Dr Mayo left a will dated 30 April 2015 which was admitted to probate on 2 February 2016. Dr Mayo named the plaintiff, Mr Stuart John Latham, as his Executor.
Dr Mayo's estate comprised some $2.5 million.
The Executor seeks advice under s 63 of the Trustee Act 1925 (NSW) as to a number of matters arising under the will and more generally in relation to Dr Mayo's estate.
[3]
The bequest to Patrick O'Connell
In his will, Dr Mayo bequeathed to Mr Patrick O'Connell, Mr O'Connell's "choice of up to twenty five (25) of my personal possessions".
Mr O'Connell has nominated, as part of his choice of "personal possessions" two motor vehicles owned by Dr Mayo.
Dr Mayo used both of those motor vehicles for personal, rather than commercial, purpose. Dr Mayo included the cars ("cars x 2") in a document that he created which he described as "Household Inventory".
The Executor's view is that in these circumstances, and having regard to the ordinary meaning of the expression "personal possessions", it should be concluded that Dr Mayo intended that Mr O'Connell might choose one or both of the motor vehicles as part of the choice granted to him under the will.
In Lowe v Lowe [2015] NSWSC 48, Brereton J concluded that "personal effects" were physical chattels having a personal connection with the testator.
Mr Evans, who appeared for the Executor, drew my attention to other authorities in which the expression "personal belongings" and similar expressions had been held to include a car (or equivalent) (for example In re McLuckie, Perpetual Executors and Trustees Association of Australia, Ltd v Honeycombe [1943] VLR 137).
In those circumstances, in my opinion, it is open to the Executor to form the view that the motor vehicles were amongst Dr Mayo's personal possessions and that Mr O'Connell is entitled to choose them as part of the choice open to him under the will.
The next issue arises because a number of the items chosen by Mr O'Connell comprise a set; for example of books, toy soldiers and gold coins.
The Executor seeks the Court's advice as to whether the Executor should treat those items as one, or a number of "personal possessions".
I do not consider it appropriate to give the Executor advice about the individual items nominated by Mr O'Connell.
It is sufficient, in my opinion, for me to advise the Executor that, in my opinion, he is justified as treating as a single personal possession any grouping of things which, in his opinion, form an obvious set or an obvious sub-set of a set.
[4]
Dr Mayo's direction of 3 June 2011
On 3 June 2011, Dr Mayo wrote a letter to Mr O'Connell, and to the solicitor who was the executor of his then will. The letter was headed "Employment Contract Annual Bonus" and read:
"I direct my estate executor…as part of his duties to pay all my existing debts at time of passing, to wit, to pay Patrick O'CONNELL $50,000 (fifty thousand dollars) as a bonus (in addition to normal pay already paid him by me). This is not a bequest but a debt to be paid in addition to bequests to legacies." [Emphasis in original]
The Executor's view is that that letter constituted an acknowledgment by Dr Mayo of $50,000 owing by Dr Mayo to Mr O'Connell and a direction by Dr Mayo that the debt be paid at his death ("at time of passing").
In my opinion, the Executor is justified in forming that opinion and acting accordingly.
[5]
American Society for Environmental Education
At the date of his death, Dr Mayo held a share portfolio (valued at some $51,000) and cash (of some $8,000) under the name "American Society for Environmental Education" (which I will refer to as the "American Society"). I will refer to the shares and cash as "the Assets".
It appears that Dr Mayo held the Assets as trustee for the American Society.
The by-laws of the American Society provided as follows:
"The purpose of the Society shall be to foster and promote environmental education in the nation's schools and colleges and amongst the corporate community and general public. The ASEE is a non-profit, non-advocacy organization and does not lobby politically on any issue. Through the educational process it encourages public and school awareness and objective understanding of environmental issues. Other purposes of this corporation include, but are not limited to, preservation of land and buildings for educational, environmental, scientific, historic, and other purposes, through the acquisition of real property and the granting of conservation easements." [Emphasis in original]
The Executor seeks the Court's advice as to whether he would be justified in his administration of Dr Mayo's estate by realising the Assets and adding the proceeds to the residue of the estate, or alternatively paying them "to a charity with similar objects".
Assuming there is a trust, and that it is a charitable trust, this component of the proceedings comprises "charitable trust proceedings" for the purpose of s 6 of the Charitable Trusts Act 1993 (NSW) as they concern the administration of that charitable trust.
Accordingly, the consent of the Attorney General of NSW, as the protector of charities, was required for the continuation of the proceedings. That consent has been given and the Attorney appears before me, by counsel, Mr El-Hage, on this part of the application. By consent, the Attorney was joined as a defendant to the proceedings.
As Mr Evans and Mr El-Hage pointed out, there are many factual uncertainties as to this aspect of the matter. The facts are by no means complete. However, the following appears to be the relevant background.
Dr Mayo was the founder and long time president of the American Society, which was established in around 1977.
The American Society was a non-profit corporation, registered in New Hampshire. It had tax exempt status under United States federal law. It was also registered in Australia as a foreign corporation until June 1996.
Dr Mayo was also the founder and president of another organisation "Australian Society for Environmental Education" which I will refer to as the "Australian Society". It appears that the Australian Society was established by Dr Mayo in November 1994.
