Mr Paul Michael Russell is the executor and trustee of the late Euphemia (Mia) Polykarpou under her will dated 22 March 2004. The deceased died on 2 March 2015, and probate of her will was granted to Mr Russell on 20 October 2015.
By summons filed on 12 December 2015, Mr Russell seeks the following relief:
1. An order that the Plaintiff be granted leave to bring these proceedings pursuant to s 6(1)(b) of the Charitable Trusts Act 1993 (NSW).
2. Advice, orders and directions pursuant to s 63 of the Trustee Act 1925 (NSW) or, alternatively, Part 55 of the Uniform Civil Procedure Rules on the following issues:
(a) Whether the Plaintiff would be justified in appealing the order of the Attorney General published in the NSW Government Gazette on 25 October 2017 establishing a cy-près scheme in favour of the YWCA ("the trust"); and
(b) Whether the Plaintiff's costs of any such appeal should be subject to an indemnity from the trust.
3 An order that the question of leave be heard and determined at the same time as the hearing of the application for judicial advice.
4. An order that the Plaintiff be indemnified from the assets of the trust for the costs of these proceedings on an indemnity basis.
It will be appropriate to consider the circumstances that have occurred in relation to the deceased's estate that have led Mr Russell to make the present application.
In her will, after appointing Mr Russell as her executor and trustee, and after making a number of minor bequests, the deceased made the following gift in relation to the residue of her estate:
4. MY EXECUTORS [sic] shall hold the rest and residue of my Estate to divide as follows: -
4.1 As to a 50% part or share thereof to be used for research into the causes and cures for MULTIPLE SCLEROSIS, the distribution and use of such funds, whether to any hospital, medical practitioner, scientist or research facility to be at the discretion of the Executor;
4.2 As to the remaining share to 'OPRAH ANGEL NETWORK' 110N Carpenter Street, Chicago, Illinois 60607 United States of America.
The gift in clause 4.1 of the deceased's will appears to have been made because the deceased was diagnosed with multiple sclerosis in 1998. The deceased was not employed from 2001 onward as a result of the disease and became essentially housebound. Mr Russell and the deceased were close friends and work colleagues for 25 years. Mr Russell maintained his friendship with the deceased after she was forced to cease work. He would frequently spend days with the deceased at her home. Mr Russell spent time with the deceased in the days leading up to her providing instructions for her will.
No issue has arisen about the effectiveness of the gift of the deceased's residue in clause 4.1 of her will.
An issue has arisen concerning the effectiveness of the gift in clause 4.2 of the deceased's will, as the Oprah Angel Network (OAN) ceased to exist before the date of the deceased's death.
By summons filed on 14 December 2015, Mr Russell applied for judicial advice under s 63 of the Trustee Act on the question whether he would be justified in making an application for a cy-près scheme in relation to the gift in clause 4.2 of the deceased's will.
On 9 February 2016, Lindsay J made orders that had the effect that the Attorney General of NSW, as the State's protector of charities, be joined to the proceedings, and also that the persons entitled to the property in question in the event that the gift in clause 4.2 failed be joined. The summons was amended to include prayers for relief as to the proper construction of the will and for directions for the administration of the estate.
Lindsay J gave judgment in the proceedings on 22 July 2016, when he published reasons for judgment which, if I may respectfully say so, provide a comprehensive and insightful explanation of the Court's jurisdiction in relation to charitable trusts, having regard to a deep historical analysis, that I can only humbly follow: Estate Polykarpou; Re a Charity [2016] NSWSC 409. I will refer to this judgment in these reasons as the principal judgment, and identify paragraphs in it with the prefix "J".
His Honour made declarations that had the effect that the gift of property in clause 4.2 of the will constitutes a valid charitable trust and that as a result of the dissolution of the corporation identified in clause 4.2 as the recipient of the trust property, the property the subject of the trust is dedicated to charity. Lindsay J then made the following orders:
(3) ORDER that the trust property be applied cy-près, and that a scheme be settled for that purpose.
(4) ORDER (pursuant to the Charitable Trusts Act, section 13(2)) that the trust be referred to the Attorney General for the Attorney to establish such a scheme.
(5) RESERVE to the Attorney General, the trustee of the charitable trust and such (if any) other persons who may be interested in due administration of the trust, liberty, at their own risk as to costs, to apply for directions in settlement of a cy-près scheme.
In accordance with order 4 made by Lindsay J, the Attorney General delegated to the Solicitor General the duty to establish a cy-près scheme in respect of the property the subject of clause 4.2 of the deceased's will. The Solicitor General did so by order dated 24 October 2017, which was published in the NSW Government Gazette No 119 of 27 October 2017. Under the order, the Young Women's Christian Association of NSW (YWCA) "is to hold the gift in clause 4.2 of the Will of the deceased on trust, to apply the capital and income for the purpose of establishing and funding a post-crisis domestic violence Centre in Campbelltown which provides services to women and children as described in the YWCA's application to the Crown Solicitor".
As was indicated in the order, there was one other applicant for consideration as the beneficiary of the cy-près scheme, which is known as the Oprah Winfrey Leadership Academy Foundation (the Foundation).
The order contains brief reasons as to why the Solicitor General determined that the order in favour of the YWCA trust was closer to the primary charitable purpose in clause 4.2 of the deceased's will than the Foundation's proposal.
Mr Russell is of the view that the judgment made by the Solicitor General as the delegate of the Attorney General in the order was wrong in so far as it concluded that the scheme proposed by the YWCA was closer to the primary charitable purpose in clause 4.2 of the will than the Foundation's proposal. Hence the application in the summons that is now before the Court.
Before Mr Russell filed his summons, certain communications occurred on his behalf between his solicitors and the Office of the General Counsel of the NSW Government. Mr Russell's solicitors advised on 7 November 2015 that Mr Russell had given instructions to lodge an appeal under s 19(1)(b) of the Charitable Trusts Act. The solicitors advised that, given the novel issues raised by the matter and the appeal, Mr Russell's counsel had advised that he should first apply for judicial advice, principally in relation to whether he would be justified in lodging the appeal and as to what extent his costs would be indemnified by the estate.
By reply dated 13 November 2017 from the Crown Solicitor's Office, it was suggested that the more appropriate course, and the one less likely to deplete the fund, was for Mr Russell to proceed to lodge the appeal without seeking judicial advice. It was suggested that the proposed judicial advice proceedings would require authorisation pursuant to s 6 of the Charitable Trusts Act before being commenced, as they would be "charitable trust proceedings" for the purposes of s 5(1) of the Act. That letter continued by suggesting that, if Mr Russell did make an application for judicial advice "it would be more appropriate for leave to commence such proceedings to be obtained from the Court, pursuant to s 6(1)(b) of the Act, rather than from the Attorney General.
I take this last suggestion to mean that, as the subject matter of the appeal would be the decision of a delegate of the Attorney General, it would not be the best course for the Attorney General to be asked to authorise the bringing of the proceedings under s 6(1)(a) of the Charitable Trusts Act, and instead the leave of the Court should be obtained under s (1)(b). Hence Mr Russell has made the application in prayer 1 of his summons.
The letter from the Crown Solicitor's office invited Mr Russell to participate in a mediation. I have been told that a mediation occurred but was unsuccessful in resolving the dispute.
I will return to the significance of this correspondence below, when I consider the most appropriate course for these proceedings to take in order to resolve the issues that have been raised in a way that will deplete the trust fund as little as possible.
Mr Russell supported his application by a statement of facts filed on 12 December 2017, and an opinion of Mr Greg McNally of senior counsel, dated 5 December 2017.
Mr Russell's application came on for hearing before me in the Applications List on 20 March 2018. Mr McNally appeared and addressed the Court. I was ambivalent about whether the leave sought should be given, and whether the Court should advise Mr Russell that he would be justified in instituting an appeal. That was principally because it was not at all clear to me that Mr Russell had substantial prospects of success on the appeal, having regard to the reasons given by the Solicitor General in the order, and I was concerned about the possibility that the trust fund would be deleted by the cost of the appeal in a manner that was not proportionate to its prospects of succeeding.
In coming to that state of ambivalence, I had regard to the fact that at J [2], Lindsay J had indicated that the approximate value of the trust fund was $700,000, and the order dated 24 October 2017 gave the current value of the portion of the deceased's estate that would be the subject of the cy-près scheme as being $609,127.66.
Further, it became apparent that the principal factor responsible for Mr Russell's desire to appeal was his strong personal belief, based upon his long and close association with the deceased, that the principal reason for her including clause 4.2 in her will was the esteem in which the deceased held Miss Oprah Winfrey, as a result of her long-term watching of Ms Winfrey's television programs. Mr Russell believed that the Solicitor General had not given any, or sufficient, weight to the fact that the alternative object of the cy-près scheme was an Oprah Winfrey charity.
Given my ambivalence concerning Mr Russell's application, I made the following orders:
1. Grants to the plaintiff leave to prepare within seven days or such longer period as may be arranged with the associate to Robb J a brief affidavit explaining his reasons for attributing significance to the testator's choice of a charity sponsored by Oprah Winfrey in relation to the appropriateness of choosing in the cy-près scheme a charity associated with the name of that person.
2. On the basis that it would assist the Court in determining the application to have the submissions made to the Attorney General by the two competing charities, request the solicitor for the plaintiff to convey to the Attorney General the Court's request that the Attorney General provide to the plaintiff for provision to the Court those submissions, and if possible to do so within seven days.
On 3 April 2008, the Crown Solicitor's Office, having obtained the consent of the two competing charities, forwarded their submissions to Mr Russell's solicitor for provision to the Court.
The covering letter contained the following request:
The Attorney General request, an opportunity to be heard in the event that the Court is considering making a conclusive finding regarding the conduct of the Attorney or the process adopted by the Attorney in considering the OWLAF and YWCA NSW submissions, or, if your client intends to make submissions in that regard to the Court.
This request is material to the course that I propose to follow in this matter, and I will return to it below.
Mr Russell also provided to the Court an affidavit affirmed by him on 29 March 2018. Apart from the evidence of his relationship with the deceased outlined above, Mr Russell gave the following evidence concerning the significance of Oprah Winfrey to the deceased's decision to include clause 4.2 in her will:
11. Because Mia spent so much time within her home after her MS diagnosis, she spent a lot of time watching television.
12. Mia's favourite television show was the Oprah Winfrey Show. Mia would watch the show whenever the show was on, as Mia was often watching television every single day.
13. Oprah Winfrey ("Oprah ") was also Mia's favourite celebrity. I recall having conversation with Mia in which she spoke of her admiration for Oprah and her achievements in life considering the rough upbringing that she had.
14. Mia and I had also had conversations on multiple occasions in which Mia expressed her admiration of Oprah's charitable pursuits. Oprah's television show often featured the works of Oprah's charity. It was my observation that Mia emotionally connected to the charitable works that she saw on Oprah's television show.
15. I would classify Mia as a "loyal fan" of Oprah.
16. I was with Mia in the days leading up to her providing her Will instructions in 2004. I also transported her to her lawyer's office on the day that the Will was executed.
17. After signing her will, Mia reiterated to me (as her executor) that her Will called for half of her property to go to the Oprah Angel Network charity. It was clear to me that the "Oprah" component to her Will was important to her.
18. Based on my conversations with Mia before and after the execution of her Will, it is my sincere belief that Oprah was the reason that Mia chose Oprah's Angel Network as 50% beneficiary of her Will (as opposed to the other 50% gift in the Will, which went to MS research generally, at the Executor's discretion).
19. It is my further belief that had Mia been aware that, as at the time of her death Oprah's Angel Network had ceased to exist, that she would have directed the gift in her Will to another Oprah-related charity.
It will be convenient at this point to refer to a number of aspects of the principal judgment, as they should inform the process by which the cy-près scheme should be settled and any appeal determined.
When I come to deal with the application by Mr Russell in prayers 2(b) and 4 of his summons, it will be appropriate to consider the fact that in order 5, in relation to the reservation of liberty to apply for directions in the settlement of the cy-près scheme, Lindsay J said that it would be "at their own risk as to costs".
Lindsay J set out Article 4 of OAN's articles of incorporation as the source of its corporate purpose, in order to determine the intended effect of clause 4.2 of the will. It is only necessary to set out the most material part of Article 4, which is as follows:
The purposes for which Oprah Angel Network (the 'Corporation') is organised are to receive or maintain a fund or funds and to administer and apply the income and principal thereof solely for the betterment, support and enrichment of women and children in need or for educational purposes and to the extent the funds are not used for the aforementioned purposes, then for religious, charitable, scientific, literary or educational purposes, but only to the extent and in such manner that such purposes constitute exclusively charitable and educational purposes within the meaning of ss 501(c)(3) and 170 (c)(2)(B) of the Internal Revenue Code of 1986, as amended from time to time (the 'Code'), or any successor provisions thereto, including, for such purposes, the making of distributions to organisations that qualify as exempt organisations under Section 501 (c)(3) Code. (Emphasis added)
It can thus be seen that the principal object of OAN was "the betterment, support and enrichment of women and children in need or for educational purposes". The use of the word "or" in this statement of corporate purpose would naturally tend to suggest two distinct purposes. I will return to this issue below when I briefly consider the reasoning in the order given by the Solicitor General.
It appears from the principal judgment that there was evidence before Lindsay J concerning the significance of Oprah Winfrey to the deceased's decision to include clause 4.2 in her will. This evidence appears to have had some influence on his Honour's construction of the will in relation to whether it exhibited a general charitable intention.
At J [10] Lindsay J said:
[10] An affidavit sworn by one of her sisters describes the deceased as a regular viewer of the show. She, the deceased, is said to have "appeared to be very inspired by what Oprah talked about on her show and the show subject matter, particularly stories about people rising above adversity."
Later, in relation to choosing the procedure that was appropriate to the then current proceedings for the determination of a cy-près scheme, his Honour said at J [107(c)]:
[107] In choosing which procedure is appropriate to the current proceedings, I am mindful that:
…
(c) as an aid to settling a scheme, the Attorney already has (in addition to these reasons for judgment) the benefit of inquiries made by the plaintiff of the Oprah Winfrey Charitable Foundation, and submissions made by the plaintiff and the deceased's parents, in spelling out alternative courses of action.
His Honour then said at J [108]-[109]:
[108] Taking these factors into account, I am satisfied that the best means of proceeding for the purpose of preserving the trust estate, and allowing it to be applied so as to give effect to the deceased's charitable intention, is to order that the trust for which clause 4.2 of the deceased's will provides be referred to the Attorney General for the Attorney to establish a scheme.
[109] Prima facie, the Attorney might reasonably be expected to establish a scheme (reflective of the primary charitable purpose recorded in article 4 of OAN's Articles of Incorporation) for the betterment, support and enrichment of women and children in need or for educational purposes, whether that involves an application of trust property within the jurisdiction or beyond it.
Lindsay J also considered the principles that govern how the most appropriate terms for the cy-près scheme should be determined. His Honour said at [51]:
[51] Category C of the exceptions to the lapsing rule for charitable institutions enunciated in Re Tyrie can be summarised as having the following field of operation in the current context: If the deceased is found, upon the proper interpretation of her will, to have had a dominant intention to benefit work or purposes of the kind which OAN carried out, notwithstanding that OAN itself might no longer exist at her death, and, if it was practicable as at the date of her death to apply the gift to OAN for the benefit of work or purposes of that kind, and in a way in which is in all respects consistent with any other elements of the dominant intention of the testatrix, then the gift is to be so applied by means of a cy-près scheme.
Lindsay J's reference not only to the need to find a way if practicable to apply the gift to OAN for the benefit of work or purposes of the kind which OAN carried out, but also to do so "in a way which is in all respects consistent with any other elements of the dominant intention of the testatrix" is in my view significant. His Honour's observation suggests that it may be necessary to look beyond the bare elements of OAN's corporate purpose, but to also act consistently with any other elements of the deceased's dominant intention. That may be relevant to the issue of whether in settling the cy-près scheme it is necessary to give proper weight to any intention of the deceased that her gift benefit a charity established by Oprah Winfrey.
Lindsay J also said the following concerning the relevance of the intention of the deceased at J [104]-[105]:
[104] Whichever procedural course is taken towards settlement of a scheme, the object of the exercise is to give effect to the intention of the deceased, as donor, as closely as possible (that is, cy-pres): Phillips v Roberts [1975] 2 NSWLR 207; Lovett v Permanent Trustee Co Ltd (unreported, the NSW Court of Appeal, 24 March 1987), cited by Young, Croft and Smith, On Equity (2009), paragraph [6.500] note 297.
[105] In the Lovett case, Priestley JA (with whom Street CJ and McHugh JA agreed) wrote the following upon an application of Phillips v Roberts:
… Although the settling and approval of cy-pres schemes has never been subject to a technical approach, the court's prime responsibility is to give effect as closely as possible to what the founder of the trust wanted: see generally Phillips v Roberts [1975] 2 NSWLR 207 where there is general discussion on this topic, and particularly at 212 per Hutley JA[,] at 214 per Samuels JA and at 216 per Mahoney JA.
It will be appropriate to look a little more closely at the decision of the Court of Appeal in Phillips v Roberts [1975] 2 NSWLR 207. The Court of Appeal was concerned with an intended charitable gift created by the deceased's will in which, she left the residue of her estate to her trustees on trust to benefit generally her fellow citizens by the improvement of biblical knowledge and instruction, to establish a church at a certain address, and directed that the main purpose of such church should be to further the study of the Bible.
The trial judge held that it was impractical to give effect to the trust for the establishment of the church, but that the will exhibited a general charitable intention, so that there was no complete failure of the residuary gift. The Attorney General and the trustees each prepared cy-près schemes. The Attorney General proposed to divide the residuary estate between six theological seminaries. The trustees proposed to make the income of the residuary estate available to a company the principle object of which, put shortly, was to engage in investigations concerning the authenticity, historicity, accuracy and inspiration of the Holy Scriptures.
The judge received the evidence of a witness as to his opinion as to what would have been the reaction of the deceased to the Attorney General's scheme, and partly in reliance on that evidence, rejected that scheme, and accepted the scheme proposed by the trustees. That evidence is stated at 214 as being: "the last thing she (the testatrix) would want would be her money to go for the training of ministers and/or priests…"
Hutley JA, in giving the first judgment, accepted that the trial judge was entitled to rely upon the witness's evidence, and expressed a relatively liberal view as to the extrinsic evidence that the Court could take into account in determining which of a number of schemes was more in tune with the charitable intention of the deceased.
His Honour said at 211:
Counsel for the Attorney-General conceded that, if the Court was engaged in settling a general scheme, i.e. giving effect to provisions in a will which did no more than evidence an intention to devote property for general charitable purposes, the Court was unrestricted in the evidence which it was entitled to receive. Where, however, there is particularity in the charitable trust, as in this case, evidence as to the intention of the testatrix could not be received at all.
No authority was cited by either counsel which cast any real light upon this particular problem, nor have I been able to find any authorities not referred to by counsel. It seems to me that the matter must be approached as a matter of principle.
Contests as to the form of a cy-près scheme are rare, such gleanings as I have found in the books indicate they are free of technicality: see Sheridan
& Delany, The Cy-près Doctrine, p. 160, and it has been recognized by distinguished lawyers that the administrative task of re-organizing charitable trusts requires freedom from restrictions associated with the judicial process: see The Report of the Committee on the Law and Practice relating to Charitable Trusts - the Nathan Committee, ss. 337-338, quoting Lord Westbury and Lord Davey.
The receipt of evidence by a court in carrying out its duties in settling a scheme involves two aspects. There is, merely because the evidence is given in administrative proceedings, no relaxation of the rules governing the form in which evidence may be tendered, for example, proof by hearsay is objectionable, written records have to be properly authenticated. However, the content of evidence is not limited, for example, direct evidence of the wishes or prejudices of the testatrix, if relevant, should not be excluded.
Then, at 212, Hutley JA said:
In this case, giving effect literally to the directions of the testatrix being impracticable, the Court is no longer simply construing the will, it is launched on the task of selecting alternative schemes within the ambit of the intentions of the testatrix as declared. I am at a loss to see why in this uncharted territory the Court does not have the same freedom in informing itself in selecting a scheme as it has in the case of a general scheme. The distinction is a matter of degree, not of kind. It is no doubt a delicate task to give full effect to the intentions of the testatrix declared in the will up to the limits practicable, and then to receive evidence of her actual or hypothetical views about the schemes brought forward, but it is not a task which is beyond a judge, and it certainly is not a task which a judge should be prohibited from under taking if he is minded so to do.
