Grain Technology Australia Ltd v Rosewood Research Pty Ltd

Texts Cited: 'Charitable corporations taking income in perpetuity', Ford HAJ, (1953) 26 ALJ 635 'The Charitable Corporation: A 'Bastard' Legal Form Revisited' (2006) 9(2) The Charity Law & Practice Review 19 'The Law of Mortmain: An Historical and Comparative Review' (1977) 27 University of Toronto Law Journal 257 'Visitatorial Jurisdiction Over Corporations in Equity' (1936) 49(3) Harvard Law Review 363 A History of English Law, Holdsworth W (1st ed, Vol 9, 1925, Sweet & Maxwell) A History of English Law, Holdsworth W (2nd ed, Vol 4, 1936, Sweet & Maxwell) Halsbury's Laws of England, Lord Simonds (Vol 4, 1953, Butterworth & Co (Publishers) Ltd) History of the Law of Charity 1532-1827 (1969, Cambridge University Press) Palmer's Company Law, Palmer F (9th ed, 1911, Stevens and Sons Limited) Palmer's Company Precedents, Palmer F (3rd ed, 1884, Stevens) Scott and Ascher on Trusts, Scott A, Fratcher W, Ascher M (Vol 5, 5th ed, 2008, Aspen Publishers) Scott on Trusts, Scott A (1st ed, Vol 3, 1923, Little, Brown and Company) Tudor on Charities, Carter HG and Crawshaw FM (5th ed, 1929, Sweet & Maxwell) Tudor on Charities, Henderson W, Fowles J, Hogan G (11th ed, 2023, Thomson Reuters) Tudor on Charities, McMullenn D, Maurice S, Parker D (6th ed, 1967, Sweet & Maxwell)

Category: Principal judgment Parties: Grain Technology Australia Limited (First Plaintiff) Raymond Bruce Schwartz (Second Plaintiff) Manildra Flour Mills Pty Limited (Third Plaintiff) Bakers Delight Holdings Limited (Fourth Plaintiff) Rosewood Research Pty Limited (First Defendant) Pathway Properties Pty Limited (Second Defendant) Asia Pacific Technologies Pty Limited (Third Defendant) Attorney General of NSW (Fourth Defendant)

Rosewood Research Pty Limited (First Cross-claimant) Pathway Properties Pty Limited (Second Cross-claimant) Asia Pacific Technologies Pty Limited (Third Cross-claimant) Attorney General of NSW (First Cross-defendant) Representation: Counsel: LP Menzies/E Lambert (Plaintiffs) P Taylor SC/D Barlin (First to Third Defendants; First to Third Cross-claimants) C Mantziaris/R Reynolds (Fourth Defendant; First Cross-defendant)

Solicitor: Prolegis Lawyers (Plaintiffs) Pointon Partners Sydney (First to Third Defendants; First to Third Cross-claimants) Crown Solicitor (Fourth Defendant; First Cross-defendant) File Number(s): 2013/152562 Publication restriction: Nil

Judgment

1. Before the Court are longstanding charitable trust proceedings. The proceedings concern the affairs of the first, second and third defendants which are proprietary companies based in Sydney. The principal asset of the companies is a property at North Ryde. The equity in the property is worth about $40 million.
2. It is claimed in the proceedings that the companies' assets are held on trust for charitable purposes. Orders are sought to ensure that the companies' affairs are conducted with a view to advancing those purposes in the future. The particular charitable purposes will be discussed in more detail later in the judgment, but broadly they involve research and development in aid of the manufacture of bread and related products. They include both improvements in the wheat and other grains used in such manufacture and improvements in the manufacturing processes themselves.
3. The first defendant, Rosewood Research Pty Limited, was incorporated in 1948 under the name "The Bread Research Institute of New South Wales Limited". Later its name was changed to "The Bread Research Institute of Australia Limited". In this judgment I will refer to it as "BRI".
4. The corporate structure of BRI has changed over time. It was originally incorporated in 1948 under the Companies Act 1936 as a company limited by guarantee. It retained that structure until 1988, when it became an incorporated association under the Associations Incorporation Act 1984. In 1995, it was re-registered under the Corporations Law as a company limited by guarantee. In 2010, it was converted under the Corporations Act 2001 (Cth) into a proprietary company limited by shares.
5. When it was incorporated in 1948, the memorandum of association of BRI contained, as was then required for companies, a list of company objects. A fresh set of objects was adopted as part of the reconversion of the company into a company limited by guarantee in 1995. There were other changes to BRI's memorandum and articles of association over time, which are not necessary to go into at this point.
6. The second defendant, Pathway Properties Pty Limited, is a proprietary company limited by shares. It was incorporated in 2006 as, and remains, a wholly-owned subsidiary of BRI. It is now the registered proprietor of the North Ryde property which it holds as trustee of a unit trust. All of the units in the trust are owned by BRI. I will refer to this company as the "Property Subsidiary".
7. The third defendant, Asia Pacific Technologies Pty Limited, is another proprietary company limited by shares which is, and has always been, a wholly-owned subsidiary of BRI. It was incorporated in 1998 but appears to have remained dormant until 2004. Since then, it has functioned as the vehicle for holding the "technology assets" developed within the BRI group of companies. I will refer to it in this judgment as the "Technology Subsidiary".
8. I will refer to BRI, the Property Subsidiary and the Technology Subsidiary collectively as the "BRI Companies".
9. From 1951 until 1981, BRI received grant funding for research from the Commonwealth Scientific and Industrial Research Organisation ("CSIRO") (from 1981 until 1988 the grant funding was received from Commonwealth Departments). The CSIRO also made the North Ryde property (which it then owned) available for BRI to use. It allowed BRI to build (at its own expense) buildings which it used for its headquarters and its research activities. The CSIRO later sold the property to BRI, with title passing in 2000. As I have already mentioned, the property is now held by the Property Subsidiary, having been transferred to it in 2006. The unit trust structure under which the property is held by the Property Subsidiary was also established in 2006.
10. Following its transfer to the Property Subsidiary, the property was redeveloped by the BRI Companies (in fact it appears that some redevelopments began prior to the formal transfer). The redevelopment involved the construction of an office building which is now commercially leased. It required substantial borrowing, which was undertaken on the security of the property. The venture has been very successful. Between 2014 and 2021 the value of the property increased by approximately $25 million to $67 million. The property remains encumbered, but, as I have already said, the equity in it is now worth about $40 million.
11. The conversion of BRI into a proprietary company limited by shares in 2010 left the company with three individual shareholders who were also its directors. They were Dr Graham John McMaster, BRI's Managing Director, Mr Allan Murphy and Mr Laurence Disdale Gullick. I will refer to them as "the Directors". The Directors were formerly the fourth, fifth and sixth defendants in the proceedings.
12. The first plaintiff, Grain Technology Australia Limited ("Grain Tech") is a public company limited by guarantee. Its "core objects" are research, development and promotional activities relating to Australian grain foods industries. The second plaintiff, Raymond Bruce Schwartz, is an individual who is a member of a grain farming partnership. The third plaintiff, Manildra Flour Pty Limited, is a member of the Manildra corporate group whose business is in grain milling. The fourth plaintiff, Bakers Delight Holdings Limited, is a member of the Bakers Delight corporate group which operates, either in its own right or through franchising arrangements, a chain of retail bakeries.
13. The plaintiffs in the proceedings thus all represent, directly or indirectly, business interests associated with the bread manufacturing industry. They began these proceedings in 2013. Their concern was that, under the control of the Directors, the affairs of the BRI Companies were not being conducted, or conducted exclusively, for what the plaintiffs regarded as the proper objects.
14. The bringing of the proceedings was authorised by the Attorney General, in accordance with the procedure laid down by the Charitable Trusts Act 1993. In due course, as sometimes happens, the Attorney General was joined as a defendant so as to be able to present submissions directly to the Court.

Claims for determination

1. Originally the plaintiffs sought three main forms of relief. First, they sought declarations that each of the BRI Companies' assets were held on trust for charitable purposes. The purposes, as formulated by the plaintiffs, essentially involved carrying out (or financing others to carry out) research and development into bread manufacturing, its raw materials (including grain) and by-products. Second, the plaintiffs sought orders appointing Grain Tech, in place of the BRI Companies, as the trustee of those charitable trusts. Third, the plaintiffs sought orders that the Directors account to the trusts, or pay compensation, for various alleged misfeasances.
2. In September 2014, consent orders were made for the appointment of Mr Jamieson Louttit ("the Receiver") as receiver to, and manager of, the BRI Companies. Since then, the Companies have been under his control.
3. Following the Receiver's appointment, he caused the BRI Companies to bring their own proceedings by way of cross-claim. The BRI Companies' statement of cross-claim named the Attorney General and the Directors as cross-defendants. The statement of cross-claim appears not to have been formally filed, but was treated by the parties as if it had been (an "amended" statement of cross-claim was formally filed in August 2021).
4. The BRI Companies' cross-claim was broadly similar to the plaintiffs' claim. It likewise sought declarations that the assets of the BRI Companies were held on trust for charitable purposes. The formulation of the charitable purposes was broadly similar to, but slightly more extensive than, those formulated on behalf of the plaintiffs. The cross-claim also sought orders removing the Companies as trustees of their respective trusts and appointing a new trustee or trustees. But rather than appointing Grain Tech directly, the cross-claim proposed that there should be an open selection process for the replacement trustee(s), in the first instance by advertising for suitable applicants. The BRI Companies made claims against the Directors for misfeasance along similar lines to the claims made by the plaintiffs.
5. The cross-claim raised an additional issue not raised by the plaintiffs. The BRI Companies contended that it had become impractical to carry out the purposes of the trusts in their existing form. Orders were sought that the trust property should be settled cy-près, or at least that the terms of the trust should be fixed by means of an administrative scheme. For his part, Dr McMaster filed a further cross-claim back against BRI for unpaid remuneration.
6. Following a very lengthy process of mediation, all of the parties to the proceedings executed a deed of settlement and release in August 2019. The deed provided for a partial settlement of the proceedings. All claims by and against the Directors were released. The deed was subject to approval by the Court which was given (coincidentally by me) in late 2019: Grain Technology Australia Ltd v Rosewood Research Pty Ltd (No 2) [2019] NSWSC 1744. As a result, the Directors dropped out of the proceedings.
7. The August 2019 deed obliged the BRI Companies, the Receiver and the Attorney General to proceed with the cross-claim to the extent to which it sought declaratory relief, the appointment of new trustees and the settlement of any administrative or cy-près scheme which might be required. Attached to the deed was a minute of order setting out the terms of the declarations which were to be sought, the terms of which largely reflected the orders sought in the cross-claim.
8. The plaintiffs were not parties to this particular part of the settlement. The BRI Companies, the Receiver and the Attorney General recorded in the deed that they considered the further participation in the proceedings by the plaintiffs to be unnecessary. It was noted that the plaintiffs nevertheless wished to continue to participate and that it had been agreed between the plaintiffs and the other parties that this would be at their own expense.
9. The plaintiffs did continue to participate. An amended version of their statement of claim was filed in September 2021. The plaintiffs no longer sought orders for the appointment of Grain Tech as the new trustee, or indeed the appointment of a new trustee at all. Nevertheless, they continued to seek declaratory relief.
10. The proceedings came before me for hearing as a result of consent orders agreed to by the plaintiffs, the BRI Companies and the Attorney General in August 2021. The consent orders provided for a separate hearing which would define the purposes of the trusts, but not their precise terms. The contemplation was that those terms would be settled in later proceedings.
11. Attempts were made to have the shareholders of BRI participate in the proceedings to advance any claim they might have. Mr Gullick has died. The surviving shareholders, and Mr Gullick's legal personal representative, have declined to become involved.
12. In final submissions, no party pursued any contention that BRI's subsidiaries are themselves trustees of the property they hold. The parties instead proceeded on the basis that the shares BRI owns in its subsidiaries (and the units it owns in the unit trust) are subject to whatever trust applies to BRI's other assets. The BRI subsidiaries effectively dropped out of the picture. In what follows, I will for simplicity refer to the BRI Company parties collectively as BRI.
13. All the parties agree that BRI's property is held on trust for charitable purposes. But there are some differences of detail between them.
14. All parties contend, as their main contention, that BRI's objects are exclusively charitable. This is said to have resulted in the property of BRI being dedicated to a trust for charitable purposes, namely the charitable purposes set out in the objects. The difference between the parties is when this occurred.
15. The plaintiffs' principal contention is that the trust came into existence when BRI was originally incorporated in 1948. Some of the objects adopted in BRI's 1948 memorandum of association were not charitable, or at least were arguably not charitable, but that, according to the plaintiffs' contention, did not matter. BRI's assets were still held for the charitable objects set out in the memorandum.
16. Neither BRI nor the Attorney General went so far. Their contention was that the trust came into existence with the adoption of the objects set out in the 1995 constitution, which were (it was agreed between the parties) exclusively charitable. The plaintiffs adopted this as their secondary position.
17. Although all parties agreed that BRI's property was held on trust for charitable purposes, they recognised that it was necessary to establish that proposition to the Court's satisfaction. In the course of the hearing, it began to emerge that the proposition was contestable. To meet this, the parties developed an alternative basis for the Court's intervention.
18. The contention was that the Court had jurisdiction over "charitable corporations". It was contended that BRI was such a corporation by virtue of its charitable objects. This was said to give the Court power to enforce "trust-like" obligations over the assets of BRI (which would of course include its shares in the subsidiary companies and the units in the property trust) which were broadly equivalent to obligations which would apply to a charitable trust in the strict sense. The form of the orders which would be made in those circumstances was left somewhat unclear and will need to be addressed if the Court ultimately concludes that there is no trust in the strict sense but that "trust-like" obligations still apply.

Summary and analysis of evidence

1. For the purposes of the trial, a huge court book was produced which contained numerous affidavits and thousands of pages of documents. But there was no dispute of primary fact between the parties. The affidavits were formally read and the documents were tendered but only a handful of them were referred to in submissions; there was no evidentiary conflict which needed to be resolved.
2. Comprehensive written submissions dealing with the history of BRI, and various other specific matters, were produced on behalf of BRI. On a factual level, the case was effectively run on the basis of those submissions. No issues were raised by the other parties and BRI's submissions were not disputed. Accordingly, I have not found it necessary to refer in any great detail to the underlying evidence.

Industrial background

1. The establishment of BRI can be traced back to a concern which had arisen by the latter part of the Second World War about the state of the bread industry in New South Wales. The industry was the subject of an inquiry held by the Industrial Commission under the Industrial Arbitration Act 1940. In September 1943, the Minister for Labour and Industry and Social Welfare referred the "system for the making, baking and delivery of bread" to the Commission for enquiry and report. The terms of reference included consideration of the welfare of employees in the industry, the quality of bread and its cost.
2. The inquiry was conducted by Mr Edward Parnell Kinsella, then a member of the Industrial Commission and later a Judge of this Court. Having conducted hearings between November 1943 and December 1944, he delivered his report in April 1945.
3. Among the active participants in the inquiry was an industrial association known as the Master Bakers Association ("MBA"). The membership of the MBA seems to have included sole-trader bakers throughout New South Wales. It was, it seems, registered as a trade union under State industrial legislation (which allowed the registration of employer as well as employee unions).
4. The MBA clearly did not represent all of the business and employee interests involved in the industry. The Baking Trades Federation and the Bread Carters' Union of New South Wales (apparently employee unions) were also represented at the inquiry. Millers and grain growers also had their own groupings.
5. According to Commissioner Kinsella's report, in about 1943 the MBA had established a "Nutrition Committee" to undertake work on improving the quality of bread. In August 1944, at a meeting of members of the MBA in Sydney, a resolution was passed to take this further. That resolution contemplated the establishment of a research institute to support the bread industry, to be funded by a levy on members of the MBA.
6. Although there was a clear public interest in improving the operation of the bread industry, the proposed research institute was to be established by the MBA alone. Inevitably, it would approach its task with a view to benefiting the members of the MBA directly. There was thus a degree of self-interest in the idea. Commissioner Kinsella was concerned about this. He preferred the model provided by the Wheat Research Institute in New Zealand, which had been established by statute and which was operated by representatives of all groups and institutions which had an interest in the industry.
7. In his report, Commissioner Kinsella recommended the establishment by the State Government of a Wheat and Flour Research Institute with a board consisting of representatives of the wheat growers, flour millers, bakers, the Department of Agriculture, the University of Sydney and of the Government. It would be financed by contributions levied upon wheat growers, flour millers and master bakers, and subsidised by the Government. Its functions would be the undertaking of research, and the provision of education and advice, with the object of improving wheat, flour and bread and the methods of production of each of them. The Commissioner specifically recommended that there be a "careful study" of the Wheat Research Institute of New Zealand.
8. At some point after the delivery of the report, the MBA underwent a reorganisation. Its functions were assumed by an industrial association known as the Bread Manufacturers of New South Wales, to which I will refer as the "Manufacturers' Association". Whether this resulted from a change of name of the former MBA or some more extensive re-organisation is not clear from the evidence. The new Association appears to have had the same membership, and the same executive, as the former MBA. By 1948, the Association had been registered as a trade union under State industrial relations legislation.
9. Despite the recommendations by Commissioner Kinsella, the Manufacturers' Association pressed on with its plan to establish its own research institute. In 1947, Dr Kent Jones, a British cereal chemist, visited Australia at the invitation of the Association to advise on the establishment of such an institute. Dr Jones produced a report for the Association in which he recommended that a "bakery advisory and research association" be established so as to provide the bread industry with scientific advice. Dr Jones argued that such advice was sorely needed. He also suggested that establishing such a research institute would enhance the Manufacturers' Association's standing in the industry.
10. It seems that the research institute was initially established as a sub-organisation within the Manufacturers' Association itself. The institute's Director was Mr Eric Bond, an Australian cereal chemist. He was formally employed as Director of the institute in July 1947.

Incorporation

1. BRI was incorporated in May 1948. BRI's memorandum and articles of association were based on the memorandum and articles of a similar British body called the British Baking Industries Research Association.
2. There were seven subscribers to BRI's memorandum of association. They were all individuals who were members of the executive of the Manufacturers' Association.
3. Clause 2 of the memorandum contained twenty-nine stated objects of the company, set out in paragraphs (a) to (cc). The initial seven objects were: (a) To carry out scientific research and developmental work in connection with the manufacture of bread and allied industries. (b) To carry out scientific research and experimental and developmental work in connection with wheat and all other cereals and the products thereof. (c) To promote, maintain, develop and preserve the manufacture of bread and flour industries and to treat and use residuals and by-products for all purposes connected therewith and to expend money thereon and in experimenting upon and testing the same. (d) To set up chemical, physical and engineering laboratories for any or all of the afore-said purposes and to carry out various tests as required by any statue for the time being in force in the State of New South Wales or elsewhere for any other purpose. (e) To compile, collect, circulate and diffuse statistical and other information relating to the manufacture of bread and allied industries generally. (f) To encourage and foster the output of bread and allied products as the Company shall deem expedient. (g) To print and publish or cause to be printed and published such journals, pamphlets, books or leaflets as the Company may think desirable for the promotion of the objects and to make any arrangements the Company may think proper for the printing, production, publication and distribution of any of the said journals and literature aforesaid and to arrange lectures and demonstrations for the furtherance of the objects.
4. These were followed by objects which extended more generally to promoting the interests of the membership: (h) To provide and conduct refreshment rooms, clubs, newspaper rooms, reading and writing rooms, libraries, dressing rooms, telephones and other conveniences, comforts or entertainment for the members and others. … (j) To communicate the opinions of the Company to the Government of the Commonwealth or of any of the States thereof or to various Departments thereof by letter, memorial, deputation or otherwise in any matter affecting the interests of the members of the Company. (k) To originate and promote improvements in the law as affecting the interests of the Company or the members thereof and to support or oppose alternations therein and to advocate improvements in administration and for the purposes aforesaid to petition the Parliament of the Commonwealth or any State thereof and take such other steps and proceedings as may be deemed expedient. (l) To attain all lawful advantages by united action which the members of the Company would have difficulty in attaining in their separate capacity.
5. The remaining objects were operational in nature. They included: the acquisition and maintenance of patents and other intellectual property (object (i)); the purchase, or receipt by way of gift, or lease, of real or personal property and the investment of the company's monies in securities (objects (p)-(w)); and the employment of staff (objects (x)-(z)). The inclusion of such operational objects was conventional in company memoranda of association of the time.
6. The operational objects appear more like powers than objects strictly so called. But the end of clause 2 provided: … the objects specified in each paragraph of this clause except where otherwise expressed in such paragraph shall be separate and independent main objects of the Company and shall not be limited or restricted by reference to or inference from the terms of any other paragraph or the name of the Company.
7. Clause 5 of the memorandum provided: The income of the Company whencesoever derived shall be applied solely towards the promotion of the objects of the Company as set forth in the Memorandum of Association and no portion thereof shall be paid or transferred directly or indirectly by way of dividend bonus or otherwise howsoever by way of profit to the persons who at any time are or have been members of the Company or to any of them or to any person claiming through any of them …
8. The articles provided for executive members of the Manufacturers' Association to be members of BRI. Their membership would cease if they ceased to be members of that executive. The Council (see the following paragraph) also retained a discretion to admit others to membership.
9. Management of BRI was conferred on a Council consisting of Councillors. The Councillors did not have to be members of BRI. They were elected by the members in general meeting, with a system of retirement and re-election by rotation. Casual vacancies could be filled by the Council, but subject to a vote at the following annual general meeting. The maximum and minimum number of Councillors (initially three and seven) could also be increased or reduced by the members in general meeting.
10. Article 55 provided for a "Director of the Institute" whose powers and duties were to be specified in an agreement between the Council and the Director. It also provided that Mr Bond would be the first to hold the position.
11. Article 85 dealt with the surplus in the event of BRI being wound up. It provided: If the Institute shall be wound-up and after satisfaction of the debts and liabilities of the Institute there remain surplus assets, then such surplus assets shall be given or transferred to the [Manufacturers' Association].
12. An initial general meeting of BRI took place on 18 May 1948, six days after its incorporation. At that meeting Mr Bond's pre-existing contract of employment was confirmed. There is no reference in the minutes to any other pre-incorporation contracts. But later reports state that on incorporation, BRI was provided with an initial capital fund of £12,000 and income of £4,500. Presumably these amounts came from the Association. BRI may have also taken over equipment and stores of the predecessor research institute belonging to the Association.

