New South Wales Supreme Court CITATION : Lankry v Clairvision School Limited [2005] NSWSC 1094 HEARING DATE(S) : 12/08/05 JUDGMENT DATE : 28 October 2005 JUDGMENT OF : Burchett AJ DECISION : See para [12] CATCHWORDS : Charities - trust for teaching of Esoteric Christianity - whether charitable - effect of Charitable Trusts Act 1993 - test for validity of gift to charity not whether the trustees are acting in accordance with the trust but how they ought to perform it. Income Tax Assessment Act 1936, s.78 LEGISLATION CITED : Income Tax Assessment Act 1997, Subdivision 50-B Charitable Trusts Act 1993 (NSW) Keren Kayemeth Le Jisroel, Limited v Commissioners of Inland Revenue [1931] 2 KB 465 In re St. Bride's, Fleet Street, Church or Parish Estate (1877) 35 ChD 147n CASES CITED : In re Flatman; Flatman v Binnie [1953] VLR 33 Re Lloyd [1958] VR 523 Leahy v A-G (NSW) (1959) 101 CLR 611 Orna Lankry (plaintiff) Clairvision School Limited (ACN 050 633 237) (first defendant) Vertical Point Pty Limited (ACN 095 271 873) (second defendant) Glenys Webster (third defendant) PARTIES : Alaine Macmoran (fourth defendant) Fiona Hickey (fifth defendant) Heather McKenny (sixth defendant) Hazel Jefferys (seventh defendant) FILE NUMBER(S) : SC 1982 of 2004 Mr P Strasser (plaintiff) COUNSEL : Mr P H Blackburn-Hart (first and second defendants) Milne Berry & Berger (plaintiff) Teece Hodgson & Ward (first and second defendants) SOLICITORS : Adams & Co (third, fourth, fifth, sixth and seventh defendants) LOWER COURT JURISDICTION : - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BURCHETT AJ 28 October 2005 1982/04 LANKRY V CLAIRVISION SCHOOL LIMITED JUDGMENT 1 The plaintiff, Orna Lankry, is the executrix, to whom probate was granted on 12 August 2003, of the will of the late Catherine Rose Ross who died on 30 June 2002 having made her last will on 14 June 1999. After revoking all prior wills and appointing her executrix, the testatrix made just one disposition of her whole estate, with one gift over, as follows: "4. I GIVE DEVISE AND BEQUEATH the whole of my estate both real and personal of whatsoever nature and wheresoever situate unto Clairvision School Limited (ACN 050-633-237) as Trustee for the Clairvision School Foundation (hereinafter called 'Clairvision School Foundation') whose place of business is 143 Balaclava Road, Marsfield in the state of New South Wales, for its sole use and benefit absolutely. 5. SHOULD the Clairvision School Foundation not exist at the time of my death, I DIRECT my Executor to give, devise and bequeath the whole of my estate both real and personal of whatsoever nature and wheresoever situate unto such persons, bodies or organisations as my Executor, in her or his absolute discretion, shall decide." The inventory for the purpose of probate estimates the value of the estate at almost $450,000. 2 On 15 March 1991, Anne McMahon had settled the sum of $100 upon trusts set out in a document entitled "DEED OF TRUST", appointing Clairvision School Limited trustee. Clause 1 provided: "1. THE TRUSTEE shall hold the said sum of ONE HUNDRED DOLLARS ($100.00) as a fund to be known as CLAIRVISION SCHOOL FOUNDATION (which expression shall include not merely the original sum contributed by the promoters but also any additions thereto whether contributed by the promoters or any other persons, corporations or associations together with the investments made from time to time with the assets of the fund, and shall hereinafter be referred to as 'the Trust') UPON TRUST exclusively for the following purposes: - To assist people in their spiritual quest for truth and self-realization through the principles and practices of Esoteric Christianity. In order to fulfil this aim, the Clairvision School Foundation will conduct lectures, courses, seminars and private consultations in the fields of spiritual development, meditation, religion and esoteric sciences; and specialized trainings to assist health professionals, educators, and other members of the working community, to introduce a spiritual dimension into their work and environment. - To buy, rent, build, maintain and operate educational centres in which the above subjects will be taught and practised, and in which free facilities for meditation and retreat will be offered. - To provide low cost or free courses on the above subjects for children, the economically disadvantaged, the blind and the handicapped. - To develop community interest in the spiritual value of a harmonious relationship with the environment, and to offer free information and advice on techniques related to the conservation of the environment, the construction of environmentally harmonious buildings, the recycling of waste products, and the harnessing of non-polluting sources of energy. - To establish a research library and to make information of [ sic ] the above subjects available to the public. - To produce and promote publications and media communications on the above subjects. - To act as consultants on the above subjects and activities, nationally and internationally." 