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

Supreme Court of NSW|2007-07-12|Before: Windeyer J, Brownie J

CITATION : Northern Sydney and Central Coast Area Health Service & anor v The Attorney-General for New South Wales & anor [2007] NSWSC 881

DECISION : Declaration that trust purposes have failed. Cy-prés scheme ordered.

CATCHWORDS : TRUSTS AND TRUSTEES- Charitable trusts - Trust property given for convalescent home - Whether trust purposes have failed - Whether cy-prés scheme should be settled

Charitable Trusts Act 1993 s6, s7, s9, s11, Pt 9 LEGISLATION CITED : Charities Act 1993 (UK) s13 Real Property Act 1900

Attorney-General of NSW v Fulham [2002] NSWSC 629 In Re Buck [1896] 2 Ch 727 CASES CITED : Perpetual Trustee Company Limited v Braithwaite (unreported Brownie J 29 May 1992) Shore v Wilson (1839) 9 Cl & Fin 355; 8 ER 450 J Warburton, Tudor on Charities 9th Edition (2003) at 11-001 RSL Veterans' Retirement Village Ltd v NSW Minister for Lands [2006] NSWSC 1161

Northern Sydney and Central Coast Area Health Service (First Plaintiff) PARTIES : The State of New South Wales (Second Plaintiff) Attorney-General for New South Wales (First Defendant) North Sydney Council (Second Defendant)

Mr B Coles QC with him Mr M Evans (Plaintiffs) COUNSEL : Mr R Lancaster with him Mr M McFadden (First Defendant) Mr M Leeming SC with him Mr C Withers (Second Defendant)

Teece Hodgson & Ward (Plaintiffs) SOLICITORS : I V Knight (First Defendant) Mallesons Stephen Jaques (Second Defendant)

16 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

1994/06 NORTHERN SYDNEY AND CENTRAL COAST AREA HEALTH SERVICE & ANOR V ATTORNEY-GENERAL FOR NEW SOUTH WALES & ORS

JUDGMENT 1 These are charitable trust proceedings under the Charitable Trusts Act 1993 in which it is sought that a cy-prés scheme be settled and ordered. As is usual in these cases there is to be a two stage hearing if it is found a scheme is justified. 2 The question for decision in this part of the case is whether the charitable purposes for which "Graythwaite" was given by Mr Thomas Allwright Dibbs (later Sir Thomas Dibbs) to His Majesty King George the Fifth on behalf of the Government of the State of New South Wales, can no longer be carried out. If it is decided that the trust purposes have failed, then it will be necessary to have a later hearing to settle a cy-prés scheme for the purpose of carrying out as nearly as possible the original trust purposes. Facts 3 The trust was created by memorandum of transfer and surrender under the Real Property Act 1900 from Thomas Allwright Dibbs to His Majesty the King for the State of New South Wales, which transfer was accepted by the Crown Solicitor on behalf of the transferee. The document is dated 1 October 1915 and omitting references to certain rights of way, is as follows: MEMORANDUM OF TRANSFER (Real Property Act 1900) A206747 In consideration of my admiration of and sincere sympathy for those brave men who have so unselfishly given their services and their lives fighting for the Empire in the cause of Justice and liberty I do hereby transfer and surrender to His Most Gracious Majesty King George V on behalf of the Government of the State of New South Wales all my Estate and Interest, as such registered proprietor, in ALL THAT piece of land containing six acres two roods 23 ¾ perches known as "Graythwaite" situate at St Leonards in the Parish of Willoughby and County of Cumberland being the whole of the land comprise in Certificate of Title dated 16th May 1888 registered volume No. 881 folio 79 ____also in that piece of land known as "Bishopsgate" as follows:- being the part of land contained in Certificate of Title Dated 28th August 1886 Registered Volume 802 Folio 193 and shown as the site of "Bishopsgate" upon the plan lying in the Land Titles Office Sydney No 504 for a convalescent home for our Sick and Wounded Soldiers and Sailors and when not required for that purpose as a Convalescent Home in perpetuity for distressed subjects of the British Empire regardless of Sect or Creed.