Operations 1948-1988

1. Membership, management and activities: According to BRI's articles, its formal membership was confined to a small group of individuals who were members of the executive of the Manufacturers' Association (subject to nomination by the Council of other persons as members). But from the outset, the ordinary members of the Association were treated for some purposes as members of BRI. They were charged a subscription fee and were entitled to receive services provided by BRI. It seems clear enough that these "baker members" (as they were described by BRI) were only members in an informal sense. There is nothing to indicate that they were registered as members by BRI (which would presumably have required them to agree to provide a guarantee of BRI's debts, albeit limited to £1, and would have entitled them to vote at general meetings).
2. The subscription paid by baker members was based on the flour tonnage used in their businesses (initially one shilling per tonne). This apparently entitled them to receive BRI's publications and use BRI's library. BRI also provided such members with technical advisory services on an individual basis. Advice was provided on subjects such as: the construction of bakeries; the installation of machinery; and the ingredients for "fancy bread". Members could also submit bakery samples for testing by BRI. These services appear to have been provided to some extent as membership benefits and to some extent on a fee-for-service basis.
3. Before long, BRI's ambitions had expanded beyond New South Wales. In April 1950, BRI's name was changed from "Bread Research Institute of New South Wales Limited" to "Bread Research Institute of Australia Limited". Bread manufacturers' associations in other States became "affiliated" with BRI. Officeholders of affiliated associations were probably nominated as members by the Council, or elected as Councillors, or both, although the representation of affiliated interstate associations was not formalised in BRI's articles until 1960 (see below).
4. It seems that initially the interstate associations paid affiliation fees on behalf of their baker members for access to BRI's facilities and services. By 1959, baker members of affiliated interstate associations were paying a direct subscription to BRI based on flour usage.
5. BRI also established a category of "membership" (again, informal, and not involving voting rights) for businesses in allied trades. This was known as "associate membership". By 1952, it included various flour millers and manufacturers of allied products, and BRI was operating an advisory and technical service for millers.
6. By 1954, associate members had been split into two categories. One, described as "ordinary" associated members, paid subscriptions which entitled them to receive BRI's publications. The other category was "service" associated members who were additionally entitled to receive advice and testing on a fee-for-service basis. They paid a subscription calculated by reference to the volume of their businesses (in the case of flour millers, per tonne of flour produced).
7. It seems to have taken a few years for BRI to organise and develop research capabilities. In 1950, BRI applied for grants to the CSIRO, which then administered a system of Commonwealth-funded grants for research and development. BRI started receiving grants from the CSIRO in 1951.
8. The beginning of BRI's relationship with the CSIRO in 1951 was accompanied by some changes to BRI's articles of association, which were made at an extraordinary general meeting in December of that year. The amendments gave the CSIRO certain entitlements for so long as it was providing grants to BRI.
9. First, the CSIRO was entitled to nominate two members of the Council (the size of which was increased to accommodate the two new members). The Councillors so nominated were to be exempt from the requirement to retire and face re-election by rotation. Second, BRI was prohibited from altering its memorandum or articles without the CSIRO's consent. Third, if BRI were wound up, its surplus assets were to go to some other institution or institutions having objects "similar to" those of BRI, provided that such institution(s) were subject to restrictions on the distribution of their income and of their assets on winding up which were at least as stringent as those applying to BRI.
10. The CSIRO was not the only organisation which provided research grants to BRI. By the mid-1950s, BRI was also receiving grants from bodies called the "Wheat Industry Research Council" and the "Rural Credits Development Fund". Over time, other bodies provided grants.
11. From 1949 or thereabouts, BRI was based at an office building in North Sydney, built on land which had been acquired in 1948. It seems that this building had no space for testing and BRI used laboratory facilities provided to it by others. Over time, BRI's need for office space also outgrew the building.
12. To meet this challenge, BRI entered into an agreement with the CSIRO in October 1958 concerning the North Ryde land (then owned by the CSIRO, and apparently vacant). Under the agreement, BRI was to have a right of occupation of the land for ninety-nine years. It was to build a new building on the land at its own expense. BRI would own the building but was obliged to accommodate a wheat research institute to be established by the CSIRO. In late 1959, BRI sold its North Sydney premises; BRI later moved to the North Ryde property following the construction of the new building there in 1960.
13. In October 1960, a special resolution was passed by the members of BRI amending various articles. This included amendments to the membership provisions. The amendments enabled the Association and affiliated interstate organisations to nominate a specified number of persons (totalling nine) as registered members of BRI. The number of nominations for each nominator organisation varied between one and three. Appointments were to last for specified periods (although no doubt subject to re-appointment) of one, two or three years. The Council retained power to appoint additional members and could remove members so appointed.
14. The amendments also affected the Council. Members nominated by the Association and affiliated interstate organisations automatically became Councillors for the duration of their appointments. Such Councillors did not need to be elected by the members. The Council also retained its power to appoint additional Councillors. Provision was made for an Executive Committee of Councillors, which presumably oversaw BRI's day-to-day management.
15. BRI's activities continued to diversify after the move to North Ryde. In 1966, BRI expanded its activities establishing a new division known as the Nutrition and Consumer Services Division. The division was intended to communicate with the public about bread and other flour products (including their nutritional value) and assess consumer preferences. It was funded by grants from the Federal Council of Flour Millowners of Australia, who continued to support the Division for many years. From at least 1973, the Federal Council was referred to as the "Flour Millers Council of Australia". In what follows, I refer to that body as the "FMC".
16. In July 1972, BRI's articles were further amended to increase the maximum number of Council members from fifteen to twenty. The annual report of that year suggests that this was to facilitate the appointment of a further three Councillors representing bakery and flour milling interests.
17. In May 1974, BRI adopted a new set of articles. The articles provided for the following membership categories: (a) ordinary members, being bread manufacturers, retired bread manufacturers, executive officers of bread manufacturing companies or retired executive officers of bread manufacturing companies; (b) affiliate members, being persons carrying on business wholly or mainly in the baking of bread, biscuits, cakes, flour confectionary or production of other farinaceous food stuffs or executive officers of such persons; (c) associate members, being persons carrying on a business in the production of or dealing with machinery, appliances accessories or materials for use in the baking industry; (d) honorary members, being persons elected to honorary membership by the Council for special services to the Institute.
18. Ordinary membership was the equivalent of the formal membership provided for under the 1948 articles. This presumably continued to involve registration as a member. The ordinary members were to be nominated in specified numbers by the Association, interstate bakers' associations, and a national Bakery Group. But rather than having fixed-term appointments, ordinary members were susceptible to removal or replacement by their nominators at any time. The Council continued to have power to appoint additional ordinary members itself.
19. Baker members and associate members were now formally recognised (the former as "affiliate members") but their memberships, and those of honorary members, still were not memberships for the purposes of the Companies Act. The articles made it clear that such memberships were granted, and could be removed, by the Council.
20. Under the new articles, the maximum number of Councillors remained at 20, subject to any variation by the members in general meeting (article 34). Ordinary members nominated by the Association and others automatically held office as Councillors. The CSIRO retained its right to nominate two Councillors if it was providing grants to BRI. The FMC was also entitled to nominate one Councillor. Additional Councillors could be appointed by the Council for a twelve-month term. The Executive Committee was no longer named in the articles, but article 49 enabled the Council to continue to delegate powers to it. Accordingly, day-to-day management continued to be in the hands of the Director (who was ex officio a Councillor) under the oversight of the Committee.
21. The new articles carried forward the prohibition on BRI changing its memorandum or articles of association without the CSIRO's consent, during any period for which a grant had been obtained from the CSIRO or while the 1958 agreement concerning the North Ryde land was in force. The article governing the surplus on winding up was new article 68. It provided: If upon the winding up or dissolution of the Institute there remains after the satisfaction of all its debts and liabilities any property whatsoever the same shall not be paid to or distributed among the members but shall be given or transferred to the [CSIRO] or some other institution or institutions having objects similar to the objects of the Institute and which shall prohibit the distribution of its or their income or property among its or their members to an extent at least as great as is imposed on this Institute under and by virtue of Clause 5 of its Memorandum. Such institutions or institutions shall be determined by the members and the [CSIRO] at or before this time of winding up or dissolution and in default thereof by the Chief Judge in Equity of the Supreme Court of New South Wales or any Judge of that Court as may have or acquire jurisdiction in the matter and if and so far as effect cannot be given to the aforesaid provisions then to some charitable object.
22. After the adoption of the 1974 articles, BRI's technical and research activities expanded to encompass the grain industry more directly. From January 1975, BRI established a new facility called the Central Grain Research Laboratory. Much like the FMC funding the Nutrition and Consumer Services Division, the new laboratory was established and funded by arrangements with the Australian Wheat Board ("AWB"). The AWB continued to fund the facility for a number of years.
23. In 1983, with funding from the AWB and the FMC, BRI constructed a pilot flour mill for research purposes on the North Ryde property. This mill was the subject of a formal agreement between the AWB and BRI in October 1984.
24. Meanwhile, BRI had adopted yet another new set of articles in November 1981. The membership provisions were similar to those adopted in 1974 but only included three categories: ordinary, associate and honorary. The entitlements of external parties to nominate ordinary members were re-jigged. In particular both the AWB and the FMC were given nomination entitlements. Nominees to ordinary membership had a fixed term of two years, subject to re-nomination.
25. As to the Council, the maximum number of Councillors was increased to twenty-five. Persons nominated to ordinary membership automatically became Councillors. The Council's ability to appoint additional Councillors or fill vacancies was retained on the same terms as in 1974. The CSIRO also retained Council representation. Provision was made for an executive committee which was to include Councillor representatives of certain specified nominating organisations (including the CSIRO).
26. A key development during the 1980s was the reduction in, and eventual withdrawal of, Commonwealth grant funding for BRI. From July 1981, grant funding was provided by the Department of Science and Technology (from 1985 it was provided by the Department of Industry, Technology and Commerce), in place of the CSIRO. In fact, according to BRI's 1984 annual report, Commonwealth funding had been in decline over the preceding five years. By 1986, there was a recommendation before the relevant Commonwealth Minister to stop providing grant funding to BRI altogether after the 1987/1988 financial year.
27. Public description of BRI's objects and activities: In its first annual report (1948), BRI described the task for which BRI has been established as having been "to improve the quality of bread in as short a time as possible, to maintain that improvement, and further, to ensure the development of the industry along scientific lines". The report grouped BRI's activities into five categories: 1. Advisory Service 2. Research 3. Travelling Baker Service 4. Industry Representation 5. Public Relations
28. The predominant activities-based section of the 1949 report concerned "scientific and advisory services". The same heading appeared in the 1950 report. Other headings in that report included "extension services", "research" and "revision of the pure food regulations". Relevant headings in the 1951 report were "scientific advisory services to members", "educational and associated activities", "research" and "bread standards".
29. In its 1953 annual report, BRI recorded that it had been recognised by the Federal Commissioner of Taxation as "an approved research organisation". The report stated that this would enable all gifts and donations to BRI to be allowable deductions for income tax purposes. The Council trusted that this recognition would encourage individual members and companies allied to the baking industry to support research projects by way of grant or donation.
30. BRI's 1954 annual report recognised that its "activities should be directed along two broad channels". The first was the provision of "advisory services for members, including the handling of day to day problems". The second was more general, namely "research into bread making methods and materials". The distinction was, however, difficult to maintain because so much of BRI's work was common to both channels.
31. Annual reports in 1954 and later years, in describing the work of BRI over the year in review, contained separate sections which reflected these two channels, being described as "technical advisory services" (which included sampling, testing, the publication of newsletters and bulletins, the provision of library services, assisting affiliated associations including by the provision of advice, training and trials, and conducting investigations) and "research activities". Following the introduction of the Nutrition and Consumer Services Division, those services were identified as a third aspect of BRI's activities.
32. In its 1969 annual report, BRI recorded that it had been recognised as an "approved research organisation" for the purposes of the Industrial Research and Development Grants Act 1967 (Cth). Under that Act, the Commonwealth Government was to provide financial assistance for approved research and development work undertaken by individual companies. Accordingly, work of that nature carried out by BRI in agreement with an individual company would qualify for Commonwealth support.
33. From 1976, BRI's annual report stated its "primary aim" as being "to carry out scientific research and developmental work for the benefit of the Australian Baking Industry and to provide technical advisory services to that industry". The 1976 report continued by noting that BRI "also undertakes research of concern to the wheat and flour milling industries and, through the Central Grain Research Laboratory, provides technical services for the Australian Wheat Board".
34. In the 1983 annual report, BRI's "primary aim" was described as being to "carry out scientific research and development work for the benefit of the industries it represents". The report continued by noting that, "[t]echnical advisory services and training programs are also provided to those industries by BRI". This language was maintained until at least 1988.
35. Income, expenditure and assets: In its first couple of years, BRI received some grants from the Manufacturers' Association to allow it to operate. But after that, BRI was able to support itself with fee income from members and (after 1951) grant income.
36. As would be expected, the levels of BRI's income and expenditure increased over time. In 1970, income was at $265,000. By 1980, it was at $952,000. By 1987, it was at $2.4 million. BRI recorded very few deficits during the first two decades of its operations. Thereafter, deficits were more frequent in the late 1970s and 1980s, when BRI experienced pressure on the income side of the ledger.
37. Overall, there appears to have been only a slow build-up (after taking into account the effects of inflation) in BRI's assets over the period from 1948 to 1988. As at the end of 1967, BRI had $317,000 in fixed assets (largely leasehold land and buildings, as depreciated). Current assets were at $60,000 and liabilities at $40,000. By the end of 1987, BRI's total assets were up to $4 million and its total liabilities were $1.8 million, resulting in net assets of $2.2 million.
38. For well over two decades, subscriptions and service fees paid by members were BRI's main source of income. They accounted for 60% of BRI's income in 1959 and reached 70% in 1964. Thereafter, they declined back towards 50% in the 1970s. By the 1980s, income from the bread and milling industries represented somewhat less than half of BRI's income.
39. Up until the late 1970s, the Commonwealth was the main source of grant income for research purposes. It seems that for at least part of the period, these grants were linked to the income received from the baking industry. Research grants were, however, provided by the bodies noted above at [66], among others. As already mentioned, Commonwealth grant monies declined in the 1980s: BRI recorded in its 1985 annual report that it had fallen, as a percentage of BRI's total income, from 22% to 12%.

Conversion to incorporated association

1. In November 1988, BRI applied to become an incorporated association. The question of conversion had been raised at an executive committee meeting in August of that year. The Chairman suggested that conversion "could simplify the presentation of the annual accounts", whereas the Companies Code format had given "a misleading overview of the composition of the profit and loss account" in the previous year.
2. BRI's application was accompanied by a copy of the "objects" and "rules" that it adopted. The new objects appear to have been identical to the objects in the 1948 memorandum of association, apart from the substitution of "association" for "company" where relevant. The rules appear to have been an amalgam of a standard set of rules for incorporated associations and some, but not all, of the provisions of BRI's previous articles. In particular, the winding up provision from the articles does not appear to have been adopted.
3. In November 1989, these rules and objects were revised at an extraordinary general meeting. The objects as set out in BRI's prior memorandum were adopted (although, as identified above, the objects adopted in 1988 appear to have already been materially identical). The articles as set out in BRI's 1981 were adopted as the rules, subject to two exceptions that are not necessary to describe.

Operations 1988-1995

1. Membership, management and activities: Commonwealth grant funding ceased from 1 July 1988 as had been foreshadowed. Shortly beforehand, the Commonwealth government had introduced an additional tax concession (a 150% tax deduction) for research and development expenditure. Although project-specific grants continued to be available, BRI was faced with a loss of grant income.
2. There was a recognition that BRI needed to reconsider its activities in a substantial way. The 1990 annual report recorded that BRI had resolved to proceed on a "more commercial basis". BRI adopted more of a "user pays" approach to its facilities and services. It also embarked on a build-up of its fee-earning services, which were expanded to include training. This culminated in contract research, contract services and fees for services becoming the predominant sources of income (see below at [109]).
3. In September 1990, BRI obtained written advice from solicitors, Mallesons Stephen Jacques ("MSJ") on its tax status as a "scientific organisation". MSJ's opinion was that the provision of technical services to the industry did not fall within that description, but that the conduct of such activities would be legitimate if undertaken incidentally to BRI's more general research activities. MSJ also drew attention to the increasing fee-for-service income from non-members and indicated that if such income reached a level of 20% or 25% of total annual fees, then BRI's tax status might be in question.
4. Despite the adjustments which they had made, BRI's management continued to see it as operating in a state of flux. In May 1993, Mr McCorquodale (the then chairman) and Dr McMaster presented a paper entitled "Future Directions" to the Council. The paper presented a "long-term plan" for consideration.
5. The paper began with the following description: BRI's Role BRI is an independent national research, training and service organisation for the grains, milling and baking industries. Rationale By its expertise in all areas of the integrated industry - grains, milling, baking - the BRI is able to be of maximum service to each of these industries in its quest for technical excellence. Mission Statement To provide services required by industry. BRI strives to be a focus of excellence through the dedication of its staff to high quality research and competence in the delivery of services. The BRI aims to provide services which both complement and supplement services available to all members from within their own organisations, and to provide an independent secretarial/representation function or members' collective activities in research, training, nutritional and regulatory areas. Operating Philosophy While BRI is a non-profit organisation and a registered research agency, it operates as far as is reasonably practicable, in accordance with commercial principles applicable in the general marketplace. The BRI is committed to a user pays/fee for service basis. It aims to be able to account fully to all members for the application of funds supplied.
6. The paper put forward a series of recommendations for changes to be made to BRI's structure and administration. Most of these were accepted by the Council. The recommendations included changes to BRI's rules. The authors noted that all ordinary members automatically become Councillors who, under the rules, were to manage the business of BRI. The report recommended that as BRI was now "a more responsive organisation" and there were "many more commercial policy decisions to be made" it was necessary to have a "more normal commercial structure". Under this, the members (Councillors) were to appoint an executive committee which would be equivalent to a board of Directors. This recommendation was accepted by the Council.
7. In July 1994, the old flour levy was phased out and replaced with a new subscription system under which members paid a flat fee or entered into a fee-for-service contract. The new system was explained in the 1993/94 annual report as follows: For many years, the BRI has received funding from all of industry via a levy on each tonne of flour. From 1 July 1994, this levy has been discontinued and the BRI is now actively promoting its services to the whole industry, seeking memberships as well as investment in specific research work to make technological advances and help solve industry problems. To make the BRI more accessible to a broader range of members and also to make BRI membership more meaningful and equitable, a new system has been adopted whereby members formally, 'sign up', 'pay up', and are officially recognised as being 'part of the organisation'. From now on, only signed up/paid up members will be kept informed about what the BRI is doing and, more importantly, kept up to date on what BRI can do for them as part of their membership privileges. They will also have priority access to BRI services at special rates.
8. The new system included different types of membership. These were described as: Subscriber Members receive 'BRIEFS' newsletter every three months to keep them up to date with BRI initiatives and important industry developments, as well as many other issues. Subscribers may also access BRI services, at members' rates, should these ever be needed. Baker 'Gold' Members on the other hand, receive BRI publications monthly. On a quarterly rotation, these will include BRIEFS newsletter, BRI Technical Bulletins, and BRI Regulatory Alerts. Gold Members will also have the right to consult by telephone with BRI experts at no charge and to access BRI services at members' rates. Miller Members are the 'gold members' of the milling industry with benefits equivalent to those of the Baker Gold Member group. Associate Members are those individuals or companies which are not classified as millers or bakers, but are connected with the cereals, milling, or baking industries through the provision of products or services. Associate members are also treated like 'gold', receiving the same benefits as Baker Gold Members.
9. The description of the new membership system for bakers and millers system in the 1993/1994 annual report however emphasised that "[f]or many years, the BRI has been an independent voice for both small and large organisations as well as individuals within the baking, milling and cereal industry"; "[t]he changes … will make it easier for us to keep in touch with members and support those who support us"; and that "to access BRI services and reap the rewards, you must be a member" (emphasis in original).
10. Public description of BRI's objects and activities: The description of BRI's activities in its annual report (see [90] above) was expanded to include "consultancy services" in its 1992 report but was otherwise unchanged in substance until the 1993/1994 report (BRI's financial year-end was changed from 31 December to 30 June from 1993). In 1994/1995, the description was reworded: The Bread Research Institute of Australia Ltd (BRI) is an independent centre of expertise in grains, grains processing, milling and baking. Operating both test and commercial-scale bakeries and flour mills, with associated research laboratories, the BRI employs expert bakers and baking scientists and millers/milling scientists who act as key reference points for their industries. The BRI's central analytical laboratory is NATA certified and attracts business from a wide sector of the food and allied industries because of its reputation for service and accuracy. The laboratory also provides a monitoring and support service to milling and baking industry laboratories. Some general industry activities are coordinated through the BRI. These include promoting the nutritional value of cereals to educators and health professionals, coordinating the industry's approach to food regulatory issues, providing a library and information resource as well as providing training at supervisory level, particularly in milling and baking.
11. Income, expenditure and assets: BRI recorded in its 1994/1995 report that contract research was BRI's "core business", and that it and "contract services" combined accounted for almost 70% of total income. Those two categories, along with fee for service income, accounted for 90% of total income. BRI's income reached $4.5 million in the 1993/94 financial year but decreased to $3.6 million in the following financial year. In both of those financial years, expenditure was closely aligned with income. As of September 1994, BRI's most valuable fixed asset was its pilot mill ($1.4 million), with fixed assets totalling $2.9 million, and current assets totalling $2.3 million. Net assets were $4.2 million.

Reconversion to a company limited by guarantee

1. In May 1995, BRI applied for reconversion to a company limited by guarantee, with ministerial consent provided in June. BRI informed members in its 1994/1995 annual report that the structural change followed legal advice "that the incorporated structure was no longer appropriate, because of the substantial commercial income now earned" by BRI. It also indicated that BRI's governance system would shift "to a normal commercial basis, with a board of directors elected by the members".
2. The new memorandum and articles were adopted in their final form in November 1995. I was not referred to any evidence on how the provisions which are relevant for present purposes came to be worded as they were.
3. The objects of the company were restated in clause 2 of the memorandum as follows: The objects for which the Company is established are: (a) to carry out scientific research and developmental work in connection with the grains, milling, baking and allied industries: (b) to carry out scientific research and development work in connection with grains and grains products; (c) to promote and develop the grains, milling, baking and allied industries; (d) to advise, consult and provide services to the grains, milling, baking and allied industries; and (e) to do anything allowed by the operation of Section 161 of the Corporations law (but only in connection with the purposes of this Clause).
4. Clause 3 provided for limited liability of members. Clause 4 provided: Every member of the Company undertakes to contribute to the assets of the Company in the event of its being wound up while he is a member, or within 1 year afterwards, for the payment of the debts and liabilities of the Company, contracted before he ceased to be a member, and the costs, charges and expenses of winding up the Company and for the adjustment of the rights of the contributories amongst themselves. The amount of the contribution is as may be required for those purposes but must not exceed $100 in any event.
5. The prohibition on the income of BRI being used for the benefit of members was restated, and expanded to include BRI's property as well as its income in clause 5: All income and property of the Company must be applied solely towards the promotion of the objects of the Company as set out in Clause 2. No portion of the income or property may be paid or transferred directly or indirectly by way of dividend, bonus or otherwise by way of profit or return of capital to members of the Company.
6. The new articles of association also contained provisions reflecting the membership categories which had developed: 3. The members are the persons the Board admits to membership in accordance with these Articles. 4. The Company has the following membership categories: (a) Category A: ("Baking Association Member") - a baking association which represents a substantial region in Australia (acknowledging that more than 1 association may represent a region or a part of a region); (b) Category B: ("National Bakery Members") - a person who conducts a baking or flour milling business of substantial size in more than 1 State or Territory of Australia; (c) Category C: ("Institutional Member") - an institution which undertakes activities connected with the Company's objectives or activities; (d) Category D: ("Invited Member") - a person who is invited by the Board to apply for membership because the person is able to assist in furthering the Company's objectives or activities: (e) Category E: ("Associate Member") - a person who is invited by the Board to apply for non-voting membership because the person may use the Company's services or may be connected with the Company's objectives or activities in some other way; and (f) Category F: ("Honorary Member") - a person who is invited by the Board to become a non-voting member in recognition of the person's special services to the Company. 5. The Board may establish sub-categories of each membership category. In these Articles, a reference to a membership category does not include a sub-category unless expressly stated. 6. Baking Association Members, National Bakery Members, Institutional Members and Invited Members are voting members. Associate Members and Honorary Members are non-voting members.
7. Control was given to a Board of Directors (article 66) consisting of persons elected by specified groups. Those groups were (with the number of Directors they could elect in parentheses): Baking Association (2); National Bakery (2); Institutional (2); and the Board itself (3). The Chief Executive Officer was a Director by virtue of their position. The CSIRO also retained conditional representation (see below at [118]). The Board could appoint additional Directors, subject to re-election (article 47).
8. Article 83 dealt with the distribution of the company's property on winding up or dissolution largely in the same terms as those which had been adopted in 1974. Article 83 provided: If on the winding up or dissolution of the Company there remains after the satisfaction of all the Company's debts and liabilities any surplus property, the surplus property must not be paid to or distributed among the members but must be given or transferred to some other institution or institutions having objects similar to the objects of the Company provided the institution or institutions prohibit the distribution of its or their income or property among its or their members to an extent at least as great as is imposed on the Company under and by virtue of Clause 5 of the Memorandum and this Article. The institution or institutions must be determined by the members at or before the time of winding up or dissolution. If the determination is not made by the members by that time, the determination is made by the Chief Judge in Equity of the Supreme Court of New South Wales or any Judge of that Court as may have or acquire jurisdiction in the matter. If effect cannot be given to the intentions of this Article, the surplus property must be paid to a charitable organisation.
9. The new articles 85 and 86 continued to provide for the CSIRO's special position but reduced the number of its nominee Directors from two to one. 85. During every period in respect of which the Company receives a grant from the Commonwealth Government of Australia, CSIRO is entitled to (and, during any other period in respect of which the Board invites CSIRO so to do, CSIRO may) appoint not more than 1 Director. During the period, CSIRO may remove and replace a Director so appointed. At the end of the period, any Director so appointed automatically ceases to hold office as a Director. 86. Until the determination of the agreement between the Company and CSIRO dated 20 October 1958 and, in addition, during every period in respect of which the Company receives a grant from CSIRO: (a) the Memorandum and these Articles cannot be amended without CSIRO's approval; and (b) CSIRO is an institution which must be considered by the members as a potential recipient of surplus property under Article 83.

