First Plaintiff Second Plaintiff v First Defendant Second Defendant

Abraham Harris executed will: will provided for a trust, the corpus comprised real estate situated at 261 William Street, Melbourne, and the will provided that the net annual rents be paid in equal shares to the treasurers of three Jewish charities, namely, Melbourne Jewish Philanthropic Society, the Melbourne Jewish Orphan and Neglected Children's Aid Society, and the Melbourne Branch of the Anglo-Jewish Association, such payments to be applied for the purposes of each of the said charities. The will appointed three men as Trustees, namely, Rabbi Jacob Lenzer and the testator's sons, Isidore Harris and Alexander Harris.

Probate of the will granted to three named executors who were also the trustees of the Trust.

Widow of Abraham Harris dies. Under the will, widow had been given deceased's personal effects, household items etc absolutely and a life interest in the residuary estate.

One of the trustees of the will, Alexander Harris, dies.

Surviving two trustees execute a deed and retire as trustees and appoint the Trustees Executors and Agency Company Limited and John Grice as trustees in their place.

The beneficiary known as Melbourne Jewish Orphan and Neglected Children's Aid Society changed its name to Melbourne Jewish Orphan and Children's Aid Society (first plaintiff).

First defendant trustee company became successor in law to the Trustees Executors and Agency Company Limited by reason of s.7(2) of the ANZ Executors and Trustee Company Limited Act 1983, and became the trustee of the trust estate.

The Melbourne Jewish Philanthropic Society and the Montefiore Homes for the Aged resolved to apply for incorporation under the Associations Incorporations Act 1981 under the name of Montefiore Homes Inc.

Melbourne Jewish Orphan and Children's Aid Society incorporated under the provisions of the Associations Incorporation Act 1981.

Mr Justice Beach ordered that because the Melbourne branch of the Anglo-Jewish Association had ceased to exist, the income payable to that association be paid cy-pres in equal shares to the Montefiore Homes for the Aged Inc and the Melbourne Jewish Orphan and Children Aid Society Inc.

Montefiore Homes for the Aged Inc and Jewish Community Services Inc amalgamated and formed the corporate body known as Jewish Care (Victoria) Inc. Pursuant to the provisions of the Jewish Care (Victoria) Act 2001, Jewish Care is entitled to receive the benefits previously received by Montefiore Homes pursuant to the Abraham Harris Trust.

Ashley J ordered that the Trustee have the power to sell the property situated at 261 William Street, Melbourne.

The said property was sold for $1,510,000 by the Trustee as registered proprietor. The net proceeds have been invested.

7 Ashley J did not give reasons for the orders he made authorising the sale of the property. The evidence placed before me leads to the conclusion that the reason for the application was that the property was a wasting asset producing fairly insignificant income, and that in all the circumstances it was more appropriate to sell the property, obtain the net proceeds and invest them.

8 The application was made pursuant to s.63A of the Trustee Act 1958, which gives power to the Court to order variation of a trust. Section 63 empowers the Court to make an order, inter alia, for the sale of trust property.

9 There is some dispute as to who suggested the sale of the property. This was the subject of affidavit evidence and raised a number of factual issues. A committee member of the Children's Aid Society, Mr Trevor Cohen, has sworn an affidavit in which he states that it was the beneficiaries who suggested that the sale should take place and the Trustee agreed, whereas it is the contention of the Trustee that it put it forward as a more appropriate way of preserving the value of the corpus of the trust and that this was agreed to by the beneficiaries.

10 The origins of the Children's Aid Society can be traced back to 1882, when a number of citizens of the Jewish faith agreed to establish a charitable organisation to raise funds to subsidise foster care for Jewish children who were in custody under the care of the Colony of Victoria. At the dates of the will and the death, the Children's Aid Society was an unincorporated association. It was incorporated in 1993. It provides funds to families and underprivileged children through existing Jewish communal organisations. It derives its funds from donations and bequests, as well as interest and rental income from investments. In the year 2004 it distributed $389,000 in grants. It has a committee of management but does not employ staff and is run by volunteers. In 1999, it established an opportunity shop in Glenhuntly, Victoria.

11 Mr Trevor Cohen states that if the organisation receives a half interest of the corpus of the Abraham Harris Trust, it intends to use it in furtherance of its charitable purposes. Included in this would be using funds to further develop and expand the opportunity shop. Another suggestion is that the moneys would be used to acquire a building to store the various items which are collected.

12 The basic facts set out above trace the history up until the time when Jewish Care became a beneficiary. If an order is made transferring half the corpus to Jewish Care, it is proposed to use the share to redevelop and refurbish a number of current residential aged care facilities. Mr Richard Zimmerman, a director of Jewish Care, in his affidavit states that the aged care facilities must be updated and redeveloped in order to comply with the Commonwealth Government standards, which come into operation on 1 January 2008. He states that the cost of the building redevelopments will total something in excess of $32M, and that half the corpus of the Trust will assist the proposed development. In addition, Jewish Care is the registered proprietor of a community residence situated in Caulfield and the home is currently undergoing a substantial redevelopment. The proceeds of the corpus would go towards assisting Jewish Care with the redevelopment.

13 On the sale of the William Street property, the net proceeds were $1,466,707.89. As at 12 December 2005, the trust funds totalled $1,954,892, and as at 23 November 2006, the value of the corpus was $2,238,382.05. The Trustee charged commission and fees of $22,089.59 for the financial year ending 30 June 2006. The two charities in that year each received a distribution of $44,764. The trust funds have increased by a substantial sum, as is apparent from the foregoing, and the first and second plaintiffs have received payments of approximately $170,000 since the property was sold. The fees of the Trustee have increased significantly. Apparently its fees in 2003 were $1,606.01, whereas in the two following financial years the fees were $16,180.31 and $18,083.88 respectively. Last financial year, the fees totalled $22,089.59.

14 Shortly prior to the hearing, the plaintiffs' solicitors filed a number of further affidavits. These raised issues which were of doubtful relevance and caused a short adjournment to enable the Trustee to file answering material. The Trustee filed an affidavit sworn by Noel Barry-Murphy, one of the managers employed by the Trustee. Unfortunately he was unable to access all of the Trustee's files.

