Rechtman v Attorney-General for the State of Victoria
[2005] VSC 507
•22 December 2005
IN THE SUPREME COURT OF VICTORIA
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
PRACTICE COURT
No. 8488 of 2005
| KATHERINE RECHTMAN (AS EXECUTRIX OF THE WILL AND TRUSTEE OF THE ESTATE OF ANNE MARIE HERZENBERG) |
| Plaintiff |
| v. |
| ATTORNEY-GENERAL FOR THE STATE OF VICTORIA |
| Defendant |
---
JUDGES: | MAXWELL, P. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 28 November 2005 | |
DATE OF JUDGMENT: | 22 December 2005 | |
CASE MAY BE CITED AS: | Rechtman v Attorney-General for the State of Victoria | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 507 | |
---
WILLS AND PROBATE – Application for an order that the gift created in the testatrix’s will be applied cy-pres – Valid charitable trust – General charitable intent – Advancement of education a charitable purpose – Original purpose impracticable and not a suitable and effective way of using the trust property – Cy-pres scheme approved.
---
| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J.V. Kaufman QC | Mr D. Rechtman |
| For the Defendant | Mr A Mazzone (sol.) | Victorian Government Solicitor |
MAXWELL, P.:
By originating motion filed 27 September 2005, the plaintiff (who is the executrix of the estate of Anne Marie Herzenberg) sought directions as to the administration of the residuary estate of the deceased. In essence, the plaintiff sought an order that the gift created in the testatrix’s will be applied cy-pres.
On 28 November, I made the orders sought. What follows are my reasons for doing so.
The proceeding names the Attorney-General as defendant, in his role as the protector of charities. He appeared by counsel, who informed the Court that the Attorney neither consented to, nor opposed, the application. For reasons which will become apparent, the proceedings were served upon the University of Melbourne. The University indicated that it did not intend to be represented at the hearing of the application.
The testatrix, Mrs Anne Marie Herzenberg, died on 13 April 2004, leaving a will dated 24 May 1995 and a codicil dated 10 December 2003. Probate of the will was granted to the plaintiff on 10 August 2004.
The will provided that Mrs Herzenberg’s estate was to go to her husband, Erwin Herzenberg, provided that he survived her. As he predeceased her, her estate was to be held by the plaintiff as her executrix. Certain bequests were made and the residue of the estate was to be held on trust to sell, call in and convert on the trusts set out in clause 6(a) alternatively 6(b) of her will.
Sub-clause 6(a) provided that the net residue was to be paid to the University of Melbourne on the express condition that the University passed a statute or regulation creating the “Walter Mangold Trust Fund” substantially in accordance with the provisions set out in the draft rules set out in annexure A to the will.
Sub-clause 6(b) provided that, in the eventuality that the University declined to pass the statute or regulation, the net residue was to be held upon trust as a fund known as the “Walter Mangold Trust Fund”, in accordance with objects as set out in Annexure ‘A’ to the will. The objects that fund include various educational objects, such as providing funds for visiting scholars, summer school programs and a variety of objects aimed at the teaching of languages as a “means of lessening conflict in the world”.
In the event, Melbourne University declined to pass the required statute or regulation. It follows, so the plaintiff submits, that the trust under clause 6(a) has failed. With respect to clause 6(b), the plaintiff submits that the terms of the trust fund set out in the Annexure are impracticable. This raises the question of whether Clause 6(b) has failed due to impracticability and whether the testator has demonstrated a general charitable intent, such that the Court ought to direct that the residuary estate be applied cy-pres to a charitable trust to which effect can be given.
The amount of the trust fund is not entirely clear. The executrix has called in the assets of the estate and holds $1,910,000 together with an entitlement to approximately $906,000 from an inter vivos trust known as the Erwann trust. There is a possible entitlement (the details of which are unknown) from a Lichtenstein-based trust of approximately 4m Swiss francs. The net amount is expected to be not less than $2,650,000. The trustees of that trust have not provided any information as to the terms on which that fund is payable.
It is clear that the trust under clause 6(a) has failed, since the University of Melbourne has declined to create the proposed trust. The real question is whether the alternative “Walter Mangold Trust Fund” has failed due to impracticability, and therefore whether a cy-pres order should be made.
In Annexure ‘A’ to the will, the terms of the proposed trust are set out. It is proposed that a committee of up to eight people be established, to include academics, representatives of the University of Melbourne, a lawyer, the President of the Victorian branch of the Australian Institute of International Affairs and people experienced in the teaching of language. That committee would administer the income of the fund.
Clause 10 of the Annexure sets out what are described as “The Objects of the Fund”. It sets out seven “objects” of the fund (in clauses 10.1 to 10.7) under various headings. These were summarised by the plaintiff as follows:
“Scholarships to young Australians to study overseas; grants/scholarships to members of the Victorian branch of the Australian Institute of International Affairs; Scholarships for overseas students to study English and culture in Australia; appointment of a visiting scholar or fellow to the University of Melbourne; vacation school in a foreign language; encouragement of inter-disciplinary studies in the study of language; support of published work which furthers the aims of the trust. “
The common law permits a charitable gift to be applied cy-pres where it is a valid charitable trust, provided that the testator has expressed a general charitable intention and it is impossible or impracticable to carry out the trust in accordance with its terms. The gift will be applied cy-pres in a manner as close as possible to the testator’s intentions. Otherwise, the gift will fail as on intestacy. Relevantly, s.2(1)(e)(iii) of the Charities Act 1978 (Vic) provides that a cy-pres order may be made, where the original purposes have ceased to provide a “suitable and effective” way of using the trust property.
