Re Estate of Michael Charles Murphy - [2005] NSWSC 104

No judgment structure available for this case.

CITATION:
Re Estate of Michael Charles Murphy; Karin Ellis [2005] NSWSC 104

JUDGMENT DATE :

25 February 2005

JURISDICTION:
Equity Division

JUDGMENT OF:
Acting Master Berecry at 1

DECISION:
See summary of advice and paragraphs 48 & 49

CATCHWORDS:
Judicial advice - Rule against accumulations - Rule against perpetutites - Trust, whether charitable - Partial intestacy - Whether failed gifts both corpus and income form part of residue

LEGISLATION CITED:
Trustee Act 1925
Wills Probate and Administration Act 1898
Charitable Trusts Act 1993 (NSW)
Property Law Act 1948 (Vic)
Perpetuities Act 1984

CASES CITED:
Perpetual Trustees v Wright & Ors (1989) 9 NSWLR 18
Congregational Union of NSW v Thistlethayte (1952) 87 CLR 375
Re Denhert [1973] VR 449
Attorney General (NSW) v Perpetual Trustee Company Limited (1940) 63 CLR 209
The Public Trustee v The Attorney General (NSW) (1997) 42 NSWLR 600
Inland Revenue Commissioners v National Anti-Vivisection Society (1946) 1 KB 185
National Anti-Vivsection Society v Inland Revenue Commissioners (1948) AC 31
Re Wedgwood (1915)1 Ch 113
Re Moss [1949] 1 All ER 195
Re Inman [1965] VR 238
RE Shaw (1957) 1 WLR 729
Vancouver Society of Immigrant and Visible Minority Women v Minister of National Revenue (1999) 169 DLR (4th) 34
Re Bushnell (Deceased) (1975) 1 All ER 721
Re Hopkins (Deceased) (1949) 1 All ER346
Yates v University of London (1873) LR 8 Ch 454

PARTIES:
Karin Ellis

FILE NUMBER(S):
SC 06187 of 2003

COUNSEL:
C Hodgson (Plaintiff)

SOLICITORS:
Bolster & Co (Plaintiff)

LOWER COURT JURISDICTION:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

ACTING MASTER BERECRY

17 February 2005

SUMMARY OF ADVICE

(i) Whether the trust created by the will entitles the beneficiaries to their respective proportionate shares of capital or whether it is only a trust for the payment of income:

(ii) Whether the trust is, in whole or part, a trust for payment of income in perpetuity:

(iii) Whether the trust fails, in whole or in part, because it is a trust for payment of income in perpetuity or by reason of the rule against accumulation of income:

(iv) Whether the trust, in whole or in part, constitutes a valid gift for charitable purposes:

(v) Whether the plaintiff is entitled to distribute the proportionate shares of the capital of the rust to any or all of the beneficiaries:

(vi) Whether, in the event that some or all of the trusts fail, the Plaintiff should:

(a) distribute the capital shares of the failed trusts to the father of the ceased; or
(b) should do so only after providing notice to the beneficiaries of the failed trusts pursuant to s 63(8) of the Trustee Act 1925 and subject to those beneficiaries not making application to the Court under s 63(10) of the Trustee Act 1925.

(vii) Whether any party should be joined to these proceedings:

JUDGMENT

1 CORAM: On 10 December 2003 the plaintiff filed a summons seeking judicial advice pursuant to section 63 of the Trustee Act, 1925, in respect of the trust created by the will of the late Michael Charles Murphy (the deceased). The plaintiff is the executrix of the deceased’s estate.

2 The deceased died on 7 October 2002 and probate was granted on 28 August 2003 of his will (28 August 2002) and codicil (3 October 2002). The plaintiff is the deceased’s sister the other executrix, Kerry Morrissey, renounced probate. The deceased married Rosemary Lynne Heritage on 9 December 1995. That marriage ended in divorce. The deceased was not in any relationship at the date of death and had no children. He was survived by the plaintiff and his father Charles Alexander Murphy. His mother predeceased him on 21 August 1998. The deceased left property in New South Wales and Queensland. Apart from the Queensland property the assets of the estate have been realised and are approximately $560,000. The deceased drafted his will. There are a number of problems with the document. However, the application is concerned only with the trust created by the will.

