Stratton v Simpson

Stratton v Simpson - [1970] HCA 45 - HCA 1970 case summary — Zoe

[5]

In the first place I cannot without some qualifications accept the view that the trustees of the testator's residuary estate, which he called the "J. P. Stratton Trust", could not distribute any of the trust income for the maintenance of a free ward in a hospital. Certainly they could not lawfully give any money to a "public hospital" for the general purposes of such hospital. That is because the testator has expressly put such hospitals outside the permissible range of his bounty. By cl. 15 of his will the testator directed that the income of his residuary estate be from time to time distributed by his trustees between the institutions and bodies (except any public hospital within the meaning of the Hospital Act, 1927) in respect of which at the date of his death any gift, bequest or legacy was by s. 134 (1) of the Administration Act exempt from estate, succession or other duty under that Act. The sense in which the word "institutions" is used in the will in cl. 15 appears from the reference in the prefatory recital (cl. 2) to "charitable Institutions as hereinafter mentioned". It is said that the words of par. (b) of s. 134 (1), "the maintenance of a free ward in any hospital", describe a purpose, not an institution. That is of course true. But every charitable trust is a trust for a purpose or purposes that are charitable, not a trust for a person or persons, although persons benefit from the fulfilment of the purpose. A body or organization which holds property upon a charitable trust and carries out the trust purposes is commonly called a charitable institution or a charity. It is really but the instrument for carrying a purpose into effect. Confusion can occur from want of remembering this, as Else-Mitchell J. observed in McGarvie Smith Institute v. Campbelltown Municipal Council [1] . The word "institution" is a word of wide denotation. It is not uncommonly used in collocation with other words as here "institutions and bodies": see, for example, Smith v. West Australian Trustee Executor & Agency Co. Ltd. [2] . In that case Fullagar J. declined to recognize any distinction between a charitable purpose and a charitable institution. It has been said that every charitable trust is not necessarily to be regarded as a charitable institution. My brother Walsh said so in the Supreme Court of New South Wales in Christian Enterprises Ltd. v. Commissioner of Land Tax [3] , founding his statement upon a passage in the judgment of the Privy Council in Minister of National Revenue v. Trusts and Guarantee Co. Ltd. [4] as follows:

[6]

It is by no means easy to give a definition of the word "institution" that will cover every use of it. Its meaning must always depend upon the context in which it is found. It seems plain, for instance, from the context in which it is found in the subsection in question that the word is intended to connote something more than a mere trust. The context there was such that their Lordships said that the charitable institutions in question are "those which are institutions in the sense in which boards of trade and chambers of commerce are institutions, such, for example, as a charity organization society, or a society for the prevention of cruelty to children". The similarity of a society as last mentioned to a chamber of commerce may not be at once apparent, although the distinction there made between such institutions and "mere trusts" is clear enough. But I can see no reason why, unrestrained by context, a fund raised by public contributions and administered by trustees could not be properly called an institution. Whether or not it would be a charitable institution would, of course, depend upon the trusts on which it was held. Funds raised for the relief of distress caused by bushfires or other disasters are well known. If the object to which the fund must be devoted is the continuing advancement of charity in the legal sense, it is a charitable institution. The Gowrie Scholarship Trust Fund and the Winston Churchill Memorial Trust come to my mind as examples. I do not think that the absence of the word "institution" in s. 134 (1) (b) means that the objects to which the income of the testator's residuary estate can be devoted do not include a fund established for the maintenance of a free ward in a hospital. I do not suggest that the trustees could themselves set up a trust for that purpose. Their power is to distribute the trust income to existing institutions. 1. (1965) 11 L.G.R.A. 321. 2. (1950) 81 C.L.R. 320. 3. (1968) 88 W.N. (Pt 2) (N.S.W.) 112, at p. 119. 4. [1940] A.C. 138, at p. 149.

