Charitable Trusts Act 1993

The Act’s reach is deliberately wide. Trustees of every charitable trust — however constituted and whether created before or after commencement — are subject to its protective, cy pres and scheme provisions (s 4(2)). Because “charitable trust” is defined by reference to the Court’s general jurisdiction (s 3), any trust that would be charitable at general law falls inside the Act.

The Attorney General is both gatekeeper and scheme-maker. He or she must be given an opportunity to consider proposed proceedings (s 6(2)), may authorise proceedings brought by persons without standing (s 6(3)), may initiate schemes (s 13(1)(b)), must consider representations after public notice (s 15(1)(b)), maintains the register (s 19), and can charge fees (s 21). The Attorney General’s own proceedings are exempt from the leave requirement (s 6(4)).

The Supreme Court of New South Wales is the ultimate supervisory body. It hears applications for leave (s 6), makes protective orders (s 7), determines cy pres schemes when referred or appealed, hears appeals from Attorney General orders (s 18), and retains its inherent jurisdiction. Receivers appointed by the Court exercise statutory powers (s 7(3)).

Donors, beneficiaries, and third parties with an interest in the due administration of charitable trusts may be affected. A person without standing can gain it via Attorney General authorisation (s 6(3)). Any person may make representations on proposed schemes (s 15(1)(b)) and, with leave, appeal (s 18(1)(b)).

Finally, Part 4A affects trustees of prescribed trusts who wish to utilise the new statutory power. They must consider tax consequences before signing the Schedule 1 declaration (the form itself recites that regard has been had to “the effect of this declaration (including its effect on the liability of the trustees to income tax)”).

Trustees owe an amplified duty under s 11: if the case permits and requires cy pres application, they must “secure its effective use for charitable purposes by taking steps to enable it to be so applied”. This is an affirmative obligation, not merely a power.

Trustees also face the protective regime. They may be removed for misconduct, participation in mismanagement, criminal convictions involving fraud or dishonesty, mental incapacity, bankruptcy or corporate insolvency events (s 8). They may be precluded from involvement by court order (s 7(2)(c)). When a receiver is appointed, trustees must deliver property and information (s 7(3)(a)).

The Act confers positive rights on trustees. They may apply for an Attorney General scheme to vary powers, combine administration or pool investments (s 12(1), s 13(1)(a)). Where the trust instrument lacks power to sell, mortgage or lease, a scheme may vest that power (s 12(2)). Trustees of prescribed trusts gain a statutory power under s 22C(1) (subject to declaration) and may limit that power to particular eligible recipients by modifying the Schedule 1 form (s 22C(4)).

The Attorney General holds the right to authorise or refuse proceedings, to establish schemes on own motion in special cases, to charge fees calculated as a percentage of trust property (s 21(2)), and to determine the valuation date for threshold purposes (s 22).

Members of the public have a right to notice of proposed schemes, to make representations, and (with leave) to appeal. The register is open to inspection during ordinary office hours (s 19(2)).

The Court’s rights and powers are expressed to be additional to its existing jurisdiction (s 7(1)) and are not precluded by the terms of any charitable trust (s 7(4)).

The Act is not primarily criminal. Enforcement is civil and supervisory. Breach of a court order made under s 7 — for example, dealing with frozen property contrary to s 7(2)(d) or (e) — would constitute contempt of court, punishable by imprisonment or sequestration. Failure to comply with a receiver’s lawful requirement under s 7(3)(a) would similarly expose a trustee to contempt proceedings.

Fees charged by the Attorney General under s 21 are recoverable from trust property if not paid by the applicant (s 21(3)). An appeal lies against the fee order itself (s 21(4)).

The gatekeeper provision in s 6 is enforced by the Court’s refusal to entertain proceedings commenced without authorisation or leave. Any scheme established in contravention of the monetary threshold or contentiousness criteria in s 14(1) may be challenged only by appeal under s 18; collateral attack is prohibited (s 18(5)).