3 The trust was created to continue the work of the deceased. It is to be administered by trustees, one of whom is the executrix, the plaintiff. A trust account and investment fund are to be created. Into the trust account are to be paid cash funds from his accounts, superannuation and profits and royalties. Provision is then made for any of the estate’s debts and running costs out of the trust and its assets.

4 The bulk of accumulated funds were to be used to restore the deceased’s property at Annandale. This property was to be used as an investment property with the rents forming part of the investment fund. The estates real property was to be owned and administered by the trust. Because it was not economically viable the Annandale property was sold. Directions were made concerning how the investment funds were to be invested. There are eight beneficiaries of the trust namely:-

1 The plaintiff,

2 The National Anti-Vivisection Society Limited,

3 World League for the Protection Animals

4 Ernst Zundel

5 David Irving

6 Adelaide Institute

7 Institute of Historical Review and

8 Egypt Exploration Society.

5 The will provides as follows in relation to the funds profits

“Portion of the investment fund profits (100%) is to be distributed as a proportion. Karin Ellis is to receive 40%. The rest of the beneficiaries listed to receive 8.57%.”

6 In respect of Karin Ellis further provision was in the following terms:

“When deceased this portion returns to the trust’s account.”

7 The will identifies the source from which the trust account is to be made up.

8 It is Commonwealth Bank account, Super Funds and Investments..

9 In construing the terms of the will, the structure of which purports to reveal the scheme, the court must first, if it is possible, ascertain what is the basic scheme which the deceased had conceived for dealing with his estate, and then construe the will so as, if possible, to give effect to the scheme: see Perpetual Trustees v Wright & Ors (1989) 9 NSWLR 18 at 32C – 33B per Bryson J.

10 The following paragraphs of the will set out the scheme intended by the deceased.

4.1 Introduction

4.2 During the shortness of time I’ve tried to compose a Will which maintained my intentions. It would have been a simple matter to disperse my worldly goods to those close kin and loved ones, but my perspective has always been the long term, and as such I hope to benefit them by adopting a strategy which invests my capital to generate profits.

4.3 Such a strategy may disappoint some, perhaps expecting a direct legacy or that they are not named. These omissions are not meant to be construed as a personal rebuff, but my strategy choice was made under very difficult circumstances, and ask them for their patience and understanding.

11 From these paragraphs the scheme of the deceased has devised it to enable his projects to be completed and to invest his capital so that from any profits received the beneficiaries will receive long-term benefits.

12 Under the heading “The Trust” he reaffirmed the above in the following manner.

“My wish is create a trust which in essence continues my work even though I am no longer living, with the objective of fulfilling the long-term goals that were always intended to benefit others.”

13 It was the deceased testamentary intention that all income derived from whatever source was to be paid into the fund and the income from the corpus of that fund was to be distributed to the beneficiaries in proportions set out in the will namely the plaintiff to receive 40% of the fund profits the rest of the beneficiaries to receive 8.75%. This does not amount to 100% of the fund profits and their needs to be an adjustment of .01%. This adjustment should form part of the residue of the estate.

14 There is no clause in the will dealing with residue. On intestacy or partial intestacy the father of the deceased takes pursuant (section 61B) the Wills Probate and Administration Act of 1898.

15 The plaintiff seeks an opinion advice and direction in respect to a number of questions put to the court. The first question is as follows:

1 Whether the trust created by the will entitled the beneficiaries to their respective proportionate shares of capital or whether it is only a trust for the payment of income.

16 Whether a gift of the produce of the fund amounts to a gift of the capital is a question of intention of the disposer. It is not a rule of law, rather a rule of construction. The rule is the same whether the gift is to an individual or a charity. The beneficiary is entitled to capital unless there is a clear intention expressed or applied from the will that the beneficiary is not to take more than the income. See Congregational Union of NSW vThistlethwayte (1952) 87 CLR 375 at 438 – 440.

17 Facts that might be taken into consideration are also to be found in Re Inman [1965] VR 238 at 240. A number of other decisions have also considered the question of what factors are relevant for the purposes of determining this matter. Matters that the court might take into account is the character of the institution or body to which the gift is made, whether there is to be taking of account at annual intervals, whether there are directions as to the form of investments, whether there are conditions regarding the seat of income, the payments made out of net income after payments of costs of administering the fund and directions to trustees regarding the manner of investment in certain events.

