SEATON, NOBLE & MOTTERAM - [2022] SASC 152

Supreme Court of South Australia
(Civil)
SEATON, NOBLE & MOTTERAM
[2022] SASC 152
Judgment of the Honourable Justice Blue
CORPORATIONS - MANAGED INVESTMENTS - AMENDMENTS TO TRUST DEED OR CONSTITUTION
EQUITY - TRUSTS AND TRUSTEES - POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES - MISCELLANEOUS OTHER POWERS, DUTIES AND LIABILITIES - POWER TO AMEND TRUST DEED
The applicants are the trustees of a charitable trust, the Rotary Club of Adelaide Charitable Trust Fund, under a trust deed.
The applicants seek the following orders under the Trustee Act 1936 (SA):
1Judicial advice under section 91 of the Act that they would be justified in applying monies and property of the Trust to another public ancillary fund pursuant to clause 7 of the Trust Deed.
2Alternatively, an order pursuant to sections 60 and 67 (or alternatively section 69B) of the Act varying the substantive terms of the Trust Deed.
3Alternatively, an order under section 59B of the Act conferring power on the trustees of the Trust to apply its assets to or for another public ancillary fund.
4Alternatively, an order pursuant to sections 60 and 67 of the Act (or under the Court’s inherent power) varying the terms of the Trust Deed to insert a new clause empowering the trustees to apply the fund to or for another public ancillary fund.

Held:
1On the proper construction of clause 7 of the trust deed, there is no power to apply property of the Trust to another public ancillary fund (at [84]).
2Sections 60 and 67 of the Act confer on the Court an independent statutory power, independent of the Court’s equitable power, to vary the terms of a charitable trust if relevantly the Court is satisfied that the variation is to the advantage or benefit of the trust (at [115] and [118]).
3It is to the advantage or benefit of the Trust to vary the terms of its trust deed as proposed subject to several alterations (at [126], [127], [136], [143], [156] [170], [176], [181], [193], [202], [211], [213], [214] and [216]).
4An order should not be made under section 59B of the Act to confer power on the trustees of the Trust to apply its assets to or for another public ancillary fund (at [226]).
5An order should not be made under sections 60 and 67 of the Act or under the Court’s inherent power varying the terms of the trust deed to insert a new clause empowering the trustees to apply the fund to or for another public ancillary fund (at [231]).
6Order made varying the terms of the Trust’s trust deed as proposed subject to several alterations (at [232]).

Administration and Probate Act 1919 (SA) s 69 and s 70; A New Tax System (Tax Administration) Act 1999 (Cth); Associations Incorporation Act 1985 (SA); Charitable Trusts Procedure Act 1922 (SA); Income Tax Assessment Act 1936 (Cth) s 78(1)(a); Income Tax Assessment Act 1997 (Cth) s 30-15 and sub-div 30-B; Legislation Interpretation Act 2021 (SA) s 17; Taxation Administration Act 1953

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2022] SASC 152
Decision Date: 14 December 2022

CaseChat Overview and Summary

The case involves the Rotary Club of Adelaide (the Club), which sought to amend the trust deed of the Rotary Club of Adelaide Charitable Trust Fund (the Trust). The Attorney-General for the State of South Australia, acting on behalf of the Crown as parens patriae, represents the beneficial objects of charitable trusts. The court was required to determine whether the proposed amendments to the trust deed were in the best interest of the Trust and its beneficiaries. The applicants argued that the amendments were necessary due to changes in regulatory and tax environments, and to ensure the Trust's ongoing effectiveness and compliance with legal requirements.

The court considered the evidence provided by the applicants and other relevant parties, including affidavits and expert opinions. The court found that the proposed amendments were justified under section 69B of the Trustee Act 1936 (SA), as they were in accordance with the spirit of the trust and justified in the circumstances. The court also noted that the Attorney-General did not oppose the orders sought. The court exercised its equitable power to direct a scheme varying the purpose of the charitable trust, as the original purpose could no longer be achieved due to the changed circumstances.

The court made the following orders: 1) The terms of the Trust Deed dated 11 December 1968 be replaced with the terms set out in the replacement deed provided by the applicants, with effect from the execution of the replacement deed by the applicants. 2) Liberty to apply to the applicants, the Trustee of the Trust, or the Attorney-General to vary the terms of the Trust. This decision demonstrates the court's willingness to approve amendments to a charitable trust deed when it is in the best interest of the trust and its beneficiaries, and when the amendments are justified under the relevant legislation.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