15 The disputed evidence can be briefly summarised. In his affidavit sworn 29 November 2006, Trevor Cohen traced the history of the sale of the William Street property. According to his evidence, from the late 1990s there was discussion amongst the Board members of the Children's Aid Society concerning a sale, the principal concern being the lack of income that the property was generating. He stated that the Board of Jewish Care was also concerned, and that in November 2001 Jewish Care informed the Children's Society that it wished the property to be sold. Mr Cohen swore that the initiative to sell the property came from the two charitable bodies. He then traced the history of discussions had with representatives of the Trustee requesting that the property be sold.

16 By May-June 2002, the arrangements for the sale were in place and eventually an application was made to the Court by the Trustee. Ashley J made the order authorising the sale on 17 March 2003. The Trustee disputes that the initiative came from the two charities. In his affidavit, Mr Barry-Murphy traces the history of the events which occurred within the Trustee leading to the sale. The topic was raised on 23 December 1999 by a memorandum from the Trustee's in-house lawyer. It was suggested in the memorandum that it may be an opportune time to contact the beneficiaries to ascertain whether they might be interested in consenting to a sale. Nothing resulted from that memorandum and on 20 June 2001, another employee of the Trustee internally raised the question of selling the property.

17 Much of Mr Barry-Murphy's evidence concerned internal documents. Whilst they provide some history of what was taking place, it is impossible to say from his affidavit what discussions were taking place between the Trustee and any representatives of the charities. However, on 13 November 2002, the Trustee's solicitors wrote to the two charities stating that they had been instructed by the Trustee to proceed with an application seeking a power of sale of the William Street property. On 26 November 2002, solicitors acting for the charities stated that they would consent to the application. It is apparent the charities did not wish to be involved in the proceeding in order to save money, and the evidence is that they consented to the order being made but did not appear before Ashley J. Mr Barry-Murphy swore that the sale was not first raised by either of the charities. Mr Cohen stated it was.

18 Whether or not it was the charities that raised the question of selling the property with the Trustee, or the other way around, does not appear to me to be relevant to any issue in this proceeding. The Court is concerned with the will executed by the deceased in the year 1912, and the intention of the testator evidenced by the terms of the will and any surrounding circumstances which were relevant to that intention. The fact is that the William Street property was sold and the corpus was changed from real estate to personal property. But in my view, who raised the question of whether the sale should take place is not relevant to any issue. The fact is that all parties joined in the application to the Court for the sale of the real estate.

19 I asked Mr Miller of counsel, who appeared on behalf of the two charities, whether he wished to cross-examine the deponent, Mr Barry-Murphy, and he declined. Trustee's counsel, Mr Richard Boaden, did not seek to cross-examine Mr Cohen. I pointed out that it was impossible in those circumstances for the Court to resolve the disputed question of fact unless there was persuasive objective evidence such as documentary evidence passing between the parties at the relevant time, before the Court which bore on the issue. Counsel did not suggest there were any documents which would resolve the dispute. Accordingly, if it was relevant to any issue before the Court, the Court was not in a position to make a finding as to who suggested the sale.

The Will and Establishment of the Trust

20 The will was executed on 30 December 1912, in the presence of a solicitor and another. The form of the will suggests, as does the execution, that the will was prepared by a solicitor. It was a three page document.

21 After dealing with the formal parts, the deceased appointed Rabbi Lenzer and the former's sons, Isidore Harris and Alexander Harris, to be the executors and trustees of the will. The will then contained the following declaration:

"I DECLARE that all trusts and powers hereinafter reposed and invested in my trustees may be exercised by the survivors or survivor of them or the executors or administrators of such survivor or other (sic) the trustees or trustee for the time being of this my will."

22 The testator then provided a gift to his wife of personal and household effects absolutely, and bequeathed a sum of money to the Rabbi and sums of money to two Hebrew congregations and two hospitals. It is pertinent to observe that these were specific gifts of capital to four institutions whose purposes would have included charitable purposes. The will then provided:

"I DEVISE my heriditaments situate in William Street Melbourne in the said State unto my trustees UPON TRUST to pay the net annual rents thereof remaining after providing for rates taxes repairs and other outgoings in connection therewith to the treasurers for the time being of the following three institutions in equal shares that is to say the Melbourne Jewish Philanthropic Society, the Melbourne Jewish Orphan and Neglected Children's Aid Society and the Melbourne Branch of the Anglo-Jewish Association such payments to be applied to the purposes of the said institutions respectively."

(Emphases added).

23 This created the Trust and prescribed its purpose, namely, the purposes of known charitable institutions.

24 The testator then dealt with the residue of his real and personal estate, which he devised and bequeathed to his trustees upon trust to pay the net annual rents and income to his wife during her life. The will then provided:

"And from and after her decease In Trust for my said sons Isidore Harris and Alexander Harris in equal shares provided that neither of them the said Isadore Harris and Alexander Harris shall have been married contrary to the Jewish faith."

25 The will then went on to provide that if either son married contrary to the faith or predeceased the widow without leaving issue, then upon the death of the widow the whole of the residuary estate would go to the survivor of the sons. It then provided:

"AND I DECLARE that if any of my said sons shall predecease my said wife leaving a child or children born of a Jewish marriage then such child or children shall take that share of my said residuary estate which their father if living would have been entitled to under this my will AND I FURTHER DECLARE that if both of my said sons shall have been married contrary to the Jewish faith or if they shall both predecease my said wife without leaving issue then and in that case my trustees shall from and after the decease of my said wife stand possessed of my said residuary estate UPON TRUST to convert the same into money and to apply the proceeds in building Alms Houses in Jerusalem (Palestine) for the benefit of the Jewish poor of that City in such manner as they in their discretion shall deem most advantageous for the purpose."

26 The will authorised the trustees to let the real estate. It provided:

"I ALSO DECLARE that my trustees may let any hereditaments for such terms at such rents and subject to such covenants as they shall think fit and generally may manage my hereditaments in such manner as they shall think fit."

