Plaintiff v Defendants

1 Albert Spatt ('the deceased') died on 16 January 1975. The plaintiff, Equity Trustees Ltd, is the remaining trustee of the deceased's estate.

2 The deceased's last will provided that his residuary estate be held on trust in perpetuity for the charitable purpose of 'establishing, equipping and maintaining a public hospital in Melbourne to be known as the Melbourne Hebrew Memorial Hospital' ('the trust').

3 In 1979, the predecessor of the second defendant, Jewish Care (Victoria) Inc, established such a hospital at 95 High Street Road, Ashwood, and named it the 'Melbourne Hebrew Memorial Hospital' (the 'Ashwood facility'). The Ashwood facility was operated as a nursing home for elderly residents of the Jewish faith.

4 Following legislative changes in 1991, it became necessary to re-name the Ashwood facility as the 'Melbourne Hebrew Memorial Nursing Home', because the Health Services (Residential Care) Regulations 1991 prohibited the proprietor of a nursing home from using the word 'hospital' in its name.[1] Senior counsel's advice was obtained at the time, to the effect that this involuntary name change did not affect the gift under the will as long as the nature of the services provided at the Ashwood facility meant that the facility remained a 'hospital' in the ordinary usage of that term. No party contends that this advice was wrong, and I also agree with it.

5 At the time, there were two trustees, one of whom has since died. They sought and received advice which satisfied them that the services provided at the Ashwood facility meant that it fell within the definition of 'hospital' in the ordinary usage of that term, and therefore for the purposes of the will. Accordingly, the trustees accepted counsel's advice and continued to apply the income of the trust towards maintaining and equipping the Ashwood facility.

6 By 2007, however, it was apparent to Jewish Care that the buildings from which the Ashwood facility was operated were no longer suitable for the purposes of operating a nursing home which complied with the applicable legislation. In these circumstances, Jewish Care acquired a new site at 4-8 Freeman Street, Caulfield, with the intention of developing thereon a nursing home facility to replace the Ashwood facility. It was intended that the new facility would be larger, accommodate more patients and continue to provide the same service as had previously been provided by Jewish Care at the Ashwood facility, together with additional services.

7 At this time, Jewish Care advised the trustee that 'the service' to be provided at the new facility would continue to be known as the Melbourne Hebrew Memorial Nursing Home, although Jewish Care intended to raise funds from benefactors by offering naming rights in respect of the buildings at the new site. As a result, the trustee sought advice from senior counsel as to whether the use of the name Melbourne Hebrew Memorial Nursing Home, together with the grant of naming rights in respect of specific buildings, would cause the new facility to cease meeting the description in the will. On the assumption that 'the overall' new facility would continue to be known as the Melbourne Hebrew Memorial Nursing Home, senior counsel advised that it did not matter that individual buildings or sections of them might be given their own names, including names associated with other benefactors. This advice was given on the basis that it was not a condition of the trust that the deceased's bequest be the only source of funds for the buildings constituting the hospital intended to be established by the will. Neither party contends that this advice was wrong, and I also agree with it. As appears below, however, the basis of counsel's opinion, that 'the overall' new facility would continue to be known as the Melbourne Hebrew Memorial Nursing Home', is now disputed.

8 In due course, the new facility was constructed on the Caulfield site, substantially with funds contributed by the Smorgon family (the 'Caulfield facility').

9 Jewish Care continued to operate the Ashwood facility until 24 June 2009, when patients were transferred to the Caulfield facility. The trustee was satisfied that the Caulfield facility was a hospital in accordance with the charitable purpose expressed in the will, and commenced funding the Caulfield facility by applying the trust's income towards maintaining the buildings of, and equipping, the Caulfield facility.

10 Since the Caulfield facility opened, however, the trustee has become concerned that it may have ceased to be 'known as the Melbourne Hebrew Memorial Nursing Home', and thus may not fall within the purpose of the trust established by the deceased's will. Pending the determination of this proceeding, the trustee has ceased paying the trust income to Jewish Care and is accumulating that income.

11 By this application, the trustee seeks the direction of the Court under its inherent power over trusts and under r 54.02(2) of the Supreme Court (General Civil Procedure) Rules 2005. In summary, the two principal issues for determination are:

(1) Is the Caulfield facility within the purpose of the trust?[2]

(2) If not, how should the trust fund be applied cy pres?[3]

12 On 14 July 2014, the Court ordered by consent of the parties that the first issue be heard separately from the second and be heard by an associate justice. The associate justice has referred the hearing to a judge for determination.

Is the Caulfield facility within the purpose of the trust?

