Re Lowin, Perpetual Trustee Co Ltd v Robins [2003] NSWSC 427 | Case summary

1 HIS HONOUR: Freda Kagan, late of London in the United Kingdom, retired secretary, died on 26 October 1996 and the plaintiff, Mr Goldwyn, obtained from this Court on 12 January 1998 probate of her last will dated 24 August 1996 and first and only codicil dated 14 October 1996. 2 The plaintiff by the summons issued on 22 August 2000, and now by amended summons, seeks a determination of some questions arising under the will. 3 One question relates to whether the plaintiff, in the events that have happened, is at liberty to pay moneys disposed of under cl 2 of the will and also cl 4, which is added to the will by the codicil, to the first defendant, Dianne Mazal. 4 The second claim seeks to establish the incidence on gifts made by the will of costs associated with obtaining the grant of probate and costs of administration. 5 The operative parts of the will are in these terms: I give devise and bequeath the whole of my property to my executor upon the following trusts:- To convert into money my commercial bill in the ANZ Bank Sydney due to mature on 6 September 1996, my deposit in the Challenge Bank Elizabeth Street, Melbourne account number 473 100 080 019 due to mature on 30 September 1996 and my parcel of land at 23 Newland Street, Terrigal To pay the net proceeds, after payment of any costs associated with the obtaining of a grant of probate and the administration of my estate to that date to my niece DIANNE MAZAL of 65 Rechov Even Shmuel, Ramot 2, Jerusalem, Israel for the purpose of setting up a trust recognised by Israeli law for the neorogically impaired and the communicatively handicapped, such trust to be named if possible after my mother FRUMA To convert into money at maturity my deposit with the Bank of Melbourne at 52 Collins Street Melbourne account number 13395371, due to mature in about May 1997 and after payment of final administration costs to pay the net proceeds to the SRI SATYA SAI UK TRUST at 5A Bathurst Street London W2 2SG for the purchase of specific medical equipment required by the SRI SATYA SAI Hospital at Puttaparthi in India. 6 It will be seen from the terms of cll 2 and 3 that there is doubt and difficulty in understanding which parts of the costs associated with administration of the estate fall on the gift in cl 2, which parts fall on the gift in cl 3 and whether any parts pass the provision in subs 46C(2)of the Wills, Probate and Administration Act and its reference to Pt 2 of the Third Schedule, that is whether the provisions of the will relating to payment of expenses of administration alter the operation of that schedule. 7 To put the matter broadly (although more problems can be identified in detail) the terms of cll 2 and 3 offer a choice between a reading in which the incidence of costs between one gift and the other is altogether time based so that all costs incurred up to the date referred to in cl 2 (and it is not altogether clear what date that is) fall on the gift in cl 2 while all costs incurred later in time fall on gifts in cl 3; or, on the other hand, a reading in which there was intended to be some basis other than time for identifying final administration costs referred to in cl 3 implying an intention of the testator that costs were to be divided in some way into a general class and a final class. 8 There are difficulties for the time based reading, although at first sight it appears attractive. It is not altogether clear what is the date referred to in clause 2; earlier in the will the only dates referred to are the dates of maturity of deposits which it would be an absurdity to suppose were intended to show the date for testing incidence of costs. 9 The time based view assumes that payment of the gift under cl 2 would take place earlier in time than the payment of the gift under cl 3, but there is no reason to suppose that the payments would necessarily or would be intended by the terms of the will to take place in that order, and they would not necessarily take place at different times. 10 After careful arguments on the meaning and effect of these provisions had been presented by the parties who appeared, they joined in putting forward a view in which certain costs relating to filing and passing accounts, applications for commission and executor's commission are to be classified as final administration costs and all others are to be regarded as falling on the gift to the first defendant under cl 2. 11 It is not only the interests of the parties who have appeared which are involved, as the second defendants, trustees of the Sri Satya Sai UK trust, were not represented at the hearing; they filed an appearance at an earlier stage in the proceedings by an Australian solicitor who in turn was agent for a solicitor in England; however the Australian solicitor has ceased to act and no other solicitor has gone on the record in this Court, while the English solicitor communicated to one of the parties an intention not to appear at the hearing. 12 Although the view of the incidence of costs to which the parties who do appear have agreed affects the amount which will be payable to the trust under cl 3 of the will, I am of the view that I should act on the basis put forward by the plaintiff and first defendant which gives effect, perhaps with an element of compromise, to a reasonably available view of the meaning and effect of the will, arrived at after argument and appropriate for me to adopt. 