Re McHenry; Thompson v Attorney General
[2020] VSC 211
•24 April 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2019 03442
IN THE MATTER of the will and estate of ROBERT WILLIAM McHENRY, deceased
-and-
IN THE MATTER of s 2(1) of the Charities Act 1978
-and-
IN THE MATTER of an application pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015
| GRAEME PHILIP LANGFORD THOMPSON (in his capacity as executor of the will of the abovenamed deceased) | Plaintiff |
| v | |
| THE ATTORNEY GENERAL FOR THE STATE OF VICTORIA | Defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 24 April 2020 |
CASE MAY BE CITED AS: | Re McHenry; Thompson v Attorney General |
MEDIUM NEUTRAL CITATION: | [2020] VSC 211 |
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EQUITY AND TRUSTS — Charitable trusts — Gift to charitable entity — Whether gift was for charitable purposes — Whether charitable entity ceased to exist — Lapse of charitable gifts — Whether there exists a successor institution to named charitable institution — Whether gift to be applied cy près — Re Tyrie, dec’d (No 1) [1972] VR 168; Re Coulson [2014] VSC 353.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S McNab | Saxbys Lawyers |
| For the Defendant | No appearance | Victorian Government Solicitor |
HER HONOUR:
Introduction
William Robert McHenry died on 7 December 2015. Probate of the deceased’s last will and testament dated 23 December 2009 was granted to the plaintiff on 11 July 2017. The deceased had no spouse or children, he is survived only by his sister, Ms Elizabeth Buxton.
Paragraph 3(g) of the deceased’s will left the net residue of his estate to be held upon trust on the following terms:
[A]s to the balance of my Estate subject to the payment thereout of my debts my funeral and testamentary expenses and all probate duties and commissions to then divide the same into two parts or shares and to give GRAEME PHILIP LANGFORD THOMPSON barrister at law of Owen Dixon Chambers, 205 William Street, Melbourne in the State of Victoria the first part being 10% of the value of my Estate and the second part being 90% of the then value of my estate to the VICTORIAN ORGAN DONATION SERVICE.
The total value of the estate is approximately $944,310 as at 20 April 2020. After payment of specific legacies and liabilities of the estate, the value of the residue is approximately $850,000.
Prior to the execution of the will, the functions of the Victorian Organ Donation Service (‘VODS’) were subsumed by the Commonwealth Government Organ and Tissue Authority (the ‘authority’). At that time, VODS was renamed ‘DonateLife Victoria’.
The plaintiff’s application
The plaintiff, in his capacity as executor of the deceased’s estate, seeks declarations pursuant to rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 that the gift to VODS created a charitable trust and that the original purpose of that trust can no longer be carried out. The plaintiff seeks orders pursuant to ss 2(1)(a)(ii) or 2(1)(e)(iii) of the Charities Act 1979 that the gift be applied cy près.
The plaintiff also seeks an order approving the compromise of a proceeding that was filed by the plaintiff against Ms Buxton and FW McHenry & Co Pty Ltd, as reflected in terms of settlement dated 27 August 2018.
The plaintiff’s application is supported by his own affidavit, sworn on 4 April 2019, the affidavit of Mr Michael Furey sworn on 17 April 2019, and two affidavits of Ms Sahra Connor sworn on 30 July 2019 and 14 August 2019.
The Victorian Organ Donation Service
VODS was established in or about 2000 by the Victorian Department of Human Services. On 12 May 2000, the department accepted a tender from the Australian Red Cross Blood Service to establish and operate the ‘Victorian Organ Donation Coordination Service’, and provided funding to do so.
The deceased had a liver transplant in or around 1999. The plaintiff deposed that the deceased conveyed to him in several conversations that he was grateful to have had the option to have a liver transplant, and wished to ‘give back’ to the organisations that supported him throughout that process. In particular, the deceased wished to contribute to community education as to the importance of becoming an organ donor.
On 1 January 2009, the Australian Organ and Tissue Donation and Transplantation Authority Act 2008 (the ‘Act’) took effect. The Act gave effect to the National Reform Package on Organ and Tissue Donation for Transplantation, which established Commonwealth funding to increase the capacity and functioning of existing State based organ donation services. Section 8 of the Act established the authority.
