RSL Veterans' Retirement Villages Ltd v NSW Minister for Lands

[2006] NSWSC 1161

CITATION:	RSL Veterans’ Retirement Villages Ltd v NSW Minister for Lands & Anor [2006] NSWSC 1161 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	13 and 27 July, 9 August and 6 September 2006
JUDGMENT DATE :	13 November 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
DECISION:	Cy pres scheme ordered.
CATCHWORDS:	CHARITABLE TRUST – CONSTRUCTION – Whether terms of the trust fixed in 1959 or were the objects of the Plaintiff as reflected in its constitution as amended from time to time. - CHARITABLE TRUSTS – SECTION 81 Trustee Act – Whether proposed variation would change objects of trust – whether permissible under s.81. - CY PRES SCHEME – What terms were closest to spirit of original trust – mechanism for periodic review by Attorney General provided.
LEGISLATION CITED:	- Aged Care Act 1997 (Cth) - Charitable Trusts Act 1993 (NSW) – s.9 - Crown Lands Consolidation Act 1913 - Returned and Services League of Australia (New South Wales Branch) Incorporation Act 1935. - Trustee Act 1925 (NSW) – s.81
CASES CITED:	- Arakella v Paton (2004) 60 NSWLR 334 - Attorney-General for NSW v Fulham [2002] NSWSC 629 - Freeman v Attorney-General (NSW) [1973] 1 NSWLR 729 - Randwick Municipal Council v Rutledge (1959) 102 CLR 54 - Somerville v Attorney-General for the Commonwealth of Australia (1921) 21 SR(NSW) 450
PARTIES:	RSL Veterans’ Retirement Villages Ltd – Plaintiff New South Wales Minister for Lands – First Defendant Attorney General for the State of New South Wales – Second Defendant
FILE NUMBER(S):	SC 5938/05
COUNSEL:	J.N. West QC, N.J. Kidd – Plaintiff Dr J. Renwick, Ms R.A. Pepper – Defendants
SOLICITORS:	PricewaterhouseCoopers – Plaintiff I.V. Knight, Crown Solicitor – Defendants

5938/05 RSL Veterans’ Retirement Villages Ltd
v NSW Minister for Lands & Anor


JUDGMENT
13 November, 2006

Introduction

1 The Plaintiff seeks a declaration as to the construction of terms of a charitable trust. Alternatively, it seeks an order under s.81 Trustee Act 1925 (NSW) authorising it to use the trust property in a certain way. If neither of the first two remedies are granted, it seeks an order that the trust property be applied in accordance with a cy pres scheme. 2 The original grantor of the trust property, the New South Wales Minister of Lands, has been joined as a defendant. As the trust is a charitable trust, the Attorney General has also been joined as a defendant. 3 The Defendants oppose the first two orders sought by the Plaintiff. The parties disagree upon the terms of the cy pres scheme to be ordered.


The history and Constitution of the Plaintiff

4    The Plaintiff is the registered proprietor of land at Narrabeen on which it operates a residential aged care facility and a retirement village (“the Village”). The Village provides care and services to approximately four hundred and fifty people in nursing home and hostel accommodation (“the Aged Care Facility”). A further seven hundred and fifty people live independently in one, two or four bedroom apartments with some form of assistance provided (“the Retirement Village”). 5    At present, the Retirement Village is occupied by war veterans, most of whom would have seen active service, or their spouses or dependents. Approximately 90% of the residents in the Aged Care Facility are war veterans or their spouses. The remaining 10% of residents in the Aged Care Facility are people from the general community in need of care. 6    The Village was formed in 1911 to provide care and service to war veterans. Services were initially provided at Bare Island, La Perouse, until 1939 when the Village was established in Narrabeen. 7    On 19 August 1942, The War Veterans Home was incorporated as a company limited by guarantee. On or about 14 September 1982, the company changed its name to R.S.L. Veterans’ Retirement Village, and on 3 May 1994, the name was changed again to RSL Veterans’ Retirement Villages Limited. 8    The objects of the Plaintiff upon its incorporation in 1942 included, relevantly, the following:

“3(a) To take over and acquire gratuitously for payment or otherwise all the real and personal property assets goods chattels effects moneys credits debts and liabilities of the unincorporated association known as “The War Veterans’ Home” … and to acquire the right to use the name of the “The War Veterans’ Home” in respect of the premises at Legacy Park Narrabeen and at Bare Island La Perouse ….
…
(c) To provide and maintain on such terms and conditions as may from time to time be determined and prescribed by the Association in the existing buildings of the Association or in any other buildings erections or premises which may hereafter be acquired or erected by it at Narrabeen La Perouse or elsewhere in New South Wales a Home or Homes for the purpose of providing board, lodging, maintenance, attendance and all necessaries and conveniences for the following persons, that is to say:–

(i) Any person who has served or shall serve in a Theatre of War in any of His Majesty’s Forces in any War in which His Majesty has been or shall be engaged and whose application shall be approved by the said Board of Management of the Association.

(ii) Any person who has served or shall serve in a Theatre of War in the Merchant Navy or Marine in any such war and whose application shall be approved by the said Board of Management.

(iii) Any person who has served or shall serve in a Theatre of War in the Forces or Merchant Service of any power allied or associated with His Majesty in any War in which His Majesty has been or shall be engaged and whose application shall be approved by the said Board of Management.”
9    On 29 March 1966, the Plaintiff adopted a new Memorandum and Articles of Association. Relevantly, Clause 3(c) of the Memorandum was amended by deleting the former paragraphs (i) to (iii) and substituting the following categories of persons for whom board, lodging, maintenance, attendance, administration and other necessaries and conveniences were to be provided:

“(i) Any person who has served or shall serve in any Branch of the Australian Defence Forces and any person of the British Common-wealth Defence Forces who have been allied in any war or who shall be involved in any future war as an ally of the Australian Defence Forces and whose application shall be approved by the said Board of Directors of the Association.

(ii) Any person who has served or shall serve in the Merchant Navy or Marine in any such war as referred to in Clause 3(i) hereof and whose application shall be approved by the said Board of Directors of the Association.

(iii) Any person who has served or shall serve in the Defence Forces or Merchant Navy of any power allied or associated with any Member of the British Commonwealth Defence Forces in which Australia is allied in any war in which Australia or any Member of the British Commonwealth Defence Forces has been or shall be engaged and whose application has be approved by the said Board of Directors of the Association.

(iv) Any person who has served in the Defence Forces of any Country of the British Commonwealth Defence Forces or person who has served in the Defence Forces of any country who has been allied with Australia and any member of the British Commonwealth Defence Forces in any war or who shall be engaged in any future war under the same conditions and relationships as aforesaid may at the discretion of the Board of Directors make application and such application may be approved by the said Board of Directors.

(v) Any dependents of any person referred to in Sub-clauses (i), (ii), (iii) and (iv) hereof.

(vi) Should the number of veterans or other persons referred to in clause 3(b) and 3(c) hereof seeking accommodation in the homes be insufficient in the opinion of the Board of Directors to enable vacancies from time to time to be filled the Board of Directors may in its absolute discretion permit all or such parts of the buildings aforesaid as they may think fit to be used by such deserving persons as they may choose until such time as veterans or other persons referred to in clause 3(b) and 3(c) hereof shall seek or offer themselves as applicants for accommodation and the Board of Directors’ decision as to who shall so occupy the buildings in such case shall be final.”
10    It should be noted that the categories of persons for whom benefits were to be provided were expanded by sub-paragraph (vi) to include, in the circumstances there prescribed, “deserving persons” who were not war veterans or their dependents within any of the previous five categories. 11    In June 1999, the Plaintiff adopted a new Memorandum and Articles of Association. They represent the constitution of the Plaintiff which is currently in force. The objects were considerably amended and now provide, so far as is presently relevant, that the purposes of the company are:

“(a) To make retirement village accommodation and amenities available to persons selected from time to time in the absolute discretion of the directors of the Company, each such person being:

(i) a member of the body corporate known as The Returned and Services League of Australia (New South Wales Branch) (in this Memorandum called “State Branch”);

(ii) a person eligible to become a member of State Branch;

(iii) a dependent of a person referred to in (i) or (ii); or

(iv) some other deserving person, but in that case the directors must have full regard to the level and nature of demand by persons within categories (i) and (ii).

(b) To make other facilities and services available to persons selected from time to time by the directors.

