Re Field
[2023] VSC 210
•21 April 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2020 02610
| Gail Younie and others (according to the schedule attached, as executors of the estate of Lilian Dorothy Field, deceased) | Plaintiffs |
| v | |
| Peter Harcourt Disability Services Limited (ACN 120 046 095) | Defendant |
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JUDGE: | Moore J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 21 April 2023 |
CASE MAY BE CITED AS: | Re Field |
MEDIUM NEUTRAL CITATION: | [2023] VSC 210 |
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JUDICIAL ADVICE – Will construction – Where gift made to an entity formerly a registered charity – Where entity had become insolvent – Whether gift lapsed – Whether defendant ceased to exist at the time of the deceased’s death – Whether gift to defendant simpliciter or for the advancement of its charitable purposes – Defendant still in existence – Gift made to defendant simpliciter - Section 36 of the Wills Act 1997 – National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31; Sydney HomeopathicHospital v Turner (1959) 102 CLR 188; In re Stemson’s Will Trusts [1970] Ch 16; Re Coghlan; Merriman v Attorney-General (No 2) [2020] VSC 688; Greenham v Greenham [2020] VSC 749.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | C McOmish | Rogers & Every |
| For the Defendant | B Slocum | Beck Legal |
HIS HONOUR:
Introduction
In this proceeding, the plaintiffs, who are the executors and trustees of the deceased estate of Lilian Dorothy Field, seek judicial advice in the administration of her estate. The three plaintiffs are the step-niece, niece and sister of the deceased respectively.
The deceased died on 15 January 2018. She was pre-deceased by her husband and by her daughter, Robyn, who did not have any children.
The deceased left a simple two-page will dated 6 June 2013 (the will). A grant of probate of the will was made to the plaintiffs on 8 May 2018. The inventory of assets and liabilities filed with the application for probate recorded that the deceased’s estate had assets of $256,957.24.
Pursuant to her will, the deceased gifted half of the residue of her estate to ‘Radius Disability Services’ (Radius). From when it was established in 1953 - at which time it was known as ‘Peter Harcourt Disability Services’ - Radius provided education facilities and activities for children with physical and/or intellectual disabilities in the Bendigo area, being the area where the deceased and her family lived. Over the years, Radius expanded its services to provide for adults with disabilities, including by providing supported employment services, day care, and some adult education and training. The deceased’s daughter, Robyn, who was intellectually disabled, attended Radius for about 40 - 45 years, including working in a ‘sheltered workshop’, and later participating in day care services which Radius provided.
The deceased’s gift to Radius is effected by clause 3 of the will, the construction of which is the central controversy in this proceeding. Clause 3 of the will provides as follows:
To divide the residue of [the deceased’s] estate into two equal undivided half parts or shares and to hold such parts upon the following trusts: -
3.1 to pay or transfer one such part to Radius Disability Services of Bendigo or its successor for its general purposes; and
3.2 to pay or transfer the other one such part to the Royal Children’s Hospital, Flemington Road, Parkville for its general purposes.
Radius is a registered business name of the defendant. The defendant entered voluntary administration on 17 October 2016, and went into liquidation on 22 November 2016.[1] Although it ceased all trading operations and activity in late 2016, the defendant remains registered and does not have a successor.
[1]Craig Crosbie and Rodney Slattery were appointed voluntary administrators and then liquidators of the defendant. Mr Slattery resigned as liquidator on 16 July 2018.
By an amended originating motion filed 30 November 2020, the plaintiffs seek answers to the following questions:
Is the gift in Clause 3.1 of the Will to be distributed to:
(a) [the defendant]:
(i) Has [the defendant] ceased to exist so that the gift in Clause 3.1 fails?
(ii) if [the defendant] still exists, does the payment of creditors come within the purpose for which the gift in Clause 3.1 was intended?
(iii) what is to happen to any surplus funds not required to satisfy creditors?
(b) Golden City:[2]
[2]Golden City Support Services Incorporated is an organisation located in the Bendigo area which provides support services to people with disabilities, people recovering from mental illness, and to people with dementia and other age-related conditions.
(i) did the deceased have a general charitable intention so that the gift in Clause 3.1 can be applied cy-près; or
(c) the Deceased’s next of kin on an intestacy?
The Defendant’s circumstances
Until 7 June 2006, the services provided by Radius were undertaken through an incorporated association. Thereafter the services were undertaken by the defendant, a company limited by guarantee.
The defendant was registered as a charity with the Australian Charities and Not-for-profits Commission, but this registration was subsequently voluntarily revoked in or around the period when the defendant entered voluntary administration.