4 The gift of the land for the stated purposes had been proposed some months earlier, and the government had decided to accept the gift on its terms some time before the transfer date, but it is pursuant to the transfer that the trust was constituted and its terms settled. 5 No question arises here as to charitable intention, nor as to the requirement for a scheme if trust purposes have failed. If they have failed then a scheme must be ordered. Once a charitable trust comes into effect, there can be no reversion to the settlor on failure. The assets must be applied cy-prés. 6 It is necessary to give a short description of the property and its historical and current use. The gift was made at a time when Australians were confronted with a large number of wounded and sick soldiers returning home from the battlefields of World War I. Australia was not really ready for the influx of injured soldiers and there was urgent need for hospitals and homes for their treatment and recuperation. The original arrangements for "Graythwaite" were that it would be managed for the State by the Red Cross, the military authorities would send convalescent soldiers there and the Australian Government would pay a daily rate for their maintenance. From documents put into evidence by the Attorney-General, it seems that the original arrangement was for the Red Cross to have control for the period of the war plus one year, but it was thereafter agreed the Red Cross Society would carry on the home with "the Repatriation Department having first claim on its accommodation for permanently disabled soldiers and sailors, and the beds occupied by them to be available for the same purposes as at present" (Premier's office minute 26 March 1918). From that time up to 1980 that was the arrangement. From the beginning there were about 40 patients accommodated in the main house; later, when additional accommodation was built, there were up to 50 patients on the site. 7 The New South Wales Health Department took over management in 1980. In 1988 management was transferred to the Home of Peace, now Hope Healthcare Limited, an Anglican charitable organisation which also controls the Greenwich Hospital. "Graythwaite" then operated as a specific purpose dementia state government residential aged care facility with 28 patients all accommodated in a building to the east of the main house, probably erected after the Second World War, although there is conflicting evidence about that. It does not matter for the purpose of these proceedings. The site 8 The whole of the "Graythwaite" property covers an area of over 6 acres. The land rises steeply from south to north - that is from Union Street to Edward Street, North Sydney. All the buildings are sited at the top or northern side and the present access to them is from Edward Street. The main "Graythwaite" house is a large, sandstone home commanding extensive harbour views. It is listed on the register of the National Trust and on the New South Wales State Heritage Register where it is described as: An early example of a prominent North Shore residence which has been altered extensively over its life to reflect the social standing and status of changing ownership.

It was clearly a gracious home when handed over. Mr Dibbs was a leading citizen of the State and manager of the Commercial Banking Company of Sydney Limited. 9 The main building is no longer used to house any patients or for any nursing home purpose, although some administration might be done there. It has fallen into disrepair and some areas, particularly the upper floors, are considered dangerous. It is perfectly clear that it has not been maintained by the trustee as it could and probably should have been, at least to ensure that it was not damaged by water. All homes need basic maintenance to ensure roofs and gutters do not leak. One of the documents put into evidence by the Attorney-General was a report in the Sydney Morning Herald of an occasion on 2 March 1916 when Mr Dibbs handed over the deeds of the property to the Premier, and the Premier handed over control of the property to the Red Cross. This was really a ceremonial occasion as the property had already been transferred to the State. The Premier, Mr Holman, is reported as saying when accepting the gift of the deeds on behalf of the government and the people of New South Wales: I can assure the generous givers in the name of this and all Governments that shall succeed us, that the trust shall be administered in a manner worthy of the great and generous spirit in which it has been made.

And in handing it over to the Red Cross he said: In the years to come, when the war has ended, and this great gift can be again restored to purposes of more peaceful charity, it will revert to the Government of the State, which will be its trustee forever. Take this great gift, guard it well, and use it in accordance with the spirit in which it has been given.

