347) | First Plaintiff |
| McCLELLAND CUSTODIAN LIMITED as trustee for | Second Plaintiff |
| McCLELLAND SCULPTURE LIMITED | Third Plaintiff |
| JOHN YOUNG AM as trustee for AM McCLELLAND ESTATE | Fourth Plaintiff |
| MATTHEW HEALY as trustee for AM McCLELLAND ESTATE | Fifth Plaintiff |
| SHIREEN JAHANGHIR as trustee for AM McCLELLAND ESTATE | Sixth Plaintiff |
| IAN DAVIS OAM as trustee for AM McCLELLAND ESTATE | Seventh Plaintiff |
| RORY HYDE as trustee for AM McCLELLAND ESTATE | Eighth Plaintiff |
| GILLIAN KAY as trustee for AM McCLELLAND ESTATE | Ninth Plaintiff |
| MICHAEL-SHAWN FLETCHER as trustee for AM McCLELLAND ESTATE | Tenth Plaintiff |
| - and - | |
| ATTORNEY GENERAL FOR THE STATE OF VICTORIA | Defendant |
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