13 The parties who appear also ask me to join in making a declaration which will dispose of claim one in the amended summons relating to whether it is appropriate for the plaintiff to pay to the first defendant the amount available under the gift in cl 2, together with the amount available under the codicil and cl 4. 14 What the parties propose is that the Court should declare (and I summarise) that it is appropriate for the plaintiff to pay the gift to the first defendant on having a receipt in which she acknowledges that she will apply all moneys in accordance with an undertaking given by her and tendered in evidence; and that receipt shall be a sufficient discharge and shall exonerate the plaintiff from seeing to the application of the money from Israel and from being answerable for any loss. 15 Involved in making such a declaration is acceptance by the Court that cl 2 of the will creates a valid and effective charitable trust according to the law of New South Wales. By so declaring the Court will establish a position which at least in concept may be adverse to the interests of persons who have not been joined as parties to the litigation, that is the class of persons, whoever they may be, who would be entitled to any assets of which the will does not effectually dispose, such as a purported but ineffectual gift to charity which lapses. 16 Those persons, whoever they may be, have not been identified; they may be close relatives; there could be questions of some elaboration about whether the law of New South Wales or the law of the United Kingdom has effect to identify the next of kin entitled on intestacy as, according to all references to her in evidence, the testatrix appears to have been domiciled in the United Kingdom; and further possible sources of complexity are that if there are no such persons, property not disposed of by the will may pass to the Crown, either in right of New South Wales or in right of the United Kingdom. 17 As the amount involved is not large enough to sustain a more elaborate lawsuit than it unfortunately has had to sustain, and as I am of the view that there is not much room for doubt about the validity of the charitable gift, I have not required the joinder of additional parties. 18 I am prepared to make the declaration which the parties seek but I will state at some length my reasons for regarding the charitable gift as valid. 19 The words of the will which come under consideration are found in cl 2. Earlier in the will the whole of the property of the testatrix was given to the executor on trust and cl 2 states one of those trusts: To pay the net proceeds ... to my niece Dianne Mazal of ... Jerusalem, Israel, for the purpose of setting up a trust recognised by Israeli law for the neurologically impaired and the communicatively handicapped... 20 In the law of New South Wales a purpose of benefiting the neurologically impaired and the communicatively handicapped is in my opinion a charitable trust. 21 The preamble to the Statute of Elizabeth does not in a clear way refer to relief of sickness or disabilities but courts have on innumerable occasions upheld gifts for the purposes of hospitals, medical treatment, medical research, the sick and the disabled, and a gift for the purposes of benefiting the neurologically impaired and the communicatively handicapped would fall within the spirit and intendment of the preamble. 22 The present gift is expressed in a more complicated way. The defendant as trustee is to pay the proceeds to a resident of Israel. The payment is to be made for the purposes of that resident of Israel setting up a trust there recognised by Israeli law. Plainly it is the first defendant living in Israel who is to carry out the purpose, and that is not the executor's responsibility. 23 The question is whether according to the law of New South Wales it is a valid charitable purpose to pay money to a person in Israel for the purposes of setting up there a trust recognised by the law there for the neurologically impaired and the communicatively handicapped. It is necessary to look further than whether the benefit of the persons indicated is charitable. 24 If it is a fact that Israeli law recognises such trusts, by which I mean gives effect to them, and if the purpose for which the money was to be paid to Dianne Mazal can be enforced in Israel, the purpose of doing so is a valid charitable purpose by the law of New South Wales, but it would not be a valid charitable purpose if the trust to be set up was not recognised by Israeli law, nor would it be a valid charitable purpose if there were no means of enforcement by which Dianne Mazal could in Israel be compelled to carry out the purpose and to set up the trust when the money was paid to her. 25 There have been years of ineffectual correspondence between lawyers in Australia and lawyers in Israel about what had to be done before the money was paid to Dianne Mazal. For a long time the lawyer representing Dianne Mazal took the position that she did not have to do anything about setting up the trust until the money was paid to her. This accords with the literal reading of cl 2 of the will, but the plaintiff did not accept that he should act accordingly and I regard his position as altogether reasonable. 26 If he paid the money to the trustee of a trust which already existed at the time of payment he would have protection under s 48 of the Trustee Act 1925 on paying the money to that trustee. He would not have any legal responsibility or potential personal liability for how the money was dealt with after he got a trustee's receipt. On the other hand, if he paid the money to Dianne Mazal before a trust in Israel was set up, the plaintiff would be exposed to possible contentions that he was responsible for seeing that the purpose was carried out, to do which he would have to supervise the conduct of Dianne Mazal in Israel and might have to bring some proceedings before the courts of Israel, or he might be exposed to complaints and claims in which it was asserted, rightly or wrongly, that he ought to have done that. Potential complainants and sources of trouble for the plaintiff include the Attorney General of New South Wales with his general responsibilities for the enforcement of charitable trusts, and persons entitled to property of which the will does not effectually dispose. 27 In the evidence there are a number of expressions of opinion by Israeli lawyers about relevant matters. Only one of these gives the impression of being fully considered so that I feel that I should rely on it. That is the opinion of Aharon Geva dated 12 May 2003, given for the purposes of these proceedings. 28 In his evidence he refers to the Trust Law, which other evidence shows was enacted in Israel in 1979. He says to the effect that a trust is not a legal entity. In my understanding his meaning is that it is not an incorporated body, or that it does not have legal personality. He refers to section 1 of the Trust Law which says: A trust is a right in connection with any property under which the trustee is obligated to maintain it or to act in relation to it for the benefit of the beneficiary or for any other purpose. 29 He goes on to state the various manners in which a trust may be created and the holder of property may become a trustee. The property held on trust is referred to as Hekdesh, and one means for creating a trust is referred to by him as a Deed of Hekdesh. Section 19 of the Trust Law states: The Court is entitled at any time to give the trustee instructions in all matters relating to fulfilment of his function or any other instruction relating to the effective management of the Hekdesh. 30 Section 1 shows that there may be a trust for a purpose. There is no reference in the Trust Law to limitations on the purposes for which a trust may be set up. 31 The Trust Law repealed the Charitable Organisations Ordinance which appears to have been made in the time of the Mandate before the creation of the State of Israel and may have reflected something of English Charities Law. Chapter 3 deals with public endowment and makes special provisions for a trust: the object, or one of the objects of which is the furtherance of a public purpose. 32 Aharon Geva gave the opinion that the will and codicil constituted a Deed of Hekdesh within the meaning of s 17 of the Trust Law. Elsewhere in the evidence it is shown that Dianne Mazal has caused to be created an Amuta, which corresponds generally with an incorporated association in New South Wales law, and the Amuta is named "Fruma Foundation for the Neurologically Impaired and Communicatively Handicapped." 33 Another lawyer who gave evidence, Gad Ben-Meir, when dealing with the certificate of registration of the Amuta said: The Amuta specifies its principal purposes as the education and rehabilitation of people suffering from neurological impairment and communication defects (Autism) and their integration into the community. 34 I accept these expert views. 35 Dianne Mazal has given in writing and has verified an undertaking to the plaintiff to apply the gift when received to the Amuta. In the circumstances the proper course for the plaintiff to take is that he should pay over moneys given by cl 2 of the will and by additional cl 4 inserted by the codicil to Dianne Mazal. 36 In my finding there is sufficient reason to have confidence that money so paid will be applied in accordance with cl 2 of the will. 37 I should give consideration to the significance of the application of the gift and the carrying out of the charitable purpose wholly within Israel, so that no benefit to the public of New South Wales can be expected to be served by the charity. 38 In Jacob's Law of Trusts in Australia, Sixth Edition 1997, Meagher and Gummow, the very learned authors at para [1059] deal with charitable trusts for purposes outside New South Wales. They observe: If the objects of the trust are necessarily valid as a charity in New South Wales, it is immaterial that the capital or income is to be expended wholly outside New South Wales, provided that the objects are also valid where the funds are to be spent. 39 After giving references to a number of cases which show that this is the position, they comment: This law is well established, but has its conceptual difficulties.

and go on to state conceptual difficulties relating to the absence of control by the Attorney General of the State over the administration of charitable trusts elsewhere, and the need for the public purpose served by a charitable trust to relate to the public of New South Wales in the cases where a public purpose is a necessary element if the purpose is to be charitable. 40 While the difficulties to which the learned authors refer claim attention and can not be dismissed as lacking in substance, and in particular the difficulty about enforcement at the suit of the Attorney General of the State may have a substantial impact if on the failure of a charitable trust there were some need to apply the property cy pres, which could not be achieved if the property was not within the state, a clear view has been taken at fist instance in the Equity Division that there is no substantial difficulty about the identification of the relevant public. 41 The matter was considered quite fully by Holland J in Lander & Anor v Whitbread (1982) 2 NSWLR 530. Holland J referred to the cases which gave rise to the comments of the learned authors. In particular, in Camille and Henry Dreyfus Foundation Inc v Inland Revenue (1954) Chancery 672, observations in the Court of Appeal, upon which the authors' comments appear in part to be based, set on one side as not subject to any doubt charities of a class which includes the present charity. Holland J at 532 cited a passage from the judgment of Evershed MR in Dreyfus at 684, including the following: It may be that, on very broad and general grounds, relief of poverty or distress in any part of the world, or the advancement of the Christian religion in any part of the world, would be regarded as being for the benefit of the community in the United Kingdom. 42 His Lordship went on to point to other classes of trust for which he saw difficulty. Jenkins LJ in the passage cited by Holland J at 532 also recognised that it was only to some and not all charitable trusts that the doubt expressed applied. 43 In Re Lowin, Perpetual Trustee Co Ltd v Robins [1965] nswr 1624, Jacobs J, in a passage cited by Holland J, at 533 said: The relief of poverty or the provision of hospital or other assistance to those who are in some need, even though it be not a financial need, are all obligations which go beyond the bounds of any particular country, but the encouragement of musical competition or the encouragement of the fine arts in a particular country seems to me to be very much a matter internal to the country itself. 44 This view was reversed on appeal [1967] 2 NSWR 140, 85 WN (Pt 1) (NSW) 403 without casting any doubt on the first reference to obligations which go beyond the bounds of any particular country; the Court of Appeal treated the music charity as similarly uncontrolled. It is to be noted that in McGrath & Anor v Cohen & Anor [1978] 1 NSWLR 621, which related to a charity for the benefit of education, being a university in Israel, the parties, including the Attorney General, denied the relevance of the fact that the donee institution was in a foreign country; see page 623. 45 There are a number of reported cases from various jurisdictions where charities law has effect in which charities that are to be put into effect in Israel, or other countries overseas, have been treated as valid. 46 Notwithstanding the doubts expressed by the learned authors, but following the authority of the decision of Holland J, I am of the opinion that the fact that the charitable purposes is to be carried out wholly in Israel does not affect the validity of the charity in the law of New South Wales. 47 For these reasons I have made the orders in the short minutes. 48 The exhibits may be returned. **********

Re Lowin, Perpetual Trustee Co Ltd v Robins

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