13 In determining whether the Caulfield facility is within the purpose of the trust, and whether the trustee is entitled to pay the income of the trust to Jewish Care to enable the maintenance of the buildings at, and the equipping of, the Caulfield facility, it is necessary for the Court to construe the terms of clauses 6 and 7 of the will in order to ascertain the objective intention of the deceased as settlor of the trust. This requires the Court to give the words used in those clauses their natural and ordinary meaning in the context of the will as a whole.[4]

14 Clauses 6 and 7 of the will are in the following terms:

6 SUBJECT to such legacies and to the annual payments provided for in paragraph 4 hereof I DIRECT my trustees to hold the income from the residue of my estate in perpetuity for the purpose of establishing equipping and maintaining a public hospital in Melbourne to be known as the Melbourne Hebrew Memorial Hospital with power to accumulate income for such period as my trustees shall think necessary to build up sufficient funds for such purpose and I DIRECT that my trustees may join with others in establishing and equipping such hospital and generally exercise their discretion as to the best and most convenient and expeditious means of bringing about fulfilment of the purposes of this trust AND I FURTHER DIRECT that after establishment of such hospital the income from my estate shall be applied in perpetuity to maintain the building of such hospital and renew repair replace and add to the equipment thereof but not otherwise for the general management and running of such hospital.

7 I DIRECT that should the said hospital not be established within five (5) years from the date of my death (the question of determining whether the said hospital has been so established within such period to be in the sole and unfettered judgment of my trustees whose decision thereon shall be final and binding), then and in such case I DIRECT my trustees to thereupon pay the income from the residue of my estate including any accumulated income annually and in perpetuity to the Haddasah Hospital in Tel Aviv Israel, each of such payments when made to be referred to as made in my memory.[5]

15 The parties agree that the hospital intended to be the subject of the trust was established within five years from the deceased's death. Reading clauses 6 and 7 together, however, it is clear that the principal intention of the deceased was to establish a trust for the purpose of establishing, equipping and maintaining a particular hospital in Melbourne 'to be known as the Melbourne Hebrew Memorial Hospital'. This is clear from the emphasised words in clauses 6 and 7 above, which identify the particular hospital by reference to its location (Melbourne) and its continuing name ('to be known as the Melbourne Hebrew Memorial Hospital'), and the subsequent use of the phrases 'such purpose', 'such hospital' and 'the said hospital'. In my opinion, the naming requirement was objectively a central aspect of the deceased's intention when establishing the trust.

16 On this basis, the only question for determination by the Court on the first issue is whether, on the facts, the Caulfield facility is known as the 'Melbourne Hebrew Memorial Nursing Home'. If not, the trustee would be acting in breach of trust if it continued to pay the trust income to the maintenance and equipping of the Caulfield facility.

17 Before I address this factual question, however, I will deal with a preliminary argument raised by Jewish Care as to the construction of clause 6 of the will. According to Jewish Care, there are two phases under clause 6 of the will, one which has a naming requirement (the 'establishment' phase) and the second which has no naming requirement (the 'maintenance' phase). Jewish Care contends that the will does not require the hospital established to meet the description in clause 6 to continue to be known as the Melbourne Hebrew Memorial Hospital (or Nursing Home).

18 Jewish Care's contention that clause 6 of the will does not require that the hospital remain 'known as' the Melbourne Hebrew Memorial Hospital (or Nursing Home) in perpetuity is based on the following steps:

(1) Clause 6 is directed at the establishment of a new hospital, rather than benefitting an existing hospital.

(2) The use of the term 'in perpetuity' is inapposite to the concept of 'establishing' a hospital.

(3) Accordingly, it is only in the maintenance phase that the term 'in perpetuity' can, logically, apply.

(4) Clause 6 does not stipulate that the hospital be known in perpetuity as the Melbourne Hebrew Memorial Hospital. It provides only that, in order to receive the income from the residuary estate, the new hospital which was to be established needed to be known as the Melbourne Hebrew Memorial Hospital at the time of establishment.

19 I do not accept Jewish Care's submissions on this issue. If accepted, they would involve the Court attributing an objective intention to the deceased that the hospital, after its establishment, would, whatever it became known as, continue to be funded by income of the trust. Moreover, the term 'in perpetuity' could be apposite to applying the trust income to 'establishing' a subsequent hospital, as the facts of this case show, and the term is clearly apposite to the purpose of 'equipping and maintaining' a hospital. It is also appropriate for the further direction in clause 6 to speak of the trust income being applied 'in perpetuity' for the continuing tasks of equipping and maintaining such a hospital.

