Tasmanian Perpetual Trustees Limited v Attorney-General - [2015] TASSC 1

[2015] TASSC 1

COURT: SUPREME COURT OF TASMANIA

CITATION: Tasmanian Perpetual Trustees Limited v Attorney-General [2015] TASSC 1

PARTIES: TASMANIAN PERPETUAL TRUSTEES LIMITED
v

THE HONOURABLE BRIAN WIGHTMAN IN HIS CAPACITY AS THE ATTORNEY GENERAL FOR
THE STATE OF TASMANIA

FILE NO:  228/2013
DELIVERED ON:  29 January 2015
DELIVERED AT:  Hobart
HEARING DATE/S:  20 May, 29 July 2013

Additional written material – 26 February 2014

JUDGMENT OF: Wood J

CATCHWORDS:

Charities – Charitable gifts and trusts – When applied cy-prés – Generally – Statutory provisions – Whether it has become impossible, impracticable or inexpedient to carry out the original purposes of a trust for charitable purposes in whole or in part – Whether circumstances exist justifying variation of the purposes – Whether proposed scheme accords with the spirit of the original gift.

Variation of Trusts Act 1994 (Tas), ss5, 6.
Aust Digest Charities [98]

REPRESENTATION:

Counsel:
             Applicant:  J Otlowski
             Respondent:  T Foulds
Solicitors:
             Applicant:  Simmons Wolfhagen
             Respondent:  Director of Public Prosecutions

Judgment Number: [2015] TASSC 1
Number of paragraphs: 61

Serial No 1/2015
File No 228/2013

TASMANIAN PERPETUAL TRUSTEES LIMITED v
THE HONOURABLE BRIAN WIGHTMAN IN HIS CAPACITY
AS THE ATTORNEY GENERAL FOR THE STATE OF TASMANIA