At the dates of the will and of the death, the testator owned eight pieces of real estate in this State.

27 The will provided what would happen if any trustee died, resided abroad, desired to retire or became incapable to act. It provided:

" ... then and in every such case it shall be lawful for the continuing trustees or trustee for the time being of this my will that if there be no continuing trustee then for the retiring or refusing trustees or trustee or the executors or administrators of the last acting trustee to appoint any other person or persons to be a trustee or trustees in the place of the trustee or trustees so dying or going to reside abroad or desiring to retire or refusing or becoming incapable to act as aforesaid with liberty upon any appointment to alter the number of trustees but so that immediately after each such appointment the number shall not be less than two And upon every such appointment the trust premises shall be so transferred to become vested in the new trustee or trustees either jointly with the continuing trustee or trustees or solely as the case may require And every such new trustee (as well before as after the trust premises shall have become vested in him) shall have all the powers and authorities of the trustee for whom he shall be substituted ... ".

28 The deceased died some two and a half months later. His real estate was valued at [sterling]8,486/8/4 and his personal estate within the jurisdiction was valued at [sterling]496/8/10.

29 The task in construing a deceased's will is to ascertain his intention. The primary source of the intention is the words used in the will, construed in context and in their every day meaning unless there is evidence that a word has, or words have, been used in a particular sense. By reason of s.22 of the Wills Act 1890, every will was to be construed "with reference to the real estate and personal estate comprised in it, to speak and take effect as if it had been executed immediately before the death of the testator, unless a contrary intention shall appear by the will."

30 The following are noted about the will:

(i) There was no express power given to the trustees to sell the real estate at William Street. The law in relation to a trustee's authority to sell the trust land is found in Halsbury's Laws of England (1st ed.) Vol. 4 at p.216 as follows:

"There is no positive rule of law absolutely prohibiting the sale of charity lands, but such a sale is rarely justifiable, the presumption being that persons who give lands to a charity intend that they should be devoted to that purpose in perpetuity.

Trustees of charities, apart from the restrictions imposed by the Charitable Trust Acts, have power at law to sell the charity estates upon their own initiative, whether expressly authorised by the instrument of foundation or not, if such sale is beneficial to the charity.

The transactions of the kind are dangerous both for the trustees and for the purchaser, the onus being on the trustees to show that they have not been guilty of a breach of trust, and upon the purchaser to show that the sale was beneficial to the charity and justified by the circumstances."

Vol. 4 was published in 1908. The reference to the Charitable Trust Acts is to the English Acts. However as was pointed out by Weigall A-J in In Re the Church of England Trust Corporation (Wangaratta),[1] the sale of charity lands can very rarely be justified, "for it is extremely improbable that such a course was ever contemplated or intended to be authorised by the donor." Weigall A-J referred with approval to a number of English cases which pre-dated the execution of the will in the present matter and which supported the statement of the law set out above.

(ii) The will expressly provided for the conversion of the residuary estate, which would include real estate, into money and to apply the proceeds in a certain way on the happening of certain events.

(iii) The will authorised the trustees to let any hereditaments, which would include the land in William Street, on such terms as they thought appropriate.

(iv) The testator expressly provided for the appointment of future trustees, which is some evidence of his intention as to the continuation of at least the trust in relation to the William Street property.

(v) The will contains specific gifts of money to institutions which were performing charitable works.

Principles of Law

31 The plaintiffs in bringing this proceeding are invoking the equitable jurisdiction of this Court with respect to the administration of trusts. The plaintiffs seek an order that the corpus be transferred to them as the two beneficiaries. They have called upon the Trustee to transfer the corpus, but it has declined to do so. Hence the proceeding.

32 There was some dispute between counsel as to the principles of law which apply to this present proceeding. Mr Miller, on behalf of the plaintiffs, submitted that the rule in Saunders v Vautier[2] applied to the Abraham Harris Trust, and that this gave the right to the plaintiffs as beneficiaries to demand the transfer of the corpus to them, thereby bringing the Trust to an end. It was submitted that the rule enabled the plaintiffs to obtain the trust corpus even though it would bring the Trust to an end and defeat the intentions of the testator. Mr Boaden, counsel for the Trustee, submitted that the correct principles to apply in the present case were those stated by the High Court in Congregational Union of New South Wales v Thistlethwayte and ors.[3] The principles stated by the High Court require this Court to consider the intention of the testator as to the continuance of the Trust, whereas the rule in Saunders v Vautier, if it applies, is not dependent upon the intentions of the testator.

33 The first issue to consider and determine is, what is the rule in Saunders v Vautier? In order to answer that question it is necessary to go to the case. The case did not decide any new principle of law, but applied old law, and the fact that the rule is described as "the rule in Saunders v Vautier" is somewhat fortuitous because principles relied on in that case went back many years. The facts were that a testator by will gave and bequeathed to his executors and trustees certain company stock "upon trust to accumulate the interest and dividends which should accrue due thereon, until Daniel Wright Vautier should attain his age of 25 years and then to pay or transfer" the stock and accumulated interest and dividends "unto the said Daniel Wright Vautier, his executors, administrators and assigns absolutely." When Mr Vautier attained the age of 21 he applied to the Court to have the capital transferred to him. It was argued that he had a vested interest in the capital and that as the accumulation and postponement of payment was for his benefit alone, he was entitled to waive that and to call for the immediate transfer of the fund. The authority supporting the submission was the case of Josselyn v Josselyn.[4] The latter was decided in 1837.[5] The facts were practically the same as those in Saunders v Vautier, and it was held that the infant on attaining 21 was entitled to the corpus. The case of Josselyn v Josselyn did not establish any new principle. The law had been established years earlier. One of the cases was the House of Lords decision of Love v L'Estrange,[6] decided in 1727.

34 Returning to Saunders v Vautier, Lord Langdale said in response to the submission:

"I think that principle has been repeatedly acted upon; and where a legacy is directed to accumulate for a certain period, or where the payment is postponed, the legatee, if he has an absolute indefeasible interest in the legacy, is not bound to wait until the expiration of that period, but may require payment the moment he is competent to give a valid discharge."

