Perpetual Trustee Company Ltd v University of New South Wales

On 6 March 2023, the plaintiff, Perpetual Trustee Company Limited (Perpetual), filed a Summons commencing these proceedings seeking a declaration and various orders in relation to the will dated 24 August 1988 (Will) of the late Richard Bradley (Deceased), who died on 18 August 2012.

The issues raised in the proceedings concern the construction of the Will which have caused difficulties with the administration of the Deceased’s estate.

The named executor in cl 2 of the Will is The Trust Company of Australia Limited. On 1 November 2006, the name of that entity was changed to Trust Company Limited. On 21 June 2010, the name of that entity was changed again to The Trust Company Limited.

On 18 January 2013, probate of the Will was granted to The Trust Company Limited.

On 1 March 2015, the estate assets and liabilities of The Trust Company Limited were transferred to Perpetual by virtue of a voluntary transfer determination made on 2 February 2015.

As a result, Perpetual has standing to bring these proceedings as the executor of the Will on which probate has been granted.

The relevant provisions of the Will which fall to be construed are as follows:

Perpetual is the plaintiff in the proceedings in its capacity as executor of the Will but it has indicated that it does not wish to be joined in its capacity as trustee of the Centenary Foundation, to which reference is made in cl 4 of the Will.

The Trustees of Marist Fathers for the Province of Australia have indicated that they do not wish to be a party to the proceedings.

The University of New South Wales (UNSW) is the sole named defendant in the proceedings by virtue of it indicating that it wished to be heard in relation to the issues that have arisen with respect to the construction of the Will.

On 31 May 2021, the Attorney General for the State of New South Wales authorised the bringing of these proceedings, which was necessary to obtain because s 6(1) of the Charitable Trusts Act 1993 (NSW) provides that “charitable trust proceedings” must not be commenced in the court unless the Attorney General has authorised the bringing of them or leave to bring the proceedings is obtained from the court. There is no dispute that these are “charitable trust proceedings”.

Perpetual read the affidavit of Jennifer Hoogenstein Saba affirmed 1 March 2023 (without objection) and tendered the documents in the exhibit to that affidavit. Ms Saba is a Trust Manager NSW/ACT in the Perpetual Private, Trustee Services & Operations business unit of Perpetual.

UNSW read the affidavit of Daniel Rosenbaum affirmed 14 August 2023 (without objection) and tendered the documents in the exhibit to that affidavit. Mr Rosenbaum is the Donations & Compliance Manager of UNSW.

There was no cross-examination of either Ms Saba or Mr Rosenbaum.

There are three issues for determination, being:

Mr S Chapple, who appeared with Mr D Yazdani as counsel for Perpetual, made submissions on each of these issues. Mr H Morrison, who appeared with Ms A T Green as counsel for UNSW, made submissions on the Medical Foundation Issue but did not make any submissions on the Centenary Foundation Issue or the Marist Fathers Issue, other than to support the submissions made for Perpetual on the Centenary Foundation Issue. I am very grateful to all counsel for the high quality and economy of their written and oral submissions.

Each of these issues is determined in turn below.

It is a longstanding and fundamental rule that the proper construction of a will requires the document to be read as a whole so as to ascertain the testator’s intention from the language which has been used: see Sidle v Queensland Trustees Ltd (1915) 20 CLR 557 at 560-561; [1915] HCA 48. One particular aspect of the task for the court in construing a clause in a will is to ascertain the main purpose and intention of the testator so that the language in that clause can be given a meaning to carry into effect the intention the testator had with respect to the whole will: see Towns v Wentworth (1858) 14 ER 794 at 800; Perrin v Morgan [1943] AC 399 at 406; [1943] 1 All ER 187, applied in Estate of Lawrence; Hatzantonis v Lawrence [2003] NSWSC 914 at [6] and Re Estate Miletic; Strbik v Strbik [2023] NSWSC 371 at [19].