20 I turn to consider the factual issue: is the Caulfield facility 'known as' the Melbourne Hebrew Memorial Nursing Home? In order to resolve that question, it is necessary to consider the objective meaning of the words 'to be known as', and then to refer to the relevant evidence.

21 For the reasons given above, the use of the words 'to be known' signals the deceased's clear objective intention that the hospital was to continue to be known as the Melbourne Hebrew Memorial Hospital after its establishment. The words 'known as' take their meaning from the verb 'know'. The Shorter Oxford English Dictionary meaning of 'know' includes the following example of its use:

know as be familiar with under the name of; in pass., be commonly called.[6]

22 Further, that dictionary gives the adverb 'commonly' the relevant meanings:

1 Generally, universally.

...

3 As a general thing; usually, ordinarily.[7]

23 In my opinion, the words 'hospital ... to be known as' in clause 6 of the will bear their ordinary meaning - a hospital which continues to be commonly, generally, usually or ordinarily called, or referred to as, the Melbourne Hebrew Memorial Hospital. I do not think that the words mean 'universally' known as, and neither party advanced a contention that it did.

25 The Caulfield facility comprises one principal building. The whole of that building is committed to the provision of a nursing home service.

26 A free-standing sign adjacent to the front pathway of the building reads:

27 The internal signage in the Caulfield facility is in the following form:

28 Adjacent to the main entrance, the sign on the front wall of the building reads:

29 As at 1 March 2013, internet searches of the Jewish Care website revealed sections of the website referring to the nursing home services conducted by Jewish Care at various 'Residences'. The website referred to the Caulfield facility as 'Gary Smorgon House' and identified other nursing home facilities conducted by Jewish Care in Caulfield and Melbourne. The Caulfield facility was referred to under the bold type heading 'Gary Smorgon House'. Although there was one reference to the facility 'incorporating Melbourne Hebrew Memorial Nursing Home', the website referred to the Caulfield facility, its services and attributes as 'Gary Smorgon House'. For example:

(1) 'Gary Smorgon House allows for progressive levels of care ...'

(2) 'Gary Smorgon House represents a pioneering new approach to aged care.'

(3) 'Gary Smorgon House allows you to continue to enjoy your lifestyle in this idyllic location.'

(4) 'At Gary Smorgon House everything you know and love stays with you'.

(5) 'At Gary Smorgon House we have our own Shule and Rabbi for your religious observance ...'

30 The Jewish Care website contained references to the types of care which it provides to older Jewish people. Under each of the headings 'Low Care', 'High Care' and 'Dementia' there was a bold type subheading: 'Gary Smorgon House'. Under each of those subheadings, the text refers to the Caulfield facility as Gary Smorgon House and only mentioned that it 'incorporates Melbourne Hebrew Memorial Nursing Home' on one occasion. Under the Low Care and High Care headings, the only reference to Gary Smorgon incorporating Melbourne Hebrew Memorial Nursing Home appeared in the reference to Jewish Care's (now defunct) website for Gary Smorgon House. Under the Dementia care subheading, the reference to Gary Smorgon House incorporating Melbourne Hebrew Memorial Nursing Home was contained in a footnote.

31 There was no evidence of the Jewish Care website, insofar as it refers to Gary Smorgon House, being the subject of any material change since 1 March 2013.

32 In February 2015, a solicitor acting for the trustee conducted an internet search of the Telstra White Pages Business Section for the name 'Melbourne Hebrew Memorial Nursing Home'. The search did not reveal any result for the Caulfield facility. A similar search for the name 'Gary Smorgon House' in Victoria resulted in a reference to 'Jewish Care' and a link which directed the solicitor to a page listing the services provided by Jewish Care. The list included a heading 'Residential Aged Care' and subheadings underneath for aged care facilities conducted by Jewish Care, including:

Gary Smorgon House

4-8 Freeman Street

Caulfield Vic 3162 03 9209 1111

33 The solicitor telephoned the number listed for Gary Smorgon House and the phone was answered: 'Good morning Gary Smorgon House, [name] speaking'.

34 The standard form resident agreement used by Jewish Care for the Caulfield facility has a cover page with a logo and 'Gary Smorgon House' in large bold type. Further down the cover page, after describing the parties to the agreement and the type of care being provided, there is a reference to:

Care Facility: Melbourne Hebrew Memorial Nursing Home

35 The body of the resident agreement describes the 'Care Facility' as meaning the residential care service conducted by Jewish Care at the Caulfield facility.