Operations from 1995

1. The issues addressed in the present judgment do not turn upon BRI's operations after 1995. Therefore, it is not necessary to consider that period, and in particular, changes in BRI's structure, in the same level of detail.
2. A milestone for BRI in this period was acquiring freehold title to its part of the North Ryde property from the CSIRO. Heads of agreement were reached in 1997. BRI was to pay $2 million to the CSIRO. In return, the CSIRO was to convey the land it had occupied under the 1958 agreement (subject to some boundary adjustments) together with an additional piece of land. BRI undertook to continue to house the Grain Quality Research Laboratory for the CSIRO. Title passed to BRI on 15 June 2000.
3. This acquisition led to a redevelopment of BRI's site. This appears to have commenced at least by the time of BRI's corporate report in 2003, in which it was noted that redevelopment was "progressing slowly but satisfactorily".
4. The provisions in BRI's articles referring to the CSIRO were only formally removed in November 2001, soon after the resignation of the last Director who had been appointed by the CSIRO. At a Directors Meeting where this was discussed, it was noted that CSIRO's Director appointment rights had lapsed upon BRI's acquisition of the formerly CSIRO-owned land.
5. The level of BRI's income expanded. BRI's 1999 annual report recorded total revenue of above $5m for the first time, with an operating surplus of $225,000. For the 2003/2004 financial year, total income was up to $8.9m with a total company surplus of $2.8m. The trend of increased reliance on research contracts as an income source continued, producing over $6m in income in the 2003/2004 financial year.
6. There were further major changes from 2006 onwards. I have already referred to the establishment of the Property Subsidiary in 2006 (see above at [6]). At the same time, BRI established another subsidiary (BRI (Research) Pty Limited) through which its research activities were to be conducted. BRI's intellectual property assets appear to have been transferred into the previously established Technology Subsidiary.
7. In January 2007, BRI entered into a contract worth $18.4 million for the construction of a further building on the North Ryde land. In November of that year, BRI transferred the land to the Property Subsidiary. A unit trust, known as the New Horizons Unit Trust, was established with the Property Subsidiary as trustee. As consideration for the transfer, BRI was issued with 9.6 million units in the Trust. The construction of the new building reached completion in July 2008.
8. The existing BRI building, now known as the "Research Building", was leased by the Property Subsidiary to BRI in April 2008. In December 2008, BRI sold its research subsidiary to Grain Growers Association Limited. This company then appears to have taken over the lease of the Research Building.
9. The effect of these transactions was that BRI became a holding company without any direct property interests or business activities of its own. This can be seen in the annual reports which characterised BRI as an investor in research and development, rather than as directly undertaking research and development.
10. BRI was converted to a proprietary company in November 2010. The justification advanced for this was that there had been changes in the commercial environment within which BRI operated. That environment was said to involve a greater role for private equity than had previously been the case.
11. BRI's new constitution limited the number of shareholders to 50, with shares to be issued as the Directors thought fit. It contained no reservation of shareholdings for external organisations. Nor did it reserve positions on the governing Board of Directors. As mentioned earlier at [11], these changes resulted in BRI having only three shareholders, who were also its Directors.
12. The winding up clause also took a very different form. If approved by special resolution, the liquidator could divide "in kind all or any part of" BRI's property among the members, at a value considered fair by the liquidator, with the division at the liquidator's discretion.
13. After some hiccups in leasing the new building, a commercial tenant, 3M Australia Pty Limited, signed a long-term lease in December 2010 and the lease began in September 2011. Until the Receiver was appointed in 2014, BRI's income consisted essentially of a flow of income from the Property Subsidiary via the Unit Trust. Presumably that remains the case.

Charitable trust

1. The declaration which the parties jointly invited the Court to make was a declaration that "all assets and undertakings currently held by" BRI are held on trust "for the following charitable purposes", which were then specified (they are quoted in full at [385] below). The parties also invited the Court to declare the trust as having been "created" on a particular date. Counsel for the Attorney-General (supported by counsel for BRI) nominated the creation date of the trust as having been 15 November 1995, the date of the resolution to adopt the new memorandum and articles of association of BRI. Counsel for the plaintiffs nominated the creation date as having been 12 May 1948, the date on which BRI's original Memorandum of Association was adopted.
2. The parties' arguments took place against the background of the law applicable to "charitable corporations", namely corporations established as vehicles for charitable activities. Before addressing the parties' contentions, I will summarise what I consider to be the main points which emerge from the illuminating submissions which I received. I will do so under two headings. First, I will say something about charitable corporations' origins and historical development in English law, including more recent authorities in England and elsewhere in the common law world. Then in a separate section, I will summarise the Australian authorities against the background of those wider common law developments.

