Northern Sydney and Central Coast Area Health & anor v Attorney-General for New South Wales & 7 ors

Northern Sydney and Central Coast Area Health Service (First Plaintiff) The State of New South Wales (Second Plaintiff) Attorney-General for New South Wales (First Defendant) North Sydney Council (Second Defendant) PARTIES : Commonwealth of Australia (Fourth Defendant) The RSL (NSW) (Fifth Defendant) Rowe, White and Perrin, trustees of RSL Welfare and Benevolent Institution (Sixth Defendant) RSL Lifecare Ltd (Seventh Defendant) St Vincents & Mater Health Sydney Ltd (Ninth Defendant) Sissters of Charity Healthcare Australia Ltd (Tenth Defendant)

Mr B Coles QC with him Mr M Evans (Plaintiffs) Mr J Renwick with him Ms G Mahony (First Defendant) COUNSEL : Mr M Leeming SC with him Mr C Withers(Second Defendant) Mr M Dicker (Fourth Defendant) Mr J West QC with him Mr N Kidd (Fifth, Sixth and Seventh Defendant) Mr J Watson (Ninth and Tenth Defendant)

Teece, Hodgson & Ward (Plaintiffs) Crown Solicitor's Office (First Defendant) SOLICITORS : Mallesons Stephen Jaques (Second Defendant) Australian Government Solicitor (Fourth Defendant) PricewaterhouseCoopers Legal (Fifth, Sixth and Seventh Defendant) Thomson, Playford and Cutlers (Ninth and Tenth Defendant)

• 15 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1994/06 NORTHERN SYDNEY AND CENTRAL COAST AREA HEALTH SERVICES V ATTORNEY-GENERAL FOR NEW SOUTH WALES & 9 ORS JUDGMENT Outline

1 By judgment delivered on 14 August 2007 I determined that the trust purposes of the Graythwaite trust had failed and ordered that a cy-pres scheme be settled. This judgment deals with the scheme and should be read with the earlier judgment, as I will not repeat what is said there. 2 I consider the original trust purpose came to an end at the latest when there were no remaining wounded or sick soldiers and sailors returned from World War I. The trust wording related to that war and expected it to come to an end. It follows that it was the second part of the trust to which attention was given in my original judgment as it was those trust purposes which had failed. It follows that in settling a scheme it is the scheme which most closely accords with a "convalescent home in perpetuity for distressed subjects of the British empire" to which attention must be addressed. 3 I indicated in the earlier judgment, and the evidence establishes, that rehabilitation treatment is in modern medical terms the replacement for treatment received in convalescent homes in earlier times. Thus a scheme providing for delivery of rehabilitation care would be a scheme as close as possible to the original trust purpose of convalescent home. 4 After a certain amount of preliminary work and refinement of earlier proposals, two schemes have been put before the court, one by the trustee the State of New South Wales (the State) and the other by the Returned Services League of Australia (NSW Branch) (the RSL). I will call the first scheme "the State scheme" and the second scheme "the RSL scheme". Both schemes are worthy schemes and it is obvious care has gone into their presentation. 5 The RSL scheme is supported by the North Sydney Council the 2nd defendant, the Commonwealth of Australia the 4th defendant, St Vincent's and Mater Health Sydney Limited (SVMHS) and the Sisters of Charity Healthcare Australia (SCHA) the 8th and 9th defendants. The State Scheme 6 The general outline of this scheme is as follows:

Main provisions A. The Graythwaite property be sold. B. The proceeds be applied to construct a new special purpose rehabilitation unit at the Ryde hospital. Other provisions C. The new facility would be erected upon land within the bounds of Ryde Hospital now held in the names of various registered proprietors but all on behalf of or within the control of the State. D. That the land required would be transferred free of cost to Her Majesty Queen Elizabeth II in right of the State of New South Wales as trustee of the Graythwaite trust. The amount of land required would vary depending on whether a 60 bed or a 30 bed facility would be built. If the greater area were transferred its value would be about $3.5 million. E. If the proceeds of sale of Graythwaite amounted to approximately $16.5 million then a 30 bed facility would be built. If the proceeds amounted to approximately $22 million then a 60 bed facility would be built. F. The facility would bear the name Graythwaite and would be operated for the State as trustee by the Area Health Service. The operating costs would be borne by the State. G. The facility would provide sub-acute rehabilitation services for public patients requiring rehabilitation. H. The beds would be provided by transferring beds from Greenwich Hospital and Royal Rehabilitation Centre if 60 beds were required and from Greenwich hospital alone if only 30 beds were involved. The effect of this would be that no greater number of rehabilitation beds would be made available as a result of the State scheme.