Part 4A contains no direct sanctions. However, if trustees of a prescribed trust provide funds to an eligible recipient without first making the required declaration, the statutory power in s 22C(1) is unavailable. Any such distribution would therefore have to be justified under the general law or the trust instrument; otherwise it may constitute a breach of trust.

The Act is expressly not exclusive (s 4(3)). It sits atop the general law of charities, the Trustee Act 1925 (NSW), and equity’s supervisory jurisdiction. Section 7(1) states that the Court’s powers are “without limiting any other powers of the Court”.

Commonwealth tax law is central to Part 4A. The definitions of “eligible recipient” and “prescribed trust” are wholly referential to the Income Tax Assessment Act 1997 (Cth), in particular s 30-15 and the concept of deductible gift recipients. Section 22D(2) deems the prescribed power to be “a power exercisable for a charitable purpose”, thereby preserving deductibility and charitable status for tax purposes.

Repeals in s 27 removed the former Division 6 of Part 2 of the Conveyancing Act 1919 and Division 3 of Part 3 of the Imperial Acts Application Act 1969, consolidating the law. Section 23 re-enacts (with updating) the former s 37D of the Conveyancing Act 1919, ensuring that a mixed charitable and non-charitable purpose does not invalidate the trust.

The Act interacts with the Supreme Court’s rules: appeals from Attorney General orders must be brought in accordance with those rules (s 18(2)). Court-referred schemes under s 13(2) allow the Court to give binding directions to the Attorney General.

Because s 4(1) applies the Act regardless of where the trust was established, where the property is situated or where the trustees reside, it interacts with choice-of-law rules and may engage comity principles when property is located in another jurisdiction.

The most significant legislative change was the insertion of Part 4A by the Charitable Trusts Amendment Act 2006 (No 100 of 2006), which commenced on the date of assent. The explanatory materials accompanying that amendment disclosed a policy intention to remove doubt about the ability of certain trusts to donate to deductible gift recipients that might not satisfy the strict common-law definition of charity. Prior to 2006, trustees risked breaching trust or losing charitable status if they applied funds to entities that were tax-deductible but not charitable at general law (for example, certain environmental or harm-minimisation organisations). The 2006 reform statutorily deems such gifts charitable, validates past actions (s 22D(4)–(5)), and reverses the presumption of charitable intention in the cy pres context (s 10(2)).

No further substantive amendments appear in the supplied text. Minor amendments were made in 1996 (s 26) and 1999 (s 6). The five-year review required by s 28 was completed long ago; the Act has otherwise remained stable, suggesting that the 1993 architecture, as expanded in 2006, continues to meet contemporary needs for both protection and flexibility.

The text itself does not record specific court decisions, but the architecture reveals anticipated points of contention. Section 6(2) requires the Court to be satisfied that the Attorney General has been consulted or that urgency or other good cause makes consultation inappropriate; disputes about the adequacy of consultation or the existence of “good cause” are therefore foreseeable. The breadth of “misconduct or mismanagement” in s 7(5) — expressly including excessive remuneration — invites litigation over what level of payment is “excessive in relation to the duties”.

The cy pres extension in s 9(1) turns on whether original purposes have ceased to provide a “suitable and effective method … having regard to the spirit of the trust”. That evaluative phrase has generated, and will continue to generate, contested evidence about the trust’s “spirit”. The statutory presumption of general charitable intention (s 10(2)) shifts the evidentiary burden but does not eliminate litigation where the trust instrument contains contrary indications.

Attorney General schemes have built-in controversy controls. The $500,000 threshold in s 14(1)(a) and the “contentious character or any special question of law or fact” exception push larger or difficult matters into the Court. The mandatory publicity and representation process under s 15 opens the door to objections that must be “given due consideration”. The appeal right under s 18, including the ability of non-trustees to seek leave, ensures that interested parties can contest both the making and the content of schemes. Section 18(5) limits collateral attack, thereby channelling all challenges into the statutory appeal route.