REASONS FOR JUDGMENT WOOD J

29 January 2015

An application has been made to this Court pursuant to s 6 of the Variation of Trusts Act 1994 (the VTA). It is sought that a trust, created by a will made by Sarah Louisa Noake in Tasmania on 28 July 1908, and regarded as a charitable trust, be varied. In her will, the testatrix directed the trustees and executors to hold land owned by her in the township of Longford for the purposes of the trust, and to expend the residue of her estate building residences on that land. The residences were to be rented to "spinsters in poor circumstances", and the rent was to be merely the sum necessary to keep the residences in repair. If spinsters in poor circumstances were not to avail themselves of any or all of the residences, the residences were to be let generally, and the rental income was to benefit the Queen Victoria Hospital for Women in Launceston.
The will provided directions to the trustees and executors regarding the trust in the following terms:
"I DIRECT my trustees to hold my land at Longford for the objects and purposes of the Trust hereinafter contained I DIRECT my trustees to expend and utilize the residue of my estate and property in erecting and building on my land at Longford suitable residences or homes for spinsters in poor circumstances and to permit such spinsters to use and occupy such residences and homes for such time as regards any one or more of such spinsters as my trustees in their discretion deem advisable charging only therefor by way of rent a sum necessary to keep such residences or homes in repair and to enable my trustees to keep the same insured It is my wish but this shall not be obligatory or binding upon my trustees that my trustees utilize the said residences or homes for elderly spinsters in the same station in life as that which I am If my trustees at any time find it impossible to give full effect to the above trust in consequence of those whom I desire to benefit declining to use or avail themselves of such residences or homes then I AUTHORISE my trustees to let the said residences or homes or any of them for the time being unoccupied and to pay the rent received therefrom after deducting any money required to repair and keep in repair the said residences and homes to or for the benefit of the Queen Victoria Hospital for Women in Launceston Lastly I DECLARE that if for any reason any bequests or trusts contained in this my Will are declared void as not being proper charitable bequests or trusts or for any other reason whatsoever then and in such case I DIRECT my trustees to hold any property or monies affected by such bequests or trusts being declared void as aforesaid for charitable purposes"
The testatrix, Sarah Louisa Noake, is described in the opening words of her will as "of Launceston in Tasmania, Spinster". She died on 6 February 1910 and probate of this will was granted on 7 December 1910.
The land owned by the testatrix is close to the centre of the township in Longford in Latour Street. In 1925, seven heritage style cottages were built on the land. For decades, they were rented by spinsters. Over time, the numbers of spinsters in poor circumstances seeking to rent the cottages diminished; in recent times, there has been no such demand. Now the cottages are rented generally and the leases have been taken up primarily by elderly tenants in receipt of welfare payments.
Further, in the decades after the will was made, the Queen Victoria Hospital in Launceston went through various changes in name and funding and, ultimately, closed in 1995. The staff and services were incorporated into the Launceston General Hospital as the Queen Victoria Maternity Unit.
This application is brought by Tasmanian Perpetual Trustees Limited (TPTL) as executors of the estate, and the successors to the trustees appointed by the will. The applicant contends that the original purposes of the trust have become impracticable and impossible to carry out. The application is for orders varying the purposes of the trust, known as a cy-prés scheme, that is, a scheme that funds be applied as near (cy-prés) as possible to the original intention of the testatrix. The applicant applies for orders which, briefly stated, are that the property be sold, the funds be invested in a share portfolio, and the income from the portfolio benefit the maternity unit at the Launceston General Hospital.
The residences, the subject of the trust, are 1, 3, 5, 7, 9, 11 and 13 Latour Street. Longford is at the junction of the South Esk and Macquarie Rivers and is approximately 18 km south of the CBD of Launceston. The total area of the property is approximately 2,172m², and is located off the Village Green, adjacent to the Longford Bowls Club and "Carins Park".
The residences are single-storey federation-style cottages, constructed of brick and timber; six are conjoined, and driveways separate the four buildings. They each have timber floors, galvanised iron roofs and the interior linings are lath and plaster and timber. The cottage at 1 Latour Street has two bedrooms, and is 109m², while the other cottages contain one bedroom and range from 80 to 85m². Each cottage contains one bathroom, hallway, lounge room, kitchen/dining and a laundry. They each have a garden, garden sheds and a porch, and some have side porches. The buildings are all individually and permanently listed on the Tasmanian Heritage Register. The cottage at 1 Latour Street is described by the Heritage Council as follows:
"An asymmetrical, single storey, brick building with a corrugated iron hipped roof, boxed eaves and chimneys with corbelled tops. The projecting gabled wing to the front elevation has half-timbered effect infill, and pendant and finial, over two segmental-arch windows double-hung with large panes. To the rest of the elevation is a 12-paned window with moulded architraves, and a segmental-arch window double-hung with large panes. The door is in the side elevation. The rear elevation has a weatherboard extension with a separate skillion roof."
Originally, the cottages were managed in conjunction with the Longford Council, and applications to rent the cottages were made to the council and the trustee approved the selected applicants. Over the years, interest in renting the properties declined as they became dilapidated. In the 1960s, the property was mortgaged and the mortgage funds were used to renovate the buildings. They were more easily rented and the rents were used to repay the mortgage. The mortgage was fully repaid many years ago.
For the past 16 years, the renting of the cottages has been managed by a real estate agency, currently, Roberts Real Estate. Roberts have been instructed to, where possible, rent the properties to spinsters in accordance with the terms of the will.

The hearing

At the hearing, affidavits were provided in support of the application. The applicant relied upon the affidavit of Phillip Wayne Wheeldon, employed by the applicant as Senior Manager, Trustee Risk and Compliance. Annexed to his affidavit were various documents, including a residential valuation report of Doug Marshall dated 11 August 2010, concerning a valuation of the property at 1-13 Latour Street in Longford. Also annexed was a report of Brett Woolcott, land surveyor, dated 21 January 2013. An affidavit of David McMeniman, financial planner, was also provided and annexed a statement of financial advice regarding the property and a proposed investment portfolio.
The Attorney-General was represented and did not oppose the application or seek to bring any additional matters to the Court's attention in evidence or submissions. In response to matters raised with counsel during the hearing, a more recent report was arranged by the applicant and provided by Mr Marshall regarding the costings for repairs and maintenance, and the anticipated market rental for the cottages once repairs had been undertaken. The hearing reconvened when the report was tendered, and I had the benefit of further submissions from counsel.

