The principle in Thistlethwayte's case
12There is a principle of construction of wills that a gift of income in perpetuity will carry with it a gift of capital. GE Dal Pont in Law of Charity , 1 st ed (2010) LexisNexis Butterworths at [6.12] explained the rule in these terms:
As a rule of construction, a perpetual gift of income from real or personal property to a person carries with it an absolute interest in the capital of the fund to which the person is entitled to call for. The rule is designed to prevent gifts of income being void by reason of the perpetuity rule. As a perpetual gift of income for a non-charitable object or to a non-charitable institution is void because of the rule against perpetuities, to adopt a construction that a perpetual gift of income carries the capital that generates the income stream is a means to ensure that the gift will vest within the perpetuity period. This gives effect, it is presumed, to the donor's likely intention, in that only by payment of the capital can the donee receive the full benefit and extent of the gift that the donor is presumed to have intended. (footnotes omitted)
As Dal Pont points out, there is conflicting authority on whether the rule of construction applies to charitable trusts. For Australia, that conflict has been settled by the decision of the High Court in Thistlethwayte's case. In that case, Dixon CJ, McTiernan, Williams and Fullagar JJ said at 440:
We cannot agree that this distinction [that is the distinction between charitable and non-charitable trusts] exists. In our opinion, the rule is the same whether the gift of income is to an individual or to a charity consisting of a body capable of holding property. The beneficiary is entitled to the capital unless there is a clear intention express or implied from the will that the beneficiary is not to take more than income.
13Since the decision of the High Court in Thistlethwayte's case, there have been a number of decisions, particularly of the Supreme Court of Victoria, that have held that proof of a contrary intention is more readily found where the beneficiary is a charity and that the fact that the beneficiary is a charity is one matter the court can take into account in determining whether a contrary intention exists: see Re Williams (deceased) [1955] VLR 65 at 69 per Dean J; Re Weaver [1963] VR 257 at 262 per Hudson J; Re Inman (deceased) [1965] VR 238 at 240 per Gowans J; Re Denheart (deceased) [1973] VR 449 at 451 per Starke J. The position was summarised by Gillard J in The Melbourne Jewish Orphan and Children's Aid Society Inc v ANZ Executors and Trustee Company Limited [2007] VSC 26 at [74] in these terms:
In my opinion, the fact that a gift of income is given in perpetuity to a charitable institution provides some evidence of a contrary intention. However, in the end, of course, it is a matter of intention of the creator of the trust. Nevertheless, in my opinion, the cases have established that the courts are more ready to find a contrary intention where the gift is to a longstanding charity in perpetuity.
Although that statement correctly summarises the earlier cases, it is not easy to reconcile it with the statement by Dixon CJ, McTiernan, Williams and Fullagar JJ that the rule is "the same" whether the gift is to a charity or to an individual. In each case, there must be a clear intention express or implied from the will that the beneficiary is not to take more than the income.
14In a number of the cases I was taken to, the courts have found a contrary intention from the fact that the gift was structured as a gift of income in perpetuity to established charities. So, for example, in The Melbourne Jewish Orphan and Children's Aid Society Inc case, Gillard J thought that it was of significance that the testator created a trust and gifted "the net annual rents" of a particular property to the charitable beneficiaries of that trust and made provision for new trustees to be appointed in the event that the original ones retired or died. A significant part of the parties' submissions in this case focussed on identifying points of similarity and differences with that case. In my opinion, however, the court should be wary of attempting to ascertain the testator's intention in this case by comparing the conclusions reached in other cases about wills that are expressed in different terms from the will in question. In addition, although I accept that the matters referred to by Gillard J are relevant to ascertaining the testator's intentions, in my opinion, evidence that the testator intended to make a gift of income in perpetuity is of limited assistance in displacing the rule. The rule has as its starting point the fact that the testator has made a gift of income in perpetuity. A gift of income in perpetuity cannot itself be evidence of a contrary intention, since the rule is concerned with what is intended by such a gift. Similarly, the fact that the will contains other provisions that contemplate the gift of income continuing in perpetuity is of limited assistance in rebutting the rule, since those provisions are an obvious incidence of such a gift. Of greater significance is whether there are terms in the will which make it clear that the testator could not have intended that the beneficiaries would have the right, if they chose to exercise it, to call for the capital. In other words, the fact that a testator chose to allow for the possibility that the beneficiaries may not call for the capital is of limited assistance in determining whether the testator has evinced a clear intention that they not be permitted to do so. If the rule of construction is to have substance, it is the latter intention that must be clear.