18 It is well established as a rule of construction that a special gift of income from real or personal property carries with it an absolute interest in the capital of the fund to which the person is entitled to call for Re Denhert [1973] VR 449 at 450 per Starke J. Three of the eight beneficiaries are persons the remaining five are organisations with either a stated purpose or no stated purpose.

19 In determining whether the deceased intended that the capital as well as the income was to be given to the beneficiaries it is necessary to look at the will. By applying the above authorities to the deceased’s will the following matters emerge. Firstly, the significance of the introductory clauses of the will 4.1, 4.2, 4.3 setting out the scheme. Secondly, the provisions regarding the objects and operations of the trust under the headings “The Trust,” in “The Trust Account” and “The Investment Fund” on pages 5 and 6 of the will. Thirdly, the reference to distribution of any portion of the investment fund profits see page 6. Fourthly, reinvestment of the proceeds of sale of the Milne Road property after the death of the father of the deceased (page 9). Fifthly, provisions regarding the trust generating income on the unpublished works and photographs of the deceased and sixthly at no point in the will does the deceased appear to contemplate the termination of the trust.

20 Taking the above matters into consideration I am of the opinion that the trust is only a trust for payment of income.

21 The second matter the plaintiff seeks advice on is:

2 Whether the trust is, in the whole or in part, a trust for the payment of income in perpetuity.

22 In respect of the plaintiff the will provides at page six that she is receive 40% of the fund profits. When she dies this portion returns to the trust account. As it is income she receives, it cannot be returned to the trust. Therefore, the qualifying words “when deceased this portion returned to the trust account”, can only mean that the 40% of the profit hitherto received by the plaintiff will remain with the fund and become part of the corpus. That is there will an accumulation of income which is not payable to any of the other beneficiaries.

23 It should be noted that the will makes no provision for any residue of the estate. Whilst the plaintiff’s gift is for her lifetime the position of Messrs Zundel and Irving is different. The will places no temporal limit on the payment of income to each of them. Coupled with the fact that it was not the deceased’s intention to give corpus to the beneficiaries, the income will be paid to their estate upon their death as such the payment is characterised as one in perpetuity.

24 Similarly payment of income to each of the organisations is a payment in perpetuity. Therefore, except in relation to the plaintiff, the trust is for the payment of income in perpetuity.

25 Next matter requiring answer is as follows:

3 Whether the trust fails, in whole or in part, because it is a trust for payment of income in perpetuity or by reason of the law that relates to the accumulation of income .

In determining this question it is necessary to consider the Perpetuities Act , 1984.

(1) For the purpose of the rule against perpetuities, the perpetuity period the principal to an interest created by settlement shall be eighty years from the date in which the settlement takes effect.

(2) When an appointment of an interest is made under a special power of appointment, the perpetuity period shall be reckoned from the date in which the settlement creating the power takes effect.

(1) Where property is disposed of in such a manner that the income of a property may be or is directed to be accumulated wholly or in part, the power or direction to accumulate that income is valid if the disposition of the accumulated income is, or may be valid, but not otherwise.

Trustees Act

26 There is no provision in the will which either ends the trust or makes provision for any residue of the estate. Therefore, the income which might accumulate after the death of the plaintiff will continue to accumulate without limitation. It follows that it, therefore, breaches the rule against accumulations. The question whether there is a valid power or direction to accumulate the income. There is no provision in the will which deals with the plaintiff’s entitlement once she dies. Thus there is not a valid power for the option to accumulate income and no disposition of the accumulated income. The will is silent on both matters. The result is that by reason of the rule against accumulations of income the trust fails in respect of that part.

27 In respect of Messrs Zundel and Irving the terms of the will impinge the rule against perpetuities – see paragraph 23 above. Therefore, the will fails in respect of the provision for Messrs Zundel and Irving.