Difficulties identified by the applicant

The affidavit of Phillip Wheeldon notes a number of difficulties faced in managing the properties. Roberts have found it increasingly difficult to find spinsters to rent the cottages to. This difficulty is further exacerbated by the cottages' location in Longford, said by Mr Wheeldon to have a limited population of spinsters. I observe that it does not appear from the affidavit that Roberts has made any enquires to find spinsters or taken any steps other than receive applications.
According to information collated in 2010, the cottages were fully leased. As noted, most of the tenants were elderly, single persons in receipt of a welfare payment, and presumably the rent charged has been modest. The total rent received for the financial years ending 2010 to 2012 was $36,585, $37,160 and $30,690 respectively. (There is no explanation given as to why there was a significant decrease in rent received in 2012). The rents received have been retained to meet the maintenance and repair of the residences, as provided for in the will. The account statement of the estate of the deceased dated 22 March 2013 shows a balance of $104,519.51.
The cottages require significant repair. The details are contained in the valuation reports of Mr Marshall dated August 2010 and July 2013. In the financial year ending 2012, an amount of $12,983.74 was spent on repairs and maintenance, including internal repainting of three of the cottages. However, all cottages require some external repair to varying degrees. Some of the timbers are rotting and need replacing; window frames, timber cladding and trims, including barge boards and facia boards, need repainting with proper surface preparation. Cracks in the internal walls need repairing in four of the cottages. There are some cracks in the external brickwork of several cottages and underpinning is required for one of them. One cottage requires maintenance of roofing iron. It is recommended that four of the cottages be repainted internally, and that two residences be provided with new floor coverings. The estimated cost is a total of $51,000. The installation of heat pumps in each of the residences is recommended, in addition to insulation, the combined cost of which would be less than $5,000 per residence. More recently, asbestos was discovered in six of the residences. The cost of remedial work required has been assessed by an asbestos consultant at $1,732.50, with an annual inspection cost of $93.50 per residence (a total of $561 per annum).
If all repair and maintenance works are done, it is expected that the appropriate rent for the cottages would be $200 per week for 1 Latour Street, and between $135-$145 per week for the other cottages.
The affidavit of Mr Wheeldon notes that the applicant may have difficulty borrowing funds. However, it is noted that the applicant had no difficulty borrowing funds in the 1960s, when the property was mortgaged to pay for renovations. Any such difficulty does not seem to be of any significance at this stage. While Mr Wheeldon's affidavit, pre-dating Mr Marshall's 2013 report, indicated that there are insufficient funds to repair the residences, it is evident from the information available to the Court that all of the recommended repairs and maintenance could be implemented at a total cost of less than $104,000, being the amount held in the account of the estate.
A separate difficulty mentioned in Mr Wheeldon's affidavit concerns the closure of the hospital referred to in the will. Presumably this difficulty, and the inability of the trustee to deliver the surplus income to the hospital for many years, has led to the build-up of funds in the account of the estate. It is plain from the outset that the aspect of the proposal allowing funds to reach the Queen Victoria Maternity Unit, in lieu of the hospital, may be implemented, even if the more comprehensive proposed scheme is not approved.

The proposed scheme

Mr Wheeldon, in his affidavit, states that, as the intention to benefit spinsters is no longer practical, and the remaining purpose of the trust is to benefit the Queen Victoria Hospital for Women, this could be better achieved by selling the cottages and investing the sale proceeds in a diversified investment portfolio.
It is contended that this proposal would result in more income for the hospital than would be achieved by renting the cottages. The comparator is the rate of rental return for the cottages for years 2010-2012. Having regard to the gross rent, and total outgoings (including agent management fees and expenses, rates, water and sewerage, land tax and repairs and maintenance), the returns from the houses are a total of $20,923.85 in 2010, $21,819 in 2011 and $3,386.98 in 2012. It may be noted that in 2012, the gross rent received was less than the other two years for reasons unexplained, and the return was diminished by money spent on repairs and maintenance. Mr Wheeldon highlights in his affidavit that the rates of return for these years are less than the rates of several managed funds operated by the applicant.
To achieve the proposed scheme, the residences would be sold. Mr Marshall has provided a valuation for the property. While it is recommended by the valuer, Mr Marshall, that the identified repairs be undertaken before the property is sold, the market value of the property "as is" is held to be between $650,000 and $710,000. It is noted that if the property could be converted to stratum titles and the cottages sold in a staged release, then the sale price would be greater. Brett Woolcott advises that this could be done, although a subdivision is required to separate the land containing the two bedroom cottage from the land with the conjoined cottages. The conjoined cottages would then be the subject of a strata title development. Development of the site would be subject to council approval and approval from the Heritage Council. There are costs associated with the subdivision and the strata survey. Some of these costs have been provided by Mr Woolcott in his report.
Mr McMeniman has provided an affidavit relevant in this context. According to his affidavit, he has been involved in the financial market since the early 1980s. He has worked with stockbroking firms as an equity advisor and as a certified financial planner. Since 5 July 2006, he has been employed as a financial advisor with the applicant, and is responsible for providing financial advice for the management of estates administered by the applicant.
Mr McMeniman was requested by Mr Wheeldon to prepare a theoretical investment portfolio, assuming a capital sum of $680,000 to invest. The hypothetical investment assumes a portfolio in a broad range of assets to achieve diversified growth. The theoretical portfolio is purely representative of the typical assets and asset weightings within a growth portfolio managed by the applicant. The annual income projection for such a diversified portfolio is $37,797. As noted by Mr McMeniman in his statement of advice, this is an increase of slightly more than 73% when compared to the 2011 net rental return of $21,819. Mr McMeniman adds that, as well as the increase in income generated by the theoretical portfolio, the portfolio diversifies the risk in the trust when compared against the risk inherent in a single asset, being real property in Longford.