It is probably because these stated intentions of the New South Wales Government have not been carried out that this case has caused such interest in the North Sydney community. It is obvious that it would take a vast amount of money to put the house back into a suitable condition for any residential use. 10 The other important building on the site in 1915 was a coach house and stables, apparently constructed around 1836. That building is still there and is presently used as a living skills centre providing day care activities for intellectually disabled people. 11 The other buildings now on the land comprise the nursing home, which looks quite unprepossessing from the outside, but on entry is light and airy and the evidence is that it is a very well conducted home. It is operated as a residential aged care facility with 28 beds, mostly allocated to dementia patients. It is agreed it provides a high standard of care for a home of its type. It is accredited up to the end of 2008, although it is accepted that after that time there may eventually be accreditation problems as the home may not comply with future Commonwealth standards governing the number of patients per room, the number of bathrooms per patient and some safety features. A failure to obtain accreditation would place continuing Commonwealth Government subsidies at risk. 12 The final building on the site is the Tom O'Neill Dementia Day Care Activity Centre. This provides some day respite to carers and people with dementia. 13 The rest of the site is open space, lawn and garden area, very steeply sloping and not very well maintained. It is presently of no particular benefit, apart from providing fresh air for the patients and ensuring the place is reasonably quiet. It would have been of obvious benefit for patients being restored to health. Constitution of the proceedings and parties 14 The proceedings were commenced by summons filed on 22 March 2006. For some unexplained reason the plaintiff went before the duty judge seeking an abridgement of time for service and an early return date before the duty judge, a procedure quite inappropriate for an action of this type. The original parties were Northern Sydney and Central Coast Area Health Service (NSCCAHS) as plaintiff and the Attorney-General of New South Wales as defendant. The NSCCAHS is the New South Wales Government entity responsible for administering and providing public health services in the area where "Graythwaite" is situated The plaintiff was authorized by the Attorney-General to bring the proceedings pursuant to s6 of the Charitable Trusts Act 1993. On 29 June 2006, on the Council's application, I ordered North Sydney Council be joined as a defendant. I subsequently refused an application by Sydney Church of England Grammar School to be joined as a defendant for the first stage of the proceedings, but stood over the motion so that it could be renewed at the conclusion of stage one. 15 From the start I indicated that I considered the State of New South Wales as trustee should bring the proceedings, or at least be a party. At the commencement of the hearing I again expressed my concern as to the constitution of the action. Counsel for the first, and at that stage only, plaintiff submitted that the NSCCAHS represented the State, which it does not. Counsel for the Attorney-General submitted that the Attorney-General represented the State. That may be so if he were the plaintiff, but generally, as defendant, the obligation of the Attorney-General is to represent the objects of the charitable gift, although it appears that if proceedings are brought by relators in the name of the Attorney-General he may appear by separate counsel for the relators and for himself as defendant as protector of charities: Shore v Wilson (1839) 9 Cl & Fin 355; 8 ER 450. In any event it was agreed that the State would seek to be added as a party so as to be bound as trustee by the orders made. An order joining the State as a defendant was made at the end of the first day. It is proper to say that I was told a submitting appearance would be filed. On the second day a submitting appearance was filed for the State of New South Wales. I expressed concern about the problem confronting the court in an action to determine whether the trust purposes could no longer be fulfilled when the trustee was not putting a positive position before the court. Finally I was asked to make an order removing the State as defendant and joining it as a plaintiff, and made that order on the second day of the hearing. I add that none of this disrupted proceedings, but the explanation is necessary so that the file can be understood. 16 Finally on the issue of the constitution of the proceedings I point out that s11 of the Charitable Trusts Act provides as follows: 11 Duty of trustee to secure application of trust property cy-prés A charitable trust places a trustee under a duty, if the case permits and requires the trust property or any part of it to be applied cy pr é s, to secure its effective use for charitable purposes by taking steps to enable it to be so applied.

