THE UNIVERSITY OF ADELAIDE

Supreme Court of South Australia
(Civil)
THE UNIVERSITY OF ADELAIDE
[2023] SASC 8
Judgment of the Honourable Auxiliary Justice Dart
CHARITIES - CHARITABLE GIFTS AND TRUSTS - WHEN APPLIED CY-PRES
EQUITY - TRUSTS AND TRUSTEES - APPLICATIONS TO COURT ON ORIGINATING PROCESS
The Maurice Holtze Trust was created by a bequest in a will - the Trust is for the purpose of research into botany - it is a charitable trust - the Chairman of the Department of Botany was appointed to determine use of the funds - the Department of Botany has been merged with other departments - the position of Chairman of the Department of Botany no longer exists - the applicant seeks to vary the terms of the Trust to accommodate the applicant's current administrative arrangements - the Court has an inherent jurisdiction to vary the administrative arrangements of a charitable trust - it is appropriate to make the variation sought - Trust funds were used as part-funding of a DNA laboratory established in 2005 - the use of funds in that way was possibly a breach of trust - the applicant seeks to be relieved from liability for any breach of trust - the provisions of s 56 of the Trustee Act give the Court power to relieve a trustee for a possible breach - the applicant acted honestly and reasonably - it is appropriate to grant relief to the applicant in respect of possible liability for breach of trust.
Held:
1. The terms of the charitable trust are to be varied in the terms sought in the application.
2. The applicant is excused from liability for any breach of trust arising from the application of the sum of $200,000 from the Maurice Holtze Trust towards the construction of the DNA laboratory.
Trustee Act 1936 (SA) s 56, s 64 and s 69B, referred to.
Taylor v Taylor (1910) 10 CLR 218; Re Lowin (deceased) [1967] 2 NSWR 140, applied.
Baptist Churches of South Australia Inc & Anor v Attorney-General for the State of South Australia [2018] SASC 14; JD & KZ Zohs Properties Pty Ltd v Ferme & Anor [2015] SASC 55; University of Adelaide v Attorney-General (SA) [2018] SASC 82, considered.

THE UNIVERSITY OF ADELAIDE
[2023] SASC 8

The University of Adelaide (“the University”) applied for certain declarations and orders in respect of the Maurice Holtze Trust (“the Trust”). The application is granted. These are the reasons for allowing the application.
Background
By her will dated 31 October 1979 Mrs Kathleen Isobel Bates gifted a pecuniary legacy to the University. The exact terms were as follows:[1]
AS TO a pecuniary legacy of SEVENTY-FIVE THOUSAND DOLLARS ($75,000) to the UNIVERSITY OF ADELAIDE for the establishment of a fund for research into botany to be known as the MAURICE HOLTZE FUND to the intent that the income of such fund shall be used as the Chairman of the Department of Botany of that University shall from time to time determine AND I DECLARE that the receipt of the Registrar Bursar or other authorised officer for the time being of the said Institution shall be a good and sufficient discharge to my Trustees for the said legacy.
[1] Affidavit of Marc Davies filed 9 September 2022, FDN3, at [6].
The gift in the will created a charitable trust. A gift for scientific research falls within the charitable pursuit of the advancement of education.[2] The University is the trustee of the Trust.
[2] Taylor v Taylor (1910) 10 CLR 218.
The evidence discloses that Dr Maurice Holtze was the grandfather of the testator. He was born in Hanover in 1840 and died in Adelaide in 1923. He was for 25 years the Director of the Adelaide Botanic Gardens. Prior to that he had been the curator of the Port Darwin Botanic Garden for nearly 20 years. Records disclose that, during the period that Dr Holtze was the Director of the Botanic Gardens, that organisation had a close relationship with the University’s Department of Botany.
The testator died in 1982. At that time the University had a Department of Botany and taught botany as a stand-alone subject. There was at that time a Chairman of the Department of Botany.
