Wesley Community Services Limited trading as Wesley Mission v Smith

HIS HONOUR: The literary world is full of notable quotes regarding good intentions and their outcomes. One of the more famous quotes by Robert Burns “The best laid schemes o' Mice an' Men, Gang aft agley. An' lea'e us nought but grief an' pain, For promis'd joy!” [1] highlights the truth that good intentions often miscarry.

The late Daphne Bunn (deceased), a widow, passed away on 11 June 2022, leaving a Will dated 22 January 2018, the probate of which was granted to Stephen Anthony Smith (first defendant or Mr Smith) and Allison Frances Paten (who is now also deceased) (together the executors) on 18 January 2023. The deceased’s estate was, according to the inventory of property, valued at approximately $6.458 million, the substantial assets of which included three properties and considerable funds in financial institutions. One of the properties was located in Newport (the property).

By some measures, the deceased left a relatively simple will. Nonetheless, the Will and the administration of the deceased’s estate has given rise to some complexities.

As will be seen below, essentially, the first gift which the deceased made by her Will after appointing her executors was to create a form of trust in respect of the property, more particularly set out in Parts (a) and (b) of cl 2 of her Will (the specific gift).

There is no dispute that the deceased intended, by use of the property and its contents, to benefit the Wesley Mission. The plaintiff, the formal legal entity which trades as Wesley Mission (plaintiff or Wesley), by summons filed on 20 September 2024 sought relief in relation to the nature and meaning of the specific gift in cl 2 and other questions regarding the purpose and administration of the property.

Mr Smith is the first defendant, and the Attorney General of New South Wales is named as the second defendant.

The summons was amended on 13 November 2024, partly to delete a reference to a provision of the Charitable Trusts Act 1993 (NSW) (CTA), and in part to make a request for the costs of the parties to be paid out of a specific fund being the subject of the proceedings, namely the proceeds of an anticipated sale of the property as distinct from coming out of the deceased’s estate generally. Mr Smith initially filed a notice of appearance in October 2024 and subsequently on 17 January 2025 filed a notice of submitting appearance, save as to costs.

On the hearing of the proceedings, Wesley appeared by Mr Flaherty of counsel; Mr Smith, consistent with the submitting appearance, and having been excused by the Court from attendance, did not appear; and Mr Farinha of counsel appeared on behalf of the Attorney General. The Court has been assisted by the provision of written submissions from each of Mr Flaherty and Mr Farinha, and they have supplemented those submissions orally.

Wesley has filed and served four affidavits being: two affidavits of David Cannings, its Chief Financial Officer, affirmed on 20 September 2024 and 1 October 2024; an affidavit of David Kenneth Allen, Wesley’s Manager of Community and Family Care, affirmed on 24 January 2025; and an affidavit of Andrew Tyndale, Wesley’s Manager of Property Management and Development affirmed on 10 February 2025. A valuation report and assessment has been provided. No objection has been taken to any of that evidence. Mr Farinha tendered some additional materials marked as exhibit AG1. Subject to that, the defendants have not filed and served any evidence.

The first prayer for relief in the amended summons has been overtaken by events. It sought leave to bring the proceedings pursuant to s 6 of the CTA. However, the Attorney General has since authorised the continuation of the proceedings pursuant to s 6(2A) of the CTA. The balance of the prayers for relief in the amended summons broadly reflect issues arising from the construction of the Will and the administration of the property, and more particularly, the trust said to be created pursuant to cl 2 of the Will.

The relief sought in prayers 2, 4, and 5 of the amended summons is not seriously contested. Prior to the hearing, as between the parties, there was no real dispute that:

The reader should understand that the absence of any real dispute between the parties in respect of the above-mentioned matters does not per se justify the Court in finding that a charitable trust exists and the removal of Mr Smith as trustee is appropriate. Thus, it is important to record that I am independently satisfied, as will be seen below, that the terms of cl 2 of the Will were intended by the deceased to create a trust and that the trust is for a charitable purpose.

On the hearing, I raised with the parties and sought to test the proposition of whether the named executors had been appointed as trustees of the trust property as distinct from Wesley. Counsel addressed this issue, and I have, in particular, been assisted by Mr Farinha. I will address these matters further below.

The questions which the parties have presented to the Court as agreed real issues are:

The first issue raises questions regarding the application of ss 9 and 10 of the CTA to the facts of the case. The second issue is essentially consequential upon that. There are three issues regarding costs being: (a) which, if any, party should receive an order for costs; (b) the basis on which any such costs are to be paid; and (c) the fund source of payment of any such costs.

It is convenient to proceed by setting out the relevant terms of the specific gift clause before addressing the issues. The salient facts will relevantly appear below in my dealing with the issues.

Clause 2 of the Will is as follows: [2]

Mr Cannings, the Chief Financial Officer of the plaintiff, deposes that the property is in very poor condition, is not habitable, and “is not suitable for any of the activities conducted by the [p]laintiff”. [4] Upon becoming aware of the bequest in the deceased’s Will, Mr Cannings arranged for an inspection of the property by the Wesley Mission Property Team. [5] Following an inspection on 17 August 2022, a report was prepared dated 16 September 2022. It concluded as follows: [6]

Mr Tyndale, the Manager of the Property Department at Wesley Mission, inspected the property in or about December 2022 and later on 8 February 2025. [7] The contents of the report have been confirmed by him insofar as they bear upon the property. He indicates that the property had further deteriorated since his earlier inspection. He deposes that the property continues to be unfit for occupation and would require a complete demolition and reconstruction in order to meet the standard to permit habitation. [8]

There is only one true construction of any legal instrument, including a Will: see Minister for Immigration and Border Protection v SZVFW (2018) 264 CLR 541; [2018] HCA 30 at [154] per Edelman J; Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60 at 78-79 per Isaacs J; [1925] HCA 18.

The object of construction of a Will is to give effect to what the Will-maker intended by the words he or she used, having regard to admissible extrinsic evidence: see e.g. De Lorenzo v De Lorenzo (2020) 104 NSWLR 155; [2020] NSWCA 351 at [50] per White JA (Gleeson JA agreeing at [1]), citing Fell v Fell (1922) 31 CLR 268 at 273-274 per Isaacs J; [1922] HCA 55, and Perrin v Morgan [1943] AC 399 at 406 per Viscount Simon LC, 416 per Lord Thankerton.

Mr Flaherty submitted that the deceased intended to create a trust, being a charitable trust, as follows: [9]

Mr Farinha separated out the questions of whether there was an intention to create a trust and whether it was for charitable purposes. He submitted that subcl (a) and (b) provide for a gift of property subject to a direction as to how the property is to be used. [10]

He made reference to possible construction issues being: (a) whether the direction is merely precatory; (b) whether the direction imposes a condition precedent or a condition subsequent; (c) whether the direction gives rise to some form of equitable charge securing the fulfilment of a purpose; and (d) whether the direction creates a trust for specified purposes. In so doing, he made reference to the decision of Dixon J in Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417 at 418-420; [1932] HCA 22 and other authorities. Mr Farinha’s submissions distinguish between an initial purpose and a subsequent purpose.

Precise definition of a trust has been said to be elusive if not impossible: J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia (8th ed, 2016, LexisNexis) (Jacobs’) at [1-01]. A trust is an institution developed by equity and cognisable by a court of equity. [11] Basically, a “trust” may be described as a relation between trustee and beneficiary in respect of certain property. Specifically, a trust exists when the owner of legal or equitable interest in property is bound by an obligation recognised by or enforced in equity to hold the interest for the benefit of others, or relevantly in this case, not a trust for beneficiaries but a trust for purposes, being some object or purpose permitted by law. [12]

There are various ways of creating charitable trusts. A charitable trust of land may be created at private law by the unilateral act of its owner, by Will or deed which either transfers the land to a trustee for a charitable purpose, or declares that the owner holds the land as trustee for a charitable purpose: e.g. Catholic Metropolitan Cemeteries Trust v Attorney General of New South Wales [2024] NSWCA 30 (CMCT) per Leeming JA at [148]. His Honour notes that transfer and declaration of trust are the two principal ways of creating express trusts, including charitable trusts. [13] Charitable trusts may also be created pursuant to statute and recognised in equity, and “statutory trusts” might be created for a public purpose which is not charitable. [14] It is not necessary to explore that further here as the relevant wording creating a trust appears from the deceased’s Will.

I am persuaded that the deceased intended to create a trust, being a trust for charitable purposes. A general charitable intention is presumed, there being no evidence to the contrary in the trust instrument: s 10 CTA.

The terminology in cl 2(b), to my mind, is far more consistent with a trust rather than some other legal institution or relation. [15] The deceased has used the word purpose at least on three occasions throughout subcl (b), those purposes being an initial purpose “providing respite care for Wesley Mission and staff and those in need under the care of Wesley Mission”, and a subsequent purpose of “maintaining and providing for homeless people under the care of Wesley Mission”.

The Macquarie Dictionary online edition contains a definition of respite as “care provided for the permanently disabled, to give respite to their normal carers”. Whilst that is one choice of meaning for respite care, I am not satisfied that there is any sense of requirement in subcl (b) for the care to be for the permanently disabled. The wording in cl 2(b) focuses upon two categories of people, one being Wesley Mission staff, and the other being those in need under the care of Wesley Mission.

Other definitions of “respite care” seem more apt. The Macquarie Dictionary online edition defines the noun “respite” as “a delay or cessation for a time, especially of anything distressing or trying; an interval of relief”. It defines the verb “respite” as being, “to relieve temporarily, especially from anything distressing or trying; give an interval of relief from”. Mr Farinha helpfully provided other definitions in relation to the meaning of respite care at [23] of his written submissions:

I accept the submission of both counsel that a purpose is expressed for persons “in need” or the like. Using the terminology of Mr Farinha, it is relevantly a trust for the relief of poverty and thus charitable: see e.g. In re Scarisbrick; Cockshott v Public Trustee [1951] Ch 622 at 634 per Evershed MR, and at 650 per Jenkins LJ.

Specifically, Mr Farinha submitted that:

As Mr Farinha observed, the subsequent purpose is also charitable on the same ground, citing as an example, YWCA Australia v Chief Commissioner of State Revenue [2020] NSWSC 1798 per Payne JA at [56].

The plaintiff’s submissions proceeded on the basis that the executors were trustees of the trust property. Clause 2(a) is a direction to the executors and trustees after payment of all just debts, funeral, and testamentary expenses to give, devise, and bequeath the property and its contents to Wesley, subject to conditions set out in cl 2(b).

I posited that there is a distinct argument that, properly construed, the deceased intended Wesley to be trustee of the property, subject to a type of supervisory role by the executors. Mr Farinha, at least for his part, accepted that possibility.

I find that the construction that I have posited is the appropriate construction of the Will. However, subject to the question of removal of a trustee about which I say more below, practically speaking, there is no issue about this. Mr Smith is content for Wesley to be the trustee, and the Attorney General does not oppose that. Mr Farinha submits that the trust is otherwise properly constituted. I agree.

I will later make reference to completion of executorial duties. However, it suffices to signal at this point that there is no suggestion that the property the subject of the trust is required to be sold for administration purposes. Essentially, all that remains is for the property to be transferred to Wesley to hold on the trust terms in cl 2, subject to any cy-près relief granted in these proceedings.

The concluding lines of subcl (b) relevantly state:

As Mr Farinha observed, the intent and effect of this provision is unclear. However, wording to that effect is not unknown in law, and Mr Farinha drew attention to a similar phrase considered by the High Court in Monds v Stackhouse (1948) 77 CLR 232; [1948] HCA 47. In that case, the wording was that the corporation “in disposing of the said money shall be the sole judge as to whether the objects to which they are applying this bequest are within the terms of a gift.”

Mr Farinha’s submissions addressed the differing positions taken by Latham CJ and Dixon J as follows.

My first and provisional impression is that the terms were intended by the deceased to create some form of supervisory role. However, I accept the submission of Mr Farinha that it is ultimately not necessary to form a concluded view regarding the provision.

The history and principles with respect to trust purposes and CTA relief were summarised by me in Green v Attorney General (NSW) [2023] NSWSC 1229; (2023) 413 ALR 575 at [75]-[108].

I return to my initial observations regarding good intentions. It is not uncommon for well-meaning people, including those of the deceased’s generation, to have a philanthropic intent regarding the use of their assets, especially a family home. The sentiment is entirely understandable. The family home might well have been entirely suited to the deceased’s recreational activities with her husband and, at times, a place of refuge or respite from the rigours of their work environment, or more generally from the other travails of life.

The exact saying “Beauty is in the eye of the beholder” is said to have been coined in 1878 by Margaret Wolff Hungerford. [16] However, the same concept in different words was expressed earlier than in 1878, for example in Shakespeare’s 1597 play Love’s Labour Lost: [17]

What the deceased found to be a charming or pleasant environment entirely amenable for the purpose of living or respite is not necessarily suited to others in their different circumstances. I accept, based on the opinions in the inspection report and Mr Tyndale’s affidavit, the original and initial purpose of the trust of providing “respite care for Wesley Mission staff and those in need under the care of Wesley Mission” for 30 years has thus become impracticable to carry out. I will not go into the issue of whether there was an initial impossibility. I accept that the original purpose of the trust has in any event become impracticable to carry out, and the Court would have power to direct a cy-près scheme under the general law.

Given the initial and subsequent purposes identified above, the spirit of the trust as a whole was to provide for those in need, including homeless people under the care of Wesley Mission. On the evidence outlined above and tendered in the case, use of the property to provide respite care would require a diversion of resources away from other works of Wesley to renovate the property and, even then, the difficulty of access would severely limit the potential use of the land. That being so, I accept the submission of Mr Farinha that s 9 of the CTA is engaged. Mr Flaherty submitted likewise.

Mr Flaherty addressed the cy-près scheme in his submissions as follows:

Mr Farinha’s submissions regarding the cy-près were as follows:

The Escaping Violence Program (EVP) is not a crisis service. Mr Allen explained how the EVP program operates. The service is mainly in the form of financial aid. It includes providing money for temporary accommodation, residential tenancy bonds, and for other basic needs up to $5,000. I am satisfied that the EVP program provides for necessities for people and that, whilst it is not necessarily tied to accommodation of a particular dwelling, it is nonetheless a type of respite care which provides temporary accommodation and respite for those who meet the eligibility criteria, and that it is within the spirit of the trust.

Mr Allen also detailed the nature of Wesley’s homeless services. There are nine specialist types of contracts that Wesley has with the Department of Community and Justice which provide funding to Wesley so that it can provide accommodation assistance to people who are living with homelessness or at the risk of homelessness. I am satisfied that those services are relatively close to the deceased’s intent for the provision of services to those in need and within the spirit of the trust.

More generally I accept that use of the funds in one or more of the four types of programs appears to be a suitable means of providing respite and other benefits to those in need under the care of Wesley, being sufficiently close to the original purpose of the trust.

There was some contention in the written submissions regarding the precise wording of orders, in particular the orders for the cy-près scheme. That contention has been resolved during the course of the hearing, and the orders that I will make below are orders that have had the considered input of both Mr Farinha and Mr Flaherty.

I have indicated above that I am not entirely convinced that the executors were intended by the deceased to be the trustees of the trust property for the 30-year period, as distinct from performing some form of supervisory role.

I find that the better view is that, on the proper construction of the Will, Wesley was intended to be the trustee of the trust. However, to the extent that there is some doubt about the position, if it be the case that Mr Smith is currently holding the property as trustee, there is no real dispute that it is appropriate for him to be replaced as trustee. In particular, Mr Farinha drew my attention to the decision of McMillan J in Giurina v Giurina [2018] VSC 599.