The RSL Scheme 7 The general outline of this scheme is as follows: A. That the RSL be appointed trustee of the Graythwaite trust in place of the State and the Graythwaite property be transferred to it as such new trustee. B. That the Graythwaite land be subdivided into two parts, the upper part or about 30% of it would be leased to SCMA for 50 years at nominal rent and the lower part would be licensed at nominal rent to North Sydney Council for 99 years. This lower land would be maintained by North Sydney Council and available to the public as open space and naturally patients in any new Graythwaite facility would have access to that land. C. That SCMA would sub-lease the leased land to SVMHS for 50 years which company would in turn build a 52 bed rehabilitation unit on the site funded partly by borrowed monies and partly by the RSL which I will explain. D. The Graythwaite home and certain outbuildings would be restored. E. The rehabilitation centre would provide rehabilitation services and treatment for patients of St Vincents Private Hospital and the Mater Hospital recovering from orthopaedic surgery, cardiac surgery and neuro surgery and also associated services. Most of the patients would be insured or fee paying patients but Defence Veterans Association Gold Card members and some other armed services members would be treated free of charge to them payment being received from the Commonwealth. F. The funding for the restoration and part of the funding for the construction of the new centre in all up to a maximum of $10 million would come from the RSL out of a grant of $20 million to be made to it by the Commonwealth of Australia. The balance of that $20 million funding would be used for other purposes of the RSL, generally of a charitable nature being for the services of RSL Lifeline, provision of convalescence for defence personnel returning from overseas duty or for furthering the objects of the cy-pres scheme or the objectives of the RSL or for other purposes approved by the Commonwealth. G. The Graythwaite centre would be expected to operate at a profit those profits being applied towards charitable objects or activities of SVMHS or SCHA. The main distinguishing aspects of the schemes are as follows State Scheme 8 The State would remain as trustee, the Graythwaite property would be sold, and the proceeds applied to construct a new rehabilitation centre using beds transferred from existing hospitals thus providing treatment free of charge to public patients. The State would bear the running costs. There would be no overall increase in the number of hospital beds dedicated to rehabilitation.

RSL Scheme 9 There would be a new trustee, Graythwaite would be restored and preserved, a new rehabilitation facility would be erected on the site comprising a 52 bed unit and associated facilities primarily for fee-paying patients with a large part of the site licensed to North Sydney Council but to remain open space with access available to patients, the retaining of open space being beneficial to their rehabilitation. There would be an increase in the number of rehabilitation bed places. Which scheme is cy-pres or nearest the original objectives The property 10 It was intended that the charitable objects be carried out on the site. The terms of the trust make that perfectly clear. There was however no fund set aside from which the cost of carrying on the convalescent home activities could be provided. I said during an earlier hearing that the continuation of activities on the site closely resembling the trust activities would be a desirable result. The State scheme requires the property to be sold. The RSL scheme provides for its retention. This consideration favours the RSL scheme. The Trustee 11 The fact that the State was selected as the trustee may indicate an intention to provide for a wide class of objects or beneficiaries or may indicate the public nature of the trust. However that does not mean that if the RSL scheme were otherwise preferable a change of trustee should stand in the way. Irrespective of the lack of a settled fund to provide for maintenance it could not be said that the State has been a good trustee over the past quarter of a century. 12 I accept that it is usual in a cy-pres scheme to maintain the existing trustee. Nevertheless this is not essential. The State could itself appoint a new trustee. In any event if the objects of the RSL scheme were as close as possible to the original objects this would I think have to prevail over any difference brought about by change of trustee. Extraneous benefits 13 As a result of its funding agreement with the Commonwealth, the RSL would obtain substantial funds which could be applied towards its objects and activities for the most part charitable. That is a consideration or a matter which has little, if any, bearing on the proper considerations here. The fund is the property. The fact that if the fund, being the property, is put to a particular use then this will bring about funds for other charitable activities is not a relevant consideration. The Ryde Hospital Proposal 14 I indicated at an earlier stage of the proceedings before the St Vincent's parties were joined that I had serious doubts about endorsing any scheme under which the proceeds of sale of Graythwaite would be used to construct a rehabilitation centre on land owned or controlled by the State and not being trust property. The concern arose partly because the terms of the trust include the words "in perpetuity". A building erected on land not trust property would be a fixture on that land so that if the land were sold the trust property would cease to exist. It seems that the State has been mindful of that indication in its final scheme, which I should indicate does involve transfer to the trust of land of considerable value.

