Re Estate of Pitt

IN THE ESTATE OF LOUIE BEATRICE PITT (DECEASED);
ASTON v MOUNT GAMBIER PRESBYTERIAN CHARGE INCORPORATED & ORS
[2002] SASC 332
Civil

DUGGAN J. An executor under the will of Louie Beatrice Pitt (the testatrix) has applied pursuant to SCR r 63 for the determination of certain questions arising on the administration of the estate of the testatrix.
The testatrix died on 25 June 1999 and probate of her will was granted on 3 December 1999. She left an estate valued at approximately $377,608.00.
In her will dated 22 April 1991 the testatrix bequeathed a sum of $5000 to the Moorak Hall. She then directed in clause 3 of the will that the residuary estate be held upon trust –
“(a)   as to sixteen thirty-ninths thereof for the PRINCE ALFRED COLLEGE FOUNDATION of Kent Town Norwood in the said State; and
(b)     as to sixteen thirty-ninths thereof for SCOT’S PRESBYTERIAN CHURCH BUILDING FUND of Mount Gambier East aforesaid; and
(c)     as to one thirty-ninth thereof for THE MOORAK UNION CHURCH INCORPORATED; and
(d)     at to one thirty-ninth thereof for THE MOUNT GAMBIER BRANCH of THE ANIMAL WELFARE LEAGUE ; and
(e)     as to one thirty-ninth thereof for my niece GEORGETTE CALLOW of Manjimup in the State of Western Australia; and
(f)     as to one thirty-ninth thereof for MARY EILEEN ANDERSON of Attamurra Road Mount Gambier aforesaid Married Woman; and
(g)     as to one thirty-ninth thereof for VICKI IRIS O’DONNELL of Casterton in the State of Victoria Married Woman ; and
(h)     as to one thirty-ninth thereof for IRIS PESKETT of Casterton aforesaid Married Woman; and
(i)     as to one thirty-ninth thereof for DALE ELIZABETH BARRETT of 2 Pressey Street Mount Gambier aforesaid.”
Clause 4 of the will is in the following terms:
“I DIRECT that on the failure of the trusts of any of the abovementioned shares in the residue of my estate the share or shares whereof the trusts so fail shall be added to the other shares in the residue of my estate in equal shares and be subject to the same trusts as apply to such original shares.”
The present application has been brought because of a difficulty associated with the gift to the “Scot’s Presbyterian Church Building Fund of Mount Gambier”. There has never been an entity or fund of that name in existence. However, it is the contention of the Mount Gambier Presbyterian Charge Incorporated (the Charge), that the testatrix intended that her bequest would go to the Presbyterian church in Mount Gambier and be used for building purposes. If this construction is not open, the Charge contends that a dominant charitable intention is to be inferred from all the circumstances and that the gift does not lapse because there is a successor institution. The further alternative urged by the Charge is that the circumstances permit the operation of the cy-prés doctrine at general law or the application of the trust variation powers contained in s 69B of the Trustee Act, 1936 (the Act).
The Attorney-General for South Australia has been joined as a defendant. Prince Alfred College Foundation Incorporated (Prince Alfred College) has been appointed to represent all the residuary beneficiaries in the will with the exception of the plaintiff. Prince Alfred College contends that the gift has failed and that this share should be distributed to the residuary beneficiaries in accordance with clause 4 of the will. The Attorney-General and the plaintiff have adopted a neutral stance, although counsel for each has made submissions on various aspects of the matter.
It is necessary to summarise the background circumstances which emerge from the affidavits tendered by the plaintiff.
At the time of making her will in April 1991 the testatrix lived at Moorak in the south-east of South Australia. She regularly attended Scot’s Presbyterian Church in Mount Gambier and was associated with the Presbyterian Church throughout her life.