The application for orders

Against these facts, the applicant seeks the Court's approval of a scheme involving maximising the sale price of the property, by subdividing and converting to strata titles, and then selling the cottages and investing the funds raised in a share portfolio to provide a perpetual income stream, used for the benefit of the Queen Victoria Maternity Unit.
The applicant applies for orders implementing that scheme:
"1 THAT pursuant to Section 6 of the Variation of Trusts Act 1994 the trust created by the deceased's Will dated 28 July 1908 be varied as follows:
(a)That the Applicant be authorised to sell the property at 1-13 Latour Street Longford in Tasmania more particularly described in Certificate of Title Volume 156292 Folio 1 by public auction or by private treaty.
(b)That prior to the sale of the property the Applicant be permitted to take such action as it deems necessary to maximise the sale price of the property including but not limited to subdividing the property and strata titling the units on the property.
(c)That the proceeds of the sale be invested by the Applicant and that the income from the investment of the sale proceeds be paid to the Respondent with a direction that the funds be paid to the Launceston General Hospital to be used for the benefit of the Queen Victoria Maternity Unit at the said hospital or alternatively that the income be paid to a special purpose account operated by the Launceston General Hospital with the funds to be applied for the benefit of the Queen Victoria Maternity Unit of the Launceston General Hospital."

The statutory scheme – determination of the application

The application for orders varying the trust is made pursuant to the VTA, s 6, which enacts a "statutory cy-prés" regime. If the Court is satisfied that circumstances exist justifying the variation of the purposes under a charitable trust, the Court may approve of a scheme varying the purposes. Before the Court's jurisdiction may be exercised approving a variation of the purposes of the trust, it is necessary for the application to satisfy the requirements of the VTA. The key provisions of the VTA are ss 5 and 6. Section 6 sets out the Court's power to vary charitable trusts:
"(1) If, on application by the trustees, the Court is satisfied that circumstances exist justifying the variation of the purposes for which property may be applied under a charitable trust, the Court may approve of a scheme varying the purposes for which the property is required or permitted to be applied under the trust."
It can be seen from the terms of s 6 that it is essential to the Court's jurisdiction that the trust be a charitable trust. The Court must be satisfied that the purposes specified in the trust are charitable. According to the terms of s 6, the Court must also be satisfied that circumstances exist justifying the variation. These circumstances are set out in section 5. The relevant parts of the section are set out below, noting that in this case the applicant relies on s 5(3)(a)(ii).
"(2)   If it has become impossible, impracticable or inexpedient to carry out the original purposes of a trust for charitable purposes in whole or in part, an application may be made for a variation of those purposes by a scheme approved under this Part.
(3)   Without limiting the generality of subsection (2), an application for a variation of trust may be made in the following circumstances:
(a)if the original purposes, in whole or in part —
(i)    have been as far as possible fulfilled; or
(ii)   cannot be carried out, either at all or according to the directions given or to the spirit of the gift;
(b)if the original purposes provide a use for a part only of the trust property;
(c)if the trust property could be used more effectively if combined with other property applicable for similar purposes and administered jointly with that property;
(d)if it is not reasonably practicable to apply the trust property in accordance with the original purposes having regard to —
(i)    the value of the trust property; or
(ii)   changes in circumstances; or
(iii) any other relevant factor;
(e)if 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."

