Supreme Court New South Wales Medium Neutral Citation: Willoughby City Council v Attorney General of NSW [2016] NSWSC 972 Hearing dates: 13 July 2016 Date of orders: 13 July 2016 Decision date: 13 July 2016 Jurisdiction: Equity Before: Hallen J Decision: (1) Declares that the compensation funds awarded to the Plaintiff in Land and Environment Court NSW, Proceedings 30990/11, in respect of the land identified as Site 1 and Site 2, the subject of the current proceedings, are impressed with a charitable trust. (2) Declares that, in the circumstances, the original purpose for which the trust was laid down has, in part, ceased to provide a suitable and effective method of using the trust property, having regard to the spirit of the trust. (3) Orders that the cy-près scheme set out in the Cy-Près Declaration of Trust, a copy of which is marked Ex. A in the current proceedings, be approved. (4) Orders that the costs of each of the Plaintiff and of the Defendant, respectively, calculated on the indemnity basis, be paid out of compensation funds awarded. Catchwords: EQUITY – CHARITIES – Trusts and trustee – Where Plaintiff trustee is a local council – Where council held land on trust for the purposes of a public park, public reserve or public recreation area – Land compulsorily acquired with result that the charitable purposes for which the land was held will no longer be fulfilled – Charitable purposes – Other purposes beneficial to public – Where original purposes have ceased to provide a suitable and effective method of using the trust property, having regard to the spirit of the trust – Cy-près scheme proposed taking into consideration practicalities – Approved by Attorney General in amended form – Cy-près scheme as proposed, with amendments, ordered. Legislation Cited: Charitable Trusts Act 1993 (NSW) Cases Cited: Attorney-General (NSW) v Fulham [2002] NSWSC 629 Brisbane City Council v Attorney-General (Qld) [1979] AC 411 Burnside v Attorney-General (1993) 61 SASR 107 Hunter Region SLSA Helicopter Rescue Service Ltd v Attorney General of New South Wales (2013) NSWSC 1749 Roads and Maritime Services v Rockdale City Council [2015] NSWSC 1844 Special Commissioners of Income Tax v Pemsel [1891] AC 531 The Trustees of The Kean Memorial Trust Fund v The Attorney-General For SA [2003] SASC 227 Category: Principal judgment Parties: Willoughby City Council (Plaintiff) Attorney General of NSW (Defendant) Representation: Counsel: Mr DAC Robertson (Plaintiff) Mr C Mantziaris (Defendant) Solicitors: Pikes & Verekers Layers (Plaintiff) Crown Solicitor's (Defendant) File Number(s): 2016/177047 Judgment – EX TEMPORE (revised) 1. HIS HONOUR: This is an application by the Plaintiff, the Willoughby City Council, for the approval of a cy-près scheme in respect of funds held by it following the determination of compensation payable as a result of the compulsory acquisition ("the compensation funds") of two parcels of land, being Lots 39 and 40 in DP xxx ("Site 1") and Lots 54 and 55 in DP xxx ("Site 2"), which land had been held by the Council on trust for charitable purposes, being "the purposes of a public park, public reserve or public recreation area". 2. There can be little doubt that these are purposes within the fourth head identified in Commissioners for Special Purposes of Income Tax v Pemsel [1891] AC 531, namely "trusts for other purposes beneficial to the community, not falling under any of the preceding heads": Brisbane City Council v Attorney-General (Qld) [1979] AC 411, at 422; City of Burnside v Attorney-General (1993) 61 SASR 107, at 135. 3. Site 1 and Site 2 were compulsorily acquired by the Roads and Traffic Authority, now the Roads and Maritime Services, for the purposes of the Gore Hill freeway. As each is no longer vested in the Plaintiff, the charitable objects for which they were held will no longer be fulfilled. 4. In the reasons for judgment in the proceedings between the Willoughby City Council, as Plaintiff, and the Roads and Maritime Services, as Defendant, relating to the determination of the compensation payable in respect of the compulsory acquisition of certain land (including Site 1 and Site 2), which reasons bear the medium neutral citation [2014] NSWLEC 6; (2014) 201 LGERA 177, Biscoe J noted, at [36]: "Any compensation awarded to Council will be impressed with the trust. Council and the Attorney-General should then consider whether there should be a cy-pres scheme. In that regard, s 11 of the Charitable Trusts Act provides: "A charitable trust places a trustee under a duty, if the case permits and requires the trust property or any part of it to be applied cy-pres, to secure its effective use for charitable purposes by taking steps to enable it to be so applied". Sections 12 and 13 empower the Attorney-General to establish a scheme for the administration of any charitable trust." 1. The Attorney General, who is the only Defendant named in the proceedings, and who is a necessary party to a suit for a cy-près scheme, has authorised the proceedings as "charitable trust proceedings" pursuant to section 6(1)(a) of the Charitable Trusts Act 1993 (NSW) ("the Act"). 