University of Adelaide v Attorney-General (SA) - [2018] SASC 82

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
UNIVERSITY OF ADELAIDE v ATTORNEY-GENERAL (SA)
[2018] SASC 82
Judgment of The Honourable Justice Stanley
15 June 2018
CHARITIES - CHARITABLE GIFTS AND TRUSTS - WHEN APPLIED CY-PRES
EQUITY - TRUSTS AND TRUSTEES - APPLICATIONS TO COURT ON ORIGINATING PROCESS
The University of Adelaide (the University) applied to the Court for various orders in relation to three charitable trusts: the Frank Perry Scholarship Trust, the Simms Trust, and the Southcott Trust. The Attorney-General neither consented to nor opposed the proposed orders, but raised certain matters for the consideration of the Court.
Held:
1. In relation to the Frank Perry Scholarship Trust, it is appropriate to make an order directing that the terms of the relevant trust be varied such that the requirement that the trustees of the relevant trust consent or agree to any variation of the terms of the said scholarship be removed.
2. In relation to the Simms Trust, it is not reasonably practicable, having regard to the value of the trust property, for the University to apply the trust property in accordance with its original purposes. It is appropriate to approve a trust variation of the kind proposed by the University to vary the purpose of the gift from endowing a Chair in Therapeutics to providing for scholarships in that, or closely related, field. This accords, as far as reasonably practicable, with the spirit of the trust.
3. In relation to the Southcott Trust, it is not reasonably practicable, having regard to the value of the trust property, for the University to apply the Southcott Trust property in accordance with its original purposes. It is appropriate to approve a trust variation as proposed to permit the trust funds also to be used to fund academic fellowships in that field. This accords, as far as reasonably practicable, with the spirit of the trust.
Trustee Act 1936 (SA) s 56, s 69B, referred to.
Re Trusts of Kean Memorial Trust Fund (2003) 86 SASR 449; Varsani v Jesani [1998] EWCA Civ 630; [1999] Ch 219; Forrest v Attorney-General [1986] VR 187; Free Serbian Orthodox Church Diocese for Australian and New Zealand Property Trust v Bishop Irinej Dobrijvic (2017) 94 NSWLR 340; Re Tobacco Trade Benevolent Association [1958] 1 WLR 1113; Hunter Region SLSA Helicopter Rescue Service Ltd v Attorney-General (NSW) [2000] NSWSC 456; Attorney-General (NSW) v Fred Fulham [2002] NSWSC 629; Retail Employees Superannuation Pty Ltd v Pain [2016] SASC 121; Jenkins v Ellett [2007] QSC 154; Oldham Borough Council v Attorney-General [1992] EWCA Civ 21, (1993) Ch 210; Re J W Laing Trust [1984] Ch 143; The Joyce Henderson Trustee Inc v Attorney-General (WA) [2010] WASC 60; Re Lutheran Laypeople's League of Australia Inc [2016] SASC 106; Re Trusts of Kean Memorial Trust Fund (2003) 86 SASR 449; JD & KZ Zohs Properties Pty Ltd v Ferme & Anor [2015] SASC 55, applied.
Ware v Cumberlege (1855) ER 697; Metropolitan Petar v Mitreski [2001] NSWSC 976; Re Royal Society's Charitable Trusts [1956] 1 Ch 87; National Trustees Executors and Agency Co of Australasia Ltd v Attorney-General (Vic) [1978] VR 374; Re Estate of Pitt (2002) 84 SASR 109; Cornish v Attorney-General's Department (NSW) [2006] NSWSC 1219; Re Lutheran Laypeople's League of Australia Inc [2016] SASC 106; Re Shipwrecked Fishermen and Mariners' Benevolent Society [1959] 1 Ch 220; Re University of London Charitable Trusts (1964) Ch 282; Re Trustees of the British Museum [1984] 1 WLR 418; In the Estate of Isinski [2014] SASC 89; Attorney-General v Brettingham (1840 49 ER 35; Andrews v M'Guffog (1886) 11 AC 313; Re Umpherston (1990) 53 SASR 293; In Re Morish [1939] SASR 305; Craven-Sands v Koch (2000) 34 ACSR 341; Ede v Ede [2006] QSC 378, discussed.

