Counsel:
P Menadue (First & Second Plaintiffs)
T L Wong (First Defendant)
L Ellison SC (Eighth Defendant)
[2]
Solicitors:
Brennan Tipple Partners (First and Second Plaintiffs)
Crown Solicitor's Office (First Defendant)
Prolegis Lawyers (Second Defendant)
McMahon Fearnley Lawyers Pty Ltd represented by Boyd House & Partners (Eighth Defendant)
File Number(s): 2017/00193289
[3]
Judgment
The plaintiffs, Mr John Greer and Mr Stuart Tipple (the Executors), are the executors of the last will of the late Duncan James Bassett (the Testator), which is dated 22 December 2011 (the Will). The Testator died on 21 February 2013 and probate of the Will was granted to the Executors on 9 August 2013.
John Greer v Attorney General for New South Wales [2018] NSWSC 725 | Case summary | Zoe
By the Will, the Testator made various gifts of real and personal property to his children, relatives and friends. Clause 11 of the Will directed the Executors to hold the residue of the Testator's estate on trust to pay all funeral debts and testamentary expenses, duties and other taxes payable in respect of the Testator's estate, and after payment of several legacies, to divide the balance of the residue as set out in Appendix 1 to these reasons.
By summons filed on 28 June 2017, the Executors seek various determinations in relation to the gift of three twentieths of the residue to "The Avondale College Foundation" made in cl 11(ii) of the Will. In particular, the Executors seek a determination:
1. as to whether the reference in cl 11(ii) of the Will to "The Avondale College Foundation" (the Donee) is a reference to The Avondale Foundation ABN 54 252 903 699 (The Avondale Foundation);
2. as to whether the Donee has dissolved and, if so, when it dissolved;
3. if the Donee has not dissolved, as to whom the Executors can validly pay the gift made in cl 11(ii) of the Will to the Donee;
4. as to whether, if the Donee has dissolved, the Testator made the gift in cl 11(ii) of the Will for the charitable purpose of benefitting Avondale College Limited ACN 108 186 401 (the College) or some other purpose, such that the gift should now be administered by way of a cy-pres scheme on the terms set out in Appendix 2 to these reasons or some other terms;
5. as to whether the gift in cl 11(ii) of the Will has lapsed or otherwise failed;
6. as to whether, if the gift in cl 11(ii) of the Will has lapsed or otherwise failed, it falls into residue to be distributed among the six residuary beneficiaries in cl 11(i) and cl 11(iii) to 11(vii) of the Will in proportion to their stated shares or should be distributed in some other way.
The defendants in the proceedings are the Attorney General for New South Wales (the Attorney General), the College and entities representing the recipients of the gifts made in cl 11(i) and cll 11(iii) to 11(vii) of the Will.
The outcome suggested in the submissions made on behalf of the Executors is that:
1. the reference in cl 11(ii) of the Will to "The Avondale College Foundation" is a reference to "The Avondale Foundation ABN 54 252 903 699";
2. The Avondale Foundation, as referred to in cl 11(ii) of the Will, dissolved on 16 April 2014;
3. the gift made in cl 11(ii) of the Will was made for charitable purposes and has not failed;
4. the gift made in cl 11(ii) of the Will should be administered by way of a cy-pres scheme in the terms set out in Appendix 2 to these reasons.
While the summons also sought an order, under r 7.6(2) of the Uniform Civil Procedure Rules 2005 (NSW), appointing a representative for the second to seventh defendants, no order appears to have been made. Each of those entities has been served with the summons and the affidavits relied upon by the Executors. The second defendant, the Bible Society ACN 135 592 193 (the Bible Society), formerly known as The New South Wales Auxiliary of the British and Foreign Bible Society Incorporated, filed a submitting appearance. The third to seventh defendants, representing the beneficiaries named in cll 11(iii) to 11(vii) of the Will, have not filed appearances and have taken no part in the proceedings.
The College has adopted the submissions made on behalf of the Executors. The submissions of the Attorney General generally support the orders suggested by the Executors. In the absence of any participation by the second to seventh defendants, there has been no effective contradictor. However, each of them, having been informed of the outcome suggested by the Executors, has specifically indicated in correspondence with the solicitors for the Executors that they did not wish to take an active part in the proceedings.