2. There is no dispute that the proceedings relate to the "administration" of the trust. There is also no dispute that, in equity, the Court may order a cy-près scheme "in the case of supervening impossibility, and an order may be made whether the intention be general or merely particular". In this regard, in equity, "impossibility" means something less than physical impossibility. The question is whether the mode of application specified by the donor can be carried into practical effect: The Trustees of The Kean Memorial Trust Fund v The Attorney-General For SA [2003] SASC 227; (2003) 86 SASR 449, at [54] – [55]. 3. However, as Bryson J observed, in Attorney-General (NSW) v Fulham [2002] NSWSC 629, at [16] – [17], in regard to s 9 of the Act, it: "has widened the grounds on which the Court may act, in that it is no longer necessary that actual compliance with the original terms should be impossible. It is now enough that they have ceased to provide a suitable and effective method of using the trust property. … The Court may alter the purposes of a charitable trust where the original purposes have ceased to provide a suitable and effective method of using the trust property; this is well short of a test requiring impossibility. [Section] 9(1) greatly widens the circumstances in which the Court may act and the influence which it may allow considerations of practicality to have." 1. In Hunter Region SLSA Helicopter Rescue Service Ltd v Attorney General of New South Wales [2013] NSWSC 1749, White J, at [37], wrote: "In my view, s 9 can be applied proleptically. Section 9 is remedial and beneficial legislation and not to be narrowly construed. A construction of s 9 that the court could not make an order altering the original purposes of a charitable trust until those purposes have ceased to provide a suitable and effective method of using the trust property, even though it will then be too late to do anything about it, should not be adopted if an alternative construction is reasonably available. Section 9(1) does not purport to state exhaustively the circumstances in which the court can alter the original purposes of the charitable trust. The section says that the circumstances in which those original purposes can be altered "include" circumstances in which the original purposes have ceased to provide a suitable and effective method of using the trust property having regard to the spirit of the trust. As the power can be exercised in those circumstances, it is only logical that it can also be exercised if it is shown that the original purposes will cease to provide a suitable and effective method of using the trust property having regard to the spirit of the trust." 1. Black J referred to the decision of Bryson J, with approval, in Roads and Maritime Services v Rockdale City Council [2015] NSWSC 1844, at [129]. 2. In Hunter Region SLSA Helicopter Rescue Service Ltd v Attorney General of New South Wales, White J added, at [38]: "By s 11 the trustee of a charitable trust is under a duty, if the case permits and requires the trust property or any part of it to be applied cy-près to secure its effective use for charitable purposes, to take steps to enable it to be so applied. This provision makes it clear that the court can make orders for trust property to be applied cy-près to secure its effective use for charitable purposes in anticipation and prevention of events that would otherwise prevent the property being effectively applied for the original purposes of the charitable trust." 1. The Attorney General submits, and the Plaintiff accepts, in my view correctly, that the Court should make a declaration, pursuant to s 9 of the Act to this effect: "(a) That the compensation funds awarded to the Council in Land and Environment Court NSW proceedings 30990/11 in respect of Site 1 and Site 2 the subject of the proceedings are impressed with a charitable trust. (b) That, in the circumstances of the resumption of the land, the original purpose for which the trust was laid down has, in part, ceased to provide a suitable and effective method of using the trust property, having regard to the spirit of the trust." 1. In the circumstances, I consider it appropriate to make the declarations as suggested by the Attorney General. 2. In support of its application, the Plaintiff, by counsel, has read an affidavit of Garry Parsons sworn 6 June 2016 and an affidavit (undated) which it sought leave to file in Court. Until 6 May 2016, Mr Parsons was the Project Management Officer of the Council. He deposes that the Plaintiff considers it appropriate to utilise the compensation funds to acquire alternative land for public reserves, or public recreation areas, whether by acquiring further parcels of land, or by redeveloping, or refurbishing, existing parcels of land already held by the Council. 