Between: STRATTON
And: SIMPSON

Judges: Barwick CJ
Menzies J
Windeyer J
Walsh J

Gibbs J

Subject References:
Trusts
Charitable
Indefinite and uncertain objects
Validity

Legislative References:
Trustees Act 1962 (WA) - s 102

Sydney

Decision by:
GIBBS J

John Peter Stratton ("the testator") died in Western Australia on 26th July 1966 having made a will and codicil which have since been admitted to probate in Western Australia. His estate was substantial. He was survived by his widow and five children one of whom applied on originating summons to a judge of the Supreme Court of Western Australia for an order declaring that the residuary bequest contained in cl. 15 of the will of the testator is void and that there is an intestacy as to the residuary estate. This application was heard by Lavan J. and was dismissed. The present appeal is brought from his order dismissing the application.

By his will the testator, after revoking prior wills (cl. 1), gave (in cl. 2) the following preliminary explanation of his desires and intentions: "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.

At the date of death of the testator s. 134 (1) of the Administration Act, 1903-1965 (W.A.) provided as follows: "No duty shall be payable under this Act in respect of any gift, devise, bequest, legacy, or settlement made or given to or in trust for- (a) any public hospital within the meaning of the Hospitals Act, 1927; (b) the maintenance of a free ward in any hospital; (c) any public educational institution in the State which is wholly or in part dependent on any State grant, aid, or subsidy; (d) any incorporated public body in the State the main object of which is to dispense or provide voluntary aid to indigent, aged, sick, blind, halt, deaf, dumb, or maimed persons; (e) any publicly subscribed medical service or fund in the State, the main object of which is the relief of the sick; or any public medical service or fund in the State which is assisted by any Government grant or subsidy; (f) 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."

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; ^[F37] Tatham v Huxtable; ^[F38] Attorney-General (N.S.W.) v Donnelly. ^[F39] 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; ^[F40] In re Wightwick's Will Trusts; ^[F41] In re Cain; ^[F42] Theobald on Wills, 12th ed. (1963), par. 1527; and Morris & Leach: The Rule against Perpetuities, 2nd ed. (1962), pp. 324-327.

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, ^[F43] "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 ^[F44] ). 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).

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. ^[F45] 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.

Paragraphs (d) and (e) would include institutions whose purposes were charitable as being for the relief of "impotent" persons within the intendment of the preamble to 43 Eliz. c. 4, but a difficulty is created by the fact that the charitable object mentioned need only be "the main object"; the institution might have other non-charitable objects. It is established that "an institution is a charitable institution if its main purpose is charitable although it may have other purposes which are merely concomitant and incidental to that purpose" or in other words if each of its objects is either charitable in itself or should be construed as ancillary to other objects which themselves are charitable: Congregational Union of New South Wales v Thistlethwayte. ^[F46] If however the non-charitable purpose is not merely incidental or ancillary to the main charitable purpose, the institution will not be charitable: Oxford Group v Inland Revenue Commissioners; ^[F47] and In re Harpur's Will Trusts. ^[F48] There is no evidence to show whether at the date of the testator's death there was in Western Australia any institution which answered the description contained in par. (d) or (e) of s. 134 (1) and yet was not charitable because it had a non-charitable object which although not its main object was not merely incidental or ancillary to a charitable object.

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 ^[F49] and Attorney-General v Jesus College, Oxford ^[F50] ). 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 ^[F51] ). 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.

I hold therefore that the trusts created by cl. 15 are not necessarily exclusively charitable. However if evidence were taken it might show that at the date of the testator's death the only institutions and bodies that answered the description in cl. 15 were charitable. If it were not for the provisions of s. 102 of the Trustees Act, 1962 (W.A.) it would be necessary to remit the matter back to the Supreme Court to take further evidence. If however s. 102 would operate to save the dispositions if they were otherwise invalid it will not be necessary to remit the matter.

Section 102 reads as follows: "(1) In this section the term `imperfect trust provision' means any trust under which some non-charitable and invalid as well as some charitable purpose or purposes is or are or could be deemed to be included in any of the purposes to or for which an application of the trust property, or any part thereof, is by the trust directed or allowed. (2) A trust shall not be held to be invalid by reason that the trust property is to be held or applied in accordance with an imperfect trust provision. (3) Every trust under which property is to be held or applied in accordance with an imperfect trust provision shall be construed and given effect in the same manner in all respects as if no holding or application of the trust property or any part thereof to or for any non-charitable and invalid purpose had been or could be deemed to have been so directed or allowed. ..."

Of course, if in fact the only institutions or bodies in existence at the testator's death which came within the description of cl. 15 of the will were charitable, the section will not apply but the dispositions made by the clause will in any case be valid. I proceed to consider the application of the section on the footing that some of such institutions and bodies were not charitable.

The appellants submitted that s. 102 can have no application to the present case for two reasons. In the first place, it was said that s. 102 can apply only where there is a trust, and that under cl. 15 no trusts are created or declared; it was said that cl. 15 merely confers on the trustees a discretionary power to distribute the income of the residuary estate, and that they are under no obligation to distribute it. In my opinion such a construction of cl. 15 is quite insupportable. The provisions in question are described as creating trusts, not only in the clause itself, but also in cll. 2 and 14. The appellants relied on the statement in cl. 15 that the distribution is to be made "from time to time" but that only means that the trustees are allowed a discretion to decide when sufficient income has accumulated to permit a distribution to be made. Plainly cl. 15 creates a trust within s. 102. The real question is whether it is an "imperfect trust" within the meaning of that section.