Development Funds 15 The State scheme even for the lesser proposal depends upon the sale of Graythwaite for at least $15,100,000. In fact if the costs of these proceedings are to be paid out of the proceeds of sale it will need to be more. There is evidence of value of $16,200,000. In an affidavit of 3 June 2008 Mr Corbett the chairmen of the Shore School Council said he understood the State had a valuation of $16,800,000. As there was no objection to that I take it to be accepted. He said that the Sydney Church of England Grammar School would be prepared and able to pay that amount for the site and would wish to acquire it subject to its being available for school purposes. 16 The RSL scheme is financed by Commonwealth funds and by funds which the hospital interests propose to borrow from their bank. They say that they expect to be able to do so and I accept that. Increase in Rehabilitation Care Places 17 The evidence of Dr Matthews would appear to be that additional facilities are not needed in the North Sydney area. I find it difficult to accept that evidence and it is contrary to the evidence put forward by the hospital parties. The desire to close the Greenwich and Royal Rehabilitation units presumably arises because they are no longer satisfactory. The evidence is that the 52 beds proposed for Graythwaite by the hospital interests are available to those interests and they expect to be able to use them on the Graythwaite site. They say there is a demand for such places. However the trust was not limited to lower North Shore residents. Sydney was not very widespread in 1915, but the persons proposed to be benefited by the trust could come from anywhere in Australia and perhaps beyond. There was no geographical limitation. In those circumstances there is no reason why, if the Graythwaite property has to be sold, a rehabilitation unit ought not to be put on land at the Ryde hospital site, although I would not have thought it appropriate that a rehabilitation facility be built outside the metropolitan area. On balance the increase in places favours the RSL scheme.