After the appointment of administrators, the assets of the defendant were sold and a total of $1,543,498 was paid to secured creditors and priority creditors. The value of the balance of the defendant’s unsecured creditors is estimated to be $641,884. The liquidator, Mr Crosbie, holds approximately $305,000 for the purposes of paying unsecured creditors. Apart from any potential entitlement that the defendant may have to the deceased’s estate, he does not anticipate that there are any other assets that may be used to pay the defendant’s creditors. If the defendant receives any funds from the deceased’s estate, Mr Crosbie intends to distribute those funds to the unsecured creditors on a pari passu basis.
Consideration
In addressing the questions raised in the plaintiffs’ amended originating motion, a preliminary issue which arises is whether the defendant had ceased to exist at the time of the deceased’s death, such that the gift under clause 3.1 of the will fails.
The plaintiffs submitted that, because the defendant had ceased all trading and charitable activities at the time of the deceased’s death, it cannot be said to have been in existence at the time of her death. This submission must be rejected. Although the defendant ceased operations in late 2016 when it entered administration, it has not been wound up and it continues to hold funds for the payment of its creditors. This is not a situation where, for example, the defendant has been dissolved with its operations being carried on via a different structure. The defendant is an entity which is capable of termination, and this has not occurred.[3] Accordingly, the defendant still exists for the purpose of receiving the gift made to it under clause 3.1 of the will.
[3]In re Stemson’s Will Trusts [1970] Ch 16, 26 (Plowman J).
It is next convenient to ascertain the nature of the gift in clause 3.1 of the will and to determine whether it is a gift to Radius simpliciter, or a gift for the advancement of Radius’ charitable purposes. If the gift is for the advancement of Radius’ charitable purposes, then the cessation of Radius’ charitable activities leads to the inevitable conclusion that the gift has failed. If, on the other hand, the gift is to be construed as a gift to Radius simpliciter, then the gift will not have failed as Radius still exists.
The plaintiffs submitted that the deceased intended for her gift to be applied for the benefit of the defendant’s work. In support of this submission, the plaintiffs argued that the deceased’s gift to the defendant was made for charitable purposes because the defendant’s work was of public benefit. The plaintiffs relied on McMillan J’s judgment in Re Coghlan; Merriman v Attorney-General (No 2) where her Honour noted that: [4]
Although a gift to a named charitable institution simpliciter may be construed as a gift outright to the relevant named entity, such a gift will usually be treated as a gift for the advancement of the charitable work or purpose of that institution.
[4][2020] VSC 688, [24] (‘Coghlan’).
The plaintiffs also relies on the evidence of the first plaintiff that:
(a) the deceased had a long association and familiarity over many years with the Peter Harcourt Centre;
(b) the deceased had often been involved in fundraising activities for the Peter Harcourt Centre;
(c) the staff at Radius had been supportive of the deceased and Robyn over many years;
(d) by previous wills[5] the deceased had made gifts to the Peter Harcourt Centre; and
(e) the deceased told her on a number of occasions that she had left her estate to the Peter Harcourt Centre and the Royal Children’s Hospital because she was grateful for the care that they had given Robyn over the years.
[5]Made on 10 June 1998 and 6 April 2001.
The plaintiffs also relied upon the terms of clause 3.1 of the will which provides that the gift referred to therein is made to the defendant ‘or its successor’. This was said to indicate that the deceased intended that the gift was made for the charitable purposes of the defendant, and not to the defendant simpliciter.
I summarised relevant aspects of the principles to be applied in construing a will in Greenham v Greenham:[6]
[6][2020] VSC 749, [13] – [23], citations omitted.
The ‘fundamental rule’ in construing a will ‘is to put on the words used the meaning which, having regard to the terms of the will, the testator intended. The question is not, of course, what the testator meant to do when he made his will, but what the written words he uses mean in the particular case – which are the “expressed intentions” of the testator’. The task is to ‘find the deceased’s intention as expressed in her words in the will’; ‘not what she meant to say, but what she actually said’.
…
A will is not, however, to be construed in a vacuum. In Perrin v Morgan, Lord Romer referred to the:
… cardinal rule of construction that a will should be so construed as to give effect to the intention of the testator, such intention being gathered from the language of the will read in the light of the circumstances in which the will was made. To understand the language employed by the court is entitled, to use a familiar expression, to sit in the testator’s armchair. When seated there, however, the court is not entitled to make a fresh will for the testator merely because it strongly suspects that the testator did not mean what he has plainly said.
By placing itself in the ‘testator’s armchair’ in order to determine the testator’s intention, the Court is able to ‘consider the circumstances by which [the testator] was surrounded when he made his will’. The surrounding circumstances may include evidence of the testator’s family, property, friends and acquaintances.