The principal submission on behalf of the appellants was that if cl. 15 creates a trust, it is a trust to distribute the income of the trust fund between institutions and bodies, and that such a trust deed does not declare the purposes for which the trust property may be applied, or, in other words, there are no purposes to or for which an application of the trust property is by the trust directed or allowed and cl. 15 is not an "imperfect trust provision" within the definition contained in s. 102 (1). This argument was largely based on the decision of the Court of Appeal in In re Harpur's Will Trusts, ^[F52] that a trust for division amongst institutions, as opposed to a trust for purposes, is not within the scope of the Charitable Trusts (Validation) Act, 1954 (U.K.). On the other hand, the respondents relied on the decision of the Judicial Committee in Leahy v Attorney-General (N.S.W.) ^[F53] in which it was held, affirming the judgment of Dixon C.J. and McTiernan J. in this Court (Attorney-General (N.S.W.) v Donnelly ^[F54] ), that a trust "for such Order of Nuns of the Catholic Church ... as my said Executors and Trustees shall select", which would have extended to contemplative orders whose objects were not recognized by the law as charitable, was saved from invalidity by the operation of s. 37D of the Conveyancing Act, 1919-1954 (N.S.W.). It is convenient at once to set out the material provisions of s. 37D to enable them to be compared with those of s. 102. They read as follows: "(1) No trust shall be held to be invalid by reason that some non-charitable and invalid purpose as well as some charitable purpose is or could be deemed to be included in any of the purposes to or for which an application of the trust funds or any part thereof is by such trust directed or allowed. (2) Any such trust shall be construed and given effect to in the same manner in all respects as if no application of the trust funds or of any part thereof to or for any such non-charitable and invalid purpose had been or could be deemed to have been so directed or allowed."

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. ^[F55] 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; ^[F56] In re Thureau; Mitchell v Holland; ^[F57] and In re Ingram. ^[F58] 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.), ^[F59] 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 ^[F60] 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. ^[F61] 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 ^[F62] 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; ^[F63] Smith v West Australian Trustee Executor & Agency Co Ltd ^[F64] ) and a trust for institutions whose objects are predominantly charitable may come within s. 37D.

The provisions of the legislation considered in In re Harpur's Will Trusts, ^[F65] were materially different from s. 37D and the corresponding Victorian sections. Section 1 of the Charitable Trusts (Validation) Act, 1954 (U.K.) is in the following terms: "(1) In this Act, `imperfect trust provision' means any provision declaring the objects for which property is to be held or applied, and so describing those objects that, consistently with the terms of the provision, the property could be used exclusively for charitable purposes, but could nevertheless be used for purposes which are not charitable. (2) Subject to the following provisions of this Act, any imperfect trust provision contained in an instrument taking effect before the sixteenth day of December, 1952, shall have, and be deemed to have had, effect in relation to any disposition or covenant to which this Act applies- (a) as respects the period before the commencement of this Act, as if the whole of the declared objects were charitable; and (b) as respects the period after that commencement as if the provision had required the property to be held or applied for the declared objects in so far only as they authorize use for charitable purposes."

This section has a more restricted operation than the New South Wales and Victorian sections, and the latter sections, unlike that of the United Kingdom statute, do not refer to a trust provision which "declares" or "describes" the objects of the trust and are not made to operate by reference to the "declared objects" of the imperfect trust provision. Moreover, s. 2 of the United Kingdom Act, which had a bearing on the construction of s. 1, has no counterpart in the Australian legislation.

Section 102 of the Western Australian Act differs in form from the Victorian and the New South Wales provisions, and resembles the United Kingdom statute, in commencing with a definition of the expression "imperfect trust provision". In this respect, the Western Australian section appears to have been influenced by the New Zealand legislation. In New Zealand, legislation in the same terms as the Victorian statute was passed in 1935 (s. 2 of the Trustee Amendment Act 1935 (N.Z.)), but has been replaced by s. 82 of the Trustees Act 1956 (N.Z.) which not only follows the Charitable Trusts (Validation) Act 1954 (U.K.) in point of form but also borrows expressions from that Act although it preserves some of the provisions of its Australian model. However, notwithstanding its form, the Western Australian section does not in other respects follow the more recent New Zealand statute, and in substance is exactly the same as s. 37D of the New South Wales Act. Subsections (1) and (2) of s. 102 in combination achieve the same result as s. 37D (1), and sub-s. (3) of s. 102 clearly has the same effect as s. 37D (2). The Western Australian, like the New South Wales, section is so materially different from the Charitable Trusts (Validation) Act, 1954 (U.K.) as to render the reasoning in In re Harpur's Will Trusts, ^[F66] inapplicable. On the other hand, everything that was said in Leahy v Attorney-General (N.S.W.), ^[F67] in relation to s. 37D applies equally to s. 102. The section therefore will apply if in the trust instrument "there is reference to a distributable class which, while not exclusively charitable, is predominantly charitable in character", ^[F68] citing Attorney-General (N.S.W.) v Donnelly. ^[F69] It is enough that the distributable class should comprise institutions and bodies whose objects are predominantly charitable.

It follows from what I have already said that the institutions and bodies which constitute the distributable class under cl. 15 have objects which are predominantly charitable. It may be that in fact no institution or body to which the clause applies was non-charitable; if so, the clause created a valid charitable trust. If, however, there did exist non-charitable institutions or bodies which come within the description, s. 102 will apply and will confine the power of the trustees to make a selection to such institutions and bodies as are charitable. By whichever road the conclusion is reached, the dispositions contained in cl. 15 of the will are valid and there is no intestacy as to the residuary estate.

Lavan J. was right in dismissing the application and the appeal should be dismissed.