Mr Paul Michael Russell is the executor and trustee of the late Euphemia (Mia) Polykarpou under her will dated 22 March 2004. The deceased died on 2 March 2015, and probate of her will was granted to Mr Russell on 20 October 2015.
The issue before the Court is whether it should accede to a joint request made by Mr Russell and the Attorney General for the State of New South Wales that the Court make a number of orders for the purpose of part of the estate of the deceased to be applied cy-près in accordance with a compromise reached between those parties.
It will be necessary first to explain the relevant background to the joint application.
In her will, after appointing Mr Russell as her executor and trustee, and after making a number of minor bequests, the deceased made the following gift in relation to the residue of her estate:
4. MY EXECUTORS [sic] shall hold the rest and residue of my Estate to divide as follows: -
4.1 As to a 50% part or share thereof to be used for research into the causes of and cures for MULTIPLE SCLEROSIS, the distribution and use of such funds, whether to any hospital, medical practitioner, scientist or research facility to be at the discretion of the Executor;
4.2 As to the remaining share thereof to 'OPRAH ANGEL NETWORK' 110N Carpenter Street, Chicago, Illinois 60607 United States of America.
The gift in clause 4.2 of the deceased's will failed as the Oprah Angel Network (OAN) ceased to exist before the date of the deceased's death.
By summons filed on 14 December 2015, Mr Russell applied for judicial advice under s 63 of the Trustee Act 1925 (NSW) on the question of whether he would be justified in making an application for a cy-près scheme in relation to the gift in clause 4.2 of the will.
Mr Russell's application was dealt with by Lindsay J in Estate Polykarpou; Re a charity [2016] NSWSC 409.
His Honour made declarations that had the effect that the gift of property in clause 4.2 of the will constitutes a valid charitable trust and that, as a result of the dissolution of the corporation identified in clause 4.2 as the recipient of the trust property, the property the subject of the trust is dedicated to charity. Lindsay J then made the following orders:
…
(3) ORDER that the trust property be applied cy-près, and that a scheme be settled for that purpose.
(4) ORDER (pursuant to the Charitable Trusts Act, section 13(2)) that the trust be referred to the Attorney General for the Attorney to establish such a scheme.
(5) RESERVE to the Attorney General, the trustee of the charitable trust and such (if any) other persons who may be interested in due administration of the trust, liberty, at their own risk as to costs, to apply for directions in settlement of a cy-près scheme.
In accordance with Order 4 made by Lindsay J, the Attorney General delegated to the Solicitor General the duty to establish a cy-près scheme in respect of the property the subject of clause 4.2 of the deceased's will. The Solicitor General did so by order dated 24 October 2017, which was published in the New South Wales Government Gazette, No 119, 27 October 2017, at 6605-6607 (NSW Government Gazette). Under the order, the Young Women's Christian Association of NSW (YWCA) "…is to hold the gift in clause 4.2 of the Will of the deceased on trust, to apply the capital and income for the purpose of establishing and funding a post-crisis domestic violence centre in Campbelltown which provides services to women and children as described in the YWCA's application to the Crown Solicitor".
Mr Russell formed the view that the cy-près scheme formulated by the Solicitor General did not sufficiently accord with the wishes of the deceased, in that it did not give adequate weight to the fact that the charity that the deceased had chosen for the purposes of clause 4.2 of her will was associated with Ms Oprah Winfrey of whom the deceased was a devotee over many years. Mr Russell thought that, if the charitable gift selected by the deceased failed, she would have wanted her estate to be applied for the purposes of an alternative charity associated with Ms Winfrey that had objects that were as close as possible to the OAN.
Appeals from orders of the Attorney General relating to cy-près schemes are regulated by s 18 of the Charitable Trusts Act 1993 (NSW) (Charitable Trusts Act), which provides:
18 Appeal from orders of Attorney General relating to schemes
(1) If the Attorney General makes an order under this Part:
(a) any trustee of the charitable trust concerned, or
(b) with the leave of the Court, any other person,
may appeal to the Court against the order within 21 days after the order is published under this Part or, with the leave of the Court, at any time after the order is so published.
(2) An appeal is to be made in accordance with the rules of the Court.
(3) The Court may, in determining the appeal, confirm, vary or quash the order.
(4) If the Court quashes the order, it may establish another scheme for the administration of the charitable trust or direct the Attorney General to establish another such scheme in accordance with the directions (if any) of the Court.
(5) A scheme purporting to be established by the Attorney General under this Part may not be challenged because of any alleged contravention of this Part, except in an appeal to the Court under this section.