That section seems to make it clear that the trustee should bring the cy-prés application. I should say also that consideration was given to the question of whether or not it was necessary to join Hope Healthcare and to give it notice of the proceedings. The court was informed that notice was given to that organisation and that for various reasons it did not wish to be joined or to make submissions. Have the trust purposes failed? 17 At the commencement of the final day of hearing, I asked Mr Coles QC, Senior Counsel for the plaintiffs, "Is it your case that the present activities on the site accord with the terms of the trust?" Mr Coles responded: "No". I asked the question because it was apparent that the case of North Sydney Council had been prepared on the basis that use of the site as an aged care facility or nursing home was within the terms of the trust, the main case of the plaintiffs being that "Graythwaite" was operating at a loss which the NSCCAHS was unwilling to cover. The evidence led by North Sydney Council was intended to establish that it would be possible to conduct an aged care facility on the site which did not operate at a loss. 18 There was some subsequent debate about the significance of the answer of Mr Coles, who submitted that his answer did not mean that the trustee was in breach, which I have to say I did not really understand. While the evidence of the first plaintiff's witnesses was that they had some concern about whether the present uses conformed with the trust, I would have thought that a statement that uses did not conform made by plaintiffs' counsel was an admission of breach. It probably does not matter as this is not an action alleging breach of trust brought under s7 of the Charitable Trusts Act. 19 There are three questions to be decided, (1) does the present use of "Graythwaite", primarily as an aged care facility, fall within the trust's purposes?, (2) if so, can that activity continue to be carried on at "Graythwaite" or is it impossible to carry it on? and (3) if not, can the property be used as a convalescent home? In answering these questions I am proceeding on the basis that the subsidiary day care activities are subsidiary only. Whatever "convalescent home" may mean it does not mean a non-residential operation. What is the meaning of "convalescent home"? 20 For the purpose of this case and the determination of the meaning of convalescent home it is not really relevant that up to 1980 "Graythwaite" was operated as a Red Cross hospital for long term sick or wounded soldiers who had returned from the First World War. We are not concerned with past uses of the trust property, whether or not they were within the trust purposes. What must be construed is the meaning of the term "convalescent home" as understood in 1915 when the trust was constituted and, perhaps, the meaning of "distressed subjects". 21 The first plaintiff called what was thought to be expert evidence of a Dr John Ward as to the meaning of "convalescent" and "convalescence". It is fair to say that his evidence was really of the medical understanding of the words in 1915, and his evidence on their meaning was by means of stating their dictionary meaning. His evidence was that "convalescence" meant to regain health after illness, or to grow strong. That is the meaning in all the dictionaries. In his words, as the present patients in the nursing home are long term aged care patients with no prospect of recovery, it is not being used as a convalescent home. I would have thought that almost beyond argument. The fact that Mr Dibbs' gift, on its terms, contemplated a time when the home would no longer be required for returned servicemen seems to support this construction. Old people, whether suffering from dementia or not, who need long term personal nursing home care, from which they will not return to some sort of independent life, are not convalescents, they are long term patients whose life can be made reasonably comfortable through proper continuous care. Certainly it is true, as Dr Ward said, that a patient in an aged care facility who suffers some physical injury will receive appropriate treatment to restore that person as far as possible to his or her pre-injury condition. That does not mean that such a person is in a convalescent home. All it means is they are getting appropriate care in an aged care nursing home. I appreciate that the Macquarie Dictionary defines "convalescent home" as a "nursing home" but that is likely to reflect merely that most convalescent homes necessarily provide nursing as a primary function of providing care, rather than meaning "nursing home" as is it commonly understood as a home for aged persons. It would otherwise be quite contrary to the Macquarie definition of convalescence as (1) the gradual recovery of health and strength after illness or (2) the period during which one is convalescing. The evidence put before the court of a Mr Avery on behalf of North Sydney Council does not counter this, in that he said in his report that nursing home care is nearly always permanent and provided towards the end of life, and that this will become even more so with the present policy of keeping people in their homes as long as possible. 22 The Council also put into evidence a report of Ruth Rae on the basis she was an expert in Australian nursing history, particularly in relation to World War I. To a large extent her report deals with the position relating to injured or sick soldiers or discharged soldiers from the middle of 1915 and their handling in military hospitals and repatriation hospitals. No objection was taken to this and she was not cross-examined. While the report is very interesting in terms of medical treatment of injured or sick soldiers from the middle of 1915, I do not think it is of any real assistance in determining the meaning of the trust, although it is of some assistance in showing that "sick and wounded soldier" could encompass men with a variety of wounds, injuries and illnesses, including mental illnesses. 23 Mr Dibbs made his offer of "Graythwaite" to the State some time before 15 June 1915 by letter to the Premier stating that he had "decided to give the Government the fee simple of our home known as 'Graythwaite' North Sydney as a convalescent home to be used in the first place for our wounded soldiers returning to Sydney". It could not be suggested the words there used had a different meaning from the well understood meaning of convalescent home as a place for recovery. 24 I conclude that the present use of the premises is not use as a convalescent home. It is, I think, not necessary to determine whether or not the present patients are "distressed". 25 Finally on this point it seemed to me during some submissions of counsel for the North Sydney Council that the purpose of s9(1) of the Charitable Trusts Act had been misunderstood. That section is in Part 3 of that Act headed "Application of Charitable Property cy-prés" and is as follows: 9 Extension of the occasions for applying trust property cy-prés (1) The circumstances in which the original purposes of a charitable trust can be altered to allow the trust property or any part of it to be applied cy pr é s include circumstances in which the original purposes, wholly or in part, have since they were laid down ceased to provide a suitable and effective method of using the trust property, having regard to the spirit of the trust.