As a practical matter, reading the whole of a will involves giving meaning to all of the clauses within it so that they are read harmoniously and consistently with each other.

In the present case, reading the Will as a whole indicates a very clear intention on the part of the Deceased to have the residue of his estate held on a perpetual trust, the income from which is to be divided between two identified charitable institutions and, in the event that either of those charitable institutions ceases to exist, for the trustee to distribute the income to similar organisations carrying out similar charitable purposes.

Although the gifts contained in cl 4(a) and (b) are both gifts absolutely to those institutions, they should be characterised as charitable because they are for the advancement of the charitable work or purposes of each of them: see Re Tyrie, deceased (No 1) [1972] VR 168 at 177, applied in Estate of the late Morris Zion Forbes v State of New South Wales & Ors [2010] NSWSC 1439 at [28]-[29]. This is because the gift in cl 4(a) to “The Trustees of The Marist Fathers for the Province of Australia” is to be paid to the Director of the Marist Mission Centre, the gift in cl 4(b) to the “Medical Foundation of the University of N.S.W” is to be used for the purposes of research into the alleviation of glaucoma, and cl 5 of the Will states that if either of the charities in cl 4 cease to exist, then the trustee may substitute similar organisations that are carrying out similar charitable purposes.

The Centenary Foundation was established by deed in 1985, which was subsequently amended by supplementary deeds, all of which are now incorporated into a Consolidated Trust Deed dated 22 March 2019 (Deed). It is common ground that the trustee of the Centenary Foundation is now Perpetual.

Clause 4.1(a) of the Deed is in the following terms:

It is therefore clear that the payment of funds by Perpetual is discretionary, which is guided by the terms of cl 4.2 of the Deed, which requires Perpetual to have regard to a number of considerations including “…the provisions and objects, so far as they are consistent with the Trust Purpose, of any other trust (including a trust established by a testamentary instrument) where… the trustee of the other trust has requested the trustee to recognise the provisions or objects of the other trust in exercising the Trustee’s discretions and powers under this deed.”

Clause 4.7(a), (c) and (d) of the Deed relevantly provide that:

As a result of these provisions of cl 4.7 of the Deed, it is impossible for Perpetual to accept the gift in cl 4 of the Will because it contains a condition that the income of that fund must be applied in the manner set out in cl 4(a) and (b) of the Will, a direction with which Perpetual cannot comply under the terms of the Deed. This means that Perpetual, in its capacity as trustee of the Centenary Foundation, cannot and has not accepted the gift, a matter which Perpetual confirmed by letter dated 17 December 2021.

The circumstances where an entity is named in a will to act as trustee of a gift under it but is incapable or unwilling to accept that gift as trustee raise particular considerations. The lack of a trustee does not mean that the trust has not been created or will fail. The funds which are the subject of the trust will revest in the settlor. This may occur by construing the words used in the will or by the court acting pursuant to its inherent jurisdiction or its jurisdiction under s 70 of the Trustee Act 1925 (NSW) (Trustee Act) to appoint a new trustee.

In Mallott v Wilson [1903] 2 Ch 494, a voluntary settlement of real estate for use of a trustee upon trust was made but then the trustee subsequently disclaimed that trust and the settlor also purported to put an end to the settlement. It was held that the settlement was not rendered inoperative, but the trust was imposed on the settlor in whom, by operation of law, the estate had revested after the creation of the trust. Byrne J found at 500 that the whole legal estate passed to the trustee and continued in him up to the time of his disclaimer. Relevantly, Byrne J also said at 502-503:

Further, as stated in Jacobs’ Law of Trusts in Australia (8th ed, LexisNexis, 2016) at [15-02] (authorities omitted):

Instances of the court acting to ensure that a charitable trust does not fail where it has become impossible for the particular named trustee to act as such are contained in Attorney-General v Stephens (1834) 3 My & K 347; (1834) 40 ER 132 and Royal North Shore Hospital of Sydney v Attorney-General (NSW) (1938) 60 CLR 396 at 413.

The relevant provisions of s 70 of the Trustee Act are in the following terms:

The central question under s 70 of the Trustee Act is whether it is appropriate in the circumstances for the court to appoint a new trustee such that it is expedient to appoint a new trustee and it is inexpedient, difficult or impractical to do so without the assistance of the court. I agree with the following reasoning of Ball J in Crowle Foundation v NSW Trustee & Guardian [2010] NSWSC 647 at [41] (applied by Henry J in Application of Browne as executor of the estate of Russell [2021] NSWSC 1340 at [18]-[19]):

The focus of the exercise of the court’s inherent jurisdiction to appoint a new trustee is on the best interests of the beneficiaries and the administration of the trust, which is slightly different to that under s 70 of the Trustee Act which is concerned with wider matters of appropriateness and expediency: estate of Russell at [21].

Whether exercising the inherent jurisdiction of this Court or its powers under s 70 of the Trustee Act, I am satisfied that the trust created by the gifts in cl 4 of the Will has not failed, that it is in the best interests of the beneficiaries and the administration of the trust, as well as appropriate in all of the circumstances for the court to appoint a new trustee.

I agree with the submissions made by Perpetual that the gift to the Centenary Foundation was not an essential part of the charitable intention of the Deceased, but is more appropriately characterised as a procedural mechanism employed by the Deceased to achieve his ultimate charitable purpose, which was to benefit each of the charitable institutions who are specifically identified in cl 4(a) and (b) of the Will. There is no machinery in the Will to appoint any alternative trustee and there is no person or entity capable of appointing a new trustee pursuant to s 6 of the Trustee Act. Unless the court exercises its powers in the present case, there will be no trustee to act.

I am also satisfied that it is appropriate to appoint Perpetual in light of the fact that it is a “licensed trustee company” under Sch 8AA of the Corporations Regulations 2001 (Cth) and cl 11(1) of the Trustee Companies Act 1964 (NSW) without the need for any inquiry by the court about its fitness for office: see Ability One Financial Management Pty Ltd v JB by his Tutor AB [2014] NSWSC 245 at [119]. As Perpetual is also the executor of the Will for which probate has been granted, it is expedient for it to act as the trustee for the gifts made in cl 4 of the Will.

By cl 4(a) of the Will, the Deceased made a gift of 75% of the income of the trust to the “Trustees of The Marist Fathers for the Province of Australia” when there is no entity known by that name. There is, however, a body which is called “Trustees of Marist Fathers for the Province of Australia” trading as Australian Marist Centre Overseas Aid Fund (ABN 87 382 823 140) (AMCOA), which operates at 3 Mary Street, Hunters Hill NSW. There is only a minor description in the Will, with a superfluous “The” before “Marist”.

AMCOA is a body which was established by Trust Deed dated 14 December 1982 between The Marist Mission Centre (a division of the Trustees of Marist Fathers for the Province of Australia) and Reverend Father Michael O’Halloran of the Australian Marist Centre Overseas Aid Fund and the Very Reverend John Geoffrey Jago, the Provincial for the time being of the Society of Mary. AMCOA therefore existed at the date of the death of the Deceased, being 18 August 2012.

AMCOA is registered with the Australian Charities and Not-for-profits Commission and is a charity endorsed to access tax concessions, including income tax exemption, and has deductible gift recipient status.

The general principles outlined above with respect to the construction of a will so as to ascertain the intention of the testator apply to minor misdescriptions of an intended beneficiary of a gift.

The principles that apply in circumstances where a bequest has been made to a specific charitable institution, which has been misdescribed, and its address is named in the will, were articulated by Slattery J in Application of Paul James Edwards: Estate of the Late John McGregor Edwards [2023] NSWSC 714 at [39]-[41] as follows:

The minor misdescription of the correct entity in cl 4(a) of the Will should not prevent the gift being made to the correct entity under that provision. I consider that Perpetual would be justified in proceeding on the basis that the income to be paid under cl 4(a) of the Will be paid to the “Trustees of Marist Fathers for the Province of Australia trading as Australian Marist Centre Overseas Aid Fund ABN 87 382 823 140”.

By cl 4(b) of the Will, the Deceased made a gift of 25% of the income of the trust to the “Medical Foundation of the University of N.S.W.” for general purposes while declaring an express wish that the gift be used for the purposes of research into the alleviation of glaucoma.

It is common ground that at the time of the making of the Will on 24 August 1988 and the Deceased’s death on 18 August 2012, there was no longer a “Medical Foundation of the University of N.S.W.” in existence.

Although establishing an exact chronology is not possible due to the significant passing of time and the absence of particular documentary evidence, the history of the Medical Foundation of the University of New South Wales is as follows:

On 18 October 1988, the University of New South Wales Foundation Limited was incorporated as a company limited by guarantee for the purposes of acting as trustee of the University of New South Wales Foundation, which was established by Deed dated 18 November 1988 and registered as a charity with the Australian Charities and Not-for-profits Commission on 3 December 2012.

It is not known if the funds of the Medical Foundation Committee were wholly expended or transferred to the University of New South Wales Foundation or some other entity.

The policy of UNSW is for gifts and bequests to be received directly and then separate project accounts for each philanthropic purpose are established, enabling the funds to be distributed by UNSW to the relevant project accounts and applied directly to specific purposes for that donation. The common practice of UNSW is to create a new fund when the purpose of a gift does not align with the purpose of any existing funds.

There is evidence that UNSW has created a Glaucoma Research Fund which was set up on 30 November 2020 for the purposes of supporting a UNSW Engineering research project (scheduled to be completed by May 2023) and has undertaken glaucoma research in 2020 – 2021 through the School of Optometry and Vision Science.

The general rule is that where a gift in a will is made to an entity that ceases to exist prior to the testator’s death, it will lapse, including if it is a charitable gift, a principle which is referred to as the “lapse rule”: see Re Servers of the Blind League [1960] 1 WLR 564; Re Tyrie at 177, both applied in Australian Executor Trustees Ltd v Ceduna District Health Services Inc [2006] SASC 286 at [8].

The “lapse rule” is subject to three exceptions in the case of a charitable gift, as listed in Re Tyrie at 177 as follows (authorities omitted):

These exceptions have been recognised as applying in this court: see Estate of the late Morris Zion Forbes v State of New South Wales & Ors [2010] NSWSC 1439 at [28]-[29] (Hallen AsJ, as his Honour then was); Cram Foundation v Corbett-Jones & Anor [2006] NSWSC 495 at [27] (Brereton J, as his Honour then was).

It was common ground between the parties that the cy-près scheme exception (C) in Re Tyrie was not applicable to the present case because the operation of cl 5 of the Will would prevent the gift from lapsing.

The argument made by UNSW was that the gift in cl 4(b) of the Will has not lapsed because it fell within either the successor institution exception (A) or the accretion exception (B) in Re Tyrie. While I consider that University of New South Wales Foundation Limited might arguably be regarded as a successor institution to the “Medical Foundation of the University of N.S.W” (defined above as Medical Foundation Corp) because its work includes that which was previously conducted by Medical Foundation Corp, I do not think that the “lapse rule” operates and therefore there is no occasion to consider the exceptions to it in this case.

In my view, the proper construction of cl 5 of the Will operates such that the gift contained in cl 4(b) has not lapsed, which means that there is no need to consider either of the exceptions (A) or (B) to the “lapse rule”.

Clause 5 must be given its natural meaning, which is that if the charity named in cl 4(b) has ceased to exist, then Perpetual has the discretion to substitute similar organisations which in Perpetual’s opinion are carrying out similar charitable purposes to the charity which has ceased to exist.

The evident purpose of cl 5 is to give expanded power to Perpetual to find similar organisations with similar charitable purposes if either of the charities named in cl 4 has ceased to exist. The clear intention behind cl 5 is to provide a mechanism for Perpetual to preserve the ultimate charitable purpose of the gifts that are made in cl 4. In this way, the gift in cl 4(b) has not lapsed.

The crucial factual matter in the operation of cl 5 in the present circumstances is whether the “Medical Foundation of the University of N.S.W.” has ceased to exist.

As outlined by the facts above, it is clear to me that the “Medical Foundation of the University of N.S.W.” ceased to exist at the time it was dissolved and deregistered in 1978. However, clause 5 operates to save the gift from lapsing. To interpret the operation of cll 4 and 5 together as allowing the gift in cl 4(b) to lapse, thereby requiring the analysis outlined in Tyrie, would be to depart from the clear testamentary intention of the Deceased. Accordingly, the exceptions contained in Tyrie have no application in the present circumstances.

A further argument made by UNSW is that the operation of cl 4 should be given priority to that of cl 5. I do not agree with that submission. Clauses 4 and 5 must be read together as part of the whole of the Will. Neither has priority over the other. Instead, they should be read harmoniously together.

UNSW also submitted that the way in which cl 5 should be read is that the charitable purpose rather than the charity must be found to have “ceased to exist” before it can have any operation. It was reasoned that a gift to a charitable institution is not truly a gift to that institution but to the purpose carried on by that institution, such that the question of whether the institution has ceased to exist is not necessarily the right question. It was contended that if there is a successor institution carrying on the same charitable purposes as the charity named in cl 4(b), then cl 5 did not operate at all in those circumstances.

I was referred to the decision of Darke J in June Shirley Overall v Family Voice Australia Incorporated [2014] NSWSC 736 at [46]-[49] and the decision of Barker J in The Public Trustee as Administrator of the Estate of Herbert Sebastian Hodge (Dec) v Cerebral Palsy Association of Western Australia Ltd & Anor [2004] WASC 36 at [40] in support of this submission as being similar cases to that before me because they involved the use of the expressions “ceased to exist” and “does not exist” in the context of clauses making charitable gifts. But I do not think the reasoning in those decisions applies because they concern the construction of a different will in different terms to the Will.

In Overall, the relevant provision of the will was in the following terms:

It was found at [46]-[47] that the unincorporated association and the incorporated association which came after it had undoubtedly ceased to exist as a legal entity but that a wider view of that expression was necessary to accord with the testator’s intention not to cause the gift to lapse simply because of that fact. It was held that even though the described body or organisation ceased to exist, a successor organisation was in existence carrying on the same purposes, such that the reference to “organisation” in the relevant clause included the successor organisation.

In Hodge, the relevant provision of the will was in the following terms:

It was found at [2] and [40] that in practical and charitable purpose terms, the Spastic Welfare Association had not ceased to exist because the Cerebral Palsy Association had carried on in all material respects the same undertaking and operations of the Spastic Welfare Association and held the same assets.

Importantly, in both Overall and Hodge the relevant clauses of the wills respectively provide that if the organisations to whom the charitable gifts were made cease to exist then those gifts would go to quite different charities, a consequence that each testator was found not to have intended.

In contrast, in the present case cl 5 of the Will is a provision which expressly provides machinery for Perpetual to act to prevent the lapse of the charitable gift such that it must go to similar organisations with similar charitable purposes. Clause 5 needs to be given meaning and operation to match the Deceased’s intention derived from the words that are used. To do otherwise would be to depart from the clear testamentary intention of the Deceased. In my view, cl 5 is quite different to the operation of the relevant clauses in Overall and Hodge. For that reason, I do not apply the reasoning contained in either of those decisions to the facts of this case.

In light of the determinations I have set out above, the orders I propose to make are as follows: