Freeman and Others v. Attorney-General for New South Wales
[1973] 1 NSWLR 729(Judgment by: Helsham J.)
Freeman and Others
v. Attorney-General for New South Wales
Judge:
Helsham J.
Subject References:
Trusts
Charitable trust
Trustees wishing to lease trust property, but having no power to do so
Not a variation of trust
Order made as asked
Legislative References:
Trustee Act, 1925 - s. 81.
Case References:
Baker (Dec'd), Re; Rouse v. Attorney-General for Victoria - [1961] V.R. 641.
Parker v. Moseley - [1965] V.R. 580.
Riddle v. Riddle - (1952) 85 C.L.R. 202.
Shipwrecked Fishermen and Mariners' Royal Benevolent Society, Re - [1959] Ch. 220.
Judgment date: 14 September 1973.
Judgment by:
Helsham J.
Section 81 of the Trustee Act, 1925, so far as relevant to this application, provides: "81. (1) Where in the management or administration of any property vested in trustees, any sale, lease, mortgage, surrender, release, or disposition, or any purchase, investment, acquisition, expenditure, or transac- tion, is in the opinion of the Court expedient, but the same cannot be effected by reason of the absence of any power for that purpose vested in the trustees by the instrument, if any, creating the trust, or by law, the Court-(a) may by order confer upon the trustees, either generally or in any particular instance, the necessary power for the purpose, on such terms, and subject to such provisions and conditions, including adjustment of the respective rights of the beneficiaries, as the Court may think fit..."
This section applies to charitable trusts, and this Court in its Equity Division can, by means of it, vary the powers of trustees of charitable trusts in a proper case. The plaintiffs in the present case are such trustees and seek an order conferring on them a power to lease property, which power has not been given them under the trust as constituted. The Attorney-General as defendant to the application has submitted that it is doubtful whether in this case the section is wide enough to give the court jurisdiction to confer the necessary power on the trustees, and has argued the case so as to obtain guidance from the court as to the extent of the powers under the section with respect to charitable trusts, and as to whether the circumstances call for the settlement of a scheme rather than for the conferring of a power pursuant to an applica- tion under s. 81.
A trust, known as the New South Wales Wheat Research Foundation, was set up under a deed dated 1st December, 1958. Four trustees were paid one pound (£1) by certain founders to be held an applied upon the trusts of the deed. Clause 2 of the deed provided: "The objects for which this Trust (which shall be known as the New South Wales Wheat Research Foundation) is established are: (a) scientific or economic research in connection with or likely to benefit the wheat industry; (b) the training of persons for purposes of the research referred to in the last preceding paragraph; (c) the dissemination of information and advice relating to technical matters in connection with the wheat industry; (d) the publication of technical reports, periodicals, books and papers in connection with the wheat industry; (e) any purpose incidental to a purpose referred to in the preceding paragraphs of this Deed; (f) to acquire and property real or personal for or incidental to or connected with or for the purpose of effectually carrying out the aforesaid objects; (g) to construct any building or buildings for the purpose of carrying out any of the objects of this Trust; (h) to conduct public appeals for funds for the purpose
of carrying out the above objects; and (i) to do and perform all acts and things that are necessary or convenient for giving effect to the objects herein- before set out."
Clauses 3 and 4 so far as relevant provided: "3. The Trustees shall subject to the terms of this Trust and subject as in this clause hereinafter provided hold the said sum of one pound (£1) and any other property whether real or personal and of whatsoever nature and all moneys acquired and received by it UPON TRUST to apply the same for the purposes of carrying out or giving effect to all or any of the objects set out in clause 2 hereof ... 4. The Trustees shall have power to acquire by gift devise bequest purchase lease loan or deposit any property whether real or personal and any moneys for any of the purposes of this Trust and to agree to and carry out the conditions of any devise bequest purchase lease loan or deposit and may sell and dispose of by way of sale or gift and turn to account any property real or personal or moneys received by them including all or any of the assets of this Trust." It is to be noted that there is no express power to lease.
Clause 6 provided: "The Trustees shall have the care control and management of the Trust and the Trust Funds and may do and perform all acts and things and make all determinations which may be necessary or convenient for giving effect to and carrying out the objects of the Trust."