Consequently, Mr Russell in the circumstances found that he required the leave of the Court to appeal against the order of the Attorney General.
Furthermore, as Mr Russell was a trustee, in accordance with conventional practice, he would be at risk of being found to be in breach of duty to the estate if he sought leave to appeal and then prosecuted the appeal without first obtaining the advice of the Court under s 63 of the Trustee Act 1925 (NSW) that he would be justified in taking that course.
By summons filed on 12 December 2017, Mr Russell sought the following relief:
1. An order that the Plaintiff be granted leave to bring these proceedings pursuant to s 6(1)(b) of the Charitable Trusts Act 1993 (NSW).
2. Advice, orders and directions pursuant to s 63 Trustee Act 1925 (NSW) or, alternatively, Part 55 of the Uniform Civil Procedure Rules on the following issues:
(a) Whether the Plaintiff would be justified in appealing the order of the Attorney General published in the NSW Government Gazette on 27 October 2017 establishing a cy-près scheme in favour of the YWCA ("the trust"); and
(b) Whether the Plaintiff's costs of any such appeal should be subject to an indemnity from the trust.
3 An order that the question of leave be heard and determined at the same time as the hearing of the application for judicial advice.
4. An order that the Plaintiff be indemnified from the assets of the trust for the costs of these proceedings on an indemnity basis.
…
Mr Russell's application was dealt with by me in the manner explained in my reasons for judgment: Paul Michael Russell re the Testamentary Trust of Euphemia (Mia) Polykarpou [2018] NSWSC 602. I will not repeat the explanation in these reasons. It is sufficient to note from [22] that I was ambivalent about whether the leave sought should be given, principally because it was unclear that Mr Russell had substantial prospects of success on the appeal, and I was concerned about the possibility that the trust would be depleted by the cost of the appeal in a manner that was not proportionate to the prospects of the appeal succeeding.
In the manner set out in my reasons, I gave Mr Russell an opportunity to provide further evidence to explain his reasons for wishing to appeal from the order made by the Attorney General, and I also decided that it would be proper for the Court to implement an appropriate ad hoc procedure for the purpose of dealing with the issues relevant to the appeal in the most cost-effective way possible.
Ultimately, I decided that the appropriate way for the Court to proceed was as follows:
86 I do not propose to advise Mr Russell, as he seeks in prayer 2(a) of his summons, that he would be justified in appealing the order of the Attorney General, if the consequence would then be that Mr Russell would commence new proceedings to appeal from the order. Instead, much as Lindsay J appears to have done in the original proceedings, I will invite Mr Russell to join the Attorney General in these proceedings. I will order that Mr Russell is justified in taking that course, and then in prosecuting an appeal within these proceedings.
87 The reason I will take that course is that much of the work necessary to be done by Mr Russell in respect of the appeal has already been done. Mr McNally's opinion will be useful for that purpose, as well as the affidavit that Mr Russell has prepared.
88 Given the size of the trust fund, I will expect Mr Russell and the Attorney General to agree on short minutes of order to appropriately reconstitute these proceedings. The short minutes of order should also provide for the Attorney General to submit a more extensive justification for the Solicitor General's decision, focusing particularly on the issue of the connection between the cy-près scheme and Oprah Winfrey. I will not circumscribe the course that Mr Russell and the Attorney General may agree to, save that I will require that the procedure that is adopted be as economical as possible. The proceedings as reconstituted should not be treated as entirely adversarial proceedings. I will be prepared to deal with as much as possible that is necessary to resolve this dispute in chambers.
89 If Mr Russell and the Attorney General can agree upon short minutes of order, they can be submitted to the Court through my associate for consideration. Otherwise, my associate will arrange for a directions hearing to be fixed at the convenience of the court and the parties.
After deliberation between Mr Russell and the Attorney General, the Court was invited on 7 November 2018 to make orders that included the following:
The Court by consent
1. Pursuant to s. 18(1) of the Charitable Trusts Act 1993 (NSW):
a. Grants leave to the plaintiff to file a summons appealing from the decision of the Attorney General published in the NSW Government Gazette on 27 October 2017, establishing a cy-près scheme in favour of the "YWCA" ("the proposed appeal proceedings");
b. That the time to bring the appeal is extended to 22 November 2018.
2. Notes that the plaintiff and defendant have reached an agreement to settle the proposed appeal proceedings.
3. Grants leave to the plaintiff to rely on any affidavits and documents filed in these proceedings (2017/376017) in the proposed appeal proceedings.