36 The letterhead of Jewish Care refers to the Caulfield facility in the following terms:

[logo] GARY

SMORGON

GARY SMORGON HOUSE

Incorp. Melbourne Hebrew

Nursing Home

37 On 30 November 2009, Jewish Care registered the business name 'Melbourne Hebrew Memorial Nursing Home' with the Australian Securities and Investments Commission.

38 'Melbourne Hebrew Memorial Nursing Home' is an accredited nursing home service under Aged Care legislation. The Commonwealth Department of Health and Aging website ('myagedcare') lists that service as being:

Locally Known as Gary Smorgon House

Previously Known as Gary Smorgon House

39 No evidence was led from persons who use the Caulfield facility or have cause to refer to it in formal or informal communications. Evidence could have been obtained from residents, relatives and friends of residents, Jewish Care staff, and from the wider Jewish community in and around Caulfield, as to how the Caulfield facility is referred to in everyday conversations or correspondence. Such evidence could have been given by individual witnesses or, to avoid a multiplicity of witnesses, by reliable survey evidence admitted under ss 66A or 78 of the Evidence Act 2008. Evidence of that kind was readily available to Jewish Care, as the operator of the Caulfield facility and other like facilities in Melbourne for aged Jewish persons. If such evidence would have assisted its case, I would have expected it to be called, even if just from Jewish Care staff. I infer that such evidence would not have been of such assistance.

40 On the basis of this evidence, the trustee contends that the Caulfield facility is commonly known as Gary Smorgon House. Particular reliance is placed upon the fact that the Caulfield facility consists of only one building; the principal signage, both external and internal, emphasises the name 'Gary Smorgon House', while merely acknowledging that the facility, incorporates the 'Melbourne Hebrew Memorial Nursing Home'; the Caulfield facility is most commonly referred to on the Jewish Care website as 'Gary Smorgon House'; and, while the Department of Health and Aging has registered the residential care service provided at the Caulfield facility as the 'Melbourne Hebrew Memorial Nursing Home', the Department's website notes that the facility is 'locally known as Gary Smorgon House'.

41 Jewish Care contends that the Caulfield facility is known by two interchangeable names - both Gary Smorgon House and Melbourne Hebrew Memorial Nursing Home - and, on this basis, clause 6 of the will is satisfied because the Caulfield facility is in fact 'known as' the Melbourne Hebrew Memorial Nursing Home. I do not accept that contention. Taking the evidence and inferences as a whole, I find that the Caulfield facility is commonly known as 'Gary Smorgon House' by persons who have cause to refer to it. The fact that the aged care service conducted at the Caulfield facility is registered and technically known to the Department of Health and Aging as 'Melbourne Hebrew Memorial Nursing Home' is, in my opinion, not a persuasive factor. Moreover, as appears above, the Department's own website records that the Caulfield facility is locally known as Gary Smorgon House.

42 I accept that some recognition is given to the name 'Melbourne Hebrew Memorial Nursing Home' in signage and documents which indicate that a nursing home by that name is 'incorporated' within Gary Smorgon House. In my opinion, however, these subsidiary references to the name specified in clause 6 of the will do not support a conclusion that the Caulfield facility is commonly known as Melbourne Hebrew Memorial Nursing Home. To the contrary, the heavy emphasis upon the name 'Gary Smorgon House' in signage, documentation, the website, the Telstra records, and the way in which the telephone at the Caulfield facility is answered (being the only relevant evidence as to the name by which the Caulfield facility is denominated orally) involves a clear public projection of the Caulfield facility by Jewish Care as 'Gary Smorgon House'. Of course, the Smorgon family's generous contribution to the establishment of the Caulfield facility deserves recognition by such public projection. But, on the evidence, it means that the Caulfield facility is not commonly known as the Melbourne Hebrew Memorial Nursing Home and, accordingly, the original purpose of the trust has failed. As a result, the trustees are not authorised by the will to pay the trust income towards its maintenance and equipment.

43 It follows from my conclusion on the first issue that the trust fund should be applied cy pres. The Attorney General has stated that he wishes to be heard as to the content of an appropriate cy pres scheme in the circumstances of this case. I will make directions for the hearing of the cy pres application contained in part B of the originating motion.

[2] The first defendant, the Attorney General for the State of Victoria, elected not to appear at this stage of the proceeding and to abide the result on the first issue.

[3] If so, the Attorney General seeks to be heard.

[4] Re Gulbenkian's Settlements [1970] AC 508, 522 (Lord Upjohn).

[6] Shorter Oxford English Dictionary (Oxford University Press, 6th ed, 2007).