[10]

any school which pursuant to the provisions of the Education Act, 1928, is included in the latest list of schools published in the Gazette that have been inspected and found efficient or have been certified to be efficient for the purposes of that Act. Speaking generally, a school may or may not be a charitable institution in a legal sense. That depends upon its character and the purpose for which it is conducted. For it to be a charity the pupils must be drawn from the public at large, or from a sufficient class or section of the public; and it must exist for the advancement of education in a broad sense and not for the private profit of individuals. The judgment of Danckwerts J. in The Abbey Malvern Wells Ltd. v. Ministry of Local Government and Planning [1] is a good pointer to the distinction, which is firmly established in law, between schools which are and those which are not charitable, although, as Lord Denning M.R. observed in Inland Revenue Commissioners v. Educational Grants Association Ltd. [2] , "when we come down to earth, we run into difficulties" for the distinction in practice becomes illogical. No doubt very many schools that answer the description in s. 134 (1) (f) are charitable institutions in the legal sense. But it may be that some are not. Of that we have no evidence one way or the other. It may be that the statute means that to escape duty a gift to a school must be to the school as an educational institution, that is to say that such gifts must be in trust for the purposes of the school and not capable of being used to augment the profits of private persons. However that may be, when the testator's will is read in the light of the principles stated by Lord Lindley and Lord Davey, I consider that, without resort to s. 102 of the Trustees Act, the trustees' power to apply income in favour of schools is restricted to such schools as are in the legal sense charitable institutions. This is not a case where the "general overriding trust for charitable purposes" necessary to produce that result is seen simply as a reflection from particular provisions. It is not implicit in the will. It is plainly expressed there. I differ here from the opinion that my brother Gibbs has expressed. I consider that the testator made it clear that the income of the trust he established must go to "charitable institutions". And then, as Lord Hanworth said in a case where a testator's overriding charitable purpose was made clear by a recital of his wishes and intention, "it is a principle of the law long established, that where there is an intention to devote property to charity, effect must be given to it": In re Hood; Public Trustee v. Hood [3] . The Master of the Rolls there said that the recital was "of dominant force". Bennett J., who had heard the case at first instance, had said it expressed "the dominating purpose" of the will. Lawrence L.J. spoke of it as stating "the main object", Romer L.J. "the dominant object". 1. [1951] Ch. 728. 2. [1967] Ch. 993, at p. 1009. 3. [1931] 1 Ch. 240, at p. 249.

[17]

The doctrine, and with it the phrase, has moved from company law into the law of charity. A gift to an institution that has several objects or purposes, some charitable some not, one or more of which it can lawfully pursue independently of others, is not a gift to charity. It does not become charitable simply because one of the objects, being charitable, is called the main object of the institution. That is entirely logical: but unfortunately it seems to have led sometimes to a supposition that the description of a charitable purpose of an institution as its main object suggests that it has other objects which are not ancillary to the main object. I do not see why that should be so. It is not supported by the case that is often cited, Oxford Group v. Inland Revenue Commissioners [2] . Professor Keeton in his book The Modern Law of Charities (1962), p. 111, in the course of sharp criticisms, has said that the decision in that case, which he calls "unfortunate", was "unexpected". It seems to me that, whether expected or not, it did not depart from well-established principles. What I think is surprising is not the decision itself, but what seems to be sometimes taken to be its effect and what it has been sought to build upon it. The case arose in this way. The Oxford Group was a company limited by guarantee. It claimed an exemption from income tax on the ground that it was "a body of persons established for charitable purposes only" within the meaning of s. 37 of the Income Tax Act 1918 U.K.. The first of the objects set out in its memorandum of association was a good charitable purpose (the advancement of the Christian religion). The second was held, after argument, not to be charitable, for in the pursuit of it the company could engage in secular activities and expend its funds on matters which were not charitable. Yet, as Tucker L.J. said [3] , it was common ground that the two objects mentioned were both "main objects". And there were too other objects which it was held were not, upon the true construction of the memorandum, themselves charitable and which were not merely ancillary to the charitable object. The Court of Appeal, having taken that view of the memorandum, naturally held that the company was not established for charitable purposes only. After that case there were in England several others in which the same question was raised under other statutes exempting charitable institutions from taxes and charges: see Crystal Palace Trustees v. Minister of Town and Country Planning [1] ; Associated Artists Ltd. v. Inland Revenue Commissioners [2] ; North of England Zoological Society v. Chester Rural District Council [3] . In each of these the question was whether the non-charitable objects or purposes of a corporate body were independent of or ancillary to its charitable object or objects. That question was resolved upon the construction of its memorandum of association or other incorporating instrument. In none of these did the words "main object" appear. But the last-mentioned case is of significance because the statutory exemption from rates, upon which the plaintiff Zoological Society there relied, was given to bodies "not established or conducted for profit and whose main objects are charitable ".

[21]

The decision in In re Harpur's Will Trusts [2] was relied upon for a different conclusion. That case is not binding upon us. But it carries the high persuasive authority of the opinions of Cross J. at first instance and of Lord Evershed M.R., Harman and Donovan L.JJ. in the Court of Appeal. It therefore must have careful and respectful consideration. It arose in this way: a testatrix directed that her residuary estate should be divided between "institutions and associations having for their main object the assistance and care of soldiers, sailors, airmen and other members of H.M. Forces who have been wounded or incapacitated during the recent world wars". On a summons to determine whether that gift was valid - [3] - Cross J., relying upon the Oxford Group Case [4] , said that the fact that the main object of an institution or association is charitable does not mean that it is necessarily established for charitable purposes only, as it might have subsidiary objects which are not charitable and which are not merely ancillary. In the absence of evidence that none of the bodies having the main object specified by the testatrix had any subsidiary non-charitable objects, his Lordship said that he could not hold that the residuary estate must go to exclusively charitable institutions or associations. He also held that the gift was not saved by the Charitable Trusts (Validation) Act, 1954 U.K.. The Attorney-General appealed, in the interest of charity, to the Court of Appeal. The appeal was however limited to the second point above mentioned. There was no appeal as to the first, counsel for the Attorney-General saying, for some reason that is not to me clear, that it was concluded by the decision in the Oxford Group Case [1] . The appeal was dismissed. Whether or not it was rightly dismissed may be arguable academically as a moot point: see the view of the Act that had been taken by Buckley J. in In re Wykes, deceased [2] . However, that question need not trouble us, because, as Gibbs J. has pointed out, s. 102 of the Trustees Act, 1962 W.A. differs from the corresponding English provisions: and its validating effect in the present case, if validation be needed, is not I think doubtful. But is validation needed? I do not think so, notwithstanding what was said by Cross J. and in the Court of Appeal. I do not seek to distinguish the present case from Harpur's Case [3] on purely literal grounds, although perhaps something might be made of the difference between institutions and associations having for their main object charity and a body the main object of which is charity. I say of the decision in Harpur's Case [3] that I do not think that the words "main object" are a term of art. I certainly do not think that the Oxford Group Case [1] made them so. I do not think that it can be said that always they must be taken to predicate other and independent objects. Nor on the other hand do I think that in every case they necessarily predicate other objects that are ancillary to the main object. As I have said, they are ambiguous: and the ambiguity must be resolved by the context of the particular topic. It may be that Cross J. was aware that some associations having as their main object the assistance and care of sailors, soldiers and airmen wounded in war were associations of old comrades having also social or other activities which might on occasions be pursued independently of the main object. However that may be, that his Lordship gave a meaning to the words "main object" in the will that was before him does not persuade me that the same meaning must be given to them in the statute that is before us. Mrs. Harpur's use of words in her will ought not I think to govern the use of words by the Parliament of Western Australia. Another meaning is open: and I think it is the natural one. I make two further observations about Harpur's Case [1] . It was said by Harman L.J. to be "a tragic case"; for, his Lordship said, "I can feel little doubt that the testatrix meant in effect to benefit members of His Majesty's Forces disabled in the wars of 1914 and 1939". And Lord Evershed said that "had the word "main" been omitted, or the epithet "charitable" been inserted before the various institutions and associations, all would have been well". His Lordship emphasized that, having regard to the concessions made on behalf of the Attorney-General, the sole question for the Court of Appeal was whether the Act of 1954 was applicable. I am not prepared to base any conclusion in the present case upon the proposition, which passed by concession in that case, that the presence of the word "main" there defeated the charitable intent of the testatrix. On the contrary, I would add the case to what MacKinnon L.J. once spoke of as "a number of authorities in most of which the manifest intentions of various testators seem to me to have been defeated by their artless use of language": Re Ward [2] . In the Administration Act the true effect of the words "the main object" is I think to confine exemptions from death duty to gifts to institutions that are charitable, not to enable gifts to institutions that are not exclusively charitable to escape duty.

[29]

As my children are well provided for and it being my desire that charitable Institutions as hereinafter mentioned shall as far as possible receive the benefit of the whole of my residuary estate I am creating under this my Will a trust to be known as " J. P. Stratton Trust " and I am convinced that the persons hereinafter named as Executors and Trustees of this my Will are public spirited and will at all times have the welfare of charity at heart and I express the wish that any future Trustee shall have similar qualities. By cl. 3 he appointed George Robert Simpson of 24 Jutland Parade Dalkeith, Chief Manager for Western Australia of the Commonwealth Reserve Bank, and Joseph Francis Ledger of 2 Bishop Road Dalkeith, Engineer, (who are respondents to this appeal) to be the executors and trustees of his will. After making a specific devise and some bequests of annuities and legacies he devised and bequeathed his residuary estate to his trustees (by cl. 14) to sell and convert and after payment of debts, funeral and testamentary expenses, and duties, to hold the same on the trusts thereinafter mentioned. Clause 15 then provided as follows: I direct that my residuary estate to be known as " J. P. Stratton Trust " shall be held by my Trustees upon trust from time to time to distribute the net income therefrom between the institutions and bodies (except any public hospital within the meaning of the Hospital Act 1927) in respect of which at the date of my death any gift devise bequest or legacy is exempt from duty under Section 134 of the Administration Act, 1903-1956, or any Act amending or re-enacting the same Act and i declare that my Trustees shall have power to distribute the net income between such of the said Institutions or some of them in such proportions and in such manner as my Trustees in their absolute discretion shall think fit. It is unnecessary to refer to the remaining provisions of the will, which confer certain powers on the trustees, or to the codicil, which is quite irrelevant to the present case.

[38]

Lavan J. held that the trusts of cl. 15 of the will must fail unless either they are exclusively charitable or s. 102 of the Trustees Act, 1962 W.A. operates to give them validity. He reached this conclusion for two reasons. First, he held that the trustees are given by cl. 15 a power to select, as objects of the testator's bounty, institutions and bodies from a class so vague and indefinite that the trustees are afforded no effective guidance as to the ambit of their power of selection and that this amounts to an unauthorized delegation of testamentary power and has the consequence that the clause is void for uncertainty of objects, unless the power of selection is confined to objects that are, or must be treated as being, exclusively charitable: Chichester Diocesan Fund and Board of Finance (Incorporated) v. Simpson [1] ; Tatham v. Huxtable [2] ; Attorney-General (N.S.W.) v. Donnelly [3] . Secondly, he held that the clause does not make any provision for the vesting of the corpus of the residuary estate but creates a trust of income of indefinite duration. There is in my opinion room for argument as to whether or not the class of institutions and bodies from which the trustees may make a selection is defined with sufficient certainty but I find it unnecessary to consider that question and would express no view upon it, particularly since there is no evidence to show what institutions and bodies there were at the date of the testator's death which answered or might have answered the description contained in cl. 15. I do, however, agree that cl. 15 upon its proper construction creates a trust of the income of the residuary estate which is of indefinite duration, without making any gift of the capital from which the income is derived, and it follows that unless the purposes to which the income must be applied are exclusively charitable the trust fails because it "tends to a perpetuity" (to use the expression which appears in the cases although it has been criticized by the text writers): Congregational Union of New South Wales v. Thistlethwayte [4] ; In re Wightwick's Will Trusts [5] ; In re Cain [6] ; Theobald on Wills, 12th ed. (1963), par. 1527; and Morris & Leach: The Rule against Perpetuities, 2nd ed. (1962), pp. 324-327.

