Attorney General in and for the State of New South Wales v Homeland Community Ltd

The parties' contentions in the Main Proceeding 25As I have said, the Main Proceeding is brought by the Attorney General under s 6 of the Charitable Trusts Act. That section relevantly provides: (1) Charitable trust proceedings are not to be commenced in the Court unless: (a) the Attorney General has authorised the bringing of the proceedings, or (b) leave to bring the proceedings is obtained from the Court. ... (4) Nothing in this section applies to the bringing by the Attorney General, with or without a relator, of charitable trust proceedings or any other proceedings relating to a charitable trust. "Charitable trust proceedings" is defined in s 5(1) to mean "proceedings in the Court brought, whether by any trustee of a charitable trust or by any other person, under the Court's statutory or general jurisdiction with respect to any breach or supposed breach of a charitable trust, or with respect to the administration of a charitable trust". 26The Attorney General alleges that Homeland is not using the Property for the charitable purposes for which the Trust was established. Rather, the Property is being used for the benefit of the members of Homeland (including persons who become members in accordance with by-laws made pursuant to cl 19 of Homeland's articles of association) to establish and operate a residential community that subscribes to the objects set out in the memorandum of association. It is essentially for that reason that the Attorney General says that Homeland should be removed as trustee of the Trust. 27Homeland's principal defence is that the original trustees failed to establish a charitable trust by the 1978 Trust Deed. It says that the purposes for which the Trust was established could not be described as charitable purposes either because those purposes could not be described as religious or because the trust was never intended to benefit the public or a sufficiently large segment of the public. Homeland also submits that the Trust was not validly created because Mr Hosken did not sign the 1978 Trust Deed. Finally, Homeland submits that the Trust has never operated or called itself a charitable trust. It follows, according to Homeland, that the Attorney General does not have standing under s 6 of the Charitable Trust Act to bring the Main Proceeding.

Relevant legal principles 28A trust for the advancement of religion is one of the recognised categories of charitable trust: see G E Dal Pont, Law of Charity, (2010) LexisNexis Butterworths at page 159; Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531; Chesterman v Federal Commission of Taxation (1925) 37 CLR 317. "Religion" is defined broadly in this context. For example, in Church of the New Faith v Commissioner of Payroll Tax (Victoria) (1983) 154 CLR 120 at 136, Mason ACJ and Brennan J defined "religion" in these terms: [T]he criteria of religion are twofold: first, belief in a supernatural Being, Thing or Principle; and second, the acceptance of canons of conduct in order to give effect to that belief, though canons of conduct which offend against the ordinary laws are outside the area of any immunity, privilege or right conferred on the grounds of religion. Those criteria may vary in their comparative importance, and there may be a different intensity of belief or acceptance of canons of conduct among the adherents to a religion. The tenets of a religion may give primacy to one particular belief or to one particular canon of conduct. Similarly, Wilson and Deane JJ expressed the concept in these terms (at 174): One of the more important indicia of "a religion" is that the particular collection of ideas and/or practices involves belief in the supernatural, that is to say, belief that reality extends beyond that which is capable of perception by the senses. If that be absent, it is unlikely that one has "a religion". Another is that the ideas relate to man's nature and place in the universe and his relation to things supernatural. A third is that the ideas are accepted by adherents as requiring or encouraging them to observe particular standards or codes of conduct or to participate in specific practices having supernatural significance. A fourth is that, however loosely knit and varying in beliefs and practices adherents may be, they constitute an identifiable group or identifiable groups. A fifth, and perhaps more controversial, indicium ... is that the adherents themselves see the collection of ideas and/or practices as constituting a religion. 29In order for a trust to be a charitable trust it must be "for the benefit of the community or an appreciably important class of the community" (to use the words of Lord Wrenbury in Verge v Somerville [1924] AC 496 at 499). As Dixon CJ explained in Thompson v Federal Commissioner of Taxation (1959) 102 CLR 315 at 321-3: The tendency of the trust must be to benefit the public, a condition that is satisfied if it tends to the benefit of the public at large, or a class or section of the public. The trusts may be limited in their operations by reference to locality, to conditions of people, to their disabilities, defects or misfortunes and by reference to many other attributes of men and things, yet the trusts may retain their "public" character. Not a little difficulty has been felt in defining the conception of "public", "public charity" or "public benefit" which this involves but the contrast is, of course, to private advantage ... Large as is the membership of the masonic order in New South Wales it forms but a society of persons bound together as a voluntary association into which members are admitted by the election of the existing members as provided by the rules adopted contractually for the government of the society. The size and importance of the order cannot give it any different character. It is true that the benefit of the William Thompson Masonic Schools and Hostels is enjoyed by the children of deceased or incapacitated brethren, not the brethren themselves. But as was remarked by Lord Normand in refusing to regard as material a similar distinction in Oppenheim's Case there is no public relationship between parent and child. On the same point Lord Simonds said in that case: "I can make no distinction between children of employees and the employees themselves. In both cases the common quality is found in employment by particular employers." The fact is that it is part of the advantages which a member of the masonic order obtains in virtue of his membership that his child should become eligible thus to be provided with part of his education and upkeep. (citations omitted). 