In addition, the requirement for a general charitable intention is preserved if that is required at general law: s 5(4).
If the Court is satisfied that there are circumstances existing which justify the variation of the charitable trust, then the Court has power to approve of a scheme providing s 6(3) is met:
"(3) The Court must not approve of a scheme under this section unless of opinion that the scheme accords as far as reasonably practicable with the spirit of the original gift."
In this case, there are three statutory criteria which must be met before the charitable trust may be varied as sought in the application:
·     The purpose(s) specified in the trust must be charitable;
·     It must have become impossible, impracticable or inexpedient to carry out the original purposes of the trust, in whole or in part. In particular, it must be the case that the original purposes, in whole or in part, cannot be carried out, either at all or according to the directions given or to the spirit of the gift; and
·     The proposed scheme must accord as far as reasonably practicable with the spirit of the original gift.

Charitable purpose

It is essential to a charitable trust that the purpose of the trust is charitable. The term "charitable" appears in s 6 but is not defined. It has a legal meaning, a general law concept which applies: Commissioners of Income Tax v Pemsel [1891] AC 531 at 580 and Swinburne v Federal Commissioner of Taxation (1920) 27 CLR 377 at 384. The Preamble of the Elizabethan Statute Of Charitable Uses 1601 sets out a list of charitable purposes. Relevant here, the list includes "relief of aged, impotent and poor people".
In Commissioners of Income Tax v Pemsel at 583, Lord Macnaughten set out a classification of charitable objects with reference to the list in the Preamble. This classification is the guiding statement of purposes recognised as charitable at law:
"'Charity' in its legal sense comprises four principal divisions: trusts for the relief of poverty; trusts for the advancement of education; trusts for the advancement of religion; and trusts for other purposes beneficial to the community, not falling under any of the preceding heads."
The provision of "residences or homes for spinsters in poor circumstances" is clearly a charitable purpose. The direction is for spinsters to be charged rent, being a sum necessary to keep such residences or homes in repair and insured. The fact that an amount by way of rent is charged does not alter the charitable nature of the purpose, or render the trust one which is not a charitable trust: In re Cottam [1955] 1 WLR 1299; [1955] 3 All ER 704; Re Payling's Will Trust [1969] 1 WLR 1595; [1969] 3 All ER 698; Hilder v Church of England Deaconess' Institution Sydney Ltd [1973] 1 NSWLR 506.
As for the Queen Victoria Hospital for Women, such a hospital falls within the fourth division of charitable bequests as classified by Lord Macnaughten, being for "other purposes beneficial to the community". It is clearly established in Australia and England that a gift for the purposes of a hospital is prima facie a good charitable gift: In re Resch's Will Trusts [1969] AC 514 at 540, Taylor v Taylor (1910) 10 CLR 218 at 227 per Griffith CJ.

Is it impossible, impracticable or inexpedient to carry out the original purposes of the trust?

