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Chapter 18
Charitable Trusts
INTRODUCTION
18.1 Charitable trusts are express trusts, which exist for a purpose rather
than for identifiable beneficiaries. In Attorney-General (NSW) v Perpetual
Trustee Co Ltd (1940) 63 CLR 209 at 222, Dixon and Evatt JJ stated:
A charitable trust is a trust for a purpose, not for a person. The objects of
ordinary trusts are individuals, either named or answering a description,
whether presently or at some future time. To dispose of property for the
fulfillment of ends considered beneficial to the community is an entirely
different thing from creating equitable estates and interests and limiting them
to beneficiaries. In this fundamental distinction sufficient reason may be
found for many of the differences in treatment of charitable and ordinary
trusts.
18.2 In that sense the major difference between charitable and other express
trusts is that charitable trusts are not subject to the beneficiary principle. In
other respects charitable trusts exhibit the same characteristics and are
subject to the same rules regarding certainty, constitution and fiduciary
duties as other express trusts. In this chapter we will examine the particular
rules that apply to the identification and validity of charitable trusts. This
chapter will also examine the small category of non-charitable purpose trusts
that have also been found to be valid even though they offend the
beneficiary principle.
18.3 Other differences between charitable trusts and express trusts should be
noted. First, charitable trusts are often referred to as ‘public’ trusts because
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of the requirement that they confer a benefit on the general public.1 Because
of their public nature both the courts and the Attorneys-General of the states
have power to supervise the operation of charitable trusts: Num-Hoi, Pon Yu,
Soon-Duc Society Inc (2001) 4 VR 527.
18.4 Second, a charitable trust is not subject to the rule against indestructible
trusts. A charitable trust can therefore be structured in such a way as to exist
indefinitely: Monds v Stackhouse (1948) 77 CLR 232 at 247–8. However,
charitable trusts are subject to the rule against perpetuities in that the
trustee’s interest must vest within the perpetuity period: Re Goode (dec’d)
[1960] VR 117.
18.5 The third major difference between charitable and other express trusts
is that the court has the inherent power to enforce and extensively vary the
terms of charitable trusts, whereas it lacks such an extensive jurisdiction in
relation to other express trusts. Because of those extensive powers it is
impossible for a charitable trust to fail because of administrative
unworkability: Commissioner of Stamp Duties (NSW) v Way (1951) 83 CLR
570.
THE MEANING OF ‘CHARITABLE’ PURPOSE
18.6 There is no exhaustive definition of the term ‘charitable purpose’.
Rather, the courts begin from the position established by the Statute of Charitable Uses 1601 (43 Eliz I, c 4), which is sometimes referred to as the
Statute of Elizabeth. The preamble to that statute contained a statement as to
the types of charitable purpose that would be recognised at law. They
include, in rough translation:
• the relief of poverty;
• care of aged persons and the sick;
• care of soldiers and mariners;
• advancement of education through universities and schools;
• repair of bridges, havens, ports, churches and highways;
• the care of orphans;
• the maintenance of prisons;
• the marriage of poor maids;
1
G E Dal Pont & D R C Chalmers, Equity and Trusts in Australia, 4th ed,
Lawbook Co, Sydney, 2007, p 741.
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•
•
•
support for young tradesmen and persons decayed;
the relief or redemption of prisoners or captives; and
relief for poor persons concerning the payment of taxes.
18.7 The statute has been repealed in some jurisdictions. 2However, the
preamble is employed by judges as a tool for determining whether a purpose
is charitable: Royal National Agricultural and Industrial Association v
Chester (1974) 3 ALR 486. In New South Wales, the ACT and Queensland
the continued use of the preamble is given statutory recognition.3 The
process employed by the court was described in Gilmour v Coates [1949]
AC 426 at 442–3; [1949] 1 All ER 848 at 852, by Lord Simonds:
[F]rom the beginning it was the practice of the court to refer to the preamble
of the statute in order to determine whether or not it was charitable. The
objects there enumerated and all other objects which by analogy are ‘deemed
within its spirit and intendment’ and no other objects are in law charitable.
That is settled and familiar law.
18.8 The question of whether a purpose falls within the ‘spirit and
intendment’ of the preamble is a difficult one. By necessity the courts are
required to reason by analogy and the analogies have widened over time.
In Scottish Burial Reform and Cremation Society v Glasgow Corp [1968]
AC 138 at 147, Lord Reid said:
The courts appear to have proceeded first by seeking some analogy between
an object mentioned in the preamble and the object with respect to which
they had to reach a decision. And they then appear to have gone further and
to have been satisfied if they could find an analogy between an object already
held to be charitable and the new object claimed to be charitable. And this
gradual extension has proceeded so far that there are few modern reported
cases where a bequest or donation was made or an institution was being
carried on for a clearly specified object which was for the benefit of the
public at large and not of individuals, and yet the object was held not to be
within the spirit and intendment of the Statute of Elizabeth I.
18.9 To illustrate the principle, in Royal National Agricultural and
Industrial Association v Chester (1974) 3 ALR 486 a trust for the breeding
and racing of pigeons failed because there was no analogous charitable
purpose in the preamble. Contrastingly, a trust for the not-for-profit publicaLegislation Act 2001 (ACT), s 17, Sched 1; Imperial Acts Application Act
1969 (NSW), s 8; Trusts Act 1973 (Qld), s 103(1).
3
Trustee Act 1925 (ACT), s 104, Sched 1; Imperial Acts Application Act
1969 (NSW), s 9(2); Trusts Act 1973 (Qld), s 103(1).
2
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tion of law reports was found to be charitable in Incorporated Council of
Law Reporting (Qld) v Federal Commissioner of Taxation (1971) 125 CLR
659; [1972] ALR 127, on the grounds that the reporting of cases was fundamental to society in the same way that the maintenance of roads, and the
promotion of agriculture were fundamental and within the spirit of the preamble. The examples show that the process of reasoning by analogy has not
always provided strictly logical results. By the same token, the flexibility of
the process has allowed judges to evolve the concept of charity over time:
Scottish Burial Reform and Cremation Society v Glasgow Corp at 154.
18.10 A significant collation of the types of charitable purpose was
accomplished by Lord Macnaughten in Commissioner for Special Purposes
of Income Tax v Pemsel [1891] AC 531. His Lordship stated at 583:
‘Charity’ in its legal sense comprises four principle 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 the preceding heads.
Lord Macnaughten’s four divisions proved popular and have been the
starting point for the discussion of what is charitable for more than 100
years.
Public benefit
18.11 In addition to the requirement that a purpose comes within the spirit
and intendment of the preamble, a charitable trust must provide a benefit to
the public. The benefit must be for the entire public or for a significant
proportion of it.
18.12 There may be two reasons why a trust for a charitable purpose will fail
for want of public benefit. First, a charitable trust will fail if it confers no
public benefit at all. There is a rebuttable presumption that trusts for relief of
poverty, advancement of religion and advancement of education are of
benefit. Trusts that fall into the fourth category of Pemsel’s case must be
proven to be beneficial.
18.13 To illustrate these principles, trusts for the advancement of religion
have failed where they have the object of favouring cloistered or
contemplative orders who have little contact with the outside world:
Gilmour v Coats [1949] AC 426 (but note the effect on Federal law of the
Extension of Charitable Purpose Act 2004 (Cth), discussed above). Trusts
established to stop the practice of vivisection have also failed because there
would be an overall detrimental effect to the public should such
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experimentation cease: Anti-Vivisection
Commissioners [1948] AC 31.
Society
v
Inland
Revenue
18.14 Second, a charitable trust will fail where benefit is provided to a group
or class whose membership excludes other members of the public, based on
inherent personal characteristics. For example, a trust for the descendants of
three children failed in Re Compton [1945] Ch 123. Lord Greene MR stated
at 131:
… [A] gift under which the beneficiaries are defined by reference to a purely
personal relationship to a named propositus cannot on principle be a valid
charitable gift. And this, I think, must be the case whether the relationship be
near or distant, whether it is limited to one generation or is extended to two
or three or in perpetuity. The inherent vice of the personal element is present
however long the chain and the claimant cannot avoid basing his claim on it.
18.15 The Compton test has been used to strike down charitable trusts when
the potential recipients of the trust funds have been defined by reference to
blood relation, employment or contract: Re Mills (dec’d) (1981) 27 SASR
200. For example, a gift to a school exclusively for the children of Masons
was found to be non-charitable in Thompson v Federal Commissioner of
Taxation (1959) 102 CLR 315; [1960] ALR 184.
18.16 Similarly, trusts for the employees of a company and their relatives
are also non-charitable: Davies v Perpetual Trustee Co Ltd [1959] AC 439;
[1959] 2 All ER 128. In Oppenheim v Tobacco Securities Co Ltd [1951] AC
297; [1951] 1 All ER 31, a trust had been created to provide for the
educational needs of children of the employees and former employees of a
company and its subsid iaries. The total number of employees of the group
of companies exceeded 110,000. Nevertheless, the trust was not said to be of
benefit to a section of the public. Lord Simonds stated at AC 306; All ER
34:
These words ‘section of the community’ have no special sanctity,
but they conveniently indicate first, the possible (I emphasise the
word ‘possible’) bene ficiaries must not be numerically negligible,
and secondly, that the quality which distinguishes them from other
members of the community, so that they form by themselves a
section of it, must be a quality which does not depend on their
relationship to a particular individual … A group of persons may be
numerous but, if the nexus between them is their personal
relationship to a single propositus or to several propositi, they are
neither the community or a section of the community for charitable
purposes.
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18.17 Some qualifications on the operation of the Compton test should be
noted. First, the requirement for public benefit does not apply to trusts for
the relief of poverty: Dingle v Turner [1972] AC 601; [1972] 1 All ER 878.
Second, trusts for people from particular geographic locales do not offend
the rule, as they can be applied regardless of inherent personal characteristics: Re Tree [1948] Ch 325; 2 All ER 65. Third, a request by the creator that
family members, or others connected by association or contract, be given
preference in the administration of the charity, will not invalidate the trust:
Public Trustee v Young (1980) 24 SASR 407. For example, in Permanent
Trustee Co (NSW) Ltd v Presbyterian Church (NSW) Property Trust (1946)
64 WN(NSW) 8, a trust which established educational scholarships was
upheld, even though the testator had directed that preference be given to his
lineal descendants. Roper J, at 10, stated:
The principle underlying these cases appears to be that provided the
paramount purpose of the foundation or endowment is to benefit the public or
a section of it, the requirement that a private class of person be preferred is
effective and does not affect the validity of the gift.
18.18 The purpose of the trust need not be effected in the jurisdiction for it
to be of benefit to the public, so that gifts to benefit people overseas will be
charitable: Kytherian Association of Qld v Sklavos (1958) 101 CLR 56;
Public Trustee of Queensland v Neale [2008] QSC 343.
Trusts for political purposes are not charitable
18.19 A trust that has a political purpose will not be charitable: Bowman v
Secular Society [1917] AC 406; [1916–17] All ER Rep 1. A trust will be
deemed to be political when it has the purpose of changing the law: AntiVivisection Society v Inland Revenue Commissioners. Examples include a
trust to establish a nationalised health service (Re Bushell (dec’d) [1975] 1
All ER 721), or to reform the alphabet (Re Shaw [1957] 1 All ER 745), or a
trust to prevent the use of performing animals: Hanchett-Stamford v
Attorney General [2008] 4 All ER 323.