(2) References in this section to the original purposes of a charitable trust are to be construed, if the application of the trust property or any part of it has been altered or regulated by a scheme or otherwise, as references to the purposes for which the trust property are for the time being applicable. This section makes it possible to order a scheme, even though the trust has not become impracticable or impossible to perform. 26 The clear purpose of this section is to allow schemes to be ordered even if, strictly speaking, the trust purpose can in some way be carried out albeit not in an economic and most effective or beneficial way. The purpose of the section is not to alter or determine the proper construction of the trust instrument. This is explained in J Warbuton Tudor on Charities 9th Edition at 11-001. The similar section in the Charities Act 1993 (UK), being s13, extends the power to order schemes to cases: (a) where the original purposes in whole or part … (ii) cannot be carried out or not according to the direction given and to the spirit of the gift 27 This is also made clear in Attorney-General of NSW v Fulham [2002] NSWSC 629 at [16], [17] and [20] and I think in RSL Veterans Retirement Village Ltd v NSW Minister for Lands [2006] NSWSC 1161. In that case Palmer J, in determining the appropriate scheme, held, having determined the trust purposes would fail in the reasonably immediate future, that in determining an appropriate scheme there should be taken into account "the spirit of the Trust and in ascertaining that it is relevant to have regard to the trust history, and the social context of the time at which it was established" [57]. That statement related to future us and not to authorized present use. 28 The use proposed by North Sydney Council is a far more elaborate nursing home, reliant upon construction of either one or two new buildings to house a number of patients which, in certain circumstances, would probably make the place economically viable. This plan would provide for restoration of the main house. The success of such a proposal would depend, according to the evidence adduced by the Council, upon patients being able to pay accommodation bonds of $400,000 to $500,000 each. Although it is not necessary to decide at this stage, even if an aged care facility fell within the words "convalescent home", which I have determined it does not, I would not think the requirement that all patients should provide such a sum of money would enable the use to fall within the term "convalescent home for distressed subjects". Old people who cannot care for themselves physically are not necessarily distressed people. Distressed people are generally people in extreme need through sickness, adversity, economic circumstances or a combination of these. I agree with 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. In the case of In Re Buck [1896] 2 Ch 727 the question was whether a gift to a friendly society, the object of which was to provide funds for the relief of members, their widows and children in "distressed circumstances", was a charitable gift. It was held that the words "distressed circumstances" required the object to be first, so sick as not to be able to work, and second, without the means to survive without working. There are some statements to the same effect in the somewhat difficult decision of Stone v Wilson to which I have referred. There, a disposition "to godly persons in distress" was held to be for persons reduced to pecuniary distress. I am not determining that to fall within the description economic problems are required: I am only saying that I would not think old age and inability to live independently was sufficient. 29 The final question is whether there is a possibility of "Graythwaite" being converted into a "convalescent home" to satisfy the trust. "Convalescence" in 1915 would I think indicate a more gentle form of recovery than does "rehabilitation" which in general refers to more aggressive treatment over a far shorter time in accordance with modern medical theory and practice. The evidence is clear about this. It is not suggested that the property should be used as a convalescent home as those words were understood in 1915 nor that it could be so used due to the difficulties of converting the property, even if such a facility were regarded as effective or appropriate in modern healthcare in New South Wales, which it appears not to be. This accords with the findings in Perpetual Trustee Company Limited