The applicant's case is that the original purposes cannot be carried out because spinsters in poor circumstances cannot be found to rent the cottages, and the income cannot be paid to the Queen Victoria Hospital for Women as that hospital no longer exists. It is submitted that in considering a scheme enabling the income to be applied to the benefit of the Queen Victoria Maternity Unit, given the age and condition of the cottages, it may be a more expedient or practicable use of the property to sell it, and invest the funds to provide a perpetual income stream for the charitable beneficiary. It is submitted that if a cy-prés scheme is approved which allows the income to be paid to the Launceston General Hospital for the purposes of the Queen Victoria Maternity Unit, then the best way to maximise the return to the maternity unit is the proposed scheme. This is supported by Mr Wheeldon's affidavit. He points to the difference in rental return for the years 2010–2012 and the expected return from the hypothetical diversified share portfolio.
The starting point is s 5 of the VTA and whether circumstances exist which justify a variation to the trust. Section 5(2) is relied on, and it must be established that it has become impossible, impracticable or inexpedient to carry out the original purposes of the trust. The applicant does not contend in this case that the higher potential return of a share portfolio bears on s 5 considerations. The submission seems to be that efficacy of return arises subsequently, when the Court is considering whether the scheme should be approved.
In demonstrating that circumstances exist justifying a variation, the applicant relies on s 5(3)(a)(ii). To fall within s 5(3)(a)(ii) it must be the case that the original purposes, in whole or in part, cannot be carried out. Is this provision enlivened here? The trust has named two charitable purposes, "spinsters in poor circumstances" and the Queen Victoria Maternity Hospital. Is it the case that, within the terms of s 5(3)(a)(ii), the part of the original purposes relating to spinsters, cannot be carried out?
I proceed on the factual basis that spinsters in poor circumstances are not seeking to rent the cottages. It is unsurprising that, due to historical reasons, there is reduced demand from spinsters. "Spinster" means an unmarried woman, especially one advancing in years. Generally, the term applied to a woman who was unmarried at an age past child bearing years; implicit is that she was also childless. The term was appended to the names of women as the proper legal designation of one unmarried and, as such, it was appended to the name of the testatrix in her will. This is uncommon now. In today's society there would be far fewer women who would identify as spinsters. The term lacks currency and is not consonant with community attitudes. However, I have some reservations about whether it is impossible or impracticable for spinsters in poor circumstances to be located. Whilst the term has fallen out of modern usage, it does not mean that there is not a category of women who qualify as spinsters in poor circumstances. Enquiries may well be made to identify needy women who qualify. It occurs to me that organisations such as The Country Women's Association of Tasmania, with its objects of promoting the interests of women living in rural circumstances, its grass roots connections with women living in rural Tasmania, as well as its experience in managing holiday accommodation, may be a helpful resource in locating eligible tenants. There is insufficient evidence for me to be satisfied that there is not more that could reasonably be done in endeavouring to fulfil this purpose.
Nevertheless, I proceed on the assumption, without deciding the point, that presently the trustees cannot rent the cottages to spinsters in poor circumstances. Does that mean that s 5(3)(a)(ii) applies? I decide that it does not. Significantly, the will provides for that very contingency and authorises the trustees to let the cottages and to pay the rent for the benefit of the hospital.
This trust is unlike others which make provision for more than one charity to receive mutual benefit. Here, there are two charitable purposes, but one of those, the hospital, only benefits if the other cannot be carried out. Thus the purpose of the trust is solely to benefit spinsters in poor circumstances if they avail themselves of the residences, and it is only if that cannot be achieved in relation to any or all of the residences that the purpose of benefitting the hospital comes into play. In this eventuality, the trust purposes are not impracticable or impossible, in part, as the trust provides for this, and the trust is operating according to its original purposes. Put another way, if not for the problem regarding the hospital, identified in the submissions, the original purposes could be fulfilled in whole.
I conclude that, given the terms of the trust, with provision for the use of the property in the event that spinsters do not rent the cottages, s 5 is inapplicable. It is not the case that the original purposes cannot be carried out. The terms of the will provide what should occur in the event of this contingency and it could not be said that it has become impossible, impracticable or inexpedient to carry out the purposes of the trust in this regard.
Consequently, it is my conclusion that, pursuant to s 5(3)(a)(ii), these are not circumstances where the original purposes cannot be carried out in the respect alleged. Further, having regard to the more general terms of s 5(2), it has not become impossible, impracticable or inexpedient to carry out the original purposes of the trust, in this part. Additionally, having regard to the terms of s 6, there could not be said to be circumstances justifying the variation when the terms of the gift made provision for those very same circumstances.
The situation is different with regard to the purpose of benefitting the Queen Victoria Hospital for Women.
The history relating to the Queen Victoria Hospital for Women in Launceston is as follows:
·     The hospital opened as the Queen Victoria Hospital for Women in 1897 and was self-supporting through fees and private grants.
·     The hospital received increasing government funding through until 1952, when the State Government became responsible for the hospital, at which time it was named the Queen Victoria Maternity Hospital.
·     It was known as the Queen Victoria Maternity Hospital until 1972 – at which time, due to a transfer of gynaecological services from the Launceston General Hospital, it became the Queen Victoria Hospital.
·     Management of the hospital was transferred to the Board of the Launceston Public Hospitals District in 1987.
·     In 1995, the hospital was closed and ceased to exist. Hospital staff and services were transferred to a wing of the Launceston General Hospital – the Queen Victoria Maternity Unit.
As for the legislative history, counsel for the applicant drew to my attention to the Queen Victoria Maternity Hospital Act 1952. By virtue of s4 of that Act, the Queen Victoria Hospital was to continue as an institution for the care and nursing of mothers (including expectant mothers) and their babies under the new name of the Queen Victoria Maternity Hospital. The applicant referred particularly to s 28, which provides that, "Where, before the appointed day, any gift at law or in equity by deed, will, or otherwise, to or for the benefit of the 'The Queen Victoria Hospital for Women' … the gift shall been deemed to be a gift to or for the benefit of the Hospital [the Queen Victoria Maternity Hospital]". The legislation demonstrates that with the further name change in 1972 (reverting to the Queen Victoria Hospital), the purpose of the hospital embraced that of the former and it was to continue as an institution for the care and nursing of mothers (including expectant mothers) and their babies, as well as extending its services to women with gynaecological conditions: Queen Victoria Hospital Act 1971, s5.
As the Queen Victoria Hospital for Women in Launceston no longer exists, the trustee has not been able to distribute surplus income as directed under the will after the deduction of maintenance and repair costs.
Section 5(3)(a)(ii) is established due to the difficulty with the hospital, and only in that regard. I cannot help but observe at this preliminary stage that any impossibility of benefitting the hospital could warrant little more than a corrective variation to the trust to identify the successor to the hospital to allow the rental income to flow to the successor.As the only difficulty with the original purposes lies with the hospital, then the corrective steps may be very modest.

