Plaintiff v Defendant

"To use and employ the same or permit the same to be used or employed for the benefit and advantage of such persons as shall from time to time be members of the clergy of the Church of England in the Diocese of Melbourne in the Colony of Victoria subject to in pursuance of or in accordance with the trusts and powers hereinafter contained."

6 The trustee was given a power of sale and purchase of any other land, but the moneys and any land were to be held upon trust for the benefit and advantage of members of the clergy for the Church of England in the Diocese of Melbourne. The deed provided for the establishment of a Board of Management of the trust estate. In addition to providing for the clergy of the Anglican Church, the Board of Management was empowered to let the premises for certain terms to other persons. The trustee is the Plaintiff Trustee. The Point Lonsdale units are in need of a major refurbishment covering new curtains, floorcoverings, hot water services and airconditioning, and they require painting throughout. The Point Lonsdale units are viable in part due to the fact that the Plaintiff Trustee has a limited power of commercial letting. The Plaintiff Trustee has purchased and furnished Unit 3, 13 - 15 Simpson Street, Point Lonsdale, with a view to it being made subject to the Latham Trust but the trust was unable to fund that purchase. What is proposed is that the Latham Trust property be used in conjunction with the property of two other trusts, and the authorised Plaintiff Trustee would then be able to obtain funds from the other trusts to assist with the purchase of Unit 3 at Point Lonsdale. The occupancy rates for the Point Lonsdale units over the years have been good. In the year 2004, the occupancy rate for the year was 75.53 per cent. This compares with the occupancy rates over the years 1997 - 2003 which range from 67.58 per cent in 1997 to 83.01 per cent in the year 2002. It is clear that the units are sought after by both the clergy and others, and are regularly occupied. The principal object which Mr Latham had in mind was to provide a residential property to clergy at the seaside for their holidays without cost. Indeed the trust authorised the trustee to pay the expenses of the clergy and their family travelling to and from Point Lonsdale.

B. Lucy Rose Trust

7 Ms Lucy Rose transferred to the plaintiff certain land at Cowes on Phillip Island, being land in Certificates of Title Volume 3426 Folio 189 and Volume 3235 Folio 955 on 8 July 1911. By a Deed of Trust executed on 9 May 1911, the Plaintiff Trustee declared that it would hold the pieces of land transferred upon trust, which included a house, to allow the said pieces of land and a dwelling house thereon and personal property,

"to be used and occupied free of charge by such clergymen of the Diocese of Melbourne or of any Diocese in the State of Victoria ... having regard to their financial position and other circumstances be in a special need of a place of resort for recreation or restoration to health."

8 The pieces of land in question were substantial and power was given to the Plaintiff Trustee to sell some parcels of the land, which it has done.

9 On land comprised in both certificates of title was a house which was divided into two self-contained units. The units had been used as rest homes for clergymen of the Anglican Church and as at 1991 were a popular holiday destination. The land is bigger than is necessary for the house and, accordingly, it was proposed in 1989 that three residential units be constructed on the land. Application was made to the Court for an order approving a scheme cy-pres to enable the units to be built. By order dated 19 November 1991 Beach J approved the scheme for the erection of three residential units using money from another trust fund. It will be necessary to trace the circumstances leading up to the orders of Justice Beach later.

C. Loveridge Estate

10 Mrs Bertha Loveridge executed her will on 9 February 1938. She subsequently executed three codicils which did not relevantly affect her will with respect to the trust she established. She devised land and a residence situated at Anglesea known as "Anglecrest" upon trust to permit the Church of England Trust Corporation for the diocese of Melbourne,

"to use, occupy and enjoy the same as a rest home for the use and benefit of clergymen of the Church of England."

She also left a sum of [sterling]5,000 to be invested, the income from which would be used for insurance, maintenance and repair of Anglecrest. Mrs Loveridge died on 2 August 1941. On 15 August 1944 O'Bryan J ordered that the trustee be at liberty to sell Anglecrest and authorised the trustee to use the proceeds in the purchase of one or more parcels of real estate,

"to be used, occupied and enjoyed as a rest home or rest homes for the use and benefit of clergymen of the Church of England."