In 1997 the Methodist, Congregational and some Presbyterian denominations formed the Uniting Church. However, five Presbyterian churches in the south-east region of South Australia and the western districts of Victoria did not join the Uniting Church. They banded together and became known as “The Mount Gambier Presbyterian Charge”. The finance and property of these churches is controlled by a committee of the Charge known as the Federal Board of Management (the Board). The members of the Board are elected from the congregations of the five churches. All church buildings within the Charge are maintained by the Board.
The five churches presently within the Charge are located at Mount Gambier, Allendale, Glenburnie, O.B. Flat and Nelson. At the time the Charge was formed church services in Mount Gambier were conducted at premises in Pick Avenue, Mount Gambier known as Scot’s Presbyterian Church.
On 30 November 1983 the Board invested a $10,000 donation in a savings investment account entitled “Mount Gambier Presbyterian New Church Building Fund” which was opened at the Commonwealth Bank, Mount Gambier. The congregations of the five churches were then informed that a building fund had been established and that it was open for further donations. This account was in existence at the time the testatrix made her will. At this stage, it was intended to build a new church for the congregation on the Pick Avenue site.
In 1990 the Charge received a bequest which led it to purchase land at Penola Road, Mount Gambier. The purpose of this purchase was to construct the new church on this site instead of the Pick Avenue site. Settlement on the property took place in May 1992.
On 13 April 1994 the Board resolved to use the funds deposited in the Mount Gambier Presbyterian New Church Building Fund to assist in financing the building of the new church at Penola Road. The construction of this church commenced on 1 August 1995 and was completed in March 1996.
The last service at Scot’s Presbyterian Church was conducted on 24 March 1996 and the first service at the Penola Road church, now known as Mount Gambier Presbyterian Church, was conducted on 31 March 1996. The two churches did not operate together at any stage. The moveable furniture and effects from Scot’s Presbyterian Church were transported to the Mount Gambier Presbyterian Church. The premises in Pitt Avenue were sold in late 1997. The proceeds which were left over from the sale were put in a term deposit to be used for the maintenance of the property on Penola Road.
I return to the events of 1983. According to the affidavit of Patricia Hamilton, the treasurer of the Charge, a donation of $10,000 was received by the Federal Board of Management and placed in an account entitled “Mount Gambier Presbyterian New Church Building Fund” on 30 November 1983. According to Ms Hamilton –
“After the ‘Mount Gambier Presbyterian New Church Building Fund’ was set up, the congregation was advised by newsletters and through the various churches that a building fund had been established and was opened for further donations.”
A donation of this order was quite substantial in 1983. If the church membership rolls for 1996 and 1997 are any guide to membership in 1983, the congregation was quite small and it is to be expected that the institution of the building fund was an important and well known fact amongst the congregation.
Ms Hamilton said that when the Charge was formed, it was intended to build on the premises at Pitt Avenue. She said the structures on these premises were built originally as a Sunday school and hall, but the church services were conducted on the site. She said in her affidavit it was intended that a church be built there when finance could be raised.
The obvious intention of the testatrix was to provide a significant bequest to the building fund which the parishioners had been told was for the purpose of building a new church. It is of no significance that the description of the fund in the will did not follow the precise wording of the title of the bank account which had been opened in 1983. There is no suggestion that there was any building fund associated with the church other than that which had been established for the purpose of constructing the new church. Nor is it of any relevance that the fund was not a legal entity. The existing church was known then as Scot’s Presbyterian Church. Obviously, it was for this reason that the description “Scot’s Presbyterian Church Building Fund” was used in the will. However, there can be little doubt that, despite the description used in the will, the testatrix intended that the bequest was to go to the existing fund for the construction of the new church for the congregation of which she was a member.
However, by the time the testatrix died in June 1999, the new church had already been constructed and had been in use for over three years. It had been paid for and the building fund bank account had been closed. The money left over from the sale of the Pick Avenue property was placed in a term deposit with the intention that it be used for maintenance purposes for the various church properties under the control of the Charge, but that deposit cannot be regarded as a building fund for the new Mount Gambier Presbyterian Church.
