BETWEEN : THE LIBRARY BOARD OF WESTERN AUSTRALIA

ATTORNEY GENERAL FOR THE STATE OF WESTERN AUSTRALIA

Equity - Charitable trust - Moral obligation to make a payment - Authority of Court to give permission

1 McKECHNIE J: This is an application to the Court in its equitable jurisdiction seeking the approval for the trustee of a charitable bequest to make a payment as an act of grace to certain named persons.

2 The matter arises in this way: the late Maude Irene Sholl was close to her sister and her sister's family. She never married or had children. As her niece, Sonia Hunn, and her husband, established a family, Aunt Maude, as she was known, became an important member, entering in full into family life, attending all the usual celebrations and school functions. Her great nephew and nieces, Simon, Amanda and Deborah, treated her as a second grandmother and she responded to them the same way. According to her great nephew:

"Auntie Maude was very interested in Western Australian history because her family had been a prominent pioneering family in the Peppermint Grove area in Perth. She had a lot of old photographs, diaries and other family records. Auntie Maude used to work as a volunteer at the Battye Library and she gave some family records to the library. She used to tell my sisters and me about her father's days as a pioneer explorer, his involvement with the pearling industry in Cossack and in his settlement of land in Peppermint Grove around 1895. She also told us her many personal recollections about her life in and around Freshwater Bay and Cottesloe, her service in the AMWAS during the War and her travels around Australia and Europe. ..."

3 She lived until 1995 in increasingly frail health and with her mental faculties in later life beginning to fail her.

4 In 1988 Ms Sholl made a will. She bequeathed as follows:

"I BEQUEATH my News Corporation shares to my trustee UPON TRUST for distribution as follows:

(a) as to three one-seventh shares thereof to my nephew SIMON HUNN

(b) as to two one-seventh shares thereof to my niece AMANDA FARMER

(c) as to the remaining two one-seventh shares thereof, to my niece DEBORAH HUNN."

5 She made one other bequest and then, after payment of the usual matters from her estate:

"to pay in perpetuity the remainder of the income each year from the capital fund (to be known and titled as 'The Sholl Bequest') to the Library Board Incorporated UPON TRUST for the Friends of the Battye Library for them to apply as they shall from time to time in their discretion decide is most appropriate for the particular purpose of compilation, of finding aids and the editing of documents with a view to publication and otherwise for the general purposes and objects of the Battye Library of Western Australian History."

6 As at 22 November 1999, that is two days ago, the value of the estate stood at $335,490.86.

7 In 1993, no doubt because of advancing age and ill health, Ms Sholl put the management of her affairs in the hands of Perpetual Trustees Pty Ltd. Mr Jackson of that company visited her. He prepared a written investment review of her financial matters. He recommended that Ms Sholl dispose of the 6086 shares she held in News Corporation. She accepted his advice. He cannot now remember whether or not he discussed her will with her.

8 Obviously, the decision to sell the News Corporation shares effectively cut Simon, Amanda and Deborah from the will by ademption. She did not make another will.

9 The Library Board holds the income from the capital fund on trust for the Friends of the Battye Library. This is an incorporated body that assists and promotes the interests of the J.S. Battye Library, a well known collection of historical manuscripts, newspapers and books about Western Australia.

10 The Library Board accepts Ms Sholl enjoyed a very close relationship with Simon, Amanda and Deborah. It considers that when she sold her shares in News Corporation she did not consider the effect on the will. Had she done so she would have made some other provision for her great nephew and nieces. In the light of the affidavit evidence, I am satisfied that this is so.

11 Ms Sholl led a busy and active life until the onset of poorer health in old age. She was devoted to the Hunn family and they to her. In her will in 1988 she made specific provision for Simon, Amanda and Deborah. Nothing seems to have occurred between then and the sale of the News Corporation shares which would suggest that she had changed her mind. On the contrary, the evidence suggests the continuation of the close relationship shown by mutual acts of assistance.

12 When Mr Jackson advised her as to her financial affairs, it was not generally his policy to refer to any will that the person may have made, although he has no memory one way or the other in this case. By 1993 Ms Sholl was frail and had, regrettably, lost some mental acuity. The probabilities are that she simply overlooked the effect of the sale of the News Corporation shares on her will. Had her attention been drawn to it I am sure she would either have not proceeded with the sale or redrawn her will to make other provision for Simon, Amanda and Deborah.

13 The Library Board has pondered its position as trustee of a charitable trust. The board has reached the view that it has a moral obligation to make a payment to Simon, Amanda and Deborah. It has decided that this moral obligation would be satisfied with the payment of 50 per cent of the capital sum presently being held by the Public Trustee, after deduction of all legal expenses, divided and paid in accordance with the will, a three-seventh share to Simon, a two-seventh share to Amanda and a two-seventh share to Deborah.

14 The intended beneficiaries, that is, Simon, Amanda and Deborah, have already incurred legal expenses of about $19,000. The Library Board considers that it has a moral obligation to contribute $8000 towards these expenses.