4. Directs that the defendant file and serve any evidence in the proposed appeal proceedings, on or before 7 December 2018.
5. Directs that the plaintiff and the defendant in the proposed appeal proceedings provide joint submissions and proposed agreed orders to the associate to Robb J by 14 December 2018 for the purpose of the determination as to whether to approve the settlement between the parties and to make the proposed orders agreed between the parties, with determination to be made in chambers on the papers.
Pursuant to the leave granted to Mr Russell, on 15 November 2018 he filed a summons to commence the present proceedings, by which he sought the following orders:
1. An order pursuant to s 18(1) of the Charitable Trusts Act 1993 (NSW) quashing the decision of the defendant published in the NSW Government Gazette on 27 October 2017, establishing a cy-près scheme in favour of the "YWCA" ("the appeal proceedings") in relation to a charitable trust created by the will of the late Euphemia Polykarpou.
2. An order that the settlement between the parties establishing an agreed cy-près scheme be approved.
3. An order that the plaintiff's costs be paid from the monies currently held on trust by the plaintiff in relation to the cy-près scheme on an indemnity basis.
4. An order that there be no order as to the costs of the defendant.
…
The Attorney General has filed an affidavit of Shannon Wright dated 7 December 2018. Ms Wright is the Director of Service Delivery at the Young Women's Christian Association of Australia (YWCA Australia).
The Court has received joint submissions of the parties signed by counsel for Mr Russell and the Attorney General on 14 December 2018.
The parties have joined in asking the Court to make orders as follows, or orders in similar terms:
1. Pursuant to s 18(3) of the Charitable Trusts Act 1993 (NSW) (CTA), the order made by the Attorney General and published in the NSW Government Gazette on 27 October 2017 (Order) is quashed;
2. The monies in the charitable trust created under cl 4.2 of the will of the late Euphemia Polykarpou dated 22 March 2004 (Charitable Trust), currently comprising the total sum of $566,077.66, be applied cy-près as follows:
(a) 60% of the Charitable Trust to the Polykarpou Trust to be applied for such purposes of the Oprah Winfrey Leadership Academy Foundation (OWLAF) as are charitable purposes for the betterment of women and children who are in need or disadvantaged.
(b) 40% of the Charitable Trust to YWCA Australia to be applied for:
(i) the purpose of establishing and funding a post-crisis domestic violence centre in Campbelltown which provides direct services to women and children effected [sic] by domestic violence, within 12 months of the date of the establishment of the cy-près scheme;
and in the event that YWCA Australia is not able to apply towards that end within 12 months of the date of the establishment of the cy-près scheme,
(ii) the benefit of women who participate in the Ngalingah Mijung Dubais programme administered by YWCA and who have one or more children.
3. Schemes be established to give effect to the preceding order.
4. The plaintiff's costs be paid from the Charitable Trust on an indemnity basis.
The parties noted in the joint submissions that, at [74] of my earlier judgment, I declined to express any view as to the nature of an appeal under s 18 of the Charitable Trusts Act. I agree with the submission made by the parties that, in the light of the agreement reached to resolve this matter, the Court need not further address the issue of the nature of the appeal.
The following explanation of the facts underlying the proposed Order 2 is relevant to the issue of whether it is appropriate for the Court to approve the settlement between the parties and to make that order. I will draw on the reasons in my earlier judgment for these facts, as well as the recent affidavit of Ms Wright.
As already mentioned, clause 4.2 of the deceased's will gave half of the residue of her estate to OAN.
The articles of association of OAN set out its corporate purpose as follows:
The purposes for which Oprah Angel Network (the 'Corporation') is organised are to receive or maintain a fund or funds and to administer and apply the income and principal thereof solely for the betterment, support and enrichment of women and children in need or for educational purposes and to the extent the funds are not used for the aforementioned purposes, then for religious, charitable, scientific, literary or educational purposes, but only to the extent and in such manner that such purposes constitute exclusively charitable and educational purposes within the meaning of ss 501(c)(3) and 170 (c)(2)(B) of the Internal Revenue Code of 1986, as amended from time to time (the 'Code'), or any successor provisions thereto, including, for such purposes, the making of distributions to organisations that qualify as exempt organisations under Section 501 (c)(3) Code. (Emphasis added)
The emphasised portion of this provision suggests that the core of the OAN's purpose was the betterment, support and enrichment of women and children in need or for educational purposes. The use of the word "or" suggests that the OAN may have had a twofold purpose.