30However, where a trust is for the advancement of religion, the court presumes that there is a public benefit unless the contrary is demonstrated: Public Trustee v Attorney-General (NSW) (1997) 42 NSWLR 600 at 604 per Santow J. 31Section 63 of the Act relevantly provides: (1) A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument. (2) If the trustee acts in accordance with the opinion advice or direction, the trustee shall be deemed, so far as regards the trustee's own responsibility, to have discharged the trustee's duty as trustee in the subject matter of the application, provided that the trustee has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion advice or direction. (3) Rules of court may provide for the use, on an application under this section, of a written statement signed by the trustee or the trustee's Australian legal practitioner, or for the use of other material, instead of evidence. (4) Unless the rules of court otherwise provide, or the Court otherwise directs, it shall not be necessary to serve notice of the application on any person, or to adduce evidence by affidavit or otherwise in support of the application. ... 32The operation of s 63 of the Act in the context of charitable trusts was considered by the High Court in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 (Macedonian Orthodox). The plurality - consisting of Gummow ACJ, Kirby, Hayne and Heydon JJ - made it clear in that case that the court had power, and it was often appropriate, under s 63 to give advice in adversarial proceedings, even where those proceedings involved an allegation of breach of trust and sought removal of the trustee. As the plurality explained (at [114]): Much emphasis was given in the Court of Appeal to the fact that, in the Main Proceedings, the plaintiffs claim that the Association had acted in breach of trust and that it should be removed as trustee. But as the primary judge pointed out, the principal issue between the parties in the Main Proceedings centres upon the terms of the trust on which the property is held, and the primary judge concluded that it was in the interests of the trust that the uncertainty about those terms should be resolved. Where, as here, the trust is a charitable purpose trust, identifying the dispute between the parties as centring upon allegations of breach of trust and claims for removal of a trustee is an incomplete description of the issues that are tendered in the litigation. It is an incomplete description because describing the dispute in this way suggests that the trustee has no more than a personal pecuniary interest in the outcome of the litigation. That may be the case where a trustee of a private trust is sued for breach of trust in managing the trust fund and beneficiaries claim compensation for losses allegedly sustained as a consequence. But in this litigation the interests at stake are larger and more complex than whether a defaulting trustee should make good the financial consequences allegedly flowing from mismanagement of a trust fund. There is a public aspect to those interests because they concern the administration of a charitable purpose trust. There is no reason why the same principle should not apply where the issue is whether a charitable trust was created at all. The Attorney General did not suggest otherwise. 33In considering whether to give judicial advice, it is not appropriate for the court to embark on a determination of the main proceedings. As the plurality explained in Macedonian Orthodox (at [74]): A necessary consequence of the provisions of s 63 of the Act is that a trustee who is sued should take no step in defence of the suit without first obtaining judicial advice about whether it is proper to defend the proceedings. In deciding that question a judge must determine whether, on the material then available, it would be proper for the trustee to defend the proceedings. But deciding whether it would be proper for a trustee to defend proceedings instituted is radically different from deciding the issues that are to be agitated in the principal proceeding. The two steps are not to be elided. In particular, the judicial advice proceedings are not to be treated as a trial of the issues that are to be agitated in the principal proceedings. 34One matter the court needs to consider in determining whether it would be proper for a trustee to defend proceedings is the trustee's prospects of success. For that reason, it is usual on an application under s 63 for the trustee to provide the court with advice that the trustee has obtained from a suitably qualified legal practitioner on the prospects of successfully defending the claim. The Attorney General submitted that the court needed to be satisfied that it was more likely than not that the trustee would prevail. In making that submission, he relied on the following statement by Young CJ in Eq in Application of Macedonian Orthodox Community Church St Petka Incorporated [2006] NSWSC 392 at [23]: [W]here the advice sought is in connection with litigation, the trustee must show not just that it has advice that it is more likely than not that it will be successful, but also that in pursuing the litigation it will be acting in the best interest of the trust. 35However, in my opinion, the real question is whether the trustee is acting in the best interests of the trust. The trustee's prospects of success will be relevant to that question, but there is no separate threshold that must be met in order for the court to be satisfied that it is in the best interests of the trust that the proceedings be defended. For example, the issue raised in the case may involve the proper interpretation of the instrument creating the trust. In those circumstances, the existence of significant doubt about the true meaning of the relevant provision may be sufficient to justify the trustee defending proceedings in which the interpretation of that provision is in issue. Similarly, where the proceedings have only just been commenced and the material before the court is limited, it may be appropriate to give advice that further investigations are appropriate where it appears that a defence is not unarguable: see Lenyo Pty Ltd; In the matter of Daquion Family Trust [2009] NSWSC 429 at [7] per Brereton J. On the other hand, different considerations will apply where the evidence is largely complete and the trustee is in a position to obtain legal advice on its prospects of success having regard to that evidence.