Documents before the Court suggest that both the Australian Society and American Society passed various resolutions. In my opinion, the Executor would be justified in concluding that the resolutions were in fact passed and, so far as concerns the American Society, were within power and capable of binding the American Society.
On 28 April 1997, the "Management Committee" of the Australian Society appears to have passed a resolution to the effect that it would be responsible for Dr Mayo's salary of "$100,000 US" (which was evidently otherwise payable by the American Society), together with interest.
About a year later, on 23 August 1998, the Australian Society executed a document acknowledging that it was indebted to Dr Mayo for $400,000 for his salary.
On 6 July 2001, the American Society passed the following resolution:
"The International headquarters of American Society for Environmental Education will remain at Avalon as long as Dr Mayo continues as chief executive. If he dies or resigns, headquarters will move back to San Francisco and Mr Wedvick will call for new election, after receiving all records from Avalon under direction of Messrs Ross and Calleia.
In the above event, all assets of the ASEE in both countries will be sold and the proceeds used to pay debt accumulated to Dr Mayo's estate, c/o ANZ Bank, Sydney, less a sum of up to A$25,000 for the Avalon office and San Francisco office to pay for the transition including shipping costs, administrative expense, accountancy costs, etc. Records of US debt to Dr Mayo on file in Avalon."
On the same day the American Society noted that the Australian Society had been "terminated".
Five years later, on 21 July 2006, the "Executive Committee" of the American Society resolved that, upon Dr Mayo's death, "any remaining…Australian assets" were to be transferred to Dr Mayo's estate "in lieu of unpaid US Salary".
[6]
Is there a charitable trust?
In these circumstances, I am satisfied that it would be open to the Executor to conclude that Dr Mayo held the assets to which I have referred as trustee for the American Society.
I am also satisfied it would be open to the Executor to conclude that that trust was a charitable trust and that the assets are impressed with a charitable trust.
The object of the American Society was to promote "environmental education in the nation's schools and colleges and amongst the corporate community and general public".
In my opinion the Executor would be justified in concluding that the trust thus falls within the second and fourth categories identified by Lord MacNaghten in Commissioners for Special Purposes of the Income Tax v Pemsel [1891] AC 531 at 583, namely a trust "for the advancement of education" or "for other purposes beneficial to the community".
[7]
What is to be done with the assets?
Mr El-Hage submitted that, assuming the regularity of the 6 July 2001 resolutions, it would be open to the Court to find that there was a debt owed by the charitable trust to Dr Mayo's estate, on account of unpaid salary.
I agree, and consistently with that submission, I am satisfied that the Executor would be justified in concluding that, at his death, Dr Mayo was a creditor of the American Society on account of his unpaid salary.
The amount of the Assets is very much less than the amount that the Australian Society (which, at that stage, had assumed responsibility for the salary) acknowledged, in 1998, was owing to Dr Mayo for salary.
There is no material to show whether or not Dr Mayo's "unpaid salary" was ever paid by the American Society.
However, on 21 July 2006, the American Society acknowledged that there was unpaid salary and resolved that any remaining Australian assets should be paid to the estate "in lieu" of such salary.
Although the facts are by no means clear, in my opinion the Executor would be justified in concluding that the salary remained unpaid at Dr Mayo's death, that the amount owing exceeded the value of the Assets and that the proceeds of sale of the Assets, save for $25,000, should be dealt with in accordance with the 21 July 2006 resolution and thus be paid to Dr Mayo's estate as part of residue.
[8]
The $25,000
The 6 July 2001 resolution provided that upon Dr Mayo's death $25,000 was to be set aside to, in effect, cover the costs of the headquarters of the American Society moving from Sydney "back to San Francisco".
The Executor has formed the view that it is most likely that the American Society no longer exists. It appears to have ceased effective operation in July 2006. There is no evidence available to the Executor of any operation of the American Society since then. On 11 August 2016 the Assistant Director - Charitable Trusts Unit, from the Department of Attorney General (New Hampshire) sent an email to the Executor stating that the American Society's corporate charter had been dissolved by the New Hampshire Secretary of State on an unknown date.
In those circumstances, my opinion is that the Executor is justified in concluding that the American Society no longer exists (although, as Mr Evans submitted, the ongoing investment in the Assets, in the name of the American Society, suggests that the charitable trust endures).
As the American Society no longer exists, there can be no question of it now moving "back to San Francisco" as contemplated by the resolution of 6 July 2001.
Accordingly, the $25,000 cannot be applied for the purpose contemplated by that resolution.
In those circumstances, as Mr El-Hage submitted, it would follow that the $25,000 is now capable of being administered by way of a cy-près scheme under s 9 of the Charitable Trusts Act as there is no longer a "suitable and effective method" of using that part of the trust property as comprises the $25,000.
In those circumstances, the appropriate course is for the Executor to now either approach the Court or (bearing in mind the relatively modest amount in question), the Attorney, in exercise of her powers under ss 12 and 13 of the Charitable Trusts Act.
[9]
Conclusion
I will now invite the Executor to consider what orders should be made to give effect to these reasons and to otherwise facilitate administration by him of the estate.
[10]
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Decision last updated: 14 December 2016
Parties
Applicant/Plaintiff:
Commissioners for Special Purposes of the Income Tax