The authority leads and administers the ‘DonateLife Network’, a national program which collaborates with State and Territory agencies, their medical directors, government departments and hospital based specialists. During the transition, VODS was renamed ‘DonateLife Victoria’, in order to maintain internal consistency within the scheme administered by the authority. The day-to-day operation of DonateLife Victoria remains contracted to the Australian Red Cross Blood Service, as part of the DonateLife Network.
In a letter to the plaintiff’s solicitors dated 23 October 2018, a representative of the Victorian Department of Health and Human Services stated with regard to the relationship between VODS and DonateLife Victoria:
I am able to advise you that the Victorian Organ Donation Service was renamed as DonateLife Victoria in 2009. The Victorian Department of Health and Human Services (the department) contracts the Australian Red Cross Blood Service to provide the statewide service and has done so since 2000.
The functions of the authority and of DonateLife Victoria, being the functions of its CEO, are prescribed as follows in s 11(1) of the Act:
(a)to formulate, in writing, policies and protocols relating to organ or tissue donation and transplantation matters; and
(b)to declare, in writing, standards and codes of practice relating to organ or tissue donation and transplantation matters; and
(c) to support and encourage the implementation of:
(i) policies and protocols formulated under paragraph (a); and
(ii)standards and codes of practice declared under paragraph (b); and
(d)to collect, analyse, interpret and disseminate information relating to organ or tissue donation and transplantation matters; and
(e)to support, encourage, conduct and evaluate training programs that are directed towards improving the skills and knowledge of people involved in organ or tissue donation and transplantation services; and
(f)to support, encourage, conduct and evaluate educational, promotional and community awareness programs that are relevant to organ or tissue donation and transplantation matters; and
(g)to make, on behalf of the Commonwealth, grants of financial assistance in relation to organ or tissue donation and transplantation matters; and
(h)to support, encourage, conduct and evaluate research about organ or tissue donation and transplantation matters; and
(i)to publish (whether on the Internet or otherwise) reports and papers relating to organ or tissue donation and transplantation matters; and
(j)to advise the Minister about organ or tissue donation and transplantation matters; and
(k)to consult and co‑operate with other persons, organisations and governments on organ or tissue donation and transplantation matters; and
(l)such other functions as are conferred on the CEO by this Act or any other law; and
(m)such other functions (if any) as are specified in a written instrument given by the Minister to the CEO; and
(n)to do anything incidental to or conducive to the performance of any of the above functions.
The plaintiff’s submissions
The plaintiff submitted that the gift to VODS, pursuant to paragraph 3(g) of the will, was a gift for a charitable purpose. It was said that the purposes of VODS and of DonateLife Victoria are not directed to commercial profits and fall within the categories of charitable purposes identified in Commissioners for Special Purposes of Income Tax v Pemsel (‘Pemsel’s Case’).[1]
[1][1891] AC 531, 583 (‘Pemsel’s Case’) (Lord Macnaghten).
It was further submitted that, but for the exceptions to the lapse rule as discussed in Re Tyrie, dec’d (No 1) (‘Re Tyrie’),[2] the gift would have lapsed in January 2009. The plaintiff submitted that the gift was saved under either the first or second of the three exceptions identified by Newton J in Re Tyrie — namely, that at the time of the deceased’s death DonateLife Victoria was a successor institution to VODS, or that the gift was capable of being construed as a gift to the accretion of the funds of VODS.
[2][1972] VR 168 (‘Re Tyrie’).
The defendant filed an appearance in the proceeding, but did not file any submissions.
Applicable principles
Gifts for charitable purposes
Charitable trusts exist to benefit a particular purpose or purposes.[3] In contrast to private trusts, to be validly constituted a charitable trust does not depend on certainty of object, provided that there is a clear indication of a general purpose of charity.
[3]Stratton v Simpson (1970) 125 CLR 138, 144 (Windeyer J).