UNIVERSITY OF ADELAIDE v ATTORNEY-GENERAL (SA)
[2018] SASC 82
Civil: Application
STANLEY J.
Introduction

The University of Adelaide (the University) has applied to the Court for various orders in relation to three charitable trusts.
The University is the trustee of the Frank Perry Trust (Frank Perry Scholarship Trust), the Muriel Faulkner Simms Trust (Simms Trust), and the William Thomas Southcott Trust (Southcott Trust). Each falls within well-recognised classes of charitable trusts for the advancement of education. The purposes of the Frank Perry Scholarship Trust and the Southcott Trust are to provide scholarships.[1] The purpose of the Simms Trust is to establish a Chair in Therapeutics.[2] The University seeks the following orders:
1.An order varying the terms of the Frank Perry Scholarship Trust to remove a restriction on the power of amendment contained within the rules of the Frank Perry Scholarship;
2.An order approving a trust variation scheme to alter the purposes of the Southcott Trust;
3.An order approving a trust variation scheme to alter the purposes of the Simms Trust;   and
4.Orders relieving the University from liability for any breaches of trust in respect of the three charitable trusts.
[1]    Re Ethel Pedley Memorial Travelling Scholarship Trust (1949) 49 SR (NSW) 329; Re Leitch [1965] VR 204.
[2]    Attorney-General v Cambridge Margaret and Regius Professors (1682) 23 ER 306; Yates v University College London (1875) LR 7 HL 438.
The University also seeks orders to have the costs of the applications payable out of the assets of the trusts.
The Attorney-General is a party to any application to vary the purposes of a charitable trust, as she represents the objects of charities.[3] The Attorney-General also performs the role, on behalf of the Crown, of the guardian of the public interest in the administration and enforcement of charitable trusts.[4]
[3] Ware v Cumberlege (1855) 20 BEAV 504 at 510-511, (1855) 52 ER 697 at 700-701; Metropolitan Petar v Mitreski [2001] NSWSC 976 at [1]-[6].
[4] Re Royal Society’s Charitable Trusts [1956] 1 Ch 87 at 92-93; National Trustees Executors and Agency Co of Australasia Ltd v Attorney-General (Vic) [1978] VR 374 at 375.
Variation of the purpose of the trusts
The Court has always had power to vary the purposes of charitable trusts. However, prior to the enactment of s 69B of the Trustee Act 1936 (SA) (the Trustee Act), this could only be done by means of a cy-près scheme.
A cy-près scheme can only be made where the purposes of a charitable trust have become impossible or impracticable to fulfil.
Section 69B expands the circumstances in which the Court may approve a trust variation scheme beyond the criteria of impossibility or impracticability. Relevantly to the present application, s 69B provides:
69B—Alteration of purposes of charitable trust
(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 (a trust variation scheme) approved under this section 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.
...
(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.
While s 69B represents a significant legislative expansion of the Court’s capacity to vary charitable trusts,[5] a trust variation will not be justified on the basis of mere expediency or because it appears that the trust assets could be used more beneficially for another purpose.[6]
[5] The inherent jurisdiction to order a cy-près scheme remains, but given the greater breadth of s 69B it is less likely to be relied upon: Re Estate of Pitt [2002] SASC 332 at [40]-[44], (2002) 84 SASR 109 at 118-119.
[6] Re Trusts of Kean Memorial Trust Fund [2003] SASC 227 at [54]-[56], [66]-[68], (2003) 86 SASR 449 at 463-464 and 466.
The effect of s 69B(6) is that a trust variation scheme should accord as closely as possible to the original purposes of the trust. This is consistent with the general law and equitable principles.
The concept of the spirit of the trust in s 69B(6)(a) gives effect to “the basic intention underlying the gift or the substance of the gift rather than the form of words used to express it or the conditions imposed to effect it”.[7] In Varsani v Jesani, Chadwick LJ said:[8]
The need to have regard to the spirit of the gift requires the Court to look beyond the original purposes as defined by the objects specified in the declaration of trust and to seek to identify the spirit in which the donors gave property upon trust for those purposes.
[7] Varsani v Jesani [1998] EWCA Civ 630, [1999] Ch 219 at 234 and 238.
[8] Varsani v Jesani [1998] EWCA Civ 630, [1999] Ch 219 at 238.
In Forrest v Attorney‑General,[9] Nathan J, in referring to the cognate provision to s 69B in the relevant Victorian Act, said:[10]
The words of s 2, “spirit of the gift”, effect a shift in emphasis in the application of the cy‑près doctrine; that is, away from the common law position of requiring the impossibility or impracticality of the testator’s original objective being achieved to those circumstances which frustrate the purposes as revealed by the terms of the will, or by evidence, being attained. The spirit of the gift is apparent by testamentary terms directed to such matters as the nature of the class or classes of recipients, the location or times at which gifts are to be made or the age, sex or status of the recipients. The list of frustrating circumstances can never be closed.
...
The Act directs the Court to take the following steps:
(1)Ascertain the original purposes of the gift.
(2)Determine whether they can be carried out in accord with the fundamental intention of the testator as revealed by interpreting the will as a whole or with the assistance of evidence.
(3) If not then apply the gift cy-près if there are suitable similar purposes.
[9] [1986] VR 187.
[10] [1986] VR 187 at 189-191.
What constitutes the spirit of the trust will comprise a broader conception than the original purposes of the trust. When determining the spirit of the trust, it is appropriate and necessary to have regard to the trust’s history and the social context of the time at which it was established. The ascertainment of the spirit of the trust requires an evaluative judgment.[11]
[11] Free Serbian Orthodox Church Diocese for Australian and New Zealand Property Trust v Bishop Irinej Dobrijvic [2017] NSWCA 28 at [217], (2017) 94 NSWLR 340 at 385.
Frank Perry Scholarship Trust
The Frank Perry Scholarship was established through a gift to the University by the trustees of the Frank and Hilda Perry Trust. The terms of the Frank Perry Scholarship are set out in the rules of the Frank Perry Scholarship in Engineering. They are exhibited to the affidavit of Kim Tamara-Lee Evans, affirmed 16 March 2017, as Exhibits KTE8 and KTE9.
The most recent version of the rules was revised on 14 September 1998. Rule 10, by implication, appears to contain a broad power of amendment, providing that:
These rules will only be changed by agreement between the Trustees of the Frank and Hilda Perry Trust, the Faculty of Engineering and the Board of Graduate Studies.
The original trustees of the Frank and Hilda Perry Trust are now deceased. Order 2 in the amended summons seeks a direction from the Court that the University may vary the terms of the Frank Perry Scholarship to remove the requirement for the consent of the trustees of the Frank and Hilda Perry Trust. In the alternative, it asks that the Court direct that the terms be varied to remove the requirement for consent. The Attorney-General submits that the appropriate order is that the Court direct that the terms of the trust be varied to remove the requirement for consent. I agree. I will order accordingly.
However, there is a more fundamental issue with the proposed variation. The original rules of the Frank Perry Scholarship included only a limited power to alter the rules. Rule 11 of the original rules provided as follows:
With the consent of representatives of the Frank and Hilda Perry Trust, the Council may from time to time alter the rules relating to the value and period of tenure of the scholarship but the title and purpose of the scholarship may not be changed.
It is apparent that rule 11 was highly restrictive. It did not confer a general power to alter the rules, let alone the power of amendment itself. It is trite that, except insofar as a power of amendment was included at the time the trust was established, neither settlors nor trustees have any power to amend the terms of a charitable trust. A charity cannot confer upon itself by a new resolution a power to alter its own rules.[12] Where a power of amendment has been included, there must be compliance with any procedural or substantive restrictions on its exercise. As a general principle of construction, a “trustee cannot utilise its power of amendment of the trust deed to remove restrictions on its power of amendment”.[13] Even in the absence of express restrictions, it seems implicit that a power of amendment cannot be exercised to amend itself.[14] The University does not contest these propositions.
[12] Re Tobacco Trade Benevolent Association [1958] 1 WLR 1113 at 1116; Hunter Region SLSA Helicopter Rescue Service Ltd v Attorney-General (NSW) [2000] NSWSC 456 at [2], [6]; Attorney‑General (NSW)v Fred Fulham [2002] NSWSC 629 at [53].
[13] Retail Employees Superannuation Pty Ltd v Pain [2016] SASC 121 at [714] (Blue J).
[14] Jenkins v Ellett [2007] QSC 154 at [15].
These limitations do not appear to have been adhered to in respect of the Frank Perry Scholarship. Over the course of various revisions, the provisions of the rules were substantially altered, including the provision relating to the power of amendment. In the successive revisions, ever greater and less restricted powers of amendment were adopted. The original rules approved by the trustees prior to transferring the property to the University in 1974, provided that assets were transferred to the University:
[F]or the purpose of founding a travelling scholarship to be named “The Frank Perry Scholarship” ...
That purpose is reflected in the provisions set out in the original rules, which required the scholar to travel outside Australia (rule 5) and provided for the payment of travel costs and a monthly travelling allowance (rule 6). Comparison of the original rules and the 1998 rules reveals the substantial changes that were made to the Frank Perry Scholarship. The effect of the various revisions to the rules was to convert what was a scholarship for engineering students to travel overseas at the end of their degree into what is now a scholarship for a student undertaking post-graduate research with no travel requirement at all.
The University submits, however, that the principle that a trustee cannot utilise its power of amendment of the trust deed to remove restrictions on its power of amendment has no application to this case.
The University submits that by his will Sir Frank Perry made a gift to his executors who were empowered to use that gift for a charitable purpose. By clause 4 of his will the testator established the Frank and Hilda Perry Trust. In 1974 the trustees of the Frank and Hilda Perry Trust made a gift to the University to establish the Frank Perry Scholarship in Engineering. The University submits that no charitable trust was established by the will in respect of the travelling scholarship. The travelling scholarship is in terms a sub-trust established by the trustees as a gift to the University with the effect that the University holds funds on trust which it has been given by the trustees of the Frank and Hilda Perry Trust. It submits that in giving the gift there were no restrictions imposed by the trustees other than that it should be used to establish a travelling scholarship for engineering students. The trustees determined to give the funds to the University to establish the travelling scholarship. The University then became the trustee holding the funds on trust. In 1990 the trustees of the Frank and Hilda Perry Trust and the University as trustee of the sub-trust determined to change the terms of the scholarship by removing the requirement that it be used by engineering students to travel overseas. The University submits there was no obstacle to the trustees of the Frank and Hilda Perry Trust and the recipient of the gift, being the University, effecting that amendment by mutual consent. That change was not inconsistent with the gift made by Sir Frank Perry in his will. The gift is still being used for a charitable purpose. The trustees were not under any limitation which prevented them from effecting a change in the basis upon which the scholarship is awarded. Accordingly, the University submits that the principle that a power of amendment cannot be exercised to remove restrictions on that power has not been contravened.
I do not accept this submission.
In my view, in 1974 the executors of Sir Frank Perry’s estate, as trustees of the Frank and Hilda Perry Trust, gifted funds to the University for the purpose of establishing a travelling scholarship for engineering students. They thereby created a trust and the income of the estate gifted to the University was then impressed with that trust purpose. The terms of that trust were set out in the original rules approved by the trustees in 1974. This created the Frank Perry Scholarship in Engineering Trust. It follows that the trust could only be amended in accordance with the power of amendment provided in the rules approved by the trustees at the time that the trust was established in 1974.
Accordingly, the alterations made to the rules subsequently are unauthorised and subsequent conduct made in reliance on the effectiveness of those alterations, if not within the scope of the original purpose, is in breach of trust.
I accept that all this was done by the University with the approval of the trustees of the Frank and Hilda Perry Trust. There is nothing to suggest that there was anything but the best of intentions and a desire to put the trust assets towards what was regarded as the most beneficial use.

The consequence, however, is that unauthorised alterations have been made to the rules, both in matters of machinery and purpose. Actions taken in reliance on the effectiveness of these alterations, if not within the scope of the original purpose, constitute breaches of trust.
I find that the revisions are outside the scope of the power of amendment and the purpose of the Frank Perry Scholarship Trust. As I understand it is the University’s wish not to revert to an earlier version of the rules and the original purpose. In these circumstances the University proposes to make an application for a trust variation scheme pursuant to s 69B of the Trustee Act.
The Muriel Faulkner Simms Trust
The purpose of the Simms Trust, as expressed in the will of Muriel Faulkner Simms, is to provide funds for the establishment or endowment of a Chair in Therapeutics at the Medical School of the University of Adelaide.[15]
[15] Clause 7(d) of the will, as set out in Exhibit KTE1 to the second affidavit of Kim Tamara-Lee Evans, affirmed 16 March 2017 and referred to in paragraphs [28]-[42] of the affidavit.
The proposal in the trust variation scheme is to establish a scholarship, in the name of Simms, for post-graduate students in therapeutics or, “in such other branch of medicine as in the opinion of the University is so closely related to the branch known as therapeutics as to fulfil the intention of Muriel Faulkner Simms in constituting the Trust in the Will”.[16]
[16] Clause 2 of the scheme, as set out in RLJ1 to the second affidavit of Rodney Lawrence Jones, affirmed 3 October 2017.
The Attorney-General neither consents to nor opposes the proposed variation. However, the Attorney-General raises certain matters for the consideration of the Court.
As at 30 June 2016, the assets of the Simms Trust amounted to $704,995. The evidence adduced by the University is to the effect that the assets of the Simms Trust will not be able to generate sufficient income to support a fully‑funded Chair in Therapeutics.[17] Other evidence relied on by the University is to the effect that the trust assets would not be able to be used to part-fund a Chair, because the University does not have the capacity to part-fund a new Chair out of its existing resources.[18]
[17] Second affidavit of Kim Tamara-Lee Evans, affirmed 16 March 2017, paragraphs [28]-[40].
[18] Fourth affidavit of Kim Tamara-Lee Evans, affirmed 16 November 2017, paragraphs [4]-[5].
I accept that the assets of the Simms Trust are insufficient for the original purposes of the trust. I find that it is not reasonably practicable, having regard to the value of the trust property, for the University to apply the trust property in accordance with its original purposes. Accordingly, it follows that some variation will be justified. The main question is what will most closely accord with the spirit of the trust, in the sense of the basic or fundamental object sought to be achieved by the testatrix, Muriel Simms.
As the Attorney-General submits, this can be approached from two perspectives. The assignment of a particular field or area in medicine suggests an intention to advance or promote that particular field. The more specific object of establishing a Chair, rather than a scholarship, suggests an intention to create a senior and prestigious academic position, rather than to provide a benefit to students directly. The request in clause 7(d) of the will of Muriel Simms to “commemorate the name of Simms concerning [the] gift”, supports a finding that the testatrix had a desire that her family name be associated with some position of prestige.
Varying a purpose of providing a Chair in a particular field or discipline (where it may be expected that the recipients will be senior academics) to a student scholarship in that (or a closely related) field represents a significant alteration. However, in this case, on the evidence before me I accept there is no realistic prospect of the trust assets being able to be employed to establish or endow a Chair in Therapeutics or a related field, and no other reasonably practicable alternative is apparent. In these circumstances, I am satisfied that it is appropriate to approve a trust variation of the kind proposed by the University to vary the purpose of the gift from endowing a Chair in Therapeutics to providing for scholarships in that, or a closely related, field. I find this accords, as far as reasonably practicable, with the spirit of the trust.
The William Thomas Southcott Trust
The purpose of the Southcott Trust, as expressed in the will of William Thomas Southcott, is to establish an annual scholarship, in the name of William T Southcott, to assist outstanding post-graduate students in advanced medical research in nuclear medicine or a closely related field.[19] The proposal in the draft variation scheme is that the trust be varied to have a purpose of funding one or more academic fellowships, or post-graduate scholarships to conduct research in nuclear medicine.[20]
[19] Clause 4(e)(iii) of the will, as set out in Exhibit KTE1 to the third affidavit of Kim Tamara-Lee Evans, affirmed 16 March 2017, paragraphs [28]-[40].
[20] Clause 2 of the scheme, as set out in Exhibit RLJ2 to the second affidavit of Rodney Lawrence Jones, affirmed 3 October 2017.
The Attorney-General neither consents to nor opposes the proposed variation. However, the Attorney-General seeks to raise certain matters for the consideration of the Court.
The position in relation to the Southcott Trust is unusual. The University suffers an embarrassment of riches. As at 30 June 2016, the assets of the Southcott Trust amounted to $3,544,260.73. The evidence adduced by the University is to the effect that the income of the Southcott Trust has been, and will continue to be, greater than that which can be expended through the awarding of scholarships in nuclear medicine. The reasons are the lack of applicants and the comparatively low value of a scholarship.[21] The evidence relied on by the University is to the effect that any person with a degree in a health-related field is eligible to apply for the scholarship. Nevertheless, only three persons have ever applied for the scholarship, one of whom subsequently withdrew.[22] The University submits that PhD candidates are often attracted to undertake a PhD at an institution with a good reputation for research in the field or where there is a particularly well‑regarded researcher at that institution. By varying the terms of the trust to permit it to be used to fund a fellowship in nuclear medicine, the University submits that this might have the benefit of encouraging greater interest on the part of students in applying for a scholarship to undertake post‑graduate study in the field.
[21] Third affidavit of Kim Tamara-Lee Evans, affirmed 16 March 2017, paragraphs [3]-[40].
[22] Fourth affidavit of Kim Tamara-Lee Evans, affirmed 16 November 2017, paragraphs [6]-[12].
An obvious variation where the income is greater than the charitable objects require would be to increase the number of scholarships or the value of the scholarship, or both. However, the evidence relied upon by the University in respect of the lack of applicants suggests that this might still leave a surplus.
In the circumstances, I find that, for the opposite reasons that apply to the Simms Trust, it is not reasonably practicable, having regard to the value of the trust property, for the University to apply the Southcott Trust funds in accordance with its original purposes.
As with the Simms Trust, the variation of a trust intended to fund a scholarship for post-graduate students, to also fund an academic fellowship (a comparatively senior position), is a significant alteration.
This is, to an extent, ameliorated by the draft variation scheme retaining as one of its purposes the option of funding post-graduate scholarships from time to time (instead of annually), in addition to the funding of “one or more academic fellowships”. The Attorney-General submits that it might, however, more closely accord with the spirit of the gift if the draft scheme were to be expressed to make it clear that only one fellowship, but one or more scholarships, could be awarded. I am not attracted to that course. I am not persuaded that the imposition of such a limitation is necessary or desirable in order to accord with the spirit of the trust.
I accept on the evidence there is no realistic prospect of the trust assets being fully employed to fund annual scholarships to assist outstanding post‑graduate students in advanced medical research in nuclear medicine or a closely-related field, and no other reasonably practicable alternative is apparent. In the circumstances I consider it appropriate to approve a trust variation as proposed to permit the trust funds also to be used to fund academic fellowships in that field. I find this accords, as far as reasonably practicable, with the spirit of the trust.
Administrative provisions of the schemes
The draft trust variation schemes put forward in respect of the Simms Trust and the Southcott Trust do not deal only with the proposed variations to the purposes of those trusts. They also provide the machinery by which the trusts will be administered.
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. Those purposes do not include provisions dealing with administration or the machinery for carrying out the trust purposes.[23]
[23] Re J W Laing Trust [1984] Ch 143 at 149-150, 153; Oldham Borough Council v Attorney-General [1992] EWCA Civ 21, (1993) Ch 210 at 221.
The Court’s power to complement a s 69B variation by providing the administrative mechanism derives from its inherent jurisdiction. Under its special jurisdiction in respect of charitable trusts, the Court may make administrative schemes to clarify, supplement or alter the machinery for the carrying out of charitable objects. By contrast, a cy-près scheme (and, now, a s 69B scheme) alters those objects. Conceptually, the distinction is between means and ends.[24]
[24] Corish v Attorney-General’s Department (NSW) [2006] NSWSC 1219 at [9]; Re Trusts of Kean Memorial Trust Fund [2003] SASC 227 at [47]-[48], (2003) 86 SASR 449 at 461; Re Lutheran Laypeople’s League of Australia Inc [2016] SASC 106 at [18].
Administrative schemes enable the Court to provide all the details 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.[25] In contrast with the higher thresholds that must be satisfied before making a cy-près or s 69B scheme, 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.[26]
[25] Re Royal Society’s Charitable Trusts [1956] Ch 87; Re Shipwrecked Fishermen and Mariners’ Benevolent Society [1959] 1 Ch 220 at 223, 225 and 227-228; Re University of London Charitable Trusts (1964) Ch 282; Re Trustees of the British Museum [1984] 1 WLR 418 at 420.