(Emphasis added).

35 The cause was stood over with liberty to apply to the Lord Chancellor who had earlier dealt with the estate. Lord Cottenham LC agreed with the decision.[7] His Lordship said:[8]

"There is an immediate gift of the East India stocks; it is to be separated from the estate and vested in trustees; and the question is whether the great nephew is not the cestui que trust of that stock. ... There is no gift over; and the East India stock either belongs to the great nephew, or will fall into the residue in the event of his dying under 25. I am clearly of the opinion that he is entitled to it."

36 What is important in relation to the application of the rule in Saunders v Vautier is that the beneficiary is given an absolute indefeasible interest in the corpus. The facts in Saunders v Vautier provide an obvious example. The gift was vested subject to postponement of both the income and transfer of the corpus.

37 Recently, the High Court made a number of observations about the rule. In CPT Custodians Pty Ltd v The Commissioner of State Revenue of the State of Victoria,[9] the High Court quoted what Mummery LJ said about the rule in Goulding v James,[10] where his Lordship said:[11]

"The principle recognises the rights of beneficiaries, who are sui juris and together absolutely entitled to the trust property, to exercise their proprietary rights to overbear and defeat the intention of a testator or settlor to subject property to the continuing trust, powers and limitations of a will or trust instrument."

(Emphases added).

38 The High Court also quoted with approval the modern formulation of the rule stated in Thomas on Powers as:

"Under the rule in Saunders v Vautier, an adult beneficiary (or a number of adult beneficiaries acting together) who has, (or between them have) an absolute, vested and indefeasible interest in the capital and income of property may at any time require the transfer of the property to him (or them) and may terminate any accumulation."[12]

(Emphasis added).

39 In my opinion, it is very difficult to argue because of the wording of the will that it was the testator's intention in the present matter to give an absolute indefeasible interest to the beneficiaries. The facts in Saunders v Vautier are different to the present because in that case, it was clear beyond doubt that it was intended that the beneficiary should have the corpus but that his enjoyment of the corpus and income was postponed until he attained the age of 25 years.

40 It was initially thought that the rule did not apply to charitable gifts but it has been recognised that the rule could apply to charities, provided, of course, that the beneficiary had an absolute vested and indefeasible interest in the capital. See Wharton v Masterman.[13] However, in England, it has been held that where the gift of income is to a charity for an indefinite period, the charity is not entitled to call for the capital. See Re Levy.[14] In fact, in 1917 the Full Court held by a majority in the case of In the Will of Wright[15] that the rule in Saunders v Vautier did not apply to a charitable gift where it was clear that it was intended that the charity should continue. The majority pointed to a number of indicia in the way a charitable trust was established and described, which told against any intention by the creator to give the corpus to the beneficiaries. Cases like Saunders v Vautier and Wharton v Masterman were dealing with clear examples of vested interests, whereas in the establishment of charitable trusts, in most cases the mere fact that income is given in perpetuity does not lead to the conclusion that it was the intention of the creator of the trust to give a vested interest in the corpus. Indeed, not only did the Court of Appeal in England in Re Levy come to that conclusion, but the same conclusion was reached by the Supreme Court of Canada in Halifax School for the Blind v Chipman.[16] Despite the compelling reasons of the majority judges in In the Will of Wright, the High Court of Australia in Congregational Union of New South Wales v Thistlethwayte overruled the decision.

41 It is now necessary to consider the High Court case of Thistlethwayte.[17]

42 The High Court considered the principles that apply in an application such as the present. A testator by will directed his trustee to hold his estate upon trust for his wife during her lifetime. Upon death, the trustees were directed to pay out of the income certain expenses, and the balance was to be used by the trustees to effect improvements of certain lands forming part of the estate or to invest it for general purposes as they in their discretion should think fit. The will provided that on the death of the last surviving relative or beneficiary, the trustees were to distribute the final available balance of income annually by paying certain sums to named charities, and as to the residue of income, the trustees were directed to divide it annually into three parts, paying one-third to three other named bodies. One of the latter named bodies demanded that the corpus should be transferred to it.

43 The majority of the Court posed the question as follows:[18]

"The Congregational Union of New South Wales contends that the gifts to it are valid on several grounds of which we need only mention two: (1) that an unlimited absolute gift of income is a gift of the capital from which the income is derived; (if this contention is sound it is immaterial whether the union is a charity or not.) ...

The question that usually arises is whether the testator intends to give a life or an absolute interest. ... It was also the question in Coward v Larkman, where Lord Watson said that the rule of construction by which a general and unlimited gift of the income of real or personal estate is held to carry an absolute interest in the corpus is established beyond dispute. ... But it cannot be a rule of law that in such circumstances a gift of the produce necessarily amounts to a gift of the corpus. It must still be a question of the intention of the testator, and the rule of construction must yield to sufficiently definite indications of intention to the contrary. ... In the present will there are very definite indications of intention to the contrary. ... "

(Emphasis added).

44 The majority then considered the terms of the will and highlighted a number of instances which were inconsistent with the trustees disposing of the capital. Their Honours then went on to observe that in In the Will of Wright the Full Court had held that the rule of construction was not to be extended to an unlimited gift of income to a charity. Their Honours quoted what Hood J said, namely, that there were considerations on which the rule was founded in the case of individuals, such as avoiding an intestacy or a perpetuity, which had no application to charities. The majority then referred to a decision of Stirling J in In re Morgan; Morgan v Morgan.[19] Their Honours observed that the distinction made by Hood J in their view did not exist. Their Honours stated the principles as follows:

"In our opinion the rule is the same whether the gift of income is to an individual or to a charity consisting of a body capable of holding property. The beneficiary is entitled to the capital unless there is a clear intention expressed or implied from the will that the beneficiary is not to take more than the income. In the present case such an intention is manifest."[20]

45 Kitto J, in a powerful dissent in respect to this part of the decision, stated:

"In my opinion a gift of the income of trust property in perpetuity is a gift of corpus, and cannot be reduced to a gift of something less than corpus by any manifestation of intention."[21]

46 He went on to observe that although intention was important, if one was satisfied that that was the effect of the intention, namely, a gift of income in perpetuity, then it follows that that was a gift of corpus. He concluded:

"Every gift of the income of property confers an interest in the property, the interest which a gift of all the income it confers cannot be less than the beneficial ownership of the property itself."

