Attorney-General (NSW) v Perpetual Trustee Co (LTD)

63 CLR 209

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(Judgment by: Dixon and Evatt JJ)

Attorney-General (NSW)
v Perpetual Trustee Co (LTD)

Court:

Judges: Latham CJ
Rich J
Starke J

Dixon J and Evatt JMcTiernan J

Subject References:
Charities
Practicability of specified property
General charitable intention
Doctrine of cy-pres

Hearing date: SYDNEY 4 April 1940; 5 April 1940; 28 June 1940;
Judgment date: 28 June 1940

Sydney

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Judgment by:
Dixon and Evatt JJ

The question for decision is whether a charitable trust declared in respect of a country property fails completely or is to be applied cy-pr? The property consists of three thousand eight hundred acres of land near West Wyalong in New South Wales, suitable for carrying sheep and in part for wheat growing. There is a small homestead upon the land, and the trust, as it has been construed, includes the plant used with the land and the live stock there depasturing. The place is named Milly Milly. The trust is declared by the will of the late Annie Reid McDonell, whom the probate describes as a "widow and grazier." The description "grazier" probably means no more than that she made her home at Milly Milly, and that she derived much of her income from the farming and grazing pursuits carried on, there and elsewhere, by a manager, whom she employed at a wage. Her will, an inartificial document, disposes of the property by the following clause: "I will and bequeath the whole of the Milly Milly property to be held by The Perpetual Trustee Co for a training farm for orphan lads being Australians."

To use the lands as a training farm has been held to be impracticable. The homestead is too small, the plant is too old-fashioned and the income produced would not suffice to support the staff and to meet the expenses thought necessary for the project. At all events these are the conclusions which provide the foundation for the declarations, not now attacked, contained in the decretal order under appeal. While declaring that the disposition created a valid charitable trust, the order also declared that to give effect to the expressed object is impracticable. It further declares that the testatrix has not expressed a general charitable intention and accordingly that the property passes as on an intestacy. From the last declarations the Attorney-General of New South Wales now appeals. He says that the intention of charity is sufficiently general to warrant a cy-pr?application of the Milly Milly lands, and that they should be sold and their proceeds applied in furtherance of the purpose of training Australian orphan lads in farming pursuits.

No one denies that to train orphans as farmers is a charitable purpose for which a trust may be validly created. The matter in question is whether, because it has been found impossible to use Milly Milly itself as a place of training, the trust declared in the will fails entirely, so that the property is undisposed of.

A charitable trust is a trust for a purpose, not for a person. The objects of ordinary trusts are individuals, either named or answering a description, whether presently or at some future time. To dispose of property for the fulfilment of ends considered beneficial to the community is an entirely different thing from creating equitable estates and interests and limiting them to beneficiaries. In this fundamental distinction sufficient reason may be found for many of the differences in treatment of charitable and ordinary trusts. As a matter of reason, if not of history, it explains the differences between the interpretation placed on declarations or statements of charitable purposes and the construction and effect given to limitations of estates and interests. Estates and interests are limited with a view of creating precise and definite proprietary rights, to the intent that property shall devolve according to the form of the gift and not otherwise. Whatever conditions are expressed or implied in such limitations are therefore as a rule construed as essential to the creation or vesting of the estate or interest unless an intention to the contrary appears. But to interpret charitable trusts in the same manner would be to ignore the conceptions upon which such trusts depend.

In the first place, the law of trusts does not enable a testator or settlor to control and direct the future use of his property as an independent power but only as a means to an end. His directions are not enforced simply because he has given them by an instrument in proper form and independently of the nature and description of the remoter purposes they are found to subserve. If they do not concern the creation, devolution or enjoyment of estates or interests, they are enforced only when they answer some purpose of a defined class allowed by law as tending to the public benefit: See Law Quarterly Review, vol. 31, p. 361; Law Quarterly Review, vol. 53, pp. 26-35; Law Quarterly Review, vol. 54, p. 258, and Hobart Savings Bank v Federal Commissioner of Taxation ^[F14] , at p. 375. The reason why the specific directions given by an instrument declaring a charitable trust receive effect is because they tend to a purpose falling within the legal description of charity. The existence of that purpose is, therefore, the foundation of a valid trust. In the next place, the very idea of a trust for a purpose beneficial to the community involves the distinction between ends and means. If property is devoted to an abstract end or purpose, the details of its application or use must be considered as a means to the end. Where the trust instrument does not leave such matters to the administration of the trust but formulates an elaborate plan or scheme or gives particular directions, there is reason in the view that the exact plan or directions are not of the essence of the disposition. In the third place, as the purpose of the trust need not, and, indeed, most usually does not, involve the expenditure or consumption of corpus, continuity and indefiniteness of duration form a common characteristic of charitable trusts. This characteristic would be lost or imperilled by a construction of specific directions making them essential to the operation of the trust, in spite of all the unforeseen changes which time brings.

The settled rule has therefore a foundation in reason as well as in historical considerations. That rule was expressed by Lord Eldon in words that have often been quoted. "I consider it now established," he said, "that although the mode, in which a legacy is to take effect, is in many cases with regard to an individual legatee considered as of the substance of the legacy, where a legacy is given so as to denote that charity is the legatee, the court does not hold that the mode is of the substance of the legacy; but will effectuate the gift to charity, as the substance; providing a mode for that legatee to take, which is not provided for any other legatee" (Mills v Farmer ^[F15] , at p. 596]). "The principle on which the doctrine rests appears to be, that the court treats charity in the abstract as the substance of the gift, and the particular disposition as the mode, so that in the eye of the court the gift notwithstanding the particular disposition may not be capable of execution subsists as a legacy which never fails and cannot lapse" (per Sir Montague E. Smith, Mayor of Lyons v Advocate-General of Bengal ^[F16] , at p. 113).

The doctrine is said to have reached its full development before the principle of resulting trusts was understood. But at the close of the eighteenth century, greater regard was given to the interests of the heir at law. In Attorney-General v Whitechurch ^[F17] , at pp. 938, 939]) Lord Alvanley said:"The doctrine of cy-pr? which has been so much discussed in this court, and by which I understand the rule to execute the charitable intention as nearly as possible, however wildly and extravagantly it has been acted upon in former cases, is by late decisions, particularly since the Statute (scil. the Georgian Mortmain Act, 9 Geo. II. c. 36) administered in this way. The court will not administer a charity in a different manner from that pointed out, unless they see, that though it cannot be literally executed, another mode may be adopted, by which it may be carried into effect in substance without infringing upon the rules of law."

A distinction in trusts declared for charitable purposes has thus come to exist which, however clear in conception, has proved anything but easy of application. It is the distinction between, on the one hand, cases in which every element in the description of the trust is indispensable to the validity and operation of the disposition and, on the other hand, cases where a further and more general purpose is disclosed as the true and substantial object of the trust, which may therefore be carried into effect at the expense of some part of the particular directions given by the trust instrument.

If there are insuperable objections, either of fact or of law, to a literal execution of a charitable trust it at once becomes a question whether the desires or directions of the author of the trust, with which it is found impracticable to comply, are essential to his purpose. If a wider purpose forms his substantial object and the directions or desires which cannot be fulfilled are but a means chosen by him for the attainment of that object, the court will execute the trust by decreeing some other application of the trust property to the furtherance of the substantial purpose, some application which departs from the original plan in particulars held not essential and, otherwise, keeps as near thereto as may be. The question is often stated to be whether the trust instrument discloses a general intention of charity or a particular intention only.

But, in its application to cases where some particular direction or directions have proved impracticable, the doctrine requires no more than a purpose wider than the execution of a specific plan involving the particular direction that has failed. In other words "general intention of charity" means only an intention which, while not going beyond the bounds of the legal conception of charity, is more general than a bare intention that the impracticable direction be carried into execution as an indispensable part of the trust declared.