The University’s Finance Committee held a meeting on 28 May 1982. It recommended the acceptance of the bequest. A cheque was provided to the University’s bursar under cover of a letter dated 5 July 1983. The monies were invested in the University’s composite fund. By letter dated 11 October 1983 the University’s bursar wrote to the executor’s solicitors advising that an account entitled “Maurice Holtze Fund” had been established in the books of the University. Further, that the income earned on the principal would be made available expenditure on the recommendation of the Chairman of the Department of Botany.
In or about 1999 the University’s Department of Botany and the University’s Department of Zoology merged, to become the Department of Environmental Biology. Accordingly, both the Department of Botany and the position of Chairman of the Department of Botany ceased to exist. This application is necessary because the University no longer has a Department of Botany, botany is no longer taught as a stand-alone subject and the position of Chairman of the Department of Botany no longer exists.
It appears that between 1984 and 2004 approximately $11,162.52 of the income generated by the fund was applied by the University. Other than that expenditure, it appears that all income during that period was reinvested in the fund. As a consequence, as at 31 December 2004, the value of the Maurice Holtze Trust was $273,006.38.
The next relevant event is that in 2005 the University was considering the establishment of a major research facility in the Botanic Gardens. It was to be a laboratory for the study of ancient DNA. Enquiries were made as to whether monies in the Maurice Holtze Fund could be applied for that purpose. Over a period, discussions took place at the University about the appropriateness or otherwise of using capital and/or income of the Maurice Holtze Fund.
On 26 September 2005 the University approved the use of $866,600 of its funds for the development of a DNA research laboratory. The proposed site of the laboratory was in Tram Barn A, which is located on Crown land in the Adelaide Botanic Gardens. Later in 2005 a deed for the lease of the site was executed between the University, the Board of the Botanic Gardens and the relevant Minister. The site remains under the care and control of the Board of the Botanic Gardens.
The University contributed the amount referred to above for the development of the DNA research laboratory. The Minister undertook to carry out and complete the works at his sole discretion. The total cost of the works was approximately $1.701 million. $200,000 of the University’s contribution came from monies held in the Maurice Holtze Trust.
The DNA laboratory was completed in about December 2005. The research conducted at the laboratory since that time can be assigned as to 40% human research, 40% animal research and 20% environmental research. The last of those research categories relates to botany.
There has been no expenditure from the Maurice Holtze Trust since 2005. Presently, the balance in the Maurice Holtze Trust is $479,180.84. The principal issue for consideration relates to the ongoing administration of the Trust.
The second issue is that the University seeks, to the extent necessary, to be relieved from any liability for breach of trust if the use of the $200,000 of trust income to fund the DNA laboratory was in fact a breach.
An application in respect of a charitable trust must be served on the Attorney‑General.[3] The Attorney-General was served with the application. The Attorney-General appeared and made written and oral submissions to the Court. Generally, they are supportive of the application.
[3] Trustee Act 1936 s 64.
The first issue
The first issue relates to the ongoing operation of the Trust. It arises because the Department of Botany has been abolished as a stand-alone department since the creation of the Trust and there is no longer a Chairman of the Department of Botany. The University was the trustee of the Trust but the Chairman of the Department of Botany was the officer of the University given the power to determine the use of the Trust funds.
The first issue is administrative. It relates to how the Trust is to operate in the present circumstances.
The applicant seeks to vary the Trust in the following terms:
3.1 The operative provisions of the [Trust] are varied such that:
3.1.1 the corpus of the fund shall be held in perpetuity for the purpose of research into botany as defined by its ordinary and natural meaning, which includes the scientific study of plants, including their anatomy, morphology, physiology, biochemistry, taxonomy, cytology, genetics, ecology, evolution, and geographical distribution; and
3.1.2 the income of the fund shall be applied for the above purpose as the University shall from time to time determine.
The application is made on two bases. The first is pursuant to the Court’s inherent jurisdiction in respect of the administration of charitable trusts. The second basis is statutory. The applicant relies on the following section of the Trustee Act 1936:
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.
(2) References in this section to the original purposes of a charitable trust shall be construed, where the purposes for which the trust property is required or permitted to be applied have been altered or regulated by a scheme or otherwise, as referring to the purposes for which the property is for the time being required or permitted to be applied.
(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.
(4) However, the Attorney-General has a discretion to refer an application to the Supreme Court if the application raises questions that should, in the Attorney-General's opinion, be decided by the Court.
(5) Notice of an application for approval of a trust variation scheme must be given as the relevant authority directs.
(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.
(7) The reasonable costs of an application under this section are payable at the direction of the relevant authority from the trust property.
(8) In the case of an application decided by the Attorney-General, the costs—
(a)     are to be fixed by the Attorney-General; and
(b)     may include costs payable to the Crown to defray the cost of investigating and deciding the application; and
(c)     may be recovered as a debt.
(9) The Attorney-General must keep available for public inspection a register of approvals given by the Attorney-General under this section.
(10) In this section—
trust variation scheme means a scheme approved under this section for the alteration of a charitable trust.
The statutory provision is appropriate where there is a need to alter the purposes for which property held by a charitable trust may be applied. I am not satisfied that it is necessary to have regard to the statutory provision to resolve this matter. The original purpose of the Trust was the pursuit of the study of botany. That purpose is still able to be satisfied. There is no need to alter the purpose of the Trust. The matter can be appropriately dealt with in the Court’s inherent jurisdiction.
In Baptist Churches of South Australia Inc & Anor v Attorney-General for the State of South Australia[4] Stanley J discussed the distinction between the operation of s 69B and the Court’s inherent jurisdiction:[5]
[4] [2018] SASC 14.
[5] [2018] SASC 14, [25]-[32].
Section 69B only empowers the Court to vary the purposes of a charitable trust, in the sense of the objects to be benefited by the charity. The purposes do not include provisions dealing only with administration or the machinery for carrying out the trust purposes.
The Court’s power to complement a variation pursuant to s 69B of the Trustee Act, by providing the appropriate machinery to render trust purposes operable, derives from its inherent jurisdiction.
In Chinachem Charitable Foundation Ltd v Secretary for Justice & Ors, Lord Walker NPJ observed:
The court has an inherent jurisdiction over the administration of charitable trusts, originally based on the notion of the sovereign as parens patriae (parent of the nation). This jurisdiction could be invoked by the Attorney General … as the sovereign’s forensic representative. Where the court exercises its jurisdiction to clarify or modify the purposes of a charitable trust, or to improve the administration of a charitable trust, it does so by making a scheme – that is, a written instrument approved by the court to regulate, in whole or in part, the future management and administration of the trust.
The power to make schemes is an aspect of the Court’s special jurisdiction in respect of charitable trusts, which is more extensive than the limited inherent jurisdiction to vary the terms of ordinary trusts.
Schemes fall into two broad categories: (1) those that alter the purposes of a charitable trust (cy-près schemes); and (2) those that alter the administrative provisions of a charitable trust (administrative schemes).
Conceptually, the distinction is between means and ends. An administrative scheme clarifies, supplements or alters the machinery for the carrying out of existing charitable objects. A cy-près scheme (and now, a s 69B scheme) alters those objects.
Administrative schemes enable the Court to provide all the mechanisms necessary for the carrying out of the purposes of a charitable trust. They commonly confer charity trustees with powers of management and investment of trust property.
The Court has a discretion to make orders by way of a scheme to regulate the administration of a charity where it appears to the Court to be “expedient” to do so. This stands in contrast to the higher thresholds which must be satisfied before making a cy-près or s 69B scheme.
[footnotes omitted]
The changes to the provisions of the Trust proposed by the applicant are of a mechanical or administrative nature. They do not change the purpose of the Trust which remains the promotion of research in the field of botany. This is not a case where the original purpose of the charitable trust cannot be satisfied because of changes since the creation of the trust which mean the purpose can no longer be achieved.
The proposed paragraph 3.1.1 is only dealing with the present day definition of botany. The applicant and the Attorney-General both submitted that the definition of botany as at the date the will was drawn was narrower than the present definition and was simply understood to mean “The science which treats of plants”.[6]
[6] Oxford English Dictionary (University Press, Oxford) 1970.
A more contemporary definition of botany is found in the Oxford Dictionary of Biology. Botany is now defined as “The scientific study of plants, including their anatomy, morphology, physiology, biochemistry, taxonomy, cytology, genetics, ecology, evolution and geographical distribution”.[7]
[7] The Oxford Dictionary of Biology (6^th ed.) Oxford University Press (2008).
I accept the submissions of the Attorney-General that the more elaborate definition of botany adds denotations to the word botany. The connotation of the word botany is not changed by a more complete definition. As a result, there is no change of the purpose of the Trust arising from proposed clause 3.1.1. The Attorney-General also submitted that for that reason clause 3.1.1 was not strictly necessary but that its inclusion would provide a clear reference point for the administration of the Trust in future. I agree with that submission.
Clause 3.1.2 makes clear that the University shall from time to time consider how the income of the Trust shall be applied. It is a mechanical provision. It is simply making clear how decisions about the application of funds are to be made. The University is the trustee of the funds and it is appropriate that it makes the spending decisions.
The Court is able to make orders of the type sought where it is expedient to do so. It is expedient to amend the definition of botany to give clarity and guidance in the application of Trust funds into the future. In the circumstances where there is no longer a Chair of a Department of Botany, it is expedient to make the order sought in clause 3.1.2.
I consider that the amendments proposed in the scheme are consistent with the testator’s express intentions.[8] The fund will continue to be used to advance the study of botany.
[8] Re Lowin (deceased) [1967] 2 NSWR 140 at 151.
The second issue
The second issue relates to the use of $200,000 of Trust funds for the purpose of the construction of the DNA laboratory. The application is necessitated by the fact that the use of those monies for that purpose was possibly a breach of the Trust.
The application is made pursuant to the Trustee Act 1936, and in particular the following section:
56—Jurisdiction of Supreme Court in cases of breach of trust
If it appears to the Supreme Court—
(a) that a trustee is, or may be, personally liable for any breach of trust (whether the transaction alleged to be a breach of trust occurred before or after the passing of this Act); but
(b) that the trustee has acted honestly and reasonably and ought fairly to be excused for the breach of trust, and for omitting to obtain the directions of the said court in the matter in which he has committed such breach,
then the said court may relieve the trustee, either wholly or partly, from personal liability for the breach of trust.

At the time the funding of the DNA laboratory was being considered by the University the proposal stated that:[9]
48.1. the Ancient DNA Lab was necessary to preserve DNA from ancient specimens of subject matter and protect them from contamination (primarily fossils of ancient flora and fauna);
48.2. the Ancient DNA Lab will be used for purposes over and above preparation of fossil material including the storing of Antarctic biota (which would include plant life);
48.3. there is interest from other institutions and groups wanting to use the Ancient DNA Lab for projects ranging from the studies of Australian megafauna to ecological studies related to palaeoclimatology;
48.4. the Ancient DNA Lab could be used for “research that requires the extinction of DNA from relatively old herbarium specimens”; and
48.5. The Ancient DNA Lab “is likely to be a very useful resource for the successful candidate for the soon to be advertised Associate Professor/Professor of Plan Conservation Biology.”
[footnote omitted]
[9] Applicant’s written submissions filed 30 November 2022, FDN8, at [48.1]-[48.5].
The statutory provision applies whether or not a trustee may be liable for a breach. The funding of the DNA laboratory may possibly be a breach of trust. The University argues that it was not a breach of trust. The purpose of the Trust was to provide a fund for research into botany. The $200,000 was used as part-payment for a laboratory which had, as one of its purposes, the study of botany related matters. At the time of its establishment it was intended that there would be research requiring the extraction of DNA from relatively old herbarium specimens and fossils of ancient flora. That research would clearly fall within the ambit of the charitable purpose. It appears that in the time since the DNA laboratory was established it has been used less than expected for research into botany. Nonetheless, it still does carry out some research into botany.
The Attorney-General made submissions in respect to this part of the application. The Attorney-General adopted a neutral position.