The clause relating to the appointment and removal of new trustees provided that there should always be a multiple of two, one half to be appointed by the Farmers' and Settlers' Association of New South Wales, and one half by the Wheat and Woolgrowers' Association of New South Wales, but that, if either body should cease to exist, then the remaining body was to make all appointments and removals. In fact the Farmers' and Settlers' Association of New South Wales has become the United Farmers and Wool- growers' Association of New South Wales, and The Wheat and Woolgrowers' Association of New South Wales has ceased to exist.
Pursuant to the powers conferred upon them, the trustees in 1959 purchased certain land at Narrabri, and from that date this land has been used for the carrying out of scientific research in connection with the wheat industry. There has since that time been much money expended by them in effecting additions and improvements to the property, and it is now described as a sophisticated and extensive wheat research institute, known as the Narrabri Institute.
The Wheat Research Act 1957 (Cth) provided for the establishment of a Wheat Research Trust Account, to be administered under a Wheat Industry Research Council; expenditure of the funds, which are provided by an annual levy on wheat growers, could be approved for certain purposes which, inciden- tally, are purposes identical with the first five objects of the Wheat Research Foundation set out in cl. 2 of the deed above; the Act also set up state com- mittees, Wheat Industry Research Committees, to approve expenditure out of separate State accounts kept as required by the Act, and each State committee allocates moneys available from the levies between various institutions in its State. I mention this because the source of the Research Foundation's funds is virtually money coming from the New South Wales Wheat Research Committee; this committee provided the funds necessary for the purchase of the Narrabri property ($48,816) and has since then provided annual grants to enable the property to be carried on as a wheat research institute. While
the institute does receive some relatively small donations and small amounts of income from wheat and farm produce sales, it relies almost wholly on the grants made by the committee for the carrying on of its activities. For example, its grants from the committee for three years were: 1969-70 $151,381.00, 1970-71 $168,193.00, 1971-72 $144,788.00.
Before coming to the situation which prompted this application, it is important to note that since 1960, that is to say almost from the time the Narrabri property was purchased by the trustees, the University of Sydney has administered the wheat research carried on at that property. The Foundation invited the University to do this because of the long and extensive experience which the University had in all aspects of wheat research, particularly into rust diseases and development of new varieties, and so that this experience would be available to maintain the institute as one of the leading and most important research institutes in Australia. It is unnecessary to set out the detailed code of operations under which this administration is carried out, but in general it can be said that the University, by its appointed administrator, advises the Foundation on the lines of research that should be undertaken in view of the likely benefit to the wheat industry of New South Wales, proposes a budget in the light of funds available, and controls and authorizes the expenditure of those funds under the Foundation's approval, and generally administers all activities performed on the property, including the appointment of academic and non-academic staff and the development of the property. The University was entitled under this code of operations to use its own funds for capital expenditure at the Institute.
The problem now arises because of shortage of funds. In respect of funds for 1972-73 the New South Wales Wheat Research Committee advised the Foundation, and other bodies and institutions making applications for grants, that it would not be able to meet applications in full; the Foundation was advised that it would receive some $30,000 less than its application, and from this source in fact it received only $117,470; the residue of its needs was in the current year made up from reserves and special grants, but nevertheless the research programme was cut back, and by reason of increased salaries and overhead, staff has been reduced from twenty-five to sixteen.
By reason of the failure of the 1972-73 wheat crop the financial outlook is worse. The allocation for 1973-74 is made up as to one half from reserve funds held by the Wheat Research Committee, which have now almost been exhausted. Unless greater grants are obtained the Foundation's wheat research programme at the institute and its staff will have to be even further reduced in the very near future, with no indication that the position will improve. While it is possible for the institute to carry on, the prospect of increasing expenses and a static income will have a most deleterious effect on the research programme.