Cases arising from illegality, impracticability or failure of some part of the express directions contained in a charitable trust are almost infinite in their variety. Sometimes the trust is expressed as a detailed scheme which the settlor or testator has elaborated. Such a scheme may be found entirely impracticable or on the other hand the impracticability may be confined to a small part, the failure of which would not defeat or change the operation of what is left. Sometimes the trust is expressed without any elaboration of detail and yet some particular element involved in the description of the purposes of the trust is found to be the source of an impracticability. The present case is one of this class. For it is the use of Milly Milly itself as a training farm which causes the difficulty, to the training of lads on a farm, nor the finding of Australian orphans who are both lads and are willing to be trained in farming. In applying the general doctrine to such varying cases it is inevitable that different considerations will govern the result and that the principle and the modes of reasoning will be stated in different forms. The problem will at times present itself as that of distinguishing between an immediate and a remoter purpose and of deciding whether the remoter is dominant or essential and the immediate subordinate or accidental. At other times it will appear as a question whether the existence of a main or paramount purpose is manifested notwithstanding that the declaration of the charitable trust takes the form of a direction to carry out a detailed plan. Upon some trusts the question may arise as one of severability, that is, whether so much of the provision as is impracticable is interdependent with or independent of and severable from the rest.

Upon others, as a question whether a complete gift to an ultimate charitable purpose has not been made with directions superadded or annexed for the purpose of carrying it into effect, directions the failure of which leave the primary gift unaffected: See, per Sargant L.J., In re Monk ^[F18] , and, per Parker J., In re Wilson ^[F19] . Yet again the matter may wear the appearance of a question whether part of the description of the trust, or a specific direction, amounts to a condition precedent to the trust taking effect: Cf., per Lord Hanworth M.R., In re Monk ^[F20] .

The truth is that the time-honoured distinction between essential and accidental characteristics is at the root of the test provided by the modern law for ascertaining whether a trust for charitable purposes, found incapable of literal execution according to its tenor, is nevertheless to be administered cy-pr? In other departments of the law, however, similar distinctions are in use. Analogies may be seen in the question whether a contractual provision is of the essence; whether a term is a condition or a warranty; in the question whether invalid provisions of a statutory enactment or other instrument are severable or form part of an indivisible whole; in the question whether a law is mandatory or directory, and perhaps in the question whether the substantial purpose of creating a special power of appointment was to ensure a benefit to the objects so that they take in default of its exercise by the donee.

In determining whether a wider charitable intention is the substantial purpose of the express directions by which the trust is constituted, the court is guided by the trust instrument and the conclusion is commonly said to depend on a question of construction. No doubt the terms of the document, together with any extrinsic circumstances admissible in aid of construction, form the materials for ascertaining whether the specific directions were animated by a wider charitable purpose which amounted to the true or substantial object of the trust. The process of extracting from such materials an intention implicit in the transaction which they evidence is properly called interpretation. But the construction of the language in which the trust is expressed seldom contributes much towards a solution. More is to be gained by an examination of the nature of the charitable trust itself and what is involved in the author's plan or project. In distinguishing between means and ends, between the dominant and the subsidiary, between the substance and the form, an understanding of the relative importance in fact of the component parts of the plan or purpose expressed in the trust is a first step towards forming an opinion of the respective values they possessed in the view of the testator or settlor. His forms of expression are by no means to be neglected. In the arrangement of his ideas and his use of terms the importance which he attached to the particular and to the general respectively may appear. The decided cases show that slight indications have at times been treated as enough to warrant a conclusion in favour of a wider charitable intention.

Almost all charitable trusts expressed with any particularity must tend towards some more general purpose. But to find that the trust as expressed is designed to achieve some further and wider end of a charitable nature is one thing. To find that the secondary and wider end is the dominant object to which the property is devoted is another and a further step. This step cannot be taken unless, from the nature of the trust, the provisions of the instrument and any circumstances which may legitimately be taken into account, the existence of such an intention may reasonably be inferred. For no definite presumption has been established in favour of a general charitable intention. At the same time the court leans, it is said, in favour of charity and is ready to infer a general intention. But little is therefore required as a ground for treating a wider purpose as the essential object of the trust.

The precise question raised by the present case is perhaps somewhat out of the common run. For it depends, not upon the impracticability of particular directions formulated by a testator as part of a scheme or plan which he has elaborated, but on the unsuitability of the specific property devised and bequeathed for purposes which are otherwise quite practicable and, though well defined, are stated with an avoidance of embarrassing particularity.

The testatrix in her disposition of Milly Milly has sufficiently stated her intention of advancing a charitable purpose, a purpose which may be said to consist in four ingredients or elements, viz., (a) the training (b) of orphan (c) lads (d) in farming. But she has stated that intention in a direction that her Milly Milly property shall be held by her trustees for a training farm for orphan lads (being Australians). It is of course clear that she regarded Milly Milly as suitable for such a purpose. But the question is whether this consideration is of the essence or is to be treated as subsidiary to the main purpose to which she devoted the land. Ought she to be regarded as meaning that the actual use of Milly Milly as the place where the boys were to be trained was an indispensable condition of her disposition? Or is the guiding purpose the training of Australian orphan lads in farming pursuits and did her choice fall on Milly Milly as an appropriate means? In other words was she devoting Milly Milly to the furtherance of the beneficial purpose or was her real object a solicitude for the retention and utilization of Milly Milly? It must be borne in mind that although the form of the gift shows that the testatrix regarded Milly Milly as suitable for the purpose of a training farm, yet it is clear that it possessed no features giving it any special suitability and distinguishing it from other grazing or farming lands; and there is nothing either in the language of the will or in the surrounding circumstances to suggest that the testatrix chose Milly Milly for any better reason than that, of the assets of which she was disposing by will, Milly Milly provided the most suitable means of giving effect to her intentions.

The failure of her issue and the presence in her will of other charitable bequests form a sufficient foundation for the inference that her testamentary dispositions were based on a desire to devote much of her property to the general benefit of the community and to negative any idea that she may have been actuated less by a wish to advance the useful end to which she devoted the property, than by some desire to conserve Milly Milly intact, a desire, to suppose a possible example, that it might continue as an enduring memorial to herself or her husband. Again she was not the framer of any particular scheme of training centering on Milly Milly. She left the means of carrying out her general purpose at large. Nevertheless she devoted the land unconditionally and once for all to the purpose. Suppose that it had been found practicable at first to use the lands as a training farm but after some time, perhaps many years, changing conditions had made it no longer feasible. Could she be taken to intend that a trust should in that event result in favour of her next of kin? Then after all Milly Milly is the subject of the trust and the purpose is the object for which it is held in trust. When property is made the subject of interminable trusts for purposes, an intention is not lightly to be inferred that in no contingencies is its form to be changed.

In questions of this kind the significance and application of rules and doctrines necessarily expressed in abstract and general terms is, we think, evidenced by the course of judicial decisions. It is true that it is not easy to find cases like the present. In re Packe ^[F21] , which was relied upon for the next of kin, does not appear to us at all like it. For there the will made it clear that the executors were to look for a society which would undertake the conduct of the "retreat" with the money which the testatrix appropriated for that purpose. Nor does In re Taylor ^[F22] resemble it, where the testamentary gift was obviously inspired by no other intention than to advance a plan which in his lifetime the testator thought he had put into execution but which was entirely invalid. On the other hand, the Victorian case of Re Wiseman's Trusts ^[F23] is more in point. The ground of the decision of Hood J. in favour of a cy-pr?application of the property is summarized in two sentences relevant to the present case. "The declared design of the deed is to provide a home for neglected children. No virtue can be ascribed to the particular locality provided for that home, nor to any special rules and regulations relating thereto ^[F24] ."

But the general trend of the case law over a long period of time appears to us to be against holding that the use of Milly Milly in specie formed an indispensable part of the gift. The gift, in our opinion, ought to be regarded as dominated by a more general charitable purpose.

We think the appeal should be allowed. The decree appealed against should be varied by omitting therefrom the declarations that in making the disposition of Milly Milly the testatrix has not expressed a general charitable intention and that the said property passes as on an intestacy of the testatrix and by substituting therefor a declaration that the trusts declared in respect of Milly Milly should be executed cy-pr?and that a scheme ought to be settled. With that declaration the cause should be remitted to the Supreme Court to be dealt with according to law.

Costs of the appeal of all parties out of the estate, those of the trustee as between solicitor and client.