Two organisations applied to the Solicitor General, as the delegate of the Attorney General, for consideration as appropriate objects of the proposed cy-près scheme. They were the Oprah Winfrey Leadership Academy Foundation (OWLAF) and the YWCA.
The results of the Solicitor General's deliberation and the reasons given are best seen in the following extract of the order, as published in the NSW Government Gazette:
… There are two applications to the Attorney General with proposals for the use of the trust funds of $609,127.66. These are:
Oprah Winfrey Leadership Academy Foundation (OWLAF) scheme
OWLAF is a not-for-profit organisation incorporated in Illinois United States. The Oprah Winfrey Leadership Academy was founded by Oprah Winfrey in South Africa to provide an independent residential boarding secondary school for disadvantaged girls. The proposed scheme would involve the Trustee, a NSW based solicitor, holding and administering, in perpetuity, the trust funds of the Polykarpou Trust for the Oprah Winfrey Leadership Academy ('the Polykarpou Trust'). Income and capital of the trust would be applied at the discretion of the trustee solely in the furtherance of the Polykarpou Trust's objects, whose core purposes are:
a) to assist and support the charitable purposes and activities of the OWLAF solely in relation to women and children who are in need or disadvantaged;
b) [Omitted]
c] to assist disadvantaged female students graduating from the Oprah Winfrey Leadership Academy for Girls - South Africa or with scholarships for such disadvantaged female students to attend college in South Africa or the United States; and
d) to do all such other things that are incidental or conducive to furthering the core purpose of the trust.
The scheme proposed by OWLAF would primarily benefit girls and young women in need or disadvantage in South Africa, as opposed to women and children in need. Further to the extent that funds can be applied for the second limb of the primary charitable purpose - education purposes - this is limited to young females in South Africa.
The Young Women's Christian Association of NSW (YWCA)
The scheme proposed by the YWCA proposes to apply the trust funds to benefit women and children requiring post crisis domestic violence services in South Western Sydney. This includes education related services and assistance and measures to counteract disadvantage. The funds would be held in trust to:
i. Provide wrap around support and care co-ordination in one location that ensure victims receive the physical and mental health services necessary to make a full recovery;
ii. Support women to develop the necessary skills/financial independence to achieve safety and stability and to parent independently;
iii. Ensure women and children have the uniforms and equipment necessary to access education and employment;
iv. Provide support to enable children to fully engage with education and develop their potential;
v. Assist women to undertake training and skills development to enable them to gain/maintain employment, reduce poverty and disadvantage and develop to their full potential;
vi. Provide case management and brokerage to address barriers to service and education access, such as childcare to enable study or transport to access health services;
vii. Assist women and children to connect with their local community through participation in sport, creative and volunteering activities that enrich their lives and help them develop supportive relationships that increase future resilience and provide opportunities for personal development;
viii. Collect feedback and undertake research to tailor the service and develop it through iterative change into a best-practice model.
By virtue of the fact that the OWLAF scheme's main focus is the provision of assistance and support to disadvantaged students attending the Academy and its graduates, the OWLAF scheme would primarily benefit young women in South Africa. It is therefore arguable that the purpose of the OWLAF scheme is narrower than the primary charitable purpose.
By comparison, the YWCA NSW scheme proposes to benefit women and children requiring services South Western Sydney [sic]. In this respect, the YWCA NSW scheme may be viewed as being closer to the primary charitable purpose of benefiting both women and children, than the OWLAF proposal.
This is an appropriate matter in which the Attorney General should approve a cy-près scheme under section 13(1)(a) of the Charitable Trust Act 1993. I therefore hereby Order that the YWCA NSW is to hold the gift in clause 4.2 of the Will of the deceased on trust, to apply the capital and income for the purpose of establishing and funding a post-crisis domestic violence centre in Campbelltown which provides services to women and children as described in the YWCA's application to the Crown Solicitor…
It will thus be seen that the Solicitor General decided that the proposal made by the YWCA was "…closer to the primary charitable purpose of benefiting both women and children, than the OWLAF proposal". The order therefore applied 100% of the available fund to the scheme proposed by the YWCA.
This was the aspect that concerned Mr Russell, as it in his view did not give any significant weight to the fact that Oprah Winfrey was associated with the OWLAF scheme and not the YWCA scheme and, as I understand it, it was Mr Russell's belief that the core reason for the deceased making the failed charitable gift to OAN was its association with Ms Winfrey. Hence the application made by Mr Russell that I have described above.