[26] Re J W Laing Trust [1984] Ch 143 at 153-155; The Joyce Henderson Trustee Inc v Attorney-General (WA) [2010] WASC 60 at [33]; Re Lutheran Laypeople’s League of Australia Inc [2016] SASC 106 at [32]; Jean Warbuton, Tudor On Charities (Sweet & Maxwell, 9^th Ed, 2003) at 492-493.
The draft trust variation schemes contain provisions which, while undoubtedly within the Court’s jurisdiction to authorise,[27] involve a departure from the general rule that trust property should be held in the name of the trustee. The Court may authorise this where there is sufficient reason, but will generally require some information as to why there should be a departure from the usual rule.[28] Clause 5.5(c) of the proposed trust variation schemes provides:
It shall not be necessary for the title to any Property forming part of the Trust Fund to be registered in the name of the University but the same may in the discretion of the University be registered in the name or names of any nominee of the University or in any other name.
[27] In the Estate of Osinski [2014] SASC 89.
[28] Re Trusts of Re Trusts of Kean Memorial Trust Fund [2003] SASC 227 at [94], (2003) 86 SASR 449 at 471.
No explanation has been forthcoming as to why it is not appropriate for the usual rule to be observed. In the circumstances I would exclude clause 5.5(c) from the trust variation schemes approved by the Court.
Relief from breach of trust
The Court may, under both its inherent jurisdiction and s 56 of the Trustee Act, relieve charity trustees from liability for breaches of trust.
In some cases, the circumstances might be such that the trustee’s conduct was so negligent or culpable that they should be required to account for any loss or liability incurred by charitable trusts. However, there is no requirement that charity trustees must be held liable regardless of circumstances.[29]
[29] Attorney-General v Brettingham (1840) 49 ER 35 at 37; Andrews v M’Guffog (1886) 11 AC 313 at 323-324, 329; Re Snowdon [1970] 1 Ch 700 at 709-710; Re Umpherston (1990) 53 SASR 293 at 300‑301.
I considered the nature and extent of the Court’s powers pursuant to s 56 in JD & KZ Zohs Properties Pty Ltd v Ferme & Anor[30] in the following terms:[31]
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.[32]The burden of proving that the trustee acted honestly and reasonably in the matter is on the applicant for relief.[33] 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.[34] 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.[35]
In Ede v Ede[36] 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.[37] He said:[38]
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 145^th 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].
[30] [2015] SASC 55.
[31] [2015] SASC 55 at [60]-[61]. See also Brine v Carter [2015] SASC 205 at [172].
[32] In Re Kay; Mosely v Kay [1897] 2 Ch 518 at 521.
[33] In Re Morish [1939] SASR 305 at 319.
[34] In Re Morish [1939] SASR 305 at 319.
[35] Craven-Sands v Koch [2000] NSWSC 374 at [188], (2000) 34 ACSR 341 at 368; Ede v Ede [2006] QSC 378 at [38].
[36] [2006] QSC 378.
[37] [2006] QSC 378 at [27].
[38] [2006] QSC 378 at [28].
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.
Conclusion
I would make an order directing that the terms of the Frank Perry Scholarship in Engineering be varied such that the requirement that the trustees of the Frank and Hilda Perry Trust consent or agree to any variation of the terms of the said scholarship be removed. I would order that the plaintiff be relieved from any liability for any supposed or actual breach of the Frank Perry Scholarship in Engineering Trust. I would order that the costs of the application be paid out of the funds received by the plaintiff from the trustees of the Frank and Hilda Perry Trust.
I would order that the plaintiff be relieved from any liability for any supposed or actual breach of the Muriel Faulkner Simms Trust. I would approve the variation proposed to the terms of the Muriel Faulkner Simms Trust save and except for the terms of clause 5.5(c). I would order that the costs of the application be paid out of the funds held by the plaintiff in respect of the Muriel Faulkner Simms Trust.
I would order that the plaintiff be relieved from any liability for any supposed or actual breach of the William Thomas Southcott Trust. I would approve a variation to the William Thomas Southcott Trust in the terms of the proposed trust variation scheme save and except for the terms of clause 5.5(c). I would order that the costs of the application be paid out of the funds held by the plaintiff in respect of the William Thomas Southcott Trust.
I direct that the plaintiff bring into Court minutes of order reflecting these reasons.