Plaintiff v Defendant

2 The Salvation Army's activities in Victoria are separated into two distinct categories, each governed by separate trusts.

3 The first trust, referred to as the 'General Trust', is a trust established to further the general religious activities of The Salvation Army. The General Trust's activities are governed by the terms of two Deed Polls:

(a) the first dated 7 August 1878 called the Deed of Constitution (Deed of Constitution)[2]; and

(b) the second dated 26 July 1904 (1904 Deed)[3].

4 The second trust, referred to as the 'Social Work Trust' is a trust established to further The Salvation Army's social work, namely the use and application of its trust property for 'the social, moral and temporal welfare and improvement of the poorer and more needy classes of society and of persons who are destitute or vicious or feeble-minded or suffering from injury or sickness or ill health or orphans or other children needing care in orphanages or reformatories'. The Social Work Trust's activities are governed by the terms of a Deed Poll dated 1 June 1920 (1920 Deed)[4].

5 The Plaintiff, The Salvation Army (Victoria) Property Trust (ARBN 143 615 169) (Property Trust), is a corporate entity incorporated in Victoria pursuant to s. 3 of the Salvation Army (Victoria) Property Trust Act 1930 (Vic) (Property Trust Act), and is registered as an Australian Registered Body pursuant to the Corporations Act (Cth)[5].

6 Pursuant to s 7 of the Property Trust Act, title to all of The Salvation Army's assets situated in Victoria, including those assets forming the General Trust's trust property and the Social Work Trust's trust property, vested in the Property Trust subject to the operation of ss 19 and 22 of the Property Trust Act.

7 Section 19 provides that all gifts or dispositions of property to The Salvation Army in Victoria after the commencement of the Property Trust Act shall vest in the Property Trust and s 22 refers to the registration of land by the Registrar of Titles (and Registrar-General). The Properties proposed to be transferred to the Housing Company form part of the trust property of the Social Work Trust.

8 The Property Trust is contemplating entering into certain transactions (Proposed Transactions) involving the voluntary transfer of 34 properties in Victoria (Properties) from itself to the Salvation Army Housing (Victoria) (ACN 133 724 651) (Housing Company) without consideration, other than the forgiveness of the loans referred to in paragraph 44 of the Roberts Affidavit. As noted in that paragraph, the loans are 'approximately $14,600.000'.[6]

9 The Property Trust is the sole member of the Housing Company, a company limited by guarantee.[7]

(a) for judicial advice from the Court as to whether the Property Trust has the power to effect the Proposed Transactions under r 54.02(2)(a)(i) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic); or

(b) If the Court finds that the Property Trust does not have power to effect the Proposed Transactions, for an order conferring upon the Property Trust the power to enter into the Proposed Transactions pursuant to s 63 of the Trustee Act 1958 (Vic) and/or s 7L of the Charities Act 1978 (Vic); and

(c) In either case, for an order approving the Proposed Transactions pursuant to r 54.02(2)(c)(i) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).

11 The Properties at issue in this proceeding are used by the Property Trust for the purpose of the Social Work Trust, namely providing affordable housing to disadvantaged people in Victoria (Housing Projects).

12 The Property Trust is party to various agreements with the Director of Housing pursuant to which the Department of Human Services (Department) contributed funds for the purchase of land and/or construction of buildings on land owned by the Property Trust. Two examples of such agreements are annexed to the affidavit of Malcolm John Roberts sworn on 3 September 2017 (the Second Roberts Affidavit) and marked 'MR9'. The Property Trust is the registered proprietor of the Properties, while (as noted) the Director of Housing has registered mortgages as security for funds contributed by the Department.

13 As mentioned in paragraph 37 of the Roberts Affidavit, the Director of Housing has indicated to the Property Trust that, in line with a new Department policy, he now requires all jointly funded property acquisitions and developments to be undertaken by stand-alone corporate entities, which do not carry out any activities other than the jointly funded Housing Projects (the New Department Policy). Copies of a series of letters[8] concerning this New Department Policy are annexed to the Second Roberts Affidavit as 'MR10'.

