The Trust Company (Australia) Limited as Trustee of the Kyle Williams Home Trust v Attorney General New South Wales

Judgment 1HIS HONOUR : The plaintiff is the trustee of a trust established by the will of Caroline Milne Williams, who died on 5 January 1939. By her will the deceased directed that her trustee hold her property, situated at Kyle Bay, George's River, together with five acres or thereabouts of land attached thereto and known as The Retreat, on trust to convert the same into a convalescent home for children. That home was to be known as the Kyle Williams Home. 2The testatrix went on to make a gift of furniture and other chattels in the home to the trustee to be used for the benefit of the home. Apart from a specific gift of other real property, the testatrix provided that her residual estate be sold and the proceeds, after payment of debts and some pecuniary legacies, be held by her trustees to be used for the equipment, renovation, alteration or extension of the home and otherwise for its maintenance and to be kept in accordance with the scheme settled. 3By its amended summons, the plaintiff seeks the determination of whether the trust established by the will of Mrs Williams constitutes a valid charitable trust, whether the original purpose of the gift failed by the date of Mrs Williams' death, or whether the original purposes, since they were laid down, have ceased to provide a suitable and effective method of using the trust's property, having regard to the spirit of the trust. The plaintiff seeks orders that a cy-pres scheme be settled and that the trust property be sold, with the net proceeds of sale to be held by the trustee, for it to apply the net annual income to charitable entities in New South Wales that provide care, support and rehabilitation to children suffering from any illness or from any physical or intellectual disability, including any psychiatric or psychological condition. 4It is usual in cases seeking orders for the settling of a cy-pres scheme that the case proceed in two stages: the first stage being the determination as to whether a scheme is justified, and the second to settle the details of the scheme. 5The plaintiff has sought all of the above orders today. The first question is whether a cy-pres scheme is justified. It is clear that the testatrix had a general charitable intention. The trust for the establishment of the convalescent home for children was a trust for charitable purposes. The gift of the house is properly to be seen as a means for implementing the testatrix's intention of providing for the convalescence of children. 6There is nothing to displace the presumption of a general charitable intention ( Charitable Trust Act 1993, s 10(2)). 7The property known as the Kyle Williams Home was a substantial private residence with extensive grounds. It has never been used for the purpose specified in the will. Due to the Second World War, it was not opened as a children's home until 1947. 8Between 1947 and 1984 the property was leased for no rent to an organisation known as Legacy House which operated it as a children's home, as distinct from a home for convalescent children. 9From 1985 the property was let at no rent to a department of the Presbyterian Church of Australia, New South Wales, known as Presbyterian Social Services, which used it as a family group home for children and young people who were unable to live at their own home. Presbyterian Social Services used the property for that purpose until about 2003. That use ceased because Presbyterian Social Services was dependent on funding from the New South Wales Department of Community Services for the operation of the facility. The Department refused to continue funding because the use of such a property in that way was no longer consistent with the Department's philosophy for providing homes for children in need of care. 10Since the property ceased to be used by Presbyterian Social Services, it has been unoccupied. The cost of maintenance and insurance is substantial. The trustee has placed newspaper advertisements inviting expressions of interest from individual organisations which may be interested in using the property as a convalescent home for children. Those advertisements have prompted only one response that arguably proposed the use of the property for those purposes. That was from a charity known as Ronald McDonald House Charities. Between November 2010 and January of this year Ronald McDonald House Charities explored the possibility of the property being used for programs which it undertakes. 11In a letter of 9 November 2010 it stated that the property might be capable of being used by it, either for the purpose of a Ronald McDonald Family Retreat or for the purpose of a Ronald McDonald House. 12At that time Ronald McDonald House Charities had not viewed the property, and its proposals were no more than indications of possible use that it might have for the property, if the property were available. 13In its submission of 18 January 2011 to the solicitor for the trustee, Ronald McDonald House Charities, stated that the property could be used as a Ronald McDonald House where sick children could convalesce with the support and care of their family and continue to receive treatment as an out-patient from either Sydney Children's Hospital at Randwick or the Children's Hospital at Westmead. However, having made that statement, the submission went on to raise what were there described as " significant difficulties " with that proposal. These included the distance of the property (which is located at Blakehurst) to the hospitals; the fact that families with sick children prefer to stay close to the medical facilities; management difficulties for Ronald McDonald House Charities arising from the distance of the property from the Charities' " governing " facility; the difficulty of obtaining volunteer support provided at facilities by the Ronald McDonald House Charities due to the distance of the property from the Westmead Children's Hospital; the capital investment required to upgrade the house and adjoining unit; and the financial investment required to upgrade the grounds to ensure that they were suitable. 14The submission said that the capital investment required to upgrade the house and unit and the investment required to upgrade the grounds was beyond the reach of the Charities. Although at one point in the submission, Ronald McDonald House Charities stated that the property could be used as a place of convalescence for sick children, it appears in fact that that would be beyond the financial capabilities of the charity. 15This is confirmed by a subsequent email from the chief executive officer of the Charities to the plaintiff's solicitor advising that Ronald McDonald House Charities could not undertake to provide a specific use for the property in situ. 16The statement of Ronald McDonald House Charities went on to say that a more equitable and optimal use of the property would be for it to be sold and the funds raised to be applied in other works of that charity. 17In addition to the property itself, the trustee holds trust funds which, with accumulated income, total approximately $1,476,000. That capital, and the income derived from it, would be inadequate to modify the property to meet regulatory standards if it were to be used as a children's home of any description, including by meeting current fire regulations. 18Further, there are limitations imposed on the renovations that can be made to the property by reason of it being subject to the heritage listing. 19I think it can be inferred from the fact that the property has never been used for the purpose specified in the will, that from the time of the testatrix's death it was impracticable to use the property and the trust funds for the stated purposes. 20However, whether that is so or not, it is clear that as the testatrix had a genuine charitable intention, the trust property can be applied cy-pres, given that, as the circumstances now exist, the use of the property as envisaged by the will is no longer a suitable or effective method of using the property to give effect to the spirit of the trust ( Charitable Trusts Act , s 9(1)). 21Accordingly, it is appropriate to order that the trust property be applied cy-pres and that a scheme be settled for that purpose. The usual course is that upon such determination being made, the parties (usually the trustee and the Attorney General) confer with a view to settling the terms of the scheme. Sometimes alternative schemes are proposed. 22In the present case, the plaintiff seeks orders, in effect, to settle such a scheme immediately by the making of an order for the sale of the trust property and for orders directing that the existing capital of the fund, and the capital to be received from the sale, be held by the trustee and that the income only be applied to such charitable entities as the trustee might from time to time determine, being entities that provide care, support and rehabilitation to children suffering from an illness or disability. 23I accept that the purpose there described is within the spirit of the trust. However, the evidence does not establish that proposal is necessarily the best way of settling the trust property. 24The plaintiff submits that in any event the trust property should be sold. Until the trust property is sold it will not be known what are the likely net proceeds of sale. There is no formal valuation of the property before me and the consultant's indication of the possible sale price is over a wide range. 25The amount of capital that would be received from the sale of the property is likely to be material to a decision as to what scheme for the application of the trust property should be approved. 26I do not accept at this stage the plaintiff has demonstrated that no part of capital should be applied, or that it should be left entirely to the discretion of the trustee from time to time as to how income should be distributed. 27The matter should proceed in two stages, in accordance with the general practice. 28The further question is whether in the meantime the plaintiff should be advised that it would be justified in selling the trust property. There has not yet been any advertisement designed to elicit a response as to whether or not some entity could use the land and buildings for a purpose within the spirit of the trust, as distinct from the specific purpose as a convalescent home for children. 29Undoubtedly, the testatrix's intention was not only to provide for the convalescence of sick children, but to do so through the use of the property. 30If the property can be used for a purpose which is within the spirit of the trust, albeit not for the specific purpose provided for by the will, then that would be a material consideration in settling the terms of a scheme. 31Moreover, the trust property, which is to be applied cy-pres, includes not only the land and buildings, but the trust fund of over $1 million, the availability of which could also be material to the potential use of the property for a purpose within the spirit of the trust. 32In my view, it is not appropriate to make an order at this stage that the trustee would be justified in selling the trust property. Rather, there should be further advertisement in relation to the potential availability of the property and the trust fund for the purposes within the spirit of the trust and further consideration should be given as to the potential charities that could benefit from either the trust property or proceeds of the sale. 33The trustee and the Attorney General should confer with a view to seeking to settle the terms of a scheme. 34Subject to hearing from counsel as to precise terms of the orders to be made, I propose the following declarations and orders: