Cram Foundation v Corbett-Jones & anor - [2006] NSWSC 495 - NSWSC 2005 case summary — Zoe

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Cram Foundation v Corbett-Jones & anor

[2006] NSWSC 495

Supreme Court of NSW|2005-10-24|Before: Brereton J, Waddell CJ

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Court

Supreme Court of NSW

Decision date

2005-10-24

Before

Brereton J, Waddell CJ

Source

Original judgment source is linked above.

Judgment (95 paragraphs)

[1]

CITATION : Cram Foundation v Corbett-Jones & anor [2006] NSWSC 495

[2]

DECISION : Order appointing representative of next-of-kin pursuant to UCPR, r 7.6. Declarations that gift in will is valid charitable gift, that plaintiff is successor of original trustee and holds on trusts of will, that gift over is void and that original purposes of trust are no longer suitable and effective method of using trust property. Order for implementation of cy pres scheme.

[3]

CATCHWORDS : TRUSTS - Charitable trusts - Procedure - difficulty in ascertaining and finding next-of-kin - whether representative should be appointed - Trustees - corporation assumes charitable functions and assets and liabilities of unincorporated society - whether corporation is successor of unincorporated society - Charitable gifts - gift for charitable purposes "as a memorial" to testator's family - whether charitable - Perpetuities - gift to charity with gift over on failure of charitable purpose - whether gift over void for perpetuity - whether at common law grantor's possibility of reverter upon termination of determinable fee is affected by rule against perpetuities - Schemes - Cy pres - for supervening impossibility - where original purposes have ceased to provide a suitable and effective method of using the trust property, having regard to the spirit of the trust - supervening failure of charitable purpose in context of void gift over - where particular charitable intent only -- general charitable intention not required - absolute gift required - distinction between limited or determinable interest and conditional interest - where gift not one for a limited period or until the occurrence of a particular event, but absolute gift to charity subject to a gift over on void condition subsequent - gift takes effect unconditionally and absolutely - cy pres is available - scheme approved.

[5]

ANZ Executors & Trustee Co Ltd v Trustees for the Presbyterian Church of Australia (NSWSC, Waddell CJ in Eq, 12 June 1990) Attorney General for New South Wales v Fulham [2002] NSWSC 629 Attorney-General for Northern Ireland v Forde [1982] NI 1 Attorney-General v Cummins (1906) 1 IR 406n Attorney-General v Pyle (1738) 1 Atk 435 Bath and Wells Diocesan Board of Finance v Jenkinson [2001] WTLR 353 Cabouche v Ramsay (1993) 119 ALR 215 Dean v Dean [1891] 3 Ch 150 Gibson v South American Stores (Gath & Chaves) Ltd [1950] Ch 177 Hancock v Watson [1902] AC 14 Hixon v Campbell (1924) 24 SR(NSW) 436 Hopper v Corporation of Liverpool (1944) 88 Sol Jo 213 Mary Portington's Case (1613) 10 CoRep 35b Matthew Manning's Case (1609) 8 CoRep 94b, 77 ER 618 Newis v Lark (1571) 2 Plowd 403 Pearks v Mosely (1880) 5 App Cas 714 Perpetual Trustee Co Ltd v Gilmour [1977] 2 NSWLR 716 Perpetual Trustee Co v Williams (1913) 13 SR (NSW) 209 Re Baillie; Faithful v Sydney Industrial Blind Institution (1907) 7 SR(NSW) 265 Re Bawden's Settlement, Besant v Board of Governors of London Hospital [1954] 1 WLR 33n Re Blunt's Trusts [1904] 2 Ch 767 Re Bowen; Lloyd Phillips v Davis [1893] 2 Ch 491 Re Chardon [1928] Ch 464 Re Cooper's Conveyance Trusts, Crewsdon v Bagot [1956] 1 WLR 1096 Re Da Costa; Clarke v Church of England Collegiate School of St Peter [1912] 1 Ch 337 Re Essex County Roman Catholic Separate School Board and Antaya (1977) 80 DLR (3d) 405 Re Evan's Contract [1920] 2 Ch 469 CASES CITED : Re Flynn [1975] VR 633 Re Gage [1898] 1 Ch 498 Re Hanbey's Will Trusts [1956] Ch 264 Re Hardy, Nelson v Attorney-General [1933] NI 150 Re King's Trusts (1892) 29 LRIr 401 Re Lepton's Charity [1972] Ch 276 Re Lysaght Decd, Hill v The Royal College of Surgeons [1966] Ch 191 Re Moore (1888) 39 Ch 116 Re North Gower Township Public School Board and Todd (1968) 65 DLR (2d) 421 Re Peel's Release [1921] 2 Ch 218 Re Randell, Randell v Dixon (1888) 38 ChD 213 Re Sharp's Settlement Trusts [1973] Ch 331 Re Slevin, Slevin v Hepburn [1891] 2 Ch 236 Re Smith [1967] VR 341 Re Tacon [1958] Ch 447 Re Talbot; Jubb v Sheard [1933] 1 Ch 825 Re the Trustees of Hollis' Hospital and Hague's Contract [1899] 2 Ch 540 Re Tilbury West Public School Board and Hastie (1966) 55 DLR (2d) 407 Re Tyrie (No 1) [1972] VR 168 Re Tyrrell's Estate (1907) 1 IR 292 Re Ulverston and District New Hospital Building Trusts [1956] Ch 622 Re Wilmott, Uniting Church in Australia Property Trust (Vic) v Royal Victorian Institute for the Blind [1999] VSC 485 Re Wright [1954] Ch 347 Re Wright, Pillgrem v Attorney-General [1951] Tas SR 13 Siemenski v Brooks Nominees [1990] Tas SR 236 Wainwright v Miller [1897] 2 Ch 255 Williams v Attorney-General (1948) 48 SR(NSW) 505 Williams v The Perpetual Trustee Co Ltd (1913) 17 CLR 469 Zapletal v Wright [1957] Tas SR 211