11 On 22 November 1982 Starke J made an order that the trustee of the estate of Mrs Loveridge be authorised to sell a property known as Loveridge House, which had been purchased after the sale of Anglecrest, and directed that the plaintiff bring into Chambers a scheme for the application cy-pres of the proceeds of the sale of the property and a sum representing the bequest of [sterling]5,000 contained in the will. Despite the provisions of Starke J's order, and although Loveridge House was sold, no scheme for the application cy-pres of the proceeds of sale was brought before the Court.

Application before the Hon. Justice Beach

12 On 8 November 1991 a summons was filed in the proceeding which had commenced before Starke J in 1982. In addition, an originating motion was filed in a new proceeding between the same parties, namely the present Plaintiff Trustee and the then trustee of the estate of Mrs Loveridge and the Attorney-General of Victoria. The object of the summons in the earlier proceeding was to regularise it. The scheme which should have been placed before the Court pursuant to the order of Starke J was placed before Beach J and approved by him. This approved scheme was the same as the scheme approved in the new proceeding. For ease of reference, I refer to the terms of the scheme approved in the later proceeding. The trust property to be applied cy-pres comprised three separate categories. First, the moneys held on trust by the trustee of Mrs Loveridge's estate, being moneys invested including moneys derived from the sale of Loveridge House. The second category was the balance of land at Cowes transferred by Lucy Rose, being the subject of the trust declared by the present Plaintiff Trustee dated 9 May 1911. The third category was moneys held in trust by the Plaintiff Trustee resulting from the sale of pieces of land the subject of the Lucy Rose trust. The scheme was approved, permitting the Plaintiff Trustee to apply the Loveridge Trust moneys and such part of the Lucy Rose trust moneys as was required, for the purpose of constructing on the trust land, being the Lucy Rose land at Cowes, three residential units. The trust land was to be known as the "Lucy Rose Estate" and the house then on it was to be known as "the Lucy Rose House". The units were to be known as the "Loveridge Cottages". The scheme went on to state that upon completion of the Loveridge Cottages, the Lucy Rose land, the Loveridge Cottages and the Lucy Rose House, were to be held on trust,

"to be used and occupied by clergy of the Anglican Church of Australia for the purposes of holiday, rest, recreation or restoration of health, accommodation and by their families."

That obligation was subject to paragraph 13 of the scheme, which authorised the Plaintiff Trustee at such time as it considered appropriate to demolish Lucy Rose House and to construct a further building or buildings to,

"provide accommodation facilities on the trust land for the use and benefit of clergy of the Anglican Church of Australia."

13 The scheme empowered the Plaintiff Trustee to determine who was to use and occupy the house and cottages, the periods of such use and conditions applicable thereto. The scheme also provided that any moneys left over in the Loveridge and Lucy Rose trusts were to be invested and the income was to be applied towards the cost of maintenance and outgoings relating to the land and the various residential buildings. Importantly, the Plaintiff Trust was authorised to require the occupants to pay some money towards the cost of maintenance and outgoings relating to the properties. It was noted that the object of requiring payment was to ensure that there was sufficient income to meet outgoings. The Plaintiff Trustee was also authorised to permit one unit of the Loveridge Cottages to be occupied by a person free from any monetary contribution on the basis that the member perform the duty of caretaker.

14 The effect of the orders made by Beach J approving the cy-pres scheme was that the trust of the late Mrs Loveridge was conjoined with the trust of Ms Lucy Rose. The Court had jurisdiction to do this pursuant to s.2(1)(c) of the Charities Act 1978 ("the Act"). However, it is clear that after the amalgamation the same trust purposes applied, namely that the land and the residential units were to be used and occupied by clergy of the Anglican Church of Australia for the purposes of holiday, rest, recreation and restoration of health.

15 In relation to the original purposes of the charitable gift, the Court in the present proceeding is, as a result of the cy-pres scheme approved by Beach J on 19 November 1991, bound to consider the purposes of the trusts. See s.2(3) of the Act.

16 This now brings me to the present application.

Present proceeding

17 The material placed before the Court in support of the present proceeding was confusing and to some extent inadequate. I have been able to determine the history of the various trust estates from exhibits supplied and the documents that the Court requested after the hearing on 23 September 2005. What is now proposed brings together the three estates of Latham, Lucy Rose and Mrs Loveridge, although the latter two have been conjoined as a result of the orders of Beach J.