If the testatrix had died shortly after the making of her will, it would have been appropriate for the gift to be directed into the Mount Gambier Presbyterian New Church Building Fund. Despite the misdescription, the content of the will and the circumstances of the case reveal the testatrix’s intention to make a gift to the fund which then existed for the building of the new church (see the discussion in Williams on Wills (7th ed) 584).
However, when the testatrix died approximately eight years later, neither the bank account nor the building fund was in existence. It follows, in my view, that the gift to Scot’s Presbyterian Church Building Fund must lapse and be distributed to the other residuary beneficiaries in accordance with clause 4 of the will unless the circumstances come within one of the recognised exceptions under the general law or the court approves a trust variation scheme pursuant to s 69B of the Act.
The exceptions under the general law relevant to this case apply to gifts for charitable purposes. It is not disputed that a bequest for the construction of a church is such a gift (In Re Findlay’s Estate (1995) 5 Tas SR 333 at 335; Tudor on Charities (7th ed) pp 62-63).
In Re Tyrie Deceased(No 1) [1972] VR 168 Newton J identified the following three exceptions to what he called “the lapse rule” at 177:
“(A) If at the testator’s death there is in existence another institution which has taken over the work previously carried on by the named institution and which can properly be regarded as the successor of the named institution, and if the dominant charitable intention of the testator was wide enough to allow the gift to take effect in favour of that successor institution, then the gift will take effect in favour of the successor institution: see, for example, Re Watt, [1932] 2 Ch. 243; Sobels v Attorney-General, [1942] SASR 251; Tudor, op cit. pp. 261, 262 and 266, 267, and Halsbury, 3rd ed., vol. 4, p. 280, where it is stated that ‘there is no lapse where an institution which has ceased to exist was named merely as the channel for carrying out a charitable intention, or for carrying on a particular charitable work which is still being carried on although by different persons or a different institution’.
For convenience I shall hereafter refer to this exception as exception (A).
(B) If upon the true interpretation of the will the testator intended that the gift should operate simply as an accretion to the assets of the named institution so as to become subject to whatever charitable trusts were from time to time applicable to those assets, and if after the named institution itself ceased to exist its assets remained subject to charitable trusts which were still on foot at the testator’s death, then the gift will be treated as taking effect as an accretion to any property which was at his death subject to those trusts: see, for example, Re Withall, [1932] 2 Ch 236; Re Lucas, [1948] Ch. 424; [1948] 2 All E.R. 22; Re Hutchinson’s Will Trusts, [1953] Ch. 387; [1953] 1 All E.R. 996; Re Roberts, [1963] 1 W.L.R. 406; [1963] 1 All E.R. 674, and Halsbury, 3rd ed., vol. 4, p. 280; cf. Re Slatter’s Will Trusts, [1964] Ch. 512; [1964] 2 All E.R. 469, and Re Ogilvy, [1953] 1 D.L.R. 44. For convenience I shall hereafter refer to this exception as exception (B).
(C) If in cases not falling within exceptions (A) or (B), the testator is nevertheless found upon the proper interpretation of the will to have had a dominant intention to benefit work or purposes of the kind which the named institution carried out, notwithstanding that the named institution itself might no longer exist at his death, and if it is practicable as at the death of the testator to apply the gift for the benefit of work or purposes of that kind, and in a way which is in all respects consistent with any other elements of the dominant intention of the testator (or to put it in another way, consistent with any indispensable or essential elements of his charitable intention), then the gift will be so applied by means of a cy-près scheme. This is simply one aspect of the cy-près principle: see, for example, Attorney-General v Perpetual Trustee Co. (the Milly Milly Case) (1940), 63 C.L.R. 209, especially at p. 225; [1940] A.L.R. 209; Beggs v Kirkpatrick, [1961] V.R. 764; Re Mulcahy, [1969] V.R. 545, especially at p. 552; Re Daniels, [1970] V.R. 72, especially at p. 78; Re Lysaght, [1966] Ch. 191, especially at pp. 201-3; [1965] 2 All E.R. 888, and Tudor, op cit., pp. 240-2. (The cy-près principle has another and different application in relation to charitable gifts which become impracticable subsequent to the date when they initially took effect: see, for example, Re Slevin, [1891] 2 Ch. 236; [1891-4] All E.R. Rep. 200, Re Wright, [1954] Ch. 347; [1954] 1 All E.R. 864; Re Tacon, [1958] Ch. 447; [1958] 1 All E.R. 163; Attorney-General v Bray (1964), 111 C.L.R. 402; [1964] A.L.R. 955, and Tudor op. cit., pp. 273 and 283.) But although the existence of this third exception is well recognized (see Tudor, op. cit., p. 259, and Halsbury, 3rd ed., vol. 4, pp 279, 280), I have myself found no reported case where it has been applied in the case of a gift to a named charitable institution simpliciter: cf. Marsh v Attorney-General (1860), 2 J. & H. 61; 70 E.R. 971, where the gift was expressly directed to be applied by the named institution for a special purpose.”
Mr White QC, for the Charge, conceded that exception (B) was irrelevant. However, he relied on exceptions (A) and (C).
In my view, the present case does not fall within exception (A). If a gift is made to a particular fund which is no longer in existence at the time of the testator’s death, but has been replaced by another fund with the same objects as the previous fund, then the gift may be directed to the new fund (Sobels v Attorney-General for South Australia [1942] SASR 251). The same principle applies when there is a gift to a particular institution such as a hospital and, at the time of the administration of the estate, the institution has been replaced by another institution carrying on the same work as the previous institution (In Re Withall [1932] 2 Ch 236; In Re Rowell [1982] 31 SASR 361 at 373).
In the present case, however, the gift was made to a particular fund which no longer existed at the time of the death of the testatrix and for which there had been no replacement. It is true that one church has replaced another, but I do not think I can ignore the fact that a particular fund was chosen by the testatrix; the gift was not to be paid direct to an institution.
This leaves exception (C) and gives rise to the question as to whether the cy-près doctrine can be applied. Many of the cases concerned with this doctrine are difficult to reconcile (see the comments in Executor Trustee and Agency Company of South Australia Limited v Warbey & Others (1973) 6 SASR 336 at 345; Re Tyrie at 177).
The core of the doctrine is set out in the passage which I have quoted from Re Tyrie’s case. Further assistance is derived from the case of Attorney-General for New South Wales v Perpetual Trustee Co (Ltd) (1940) 63 CLR 209 at 225 in the following passage from the judgment of Dixon and Evatt JJ at 225:
“If there are insuperable objections, either of fact or of law, to a literal execution of a charitable trust it at once becomes a question whether the desires or directions of the author of the trust, with which it is found impracticable to comply, are essential to his purpose. If a wider purpose forms his substantial object and the directions or desires which cannot be fulfilled are but a means chosen by him for the attainment of that object, the court will execute the trust by decreeing some other application of the trust property to the furtherance of the substantial purpose, some application which departs from the original plan in particulars held not essential and, otherwise, keeps as near thereto as may be. The question is often stated to be whether the trust instrument discloses a general intention of charity or a particular intention only. But, in its application to cases where some particular direction or directions have proved impracticable, the doctrine requires no more than a purpose wider than the execution of a specific plan involving the particular direction that has failed. In other words ‘general intention of charity’ means only an intention which, while not going beyond the bounds of the legal conception of charity, is more general than a bare intention that the impracticable direction be carried into execution as an indispensable part of the trust declared.”
In the case of In Re Rowell Wells J said (31 SASR at 372):
“… the cardinal inquiry is whether every element in the description of the trust is indispensable to the validity and operation of the disposition, or whether a further and more general purpose is disclosed as the true and substantial object of the trust, which may therefore be carried into effect at the expense of some part of the particular directions given by the trust instrument.”
I return then to the facts of the present case. At the time of the making of the will, the testatrix was clearly aware that it was the intention of the congregation who attended her church and those charged with its administration that a new church would be built to replace the present church building. I have pointed out that a building fund for the purpose had been established approximately eight years before she made her will. At the time she made the will it was intended that the new church would be built on the site of the existing church building, but that changed in 1992 when the Penola Road land was purchased.
A gift may fail because of the failure of the purpose of the gift or because of the non-existence of the institution to which the property is given (Tudor on Charities (7th ed.) 217). In either event, the property can be applied cy-près if, in the case of a charitable gift, a general charitable intention exists.
In most cases when there is failure of the institution, the gift will be a gift direct to that institution and the question will be whether a general charitable intention exists so that the property can be applied cy-près by, for example, directing that it be given to another institution which is engaged in activity compatible with the general charitable intention which is found to exist.
In the present case, the testatrix made a bequest to a fund which was not a legal entity. The fund was little more than a conduit through which the monies were to be applied for the building purposes for which the fund existed at the time of the making of the will. Nevertheless, the non-existence of the fund at the time of the death of the testatrix could result in a failure of the gift in the absence of intervention by the court.

The other issue is whether there has been a failure of the purpose of the gift. It is arguable that, on a proper construction of the will, the purpose has not failed. I think it is too narrow a view to take to say that the property in the building fund could not be used for extensions, renovations or maintenance of the church once the main building had been erected. Simply because a church is ready for worship does not mean that the purpose of the building fund comes to an end. If, for example, certain outbuildings were required to service the church, it could hardly be said that they were outside the permitted uses of the building fund. But, whether or not the original purpose has failed, the fact that the fund is no longer in existence and there is no successor fund, requires the intervention of the court if the gift is to be saved from lapse.
If the power to intervene is to be derived from the general law, then a general charitable intention is required. In this respect it is my view that the intention of the testatrix went beyond a desire to contribute by means of the original fund and that fund alone. I think she had a general charitable intention that her gift would be used for the purposes of constructing a new church. The site of the new church was irrelevant for the purposes of the gift. The concern of the testatrix was for a new church for the congregation of which she was a member. I do not think this intention was necessarily limited to the central building in which worship was to take place or to the precise fixtures which were in place at the time when the new church was first opened for worship.
Mr Krupka, for Prince Alfred College, placed considerable reliance on clause 4 of the will, arguing that it evinced an intention to exclude the operation of the cy-près doctrine or the application of s 69B of the Act because it makes specific provision for the contingency that one or other of the trusts might fail. I am unable to agree with this proposition. A gift which is saved from lapse by reason of the general law or pursuant to the Act does not fail. The testatrix in the present case has done no more than provide for the manner in which funds being the subject of failed trusts are to be distributed.
The case of In re Weir Hospital [1910] 2 Ch D 124 relied upon by Mr Krupka does not assist his argument. The case is authority for the fundamental proposition that if a charity can be administered according to the directions of the founder or testator, the law requires that it be so administered (per Kennedy LJ at 141). It is obvious in the present case that the trust cannot be administered in the manner directed by the testatrix. The fact that there is a specific clause in the will containing directions in the event of a failure of any of the trusts does not alter the fact that this particular trust cannot be administered in the precise manner directed by the testatrix. Once this is apparent, it is relevant to consider whether the trust can be varied so as to prevent the gift from lapsing. If this can be achieved in accordance with the relevant principles, then there is no requirement to follow the directions in clause 4 of the will.
In my view, a cy-près scheme is one of the alternatives open to the court in the circumstances of this case. This is based on the assumption that the gift could be utilised for purposes of the type to which I have referred, namely, the construction of buildings associated with the new church or other extensions or maintenance. Of course a final decision could not be made until a scheme had been brought into court for consideration and approval.