(c) To obtain funds to support the objectives of the Company.”
12    The Returned and Services League of Australia (New South Wales Branch) (“the State Branch”) is a body incorporated under the Returned and Services League of Australia (New South Wales Branch) Incorporation Act 1935 . 13    A “member” of the State Branch is defined in the constitution of the State Branch as meaning:
“A person who has been admitted to any one of the classes of members of the League referred to in this Constitution.”
14    Clause 12.1 of the Constitution of the State Branch provides:
“There shall be 5 classes of members of the League, namely:–
(i) Service Members;
(ii) Members;
(iii) Life Members;
(iv) Honorary Members; and
(v) Honorary Life Members.”
15 “Service Members” are defined in clauses 13, 14 and 15 of the Constitution of the State Branch. In summary, they comprise persons who served in the armed forces of Australia and its allies in war time or in a theatre of conflict or who have served as a member of the armed forces of Australia or its allies for a period of not less than six months. It should be noted that the categories of Honorary Members and Honorary Life Members, as defined in Clause 17A and 18 of the Constitution, include persons who are not necessarily members or former members of eligible defence forces.


The grant and use of the subject land

16    The Village occupies approximately 100 acres of land in Narrabeen. The land is comprised of six parcels. Three parcels were granted by the Crown to “THE WAR VETERANS’ HOME and its Assigns” on 3 June 1959 “Upon Trust to use the said Land as the Site for War Veterans’ Home [sic] and for no other use trust or purpose whatsoever” . 17    On 27 January 1961, a further parcel was dedicated for the purpose of “War Veterans’ Home (addition)” by Notification of Dedication of Land for a Public Purpose under the Crown Lands Consolidation Act 1913. The two remaining parcels now comprising the Village were purchased by the Plaintiff at various times. 18    At present there are approximately 1,200 residents at the Village. Residents of the Retirement Village enter into a Licence Agreement relating to the accommodation provided (“Licence Agreement”). Residents of the Aged Care Facility enter into a Residential Care Agreement (“Care Agreement”). 19    A resident entering into a Licence Agreement to occupy an apartment in the Village pays an ingoing contribution fee to the Plaintiff. Approximately 30% of admissions to the Retirement Village over the last fours has been provided to veterans who do not have the means to pay. Those veterans are not required to pay an ingoing contribution fee. Discounts of generally around 25% are also provided to regional and rural veterans entering the Village. 20    The ingoing contribution fee entitles the resident to occupy specified premises subject to the terms and conditions of the Licence Agreement. The resident is then charged a weekly fee to cover operational costs such as waste collection, on-site nurse service and other day-to-day expenses. 21    It is a term of the Licence Agreement that the greater of $40,000 or 10% of the total ingoing contribution fee is non-refundable and can be used by the Plaintiff for its own purposes. A further charge of 2% per year of the ingoing contribution fee is charged for ten years. The balance of the ingoing contribution fee is repayable by the Plaintiff when the resident vacates. 22    A resident entering into the residential Aged Care Facility enters into the Care Agreement. The fees charged by the Plaintiff depend on the type and level of care provided and are governed by the Aged Care Act 1997 (Cth). However, all residents entering into the Aged Care Facility pay resident fees calculated in accordance with the Aged Care Act . All high care residents do not pay a bond and low care residents may pay a bond depending on their financial situation. The Plaintiff gives priority to all veterans regardless of their financial situation. 23    The Plaintiff is holding a very substantial sum in term deposits and cash accounts. These funds are used to refund residents their ingoing contribution fees and accommodation bonds when the residents vacate the Village. However, the total liability to residents for refund of contribution fees and for refund of accommodation bonds is very substantially in excess of the term deposits and cash accounts held to meet those liabilities. The shortfall has arisen due to the fact that, historically, the ingoing contribution fees paid by residents of the Retirement Village have been used in part by the Plaintiff to fund significant capital works as well as to fund deficits arising from the operation of the Aged Care Facility. This is common industry practice. Amounts owed to departing residents are repaid out of new contribution fees and accommodation fees paid by incoming residents who take up the vacated places. 24    The number of war veterans and other persons eligible for accommodation in the Village, as defined in the Plaintiff’s Constitution and in the Constitution of the State Branch, is declining. It is not possible for the Plaintiff to be precise about the rate of that decline or about the impact of that decline on the level of demand by veterans and other eligible persons for accommodation in the Retirement Village. Nor is it possible to be precise about the impact of that decline on the level of demand by veterans and other eligible persons who are impoverished, as distinct from veterans and eligible persons who can afford to pay the ingoing contribution fees. 25    The Plaintiff says, however, that if present trends continue, the number of veterans and other persons eligible, willing and financially able to take up accommodation in the Village will be insufficient to keep levels of accommodation at an economically viable level in the medium to long term. The Plaintiff says that if it is not permitted to expand the categories of persons entitled to take up accommodation in the Village it will, sooner or later, be unable to repay the amounts which it owes to outgoing residents of the Village and to pay for capital works and necessary improvements. 26    While the Defendants do not necessarily accept the Plaintiff’s evidence in this regard, they have offered no evidence to contradict it, nor have they pointed to anything which makes the Plaintiff’s evidence inherently unreliable or improbable. I accept the Plaintiff’s evidence.


Construction of the trust

27    The first question which arises is one of construction of the terms of the trust created by the Crown Grants and ancillary dedications of land under the Crown Lands Consolidation Act 1913 . The parties do not dispute that the terms of the trust created by the initial Crown Grant will determine the terms of the trust upon which all parcels of land owned by the Plaintiff are held. 28    The three parcels at Narrabeen granted by the Crown on 3 June 1959 and dedicated “for public purposes” under the Crown Lands Consolidation Act were granted to “THE WAR VETERANS’ HOME … TO HOLD unto THE WAR VETERANS’ HOME and its Assigns forever Upon and for the … Purposes hereinafter declared … that is to say Upon Trust to use the said Land as the Site for War Veterans’ Home [sic] and for no other use trust or purpose whatsoever” . 29    It is accepted by the parties that the grant to “The War Veterans’ Home” is a grant to the Plaintiff as that was the name of the Plaintiff at the time of the grant. 30    It is not so clear whether the words “Upon Trust to use the said Land as the Site for War Veterans’ Home [sic] ” means “to use the land for the purposes of the company called the War Veterans’ Home” or means “for the purposes of the institution being conducted on the land”. The words “for War Veterans’ Home”, lacking a preceding definite or indefinite article, are the cause of the uncertainty. If “ The War Veterans’ Home” had been used, it would have been quite clear that the words referred to the company called by that name. If “ a War Veterans’ Home” or “the War Veterans’ Home” had been used, the words could have referred to the institution being conducted by the Plaintiff and the purposes for which that institution was established, not necessarily as stated in the objects of the Plaintiff at the time. 31    In my opinion, the reference to “War Veterans’ Home” is a reference to the company, not to some institution run by the company. There is a grant of the land to “The War Veterans’ Home” upon trust “for the purposes hereinafter declared” and then follows “for War Veterans’ Home” which, in my opinion, means a grant to “The War Veterans’ Home” for the purposes of “[The] War Veterans’ Home”. If the purposes of The War Veterans’ Home, as stated in its Memorandum, were not by this means incorporated by reference as the terms of the trust created by the grant, then it would be hard to know what else could be readily identified as “ the purposes hereinafter declared”. 32 The question then arises: are the purposes of The War Veterans’ Home, incorporated by reference as the terms of the trust, the objects of the company as they appeared in the company’s Memorandum of Association at the time of the grant in 1959 or are the purposes of the trust the objects of the company as appearing in its Constitution as amended from time to time? The Plaintiff urges the latter construction, saying that the purposes of the trust are now defined by its 1999 Constitution. The Defendants contend for the former construction. 33 The Plaintiff submits that the Crown, knowing that the grant was to a company and that a company may change its purposes over time by amendment to its constitution, must be taken to have intended that the purposes of the trust should be the purposes of the Plaintiff from time to time. In other words, the purposes of the trust have been changed in accordance with the procedures of corporations law. 34 The Defendants place strong reliance on the words in the grant “upon trust for … the purposes hereinafter declared … and for no other use trust or purpose whatsoever” . They say that those words indicate that the purposes of the trust were identified in the grant and fixed immutably at the time of the grant. 35 In my opinion, the Defendants’ submission is correct. The Plaintiff, being a corporation, has an indefinite existence. Like any corporation, its purposes can change over a long period of time, as circumstances change. So, in the present case, a little more than sixty years after the Plaintiff’s incorporation, its Constitution already gives eligibility for residence in the Village to a much wider range of people than was given in the 1942 Memorandum of Association. Under the 1942 Memorandum, a qualified person had to be a member of the armed forces of His Majesty or His Majesty’s allies who had served in a theatre of war. Under the 1999 Constitution of the Plaintiff, a person may qualify for residence of the Village as an Honorary Life Member of the State Branch, being a person who has never been a member of any armed force let alone one who has served as such in a theatre of war. 36 It is quite possible that many years from now the Constitution of the Plaintiff could be very different again from the present Constitution and that its provisions as to eligibility for residence in the Village could have virtually no connection with war veterans or members or former members of the armed services. I do not think that this possibility, which is inherent in the operation of corporations law, can have been what the Crown intended in making the grant and constituting the trust. 37 In my opinion, the words of the grant, particularly in their insistence that the trust assets be used only for the declared purposes, indicate strongly that the purposes of the trust are those stated in the Memorandum of the Plaintiff as at the date of grant in June 1959 and that those purposes may be altered in accordance with the law of trusts, not in accordance with the law of corporations.

Order under s.81 Trustee Act

38 The Plaintiff seeks an order under s.81(1) of the Trustee Act authorising it to use the land the subject of the trust for the purpose of providing retirement village accommodation and amenities in accordance with the objects of the Plaintiff set out in the Constitution of the Plaintiff, as amended from time to time or, alternatively, as presently in force. 39 Section 81(1) provides:

“ Advantageous dealings

(1) Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release, or disposition, or any purchase, investment, acquisition, expenditure, or transaction, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the instrument, if any, creating the trust, or by law, the Court:

(a) may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions, including adjustment of the respective rights of the beneficiaries, as the Court may think fit, and

(b) may direct in what manner any money authorised to be expended, and the costs of any transaction, are to be paid or borne as between capital and income.”
40    The Plaintiff relies strongly on the decision of Austin J in Arakella v Paton (2004) 60 NSWLR 334 and the cases therein discussed to support the proposition that the powers of the Court under s.81(1) are wide enough to permit the reformulation of the purposes of the trust which is now proposed. 41 In Arakella , the trustee of a trading trust sought to invoke the powers of the Court under s.81 for the purpose of converting the trading trust, in which the beneficiaries held units, into a corporation in which the beneficiaries would hold shares. There was no dispute that the mechanics of the trading trust had, in many respects become unworkable. 42 In order to achieve the restructuring, substantial amendments to the trust deed of the trading trust were required. One of the questions to be answered by the Court was whether it had power under s.81(1) Trustee Act to make orders conferring on the trustee the power to make such substantial amendments to the trust deed. 43 After a comprehensive review of the authorities, Austin J came to the conclusion that, wide though the power under s.81 is, it “cannot be used to subvert the beneficial disposition in the trust instrument” : at para 112. However, the amendment of the trust deed to permit conversion of units in the trust to shares in the corporation was possible under s.81(1) because it accommodated the beneficial interests of the unitholders to the new situation created by permitting the corporation to take over the trading activities of the trust in a more efficient way. 44 The trust in Arakella was a private trust. There is no doubt, however, that s.81 is equally applicable to a charitable trust: see e.g. Freeman v Attorney-General (NSW) [1973] 1 NSWLR 729. In the case of a charitable trust, what cannot be subverted by resort to the section are the purposes or objects which the trust was constituted to achieve: see e.g. Freeman at 735 per Helsham J. 45 Sometimes, it will be clear enough that even radical changes to the terms of the trust do no more than “adjust” the respective rights of beneficiaries of a private trust or the purposes of a charitable trust: the section permits such adjustments if they are expedient in the management or administration of the trust. Sometimes, however, it will not be easy to draw the line between “adjustment” of rights or purposes and “subversion”. In the case of a charitable trust one has to identify the essential characteristic of the objects which the trust is designed to achieve. A change which alters the essential characteristic of the objects will be a subversion; a change which affects merely ancillary or incidental aspects of the objects will be an adjustment. In some case, minds may differ as to what is essential and what is ancillary or incidental. 46 In the present case, the essential characteristic of the objects of the trust, as found in the 1959 Memorandum of Association of the Plaintiff, is the provision of accommodation, maintenance, necessaries and conveniences for persons who have served in war in the armed forces of this country and its allies. The defining element is war service, the intention being that those who have served the country in war should not later want for care and maintenance, and that the assets of the trust should be devoted solely to the provision of that care and maintenance. 47 The purposes or objects of the Plaintiff as embodied in its 1999 Constitution depart significantly from the terms of the trust as fixed in 1959 and in an essential, not an ancillary, way. The present object of the Plaintiff, as expressed in its Constitution, is to provide care and maintenance to a wide range of people; the selection of the recipients is to be in the discretion of the directors. The range of people eligible for the exercise of that discretion may include people who have never served in war and, indeed, who may never have served at all in the armed forces of this country or its allies. The objects and purposes of the Plaintiff may, by amendment to the Constitution in the future, depart even further from the essential characteristic of the objects of the trust as fixed in 1959. 48 In my opinion, the changes to the terms of the present trust which the Plaintiff seeks to achieve by resort to s.81 Trustee Act are changes which subvert the essential characteristic of the objects, as fixed in 1959. The changes may well be expedient for the continuing economic viability of the trust but they are not expedient in administering the essential objects of the trust as they are presently constituted. If the objects of the trust are to be changed in the way which the Plaintiff proposes in order to ensure that the trust remains economically viable, the change must be effected through a cy pres scheme, not by recourse to s.81. 49 For these reasons, I decline to make the order sought under s.81 Trustee Act .