Consideration of this type of extrinsic evidence is not limited to or conditional upon the existence of ambiguity in the terms of a will. Under the armchair rule, evidence of the factual matrix in which a testator made their will ‘is always admissible to explain what the testator has written, and to show the meaning of his words, and this evidence is totally distinct from evidence sought to be applied to prove the testator’s intention as an independent fact‘. As the High Court stated in King v Perpetual Trustees Company Ltd, ’it is from the words of the will that the intention of the testator must be ascertained, aided only by such facts as existed and were known to the testator at the date of the will which it is permissible to take into account in interpreting that language.’ This reflects the fact that ‘the meaning of words varies according to the circumstances of and concerning which they are used’.
This is consistent with the contemporary approach to the interpretation of contracts. In Marley v Rawlings, Neuberger LJ succinctly formulated that approach in the following terms:
When interpreting a contract, the court is concerned to find the intention of the party or parties, and it does this by identifying the meaning of the relevant words, (a) in the light of (i) the natural and ordinary meaning of those words, (ii) the overall purpose of the document, (iii) any other provisions of the document, (iv) the facts known or assumed by the parties at the time that the document was executed, and (v) common sense, but (b) ignoring subjective evidence of any party’s intentions.
Lord Neuberger continued:
When it comes to interpreting wills, it seems to me that the approach should be the same. Whether the document in question is a commercial contract or a will, the aim is to identify the intention of the party or parties to the document by interpreting the words used in their documentary, factual and commercial context.
Evidence which bears upon the factual context in which a will is made is therefore relevant to the task of construction. Lord Neuberger’s observations in Marley v Rawlings have been applied on numerous occasions by Australian courts in relation to the construction of wills.
In addition to the position at common law, s 36 of the Wills Act 1997 (the Wills Act) also addresses the admissibility of evidence in proceedings to construe a will. Section 36 states:
36 When is evidence admissible to clarify a will?
(1) In any proceedings to construe a will, if the language used in a will renders the will or any part of the will –
(a) meaningless; or
(b) uncertain or ambiguous on the face of the will; or
(c)uncertain or ambiguous in the light of surrounding circumstances –
evidence may be admitted to assist in the interpretation of that language.
(2) Evidence which may be admitted under subsection (1)(c) does not include evidence of the testator’s intention.
(3) Nothing in this section prevents the admission of evidence which would otherwise be admissible at law in any proceedings to construe a will.
As recently stated by Hallen J in Serwin v Dolso, language used in a will:
… is ambiguous if it can reasonably be interpreted in more than one way, or the words used can reasonably be given more than one meaning. The ambiguity may be apparent on the face of the will itself or when construed in the light of the surrounding circumstances.
Although cast in wide terms, two limits on the operation of s 36 of the Wills Act should be noted. First, assuming one or other of the conditions in sub-s (1) are engaged, it is not licence to admit any evidence; evidence may be admitted ‘to assist in the interpretation’ of the language used in will. Evidence which does not bear upon the proper construction of the testator’s language used in a will should not be admitted. Secondly, the operation of sub-s (2) is not to be overlooked; where uncertainty or ambiguity arises in the light of the surrounding circumstances, evidence of the testator’s intention may not be admitted
Applying these principles, the issue is whether the words used to make the gift in clause 3.1 of the will – ‘to pay or transfer one such part to Radius Disability Services of Bendigo or its successor for its general purposes’ – manifest an intention by the deceased for the gift to be for the advancement of Radius’ charitable purposes, or for it to be a gift to Radius simpliciter.
I do not accept the defendant’s submissions that, because the words used in clause 3.1 are not themselves ambiguous or uncertain, it is not necessary for the Court to take into account any extrinsic evidence. As explained above, under the armchair rule, evidence of the factual matrix in which a testator made their will is always admissible in determining the proper meaning of the words used by the testator. In this case, the deceased’s long association and involvement with the Peter Harcourt Centre over many years, including in fundraising activities, as well as the support provided to her and Robyn over many years, form part of the surrounding circumstances in which the will was made. I will, however, disregard the evidence referred to in paragraph 15(e) above as it is inadmissible evidence of the deceased’s intentions. Further, the fact that the deceased had made gifts to the Peter Harcourt Centre in previous wills is of little assistance in resolving the present issue of construction.
However, evidence of the surrounding circumstances in which the will was made is only relevant in elucidating the meaning of the words used by the deceased in clause 3.1 of the will. Neither party suggested that any provision of the deceased’s will other than clause 3 assisted in the task of determining the purpose of the gift in clause 3.1. The difficulty for the plaintiffs is that there is no apparent ambiguity in the language of clause 3.1 the meaning of which might be clarified by these surrounding circumstances.
The most significant feature of the text of clause 3.1 of the will are the words ‘for its general purposes’. These words, together with the absence of any reference to Radius’ charitable purposes, suggest that the deceased expressly stated the purpose of her gift in terms which effectively foreclose a characterisation of it as being for the advancement of Radius’ charitable purposes. The reference to the gift being made to the defendant ‘or its successor’ is, I consider, a neutral factor.