The interested party, the Attorney-General for the State of South Australia, represents the beneficial objects of charitable trusts in the Attorney-General’s role on behalf of the Crown as parens patriae.[1] Subject to the form of the orders, the Attorney-General does not oppose the orders sought.[1] Attorney-General v Bishop of Worcester (1851) 9 Hare 328 at 361 (68 ER 530) per Turner VC.Background The Rotary Club of Adelaide (the Club) was founded in 1923 as a member of Rotary International. It was founded as an unincorporated association but is now incorporated under the Associations Incorporation Act 1985 (SA). The Club is a member of Rotary International District 9510 Incorporated, which encompasses all Rotary Clubs in South Australia. The Club has approximately 170 members. Rotary International has approximately 1.2 million members of Rotary Clubs worldwide. The Club is governed by a Constitution (the Club Constitution) and By Laws (the Club By Laws), both of which were adopted in June 2020. The primary purposes of the Club are to pursue Rotary International’s Objects of Rotary (which focus on service to the community) and to carry out service projects based on Rotary International’s five Avenues of Service. The principal governing body of the Club is its Board. Members of the Board comprise the President, President Elect, Two Vice Presidents, the Secretary and the Treasurer (who also collectively comprise the Executive Committee of the Board), together with the Immediate Past President and six Directors elected by Active Members of the Club. Article 17 of the Club By Laws provides that the Board shall not without the approval of the Active Members by special resolution gift or dispose of any part of the capital of the Trust. The Trust was created by execution of the Trust Deed on 11 December 1968. The Trust Deed is a bilateral deed that was executed by the Club and by the three inaugural trustees of the Trust. On 11 December 1968 the members of the Club in general meeting authorised and approved of the Trust and the appointment of the inaugural trustees. The principal recital in the Trust Deed provides:WHEREAS the Club is desirous of establishing a fund to be known as "The Rotary Club of Adelaide Charitable Trust Fund" (hereinafter called "the fund") with the object of receiving moneys and property from time to time given devised or bequeathed to the Club by donors for disposition or payment out by the Club to such charitable organisations approved as hereinafter provided as the Board of Directors of the Club from time to time in its absolute discretion may select The Trust Deed provides that the trustees (the Trustees) agree and declare that they will receive and hold all moneys and property donated devised and bequeathed to the Club for the purposes referred to in the principal recital upon trust subject to the conditions contained in the clauses of the Trust Deed (the declaration of trust). Clause 3 provides that all moneys received by the Trustees are to be paid to the credit of a bank account in the name of the Trust.

Evidence

Evidence Before The Court

The primary source of income of the Trust is donations by members of the Club. The Trust also receives donations from members of the public (usually via the Club’s website) and on occasions donations from the Club itself. The other source of income is income on, or the revaluation of, investments of the Trust.Evidence I received an affidavit sworn by Mr Seaton on 27 January 2022 and a second affidavit sworn by him on 30 November 2022. He exhibited relevant documents, described the Trust and its history, described changes in the regulatory and tax environments, explained why the applicants are seeking the orders sought and described the steps taken by the Club and the Trust as summarised above. I received an affidavit by Heidi Unferdorben affirmed on 4 February 2022. Ms Unferdorben was the Immediate Past President of the Club. She described the Club, its governance, membership and history. She described the role of the Club in relation to the Trust and also in the review of the operation of the Trust and the proposed new arrangements. I received an affidavit by Paul Denver affirmed on 2 February 2022. He was the President of the Club. He deposed to the fact that Ms Unferdorben and Mr Seaton were well-placed to inform the Court of matters relevant to the application from the perspective of the Club and the trustees respectively. I received in closed court a counsel opinion by Suzanne Mackenzie dated 7 March 2022. I received copies of the October 2022 correspondence passing between the Trust’s solicitors and the Australian Taxation Office and a copy of the Guidelines. The legislative regimeSection 60 to 69 applications Part 4 of the Act addresses charitable trusts. Sections 60 to 69 provide:Part 4—Charitable trusts procedure60—Applications to Supreme Court(1)In every case of a breach of any trust or supposed breach of any trust created for charitable purposes, or whenever the direction or order of the Supreme Court shall be deemed necessary for the administration or management or to the advantage or benefit of any trust created for charitable purposes, it shall be lawful for a person referred to in subsection (2) to apply to the Supreme Court, stating such breach or supposed breach, or the grounds upon which such direction or order is necessary, as the case may be, and seeking such relief as the nature of the case may require.(2)An application may be made by any of the following persons:(a)the Attorney-General; or(b)a trustee of the trust; or(c) a person who is named in the instrument establishing the trust as a person who is entitled to, or may, receive money or other property for the purposes of the trust; or(d) a person who is named in the instrument establishing the trust as a person who must, or may, be consulted by the trustees before distributing or applying money or other property for the purposes of the trust; or(e) a person who has in the past received money or other property from the trustees for the purposes of the trust; or(f)a person of a class that the trust is intended to benefit; or(g) any other person who satisfies the Court that he or she has a proper interest in the trust.61—Application to be accompanied by affidavitAn application must be accompanied by an affidavit made by 1 of the persons making the application or a person who can swear positively to the facts, verifying the application and the grounds on which the proposed relief is sought.62—Application to be heard in open courtAn application must be heard in open court.63—Evidence may be brought by affidavit or otherwise(1)An applicant or other person appearing at the hearing of the application may bring before the court evidence by affidavit, or, if the court so directs, oral evidence, and the court may call on an applicant or other person appearing at the hearing of the application to prove before it, by affidavit or otherwise, as the court directs, such matters as the court thinks fit.(2)The attendance of any witness or the production of any document for the purposes of this section may be enforced by subpoena issued at the instance of the person requiring such attendance or production.64—Service of application and copy of affidavitThe application, together with a copy of the accompanying affidavit, shall be served upon the Attorney-General where the application is presented by some person other than the Attorney-General, and upon such other persons as the court may direct.65—Attorney-General may address court at hearingThe Attorney-General may appear and address the court, either personally or by counsel, at the hearing of the application.66—Person may address court with permission of JudgeWith the permission of the court, any person interested who has not been served with the application may appear and address the court on the hearing of the application, but shall not be allowed costs out of the trust funds unless the court so directs.67—Powers of court in dealing with applicationThe court may make such order on the application as to it seems just, or may refuse to make any order, or may direct that the right to the relief sought be determined in an action to be brought for that purpose.68—Court may order costsThe court may make such order as to costs as to the court may seem just, and may order an applicant to pay the adjudicated costs of any person appearing at the hearing in pursuance of section 66.69—Powers of Supreme Court may be exercised by a single JudgeThe authority and jurisdiction by this Act vested in the Supreme Court may, subject to any rules or orders of that court in relation thereto, be exercised by a single judge of such court.

Decision

Reasons for decision

For the reasons given above, it is not to the benefit or advantage of the Trust to empower the Trustees to transfer the assets of the Trust to another public ancillary fund.Conclusion I make the following orders:1Pursuant to an application made by the applicants under section 60 of the Trustee Act 1936 (SA), and pursuant to sections 60 and 67 of that Act, the Rotary Club of Adelaide Charitable Trust Fund be varied by replacing the terms of the Trust Deed dated 11 December 1968 with the terms set out in the replacement deed provided by the applicants to the Court on 15 December 2022 (the Replacement Deed) with effect on and from execution of the Replacement Deed by the applicants.2Liberty to apply to the applicants, the Trustee of the Trust or the Attorney-General to vary the terms of the Trust.

Ratio Decidendi

Legal Principle Established

Section 69B was introduced into the Act in 1980.[9] It has since been amended several times. The current version of the Act relevantly provides:[9] By the Trustee Act Amendment Act 1980 (SA).69B—Alteration of purposes of charitable trust(aa1)Subject to subsection (1), the purposes for which property is required or permitted to be applied in pursuance of a charitable trust may be altered by a scheme approved under this section.(a1)The powers of the trustees of a charitable trust in respect of which a trust variation scheme under this section may be approved by the Attorney‑General (on account of the operation of subsection (3)(b)) to manage or administer the trust may be altered by a scheme approved under this section.(1)The purposes for which property is required or permitted to be applied in pursuance of a charitable trust may be altered by a trust variation scheme in any of the following circumstances:(a)where the original purposes, in whole or in part—(i)have been as far as possible fulfilled; or(ii)cannot be carried out, or not according to the directions given and to the spirit of the gift; or(b) where the original purposes provide a use for part only of the trust property; or(c) where the trust property could be more effectively used if combined with other property applicable for similar purposes and administered jointly with that property; or(d)where it is not reasonably practicable having regard to—(i)the value of the trust property; or(ii)changes in circumstances that have taken place since the constitution of the trust; or(iii)any other relevant factor,to apply the trust property in accordance with the original purposes; or(e)where the original purposes, in whole or in part—(i)have been adequately provided for by other means; or(ii)have ceased to be charitable purposes; or(iii)have ceased to provide a suitable and effective method of using the trust property.…(3)A trust variation scheme may be approved, on the application of the trustee, by—(a)the Supreme Court; or(b) if the value of the trust property does not exceed $300 000 or another limit prescribed by regulation—the Attorney-General.(3a)The authority to which the application is made (ie the Supreme Court or the Attorney-General) is referred to in this section as the relevant authority.…(6)If the relevant authority is satisfied, on application under this section, that the variation of the terms of a trust proposed in a trust variation scheme—(a)accords, as far as reasonably practicable, with the spirit of the trust; and(b)is justified in the circumstances of the particular case,the relevant authority may approve the trust variation scheme and the approved scheme prevails over inconsistent provisions of a relevant instrument or declaration of trust.…(10)In this section—trust variation scheme means a scheme approved under this section for the alteration of a charitable trust. This Court has equitable power (referred to below) to direct a scheme (known as a cy-pres scheme) varying the purpose of a charitable trust if, due to a change in circumstances, the original purpose can no longer be achieved. Section 69B confers an independent statutory power on the Court to approve a scheme for the alteration of a charitable trust which involves a variation of its purpose.