Perpetual Trustee Company Ltd v Attorney General for the State of New South Wales - [2018] NSWSC 1456 - NSWSC 2018 case summary — Zoe

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Perpetual Trustee Company Ltd v Attorney General for the State of New South Wales

[2018] NSWSC 1456

Supreme Court of NSW|2018-08-02|Before: Leeming JA

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Source facts

Court

Supreme Court of NSW

Decision date

2018-08-02

Before

Leeming JA

Source

Original judgment source is linked above.

Judgment (16 paragraphs)

[1]

The application of the doctrine to discriminatory trusts

Settlors and testators have not infrequently established charitable trusts subject to conditions imposing racial or religious restrictions which are foreign to a purpose of advancing education. Re Lysaght [1966] Ch 191 is perhaps the best known example, although in some respects that is a difficult case, because it was decided without reference to the (then recently enacted) antecedent of s 9 of the Charitable Trusts Act. Buckley J ordered that a provision of the trust which excluded Jewish and Roman Catholic students from receiving scholarships be removed, on the basis that (at pp 201-202): "A general charitable intention, then, may be said to be a paramount intention on the part of a donor to effect some charitable purpose which the court can find a method of putting into operation, notwithstanding that it is impracticable to give effect to some direction by the donor which is not an essential part of his true intention - not, that is to say, part of his paramount intention."
That reasoning was criticised. The 6th edition of Tudor on Charities (1967, Sweet & Maxwell) said at 245 that while "no clear rules of construction" could be adduced from the cases to determine whether a general charitable intention should be imputed to the donor, it could be said with some confidence that "the more detailed the testator's directions as to the application of his gift, the more unlikely will the court be to impute to him a general charitable intention". The authors criticised Buckley J's judgment as "erroneous"; while his Lordship's liberal views were commendable, they ought not to be applied so as to defeat a testator's intention (at pp 247-248). However, Re Lysaght was followed without comment or argument by the British Columbia Court of Appeal in UBC v British Columbia (Attorney-General) 2008 BCCA 367, in which the words "who are British Subjects and non-Roman Catholics" were deleted.
Vinelott J addressed the criticisms in Tudor on Charities in In re Woodhams, deceased [1981] 1 WLR 493, a decision which concerned two music scholarships to be awarded to "absolute orphans". Vinelott J regarded the criticism of Re Lysaght as "ill-founded" (at p 501), saying that Buckley J's reasoning was consistent with the "well known passage" in the judgment of Parker J in In re Wilson [1913] 1 Ch 314 at 320-321: "… the gift is given for a particular charitable purpose, but it is possible, taking the will as a whole, to say that, notwithstanding the form of the gift, the paramount intention, according to the true construction of the will, is to give the property in the first instance for a general charitable purpose rather than a particular charitable purpose …"

The position at general law, before the enactment of the Charitable Trusts Act and its equivalents elsewhere, was stated by Dixon and Evatt JJ in Attorney-General (NSW) v Perpetual Trustee Co Ltd (1940) 63 CLR 209 at 225; [1940] HCA 12. The question in that case was whether a devise of "the whole of the Milly Milly property" for a training farm for orphan lads, which could not practicably be satisfied in its terms, could be the subject of a cy-près scheme, on the basis that the use of the particular property was an inessential aspect of the testatrix' general charitable intention. Roper J at first instance, and Latham CJ and Starke J dissenting on appeal, held that a scheme was not available, based primarily upon the language of the will. Rich and McTiernan JJ wrote separate short judgments reaching the opposite view. Dixon and Evatt JJ's joint judgment treated the issue elaborately, identifying the distinction as follows at 225: "A distinction in trusts declared for charitable purposes has thus come to exist which, however clear in conception, has proved anything but easy of application. It is the distinction between, on the one hand, cases in which every element in the description of the trust is indispensable to the validity and operation of the disposition and, on the other hand, cases where a further and more general purpose is disclosed as the true and substantial object of the trust, which may therefore be carried into effect at the expense of some part of the particular directions given by the trust instrument. ... The question is often stated to be whether the trust instrument discloses a general intention of charity or a particular intention only. But, in its application to cases where some particular direction or directions have proved impracticable, the doctrine requires no more than a purpose wider than the execution of a specific plan involving the particular direction that has failed. In other words 'general intention of charity' means only an intention which, while not going beyond the bounds of the legal conception of charity, is more general than a bare intention that the impracticable direction be carried into execution as an indispensable part of the trust declared."

The upshot of the foregoing is this. 1. There continues to be a precondition to the exercise of a power to order a cy-près scheme that there be a general charitable intention. Originally a requirement of equity, it is now entrenched by s 10(1) of the Charitable Trusts Act. 2. The requirement that a charitable intention, if found, is general, is presumptively taken to be satisfied, and the presumption may only be displaced by contrary evidence in the instrument establishing the trust. 3. Even if there be such evidence, it would be open to weigh the textual indications against the "nature of the charitable trust itself and what is involved in the author's plan or project". Consistently with what Dixon and Evatt JJ said in Attorney-General (NSW) v Perpetual Trustee Co Ltd, the evidence bearing upon a general charitable intention is not confined to the text of the instrument, and s 10 not merely creates a presumption, it also limits the evidence recourse to which may be had in order to rebut it. Textual indications may be strong or slight. It would be one thing, for example, if the instrument conveyed in plain terms that an essential aspect of the gift was a condition which could not be performed then. If say Mr Nesbitt's will had said "for the avoidance of doubt, if for any reason the school declines to abide by my wishes that scholarships must not be received by students whose parents are Roman Catholics, then all funds are to be given to the Red Cross", then that would be a strong indication that the condition precluding receipt by the children of Roman Catholics was essential. However a less potent textual indication might be found not to displace the statutory presumption. 4. The power to order that a trust be applied cy-près extends to circumstances when the original purpose, even if it is not impossible or impracticable to carry out, has ceased to provide a suitable or effective method of using the trust property. In exercising the power, it is necessary to have regard to the spirit of the trust, being the basic intention underlying the gift.

[2]

Application to the scholarships and children's home trusts

There is no evidence to displace the presumptive general charitable intention in the charitable trust established by Mr Nesbitt's will. The distributions to be made to the hospital and to the church are classic instances of trusts for charitable purposes. True it is that there is recurring language designed to ensure that the children of Roman Catholics do not receive any of the income from the trusts established under his will. In addition to the scholarship trusts and the children's home, that may be seen in the (now-defunct) cl 8(B)(VIII) "home for Protestant girls" and the insistence that the incumbent at the local Anglican Church "does not believe in practise or advocate the doctrines of Anglo Catholicism or Roman Catholicism". However, those considerations do not detract from the finding of a general charitable intention. The question is whether there is a general charitable intention manifest on the face of the will, notwithstanding the qualifications directed to insisting on benefits to protestant children. I think there is. The general intention is to advance education (in the case of the scholarship trusts) or the relief of poverty (in the case of the children's home). Those are the underlying purposes in cll 8(B)(VI), (VIII) and (IX).
I am also satisfied that none of the High School Scholarship trusts, nor the children's home trusts, can be carried out on the conditions in Mr Nesbitt's will. The evidence is all one way and is inherently plausible. Neither the State (through the Department of Education) nor CASPA Services is willing to accept distributions on the conditions as to religion imposed by Mr Nesbitt's will. It follows a fortiori that the more relaxed test in s 9 as to Mr Nesbitt's purpose no longer providing a suitable or effective method of using the trust property is also satisfied.
Mr Nesbitt's will deals in terms with the possibility that one or more of the cl 8B trusts might fail. Ordinarily, a good reason not to order a scheme will be if the effect would be to defeat a gift over to another charity: Re Hanbey's Will Trusts [1956] Ch 264, applied in Re Will of Meshakov-Korjakin (decd) [2011] VSC 372 at [53]-[75] esp at [60]. The underlying principle is that the purpose of the power to order a scheme is to effectuate the settlor's or testator's intention. The "first duty" and "fundamental responsibility" of the court is to give effect to the trusts laid down by the settlor or testator: Phillips v Roberts [1975] 2 NSWLR 207 at 211 (a decision pre-dating statutory intervention in this area; New South Wales lagged behind the United Kingdom and Victoria). Ordinarily, if the settlor or testator has indicated in terms what is to occur in the event of supervening impossibility, there is no occasion to order a scheme to approximate the settlor's or testator's intention.
However, the conditions attaching to the gift over display the same vice as the primary gift. The restriction to children of Protestant parents which causes the cl 8B(I) and (II) distributions to fail likewise causes the gift over (as to one half) in cl 8C(I) to fail. It follows that the presence of the gift over is no reason not to order a scheme.
The evidence establishes that CASPA Services is the successor to the North Coast Children's Home named in Mr Nesbitt's will. What has been said so far is sufficient to warrant an order removing the restriction imposed by cl 8(B)(VII) to Protestant children. The trustee's summons and supporting affidavit go further, and seek relief entitling distributions to be made for the maintenance of children "without regard to a child's religious denomination or gender". It is not clear why a dispensation in relation to the children's sex is called for; there is no such restriction on the face of the will, and it goes beyond what is sought by CASPA.
A draft scheme was not provided by the trustee. As presently advised, it will be sufficient to order that the trust established by cl 8(B)(VII) of Mr Nesbitt's will be administered by deleting the word "Protestant". True it is that the reference to "the Church of England at Lismore" is out-dated, but as presently advised there is no need for any further reformulation. If there is the need for further orders, application may be made within 14 days in accordance with the rules.
In relation to the scholarship trusts, once again the evidence establishes that The Rivers Secondary College is the successor to the High School nominated in Mr Nesbitt's will. I have no difficulty in regarding the requirement of entry "from a public school in the Richmond River District" as inessential. In part, that provision may have been directed to excluding students who were educated at a primary school within the Roman Catholic education system; to that extent its removal is appropriate for the same reasons as the condition as to the religion of the student's parents. To the extent that the condition had the further operation of preventing a student who was a newcomer to the district (who may have spent the first 12 years of his or her life anywhere outside the Lismore region) there is no difficulty in determining that that is a potentially capricious and entirely ancillary aspect of the trust.

[3]

Retrospective scheme?

As ever, the word "retrospective" in legal contexts is apt to confuse if used imprecisely. Cozens-Hardy MR said more than a century ago that "retrospective operation" can be an inaccurate term: West v Gwynne [1911] 2 Ch 1 at 11. Isaacs J drew upon this when distinguishing retrospective laws "in the true sense" in R v Kidman (1915) 20 CLR 425 at 443; [1915] HCA 58: "A retroactive law, that is, a retrospective law in the true sense, is one which 'provides that as at a past date the law shall be taken to have been that which it was not' (per Buckley LJ in West v Gwynne). That does not include an Act which only alters existing rights as from the date of the Act."
In Australian Education Union v General Manager of Fair Work Australia (2012) 246 CLR 117; [2012] HCA 19 at [26], French CJ, Crennan and Kiefel JJ said: "The common law principles of interpretation require careful consideration of the adjective 'retrospective' in its application to statutes. Interference with existing rights does not make a statute retrospective. Many if not most statutes affect existing rights. As Fullagar J said in Maxwell v Murphy: 'I think that the word "retrospective" has acquired an extended meaning in this connexion. It is not synonymous with "ex post facto", but is used to describe the operation of any statute which affects the legal character, or the legal consequences, of events which happened before it became law.'"
There is also a helpful discussion of retroactive and retrospective legislation in Wilson v Secretary of State for Trade and Industry [2004] 1 AC 816; [2003] UKHL 40 by Lord Rodger at [188]-[192].
The legislative analogy in those passages is apt. The orders altering the terms of the trust sought by the trustee are legislative in the sense of altering rights and obligations.
However, the Court has not been asked to order a scheme so as retrospectively to cure a breach of trust from historical conduct. No application is made to back-date the children's home scheme. The orders proposed by the Attorney will enable the trustee in the future lawfully to distribute scholarships to students by reference to past events (namely, the students' academic success), but the critical difference is that funds have not been distributed for those years. There is no difference in this respect between a distribution, say, in early 2019 based on academic success in 2018, and one based on academic success in 2011. The scheme would be relevantly retrospective if it purported, say, to date back to a time when distributions had been made, say, to 2003, and alter the entitlement of the original recipient of the Adina Nesbitt Scholarship for that year, whose mother was Roman Catholic. But since no distributions of income are affected, it is not sensibly described as being of retrospective effect.
In any event, the Court has, by dint of UCPR r 36.4(3), power to order that a judgment or order is to take effect at a date earlier than the date at which it is made, as the trustee observed. It is unnecessary to consider the competing approaches which are disclosed by the authorities dealing with that provision and its predecessors (as to which see Zoef v Nationwide News Pty Ltd (No 2) [2017] NSWCA 2 at [40]-[45]).
I do not think there is any substance to the trustee's submission that there cannot be two different regimes for different time periods. It is not necessary to consider whether there would be power, in an appropriate case, to make such orders. That is not this case. In substance, the income from the trust assets is being used for the same purpose, namely, to reward the most proficient students. There are at best only minor differences in the methodology used to identify those students.
The underlying discretion is guided by the object of seeking to achieve Mr Nesbitt's purpose. That is done by granting scholarships to successful students in all years, rather than excluding 7 years of students for the period when the trustee was, according to the evidence, investigating this and other aspects of the trust. The will did not give the trustee a discretion not to distribute the income.
Accordingly, I shall in due course make orders in accordance with the four cy-près schemes. The orders proposed by the Attorney do not identify how the amounts for previous years will be determined. No doubt there is a number of ways in which that could occur. One would be to determine what amount of capital there would have been today, in 2018, had the scholarship payments been made in a timely fashion, and then devote the surplus to making the outstanding distributions. I can readily contemplate a number of ways to deal with accrued interest. I think it is appropriate for there to be a measure of transparency as to how this occurs, given the delays to date. I will direct the trustee and the Attorney to bring in orders which they propose will achieve this.

[5]

St Andrews Church of England Lismore - cl 8(B)(IV)

Clause 8(B)(IV) gives rise to two very minor difficulties. First, since 1962, the Anglican Church of Australia has been established, and a letter from the Diocesan administrator for the Anglican Diocese of Grafton states that "[t]he correct entity to which distribution should be made is the Anglican Parish of Lismore".
Secondly, there is a question about how to establish that the incumbent does not hold, or practise, the beliefs identified in Mr Nesbitt's will. The same letter advises that the Bishop of that Diocese is the appropriate individual to whom inquiries should be addressed as to whether the incumbent of the Anglican Parish of Lismore practises or advocates the doctrines of Anglo-Catholicism or Roman-Catholicism. (The affidavit states that the administrator has the appropriate authority, but does so by reference to the letter, and appears to be in error.)
There is evidence that the Bishop consents to the making of the inquiry and communicating its outcome to the trustee. There is also evidence that the current incumbent does not believe in, practice or advocate the doctrines of Anglo-Catholicism or Roman-Catholicism.
The summons seeks: "A determination that the terms of clause 8(B)(IV) of the will are incapable of being carried out and in the events which have happened, the Trustee is justified in making the prescribed payment of income from the Trust Fund annually to the Anglican Parish of Lismore in lieu of the St Andrew's Church of England Lismore upon information provided in writing by the Bishop of the Anglican Diocese of Grafton, that the Incumbent from time to time of the Anglican Parish of Lismore does not believe in, practice or advocate the doctrines of Anglo Catholicism or Roman Catholicism."
I do not understand the reference in the opening words to "incapable of being carried out". For the last 56 years, the Anglican Church of Australia has been the name for the successor of the Church of England. It is clear that the incumbent of the parish corresponds to the "Minister or Clergyman" referred to in cl 8(B)(IV) of Mr Nesbitt's Will. Counsel treated this as an infelicitously drafted request for advice. There is no reason for the trustee not to regard itself as satisfied by the answer provided by the Bishop as to the beliefs or practices of the incumbent in that parish. An order will be made accordingly.

[6]

North Coast National Agricultural and Industrial Society Lismore - cl 8(B)(VI)

The evidence establishes that "the North Coast National Agricultural & Industrial Society Inc" was incorporated in 1987. One of its objects was to "assume and carry on the functions and objects of the unincorporated Society known as the North Coast National Agricultural & Society" (memorandum of association, cl 3(a)). The Society conducts various events annually at the Lismore Showgrounds, including an annual show. The show includes a Schools Competition Program, which extends to arts and crafts, needlework and cookery sections. A letter from the President states that in September 1908, Mr George Nesbitt was one of five joint tenants of some of the lands on which the Showgrounds were established, as well as being President of the Society in 1907/1908.
The President's letter advises that the amounts received each June and December have been around $3,000, which are divided among the various categories of the Schools Competition on the one hand and the General Show section on the other. What seems to have happened is that there are a great many classes within each section of the Schools Competition and General Show Competition, in each of which first and second prizes are offered. The President advises that the "number of classes available for exhibitors to enter would number in the many hundreds".
The trustee seeks: "A determination that for the purposes of clause 8(B)(VI) of the will and in the events which have happened, the Trustee is justified in making the prescribed payment of income of the Trust Fund annually to the North Coast National Agricultural and Industrial Society Incorporated, formerly the North Coast National Agricultural and Industrial Society to be applied as to one-half to the North Coast National Schools Competition Program for arts and crafts, needlework and cookery and the other half to the General Show section in such manner as the committee of the society shall from time to time decide, such prizes to be known as the George and Adina Nesbitt Prizes."
Allowing for the 1987 incorporation, this very closely corresponds with the terms of the will. Advice will be given accordingly.

[8]

The Lismore Ladies' Benevolent Society - cl 8(B)(IX)