The effect of the settlement reached between Mr Russell and the Attorney General is that 60% of the fund that remains after Mr Russell's costs have been paid will be applied for the purposes of a cy-près scheme as proposed by the OWLAF, and 40% will be applied generally in accordance with the original proposal by the YWCA, although further explanation is required concerning this aspect of the scheme.
It is plain, in simple terms, that there has been a sensible practical compromise between two deserving alternatives, and a slight weighting has been given to the OWLAF because of its connection with Ms Winfrey.
As Ms Wright has explained in her affidavit, the YWCA has recently merged with other associated entities into the YWCA Australia. The constitution of this latter entity enables it to implement the proposal that had earlier been made by the YWCA.
Ms Wright explained the admirable intent of that proposal in providing physical and mental health services in the Campbelltown area for women and children seeking respite from domestic violence. She explained that a sum of $250,000 would be required to make the service viable for a number of years, so that even though the YWCA was willing to participate in a cy-près scheme that contained 40% of the available fund, it would not be possible to implement the proposal unless additional funds could be found to make up the available fund to $250,000. While there are reasonable prospects of that occurring, Ms Wright could not be sure that the proposal to do so would be effective.
Hence, the YWCA Australia has suggested an alternative object of a cy-près scheme if it is not possible to implement the preferred proposal within 12 months. Ngalingah Mijung Dubais (Our Happy Women) is a program in the Northern Rivers Region of New South Wales, led by a YWCA Australia Cultural Engagement Officer, which provides education, employment and further training opportunities for Aboriginal and Torres Strait Islander women in the Lismore area, many of whom have young children. The participants engage in pre-vocational courses to develop skills necessary to enter the workforce.
I respectfully adopt the following observation by Slattery J in Ubiparipovic v Vucicevic [2018] NSWSC 1583 as to the circumstances in which the Court has power to approve a compromise such as the one that is now before the Court:
[4] It is well established that charitable trust proceedings may be settled by compromise. The Court has inherent jurisdiction to approve the terms of such a compromise: Permanent Trustee Co Ltd v New South Wales (Supreme Court (NSW), Santow J, 23 November 1995, unreported) ("Permanent Trustee"). The consent of the Attorney General is a necessary condition to the Court's approval. The Attorney General consents here.
The Attorney General has given consent to the settlement in the present case.
Slattery J at [5] set out in a summary way the reasons why he had concluded that the Court's approval should be given to the settlement of the dispute in that case as to how the relevant fund should be dealt with cy-près. The underlying dispute was more complex than in the present case, and not all of his Honour's reasons have application here.
As the parties jointly submitted, in deciding on an appropriate cy-près scheme the fundamental responsibility of a court administering charitable trusts is to give effect to the objects of the charitable trust as closely as possible: Attorney General for New South Wales v Fred Fulham [2002] NSWSC 629 at [13]-[18]. The Court, in determining whether a cy-près scheme is appropriate, is required "…to have regard not only to the letter of the terms of the trust but also to its spirit": RSL Veterans' Retirement Villages Ltd v NSW Minister for Lands [2006] NSWSC 1161 (Palmer J) at [57].
In his judgment mentioned above, Lindsay J found that the intended purpose of clause 4.2 of the deceased's will was to provide for "…the betterment, support and enrichment of women and children in need or for educational purposes…", at [109].
While it may be that only some of the objects of the proposals made by the OWLAF and the YWCA Australia overlap with those of the now defunct OAN, I am satisfied that the objects are sufficiently consistent that it is appropriate for cy-près schemes to be established in accordance with the orders jointly proposed by the parties. I am satisfied that between them the parties, as well as the Solicitor General, have followed a diligent course in attempting to find charitable purposes that are as consistent as possible with the original charitable intent and purpose of the deceased. As it has happened, it has been necessary to compromise and to divide the fund between two cy-près schemes in order to cover as much of the deceased's intent and purpose as possible.
As it is the intent of the deceased that is paramount, it may confidently be supposed that in cases involving relatively small funds the last outcome that will be consistent with the deceased's intent is that the available funds be dissipated in excessive administration and legal dispute. Here, it appears that the parties have an interest in selecting the most appropriate way to deal with the failed charitable trust cy-près, and appear to have pursued their obligations diligently and to have compromised sensibly. In order to give effect to the objects of the charitable trust, and in the interests of the preservation of the fund and the implementation of the charitable purpose of the deceased, the Court is ready to accept the compromise.
Accordingly I make orders in terms of the orders jointly proposed by the parties, which are set out at [22] above.
[3]
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Decision last updated: 15 February 2019