[24]

14 The proposed scheme, to be called "the Martha Ann Cram Trust for assisting disabled persons in the Illawarra District" (or, in short form, "The Cram Trust"), of which the Foundation is to be the trustee, would empower the Foundation to sell, mortgage, lease or otherwise dispose of 360-362 Crown Street, and apply the net proceeds, to the extent that they are referable to 362 Crown Street, after costs, in payment into a separate trust account, to be invested and applied in providing accommodation, goods and other services to disabled persons in the Illawarra District, with power to gradually expend the capital sum even if the eventual result would be to utilise all the funds and bring the Trust to an end. Should a representative be appointed? 15 The deceased appears to have been born in 1880, the seventh of eleven children of James Cram (who died in 1919) and his second wife Alice (who died in 1914). There were also seven children of James Cram's first marriage to Sarah (who died in 1866). The Foundation's Chief Executive Officer has made inquiries, and has identified five descendants of the siblings of the deceased, including Ms Corbett-Jones. 16 Uniform Civil Procedure Rules 2005 (NSW) , r 7.6 provides that, in relation to proceedings concerning property the subject of a trust, where a class of persons may be interested in the proceedings, the court may appoint one or more of those persons to represent any one or more of them, but only if (a) the class or a member of it cannot, or cannot readily, be ascertained, or though ascertained, cannot be found; or (b) though the class or a member has been ascertained and found, it is expedient for the purpose of saving expense (having regard to all of the circumstances, including the amount at stake and the degree of difficulty of the issues) for a representative to be appointed for one or more of them. 17 The large number of siblings and half-siblings of the deceased inhibits the economical and expeditious ascertainment of her next-of-kin. I am satisfied that the class constituted by the deceased's next-of-kin cannot be ascertained and found readily, if at all, although some members of it can be; and although that some members of the class have been ascertained and found, I am also satisfied, notwithstanding that there is a substantial amount at stake and that the issues are not without difficulty, that it is expedient for a representative of the class to be appointed for the purpose of saving expense, having regard to the time which has passed since the death of the deceased, that the issue was considered but not litigated as long ago as 1965 (when counsel's advice on it was sought and obtained), and that the Attorney General has presented the arguments which might otherwise have been advanced by the next-of-kin. 18 Accordingly I am satisfied that it is appropriate to appoint Ms Corbett-Jones to represent the next-of-kin, pursuant to UCPR, r 7.6. Was the gift a valid charitable gift? 19 The bequest of the residence "Froam" at 362 Crown Street was to the trustees of the Society, to be used "as a Home or Hospital for Crippled Children as a Memorial to the Cram family". 20 The purpose of a home or hospital for crippled children is plainly charitable. While a gift for the purpose of a family memorial is not of itself charitable, the dominant aspect of this gift is the purpose of use as a home or hospital for crippled children. It is an incident of this that it serve as a memorial, but the substance of the gift's object is charitable. The circumstance that as an incident the property would stand as a memorial to the Cram family does not deprive it of its charitable character and purpose. 21 In any event, even if the reference to a memorial would otherwise have denied charitable status to the gift, the charitable part of the gift would be saved by Charitable Trusts Act 1993 (NSW), s 23. 22 Accordingly, the gift of 362 Crown Street was a valid charitable gift.