Cy pres Scheme

50    There is no dispute that this is a charitable trust, being a trust for the benefit of members or former members of the armed services: Attorney-General for NSW v Fulham [2002] NSWSC 629, at para 51; Randwick Municipal Council v Rutledge (1959) 102 CLR 54, at 76; Somerville v Attorney-General for the Commonwealth of Australia (1921) 21 SR(NSW) 450. 51 Section 9(1) of the Charitable Trusts Act 1993 (NSW) provides that the property of a charitable trust may be applied cy pres in circumstances in which the original purposes have, wholly or partly, ceased to provide a “suitable and effective method of using the trust property, having regard to the spirit of the trust” . 52 I am satisfied that if the purposes of the present trust are confined to benefiting war veterans, the declining number of war veterans in the community will, sooner or later, lead to the real risk that the Village will become uneconomical to maintain and the Plaintiff will become insolvent. There is no dispute that it would not be for the benefit of any war veteran who might require maintenance, accommodation and care facilities in the Village in the future that the Village and the Plaintiff cease to be available for that purpose. In those circumstances, I am satisfied that the original purpose of the present trust has ceased to provide a suitable and effective method of using the trust property. 53 The Attorney General agrees with the Plaintiff that a cy pres scheme should be ordered and recognises that the Plaintiff will have to make accommodation and facilities in the Village available to a broader range of people in the community than impecunious war veterans. He accepts that in order to survive economically, the Village will, to some degree, have to be open to those who have no connection with war service and who are able to pay commercial rates for accommodation and facilities. However, the Attorney General is concerned that the categories of persons eligible for accommodation and facilities in the Village may be made so wide, and the directors of the Plaintiff be so unlimited in the exercise of their discretion as to who is to have the benefit of such services, that the Village may in time become far more of a commercial enterprise than a charitable institution in the spirit of the original trust. 54 I have not the slightest doubt that the present directors of the Plaintiff have the interests of all veterans and their dependents at the forefront of their consideration in applying for a cy pres scheme which seeks to make the Village economically viable. However, as circumstances change over time so also can perceptions within the Plaintiff’s Board change as to what is a proper and desirable application of the trust funds, and as to how the directors should exercise their discretion as to the proportions of veterans and non-veterans, financially secure or impecunious, who should be given accommodation and care facilities in the Village. In my opinion, the concerns which the Attorney General has expressed are valid. 55 The Plaintiff has discussed several draft proposed cy pres schemes with the officers of the Attorney General’s Department. Discussion of the proposals in Court has led to further refinement of the terms. The Plaintiff now puts forward two proposals for a cy pres scheme, which are Annexures A and B to Mr Thompson’s affidavit of 7 August 2006. The Attorney General has the same fundamental concern with respect to each of the proposed schemes. He takes the view that the spirit of the terms of the trust as established in 1959 is for the relief of war veterans suffering financial hardship, homelessness or ill health and that the cy pres schemes proposed by the Plaintiff do not give this category of war veterans sufficient priority. 56 The Plaintiff says that the terms of the trust as found in Clause 3(c) of the Plaintiff’s 1959 Memorandum of Association refer simply to war veterans and there is no requirement of financial hardship, homelessness or ill health. The Plaintiff says that these qualifications should not be reflected in any cy pres scheme. 57 It is true, as the Plaintiff says, that the terms of the trust do not refer to any qualification for eligibility to the benefits of the trust property, except war service. However, s.9(1) of the Charitable Trusts Act requires the Court, in determining whether a cy pres scheme is appropriate, to have regard not only to the letter of the terms of the trust but also to its spirit. In ascertaining the spirit of this trust, it is relevant to have regard to the trust’s history and the social context of the time at which it was established. 58    As I have recounted, the Plaintiff was incorporated in 1942 to take over conduct of two homes for war veterans which had been established in 1911 and had been carried on by an unincorporated association. One of the homes was at Bare Island, La Perouse, and the other was at Narrabeen. I think that I may take judicial notice of the fact that in 1942 and in 1949, when the trust was created, neither La Perouse nor Narrabeen was regarded as a preserve of the well-to-do. I think that I am also able to take judicial notice of the fact that in 1959, when war veterans of both World Wars were far more numerous than they are now, the concept of a retirement village as we know it today was not at all familiar. Generally, the elderly and infirm were looked after at home by the families, unless poverty or the gravity of the illness forced people into nursing homes or other care facilities, private or public. 