Charitable corporations: English origins and later authorities

1. Charitable corporations before the nineteenth century: The charitable corporation is one of the earliest institutions in English law. From medieval times, charities existed in corporate form. Religious houses such as monasteries were a prime example. There were also eleemosynary corporations, which were charged with distributing bounty of the founders in the form of alms or other benefits. Such corporations included, for instance, university colleges: Patel v University of Bradford Senate [1978] 1 WLR 1488 at 1491-2. Hospitals (in medieval times generally concerned with looking after the poor rather than the provision of medical care as such) were another example.
2. The use of trusts for charitable purposes is said in Tudor on Charities to date from "at least" the sixteenth century: Henderson W, Fowles J, Hogan G, (11th ed, 2023, Thomson Reuters) at [6-002]. Charitable corporations of the type described in the previous paragraph, however, existed long before 1500. It is notable that the authority given by the learned authors of Tudor (footnote 13) states that the limitation of a use to "the poor of" a specified parish "is good though no corporation". In the case in question, trust law appears to have been filling the gap left by the absence of a corporation.
3. Although monastic houses and chantries ceased to exist in the Reformation, ecclesiastical and eleemosynary corporations remained an important part of the legal landscape. Indeed, Professor Holdsworth's A History of English Law (1st ed, Vol 9, 1925, Sweet & Maxwell) at 58 says that such corporations were "perhaps" the most numerous and "not the least important" ones until the rise of the joint stock company which began in the second half of the nineteenth century.
4. Charitable corporations of this type gave rise to various issue of public policy. One was mortmain, the history of which is the subject of a learned article by Professor Oosterhoff of the University of Western Ontario: 'The Law of Mortmain: An Historical and Comparative Review' (1977) 27 University of Toronto Law Journal 257.
5. Since medieval times, the alienation of interests in land in favour of corporations had been restricted by statute. The alienation of such an interest required the licence of the Crown (and of any intermediate feudal lord). If the necessary licences were not obtained, the alienation was valid but subject to forfeiture. The initial concern was with land being donated to the Church. The early statutes therefore focused on alienation of land to ecclesiastical corporations such as monasteries. But there was a more general concern about land increasingly being locked up in perpetuity, and later legislation extended the prohibition to all corporations, even secular ones such as municipal corporations (Oosterhoff at 265-271).
6. In post-Reformation times, the practice of obtaining a licence was liberalised; in 1696, it became sufficient to obtain a licence from the Crown and no licence from intermediate feudal lords was required: Oosterhoff at 270. But the medieval Statutes of Mortmain continued to apply into the nineteenth century, although exemptions were increasingly provided by statute. In fact, the medieval statutes were re-enacted in 1888 and were not finally repealed until 1960: Oosterhoff at 288-295.
7. Another public policy issue was ensuring that charities were properly administered in the interests of those they supported, and in the public interest generally. In this regard, the key feature of charitable corporations, as with other corporations, was the existence of the office of "visitor". The visitor was charged with the oversight of the corporation's affairs. Usually, this included the appointment and removal of officers of the corporation; regulating the management of the corporation's property; and determining claims and complaints about the internal management of the corporation, including the interpretation of the corporation's charter.
8. In ecclesiastical corporations, the visitor would usually be the diocesan bishop. In lay eleemosynary corporations, however, the founders and their heirs might exercise the right of visitation.
9. But what if no visitor had been provided for in the corporation's charter, as, for instance, with municipal corporations? By the end of the eighteenth century, it was seen as essential for a corporation to have a visitor. If none had been provided for, the power of visitation was in the Crown, whose powers of visitation were exercised through the courts: see Holdsworth vol 9 at 57-58.
10. This power of visitation by the courts was termed the "visitatorial jurisdiction" in a 1936 article by Dean Roscoe Pound of Harvard University ('Visitatorial Jurisdiction Over Corporations in Equity' (1936) 49(3) Harvard Law Review 363). The article discussed the features and history of the jurisdiction in some detail.
11. As Pound describes at 371-376, the visitatorial jurisdiction was originally exercised through the courts of common law. But the relief available through those courts was limited. Mandamus could be obtained to compel the corporations or their officers to perform specific duties imposed on them under their statutes or ordinances or the common law, but apart from that the remedies for breach were drastic. Forfeiture of the charter could be enforced by scire facias. Quo warranto was also available, but at least in its origin, it was confined to seizure of the charity's assets by the Crown. These deficiencies were, however, mitigated by an auxiliary jurisdiction in equity. This allowed the Crown to obtain injunctions and other forms of equitable relief.
12. The idea that it was the visitor's responsibility to ensure the proper working of the corporation led naturally to the conclusion that the Court should, if asked to intervene in its affairs, defer to the visitor. In Attorney-General v Governors of the Foundling Hospital (1793) 2 Ves Jun 42; 30 ER 514, Lord Commissioner Eyre, sitting in the Court of Chancery, stated (at 47; 516). There is nothing better established, than that this Court does not entertain a general jurisdiction to regulate and control charities established by charter. There the establishment is fixed and determined; and the Court has no power to vary it. If the Governors, established for the regulation of it, are not those, who have the management of the revenues, this Court has no jurisdiction; and, if it is ever so much abused, as far as respects the jurisdiction of this court, it is without remedy: but if those, established as governors, have also the management of the revenues, this Court does assume a jurisdiction of necessity, so far as they are to be considered as trustees of the revenue.
13. Two points should be emphasised about this passage. First, the court's power to intervene derived from a "jurisdiction of necessity". The court intervened because there was no-one else who could have done so; it was said to be unreasonable and mischievous that visitors should be exempt from being visited themselves (see Pound at 374). Second, the jurisdiction was not directly based on the court's control over trusts. The governors themselves were not trustees; the trustee was the corporation itself. In acting against the governors, the court was acting by analogy, on the footing that the governors were "to be considered as trustees".
14. The origin of this "jurisdiction of necessity" is obscure; see, for example, the competing views of Blackstone and Fonblanque quoted by Lindsay J in Estate Polykarpou; Re a charity [2016] NSWSC 409 at [147]-[148]. It may have been rooted in the Crown's role, as parens patriae, in protecting charities (see [220] below). On the other hand, it could be explained as some form of outgrowth of the visitatorial jurisdiction, operating as a further auxiliary extension of equitable power. This would have been significant because such a jurisdiction would not have been confined to charitable corporations. Yet another possible explanation, again not necessarily restricted to charities as such, would be to see it as an ad hoc recognition of a fiduciary duty, analogous to that of a trustee, in the particular circumstances of the case: see the discussion of the High Court decision in Fouche at [311]-[313] below.
15. Charitable trusts before the early nineteenth century: Subsequent developments need to be understood in the light of the development of charitable trusts between the Reformation and the early nineteenth century. Gareth Jones tells the story in History of the Law of Charity 1532-1827 (1969, Cambridge University Press).
16. It is convenient to begin with the Statute of Elizabeth of 1601 (UK) (43 Eliz 1 c 4). The Statute was part of a suite of statutory reforms dating from late in the reign of Queen Elizabeth I which were concerned with the relief of sickness and destitution: see Holdsworth W, A History of English Law (2nd ed, Vol 4, 1936, Sweet & Maxwell) at 398-399; see also Jones at 22-25.
17. The concern of the Statute was to deal with the maladministration of charities. It empowered the Lord Chancellor to appoint commissioners who would investigate a charity's affairs and make orders for the recovery of assets which had been misapplied as well as specifying how the charity was to be managed in the future. These orders were to have their own force and effect but were subject to review in the Court of Chancery where they might be confirmed, varied, or set aside.
18. Although the Statute is often called the 'Charitable Uses Act', it was in fact, as a matter of language, not limited to charitable trusts. The recitals referred to charities founded by the Crown as well as by private donors. The Statute however contained exemptions for university colleges, cathedral or collegiate churches, municipal corporations, and other colleges, hospital and schools with visitors or governors appointed by their founders, although the exemptions were strictly construed: Jones at 37-39. It also provided that any orders made by the commissioners could not be "contrary or repugnant to the orders, statutes or decrees of the owners or founders" of the charity. For practical purposes, therefore, the Statute had very limited application to charitable corporations.
19. Initially, the use of commissioners under the Statute worked well. But over time the procedure became slow and cumbersome, and it was superseded by Chancery proceedings in which the Court directly exercised the function of controlling the administration of charitable trusts under the Statute. Such proceedings were brought on information by the Attorney-General or by relators using the Attorney-General's name: Jones at 52-56.
20. The next significant statutory development was the Mortmain Act 1736 (UK) (9 Geo 2 c 36). The medieval statutes of mortmain applied only to corporations. The 1736 Act applied the relevant public policy to charitable trusts. It invalidated dispositions of land by will for charitable purposes which did not comply with specified conditions.
21. The real reasons for the passage of the Act are hard to discern, but they appear to have included a concern to protect the heirs of vulnerable testators from rapacious charities (which, of course, had no doubt been part of the justification for the medieval Statues of Mortmain as well): Oosterhoff at 277-284. This encouraged to the courts to define gifts for charitable purposes broadly in cases where the Act would apply to defeat the gift. However, where the Act would not apply (for example in cases of gifts of money or other non-land assets) the interests of the heir could only be protected if the gift were construed as a trust for a non-charitable purpose, thus invalidating it in equity, and this created a counter-current which was not (and arguably still has not been) satisfactorily resolved: see Jones at 128-133.
22. Prerogative cy-près: I have already referred to the Crown's role as protector of charities. In controlling the administration of trusts, that power was exercised through the Court of Chancery in the manner which has just been discussed. But this did not fully cover the field. During the Reformation, the Crown was given statutory power to resettle property held on trust for Roman Catholic practices, which were now classified as illegal "superstitious uses". In the following century, the courts began to accept that illegal trusts of this type were, without the need for specific statutory authorisation, to be re-settled under the prerogative power of the Crown (Jones at 10-15, 76ff).
23. This doctrine, referred to by Jones as the doctrine of "prerogative cy-près", involved instructions for the re-settlement of the property (whether directly or by delegation) being issued under the sovereign's signature (referred to by its old name, the "sign manual"). The doctrine was later extended to gifts to "indefinite" or "general" charitable purposes which were too uncertain to be enforced; as, for example, where no trustees were identified (Jones at 88ff).
24. The doctrine of prerogative cy-près operated alongside the conventional doctrine of cy-près applied by the Court of Chancery to validly established charitable trusts where the objects had failed. The power of re-settlement under the sign manual was typically delegated to, or exercised on the advice of, the Lord Chancellor, with the result that in practice the two doctrines tended to lead to equivalent results: Polykarpou at [132]-[137]. Nevertheless, the distinction, which was a somewhat fine one, was taken up and confirmed by Lord Eldon early in the nineteenth century in Moggridge v Thackwell (1803) 7 Ves 36; 32 ER 15 (Jones at 151-153).
25. Charitable corporations in the nineteenth century: The result at the end of the eighteenth century was a patchwork system of charity law where charitable trusts clearly did not cover the whole field. As well as the doctrine of prerogative cy-près, there was a distinct role for charitable corporations. So, for instance, when income tax was first introduced in 1799, an exemption was provided for the income of any "corporation, fraternity or society of persons established for charitable purposes only": Duties on Income Act 1799 (UK) (39 Geo 3, c 13), s 5. That exemption was carried forward in subsequent income tax statutes.
26. The distinct role of charitable corporations was even clearer in the United States where, generally speaking, English law had been received in its seventeenth century form. Indeed, in New York and some other American states, charitable trusts were not recognised, and charities therefore could only be constituted in corporate form. Part of the explanation for this was a (mistaken) belief that jurisdiction over the administration of charitable trusts depended upon the Statute of Elizabeth, which was not in force in New York. But another part of the explanation was an express public policy preference for charities to be operated in corporate form. This situation continued until statutory intervention early in the twentieth century: see Scott on Trusts (1st ed, Vol 3, Little, Brown and Company) s 348.3, at 1925-1929.
27. The corollary was that the rules which governed charitable corporations and charitable trusts (where they existed) were not necessarily the same. In 1939, Professor Scott commented Scott on Trusts (1939, Vol 3) s348.1, at 1818-1819): It may be asked whether a gift to a charitable corporation creates a charitable trust. The answer probably is that it does not create a charitable trust at least in the strict sense of the word. …. It is not infrequently stated in the cases that a charitable corporation does not hold upon charitable trust property conveyed or bequeathed to it, but holds the property beneficially. However, a charitable corporation does not hold its property beneficially in the same sense in which an individual or non-charitable corporation can hold it beneficially, since in the case of charitable corporation the Attorney General can maintain a suit to prevent a diversion of the property from the purposes for which it was given.
28. The continuing availability, in the United Kingdom, of the jurisdiction over corporations is shown in an 1828 case in the Irish Court of Chancery involving the town of Galway, discussed by Pound at 372-373. The town's charter gave it the right to levy tolls, which were to be used for walling and paving the town and no other purpose. The Attorney-General brought an information alleging that the town corporation was neglecting its obligations in this regard. Orders were sought for an accounting of the tolls received and their application to walling and paving works. The Court held that it was open to the Attorney-General to proceed in this way even though no trust was involved.
29. What is particularly striking about this example is the practical similarity between equity's auxiliary visitatorial jurisdiction and its jurisdiction over the administration of trusts. Wall and pavement works are closely analogous to other public works expressly mentioned in the preamble to the Statute of Elizabeth, such as the construction and maintenance of bridges, ports, causeways and highways. In the Galway case we see equity requiring funds earmarked for such works to be accounted for, and requiring the works to be undertaken, in the same manner as if there had been a trust for the relevant purposes.
30. But by this time there was a doctrinal shift under way in England. The shift is described in a paper by Mr Justice Cullity of the Superior Court of Justice in Ontario, writing extrajudicially, and published in 2006, to which I was referred by counsel for the Attorney-General: 'The Charitable Corporation: A 'Bastard' Legal Form Revisited' (2006) 9(2) The Charity Law & Practice Review 19 (the title refers back to an earlier paper by EJ Mockler published in the journal of the Canadian Bar Association in 1966). As Cullity puts it (at 20), the prevailing view became that "charitable corporations were a species of charitable trust".
31. Cullity's description of how this shift occurred is (at 21-23): In the early 19th century, as investigations into the administration of charitable funds revealed the inadequacy of corporate law to prevent abuses, the court gradually extended its jurisdiction to cases in which, at an earlier period, deference would have been paid to the function and powers of visitors [referring to the passage from the Foundling Hospital case quoted above]. As a justification for their intervention, judges ceased to speak of the jurisdiction of necessity and, instead, referred exclusively to the Court of Chancery's jurisdiction with respect to trusts. Many of the earlier cases involved privately endowed charities or royal foundations, such as hospitals, schools and university colleges, where the analogy with trusts was particularly close. This change in characterization provided a firm basis on which the Court could exercise a general supervisory jurisdiction that was not restricted - or barely restricted - by the implications of legal personality. Although earlier references to the existence of a trust as the foundation of the jurisdiction can be found and although it can hardly be said that the later authorities reveal a completely consistent approach or terminology, three decisions of Sir John Romilly M.R. were influential from the second half of the 19th century until quite recently. … While the 18th and early 19th century cases show the courts attempting - not always consistently and never definitively - to draw lines of demarcation between areas in which corporate law and trust law would apply, the effort was virtually abandoned after the cases mentioned.
32. Many, if not most, of the cases which manifested this approach concerned the construction of gifts in wills to charitable corporations. Cullity quotes (at 23) an 1841 judgment of Sir Edward Sugden (then Lord Chancellor of Ireland, and later Lord St Leonards) in a case of this type: Incorporated Society in Dublin v Richards (1841) 4 I Eq Rep 177 at 198-9. The will in question contained a gift to an incorporated society. But his Lordship rejected the proposition that it was an absolute gift to the corporation, unfettered by any trust. In his Lordship's view, the name of the corporation, which was "The Incorporated Society in Dublin for the promotion of English Protestant Schools in Ireland", of itself expressed a trust purpose. Thus, although the testator did not "say in express terms that the gift is in trust for the charity, yet it must clearly be taken to be so".
33. Meanwhile, a process of statutory reform was under way. Earlier there had been attempts to speed up charitable trust proceedings. When this proved rather unsuccessful, there was more thorough reform which involved establishing a regulatory body of charity commissioners (see Jones at 165-168).
34. Whether coincidentally or not, this process of reform focused essentially on charitable trusts. The procedural statutory reforms sought to replace the system of proceedings by information in the Court of Chancery with a faster and more summary procedure. This began with an 1812 Act (Charities Procedure Act 1812 (UK) (52 Geo 3 c 101) known as "Romilly's Act". The charity commissioners' legislation (Charitable Trusts Act 1853 (UK) (16 & 17 Vict c 137); Charitable Trusts Amendment Act 1855 (UK) (18 & 19 Vict c 124); Charitable Trusts Act 1860 (UK) (23 & 24 Vict c 136)), as the short titles of the Acts suggested, operated within the procedural framework of the Court of Chancery's charitable trust jurisdiction. Although the commissioners' jurisdiction extended to all "charities" in England and Wales, there were exemptions for religious, educational and other charitable bodies which would have covered many if not most of the charitable corporations then in existence (1853 Act, s 57).
35. Rise of statutory trusts: Corporations and trusts created by Parliament had always coexisted alongside chartered corporations which had been created by royal charter under Crown prerogative. But while the use of royal charters continued through the nineteenth century, it was increasingly overshadowed as Parliament created new institutions dedicated to public education, public health, and the provision of public facilities and services.
36. These new statutory institutions did not of course have to have objectives that were charitable in the legal sense, but the objectives of many of them were in fact charitable, or quasi-charitable. Furthermore, Parliamentary intervention itself had the capacity to influence the definition of charity, as in Scottish Burial Reform and Cremation Society Ltd v Glasgow Corporation [1968] AC 138, where Victorian-era legislation providing cemeteries and cremation services contributed to the decision of the House of Lords that the provision of such services by a private body was charitable, as providing a public benefit: see Rookwood General Cemeteries Reserve Land Manager v Attorney-General NSW [2022] NSWSC 1763 at [214].
37. Often in creating such statutory institutions, Parliament used the language of trust and trusteeship. This did not necessarily mean that these "statutory trusts" were trusts in the strict sense, cognisable in equity in the usual way. Whether they were or not depended upon the terms of the legislation: see the authorities discussed in the Rookwood case at [183]-[211].
38. Typically, the trustees of such statutory trusts would also be given corporate status by Parliament. Not surprisingly, there were points of functional equivalence between statutory trusts of this type and incorporated charities.
39. Where the Parliament laid down requirements as to the administration of the trust, those requirements could be enforced through proceedings for administrative law remedies (including auxiliary equitable remedies such as declarations and injunctions) brought in the name of the Attorney-General. But the Crown also usually had the right to remove or replace the trustees, and to give directions about how the trust was to be administered. Powers of this type in effect amounted to a form of statutory visitation by the Crown. The statute might also give the Crown power to redirect the trust's property elsewhere if its objects could no longer be carried out or if for some other reason redirection was thought desirable.
40. Companies limited by guarantee: Meanwhile, the era of "do-it-yourself" companies had begun with the enactment of the Joint Stock Companies Act 1844 (UK) (7 & 8 Vict c 110). Initially, such companies were limited to trading ventures, analogous with business partnerships. But that changed with the Companies Act 1862 (UK) (25 & 26 Vict c 89). There were two relevant changes.
41. First, the 1862 Act provided for the incorporation of companies limited by guarantee. Clearly, it was contemplated that such a company might operate on a non-commercial (or, at least, non-dividend-paying) basis. It did not need to have share capital at all.
42. The second change was the creation of a special category of companies, described as "associations", which were "formed for the purpose of promoting art, science, religion, charity or any other like object, not involving the acquisition of gain by the company or the individual members thereof". Such companies were subject to a mortmain provision (s 21) which restricted the amount of land they could hold, unless permission was first obtained from the Board of Trade. They could be limited by guarantee or by shares.
43. The Companies Act 1867 (UK) (30 & 31 Vict c 131) contained further provisions relating to the incorporation of companies falling within that special category (or at least a very similarly worded category). Section 23 of the Act applied to any "association" to be formed under the 1862 Act as a limited company which was "formed solely for the purpose of promoting commerce, art, science, religion, charity, or any other useful object" where the profits or other income of the association had to be applied in promoting its objects, and the payment of any dividend to members was prohibited. The Board of Trade might by license direct the incorporation of the company, and a company so incorporated was to enjoy all of the privileges, and be subject to all of the obligations, of the Act, except the obligations: to use the word "limited" in its name; to publish its name; and to provide details of its members, directors or managers to the Registrar. The Board of Trade was empowered to impose such conditions as it saw fit on the grant of any such licence.
44. Provision for the incorporation of such companies, to which I will refer as "special company associations", appears to have answered a need. According to the 1884 edition of Palmer's Company Precedents (3rd ed, Stevens) (at 78-80), s 23 had proved very useful and many associations had been registered under it, generally as companies limited by guarantee. Examples were law societies, chambers of commerce, trade protection societies, medical societies, agricultural associations and "charitable associations". Palmer provides a list of some of the associations in question. Not infrequently, these special company associations replaced and took over the operation of earlier unincorporated but privately funded bodies of equivalent type.
45. The 1884 edition of Palmer's Company Precedents set out precedent memoranda and articles of association for a special company association, presumably as sanctioned by the Board of Trade. The precedent memorandum of association contained a restriction on paying income or property of the company (referred to in the precedent as the "society") out to members (clause 4). It also dealt with winding up in clause 8: If upon the winding up or dissolution of the society there remains, after the satisfaction of all its debts and liabilities, any property whatsoever, the same shall not be paid to or distributed among the members of the society, but shall be given or transferred to some other institution or institutions having objects similar to the objects of the society, to be determined by the members of the association at or before the time of dissolution, and in default thereof by such judge of the High Court of Justice as may have or acquire jurisdiction in the matter.
46. The provisions of the 1867 Act concerning special company associations were carried forward to subsequent provisions of the United Kingdom Companies Acts. It would seem that the incorporation requirements of the Board of Trade, and in particular the precedent provisions of its approved memorandum of association, likewise remained substantially the same until well into the twentieth century (see Re Merchant Navy Supply Association Ltd [1947] 1 All ER 894 at 895).
47. In the 9th Edition of Palmer's Company Law in 1911 (Stevens and Sons Limited) Palmer stated (at 251): The advantages of incorporation for such associations is [sic] great. The association gains in stability, public estimation and credit. It becomes a body corporate with perpetual succession, just as if it were incorporated by Royal Charter or special Act of Parliament. It can adopt in lieu of "company" a more suitable name, such as chamber, club, college, guild, association. It can have a common seal; it can hold property in its own name without the intervention of trustees; it can contract and take and defend legal proceedings in its own name; its affairs can be conducted much more efficiently, and - finally - its officers and members are freed from personal liability.
48. Incidentally, five years after the 1867 Act, an attempt had been made in the Charitable Trustees Incorporation Act 1872 (UK) (35 & 36 Vict c 24) to give charitable trusts with individual trustees some of the advantages of incorporation. The Act allowed for the trustees to be constituted as a corporation, with perpetual succession. But it did not provide for limited liability and in practice was not used: see Lady Arden's judgment in the Children's Investment Fund Foundation case (below at [244]) at [62]-[63].
49. Secular Society case: Although the case did not directly concern a charitable corporation, the decision of the House of Lords in Bowman v Secular Society Ltd [1917] AC 406 later came to be seen as an important step in the development of the law. The case concerned a gift in a will to a rationalist association named the Secular Society, which had been incorporated as a company limited by guarantee (but not apparently as a company association). The Society's objects were not charitable (in fact they were anti-religious). One of the arguments against the validity of the gift was that the Society took the gift as trustee for its objects, and because those objects were not charitable, the gift failed. This argument was rejected by the House.
50. Lord Parker of Waddington began his opinion by referring to some basic principles about the law as it applies to gifts (at 436-437): At common law the conditions essential to the validity of a gift are reasonably clear. The subject-matter must be certain; the donor must have the necessary disposing power over, and must employ the means recognized by common law as sufficient for the transfer of, the subject-matter; and, finally, the donee must be capable of acquiring the subject-matter. If these conditions be fulfilled, the property in the subject-matter of the gift passes to the donee, and he becomes the absolute owner thereof and can deal with the same as he thinks fit. The common law takes no notice whatever of the donor's motive in making the gift or of the purposes for which he intends the property to be applied by the donee, or of any condition or direction purporting to affect its free disposition in the hands of the donee. It is immaterial that the gift is intended to be applied for a purpose actually illegal … or in a manner contrary to the policy of the law … In either case, the essential conditions being fulfilled, the gift is complete, the property has passed, and there is an end of the matter. A gift at common law is never executory in the sense that it requires the intervention of the Courts to enforce it. With regard to the conditions essential to the validity of a gift, equity follows the common law. … Under certain circumstances, however, the donee does not in equity, even if all the requisite conditions be fulfilled, obtain an absolute interest. … the circumstances of the gift or the directions given or objects expressed by the donor may be such as to impose on the donee the character of a trustee. In such a case equity will enforce the trust so far as may be, and, if for any reason the trust fails, will imply a resulting trust in favour of the donor or those claiming under him. But, except so far as they may be relevant on the points above mentioned, equity does not any more than the common law pay any attention to the donor's motives in making the gift or to the purposes for which he intends the property to be applied by the donee, or to any condition or direction affecting its free disposition in the hands of the donee. … … Thus, if a testator gives £500 to A, saying that he knows A will expend it in procuring masses to be said for testator's soul [a classic "superstitious use"], the question arises whether A is a trustee for the purpose indicated. If he be not a trustee, he will in equity take the legacy beneficially; the fact that the trust, if there be a trust, would be unlawful being quite immaterial. If, however, it be held that A is a trustee, then, as the trust is unlawful, equity will not allow the trustee to retain the legacy.
51. Against this background Lord Parker stated (at 440-441) that the appellant's argument: … is, in my opinion, quite fallacious. The fact that a donor has certain objects in view in making a gift does not, whether he gives them expression or otherwise, make the donee a trustee for those objects. If I give property to a limited company to be applied at its discretion for any of the purposes authorized by its memorandum and articles, the company takes the gift as absolutely as would a natural person to whom I gave a gift to be applied by him at his discretion for any lawful purpose … A gift of a fund on trust to pay the income thereof in perpetuity to a society, whether corporate or otherwise, might possibly, if the objects of the society were charitable, be established as a charitable gift, exempt from objection on the ground that it created a perpetuity. But it is one thing to establish a gift (which would otherwise fail) on the ground that it is charitable, and quite another thing to avoid a gift which would otherwise be good on the ground that it creates an unenforceable trust. If a gift to a corporation expressed to be made for its corporate purposes is nevertheless an absolute gift to the corporation, it would be quite illogical to hold that any implication as to the donor's objects in making a gift to the corporation could create a trust. The argument, in fact, involves the proposition that no limited company can take a gift otherwise than as trustee … Lord Dunedin and Lord Buckmaster agreed: see at 435, 478.
52. Twentieth century Canadian developments: As Cullity describes at 24-25, only a year after the decision in the Secular Society case, it was suggested in the Irish courts that the decision had effectively displaced the analysis in the Incorporated Society in Dublin case. The same thought was later taken up in the Canadian courts.
53. In Roman Catholic Archiepiscopal Corporation of Winnipeg v Ryan (1957) 12 DLR (2d) 23, the British Columbia Court of Appeal had to consider the validity of a gift by will in favour of the Corporation for the benefit of a church in that city "or otherwise as the said corporation shall see fit". The Corporation had been established by statute as a vehicle for the administration of the Roman Catholic Archdiocese of Winnipeg. It was argued for the next-of-kin that the Archdiocese's operations were not exclusively charitable (in the sense understood in trust law) and accordingly that the gift failed. The Court, however, held that the gift was a gift in favour of the Corporation as a corporate entity. It was therefore immaterial whether the Corporation's activities were exclusively charitable.
54. Davey JA referred to the passage in Lord Parker's opinion in the Secular Society case which I have set out at [183]-[184] above. The gift was not expressly in favour of the Corporation as trustee. Davey JA saw the question as turning on whether the testator's "ultimate motive or purpose" of advancing the affairs of the Roman Catholic Church in Winnipeg was "so inconsistent with an intention that the Corporation should take absolutely that a trust for such purpose must be implied" (at 28). Davey JA reasoned that the Corporation was in any event obliged to apply its property for the relevant purposes by its constituting statute and accordingly there was "no reason to imply a trust to compel the Corporation to do that which its constitution requires it to do" (at 29).
55. Twentieth century English doctrine: Initially the decision in the Secular Society case had no effect on the prevailing orthodoxy in England so far as gifts to charitable bodies were concerned. The fifth edition of Tudor on Charities (Carter HG and Crawshaw FM, 1929, Sweet & Maxwell) stated at 118-119: A gift generally to an existing charitable institution or society, whether incorporated or not … is applicable to the general purposes of the institution, the corporation where the institution is incorporated, and the governors or trustees or other officials responsible for the administration of the funds where it is not incorporated, being trustees for that purpose. The proposition that the corporation was a trustee was supported by a footnote referring to the Incorporated Society in Dublin case.
56. Although this passage appeared to state that a charitable corporation holds its funds as a trustee, elsewhere the authors presented a somewhat more nuanced picture. A whole chapter of the book (chapter 6) was devoted to the jurisdiction of visitors. The authors stated (at 195): Eleemosynary corporations hold their property upon charitable trusts, and are therefore subject to the jurisdiction of the Court like all trustees, corporate or incorporate, lay or ecclesiastical. The corporate property of ecclesiastical and civil corporations, on the other hand, is not by its nature subject to any trust, and the court has, therefore, no more jurisdiction over it than it has over the goods of private individuals.
57. In discussing the jurisdiction of the Chancery Division of the High Court, the authors stated that the jurisdiction which the Court of Chancery possessed over charitable foundations and gifts was, apart from the Court's additional power to settle property cy-près, "coterminous with that over trusts of every kind". The authors, however, in the following paragraph stated more cautiously that it "seems always to have been admitted that the jurisdiction of the court rested on the existence of a trust" (at 174, emphasis added).
58. As time went on, however, textbook orthodoxy seems to have hardened. Cullity quotes (at 20) a passage from the 3rd edition of Halsbury's Laws of England (Lord Simonds, Vol 4, 1953, Butterworth & Co (Publishers) Ltd) which stated (emphasis added): "As charitable corporations exist solely for the accomplishment of charitable purposes, they are necessarily trustees of their corporate property whether the beneficiaries are members of the corporation, as in the case of hospitals and colleges, or not."
59. And in the sixth edition of Tudor on Charities, published in 1967, the fifth edition's slightly nuanced commentary on the jurisdiction of the High Court was replaced with the unqualified statement that the "jurisdiction of the court is founded on the existence of a trust" (McMullen D, Maurice S, Parker D, Sweet & Maxwell, at 302). The suggestion to the contrary by Vaisey J in Re Bennett (see at [202] below) was flatly declared to be incorrect.
60. But there were signs in the courts that the position was not as absolute as this. One example was seen in the administration of corporations established by royal charter. While they might be closely analogous to charitable trusts, as Cullity had noted, they were undoubtedly corporate bodies, legally distinct from the individuals who constituted the membership and the governing body of the corporation.
61. Re The French Protestant Hospital [1951] Ch 567 concerned a charity which had been established in corporate form by royal charter in 1718. The charter provided that the Hospital was to be managed by a board of governors, who had the power to make by-laws regulating the Hospital's operation, provided that any such by-laws were "not repugnant to law". One such by-law prohibited any person who received "any emolument" from the Hospital or was "directly or indirectly interested in the supply or sale of any goods to, or in any work done for" the Hospital from being appointed, or continuing in office, as a governor.
62. In 1949, the board of governors proposed an amendment which would modify the by-law so as to remove the disqualification on a governor being a member of a firm receiving remuneration from the Hospital for services performed for, or supplying or selling goods to, the Hospital. The governors sought the Court's advice as to whether an amendment in those terms was authorised under their by-law making power.
63. Danckwerts J upheld a submission by the Attorney-General that the amendment was "repugnant to law" because it involved a breach of the fiduciary obligation of the governors not to profit from their position. His Lordship observed (at 570): It is said by [counsel for the governors] that it is the corporation which is trustee of the property of the charity in question, and that the [governors] are not trustees. Technically that may be so. The property of the charity is, of course, vested in and held by the corporation. It is a perpetual person which exists, however, only according to the rules of law, and it is not an actual person capable of acting on its own motion in any way whatever. It seems to me that in a case of this kind the court is bound to look at the real situation which exists in fact. It is obvious that the corporation is completely controlled under the provisions of the charter by the [governors], and that those are the persons who in fact control the corporation and decide what shall be done. It is plain that those persons are as much in a fiduciary position as trustees in regard to any acts which are done respecting the corporation and its property … Therefore it seems to me plain that they are, to all intents and purposes, bound by the rules which affect trustees.
64. Shortly afterwards, in Re Whitworth Art Gallery Trusts v Victoria University of Manchester [1958] 1 Ch 461, the Court was asked to sanction a scheme of the type usually seen for charitable trusts in the case of a charitable corporation. The case concerned an art gallery conducted by the Manchester Whitworth Institute which had been incorporated by royal charter in 1890. The Institute's financial position had become unsatisfactory, with a lack of income to cover its expenditure, so that the governors had come to the conclusion that the Institute would have to be closed down or "reduced to a scale unworthy of its traditions". An application was made to sanction a scheme whereby the Institute's assets would be transferred to the Victoria University in Manchester, to be taken over by the University.
65. Vaisey J had to consider whether, given that the Institute had been founded by royal charter, it was permissible to sanction the scheme without the Crown having revoked the charter or legislation having been passed by Parliament. His Lordship stated that the proposition established by the authorities was that "a charitable corporation founded by royal charter cannot be re-founded or re-established by the court, but can be regulated and controlled by the court, especially on financial grounds, and in that case the court is entitled to have regard to altered circumstances" (at 467). Thus, the court could not interfere in the constitution of the Institute (for example, by appointing or removing governors) "but could give directions by scheme as to the application of its income" (at 467). In support of that distinction, Vaisey J (at 468) cited the passage from the Foundling Hospital case which I have quoted above at [145].
66. In Re Shipwrecked Fishermen and Mariners' Royal Benevolent Society [1959] Ch 220, a similar approach was taken in the case of a statutory trust. The Society which was the subject of the case had been incorporated by an Act of Parliament in 1850. The Act provided in s 11 that the Society's funds might be invested in a restricted group of approved investments. Later the Trustee Act 1925 (UK) gave general authorisation for trustees to invest in a wider class of investments, or in accordance with a scheme approved by the Court under s 57 of that Act. The Society sought approval of a scheme which permitted them to exercise those wider investment powers.
67. Counsel for the Attorney-General, relying on earlier authority concerning statutory trusts, submitted that the proposed scheme was impermissible. Section 11 necessarily restricted the Society to the investments specified in the 1850 Act. The application was in effect an attempt to re-write the Society's governing statute.
68. Danckwerts J overruled this objection. Part of his Lordship's reasoning was that as a matter of construction of the 1925 Act, it modified the 1850 Act by necessary intendment. But he also justified the conclusion on a wider basis (at 227): The cases to which I have been referred are far from clear, but I think the general principle which emerges is that the court cannot alter the … statute by a stroke of the pen and cannot therefore direct anything which is inconsistent with the terms of the Act of Parliament in question. The conclusion which I reach is that to allow a wider power of investment is to confer additional powers of investment and is not therefore inconsistent with but is in aid of and supplemental to the powers of investment which are conferred by section 11 of the Act.
69. Soon afterwards, there was a reminder that the cy-près field was not confined to charitable trusts. In Re Bennett, Decd; Sucker v Attorney-General [1960] 1 Ch 18, Vaisey J accepted an argument for the Attorney-General that the doctrine of prerogative cy-près remained a separate and operative part of the law. The will in that case contained a gift to "the Hospital for Incurable Women of Brompton Road, London", when there was no such institution. His Lordship saw the gift as not involving a trust and therefore having to be re-settled by the Crown under the sign manual.
70. His Lordship stated (at 26): Once I have come to the conclusion that there is not a trust but only a direct gift … I cannot see that this court, as a court of equity, has any jurisdiction. … I do not say the jurisdiction of the court is exclusively based on the existence of a trust … [T]he jurisdiction of this court is derived from the Crown; there is no kind of conflict and the only question is whether this peculiar particular problem falls within my jurisdiction as a judge of the High Court or has to be dealt with away from this court by the authority which is at the base of both jurisdictions; that is to say, by the Crown itself.
71. Re Vernon's Will Trusts: At around the same time, gifts to charitable corporations came under consideration in a line of cases arising out of the establishment of the National Health Service in the late 1940s. The establishment of the NHS had involved the involved the nationalisation of private charities which had previously operated hospitals and allied facilities. Their facilities had been taken over, and thereafter operated, by the NHS. Some of these institutions had been conducted by boards of individual trustees but others had been conducted by charitable corporations. Some of those corporations had been established by royal charter but others had been established as special company associations under the Companies Act.
72. Questions arose as to gifts made by will to privately founded hospitals and other medical institutions which had, after the will had been made, been taken over by the NHS. In particular, it became necessary to decide whether such a bequest was defeated by the nationalisation of the institution referred to in the will.
73. A particularly influential case in this line of cases was a 1962 decision of Buckley J, reported in the authorised reports ten year later: Re Vernon's Will Trusts [1972] Ch 300. The case concerned a bequest to a guild which provided orthopaedic treatment and convalescent care for crippled children. The guild operated an orthopaedic clinic and a separate orthopaedic hospital.
74. Originally the guild had been an unincorporated body. But at the time the testator made her will, it had been incorporated as a company limited by guarantee (and presumably as a special company association). By the time the testator died, however, the clinic and the hospital had been transferred to the NHS, and the company had been dissolved.
75. Buckley J began by drawing a distinction between a gift to an unincorporated charity and a gift to a charitable corporation. He said (at 303): Every bequest to an unincorporated charity by name without more must take effect as a gift for a charitable purpose. No individual or aggregate of individuals could claim to take such a bequest beneficially. If the gift is to be permitted to take effect at all, it must be as a bequest for a purpose, viz., that charitable purpose which the named charity exists to serve.
76. This statement of the law represented something of an over-simplification. The topic had, when Buckley J delivered his decision, recently been considered in some detail by Lord Simonds in his judgment for the Privy Council in Leahy v Attorney-General for New South Wales [1959] AC 457. The law as stated by Lord Simonds was that it was perfectly possible for a testator to make a gift in favour of an unincorporated association which would take effect as a gift in favour of the then members of the association personally. Indeed, there was said to be a presumption that gifts to unincorporated associations were intended as gifts of that kind. But as the result in Leahy showed, only very slight grounds were required to displace that presumptive view and conclude that the testator had intended the gift to be for the ongoing work of the association in question, which would render it invalid unless that work were charitable. Expressing the gift as one in favour of the unincorporated body itself tended to support that conclusion. One might almost say that, where the gift was to an unincorporated association by that name, for practical purposes the presumption was that the gift was made on trust for the association's objects.
77. Buckley J continued (ibid): A bequest to a corporate body, on the other hand, takes effect simply as a gift to that body beneficially, unless there are circumstances which show that the recipient is to take the gift as a trustee. There is no need in such a case to infer a trust for any particular purpose. The objects to which the corporate body can properly apply its funds may be restricted by its constitution, but this does not necessitate inferring as a matter of construction of the testator's will a direction that the bequest is to be held in trust to be applied for those purposes: the natural construction is that the bequest is made to the corporate body as part of its general funds, that is to say, beneficially and without the imposition of any trust. That the testator's motive in making the bequest may have undoubtedly been to assist the work of the incorporated body would be insufficient to create a trust.
78. The part of this passage which states that there is usually no need to infer a trust in the case of a charitable corporation is strikingly similar to what Davey JA said in the Winnipeg Roman Catholic Corporation case, which in turn applied Lord Parker's reasoning from the Secular Society decision. Buckley J did not cite either case in his judgment, and the report does not indicate whether either case was cited in argument. But it is hard to imagine that his Lordship did not have Lord Parker's reasoning, at least, in mind. The point made in the last sentence about the irrelevance of the testator's motive was expressly part of that reasoning (see the passage from the Secular Society case quoted at [183]-[184] above).
79. Arguably, the distinction drawn by Buckley J between gifts to unincorporated and incorporated bodies resulted in distinctions which were somewhat anomalous. This point troubled Goff J in another similar gift case, Re Finger's Will Trusts [1972] Ch 286, but in the end, he fell into line with Buckley J's approach.
80. Buckley J considered the wording of the will and continued: The bequest was, in my judgment, a simple bequest to the incorporated guild which that body, had it survived the testatrix, would have been entitled to receive as part of its general funds unfettered by any trust imposed by the testatrix as to the purposes for which it should be used. Had the incorporated guild been other than a charitable body, that would be the end of the matter, for the bequest would lapse on account of the dissolution of the incorporated guild in the lifetime of the testatrix. The guild was, however, incorporated for exclusively charitable purposes, and its memorandum of association was so framed that its funds could never be distributed among its members and that in a winding up any surplus assets would continue to be applied for objects similar to those of the incorporated guild. Whether and how far it would be right to regard the funds of the incorporated guild as subject to a charitable trust, I do not pause to consider beyond pointing out that any assets which it took over from the unincorporated guild would appear to have been subject to such a trust. Trust or no trust, however, it is true to say that the assets of the incorporated guild were all effectually dedicated to charity. In no circumstances - at least without the intervention of Parliament - could any of those funds have been used otherwise than for charitable purposes of the kind for which the guild existed so long as those purposes remained practicable. Even if those purposes ceased to be practicable, the charity would not cease to exist, although its funds would be applied cy-près. Such a charity, considered as a charity and apart from the mechanism provided for the time being and from time to time for holding its property and managing its affairs, could never cease to exist except by exhaustion of all its assets and cessation of its activities. A change merely in its mechanical aspect could not involve the charity ceasing to exist. The principle of the decisions in In re Faraker [1912] 2 Ch 488 and In re Lucas [1948] Ch 424 is, in my judgment, equally applicable to an incorporated charity of this kind as to a charity constituted by means of a trust.
81. The Faraker case to which his Lordship referred involved a bequest to an unincorporated charitable institution. Before the testator died, the charity's endowments were consolidated, by means of a cy-près scheme, with those of thirteen other charities. The Court of Appeal (despite the doubts of Kennedy LJ and the contrary decision of the trial judge) held that the original charity, once endowed, could not be destroyed or extinguished. All that had happened was that its objects had been changed in accordance with the law. The gift was thus upheld as a gift to the trustees of the consolidated charities.
82. The Lucas decision was another decision of the same type, involving a home for crippled children which before the testator's death was closed and replaced by a new charity under a cy-près scheme. Again, the gift was treated as a gift to the trustees of a new scheme, by identification with the previous charity to which the testator had referred. The decision was seen as being determined by the authority of the Faraker decision.
83. The justification offered by Buckley J for applying to the company a principle which applied to unincorporated charities was: In such cases the law regards the charity, an abstract conception distinct from the institutional mechanism provided for holding and administering the fund of the charity, as the legatee, and so long as the charity as so conceived continues in existence the bequest will not lapse. This result is not a consequence of construing the gift as one made for a charitable purpose to be ascertained by withstanding that its objects may have been modified or changed in accordance with the law between the date of the will and the testator's death or any later date at which the gift takes effect. It is a consequence of regarding the charity as the legatee in the manner I have stated. The result was that the gift took effect as a gift to the division of the NHS conducting the clinic and hospital as, in effect, the successor of the company.
84. Charities Act 1960 and Construction Industry Training Board case: Meanwhile, the statutory framework for charities in the United Kingdom had been updated by the enactment of the Charities Act 1960 (UK). That Act expressly defined charities as including not only trustees but also certain types of corporations. To be covered by the Act, a corporation had to be one "established for charitable purposes" and "subject to the control of the High Court in the exercise of the Court's jurisdiction with respect to charities" (s 45(1)).
85. The definition was considered by the Court of Appeal in Construction Industry Training Board v Attorney-General [1973] Ch 173. The question was whether the Board, which was a statutory body incorporated under the Industrial Training Act 1964 (UK) (c 16) for the purposes of providing training in the construction industry, was entitled to be registered as a charity under the 1960 Act.
86. The 1964 Act gave the responsible Minister powers of control over the membership of the Board and the management of its affairs. It was argued that the Board was a purely statutory body and could not be said to be subject to the High Court's charity jurisdiction. By majority, the Court of Appeal rejected this argument.
87. The leading judgment was given by Buckley LJ (as his Lordship had by then become). He stated: It is a function of the Crown as parens patriae to ensure the due administration of established charities and the proper application of funds devoted to charitable purposes. This it normally does through the instrumentality of the courts, but this is not the only way in which the Crown can regulate charities or the application of charitable funds. Where a charity has been incorporated by Royal Charter, the Crown may amend its constitution or vary its permitted objects by granting a supplemental charter. Where funds are given for charitable purposes in circumstances in which no express or implied trust is created, the Crown can regulate the application of those funds by means of a scheme under the sign manual. Where the Crown invokes the assistance of the courts for such purposes, the jurisdiction which is invoked is, I think, a branch of the court's jurisdiction in relation to trusts. In such cases the relief granted often takes the form of an order approving a scheme for the administration of the charity which has been laid before the court, but this is not the only way in which the court can exercise jurisdiction in respect of a charity or over charity trustees. The approval of a scheme of this nature is, so far as I am aware, a form of relief peculiar to charities, but it does not constitute relief of a kind given in the exercise of a jurisdiction confined to giving relief of that sort. The court could, for instance, restrain trustees from applying charitable funds in breach of trust by means of an injunction. In the case of a charity incorporated by statute this might, as was suggested in the present case, be explained as an application of the doctrine of ultra vires, but I do not think that this would be a satisfactory explanation, for a similar order upon unincorporated trustees could not be so explained. Or, by way of further example, the court could order charity trustees to make good trust funds which they had misapplied, or could order them to account, or could remove or appoint trustees, or could exercise any other kind of jurisdiction available in the execution of trusts other than charitable trusts. In every such case the court would be acting upon the basis that the property affected is not in the beneficial ownership of the persons or body in whom its legal ownership is vested but is devoted to charitable purposes, that is to say, is held upon charitable trusts. Any relief of this kind is, in my judgment, appropriately described as relief granted in the exercise of the court's jurisdiction with respect to charities, and, where the relief is such as to bind the body of trustees as a whole, this would, in my opinion, constitute control of the charity by the court in the exercise of its jurisdiction with respect to charities.
88. Liverpool Hospital case: A key authority in the argument before me was the decision of Slade J in Liverpool and District Hospital for Diseases of the Heart v Attorney-General [1981] Ch 193. The case concerned a company limited by guarantee which had been incorporated in 1908 with the objects of providing a hospital for the treatment of patients with cardiac diseases and promoting research into the causes of, and cures for, such diseases. The hospital operated by the company was transferred to the NHS in 1948. The company continued to operate a research institute but eventually this petered out.
89. By 1978 the company had no members (or at least no active members) and had long since ceased to file returns. The Attorney-General successfully applied to have the company wound up under the Companies Act 1948 (UK) pursuant to a provision of the Charities Act 1960. The question was what should happen to its surplus assets on the completion of the winding-up.
90. The memorandum of incorporation expressly described the company as a "charitable association". The company's objects applied only so far as they might properly be objects of such a charitable association. The memorandum contained clauses concerning the application of its income and property while it was operating, and the transfer of its net assets after it was wound up, in substantially the same terms as the clauses set out at [117] above. In particular, by clause 9, the institution or institutions to which the property were to be transferred were to be determined in the first instance by the members of the company at or before the time of dissolution, but in default of such determination, to "some charitable object" determined by a Judge of the High Court who might "have or acquire jurisdiction in the matter".
91. Counsel for the Attorney-General submitted that a company whose objects were charitable necessarily held its assets as trustee for those objects, giving rise to a charitable trust. On this submission, no surplus was available for distribution. Counsel relied upon the French Protestant Hospital and Construction Industry Training Board cases, among others.
92. His Lordship rejected the submission. He considered that none of the authorities upon which counsel relied, properly understood, actually decided that a company with charitable objects held its assets under a charitable trust in the strict sense. Decisions which had described such a company as holding assets on trust were using the term in a loose sense, or the point had been conceded. His Lordship referred to a passage in a judgment of Buckley LJ (Von Ernst & Cie SA v Inland Revenue Commissioners [1980] 1 WLR 468 at 479-480) stating that a company with charitable objects was "in the position of a trustee of its funds or at least in an analogous position" (emphasis by Slade J). Slade J concluded that such a company was only a quasi-trustee.
93. Slade J thought that this conclusion was supported by three further considerations. The first was the decision in the Secular Society case. His Lordship quoted the passage of the judgment of Lord Parker which I have quoted above. That statement did not in terms refer to charitable corporations, but Slade J considered that the existence of such corporations must have been in Lord Parker's mind. Secondly, Slade J considered that the concept of a company which would be incapable of holding any asset beneficially but was capable of incurring liabilities "would seem to be inconsistent with the general intention of the legislature as appearing from the [Companies] Act". Thirdly, provisions of the Charities Act 1960 expressly contemplated that a "charity" for the purpose of that Act need not necessarily be established by way of trust.
94. His Lordship next held that the terms of the company's memorandum of association prevented the surplus from being distributed to its members. Counsel for the Attorney-General contended that the Court should, in those circumstances, order a cy-près scheme over the proceeds. Counsel for the company argued, however, that the Court only had power to intervene in the company's affairs if there were a trust in the strict sense.
95. Slade J rejected this argument. He considered that the authorities, including the Construction Industry Training Board case, established "that the Court may have jurisdiction to intervene in the affairs of a company, even though a trust in the strict sense does not exist in relation to its assets". He continued: In the present case, as I have indicated, I do not think that the assets of the association were held by them subject to a trust in the strict sense. Nevertheless, under the terms of its constitution, they were at all times held subject to a legally binding obligation, which bound it to apply them for exclusively charitable purposes. It can therefore fairly be said that the position of the association in relation to its assets has at all times been analogous to that of a trustee for charitable purposes. This in my judgment suffices to give rise to the jurisdiction of the court to order a cy-près scheme in the events which have happened. In support of this conclusion, his Lordship quoted the passage I have set out at [214] and [216] above from the judgment of Buckley J in Vernon, about the law regarding a charity as an abstract conception distinct from the institutional mechanism provided for holding and administering its assets.
96. Finally, Slade J pointed out that nothing in the company's constitution ousted the jurisdiction of the Court. To the contrary, the memorandum of association "expressly recognise[d] and adopt[ed]" that jurisdiction (an apparent reference to clause 9). Accordingly, his Honour directed that the net assets of the company on winding-up be distributed cy-près.
97. Current authority: As Cullity describes in his article (at 25), later Canadian authority has recognised charitable corporations as being distinct from charitable trusts, but subject nevertheless to "trust-like" obligations in equity where there is no relevant corporate mechanism, or the mechanism has broken down. A key step was the decision of Anderson J in Re Public Trustee and Toronto Humane Society (1987) 60 OR (2d) 236.
98. The Society had been incorporated under Ontario's Benevolent and Provident Societies Act 1877 which allowed for societies to be incorporated (presumably in a form similar to a special company association) "for any benevolent or provident purpose". Such societies had subsequently come under Ontario's company legislation.
99. The proceedings arose because of a dispute within the Society about its future direction. One faction wanted the Society to support and contribute to a politically controversial campaign being pursued by another organisation against the use of animals for scientific research purposes. This faction, which was headed by the president, obtained control of the Society's board. Some of the newly appointed directors were then employed by the Society and paid substantial salaries.
100. The Public Trustee (apparently acting as the protector of charities in the same manner as the Attorney-General would act in England) sought to have the Court intervene in the administration of the Society. It was contended that the Society's property was subject to a charitable trust, and the appointment of a new trustee was sought.
101. There was no dispute that the Society's objects were charitable. Anderson J, however, did not accept that its assets were subject to a charitable trust in the strict sense. His Lordship also was inclined to think that the steps by which the president and her associates had obtained control of the board were legitimate from a corporate law point of view. But it was not necessary to go into this question, because the Court had an overarching jurisdiction allowing it to intervene.
102. In his Lordship's view, certain provisions of Ontario statute law concerning trusts and accounting by charities applied as a matter of construction. But also, and "conclusively", there was what his Lordship described as the "inherent equitable jurisdiction of the court in charitable matters".
103. But although the Court had power to intervene, that power needed to be exercised cautiously, and with due regard for corporate forms. His Lordship made orders for a meeting of the members of the Society to be held to elect a new board, with an impartial person to be responsible for convening and conducting the meeting. His Lordship was not prepared to make an order preventing the Society from supporting the political campaign espoused by the president and her group. But he did warn that funds of the Society could not be used for political (non-charitable) purposes even if, strictly speaking, that might have fallen within the scope of the Society's objects as a matter of corporate law. And, relying on the decision in the French Protestant Hospital case, his Lordship ruled that the directors were under a duty not to profit from their positions. An order was made which effectively prevented the Society from paying remuneration to its directors.
104. The position as it had been reached in Canada is thus consistent with the conclusions of Slade J in the Liverpool Hospital case. It is also, in effect, the view propounded in the current edition of Scott and Ascher on Trusts (Scott A, Fratcher W, Ascher M, Vol 5, 5th ed, 2008, Aspen Publishers) s 37.1.1, at 2365: The truth is that, in some senses, a charitable corporation is a trustee, and, in other senses, it is not. The question in each case is whether a rule that applies to trustees also applies to a charitable corporation.
105. Chinachem case: A similar view was taken by Lord Walker of Gestingthorpe, sitting as a Non-Permanent Judge of the Hong Kong Court of Final Appeal, in Secretary for Justice v Joseph Lo Kin Ching (2015) 18 HKCFAR 169. Ma CJ, Ribeiro, Fok PJJ and Chan NPJ concurred in his Lordship's judgment.
106. The case concerned the interpretation of a will which contained a large bequest in favour of a company limited by guarantee which operated a charitable foundation ("Chinachem Charitable Foundation"). The question was whether the bequest was a gift to the Foundation absolutely or a gift to the Foundation on trust for its charitable objects. Both at first instance and on appeal it was held that the gift was, as a matter of construction, a gift upon trust and an appeal to the Court of Final Appeal was dismissed.
107. Lord Walker addressed the principles applicable to the construction question at [37]-[40]. At [38] he remarked: It may be said that an incorporated charity holds its general funds "beneficially", but that expression may be a little misleading. Human beneficial owners of property, if of full age and sound mind, can dispose of their property as they like, but a charitable corporation may use its resources only for its charitable objects. So in practical terms it is not very different from a charitable trust, especially as the law imposes on the individuals who manage the corporation's affairs the same fiduciary obligations (in relating to deriving personal profit from their office, and similar matters) as are imposed on trustees: see for instance Re French Protestant Hospital [1951] Ch 567. The officers of a charitable corporation are not trustees in the strict sense, but they are in "at least an analogous position", as Buckley LJ (a judge with great expertise in charity matters) said in Von Ernst & Cie SA v Inland Revenue Commissioners [1980] 1 WLR 468, 479. Slade J expressed the same view in Liverpool and District Hospital for Diseases of the Heart v Attorney General [1981] Ch 193, 209.
108. At [39] his Lordship stated that, in the case of a gift to a corporation with wholly charitable objects, "the court does not readily construe words expressing a testator's motives or wishes as imposing a charitable trust on a gift which is already (because of the recipient's objects) destined to be applied for charitable purposes". He went on to refer with approval to the passage from Buckley J's judgment in Vernon which I have set out at [210] above, and to the decision in the Winnipeg Roman Catholic Corporation case. On the facts of the case, however, he concluded that the gift was for trust purposes and not simply a gift to the Foundation for its corporate purposes.
109. There was also a question as to whether it would be proper to direct a scheme to overcome deficiencies in the wording of the will. Lord Walker concluded that a scheme was appropriate. At [44], his Lordship stated: The court's inherent jurisdiction over charitable trusts is also exercisable, subject to some constraints and qualifications, in relation to charitable corporations, even though their property is not held in trust in the strict sense. The constraints and qualifications arise from the variety of constitutional sources from which a charitable corporation may derive its corporate status. These include incorporation by royal charter and incorporation by a special Act of Parliament, which may go so far as to confer public law functions on the body so incorporated: see the judgment of Lightman J in Royal Society for the Prevention of Cruelty to Animals v Attorney General [2002] 1 WLR 448, especially at pp 458-459, comparing the position of the RSPCA to that of the National Trust, whose status had been considered in Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705. (Both cases were concerned with these charities' attitudes to fox hunting and deer hunting with hounds.)
110. At [45], his Lordship noted that in such cases it might be inappropriate for the Court to interfere with the administrative machinery approved by the legislature, as in the case of a visitor. He referred to the judgments of Buckley LJ in the Construction Industry Training Board case and Slade J in the Liverpool Hospital case. But it was not necessary for the purposes of the judgment to explore this in any detail. A cy-près scheme was desirable because of the very large amount of money involved and the infelicities of expression and vagueness of the will.
111. Children's Investment Fund Foundation case: The Supreme Court of the United Kingdom recently considered a case involving a charitable corporation in Children's Investment Fund Foundation (UK) v Attorney-General [2022] AC 155. The dispute between the parties arose from a complicated series of transactions consequent upon the marital breakdown between two founding directors of a charitable company ("CIFF"). In exchange for one director (Ms Cooper) resigning as a member and trustee of CIFF, it was contemplated that CIFF would make a substantial grant to a second charitable company, Big Win Philanthropy ("BWP"), of which the sole director and member was Ms Cooper. Difficulties arose, however, when the other member of CIFF, Dr Lehtimäki, refused to commit to voting in favour of a resolution authorising the making of the grant. Such a vote was made necessary by s 217 of the Companies Act 2006 (UK), given the grant's characterisation as a payment for loss of office.
112. The question was whether Dr Lehtimäki could be compelled, in the exercise of the Court's jurisdiction over charities, to vote in favour of the resolution (it having been decided at first instance and on appeal that the resolution was in the charity's best interests). In turn, that raised two sub-issues. The first was whether Dr Lehtimäki was a fiduciary in the exercise of his powers as a member. The second was whether, if so, the Court had power to give a specific direction as to how he should vote.
113. Four members of the Court (Lord Briggs JSC, with whom Lord Kitchin JSC and Lord Wilson agreed, and Lady Arden JSC, in a separate judgment) considered that Dr Lehtimäki was under a fiduciary obligation to exercise his powers as member so as to advance the charitable objects of the company. They also concluded (by different routes) that the court had power to direct Dr Lehtimäki to vote in favour of the resolution.
114. For present purposes, the significance of the decision is the discussion of the Liverpool Hospital case by Lady Arden (with whose conclusion Lord Briggs agreed: see at [205]). Her Ladyship referred to the decision as part of her reasoning on whether Dr Lehtimäki was subject to fiduciary obligations in exercising his vote. In doing so, Lady Arden referred to two matters of context. The first (at [53]-[55]) was the courts' traditional desire to uphold charitable gifts. The second (at [56]-[65]) was the recognition of charitable corporations in the Charities Act 1960 and the successor Charities Act 2011 (UK).
115. Against that background, Lady Arden summarised (from [67]), with apparent approval, the decision in the Liverpool Hospital case. In passing, Lady Arden quoted (at [69]) the passage which I have quoted at [220] above from the judgment of Buckley LJ in the Construction Industry Training Board case, which her Ladyship described as an "illuminating description of the court's extensive jurisdiction over charities". Lady Arden also quoted (at [71]) the passage from Von Ernst which referred to a company incorporated for exclusively charitable purposes as being in a position "at least analogous" to that of a trustee, observing that the passage "provided a strong footing" for the decision of Slade J.
116. Lady Arden added that there were "wider points" to be drawn from the Liverpool Hospital decision, observing at [72], [73] and [80] that it: … is a yet further example of the determination of the courts to give effect to the charitable objects and not to allow technical matters, such as the reference to the company's articles in section 302 of the Companies Act 1948, to prevent the gift to charity taking effect. It would be a break with a long-standing tradition if this court was to depart from that approach. It also demonstrates another point, this time new as there had been little or no litigation about charitable companies registered under the Companies Acts in this regard before, namely the court's determination to make the statutory framework cohesive where this could be achieved. No party to these proceedings has challenged the authority of this important case. This decision was cited with approval by Lord Walker in [the Chinachem case]. It recognised that registered companies could be charities, and that meant that the new charitable vehicle had to meet both the charitable and corporate model. ... … The decision in [the Liverpool Hospital case] was an important decision because it set the direction of travel. Slade J gave precedence to the fact that a member had agreed to become a member of a charity. The general principle is that, as a result of the agreement which is made when a person becomes a member of a company, the rights of a member against the company and his liabilities to it stem from the memorandum and articles and the obligations imposed by the Companies Acts and the general law.