18 The Plaintiff Trustee seeks a declaration that the trusts are for charitable purposes. The three trusts are the Latham, Rose and Loveridge trusts and there is no doubt in my opinion that each trust is for charitable purposes. The Latham trust now comprises three units at Point Lonsdale, the Rose trust comprises the Cowes land and Lucy Rose House situated therein, and the Loveridge trust comprises the three units built at Cowes and any funds in each trust.

19 The Plaintiff Trustee seeks an order approving a scheme cy-pres whereby the Latham estate be conjoined to the already conjoined Lucy Rose and Loveridge trusts. The Plaintiff Trustee relies upon s.2(1)(a)(ii), s.2(1)(c) and s.2(1)(e)(iii) of the Act to achieve the changes in the charitable purposes. The relevant dates for the purposes of the present proceeding are, in respect of the Latham trust, 1884, and for the other two trusts, 1991.

Cy-pres doctrine

20 The cy-pres doctrine is a creature of equity and has been part of the law for many centuries. It is a doctrine which did and does apply to charities. If the person setting up the charitable gift expressed a general charitable intention that could not be carried out as expressed, the Court had jurisdiction to direct by way of a scheme that the intention be carried out in a way which resembled as nearly as possible the way originally intended. Failure of the charitable intention could occur at the date of establishment of the trust, or at a later date. The doctrine only applied if there was a general charitable intention expressed by the donor. It could not apply if there was a particular charitable intention which had failed. So, for example, if a donor chose a charity which never existed at all it may be easy to infer a general charitable intent. See re Harwood.[1] On the other hand if a testator left a gift to a particular charity which had ceased to exist at the date of the testator's will the money could not be administered cy-pres. See re Ovey.[2] Sometimes the circumstances under which the trust was to operate had changed over the years so that it was difficult or impossible to carry out the trust as originally intended. In some cases the Court had jurisdiction to amend the trust and apply the trust property cy-pres, that is, for some other charitable purpose.

21 The law required two matters to be established before it could alter the original purpose and allow the property or part of it to be applied cy-pres. First, that the charitable trust had become impracticable or impossible to perform. Second, that the donor had manifested a general charitable intention. Early law required strict compliance. The two factors had to be established. However, as the years passed the issue of impossibility became less demanding and the element of proof was applied in a less strict way. In re Weir Hospital[3] the Court of Appeal held that the doctrine did not apply unless it was shown that the particular charitable purpose was impossible to carry out in accordance with the donor's intention. At page 131 Cozens-Hardy MR observed that in general the cy-pres doctrine applied to old charities -

"Where by reason of lapse of time and change of circumstances the original purpose cannot be carried into effect in the exact way directed by the testator."

22 His Lordship went on to observe that where the doctrine was to be applied it was open to a Court to consider the comparative advantages of various charitable objects but then observed -

"There can be no question of cy-pres until it is clearly established that the directions of the testator cannot be carried into effect."

23 In Re Dominion Students' Trust[4] Evershed J after referring to Re Weir Hospital went on to observe -

"It is true, also, that the word "impossible" should be given a wide significance; (authorities referred to). It is not necessary to go to the lengths of saying that the original scheme is absolutely impracticable."

24 His Lordship observed that his first question was to consider "the primary intention of the charity."

25 In 1960 the English Parliament passed the Charities Act, which qualified the condition being the first matter that had to be established, namely, impossibility or impractically. But the other matters, namely, a charitable intention, had to be proven.[5] The Charities Act 1960 obviated the necessity of proving that there was impossibility within the meaning of the old authorities. Instead the doctrine may apply if the facts can be brought under one of a number of heads set out in s.13(1) of the Act. In 1978 the Victorian Parliament passed the Charities Act and s.2 of that Act is the same as s.13 of the English Act. In Varsani v Jesani[6] Morritt L J referred to the new jurisdiction as follows -

"Now the jurisdiction to make a cy-pres scheme depends on whether the case falls within one or other of the paragraphs of s.13(1)."