The Lismore Ladies' Benevolent Society appears to have been established in 1890 at a public meeting. A newspaper report states that the first annual meeting was held in the School of Arts' hall on 26 November 1891. An essay written in 1960 records that "from 1952 to the present date over £198 has been received from the Nesbitt estate". The paper records that in 1920 Mrs Nesbitt "attended the annual meeting and was greatly interested in, and impressed by our work and showed that interest in a practical manner." The activities of the society disclosed in that paper included distributions of clothing, advertisements for foster parents, the endowment of a cot in the Renwick Hospital for Babies in Sydney, raising funds to send a man crippled with rheumatism to the Muckadilla Mineral Springs in Queensland, providing a holiday for a blind girl who was in ill health, sending an incurably crippled woman to the home for incurables at Ryde in Sydney, distributing parcels of clothing, deliveries of groceries for Christmas cheer to needy families, supporting the dependants of soldiers during both world wars, distributing food and clothing after the Lismore floods in 1945 and 1954 and raising funds for the building of self-contained home units for "the aged folk and chronic invalids".
Mrs Adina Nesbitt's obituary (in the Northern Star on 5 September 1950) recorded that "[h]er work for the Ladies' Benevolent Society, the Presbyterian and Anglican Churches and in the course of charity generally, will long be remembered."
The early juristic status of the society is unclear on the evidence in this proceeding. However, no later than 1961 it was incorporated as a company limited by guarantee. In 2006, "The Lismore Ladies Benevolent Society Inc" was incorporated as an association under the Associations Incorporation Act 1984 (NSW). The objects of the incorporated association were expressed to be: "to provide benevolent-type services and related activities to elderly persons in the Lismore & surrounding areas".
The Memorandum of Association identified as the objects of the company limited by guarantee as being to relieve and provide assistance of all kinds for the necessitous, destitute and indigent and the District of Lismore, to provide homes for aged persons and to acquire land and buildings for that purpose, to become eligible for assistance as an "eligible organisation" under the provisions of the (Commonwealth) Aged Persons Homes Act and retain such assistance, and to "assist any public, benevolent, charitable or patriotic object".
The trustee accepted that this prayer of its summons could be regarded as asking for a determination of the construction of the will, or alternatively judicial advice (transcript 2 August 2018, T20.24). I shall proceed on the basis that advice is sought, in part because although there was evidence that the association did not wish to be heard unless there was a change to the orders sought in the summons, it was not made a party. Would the trustee be justified in making the payments of income to the Lismore Ladies' Benevolent Society Inc?
The starting point is the construction of the will. It does not, on the view I take, matter whether in 1948 the society was incorporated or was an unincorporated association. There is no reason to doubt, and such evidence as bears upon its activities confirms, that its objects then were substantially as recorded in the rules dated 1958 and the Memorandum of the company in 1961.
Plainly as to part, the objects of the company limited by guarantee (including "to assist any Public Benevolent Charitable or Patriotic Object") and the object of the incorporated association ("to provide benevolent-type service and related activities") are not necessarily within the legal meaning of charity. Benevolent objects are not necessarily charitable: Morice v Bishop of Durham (1805) 10 Ves 522; 32 ER 947. However, because the trust came into existence in 1948, this issue may be dealt with straightforwardly. Section 23 of the Charitable Trusts Act provides: "23 Inclusion of non-charitable purpose not to invalidate trust (cf former s 37D of Conveyancing Act 1919) (1) A trust is not invalid merely because some non-charitable and invalid purpose as well as some charitable purpose is or could be taken to be included in any of the purposes to or for which an application of the trust property or of any part of it is directed or allowed by the trust. (2) Any such trust is to be construed and given effect to in the same manner in all respects as if no application of the trust property or of any part of it to or for any such non-charitable and invalid purpose had been or could be taken to have been so directed or allowed. (3) This section does not apply to any trust declared before, or to the will of any testator dying before, 1 January 1939, being the date of commencement of the Conveyancing, Trustee and Probate (Amendment) Act 1938."
I think it is clear that cl 8B(IX) was in 1948, and is now in 2018, a gift for a purpose, rather than a gift to the members from time to time comprising the unincorporated association in 1949, or to company or the incorporated association of substantially similar names which succeeded it. That follows from (a) the charitable nature of the balance of the will, (b) the fact that it was expressed to be "in perpetuity", (c) the fact that the trust would otherwise offend the rule against remoteness in vesting, and (d) the name and (at least) predominantly charitable character of the society.
It is clear that former s 37D would have ensured the validity of the gift in 1948. It is sufficient to go directly to what was said by Gibbs J, with the agreement of Barwick CJ and Menzies J, in Stratton v Simpson (1970) 125 CLR 138 at 163; [1970] HCA 45: "It is now clearly established … that s 37D validates trusts which would otherwise have been invalid either because of uncertainty or because of perpetuity and that the section applies not only where the testator had expressly indicated alternative purposes, the one charitable and the other non-charitable, but also where the gift is for a purpose described in a compendious or composite expression which embraces both charitable and noncharitable purposes. Moreover the decision [Leahy v Attorney-General (NSW) [1959] AC 457] must be regarded as establishing that the section can apply where there is no express statement of purpose in the disposition creating the trust and the trust is expressed to be in favour of institutions. The trust there was for orders of nuns, which were unincorporated associations, and which their Lordships described as 'an object so predominantly charitable that a charitable intention on the part of the testator can fairly be assumed'. In other words, a gift for charitable institutions is prima facie a gift for charitable purposes and a trust for institutions whose objects are predominantly charitable may come within s 37D." (citations omitted, emphasis added).
The character of the gift did not change when two new legal persons, "The Lismore Ladies Benevolent Society" and the "Lismore Ladies Benevolent Society Incorporated" came into existence in 1961 and 2006. There continued to be a trust for a purpose, rather than for that person, which was read down in accordance with (former) s 37D, and now s 23.
Accordingly, advice will be given that the trustee would be justified in continuing to make payments pursuant to cl 8B(IX) to The Lismore Ladies Benevolent Society Incorporated, on the basis that those payments are to be used for charitable purposes.

[9]

Costs

The trustee sought an order that its "costs of the application be met from the Trust Fund on the indemnity basis". So did the Attorney. However, the two are in very different positions.
The order sought by the trustee is the usual order in such cases. In fact, in many circumstances - namely, where there is no suggestion of impropriety - it has precious little content. It is helpful to explain why, because apart from anything else it is a distraction to the analysis of the more important question, as to the costs of the Attorney.
The trustee has retained solicitors to appear on its behalf in this Court. The solicitors have in turn retained counsel. The subject matter of the order sought by the trustee is the fees charged by solicitors and counsel, plus the disbursements associated with the proceedings, which may have been borne by either solicitor or client.
In all likelihood, the solicitors are entitled, as a matter of contract, to recover their costs, on a solicitor/client basis, from the trustee, ultimately (in the event of any dispute) through a process of assessment. To the extent that those costs have been properly incurred, the trustee is entitled to an indemnity from the assets of the trust. Indeed, the Court of Appeal (Sir George Jessel MR, Cotton and Lindley LJJ) observed in Turner v Hancock (1882) 20 Ch D 303 that a trustee's costs (like those of a mortgagee) being a matter of contract, they were not in the discretion of the Court, unless (as Cotton LJ put it at 306) "something has occurred to deprive the trustee of his right to take them out of the fund".
It follows that without any order, in an application such as this which was properly made by the trustee, the trustee is entitled to recover all of its properly incurred costs in the exercise of its rights of exoneration or recoupment out of trust assets. Starke J in National Trustees Executors and Agency Company of Australasia Ltd v Barnes (1941) 64 CLR 268 at 274; [1941] HCA 3 referred to the "rule acted upon by the Court of Chancery that an executor or trustee is entitled as of right to be recouped everything that he has expended properly in his character as executor or trustee".
There has been a deal of statutory intervention in this area. As Payne JA pointed out in Free Serbian Orthodox Church Diocese for Australia and New Zealand Property Trust v Bishop Irinej Dobrijevic (No 3) [2017] NSWCA 109 at [28] there are three statutory sources of power to order that the trustee be indemnified from trust assets in addition to the general law principle: s 59(4) of the Trustee Act, s 93 of the Trustee Act and UCPR r 42.25. Section 59(4) enacts the position at general law. The history of its Victorian and English counterparts is summarised in National Trustees Executors and Agency Company of Australasia Ltd v Barnes at 277. Subsection 93(2) and r 42.25 go further and confer a power upon the Court to make an order for costs, and the latter expressly confers a power to order that the trustee's costs not be paid. Thus, contrary to what had been held in Turner v Hancock, it is clear that the Court's power extends to the circumstances when a trustee enjoys a right of indemnity.
I shall make the usual order sought by the trustee, on the basis that the application was properly made. Senior counsel for the trustee acknowledged that the order did not supplant the assessment process in the event that there is dispute between lawyer and client as to, say, whether some costs were unreasonably incurred (transcript, 2 August 2018, T21.44); of course, the amount of costs, the terms of the retainer, and to what extent work was done externally as opposed to internally by the trustee are matters entirely unknown to me. The point of the foregoing is merely to emphasise that the fact that the trustee is to be indemnified out of assets of which it holds legal title and enjoys a right of indemnity at general law and pursuant to statute says little about any entitlement by the Attorney to an order placing him in the same position.