3 The reference in the first of these objects to "Esoteric Christianity" is a reference to a form of religious spirituality which is said to have links to the early Gnostics, as well, in more recent times, as to Swedenborg and Rudolph Steiner. It is bound up with a tradition of meditation as a pathway to spiritual experience. An adherent of this tradition is Dr Samuel Sagan who has a doctorate in medicine from Paris University V as well as a doctorate in divinity from the International Gnostic Church and is the author of numerous books on meditation and Esoteric Christianity. Dr Sagan founded a school for the teaching and promotion of Esoteric Christianity after his arrival in Australia in 1987, and in 1991 Clairvision School Limited was incorporated and the trust which has been mentioned was formed. Classes were held at various places in the suburbs of Sydney, in particular from 1992 until 1997 at Roseville; from 1997 to 2001 at Marsfield; and since then in Mortdale. 4 Both the testatrix and Orna Lankry became very much involved, both as students and as administrators and teachers, in the school. It was through Orna Lankry that the school obtained the use of the premises at Marsfield, which belonged to her father, Mr Harry Triguboff. The testatrix was a director of Clairvision School Limited from 1991 to 1998. 5 Clairvision School Limited was formed as a company limited by guarantee, with objects identical to those set out in the document that establishes the trust. Both the testatrix and the executrix signed the Memorandum of Association of Clairvision School Limited as subscribers. 6 In the year 2000, and at least partly by reason of the changes in taxation administration brought about by the adoption of the goods and services tax, the directors of Clairvision School Limited were advised that some reorganisation of the administration of the trust and the school was desirable. Both had been accepted by the Commissioner of Taxation as entitled to the charitable exemption contained in section 78 of the Income Tax Assessment Act 1936. On 1 July 2000, each was also endorsed "as an income tax exempt charitable entity" under Subdivision 50-B of the Income Tax Assessment Act 1997. The reorganisation that was contemplated involved the retirement of Clairvision School Limited as trustee of the trust of the foundation and the substitution of a new trustee, Vertical Point Pty Limited. Clause 12 of the document entitled "DEED OF TRUST" by which Clairvision School Foundation was established empowered the trustee "to appoint a new Trustee or new Trustees". Pursuant to this power, by deed made 1 December 2000, Clairvision School Limited both resigned as trustee and contemporaneously appointed Vertical Point Pty Limited trustee in its place, and Vertical Point Pty Limited covenanted "that it shall stand possessed of the assets of the Clairvision School Foundation Trust" and the terms and conditions of the trust were confirmed. For some reason which is obscure, doubts were raised about this deed, and a further deed of confirmation of appointment of new trustee was executed on a subsequent date confirming that on 1 December 2000 the property subject to the trust was transferred so as to vest in Vertical Point Pty Limited. 7 Since the appointment of the new trustee, the teaching activities of the school have been carried on by Clairvision School Limited through Dr Sagan and others. What the foundation through its new trustee has principally done is provide funds for that purpose and for the purpose of retreats associated with the propagation of Esoteric Christianity. On 1 December 2000 a loan agreement was entered into between Vertical Point Pty Limited as trustee for The Clairvision School Foundation Trust (the Lender) and Clairvision School Limited (the Borrower). The principal sum involved was $723,682 which was lent for a period up to 14 March 2051. There was provision for interest at 1% above a specified bank overdraft rate for a loan of over $100,000, but there was a special provision to reduce the interest rate to nil "[i]f the Borrower continues to meet the Special Terms and Conditions set out in item 14 in the Schedule". Those special terms and conditions were the following: I. The loan shall be by way of venders [ sic ] finance to assist in the facilitation of the sale of land to Clairvision School Limited, II. Clairvision School Limited shall assume liability of a loan which the Clairvision School Foundation Trust has with the Commonwealth Bank in the sum of $168,360, III. That the company continuing [ sic ] to carry on its activities for the advancement of Esoteric Christianity and Spirituality and, IV. The company continues to conduct its affairs in such a way as to continue to satisfy the requirements to be recognized as a Religious Institution." 