26 In the present case counsel for the Plaintiff Trustee has relied upon s.2 sub-section 1(a)(ii), sub-section 1(c) and sub-section 1(e)(iii).

27 It is necessary to set out the provisions relied upon. They are -

"2. Occasions for applying property cy pres

1. Subject to sub-section (2) the circumstances in which the original purpose of a charitable gift can be altered to allow the property given or part of it to be applied cy pres shall be as follows -

(a) where the original purposes, in whole or in part -

(ii) cannot be carried out, or not according to the directions given and to the spirit of the gift; or

(c) where the property available by virtue of a gift and other property applicable for similar purposes can be more effectively used in conjunction and to that end can suitably, regard being had to the spirit of the gift, be made applicable to common purposes; or

(e) where the original purposes, in whole or in part, have, since they were laid down -

(ii) ... or

(iii) ceased in any way to provide a suitable and effective method of using the property available by virtue of the gift, regard being had to the spirit of the gift."

(Emphases added).

28 It is noted that sub-section (2), to which sub-section (1) is subject, provided that the conditions which must be satisfied for the doctrine to apply shall not be affected by sub-section 1 "except in so far as those conditions require a failure of the original purposes". Hence it is still necessary to prove a charitable intention.

29 It is noted that the three paragraphs relied upon all contain the phrase "to the spirit of the gift".

30 In In re Lepton's Charity[7] Sir John Pennyquick V-C considered the effect of the change to the law. He said at p 284 -

"It is clear that this section in part re-states the principles applied under the existing law, but also extends those principles. The section should be read as a whole."

31 His Lordship referring to the expression "spirit of the gift" said -

"It must, I think, be equivalent in meaning to the basic intention underlying the gift, that intention being ascertained from the terms of the relevant instrument read in the light of admissible evidence."[8]

32 In Peggs v Lamb[9], Morritt J referred to what Sir John Pennyquick V-C said and observed that in the absence of any founding document the spirit must be inferred from all the circumstances. He referred to the original basic intention or spirit of the gift.

33 It is clear from s.2(3) that reference to the original purpose of the gift is to be construed where a scheme has already in some way altered or regulated the original trust, to the purposes for which the property was at the time of the application being used. Hence, the starting point with respect to the Loveridge and Lucy Rose trusts must be orders made by Beach J on 19 November 1991.

34 It is now necessary to consider the evidence and what is proposed with respect to the two areas of land namely at Cowes and at Point Lonsdale. As a result of the orders made by Beach J, three residential units were erected on the Cowes property. The Plaintiff Trustee was authorised to demolish Lucy Rose House and to construct any further building or buildings to provide accommodation facilities for "the use and benefit of clergy of the Anglican Church of Australia".

Cowes Land

35 Erected on the Cowes land are Lucy Rose House and the Loveridge cottages. The Loveridge cottages have a street frontage to 28 Broughton Street, Cowes, and the three units are in an adequate condition of repair and maintenance except that a major refurbishment is overdue. They were erected 13 years ago. It is estimated that the cost of performing these works will be in the order of $60,000. Lucy Rose house is situated at 34-36 Stradbroke Avenue, Cowes. It is a timber dwelling and is in an extremely poor state of repair. It has been vandalised, is unfit for human habitation, is infested by termites and is suitable only for demolition. It will be necessary to obtain a planning certificate to demolish the house. According to a report obtained from a firm of architects in June 2001, the cost to put the property in a habitable condition would be somewhere in the order of $200,000. There is no doubt that the cost would not be any less today. The 2004 occupancy rates for the units at Cowes, being the Loveridge units, are 49.27 per cent. The occupancy rates for the years 1997 to 2003 (inclusive) range from 45.21 to 58.54 per cent. It does suggest that the presence of the run down Lucy Rose House next to the units contributes to the low occupancy rates. It is proposed that the land where the Lucy Rose house is should be sold off. It is situated on Lots 1 and 2 of a plan of subdivision. A valuation report was obtained as at 31 December 2004 and the land is valued at M$2.25. The Registrar of the Anglican Diocese of Melbourne, John Alfred McKenzie, in his affidavit filed in support of the motion, has prepared an estimated cash surplus after the sale of the property and it is his opinion that the proceeds from the sale would be in the order of M$1.641 on the basis of a sale price of M$1.75. The proposed scheme seeks authority for the Plaintiff Trustee to sell Lots 1 and 2 on the plan of subdivision, being the land on which the Lucy Rose House is erected. It is also proposed that the Plaintiff Trustee be given the authority to sell any of the units at Cowes and purchase land in Victoria for the purposes of the trust. Evidence was given that the restriction on the use of the units being for Anglican clergy and their families meant that the Loveridge cottages were not viable. I will return to this question later.

Latham Estate - Point Lonsdale units

36 The three units at 13-15 Simpson Street, Point Lonsdale, are more popular with the clergy and are in fairly good condition. The occupancy rates for the years 2003 - 2004 average between 75 to 80 per cent. One of the reasons for this is because the trustee of the Point Lonsdale units has a limited power of commercial letting. The plaintiff trustee has purchased and furnished unit 3 by contract dated 3 March 2005 for $482,500. It is proposed that the unit would be made subject to the Latham trust but the latter is unable to fund the purchase. It is proposed that the proceeds from the sale of the Lucy Rose land be applied in conjunction with the property being the subject of the Latham trust deed, and that the trust property of both trusts be applied to pay for the unit and provide funds for the maintenance of the units.

The proposed scheme

37 It can be summarised -

• The property in the Lucy Rose trust and the Loveridge trust being the subject of the scheme approved by Beach J on 19 November 1991 is to be held in conjunction with the property held in the Latham trust.

• The Plaintiff Trustee be authorised to sell Lots 1 and 2, on P/S No. 534377W being the Lucy Rose land at Cowes.

• Out of the proceeds of the said sale the Plaintiff Trustee be authorised to pay the purchase price of Unit 3, 13-15 Simpson Street, Point Lonsdale.

• The Plaintiff Trustee is to hold all the residences on trust, that is, the Point Lonsdale and Cowes units are to be occupied, in an order of priority, by ordained members of the Anglican Church and families, holders of lay offices in the Anglican Church and their families, and persons who are in necessitous circumstances, all for the purposes of holiday, rest, recreation and restoration of health, and by other persons being commercial occupants.

• The occupancy fee to be paid by the residents is to be fixed in the discretion of the Plaintiff Trustee but insofar as it relates to clergy, lay officers and persons in necessitous circumstances, the amount be kept at a nominal rate.

• The Plaintiff Trustee be empowered to sell property and purchase land in Victoria and use it for the purposes of the Trust.

• All capital moneys to be invested and the income to be used for maintenance of the residences and payment of expenses of the trust, travelling expenses of the proposed occupants, other than commercial occupants, and the balance to go to the Bishop of Melbourne's Fund of the Anglican Diocese of Melbourne.

38 The proposed scheme seeks two main objects. First, the sale of the Lucy Rose home at Cowes and the use of the funds for the Loveridge and Latham units, including the purchase of a new unit at Point Lonsdale, resulting in the property of the trusts being used in conjunction and second, variation of the trust so that persons other than Anglican clergymen and their family may occupy the units. I interpolate to observe that under the Latham trust the trustee was authorised to let out the units on a commercial basis from time to time but the clergymen were to occupy the units without charge.

39 First, dealing with the question of the sale of the Lucy Rose land and the use of the funds to purchase a unit for the Latham trust and the balance of funds for maintenance of all residences, payment of trust expenses, travelling expenses and balance to the Bishop of Melbourne's Fund. There is no doubt that the blocks of land upon which is erected the Lucy Rose home constitute a very large area which is of considerable value. The Lucy Rose home is in a state of disrepair and there are insufficient funds to repair the home and make it habitable. The only practical solution is to demolish the home. In my opinion, s.2(1) of the Charities Act 1978 gives the Court jurisdiction to alter the provisions concerning the trust property by reason of paragraph (a)(ii), (c) and (e)(iii). The original purpose cannot be carried out because there are insufficient funds to restore the building. Secondly, the original purposes in part cease to provide a suitable and effective method of using the property, regard being had to the spirit of the gift, and by reason of paragraph (c) the property can be used for similar purposes effectively in conjunction with other property. In my opinion the doctrine of cy-pres as stated in s.2 enables the property to be sold, and the proceeds to be used to purchase the unit at Point Lonsdale and to carry out maintenance, repairs and the like concerning the Loveridge units and the Latham units. I am satisfied that the properties in the conjoined Lucy Rose and Loveridge Trusts can be more effectively used in conjunction with the property in the Latham Trust pursuant to s.2(1)(c) of the Act.

40 Secondly, paragraph 2(a) of the originating motion requested answers to three questions. Paraphrasing the questions, they are: whether given the events that have occurred the original purposes of the trusts of the Cowes land are no longer capable of being carried out in accordance with the directions given; have the original purposes of the trusts of that land ceased to provide a suitable and effective method of using the land; and can the Cowes land and the land and money subject to the trusts at Point Lonsdale be more effectively used in conjunction? I answer those questions, yes.

41 Question 2(b) provides:

"(b) If yes to (a)(i), or (ii), or (iii), ought the land the subject of the trusts be applied cy-pres?"

42 In my opinion the answer to that question is also yes.

43 The third question is asked on the assumption that the answer to 2(b) is yes, and the question is expressed as follows:

"Ought the land be applied in accordance with a proposed cy-pres scheme annexed to this originating motion?"

44 I have carefully read the proposed scheme and there are some proposals which in my view have to be carefully considered. At the outset in my view the proposals contained in paragraphs 2, 3, 4, 7, 9 and 10 are acceptable and in accordance with the cy-pres doctrine qualified as it is by s.2 of the Act. However, paragraphs 5, 6 and 8 raise a number of questions. The concern comes about because each of the three original trusts provided land and buildings for use and occupation by clergymen of the Anglican Church and their families. The Latham Trust provided that the occupation should be at no cost and clearly it was envisaged by the settlor that the commercial letting of the residential buildings would ensure that all expenses were covered. But the important point is that the objects of the charitable purpose were Anglican clergymen and their families. What each of the settlors contemplated was that the recipients of the benefit of their charity were members of the Anglican clergy and their families, and that in my view was the spirit of the gift provided by Edward Latham, Miss Lucy Rose and Mrs Loveridge. The first question is, what were the original purposes of the charitable gifts? Once the original purposes are ascertained, the question then arises whether s.2(1)(a)(ii) and/or 2(1)(e)(iii) apply. In my opinion there is no doubt that the original purposes of each of the charitable gifts was to provide holiday accommodation at Point Lonsdale or Cowes to Anglican clergymen or their family without cost or at a nominal cost. The questions then arise whether the original purposes in whole or in part cannot be carried out according to the directions given and to the spirit of the gift and/or have ceased in some way to provide a suitable and effective method of using the property available, regard again being had to the spirit of the gift. It is appropriate to consider paragraph 5 of the proposed scheme to answer these questions.

45 Paragraph 5 of the proposed scheme states -

"5. The Trustee is to hold the residences on trust to be occupied in absolute order of priority by the following classes of persons in the following order of priority.

(a) ordained members of the Anglican Church of Australia and their families;

(b) holders of lay office in the Anglican Church of Australia and their families;

(c) persons who are in necessitous circumstances,

in all the above cases for the purposes of holiday, rest, recreation and restoration of health,

46 Paragraph 6 deals with the occupancy fees and persons described in paragraph 5(a),(b) and (c) above are to pay a nominal occupancy fee. In addition, by reason of paragraph 8(c), income from the conjoined trust is to defray the travelling and other expenses of the persons just mentioned.

47 The benefit of the trustee being able to lease the premises to commercial occupants is obvious and has been a feature of the Latham trust. This has enabled the Latham units to be occupied on a fairly high basis, and basically paying their own way. This power was not given to the conjoined Lucy Rose and Loveridge trusts. In my view, the proposed scheme whereby commercial occupants can occupy the units at Cowes is commendable and necessary to defray expenses. By reason of the scheme approved by Beach J it was open to the Plaintiff Trustee to require clergymen occupants to pay some expenses in respect to the occupation. It is proposed according to paragraph 6(a) that the occupancy fees to be paid by the occupants and "the mix of such occupants" are to be fixed in the discretion of the trustee. However, there is a concern with respect to paragraph 6(d).

"d. The mix of occupants is to be determined so that so far as practicable the income from commercial occupants covers any shortfall in the outgoings of the trust that would otherwise result from the charging of nominal occupation fees."

48 My concern is that the priority given by paragraph 5 to members of the Anglican Church, both ordained and holders of lay office, could be seriously qualified especially during school holidays. There would be a temptation to the Plaintiff Trustee to lease the premises out to commercial tenants even though clergy are to be given priority during these periods. In my view it is necessary to make that sub-paragraph subject to paragraph 5(a) and (b).

49 However, the first question that has to be considered is whether or not cy-pres doctrine as authorised by s.2 can be used in the circumstances to effect a change to the rights of those who may occupy. It is important at this stage to differentiate between those who will reside at any of the residential units paying a nominal occupation fee, and commercial occupants.

50 The basis for the proposed changes to those who may occupy, is dealt with by Mr McKenzie in his affidavit. He observes that the purposes of the trust are the needs for rest and recreation of Anglican clergy. He observes that the needs for rest and recreation are no longer confined to ordained church leaders and that in this day and age many of the functions of the Church are now performed by lay members of the Church licensed by a Bishop of a Diocese. I accept his evidence that there are many lay members of the Anglican Church licensed to carry out many of the functions of an ordained member of the clergy. Times have changed. When the trusts were established the functions performed by lay members were few.

51 In my opinion, s.2(1)(e)(iii) authorises the Court to permit the property the subject of the trust to be used by lay members of the Anglican Church licensed by a Bishop of the Diocese. I say that because of the occupancy rates, especially at Cowes, and taking into account the priority expressed in paragraph 5. The addition of lay members is in accordance with the spirit of each gift and reflects the changes in the persons who carry out the functions of the Anglican Church. Accordingly, in my view, paragraphs 5(a) and (b) are appropriate. However, the proposal in paragraph 5(c) raises a difficult problem. As stated in the affidavit in support, persons who are in necessitous circumstances may be persons who are non-Anglican. It is contemplated that these persons would be permitted to occupy a property at a nominal rate. Mr McKenzie states that the proposed inclusion "reflects the shift during the lives of the trusts in the fundamental approach of the Anglican Church of Australia to its ministry". It is noted that the ministry of the Anglican Church concerning poverty has changed so that the Church now is concerned to provide for the benefit of Anglicans and non-Anglicans alike without discrimination on the basis of the faith of the recipient. Mr McKenzie deposes -

"This I believe reflects a similar shift in the delivery of ministry by a number of other Christian denominations."

52 The Latham Trust was set up in 1884, the Lucy Rose Trust was set up in 1911 and the Loveridge Trust was set up in 1944. Each trust had a common purpose, namely, that the properties in question were to be used and occupied either free of charge or at a nominal sum, by such clergymen of any Diocese in the State of Victoria who, having regard to their financial position and other circumstances, were in special need of a place of resort for recreation or restoration to health. The cy-pres schemes approved by Beach J in November 1991 also expressly provided that the Loveridge Cottages and the Lucy Rose House were to be used and occupied "by clergy of the Anglican Church of Australia for the purposes of holiday, rest, recreation and restoration of health accommodation and by their families." They were the express purposes of each trust and gave effect to the spirit of the gift of each settlor and donor. In my view, the original purposes, whether in whole or in part, and as at 1991 with respect to the conjoined trusts, can be carried out and in accordance with the directions given and in the spirit of the gift.[10] Further, the original purposes, again in whole or in part, have not ceased in any way to provide a suitable and effective method of using the property, regard being had to the spirit of the gift.[11] If necessitous persons were permitted to occupy at a nominal payment, and were given assistance in other ways, then that would throw a greater burden on the whole trust fund. I do not believe that the grounds upon which one may exercise jurisdiction pursuant to s.2(1)(a)(ii) or (e)(iii) have been demonstrated in respect to necessitous persons occupying the premises at a nominal payment. The fact is that the circumstances that have prevailed since 1884 through 1911 to 1991 have not changed to such an extent to in any way cut across the original purposes which were to benefit Anglican clergy. In my view, s.2 does not enable this Court to approve the scheme to enable persons other than Anglican clergy or lay members of the Anglican Church licensed by a Bishop of a Diocese to occupy the premises at a nominal payment.

53 The Court is bound by s.2(1)(a)(ii) and (e)(iii) of the Act to have regard to the spirit of the gift. The Court must give effect to it. What the Court is concerned with is the basic intention underlying the gift. As Morrit LJ said in Varsani v Jesani:[12]

"The Court is enjoined by s.13(1)(e)(iii) of the Charities Act 1993 [Victorian provision 2(1)(e)(iii) to have regard to the spirit of the gift. In my view it does not matter whether the origin of that concept is to be found in ... . Either way the concept is clear enough, namely, the basic intention underlying the gift or the substance of the gift rather than the formal words used to express it or conditions imposed to effect it.

It is noteworthy that the phrase is used in s.13(1) only in contexts which require the Court to make a value judgment. Thus it does not appear in paragraphs (a)(i), (b), (e)(i) or (ii). Moreover when it is used, in each case except one it appears in the context of suitability. The exception, paragraph (a)(ii), whilst not actually using the word 'suitable' requires a similar value judgment. The Court is not bound to follow the spirit of the gift but it must pay regard to it when making the value judgments required by some of the provisions of s.13(1)."

(Emphasis added).

54 In my opinion, there is no basis for applying s.2 to enable persons in necessitous circumstances to be the objects of the trust. I accept the change in the attitude of the Anglican Church to poverty and that the change is not confined to Anglicans, but nevertheless in my opinion s.2 does not enable the Court to approve a cy-pres scheme whereby the property is used by persons other than Anglicans at a nominal rate. Each of the settlors and donors expressed a general charitable intention to provide property for the use of Anglican clergymen at a nominal occupation fee. That purpose today is just as relevant as it was when each trust was set up. Clergymen are no better off financially today than they were back at the relevant dates. They should have the property available when they want it at a nominal rate. Whilst I note that the proposed scheme involves priority being given to Anglican clergy, I am not persuaded that s.2 of the Act enables the Court to allow other persons to occupy at a nominal rate.

55 Finally, it is proposed that any surplus income after paying for maintenance of the residences, payment of expenses of administration of the trust and defraying of travelling expenses and the like, is to be used in the Bishop of Melbourne's Fund of the Anglican Diocese of Melbourne. According to Mr McKenzie the fund is to be administered in accordance with s.5 of the Church Funds Act 1878. Section 5 permits the income to be used for the augmentation of the stipends of clergymen and others and the purchase of churches, schools and the like. In my opinion, this would not be permitted giving effect to s.2 of the Act. The surplus funds arising from the sale of the Lucy Rose land, after determining a sum of capital to be retained for expenses, maintenance and repairs, should be used to purchase other residential property to be used for the purposes of the trust. As presently advised, the proposal is not authorised by s.2 of the Act.

56 It follows that the proposed scheme put forward and attached to the originating motion cannot be approved in its present form. Since the hearing, the Court has been provided with further information. I informed counsel at the hearing that I would give counsel the opportunity to further address argument to the Court when all the material was before the Court. I am prepared to give counsel the opportunity to make further submissions in the light of the reasons, and further the Court would be prepared to consider another scheme consistent with these reasons. In summary, the Court is not prepared to apply cy-pres the land and money held under the scheme approved by Beach J on 19 November 1991 and the land and money held under the Edward Latham declaration of trust as proposed because the Court is not prepared as presently advised to approve the proposed scheme which includes paragraph 5(c), paragraph 6(a), (b) and (d), in their present form, paragraph 8(c) in its present form and (d).

57 I propose that counsel and the solicitor for the Attorney-General should be given the opportunity to further address the Court on the issues raised in my reasons and my provisional views.

[1] [1936] Ch 285.

[2] (1885) 29 Ch D 560.

[3] [1910] 2 Ch 124.

[4] [1947] Ch 183.

[5] See s.13(2).

[6] [1999] Ch 219, at p233.

[7] [1972] Ch 276.

[8] (See p 285).

[9] [1994] Ch 172 at 197.

[10] See 2(1)(a)(ii).

[11] See s.2(1)(e)(iii).

[12] supra at p.233.