Finally, Hutley JA said at 212:
It might be suggested that the evidence of an associate of the testatrix as to how she would have reacted to proposals for the disposition of her property of which she had never heard is not in the same position as evidence of intention; it is speculation as to how her will would operate. The distinction is a real one, but irrelevant. His Honour was trying to find what she would want in a hypothetical position and can only do so from her associates. It is not irrelevant, and the weight was a matter for his Honour.
Faced with two schemes, neither of which, in my opinion, can be said to be close to what she appears to have had in mind, his Honour accepted evidence by those who knew her well as to how they believed she would have viewed the gift of her property to these two schemes. I can see no principled basis for rejecting this evidence. It was not properly characterized, as his Honour did "as evidence directed towards filling out a donor's expressed intention, giving it greater depth and intelligibility", as it does not fill out the expressed intention at all. What it does is to fill in a gap in the expressed intention; it provides evidence of what her reaction, it is believed, would have been by those in her confidence, if she were faced with the novel situation. I am, therefore, of the opinion that the challenge to the receipt of this evidence by his Honour is misconceived.
Even if the evidence was wrongly received, his Honour came to the right result. He was clearly entitled to regard his prime responsibility giving effect as closely as possible to what the testatrix desired…
Samuels JA expressly held at 214 that it was not necessary to determine the question of whether the evidence of the witness was admissible to establish the deceased's intention "because, it seems to me that the will itself demonstrates an intention incompatible with the scheme proposed by the Attorney General". His Honour decided the issue "upon the terms of the will alone".
Mahoney JA said at 224 (footnotes omitted):
In the third class of case, that, essentially, which the Court does, is to select the manner of application of the gift which is as near as possible to the manner which the deceased herself selected. Prima facie, it is to the manner chosen, rather than to the intention of the deceased, that attention is directed: see the statement of principle as in Tudor on Charities, 6th ed., p. 219; Halsbury's Laws of England, 4th ed., vol. 5, p. 430, par. 696. If the manner of application be stated clearly by the deceased, and there is a manner of application which is as close as may be to that manner, then the deceased's intention otherwise than as expressed by her, is not relevant and evidence of the present kind is of no assistance.
I do not think that the decided cases establish any contrary principle. Both counsel have informed the Court that there are no cases in which the admissibility of evidence in the third class of case to which I have referred has been considered. For the most part, the cases in which the relevance of evidence of this kind has been considered have been cases of the first class. How far the decided cases establish that extrinsic evidence of the kind here in question is admissible to establish the deceased's intention or preference, even in the first class of case to which I have referred, is not clear; it may be that the cases are cases of the drawing of inferences from the terms of the will itself and from evidence otherwise properly admissible in the interpretation of it. Re Mann is sometimes cited as warranting the use of extrinsic evidence, but the evidence which was relied upon in that case concerning the deceased's interests in charitable activities of a particular locality was relevant to determine whether, as a matter of construction, a gift to be applied "for the benefit of the Mann Institute" was a gift for the benefit of merely of a particular building of that name, or for the activities which the deceased had fostered, centred upon that building. The decision of Sir Edward Sugden in Attorney-General v. Madden is sometimes cited as authority for referring, for present purposes, to the intention of the deceased as set forth in an unexecuted codicil. In that case, the deceased had left a gift for charitable purposes upon trusts which were to be specified in a codicil, but the codicil, though executed, had never been attested. The Court, in a short judgment, directed a scheme to be prepared and that regard should be had to the directions in the unattested codicil. For this purpose, reliance was placed upon Hitch v. Leworthy, in which it was held that a trustee, in exercising a discretion to divide among a specified class, could have regard to the wishes of the settlor as set forth in an invalid codicil. This decision does not, in my opinion, warrant reference generally to what were the wishes and preferences of the deceased in such a case as the present… (Emphasis added)
Finally, his Honour said at 225:
It may be accepted, in my opinion, that, in a case of the third class, it is permissible to have regard to the deceased's intention or inclination as to charitable matters and matters touching them as appearing from other dispositions in the will. Thus, if the deceased has sought to achieve her charitable purposes by the foundation of a Church to further the study of the Bible, and, if it should appear that there were two such Churches, one following the Anglican and the other a non-comformist persuasion, it would be, in my opinion, permissible to ascertain from other provisions of the will whether the deceased leaned to one or the other persuasion. However, if there be no such intention or inclination evident from the will, I do not think that it is legitimate that the choice be made by reference to statements made de hors the will of the kind here in question.
Phillips v Roberts is therefore inconclusive concerning the nature of the evidence that the Court or the Attorney General should take into account in deciding upon the appropriate cy-près scheme where that evidence is not contained in the will itself.
While Hutley JA took a liberal view, and Samuels JA found it unnecessary to decide the question, the approach adopted by Mahoney JA was significantly narrower.
Mahoney JA preferred the view that it was necessary to have regard to the "manner chosen" by the deceased for the implementation of his or her charitable intention, "rather than to the intention of the deceased". If that is the correct approach, then it would be necessary to focus on the "manner" in which the deceased had sought to achieve his or her charitable intention in the will, rather than the wider "intention" of the deceased.