15 The present beneficiary of the charitable trust, Friends of the Battye Library, has also expressed a view. In the words of its president, Prof Geoffrey Bolton, the committee of management would feel uncomfortable if it retained the benefit of the income from the testatrix's entire residuary estate in circumstances where Mr Hunn, Ms Farmer and Ms Hunn did not receive any benefit under the will.

16 The committee of management considers that the testatrix would have wished Mr Hunn, Ms Farmer and Ms Hunn to benefit from her estate and considers that a moral obligation is owed to them to make some provision in their favour. The committee of management therefore supports the plaintiff's proposal that an ex gratia payment be made.

17 The Attorney General, who exercises general supervisory control over charitable trusts, was asked to give his authority to the payment made pursuant to the moral obligation which I have found exists. He has declined to do so, in part because the present holder of the office also has responsibilities as Minister for the Arts and they include responsibilities over the Library Board. I consider the Attorney General's refusal to act in these circumstances as an appropriate position to take. The Attorney General, however, does not oppose the orders presently sought.

18 A charitable trust has no general authority to make gifts beyond the purposes of the charity. Therefore, if a charity considers that it has a moral obligation to make a gift or settle an amount on another person, it must have authority given to it from some other quarter.

19 The foundation of the equitable jurisdiction of this Court is in the Supreme Court Act s 16(d)(1). The Court is given power and authority to administer justice and to do and to exercise and perform all acts, matters and things necessary for the due execution of such equitable jurisdiction as possessed by the Lord Chancellor at the commencement of the Supreme Court Ordinance 1861.

20 In 1840, the Master of the Rolls, Lord Langdale, considered the general power of intervention of the Court where a charitable trust had conveyed land and the Attorney General sought an order for reconveyance. This is in the case of Attorney-General v Brettingham [1840] EngR 796; (1840) 3 Beav 91. The original conveyance had improved the charity. Lord Langdale was of the opinion that at law the transaction could not stand. However, rather than determine the matter, it being a hard case, he stood it over and left it for the Attorney General to exercise discretion.

21 The basis of this decision by Lord Langdale appears to be that the Attorney General has a discretion not to insist on strict compliance with the law. At first glance this case would seem to deny the existence of a power to authorise a transaction, as opposed to a discretion to refrain from enforcing a right or power.

22 In In re Snowdon (Dec'd) and In re Henderson (Dec'd) [1970] 1 Ch 700, Cross J dealt with two applications which were made by way of test cases. The facts in the Snowdon case were very similar to the present matter.

23 Cross J held that a rule denying power to authorise payment, pursuant to a moral obligation, was difficult to justify. His reasons were as follows at 709:

"In the first place it would be odd that a charity, which depends for its continued existence on the recognition by members of the public of a moral obligation to give to charity should itself be incapable of giving effect to any moral obligation however strong. Secondly, the rule would deny to the court or the Attorney-General in the case of charities a power which exists in other cases which may be said to be somewhat analogous. For example, the Court of Protection in managing the properties of mental patients has power to make provisions for persons or purposes for whom or which the patient might be expected to provide if he were not mentally disordered. This certainly includes the authorising of payments in pursuance of a moral obligation. ..."

"Finally, there are some old cases for which I am indebted to the industry of counsel which appear to me to be inconsistent with the view that there is an inflexible rule against the sanctioning of ex gratia payments out of the charity funds. "

24 In respect of one of those cases, Attorney-General v Brettingham op cit, he said:

"If the court acting on the advice of the Attorney General has power to relieve charity trustees from the obligations to make good in full breaches of trust for which they have been shown to be answerable, and so in effect to allow them to retain money which belongs to the charity, it would be extraordinary that there were no power in the court or the Attorney-General to allow charity trustees to apply charitable funds in the discharge of a moral obligation of the charity."

25 In re Snowdon was followed in New South Wales in Hobday v Attorney-General (NSW) (1982) 1 NSWLR 160. Holland J, having referred to In re Snowdon, said:

"Independently of any authority it seems to me that it would be extremely difficult for any court to justify the view that no power existed."

26 In re Snowdon was also followed in Re The Queen Victoria Neonatal Research and Development Trust (1989) unreported; No 1680; SCt of SA (Millhouse J); 29 September 1989.

27 In my view, this Court does have jurisdiction to grant authority to allow a charitable trustee to fulfil a moral obligation. Firstly, I consider that the Court has direct power, as a matter of conscience, in its equitable jurisdiction to administer justice. It would be odd if a court of conscience was unable to authorise a charity to make a payment in conscience pursuant to a moral obligation. Secondly, as a matter of comity, I consider that the decisions In re Snowdon (Dec'd) and in Hobday v Attorney-General (NSW), should be followed.

28 I am of the view that in the particular circumstances, Ms Sholl would, had she thought of it, have made alternative provision for her great nephew and great nieces in the event that she sold the News Corporation shares. Further, I am of the view that the Library Board has rightly identified that it has a moral obligation to make a payment to them. I therefore propose to make orders in terms of the minute of proposed orders as amended.