14 The Property Trust now seeks to transfer the Properties to the Housing Company, which was incorporated as a consequence of the New Department Policy.

15 As part of the New Department Policy, the Director of Housing has stated the amounts outstanding on the mortgages to the Department will be forgiven and the mortgages discharged. The Properties will be unencumbered in the Housing Company for the purposes of the ongoing joint venture with the Director of Housing. [9]

16 Given ambiguity under the governing trust deed and associated legislation, the trustees of the Property Trust request judicial advice regarding:

(a) whether the Property Trust has power to effect such transactions; and

(b) whether the Property Trust, as trustee, would be acting in accordance with its obligations in making the transfers, without consideration other than the forgiveness of the loans referred to in paragraph 44 of the Affidavit of Malcolm John Roberts sworn on 26 July 2017.

17 As noted above, the Property Trust has entered into various agreements with the Director of Housing pursuant to which the Department of Human Services has contributed funds for the purchase of land by, and/or construction of buildings on land owned by, the Property Trust.

18 The contribution towards the purchase and construction on the Properties was funded by the Social Work Trust (from public donations to The Salvation Army for the purposes of its Social Work).

19 The Properties are used for the purpose of providing affordable housing to those who cannot afford housing in Victoria which meet the objectives of the Social Work Trust and the objectives of the Department pursuant to the Housing Act 1983 as amended by the Housing (Housing Agencies) Act 2004 (Housing Act).

20 It is understood that the Director of Housing has similar 'joint venture' arrangements with other not-for-profit bodies in Victoria and that the Director of Housing has indicated to all joint venture partners, including The Salvation Army, that he now requires all jointly funded property acquisitions and developments to be undertaken by a stand-alone corporate entities, which do not carry out any other activities, apart from the jointly funded Housing Projects. This is referred to above as the 'New Department Policy'.

21 The subsequently incorporated Housing Company is a company limited by guarantee of which the Property Trust is the sole member. The Housing Company has been accepted by the Australian Charities and Not-for-Profits Commission (ACNC) as a public benevolent institution and endorsed as a deductible gift recipient under Subdivision 30-BA of the Income Tax Assessment Act 1997, thereby accessing the same tax exemptions and deductible gift recipient status as the Social Work Trust of The Salvation Army pursuant to which the Property Trust currently holds the Properties. Copies of:

(a) the Registration Details of the Housing Company issued by the ACNC dated 1 June 2016;

(b) an ASIC search of the Housing Company dated 15 August 2017; and

(c) the endorsements of the Housing Company by the Australian Government as detailed on the Australian Business Register as at 15 August 2017

are annexed to the Second Roberts Affidavit as 'MR11'.

22 The constitution of the Housing Company[10] contains a winding up clause (cl 8 and 10.3) providing that, on the winding up of the Housing Company, all property owned by it must be given or transferred to an institution that is a registered agency under the Housing Act as decided by the directors of the Housing Company and approved by the Registrar of Housing Agencies. The structure of the board of directors of the Housing Company differs from that of the Property Trust; the directors of the Housing Company are not limited to the trustees of the Property Trust (who are currently directors of the Property Trust) and may include State Government nominees pursuant to s 131 of the Housing Act.

23 As part of the New Department Policy, the Property Trust has been asked by the Director of Housing to transfer the Properties to the Housing Company on the basis that the Director of Housing will forgive the amounts owed to the Department (and secured by mortgages) concurrently with such transfer so that all Properties will be unencumbered in the Housing Company for the purposes of the ongoing joint venture with the Director of Housing[11]. However, as a consequence of the winding-up clause in the Housing Company's constitution, in the event that the Housing Company is wound up, the Properties may not necessarily be distributed to the Property Trust (or any other entity controlled by The Salvation Army). As such, once the Properties are transferred to the Housing Company it is not certain that they will vest back in The Salvation Army in the event that the Housing Company is wound up.