To create a charitable trust, a gift must identify some charitable object, as well as serve some public as opposed to private benefit. Recourse is often had to the preamble to the Statute of Elizabeth, which contains a list of deemed charitable purposes. Those deemed purposes include ‘relief of the aged, impotent, and poor’.[4] Courts also look to the four heads of charity identified by Lord Macnaghten in Pemsel’s Case:
[4]Statute of Charitable Uses 1601 43 Eliz I, c 4.
(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.[5]
[5]Pemsel’s Case (n 1), 583.
It is well accepted that gifts directed towards the enhancement and efficiency of medical services provided by hospitals, or to improving the recovery prospects of patients, may be gifts for charitable purposes within both of those definitions.[6]
[6]See generally, Re Dubberke; Marshall v Attorney-General (Vic) [2019] VSC 86, [10] (McMillan J); Australian Executor Trustees Ltd v A-G (SA) (2010) 7 ASTLR 83; Royal College of Surgeons of England v National Provincial Bank Ltd [1952] AC 631,654–5 (Lord Morton of Henryton; Re White’s Will Trusts; Tindall v Board of Governors of the United Sheffield Hospitals [1951] 1 All ER 528, 530 (Harman J); Re Deans Will Trusts; Cowan v Board of Governors of St Mary’s Hospital, Paddington [1950] 1 All ER 882, 883 (Harman J).
A gift may alternatively be construed as a gift outright to the relevant named entity, rather than a gift for the purposes of that entity. In the former circumstance, the gift will not be considered to be a gift for charitable purpose but rather a gift to the entity itself. If the entity were to cease to exist the gift would lapse and, there being no specific gift over provision the deceased’s will in this case, the proportionate share of the residue would pass to the other residuary beneficiary.[7] Nevertheless, a gift to a charitable institution simpliciter will usually be treated as a gift for the advancement of the charitable work or purpose of that institution.[8]
Lapse of charitable gifts
[7]Wills Act 1997 (Vic) s 46(3).
[8]Re Tyrie (n 2) 177 (Newton J), citing Hardey v Tory (1923) 32 CLR 592; Smith v West Australian Trustees Executors and Agency Co Ltd (1950) 81 CLR 320; Re Godfree [1952] VLR 353; Re Inman [1965] VR 238; Sydney Homeopathic Hospital v Turner (1959) 102 CLR 188,220–2 (Kitto J); and Stratton v Simpson (1970) 44 ALJR 487, 488 (Windeyer J), 495–6 (Gibbs J).
Where a testamentary gift is made to a particular named recipient which has ceased to exist at the date of the testator’s death, prima facie that gift will have lapsed. The principle applies whether the charity ceased to exist before or after the date of the will.[9] However, the position differs in circumstances where that gift was made for charitable purpose. In those circumstances, the gift may be saved under one of three exceptions to the lapse rule discussed in Re Tyrie. In that case, Newton J listed those exceptions as follows:
(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 …
(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 …
(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-pres scheme. This is simply one aspect of the cy-pres principle … But although the existence of this third exception is well recognized … I have myself found no reported case where it has been applied in the case of a gift to a named charitable institution simpliciter … where the gift was expressly directed to be applied by the named institution for a special purpose…[10]
[9]See In Re Lucas; Sheard v Mellor [1948] 1 Ch 424, 427 (Lord Greene, MR); GE Dal Pont, Law of Charity (LexisNexis Butterworths, 2nd ed, 2017), 360–61 [15.4].
[10]Re Tyrie (n 2) 177–8 (citations omitted).
It may alternatively be the case that the gift has not lapsed at all. That is, the gift still remains capable of fulfilment under the original terms of the will because the charitable institution has not ceased to exist. Changes to the method or machinery through which a charitable institution’s purposes are achieved will not be fatal to the gift, provided that the purposes for which it was made continue to be carried out. In Re Coulson, the Court observed:
Incorporation in a particular jurisdiction or in a particular manner is merely the machinery by which the charity operates. If the charity organisation continues its work through a new body corporate, it may not have ceased to exist. This will depend on the objects and purposes, and arrangements upon dissolution, of the two organisations. This principle recognises that a charitable organisation may have conducted its charitable work continuously, yet made changes to its legal form depending on the vicissitudes of government regulatory policy or the benefits of incorporation in different jurisdictions. In such situations the charity organisation has not truly ceased to exist.[11]
[11][2014] VSC 353, [43] (McMillan J).
Consideration
The gift of 90 per cent of the deceased’s residuary estate to VODS, pursuant to paragraph 3(g) of the will, is properly construed as a gift for charitable purposes. The objects of both VODS and DonateLife Victoria are charitable in nature, namely the provision of support to improve the efficiency of medical and recovery services to organ transplant patients, as well as the provision of educational services to the community at large. Those purposes also carry a public benefit. Although the gift does not specify a purpose to which the funds are to be applied, it is proper for the Court to assume that the deceased intended that the gift would be one for the charitable purposes of VODS, rather than to VODS itself. Although not strictly necessary to form that conclusion, the plaintiff’s evidence of the deceased’s testamentary intention supports the Court’s finding that the bequest is properly construed as a gift for VODS’ charitable purposes.
The commencement of the Act in January 2009 reflected an increasing Commonwealth presence in the funding and provision of organ donation services in Australia. Although the establishment of the authority and the DonateLife Network added an additional layer of regulation, the Act did not materially change the manner in which organ donation services were provided in Victoria. The letter to the plaintiff’s solicitor dated 23 October 2018 confirmed that although VODS had changed its name to DonateLife Victoria, day-to-day operation and provision of services remained with the Red Cross Blood Service. The charitable objects of VODS and DonateLife Victoria remained identical. The entity has undertaken the same charitable work continuously, albeit under an altered policy and funding framework. In those circumstances, the Court does not consider that VODS ceased to exist, or that the gift has lapsed. The entity named in paragraph 3(g) of the will remains in existence in the form of DonateLife Victoria and fulfils the same charitable purposes to which the deceased intended to contribute.
If the gift to VODS did lapse upon the commencement of the Act in January 2009, it ought nonetheless be applied cy près in favour of DonateLife Victoria as successor to VODS under the first exception described by Newton J in Re Tyrie.
In assessing whether or not an institution is a successor institution, the Court will compare its objects and activities with those of the named institution, by reference to the testator’s purpose in making the bequest.[12] In this case, the Court is satisfied that there is complete identity between VODS and DonateLife Victoria. As observed, the charitable objects and services of both entities are identical. Furthermore, those objects are still carried out by the same means, being administered by the Red Cross Blood Service. In the circumstances, the gift is properly administered to DonateLife Victoria as the successor institution to VODS.
[12]Dal Pont, Law of Charity (n 9), 362 [15.7], citing Re Goodson (deceased) [1971] VR 801, 810 (Adam J); Cram Foundation v Corbett-Jones [206] NSWSC 495, [28] (Brereton J); Overall v Family Voice Australia Inc [2014] NSWSC 736, [47]–[49] (Darke J); Re Public Trustee [2014] SASC 46, [24] (Stanley J); and Re Meyers [1951] 1 Ch 534. 539–42 (Harman J).
In light of the Court’s finding that the gift is properly construed as a gift for the charitable purposes of VODS, it is not necessary for the Court to consider whether the gift was an accretion to its assets pursuant to the second Re Tyrie exception.
Approval of compromise
Paragraph 5 of the plaintiff’s originating motion seeks further relief in the form of an order approving the compromise of proceedings between himself, Ms Buxton, and FW McHenry & Co Pty Ltd. That compromise is contained in terms of settlement dated 27 August 2018. The settlement agreement is conditional upon the approval of all of the residuary beneficiaries under the will, or from the Court.
In light of the Court’s finding that VODS has not ceased to exist, it remains possible for the plaintiff to seek its approval by approaching DonateLife Victoria. It is therefore unnecessary for the Court to consider the approval of the terms of settlement dated 27 August 2018.
Orders
The parties are to forward to the Court proposed orders implementing these reasons and addressing the issue of costs.
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