18.20 A gift to an organisation will be deemed political when the dominant
purpose of the organisation can only be effectuated through legal change: Re
Cripps [1941] Tas SR 19. For example, a gift to Amnesty International
failed because the primary purpose of the organisation was to effect the
release of political prisoners: McGovern v Attorney-General [1982] Ch 321;
[1981] 3 All ER 493. It matters not that the legal changes may occur outside
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of the jursidiction. A gift to the Free Papua Movement was said to be
political as the movement’s aim was to rest control of Irian Jaya from
Indonesia: Application of Van Campen-Beekman [2007] NSWSC 916.
18.21 If the dominant purpose is to maintain a law, for example, the
prohibition of abortion, it will also be deemed to be non-charitable: Molloy v
Commissioner of Inland Revenue [1981] 1 NZLR 688.
18.22 However, if changing or maintaining a law is only an incidental part
of the purpose of the association, the gift may succeed: Royal North Shore
Hospital of Sydney v Attorney-General (NSW) (1938) 60 CLR 396. Alternatively, if the purposes of the association include mixed charitable and
political purposes, it may be possible to save the gift using legislation which
prevents mixed gifts from failing: see 18.102; Public Trustee v AttorneyGeneral of New South Wales (1997) 42 NSWLR 600.
18.23 Writing extra-judicially, the late Santow J has argued that the rule
against political trusts should be varied.4 Not all changes to the law should
be viewed as political, nor should all trusts which advocate such change be
struck down. His Honour stated at 69 that:
There is a crucial distinction, inhering in McGovern, between permissibly
changing the law within the framework of its established policy and
impermissibly reversing the law along with its established policy.
Incremental change to the law consistent with its established direction may
indeed be permitted today.
Following Santow J’s lead, Young CJ in Eq was equally critical of the
Bowman principle in Attorney General (NSW) v The NSW Henry George
Foundation Ltd [2002] NSWSC 1128. That case concerned a trust to further
the study of Henry George’s ideas about a unitary land tax system, and
pursuing them via legislative change. His Honour stated at [63-4]:
There is a feeling of what I might call ‘judicial cop out’ in the policy that
the court cannot judge the public benefit of proposals to amend the law.
Indeed, in many instances, the fact that diverse arguments are presented to
the public on issues of importance may itself be important to the
community. Indeed, it is clear that when considering what is of benefit to
the community, the court rules on what is beneficial at the date of the trust
or at the hearing. Courts are well equipped to do this.
In any event, Young J found that the trust was intended to educate people about the
works of Henry George and that the non-charitable parts of the trust, that sought
4
G F K Santow, ‘Charity in its Political Voice – a Tinking Cymbal or a
Sounding Brass?’ (1999) 18 Australian Bar Review 225.
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legal change, could be severed: 18.102.
Charitable trusts and government functions
18.24 There is a general principle that gifts to the government are not
charitable. The case of Re Cain [1950] VLR 382, concerned a gift to the
Childen Welfare Department of Victoria. Dean J, at 138, said:
In my opinion, if the present gift be construed as a gift for carrying
on the ordinary activities of a Government department pursuant to a
statute, the gift is not a gift for charitable purposes, even if the
activities are such that if carried on by private persons they would
be charitable. Such activities are simply part of the government of
the country.
Neverthless, Dean J found the gift to be charitable as it was not to go into
general revenue, but would rather be used for the benefit of the children in
the government’s care, in ways which not have otherwise been provided for
by the government.
18.25 As Dean J’s judgment illustrates, the problem with the rule against
charitable gift to government, lies in the massive expansion of the role of
government into the lives of the citizenry that occurred in the 20th century.
The birth of the welfare state and the governmental provision of health and
education have meant that government functions have swept up many of the
areas which had in the past been the provision of charities.
18.26 The courts have attmept to draw distinction’s between bodies that
carry out the policies of the government, paid for by the government’s
revenue (which are not chartiable), and bodies which provide services which
are totally or partially funded by the government, but which are nevertheless
not part of the government, and therefore charitable. These issues were
considered by the High Court in Central Bayside General Practice
Association Ltd v Commissioner of State Revenue (Vic) (2006) 228 CLR
168; 229 ALR 1. The case concerned a medical practice, which was fully
funded by the Commonwealth government, which had the purpose, amonsgt
opthe things of providing health care to the residents of the Bayside area, to
improve communications between patients and general practitioners, and to
meet the special health needs of Aboriginal and Torres Strait Islanders and
non-English speaking patients. While the objects of the practice were clearly
charitable, the Victorian Commissioner for State revenue had refused to
classify the practice as charitable because it received the entirety of its funds
from the Commonwealth government. Nearly half of thos funds had been
granted under conditions that the pratice had agreed to comply with. On that
basis the Commissioner argued that the practice was so much under the
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control of the government that it should be treated as acting as an arm of the
government.
18.27 The High Court found against the Commissioner. Gleeson CJ, Heydon
and Crennan JJ found that the conditions of the grant were negotiated by the
practice and not merely dictated by the government. There was not ongoing
management and control by the government and while donors are permitted
to place conditions on the recent of charitable funds that did not render the
practice an arm of government. Nor did that fact that the practice’s purpoises
matched those of the government mean that the pratices charitable staus had
been lost. Gleeson CJ, Heydon and Crennan JJ, at CLR 184-5; ALR 12
The [practice] had a certain charitable purpose. The government
wanted to advance the very same purpose. The [practice] decided
to advance its purpose by receiving funds from the government and
spending them in the manner it did. These events did not cause the
[practice] to cease to be a charitable body merely by reason of the
fact that the government is not a charitable body. Many charities
implement government policy in the sense that their goals –
providing education, aiding the sick and the poor – are the same as
those of the government…The mere fact that the [practice] and the
government both have a purpose of improving patient care and
health does not establish that the [practice] has the purpose of
giving effect to government purposes, abdicating any independent
fulfilment of its own. The [practice]’s purpose is charitable. It
remains charitable even though the government is the source of the
funds it uses to carry out that purpose. Its consent to the attachment
by the government of conditions to the employment of those funds
does not establish that the [practice] t is not independently carrying
out its purpose.
18.28 Kirby J and Callinan J agreed. Kirby J followed the analysis of Dean J
in Re Cain. Kirby J, at CLR 210; ALR 33, stated:
The reasoning behind this analysis suggests a bifurcation between
bodies that carry out governmental policy, using funds derived from
Consolidated Revenue; and bodies that receive public funds but are
not part of the machinery of government. For bodies that are part of
such machinery, the charitable ‘purposes’ necessary to attract
characterisation as a ‘charitable body’ are absent. Their purposes
are governmental. Such bodies are therefore no more than an agent
of government. Their activities may be beneficial to individuals and
to the community, but they are still performing activities decreed by
government. They lack the spark of altruism and benevolence that is
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essential to characterisation as ‘charitable.’ They are, in Dean J’s
words, ‘simply part of the Government of the country.’
Charitable trusts and profit
18.29 A charitable institution may make a profit, as long as that profit is
reinvested back into the charitable purpose: The Incorporated Council of
Law Reporting of the State of Queensland v FCT (1971) 125 CLR 659 at
669–70; Crystal Palace Trustees v Minister of Town and Country Planning
[1951] 2 Ch 132; [1950] 2 All ER 857; Re Tennant [1996] 2 NZLR 633 at
640.
18.30 In Re Resch’s Will Trusts; Le Cras v Perpetual Trustee Co Ltd [1969]
1 AC 514; [1967] 3 All ER 915, the charitable nature of a trust for St
Vincent’s Private Hospital was questioned as the hospital charged for its
services. The Privy Council noted at AC 540; All ER 920–1 that such a gift
was prima facie charitable:
This is now clearly established both in Australia and England, not
merely because of the use of the word ‘impotent’ in the preamble to
43 Eliz c4, though the process of referring to the preamble is one
often used for reassurance, but because the provision of medical
care for the sick is, in modern times, accepted as a public benefit
suitable to attract privileges given to charitable institutions.
18.31 The Privy Council then went on to note that the hospital was not run
for profit and that any fees paid were used to fund the continued services of
the hospital. As such the Privy Council found the trust to be charitable at AC
544; All ER 923:
The test is essentially one of public benefit, and indirect benefit as
well as direct benefit enters into the account. In the present case, the
element of public benefit is strongly present … The service is
needed by all, not only the well-to-do. So far as its nature permits it
is open to all: the charges are not low, but the evidence shows that it
cannot be said that the poor are excluded …
18.32 The general benefit to the community of such facilities resulted from
the relief to the beds and the staff of the general hospital, the availability of a
particular type of nursing and treatment which supplements that provided by
the general hospital and the benefit to the standard of medical care in the
general hospital which arose from the juxtaposition of the two institutions.
18.33 In Tasmanian Electronic Commerce Centre Pty Ltd v Commissioner
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of Taxation (2005) 219 ALR 647, the promotion of digital commerce and the
provision of aid to businesses for that purpose was deemed to be charitable.
Heerey J, at 662, said:
Once it is accepted that assistance to business and industry can provide a
public benefit of the kind which the law recognises as charitable, a
proposition which does not seem to be in dispute in the present case, I do
not see how the fact that individual businesses may benefit can be a
disqualifying factor. On the contrary, if business in general is assisted, it
seems inevitable that some firms at least will become profitable, or more
profitable, as a result of that assistance. There would be no point in the
exercise if this were not the case. It would be an odd result if an
institution established to benefit business could only qualify as a charity if
the recipients of its benefits made losses or did no more than break even.
18.34 The cases above considered situations where the charity itself made
profit and reivested that profit into its charitable purposes. But what if the
charity owned separate businesses which were for profit, but those profits
were paid back to the charity? In earlier cases, such separate entities were
not considered to be charitable: Darkinjung Pty Ltd v Darkinjung Local
Aboriginal Land Council (2006) FLR 394 at 446. In Shire of Derby-West
Kimberley v Yungngora Association Inc [2007] WASCA 233, a cattle station
which was owned by an Aboriginal Association, and profits from which
were dispersed back into the local indigenous community as not found to be
chartibale. Newnes AJA, at [84], stated:
The fact that the activities on the Land are a source of funds or other
resources used by the Association for charitable purposes, or that the
object of the pastoral business is to provide the resources by which those
purposes might be achieved, does not, in my view, alter the nature of the
use to which the Land is currently put. The Land is not, except to a small
degree, used for charitable purposes; rather it is used essentially for the
non-charitable purpose of operating a pastoral business, albeit with the
object of providing resources which may be used for charitable purposes.
Indeed, even if that non-charitable purpose were not the main purpose for
which the Land were used, it would nevertheless be a distinct purpose so
that, at the least, the Land would be used for a dual purpose.
18.35 The High Court considered these issues in Commissioner of Taxation
v Word Investments (2008) 236 CLR 204; 251 ALR 206. The Wycliffe Bible
Translators (‘Wycliffe’) were a charitable group who sought to spread
Chritianity through the translation of the Bible into other languages. The
organisation had been endorsed as a tax-exempt charity. Wycliffe had set up
a separate company called Word Investments Ltd (‘Word’) which operated a
funeral home business and an investment scheme. Word operated on a profit
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basis but all profits were paid to the charitable purposes of Wycliffe. The
Federal Commissioner of taxation refused to classify Word as an exempt
charity.
18.36 The majority of the High Court overturned the Commissioner’s
decision and found that Word was a charitable institution. Gummow, Hayne,
Heydon and Crennan JJ found that the objects of Word were expressly
charitable as they were aimed at advancing the spread of religion. On the
issue of profit their Honour , at CLR 220; ALR 214 stated:
It is …necessary to reject the Commissioner’s arguments so far as they
submitted that Word had a ‘commercial object of profit from the conduct
of its business’ which was ‘an end in itself’ and was not merely incidental
or ancillary to Word’s religious purposes. Word endeavoured to make a
profit, but only in aid of its charitable purposes. To point to the goal of
profit and isolate it as the relevant purpose is to create a false dichotomy
between characterisation of an institution as commercial and
characterisation of it as charitable.