Part 4A has its own latent controversies. The requirement of a Schedule 1 declaration means that failure to execute or retain the document could render an otherwise authorised gift unauthorised. The interaction between the statutory power and any express prohibition in the trust instrument (s 22C(2)(b)) will require careful construction of trust deeds. Because the power is deemed charitable (s 22D(2)), questions may arise about whether the trust remains exclusively charitable for other legal purposes, although s 22D(3) seeks to close that door.

Most practitioners assume that once a trust is declared charitable it can only benefit entities that are charitable at general law. Part 4A upends that assumption for prescribed trusts: after a Schedule 1 declaration, trustees may lawfully donate to any deductible gift recipient even if that recipient would fail the common-law test. The “gotcha” is the mechanical requirement in s 22C(3)–(5): without the declaration (or a certified copy) retained in the records, the statutory power simply does not apply.

Another trap is the interaction between the monetary thresholds. A scheme that alters purposes and affects property worth $600,000 cannot be made by the Attorney General even if the parties consent; it must go to the Court. Yet the publicity exemption in s 15(3)(b) for schemes under $2,000 can lull practitioners into thinking small variations need no notice, forgetting that the $500,000 bar in s 14 still applies to the Attorney General’s power.

Section 7(5) is often overlooked. Excessive remuneration is expressly defined as misconduct. Trustees who approve high salaries or management fees without clear benchmarking documentation risk personal liability and removal. The receiver powers in s 7(3) are broader than many expect: a receiver may “deal with any property … in any manner in which the trustees might lawfully have dealt”, effectively stepping into the trustees’ shoes.

The presumption of general charitable intention (s 10(2)) is rebuttable only by evidence “in the instrument establishing the charitable trust”. Extrinsic evidence of the donor’s specific intent is therefore inadmissible on that issue — a subtle but powerful forensic limitation.

Finally, s 18(5) is a stealth jurisdiction-stripping provision. A scheme that on its face breaches the publicity or monetary requirements of Part 4 cannot be attacked collaterally; the only remedy is a timely appeal. Late discovery of procedural irregularity is therefore fatal unless the Court grants an extension of time.

Trustees should begin with a compliance audit. Map every charitable trust against the s 3 definition and confirm that the Act applies (it almost always will). Review the trust instrument for any express prohibition on gifts to non-charitable eligible recipients; if none exists, consider making a Schedule 1 declaration (or a limited version under s 22C(4)) and retaining the executed document with the trust records. The declaration should be executed as a deed to maximise evidentiary weight.

For day-to-day administration, document all remuneration decisions with market benchmarking evidence to rebut any future s 7(5) excessive-remuneration allegation. Maintain accurate records of trust property location and value; the Attorney General’s valuation under s 22 is made as at the application date or any other convenient date the Attorney General chooses, so contemporaneous valuations assist in determining whether the $500,000 threshold will force a court application.

When a purpose becomes unsuitable, trustees must actively consider cy pres under s 11. Obtain counsel’s opinion on whether the “spirit of the trust” test in s 9(1) is satisfied and whether general charitable intention can be presumed. If an Attorney General scheme is viable (value under threshold and non-contentious), prepare a detailed submission addressing the factors in s 12(1). Publish the required notice and keep a file of all representations received and how they were considered.

If proceedings are contemplated, first approach the Attorney General for authorisation. Draft the letter to demonstrate compliance with s 6(2) or to establish urgency. Keep a copy of any authorisation; it may be granted even after proceedings have commenced (s 6(2A)).

When drafting new trust instruments, include an express power under s 22B if philanthropic flexibility is desired, and consider inserting a clause that expressly preserves the statutory power under s 22C notwithstanding any other provision. For existing trusts, amend only with great care so as not to trigger the “express prohibition” exclusion in s 22C(2)(b).

Maintain a central register of all Attorney General orders affecting any trust (cross-referenced to the public register under s 19) and diarise the 21-day appeal period whenever an order is published.

Finally, because the Act binds the Crown (s 24), government departments administering charitable funds must comply in exactly the same way as private trustees. Regular training for charity board members on the s 7 removal grounds and the s 11 duty is a prudent risk-management step that most charities still do not undertake.