[40]

The question whether the trusts of cl. 15 are in favour of institutions and bodies that are exclusively charitable is one that depends upon the proper construction of the will. An initial question that arises is whether the trustees are entitled to apply the income for the purpose mentioned in s. 134 (1) (b). It appears from cl. 15 that the income of the residuary estate may only be applied in favour of something properly described as an "institution" or a "body", although the fact that the introductory words of cl. 2, and the second part of cl. 15, refer only to "institutions" suggests that the two words are used as synonyms. Further, the institution or body must have been such that a gift made in respect of it at the date of the testator's death would be exempt from duty under s. 134. The words "in respect of" in cl. 15 would appear to be equivalent to the words "to or in trust for" in s. 134. The choice by the testator of the words "institutions and bodies" suggests at first sight that he intended to benefit only the institutions and bodies expressly so described in s. 134 (1) (c) and (d), but if this had been the effect of cl. 15 it would have been unnecessary to except public hospitals, which are not described in s. 134 as institutions or bodies. The inclusion in cl. 15 of the words "except any public hospital within the meaning of the Hospital Act 1927 " therefore strongly suggests that the words "institutions and bodies" are intended to refer to any establishment mentioned in s. 134 which is an institution or body in the ordinary sense of those words, even though it is not there expressly so described. In its ordinary sense "institution" means "an establishment, organization, or association, instituted for the promotion of some object, especially one of public utility, religious, charitable, educational etc." (The Shorter Oxford English Dictionary). It means, as was said in Mayor etc. of Manchester v. McAdam [1] , "an undertaking formed to promote some defined purpose " or "the body (so to speak) called into existence to translate the purpose as conceived in the mind of the founders into a living and active principle". Although its meaning must depend on its context, it would not ordinarily connote a mere trust (cf. Minister of National Revenue v. Trusts and Guarantee Co. Ltd. [2] ). A school could appropriately be called an institution within the ordinary meaning of the word. Similarly the words "medical service or fund", if construed to mean the body set up to organize and control the service or administer the fund, could also be regarded as describing an institution. Paragraphs (c) to (f) of s. 134 (1) may therefore all be taken as referring to institutions or bodies which may be selected by the trustees under cl. 15 to share in the distribution of the income. However I find it difficult to regard par. (b) of s. 134 (1) as describing an institution or body; it describes a purpose, and although an institution may be formed to promote that purpose, s. 134 (1) (b) does not exempt a gift to the institution as such. It does not seem to me that s. 134 (1) (b) can properly be regarded as specifying any institution or body in respect of which a gift is exempt from duty. I conclude therefore that under cl. 15 the trustees are not at liberty to distribute income to an institution or body simply because it has as one of its purposes, or its sole purpose, the maintenance of a free ward in a hospital. Of course, such an institution or body might come within par. (d) or par. (e) of s. 134 (1).

[42]

The question then is whether institutions or bodies which at the date of death of the testator answered the description of pars. (c), (d), (e) or (f) of s. 134(1) are charities in the legal sense. It is impossible to give a final answer to this question on the present material, because (as I have mentioned) no evidence was led before the learned primary judge as to what institutions or bodies there were at the date of death which answered this description. Some of such institutions and bodies would certainly have been charitable, but some were not necessarily charitable. Thus a "public educational institution" within par. (c) would be charitable, as being for the advancement of education; the word "public" shows that the institution would not qualify unless it provided a benefit for the public or a sufficiently large class of the public. The same could not however be said of a "school which pursuant to the provisions of the Education Act, 1928, is included in the latest list of schools published in the Gazette that have been inspected and found efficient or have been certified to be efficient for the purposes of that Act" (par. (f)). The list referred to appears to be that kept under s. 32B of the Education Act, 1928-1965 W.A. (the statute in force at the date of the testator's death) although a similar list had been kept under an earlier section (s. 32) which had been repealed before the date of the testator's death. It is clear from the references in ss. 32 and 32B to the "proprietor" of the school that those sections extended to private schools. It is, therefore, possible that there could be included in the list mentioned in par. (f) schools which were not for the benefit of the public or an appreciable section of the public and which, therefore, could not be regarded as existing for charitable purposes - for example, such a school as was the subject of the decision in Thompson v. Federal Commissioner of Taxation [1] . In the present case there is no evidence to show whether at the date of the testator's death a list was kept under the Education Act and, if so, what schools were on it.