[10]

Costs of the Attorney General

The same solicitor and counsel appeared for the Attorney General and the State (in its capacity as recipient of funds pursuant to various paragraphs of Mr Nesbitt's will). No application was made by the State. The Attorney sought his costs to be paid from trust assets on an indemnity basis.
The position of the Attorney is entirely different from that of the trustee. Only if an order is made is he entitled to any costs from the trust assets. Picarda states that in administration actions where the Attorney General is joined to represent the interests of charity he is usually given his costs on a standard basis out of the estate: p 715. Hurst states that "the trustee is entitled to his costs out of the fund on the indemnity basis provided that he has not acted unreasonably or 'in substance for his own benefit rather than that of the fund'": P Hurst, Civil Costs (6th ed, 2018, Sweet & Maxwell) 580. On the other hand, the treatment in W Henderson and J Fowles, Tudor on Charities (10th ed, 2015, Sweet & Maxwell) at pp 742-3 is accompanied by reasons: "In applications by charity trustees to the court for directions in respect of the administration of a charity or where a scheme is sought and made the court will usually order the Attorney General's costs to be paid out of the charity's assets; more often than not on the indemnity basis. The Attorney General is a necessary party to such proceedings and assuming that he has not acted unreasonably, his costs should be provided for, otherwise they will be borne by the taxpayer generally, rather than by the charity whose problems have caused them to be incurred."
The authors give, by way of example, Stanway v Attorney General (5 April 2000, Sir Richard Scott V-C) at p 24, and Varsani v Jesani [2001] All ER (D) 458 at [57]. I have not been able to locate the former decision, while there are no reasons for the indemnity costs order made in the latter decision.
The Australian works I have consulted do not appear to address the point. During the hearing, I observed that in The Trust Company (Australia) as trustee of the Kyle Williams Home Trust v Attorney-General of New South Wales (No 2) [2012] NSWSC 1505, it was noted that the Attorney had made helpful submissions and ordered that the Attorney receive his costs from the trust fund on the ordinary basis, while in Public Trustee v Attorney General [2005] NSWSC 1267 orders were made that the Attorney be paid his costs on an indemnity basis from the trust fund. I now see that in an earlier phase of the Kyle Williams Home Trust application, orders were made that both the trustee and the Attorney be paid their costs out of the trust estate on the indemnity basis: The Trust Company (Australia) Limited as Trustee of the Kyle Williams Home Trust v Attorney General New South Wales [2011] NSWSC 323 at [35]. Consistently with this, the trustee submitted that there did not appear to be any general rule, and instanced a further case when the Attorney General was awarded costs on an ordinary basis: Estate Polykarpou; Re a charity [2016] NSWSC 409.
The pattern of inconsistent orders continues. The trustee's and the Attorney's costs were ordered to be paid out of trust assets on the indemnity basis in Lever v Attorney General of NSW [2018] NSWSC 838, while in John Greer v Attorney General for New South Wales [2018] NSWSC 725 the Attorney's costs were ordered to be paid on the ordinary basis, while the trustee's were ordered to be paid out of the estate on the trustee basis.
In none of these cases were any reasons given. Plainly enough, that body of decisions is not authority for any proposition of law.
In the present case, the Attorney's submissions were helpful, the fund itself is relatively large, and the occasion for the application is the conditions imposed by Mr Nesbitt's will concerning Roman Catholics. I think that in those circumstances, the reasons given in Tudor on Charities are persuasive. The institution of the charitable trust enjoys a range of advantages within the Australian legal system, not least a privileged tax status, but I see no reason why the costs of the Attorney's involvement in an application for a cy-près scheme to preserve the general charitable intention expressed in Mr Nesbitt's will should not be borne by the trust fund, as opposed to taxpayers generally, so long as those costs were not unreasonably incurred. Orders will be made to that effect.

[11]

Orders

For those reasons I make the following orders. Cy-près Schemes
I direct the trustee and the Attorney General to bring in agreed short minutes of order, or in lieu of agreement, orders as propounded by them consistently with these reasons, for the making of schemes for the administration of the high school scholarships, within 14 days of today. Those orders or accompanying materials should disclose how the income which has been accumulating since 2010 will be distributed as between the recipients from 2010 to 2017 and recipients in future years. They may be supplied electronically to my Associate.
Order that the trust established by cl 8(B)(VII) be altered so as to delete the word "Protestant", so that it reads: "To the North Coast Children's Home under the auspices of the Church of England at Lismore for the maintenance of children eight per cent of the income of the Trust Fund annually." Advice
The trustee is justified in making the annual payments of income required by cl 8(B)(IV) of the will to the Anglican Parish of Lismore, in lieu of the St Andrew's Church of England Lismore, upon information provided in writing by the Bishop of the Anglican Diocese of Grafton, that the Incumbent from time to time of the Anglican Parish of Lismore does not believe in, practise or advocate the doctrines of Anglo Catholicism or Roman Catholicism.
The trustee is justified in making the annual payments of income required by cl 8(B)(VI) of the will to the North Coast National Agricultural and Industrial Society Incorporated, formerly the North Coast National Agricultural and Industrial Society, to be applied as to one-half to the North Coast National Schools Competition Program for arts and crafts, needlework and cookery and the other half to the General Show section in such manner as the committee of the society shall from time to time decide, such prizes to be known as the George and Adina Nesbitt Prizes.
The trustee would be justified in continuing to administer the trust on the basis that the prescribed payments of income in cl 8(B)(VIII) fall into the fund created by clause 8(C) of the will.
The trustee would be justified in continuing to make payments pursuant to cl 8(B)(IX) to The Lismore Ladies' Benevolent Society Incorporated, on the basis that those payments are to be used for charitable purposes. Costs
The costs of each of the trustee and the Attorney General are to be paid from the trust assets, on an indemnity basis.