Their Honours did note that it would not be enough for Word to have stated
purposes which were chartiable. It had to carry out those purposes.
18.37 Kirby J dissented. His Honour, at CLR 248; ALR 238, raised the issue
that the recognition of religious charities needs to be conservatively
constructed:
Charitable and religious institutions contribute to society in various
ways. However, such institutions sometimes perform functions that
are offensive to the beliefs, values and consciences of other
taxpayers. This is especially so in the case of charitable institutions
with religious purposes or religious institutions. These institutions
can undertake activities that are offensive to many taxpayers who
subscribe to different religious beliefs or who have no religious
beliefs. Although the parliament may provide specific exemptions,
as a generally applicable principle it is important to spare gen-eral
taxpayers from the obligation to pay income tax effectively to
support or underwrite the activities of religious (and also political)
organisations with which they disagree. This states a reason of
constitutional principle for ensuring that any exemption of a
‘charitable institution’ with religious purposes or any specific
‘religious institution’ does not extend beyond an exemption that is
clearly provided by law.
18.38 Kirby J, at CLR 250; ALR 239 was also concerned by the economic
and competition aspects of the majority’s decision:
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A taxation exemption for religious institutions, so far as it applies,
inevitably affords effective economic support from the consolidated
revenue fund to particular religious beliefs and activities of some
individuals. This is effectively paid for by others. It involves a
cross-transference of economic support...
18.39 With respect, his Honour was right to call into question economic
consequences of expanding the definition of charity to profit making
businesses. These businesses will invariably compete with non-charitable
businesses, but will have a significant comparative advantage. That
advantage could well cripple competitors and cause consequential reduction
of providers in the market. The result of such a decrease in competition will
invariably be higher prices for consumers. This could result in significant
public detriment.
18.40 There may be other serious consequences. Murray has stated:
If commerical fundraising by charities does increase, then, as
emphasised by Kirby J, there may be important policy implications
for government – for instance, the erosion of the tax base or a loss
of competitive neutrality. In addition to those identified by Kirby J,
potential issues include:

as a corollary to the competitive neutrality concern, whether
differential tax treatment of charitable and for~profit businesses
might cause ‘economic inefficiency’;

a potential increase in the risk of loss of an entity's charitable
assets if commercial liabilities are not quarantined;

the 'diversion' of the efforts of the controllers of all entity away
from its charitable purpose and towards its commercial
activities; and

that individuals may view charities as less altruistic if they
expand their commercial activities.5
18.41 Currently the Federal Government is considering these issues as part
the Henry Review of taxation.6 The government has also commissioned the
Productivity Commission to review the not-for-profit sector. The review will
examine, amongst other things, the recent changes in the relationships
between government, business and community organisations and whether
I Murray, ‘Charity Means Business’ (2009) 31 Sydney Law Review 309 at 326.
Commonwealth of Australia, Australia's Future Tax System Consultation
Paper (Canberra: Treasury, 2008)
5
6
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there is scope to enhance these relationships so as to improve outcomes
delivered by the not for profit sector.7
Reforming the definition of charity
18.42 In Australia, a substantial review of the definition of charity occurred
in the Report of Inquiry Into the Definition of Charities and Related
Organisations 2001, a report commissioned by the Federal Government.8
That report recommended the abandonment of Preamble to the Statute of
Elizabeth and the creation of a legislative definition of charity. That
definition of charitable purpose included:
1. the advancement of health, which includes the prevention and relief
of sickness, disease or of human suffering;
2. the advancement of education;
3. the advancement of social and community welfare, which includes
the prevention and relief of poverty, distress or disadvantage of
individuals or families; the care, support and protection of the aged
and people with a disability; the care, support and protection of
children and young people; the promotion of community
development to enhance social and economic participation; and the
care and support of members or former members of the armed
forces and the civil defence forces and their families;
4. the advancement of religion;
5. the advancement of culture, which includes the promotion and
fostering of culture and the care, preservation and protection of the
Australian heritage;
6. the advancement of the natural environment; and
7. other purposes beneficial to the community, which without
limitation include the promotion and protection of civil and human
rights; and the prevention and relief of suffering of animals.
18.43 The recommendations were included in an exposure draft of a
7
Productivity Commission, Contribution of the Not for Profit Sector
http://www.pc.gov.au/projects/study/not-for-profit (accessed 10 Sept 2009).
8
R F Sheppard, I R Fitzgerald & D Gonski, Report of Inquiry Into the
Definition of Charities and Related Organisations, 2001
(www.cdi.gov.au).
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proposed Charities Bill in 2003, but the Bill was never introduced into
Federal Parliament. Instead a less ambitious change was introduced via the
Extension of Charitable Purpose Act 2004. That Act attempts to include the
provision of non-profit child care as a charitable purpose, within the Federal
jurisdiction. It also states that open and non discriminatory self-help groups
for the disadvantaged, and closed religious orders, provide a public benefit:
see 18.70. Outside of these changes, the Preamble to the Statute of Elizabeth
and the four categories of Pemsel’s case still apply in Australian
jurisdictions.
18.44 Other countries have also considered the legislative reform route. The
New Zealand government adopted a new definition of charity in the Charity
Act 2005, which is based on the four Pemsel categories but expanded to
include trusts for where the beneficiaries are related by blood, and trusts for
marae (sacred clearings and meeting places of the Maori).
18.45 The United Kingdom passed its Charities Act 2006, which replaced
the Preamble with a statutory definition of charitable prupose in s 2. Section
2(2) lists the following charitable purposes:
(a) the prevention or relief of poverty;
(b) the advancement of education;
(c) the advancement of religion;
(d) the advancement of health or the saving of lives;
(e) the advancement of citizenship or community development;
(f) the advancement of the arts, culture, heritage or science;
(g) the advancement of amateur sport;
(h) the advancement of human rights, conflict resolution or
reconciliation or the promotion of religious or racial harmony or
equality and diversity;
(i) the advancement of environmental protection or improvement;
(j) the relief of those in need by reason of youth, age, ill-health,
disability, financial hardship or other disadvantage;
(k) the advancement of animal welfare;
(l) the promotion of the efficiency of the armed forces of the Crown,
or of the efficiency of the police, fire and rescue services or
ambulance services…
Section 2(4) also includes within the definition purposes recognised as being
chartiable by the Recreational Charities Act 1958 and other purposes with
are analogous or within the spirit and intendment of the other purposes.
18.46 It is regrettable that the Australian government has failed to fully
embrace reform of the definition of charity. While the judges have done well
to update the definition for modern times there are anomalies that have
necessarily creeped into the law from its reliance on the premable to a statute
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from over 400 years ago. In Central Bayside General Practice Association
Ltd v Commissioner of State Revenue (Vic) Kirby J noted these deficiencies.
At CLR 201; ALR 26 his Honour stated that the continued use of the
Preamble represented the ‘irrational surrender to the pull of history over
contemporary understandings of language.’ Neverthless, Kirby J, at CLR
207; ALR 31 felt bound to follow Pemsel primarily because the risk of reopening the question of the meaning of charity ‘might produce a more
restrictive and deleterious policy outcome than is represented by persistence
with the approach that Pemsel mandates.’
TRUSTS FOR THE RELIEF OF POVERTY
The poor
18.47 ‘Poverty’ is given a relative meaning in the law of trusts. In order to
be valid as a gift for the relief of poverty the law does not require that the
persons to be benefited should be destitute, or even on the border of destitution: Re Gillespie (dec’d) [1965] VR 402 at 406, per Little J. Rather, a trust
will relieve poverty when it provides money to those who would have to ‘go
short’ because of their financial status: Re Coulthurst (dec’d) [1951] Ch 661
at 666.. The concept of ‘going short’ in Australia has been taken to mean
that the person is in necessitous circumstances which have prevented them
from obtaining a modest standard of living: Ballarat Trustees Executors &
Agency Co v Federal Commissioner of Taxation (1950) 80 CLR 350 at 355,
per Kitto J. Trusts for the ‘distressed’ have been viewed as realting to people
who suffer economic pressure and impecuniousness: Northern Sydney And
Central Coast Area Health v Attorney General [2008] NSWSC 1223; Re
Pieper (dec'd) [1951] VLR 42.
18.48 An intention to create a trust for the relief of poverty need not be
evidenced by a direct statement, as long as there appears a general intention
that the trust be used to benefit someone in necessitous circumstances: Muir
v Open Brethren (1956) 96 CLR 166.
18.49 As stated above, the requirement of public benefit, contained in the
Compton test, does not apply to trusts for the relief of poverty: Dingle v
Turner [1972] AC 601; [1972] 1 All ER 878. Trusts have been held to be
charitable when they have the purpose of relieving poverty among poor
relations or among poor employees: Re Scarisbrick’s Will Trusts [1951]
1 Ch 622 at 649; [1951] 1 All ER 822. The main difficulty in such situations
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is determining whether the trust is a charitable trust or an express trust for
identifiable beneficiaries. The determination rests on the intention of the testator as evidenced in the wording of the trust: Re Segelman (dec’d) [1996]
Ch 17; [1995] 3 All ER 676.
The aged
18.50 While there is some earlier authority which suggested that a trust for
the aged required some added element for it to be charitable, it is now
established that a trust for the aged is prima facie charitable: City of
Hawthorn v Victorian Welfare Assoc [1970] VR 205 at 209, per Smith J.
18.51 However, if the trust is confined in an inappropriate way it will lose its
charitable nature. For example, if the trust is confined to the wealthy aged
then the trust will be non-charitable: Hilder v Church of England
Deaconess’ Institution [1973] 1 NSWLR 506 at 510.
The impotent
18.52 The term ‘impotent’ has been taken as referring to those who suffer
from an illness or disability, and those who are without family support
networks. Examples of such trusts include, trusts for orphans, AttorneyGeneral (NSW) v Perpetual Trustee Co Ltd (1940) 63 CLR 209, trusts for
‘crippled children,’ The Cram Foundation v Corbett-Jones [2006] NSWSC
495, trusts for the blind, Re Inman (dec’d) [1965] VR 238, and trusts for
single mothers (‘who have erred once but not twice’): Re Wyld [1932] SASR
298.
18.53 Gifts to hospitals and related institutions, will also be charitable under
this heading. Such gifts may also be included under the fourth category in
Pemsel’s case: Perpetual Trustee Co Ltd v St Luke’s Hospital (1939) 39
SR(NSW) 408. As stated above, the charitable status of gifts to hospitals is
not effected by the hospital charging for its services if the fees are put back
into the running of the hospital
TRUSTS FOR THE ADVANCEMENT OF EDUCATION
18.54 The word ‘education’ has a wide meaning in the law of trusts.
It includes gifts to particular educational institutions, such as schools and
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universities, which, coming under the preamble, are prima facie charitable:
Lankry v Clairvision School Limited [2005] NSWSC 1094. It also includes
gifts that are unrelated to institutions and stated in the broadest of terms. For
example, in Permanent Trustee Co (NSW) Ltd v Presbyterian Church (NSW)
Property Trust (1946) 64 WN(NSW) 8, a gift for ‘the promotion and
encouragement of education in New South Wales’ was upheld as an
educational trust.
18.55 Educational trusts can embrace specific purposes that are related,
sometimes loosely, to education. Trusts for scholarships, buildings and the
dramatic arts are all examples of valid educational trusts: Re Leitch (dec’d)
[1965] VR 204; Re Queensland State and Municipal Orchestra Endowment
Fund (1999) BC9905299; Perpetual Trustee Co Ltd v Commissioner of
Stamp Duties (NSW) [1976] 1 NSWLR 127. A trust for establishing boys in
employment on the land was found to be charitable in Trustees of the
Christian Brothers In Western Australia (Inc) v Attorney General [2006]
WASC 191.
