Supreme Court New South Wales Medium Neutral Citation: Royal Botanic Gardens and Domain Trust v The Attorney General of New South Wales [2018] NSWSC 1666 Hearing dates: 26 October 2018 Date of orders: 31 October 2018 Decision date: 31 October 2018 Jurisdiction: Equity Before: Kunc J Decision: Administrative scheme ordered; parties' costs to be paid out of the fund on the indemnity basis Catchwords: CHARITIES — Charitable gifts and trusts — Validity and practicability — Administrative scheme Legislation Cited: Charitable Trusts Act 1993 (NSW) Royal Botanic Gardens and Domain Trust Act 1980 (NSW) Cases Cited: Corish v Attorney-General's Department of NSW [2006] NSWSC 1219 College of Law Pty Limited v Attorney-General of NSW [2009] NSWSC Perpetual Trustee Ltd v Attorney General of NSW (Will of Hon G Nesbitt) [2018] NSWSC 1456 University of Adelaide v Attorney General (SA) [2018] SASC 82 Category: Principal judgment Parties: Royal Botanic Gardens and Domain Trust (Plaintiff) The Attorney General of New South Wales (Defendant) Representation: Counsel: D Barlin (Plaintiff) Dr C Mantziaris (Defendant) Solicitors: Finn Roache (Plaintiff) Crown Solicitor for New South Wales (Defendant) File Number(s): 2018/40809 Publication restriction: No Judgment Summary 1. The public gardens of Sydney are among the glories of our city. They are oases of recreation and research. Their staff are dedicated and skilled. 2. The Court has no doubt that the late Lorna May Backhouse ("Mrs Backhouse") shared those sentiments. Her home was on the Old Bells Line of Road at Mount Tomah, not far from the Blue Mountains Botanic Garden at Mt Tomah (the "Mt Tomah Garden"), where she was a regular volunteer. 3. Mrs Backhouse died on 31 May 2010. By her will dated 4 January 1996, she left part of the residue of her estate to the plaintiff, Royal Botanic Gardens and Domain Trust ("RBGDT"), on trust to establish "The Lorna and Clive Backhouse of Mt Tomah Scholarship" to be awarded every two years to a member of staff at the Mt Tomah Garden (the "Scholarship Trust"). RBGDT received just over $1.1 million from Mrs Backhouse's estate to form the corpus of the Scholarship Trust. With accumulated interest income, the current value of the Scholarship fund is approximately $1.3 million. 4. These proceedings were brought by RBGDT because it wishes to be able to award the scholarship annually and to more than one person in any year. 5. RBGDT and the defendant, the Attorney General of New South Wales, have agreed that, subject to the consent of the Court, an administrative scheme be ordered to give effect to RBGDT's intention (the "Scheme"). Although the parties have agreed on the orders to be made, the administration of charitable trusts is a matter of public interest and it remains a matter for the Court to determine whether the orders should be made. These are the reasons why the Court is satisfied that the Scheme should be ordered. The Scheme is set out at the conclusion of these reasons as part of the orders of the Court. The facts 1. Clause 5(f) of Mrs Backhouse's will provides: "(f) As to the remaining three (3) parts to pay the same to the ROYAL BOTANICAL GARDENS AND DOMAIN TRUST which shall invest the same upon authorised Trustee investments and shall hold the investments and the income therefrom UPON THE FOLLOWING TRUSTS namely: (i) out of the income of the said Trust, to provide a scholarship to a member of the staff of the botanic Gardens at the Mount Tomah Garden to be applied to advance knowledge in horticulture and/or plant physiology with relevance to the said garden at Mount Tomah. (ii) this scholarship shall be awarded each two (2) years or at longer intervals at the discretion of the Director of the Royal Botanic Gardens Sydney. (iii) in awarding the scholarship, the Royal Botanic Gardens and Domain Trust shall consider the advice of the Officer in Charge of the Gardens at Mount Tomah. (iv) this scholarship shall be known as the "Lorna and Clive Backhouse of Mount Tomah Scholarship". 1. RBGDT is a statutory corporation established under the Royal Botanic Gardens and Domain Trust Act 1980 (NSW). It is responsible for the management and stewardship of the Royal Botanic Gardens Sydney, the Domain, the Australian Botanic Garden at Mt Annan and the Mt Tomah Garden. The trustees of RBGDT report directly to the NSW Minister for Environment and Heritage and have responsibility for all of its assets and programs. RBGDT's staff are part of the NSW Office of Environment & Heritage. 2. The total amount received by RBGDT under clause 5(1)(f) of Mrs Backhouse's will was $1,173,886.76 (the "Corpus"). 3. The Mt Tomah Garden was established for the express purpose of conservation and research. It is the highest botanic garden in Australia and includes the Greater Blue Mountains World Heritage Exhibition Centre. It is 252 hectares consisting of 28 hectares of landscaped gardens, 33 hectares of temperate rainforest, 186 hectares of conservation area and 5 hectares of Sunrise property. There are currently 31 people working in horticulture at the Mt Tomah Garden, including three apprentices. 4. RBGDT has established a policy and procedure for the administration of the scholarship, including an applications procedure, assessment by a selection committee and non-exhaustive guidelines for how the scholarship can be applied. 5. Two scholarships have thus far been awarded. The first was in 2015 and was a grant of $17,415.69. The second was in 2017. For the second scholarship, an amount of $6,840.00 was awarded but $3,621.00 was unused and returned to RBGDT. 6. In addition to the Corpus, the accumulated income as at 30 June 2018 was $213,701.24 net of expenses. 7. RBGDT commenced these proceedings by summons filed on 7 February 2018 and ultimately moved on an amended summons filed on 30 April 2018 which sought: "1 Declaration that on the true construction of the will of the late Lorna Backhouse dated 4 January 1996 ("Deceased's Will") the gift of property in clause 5(f) of the will constitutes a valid charitable trust. 2 Declaration that in the circumstances in which the original purpose of the said charitable trust have, since they were laid down, ceased to provide a suitable and effective method of using the trust property, having regard to the spirit of the trust. 3 Order that the trust property be applied cy-près and that a scheme be settled for that purpose. 4 Further, and in the alternative to paragraph 3, order that the trust property be administered in accordance with the an administrative scheme to be settled for that purpose. set out in Annexure D of the Affidavit of Jimmy Lynn Turner of 5 February 2018." 1. The Attorney General authorised these proceedings as "charitable trust proceedings" pursuant to s 6(1)(a) of the Charitable Trusts Act 1993 (NSW) (the "Act"). Jurisdiction 1. As is apparent from the amended summons, RBGDT originally pressed for a cy-près scheme. Ultimately, the parties came to the view that there was real doubt whether it could be said that the Scholarship Trust could no longer be performed or that it had become impracticable. It followed that it was not clear whether there was a basis for the Court to order a cy-près scheme, either under its general jurisdiction or pursuant to s 9 of the Act. The parties' concerns were well founded. However, because it is not necessary for me to decide, I do not express any view on whether a cy-près scheme could have been ordered. 2. Section 12(1)(b) of the Act provides: "12 Attorney General may establish schemes (1) The Attorney General may by order establish a scheme for the administration of any charitable trust. In particular, the Attorney General may by such an order: … (b) establish a scheme to extend or vary the powers of trustees of a charitable trust or prescribe or vary the manner or mode of administration of any charitable trust, either generally or in a particular case, if it appears to the Attorney General that it is expedient to do so in the interests of the administration of the charitable trust, …" 1. However, the Attorney-General's power under s 12(1)(b) of the Act does not apply to the present case, because the value of the trust property exceeds $500,000 (see s 14(1)(a) of the Act). The present application therefore proceeds by reference to the inherent power of the Court to order an administrative scheme. 2. The difference between a cy-près scheme and an administrative scheme was explained by Campbell J (as his Honour then was) in Corish v Attorney-General's Department of NSW [2006] NSWSC 1219: "9 There is a clear conceptual difference between a cy-près scheme and an administrative scheme for a charitable trust. It is the difference between ends and means. A cy-près scheme can be directed when it is impossible or impractical to carry out the objects of the trust in all the details the settlor stipulated. An administrative scheme supplements and/or clarifies any provisions the settlor has stipulated concerning the manner in which the objects of the trust are to be pursued, when practical circumstances show that the settlor's stipulation (if any) of the means is inadequate or impractical." 1. In College of Law Pty Limited v Attorney-General of NSW [2009] NSWSC 1474, Brereton J (as his Honour then was) said: "7 Where there is uncertainty as to the mode of carrying out the objects of the charitable trust — for example, because the donor has failed to specify a particular means by which the gift is to be applied for those objects, or the means specified are insufficient for its practical application — the Court has the jurisdiction to provide the detailed machinery for the administration of the donor's charitable objects by means of an administrative scheme [see Re Robinson; Besant v German Reich [1931] 2 Ch 122; Re Gott; Glazebrook v University of Leeds [1944] Ch 193 at 197; The Diocesan Trustees of the Church of England in Western Australia v The Solicitor-General (1909) 9 CLR 757, 763; Kytherian Association of Queensland v Sklavos (1958) 101 CLR 56, 66; Phillips v Roberts [1975] 2 NSWLR 207, 222–223]. Such administrative schemes are to be distinguished from cy-près schemes, which result in the charitable object being varied, in order to achieve a general charitable intent where the stipulated charitable object is no longer capable of attainment [Corish v Attorney-General of New South Wales [2006] NSWSC 1219, [9]]." 