The proposed scheme and the spirit of the gift

Circumstances exist justifying the variation of the purposes with respect to the hospital and there is therefore a need to consider the proposed variation. In considering this matter, the Court must have regard to whether the scheme accords, as far as practicable, with the spirit of the original gift. The Court is concerned with the basic intention underlying the gift: Melbourne Anglican Trust Corporation v Attorney-General [2005] VSC 481, per Gillard J at [31]-[32] and [53].
The contention is that, as there is impossibility in carrying out the original purposes of the trust, the Court should approve the scheme proposed. To my mind, the issue of the proposed scheme is simply answered. The terms of s 6 which grant power to approve of a scheme provide that the Court's power to vary is dependent on being satisfied that circumstances exist "justifying the variation".
The circumstances with regard to the impossibility of distributing the surplus income to the hospital justify a variation in a corrective sense to enable income to be distributed to the appropriate institution. The circumstances do not justify the wholesale scheme proposed by the applicant, as, for the reasons I have explained, the difficulty with spinsters not renting the cottages is provided for in the terms of the gift and could not amount to impossibility or impracticability of carrying out the original purposes. I add that it would seem discordant with the general law and principles of equity to make a wholesale variation when a corrective measure is all that is required to give effect to the original purposes.
Section 6(3) provides that the Court is precluded from approving of a scheme unless the Court was of the opinion that the scheme accords, as far as reasonably practicable, with the spirit of the original gift. It is noteworthy that the cottages were not in existence before the will was made. According to the directions to the trustees, the residual estate, which must have been considerable, was to be expended on erecting purpose-built accommodation, "suitable" for poor spinsters. In the event that the hospital was to benefit, the original purpose was for it to receive the benefit of rent, with the cottages remaining in existence.
The spirit of the gift was not merely to result in benefit to the hospital or to maximise that benefit. The spirit of the original gift seems to have been to preserve the possibility of providing accommodation for spinsters in poor circumstances, even if none of the houses could be rented to spinsters, and even if there was, at the time in question, no tangible prospect of any being let to spinsters. A share portfolio with an income stream severs any possibility of any assistance to spinsters in the future. I conclude that the proposed scheme does not accord with the spirit of the gift.
I add that, in another respect, the proposal does not accord with the real intention behind the original purposes. It appears from the terms of the will that the deceased had a family connection to the township of Longford. The Noake family had a vault tomb and enclosure in the Longford Church yard; the terms of the will provided for the expenditure of a sum on repairing and renovating the tomb and enclosure during and within 21 years of the testatrix's death. The construction of houses in the township for a charitable purpose provided an enduring and substantial legacy to the deceased and her family name in the township. The proposed scheme would spell an end to that legacy.
In relation to the proposed variation with respect to the hospital, I am satisfied that it accords, as far as reasonably practicable, with the spirit of the original gift. The Maternity Unit of the Launceston General Hospital has taken over the work of the hospital in Launceston and is a like institution. It is the successor to the hospital in key respects: in terms of its purpose, the nature of the services it offers and delivery of those services to the benefit of the public.
It will be evident that I have not considered the matter of whether a general charitable intention is required. It was not contended that, in the circumstances of this case, it is a requirement of the general law and applicable here by virtue of s5(4) of the VTA, but for the sake of completeness I mention it. The key factor is that the institution was in existence at the time of the testator's death. In such cases, the Court has jurisdiction to order a cy-prés scheme without the need to find a general charitable intention: Re Slevin; Slevin v Hepburn [1891] 2 Ch 236; In re Findlay’s Estate (1995) 5 Tas R 333 at 341-2. I add that if it was necessary to find a general charitable intention, I would find that it was clearly revealed by the words of the will.