18.56 Gifts to sporting associations will be held to be educational if they
take effect within an educational setting: Kearin v Kearins (1956) 57
SR(NSW) 286. However, a trust to promote a sport that is unassociated with
an educational purpose or general health and welfare is not be charitable: Re
Nottage [1895] 2 Ch 649; Strathalbyn Show Jumping Club Inc v Mayes
[2001] SASC 73.
Research and education
18.57 The term ‘education’ has been taken to require the dissemination of
knowledge. It has therefore been said that a trust to further pure research
would not be educational because it would merely acquire knowledge:
Whicker v Hume (1858) 7 HLC 124; 11 ER 50. However, in Taylor v Taylor
(1910) 10 CLR 218 at 224, Griffith CJ stated:
I confess my inability to apprehend how the stock of available knowledge
can be increased without diffusion of the addition to the existing stock … In
these days scientific research is recognised as one of the most efficient means
of adding to the knowledge of mankind. We are all familiar with the fact that
research scholarships are granted by universities and other institutions for
this purpose. It is true that the holder of such a scholarship may, in breach of
the honourable obligations incumbent upon him, fail to disclose the result
of his researches, but the existence of that necessary risk cannot alter the
character of an endowment granted for such a purpose.
18.58 Since Taylor v Taylor courts in Australia have held a number of
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research trusts to be charitable, such as trusts for the study of natural history,
trusts for research into disease, and trusts for cancer research: Re Benham
[1939] SASR 450; Estate of Schultz [1961] SASR 377; Re Simpson (dec’d)
[1961] QWN 50.
Trusts with no educational value
18.59 Trusts for education may be struck down on the basis of public
benefit, if the knowledge that is being disseminated is considered to be
worthless. For example, a trust to establish a training school for psychic
mediums was not found to be valid in Re Hummeltenberg [1923] 1 Ch 237.
Russell J stated at 242:
If a testator by stating or indicating his view that a trust is beneficial to the
public can establish this fact beyond question, trusts might be established in
perpetuity for all kinds of fantastic (though not unlawful) objects, of which
the training of poodles to dance might be a mild example … In my opinion
the question, whether a gift is or may be operative for the public benefit is a
question to be answered by the court forming an opinion upon the evidence
before it.
In a similar fashion, the trust which gave the testator’s studio as a museum
failed in Re Pinion (dec’d) [1965] Ch 85; [1964] 1 All ER 890, because the
contents contained nothing of value. In Re Elmore (dec’d) [1968] VR 390, a
trust to prepare and publish the testator’s writings was found to confer no
public benefit when the writings were found to have no literary value.
TRUSTS FOR THE ADVANCEMENT OF RELIGION
The definition of religion
18.60 The preamble to the Statute of Charitable Uses did not make express
reference to the advancement of religion because of Tudor concerns with
church power. Over time, the concerns over religious charity diminished and
trusts were accepted as being charitable when they sought the advancement
of religion.9
18.61 The definition of ‘religion’ was provided by Mason CJ and Brennan J
in Church of the New Faith v Commissioner of Pay-roll Tax (Vic) (1983)
154 CLR 120 at 136:
[F]or the purposes of the law, the criteria of religion are twofold: first, belief
in supernatural Being, Thing or Principle; and second, the acceptance of
9
HAJ Ford & WA Lee, Principles of the law of trusts (Online), Thomson
Reuters, Sydney, [19050], [19250].
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canons of conduct in order to give effect to that belief, though canons of
conduct which offend against ordinary laws are outside the area of immunity,
privilege or right conferred on the grounds of religion.
Advancement of religion generally
18.62 Trusts under this category must seek to advance religious purposes. In
United Grand Lodge of Ancient Free & Accepted Masons of England v
Holborn Borough Council [1957] 3 All ER 281 at 285, Donovan J said:
To advance religion means to promote it, to spread its message, even wider
among mankind; to take some positive steps to sustain and increase religious
belief; and these things are done in a variety of ways which may be comprehensively described as pastoral and missionary.
18.63 Any general expression that reflects some concern with religious
purposes will be enough to satisfy the test, as long as it can be shown to
come with public benefit. For example, trusts for ‘work of the Lord’ have
been found to be charitable, Re Brooks (1969) 4 DLR (3d) 694, as have
trusts for the independent study of the Bible: Re Flatman [1953] VLR 33.
Other examples include trusts for missionary work, which are charitable
regardless of whether the work is engaged in Australia or overseas: Hardey v
Tory (1923) 32 CLR 592.
18.64 The test of public benefit is difficult to apply to religious trusts
because of the danger that the bigotry of the bench may manifest itself in
judgments. For example, in earlier times, a trust for the instruction of people
in the Jewish faith failed for being superstitious: Da Costa v De Pas (1754)
Amb 228; 27 ER 150. Thankfully, in modern times, the courts are more
open to alternative religions. For example, a trust to promote the mediocre
religious writings of a builder was held to be charitable in Re Watson (dec’d)
[1973] 3 All ER 678. However, there is still the possibility, even in these
enlightened times, that a purpose will be found to be so subversive of established morality that it ought not be supported: Re Jones [1907] SALR 190.
18.65 Other requirements of public benefit apply to religious trusts. As
stated above, religious trusts for contemplative orders are said to have no
public benefit, although, this has now been changed in the Federal
jurisdiction: 18.70; Gilmour v Coats [1949] AC 426; [1944] 1 All ER 848.
Gifts to named churches or congregations
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18.66 A gift to a named church, demonination, congregation or church body
will be presumed to be limited to the religious purposes of those
organisations: Green v Third Church of Christ, Scientist [2006] VSC 39;
Hardey v Tory (1923) 32 CLR 592 at 595; Presbyterian Church (NSW)
Property Trust v Ryde Municipal Council (1978) 2 NSWLR 387 at 404.
Trusts for buildings, grounds and cemeteries
18.67 Express reference is made in the preamble to the repair of churches.
As such, trusts for the repair or building of churches and related buildings,
and the maintenance of church grounds are valid charitable trusts: Re Tyrie
(dec’d) [1970] VR 264; Re Findlay’s Estate (1995) 5 Tas R 333. Trusts for
graveyards in church grounds are also charitable: Re Michner [1922] QSR
39. Trusts for monuments or tombs that are not part of a church are not
charitable, but may come under the heading of a recognised non-charitable
purpose trust: Re Spehr (dec’d) [1965] VR 770. If the trust is for a private
chapel it will not satisfy the test of public benefit: Power v Tabain [2006]
WASC 59; Hoare v Hoare (1896) 56 LT 147.
18.68 In Uniting Church in Australia Property Trust (Q) v Attorney-General
[2007] QSC 318, a gift of land for a holiday camp for youth of the Uniting
Church was found to be for the advancement of religion, although it was
recognised that the gift ocntained a mixture of chartiable and non-charitable
purposes. Other similar gifts have failed to be found to be charitable: 18.92.
Trusts for prayers, masses and ceremonies
18.69 Trusts for public prayer and the saying of public masses and ceremonies are valid charitable purposes: Nelan v Downes (1917) 23 CLR 546;
Crowther v Brophy [1992] VR 97. The reason for this is because such
ceremonies reinforce and enhance religious beliefs. Trusts for private prayer
or contemplation are of no public benefit and, as such, are not charitable:
Gilmour v Coats [1949] AC 426; [1944] 1 All ER 848.
18.70 Some doubt has been expressed over the different treatment meted out
to private prayer. The primary reason for the failure of private prayer has
been the impossibility of proving that such prayer confers a benefit on society: Gilmour v Coats [1949] AC 426 at 447, per Lord Greene MR. Some
Australian judges have doubted the validity of the distinction on the grounds
that private prayer enhances the lives of those involved and as such confers a
benefit commensurable with public prayer: Crowther v Brophy [1992] 2 VR
97 at 100, per Gobbo J. The changes in the Federal law brought about by the
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Extension of Charitable Definition Act 2004 (Cth), seem to reflect these
concerns: 18.13.
Gifts to religious office bearers
18.71 A gift to a religious office bearer will take the form of a trust when it
is intended to bestow a benefit on the office rather than on the individual: Re
Hannah’s Will (1939) 34 Tas LR 45. Under this heading trusts to
supplement the stipend of an office holder are said to be charitable: Re Fall
[1944] Tas SR 41. Trusts for supporting retired ministers have also been
found to be charitable: Presbyterian Church of New Zealand Beneficiary
Fund v Commissioner of Inland Revenue [1994] 3 NZLR 363. Such trust
may also provide for the families of ministers: Baptist Union of Ireland
(Northern) Corporation Ltd v Commissioners of Inland Revenue (1945) 26
TC 335. Questions arise as to whether gifts can include lay members of
Churches. In Melbourne Anglican Trust Corp v Attorney-General [2005]
VSC 481, a trust for providing holiday homes for Anglican ministers was
expanded to include lay members of the Church who were licnesed to
perform Church functions. However, in Hester v Commissioner of Inland
Revenue [2005] 2 NZLR 172, a superannuation trust which provided
benefits not only to ministers and their families, but also to all Church
employees are not charitable. The distinction most probably lies in the fact
that Church ministry functions were being performed by the lay members in
the first case, whereas, ordinary employees were included in the latter.
18.72 Problems can occur if the trust is given to an office holder whose tasks
may include non-charitable purposes; for example, a trust for ‘parish work’.
Given the wide-ranging nature of parish work, such a gift may contain
mixed charitable and non-charitable elements and hence be invalid: Farley v
Westminster Bank Ltd [1939] AC 430. Other examples of invalid trusts
include gifts to an archbishop ‘to apply the income thereof as he shall in his
sole and uncontrolled discretion think fit’ or ‘for such other purposes as the
Council of the Diocese shall think fit’: Queensland Trustees Ltd v Halse
[1949] St R Qd 270; Anglican Trusts Corporation of the Diocese of
Gippsland v Attorney-General [2008] VSC 352. The law on this point is in a
poor state, primarily because of inconsistent findings about the purposes
embraced by particular phrases. For example, we can compare the term
‘parish work’ with that of ‘diocesan purposes’, which was found to be
exclusively charitable in Re Macgregor (1932) 32 SR(NSW) 483. Why a
distinction should be made between the use of these phrases is a mystery that
does little to instil admiration for the law.
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TRUSTS FOR PURPOSES THAT ARE BENEFICIAL TO THE
COMMUNITY
18.73 Trusts coming within the fourth category of Pemsel’s case must
be both beneficial to the community and be within the spirit and intendment
of the statute: Incorporated Council of Law Reporting (Qld) v Federal
Commissioner of Taxation (1971) 125 CLR 659 at 667.
18.74 Because of the ‘catch all’ nature of the fourth heading it is hard to
summarise the types of trusts that fall under this grouping. In Barby v
Perpetual Trustee Co Ltd (1937) 58 CLR 316, at p 324, Dixon J said of the
fourth category:
In this now familiar classification of charitable gifts, the fourth class, as
has often been pointed out, does not attempt to define a charitable object.
It is no more than a final class into which various objects fall that are not
comprised in the first three classes, but are nevertheless charitable. It has
been found impossible to give an exhaustive definition of what amounts
to a charitable purpose, but the authorities indicate the attributes that are
to be looked for. The gift must proceed from altruistic motives or from
benevolent or philanthropic motives. It must be directed to purposes that
are for the benefit of the community or a considerable section or class of
the community. The purposes must tend to the improvement of society
from some point of view which may reasonably be adopted by the donor.