18 It might be thought that the result of the State scheme is that the State would be using the funds of a private trust to finance some activity which it ought to be funding through taxpayers funds. Apart from the fact there would be no increase in rehabilitation beds this was an argument which was not put forward by any party. It is probably reasonable to say that at the present time in the present condition of the State's finances this proposed facility would not be constructed unless the funds from the trust were available. It was not suggested a new up to date unit was not needed. Additional Matters 19 Because the objective is to replace the failed trust purpose a trust solely devoted to returned service personnel from any war would not be an appropriate scheme, although a trust which incorporated such people as objects might possibly tip the balance if all else were equal. Both the State and the hospital interests provide for such people. The second matter to bear in mind is that although the RSL may benefit by up to $10 million from Commonwealth funding if this scheme is considered the better one that is really irrelevant. The fact that such money may be applied for other charitable purposes might be good for the RSL and for the public benefit but it does not bear on the matter. It is the use of the trust property which is the determining matter, not the use of additional Commonwealth funds for other charitable purposes. 20 The next matter to bear in mind is that it was never any part of the trust purposes to provide open space and recreation facilities for the ratepayers of North Sydney. Whatever may be the socially desirable elements of the RSL scheme so far as the licence to North Sydney Council is concerned, the only relevance of this to the present considerations is that the keeping of such an area as open space can be accepted as being of benefit to patients in a rehabilitation centre at Graythwaite insofar as it would provide quietness and fresh air. This would compare favourably with the situation which would arise if that land were cluttered with buildings. If a reasonable way of achieving this quiet and fresh air is by licence to the council with an obligation to maintain the open space at no expense to the trust then that would be a reasonable use of part of the trust property. Senior counsel for the State argued that the trust encompasses the whole of the land and that therefore the excision of part of it for the benefit of North Sydney Council is not a use of the land for trust purposes or a use close to the original trust purposes. I reject that submission. 21 I have in the earlier judgment expressed my views on the meaning and purpose of section 9 of the Charitable Trusts Act 1993. Insofar as some submissions appear to be contrary to those views I adhere to what I said. However spirit and intentions may show that one proposal is closer to the original trust objects than another. Distressed subjects of the British Empire without regard to Race or Creed 22 Leaving aside the word "distressed", this description embraces a large proportion of the population of Australia in 1915. No scheme proposes any limitation of patient and if "subject of the British Empire" were thought to be a limitation it would probably not now be possible to limit scheme beneficiaries to Australian citizens and in any event that would be narrower than the original class of persons encompassed as objects of the charitable trust. 23 It is the adjective "distressed" to which attention must be given. Under the RSL scheme the vast majority of those persons receiving rehabilitation services would be private patients namely those with private health insurance or those who could afford about $560 per day. Those persons, or at least those who could pay the daily rate, could not be persons who were financially distressed. Persons who could afford private insurance would be far less likely to be financially distressed than those who could not afford it. The State scheme is for the treatment of public patients, that is, those for whom the cost falls upon the State. I accept that there are many public patients who are not financially distressed but are persons who choose not to take out private insurance. Nevertheless those persons who would be patients at the rehabilitation unit at Graythwaite proposed by the RSL scheme would be far more likely to be financially better off and not to be financially distressed than the majority of persons treated under the State scheme. 24 In paragraph 28 of my earlier judgment, although it was not strictly necessary for the question then being decided, I set out some views on the meaning of distressed. I adhere to those views. I set out there the views expressed by counsel for the Attorney-General that "while distressed does not necessarily require economic distress or lack of money to enable a person to pay for care the word at least encompasses those in dire economic circumstances and the trust property could not be reserved for those of substantial means." Dr Renwick who appeared as counsel for the Attorney-General on the 2nd hearing adopted the views that I had expressed in paragraph 28 of the earlier judgment and particularly the statement that "distressed people are generally people in extreme need through sickness, adversity, economic circumstances or a combination of these." 25 No counsel for any of the defendants referred to any authorities additional to those I discussed in that paragraph 28 on the question of "distressed". Senior counsel for the State referred to In re Pieper (deceased) [1951] VLR 42 where the subject of the charitable gift was "for the relief of the distressed in Europe." The issue there was whether there was a good charitable gift. However Smith J at page 44 of that judgment said: It is true that the word "distress" is capable, in a suitable context, of meaning or including emotional disturbance or sickness not connected in any way with poverty or want. But here the words to be construed are "the relief of distress in Europe", and in common usage this language, I think, would more naturally be applied to distress in the sense of poverty or want.

Each case depends upon its facts but as a general rule tend to associate distress with being impecunious. See also The Board of Trade v The Sailing Ship Glenpark, Limited [1904] 1 KB 682.