28 The next matter raised by the plaintiff is:

29 To constitute a valid gift the trust must fall into one of four categories namely:

1 For the relief of the poor, aged or impotent;

2 Educational purposes;

3 Religious purposes;

4 Other purposes beneficial to the community not falling under any of the other heads.

30 The court may recognise a general charitable intention if the gifts be made for the purposes, of an institution that has as its purposes predominately charitable purposes see Attorney General (NSW) v Perpetual TrusteeCompany Limited (1940) 63 CLR 209 at 222. The Public Trustee v TheAttorney General (NSW) (1997) 42 NSWLR 600 at 602, 615 Santow J considered section 23 of the Charitable Trusts Act 1993. His Honour said that it is necessary that the court be able to sever non- charitable objects for charitable objects in order to apply the section. If after severing the non-charitable and invalid purposes what remains permits an application for charitable purposes is one way of completely satisfying the cash testator’s presumed intention, the trust will be valid.

31 In the present matter there are five organisations who are included as beneficiaries of the trust. In order to determine whether there has been a valid gift for a charitable purpose it is necessary to consider the purpose of each organisation.

National Anti-Vivisection Society

32 In Inland Revenue Commissioners v National Anti-Vivisection Society (1946) 1 KB 185 and in National Anti-Vivisection Society v Inland RevenueCommissioners (1948) AC 31 it was held that the question of public benefit is one of fact which the court must of itself determine and on the facts it was held that the primary purpose of the society was to obtain a change in the law and that this purpose was not charitable.

33 Enclosed with the plaintiff’s statement of facts was material obtained from the National Anti-Vivisection Society’s website. Its objects have not changed since the two cases referred to above. The position therefore, is that, a gift to the Society fails.

34 The deceased directed that the gift to this organisation should go towards cat welfare. In Re Wedgwood (1915) 1 Ch 113 at 122 Swinfen Eady LJ said that a gift for the protection or benefit of animals, irrespective of whether or not they are useful to man, is prima facie, a charitable gift and because

inter alia

35 Material has been provided in the plaintiff’s statement of facts from the Royal League’s website. The material states the League is committed to promoting the well-being and rights of all animals throughout the world both native and non-native. It also indicates that it receives no government subsidies and is staffed primarily by volunteers. However, from this material it is difficult to ascertain whether the predominant purpose of the league is charitable in nature. It may well be that the League also conducts a campaign of a political nature to influence governments in respect of certain aspects of animal rights. In the absence of further material I am not in a position to make a finding in respect of the League. To that end I direct the plaintiff to provide further material in relation to the purposes and operations of the League.

Adelaide Institute

36 The evidence suggests that this organisation does not fall within any of the four categories for a charitable trust. In the words of the founder it is a one-man crusade sponsoring a revisionist view of the holocaust. It does not have any community benefit nor could it be regarded as having as its purpose a bona fide educational purpose.

37 The gift fails because the purpose of the institute is either political or propaganda. In Tudor on trusts, 9th edition, the learned author says at 2.020 …. Whilst ‘educating’ has consistently been given a wide meaning, a gift to increase the sum of knowledge available without provision for propagating it has been said not to be charitable. (Re Shaw (1957) 1 WLR 729). A useful summary of the distinction is made by Iacobucci J in Vancouver Society of Immigrant and Visible Minority Women v Minister of National Revenue (1999) 169 DLR (4th) 34 at 113:

(T)he threshold criterion for an educational activity must be some legitimate targeted attempt at educating others, whether through formal or informal instruction, training, plans of self-study or otherwise. Simply providing an opportunity for people to educate themselves, such as by making available materials with which this might be accomplished but need not be, is not enough.

Re Bushnell

38 Therefore, the gift fails as it is clear that the purposes of the institute are neither educational nor beneficial to the community.

Institute of Historical Review

39 The purpose of the institute is stated as being for the promotion of public awareness of key chapters of 20th century history that has social-political relevance today. This is achieved by publishing material and conducting seminars. However, the material accompanying the plaintiff’s statement the facts revealed that the institute promotes a revisionist view of history in particular of the holocaust and appears to have a fixation towards Jews and Jewish organisations.

40 The purpose of the institute is purely propaganda or a revisionist view of history held by its members. The material published by the institute lacks objectivity for neutrality. In Re Hopkins (Deceased) (1949) 1 All ER 346 at 350, 352 Vasey J noted that

“..…political propaganda masquerading… as education is not education as defined for charitable purposes ….. the testators object was, not education in the proper sense of that word, but the furtherance of his political view and the better equipping of those who make it their business to further them.”

