College of Law Pty Ltd v Attorney General of NSW [2009] NSWSC 1474 | Case summary

5139/09 College of Law Pty Limited v Attorney General of New South Wales JUDGMENT (ex tempore) 1 HIS HONOUR: By summons filed on 23 October 2009, the plaintiff College of Law Pty Limited (CoL) claims an order that the trust of the land and building (known as the College of Law) at 2 to 12 Chandos Street, St Leonards and the business known as the College of Law, held by CoL as trustee, be administered in accordance with an administrative scheme, particulars of which are annexed to the summons. Is CoL a charity? 2 In proceedings in the Land and Valuation Court of New South Wales in 1978, in which the liability of the Chandos Street property for municipal rates was in issue, Rath J held that the purposes of CoL were charitable, and that the Chandos Street property was held by CoL as constructive trustee of a charitable trust [see College of Law (Properties) Pty Limited v Willoughby Municipal Council (1978) 38 LGRA 81]. His Honour concluded that, in circumstances where the funding for the initial acquisition and early operation of the College had been provided by way of grant from the Law Foundation, for the purpose of establishing practical legal training and providing the necessary financial support for that purpose, but the original intent to incorporate an entity to conduct the affairs of the College of Law by Act of Parliament had (for reasons which today remain mysterious) failed, CoL held the property as constructive trustee of a charitable trust. CoL has always accepted that it carries on the business of the College of Law, and holds assets ancillary to that business, on the same charitable trust. 3 In the present proceedings, the Attorney General - who has, for the purposes of the (NSW) Charitable Trust Act 1993, s 6 authorised the bringing of the proceedings - submits that it is necessary to determine whether CoL and its business remains of that charitable character today, and that the 1978 decision of Rath J has some limitations when it comes to considering the present position and status of CoL. If that be so, the evidence nonetheless establishes that CoL continues to have, as its primary purpose, the delivery of practical legal training to entrants to the legal profession, and the delivery of continuing legal education to members of the profession both in New South Wales and now, to some extent, on a wider basis. 4 It is well established that the advancement of education is one of the recognised categories of charity [see Commissioners for Special Purpose of Income Tax v Pemsel [1891] AC 531, 583], and that the provision of education for lawyers, including their professional development and advancement, is within that category [see Incorporated Council of Law Reporting of (Queensland) v Federal Commissioner of Taxation (1971) 125 CLR 659; [1972] ALR 127; and College of Law (Properties) v Willoughby Municipal Council]. That the institution conducts business and commercial activities does not deprive it of its charitable character, so long as those activities are associated with or ancillary to the charitable purpose [see for example Victorian Women Lawyers' Association Inc v Commissioner of Taxation (2008) 250 ALR 516, [130] - [132]; Commissioner of Taxation v Word Investments Ltd (2007) 243 ALR 44, [22] - [24]]. 5 I am amply satisfied that the purposes of the College of Law remain charitable in the relevant sense. An administrative scheme? 6 Because the trust upon which CoL holds the Chandos Street property and the business is a constructive one, there is no trust instrument, and the precise terms of the trust, at least in some respects, remain therefore unclear. 7 Where there is uncertainty as to the mode of carrying out the objects of the charitable trust - for example, because the donor has failed to specify a particular means by which the gift is to be applied for those objects, or the means specified are insufficient for its practical application - the Court has the jurisdiction to provide the detailed machinery for the administration of the donor's charitable objects by means of an administrative scheme [see Re Robinson; Besant v German Reich [1931] 2 Ch 122; Re Gott; Glazebrook v University of Leeds [1944] Ch 193 at 197; The Diocesan Trustees of the Church of England in Western Australia v The Solicitor-General (1909) 9 CLR 757, 763; Kytherian Association of Queensland v Sklavos (1958) 101 CLR 56, 66; Phillips v Roberts [1975] 2 NSWLR 207, 222 - 223]. Such administrative schemes are to be distinguished from cy-pres schemes, which result in the charitable object being varied, in order to achieve a general charitable intent where the stipulated charitable object is no longer capable of attainment [Corish v Attorney-General of New South Wales [2006] NSWSC 1219, [9]]. 8 There have been significant changes in the delivery of practical legal training and continuing professional education since the College was first established, and the initial arrangements and premises will not necessarily remain appropriate or optimal for CoL's purposes. The College is presently conducting a significant business as trustee of a charitable trust without a written trust instrument, and this creates difficulties in its administration, and in particular in its ability to deal with trust property. Particular instances revealed by the evidence include questions concerning its ability to sell or lease the Chandos Street property should it wish to move to new premises, or to enter into joint arrangements with other educational institutions for the occupation of alternative property, or to enter into a lease to occupy alternative premises. But while the purpose of the proposed administrative scheme is, in part, to address those difficulties, it is primarily to permit the winding up of the trust so as to permit the transfer of the trust assets to a new company (for present purposes, called TCOL Limited), the objects of which are to be the same charitable objects as those of the trust. 