[14]

"Retrospective" scheme for George Nesbitt Scholarship 2010-2017 "(a) The scholarship is to be open annually to all males who were Year 11 students at the School during the years of 2010 - 2017. For the 2010 school year, being a transitional year, the scholarship also is to be open to all males who were Year 12 students at the School during the 2010 school year. (b) There is no requirement for applications to be submitted. (c) For the 2010 school year, the scholarship is to be awarded, as to one half, to the male student who is determined by the Principal of the School to be the male Year 11 dux, and as to the other half, to the male student in Year 12 who is determined by the Principal of the School to be the male Year 12 dux. (d) For the school years 2011 until 2017, the scholarship to be awarded to the male student who is determined by the Principal of the School to be the male Year 11 dux of the relevant school year. (e) If more than one male candidate is appointed as dux, then the scholarship amount is to be divided equally between the successful students. (f) If the successful candidate indicates they do not wish to receive the scholarship or they cannot be located after reasonable attempts, the scholarship is to be awarded to the male student who was determined by the Principal of the School to be the runner-up to the male dux. (g) If the successful candidate is over 18 years old, the scholarship is to be paid to him directly. If the recipient is under 18 years old, the scholarship is to be paid to his parent(s)/guardian(s). (h) The scholarship is to be awarded without regard to any denominational or geographic limitation. (i) The scholarship is to be awarded to the successful candidate regardless of whether he was enrolled from a public school or a private school or was homeschooled. (j) The School is at liberty to publish the name(s) of the successful candidate(s). (k) The Secretary of the Department of Education is to have oversight over the awarding and administration of the George Nesbitt High School Scholarship."

Parties

Applicant/Plaintiff:

Perpetual Trustee Company Ltd

Respondent/Defendant:

Attorney General for the State of New South Wales

Legislation Cited (6)

Associations Incorporation Act 1984(NSW)

(UK) Trustee Act 1925(NSW)

Charitable Trusts Act 1993(NSW)s 23

Conveyancing Act 1919(NSW)

Uniform Civil Procedure Rules 2005(NSW)

Trustee Act 1925(NSW)

Cases Cited (33)

TRUSTS - practice - distinction between summons for advice and application for cy-près scheme - obligations of trustee in making application Legislation Cited: Associations Incorporation Act 1984 (NSW) Charitable Trusts Act 1993 (NSW), ss 9, 10, 23 Charities Act 1960 (UK), s 13 Charities Act 1993 (UK), s 13 Charities Act 2011 (UK), s 62 Conveyancing Act 1919 (NSW), s 37D Education (Scotland) Act 1946 (UK), s 116 Endowed Schools Act 1869 (UK) Grammar Schools Act 1840 (UK) Public Schools Act 1868 (UK) Race Relations Act 1976 (UK) Trustee Act 1925 (NSW), ss 59, 63, 93 Uniform Civil Procedure Rules 2005 (NSW), rr 6.12, 36.4, 42.25, 55.1 Cases Cited: Attorney General for New South Wales v Fred Fulham [2002] NSWSC 629 Attorney General v Sherbourne Grammar School (1854) 18 Beav 256; 52 ER 101 Attorney-General (NSW) v Perpetual Trustee Co Ltd (1940) 63 CLR 209; [1940] HCA 12 Australian Education Union v General Manager of Fair Work Australia (2012) 246 CLR 117; [2012] HCA 19 Canada Trust Co v Ontario Human Rights Commission (1990) 69 DLR (4th) 321 Cattanach v Melchior (2003) 215 CLR 1; [2003] HCA 38 Davies v Perpetual Trustee Co (Ltd) [1959] AC 439 Estate Polykarpou; Re a charity [2016] NSWSC 409 Forrest v Attorney-General [1986] VR 187 Free Serbian Orthodox Church Diocese for Australia and New Zealand Property Trust v Bishop Irinej Dobrijevic (2017) 94 NSWLR 340; [2017] NSWCA 28 Free Serbian Orthodox Church Diocese for Australia and New Zealand Property Trust v Bishop Irinej Dobrijevic (No 3) [2017] NSWCA 109 Hunter Region SLSA Helicopter Rescue Service Ltd v Attorney General for NSW [2000] NSWSC 456 In re Campden Charities (1880) 18 Ch D 310 In re Dominion Students' Hall Trust [1947] Ch 183 In re Harding, deceased [2008] 2 WLR 361 In re Lepton's Charity [1972] Ch 276 In re Wilson [1913] 1 Ch 314 In re Woodhams, deceased [1981] 1 WLR 493 Inland Revenue Commissioners v Baddeley [1955] AC 572 J W Laing Trust [1984] Ch 143 John Greer v Attorney General for New South Wales [2018] NSWSC 725 Kay v South Eastern Sydney Area Health Service [2003] NSWSC 292 Lever v Attorney General of NSW [2018] NSWSC 838 Maxwell James Anthony Connery v Williams Business College Ltd [2014] NSWSC 154 Melbourne Anglican Trust Corporation v Attorney-General for the State of Victoria [2005] VSC 481 Morice v Bishop of Durham (1805) 10 Ves 522; 32 ER 947 National Trustees Executors and Agency Company of Australasia Ltd v Barnes (1941) 64 CLR 268; [1941] HCA 3 Northern Sydney and Central Coast Area Health Service v Attorney-General for New South Wales [2007] NSWSC 881 Oldham BC v Attorney-General [1993] Ch 210 Parker v Moseley [1965] VR 580 Peggs v Lamb [1994] Ch 172 Phillips v Roberts [1975] 2 NSWLR 207 Public Trustee v Attorney General [2005] NSWSC 1267 Public Trustee v Attorney General of NSW (1997) 42 NSWLR 600 R v Kidman (1915) 20 CLR 425; [1915] HCA 58 Re Estate Late Chow Cho-Poon; Application for judicial advice [2013] NSWSC 844; 10 ASTLR 251 Re Hanbey's Will Trusts [1956] Ch 264 Re Lysaght (dec'd) [1966] Ch 191 Re Watt [1932] 2 Ch 243n Re Will of Meshakov-Korjakin (decd) [2011] VSC 372 Stanway v Attorney General (5 April 2000, Sir Richard Scott V-C) Stratton v Simpson (1970) 125 CLR 138; [1970] HCA 45 The Trust Company (Australia) Ltd as Trustee of the Kyle Williams Home Trust v Attorney General New South Wales [2011] NSWSC 323 The Trust Company (Australia) Ltd as trustee of the Kyle Williams Home Trust v Attorney-General of New South Wales (No 2) [2012] NSWSC 1505 Turner v Hancock (1882) 20 Ch D 303 UBC v British Columbia (Attorney-General) 2008 BCCA 367 Versani v Jesani [1999] Ch 219 Varsani v Jesani [2001] All ER (D) 458 Walter Rau Neusser Oel Und Fett AG v Cross Pacific Trading Ltd [2005] FCA 955 West v Gwynne [1911] 2 Ch 1 Wilson v Secretary of State for Trade and Industry [2004] 1 AC 816; [2003] UKHL 40 Zoef v Nationwide News Pty Ltd (No 2) [2017] NSWCA 2 Texts Cited: M Harding, "Charitable Trusts and Discrimination: Two Themes" (2016) 2(1) Canadian Journal of Comparative and Contemporary Law 227 W Henderson and J Fowles, Tudor on Charities (10th ed, 2015, Sweet & Maxwell) P Luxton, "In Pursuit of 'Purpose' Through Section 13 of the Charities Act 1960" [1985] Conv 313 D H McMullen et al,Tudor on Charities (6th ed, 1967, Sweet & Maxwell) P Pettit, Equity and the Law of Trusts (4th ed, 1979, Butterworths) H Picarda, The Law and Practice Relating to Charities (3rd ed, 1999, Butterworths) J Warburton, "The Spirit of the Gift" (1995/6) 3 Charity Law and Practice Review 1 Category: Principal judgment Parties: Perpetual Trustee Company Ltd (Plaintiff) Attorney General for the State of New South Wales (First Defendant) The State of New South Wales through its Department of Education (Second Defendant) CASPA Services Ltd (Third Defendant) Representation: Counsel: P Blackburn-Hart SC (Plaintiff) H El-Hage (First and Second Defendants)