Specifically, Mr Farinha submitted:

The Court has power to remove or replace a trustee as part of its inherent power to see that trusts are properly executed: see Letterstedt v Broers (1884) 9 App Cas 371 at 386. The power to remove or replace a trustee is also conferred by statute, relevantly here, s 70 of the Trustee Act 1925 (NSW) (rather than ss 7 and 8 of the CTA, which are not engaged on the facts). In Crowle Foundation v NSW Trustee and Guardian [2010] NSWSC 647; (2010) 5 ASTLR 556, Ball J observed:

In my view, Wesley was intended by the deceased to be trustee of the trust. In saying that, I do not propose to venture any opinion as to whether Mr Smith has acted per se in any untoward way by assuming that he is trustee. If it be the case that executorial duties are complete and Mr Smith has transferred the property into his own name apparently as trustee, then on one view he holds the property as constructive trustee, or as Mr Farinha mentioned, as trustee de son tort.

The question of when executorial duties are complete is not always easy to determine. Bergin CJ in Eq in Ford v Simes [2009] NSWCA 351 at [38]-[51] (Tobias JA and Handley AJA agreeing at [1] and [76] respectively) discussed the question regarding completion of executorial duties and referred to some authorities bearing on that issue. It can be the case that an executor has not completed all executorial duties but is, nonetheless, prepared to acknowledge that a certain asset is no longer required for administration purposes. On any view of the matter, practically speaking, that is the situation here.

To the extent that there is any doubt regarding Mr Smith holding the property in some trustee capacity, I am satisfied that there should be an order made for more abundant caution that Mr Smith should be removed as trustee. As I have mentioned, that is not for any untoward reason but essentially because it will give effect to the Will as I have construed it and facilitate the trust purposes and the proper execution of the administration of the trust.

I mentioned there were three issues regarding costs.

On the first issue, there is essentially no dispute as between the parties that there should be an order for costs of all the parties in respect of the proceedings. However, the issue is an important one and for that reason alone, bears some consideration by me.

Mr Farinha submitted as follows:

The discussion by Leeming JA in Perpetual Trustee Co Ltd v Attorney General (NSW) [2018] NSWSC 1456; (2018) 17 ASTLR 126 is illuminating. As his Honour observes, the position of the Attorney General is entirely different from that of a trustee. The Attorney General, generally speaking, has no entitlement to costs being paid from trust assets. The survey of authorities by Leeming JA reveals a pattern of inconsistent costs orders with no clear principles emerging as to the basis of making an award for costs in favour of the Attorney General. Nonetheless, his Honour cited treatment of the issue in William Henderson and Jonathon Fowles, Tudor on Charities (10th ed, 2015, Sweet & Maxwell) as follows:

His Honour regarded those reasons as being persuasive for the making of an order in favour of the Attorney General. For my part, I consider that I have been considerably assisted by the Attorney General’s submissions, and I am satisfied that the costs of all parties should be paid out of the proceeds of the sale of the property.

On the second costs issue, in relation to the basis for costs, the parties submitted that costs should be on an indemnity basis. To my mind, the Attorney General was effectively performing a like role to the role that would be performed by the executor of the deceased’s estate who, as noted, late in the piece, filed a submitting appearance except as to costs. In those circumstances, there has been no real duplication of work and in the circumstances of this particular case, I consider that costs on the indemnity basis are appropriate.

The third and final costs issue is in relation to the fund from which the costs should be paid. In estate litigation there is a question as to whether the costs should be borne by the property that, in the opinion of the Court, is the real subject matter of the proceedings, as opposed to costs being borne in accordance with the statutory order provisions of s 46C(2) of the Probate and Administration Act 1898 (NSW).

In Reeves v Reeves (No 2) [2024] NSWSC 386, I stated at [46]-[56]:

In the present matter, I am satisfied that the costs should be borne by the net proceeds of sale of the Newport property, which was the real subject matter of the proceedings.

The orders of the Court are as follows.