47 Although Kitto J differed from the majority as to the true nature of the rule, the whole Court was agreed that the rule worked in favour of an incorporated charitable institution. The difference between the majority and Kitto J was that the majority regarded the rule as one of construction whereas Kitto J differed in respect to the status of the rule, concluding that it was a rule of law.

48 Mr Miller of counsel, who appeared for the plaintiffs, submitted that the rule stated by the High Court in the Thistlethwayte case was subordinate to the rule in the English case of Saunders v Vautier. He submitted that the latter rule was paramount and it had the effect that where a beneficiary was entitled to an indefinite gift of income, then the person was entitled to the corpus. He submitted in those circumstances that the rule stated by the High Court did not apply and that the rule in Saunders v Vautier required the Court as a matter of law to make an order transferring the capital to the beneficiaries. He submitted that the intention of the testator in those circumstances was of no relevance and would be defeated.

49 Mr Miller's submission meets some historical obstacles. In 1917, the Full Court held that the rule did not apply to a charity in this State. Hence, there is no case prior to Thistlethwayte's case where any court in this State had applied the rule in Saunders v Vautier to a charity. By 1960 in England, it was clear that the English law did not recognise the application of the rule to charitable trusts. The High Court in 1952 overruled in In the Will of Wright. Although there is no mention of the rule in Saunders v Vautier in the reasons for the decision of the High Court, there is no doubt that the members of the Court would have been well aware of the rule because it was much discussed in In the Will of Wright, of which their Honours disapproved. The later cases in this State in this area dealt with the principles stated in Thistlethwayte's case. It follows that Mr Miller is seeking to open new ground. That is not to say, of course, that the rule may not apply. The rule in Saunders v Vautier is concerned with a situation where there is a vested gift of corpus. It is pertinent to observe that there is another rule, and that is that where there is an unlimited gift of income, it also includes a gift of corpus. This was the rule stated by the majority in the High Court in Thistlethwayte's case.[22] What Mr Miller is submitting is that the rule in Saunders v Vautier applies to the trust created by Mr Harris in his will, and accordingly, the beneficiaries, being the two plaintiff charities, are entitled to call for the corpus.

50 In my opinion, the rule stated by Lord Langdale MR in Saunders v Vautier and confirmed by the Lord Chancellor could not apply here because the named charities did not have an absolute vested indefeasible interest in the trust property. A number of reasons have been stated justifying the rule in Saunders v Vautier, namely, that to postpone the enjoyment of property is inconsistent with the right of enjoyment which flows from ownership, and that any direction to postpone payment is repugnant to the enjoyment of a vested interest. There is nothing in the will of Mr Harris which shows that he intended that the beneficiaries should have the corpus. In other words, there are no words which show that he intended that the beneficiary should have an absolute vested indefeasible interest in the trust estate. The establishment of the trust for the benefit of charities operating for charitable purposes does not establish an inalienable vested interest in the corpus. In his will, Mr Harris made provision for the payment of income from a property for the charitable purposes of three named institutions. The charitable purposes may change from time to time. There is no doubt that the beneficiaries did perform charitable services, though whether or not their purposes were wholly charitable does not emerge. In addition, the will provided for a change of trustees, which tends to suggest the trust operating in perpetuity. The will also provided for a situation involving other property that could be sold and proceeds used for other purposes. The will also provided that the property at William Street could be leased, and that in itself provides some evidence of an intention that the trust was to last well into the future. In addition, the testator drew a distinction between a number of charities, giving four specific bequests of property to four named institutions which, on their face, were involved in charitable purposes, and the specific trust established in respect of the William Street property.

51 In my opinion, the conclusion is beyond doubt that it was not the intention of the testator to give an inalienable vested interest in the trust property to the beneficiaries of the trust.

52 My conclusion is reinforced by the fact that no attempt to call for the corpus has been made by the beneficiaries for nearly 100 years. Further, if the submission that the rule in Saunders v Vautier applied to this charity is correct, then it must follow that the great bulk of charitable trusts, which would be set up in much the same way, could be terminated very soon after their establishment. This would come as a surprise to those establishing a trust to benefit a charity by the payment of income generated by the leasing of a piece of real estate.

53 In my opinion, the statement of the rule by the High Court in the Thistlethwayte case is the rule which is to be applied in the present application. It is a rule of construction and not a rule of law. In my opinion, the rule in Saunders v Vautier does not apply in the present proceeding.

54 The rule in Thistlethwayte's case establishes a presumption in favour of a transfer of capital where a gift of income to an individual or a charity is without a time limit. The presumption is rebuttable. It is rebutted if there is a clear intention expressed or implied from the will that the beneficiary is not to take more than the income. Did the Testator intend that the gift was a perpetual gift of income not carrying the capital?

Charities and Contrary Intention

55 Although the rule applies equally to a charity as well as to an individual, the proof of a contrary intention is usually more readily found where the beneficiary is a charity. This comes about because of the very nature of a charity as a beneficiary. A charity is formed to perform charitable acts, usually for an indefinite period into the future, and the types of demands on the charitable purposes often change with the passage of time. The rule against perpetuities which gives effect to the common law's policy to encourage alienation of property does not apply to charitable trusts. This means that charitable trusts can last indefinitely. Indeed, it is in the public interest that there be trusts lasting indefinitely. These considerations led the Full Court in 1917 in In the Will of Wright[23] to decide that the rule that a disposition of income carried with it the corpus did not apply to dispositions in favour of a charitable institution. As observed above, the High Court in Thistlethwayte overruled that decision. In Re Levy,[24] the Court of Appeal in England established the same rule as the Full Court in relation to a charity. The Court held that in the case of a gift to a charity for its general purposes, it should not be inferred that an indefinite gift of income carried a right to corpus, because such a gift could be enjoyed by the charity to its fullest extent in perpetuity. The existence of any right to corpus depended upon a true interpretation of the gift. The judgments of the Court of Appeal underline the difference in approach where the beneficiary is a charity.