26 There can be little doubt that persons in need of convalescence were persons who had been sick and who were recovering and required a convalescent home in which they could be assisted with recovery. The word "distressed" would add nothing if it encompassed people who were sick but nothing more, at least unless the sickness was caused by some catastrophic event or happening in their lives. In the context in which it appears in the terms of the trust, I conclude that the word imports some element of poverty and hardship induced by poverty. It seems to me that this was an essential part of the original objectives of the trust once the trust for the sick and wounded soldiers and sailors had come to an end. It follows from this consideration that the scheme put forward by the State is, in my opinion, closer to the original trust purposes than the scheme put forward by the RSL, at least on this aspect. Thus it would only be if the construction and conducting of a rehabilitation unit on the site providing for far fewer people in distressed circumstances than would be provided for by the State scheme is to be preferred because it involves the continuing use of the site that the RSL scheme should be accepted. After careful consideration I have determined that not to be the position and that the cy-pres requirements means that subject to the matters to which I am about to refer the State scheme should be preferred because the objects (meaning the persons to be benefited) under the State scheme are closer to those originally benefited under the failed scheme than those persons who could benefit under the RSL scheme. The Attorney-General supports that view. Other considerations 27 One matter of significance is this: it was, I think, probably apparent from discussion between bench and counsel during the hearings on 10 and 11 June 2008 that I was unlikely to approve a scheme which would involve the construction of the building using trust funds on land which was not trust property. I have given the reasons for that. That remained the position when the matter was adjourned on 11 June 2008. A further adjournment was granted on 24 August 2008 of a hearing which was to commence the following week on application of the State, because it was felt that there may be some impact on its proposal as a result of the Mini-Budget which was being put to Parliament on 11 November 2008. It was for that reason that the matter was adjourned to 14 November 2008. Mr Matthews had originally stated that the trust property would be sufficiently protected because land upon which it was built could not be sold without the approval of the Minister. That would not seem to me to provide adequate protection. It seems to me to be quite extraordinary that between 11 June and 14 November no decision was made by the State binding it to transfer the land upon which it is proposed to build the rehabilitation unit at Ryde to the trust. It is now put forward as a part of the scheme but unless the court is satisfied it has taken place, it should not approve the scheme. In other words, in my view, approval must be made conditional upon that. 28 The other matter of concern is that the evidence of Mr Matthews which appears at page 185 of the transcript is that this proposal to spend the proceeds of the Graythwaite property on the rehabilitation unit is subject to Treasury approval and that any proposal to spend additional funds is subject to such approval. This is said to apply to trust funds as well as what might otherwise be described as public funds. As far as evidence goes, the State has done nothing to advance this position since June. Not only that, it does not appear to have done anything to advance that position since the original hearing was concluded. It seems to me to be rather unsatisfactory and points to the necessity of making the approval of the scheme subject to some preconditions being satisfied. I accept that the same sort of problem arises but in a lesser way with the RSL scheme. There all the necessary resolutions are in place for the matter to go forward, whereas that is not the position with the State scheme. Nevertheless the Court should proceed on the basis that the necessary approvals are likely to be obtained and therefore direct that the State scheme be approved subject to some conditions being satisfied within a particular time frame. 29 It follows that if the conditions are not met the action would have to be restored for further consideration. It is my view that if that situation arose the RSL scheme should be approved but circumstances may alter and that would be a matter for the judge of the time. Costs 30 No order for costs should be made in favour of the defendants other than the Attorney-General. They do not seek costs. The costs of the Attorney General should be paid out of the trust property. If some problem arises because the trust property is not sold, then the matter could be relisted for further consideration, but the Attorney is entitled to his costs in any event. 31 The State as trustee would in absence of improper conduct be entitled its costs on the indemnity basis out of the trust property. From time to time, presumably in an attempt to add some colour to these proceedings, statements have been made by counsel about breach of trust. These are not proceedings concerning breach of trust by a trustee of a charitable trust so that such statements are irrelevant. 32 The State became a plaintiff on 11 July 2007. It should have its costs from that date. So far as the 1st plaintiff the Northern Sydney and Central Coast Area Health Service is concerned, it did have the authority of the Attorney-General under section 6(a) of the Charitable Trusts Act 1993 to bring the proceedings but that does not establish entitlement to costs. The Area Health Service was not trustee, nor agent of the trustee, nor was it the State. Section 11 of the Charitable Trusts Act placed the obligation on the trustee to bring the proceedings. From the very commencement I made it quite clear that was my view. Costs of the 1st plaintiff should not be paid out of the trust property. Proposed Orders

1. Subject to satisfaction of the following conditions:- a) That the trust property be sold within 12 months from this date, on terms requiring completion of the sale not more than 18 months from this date, for a sale price of not less than $16,800,000; b) The State of New South Wales within 6 months of this date binding itself to vest in her Majesty Queen Elizabeth II in right of the State of New South Wales as trustee of the Graythwaite Trust the land referred to in paragraph 6 of the Scheme; c) The plaintiff as trustee obtaining within 6 months from this date such government approvals, if any, as are required for the expenditure of the proceeds of sale of the trust property upon the construction of the rehabilitation facility described in paragraph 7 of the Scheme; And conditions (b) and (c) being satisfied before any sale takes place.

Order that: the 2nd further amended outlined scheme filed on 14 November 2008 (the scheme) be carried into effect.

2. If such conditions are not satisfied, reserve further consideration and direct that the matter be listed for that purpose before such Judge as the Chief Judge in Equity shall nominate.
3. Order that subject to such conditions being satisfied the costs of the 2nd plaintiff from 11 July 2007 on the indemnity basis and the costs of the Attorney-General be paid out of the trust property.
4. Order that if such conditions are not satisfied the costs of the Attorney-General be paid out of the trust property and the costs of the 2nd plaintiff be reserved for further consideration.
5. No other orders as to costs.

6. The exhibits may be returned and are to be retained by the parties for 28 days and returned to the Court in the event of an appeal.

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