This conclusion is confirmed by the absence of sufficient evidence to support a finding that the defendant is a charitable trust with charitable purposes. If the defendant is a charitable trust, a gift for its ‘general purposes’ would not preclude it being properly characterised as a gift for its charitable purposes. A gift to a charitable institution will usually be treated as a gift for the advancement of the charitable work or purpose of that institution, although it may be construed as a gift outright to the relevant entity; all will depend on the proper construction of the gift.[7] As Kitto J stated in Sydney HomeopathicHospital v Turner:[8]
Not, of course, that a trust arises in every case of a gift to a body established for limited objects. The nature of the objects may have provided the donor with the motive for his gift, and yet the gift may be a beneficial gift entitling the body to apply the property as it sees fit within the scope of its powers as they exist from time to time.
[7]Coghlan (n 4), [24].
[8](1959) 102 CLR 188, 221.
The principles applicable to charitable trusts were summarised by McMillan J in Coghlan as follows:[9]
[9]Coghlan (n 4) [19]-[22].
Charitable trusts exist to benefit a particular purpose or purposes, rather than a specific person or entity. In contrast to private trusts or private testamentary gifts, to be validly constituted a charitable trust is not dependent upon having named beneficiaries, provided that there is a clear indication of a general intention of charity. The law ordinarily affords a flexible approach or attitude to the certainty of objects in the instance of charitable trusts, provided that certainty of intention and certainty of subject matter are satisfied. Further, a charitable trust may overcome defects that would otherwise be fatal to a non-charitable gift through, for example, nomination of a successor entity or settlement of an administrative or cy-près scheme.
Two requisite elements must be met to establish a charitable trust:
(a) it must identify some charitable object; and
(b) it must serve some public as opposed to private benefit.
In his well-accepted dicta in Commissioners for Special Purposes of Income Tax v Pemsel, Lord Macnaghten identified four broad heads of charity under which a recognisable charitable object may fall, namely:
(a) trusts for the relief of poverty;
(b) trusts for the advancement of education;
(c) trusts for the advancement of religion; and
(d) trusts for other purposes beneficial to the community, not falling under any of the preceding heads.
Lord Macnaghten’s identified heads of charity are broadly in concert with the list of deemed charitable purposes identified in the preamble to the Statute of Elizabeth, which include, inter alia, ‘relief of the aged, impotent, and poor’.
Although the defendant was once registered as a charity, such registration is not determinative of its status as a charity. If a trust is not for the relief of poverty, advancement of education or religion, then the public benefit must be affirmatively proved.[10] As explained by Lord Wright in National Anti-Vivisection Society, ‘the test of benefit to the community goes through the whole of Lord Macnaghten's classification, though as regards the first three heads, it may be prima facie assumed unless the contrary appears.’[11]
[10]John Dyson Heydon and Mark James Leeming, Jacobs Law of Trusts in Australia (LexisNexis Butterworths, 8th ed, 2016) 129 [10-10]; National Anti-Vivisection Society v Inland Revenue Commissioners [1948] AC 31, 42 and 65 (‘National Anti-Vivisection Society’); Nelan v Downes (1917) 23 CLR 546, 559.
[11]National Anti-Vivisection Society (n 10), 42.
Although it may be accepted that some of Radius’ activities and operations which the defendant carried on related to the provision of education for persons with disabilities, being one of the recognised categories of charitable objects, the evidence makes clear that its activities were not solely, or limited to, the recognised purposes of charitable trusts. Its operations extended to providing supported employment of persons with disabilities, and the running of businesses for the benefit of these persons to enable meaningful supported employment. The charitable purpose of these activities cannot be assumed and has not been affirmatively proven. There is no evidence about how the defendant selected the participants of the employment support programs and related activities which it operated, and whether this would result in its services being of a ‘public’ nature such as to warrant the defendant being recognised as a charitable trust.
The Court will accordingly order that the gift in clause 3.1 of the will be paid to the defendant simpliciter. As I have found that the gift was made to the defendant simpliciter, and not for its charitable purposes, the gift has not lapsed. It is therefore unnecessary to consider the other questions raised by the plaintiffs.
Costs
The plaintiffs brought this proceeding in their capacity as executors and trustees of the estate, in relation to a question arising in the course of the administration of the deceased’s estate. The defendant was a necessary party to act as contradictor for the purposes of the proceeding. In the circumstances, the costs of the parties should be paid out of the estate on an indemnity basis.
The parties are to submit proposed orders giving effect to these reasons for judgment within 14 days.
SCHEDULE OF PARTIES
GAIL YOUNIE First Plaintiff
MARGARET ELEANOR BAUER Second Plaintiff
LAUREL IRENE KELLY Third Plaintiff
(as executors of the estate of Lilian Dorothy Field, deceased)
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PETER HARCOURT DISABILITY SERVICES LIMITED Defendant
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