8 It is in this situation that the plaintiff seeks declaratory relief as to the meaning and effect of the disposition made by the will. She has joined the sisters of the testatrix as her next of kin, but they make no claim. The argument was presented by Mr Strasser on the footing that the circumstances raised some doubt as to whether the Clairvision School Foundation was continuing to function as the entity which had been the object of the testatrix's bounty. I confess I have some difficulty in understanding how the alleged doubt has arisen. It is trite law that a trust will not fail for want of a trustee, so the mere change of trustee, which in any event was contemplated by the express power included in the terms of the settlement itself, could make no difference. That the new trustee, instead of itself conducting religious activities in the nature of those conducted by the school, which would certainly fall within the terms of the trust, chose to lend substantial funds available to the trust for the purpose of the operations of the school, or at least of activities falling within the trust, to be carried on by Clairvision School Limited does not seem to me to make any difference either. To provide the funds to a company the constitution of which binds it to use them for trust purposes, so that it may do so, is an entirely appropriate way of carrying out the trust. 9 But in any event, it is clear law that the test is the purpose for which the property is held, not the way in which, whether rightly or wrongly, the trustee has attempted to fulfil that purpose. If, indeed, a trustee strays outside the area to which the trust activities should be confined, a remedy is available through the Court, but the trust as the object of the testatrix's bounty does not disappear. Authority for this proposition is to be found in the judgment of Lord Hanworth MR in Keren Kayemeth Le Jisroel, Limited v Commissioners of Inland Revenue [1931] 2 KB 465 at 476 where he referred to what Sir George Jessel MR had said in In re St. Bride's, Fleet Street, Church or Parish Estate (1877) 35 ChD 147n, "that in deciding whether the test of charity is fulfilled or not 'what the Court has to look to is, the purposes for which the property is held, and the way in which it ought to be applied.'" Lord Hanworth added: "It is unnecessary to trace the source, or determine the motives. The facts as to how it is being used may be laid aside. But the purpose for which the property is held, or ought to be applied, is crucial." The same point was made by Barry J in In re Flatman; Flatman v Binnie [1953] VLR 33 at 37: "It is irrelevant to the question of construction [ie. of the gift in the will] that the trustees may not carry out their duties under the trust; 'it is the right and the duty of [the] Attorney-General to intervene and inform the Court if the trustees fall short in their duty', and it is the duty of the Attorney-General, if need be, to assist the Court in the formulation of a scheme for the execution of a charitable trust." 10 I did not understand Mr Strasser to dispute the status of the foundation as a charity the purposes of which either fall within the category of religious charities or that of educational charities or both. Even if some of its purposes extend beyond the bounds to which a legal charity should be confined, the validity of the gift is saved by section 23 of the Charitable Trusts Act 1993 (NSW) as a gift for those objects of the foundation that are charitable: Re Lloyd [1958] VR 523; Leahy v A-G (NSW) (1959) 101 CLR 611; and see Jacobs' Law of Trusts in Australia (6 ed, 1997) by R P Meagher and W M C Gummow at para 1066. 11 After the conclusion of the hearing, a further affidavit was filed as to certain dealings with the funds of the foundation which, it appears, now exceed $1 million. A substantial part of the moneys lent as earlier stated has been repaid and a further loan has been made to another company limited by guarantee, Gate to Philadelphia Limited, the objects of which are clearly religious and bound up with the teaching and propagation of Esoteric Christianity. That company has on-lent most of the money to another company the constitution of which is not before me, for the purposes of the conduct of lectures and seminars by the Clairvision school. These additional facts, far from suggesting the foundation is defunct, suggest it is seeking, by indirect means which the trustee judges appropriate, to pursue its charitable objects. 12 Since there is no occasion to resort to clause 5 of the will, it is unnecessary to consider whether that clause involves an impermissible delegation of testamentary power. 13 For these reasons, I propose to make a declaration that the gift in clause 4 of the will took effect, Clairvision School Limited having ceased before the death of the testatrix to be the trustee, as a valid gift to Vertical Point Pty Limited as trustee of the Clairvision School Foundation Trust. I direct the parties to bring in on a date to be fixed, short minutes of orders appropriate to be made in the light of these reasons. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.