v Braithwaite (unreported Brownie J 29 May 1992). For the reasons I have given it is not necessary to take the first part of the matter further. No one suggests that "Graythwaite" can be used as a convalescent home in the meaning of that term which I have determined. That does not mean that there could not be a scheme under which the property could be used for the purposes of a rehabilitation centre, which could incorporate the main home, but it is clear that at least the first plaintiff will not provide funds for that purpose, its evidence being that it is not an appropriate place for such a centre. That does not necessarily apply to the State of New South Wales. While it was not a condition of the original gift that the State would maintain and keep the property forever, although the Premier said it would, it may feel nonetheless some obligation, as trustee of such an important site, to consider a scheme making use of the site. 30 It is thus important to understand that this decision does not necessarily mean that a cy-prés scheme could not involve purposes as near as possible to the original purposes being conducted on the "Graythwaite" property. That is a matter for the future, but the fact that the settlor intended the trust purposes to be carried on at his home may be a matter to take into account. 31 The result is that I find the trust purposes have failed. They have ceased to be a suitable method of using the trust property having regard to the spirit of the trust. It follows that a cy-prés scheme should be ordered. Some of the evidence relevant to this, on the part of the plaintiffs, has already been filed. The Council may wish to put forward again the evidence it adduced on the possibility of a modern aged care facility being constructed on the site involving the restoration of the main heritage building. Other persons or bodies may wish to promote schemes. The Returned & Services League of New South Wales ought to have been informed of the proceedings by the plaintiff, or so I was told, and was not so informed. It may wish to be joined and to put forward a scheme. This is not a matter where it is appropriate that the only scheme to be considered is that promoted by the first plaintiff before the State became a party. The State, as trustee, is the party required to make the application and to decide whether to adopt the scheme put forward by the NSCCAHS. That scheme is that the property be sold and the proceeds be applied by the NSCCAHS in "the construction of a purpose built wing at Royal North Shore Hospital for the provision of aged care rehabilitation services at that hospital to be known as the Graythwaite wing". It can readily be understood that the first plaintiff was not prepared to fund continuing losses of the nursing home, as it did not consider that to be its duty in the application of scarce funds and because the responsibility of residential aged care facilities had been taken over by the Australian Government, and neither did it consider the site a suitable one for a rehabilitation centre. That decision is not necessarily the attitude of the State as trustee. At present I find it difficult to see a basis for handing over the funds to the NSCCAHS. 32 The appropriate course is for a further advertisement to be published to give parties and non-parties with a proper interest the opportunity to put forward proposals for a scheme; to set a date when applications to be joined or to appear are considered, with the requirement that any person making such an application put forward an outline proposal; and thereafter to set a date for the final hearing to settle a scheme. I will stand the matter over for a week to enable the plaintiff to bring in draft directions including a draft advertisement. I should add that if it is determined the property should be sold it may be necessary to have a final hearing to decide how the proceeds of sale should be applied, as the amount of money available would bear on that decision. Orders

Declaration as sought in paragraph 1 of the Further Amended Summons omitting the words "in the terms of s9 of the Charitable Trusts Act 1993".

Order that the Trust property be applied cy-prés and that a scheme be settled for that purpose.

Direct the plaintiffs to bring in draft directions for the purpose of Order 2.

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At a glance

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Judgment (21 paragraphs)

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