The Court’s powers in relation to s 56 were considered by Stanley J in JD & KZ Zohs Properties Pty Ltd v Ferme & Anor.[10] His Honour said:[11]
Section 56 confers power on the Court to excuse any breach of trust where the trustee has acted honestly and reasonably and ought fairly to be excused for the breach. The provision can apply to a representative who has committed a devastavit. The burden of proving that the trustee acted honestly and reasonably in the matter is on the applicant for relief. Once that has been established, it is for the Court to decide whether the trustee ought fairly to be excused for the breach of trust committed. Each case depends on its own circumstances. The Court has a wide discretion in matters of this kind and must look to the whole circumstances in which the breach took place. The Court should not be hard on a trustee who has tried to act honestly but it must not encourage laxity of dealings.
In Ede v Ede Muir J (as he then was) considered a cognate provision, s 105(1) of the Powers of Attorney Act 1998 (Qld). He noted that the meaning of “honestly” in s 1318(1) of the Corporations Act 2001 (Cth), and in its analogues, has been equated with absence of moral turpitude. He said:
Whilst I accept that acting in conscious disregard of the interests of a person to whom fiduciary duties are owed will normally, if not invariably, constitute dishonesty or moral turpitude, I doubt that consciousness of wrongdoing is a necessary prerequisite to a finding of dishonesty. For example, in Re Second East Dulwich 145th Starr-Bowkett Building Society, Kekewich J, with reference to legislation excusing trustees for breach of duty where they acted “honestly and reasonably”, observed:
“In the one sense a trustee is honest if he has not done anything dishonest … But in another sense he is not honest. It seems to me that a man who accepts such a trusteeship, and does nothing, swallows wholesale what is said by his co-trustee, never asks for explanation, and accepts flimsy explanation, is dishonest.” [Citation omitted].
[footnotes omitted]
[10] [2015] SASC 55.
[11] [2015] SASC 55 at [60]-[61].
The statutory provision requires, as a jurisdictional trigger, that a trustee must have acted honestly and reasonably such that it ought fairly be excused for the breach of trust and for failing to obtain directions of the Court. The onus is on a trustee to establish those matters.
The first question is whether the University acted honestly. There is no evidence of moral turpitude. The evidence shows there was considerable discussion about whether it was appropriate or permissible to use funds in the Trust for the purpose of a DNA laboratory. The University was fully aware of the purpose of the Trust and the fact that only income of the Trust and not principal could be used. The evidence suggests that there was careful consideration about the status of the funds.
The University eventually sought legal advice in relation to the matter. The legal advice was that the funds could be used for the purposes of the establishment of the DNA laboratory. In the circumstances, I am satisfied that the applicant acted honestly.
There is a separate question of whether it acted reasonably. I think it would be fair to say, as a general proposition, that when a trustee of any trust is in doubt in relation to a matter such as this, it would be prudent to apply for advice and directions from the Court under the Trustee Act. Notwithstanding that, and having regard to the obtaining of legal advice, I am satisfied that the University acted reasonably.
Those matters having been established, the question becomes whether the University should be excused for the possible or actual breach of trust.
I note the comments of Stanley J in University of Adelaide v Attorney‑General (SA)[12] on this question:[13]
There is no suggestion in the evidence before the Court that there has been laxity, dishonesty, bad faith or wilful misapplication of the trust funds by the trustee. In the circumstances, the Attorney-General does not oppose forgiveness for any breaches of trust arising through inaction by the University, through the awarding of scholarships to persons who may not have been eligible, or arising from invalid amendment of the rules of the Frank Perry Scholarship. Given my finding that there has been no laxity, dishonesty, bad faith or wilful misapplication of the trust funds by the trustee, and the attitude of the Attorney-General, I propose to make the orders sought by the University, relieving it from liability for any breaches of trust in respect of the three trusts, namely orders 1, 4 and 7 of the second summons filed on 2 November 2017.
[12] [2018] SASC 82.
[13] [2018] SASC 82 at [52].
The position is the same in this matter. The evidence discloses no laxity, bad faith or wilful misapplication of trust funds. It is appropriate to make orders relieving the University from liability for a breach of trust, if in fact there was a breach.

[2023] SASC 8

20 January 2023