The manner in which this tendency may be manifested is not defined by
any closed category. It is capable of great, if not infinite, variation. It may
be by the relief of misfortune; by raising moral standards or outlook; by
arousing intellectual or aesthetic interests; by general or special
education; by promoting religion; or by aiming at some other betterment
of the community. The purposes must be lawful and must be consonant
with the received notions of morality and propriety.
Gifts to a community
18.75 A gift to the general, or a specific, community will be a valid
charitable purpose. For example, a gift to the ‘community of Australia’ was
found to be valid in Commissioner of Stamp Duties (NSW) v Way (1951)
83 CLR 570. A gift to the ‘Government of Bengal’ was found to be
charitable in Midford v Reynolds (1842) 41 ER 602, as was a gift to the
‘Govt’ in Ryder v the Attorney General [2004] NSWSC 1171.
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18.76 Gifts may also be made under this heading to smaller locales and
districts: Re Baynes [1944] 2 All ER 597. However, a gift to ‘benefit
mankind in general’ was found to be so wide as to include non-charitable
elements in Attorney General (Cayman Islands) v Wahr-Hansen [2001] 1
AC 75; [2000] 3 All ER 642.
Gifts to Indigenous Australians
18.77 Gifts to indigenous Australians have been upheld as charitable: Shire
of Ashburton v Bindibindi Community Aboriginal Corporation [1999]
WASC 108; Re Mathew (dec’d) [1951] VLR 226; Re Bryning [1976] VR
100. In Dareton Local Aboriginal Land Council v Wentworth Council
(1995) 89 LGERA 120, Bignold J found, at 125, that the the fourth category
would cover such gifts given ‘the widespread recognition in the common
law of Australia of the plight of Aborigines in the Australian community in
terms of their socio-economic status, opportunities for advancement, and the
legacy of dispossession that was the inevitable result of British settlement in
this country.’ In Public Trustee v Attorney-General of New South Wales
(1997) 42 NSWLR 600, Santow J opined that a gift to help race relations
and improve the lot of Aboriginals and Torres Strait Islanders would be
charitable.
18.78 More specific gifts to provide accommodation and housing to
Aboriginal Australians have also been found to be charitable: Aboriginal
Hostels Ltd v Darwin City Council (1985) 55 LGRA 414; Alice Springs
Town Council v Mpweteyerre Aboriginal Corporation (1997) 139 FLR 236;
Toomelah Co-operative Ltd v Moree Plains Shire Council (1996) 90
LGERA 48.
Gifts to cultural and ethnic groups
18.79 Gifts to significant ethnic communities not related to geography have
been upheld, such as members of Maori communities: Latimer v
Commissioner for Inland Revenue [2002] 3 NZLR 195. A gift to the ‘Black
community in of Hackney, Haringey, Islington and Tower Hamlet' was
likewise upheld as charitable in Re Harding (deceased) [2007] 1 All ER
747.
18.80 In Radmanovich v Nedeljkovic (2001) 52 NSWLR 641 at 665-6,
Young CJ in Eq said that trusts to help ethnic community members settle in
Australia, were not yet charitable, but might be recognised as such in the
future.
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Trusts to aid the status of women
18.81 In Victorian Women Lawyers’ Association Inc v Commissioner of Taxation
(2008) 170 FCR 318; 250 ALR 516, it was held that the Victorian Women
Lawyers’ Association was chartibale as its primary purpose wa to remove barrier
and increase opportunities for women in the legal profession. The facts that society
recognised the advancement of women in legislation and in international treaties,
mean that there was community recognition of historical and persisting gender based
discrimination and the need to take positive steps to overcome it. Such a purpose
was for the benefit of the community.
Public works and beautification trusts
18.82 The reference in the preamble to repair of highways, havens, ports etc,
has been used to justify trusts for the beautification of particular local areas
and trusts for public works. For example, trusts have been upheld for ‘the
improvement of the city of Ballarat’: Re Bones [1930] VLR 346; and for the
building of a public concert hall in Launceston: Monds v Stackhouse (1948)
77 CLR 232. Gifts of land for public parks are charitable, such as a trust for
the establishment of an agricultural showground: Brisbane City Council v
Attorney-General (Qld) [1979] AC 411; 19 ALR 681.
Gifts for improving agriculture, industry and commerce
18.83 Gifts to improve agriculture fall within the preamble and are
charitable. In Inland Revenue Commissioners v Yorkshire Agricultural
Society [1928] 1 KB 611, a society which ran an agricutural show for the
iprovement and advancement of agriculture was found to be charitable.
18.84 Gifts may also be charitable if they are aimed at improving industry
and commerce, either at large or in a specific locality. For example, in
Crystal Palace Trustees v Minister of Town and Country Planning [1951] 2
Ch 132 at 142 ; [1950] 2 All ER 857, the charitable trust consisted of a
leisure centre and park of some 200 acres for the purposes of education and
recreation and the promotion ‘of industry, commerce and art.’ Dankwerts J,
at Ch 142; All ER 858-9, said;
In those circumstances, it seems to me that the intention of the Act in
including in the objects the promotion of industry, commerce and art, is
the benefit of the public, that is, the community, and is not the furtherance
of the interests of individuals engaging in trade or industry or commerce
by the trustees. It appears to me that the promotion of industry or
commerce in general in such circumstances is a public purpose of a
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charitable nature within the fourth class in the enumeration of charitable
purposes contained in Pemsel’s case [1891] AC 531, 583
An Australian example is Tasmanian Electronic Commerce Centre Pty Ltd
v Commissioner of Taxation where the promotion and funding of ditigal
commerce in Tasmania was said to be charitable.
18.85 The promotion of tourism has not been found to be charitable: Travel
Just v. Canada (Canada Revenue Agency) 2006 FCA 343; [2007] 1 CTC
294. In National Tourism Development Authority v Coughlan [2009] IEHC
53, the Irish High Court, refused to recognize as charitable a trust of golf
courses in Killarney, which aimed to preserve a small stretch of countryside
and to promote tourism to Killarney.
Animals and wildlife
18.86 Trusts for the ‘benefit of animals generally’ are not charitable:
Murdoch v Attorney-General (Tas) (1992) 1 Tas R 117. This is because such
a trust is viewed as being for the benefit of animals rather than the public.
Contrastingly, trusts for animal shelters and for the prevention of cruelty to
animals are charitable as they promote personal and public morality:
Perpetual Trustees Tasmania Ltd v Tasmania [2000] TASSC 68; AttorneyGeneral (SA) v Bray (1964) 111 CLR 402. However, if the primary purpose
of the trust is to change the law, the fact that animal welfare is also an aim
will not save the trust from being struck down as political: Anti-Vivisection
Society v Inland Revenue Commissioners; Hanchett-Stamford v Attorney
General.
18.87 Trusts that create areas for animals, free of human contact, have been
set aside on the basis that they do nothing to elevate the standard of human
conduct: Re Grove-Grady [1929] 1 Ch 557; [1929] All ER Rep 158; Re
Green (dec’d) [1970] VR 442. However, more recent judgments that reflect
the concern with conservation and have found that such reserves are valid
charitable purposes, as the public can be said to benefit from the protection
of rare or endangered species: Attorney-General (NSW) v Satwell [1978] 2
NSWLR 200.
Protection from war and disaster
18.88 Trusts with the purpose of protecting people from the effects of war or
disaster are charitable: Re Darwin Cyclone Tracy Relief Fund Trust (1979)
39 FLR 260. Examples include trusts for fire engines: Attorney-General v
Walker (1914) 31 WN (NSW) 59; rehabilitation after war: Muir v Open
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Brethren (1956) 96 CLR 166; or ‘for the elimination of war’: Re Blyth
[1997] 2 Qd R 567.
Relief of taxes
18.89 Gifts for the payment of taxes or debts are charitable as they are
expressly referred to in the preamble of the Statute of Charitable Uses. An
example is a gift for the reduction of national debt: Newland v AttorneyGeneral (1809) 3 Mer 684; 36 ER 262.
Public sport and recreation
18.90 A trust that merely promotes sport is not charitable: Royal National
Agricultural & Industrial Association v Chester (1974) 3 ALR 486; Amateur
Youth Soccer Association v Canada 2007 SCC 42. In Re Nottage [1895] 2
Ch 649; [1895–9] All ER Rep 1203, a trust to encourgae yacht racing was
found to be non-charitable. Lindley LJ at Ch 655 stated:
It is a prize for a mere game . . . Now, I should say that every
healthy sport is good for the nation – cricket, football, fencing,
yachting, or any other healthy exercise and recreation; but if it had
been the idea of lawyers that a gift for the encouragement of such
exercises is therefore charitable, we should have heard of it before
now.
Lopes LJ, at Ch 656, also rejected trusts for sport:
It is most difficult to draw a line separating charitable gifts from
gifts not charitable; and the only safe course is to say that a
particular class of gifts do not come within the definition of a
charitable gift. I am of opinion that a gift, the object of which is the
encouragement of a mere sport or game primarily calculated to
amuse individuals apart from the community at large, cannot upon
the authorities be held to be charitable, though such sport or game is
to some extent beneficial to the public. If we were to hold the gift
before us to be charitable we should open a very wide door, for it
would then be difficult to say that gifts for promoting bicycling,
cricket, football, lawn-tennis, or any outdoor game, were not
charitable, for they promote the health and bodily well being of the
community.
18.91 Inroads have been made into this principle when the trust can be
considered to have an educational purpose: Internal Revenue Commissioners
v McMullen [1981] AC 1; [1980] 1 All ER 884. In Strathalbyn Show
Jumping Club Inc v Mayes [2001] SASC 73, Bleby J found that a trust for
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the promotion of a sport where it can be seen as but part of a broader
educational purpose, or for the promotion of the general health and welfare
of a sector of the community, may be a valid charitable trust. Similarly,
trusts that promote sport in the armed services and police force may be
upheld as trusts for defence and public safety, when they have the primary
purpose of enhancing the efficiency of those services: Re Gray [1925] Ch
362; Inland Revenue Commissioners v City of Glasgow Police Athletic
Assoc [1953] AC 380; [1953] 1 All ER 747.
18.92 Trusts for recreation have also failed. For example, trusts for the
creation of community centres with the purpose of promoting cultural
welfare have failed: Internal Revenue Commissioners v Baddeley [1955]
AC 572; as have trusts for clubs: Re Wilson’s Grant [1960] VR 514 (Girls
Friendly Society); Attorney-General (NSW) v Cahill [1969] 1 NSWR 85
(Catholic Boys Club); Anglican Trusts Corporation of the Diocese of
Gippsland v Attorney-General [2008] VSC 352 (trust for a girls camp for
girls of the Gippsland Diocese of the Church of England). Confusingly, a
trust for public recreational facilities will be valid when it can be said to be a
gift to a community for public works: Monds v Stackhouse (1948) 77 CLR
232.
18.93 Many recreational trusts are now saved by legislative reforms, which
have expanded the definition of charity to include the provision of facilities
for recreation.10 In Queensland, South Australia and Western Australia, the
legislation requires that the facilities be provided in the interests of social
welfare, with the object of improving the conditions of life for the persons
for whom the facilities are intended. Moreover, it is necessary in these states
for the facilities to be made available to both sexes, or, as an alternative, that
the facilities are being made to persons because of youth, age, disability or
other social and economic factors. In Tasmania, there are no such qualifications. The trust merely needs to be for recreation.