59    In the social conditions prevailing in 1959, it seems to me that it would have been understood that a war veterans’ home was intended to be for the benefit of those too ill or too poor to be cared for by their families and for those who had no families to care for them. 60    In my view, the spirit of the present trust which should be reflected in the cy pres scheme, is to give priority in use of the Village and its facilities to war veterans who are suffering financial hardship, homelessness or illness. 61    The draft scheme which is Annexure B to Mr Thompson’s affidavit expressly recognises that priority is to be given to the poor, the homeless and the ill. Its terms, in my view, are the closest to the spirit of the trust established in 1959, with some little amendment required. I will call this scheme “Scheme B”. 62    Scheme B provides three categories of eligibility for retirement village accommodation and aged care facilities. Only if there are insufficient persons to fill a higher category may the next lower category be filled. 63    The first level of priority is for Retirement Village accommodation and Aged Care Facilities for those who were eligible under the original terms of the trust. However, in a departure from Clause 3(c) of the Plaintiff’s 1959 Memorandum and Articles, priority within this category is to be given for Aged Care accommodation (but not for Retirement Village accommodation) to those suffering financial hardship, homelessness or ill health. 64    The second category of priority is for Retirement Village accommodation and Aged Care facilities for those who are, or were, members of the armed forces, and their dependents. Again, within this category, priority is to be given for aged care accommodation to those suffering hardship, homelessness or ill health. 65    The third level of priority is for both Retirement Village accommodation and Aged Care facilities for such persons as the directors of the Plaintiff determine, in their absolute discretion, pursuant to the objects of the Plaintiff as amended from time to time. 66    Because the economic viability of the Village as a whole is dependent on the income derived from providing Retirement Village accommodation and not by providing Aged Care accommodation, special provision is made to ensure that the income from that source will not be depleted to the extent that the Plaintiff becomes insolvent. 67    The Plaintiff says, and I accept, that approximately 30% of admissions to the Retirement Village over the last four years have been for war veterans who do not have the means to pay for the accommodation. They are not required to pay an ingoing contribution fee. Discounts are also provided to regional and rural war veterans entering the Retirement Village of around 25%. The apartments within the Retirement Village which have been provided without any ingoing contribution fee, or a discounted contribution fee, have generally been bed-sitters or one room apartments. Presently, approximately 135 apartments in the Retirement Village are occupied by war veterans who have paid no ingoing contribution or only a discounted fee. 68    The Plaintiff says, and I accept, that if it were required to give priority for Retirement Village accommodation to an unlimited extent to those who cannot afford to pay then it will inevitably encounter financial difficulty, although it is impossible to predict at what time. It therefore proposes that the number of apartments in the Retirement Village which it must make available in priority to those who cannot afford to pay be limited to 135. This number will be subject to review, both if the number becomes too high or if it becomes too low, as circumstances change. 69    The Attorney General says that there is insufficient evidence for the Court to be satisfied that 135 apartments in the Retirement Village is the appropriate number to keep in priority for those who cannot pay. However, I bear in mind that there is no suggestion that the directors of the Plaintiff, in proposing this scheme, are motivated by anything other than a genuine desire to carry out the terms of the trust in the most effective way to secure benefits for war veterans, former and present members of the armed services and their dependents. I accept that projections as to the need for accommodation of different types in the Retirement Village are impossible to make for the indefinite future. I am satisfied that the spirit of the trust is properly reflected in the provisions of Scheme B which set aside 135 Retirement Village apartments for those who cannot pay. 70    Scheme B provides that it is open to review by the Attorney General, and thereby to review by the Court, if its operation in the present form raises the risk of insolvency. It also requires the Plaintiff to provide to the Attorney General annual reports which will show the provision of accommodation and facilities in each category of priority. The Attorney General will be able to see if the number of apartments in the Retirement Village reserved for those who cannot pay is either too low or too high. There is a mechanism in Scheme B to enable the Attorney General to monitor to what extent the spirit of the original trust is still being observed. 71    For these reasons, I am satisfied that Scheme B, with the amendments to paragraph 5(a) suggested by Mr West QC in argument, should be accepted as the cy pres scheme to be ordered.


Orders

72    The orders of the Court are:


1) Declaration that, upon its proper construction, the trust referred to in the grant of land by the First Defendant to the Plaintiff having the registered number Volume 7715 Folio 94 and in the dedications made under the Crown Lands Consolidation Act 1913 in respect of the land now constituted in Folio Identifiers 2026/752038, 2611/752038, 2641/752038 and 1/774980 is a charitable trust of which the Plaintiff is trustee.

2) Declaration that the original purposes of the charitable trust have ceased to provide a suitable and effective method of using the Land.

3) Order that the Land be applied and dealt with in accordance with the Scheme set out in the Schedule to this judgment.

4) Each party to bear his or its own costs.

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RSL Veterans’ Retirement Villages Ltd v NSW Minister for Lands & Anor
Proceedings 5938 of 2005

Schedule to Judgment

The Scheme

The land constituted in Folio Identifiers 2026/752038, 2611/752038, 2641/752038 and 1/774980 (“Land”) be continued to be held by the Plaintiff but upon the basis that the Land be available to the Plaintiff for the purpose of providing retirement village accommodation and amenities for the following persons:

1. Subject to 4, 5 and 6 below, priority is to be given to those persons (and their dependents, if any, with them) who express a desire for retirement village accommodation and amenities who fall within the relevant objects of the Plaintiff as at the time of the Crown grant in 1959, being the objects set out in paragraph 3(c) of the Memorandum of Association of the War Veterans’ Home dated 15 July 1942 (“Category 1”).

2. Subject to 4, 5 and 6 below, in the event that upon reasonable inquiries amongst those persons falling within Category 1, there are insufficient persons to fill the available accommodation, then priority is to be given to former and current serving members of the Australian Defence Forces or associated Forces (and their dependents, if any, with them) (“Category 2”).

3. Subject to 4, 5 and 6 below, in the event that upon reasonable inquiries amongst those persons falling within Categories 1 and/or 2, there are insufficient persons falling within those categories to fill the available accommodation, then the Plaintiff may offer retirement village accommodation and amenities to such other persons as is determined by the directors of the Plaintiff as recorded in its Memorandum of Association, as amended from time to time (“Category 3”).

4. In relation to the provision of residential aged care accommodation, within Categories 1 and 2 above, priority is to be given to persons suffering financial hardship and/or homelessness and/or ill health.

5. In relation to the provision of retirement village accommodation (not being residential aged care accommodation):

a) the Plaintiff shall keep one hundred and thirty-five (135) apartments which, as and when they become available, shall be offered and made available to any person falling within Categories 1 and/or 2 above with priority to be given to such persons who are not able to pay any fee for that accommodation;

b) the balance of the apartments shall, as and when they become available, be offered and made available to any person falling within Categories 1 and/or 2 above who is ready, willing and able to pay the requested for that accommodation (being the fee that the Plaintiff determines represents the market fee for the relevant apartment), and in the event that there is no such person available to accept any such apartment, then the apartment may be offered and made available to any person falling within Category 3 above who is ready, willing and able to pay the said fee.

6. Without limiting 5 above, in the event that the giving of priority to persons in Category 1 or Category 2 above (as the case may be) will in the reasonable opinion of the Plaintiff cause the Plaintiff to become insolvent, or likely to become insolvent, then the Plaintiff may offer retirement village accommodation and amenities to persons falling within Category 3 above, provided that the Plaintiff gives to the Attorney General of New South Wales:

a) four months’ notice of any intention to so offer; and

b) copies of all information and material upon which the Plaintiff has relied in forming the opinion that the giving of priority to persons in Category 1 or Category 2 above (as the case may be) will cause the Plaintiff to become insolvent, or likely to become insolvent.

7. The Plaintiff is to provide an annual report to the Attorney General of New South Wales within three months of the end of each financial year, reporting on the number of persons within each category above who have been provided with accommodation in that financial year.

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13/11/2006 - Addition of date of judgment, i.e. 13.11.06 - Paragraph(s) Cover sheet only.