56 Lord Evershed MR[25] drew a distinction between a gift to an individual and a gift to a charity. He emphasised that the resolution of any question depended upon the intention of the testator. He said:

"If, on the true construction of his will, the testator intended to give to each of the charities a share of income (and no more) in perpetuity, and if he further intended that the income given to each charity was to be applied for the general purposes of the charity, then, in my judgment, the question whether the charities can call for the distribution of the corpus depends on the true interpretation of the scope and extent of the gift which the testator intended to confer. I repeat that, in my judgment, an indefinite gift of income to an individual requires that the individual be entitled to the corpus not by reason of some overriding rule of law, but because only by payment of the corpus can the individual get the full benefit and extent of the gift which, as a matter of interpretation, the testator intended. A similar conclusion does not, I think, follow in the case of an indefinite gift of income to a charity for its general purposes, and if the testator here intended his gifts to be of that character, I see no reason why his disposition should not be effective.

It seems to me, therefore, that the first question which must be answered is: what did the testator intend? More specifically, did he here intend to impose perpetual trust of the income of his trust estate for the general purposes of the six charities which he named?"

(Emphasis added).

57 His Lordship placed reliance on the fact that the testator required the fund to be entitled "the Levy Family Charitable Trust". His Lordship observed that this was a highly important feature of the testator's intended gift, that is, that the corpus of the estate should form part of the named family trust. His Lordship then stated:

"It is not, I think, possible to doubt that he intended the trust to be perpetually maintained as a family memorial."

58 His Lordship then noted that although the testator had not stated that the gifts were to be for the general purposes of each of the charities, nevertheless he was prepared to infer that that was intended. That was another factor upon which his Lordship relied as showing an intention against a gift of corpus. His Lordship observed that there was no rule of law which could override intention and then went on to make an observation which emphasises the nature of a charity, namely, that he did not think that where there was an indefinite gift of income to a charity, it required, in order to give effect to it as a matter of construction of the nature and extent of the gift, that the charity was entitled to call for the corpus.[26]

59 Whilst the Court of Appeal decision does not state the law in this country because of Thistlethwayte's case, nevertheless the approach of the Court provides some support for the conclusion that a Court is more ready to find a contrary intention from the very nature of a settlement in favour of a charity. There are a number of reasons which support this approach. First, charities were set up to last indefinitely and in perpetuity. The rule against perpetuities did not apply. The law recognised the common characteristic of a charity. Secondly, most charities were set up and received gifts that were indefinite in duration. In other words, this was a characteristic of a charitable trust. Given that, it was not difficult to presume that a testator, in setting up a trust making a charitable gift of the income, intended that the capital should be preserved indefinitely.

60 Another principle of the law which was well established and which emphasised the special nature of a charitable institution, was the principle that if a gift is given to an institution which is charitable, then those in charge of the institution were obliged to devote the gift to its charitable purposes. See Incorporated Society v Richards.[27]

61 In that case, Sir Edward Sugden LC said:[28]

"That was a gift of all his unsettled estate, after the death of his wife, to 'The Incorporated Society in Dublin for the Promotion of English Protestant Schools in Ireland.' It was contended on the part of the defendant, although but faintly, that those words do not mean that the devise was for the purposes for which this society was incorporated, but constituted an absolute gift to them, unfettered by any trust. I cannot say that I feel any difficulty upon that ground, because the nature of the trust is expressed in the very description of the society contained in the gift; and giving it to them in that character, the testator gives it charged with an obligation to devote it to those purposes and the plaintiffs must take it, if at all, subject to that obligation."

62 As his Lordship pointed out, although a gift may not expressly state that it is in trust for a charity, the very circumstances may make it clear that that is so. In the present matter the Court is not dealing with a gift to the charitable institutions. The testator has interposed a trust, and this provides some evidence of an intention that the institutions were to obtain only the income and not the capital.

63 The difference between a gift to an individual and one to a charity was discussed by Dixon and Evatt JJ in Attorney-General (NSW) v Perpetual Trustee Co Ltd.[29] Their Honours said:

"A charitable trust is a trust for a purpose, not for a person. The objects of ordinary trusts are individuals, either named or answering a description, whether presently or at some future time. To dispose of property for the fulfilment of ends considered beneficial to the community is an entirely different thing from creating equitable estates and interests and limiting them to beneficiaries. In this fundamental distinction sufficient reason may be found for many of the differences in treatment of charitable and ordinary trusts. As a matter of reason, if not of history, it explains the differences between the interpretation placed on declarations or statements of charitable purposes and the construction and effect given to limitations of estates and interests. Estates and interests are limited with a view of creating precise and definite proprietary rights, to the intent the property shall devolve according to the form of the gift and not otherwise. Whatever conditions are expressed or implied in such limitations are therefore as a rule construed as essential to the creation or vesting of the estate or interest unless an intention to the contrary appears. But to interpret charitable trusts in the same manner would be to ignore the conceptions upon which such trusts depend."

(Emphases added).

64 Later, their Honours said in relation to a charitable trust:

"In the third place, as the purpose of the trust need not, and, indeed, most usually does not, involve the expenditure or consumption of corpus, continuity and indefiniteness of duration form a common characteristic of charitable trust. This characteristic would be lost or imperilled by a construction of specific directions making them essential to the operation of the trust, in spite of all the unforeseen changes which time brings."

(Emphasis added).

65 The differences between a charitable trust and one for an individual lead to a conclusion that the fact that the donee of income which is given in perpetuity is a charity is a matter of weight, when considering whether or not the donor intended that the donee should only have the benefit of the income. There have been a number of cases decided in this Court since the Thistlethwayte case which support the conclusion that where the donee of income in perpetuity is a charity, that is some evidence of an intention to give only the income in perpetuity. Of course, in the end it is a matter of construction of the words establishing the gift to determine the intention of the donor.

