Russell v Attorney General of New South Wales

Mr Paul Michael Russell is the executor and trustee of the late Euphemia (Mia) Polykarpou under her will dated 22 March 2004. The deceased died on 2 March 2015, and probate of her will was granted to Mr Russell on 20 October 2015.

The issue before the Court is whether it should accede to a joint request made by Mr Russell and the Attorney General for the State of New South Wales that the Court make a number of orders for the purpose of part of the estate of the deceased to be applied cy-près in accordance with a compromise reached between those parties.

It will be necessary first to explain the relevant background to the joint application.

In her will, after appointing Mr Russell as her executor and trustee, and after making a number of minor bequests, the deceased made the following gift in relation to the residue of her estate:

The gift in clause 4.2 of the deceased’s will failed as the Oprah Angel Network (OAN) ceased to exist before the date of the deceased’s death.

By summons filed on 14 December 2015, Mr Russell applied for judicial advice under s 63 of the Trustee Act 1925 (NSW) on the question of whether he would be justified in making an application for a cy-près scheme in relation to the gift in clause 4.2 of the will.

Mr Russell’s application was dealt with by Lindsay J in Estate Polykarpou; Re a charity [2016] NSWSC 409.

His Honour made declarations that had the effect that the gift of property in clause 4.2 of the will constitutes a valid charitable trust and that, as a result of the dissolution of the corporation identified in clause 4.2 as the recipient of the trust property, the property the subject of the trust is dedicated to charity. Lindsay J then made the following orders:

In accordance with Order 4 made by Lindsay J, the Attorney General delegated to the Solicitor General the duty to establish a cy-près scheme in respect of the property the subject of clause 4.2 of the deceased's will. The Solicitor General did so by order dated 24 October 2017, which was published in the New South Wales Government Gazette, No 119, 27 October 2017, at 6605-6607 (NSW Government Gazette). Under the order, the Young Women's Christian Association of NSW (YWCA) "…is to hold the gift in clause 4.2 of the Will of the deceased on trust, to apply the capital and income for the purpose of establishing and funding a post-crisis domestic violence centre in Campbelltown which provides services to women and children as described in the YWCA's application to the Crown Solicitor”.

Mr Russell formed the view that the cy-près scheme formulated by the Solicitor General did not sufficiently accord with the wishes of the deceased, in that it did not give adequate weight to the fact that the charity that the deceased had chosen for the purposes of clause 4.2 of her will was associated with Ms Oprah Winfrey of whom the deceased was a devotee over many years. Mr Russell thought that, if the charitable gift selected by the deceased failed, she would have wanted her estate to be applied for the purposes of an alternative charity associated with Ms Winfrey that had objects that were as close as possible to the OAN.

Appeals from orders of the Attorney General relating to cy-près schemes are regulated by s 18 of the Charitable Trusts Act 1993 (NSW) (Charitable Trusts Act), which provides:

Consequently, Mr Russell in the circumstances found that he required the leave of the Court to appeal against the order of the Attorney General.

Furthermore, as Mr Russell was a trustee, in accordance with conventional practice, he would be at risk of being found to be in breach of duty to the estate if he sought leave to appeal and then prosecuted the appeal without first obtaining the advice of the Court under s 63 of the Trustee Act 1925 (NSW) that he would be justified in taking that course.

By summons filed on 12 December 2017, Mr Russell sought the following relief:

Mr Russell’s application was dealt with by me in the manner explained in my reasons for judgment: Paul Michael Russell re the Testamentary Trust of Euphemia (Mia) Polykarpou [2018] NSWSC 602. I will not repeat the explanation in these reasons. It is sufficient to note from [22] that I was ambivalent about whether the leave sought should be given, principally because it was unclear that Mr Russell had substantial prospects of success on the appeal, and I was concerned about the possibility that the trust would be depleted by the cost of the appeal in a manner that was not proportionate to the prospects of the appeal succeeding.

In the manner set out in my reasons, I gave Mr Russell an opportunity to provide further evidence to explain his reasons for wishing to appeal from the order made by the Attorney General, and I also decided that it would be proper for the Court to implement an appropriate ad hoc procedure for the purpose of dealing with the issues relevant to the appeal in the most cost-effective way possible.

Ultimately, I decided that the appropriate way for the Court to proceed was as follows:

After deliberation between Mr Russell and the Attorney General, the Court was invited on 7 November 2018 to make orders that included the following:

Pursuant to the leave granted to Mr Russell, on 15 November 2018 he filed a summons to commence the present proceedings, by which he sought the following orders:

The Attorney General has filed an affidavit of Shannon Wright dated 7 December 2018. Ms Wright is the Director of Service Delivery at the Young Women’s Christian Association of Australia (YWCA Australia).

The Court has received joint submissions of the parties signed by counsel for Mr Russell and the Attorney General on 14 December 2018.

The parties have joined in asking the Court to make orders as follows, or orders in similar terms:

The parties noted in the joint submissions that, at [74] of my earlier judgment, I declined to express any view as to the nature of an appeal under s 18 of the Charitable Trusts Act. I agree with the submission made by the parties that, in the light of the agreement reached to resolve this matter, the Court need not further address the issue of the nature of the appeal.

The following explanation of the facts underlying the proposed Order 2 is relevant to the issue of whether it is appropriate for the Court to approve the settlement between the parties and to make that order. I will draw on the reasons in my earlier judgment for these facts, as well as the recent affidavit of Ms Wright.

As already mentioned, clause 4.2 of the deceased’s will gave half of the residue of her estate to OAN.

The articles of association of OAN set out its corporate purpose as follows:

The emphasised portion of this provision suggests that the core of the OAN’s purpose was the betterment, support and enrichment of women and children in need or for educational purposes. The use of the word “or” suggests that the OAN may have had a twofold purpose.

Two organisations applied to the Solicitor General, as the delegate of the Attorney General, for consideration as appropriate objects of the proposed cy-près scheme. They were the Oprah Winfrey Leadership Academy Foundation (OWLAF) and the YWCA.

The results of the Solicitor General’s deliberation and the reasons given are best seen in the following extract of the order, as published in the NSW Government Gazette:

It will thus be seen that the Solicitor General decided that the proposal made by the YWCA was “…closer to the primary charitable purpose of benefiting both women and children, than the OWLAF proposal”. The order therefore applied 100% of the available fund to the scheme proposed by the YWCA.

This was the aspect that concerned Mr Russell, as it in his view did not give any significant weight to the fact that Oprah Winfrey was associated with the OWLAF scheme and not the YWCA scheme and, as I understand it, it was Mr Russell’s belief that the core reason for the deceased making the failed charitable gift to OAN was its association with Ms Winfrey. Hence the application made by Mr Russell that I have described above.

The effect of the settlement reached between Mr Russell and the Attorney General is that 60% of the fund that remains after Mr Russell’s costs have been paid will be applied for the purposes of a cy-près scheme as proposed by the OWLAF, and 40% will be applied generally in accordance with the original proposal by the YWCA, although further explanation is required concerning this aspect of the scheme.

It is plain, in simple terms, that there has been a sensible practical compromise between two deserving alternatives, and a slight weighting has been given to the OWLAF because of its connection with Ms Winfrey.

As Ms Wright has explained in her affidavit, the YWCA has recently merged with other associated entities into the YWCA Australia. The constitution of this latter entity enables it to implement the proposal that had earlier been made by the YWCA.

Ms Wright explained the admirable intent of that proposal in providing physical and mental health services in the Campbelltown area for women and children seeking respite from domestic violence. She explained that a sum of $250,000 would be required to make the service viable for a number of years, so that even though the YWCA was willing to participate in a cy-près scheme that contained 40% of the available fund, it would not be possible to implement the proposal unless additional funds could be found to make up the available fund to $250,000. While there are reasonable prospects of that occurring, Ms Wright could not be sure that the proposal to do so would be effective.

Hence, the YWCA Australia has suggested an alternative object of a cy-près scheme if it is not possible to implement the preferred proposal within 12 months. Ngalingah Mijung Dubais (Our Happy Women) is a program in the Northern Rivers Region of New South Wales, led by a YWCA Australia Cultural Engagement Officer, which provides education, employment and further training opportunities for Aboriginal and Torres Strait Islander women in the Lismore area, many of whom have young children. The participants engage in pre-vocational courses to develop skills necessary to enter the workforce.

I respectfully adopt the following observation by Slattery J in Ubiparipovic v Vucicevic [2018] NSWSC 1583 as to the circumstances in which the Court has power to approve a compromise such as the one that is now before the Court:

The Attorney General has given consent to the settlement in the present case.

Slattery J at [5] set out in a summary way the reasons why he had concluded that the Court’s approval should be given to the settlement of the dispute in that case as to how the relevant fund should be dealt with cy-près. The underlying dispute was more complex than in the present case, and not all of his Honour’s reasons have application here.

As the parties jointly submitted, in deciding on an appropriate cy-près scheme the fundamental responsibility of a court administering charitable trusts is to give effect to the objects of the charitable trust as closely as possible: Attorney General for New South Wales v Fred Fulham [2002] NSWSC 629 at [13]-[18]. The Court, in determining whether a cy-près scheme is appropriate, is required “…to have regard not only to the letter of the terms of the trust but also to its spirit”: RSL Veterans’ Retirement Villages Ltd v NSW Minister for Lands [2006] NSWSC 1161 (Palmer J) at [57].

In his judgment mentioned above, Lindsay J found that the intended purpose of clause 4.2 of the deceased’s will was to provide for “…the betterment, support and enrichment of women and children in need or for educational purposes…”, at [109].

While it may be that only some of the objects of the proposals made by the OWLAF and the YWCA Australia overlap with those of the now defunct OAN, I am satisfied that the objects are sufficiently consistent that it is appropriate for cy-près schemes to be established in accordance with the orders jointly proposed by the parties. I am satisfied that between them the parties, as well as the Solicitor General, have followed a diligent course in attempting to find charitable purposes that are as consistent as possible with the original charitable intent and purpose of the deceased. As it has happened, it has been necessary to compromise and to divide the fund between two cy-près schemes in order to cover as much of the deceased’s intent and purpose as possible.

As it is the intent of the deceased that is paramount, it may confidently be supposed that in cases involving relatively small funds the last outcome that will be consistent with the deceased’s intent is that the available funds be dissipated in excessive administration and legal dispute. Here, it appears that the parties have an interest in selecting the most appropriate way to deal with the failed charitable trust cy-près, and appear to have pursued their obligations diligently and to have compromised sensibly. In order to give effect to the objects of the charitable trust, and in the interests of the preservation of the fund and the implementation of the charitable purpose of the deceased, the Court is ready to accept the compromise.

Accordingly I make orders in terms of the orders jointly proposed by the parties, which are set out at [22] above.