However, Mahoney JA did allow that the cases may permit "the drawing of inferences from the terms of the will itself and from evidence otherwise properly admissible in the interpretation of it". Thus, Mahoney JA may have permitted reliance upon some extrinsic evidence, where that evidence was admissible in order to construe the will. On that principle, evidence referred to in the principal judgment that Lindsay J took into account in construing the will for the purpose of determining whether it exhibited a general charitable intention on the part of the deceased would also be taken into account in formulating the appropriate cy-près scheme.
At the end of the part of his judgment extracted above, Mahoney JA explicitly rejected the legitimacy of evidence "of the kind here in question", which was a statement by an acquaintance of the deceased of that person's belief as to what the deceased would have preferred as a cy-près scheme if the gift intended by the deceased failed.
As stated at J [105] (extracted above), in Lovett v Permanent Trustee Co Ltd (unreported, NSW Court of Appeal, 24 March 1987), Priestley JA (with whom Street CJ and McHugh JA agreed) stated by reference to Phillips v Roberts that: "… Although the settling and approval of cy-près schemes has never been subject to a technical approach, the court's prime responsibility is to give effect as closely as possible to what the founder of the trust wanted…"
I take this statement to be supportive of the view that the objective of the Court is weighted towards giving effect to the intention of the deceased, rather than to try to mimic as close as possible the manner in which the deceased attempted to implement that intention in the deceased's will.
That appears to be the conclusion reached by Lindsay J at J [104] (also extracted above). I respectfully agree with his Honour.
Provided the issue of what evidence is admissible to assist the Court to determine the intention of the deceased is appropriately resolved, in my view the preferred course should be for the Court to implement that intention as closely as may be possible in the terms of the cy-près scheme that is chosen, and it would not be desirable for the Court to limit its objective to simply matching as closely as possible the objective components of the manner in which the deceased attempted to implement the deceased's charitable intention.
The question of what evidence is admissible to assist the Court to determine the real intention of the deceased is currently unsettled, at least in the sense that the authorities binding upon this Court do not comprehensively describe the types of evidence that are admissible.
Given the nature of the present application, and that the Attorney General has not yet had an opportunity to make relevant submissions, it would be premature for the Court to express any final view on the question of what types of evidence are admissible for the purpose of determining the deceased's intention. However, as I propose to follow a relatively summary approach in dealing with the present dispute, it will be appropriate for me to make a number of observations on this issue.
Some guidance may be found in the judgment of the Court of Appeal in Lovett's case. An issue arose at the hearing of the appeal concerning whether the cy-près scheme that was proposed adequately preserved the settlor's intention of keeping the capital at all times intact. The relevant deed created two trusts. The first trust that was created was valid. The second trust failed. The deed provided that the first £100 of income was to be applied for the benefit of the first trust, before any excess income was to be applied for the benefit of the failed trust. The Court of Appeal apparently took the view that the settlor would have intended that none of the settled capital would be applied directly to the second trust, if that would jeopardise the capacity of the capital applied to the first trust to earn the income of £100 as to which it had priority. Priestley JA said (at 12 of his published judgment):
… The court thought some help might be had in assessing this situation if the actual trust income for the first and immediately following years of the trust's existence could be obtained, because it might reasonably be thought the settlor would have a close idea of what at least the first year's income would be when he executed the indenture. If that figure was close to £100 then confirmation would be provided of the primacy of the clause 1 trust which the indenture itself suggests. The court was later supplied with figures by the trustee concerning the early years of the trust, but because some original records were unavailable, a certain amount of re-construction had been necessary and the picture was incomplete. The figures were in any event inconclusive and I do not think any help could be had from them without a good deal more material being obtained, which, I suspect, would still give only equivocal assistance…
Even though the course that the Court of Appeal took did not in the event assist the Court in deciding which of the two competing schemes was more in accord with the settlor's intention, it is clear that the Court accepted that, on the basis that when the deed was entered into the settlor should have had a reasonable ability to forecast the income earning capacity of the capital of the trust, and how that would affect the distribution of the income between the two trusts that he created, the Court could take the inferred understanding of the settlor into account in determining whether a cy-près scheme in relation to the failed second trust that involved a gift of capital rather than income was consistent with the real intention of the settlor.
That, I would respectfully conclude, is a relatively liberal approach to determining whether a particular scheme would accord with the true intention of the creator of the failed trust. The Court of Appeal was prepared to receive evidence of how the investments of the trusts had actually fared, in order, so to speak, to reverse engineer a conclusion as to what the settlor would have intended concerning the operation of a cy-près scheme for his failed second trust.
In my view the real objective in creating a cy-près scheme, or in choosing between alternative schemes that are on offer, is to choose a scheme that as closely as possible reflects the true subjective intention of the person who attempted to create the failed trust.
Obviously, the starting point will be the terms of the will or other instrument by which the failed charitable trust was sought to be created.
Any evidence that the Court is required to take into account for the purpose of the proper construction of the will or other instrument should be admissible on this issue. I respectfully adopt the statement of the principles governing construction of wills set out by Lindsay J at J [64].
There is a question of whether it is permissible for the Court to act upon evidence of statements made by the deceased or other conduct of the deceased during his or her lifetime, for the purpose of inferring the deceased's preference concerning a cy-près scheme (as an implementation of the deceased's charitable intention).
The question of whether the Court should act upon evidence given by acquaintances of the deceased concerning what the deceased would or would not have intended, or which of alternative schemes the deceased would have preferred, is perhaps more problematic.
These are not questions that should be addressed on an application such as the present one.
I now turn to the explanation given by the Solicitor General in the order made on 24 October 2017 for selecting the proposal made by the YWCA. It will be necessary to set out at some length the terms of the order as published in the NSW Government Gazette:
… There are two applications to the Attorney General with proposals for the use of the trust funds of $609,127.66. These are:
Oprah Winfrey Leadership Academy Foundation (OWLAF) scheme
OWLAF is a not-for-profit organisation incorporated in Illinois United States. The Oprah Winfrey Leadership Academy was founded by Oprah Winfrey in South Africa to provide an independent residential boarding secondary school for disadvantaged girls. The proposed scheme would involve the Trustee, a NSW based solicitor, holding and administering, in perpetuity, the trust funds of the Polykarpou Trust for the Oprah Winfrey Leadership Academy ('the Polykarpou Trust'). Income and capital of the trust would be applied at the discretion of the trustee solely in the furtherance of the Polykarpou Trust's objects, whose core purposes are:
a) to assist and support the charitable purposes and activities of the OWLAF solely in relation to women and children who are in need or disadvantaged;
b) [Omitted]
c] to assist disadvantaged female students graduating from the Oprah Winfrey Leadership Academy for Girls - South Africa or with scholarships for such disadvantaged female students to attend college in South Africa or the United States; and
d) to do all such other things that are incidental or conducive to furthering the core purposes of the trust.
The scheme proposed by OWLAF would primarily benefit girls and young women in need or disadvantage in South Africa, as opposed to women and children in need. Further to the extent that funds can be applied for the second limb of the primary charitable purpose - education purposes - this is limited to young females in South Africa.
The Young Women's Christian Association of NSW (YWCA)
The scheme proposed by the YWCA proposes to apply the trust funds to benefit women and children requiring post crisis domestic violence services in South Western Sydney. This includes education related services and assistance on measures to counteract disadvantage. The funds would be held in trust to:
i. Provide wrap around support and care co-ordination in one location that ensure victims receive the physical and mental health services necessary to make a full recovery;
ii. Support women to develop the necessary skills/financial independence to achieve safety and stability and to parent independently;
iii. Ensure women and children have the uniforms and equipment necessary to access education and employment;
iv. Provide support to enable children to fully engage with education and develop their potential;
v. Assist women to undertake training and skills development to enable them to gain/maintain employment, reduce poverty and disadvantage and develop to their full potential;
vi. Provide case management and brokerage to address barriers to service and education access, such as childcare to enable study or transport to access health services;
vii. Assist women and children to connect with their local community through participation in sport, creative and volunteering activities that enrich their lives and help them develop supportive relationships that increase future resilience and provide opportunities for personal development;
viii. Collect feedback and undertake research to tailor the service and develop it through iterative change into a best-practice model.
By virtue of the fact that the OWLAF scheme's main focus is the provision of assistance and support to disadvantaged students attending the Academy and its graduates, the OWLAF scheme would primarily benefit young women in South Africa. It is therefore arguable that the purpose of the OWLAF scheme is narrower than the primary charitable purpose.
By comparison, the YWCA NSW scheme proposes to benefit women and children requiring services South Western Sydney. In this respect, the YWCA NSW scheme may be viewed as being closer to the primary charitable purpose of benefiting both women and children, than the OWLAF proposal.
This is an appropriate matter in which the Attorney General should approve a cy-près scheme under section 13(1)(a) of the Charitable Trust Act 1993. I therefore hereby Order that the YWCA NSW is to hold the gift in clause 4.2 of the will of the deceased on trust, to apply the capital and income for the purposes of establishing and funding a post-crisis domestic violence Centre in Campbelltown which provides services to women and children as described in the YWCA's application to the Crown Solicitor…
It will not be appropriate to discuss the contents of Mr McNally's opinion, as it remains confidential to Mr Russell.
It is sufficient to say that it contains observations concerning the nature of an appeal pursuant to s 18 of the Charitable Trusts Act. It also considers the reasoning expressed by the Solicitor General in support of his choice of the YWCA proposal, as well as the significance of the deceased's following of Oprah Winfrey.
Now is not the time to deal with the issue of the nature of an appeal from any determination of the Attorney General. It may well be that, on the proper interpretation of the relevant provisions of the Charitable Trusts Act, in the light of the history of the Court's jurisdiction in supervising charitable trusts discussed in the principal judgment, that appeals in this context may not be subject to any special restrictions given the supervisory role of the Court. I would hope that the present dispute does not become weighed down by technical controversy about the nature of the appeal.
As to the issue of whether the YWCA proposal is more aligned to the corporate purpose of the OAN's corporate purpose than the proposals submitted by the Foundation, the observations of Lindsay J in the principal judgment at J [113]-[114] should be borne in mind:
[113] That said, a reference order having been made, the Court will not lightly interfere with the Attorney's performance of the functions of her office, particularly as s 18 of the Charitable Trusts Act provides an avenue of appeal from any determination she may make.