Egypt Exploration Society

41 The purpose of the Society appears to be to explore archaeological sites, provide online database for scholars and provide library facilities to the public and conduct seminars. Society purports to be registered as a charity. However there is no evidence one way or the other concerning its purported registration. The promotion of archaeology has been held to be a charitable purpose: see Yates v University of London (1873) LR 8 Ch 454. Therefore, the trust in respect of the Society is valid.

Conclusion

42 The trust, in part, constitutes a valid gift for charitable purposes. It fails in respect of the following beneficiaries.

1 National Anti-Vivisection Society Limited.

2 The Adelaide Institute.

3 The Institute of Historical Review.

43 The next matter raised by the plaintiff is:

Re Inman

Property Law Act

44 Section 131 of the Property Law Act 1948 (Vic) is in similar terms to section 23 of the Charitable Trusts Act 1993 (NSW). In my opinion the manner in which Gowans J applied the corpus is in all the circumstances the appropriate way in which to deal with the corpus in the deceased’s estate. Namely, that those gifts that fail either because they infringe the rule against accumulations, the rule against perpetuities or were not for charitable purposes then the corpus together with any accumulated income forms part of the deceased’s residual estate. As there is a partial intestacy the relevant provisions of the Wills Probate Administration Act 1898, apply.

45 Subject to the opinion in respect of question 6 the plaintiff is entitled to distribute a proportionate share of the capital of the trust to the beneficiaries whose trust succeeds if they agree.

46 The next matter raised by the plaintiff is:

6 Whether, in the event that some or all of the trust fail, the plaintiff should:
( a) Distribute the capital shares of the failed trust to the father of the deceased; or

(b) Should do so only after providing notice to the beneficiaries of the failed trusts pursuant to section 63(8) of the Trustee Act 1925 and subject to those beneficiaries not making application to the court under section 63(10) of the Trustee Act .

Trustee Act

47 The last matter raised by the plaintiffs:

7 Whether any party should be joined to these proceedings.

In the circumstances it is not necessary to join any other party to these proceedings.

48 In respect of costs of the application the plaintiff’s costs should be paid out of the estate on the indemnity basis.

49 Liberty to the plaintiff to mention the proceedings on 14 days notice.

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Citations

Re Estate of Michael Charles Murphy [2005] NSWSC 104

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CITATION:	Re Estate of Michael Charles Murphy; Karin Ellis [2005] NSWSC 104
JUDGMENT DATE :	25 February 2005
JURISDICTION:	Equity Division
JUDGMENT OF:	Acting Master Berecry at 1
DECISION:	See summary of advice and paragraphs 48 & 49

CATCHWORDS:	Judicial advice - Rule against accumulations - Rule against perpetutites - Trust, whether charitable - Partial intestacy - Whether failed gifts both corpus and income form part of residue
LEGISLATION CITED:	Trustee Act 1925 Wills Probate and Administration Act 1898 Charitable Trusts Act 1993 (NSW) Property Law Act 1948 (Vic) Perpetuities Act 1984
CASES CITED:	Perpetual Trustees v Wright & Ors (1989) 9 NSWLR 18 Congregational Union of NSW v Thistlethayte (1952) 87 CLR 375 Re Denhert [1973] VR 449 Attorney General (NSW) v Perpetual Trustee Company Limited (1940) 63 CLR 209 The Public Trustee v The Attorney General (NSW) (1997) 42 NSWLR 600 Inland Revenue Commissioners v National Anti-Vivisection Society (1946) 1 KB 185 National Anti-Vivsection Society v Inland Revenue Commissioners (1948) AC 31 Re Wedgwood (1915)1 Ch 113 Re Moss [1949] 1 All ER 195 Re Inman [1965] VR 238 RE Shaw (1957) 1 WLR 729 Vancouver Society of Immigrant and Visible Minority Women v Minister of National Revenue (1999) 169 DLR (4th) 34 Re Bushnell (Deceased) (1975) 1 All ER 721 Re Hopkins (Deceased) (1949) 1 All ER346 Yates v University of London (1873) LR 8 Ch 454
PARTIES:	Karin Ellis
FILE NUMBER(S):	SC 06187 of 2003
COUNSEL:	C Hodgson (Plaintiff)
SOLICITORS:	Bolster & Co (Plaintiff)