Trust for members of the armed services, ex-members and their families
18.94 Trusts for the benefit of members of the armed services are charitable:
Attorney-General for NSW v Fulham [2002] NSWSC 629 at [51];
Somerville v Attorney-General (1921) 21 SR(NSW) 450. For example, in Re
Good [1905] 2 Ch 60, a valid charitable gift consisted of a library for an
Trusts Act 1973 (Qld), s 103(2); Trustee Act 1936 (SA), s 69C; Variation
of Trusts Act 1994 (Tas), s 4(1); Charitable Trusts Act 1962 (WA), s 5.
10
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officer’s mess. In Re Gray [1925] Ch 362, the gift was of a fund to promote
sport, including shooting, fishing, cricket, football and polo, being played in
a regiment. Both gifts were said to be charitable as they enhanced the mental
and physical abilities of the soldiers.
18.95 In Navy Health Limited v Deputy Commissioner of Taxation (2007)
163 FCR 1, the provision of health insurance to members, ex-members of the
armed services and their family members was said to be charitable (although
the particular insurance company could not be deemed a charitable institution
for the purposes of fringe benefits tax as it provided insurance to others
outside these classes).
18.96 Trusts for ex-members and returned servicemen and servicewomen
are also charitable. In Verge v Somerville [1924] AC 496 a repatriation fund
for returned soldiers was upheld as being of benefit to the community.
Chartibale status will also be extended to trusts for the children of returned
soldiers: Re Elgar (deceased) [1957] NZLR 1221. In Downing v Federal
Commissioner of Taxation (1971) 125 CLR 185, Walsh J at 199 said:
I am of opinion that there is no justification for laying down a rule
that either a trust for the benefit of ex-servicemen or a trust for the
benefit of the dependants of ex-servicemen cannot be a valid
charitable trust … A trust of either of those kinds may tend to
promote the efficiency of the armed forces and to promote the
security of the country and may be held for that reason to be
charitable.
The notion that there can charitable trust for the families of soldiers
therefore seems to be an exception to the Compton rule against naming a
propositus by reference to blood relation.
Public safety and defence
18.97 Trusts that seek to promote public safety or defence are also
charitable. Examples include trusts for the teaching of shooting, Re Stephens
(1892) 8 TLR 792, the training of police or members of the armed services,
Lloyd v Federal Commissioner of Taxation (1955) 93 CLR 645, gifts to
ambulance services: Public Trustee of Queensland v State of Queensland
[2004] QSC 360.
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TRUSTS WITH MIXED CHARITABLE AND NON-CHARITABLE
PURPOSES
18.98 A trust with mixed charitable and non-charitable purposes will
ordinarily fail: Morice v Bishop of Durham (1804) 9 Ves 399; 32 ER 656;
McCraken v Attorney-General (Vic) [1995] VR 56. Such gifts are described
as ‘compendious’ because it is not possible to separate the charitable from
the non-charitable objects. Examples of compendious gifts include gifts for
‘objects of benevolence and liberality’: Morice v Bishop of Durham. Additionally, if the gift is worded to give the trustee a discretion to choose
between charitable and non-charitable purposes, the gift will fail. An
example of such a gift is a gift for ‘charitable or benevolent purposes’:
Attorney-General v Metcalfe (1904) 1 CLR 421.
18.99 The gift may survive if the charitable and non-charitable purposes are
severable. For example, a trust that has been created to apportion funds
between the charitable and non-charitable purposes will be upheld: Muir v
Archdall (1918) 10 SR(NSW) 10. If the quantities to apportion are uncertain,
the court will apportion them in equal shares. Shares will be split between
the charitable and non-charitable purposes, on the proviso that valid
private trusts have been created for the non-charitable purposes.
18.100 If the charitable and non-charitable purposes can be read cumulatively, the gift will survive.11 For example, in a gift to ‘charitable institutions
bodies and organisations’, the terms ‘bodies’ and ‘organisations’ are read
consistently with the prior words to give them charitable meaning: Smith v
WA Trustee Executor & Agency Co Ltd (1950) 81 CLR 320.
Gifts to associations
18.101 A gift to an association will be examined to see whether the association has charitable objectives and engages in charitable activities: Inland
Revenue Commissioners v City of Glasgow Police Athletic Assoc [1953]
AC 380; [1953] 1 All ER 747. If an association has incidental purposes that
are non-charitable, the gift will be upheld but the trustees will be prevented
from using the funds for the non-charitable objectives of the association:
Re Lloyd (dec’d) [1958] VR 523. For example, in Congregational Union of
New South Wales v Thiselwayte (1952) 87 CLR 375, the High Court upheld
a gift to an association which included amongst its objects the furtherance of
11
Dal Pont & Chalmers, note 1, pp 777-78.
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philanthropy and the preservation of religious liberty. The principles were
held to be non-charitable, but were ancillary to the association’s mission.
The gift was upheld but the trustees were limited in applying the funds to
philanthropic agencies that were religious in nature.
Statutory reform
18.102 Most jurisdictions have enacted statutory reforms to save trusts that
have mixed charitable and non-charitable purposes.12 Section 131 of the
Property Law Act 1958 (Vic) is typical when it states:
(1) No trust shall be held to be invalid by reason of some non-charitable and
invalid as well as some charitable purpose or purposes is or are or could be
deemed to be included in any of the purposes to or for which an application
of the trust funds or part thereof is by such trust directed or allowed.
(2) Any such trust shall be construed and given effect to in the same manner
in all respects as if no application of the trust funds or any part thereof to or
for any such non-charitable and invalid purpose had been or should be
deemed to have been so directed or allowed.
The section saves compendious gifts by reading them down and restricting
them to the purely charitable elements. For example, in Leahy v Attorney
General (NSW) [1959] AC 457; 101 CLR 611, a testator created a post
mortem trust under which the trustees had the discretion to select an order of
nuns or Christian Brothers to take the beneficial ownership of his farm..
Problems arose because the phrase ‘order of nuns’ could be read to include
contemplative orders that were non-charitable. The Privy Council held that
the gift could be saved by the legislation because the predominant purpose
of the gift was charitable.
18.103 The charitable intention must be clear to invoke the restorative power
of the section. If there is no evidence, or weak evidence, of charitable
intention then the legislation cannot save the provisions. Gifts for ‘deserving
journalists’, ‘raising the standard of life’, and for a ‘Catholic daily
newspaper’ all failed to attract the protection of the section because they
were not found to contain a general charitable intention: Perpetual Trustee
Co Ltd v John Fairfax & Sons Pty Ltd (1959) 76 WN(NSW) 226; Re Blyth
[1997] 2 Qd R 567; Roman Catholic Archbishop of Melbourne v Lawlor
(1934) 51 CLR 1.
Charitable Trusts Act 1993 (NSW), s 23; Trusts Act 1973 (Qld), s 104;
Trustee Act 1936 (SA), s 69A; Variation of Trusts Act 1994 (Tas), s
4(2),(3); Property Law Act 1958 (Vic), s 131, Charitable Trusts Act 1962
(WA), s 102.
12
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18.104 In cases where the trust gives the trustee a discretion to choose
between charitable and non-charitable purposes, the gift can be saved as the
legislation allows the court to ‘apply a blue pencil’ and strike out the noncharitable alternative: Stratton v Simpson (1970) 125 CLR 138;
[1971] ALR 117.
THE ENFORCEMENT AND ADMINISTRATION OF
CHARITABLE TRUSTS
Enforcement
18.105 The Crown has jurisdiction to enforce and protect charitable trusts.
The jurisdiction originates from the ancient parens patriae jurisdiction,
which gives the Crown and the courts the power to care for infants and the
mentally disabled (who were traditionally classed idiots and natural fools, or
lunatics): Hunter Region SLSA Helicopter Rescue Service Ltd v AttorneyGeneral (NSW) [2000] NSWSC 456. The Attorneys-General of each
jurisdiction represent the Crown’s interests in matters of charitable trusts and
have standing to appear. Indeed, the Attorney-General is a necessary party to
any proceedings regarding a gift to charity that is made generally or for
undefined charitable purposes, or for any proceedings concerning the
alteration of a charity’s rules: Meagher & Gummow (1997) pp 249–50. The
representatives of charitable institutions can also appear when they are
involved in the administration of the trust. A statutory right to appear has
been granted in some jurisdictions to persons who have an interest in the
charitable trust.13
General administrative schemes
18.106 In some, cases the creator may have indicated a general charitable
intention but not provided a description of the workings of the trust with sufficient detail. For example, the creator may have neglected to name a trustee,
or the trustee may have died before the gift takes effect: Re Flatman [1953]
VLR 33. In such cases the court can direct a general scheme of administraSee Charities Procedure Act 1812, 52 Geo III c 101, which appears to still
apply in the Northern Territory; Trustee Act 1925 (ACT), s 94A; Charitable
Trusts Act 1993 (NSW), s 6 (proceedings to be brought with the AttorneyGeneral’s permission or with the leave of the court); Trusts Act 1973 (Qld),
s 106(2), Trustee Act 1936 (SA), ss 60(2), 66; Religious Successory and
Charitable Trusts Act 1958 (Vic), s 61 (two or more persons with the
consent of a law officer); Charitable Trusts Act 1962 (WA), s 21(1).
13
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tion that will aim to achieve the creator’s intention. In Corish v AttorneyGeneral's Department of NSW [2006] NSWSC 1219, Campbell J, at [9] said:
An administrative scheme supplements and/or clarifies any
provisions the settlor has stipulated concerning the manner in which
the objects of the trust are to be pursued, when practical
circumstances show that the settlor's stipulation (if any) of the
means is inadequate or impractical.
18.107 When creating such a scheme the court can have regard to evidence
of the creator’s intention, which may take the form of religious beliefs,
interests, and precatory directions: Re Ashton’s Charity (1859) 27 Beav 115;
54 ER 45; Re Mann; Hardy v Attorney-General [1903] 1 Ch 232; [1900–3]
All ER Rep 93.
Cy-près schemes
18.108 A cy-près scheme, unlike an administrative scheme, involves the
variation of the creator’s intended charitable purpose when it is impossible
or impractical to carry out the objects of the trust in the way the creator of
the trust intended. Cy-près schemes are only employed by the court in cases
where there is a general charitable intention but the charitable purpose is
impossible to perform. In Attorney- General (NSW) v Adams (1908) 7 CLR
100 at 125, Isaacs J accepted the earlier definition of cy-près from Re Taylor
(1888) 58 LT 538, by stating that the role of the court is to make orders that
‘... carry out the general paramount intention in some way as nearly as
possible the same as that which the testator has particularly indicated
without which his intention itself cannot be effectuated’.
18.109 Heydon and Leeming state:
…[I]n order for the court to order a cy-près scheme, one of the following has
to occur:
(1) there is
(a) a case of initial impossibility, and
(b) either an out-and-out intention to benefit charity or a general charitable intention plus a possible mode of effectuating that intention; or
(2) there is a case of a supervening impossibility (whether the intention be
general of merely particular); or
(3) there is a case where a trust has exhausted its original purpose (whether
the original purpose be particular or general in intent) and a surplus
remains.14
14
J D Heydon & M J Leeming, Jacob’s Law of Trusts in Australia (2006),
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18.110 It should be noted that a cy-près scheme cannot be ordered in cases
where the creator has expressed a specific or particular intention, as opposed
to a general charitable intention. If the creator has expressed particular and
specific instructions as to how the trust is to function, the creator may have
intended that the trust should fail completely if it could not be carried out
exactly as expressed: Good’s Will Trusts v Batten [1950] 2 All ER 653. Such
a gift will fail completely if it becomes impossible to perform: Uniting
Church v Royal Victorian Institute for the Blind [1999] VSC 485. In New
South Wales, s 10 of the Charitable Trusts Act 1993, provides that ‘a general
charitable intention is to be presumed unless there is evidence to the contrary
in the instrument establishing the charitable trust’.
Initial impossibility
Trustee not specified or refuses to carry out the trust
18.111 There may be numerous reasons why a charitable trust is initially
impossible to perform. A trustee may not have been specified, or, alternatively, the trustee may refuse to carry out the purpose of the trust:
Re Dominion Student’s Hall Trust [1947] Ch 183. For example, in
Re Lysaght [1966] Ch 191, a trust for scholarships to the Royal College of
Surgeons was created on the proviso that the scholarships were limited to
non-Jewish and non-Catholic males. The trustees refused to accept the condition. The court found a general charitable intention that was frustrated by
an impossibility. The impossibility was mended by a cy-près scheme that
removed the offending conditions.
Charitable beneficiary never existed
18.112 If a donor has merely made a trivial misdescription of a donee the
courts are free to direct that the gifts must go to the intended beneficiary and
there is no need to resort to a scheme: Re Wedgwood [1914] 2 Ch 245. If
there is uncertainty as to whom the gift was intended for the court can call
upon evidence of the donor’s previous actions in making donations or their
involvement with charities to discern which donee was intended: Re Tharp
[1943] 1 All ER 257; Hood v the Attorney General for Western Australia
[2006] WASC 157.
18.113 Problems can arise if the charitable institution that the creator intends
to benefit never existed at all. For example, in Gray v Australian Cancer
Foundation for Medical Research [1999] NSWSC 492, trusts for the
Sydney, LexisNexis, p 208
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‘Cancer Research Foundation,’ ‘Victorian Cancer Research Foundation’,
proved impossible because such institutions never existed. In such cases,
courts will prefer to find a general charitable intention and then apply a cyprès scheme, by applying the funds to institutions that most closely resemble
the creator’s intention: Public Trustee v Attorney General [2005] NSWSC
1267 at [19]; Re Davis ; Hannen v Hillyer [1902] 1 Ch 876;
18.114 A similar problem exists for institutions without juristic personality,
such as a home. In Executor Trustee Australia Ltd v Jamestown District
Homes for the Aged Inc [2007] SASC 262, the testatrix made a gift to the
Belalie Home for the Aged, but this home was not incorporated and had
been owned and operated by different corporations over time. Anderson J, at
[35] found that:
It is accepted that where a gift, and in particular a residuary gift, is
made by a testator to a non-existent body, but from the description
of the body set out by the testator in his will, it may be assumed that
the testator intended it to be a body carrying on a charitable activity,
then a Court of Equity will lean in favour of finding a general
charitable intention to save the gift from lapse.
Anderson J found that the gift was a gift to the purposes of the Lodge, and
on that basis the gift should go to its current owner and operator, not the
coporation who owned the Lodge at the time the will was made.
Charitable beneficiary has ceased to exist
18.115 Ordinarily, in testamentary trusts, where a named beneficiary has
ceased to exist at the date of the death of the testator, the gift to that
beneficiary lapses. This is known as the ‘lapse rule.’ In cases of charitable
gifts to beneficiaries who have cease to exist by the time of the gift, the
courts are more reticent to apply a cy-près scheme, as a gift to a specific
institution is more likely to represent a particular, rather than a general,
charitable purpose: Re Tyrie (dec’d)(No 1) [1972] VR 168 at 177–8. If there
is a particular charitable intention which can no longer be satisfied the gift
will fail: Re Ovey; Broadbent v Barrow (1885) 29 Ch D 560; Re Rymer;
Rymer v Stanfield [1895] 1 Ch 19 ; [1891-4] All ER Rep 328; Re Stemson's
Will Trusts; Carpenter v Treasury Solicitor [1970] 1 Ch 16
18.116 There are a number of ways that the courts can navigate around the
lapse rule. If the named institution has a clear successor with almost
identical objects then it may be possible for the gift to pass to that successor,
without the institution being considered to have ceased to exist in a practical
sense: The Cram Foundation v Corbett-Jones at [27]; Re Faraker [1912] 2
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Ch 488; Re Vernon's Will Trusts [1972] Ch 300; [1971] 3 All ER 1061.
18.117 An example of these problems is Public Trustee v Cerebral Palsy
Association of Western Australia Ltd (2004) 28 WAR 496, where the named
beneficiary was the Spastic Welfare Association of Western Australia, a
charitable association incorporated under the Associations Incorporation Act
1987 (WA). The association had been dissolved by the Acting
Commissioner of Corporate Affairs and its assets were transferred to the
Cerebral Palsy Association of Western Australia, an incorporated company
which had almost identical objects. The judge found that for practical
purposes the institution had not ceased to exist and had continued to provide
the same charitable undertakings and operations, albeit by a different
corporate shell. Similar findings arose in Estate of Rand (dec'd) [2009]
NSWSC 48, where a gift was made to an unincorporated church
congregation which had changed its name but which was clearly the same
congregation. Another example is Davis v Adventist Development and Relief
Agency [2006] NSWSC 876 where an unincorporated association had since
taken corporate form, but was nevertheless the same organization.
18.118 The lapse rule can also be avoided where the gift indicates a
dominant intention to give property to the purposes of the named
beneficiary, so that a successor insitution with the same purposes can be
given the trust property. In Sir Moses Montefiore Jewish Home v Howell &
Co (No 7) Pty Ltd [1984] 2 NSWLR 406, Kearney J said at 416:
In my view a disposition to a charitable corporation is to be treated as
having presumptively the necessary elements creating a trust, so that
the disposition to such a charitable corporation takes effect as a trust
for the purposes of the corporation rather than as a gift to it to be
applied as it sees fit.
18.119 In such cases the courts will assess the purposes of the alleged
sucessor to see if they match those of the intended beneficiary. For example,
in ANZ Trustees Limited v Attorney General of New South Wales [2008]
NSWSC 1081, a testamentary trust created by a Catholic priest who died in
1938, made a number of charitable gifts to various organisations. Advice
was sought from the court about administration in 1943 but nothing had
proceeded with the matter until it was returned to the court over 50 years
later in 2007. In the course of that time, many of the organisations had
changed their names or ceased to exist. Windeyer J made orders effecting
gifts to successor organisations which had taken over the charitable purposes
of the named beneficiaries. Contrasingly, in Australian Executor Trustees
Ltd v Ceduna District Health Services Inc [2006] SASC 286, a corporation
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running a retirement village was dissolved and taken over by a larger health
and aged service. The health service was not found to be a successor
organisation as its purposes were much broader and significantly different
from the original beneficiary and the gift failed.
18.120 In earlier cases it was said that if the gift were made to an
unincorporated association then it would be construed as a gift to the
purposes of that association, whereas if it were a gift to a corporate
beneficiary it would be constured as a gift to that body and hence subject to
lapsing should the corporation have ceased to exist: Re Vernon’s Will Trust
[1972] Ch 300; [1971] 3 All ER 1061; Re Finger’s Will Trusts [1972] Ch
286; [1971] 3 All ER 1050. However, Australian authorities downplay the
importance of whether the beneficiary is incorporated or not. In Sir Moses
Montefiore Jewish Home v Howell & Co (No 7) Pty Ltd Kerney J rejected
any rule based on the corporate status of the intended beneficiary, and found
that the presumption should be that the gift is given for the purposes of the
organisation regardless of whether it is incorporated or not.
18.121 The third exception to the lapse rule exists when the gift is intended
to be a gift to funds and/or assets of an organisation rather than to the named
beneficiary. In Re Tyrie(dec’d) (No 1) at 178, Newton J said:
If upon the true interpretation of the will the testator intended that the
gift should operate simply as an accretion to the assets of the named
institution so as to become subject to whatever charitable trusts were
from time to time applicable to those assets, and if after the named
institution itself ceased to exist its assets remained subject to charitable
trusts which were still on foot at the testator's death, then the gift will
be treated as taking effect as an accretion to any property which was at
his death subject to those trusts
18.122 An example of this is In Re Lucas [1948] Ch 424; [1948] 2 All ER
22, which involved a gift to a home for ‘poor crippled children.’ By the time
of the gift the home had been closed and a scheme was created for the assets,
whereby they would be used to send ‘poor, crippled children’ to holiday
homes. The gift was interpretated as being a gift to augment the charity’s
funds. Given the funds had survived the closure of the home the gift could
pass to the scheme. A contrasting example is In re Slatter’s Will Trusts
[1964] Ch 512; [1964] 2 All ER 469. Here the testatrix had made a gift of
money to a tuberculosis hospital run by the Red Cross which had closed
prior to her death. The hospital had been sold and the proceeds were not
devoted to a continued charitable purpose but rather given back to the Red
Cross. Because there was no surviving fund there was no way for the gift to
be construed as a gift to augment the funds for the treatment of tuberculosis.
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There was no intention for the gift to go to the Red Cross. Nor was there a
general charitable intention. The gift then fell subject to the lapse rule.
18.123 Finally, if the court can find that the gift contained a general
charitable intention (as opposed to a particular intention) then the court can
order the institution of a cy-pres scheme: Public Trustee of Queensland v
State of Queensland [2009] QSC 174; Public Trustee of Queensland v
Neale. Unfortunately the cases do not lend themselves to clear criteria as to
when there is a general charitable intention rather than a particular one and
‘it is at least arguable that every gift to a particular charitable institution
must of necessity be a gift for its purpose.’15
Charitable purpose impractical
18.124 Alternatively, a charitable trust can fail at the outset because the
purpose is impractical: Rechtman v Attorney-General for the State of
Victoria [2005] VSC 507. In Attorney-General (NSW) v Perpetual Trustee
Co Ltd (1940) 63 CLR 209, the testatrix had left her farm, ‘Milly Milly’, for
the training of ‘orphan lads’. Unfortunately the farm could not be used as a
training farm, as it was too small and run down. Nor was there enough funds
available to properly equip the farm. The issue then became whether a
general charitable intention had been evidenced that would allow the court to
order the sale of the property and the use of the funds cy-près.
18.125 Dixon and Evatt JJ at CLR 225 stated the primary principles
involved in cy-près schemes:
If there are insuperable objections, either of fact or of law, to a literal
execution of a charitable trust it at once becomes a question of whether
the desire or directions of the author of the trust, with which it is found
impractical to comply, are essential to his purpose. If a wider purpose
forms his substantial object and the directions or desires which cannot
be fulfilled are but a means chosen by him for attaining that object, the
court will execute the trust by decreeing some other application of the
trust property to the furtherance of the substantial purpose, some
application which departs from the original plan in particulars held not
essential and, otherwise keeps as near thereto as may be. The question
is often stated to be whether the trust instrument discloses a general
intention of charity or a particular intention only. But, in its application
to cases where some particular direction or directions have proved
impracticable, the doctrine requires no more than a purpose wider than
15
Heydon & Leeming, note 14, p 221.
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the execution of a specific plan involving the particular direction that
has failed. In other words ‘general intention of charity’ means only an
intention which while not going beyond the bounds of legal conception
of charity is more general than a bare intention that the impracticable
direction be carried into execution as an indispensable part of the trust
declared.
Their Honours continued at 227 to discuss the issue as primarily one of
construction, but also one of examining ‘the nature of the charitable trust
itself and what is involved in the author’s plan or project’. This required a
distinction to be made between the ends of the testatrix’s purpose and the
means to which that purpose could be fulfilled: CLR 228. If the use of
‘Milly Milly’ was merely a means then the impossibility of using that farm
for training was not a bar to the ordering of a cy-près, because a general
charitable intention survived the impossibility. If, however, the use of ‘Milly
Milly’ was an end, the testatrix’s intention was particular and no scheme
could be ordered.