[32]

32 First, the view that the rule against perpetuities does not apply to the grantor's possibility of reverter is sound in principle. The rule against perpetuities is concerned with the creation, and not the duration or termination, of interests, and does not invalidate a limitation which provides that an interest shall or may cease at a future date outside the perpetuity period [Wainwright v Miller [1897] 2 Ch 255, esp 261; see also Re Gage [1898] 1 Ch 498]. If a determinable fee terminates, then there will be an interest of which the settlor has not disposed. Any beneficial interest of which a settlor fails to dispose remains in the settlor under a resulting trust, ab initio, even if it is uncertain when, if ever, it will take effect [Charles Harpum, Malcolm Grant and Stuart Bridge, The Law of Real Property, 6th ed, 2000, [7-090]-[7-091]]. 33 Secondly, although several cases suggest that the perpetuity rule is applicable to the grantor's possibility of reverter, on examination their reasoning is not compelling. 34 In the Hollis' Hospital case, Byrne J recorded (at 549) a concession in argument that if the clause in question ought to be construed as a limitation or as creating a shifting use it would be void as infringing the rule against perpetuities, and held (at 555) that, taking effect as a condition, it was void for the same reason. However, as Isaacs J pointed out in Williams v Perpetual Trustee (at 495), while portion of the land conveyed was the legal property of Thomas Hollis, Snr and other grantors, the right of reverter was limited to the heirs of Thomas Hollis alone; thus this was not a true case of reverter to the grantor, as if on resulting trust, upon termination of a determinable fee; it was in substance a gift over. In Re Smith [1967] VR 341, Menhennitt J (at 346.26-29) described the concession referred to by Byrne J as a "decision", but as the context was a condition for re-entry and not a determinable grant, what his Honour said was obiter. 35 In Hopper v Corporation of Liverpool (1944) 88 Sol Jo 213, Bennett V-C expressed the opinion that if the rule against perpetuities applied to the possibility of reverter on a fee subject to a condition which may or may not happen, it must equally apply to the possibility of reverter on a fee limited to determine on an event which may or may not happen. But in my respectful opinion, this overlooks the circumstance that the perpetuity rule applies to the creation, not termination, of interests, and leaves unexplained what happens to the fee simple upon termination of a determinable fee. 36 In Siemenski v Brooks Nominees [1990] Tas SR 236, Zeeman J, with reference to Hopper v Corporation of Liverpool, the Hollis' Hospital case and Re Smith, said that though Hollis' Hospital and Hopper had been much criticised, he was persuaded he should follow Hollis' Hospital, concluding that "the respondent holds the fee simple free from any possible re-entry or reverter" - which reflects that his Honour approached the case as if it made no difference whether the specified event was a condition or a limitation, and did not consider whether it made a difference, save to observe that the view expressed in Morris and Leach on the Rule against Perpetuities, 2nd edn, (at 213) - that any decision that the rule against perpetuities applied was practically equivalent to a decision that determinable fees simple and fees simple subject to a right of entry for condition broken did not exist, or that there was no difference between them and a fee simple absolute - may be too extreme as, for example, an executory limitation on failure of issue on the part of a grantee would not offend the rule. That exception itself illustrates that there may be a difference between failure of an executory limitation, and fulfilment of a condition.