9 The proposed scheme takes the form of a fairly typical trust deed for a charitable trust. The object specified is that which was found by Rath J in the 1978 proceedings. The distribution of profits to the trustee or any of its members, other than by way of reasonable remuneration for the trustee, is prohibited. A majority of the directors of the trustee are required to be qualified persons (defined as persons holding some suitable office, position or standing in the community). The trustee is given a general power of amendment, but it is subject to a proviso that no part of the trust fund become subject to any trust other than a trust for the public charitable purposes of the provision of education and a legal practitioner certifies that the amendment is within the power so granted. 10 Importantly, clause 14 provides that the trustee may decide to wind up the trust, upon which event the trustee must give and transfer the trust fund, after payment of all debts and liabilities, to TCOL (or to another institution maintained exclusively for public charitable purposes and which prohibits the distribution of income and property among its beneficiaries or members to an extent at least as great as is imposed in respect of the trust fund by the proposed scheme). 11 Because the evidence indicates that the College proposes to take advantage of clause 14 in order to wind up the trust in order to transfer the assets to TCOL, it is appropriate to make some further observations about TCOL. TCOL is a not for profit company limited by guarantee. Its objects are to provide higher education and conduct research through the acquisition, maintenance and promotion of the College of Law. Its profits, income and property must be applied solely towards those objects, and none is to be paid or transferred to a member, whether by way of dividends, bonds or otherwise. Provision is made for the governance of TCOL by a Board of Governors in whom management of the company is to be vested, comprising a number of elected and appointed members and some emeritus members; the governance structure is broadly akin to that adopted by other higher education institutions. In the event of TCOL being wound up, any property must not be paid or distributed to members, but must be given or transferred to some other institution having objectives or purposes similar to those of TCOL, and whose constitution prohibits the distribution of income and property amongst its members to the same extent at least as is imposed on TCOL. Substitution of such a successor institution is to be determined by the members, or upon application to the Court. 12 The evidence indicates that the constitutional clarity of a corporate structure is desirable from the perspective of enabling the College to gain self-accrediting status as a higher education provider. No doubt, the constitutional clarity of a corporate structure will also facilitate commercial dealings with third parties who will not have to be concerned about limitations and restrictions imposed by trusts, which might otherwise be an inhibiting factor under the existing trust structure. 13 The Attorney General, whose helpful submissions I have also considered, takes no issue - either with the proposed scheme in general, or with the proposal that the trust be wound up and its assets transferred to TCOL. The Attorney General suggests that it might be preferable to include a provision that favours a transfer of the trust assets to an institution providing practical and continuing legal education - as distinct from one providing education generally - before defaulting to the general charitable intention of education; CoL has no issue with such a provision, and I will incorporate it in the scheme. Conclusion 14 I am, therefore, satisfied that it is appropriate to decree the proposed scheme. However, for clarity I should record that I have not been asked to give judicial advice as to whether the trustee would be justified in transferring its assets to TCOL; it is intended that the trustee will make that decision under clause 14 of the Administrative Scheme, if it is approved. I ought, therefore, not be taken as having given any such advice. 15 In the draft scheme attached to the short minutes of order, a typographical correction has been made in clause 2.1 in the definition of "object". In clause 14.2, I will insert in the fifth line, after the word "or", the words "or if TCOL is unable or unwilling to accept such transfer", and then to insert in subclause (a), after the words "public charitable purposes", the words "including to the extent possible the furtherance of practical and continuing legal education". 16 I make orders in accordance with the short minutes of order initialled by me, dated this day and placed with the papers. I order that the costs of the proceedings be paid out of the funds of the trust.

College of Law Pty Ltd v Attorney General of NSW

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Judgment (10 paragraphs)

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