The University of Sydney has access to funds not available to the Foundation, and which it is prepared to use in wheat research at the Narrabri Institute, and for the making of improvements and additions to the property, so as to supplement the income available to the Foundation and to enable a full and extensive wheat research programme to be carried on at the institute. However, it cannot and will not make these funds available for this purpose unless it either establishes its own institute, or secures a long-term lease of the
Narrabri property. To convert any of its other New South Wales installations to the extent and sophistication of what now exists at Narrabri would require by it expenditure of the order of one million dollars ($1,000,000), and this is apparently out of the question; consequently the University is anxious to obtain the security of a long-term lease of the Narrabri property.
The foundation is faced with the alternative of further curtailing its activities, with what the trustees believe will be a deleterious effect on research, or of granting a long-term lease to the University to enable a full and extensive wheat research programme to be carried on. The trustees are of the opinion that the latter course would best promote the purposes for which the Founda- tion was established, and they have approached the court for the necessary power to enable them to enter into such a lease. The United Farmers and Woolgrowers' Association of New South Wales, now the sole body able to appoint trustees, has considered the proposal carefully, believes it to be in the best interests of the New South Wales Wheat Research Foundation, and is in complete favour of the proposal.
The proposed lease to the University is for a term of twenty-five years with an option for renewal of ten years and perpetual options for renewal for further periods of ten years. It provides that the University shall not use the property otherwise than for the purpose of scientific research in connection with or likely to benefit the wheat industry. There are a number of safeguards concerned with the running and looking after the property which need not be detailed here. There is provision for the trustees to enter at all reasonable times, power to determine for breach, and further as follows: "If the Lessor shall be of the opinion that the Lessee is not using the demised premises for the purpose of scientific research in connection with or likely to benefit the wheat industry to the entire satisfaction of the Lessor whether by reason of lack of available funds or otherwise the Lessor may give written notice to the Lessee of termination of this Lease either forthwith or at a time specified in the notice and this Lease shall terminate accordingly. The Lessor need give no reason or reasons for nor any prior notice of the Lessor being of or forming any such opinion. If the Lessee shall be of the opinion that the funds available to it for the purpose of scientific research in connection with or likely to benefit the wheat industry, are insufficient to effectively utilise the demised premises for such purpose the Lessee may give written notice to the Lessor of termination of this Lease either forthwith or at a time specified in the notice and this Lease shall terminate accordingly."
The trustees have also become parties to a deed setting up a council, the function of which is to advise the University on all or any matters relating to wheat research on the Narrabri property during the term of the lease, if the court should grant the trustees power to enter into it. This council of fourteen, comprising seven persons appointed by the University, six trustees of the Foundation, and one person appointed by the Minister for Agriculture of New South Wales, is to receive such information from the University relating to wheat research on the property and the administration thereof as it may reasonably request. It is an advisory body only.
I would have had no hesitation in conferring upon the trustees the necessary power to enter into the lease as sought were it not for the submissions put forward on behalf of the Attorney-General.
One of those submissions was that I ought to make it a condition of any order conferring power to enter into a lease of the property that the University furnish annual or other reports to the trustees concerning the carrying out of wheat research on, and the administration of, the property. I was referred by counsel to the decision of Adam J. in Re Baker (Dec'd); Rouse v. Attorney-General for Victoria[F1], where his Honour saw fit to impose certain safeguards thought to be desirable in that case, including the requirement for making annual reports in connection with the conferring of power upon trustees to make unauthorized investments of funds devoted to charity. I do not consider a condition such as that suggested appropriate here. The trustees are charged with the duty of carrying out the objects of the Foundation, and have over the years been dealing with and will continue to deal with a responsible body, the University of Sydney. There is no reason to suppose that they will not be able to obtain such information as they consider necessary, and there is every reason why they should not be restricted in any way as to how or when they obtain such information. I see no need for any condition as to annual or other reports, and I feel that the imposition of any condition requiring regular reports might have a restrictive effect upon the ability of the trustees properly to administer the trust.
The real matter thrown up for decision by the submissions made on behalf of the Attorney-General was whether the situation disclosed by the events was one that ought to be dealt with by the settlement of a scheme rather than by means of this application designed to confer a specific power on the trustees. The argument was that the application was not one by trustees for the purpose of obtaining power to effectuate the trust by the better administration of property held by them, but rather to alter the whole nature of the trust, by giving the trust property over to a university-controlled research activity over which the trustees would virtually relinquish their supervision; the suggestion is that what is proposed will really amount to a handing over of the trust to the University. I do not accept this as being the situation.