[44]

48 It might be suggested that, in the light of the words of the proviso in clause 3 of the Will, administration cy pres would be contrary to the testator's intention. Does the gift over, though void, indirectly produce this result? General charitable intention not required 49 The starting point is that in the context of supervening (as distinct from initial) impossibility or impracticability, the availability of cy pres does not depend on a "general charitable intention". The principle that once property is effectively dedicated to charity, whether in pursuance of a general or particular charitable intent, the next-of-kin and residuary legatees are forever excluded, and no question of subsequent lapse can affect the matter so far as they are concerned, is well-established [Re Slevin, Slevin v Hepburn [1891] 2 Ch 236; Re Wright [1954] Ch 347, 362-3 (Romer LJ), 364 (Denning LJ); Re Ulverston and District New Hospital Building Trusts [1956] Ch 622, 636 (Jenkins LJ); Re Tacon [1958] Ch 447; Re Lysaght, Hill v The Royal College of Surgeons [1966] Ch 191, 208 (Buckley J)]. 50 While Charitable Trusts Act, s 10, reiterates the general law requirement that trust property cannot be applied cy pres unless it is given with a general charitable intention, that is so only in a case of initial impossibility. This is because, where it is initially impossible to implement the terms of the trust, no charitable trust has come into existence unless there is a general charitable intention. But where a charitable trust has been validly created, and afterwards implementation has become impossible (or, under the Act, ceased to be suitable and effective) as a result of supervening circumstances, a general charitable intention is not required: because the property has already been given to charity, and cannot be taken back [Hixon v Campbell (1924) 24 SR(NSW) 436, 441-442 (Maughan AJ); Williams v Attorney-General (1948) 48 SR(NSW) 505, 508 (Sugerman J); Re Wright, 362-3 (Romer LJ); Re Ulverston New Hospital Building Trusts, 635-7 (Jenkins LJ); Re Lysaght, 208 (Buckley J); ANZ Executors & Trustee Co Ltd v Trustees for the Presbyterian Church of Australia (NSWSC, Waddell CJ in Eq, 12 June 1990), pp 19-23; Attorney General for New South Wales v Fulham, [21]-[22] (Bryson J)]. 51 In this case, there was no question of initial impossibility or impracticability of the charitable gift contained in clause 3 of the Will. To the contrary, for many years, the property was used for the purposes specified in the gift. The impracticability or impossibility that has arisen is a supervening one, after the initially valid charitable gift had taken effect, as a result of changes in social policy. In those circumstances, it is unnecessary to search for any general charitable intention as a precondition to the availability of cy pres. Absolute gift required

[61]

63 In Re Randell, Randell v Dixon (1888) 38 Ch D 213, the testatrix had bequeathed £14,000 on trust to pay the income to the incumbent for the time being of a certain church "so long as" he should permit the sittings to be occupied free, and there was a direction that, in case any such incumbent should make any claim for and receive payment in respect of the sittings in the church, thenceforth the trust moneys should fall into and be dealt with as part of her residuary personal estate. Counsel for the incumbent argued that the testatrix had shown an intention to devote the sum to charitable purposes, and that if the particular purpose ever came to an end, a scheme would be settled for the application of the fund cy pres, but North J said (at 218): On the construction of the will, it is a charity for a particular limited purpose, and nothing beyond that is declared; as soon as that particular purpose comes to an end, the fund which was subjected to that particular trust falls into the residue of the estate; and it would do so just as much if there was no such limitation as this in the will, as it does when the limitation exists. 64 The opposite result was reached in Re Bowen, Lloyd Phillips v Davis [1893] 2 Ch 491, which involved bequests two sums of money to trustees upon trust to establish schools in certain parishes and to continue the same schools "for ever thereafter", with a declaration that if the Government should establish a general system of education, the trusts should cease and determine and the amounts of the bequests be dealt with as residue. Re Randell was referred to as showing that property could be given to charity for a limited period, however long, in which case the interest undisposed of, though it could not be the subject of a direct executory gift, would be left to devolve in accordance with law. Stirling J stated the issue (at 495-496) as follows: "The question which I have to decide, therefore, appears to me to reduce itself to one of the construction of the testator's will - i.e., whether the testator has given the property to charity, in perpetuity, subject to an executory gift in favour of the residuary legatee, or whether he has given it for a limited period, leaving the undisposed of interest to fall into residue". His Lordship concluded that on the true construction of the will there was an immediate disposition in favour of charity in perpetuity, and not for any shorter period, followed by a gift over if at any time the Government should establish a general system of education, under which the residuary legatees took a future interest conditional on an event which need not necessarily occur within perpetuity limits, so that the gift over failed.