24 The Salvation Army has given in-principle agreement to this proposal on the basis that it is the only financially viable means of continuing The Salvation Army's affordable housing mission, taking into account the New Department Policy. That is, this proposal is the only financially viable means of continuing to use the Social Work Trust's property in pursuit of its objects, in particular, in pursuit of its object to provide affordable housing to those who cannot afford housing in Victoria.[12]

25 The Salvation Army Trustees further consider that:

(a) the Housing Company, working in concert with the Victorian Government under the New Department Policy, will be better equipped to leverage and develop property for housing purposes; and

(b) if it transfers the Properties to the Housing Company (including the equity developed in the Properties over and above the amount owing under the mortgages) such a transfer is within its mission and powers to continue to be involved in Housing Projects (apart from ongoing tenancy support) for the needy through the only practical means now available by reason of the New Department Policy, through a separate corporate entity, namely the Housing Company[13].

26 Dealings in the Properties are governed by the provisions of the Property Trust Act and the terms of the 1920 Deed.[14]

(a) The Property Trust has the power to grant, transfer, sell and dispose of any real property subject to the provisions of the Property Trust Act. The relevant provisions of the Property Trust Act to which this provision is subject are ss 8, 9, 11, 13 and 21. These sections are addressed in the following sub-paragraphs.

(b) (Power of Trustees) Section 8 provides that the trustees of the Property Trust are entitled to exercise all the powers which were immediately before the commencement of the Property Trust Act exercisable by the General of The Salvation Army and the Director of the Social Work of The Salvation Army respectively as contained in the Deed of Constitution and the 1904 Deed or the 1920 Deed (as the case may be) and the powers conferred on the trustees by the Property Trust Act.

(c) (Distinct Trusts) The trust property of the General Trust and Social Trust are to be kept distinct. Pursuant to s 9(1) of the Property Trust Act:

(i) the General Trust's trust property is held and dealt with in accordance with and subject to the trusts, powers and provisions of the Deed of Constitution and the 1904 Deed; and

(ii) the Social Work Trust's trust property is held and dealt with in accordance with and subject to the trusts, powers and provisions of the 1920 Deed.

(d) (Sale of Property) Pursuant to s 11 of the Property Trust Act, the Property Trust is conferred a power to sell any real property (by public auction or private contract) as the trustees of the Property Trust deem expedient 'at such price and upon such terms as to payment of purchase money and on such conditions and generally in such manner as they think fit.' The trustees may also convey, transfer or assign the property (or part thereof) as directed by the purchaser and the property so conveyed, transferred or assigned shall thereupon be absolutely freed and discharged from the trusts affecting it. Any sales proceeds arising from the sale of the Social Work Trust's trust property are to be devoted to the purposes of the Social Work Trust (see s 13 of the Property Trust Act).

(e) (General's rights vested in the trustees) Pursuant to s 21 of the Property Trust Act, the trustees of the Property Trust may also exercise any rights vesting in William Bramwell Booth just prior to his death (i.e. on 16 June 1929) or in the General of The Salvation Army before commencement of the Property Trust Act (i.e. 14 January 1931) and may exercise these rights in the same manner as William Bramwell Booth or the General could have enforced them if the Property Trust Act had not been passed.

28 Section 3 of the Property Trust Act permits the grant, transfer, mortgage, demise, sale and disposal of the Property Trust's trust property, subject to the provisions of the Property Trust Act. In addition to the impact of ss 8, 9, 13 and 21, which have been addressed above, s 11 confers power on the Property Trust to sell any real property (by public auction or private contract) as the trustees of the Property Trust deem expedient 'at such price and upon such terms as to payment of purchase money and on such conditions and generally in such manner as they think fit'.

29 Any dealings concerning the Properties are also governed by the terms of the 1920 Deed. The 1920 Deed provides that:

(a) the trust property of the Social Work Trust is to be used and applied for the social, moral and temporal welfare and improvement of the poorer and more needy classes of society and of persons who are destitute or vicious or feeble-minded or suffering from injury or sickness or ill health or orphans or other children needing care in orphanages or reformatories in the Commonwealth and for other charitable purposes in or in connection with the Commonwealth as William Bramwell Booth (or other Director of Social Work) thinks fit (see cl 1).

(b) the Director of Social Work has numerous powers, including the power 'to sell exchange mortgage lease or otherwise dispose of deal with or turn to account any of the trust property real or personal...' (see cl 3(d)).

30 The terms of the 1920 Deed expand the trustees' powers in relation to dealings with the Social Work Trust's trust property. In addition to the power to sell real property, cl 3(d) of the 1920 Deed also permits the exchange, mortgage or lease of property and includes a broad catch-all power to 'otherwise dispose of' the real property.

32 First, the Court should find that the Property Trust has the power to transfer the Properties under the Transfer Proposal. The Court, it was submitted, has jurisdiction to make a determination on the interpretation of the 1920 Deed and the Property Trust Act pursuant to r 54.02(2)(a)(i) of the Supreme Court (General Civil Procedure) Rules 2015.

33 Second, it was submitted that the Court should approve the Proposed Transactions under r 54.02(2)(c)(i) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).

34 I accepted both submissions at the hearing on 13 September 2017 and made orders accordingly.[15] I indicated that reasons would follow. These are the reasons.

35 The powers granted by ss 3, 8, 11 and 21 of the Property Trust Act are very broad; the trustees of the Property Trust may sell the Properties and they have an unfettered discretion as to the price and payment terms. In addition to these powers, and most significantly cl 3(d) of the 1920 Deed includes a broad catch-all power to 'otherwise dispose of' real property. This power is also probably available pursuant to and on a proper reading of the sections of the Property Trust Act referred to above.

36 The transfer to the Housing Company by way of gift constitutes (as was submitted) a 'disposal of' the Properties and therefore is clearly supported by cl 3(d) of the 1920 Deed.

37 The phrase 'dispose of' is not defined in the 1920 Trust Deed. As such, the phrase takes its plain, ordinary and popular meaning (unless this would lead to some absurdity, repugnance or inconsistency with the rest of the 1920 Deed).[16] In addition, when interpreting clauses within a deed, every part of the deed ought to be compared with the other, and one entire sense ought to be made of the deed.[17]

38 The phrase 'dispose of' is defined in the Macquarie Dictionary[18] (so far as is relevant) as follows:

to make over or part with (property), as by gift or sale.

39 The Courts have also considered the ordinary meaning of the word 'dispose' and in so doing have made the following observations:

(a) In Re Silk Deceased; Equity Trustees Executors and Agency Co Ltd v Commissioners of Probate Duties [1975] VicRp 24; [1975] VR 229 at 239, Pape J stated that:

The ordinary meaning of the word 'dispose' is, I think, to bestow, make over, hand over, distribute or get rid of, and this seems to be the meaning generally assigned to it in the Oxford English Dictionary, Webster's Dictionary, and Johnston's Dictionary.

(b) In Carter v Carter [1896] 1 Ch 62 at 67, Stirling J stated that:

The words 'dispose' and 'disposition' ... are not technical words, but ordinary English words of wide meaning; and where not limited by context those words are sufficient to extend to all acts by which a new interest (legal or equitable) in the property is effectually created.

40 Based on the dictionary definition and ordinary meaning of 'dispose', it is in my opinion clear that cl 3(d) empowers the trustees of the Property Trust to dispose of the Properties to the Housing Company, including by way of gift. As noted earlier this power is probably supported further by the relevant provisions of the Property Trust Act. My opinion remains unaffected by other clauses of the 1920 Deed[19] and the Deed of Constitution.

41 Pursuant to r 54.02(2)(c)(i) of the Supreme Court (General Civil Procedure) Rules 2015, a proceeding may be brought for an order approving any sale, purchase, compromise or other transaction by a trustee.

42 Rule 54.02 confers on the Court 'very broad powers':

It enables a trustee to seek an order of the Court either to approve a transaction or to direct that an act be done in the execution of the trust. If the trustee enters into a transaction approved by the Court or performs an act in accordance with the Court's direction, he or she is protected from any claim by a beneficiary or creditor arising from that transaction or act.[20]

43 Having regard to the matters set out above, and most importantly the opinion of the Salvation Army Trustees and the forgiveness of the substantial loans, it is in my view entirely appropriate that the Court make an order approving the Proposed Transactions. It should also be noted and is of significance that the Defendant submitted that the Plaintiff does indeed have such power and did not oppose the application.[21]

[1] In this Judgment I have made extensive use of much of the outline of submissions filed by the Plaintiff, for which I am grateful. I have for convenience retained references to the evidence where appropriate.

[2] A copy of the Deed of Constitution is exhibited to the affidavit of Malcolm John Roberts sworn 26 June 2017 (Roberts Affidavit) as 'MR3'.

[3] A copy of the 1904 Deed is exhibited to the Roberts Affidavit as 'MR4'.

[4] A copy of the 1920 Deed is exhibited to the Roberts Affidavit as 'MR5'.

[5] A company search of the Property trust is exhibited to the Roberts Affidavit as 'MR1'.

[6] A schedule of the Properties, the estimated current valuations of the Properties and the current amounts owed to the Department which are secured by registered mortgage over the Properties is exhibited to the Roberts Affidavit as 'MR6'. The value of the properties is between $15,070,000 (low value) and $18,800,000 (high value). The Department or State Government entitlement secured by the registered mortgages comprises 77.7% of the value and the entitlement of the Property Trust comprises 22.3%.

[7] A copy of the Constitution of the Housing Company is exhibited to the Roberts Affidavit as 'MR2'.

[8] Letter from the Registrar of Housing Agencies to Livia Carusi dated 30 August 2007; letter from the Housing Registrar to Major David Eldridge dated 6 May 2008; and letter from the Department of Health and Human Services to Mr Floyd Tidd dated 30 March 2016.

[9] See paragraph 50 of the Roberts Affidavit.

[10] A copy of the Constitution of the Housing Company is attach to the Roberts Affidavit at 'MR2'.

[11] See paragraph 50 of the Roberts Affidavit.

[12] See paragraph 46 of the Roberts Affidavit.

[13] See paragraphs 46 and 47 of the Roberts Affidavit.

[14] Section 8 of the Property Trust Act; see also s 21 of the Property Trust Act. A copy of the 1920 Deed is exhibited to the Roberts Affidavit as 'MR5'.

[15] It follows that it was unnecessary to deal with any amendments to the relevant constituent documents so as to confer power. Had it been necessary I would have made the necessary amendments.

[16] Robertson v French [1803] EngR 639; (1803) 4 East 130 at 135; [1803-13] All ER Rep 350 at 353; [1803] EngR 639; (1803) 102 ER 779 at 781 per Lord Eldon; Hart v Standard Marine Insurance Co Ltd (1889) 22 QBD 499 at 501 per Lord Esher MR; Stockton Coal Co v McIlwraith, McEacharn & Co [1899] NSWLawRp 62; (1899) 16 WN (NSW) 59; 20 LR (NSW) L 292.

[17] Throckmerton v Tracy (1555) 1 Plowd 145 at 161; [1558-1774] All ER Rep 168; (1555) 75 ER 222; Shore v Wilson (1842) 4 StTrNS 1370; (1842) 9 Cl & Fin 355 at 511; 8 ER 450 at 513 per Erskine J; Cholmondeley v Clinton [1820] EngR 550; (1820) 2 Jac & W 1 at 89; [1820] EngR 550; 37 ER 527 at 558 per Plumer MR; Hume v Rundell [1824] EngR 961; (1824) 2 Sim & St 174 at 177; [1824] EngR 961; 57 ER 311 at 312 per Leach VC; Re Jodrell; Jodrell v Seale (1890) 44 Ch D 590 at 605 per Lord Halsbury LC, CA.

[18] Macquarie Dictionary 4th Ed. at p.413.

[19] Reference was properly made to clauses that (in other but similar circumstances) included the power to 'give away' (cl 3(a) in the 1920 Deed and to like effect in the Deed of Constitution.) The absence of these words (in cl 3(d)) does not, in my opinion, affect the construction or ambit of the word 'dispose'.

[20] Ballard & Ors v Attorney-General for the State of Victoria (2010) VR 413 per Kyrou J at [41].

[21] Letter dated 7 September 2017 from the Victorian Government Solicitor's Office to the Court.