50 There is no dispute that this is a charitable trust, being a trust for the benefit of members or former members of the armed services: Attorney-General for NSW v Fulham [2002] NSWSC 629, at para 51; Randwick Municipal Council v Rutledge (1959) 102 CLR 54, at 76; Somerville v Attorney-General for the Commonwealth of Australia (1921) 21 SR(NSW) 450.
51 Section 9(1) of the Charitable Trusts Act 1993 (NSW) provides that the property of a charitable trust may be applied cy pres in circumstances in which the original purposes have, wholly or partly, ceased to provide a "suitable and effective method of using the trust property, having regard to the spirit of the trust" .
52 I am satisfied that if the purposes of the present trust are confined to benefiting war veterans, the declining number of war veterans in the community will, sooner or later, lead to the real risk that the Village will become uneconomical to maintain and the Plaintiff will become insolvent. There is no dispute that it would not be for the benefit of any war veteran who might require maintenance, accommodation and care facilities in the Village in the future that the Village and the Plaintiff cease to be available for that purpose. In those circumstances, I am satisfied that the original purpose of the present trust has ceased to provide a suitable and effective method of using the trust property.
53 The Attorney General agrees with the Plaintiff that a cy pres scheme should be ordered and recognises that the Plaintiff will have to make accommodation and facilities in the Village available to a broader range of people in the community than impecunious war veterans. He accepts that in order to survive economically, the Village will, to some degree, have to be open to those who have no connection with war service and who are able to pay commercial rates for accommodation and facilities. However, the Attorney General is concerned that the categories of persons eligible for accommodation and facilities in the Village may be made so wide, and the directors of the Plaintiff be so unlimited in the exercise of their discretion as to who is to have the benefit of such services, that the Village may in time become far more of a commercial enterprise than a charitable institution in the spirit of the original trust.
54 I have not the slightest doubt that the present directors of the Plaintiff have the interests of all veterans and their dependents at the forefront of their consideration in applying for a cy pres scheme which seeks to make the Village economically viable. However, as circumstances change over time so also can perceptions within the Plaintiff's Board change as to what is a proper and desirable application of the trust funds, and as to how the directors should exercise their discretion as to the proportions of veterans and non-veterans, financially secure or impecunious, who should be given accommodation and care facilities in the Village. In my opinion, the concerns which the Attorney General has expressed are valid.
55 The Plaintiff has discussed several draft proposed cy pres schemes with the officers of the Attorney General's Department. Discussion of the proposals in Court has led to further refinement of the terms. The Plaintiff now puts forward two proposals for a cy pres scheme, which are Annexures A and B to Mr Thompson's affidavit of 7 August 2006. The Attorney General has the same fundamental concern with respect to each of the proposed schemes. He takes the view that the spirit of the terms of the trust as established in 1959 is for the relief of war veterans suffering financial hardship, homelessness or ill health and that the cy pres schemes proposed by the Plaintiff do not give this category of war veterans sufficient priority.
56 The Plaintiff says that the terms of the trust as found in Clause 3(c) of the Plaintiff's 1959 Memorandum of Association refer simply to war veterans and there is no requirement of financial hardship, homelessness or ill health. The Plaintiff says that these qualifications should not be reflected in any cy pres scheme.
57 It is true, as the Plaintiff says, that the terms of the trust do not refer to any qualification for eligibility to the benefits of the trust property, except war service. However, s.9(1) of the Charitable Trusts Act requires the Court, in determining whether a cy pres scheme is appropriate, to have regard not only to the letter of the terms of the trust but also to its spirit. In ascertaining the spirit of this trust, it is relevant to have regard to the trust's history and the social context of the time at which it was established.
58 As I have recounted, the Plaintiff was incorporated in 1942 to take over conduct of two homes for war veterans which had been established in 1911 and had been carried on by an unincorporated association. One of the homes was at Bare Island, La Perouse, and the other was at Narrabeen. I think that I may take judicial notice of the fact that in 1942 and in 1949, when the trust was created, neither La Perouse nor Narrabeen was regarded as a preserve of the well-to-do. I think that I am also able to take judicial notice of the fact that in 1959, when war veterans of both World Wars were far more numerous than they are now, the concept of a retirement village as we know it today was not at all familiar. Generally, the elderly and infirm were looked after at home by the families, unless poverty or the gravity of the illness forced people into nursing homes or other care facilities, private or public.
59 In the social conditions prevailing in 1959, it seems to me that it would have been understood that a war veterans' home was intended to be for the benefit of those too ill or too poor to be cared for by their families and for those who had no families to care for them.
60 In my view, the spirit of the present trust which should be reflected in the cy pres scheme, is to give priority in use of the Village and its facilities to war veterans who are suffering financial hardship, homelessness or illness.
61 The draft scheme which is Annexure B to Mr Thompson's affidavit expressly recognises that priority is to be given to the poor, the homeless and the ill. Its terms, in my view, are the closest to the spirit of the trust established in 1959, with some little amendment required. I will call this scheme "Scheme B".
62 Scheme B provides three categories of eligibility for retirement village accommodation and aged care facilities. Only if there are insufficient persons to fill a higher category may the next lower category be filled.
63 The first level of priority is for Retirement Village accommodation and Aged Care Facilities for those who were eligible under the original terms of the trust. However, in a departure from Clause 3(c) of the Plaintiff's 1959 Memorandum and Articles, priority within this category is to be given for Aged Care accommodation (but not for Retirement Village accommodation) to those suffering financial hardship, homelessness or ill health.
64 The second category of priority is for Retirement Village accommodation and Aged Care facilities for those who are, or were, members of the armed forces, and their dependents. Again, within this category, priority is to be given for aged care accommodation to those suffering hardship, homelessness or ill health.
65 The third level of priority is for both Retirement Village accommodation and Aged Care facilities for such persons as the directors of the Plaintiff determine, in their absolute discretion, pursuant to the objects of the Plaintiff as amended from time to time.
66 Because the economic viability of the Village as a whole is dependent on the income derived from providing Retirement Village accommodation and not by providing Aged Care accommodation, special provision is made to ensure that the income from that source will not be depleted to the extent that the Plaintiff becomes insolvent.
67 The Plaintiff says, and I accept, that approximately 30% of admissions to the Retirement Village over the last four years have been for war veterans who do not have the means to pay for the accommodation. They are not required to pay an ingoing contribution fee. Discounts are also provided to regional and rural war veterans entering the Retirement Village of around 25%. The apartments within the Retirement Village which have been provided without any ingoing contribution fee, or a discounted contribution fee, have generally been bed-sitters or one room apartments. Presently, approximately 135 apartments in the Retirement Village are occupied by war veterans who have paid no ingoing contribution or only a discounted fee.
68 The Plaintiff says, and I accept, that if it were required to give priority for Retirement Village accommodation to an unlimited extent to those who cannot afford to pay then it will inevitably encounter financial difficulty, although it is impossible to predict at what time. It therefore proposes that the number of apartments in the Retirement Village which it must make available in priority to those who cannot afford to pay be limited to 135. This number will be subject to review, both if the number becomes too high or if it becomes too low, as circumstances change.
69 The Attorney General says that there is insufficient evidence for the Court to be satisfied that 135 apartments in the Retirement Village is the appropriate number to keep in priority for those who cannot pay. However, I bear in mind that there is no suggestion that the directors of the Plaintiff, in proposing this scheme, are motivated by anything other than a genuine desire to carry out the terms of the trust in the most effective way to secure benefits for war veterans, former and present members of the armed services and their dependents. I accept that projections as to the need for accommodation of different types in the Retirement Village are impossible to make for the indefinite future. I am satisfied that the spirit of the trust is properly reflected in the provisions of Scheme B which set aside 135 Retirement Village apartments for those who cannot pay.
70 Scheme B provides that it is open to review by the Attorney General, and thereby to review by the Court, if its operation in the present form raises the risk of insolvency. It also requires the Plaintiff to provide to the Attorney General annual reports which will show the provision of accommodation and facilities in each category of priority. The Attorney General will be able to see if the number of apartments in the Retirement Village reserved for those who cannot pay is either too low or too high. There is a mechanism in Scheme B to enable the Attorney General to monitor to what extent the spirit of the original trust is still being observed.
71 For these reasons, I am satisfied that Scheme B, with the amendments to paragraph 5(a) suggested by Mr West QC in argument, should be accepted as the cy pres scheme to be ordered.