15In this case, the testator made provision for the gift of income to continue in perpetuity. He appointed Perpetual as one of his executors. It was to be expected that that entity would continue indefinitely. The testator also made provision in cl 6 for the capital of the trust to be preserved and provided a mechanism in cl 9 for resolving disputes about what was income and what was capital. Although these matters provide some evidence that the testator intended to make a gift of income only, for the reasons I have given, I do not attach significant weight to those considerations. Of much greater significance are the terms of cl 5 of the will. In my opinion, it is clear from the terms of that clause, particularly the two provisos, that the testator did not intend to give the capital of the trust to the plaintiffs.
16The first proviso states that, if it is determined that any of the plaintiffs is not a charity, then the gift to that plaintiff is a gift of income to that body for the perpetuity period (as it then was) and is then a gift of the capital absolutely. The second proviso states that if any of the beneficiaries cease to exist, amalgamate or change their names before or after the deceased's death, the trustees shall pay the income gifted to that institution to a charitable organisation which they consider most nearly fulfils the objects the testator intended to benefit. It can be seen from these provisos that the paramount concern of the deceased was to benefit the plaintiffs as they existed at the time of his will for so long as they continued to exist, whether or not they were charitable institutions. However, it was also the intention of the testator that the plaintiffs were only to receive income and were only to receive it for so long as they continued to exist in the form they had existed at the time the testator made his will. It is not entirely clear why the names of the relevant institutions were so important to the testator. But it is clear from the terms of the second proviso that a change in name is sufficient to cause the gift to fail.
17The testator could not have intended to give each of the plaintiffs an absolute interest in one third of his residual estate which each was entitled to call for at any time since, if they were or became non-charitable institutions, he specifically provided that they were to continue to receive income until the expiration of the perpetuity period and only then were they to receive the capital. The fact that it was unlikely that any of the three beneficiaries would cease to be charities does not undermine this point. What is critical is the light that the proviso sheds on the testator's intentions, not the likelihood that the proviso would operate.
18Mr Kelly SC, who appeared on behalf of the plaintiffs, submitted that the first proviso supported the contention that the testator must have intended that the plaintiffs would be entitled to call for the capital. In his submission, the testator could not have intended that the plaintiffs were entitled to the capital if they were not charitable institutions, but were only entitled to the income if they were. I do not accept that submission. What the proviso demonstrates is that the testator's primary concern was to benefit the plaintiffs. He chose to do that by gifting income in perpetuity. Only if the rule against perpetuity prevented him from doing so was he prepared to give them the capital, and then only on the expiration of the perpetuity period. The perpetuity period would not have been a concern at all if the gift carried with it an absolute interest in the capital which the plaintiffs could call for at any time. If that is what the testator intended, the proviso was unnecessary.
19Similarly, it is difficult to understand why the second proviso was necessary if the plaintiffs were entitled to call for the capital at any time after the gift took effect. That proviso is expressed to continue to apply after the testator's death. But, in that event, the plaintiffs would have been able to call for the capital at any time and it is difficult to understand why in those circumstances there was a need to make provision if they altered their nature through amalgamation or one or more of them altered their names. If they were entitled to call for the capital at any time, the expectation would have been that they would do so at least before any such change took place.
20Some further support for the proposition that the testator did not intend to make a gift of capital except in the limited circumstances referred to in the first proviso can be found in the testator's desire expressed at the end of cl 5 that the bequests to the three charitable institutions be known as "the RUPERT MICHAELIS BEQUESTS". In Roberts v University of Sydney [1960] NSWR 702, Jacobs J took the view that a similarly expressed desire in that case was some evidence that the testator did intend to gift the capital as well. But there the gift was to a single institution for a specific purpose - that is, research in such branch or branches of medicine as the senate of the university determined - and it was the fund payable to the university that the testator expressed a desire would be named after him. In this case, the gifts made to the three institutions were not for any particular purpose. If the capital were paid to those three institutions, there is no reason to suppose that it would remain an identifiable bequest to which the testator's name would be attached. That could only be achieved if the capital were kept separately and the income paid to the institutions annually as a bequest that bore the testator's name.
21For those reasons, the plaintiffs are not entitled to the declaration they seek.