The matter was heard on 7 May 2018. At the conclusion of the hearing, the orders that the Court proposed to make were circulated to the parties that were present. The Executors subsequently informed the second, third and sixth defendants (being those defendants not connected with the Seventh-day Adventist Church) of the proposed orders. None of those parties objected to or commented upon the proposed orders.
[4]
Factual background
The Testator was born on 27 February 1924. He held strong Christian beliefs and became a member of the Seventh-day Adventist Church on 2 December 1989. He was generous in providing donations and gifts to Christian organisations, including the Seventh-day Adventist Church. Each of the entities referred to in cll 11(iv), 11(v) and 11(vi) of the Will was associated with the Seventh-day Adventist Church.
In 1897 the Seventh-day Adventist Church established the Avondale College at Cooranbong as a not-for-profit provider of private education with the aim of fostering a Christian learning community "dedicated to serving world needs". The College was incorporated in 2004 as Avondale College Ltd. From that time, it has carried on the undertaking previously carried on by the unincorporated body known as the Avondale College. The College currently trades as the "Avondale College of Higher Education". It has two campuses. One campus is situated in the town of Cooranbong near Lake Macquarie. The other campus is in Wahroonga, adjacent to the Sydney Adventist Hospital.
In about 1978, an unincorporated association was established under a constitution with the name "the Avondale College Foundation". In 2004, the name of the Avondale College Foundation was changed to "the Avondale Foundation". The constitution was revised as at 27 September 2004 (the Constitution), and provided that the Avondale College Foundation was constituted under the name "the Avondale Foundation".
While there is no evidence as to the terms of the Constitution prior to that date, there is no evidence that the Constitution was relevantly amended prior to that time. Under the Constitution, the objects of the Avondale Foundation were to support and assist Avondale College Cooranbong and to encourage and foster the interests and financial support of alumni, commerce and industry, other potential benefactors and friends of Avondale College, for the benefit of Avondale College.
The Constitution provided that if, upon the winding up or dissolution of the Avondale Foundation or upon its ceasing to carry out its activities, there remained, after satisfaction of all of its debts and liabilities, any property whatsoever, that property was to be given or transferred to the Board of Governors of Avondale College for the purposes of Avondale College or, if Avondale College should have ceased to exist, to the Australasian Conference Association Limited.
Under cl 14 of the Constitution, the control, management and conduct of the Avondale Foundation was vested in the Board of Governors. The Board of Governors was to include the officers of the Avondale Foundation, who were to comprise a President, up to five Vice-Presidents, a Treasurer and a Secretary. Under cl 23 of the Constitution, the administration of the Avondale Foundation was to be under the control of an Executive Committee, which was also to be responsible for implementing the policies of the Board of Governors. The Executive Committee was to include, as members ex officio, the President, Vice-Presidents, Treasurer and Secretary of the Avondale Foundation, as well as the chairmen of the board of directors of all companies controlled by the Avondale Foundation. In addition, the Board of Governors had the power to appoint up to three persons to the Executive Committee in addition to the ex officio members.
At some stage, the Avondale Foundation was allocated an Australian Business Number, namely, ABN 54 252 903 699. From 1978 to 2006, the unincorporated association, under one name or the other, contributed substantial sums of money for the purposes of the Avondale College conducted at Cooranbong and, following its incorporation, for the purposes of the College.
The unincorporated association engaged in various business undertakings including:
coffin making;
production of macadamia oil and macadamia products;
property development, and
a propagation nursery.
In 1980, two companies were established under the auspices of the association. ACF Investments Limited (ACF) was incorporated to engage in various business activities, including deposit taking and paying interest on deposits. Avondale Nurseries Limited (Avondale Nurseries) was incorporated to operate the propagation nursery.