What is left to consider is the relatively poor rental return versus the income from a share portfolio and what, if any, relevance this has. The projected income from the hypothetical share portfolio is $37,797, while the net income from rent, taking the 2010 and 2011 financial years as examples, is in the vicinity of $21,000 per annum. It is this comparison which is relied upon to justify the more comprehensive proposal of selling the property and investing in a share portfolio. It is submitted that this is a relevant consideration in the context of the Court's task of contemplating approving the proposal. For the reasons I have mentioned, I am not satisfied that the proper exercise of discretion to vary the scheme should take account of this consideration in light of the limited nature of the difficulty in fulfilling the trust purposes found to exist, and that this consideration is not relied upon as circumstances justifying the variation pursuant to s 5. I add that it is now clear that, in any event, the difference in expected income is nowhere as stark as it seemed before the more recent report from Mr Marshall. I pause to illustrate this.
Based on the figures of rental income provided in Mr Marshalls' 2013 report, the future gross rental income, once repairs and maintenance have been carried out, would be approximately $54,080 per annum. This assumes rent of $140 per week for six cottages, and $200 for the larger cottage (and full occupancy). Assuming outgoings of approximately $16,500 per annum, which takes account of outgoings in the most recent financial year provided (2012), and allows $2,000 for repairs and maintenance as an annual average cost, then the net return is $37,580 per annum. This is comparable to the projected annual income of the share portfolio of $37,797. It is not possible to achieve precision in the comparison. The amount invested may be higher or lower than projected. The share portfolio may perform better or worse than expected; rental income may be higher or lower. There is no precision in the costings involved in implementing the proposal. Not all of the costs associated with subdividing and a strata title development have been provided, and the costings that have been provided could be higher than expected. Both the proposed scheme and the status quo is expected to result in asset growth, but comparison of the potential growth of each is beyond the sort of exercise that can be undertaken here. Similarly a comparison of the risks involved in the proposed scheme versus the status quo is not possible. While Mr McMenamin speaks of the proposal avoiding the risk of having the investment in one asset, being the property at Longford, history teaches us that an investment in a diversified share portfolio is not without risk.
The conclusion I reach on the information before me is that implementation of the proposed scheme would be likely to result in an income stream comparable to the income produced by renting the cottages.

Before leaving the issue of the proposed scheme, I note that it would undoubtedly be more convenient to the trustee to manage a share portfolio than the property at Longford. This is not pressed by the applicant as a consideration in advancing the proposed scheme, which is appropriate given the statutory prominence to the spirit of the gift and also public policy considerations at stake, including the importance of promoting charitable gifts.

Conclusion

I am satisfied that a limited variation to the purposes specified in the trust should be approved. Surplus rental income should be applied under the trust so that the Queen Victoria Maternity Unit at the Launceston General Hospital receives the benefit of the funds, instead of the now non-existent Queen Victoria Hospital for Women. For the reasons I have given, I do not approve the other aspects of the proposed scheme.

Outcome

Mr Wheeldon has caused enquiries to be made with the Launceston General Hospital and has been advised that a special purpose trust account can be created in the books of the Launceston General Hospital to receive income distributions from the trust, with the funds to be applied for the benefit of the Queen Victoria Maternity Unit of the Launceston General Hospital. This seems prudent and I will hear from the parties as to the appropriate terms of the order to reflect this course. In light of the nature of this jurisdiction, and in case there is any other matter that should be drawn to my attention, I will give the parties an opportunity to be heard generally as to the application and the orders to be made.