18.126 The High Court found that the testatrix had evidenced a general
charitable intention and that a cy-près scheme could be ordered. Dixon and
Evatt JJ stated at 229:
… there is nothing either in the language of the will or in the
surrounding circumstances to suggest that the testatrix chose Milly
Milly for any better reason than that, of the assets she was disposing by
will, Milly Milly provided the most suitable means of giving effect to
her intentions. The failure of her issue and the presence in her will of
other charitable bequests form a sufficient foundation for the inference
that her testamentary dispositions were based on a desire to devote
much of her property to the general benefit of the commu nity and to
negative any idea that she may have been actuated less by a wish to
advance the useful end to which she devoted the property, than by
some desire to conserve Milly Milly intact, a desire to suppose for
example, that it might continue as an enduring memorial to herself or
her husband.
Supervening impossibility
18.126 A charitable purpose may become impossible after the trust has taken
effect. In such cases a general charitable intention is not necessary as the
property had already been effectively dedicated to charity. No question of
lapse can arise: The Cram Foundation v Corbett-Jones at [49]; Re Slevin,
Slevin v Hepburn [1891] 2 Ch 236.
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18.127 For example, gifts may be given to hospitals, care units or schools
that later close: In the Matter of Bianco (decd); Cox v Attorney-General
(Vic) (unreported, SC(Vic), Gillard J, No 5727/97, 23 September 1997). In
RSL Veterans' Retirement Villages Ltd v NSW Minister for Lands [2006]
NSWSC 1161, a trust for a retirement village for veterans was unable to
maintain enough numbers of veterans to be sustainable. The Court ordered a
scheme whereby the village could offer places to others, while retaining a
preference for current serving members of the Australian Defence Forces or
associated Forces.
18.128 Cy-pres can also be applied in in supervening cases where the
original terms have ceased to provide a suitable and effective method of
using the trust property: Attorney General for New South Wales v Fulham at
[12]-[17]. In The Cram Foundation v Corbett-Jones a cy-pres was ordered
for the use of a home which had been originally intended for the care of
‘crippled’ children. Changes in government policy to shift towards deinstitutionalisation meant that the original terms were no longer a suitable
and effective means of carrying out the donor’s intention.
Satisfaction of original purpose
18.129 Cy-près schemes are also employed in situations where the original
charitable purpose has been satisfied and a surplus of trust property remains:
Hickling v Lebsanft [1999] QSC 362. In Re Anzac Cottages Trust [2000]
QSC 175 a trust had been established to provide homes for the dependants of
servicemen killed in World War I. That purpose had been fulfilled and all
the homes bar one had been sold and the proceeds retained. The court was
asked to order a cy-près scheme whereby the last cottage could be sold and
then the proceeds distributed. The judge, in applying a cy-près scheme, had
regard to the social and historical changes that had taken place and ordered
the fund to be applied to various organisations that provided housing to
needy family members whose spouse or parent had died in active service.
Statutory powers to create schemes
18.130 All Australian states have legislated to simplify cy-près mechanisms.16 Neither the ACT nor NT have made any legislative changes. The
Charitable Trusts Act 1993 (NSW), ss 9–10; Trusts Act 1973 (Qld), s 105;
Trustee Act 1936 (SA), s 69B; Charities Act 1978 (Vic), s 2; Charitable
Trusts Act 1962 (WA), s 7.
16
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Queensland, South Australian, Tasmanian and Victorian legislation is
similar. Section 105 of the Trusts Act 1973 (Qld) states:
(1) Subject to subsection (2), the circumstances in which the original
purposes of a charitable trust can be altered to allow the property given or
part of it to be applied cy-près shall be as follows—
(a) where the original purposes, in whole or in part—
(i) have been as far as may be fulfilled; or
(ii) can not be carried out; or
(iii) can not be carried out according to the directions given and to
the spirit of the trust;
(b) where the original purposes provide a use for part only of the
property available by virtue of the trust;
(c) where the property available by virtue of the trust and other
property applicable for similar purposes can be more effectively
used in conjunction, and to that end can suitably, regard being had
to the spirit of the trust, be made applicable to common purposes;
(d) where the original purposes were laid down by reference to an area
which then was but has since ceased to be a unit for some other
purpose, or by reference to a class of persons or to an area which
has for any reason since ceased to be suitable, regard being had to
the spirit of the trust, or to be practical in administering the trust;
(e) where the original purposes, in whole or in part, have, since they
were laid down—
(i) been adequately provided for by other means; or
(ii) ceased, as being useless or harmful to the community or for
other reasons, to be in law charitable; or
(iii) ceased in any other way to provide a suitable and effective
method of using the property available by virtue of the trust,
regard being had to the spirit of the trust.
(2) Subsection (1) shall not affect the conditions which must be satisfied in
order that property given for charitable purposes may be applied cy-près,
except in so far as those conditions require a failure of the original purposes.
18.131 The effect of the legislation is to provide broader grounds for the
application of cy-près schemes, although the orginal jurisdiction survives:
Re Estate of Pitt (dec’d) (2002) 84 SASR 109. The statutes in New South
Wales, Queensland, Tasmania and Victoria do not do away with the
requirement of a general charitable intention. However, in Western
Australia, the legislation states that cy-près schemes can be applied ‘whether
or not there is any general charitable intention.’17
18.132 The NSW provisions are simpler in that they provide for the
17
Charitable Trusts Act 1962 (WA), s 7(1).
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application of a cy-près scheme in ‘circumstances in which the original purposes, wholly or in part, have since they were laid down ceased to provide a
suitable and effective method of using the trust property, having regard to
the spirit of the trust.’18
18.133 In some jurisdictions a limited power to settle cy-près schemes has
also been bestowed on the Attorney-General.19 For example, the Charitable
Trusts Act 1993 (NSW), gives the Attorney-General power to establish
schemes where the value of the trust property is less than $500,000, and
where the Attorney-General is satisfied that the scheme is non-contentious.20
Cy-pres and conditional chartiable gifts
18.134 Cy-pres is only available if the gift is absolute. If the gift is
conditional the obligation or undertaking creates either a reverter or
remainder, which the courts cannot override with a cy-pres scheme. If the
gift stipulates what is to happen to the property on the triggering of the
condition, it creates a remainder and the property will pass on to that
remainderperson: Re Wilmott, Uniting Church in Australia Property Trust
(Vic) v Royal Victorian Institute for the Blind [1999] VSC 485. If the gift is
silent on what is to happen to the property on the triggering of the condition,
it creates a reversion, which will revert back to the donor on resulting trust.
18.135 Conditions can often be found to be void. The effect of a void
condition will depend on whether the condition is ‘determinable’ or a
‘condition subsequent’: Cabouche v Ramsay (1993) 119 ALR 215. As
discussed at 17.79, a determinable interest is created so that the condition is
built into the gift, so that the gift is given until the triggering events occurs.
If the donor uses the words, ‘while’, ‘during’, ‘so long as’, or ‘until’, the
courts will contrue the gift as being determinable. Importantly, because the
determinable condition is built into the gift, the entire gift will fail if the
determinable condition is found to be void: Zapletal v Wright [1957] Tas SR
211 at 218.
18.136 Contrastingly, if the gift is given and then a condition is attached, the
condition will be described as a condition subsequent. Effectively, the
Charitable Trusts Act 1993 (NSW), s 9(1).
Charitable Trusts Act 1993 (NSW), Pt 4; Trustee Act 1936 (SA), s 69B(3),
(4); Variation of Trusts Act 1994 (Tas), ss 7–9; Charities Act 1978 (Vic), ss
4–5.
20
Charitable Trusts Act 1993 (NSW), s 14.
18
19
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property is given absolutely, but then a condition is fastened to it so that it
will be cut short. Words such as ‘provided that’, ‘on condition that’, ‘but if’,
or ‘if it happen that’ indicate the intention to create a condition subsequent.
If the condition is found to be void, it is posible for the court to strike out the
condition but leave the gift to stand so that it becomes and unconditional and
absolute gift: Perpetual Trustee Co Ltd v Gilmour [1979] 2 NSWLR 716 at
720-721; Hancock v Watson [1902] AC 14 at 22.
18.137 These issues were discussed in The Cram Foundation v CorbettJones. The case concerned a charitable gift of a house for use by the
Wollongong and District Society for Crippled Children as a home or
hospital. The gift was ‘subject to the proviso that should the property at any
time cease to be used for these purposes it shall thereupon revert to my nextof-kin at that time.’ The gift could no longer be used as a home or hospital
and the organisation soguht to have the power to sell, mortgage or lease the
property to raise funds for providing accommodation, goods and services to
people with disabilities in the Illawarra region. Brereton J could not order a
cy-pres scheme unless the condition was found to be a void condition
subsequent. If the condition was a valid condition it would mean that the
property would pass to the next-of-kin.
18.138 The wording was found to have created a condition subsequent. Even
though the word ‘revert’ favoured the construction of a determinable
interest, the phrase ‘subject to the proviso that’ and the fact the gift would go
on remainder to the next of kin indicated a condition subsequent and not a
determinable interest.
18.139 The condition was subject to the common law rule against
remoteness of vesting because the will had been created prior to the
operation of the Perpetuities Act 1984 (NSW): 17.103. Brereton J found that
the condition was void because it could possibly vest outside the perpetuity
period and on that basis he struck out the condition, which left the
disposition as an absolute charitable gift. A cy-pres scheme was then
ordered. His Honour set down four principles, at [80]-[83], for dealing with
these situations:
First, property that is the subject of an absolute gift to charity, once
vested, remains with charity forever. If the particular charity or
purpose to which it is given subsequently fails, a cy pres scheme
will be directed. In this context, cy pres is available regardless of
whether or not the donor had a general charitable intention…
Secondly, property that is the subject of a limited or determinable
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gift to charity reverts, upon termination of the gift, to the donor or
his/her estate, unless there is a valid gift over …
Thirdly, however, property that is the subject of a conditional gift
where the condition is void is regarded as the subject of an
unconditional, or absolute, gift …
Fourthly, the true distinction …is the distinction between a limited
or determinable gift, and a conditional gift, and not between a
limited or particular charitable intention and an ‘out-and-out gift to
charity.’ If the gift is conditional and the condition is void, then it
matters not that the testator might appear not only to have had no
general charitable intention, but even to have had a plainly and
solely particular one.
VALID NON-CHARITABLE PURPOSE TRUSTS
18.140 As stated at 16.41, the beneficiary principle normally operates to
strike down trusts that are created for non-charitable purposes: Re Astor’s
Settlement Trusts [1952] Ch 534. However, there exists a very small
category of purpose trusts that have been upheld by courts, even though they
are non-charitable. This odd and anomalous group is difficult to categorise.
Some examples of the types of trust coming under this heading are trusts for
the maintenance of pets, Pettingall v Pettingall (1842) 11 LJ Ch 176; Re
Dean (1889) 41 Ch D 552, and trusts for the construction and maintenance
of tombs unassociated with churchyards: Re Hooper [1932] 1 Ch 38. A more
recent example was a trust for the promotion and furtherance of fox hunting:
Re Thompson [1934] Ch 342. These cases have not generally been followed
in Australia, and there has been no support for expanding the recognised categories: Public Trustee v Nolan (1943) 43 SR(NSW) 169; Pedulla v Nasti
(1990) 20 NSWLR 720.
18.141 These trusts must also satisfy the rule against indestructible trusts
and the rule against perpetuities. In South Eastern Sydney Area Health
Service v Wallace (2003) 59 NSWLR 259, a trust for the maintenance of a
gravesite, offended these rules because it was set up to continue forever, but
the trust for the erection of the headstone and turf grave could survive and
was upheld.