However, in 2007, ACF suffered write downs and illiquidity in relation to some of its investments and was unable to repay deposits as and when they fell due for repayment. On 19 December 2008, Messrs Brett Lord and Stephen Parbery were appointed as administrators of ACF (the Administrators). On an unspecified day in 2008, the Administrators, ACF, the Avondale Foundation and Avondale Nurseries, together with other entities, entered into a deed of company arrangement (the Deed), under which the Avondale Foundation and Avondale Nurseries gave certain guarantees in respect of the obligations of ACF. Under the Deed, each guarantor was required, on demand by the Administrators, to transfer to the Administrators all of its assets after discharging its liabilities or to pay to the Administrators an amount equal to the value of its assets less its liabilities. Pursuant to the Deed, the Avondale Foundation transferred all of its assets to the Administrators. Thus, after the Avondale Foundation entered into the Deed, it realised all its assets and discharged all of its liabilities.
There is no evidence that an annual general meeting of the Avondale Foundation or any meeting of the Board of Governors or the Executive Committee has been held since October 2009. On 16 April 2014, Mr Norman Young, the then President of the Avondale Foundation, sent an email to the members of the Executive Committee in which he tendered his resignation as President and invited the members of the Executive Committee "to vote through the dissolution" of the Avondale Foundation. Mr Young received responses from three recipients of the email who supported that proposal. There is no evidence that any other responses were received.
[5]
The questions
The evidence summarised above demonstrates that an entity called "The Avondale College Foundation" was established in 1978 to support and assist the undertaking known as the Avondale College, which operated at Cooranbong. The entity changed its name to "the Avondale Foundation" in 2004 without changing its objects or nature. It is clear that, when the Testator referred in the Will to "the Avondale College Foundation", he intended to refer to the Avondale Foundation to which ABN 54 252 903 699 was allocated.
An unincorporated association can dissolve in various ways, including dissolution according to the rules of the association, dissolution by agreement of its members and winding up by the court. However, even absent agreement among the members to dissolve an unincorporated association, it is possible for such an association to dissolve without formality. [1] While it is not sufficient for an association merely to be inactive, inactivity, coupled with other circumstances showing that the members of the association do not intend it to continue, can give rise to the inference that it has ceased to exist. [2] Thus, if an unincorporated association parts with all of its assets and ceases to undertake activity, in circumstances where the executive of the association conclude informally that it will no longer continue to operate, the inference can be, and should be, drawn that the association has been dissolved.
The Avondale Foundation ceased to engage in any activity after 25 October 2009, when the last annual general meeting and meeting of the Board of Governors occurred. The email of 16 April 2014 indicates that the Executive Committee of the Avondale Foundation reached a consensus that it be dissolved from that time. I consider, on the basis of the material that I have summarised above, that it is appropriate to conclude that the Avondale Foundation dissolved after the death of the Testator and no later than 16 April 2014.
It is clear that, at the time of the Will and at the time of his death, the Testator had a charitable intention to benefit the College. I consider that the gift in the Will to "the Avondale College Foundation" was a gift for charitable purposes and did not fail. It follows, therefore, that the interests of the other residual beneficiaries named in cl 11 were excluded. [3] Since the Avondale College Foundation no longer exists, the gift should be distributed cy-pres. [4]
[6]
Conclusion
It follows that a declaration should be made that, on the true construction of the Will, and in the events that have happened, the reference in cl 11(ii) of the Will to "The Avondale College Foundation" is a reference to "The Avondale Foundation ABN 54 252 903 699", an unincorporated association. That unincorporated association dissolved after the death of the Testator but no later than 16 April 2014. The Testator made the gift in cl 11(ii) for a charitable purpose and, notwithstanding the dissolution of the association, the gift has not failed.
Accordingly, an order should be made that the gift in cl 11(ii) of the Will be administered by way of a cy-pres scheme in the terms set out in Appendix 2 to these reasons. The Executors should be ordered to hold the share of residue referred to in cl 11(ii) of the Will on trust for the College and they should pay that share to the College.
[7]
Costs of the present proceedings
On 21 December 2016, the Executors made an interim distribution to the residuary beneficiaries referred to in cl 11(i) and cll 11(iii)-(vii) of the Will, leaving a balance of in excess of $2,560,000. If the beneficiary referred to in cl 11(ii) had been given a pro rata interim distribution at that time, it would have received the sum of $1,350,000. If that amount is distributed on the basis of the cy-pres scheme suggested above, the Executors would be left with a residuary estate of approximately $1,215,000, which would be available to pay the costs of the proceedings before the final distribution is made to the residuary beneficiaries.