Consideration 36Homeland provided the court with an opinion of Mr Willmott SC. It is clear, however, that that opinion was provided before the Attorney General served his evidence. As I have said, that evidence includes detailed evidence of the circumstances in which the Trust was established from persons involved at the time. None of the witnesses relied on by Homeland were involved at the time. Mr Boyle, who appeared for Homeland, submitted that Homeland had not filed its evidence in reply and that it was possible that Homeland would file evidence from witnesses who participated in the establishment of the Trust. There was, however, no evidence to that effect. In those circumstances, little weight can be placed on the opinion of Mr Willmott SC. 37In my opinion, Homeland has not established that it is entitled to the advice that it seeks. 38In my opinion, the fact that Mr Hosken did not execute the 1978 Trust Deed cannot provide an arguable defence to the claim that the trust deed established a charitable trust. It is clear that those who did execute the 1978 Trust Deed intended to create a charitable trust and to hold their interests in the Property on trust for that purpose. The evidence of Mr Mark Davis is that Mr Hosken also intended to create a charitable trust and Mr Mark Davis's evidence is consistent with the fact that Mr Hosken remained on the Property for a time and his wife became a trustee of the Trust. Homeland has produced no evidence to suggest that Mr Hosken ever asserted a continuing interest in the Property. Homeland itself claims to be the owner of the Property on the basis of a transfer executed by the trustees. In those circumstances, I do not think that it has an arguable case that Mr Hosken's estate retains a continuing interest in the Property which would in some way or another affect the creation of the trust established by the 1978 Trust Deed. 39I doubt that it is arguable that the Trust fails as a charitable trust because it is not for the advancement of religion or is not for a public purpose. Homeland submits that the Trust is not for religious purposes because the set of beliefs which formed the basis of the establishment of the Thora Community College of Light do not amount to a religion. That submission, however, misses the point. The question is not whether the original trustees intended to create a religion. There is no evidence that they did. The question is whether they intended to create a trust for the advancement of religion and religious studies and practices by teaching, example and demonstration. It is not necessary for the trust to be established for the advancement of any particular religion. It is difficult to see how it could be said that the parties to the 1978 Trust Deed did not intend to create a trust for the advancement of religion given the terms of cl 3 of that document. Homeland says in its further amended defence that other objects are referred to in cl 3. However, it is clear that those other objects are directed at achieving the object stated in cl 3(a). 40In addition, there is no evidence to suggest that the original trustees did not intend to create a trust for the public benefit. There is nothing in the 1978 Trust Deed, for example, which suggests that the facilities and services that the Trust was set up to provide were not available to anyone who wanted to take advantage of them. 41There is, however, a more fundamental problem with Homeland's application. It is not easy to understand precisely how Homeland puts its case in the Main Proceeding. It accepts that it holds the Property on trust. It is not clear whether it asserts that it holds the Property on trust for its members. But whether it does or not does not matter. What Homeland does accept is that, even on its own case, there are a range of possible beneficiaries. If the Trust fails, one possibility (which Homeland does not appear to accept) is that the 1978 Trust Deed evinces a general charitable intent with the result that the trust assets should be the subject of a cy pres scheme. Another possibility is the trust fails altogether with the result that Homeland holds the Property on a resulting trust or a constructive trust for the original donors or for the existing residents. However, whatever the position, it is plain that Homeland is not acting in the interests of the Trust in resisting the Attorney General's application in the Main Proceeding. Rather, it is seeking to advance the interests of its members who are the current residents on the Property. That is made clear by the following submission of Mr Boyle's: Obviously they are caught by surprise by this action and there's an overriding issue of general justice to give these people, a chance to have their day in court and to have any determination about what the situation is judicially and properly determined. Because that will - if it does arise which is certainly the plaintiff's intention in that proceeding that the place they would be evicted from the place or the place had to be sold or some other trustee is going to take it over, that has very serious public community consequences for that area. It is not surprising that Homeland should take that position, since it is controlled by the existing residents. However, in taking that position, Homeland is seeking to use trust funds to advance the interests of one class of possible beneficiaries. In those circumstances, it rather than the Trust should bear the costs of doing so. 42It might be thought that it is appropriate to give the advice that Homeland seeks because Homeland only seeks to use the money in its bank account and that money has been contributed by existing residents of the Property. However, the difficulty with that submission is that it is clear that that money has been paid for the right to occupy the Property. The Property is clearly the subject of the Trust and money paid to Homeland for use of the trust assets must also belong to the Trust. Homeland did not seek to advance a contrary argument. 43For those reasons, the advice sought by Homeland should be refused. Homeland's notice of motion should be dismissed.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 June 2013