[45]

However it was submitted on behalf of the respondents that even if cl. 15, if it stood alone, might have permitted the trustees to apply the income in favour of institutions all of whose purposes are not charitable, the clause must be construed in the light afforded by cl. 2 of the will, which, it was said, shows that the testator intended that the trustees should select only such institutions and bodies of the kind mentioned in cl. 15 as are charitable. In other words, cl. 2 should be construed as a declaration of intention that such of the institutions as thereinafter mentioned as are charitable should alone receive the benefit conferred by cl. 15. Clause 2 contains a prefatory explanation by the testator of his reason for making the disposition contained in cl. 15. If the latter clause is ambiguous, the former may be referred to for the purpose of resolving the ambiguity, but if cl. 15 is unambiguous, the prefatory words of cl. 2 do not afford any justification for doing violence to the words of cl. 15 or for supplying words into that clause to restrict it to charitable objects on the basis of speculation as to what the testator would probably have wished or intended if his attention had been drawn to the matter (cf. Hunter v. Attorney-General [4] and Attorney-General v. Jesus College, Oxford [5] ). Clause 15 seems to me to be unambiguous; it authorizes the trustees to select any of the institutions and bodies therein described and it does not impose the restriction that the institution or body chosen must be charitable. Clause 2 shows that the testator believed that the institutions described in cl. 15 were charitable; he may have been right or wrong in his belief, but he was not intending by cl. 2 to limit the power of selection given by cl. 15. Moreover the fact that cl. 2 describes the trustees as persons who are public spirited and have the welfare of charity at heart does not assist in the interpretation of cl. 15 (cf. In re Harpur's Will Trusts [1] ). In some cases a charitable intention may be discerned from the fact that the donee is described as the holder of a particular charitable office, but that is not the case here.

[56]

This section (which was inserted in the New South Wales statute in 1938) is substantially the same as s. 2 of the Charitable Trusts Act 1914 Vict. which has now become s. 131 of the Property Law Act 1958 Vict., although there are some minor textual differences mentioned in Attorney-General (N.S.W.) v. Donnelly [1] . In Victoria, the Courts found no difficulty in applying the section to validate trusts which were expressed to be in favour of institutions rather than for purposes as such: In re Griffiths; Griffiths v. Griffiths [2] ; In re Thureau; Mitchell v. Holland [3] ; and In re Ingram [4] . Although not all the reasoning in those cases can be accepted, the correctness of the conclusions reached is confirmed by Leahy v. Attorney-General (N.S.W.) [5] , where the effect of the section was authoritatively expounded. It is now clearly established by that decision that s. 37D validates trusts which would otherwise have been invalid either because of uncertainty or because of perpetuity [6] and that the section applies not only where the testator had expressly indicated alternative purposes, the one charitable and the other non-charitable, but also where the gift is for a purpose described in a compendious or composite expression which embraces both charitable and non-charitable purposes [7] . Moreover the decision must be regarded as establishing that the section can apply where there is no express statement of purpose in the disposition creating the trust and the trust is expressed to be in favour of institutions. The trust there was for orders of nuns, which were unincorporated associations, and which their Lordships described [8] as "an object so predominantly charitable that a charitable intention on the part of the testator can fairly be assumed". In other words, a gift for charitable institutions is prima facie a gift for charitable purposes (Hardey v. Tory [9] ; Smith v. West Australian Trustee Executor & Agency Co. Ltd. [10] ) and a trust for institutions whose objects are predominantly charitable may come within s. 37D. 1. [1962] 1 Ch. 78. 2. [1959] A.C. 457. 3. (1958) 98 C.L.R. 538. 4. (1958) 98 C.L.R., at p. 569. 5. [1926] V.L.R. 212. 6. [1948] 2 A.L.R. 487. 7. [1951] V.L.R. 424. 8. [1959] A.C. 457. 9. [1959] A.C., at p. 473. 10. [1959] A.C., at pp. 474-475. 11. [1959] A.C., at p. 476. 12. (1923) 32 C.L.R. 592. 13. (1950) 81 C.L.R. 320, at. pp. 322, 325.

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