The question that arises is whether the costs of the proceedings should be borne by the fund arising under cl 11(ii) of the Will or whether it should be borne by the whole of the residuary estate on the basis that the costs of the proceedings constitute a testamentary expense.
Clause 11 of the Will provides that the Executors are to hold the residue of the estate to pay all funeral debts and testamentary expenses payable in respect of the estate, to pay specified legacies and then to divide the balance among the seven entities referred to in Appendix 1 to these reasons. Clearly it was necessary for the Executors to resolve any question as to who is entitled to the gift made in cl 11(ii) before the distribution of the residuary estate could be completed. In the circumstances, I consider that the costs of these proceedings constitute a testamentary expense. They should be paid out of the residue presently held by the Executors before making the final distribution of the seven gifts referred to in cl 11.
It is appropriate that the costs of the Executors be paid out of the estate on the trustee basis. The costs of the Attorney General and of the College should be paid out of the estate on the ordinary basis. The costs of the Bible Society of filing a submitting appearance should be paid out of the estate on the ordinary basis.
[8]
Appendix 1
Three twentieths (3/20ths) to THE NEW SOUTH WALES AUXILLARY OF THE BRITISH AND FOREIGN BIBLE SOCIETY INCORPORATED;
Three twentieths (3/20ths) to THE AVONDALE COLLEGE FOUNDATION;
One twentieth (1/20th) to the CREATION SCIENCE FOUNDATION LIMITED;
One twentieth (1/20th) to the "SIGNS MAGAZINE" being a magazine published by the Seventh-day Adventist Church and a receipt for the payment of this bequest by either the treasurer of any corporation or entity responsible for the publication of the "Signs Magazine" or the treasurer of the South Pacific Division of Seventh-day Adventist shall be an effective discharge.
Six twentieths (6/20ths) to the AUSTRALASIAN CONFERENCE ASSOCIATON LIMITED to be applied in the following manner:-
Three twentieths (3/20ths) to be applied under the direction of the Executive Committee of the South Pacific Division of the Seventh Day Adventist Church.
Three twentieths (3/20ths) to be applied under the direction of the Board of Management of the Adventist Development Relief Agency;
Three twentieths (3/20th) to the SEVENTH-DAY ADVENTIST (AUSTRALIAN UNION CONFERENCE) LIMITED for the express purpose of promoting and maintaining the Hope Channel.
Three twentieths (3/20th) to 3ABN AUSTRALIA INC. DONNYBROOK, WESTERN AUSTRALIA.
AND if any of the preceding trusts in this clause fail then any failed part or parts shall be added to the other parts in the same proportions as the original gifts and a receipt from the Treasurer or any official officer of any beneficiary shall be a sufficient discharge to my Executors.
[9]
Appendix 2
Scheme for the Application of a gift in clause 11(ii) of the will of Duncan James Bassett ("the Testator") dated 22 December 2011 ("the Will").
1. The Plaintiffs, being the Executors of the Estate of the Late Duncan James Bassett, hold the gift in cl 11(ii) of the Will (being 3/20ths of the balance of the residue) on trust for the eighth defendant in these proceedings (Avondale College Ltd).
2. The said Executors pay the said gift to the eighth defendant.
3. That a receipt of the treasurer or other proper officer of the eighth defendant is sufficient discharge of the Executors' obligation to pay the said gift to the eighth defendant.
[10]
Endnotes
AS Sievers, Associations and Clubs Law in Australia and New Zealand (Federation Press, 2010) at [2.6].
See GKN Bolts and Nuts Ltd Sports and Social Club Leek & Ors v Donkersley & Ors [1982] All ER 855 at 860 and GE Dal Pont, Law of Associations (LexisNexis, 2017) at 11.08-11.10.
See Tantua v MacFarlane [2010] NSWSC 244 at [167].
See Tantua v MacFarlane [2010] NSWSC 244 at [168].
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: 23 May 2018