The gifts contained in cll.6(a) and (b) of the will are clearly gifts for charitable purposes. The “advancement of education” is a charitable purpose.[1] I was satisfied that the testatrix had a charitable intention.
[1]Income Tax Special Commissioner v Pemsel [1891] AC 531.
In the present case, the gift is for a general charitable purpose rather than to a specific charitable entity. This is a case where the testatrix intended that the gift be applied to a charitable purpose, and the mode or recipient selected in the will was merely a conduit for that purpose.[2]
[2]Attorney-General (NSW) v Perpetual Trustee Co Ltd (1940) 63 CLR 209 at 227.
The plaintiff set out in her affidavit dated 27 September 2005 the reasons why the trust fund proposed under clause 6(b) was “impracticable” and “unable to be given effect in accordance with the spirit of the gift.”, as the means has ceased to be “suitable” or “practical”.[3] Those reasons included that:
[3]Crowther v Brophy [1992] 2 VR 97.
(a)The annexure provides that the income of the fund must be allocated in a certain limited way. It states that certain percentages of the income must be allocated to each of the objects. Those income amounts are inflexible, and too small to practically provide for each of the objects.
(b)As expressed by the University, the proposed trust would be costly to administer. The resources required would be reasonably substantial, especially given the wide range of powers vested in the committee, to consult with various people, select scholarship applicants and so on, as contemplated by the deed.
(c)The administrative detail was so onerous that the University felt, and the trustee agrees, that it would require a full-time employee to be allocated to it, and the amount of income left over after payment of that person, and expenses, would be inadequate to meet any, let alone all, of the seven “objects” of the trust.
(d)Even without a full-time staff member, it is impracticable to carry out all seven objects of the trust in each year, given the likely amount of the annual income available to the Trust. The amount of income available renders the amounts available for some of the tasks so small as to be pointless, unless the Trustee has a discretion as to the application of the income as between objects and from year to year.
(e)It makes no provision for the payment of expenses of the Fund itself, the committee or any other administration costs.
(f)It is impracticable and unwieldy to have a committee of eight people commissioned to administer the Fund. It may be difficult to find appropriately qualified people who are prepared to be part of such a committee, especially where no provision is made to pay their expenses.
(g)The terms of the trust are burdensome. The committee would be required to advertise for scholarships, accept and review nominations, select candidates, receive reports and generally administer the scholarships, and in doing so consult with relevant people, attend meetings, liaise with Ormond College, liaise with people to attend from overseas, conduct vacation school courses and receive submissions from publishers. These functions are in addition to the care and responsibility entailed in exercising their discretions and ensuring the trust fund is properly maintained.
For those reasons, I was satisfied that the gift was impracticable to carry out in accordance with its terms. In the language of s.2(1)(e)(iii), I was satisfied that the original purposes had ceased to provide a suitable and effective method of using the property. Cy-pres application is therefore permissible.
Once a gift is to be applied cy-pres, the Court is obliged to order or to sanction a scheme which applies the gift as close as possible to the testator’s original intentions.[4]
[4]Price v A-G [1914] AC 20.
Being satisfied that the testatrix had a general charitable intention, and that it would be impracticable to carry out the trust in accordance with its terms, I ordered as follows:
1.The answers to the questions stated in the originating motion are as follows:-
In answer to question B (i):
The gift (“the Gift”) created by clause 6(a) of the will dated 24 May 1995 (“the will”) of Anne Marie Herzenberg, deceased, for the University of Melbourne to create the “Walter Mangold Trust Fund” is a charitable gift;
In answer to question B (ii):
The gift created by clause 6(b) of the will dated 24 May 1995 of Anne Marie Herzenberg, deceased, to create the “Walter Mangold Trust Fund” is a charitable gift; and
In answer to question B (iii):
The gift in clause 6(b) of the will is unable to be carried out, according to the directions given and to the spirit of the gift, by reason of impossibility or impracticability.
In answer to question B (iii):
In the making of her will, Anne Marie Herzenberg, deceased, has displayed a general charitable intent.
In answer to question C (i):
In the events which have happened the gift created in clause 6(a) of the will is unable to be carried out or has failed.
In answer to question C (ii):
In the events which have happened the gift in clause 6(b) of the will is unable to be carried out according to the directions given and according to the spirit of the gift, by reason of impracticability.
In answer to question C (iii):
The Gift ought be applied cy-pres.
In answer to question C (iv):
The scheme contained in the proposed Trust Deed set out at exhibit “DR2” to the affidavit of Daniel Rechtman sworn 20 October 2005 and filed herein is an appropriate scheme for the application cy-pres of the subject-matter of the Gift.
2.Order that the Gift of the net residue of the estate created by clause 6 of the will dated 24 May 1995 of Anne Marie Herzenberg, deceased, be applied cy-pres on the trusts set out in the proposed Trust Deed set out at exhibit “DR2” of the affidavit of Daniel Rechtman sworn 20 October 2005 and filed herein.
3.The costs of the plaintiff and of the defendant of and in relation to this proceeding be paid or retained from the estate of the Deceased on an indemnity basis.
4.An authenticated copy of this Order be annexed to the Probate dated 10 August 2004 of the will of the abovenamed deceased.
5.There be liberty to apply.
- - -
1
0