The relief sought by the trustee

No difficulties have been encountered in relation to the administration of the payments in cl 8(B)(III), (V) and (X) and 8(C)(II) (being the Municipal Council of Lismore, the Lismore Public or Base Hospital and the Lismore Musical Festival Society). The other clauses have, for a variety of reasons, proven more problematic.
The trustee's summons seeks undifferentiated "determinations" in relation to each of the other clauses in the will, to the effect that the trustee is "justified" in taking a certain course. For the benefit of future applications, it is as well to note the following. 1. First, a summons should contain the orders sought in accordance with r 6.12(1) of the Uniform Civil Procedure Rules, rather than the findings the court is asked to make. 2. Secondly, although "justified" is the usual form of order to frame judicial advice given pursuant to s 63 of the Trustee Act 1925 (NSW) (see for example Re Estate Late Chow Cho-Poon; Application for judicial advice [2013] NSWSC 844; 10 ASTLR 251 at [31]), and the majority of the summons is best regarded as an application for advice, there has been no attempt to comply with UCPR r 6.12(2), which provides that "[i]f the relief claimed requires the determination or direction of the court on any question, the statement of claim or summons must state the question." True it is that UCPR r 55.1(2) exempts the originating process from this rule in cases of judicial advice, but that exemption is best read as applicable to cases where the procedure endorsed by s 63(3) of the Trustee Act 1925 (NSW) and UCPR r 55.1(1) of a signed statement which states the facts concisely and the question for opinion, advice or direction has been used. The trustee did not use that procedure, and in fact nowhere identified in terms the questions the subject of the advice. 3. Thirdly, it is quite plain that orders in the nature of a cy-près scheme are sought in relation to some of the clauses in the will, namely, those relating to the scholarships and children's home. Parts of the summons seem to conflate the cy-près jurisdiction with advice. This is most conveniently seen in relation to prayer 7: "A determination that the terms of clause 8(B)(VII) of the will are incapable of being carried out and in the events which have happened, the Trustee is justified in making the prescribed payment of income of the Trust Fund annually to CASPA Services Ltd ... in lieu of the North Coast Children's Home for the maintenance of children nominated by the Chairperson of the Board of Governance for the time being of CASPA without regard to a child's religious denomination or gender." 1. This drafting reflects confusion of thought. If this clause of the will is made subject to a scheme, then (a) it will be done by way of order, not "determination", (b) it will not be a consequence of "the events which have happened", and (c) the scheme will make it plain what the trustee may do, so as to obviate the need for advice.

The revised approaches of the trustee and the Attorney General following the hearing

At the hearing, the trustee, the Attorney General and the State made common cause in seeking a cy-près scheme only for the future. The trustee had originally sought an order authorising retrospective payments, but abandoned that and instead sought an order authorising the accrued income to be added to capital: "HIS HONOUR: What in your submission should happen to the 8 per cent waterfalls that have been accumulated over eight years? BLACKBURN-HART: That money should be allocated to the capital of the main fund."
The certain result of this approach would be that if a cy-près scheme were ordered, students who would have been entitled to scholarships for their performance in the years 2010-2017 would receive nothing. If, as may well be the case (the evidence does not disclose whether it is so), the trustee's remuneration turns on the balance of the fund, the course proposed by the trustee would result in a pecuniary benefit to itself. That course was sought to be justified, after years of delay on the part of the trustee, in respect of trusts where the distribution of income was mandatory, on the basis that so much time had elapsed that it was impracticable to attempt to identify and locate the rightful recipients of the award. The evidence of impracticability was, at best, scant.
During the hearing, I indicated the following: "the overriding intention was that each year highly proficient students were to receive a prize. It seems a little capricious that because of difficulties that have taken many years, ... we are just going to give up on those students receiving what this testator wanted them to receive. ... [I]t may well be that - certainly for the B1 and 2, the senior school prizes - it is very easy to find out who those 14 students are, and they, or 12 of them, as soon as word gets around, come racing, saying 'yes, in fact I applied at the time and I've been disappointed'."
I made directions at the conclusion of the hearing granting liberty to the parties to file and serve any further evidence or submissions directed to issues relating to the orders sought in paragraphs 1-3 of the summons. After seeking and obtaining a further extension of time, the trustee and the Attorney General supplied further submissions (dated 24 and 28 August 2018) and an affidavit sworn by the principal of the Rivers Secondary College, Mr Christopher Williams.
Mr Williams' affidavit expressed the views that it was possible to award scholarships for the period 2010-2017, and that the "fairest and most objective manner" to do so would be to calculate the duxes of each year, and in the case of the junior years, the three runners up, on the basis of a points scale. Without descending into the detail of his evidence, its thrust is that the grades awarded to students over the whole of this period are available, that the grades were a numerical mark for years 11 and 12 but a letter grade for the junior years, and they could be used to identify the most proficient students in each year. No doubt there is a range of ways in which those students may be identified, but there is also no reason to doubt that Mr Williams is well placed to do so in the fairest and most objective manner.

The children's home trust - cl 8(B)(VII)

This cy-près scheme is more straightforward. The evidence establishes that the "North Coast Children's Home Lismore" was established in around 1919 by the local Church of England Vicar. It was registered as an incorporated association in May 1989, with the name "North Coast Children's Home Inc". From 1 November 2005, it traded as "CASPA - Child and Adolescent Specialist Programs and Accommodation" and in February 2017 it became a company limited by guarantee, with the name "CASPA Services Ltd".
In August 2009, the chairperson of the Management Committee of CASPA Services wrote to the (former) trustee advising that: "[W]e care for young people from a wide range of backgrounds in our specialist programs and accommodation. Over the years we have had children from all denominations, from non-Christian religious backgrounds, from other spiritual backgrounds like Aboriginal spirituality, and from no apparent religious or spiritual tradition."
The letter states that one of the objects of the 2005 Constitution was to ensure "that all services provided are done so in a manner that follows the Anglicare Code of Conduct", the philosophical objectives state, inter alia, that the organisation "relates to the Christian ethos and provides care for all children regardless of culture, religion, race or sexual preference" and "accepts its role in the wider community to meet the need of all family members irrespective of race, culture, creed or sex".
The letter continues: "Often we do not know anything about a child's religious background unless the parents have specifically advised us of this. Most of our clients are referred to us and largely funded by the Department of Community Services. One of their requirements is that we do not ask about or discuss a child's religion unless that child directs religious questions to us, and to contravene this would be to jeopardise our funding agreement. It is a similar situation with our other funding bodies. We are aware of the terms of the Will that state the funds are to be used for 'the maintenance of Protestant children'; this is a reflection of past attitude that used to be socially acceptable. Over the years we have done our best to meet these requirements, but to do so has presented difficulties and proven quite demanding. In operational terms, for example, it necessitates distinguishing between Protestant and non-Protestant children in our financial records, a task that is further complicated by the fact there is no one definitive or widely-accepted definition of Protestant children. These days distinguishing between children on the basis of religion is not acceptable, and observation of this limitation of the Trust places on North Coast Childrens Home Incorporated an unnecessary burden under which we have to operate. We therefore advise that we support an application in the Supreme Court of NSW in relation to this charitable trust so that we may apply the funds as needed among all children in our care without religious discrimination."

Cy-près schemes - applicable principles

It was not submitted that the scholarship and the children's home trusts, or the conditions attaching to them which limited distributions to Protestant children, were invalid as contrary to public policy. Any such submission would have been contrary to Re Lysaght [1966] Ch 191, in which Buckley J said at 206 that it would be "going much too far" to say that the similar discrimination against Roman Catholics and Jews in the trust established in Ms Rosalind Lysaght's will made the trust contrary to public policy. Although public policy varies from time to time: Cattanach v Melchior (2003) 215 CLR 1; [2003] HCA 38 at [229], it was also said more recently, of a discriminatory trust for the treatment of "white babies", that "generally speaking testators can be as capricious as they like and ... if they wish to benefit a charity in respect of ... a discriminatory group, they are at liberty to do so": Kay v South Eastern Sydney Area Health Service [2003] NSWSC 292 at [2]. The position is different in Canada, where such trusts have been said to contravene public policy, notably in the decision of the Ontario Court of Appeal in Canada Trust Co v Ontario Human Rights Commission (1990) 69 DLR (4th) 321, as noted by Professor Harding, "Charitable Trusts and Discrimination: Two Themes" (2016) 2(1) Canadian Journal of Comparative and Contemporary Law 227 at 232-236. As he explains, there is a deep and complex question whether a settlor's or testator's freedom of disposition should prevail over a discriminatory purpose in a public trust. That question need not be addressed here; I mention the point because it is not possible on the law as is accepted in Australia and the United Kingdom to justify a cy-près scheme because an otherwise charitable trust contains a discriminatory condition and for that reason is void as contrary to public policy subject to the saving effect of the scheme (cf Canada Trust at [108]).
Nor was it said that these aspects of the trust failed because they capriciously qualified an educational purpose by insisting on excluding Roman Catholics: cf Inland Revenue Commissioners v Baddeley [1955] AC 572 and Davies v Perpetual Trustee Co (Ltd) [1959] AC 439 at 456. In the latter appeal, one factor which contributed to the devise not being for a charitable purpose was that "the qualifications which a boy must possess in order to benefit are in some respects wholly irrelevant to the educational object which the testator had in mind."
Rather, the basis for the present application rests upon the present unwillingness of the chosen recipients of Mr Nesbitt's bounty to receive distributions from the trustee on the discriminatory conditions of his will (those recipients having been content to do so for slightly more than half a century).

"Ceased to provide a suitable and effective method of using the trust property, having regard to the spirit of the trust"

Section 9 extends the circumstances in which a cy-près scheme may be ordered to cases where the original purposes no longer provide a "suitable and effective" method of using the trust property. Although it was common to speak of "supervening impossibility" in this class of case, absolute impossibility is not the test, as Starke J noted in Parker v Moseley [1965] VR 580 at 584. It is now clear from s 9 that the test of "ceased to provide a suitable and effective method" is sufficient, but that it remains necessary to have regard to the spirit of the trust.
There are two elements in this part of the statute. The first is the dilution of the traditionally strict test, seen in the words "suitable and effective", which may be contrasted with "impossible or impracticable". The second is the mandatory but metaphoric if not metaphysical consideration, the "spirit of the trust". The latter words, which to a reader unfamiliar with the case law in this area might well be regarded as an unusual element in a statutory test, are best addressed first.
The notion of the "spirit of the trust" was well established in the case law prior to the 1960 legislation. The history is helpfully explained in J Warburton, "The Spirit of the Gift" (1995/6) 3 Charity Law and Practice Review 1. She traces the legislative language to the Education (Scotland) Act 1946 (UK), s 116 and from there to case law a century earlier. In Attorney General v Sherbourne Grammar School (1854) 18 Beav 256; 52 ER 101, Sir John Romilly MR said at 280: "This Court has a further power and authority when the objects contemplated by the founder cannot be carried into effect, to direct the application of the revenues of the charity to promote objects in accordance with the spirit of the original foundation, the actual compliance with which has become impossible." (emphasis added)
A relatively early judicial exposition of "the spirit of the gift" in the statute was given by Sir John Pennycuick VC in In re Lepton's Charity [1972] Ch 276. Mr Browne-Wilkinson for the Attorney-General submitted: "Section 13 of the Act of 1960 is partly declaratory of the old law but also extends it so as to allow cy-près application where the original trusts are not absolutely impossible but only undesirable. Section 13(1) draws a distinction between (a) the charitable gift and (b) the purposes of the gift. The question is whether there is one charitable gift with two purposes or two charitable gifts each with one purpose. If there are two charitable gifts, there are two "spirits" of the gifts and it is accepted that no cy-près application is possible. But on the true construction there is one gift with a dual purpose."