[66]

68 In Attorney-General for Northern Ireland v Forde [1932] NI 1, the testator gave a rent-charge to trustees for the upkeep of houses for the accommodation of, and for the maintenance of, widows of persons who had resided on his estates. Not all of the fund was required for those purposes. An application for administration cy pres of the trusts by the Attorney General failed, principally because the trust was not charitable. However, Andrews LJ (at 30), in agreeing with the Attorney General's submission that this was not a case of initial failure, but one in which a perpetual trust had come into actual operation - in which case (were it charitable) it could never cease - pointed out that except in the case of a limited (or determinable) gift, a gift of property to charity, once it took effect, remained forever charitable regardless of whether or not there was a general charitable intention: In my opinion once there is established and in operation a perpetual charitable trust, then the trust property remains always charitable, and funds subject to such charity cannot revert or result to the donor or his representatives. To hold otherwise would in my opinion to be to express our disapproval of In re Slevin, Slevin v Hepburn [1891] 2 Ch 236, Peel's Release [1921] 2 Ch 218, and In re Monk, Giffen v Wedd [1927] 2 Ch 197. Where a charity is in existence at the death of a testator the legacy, as Kay LJ puts it, by that very fact becomes impressed with charity which the residuary legatee cannot get rid of. As in the case of a legacy to an individual, lapse can only occur by failure of the object in the lifetime of the testator. A legacy given on a perpetual trust becomes the property of the charity; and on its ceasing to exist, tis property, quite independently of general charitable intention, falls to be administered by the Crown. No doubt, if, as in In re Randell and In re Blunt's Trusts , the gift to the charity was stated to be for a term or a limited period only, the principle which I have stated would not apply, for a reversion would be left in the donor.

[73]

75 Reference has already been made to In Re Cooper's Conveyance Trusts, Crewsdon v Bagot, which concerned a conveyance to trustees their heirs and assigns "forever" in trust for the purposes of an orphan girls home and upon failure of that trust to the person or persons entitled to a particular mansion house. The gift over to the person entitled to the mansion house was void for perpetuity; the question was whether the trust property ought to be applied cy pres, or resulted to the trust of the donor. Upjohn J, following Gibson, held that although the gift over failed for perpetuity, it indicated that there was not an "out-and-out gift to charity" albeit to a particular charity or purpose (which he said was not inaptly described as a general charitable intention), but a gift which contemplated the possibility of failure and which was to be used only for a limited time or purpose. His Lordship expressed his conclusion in the following terms (at 1104): What, however, seems to me clear is that the donor desired the charity to continue only while it could be carried on as an orphan girls' home by the committee of management and subject to the general supervision of general meetings of subscribers as detailed in the schedule. When that particular charity came to an end, in my judgment, she evinced the clearest possible intention that the property was to go over to the non-charitable purpose mentioned in her will. She has said quite clearly that, on failure of the trusts, to be evidenced by these resolutions, then, "subject to the foregoing trust and to all acts and things done by virtue thereof," it is to be held upon the new trust, and she ends up her direction upon this matter by saying that the property is to be conveyed "accordingly and upon or for no other trust or purpose whatsoever." True, those concluding words have no dispositive effect, and in that sense are otiose, but they do confirm the view which independently thereof I should have formed, that the donor in this case is concerned and concerned only with an orphanage carried on upon the particular property by the particular bodies she has appointed in the schedule to carry it on. The moment that particular purpose comes to an end, the gift is to go over, and the donor has again made that intention as to the land and buildings abundantly clear by the language she has employed in rule 39.