3. He also states that there is limited availability of suitable land in the Willoughby Local Government area that can be used, or converted to use, for open space. To acquire additional land to increase the supply of open space, the Plaintiff must be prepared to canvass the whole of its local government area. 4. The Plaintiff has, in fact, circulated its interest in acquiring suitable properties to real estate agents in the area, and has reached an agreement in principle for the purchase of the land on which the Artarmon Bowling Club is situated. It is proposed that part of the compensation funds will be used for the acquisition and embellishment of that site. 5. The Plaintiff submits that it would be impractical to obtain the approval of the Court to a specific acquisition by the Plaintiff as such acquisition may need to be negotiated, and completed, at short notice. It is put, by way of example, that it would be impracticable for the Plaintiff to seek to bid at auction for a property in circumstances where it could not be confident that it would obtain (or obtain within a sufficiently short period of time) the approval of the Court to complete the acquisition. 6. For these reasons, the Plaintiff has sought the approval of the cy-près scheme in a form annexed to the Summons (as subsequently amended), the effect of which is to require the Plaintiff to apply the compensation funds for the acquisition, redevelopment, or refurbishment of land "with reasonable expedition" ensuring, however, that the Plaintiff is not obliged to purchase any land until suitable land is available and able to be purchased. 7. Clause 2 of the proposed cy-près scheme provides that the Plaintiff should not be required to purchase any land at a price unreasonably above the market price as advised by a qualified valuer of not less than 5 years standing. 8. The proposed scheme also provides, in Clause 6, that, if after the acquisition of any land, there remains any surplus of the compensation funds, which cannot practicably be used for the acquisition of further land, that surplus be used, or spent, improving, and maintaining, the land acquired with the compensation funds or any building thereon. The Plaintiff submits that, in this way, the whole of the compensation funds will be applied for the charitable purposes relating to public parks and recreation. 9. The Attorney General, who has reviewed the cy-près scheme proposed by the Plaintiff, initially suggested that the cy-près scheme be amended so that: 1. any proposed alteration to the zoning classification of land purchased by the trust would be notified to the Attorney General (Clauses 7-8); and 2. any proposed change to the trust purpose would be brought back before the Court (Clause 9). 1. Subsequently, the Attorney General suggested two additional amendments, namely that: 1. The Schedule annexed to the Summons be substituted by an Amended Schedule, with the deletion of the words "acting reasonably" in Clauses 7 and 9. 2. The Plaintiff clarified whether the trust funds ($6,593,356) are held in an account separate from the other compensation funds received by the Plaintiff as a result of the decision of Biscoe J. 1. These matters have been attended to, and are included in documents that have been tendered in the proceedings. 2. The Plaintiff had no objection to any of the proposed amendments suggested by the Defendant, and the amended Schedule to the proposed form of Orders, the terms of which have been agreed, has been marked Ex. A in the proceedings. 3. The grounds for the proposed declarations and orders are made out. In particular, I am satisfied that the trusts with which the compensation funds are impressed can no longer be performed on Site 1 and Site 2, with the result that the original purpose of the trust has ceased to be a suitable, or effective, method for performing the trust purpose, and that the proposed use of the compensation funds will be for an almost identical purpose, i.e. the purchase of land for use as a "public park, public reserve or public recreation area", with any surplus to be used for improving and maintaining land acquired for that use, and redevelopment or refurbishment of a facility for that use. 4. In relation to costs, there is no reason why each of the parties should not be indemnified from the compensation funds awarded and held on trust, for its or her costs, calculated on the indemnity basis, of these proceedings. 5. It would be remiss of me not to mention the assistance provided to the Court by the legal representatives of the parties in the preparation of the case for hearing and in providing the very helpful written Outline of Submissions that enabled the hearing to be conducted expeditiously. 6. The Court: 1. Declares that the compensation funds awarded to the Plaintiff in Land and Environment Court NSW, Proceedings 30990/11, in respect of the Land identified as Site 1 and Site 2, the subject of the current proceedings, are impressed with a charitable trust. 2. Declares that, in the circumstances, the original purpose for which the trust was laid down has, in part, ceased to provide a suitable and effective method of using the trust property, having regard to the spirit of the trust. 3. Orders that the cy-près scheme set out in the Cy-Près Declaration of Trust, a copy of which is marked Ex. A in the current proceedings be approved. 4. Orders that the costs of each of the Plaintiff and of the Defendant, respectively, calculated on the indemnity basis, be paid out of compensation funds awarded. ********** 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. Decision last updated: 14 July 2016