Charitable corporations: Australian authorities

1. Reception of English law: It never seems to have been in doubt that the Statute of Elizabeth, and the pre-existing equitable jurisdiction over charitable trusts, were received as part of English law on settlement. But neither the medieval Statutes of Mortmain nor the 1736 Mortmain Act became part of the law of New South Wales: Whicker v Hume (1858) 7 HL Cas 124; 11 ER 50; see also Oosterhoff at 297. In Polykarpou ([2016] NSWSC 409), Lindsay J expressed the opinion that there is no separate prerogative cy-près here either. After reviewing the history of the doctrine, his Honour concluded that, due to local conditions, the prerogative power passed to this Court along with its equitable counterpart, rather than passing to the Executive. There may, however, have been alternative bases for the actual decision his Honour made.
2. The United Kingdom Companies Acts of 1862 and 1867 were in substance adopted in the New South Wales Companies Act 1874. This included (ss 54 and 55) the provisions in the 1862 and 1867 Acts for the incorporation of special company associations and restricting such associations' ownership of land. The incorporation provisions were carried forward in s 34 of the Companies Act 1936, which was the Act in force when BRI was incorporated.
3. There was of course no equivalent in New South Wales of the religious and eleemosynary corporations which had survived the Reformation in England. At least one charitable corporation was established in New South Wales by royal charter after settlement. This was the Clergy and School Lands Corporation, which was established in 1826 and dissolved in 1833: see the Rookwood case ([2022] NSWSC 1763) at [33]-[42]. But, even more than in the United Kingdom, the governmental charity and quasi-charity field was largely occupied by statutory trusts. Probably the most important type of statutory trust was the one used to administer lands dedicated or reserved for public purposes under the Crown Lands Acts, described in the Rookwood case at [43]-[89].
4. Nor was there any equivalent in New South Wales legislation to the regulation of charitable corporations as such, found in the United Kingdom Charities Act 1960 and its successors (no reference was made in argument to the recent Commonwealth legislation on charities and not-for-profit organisations). The Charitable Trusts Act 1993, like the early nineteenth century English legislation, has remained focussed on charitable trusts.
5. Gift cases: Cases arose in Australia, as they had elsewhere, about whether a gift in favour of a charitable body was to be interpreted as a gift to the body beneficially or as a gift in trust for charitable purposes. In Hardey v Tory (1923) 32 CLR 592 a bequest was made by will to the secretaries of the Wesleyan Missionary Society (an unincorporated body) in London. It was argued for the next of kin that the gift was not a valid charitable gift, being only to the secretaries of the Society. But the High Court rejected this contention.
6. Knox CJ (Higgins J and Starke J agreeing) held that the gift was a gift to the secretaries of the Society for the purposes of the Society, which were accepted as being charitable. Higgins J added (at 595): [W]here a gift is made to a society having a distinctive charitable purpose, prima facie the gift is for that purpose. It is quite true that no trust is created unless the object as well as the subject of the gift is defined. The gift to the Wesleyan Missionary Society is prima facie to the objects of that Society, and there is nothing in the will to contradict or qualify that prima facie meaning.
7. In Smith v The West Australian Trustee Executor and Agency Company Ltd (1950) 81 CLR 320, the testator gave his estate to his trustees to distribute the balance of the estate "between such charitable institutions bodies and organisations in the Perth-Fremantle area as my Trustees may select". It was argued that the gift was not valid because a gift to an "institution", which might be a corporation rather than a trust, would not necessarily be charitable. The High Court however upheld the gift.
8. Latham CJ cited Hardey v Tory for the proposition that a gift to charitable institutions was prima facie a gift for charitable purposes and accordingly held that the bequest was valid (at 322-324). In Fullagar J's concurring judgment his Honour stated (at 325): If the objects of an organisation or body or institution are charitable, the body or organisation or institution is bound by law to apply the moneys received to those charitable purposes. If it does not do so, it is guilty of a breach of trust and the usual remedies are available.
9. In Re Godfree [1952] VLR 353, a testator gave his residuary estate to trustees with directions for the conversion of his residuary estate into money, and the investment of any proceeds resulting therefrom. The resulting income was to be paid to the testator's siblings, but after each sibling's death his or her share of the income was to be shared in perpetuity among nine "public charitable institutions".
10. The testator died in 1929 and by 1950 only one of his siblings was still alive. One of the nine institutions was a women's refuge named The Carlton Home. The Home was (at least by 1950) incorporated and subject to the Hospital and Charities Act 1948 (Vic). In the exercise of statutory powers under the Act, the Attorney-General closed the Home, dissolved the corporation, and directed that the Home's real property and personal property should pass to another institution, the Victorian Baby Health Centres Association. The question was whether the transfer included the Home's share of the income being distributed by the trustees under the testator's will.
11. Herring CJ decided that it did not. There was no warrant for treating the Home as having been beneficially entitled to the income, as the Association's argument assumed. That was because "the gift to the Home [was] a charitable gift". Herring CJ explained (at 356, emphasis added): The charitable nature of the gift derives from the fact that the purposes and objects of the institution are themselves charitable, for it is presumed that a gift to such an institution without more is to be held for its general purposes and objects. The devotion to charity is effected by the institution itself applying the income each year as it is received to its purposes and objects. It is with an obligation so to apply the income each year that it receives it. There is in other words a trust involved so to apply it, and the institution itself, where it is incorporated as The Carlton Home was, is the trustee and takes the income as such - Tudor on Charities (5th ed), at pp 118-9 [a reference to the passage set out at [188] above]. Thus, with the Home no longer in existence, Herring CJ directed that the income in question be distributed cy-près (see at 358).
12. In Congregational Union of New South Wales v Thistlethwayte (1952) 87 CLR 375, the High Court had to consider the validity of a bequest to trustees to pay the income of the trust fund to certain named institutions (and in some cases, on certain conditions). One of the institutions was the Congregational Union of NSW ("the Union"). The Union was an umbrella organisation for several churches and had been incorporated by statute in 1882.
13. The main issue was whether the beneficiary institutions could require the transfer of the corpus of the trust from the trustees, thus bringing it to an end under the rule in Saunders v Vautier (1841) 4 Beav 115; 41 ER 482. But there was also an argument about whether the gift in favour of the Union was a valid charitable gift. The Union's constitution included certain objects which, taken on their own, would not have been charitable. The High Court sustained the gift on the basis that on the true construction of the Union's constitution, these objects were ancillary to the Union's principal activities, which were religious (and therefore charitable) in nature.
14. The decision in the case is thus not directly relevant for present purposes. But in passing, Dixon CJ, McTiernan, Williams and Fullagar JJ said of the Union (at 442) that "[i]t is a religious institution composed of ministers and members of Congregational churches combining for certain religious purposes of common interest and a bequest to a religious institution is prima facie a bequest for a charitable purpose".
15. Shortly after the Congregational Union decision was given, it was the subject of an article by HAJ Ford in the Australian Law Journal ("Charitable corporations taking income in perpetuity") (1953) 26 ALJ 635. The principal focus of the article was on the Saunders v Vautier question. But Ford also commented on the decision of Herring CJ in Re Godfree and in particular the proposition that a gift to a charitable corporation was a gift on trust for charitable purposes.
16. Ford asked whether that proposition could stand alongside the reasoning of Lord Parker in the Secular Society case. But on the other hand, Herring CJ's proposition was consistent with the passage from Tudor on Charities which his Honour had cited, and that passage in turn appeared to be supported by the decision in the Incorporated Society in Dublin case.
17. Ford commented: "it is argued that on the authorities, in determining the character of a disposition to a corporation which prima facie appears to be a gift, it is necessary to exclude the possibility that the corporation is charitable. If the corporation is in fact charitable, then it takes the disposition subject to an obligation best described as a trust to apply the property to its charitable purposes" (at 640). But he added in a footnote (footnote 35a): Perhaps it is better to call it a quasi-trust. It is not a true trust because the management of a charitable corporation's property is governed by the law of corporations rather than the law of trusts. But it is similar to a charitable trust in that the Attorney-General can enforce devotion of the corporation's funds to the corporation's charitable purposes and in consequence, it is conceived, the charitable corporation does not take beneficially". Ford added that the same view was taken by some writers in America and included a reference to the 1939 edition of Scott on Trusts vol 3, page 1919, to which I have referred at [159]-[160] above.
18. Sydney Homeopathic Hospital v Turner (1959) 102 CLR 188 was another High Court case arising out of the will which had been the subject of the Congregational Union case. The testator had left a share in the "final available balance" of his estate (which eventually fell to be distributed in November 1953) to the "Sydney Homeopathic Hospital", subject to a proviso that if at the relevant date there should be "no such Hospital established in Sydney", then the monies were to be applied to the foundation or maintenance of such a hospital.
19. An institution named the Sydney Homeopathic Hospital had been established in 1902 as an unincorporated association. It was known to, and supported by, the testator, who died in 1911. In 1936, the Hospital was incorporated under the Public Hospitals Act 1929. The Act provided (s 18) that any reference in any "instrument" to the unincorporated association was to be construed as a reference to the corporation. But homeopathy was in decline and by 1945 it was no longer offered at the Hospital, although a bed was kept free for homeopathic treatment in case any patient required it. The question was whether this resulted in the gift being defeated under the proviso.
20. All of the members of the Court concluded that it did not. But their reasoning varied in some respects.
21. Dixon CJ stated (at 202-203): If the hospital had not been incorporated before the time arrived for carrying the direction out, the primary object of the trust to pay would have been an unincorporated body formed for a charitable purpose. The charitable purpose gave validity to an indefinite gift of income otherwise tending to perpetuity. But the charitable nature of the gift arose from the objects of the body. The position is that described in a passage in the judgment of Herring CJ in Re Godfree.
22. His Honour quoted the passage from the judgment of Herring CJ set out at [260] above, apart from the last, italicised, sentence stating that the Carlton Home received the income in trust. He noted that the two sentences formed part of a longer passage which had been considered in what he described as the "useful article" by Ford. He continued (at 203): The foregoing statement is applicable to an unincorporated body as the Sydney Homeopathic Hospital was. The rules under which such a body is organized sufficiently govern the application of the funds, it would seem, to justify the classification of a trust in its favour as charitable. The incorporation of the hospital, which took place on 1st November 1929 when the Public Hospitals Act 1929 came into operation, supplied a new legal person and provided a new system of government for the institution, but otherwise left the considerations very much the same upon which the right of the institution turns to the third part of the residue of the balance of income of the estate.
23. Dixon CJ then turned to the general principles applicable to the construction of wills, and in particular the principle that a defeasance should not lightly be inferred. His Honour concluded that no defeasance could be spelt out of the will in the circumstances of the case.
24. Kitto J rejected the contention that the gift was a gift to the Hospital as a specified body. His Honour observed (at 220-1, citations omitted): The natural meaning to attribute in the circumstances to the testator's direction to pay income to "the Sydney Homeopathic Hospital" is that the payment should be made to the unincorporated association (i.e. to the trustees appointed to hold property under its rules) to be applied for the purposes for which the body existed. The gift cannot possibly have been intended as a gift to a body of persons taking beneficially, so that moneys received under it might be diverted to new purposes by decision of the board of management or agreement of the members or might be distributed amongst the members in a winding-up. There is, I think a strong implication of an intention that, through the medium of the unincorporated association, the relevant income should be devoted to the purposes which that association announced by its rules and was serving by carrying on its hospital. Such an implication must often arise upon a gift to a body which exists for specific purposes of an altruistic nature, and especially where the name used in the words of gift fits indifferently an activity serving such purposes (as for instance a hospital) and the body which carries it on. … Not, of course, that a trust arises in every case of a gift to a body established for limited objects. The nature of the objects may have provided the donor with the motive for his gift, and yet the gift may be a beneficial gift entitling the body to apply the property as it sees fit within the scope of its powers as they exist from time to time. Property given to a company, for example, is not necessarily held on trust for the objects stated in the company's memorandum of association, nor is property which is given to a chartered corporation necessarily held on trust for application in accordance with the charter. But if the objects of a body are limited to altruistic purposes, it is an instrument of altruism that is likely to attract benefactions. Very often, to say the least, it will be a proper inference, when a gift is made to such a body, that the donor intends the gift to operate as a devotion of the subject property to the relevant purposes, and that the donee accepts it as such. Where that is the case all the elements necessary for the creation of a binding trust are present.
25. The result, for his Honour, was that the gift was a gift for a charitable purpose, namely the operation of a homeopathic hospital. But that purpose could no longer be fulfilled. This would usually have required the gift to be the subject of a formal cy-près application. But his Honour was prepared to go along with the order proposed by Dixon CJ, which provided by way of declaration that the Hospital was entitled to the gift.
26. Fullagar J took a different tack. His Honour began with (at 212): … the cardinal fact that the initial gift, though doubtless motivated by reference to some purpose or purposes which the donee is assumed to pursue, is not a gift for purposes as such. It is a gift to a specific corporate person bearing the name of the Sydney Homeopathic Hospital. The gift is not, of course, to a building or to a physical establishment but to a person.
27. His Honour considered that the question in the case was "primarily a problem of identity" (at 214). Prima facie, the Sydney Homeopathic Hospital, in its incorporated form, was the body designated by the testator as the donee of the gift. Its objects remained the same and it had never repudiated its homeopathic role. There had been, in his Honour's view, insufficient change to its character to say that it was no longer the body described by the testator. Menzies J reasoned to similar effect. McTiernan J agreed with the judgments of Fullagar and Menzies JJ.
28. In Bacon v Pianta (1966) 114 CLR 634, the High Court had to consider a bequest in favour of the Communist Party of Australia. The Party was an unincorporated association, and the Court followed the approach laid down by Lord Simonds in Leahy. The result was consistent with Buckley J's summary of the law in Vernon: the bequest was held to be a gift for purposes despite the supposed presumption in favour of a gift to the members individually. The Court did not have to say anything about the distinction drawn by Buckley J between gifts to unincorporated and incorporated bodies.
29. Apart from the decisions I have mentioned, there were other gift cases, both before and after Godfree, considering the problems presented by gifts to charitable bodies. One was Re Inman [1965] VR 238, where Gowans J remarked on the tension between Herring CJ's passage in Godfree and what Lord Parker had said in the Secular Society case. His Honour also noted, with apparent approval, Ford's commentary on the subject.
30. In Re Tyrie [1972] VR 168 at 177-178, Newton J extracted from the authorities (which were "very numerous" and not easy to reconcile with each other) a series of propositions on gifts to charitable bodies. The first proposition was (at 177, citations omitted: A gift by will to a particular charitable institution simpliciter must be treated as a gift for the advancement of the charitable work or purposes of that institution. In support of this proposition, his Honour referred, among other authorities, to Hardey v Tory; Smith; Re Godfree; Re Inman; and the Sydney Homeopathic Hospital case.
31. Sir Moses Montefiore Jewish Home v Howell & Co (No 7) Pty Ltd [1984] 2 NSWLR 406 concerned two settlements, with each in the same terms. The settlements provided for a gift on trust, with the capital to be shared between two institutions. The vesting of the capital was postponed by a royal lives clause and in the intervening period the income was subject to a trust in favour of one or other of those institutions, at the trustee's discretion.
32. The first institution was the Sir Moses Montefiore Jewish Home ("MJH"). MJH had been incorporated under an Act of Parliament which specifically provided that its property was vested in it "upon a charitable trust for the objects of the body corporate as specified in" the Act. The other institution was the Isabella Lazarus Home for Jewish Children. This was a charity established originally under a cy-près scheme and of which the MJH happened to be trustee. MJH sought to extinguish the trusts under the rule in Saunders v Vautier.
33. Most of Kearney J's judgment concerned the extinguishment question (on which MJH was successful). But in passing, his Honour referred to the competing views on whether gifts to charitable corporations are gifts on trust. On the one hand, his Honour quoted from the judgment of Buckley J in Vernon (see [208] and [210] above). On the other hand, his Honour referred to the judgment of Latham CJ in Smith (see [257] above); the judgment of Herring CJ in Godfree (see [260] above); and the judgment of Kitto J in the Sydney Homeopathic Hospital case (see [273] above). He concluded (at 416, citation omitted): It … appears that Kitto J saw no reason to distinguish between an unincorporated charity and one which was incorporated. So far as his Honour was concerned the important thing was that each had altruistic objects which could be called in aid when deciding whether or not a disposition was a gift or by way of trust. I consider that this more refined analysis exemplified in the judgment of Kitto J is the proper approach, and I accordingly do not consider that the rule enunciated in the English cases is an automatic rule which operates in all circumstances. In my view a disposition to a charitable corporation is to be treated as having presumptively the necessary elements creating a trust for the purposes of the corporation rather than as a gift to it to be applied as it sees fit. Following this approach, his Honour concluded on the facts that the gifts were for purposes, rather than being gifts to the Homes "as entities".
34. Australian Executor Trustees Ltd v Attorney-General (SA) [2010] SASC 348, a decision of Kourakis J (as his Honour then was), concerned the validity of a testamentary gift by a former patient in the aged care wing of a South Australian hospital. At the time the testator was being cared for in the hospital, it was operated by a statutory corporation (constituted under the South Australian Health Commission Act 1976 (SA)) called the Central Yorke Peninsula Hospital Incorporated ("CYPH"). The testator referred to the institution in his will by that name. But by the time the testator died, CYPH had been dissolved by proclamation under the 1976 Act and its functions transferred to a new entity incorporated under that Act. By the time the case came before Kourakis J, the 1976 Act had been replaced by the Health Care Act 2008 (SA) and the hospital was being conducted by a different statutory body incorporated under that Act, Country Health SA ("CHSA"). There had also been incorporated under the 2008 Act the Yorke Peninsula Health Advisory Council incorporated ("YPHAC") which carried on ancillary roles, including the administration of trusts over property that might be used in or in connection with the provision of health services.
35. Section 78 of the 2008 Act, which his Honour held applied to the testator's bequest, provided that where a testamentary disposition had been made "in favour of", or a trust had been created "for the benefit of", a "prescribed entity", and that body had been dissolved, with the functions being transferred to a new incorporated hospital, then the disposition was taken to operate in favour of that new incorporated hospital. CYPH was a "prescribed entity". This meant that if s 78 applied, the gift would take effect in favour of CHSA.
36. Two issues arose for determination. The first was whether s 78 applied to the disposition in question, namely whether it was a disposition "in favour of" CYPH or created a trust "for the benefit of" CYPH. The second was whether, if the section did not apply, the gift had been defeated by the dissolution of CYPH.
37. Kourakis J reviewed some of the Australian authorities on gifts to charitable organisations, and in particular the decision in the Sir Moses Montefiore Jewish Home case. His Honour considered that Kearney J's judgment correctly stated the approach to be taken to the construction of charitable gifts in Australia (at [46]). Following that approach, his Honour considered that the testator's gift had not been made "in favour of," and had not created a trust "for the benefit of", CYPH. This was because the gift had been made by the testator for the work of the hospital and had been given to CYPH merely as trustee. Section 78 therefore did not apply. But the testator's purpose being charitable, the Court would appoint a new trustee to carry the bequest into effect. His Honour made an order appointing YPHAC for this purpose.
38. Rating cases: It is also necessary to consider a line of rating cases to which I was referred by counsel for the plaintiffs. The cases involved rating exemptions for charitable and benevolent institutions and considered the application of such exemptions to corporations with charitable objects or activities.
39. The first case is the decision of Rath J, sitting as a judge of the Land and Valuation Court of New South Wales, in College of Law (Properties) Pty Ltd v Willoughby Municipal Council (1978) 38 LGRA 81. The case concerned the land on which the College of Law had been built. The College was (and is) an institution providing practical legal training and continuing legal education for solicitors. The relevant rating exemption was given by s 132(1)(d) of the Local Government Act 1919, which exempted land which belonged to "any public benevolent institution or public charity and [was] used or occupied by it for the purposes thereof".
40. The purchase of the land in question had been financed by the Law Foundation. It was a statutory fund administered by the Law Society earmarked for the purpose of furthering legal education, legal research, law reform and the establishment, operation and maintenance of law libraries. The owner of the land was a proprietary company which had been incorporated (it appears, as a shelf company) with commercial objects. The balance of the purchase money came from mortgage finance. Several months after the contracts to purchase the land were exchanged, the objects of the company were altered by special resolution so that its dominant object became the provision of legal education.
41. The purchase contracts provided that the company purchased the land "as trustee for the College of Law to be incorporated". No such body was incorporated. Instead, the operations of the College were conducted, in effect, by a committee of the Law Society. His Honour was satisfied that those operations were charitable, as involving education.
42. Counsel for the plaintiff argued that the purchase contracts involved a declaration of trust, but his Honour rejected this argument. He observed, however (at 87-88, citations omitted): … the [company] by its counsel disclaimed any beneficial interest in the building. It was said that this disclaimer was evidence as a declaration against interest. I do not think it is necessary to decide that point, because I regard the disclaimer as part of a pattern of behaviour before and after the acquisition of the property. The [company] has always dealt with the property in a manner consistent only with the existence of an obligation to hold it for the advancement of legal education, and in particular the activities for the time being of the College of Law as an educational establishment. Though the detailed figures were not before the Court it was clear that very considerable moneys were made available to the [company] by the Law Foundation for preliminary expenses, the purchase of the land and the erection of the building. No money came from shareholders' funds …. The description of the [company] as a trustee in the contracts is cogent evidence that the [company] has never had any beneficial interest in the property. In these circumstances it would, in accordance with the principles of equity, in my view, be a fraud for the [company] to assert a beneficial interest in the property and the [company] is to be regarded as a constructive trustee.
43. His Honour concluded that, as constructive trustee, the company held the property in trust either for the advancement of legal education or for the more specific purposes of the College of Law. It was unnecessary to determine which was the case. On any view, the property belonged to a "public charity" and the exemption applied.
44. The second case is the decision of Nader J, sitting in the Supreme Court of the Northern Territory, in Aboriginal Hostels Ltd v Darwin City Council (1985) 75 FLR 197. The rating exemption in question applied to land which was used or occupied for the purposes of a public benevolent institution or a public charity (Local Government Act 1954 (NT), s 175B(3)(c)). The land in question was used for the provision of hostel accommodation for Aboriginal persons, a purpose his Honour considered to be charitable.
45. The ownership arrangements for the land were unusual. The land was owned by a company named Aboriginal Hostels Limited. The company had been incorporated in the Australian Capital Territory and registered in the Northern Territory. It was a company limited by guarantee.
46. The objects of the company were stated to be the provision of hostels for the accommodation of Aboriginal people, and the provision of ancillary services for Aboriginal people so accommodated. The memorandum of association provided that all income and property of the company was to be applied solely towards its objects and none of its income or property was to be transferred by way of dividend or otherwise by way of profit to the members. If upon winding up or dissolution there remained any residual property, it was not to be distributed to the members, but instead transferred to the Commonwealth Minister for Aboriginal Affairs to be applied as he directed.
47. Under the company's articles of association, the business of the company was managed by the board of directors, each of whom was appointed by the Minister. A director would be disqualified if he was required by the Minister to resign. The Minister also had power to appoint an executive director, who, subject to the board of directors, could exercise the executive powers of the board. The Minister could also require the company to be wound up.
48. There was also a written agreement between the Commonwealth and the company, under which the Commonwealth provided funding and financial assistance for the carrying out of the company's activities. The agreement provided for the company to acquire and run hostel accommodation and to carry on ancillary activities. In doing so, the company was to act in consultation with the Minister. A charter governing the operation of the company was annexed to the agreement. The charter provided that the company was to regard itself as an instrument and agent of the Minister for the provision of hostel accommodation and was to act within the framework of guidelines agreed upon by the Minister and the company.
49. Nader J held that the company fell within the public charity exemption in s 175B(3)(c). He reasoned (at 207-208): The company submitted that it was a trustee in the relevant sense. Although there is no express trust it was submitted that the circumstances of the case point to a constructive trust in much the same way as in [the College of Law case]. … One cannot look for a provision of the memorandum of association casting obligations in terms of a trust on the Minister because here there is no express or even implied trust but a constructive trust which arises independently of intention. So long as the company exists, if I am correct, it is trustee of its assets for its objects. In the event of the company ceasing to exist, any surplus property impressed with the trust will be disposed of by the Minister in accordance with the trust. There are cases where the English courts have refused to regard companies formed for charitable purposes as trustees in the strict sense, but even in those cases the members of such companies have been refused the benefit of the assets on winding up despite statutory provisions to the contrary because it was held that the companies were in positions analogous to those of trustees in relation to their corporate assets so as to give rise to the jurisdiction of the court to intervene in their affairs: see Liverpool and District Hospital for Diseases of the Heart v A-G [1981] Ch 193. [His Honour then quoted from Slade J's judgment] … I think the reasoning in the College of Law case (supra), is sufficiently apposite to be followed here, and, for the reasons given, I do not think the Minister's power to dispose of surplus property prevents the existence of a trust. I am satisfied there is a constructive trust, the terms of which are sufficiently defined by the memorandum of association of the company and the agreement and Charter.
50. The next case was the decision of the Court of Appeal in Maclean Shire Council v Nungera Co-Operative Society Ltd (1995) 86 LGERA 430. The Society was a body incorporated under the Co-operation Act 1923 to provide housing for Aboriginals. The relevant exemption was s 132(1)(d) of the Local Government Act 1919; specifically, the "public benevolent institution" limb of the exemption.
51. The argument for the Council was that, while in general the provision of such housing was a charitable purpose, the Society's constitution contemplated that its assets might be used for other activities which were not charitable. For present purposes, the relevant provision was r 74(b) which provided: On the winding up of the Society a member shall not in respect of any shares held by him be entitled to receive an amount in excess of the amount paid thereon. Any surplus … shall be transferred only to a fund or association established for the benefit of, and controlled by, Aboriginals in Australia, and any land shall be held in perpetuity for the use and benefit of Aborigines in Australia.
52. Handley JA, with whose judgment Priestley JA and Sheller JA agreed, observed that the requirement that upon winding up the Society's land should be held in perpetuity for the use and benefit of Aboriginals meant that such land would be "held on a charitable trust" (at 434). Likewise, the holding of land for the benefit of Aboriginals was considered by his Honour to be a public benevolent purpose (at 434). The argument that the land was rateable because of r 74(b) therefore failed.
53. The fourth case is the decision of Stein J, then of the New South Wales Land and Environment Court, in Toomelah Co-operative Ltd v Moree Plains Shire Council (1996) 90 LGERA 48. Again, the issue was whether land owned by a co-operative and used to provide accommodation for Aboriginals fell within the exemption in s 132(1)(c) of the Local Government Act 1919. There were some differences in the wording of the objects when compared with the Nungera case, but these did not affect the outcome. Stein J relied upon the decisions in the College of Law, Aboriginal Hostels and Nungera cases to conclude that the land in question was subject to a constructive charitable trust and the land was not rateable. He stated (at 54): Applying the College of Law case to the present situation and noting the rules relating to (inter alia) the disposal of the [co-operative's] income and property, I am satisfied that a constructive trust is created.
54. The fifth and final case is the decision of the Northern Territory Court of Appeal in Alice Springs Town Council v Mpweteyerre Aboriginal Corporation (1997) 139 FLR 236. The case concerned leasehold interests held by a number of incorporated associations which were used as "town camps" for Aboriginal people at Alice Springs. The relevant exemption was given by s 97(1)(d) of the Local Government Act 1985 (NT), which was in substantially the same terms as the exemption in the predecessor Act considered in the Aboriginal Hostels case.
55. Some of the associations had been incorporated pursuant to the Aboriginal Councils and Associations Act 1976 (Cth). Associations incorporated under that Act could be formed for carrying out any lawful object and might be carried on for profit. Only Aboriginal persons and their spouses were permitted to be members. On a winding up, surplus assets were to be distributed according to the rules of the associations.
56. The other associations involved in the case had been incorporated pursuant to the Associations Incorporation Act 1963 (NT), Part 2. Associations under Part 2 had to be "formed or carried on for a religious, educational, benevolent or charitable purpose". Property acquired from the Territory or the Commonwealth, or using funds received from the Territory or Commonwealth, could not be disposed of without the consent of the Minister. The usual provisions of the Corporations Law relating to winding up applied, subject to exceptions. One exception provided a mechanism for the members, by resolution, to dispose of surplus assets, subject to the order of a judge. The judge was to consider whether the resolution was just, and to make such order as was just, having regard to the objects and purposes of the association.
57. In each case, the constitution or rules of the association stated its central objects to be the relief of poverty, sickness, destitution, and other misfortunes of Aboriginal peoples in central Australia, in particular by obtaining land, housing and other facilities for the members of the association and other needy Aboriginal people. Each association was precluded from engaging in trade or commerce. The members were prevented from receiving any of the association's income or property. Surplus assets on winding up could not be distributed to members; they had to be given or transferred to an Aboriginal association or Aboriginal-controlled body corporate or institution having objects similar to the objects of the association.
58. The trial judge, overturning the initial decision by the Local Government Tribunal, concluded that the associations' land was exempt from rating. The Council appealed. Mildren J, with whom Martin CJ agreed, began by stating (at 251): There is no doubt that a corporation can be a charitable corporation. Halsbury's Laws of England (4th ed, 1993, reissued), Vol 5(2), par 211, states: "A charitable corporation is one whose corporate purpose is charitable." There is no restriction upon how a charitable corporation may be formed or created. It may be incorporated by any means, but in Australia the usual method involves the creation of a trust structure: Halsbury's Laws of Australia (1993), Vol 4, par 75-810. The reason for this appears to be that the Charitable Uses Act 1601 (UK), 43 Elizabeth I, C4, refers to "uses" or trusts.
59. This passage is, with respect, difficult to understand. Charitable trusts exist because they are cognisable as such in courts of equitable jurisdiction. This is not a form of incorporation in the usual sense of that term. Nor does it depend upon the terminology used in the Statute of Elizabeth; charitable trusts had been recognised and enforced well before the Statute was enacted.
60. Be this as it may, Mildren J continued (at 251): What is required to be identified is either an express trust to be found in the terms of the [associations'] constitutions, or a constructive trust, the terms of which are sufficiently defined therefrom and or from the Acts under which they are created see: College of Law (Properties) Pty Ltd v Willoughby Municipal Council (1978) 38 LGRA 81; Aboriginal Hostels Ltd v Darwin City Council at 424-427. Neither the provisions of the [associations'] constitutions nor the Acts create any express trust, so the question is whether the assets of the [associations] are subject to a constructive trust. Whilst the general rule is that an incorporated body is not usually a trustee of its assets for its objects (Liverpool and District Hospital for Diseases of the Heart v Attorney-General [1981] Ch 193) if the provisions of the constitution prevent the members from ever obtaining any beneficial interest in the assets, the company will be treated as a constructive trustee of the assets: see College of Law (Properties) Pty Ltd at 88; Aboriginal Hostels Ltd at 425. That is the case in respect of each of the [associations], and I consider that, notwithstanding the provisions of s 20 of the Associations Incorporation Act, a judge would be bound under s 22 to ensure that any surplus assets were disposed of cy-prés and in accordance with each association's rules. His Honour went on to decide that the associations' objects were charitable and the exemption applied. The Council's appeal therefore had to be dismissed. Thomas J reached the same conclusion but simply held that the trial judge's decision had not been erroneous (at 357).
61. Statutory trusts: I was not referred to any authority which directly considers the recognition in Australia of an equitable jurisdiction over charitable corporations, as has occurred in the United States, Canada, and now, apparently, the United Kingdom. But there are two decisions of the High Court concerning statutory trusts which I think are suggestive.
62. The first is the decision in Fouche v Superannuation Fund Board (1952) 88 CLR 609. The facts and reasoning are set out in some detail in the Rookwood case at [189]-[191]. The case concerned a statutory superannuation fund established for Tasmanian government employees and constituted as a corporation.
63. Orders for account and compensation were made against individual members of the fund's board who had been responsible for mismanaging monies of the fund. They were not trustees in the strict sense; the trustee was the separate corporation. Furthermore, the employees were not beneficiaries who would be entitled to invoke equity's jurisdiction over trusts; the arrangement was a "trust for public purposes". Nevertheless, the orders against the individual board members were upheld, on the basis that they owed fiduciary duties which were "sufficiently similar" to those of trustees for equity to grant relief.
64. The statutory trust in the case was one for persons rather than purposes, but that would not seem to affect its reasoning. The thinking is remarkably similar to the thinking in the French Protestant Hospital case, which was decided only shortly beforehand (although it is not referred to in the judgment).
65. The second decision is Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566, discussed in the Rookwood case at [202]-[207]. The case concerned land which the Council accepted it was bound to hold for a public purpose (the operation of a carpark). The case's significance for present purposes is that the Court upheld orders compelling the Council to use the land for that purpose without finding it necessary to decide whether the land was subject to a charitable trust in the strict sense or not. Again, this suggests the existence of an equitable jurisdiction, at least in the case of statutory trusts, extending beyond the boundaries of equity's traditional jurisdiction over the administration of charitable trusts.