I leave this possible solution to one side for the moment in order to consider the further alternative argument based on s 69B of the Trustee Act 1936. This 1980 amendment provides as follows:
“69B. (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.
(3)     A trust variation scheme may be approved, on the application of the trustee, by –
(a)     the Supreme Court; or
(b)if the value of the trust property does not exceed $250 000 or another limit prescribed by regulation –the Attorney-General.
[The authority to which the application is made (ie. the Supreme Court or the Attorney-General) is referred to in this section as ‘the relevant authority’.]
(4)    However, the Attorney-General has a discretion to refer an application to the Supreme Court if the application raises questions that should, in the Attorney-General’s opinion, be decided by the Court.
(5)    Notice of an application for approval of a trust variation scheme must be given as the relevant authority directs.
(6)    If the relevant authority is satisfied, on application under this section, that the variation of the terms of a trust proposed in 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.
(7)    The reasonable costs of an application under this section are payable at the direction of the relevant authority from the trust property.
(8)    In the case of an application decided by the Attorney-General, the costs –
(a)     are to be fixed by the Attorney-General; and
(b)may include costs payable to the Crown to defray the cost of investigating and deciding the application; and
(c)     may be recovered as a debt.
(9)    The Attorney-General must keep available for public inspection a register of approvals given by the Attorney-General under this section.”
Australian jurisdictions followed the lead of the United Kingdom parliament which enacted the Charities Act 1960 pursuant to the recommendations of the Nathan Committee which reported in 1952 (Dal Pont, Charity Law in Australia and New Zealand 56). Under the English legislation the court is empowered to alter the original purposes of a charitable trust in certain defined circumstances by means of a cy-près scheme. The legislation replaces the power which existed previously under the general law (Oldham Borough Council v Attorney-General [1993] Ch D 210 at 218). However, the wording of the South Australian legislation does not appear to exclude the operation of the cy-près doctrine; it provides a further solution to the same or similar problems.
Furthermore, the South Australian legislation does not require a general charitable intention before a variation scheme can be ordered by the court, although such an intention is required by similar legislation in other jurisdictions (Charities Act (UK) 1960 s 13; Trusts Act 1973 (Qld) s 105(2); Charities Act 1978 (Vic) s 2(2). Nevertheless, the South Australian legislation does require that the variation of the terms of the trust accords, as far as reasonably practicable, with the spirit of the trust (s 69B(6)(a)).
Mr Krupka argued that s 69B does not apply to trusts which fail ab initio. I reject Mr Krupka’s submission. The test of impossibility is applied as at the date of the testatrix’s death (Dal Pont at 292). It is clear from the wording of the section that the circumstances in which the statutory power can be exercised are wide enough to include gifts which would otherwise fail at the outset (s 69B(1)(a)).
I have reached the conclusion that this is a case in which it is appropriate for the court to consider approving a trust variation scheme pursuant to s 69B of the Act. The gift under consideration gives rise to a charitable trust. The original purposes of the trust cannot be carried out in accordance with directions given in the will, but there is scope to vary the conditions attaching to the gift so as to enable it to be applied in accordance with purposes closely allied to the wishes of the testatrix. I have reached the provisional conclusion that a variation of the trust would be appropriate if the further requirements specified in s 69B(6) were satisfied, namely, that the proposed variation accords, as far as reasonably practicable, with the spirit of the trust and that it is justified in the circumstances of the case.
In the result, therefore, I am of the view that the terms of the gift in the will could be varied by either a cy-près scheme under the general law or a trust variation under the Act. As the conditions precedent for employing the cy-près doctrine are more demanding than the requirements under the Act, particularly in relation to a general charitable intention, it would seem wise to employ the statutory power.
After publishing these reasons I will provide the opportunity for a proposed trust variation scheme pursuant to s 69B of the Act to be brought into court for consideration.

[2002] SASC 332

9 October 2002