[75]

77 In Bath and Wells Diocesan Board of Finance v Jenkinson, two deeds provided respectively for the transfer of two lots upon trust for schools, with a proviso that if the relevant lot should cease to be used for the purposes of a school (for one and two years respectively), it should immediately revert in the settlors, as if there had been no such gift. It was common ground that the provisos for reverter were void for perpetuity. The rival contentions were, by the Attorney General for charity, that the deeds were intended to create an absolute and perpetual gift to charity with a gift over on the failure of the charitable purpose prescribed, and by the heirs of the grantors, that what was intended for a gift to charity for a limited period defined by the period during which the charitable purpose was capable of subsisting, which period having terminated there was a resulting trust for the grantors. Evans-Lombe J adopted Upjohn J's statement of the test and the approach, but noted that the outcome of Re Cooper was to be contrasted with Re Peel, and thought the two cases difficult to reconcile. His Lordship concluded that the deeds evinced an intention to transfer the land in trust in perpetuity for the purposes of a school, subject only to a condition for defeasance in the event of the trusts failing; the provisos for reverter being void for perpetuity the result was, as in Re Peel, that the charitable trusts were absolute. At [74], Evans-Lombe J said: It seems to me to be clear that the words used in the operative part of the 1849 Deed evince a clear intention by the grantors in that deed to transfer the Red Land upon trust in perpetuity for the purposes of a school subject only to a clause of defeasance in the event of the trusts upon which those trustees were to hold the land in question failing. The words used in the 1852 Deed are less emphatic, but it seems to me that the grantors under that deed have evinced a similar intention. Both provisos for reverter being, by common consent, void for remoteness, the result, in my judgment, is similar to that in Re Peel's release , namely, that the trustees under both deeds hold their possessory title to the Red Land and the Blue Land for charity upon the trusts of the two deeds but not upon trust for the successors of the grantors under those deeds or those now presently entitled under the trusts of the will of the first Duke.

[86]

89 In Re Cooper's Conveyance Trust, the grant was found to be of a limited or determinable gift, despite the initial conveyance being expressed to be to "heirs and assigns forever", despite the trusts not being expressed to be limited in time, despite the testator's intention not being that upon failure the trust property revert to his estate but that it be the subject of a (non-charitable) gift over, and despite his Lordship's observation that, but for the gift over, it would hardly have been suggested that on failure of the original gift there was a resulting trust. Thus the void gift over was used to illuminate the testator's intention, so as to justify a conclusion, which would not otherwise have been reached, that the testator intended a gift to charity only for a limited time and purpose, and thus to leave an interest undisposed of in the testator's estate. Yet again, the reasoning of Upjohn J gives weight to the absence of a general charitable intent, and significance to the particular charitable intent of the donor. Although his Lordship acknowledged that Re Slevin and Re Wright established that, in the case of an initial out-and-out or perpetual gift to charity - even a particular charity or charitable purpose - it was (emphasis added) "in a sense irrelevant to consider whether there is a general charitable intention" if it failed after the gift had vested, his Lordship emphasised that this exception to the requirement for general charitable intention arose in respect of "property given absolutely and perpetually to charity". The effect of applying Re Cooper would be indirectly to require, if cy pres were to be available, if not a general charitable intention, then at least the absence of any attempt to provide for the possibility that the testator's particular charitable intention might fail; or, as Davies has put it, that although general charitable intent is not normally required for cy pres on supervening failure, it is where there is a purported gift over [JD Davies, "Evading Charity Reform" (1961) 25 Conv (NS) 56, 72-3].

Cram Foundation v Corbett-Jones & anor

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