Trust for corporate objects?

1. Over the years, BRI's main external sources of income were from: subscriptions; grants (especially those from the CSIRO); and fees for services. In theory, these monies, or some of them, could have been received in trust. But if so, that will have been because the payers intended, expressly or impliedly, for the payments they were making to be held on trust. BRI's internal rules about how the monies were to be applied, expressed in the form of objects, would not necessarily have been relevant and certainly could not have been determinative.
2. When I raised this point with counsel for BRI, they referred me to the evidence (summarised earlier) about the way in which BRI described itself in its annual reports and other publications. Counsel noted that research and development for the benefit of the grain industry has, over time, been an important, or perhaps the predominant, stated public purpose of BRI's activities. Their suggestion was that it could be inferred that the payments made to BRI were made for that purpose.
3. Counsel submitted that the descriptions in the annual reports showed that BRI portrayed itself as an "industry related research organisation". This was so from 1953, at the latest. The reference to research increased in its emphasis over time, becoming the "primary aim". Counsel noted that by 1994/1995, BRI was describing itself as an "independent" entity, as opposed to being "supported by" bread-making and allied industries.
4. These submissions are true so far as they go, but the fact remains that at all times BRI described itself (correctly) as an "industry" research organisation; that is, an organisation dedicated to the needs of the bread manufacturing industry (and later the allied flour and grain industries). Moreover, from first to last, BRI offered "technical services" to its client industries. The references in some of the annual reports to the "primary aim" of BRI are somewhat ambiguous; but I think it is clear that the two channels of activities identified in BRI's 1953 report were always critical objectives for it and were understood as such by members of the public and the industry who dealt with BRI.
5. No doubt the "members" of BRI would have expected that monies paid by them would, in a general sense, contribute towards achieving BRI's stated objectives. But "membership" fees and subscriptions were, both for legal and practical purposes, payments made so as to obtain the benefits of "membership". Such payments formed part of the expenses of the members' own businesses and were ultimately made in order to advance those businesses. They were not intended as gifts, and I do not think it is meaningful to analyse them in such terms. The same is so for payments made to BRI by way of fees for services rendered (from which BRI's surpluses since the mid-1990s appear largely to have been derived).
6. On the face of it, grant monies from the CSIRO to BRI were gifts of a type. If any of the parties whose payments contributed to the funds built up by BRI were entitled to be heard, it would have been the CSIRO. I suggested at one point in the hearing that the CSIRO might be joined but this was not taken up by any party.
7. On reflection, this is understandable. In making the grants, the CSIRO was no doubt seeking to promote scientific and industrial research in Australia. But it was doing so because that was one of its statutory functions. Furthermore, the grants (and other benefits, such as use of the North Ryde land) provided by the CSIRO to BRI were the subject of formal contractual arrangements between them. Presumably, the provision in BRI's articles of association from 1951 onwards which required the CSIRO to be represented on BRI's board was one of the conditions imposed under those contractual arrangements. Again, I do not think it would be correct to see the CSIRO's funding as having been provided by way of gift for trust purposes.
8. BRI benefited from the tax-deductible status of monies paid to it, and no doubt would have emphasised that status in soliciting business from the private sector. But the monies it received from industry members and from the CSIRO were monies for specific grants or research projects, and carried with them contractual obligations. They were not donations received from members of the public who might have wished to support BRI's work generally.
9. For these reasons, a gift analysis does not assist the parties. Indeed, I did not understand any party to contend that it did.
10. Another approach, however, may be available. As a matter of basic principle, if property is held on charitable trust, then income derived from that property is likewise impressed with the terms of that trust: Metropolitan Petar v Mitreski [2012] NSWSC 16 at [58] per Brereton J (as his Honour then was). This principle does not depend in any way on the intention of the payer. Nor does it depend upon the subjective intention of the recipient, as the result of that case shows.
11. None of the parties expressly relied upon this principle in contending that BRI's assets, as built up over time, were held on trust. But it seems to me that if their contention is to be sustained, it can only be sustained on that basis. That of course requires it to be demonstrated that the assets from which BRI derived its income were trust assets in the first place.
12. Between them, counsel for the parties developed the contention in three different forms. I will deal with them in turn.
13. Charitable objects create charitable trust: It is convenient to deal first with the broad contention developed by counsel for BRI. That contention was that a company with objects which are exclusively charitable holds its property on trust for those objects. This did not depend upon any resolution or decision by the company. Rather, it was said to be an automatic consequence of the company's exclusively charitable objects.
14. Counsel did not argue that BRI's 1948 objects were exclusively charitable. But the 1995 objects, on counsel's submission, were, and this meant that a charitable trust came into being when those objects were adopted.
15. The trust which came into existence was not, in counsel's primary submission, a "trust-like" or "quasi-trust" institution. Rather it was a true trust, subject to the cognisance of equity in the usual way. In ordinary circumstances, while BRI's affairs were being conducted in accordance with its charitable objects, the trust would sit in the background. But now that there was no-one effectively in control of BRI, equity could step in with a full panoply of trust remedies. The making of a declaration in the form sought was the first step towards making those remedies available.
16. Counsel recognised that their contention was not consistent with the course of authority in England. As counsel acknowledged, the Secular Society case has been understood there to stand for the proposition that a company does not, merely because its objects are charitable, hold its assets on trust for those objects. Rather, and unless a trust has been otherwise created, the company holds its property beneficially, although for some purposes its position may be analogous to that of a trustee. As counsel acknowledged, that view was clearly expressed by Slade J in the Liverpool Hospital case.
17. But counsel submitted that this view was not mandated by the decision in the Secular Society case, as properly understood. Slade J had been mistaken in Liverpool Hospital in thinking that it did. His Lordship had also misinterpreted what Buckley LJ had said in Von Ernst; contrary to Slade J's view, Buckley LJ had not resiled from what he had earlier said in the Construction Industry Training Board case.
18. Counsel went on to submit that Lord Walker had been guilty of using a euphemism in Chinachem to describe the proposition that a charitable corporation holds its property beneficially as "a little misleading" (at [240] above). The description was, in counsel's submission, wholly misleading and wrong.
19. Counsel submitted that their contention was supported by the Australian gift cases summarised at [254]-[286] above. In particular, they argued, the contention was supported by Godfree, which had been approved in the Sydney Homeopathic Hospital case. The same view had been taken in later first instance decisions, culminating in the Australian Executor Trustees case.
20. It is a fundamental principle that the terms of a charitable trust are fixed at the outset and cannot (except by statute or court-sanctioned scheme) be altered while they are capable of being carried out: General Assembly of Free Church of Scotland v Lord Overtoun [1904] AC 515. Counsel acknowledged that it is usually possible to change a company's objects. But counsel submitted that this was not inconsistent with the proposition being advanced. If a company having exclusively charitable objects adopted a new set of objects which were not charitable, then property acquired after the change would not be held on trust, but property held up to that point would remain held on trust.
21. It is true that some of the gift cases, and some of the older textbooks, contain statements that a gift to a corporation is a gift for its objects, and that a corporation having wholly charitable objects holds its assets as trustee for charitable purposes. The language of these statements does support the contention advanced by counsel for BRI. But they must be handled with care. The term "trustee" is commonly used in a loose way, so as to denote a person subject to fiduciary or other equitable obligations but who is not a trustee in the strict sense: see Clay v Clay (2001) 202 CLR 410 at [41].
22. I propose to address counsel's contention in two stages. First, I will discuss the proposition that a gift to a corporation having charitable objects is necessarily a gift on trust. I will consider whether that proposition is consistent with principle and authority. Then, I will discuss counsel's broader contention that a corporation having charitable objects necessarily holds its assets in trust. Again, I will consider this by reference both to principle and authority.
23. The proposition that a gift to a corporation having charitable objects is necessarily a gift on trust, needs to take account of the way in which charitable gifts operate. Usually, a charitable trust comes into existence because there is a gift of legal property. The alternative is a formal declaration of trust, to which I will return below. As I have stated, in the case of a gift the critical intention is that of the donor.
24. The distinction between a gift to a company as corporate property, but to be dealt with in accordance with its objects, and a gift to the company as trustee for charitable purposes expressed in those objects, is a fine one. But it can be of real significance, as the facts of the Liverpool Hospital case, and of this case, show.
25. It may be accepted that usually donors will not be conscious of the distinction. But not necessarily in every case. What if the donor is an experienced company lawyer, or sits on the board of the particular institution? In my view, it is impossible to deny the possibility that some donors may understand the distinction and may, for their own reasons, choose to make a gift to the company as corporate property. If that intention appears sufficiently clearly from the language used by a donor, understood in the light of the surrounding circumstances, there is no justification for a rule which refuses to give effect to it.
26. Furthermore, any absolute rule would run straight into the point made by Lord Parker in the Secular Society case: it would mean that property given to the company would always be subject to a trust for the purposes stated in its objects ([183]-[184] above). Counsel's argument assumed that if those objects were not charitable, or not exclusively charitable, that would just mean that there would be no trust: the company would be left free to apply the property in accordance with its objects. But according to Lord Parker that is not so: there would be a resulting trust back to the donor because equity would "not allow the trustee to retain" the property ([183]-[184] above).
27. Another difficulty with an absolute rule in the terms suggested is that, historically, gift cases were decided in the context of the doctrine of ultra vires. But that doctrine, as it applied to companies, has now been abolished. It is no longer necessary for a company to have a statement of objects: Corporations Act 2001, s 125. It is hard to see how the suggested rule could apply at all in such a case. And even where a company does have such a statement of objects, its capacity is not limited by those objects: Corporations Act 2001, s 125(2). Thus, it is no longer possible to say that a company cannot validly act outside those objects: compare the passage from the judgment of Buckley J in Vernon quoted at [213] above.
28. Turning to authority, in Godfree, Herring CJ did indeed state that the Carlton Home held its assets on trust, and this was the basis for his Honour's conclusion that the gift of income did not pass to its successor Association. But although parts of his Honour's judgment were quoted with approval by Dixon CJ in the Sydney Homeopathic Hospital case, Dixon CJ stopped short of quoting that particular sentence. His Honour also referred, with apparent approval, to Ford's article which characterised the arrangement as a quasi-trust rather than a true trust. Furthermore, Fullagar J and Menzies J, who together with McTiernan J constituted the majority of the Court, reasoned differently.
29. More precise versions of the rule in the Australian cases put it in a narrower form: it is presumed that a gift to a corporation having charitable objects is a gift to the corporation as trustee for those objects. This is the way it is expressed by Higgins J in Hardey (quoted at [255] above). The reasoning of Kitto J in the Sydney Homeopathic Hospital case (quoted at [273] above) is likewise expressed in terms of a presumption as to the testator's intention. That reasoning also recognises that the presumption may have greater or lesser force depending on the nature of the corporation in question, a gift to a hospital being a case where the presumption is at its strongest. As we have seen, BRI's circumstances were quite different.
30. Godfree was a decision about the administration of will trusts. It concerned the interpretation of a statute dealing with incorporated hospitals (so too did the decision of Kourakis J in Australian Executor Trustees). Herring CJ was not called upon to grant relief which would have declared that the Carlton Home held its assets as trustee in the strict sense. In my respectful view, the more limited statement of the rule, in terms of a presumption, is more consistent with principle and is better supported by authority than the absolute rule for which counsel contended.
31. It is true that the Australian cases appear to have diverged from the approach laid down by Buckley J in Vernon. According to that approach, there is a presumption in favour of the gift being for corporate purposes. On the Australian authorities, the presumption may be the other way.
32. As we have seen, however, the parties do not contend in the present case that BRI is a trustee because gifts were made to it for charitable purposes. It is therefore unnecessary for the purposes of this judgment to resolve the debate about whether the English or the Australian approach to gifts is preferable. I do, however, note two points in passing.
33. First, a significant argument against Buckley J's approach was the inconsistency it apparently set up between incorporated and unincorporated charitable bodies. But in New South Wales, gifts to unincorporated bodies for the purposes of those bodies are now sustained by statute (Succession Act 2006, s 43) and the inconsistency point is merely theoretical.
34. The second point is that some of the cases concern gifts to trustees to hold the trust funds and pay the income from it to a corporation in perpetuity, rather than gifts to corporations directly (as, for example, in Re Godfree; see also the passage from Lord Parker's judgment in the Secular Society case quoted at [183]-[184] above). It is possible that different considerations apply to the two types of gifts.
35. For the reasons I have given, I think that an absolute rule that gifts to corporations having charitable objects are held on trust is not consistent with principle. The same applies to the contention that a corporation having wholly charitable objects necessarily holds its property as trustee for charitable purposes. Charitable trusts and charitable corporations are, quite simply, different types of legal institution.
36. It may be accepted that the courts have in some cases granted equitable remedies of a trust nature against charitable corporations and those who control them. But this does not compel the conclusion that charitable corporations are a species of trust. Those decisions can be explained by reference to a historically and doctrinally separate jurisdiction over the affairs of charitable corporations or those who control and direct those corporations' affairs.
37. Whether this equitable jurisdiction derives from some sort of parens patriae power associated with charity, or a "visitatorial" power over corporations, or simply from equity's power to hold fiduciaries of any type to account, is, as I have noted, obscure. But for present purposes that does not matter. Nor do the precise scope and limits of the jurisdiction matter. On any view, the jurisdiction would never have developed at all if counsel's contention were correct.
38. It follows that Slade J was well justified, in my respectful view, in concluding in the Liverpool Hospital case that a charitable corporation is not a trustee in the strict sense, but only a quasi-trustee. I do not accept that the conclusion is necessarily inconsistent with the majority view in the Construction Industry Training Board case, as interpreted in Von Ernst. In fact, if the issue in the Construction Industry Training Board case arose in Australia, the dissenting view of Russell LJ might be seen as closer to the current state of High Court authority in the Bathurst City Council case. But in any event Slade J's conclusion now has the express endorsement of the Hong Kong Court of Final Appeal and of Lady Arden in the United Kingdom Supreme Court. It is also consistent with the Canadian and United States authority to which I have referred.
39. So far as the parties' arguments went, and my further research has gone, there is no Australian case which considers directly, and as part of its ratio, whether property held by a company having charitable objects is held by the company as trustee, in the strict sense, for purposes expressed in those objects. Nor is there any authority questioning the Liverpool Hospital decision.
40. I have already stated why I consider that the gift cases do not assist counsel's contention. As I explain below, I do not think the rating cases do either. Once these two lines of authority are put to one side, I think the Australian case law gives no support to counsel's contention.
41. Declaration of trust: This brings me to the argument by counsel for the Attorney-General (which was supported, by way of fall-back, by counsel for BRI). Counsel did not go so far as to invite me to reject what Slade J said in the Liverpool Hospital case. Instead, counsel's argument sought to bypass it. The argument characterised the adoption of BRI's new constitution in November 1995 as in effect being a declaration of trust under which the then existing assets of BRI, and future income and assets, were devoted to objects which were contended to be wholly charitable.
42. There would of course be nothing to have prevented BRI from making a valid declaration of trust over the property which it owned as at 1995. I am less sure that such a declaration of trust could bind future income and property. Given that most of the income received after that date came from fees for services, the principle in the Macedonian Orthodox Church case would not necessarily result in the recognition of a trust over all the assets which BRI now holds; some sort of accounting process might be required. But it is not necessary to pursue this further, as I do not think that I can uphold counsel's submission.
43. The first difficulty with the submission is the form of the resolution. On its face it was a resolution for the adoption of a new set of articles; no more and no less. The question is why it should be interpreted as having been a declaration of trust as well.
44. The starting point is that the adoption of a corporate constitution is not in itself a disposition of property at all. Ownership of property is not a necessary element of a company's corporate existence. On incorporation, a company's only assets are the monies subscribed by its members, which may be, and often are, nominal. In the case of a company limited by guarantee, such as BRI was on its incorporation, there are no subscription monies at all and the only "property" the company has is the contingent benefit of the guarantors' obligation to contribute a fixed sum (usually nominal) towards the company's debts in the event of winding up. In 1995, BRI did have substantial assets, but that was purely fortuitous and the quantum of those assets was not relevant to the terms of the new constitution.
45. It may be accepted that the parties to a transfer of property need not have a subjective intention to create a trust in order to do so: Byrnes v Kendle (2011) 243 CLR 253 at [55]; see also at [107]-[110]. But a declaration of trust, being unilateral, requires some formal external manifestation of the donor's intention, and what must be manifested is an intention to make an immediately effective devotion of property to charitable purposes: see Harpur v Levy (2007) 16 VR 587 at [98]-[100] and the cases there cited. It would have to be a very unusual case for a charitable trust to be created by way of declaration of trust without the declarant having any subjective intention to do so.
46. In this regard, it is relevant that the adoption of the resolution was the culmination of a lengthy restructuring process in which lawyers were involved (including in drafting the resolution itself). It can be safely assumed that the lawyers would have been well aware of the distinction between a resolution for the adoption of a new corporate constitution on the one hand, and a declaration of trust on the other. If instructions had been given that BRI was to make a declaration that all of its present (and, if possible, future) assets and income were to be devoted to charitable purposes, the drafting and execution of the declaration would have required careful consideration of, and advice upon, trust law issues and related questions such as stamp duty. It would have resulted in a document having quite a different appearance. Clearly, it does not appear to have occurred to anyone involved that the resolution would have that effect.
47. The second difficulty with counsel's submission is the possibility of further changes to BRI's constitution in future. In particular, there was no obstacle to further amendments being made to the terms of BRI's objects. Such changes had been made in the past, as BRI's activities had evolved. There was every reason to think that similar evolution would occur in the future.
48. I have not overlooked the point made by counsel for BRI that the Overtoun principle can accommodate a change to non-charitable objects on the basis that property acquired up to the change is subject to a trust and property acquired afterwards is not. But if there was a change from one set of charitable objects to another, then after-acquired property would (subject to the tracing issue which I am about to mention) be held on the terms of a different trust. At the same time, the company would continue to hold its existing property on the terms of the original trust. That would mean that, to the extent derived from the existing property, after-acquired property would be held on the terms of the original trust. The result would be extraordinarily inconvenient and restrictive, and hardly something to be imputed as the intention of the authors of the resolution without that being unmistakeably clear.
49. I think these circumstances reinforce the conclusion that the resolution was not a permanent devotion of property to specified charitable purposes. Nor was it a permanent devotion of property to charity generally. It was nothing more than the adoption of a new set of rules for the governance of BRI, which would apply indefinitely until changed, but not necessarily perpetually.
50. Counsel relied on the provisions of Article 83 (see [117] above) as supporting an intention to devote the monies to charity. Counsel referred, in particular, to the purported conferral on the Chief Judge of this Division or any Judge of this Court as "may have or acquire jurisdiction in the matter" of power to determine where the net assets should go, in default of determination by the members at the time of winding up.
51. As we have seen, a provision in this form in the articles of a company limited by guarantee has a long history. The reference to jurisdiction which the Court "has" or "may acquire" is nevertheless obscure. It seems difficult to reconcile with the principle that jurisdiction cannot be conferred on the Court by consent: see Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 163.
52. There is a tantalising possibility that the language could have referred to some sort of visitatorial "jurisdiction of necessity". But no party to the proceedings has so far contended for the existence of a visitatorial jurisdiction, and the issue does not need to be considered further in this judgment. If the jurisdiction exists, and the article was capable of invoking it, I still think it does not assist the argument by counsel for the Attorney General as to the construction of the resolution. That is for two reasons.
53. First, the article in its terms was not confined to institutions with charitable objects. It only limited distributions to institutions with objects similar to those of BRI. Whether those objects were exclusively charitable I consider in due course. If they were, then the distribution to "similar" objects might have been; if they were not, they would not have been. That part of the article did not add any charitable element or restriction.
54. Secondly, and perhaps more importantly, the article only applied to the distribution of proceeds from a liquidation of the company. It did not have any application to the company while it was operating in the ordinary way.
55. For these reasons, I do not think that the 1995 resolution involved a declaration of trust. The argument of counsel for the Attorney General fails.
56. Constructive trust: I turn, finally, to the argument by counsel for the plaintiffs which contended for the same outcome, namely that the property was held on trust, but placed that as having occurred from 1948. Counsel for the plaintiffs contended for this result based on a constructive trust. According to counsel's argument, having effectively held itself out as a charitable organisation, it would be inequitable for BRI to depart from that understanding.
57. With respect, I think saying that BRI held itself out as a charitable organisation really begs the question. Generally speaking, a constructive trust is imposed over property which has got into the hands of the defendant in such circumstances that it would be inequitable for the defendant to deny an equitable interest in the property to the plaintiff. It is hard to see how that could apply in the present case. As I have explained, the sources of revenue from the members of BRI were not in any sense gifts. Payments made by way of grant from the CSIRO may have been made gratuitously but cannot be seen as charitable gifts either.
58. Counsel for the plaintiffs naturally relied on the decision of Rath J in the College of Law case and on the subsequent decisions which picked up his Honour's "constructive trust" reasoning. But it seems to me that the critical factor in the decision was that the College had received the benefit, without payment, of the land in question, and yet clearly not as a free gift. It would seem strange if the shared understanding that the land was to be used for educational purposes could not have been enforced, at least by the Law Society as donor. On the facts, the case may have been closer to an express (or perhaps tacit) trust rather than a constructive one.
59. There is a similar explanation for the Aboriginal Hostels case. In that case, the company in question expressly subjected itself to the direction of the Minister and it seems inconceivable that the Minister would not have been able to enforce against the company the obligations undertaken by it. Indeed, the facts of the case, right down to the use of the term "charter", inevitably bring to mind parallels with earlier forms of charitable corporation. One might almost term the arrangement one in which a Crown charter was grafted onto the company.
60. In the present case, by contrast, there was no conferral of property on BRI by third party donors in terms which required BRI to apply the monies for a particular purpose. Indeed, BRI's funds were not contributed by third party donors at all, but as a result of arms-length transactions, between BRI and its members, the parties to whom it provided services, and the CSIRO. Nor did BRI subject itself to the ongoing supervision or control of the Crown. The only comparable obligation undertaken by BRI was the obligation to allow the CSIRO to be represented on its Board, and that obligation was discharged by 2001, at the latest (see above at [122]).
61. At first sight, it might be thought that the memorandum of association of a company constitutes an ongoing agreement between the members which is capable of giving rise to constructive trust obligations in the same way as an understanding with outsiders arguably did in the College of Law and Aboriginal Hostels cases. There is, however, an important difference.
62. It is true that, before registration, the memorandum of association of a company is a contractual agreement between the parties to the deed (the initial subscribers) like any other. But once registered, it takes on a different character. It becomes a "statutory contract": see Walker Corporation Pty Ltd v The Owners - Strata Plan No 61618 [2022] NSWSC 1246 at [65]-[86]. Not only can existing shareholders be removed as parties and new shareholders added, but there is a statutory right to amend it. It also potentially affects the rights of third parties. Thus, once registered, it cannot be rectified, as an ordinary contract could be, even if no new members have joined the company: see Scott v Frank F Scott (London) Ltd [1940] Ch 794.
63. In deciding the Toomelah case, Stein J did not address the special facts of the College of Law and Aboriginal Hostels cases. In particular, his Honour seems to have relied effectively on the fact that the corporation in question had objects which his Honour considered to be charitable, and articles which restricted the distribution of its assets and income to its members. This was the very feature which Slade J said in the Liverpool Hospital case was insufficient to give rise to a trust.
64. Stein J referred to the judgment in the Aboriginal Hostels case which in turn had referred to the Liverpool Hospital case without suggesting it was wrongly decided. The facts of the Aboriginal Hostels case may have justified it being distinguished from the Liverpool Hospital case. But in my respectful view the facts of the Toomelah case did not.
65. Similar observations apply to the reasoning of Mildren J in the Alice Springs Town Council case. Again, his Honour accepted the proposition, derived from the Liverpool Hospital case, that an incorporated body with charitable objects does not without more hold its assets on trust for charitable purposes, but sought to distinguish the case by relying purely on the terms of the associations' constitutions.
66. Similar comments might be made about the dicta of Handley JA in the Nungera case (which was not referred to by counsel for the plaintiffs) but it may be that the context for those dicta makes them distinguishable anyway. His Honour's remarks were focussed on the possibility of the company being wound up and its assets applied in perpetuity for the "use and benefit of Aborigines in Australia" which his Honour apparently considered would be a charitable purpose. The reference to a constructive trust may have been to that contingency. I am not sure that his Honour was necessarily saying that the association, before it was wound up, held its property on constructive trust.
67. In any event, as counsel for the Attorney General pointed out, in the Bathurst City Council case, the High Court doubted whether it is possible to have a constructive trust for charitable purposes, as distinct from a constructive trust for persons. Part of the perceived difficulty is the need, in the case of a charitable trust, to identify a general charitable intention, which is to operate despite any difficulties which may be encountered in carrying a particular scheme into effect: see at [41] [CBH/1960]. This decision post-dated the College of Law, Aboriginal Hostels, Nungera and Toomelah cases. It pre-dated the Alice Springs Town Council case but was not referred to in that judgment.
68. There is a more general point about the rating cases. It is generally accepted, following on the lead given by Income Tax Special Purposes Commissioners v Pemsel [1891] AC 531, that the definition of "charity" in taxing statutes is a reference to the legal definition of charity, and thus to purposes covered by the Statute of Elizabeth. But the exemption in the rating cases referred to a charitable "institution". A trust may be an institution, but so too would a company or other corporate body answer that description, at least while its objectives were charitable: see the ICLR Queensland case below at [394]. The exemption also applied to "benevolent" institutions whose objects may be wider, and not necessarily charitable. Thus, there was no reason to find that the property was the subject of a charitable trust in the true sense before concluding that the exemption applied. Statements about the existence of a trust in the rating cases were obiter.
69. For these reasons, I do not consider that the rating cases establish that BRI's property was subject to a constructive charitable trust. The contention by counsel for the plaintiffs fails.