In its application to charitable trusts I do not consider that the jurisdiction conferred by s. 81 is any less extensive than when applied to private trusts. As it was put by Dixon J., as he then was, in Riddle v. Riddle[F2]: "Section 81 is a provision conferring very large and important powers upon the Court which depend upon the Court's opinion of what is expedient, a criterion of the widest and most flexible kind. The power necessarily carries with it responsi- bilities of equal extent. The responsibilities imposed involve business and financial considerations, but responsibilities of that description have always fallen on courts of administration. I do not think that the powers given by s. 81 were intended to be restricted by any implications."
In its application to charitable trusts there is still, of course, a requirement of jurisdiction that the transaction in question must be one arising in the manage- ment or administration of property vested in trustees. And in connection with such trusts expediency must be determined by reference to the purpose or objects of the particular trust. The section would not permit an order to be made that enabled a use of trust property which went outside the confines of the purpose or objects to benefit of achieve which the trust was constituted, but would permit an order which enabled use of trust property directed towards furthering such purpose or objects. If the purpose or objects of a charitable trust, although initially possible, had ceased to be possible of achievement with the means at the disposal of the trustees, as, for example, where objects might require to be adjusted to changed circumstances, then the situation might not be appropriate for an advantageous dealing to be empowered under s. 81; likewise, if the machinery designated for effectuating the charitable purpose had failed the situation might require the settlement of a scheme; there would doubtless be other occasions when the same could be said. But a charitable purpose does not become impossible of achievement merely because the trustees wish to alter the mode of employing trust property but have not the power to do so; providing the proposed use could be said to be a means of employing the trust property in order to effectuate the purpose of the trust, then the court would be entitled to empower such use if it enabled the property to be more effectively employed in furtherance of such purpose. Dankwerts J. in Re Shipwrecked Fishermen and Mariners' Royal Benevolent Society[F3] seemed to adopt the same approach to the application of the equivalent English statutory power to permit advantageous dealings (s. 57 of the Trustee Act, 1925) where he said in relation to the application before him: "It is not altering the substantive trusts in any way whatever; it is simply giving the trustees power, in the administration of the funds which they have under their control, to administer them in a more satisfactory and more effective way which the changed circumstances of a hundred years show to be necessary for the proper administration of the charity."
No problem arises in the present case as to whether the objects of the foundation have become impossible or no longer able to be achieved with the means at the disposal of the trustees (cf. Parker v. Moseley[F4]). The trustees, if granted power to do so by this Court, propose to use the Narrabri property as it has previously been used, namely to promote and encourage research in connection with or likely to benefit the wheat industry. The Foundation has always made use of facilities and expertise provided by the University of Sydney in the administration of the trust. The added interest which that University will have in the trust property as lessee and its increased participation in the activities to be carried on there does not alter the nature of the trust at all; it will enable the trust property to be more effectively devoted to the objects of the trust under the supervision and ultimate control of the trustees. I have not overlooked the care with which the court would be bound to approach the matter of permitting long-term leases of property held for charitable purposes (cf. Halsbury's Laws of England, 3rd ed., vol. 4, p. 344 par. 710), but here I am satisfied that the entering into a lease such as that proposed would in all the circumstances be expedient. To empower the trustees to enter into it is to enable an act to be done in the management of trust property that does not permit the trustees to go outside the charitable purpose as embraced in the defined objects of the trust. The case is a proper one for an order under the section.
The proposed lease is annexed to a deed whereby the trustees covenanted to grant a lease in those terms should this Court grant them leave to do so, and is
sufficiently identified in the affidavit of the trustees sworn in these proceedings; an order referring to it as such will be adequate.
Order as sought in the summons. Costs of the plaintiffs, on a trustee basis, and of the defendant, on a common fund basis, to be paid out of the funds forming part of the trust property.
Order accordingly.
Solicitors for the plaintiffs (the trustees): Maund & Kelynack.
Solicitor for the defendant (the Attorney-General): R. J. McKay (Crown Solicitor).
P. W. YOUNG,
Barrister.