66 That approach is supported by the decision of Dean J in Re Williams (deceased).[30] In that case, the testator bequeathed a number of pecuniary legacies to named persons and devised and bequeathed the residue of his estate to his trustees upon trust. One of the directions was to stand possessed of the residue upon trust to pay income arising therefrom to "the Bendigo Base Hospital forever". A question arose whether the gift of the residuary estate carried with it the capital. Of course, the important word was "forever" and this no doubt had considerable influence on the outcome of the proceeding. However, his Honour noted the following in respect to a perpetual gift of income to a charity: [31]

"But the next consideration is whether the fact that the beneficiary is a charitable institution should not lead to a contrary view being taken.

It is impossible to read the will without thinking the testator's real intention was that the income should be payable to the hospital each year, but that the corpus should be held in perpetuity by the trustees for that purpose. The permanent endowment of charitable institutions is a recognised method of providing for their maintenance. Provisions of this kind have always been respected by those who administer them. It would be disturbing to testators and to governing bodies of such institutions to be told that such a provision as that before me is really a gift of corpus, and that testators who desire their benefactions to be held as a permanent endowment must use some additional expressions to make such intention clear."

(Emphasis added).

67 His Honour noted that the point was made by the Full Court in In the Will of Wright, which was overruled in the Thistlethwayte case. Having said that, his Honour then said:[32]

"It appears to me that the view might well have been taken that in ascertaining the intention of the testator as disclosed by his will, the character of the beneficiary would be of great importance, and often decisive, and that where a fund was given to trustees upon trust to pay the income forever to a charity incorporated or unincorporated, the charity would take the income only. If instead of a gift of income to a particular charity the gift of income had been to charity generally or to some general purpose of charity such as the relief of poverty could it be contended by the Attorney-General that a scheme should be propounded for the immediate application to that purpose of the corpus of the fund? And if such could not be contended, can it make any differences that the gift is not a charity generally, but is to a particular charitable institution such as a public hospital?"

68 His Honour then referred to Thistlethwayte's case and observed:

"It may, of course, be said that there is no different rule applicable to gifts of income to individuals and to charities, but in the case of a charity, the fact that the legatee is a perpetual charity may usually afford an indication of an intention to exclude the operation of what, after all, is a rule of construction."[33]

(Emphasis added).

69 His Honour then stated that it was his view that Thistlethwayte case did not require him to hold that the fact the beneficiary was a charitable institution was not a matter which could be properly considered or which was of no importance in ascertaining the intention of the testator. He then observed:

"Whether it be sufficient to exclude the rule if no more appeared is a matter which I need not determine, because in the present case more does appear."

His Honour held that the evidence showed that the intention of the testator was to provide income and not the corpus.

70 A similar approach was taken by Hudson J in Re Weaver,[34] where his Honour placed some weight on the Court of Appeal decision of Re Levy (deceased)[35] as demonstrating that where a charity was concerned, the scope and extent of the gift provided some evidence that a testator intended a perpetual gift of income.

71 In the later case of Re Inman,[36] Gowans J said,[37] after referring to the Thistlethwayte case:

"The decision was that the rule applies to charities, and according to the judgment of the majority, it is a rule which yields to an intention to the contrary, if there are sufficiently definite indications express or implied. I accept the view of Dean J in Re Williams ... , that one of the sources of such indications is the character of the institution or body to which the gift is made. Each of the bodies concerned is perpetual in form."

72 His Honour then went on to indicate that there was other evidence of a contrary intention.

73 Starke J in Re Denheart (deceased)[38] held that the fact that the beneficiary was a charity and an institution that was intended to last indefinitely was a factor which should be taken into account, but his Honour went on to state that if that was the only fact then it was not sufficient to exclude the rule. His Honour observed, and in my respectful opinion clearly correctly, that to say otherwise would result in the Court not following Thistlethwayte's case.

74 In my opinion, the fact that a gift of income is given in perpetuity to a charitable institution provides some evidence of a contrary intention. However, in the end, of course, it is a matter of intention of the creator of the trust. Nevertheless, in my opinion, the cases establish that the courts are more ready to find a contrary intention where the gift is to a longstanding charity in perpetuity.

Did Mr Harris intend income only?

75 The cases provide examples of matters which have been taken into account in reaching the conclusion that the testator or donor had expressed an intention that the donee should only have the income and not the corpus. They are illustrations of the principles stated in Thistlethwayte's case. Mr Miller submitted that the cases could not finally determine the questions in this proceeding because this proceeding is concerned with the intention of Abraham Harris, who executed the will in the form which was granted probate.

76 Mr Miller referred to what Isaacs J said in Ramsay v Lowther:[39]

"Rules of law or construction are to be observed, and may govern the interpretation, as pointed out by Lord Wensleydale in Greville v Browne but apart from them, each will must stand alone for the purpose ascertaining the intention of its maker."

77 His Honour referred to what Wilmot LC said as far back as 1768, where his Lordship observed:

"A will is the picture of a man's mind; and one may as well look at the picture of one man to know the person of another, as look at the will of one mind to know the mind of another."

78 Mr Miller submitted that counsel for the Trustee had referred to a number of Victorian cases in order to demonstrate that the testator, Mr Harris, had evinced a contrary intention, and submitted this was not a helpful approach.

79 Whilst I accept that, in the end, it is a matter of looking at the will of Mr Harris to determine his intention, the cases provide some assistance in that they identify matters which were thought to point to a particular conclusion as to intention. They are examples of a contrary intention; the law in action. Of course, the Court must be mindful of the fact that judges speaking in the 1950s and later are considering wording used in those times as against words used in 1913 in a backdrop of the law relating to the construction of wills. Whether or not the matters that have been relied upon in other cases should carry any weight in the consideration of the questions this Court has to consider will, of course, depend upon all the circumstances, and I accept that in the end it is the wording used by the testator in the will under consideration in this case that decides what was his intention.

80 The rule stated in Thistlethwayte's case means that the plaintiff charities are entitled to the corpus unless the wording of the will indicates a clear intention by Mr Harris that the beneficiaries were not to take anything more than the income in perpetuity. It is now necessary to consider the wording of the will in its setting and determine whether or not there is a contrary intention.

81 In my opinion, there are a number of factors which clearly establish a contrary intention. To quote the High Court in Thistlethwayte's case, it is my opinion that "in the present case such an intention is manifest."

82 I reach that conclusion for the following reasons:

(i) The devise of the property in William Street was to three trustees, for the benefit of three named charities. The testator created a trust. It was not a direct gift to the charities.

(ii) The funds were to be paid to the treasurers of each institution and were to be applied for the purposes of each institution; that is, charitable purposes.

(iii) Each charitable organisation was an unincorporated institution with changing membership and changing demands upon its benevolence.

(iv) What was given to each of the charities was "the net annual rents". This is cogent evidence that the testator intended that income should be paid each year into the future.

(v) The will appointed three named individuals, a Rabbi and the deceased's two sons, to be the trustees with the expectation that each would serve for life, and the will provided that upon the death of a trustee, the executor or administrator of that person's estate should be the trustee for the time being together with any other trustee appointed in the meantime. Having made that provision, the will then expressly provided at the end for what would happen if a trustee appointed, and any future trustee, dies or goes abroad or desires to retire from or refuses to act or becomes incapable of acting as a trustee of the will. The will further provided that the number of trustees shall not be less than two. It finally vested the trust premises in any new trustee or trustees and authorised any new trustee to have all the powers and authorities of the trustee substituted. The appointment of three trusted persons at the creation of the trust provides evidence of the trust continuing and the further provisions relating to future trustees are also cogent evidence of that intention.

(vi) The deceased gave bequests of [sterling]5 to each of four institutions which were named, being the St Kilda Hebrew Congregation, the East Melbourne Hebrew Congregation, the Melbourne Hospital and the Alfred Hospital Prahran, some of which by reason of their names were charities. The gifts were absolute to each institution; this is to be compared with the establishment of a trust in respect of the property situated in William Street, Melbourne to pay income to four named charitable beneficiaries.

(vii) The deceased gave his trustees express power to let and manage the William Street property with a wide discretion as to how they managed the property. This is also cogent evidence of the trust continuing into the future. A lease of property could be for a substantial period subject to a variety of terms.

(viii) The testator did not expressly authorise his trustees to sell the property and this is to be compared with the provision concerning his residuary estate if, in the end, neither of his sons or their children were to take, resulting in the sale of the residuary estate, which included real estate and the establishment of Alms houses in Jerusalem in Palestine. The lack of an express power to sell, taking into account the then law and the risk involved in selling, also provides some evidence of an intention to establish a trust in perpetuity.

(ix) The three institutions were well known charities, and at least one was long-established, and were public charitable institutions in respect to providing charitable services to members of the Jewish faith, which implies an intention to provide an ongoing stream of income and not the transfer of capital.

83 In my opinion, these factors lead to the conclusion that it was the intention of Mr Harris that each of the charitable institutions was to receive income in perpetuity and not to receive the capital. The above factors, upon which I rely in reaching that conclusion, are factors which have been noted in other cases as being some evidence of a contrary intention. I am dealing with the will of Abraham Harris and his intention evidenced by the words used in the will, and in my opinion, it is clear beyond doubt that Mr Harris intended to create a trust of indefinite duration. It was his clear intention that each of the said beneficiaries was not to take more than the income.

Conclusion

84 In my opinion, the rule in Saunders v Vautier does not apply to the will of Mr Harris, nor does the rule that a gift of the income of real estate without limit of time is equivalent to the gift of the principal. In my view, the rule stated in Thistlethwayte's case applies to the issues raised in this proceeding. I am satisfied that the will makes clear the intention of Mr Harris, and that was that each of the named charitable institutions was not to take more than the income.

85 The originating motion and summons sought an order that the Trustee distribute forthwith to the plaintiffs equally the moneys it held in trust from the net proceeds of the sale of the property. In my opinion, the plaintiffs are not entitled to that relief and the proceeding should be dismissed.

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[1] [1924] VicLawRp 30; [1924] VLR 201 at 206.

[2] [1841] EngR 629; (1841) 4 Beav 115; 94 ER 282.

[3] [1952] HCA 48; (1952) 87 CLR 375.

[4] [1837] EngR 1156; (1837) 9 Sim 63; 59 ER 281.

[5] [1837] EngR 1156; 1937 59 ER 281

[6] [1727] EngR 35; (1727) 5 Bro. PC 59; 2 ER 532.

[7] (1841) Cr and Ph 240; 41 ER 482.

[8] At 485.

[9] [2005] HCA 53; (2005) 224 CLR 98.

[10] [1997] 2 All ER 239 at 247.

[11] At p.118.

[12] At p.119.

[13] [1895] AC 186, Re Knapp [1929] 1 Ch 341.

[14] [1960] Ch 346.

[15] [1917] VicLawRp 21; [1917] VLR 127.

[16] (1937) 3 DLR 9.

[17] Supra.

[18] At p.438.

[19] [1893] 3 Ch 222.

[20] At p.440.

[21] At p.447.

[22] At p.438.

[23] Supra.

[24] [1960] Ch 346.

[25] At p.356.

[26] Supra at p.358.

[27] (1841) 1 Dr and W 258; 4 I Eq R 177.

[28] At p.198 of the Irish Equity Reports.

[29] [1940] HCA 12; (1940) 63 CLR 209 at pp.222.

[30] [1955] VicLawRp 12; [1955] VLR 65.

[31] At p.67.

[32] At p.68.

[33] At p.69.

[34] [1963] VicRp 40; [1963] VR 257.

[35] Supra.

[36] [1965] VicRp 36; [1965} VR 238.

[37] At p.240.

[38] [1973] VicRp 43; [1973] VR 449.

[39] [1912] HCA 68; (1912) 16 CLR 1 at 14.