[114] As in other areas of the law in which the Court retains inherent, parens patriae jurisdiction over a subject matter in respect of which a public officer, or tribunal, exercises analogous statutory powers, subject to an appeal to the Court, the Court can be expected to exercise caution in exercising its parens patriae, or administrative law (judicial review), jurisdiction lest it undermine the integrity of the statutory scheme, including the appeal procedure: eg, Re Victoria [2002] NSWSC 647; 29 Fam LR 157 at [37]-[40]; Re Frieda and Geoffrey [2009] NSWSC 133; 40 Fam LR 608. On the other hand, the Court's jurisdiction may be invoked specifically to aid the effective operation of statutory procedures: P v NSW Trustee and Guardian [2015] NSWSC 579 at [112]-[116]; IR v AR [2015] NSWSC 1187 at [116]-[117].
Putting the issue perhaps over-simply, the primary focus of the corporate purpose of the OAN was the support of women and children in need or for educational purposes. The YWCA proposal focused on the needs of both women and children, but less directly on education. The Foundation's proposal focused on the educational needs of girls but less directly on women. Both are plainly worthy charities. A moment's reflection shows how quickly an argument as to which of the proposals was truly closer to the corporate purpose of the OAN could become arid and pointless. At the end of the day, the best decision possible must be made by the decision-maker, having regard to the size of the trust fund and the potential costs of the process of determination.
As Priestley JA said in Lovett "the settling and approval of cy-près schemes has never been subject to a technical approach".
In my view the more serious issue in the present case, and one which justifies the course that Mr Russell has taken, is the significance of the deceased's admiration of Oprah Winfrey, and the possibility that her real intention was to contribute part of her estate to the charitable activities of Oprah Winfrey.
There is nothing in the order to suggest that the Solicitor General took this issue into account when deciding between the two competing proposals and it is unclear whether he gave any weight to this aspect of the deceased's intentions.
Lindsay J, as stated in J [107(c)], specifically stated, in the context of his Honour's determination of the best means of proceeding that, as an aid to settling a scheme, the Attorney General "already has (in addition to these reasons for judgment) the benefit of enquiries made by the plaintiff of the Oprah Winfrey Charitable Foundation, and submissions made by the plaintiff and the deceased's parents, in spelling out alternative courses of action". That said, it is true that in J [110], Lindsay J stated that in the absence of any application he did not propose to constrain the Attorney General's performance of her public duties by giving any formal directions.
The evidence that Lindsay J referred to in J [107(c)] is not before this Court. I cannot assess its significance, but note that it is not referred to in the Solicitor General's order.
I am satisfied that Mr Russell has taken the course that he has out of a genuine and reasonable desire to ensure that his late friend's true intention is given effect as far as practically possible. For the reasons that I have considered above, Mr Russell has a real point at least as concerns the significance of the deceased's admiration for Oprah Winfrey and her choice of a charity established by that person in Illinois in the USA.
Consequently, I have decided that it will be justifiable for the Court to order that Mr Russell's costs be paid out of the trust fund. However, I propose to monitor the amount of those costs.
I do not think my preparedness to allow Mr Russell's regulated costs out of the trust fund is inconsistent with Lindsay J's order 5, in so far as he ruled that any application for directions would be at the party's risk as to costs. That a party was at such risk would not mean that the Court would necessarily reject an application for costs on proper cause being shown. In the present case, I have concluded that what I will call the Oprah Winfrey issue justifies the course taken by Mr Russell. Mr Russell may, however, remain at some risk if too great an issue is made out of the objective comparison between the two competing proposals and the OAN's corporate purpose.
There appears to be some difference between a view expressed on behalf of the Attorney General that Mr Russell is not entitled to make an application for advice under s 63 of the Trustee Act in a case such as the present, without first obtaining leave to do so under s 6 of the Charitable Trust Act, and Mr Russell's view that leave may not be required for such an application. In the absence of submissions, I will not decide that issue, and it is not necessary for me to do so, as if leave is required, I would grant it to Mr Russell under s 6(1)(b) of the Charitable Trust Act.
I do not propose to advise Mr Russell, as he seeks in prayer 2(a) of his summons, that he would be justified in appealing the order of the Attorney General, if the consequence would then be that Mr Russell would commence new proceedings to appeal from the order. Instead, much as Lindsay J appears to have done in the original proceedings, I will invite Mr Russell to join the Attorney General in these proceedings. I will order that Mr Russell is justified in taking that course, and then in prosecuting an appeal within these proceedings.
The reason I will take that course is that much of the work necessary to be done by Mr Russell in respect of the appeal has already been done. Mr McNally's opinion will be useful for that purpose, as well as the affidavit that Mr Russell has prepared.
Given the size of the trust fund, I will expect Mr Russell and the Attorney General to agree on short minutes of order to appropriately reconstitute these proceedings. The short minutes of order should also provide for the Attorney General to submit a more extensive justification for the Solicitor General's decision, focusing particularly on the issue of the connection between the cy-près scheme and Oprah Winfrey. I will not circumscribe the course that Mr Russell and the Attorney General may agree to, save that I will require that the procedure that is adopted be as economical as possible. The proceedings as reconstituted should not be treated as entirely adversarial proceedings. I will be prepared to deal with as much as possible that is necessary to resolve this dispute in chambers.
If Mr Russell and the Attorney General can agree upon short minutes of order, they can be submitted to the Court through my associate for consideration. Otherwise, my associate will arrange for a directions hearing to be fixed at the convenience of the court and the parties.
[3]
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Decision last updated: 08 May 2018