Charitable corporate objects?

1. In case I am wrong in the views that I have just expressed, I will consider briefly whether, if BRI does hold its property on trust for its corporate objects, those objects were charitable ones, such as to make a trust for them a valid charitable trust.
2. The corporate objects upon which the parties asked the Court to declare that BRI held its assets on trust were: a. to carry out and/or fund scientific research and experimental, development and testing work in connection with manufacturing of bread and related products; b. to carry out and/or fund scientific research and experimental, development and testing work in connection with wheat and other grains and cereals and grain foods and products made from wheat and other grains and cereals and grain foods; c. to carry out and/or fund scientific research and experimental, development and testing work in connection with the treatment and use of residuals and by-products of wheat and other grains and cereals and grain foods and products made from wheat and other grains and cereals and grain foods; d. to establish and/or fund the establishment of laboratories or like research facilities for any or all of the aforesaid purposes; e. to publish information and promote activities relating to any or all of the aforesaid purposes and to arrange lectures and demonstrations for furtherance of the aforesaid purposes.
3. Counsel submitted that a trust in such terms fell within the well-known categories identified by Lord Macnaghten in Pemsel at 583. Specifically, it was argued that the present case fell within both the second category (education) and the fourth category (general public benefit).
4. It is convenient to begin with the 1995 objects (set out at [112] above). It should be noted immediately that the terms of the declaration agreed by the parties do not exactly reflect the terms of those objects. In the first place, the agreed declaration refers to objects not only encompassing the undertaking of certain research tasks, but also the "funding" of research tasks. Another noticeable difference is that the terms of the agreed declaration focus exclusively on research and development whereas the 1995 objects are not so limited and speak in more general terms of support for the bread manufacturing and allied industries.
5. The objects specified in the agreed form of declaration may represent the activities in which BRI is now engaged and which it is contemplated BRI will pursue in the future. But that does not necessarily justify making a declaration in those restricted terms. The Overtoun principle means that, if BRI is, as contended, a trustee for the purposes expressed in the 1995 objects, then the trust should be declared in the terms of those objects, and not in different and narrower terms selected by the parties.
6. I turn now to the authorities. Chronologically, the first case to which I was referred was the decision of the English Court of Appeal in Commissioners of Inland Revenue v Yorkshire Agricultural Society [1928] 1 KB 611. That case concerned the charitable status of the Yorkshire Agricultural Society whose objects were the conduct of an annual agricultural show, and the promotion of agriculture generally, in Yorkshire. The Society's rules gave certain benefits to members in the form of reduced entry to shows and other services provided by the Society.
7. The Court of Appeal held that the Society's purposes were charitable. The conduct of an agricultural show (entrance to which was not limited to Yorkshire farmers) was seen as a charitable object. The promotion of agriculture generally, was also said to be charitable. The fact that members incidentally obtained some benefit did not detract from the overall charitable nature of the Society's activities.
8. In Re British School of Egyptian Archaeology [1954] 1 All ER 887 Harman J was concerned with an institution "whose objects are, and whose funds are devoted to, the discovery of knowledge connected with ancient Egypt and its kingdom, to publishing works in that connection, and in the course of its activities to training students in the craft of excavation". Donations to the School were found to be held on charitable trust. This was because the School's objects involved both the advancement of knowledge, which was a general public benefit, and the education of individual Egyptologists.
9. A less straightforward case presented itself to Wilberforce J in Re Hopkins' Will Trusts [1965] Ch 669. The bequest in question was to the Francis Bacon Society, to try to find manuscript evidence that the plays commonly attributed to Shakespeare had in fact been written by Bacon. His Lordship considered that the bequest was charitable, but not on the ground of education. Rather, although the terms of the bequest did not expressly say so, the result of any discovery made would inevitably be published. This would increase the generally available knowledge about Shakespeare's plays, which was generally for the benefit of the public under the fourth class.
10. The limits of these principles, however, are demonstrated by the decision in Re Shaw [1957] 1 WLR 729. The case considered the will of George Bernard Shaw, which included a bequest for the development and promotion of an alternative alphabet for the English language. It was argued that the development of a new alphabet would be a valuable contribution to the store of human knowledge. Harman J held that this was insufficient to make the object a charitable one, unless it was combined with teaching or education (at 737). Nor was the promotion of the new alphabet, which his Lordship characterised (non-pejoratively) as "propaganda", educative in the relevant sense. The gift was therefore not charitable.
11. The next case, and the one of greatest significance for me, is the High Court decision in the ICLR Queensland case (Incorporated Council of Law Reporting (Queensland) v Federal Commissioner of Taxation (1971) 125 CLR 659). The question was whether the Council was exempt from income tax on the grounds that it was a "religious, scientific, charitable or public institution or educational institution".
12. The Council was incorporated under the Companies Act of Queensland as a company limited by guarantee. The memorandum of association contained the usual provision preventing the distribution of profits by way of dividend to the members. The Council's objects included the publication of law reports for Queensland and the provision of support to the libraries of the Supreme Court of Queensland (by gifting publications of, or received by, the Council, or by donating profits). Effectively, therefore, any profits from the sale of those law reports would go to those libraries. On winding up, there was the usual provision forbidding any payment or distribution among the members of the company, and instead the proceeds were to be transferred to the Supreme Court libraries. The membership was to consist of three barristers, three solicitors, the Attorney-General, the Solicitor-General and the Registrar of the Supreme Court.
13. The leading judgment was given by Barwick CJ, with whom McTiernan J agreed. Barwick CJ began by noting that the Council was a corporation limited in its activities by its memorandum of association. There was no difficulty in saying that it was an "institution" within the meaning of s 23(e) of the Act (at 665).
14. It had previously been held by the High Court that the Council was not a "public educational institution" (Incorporated Council of Law Reporting (Queensland) v Federal Commissioner of Taxation (1924) 32 CLR 580), but this did not prevent it from being a "charitable institution". His Honour considered that the production of law reports was not educational in the relevant sense. However, the "charitable" test was satisfied under the fourth Pemsel category. The production of accurate reports of decided cases, in the common law context, was necessary to assist in informing the judges and the public of what the law was. As such, it was an indispensable element of the legal system (at 669).
15. Windeyer J, in his concurring judgment, reasoned more widely. He agreed that the Council was not a "public educational institution", but this was because a "public" educational institution had to be an establishment at which instruction was given to students drawn from the public or some significant section of the public. In his Honour's view, the production of law reports aided the study of the law by practitioners and others, which was educational in the relevant sense as well as being indispensable for the rule of law (at 671-672). Thus, the Council was a charitable institution under both the fourth and second limbs of the Pemsel test.
16. Meanwhile, the charitable status of the Incorporated Council of Law Reporting for England and Wales had arisen for determination in the United Kingdom. Strictly speaking, the question was whether the Council could be registered under the Charities Act 1960, but the Inland Revenue Commissioner was joined as an interested party because of the obvious implications for taxation of any decision that the Council could be so registered.
17. At first instance, it was held that Council's objects were charitable. The IRC's appeal was heard before the High Court had decided the ICLR Queensland case and judgment was delivered by the Court of Appeal only a few days after delivery of the High Court's decision (Incorporated Council of Law Reporting for England and Wales v Attorney-General [1972] Ch 73).
18. The Council was established as a company limited by guarantee with an exemption under s 23 of the 1867 Companies Act (in fact it was one of the institutions listed in Palmer's text). Its membership was made up of professionals who were not remunerated. Under its memorandum of association, profits from its activities could not be distributed to its members, although payment of remuneration could be made to editors, reporters, and other persons for services rendered.
19. On appeal, it was argued on behalf of the IRC that the principal object of the Council was to advance the interests of the legal profession by supplying it with the tools of its trade. This was said not to be charitable. The argument was rejected. Russell LJ said (at 87): It seems to me that if the publication of reliable reports of decisions of the courts is for the benefit of the community and of general public utility in the charitable sense, it is an inevitable and indeed necessary step in the achievement of that benefit that the members of the legal profession are supplied with the tools of their trade. I do not see how the benefit to the public, assuming it to be a charitable object, could otherwise be achieved. So it would be if there were a non-profit-making association under gratuitous professional supervision for the production at moderate expense of pure medical drugs or efficient surgical instruments. But the only main object or purpose in such case would be, it seems to me, the relief of the sick.
20. Even so, Russell LJ did not consider that the purpose of the Council was for the advancement of education as such. Nonetheless, he held the Council's objects charitable under the fourth Pemsel category, essentially for the same reasons as had been given in the ICLR Queensland case. The other members of the Court, Sachs LJ and Buckley LJ, considered that the Council was a charitable corporation on both bases.
21. I turn now to the text of the 1995 objects. For convenience, I will set out objects (a) to (d) again (object (e) is an ancillary one which does not make any difference to the outcome of the present debate): (a) to carry out scientific research and developmental work in connection with the grains, milling, baking and allied industries: (b) to carry out scientific research and development work in connection with grains and grains products; (c) to promote and develop the grains, milling, baking and allied industries; (d) to advise, consult and provide services to the grains, milling, baking and allied industries; and
22. Counsel submitted that objects (a) and (b) are charitable because they are directed towards the improvement of scientific and technical knowledge in the bread-making industry. This makes them both educational and conducive to the public interest generally. But I think there are difficulties with this submission.
23. Objects (a) and (b) do not require the education or training of students, as in the School of Egyptian Archaeology case. Nor do they require the publication of the results of the research and development funded (or undertaken) by BRI, as in the Francis Bacon Society case. It would be possible for any scientific knowledge or technical know-how discovered or developed by BRI to be retained by it for the private benefit of members of the industries it serves. Indeed, BRI has established a subsidiary (which is an ordinary company limited by shares) which holds intellectual property rights, presumably so that the fruits of its research may be commercialised.
24. Object (c) refers to promotion of the grains, milling, baking and allied industries. Counsel submitted, by reference to the Yorkshire Agricultural Society case, that this is within the fourth Pemsel class.
25. I am not sure that the promotion of a particular industry, as such, can necessarily be seen as charitable. To my mind, a critical feature in the Yorkshire Agricultural Society case was that the agricultural shows mounted by the Society were open to the public, and thereby served to educate and inform the public generally. Clearly, that gave rise to a public benefit. Furthermore, the object of promoting agriculture, as the decision emphasised, involved the promotion of agriculture generally, and not the promotion of the business ventures of the Society's members.
26. There is nothing in the present case which would limit the promotional activities which BRI might undertake to disseminate scientific knowledge or educate the public. Advertisements designed to increase consumption of the industry's products would undoubtedly fall within the object as expressed of promoting the industry, but I do not think that such advertising would necessarily have the requisite element of public education or information. It might be no more than propaganda, in the sense in which that term was used in Shaw.
27. It may, in a general sense, be for the benefit of the public that the quality of bread should be improved and its price kept down. But that does not necessarily make activities directed to those objectives charitable. The example given by Russell LJ in the ICLR England and Wales case of the production of cheap medical drugs or surgical instruments underlines the problem. His Lordship considered that this would be charitable because it would be for the relief of sickness. But that is an independent category of charitable endeavour under the Pemsel classification. In the present case reducing the price of bread or improving its quality would benefit all consumers. It would not involve the relief of poverty or sickness as such.
28. It is not necessary, however, to reach any final conclusion on objects (a) to (c). That is because object (d) is, on any view, too broad to be charitable. The object authorises the provision of any advice or services whatsoever, on any terms, to participants in the industries served by BRI. While the provision of advice or services might indirectly conduce to cheaper or better bread products, in my view, that does not make it a charitable purpose. And object (d) cannot be read down as ancillary to other objects, as in the Yorkshire Agricultural Society case. In my view, the 1995 objects are not exclusively charitable
29. The 1948 memorandum contained additional provisions, not reflected in the 1995 memorandum, for BRI to act for the personal benefit of its members, including by such means as providing facilities for their use and lobbying for their benefit (see [47]-[50] above). It also provided that all of the objects were independent.
30. This led counsel for BRI and the Attorney General to eschew the submission that a charitable trust was created on the incorporation of BRI in 1948. Counsel for the plaintiffs however contended that these additional provisions were not an obstacle to the Court making such a finding, and urged me to do so. In counsel's submission, the additional provisions were no more than powers for achieving the main, allegedly charitable, objects, or were ancillary thereto.
31. In my view, the additional provisions to which I have referred cannot be seen purely as ancillary powers. They are expressed as objects and that is what they are. They include ends which may be pursued rather than being simply means to such ends. And I think the independency clause makes it impossible to argue they are merely ancillary to other objects. In any event, the conclusions I have already reached on the 1995 version of the memorandum apply with the same force to the 1948 version.
32. For these reasons, even if I had concluded that a trust had been created in 1995 or in 1948, the trust would not have been a valid charitable trust.
33. It hardly needs to be said that BRI's entitlement to taxation or rating exemptions is a separate matter. I have already indicated that BRI could be seen as an "institution" even though, in my view, it is not a trustee for charitable purposes. The application of taxation and rating legislation was not debated before me and will depend upon the particular terms of the relevant statutes.

Charitable corporation with quasi-trust obligations

1. Had I concluded that BRI's objects were charitable, it would have been necessary to consider the possibility that the Court could exercise some form of quasi-trust jurisdiction over its affairs. Even in that event, I would not have been prepared to make the declaration that was sought, which was a declaration that BRI holds its assets "subject to the same obligations and entitlements that would apply to a trustee possessed of [those assets] for the charitable [objects specified]".
2. A declaration in these terms would have been too vague to be of practical utility and would only have led to further argument. Instead, it would have been necessary for the parties to formulate relief based on a specific aspect of BRI's quasi-trustee status and justify the grant of relief in those specific terms.
3. As it is, I have concluded that BRI's objects are not charitable. In theory, there may be some argument that there is some power of the Court that does not depend upon possession of exclusively charitable objects. Alternatively, it might be argued that there may be a "visitatorial" jurisdiction in any event. The article by Dean Pound appears to have been directed towards establishing that proposition.
4. But to pursue any such argument would require further, much more extensive, analysis of the authorities. Alternatively, as I suggested to the parties at an earlier stage, it would appear to be open to BRI, through the Receiver, now to make a declaration of trust in favour of suitably worded charitable objects. Or the proper course might be to order that BRI be wound up on the "just and equitable" ground. In that event, the Court's power to determine what should be done with its surplus assets under Article 83 might possibly be invoked. I will leave all of this to the parties for further consideration.

Conclusions and orders

1. I have concluded that: 1. the property of BRI is not held on the terms of a charitable trust cognisable in equity; 2. BRI's objects are not solely charitable in the legal sense of that term, and so BRI is not amenable to such jurisdiction as the Court may have over "charitable corporations" with exclusively charitable objects; 3. whether the Court has some other basis for making orders about the administration of BRI's affairs or the destination of its property on winding up remains to be considered by the parties.
2. It seems to me that the claims for declarations of trust will need to be dismissed. The parties will need to consider what, if any, other relief they are able to seek. As the Receiver's appointment is interlocutory, the parties will also need to consider how much longer the receivership can, or should, be maintained.
3. I will stand the proceedings over for two weeks to allow the parties to consider these questions and to agree, if possible, orders giving effect to this judgment. If agreement cannot be reached, I will hear argument. The parties are also invited to identify any errors or omissions (including arguments which I have not dealt with) in the reasons for judgment.
4. The orders of the Court are: 1. Adjourn the proceedings to 9:30 am on 31 March 2023 or such other time as may be arranged with my Associate. 2. Direct that the parties confer on the form of orders to be made to give effect to this judgment, and, no later than 24 hours before the adjourned hearing, submit proposed orders for this purpose.

Amendments 29 January 2024 - [132] Deletion of incorrect word. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 January 2024