1. The recent judgment of Stanley J in the Supreme Court of South Australia in University of Adelaide v Attorney-General (SA) [2018] SASC 82 bears a factual similarity to the present case. One of the trusts which was the subject of his Honour's decision suffered from what his Honour described (at [37]) as "an embarrassment of riches". The evidence was to the effect that the income of the particular trust had been, and would continue to be, greater than what could be expended through the awarding of scholarships in the limited circumstances specified by the terms of the trust. As is set out in paragraph [21] below, the same could be said in the case at bar. Stanley J said at [45]–[46] (citations omitted): "45. The Court's power to complement a s 69B variation by providing the administrative mechanism derives from its inherent jurisdiction. Under its special jurisdiction in respect of charitable trusts, the Court may make administrative schemes to clarify, supplement or alter the machinery for the carrying out of charitable objects. By contrast, a cy-près scheme (and, now, a s 69B scheme) alters those objects. Conceptually, the distinction is between means and ends. 46. Administrative schemes enable the Court to provide all the details necessary for the carrying out of the purposes of a charitable trust. They commonly confer charity trustees with powers of management and investment of trust property. In contrast with the higher thresholds that must be satisfied before making a cy-près or s 69B scheme, the Court has a discretion to make orders by way of a scheme to regulate the administration of a charity where it appears to the Court to be expedient to do so." Consideration 1. An affidavit sworn by the director of Horticultural Management for RBGDT succinctly stated the reasons for these proceedings: "Number of scholarships 29 The Backhouse Scholarship can only be awarded once every two years. 30 There are a limited number of staff at Mount Tomah Garden. They have professional commitments at the Mount Tomah Garden. They also have personal commitments. It is challenging for staff to be away from the Mount Tomah Garden for an extended period of time. 31 Therefore, a study trip is usually limited to one or two months. The cost of such a study trip is approximately $15,000.00 to $20,000.00. 32 The annual income from the Scholarship Fund would easily be able to finance more than one scholarship every two years. 33 If the Backhouse Scholarship could be awarded more often, more members of the staff would have an opportunity to use the Scholarship Fund, which would advance the knowledge in horticulture and/or plant physiology of more members of the staff. Cannot be used for group projects 34 The terms of the Backhouse Scholarship restrict the scholarship to one member of the staff. 35 A horticultural study trip usually involves a number of administrative and practical tasks such as collecting and collating seeds, plant specimens and other organic material, as well as other information. It is more practical if a number of persons travel together, rather than one individual. 36 In addition, the Mount Tomah Garden may be able to negotiate better access to host botanic garden staff, leading horticulturalists and other leading practitioners if there are a number of members of staff involved rather than one individual. 37 It would advance the knowledge in horticulture and/or physiology of plants of Mount Tomah Garden if the Scholarship Fund could be used to pay for a number of staff rather than one member of staff." 1. The Scheme is a textbook example of maintaining the ends or purpose of Mrs Backhouse's generous gift, but altering the means. Without intending by this observation to establish a legal test of general application, the Court has no hesitation in approving the Scheme because it has no doubt that if Mrs Backhouse's views were able to be sought, she would express her satisfaction that her gift was to be used for the benefit of more people and more often to undertake the activities she wished to support. Approval of the Scheme will permit annual awards to be made and, if appropriate, to more than one person in any year. 2. There are only two matters concerning the orders the Court will make which require special mention. 3. First, it will be seen that the Scheme makes provision for the accumulation of income. 4. The Scheme originally presented for the Court's consideration permitted RGBDT to mix the Corpus and the unspent income for the purposes of investment. However, it maintained the requirement for the Scholarship to be paid only from income. During the hearing I raised with the parties my concern that this approach might lead to administrative and accounting complications in keeping track of how the investment returns were to be treated from a mixed investment. Given further time to consider the matter, the parties have now adopted a different solution which, in my view, is a simpler one (see Clause 7(e) of the Scheme). 5. In my respectful view, there is a real public interest in ensuring that the administration of trusts such as those in relation to scholarships should be as straightforward as possible. Apart from the inherent advantage of ease of administration, it is also likely to ensure that the costs of administering such a gift are minimised. Simplifying such matters has at least two benefits. First, it may encourage other potential donors to make such gifts in the knowledge that as much as possible will be expended on the intended purpose rather than the administration of a gift. Second, it will also encourage organisations to be prepared to take such gifts. In many cases, such gifts are made to organisations which themselves are charities and whose administrative resources may be limited. The approach which the parties have now adopted in this case will be administratively simpler but still ensure that the Corpus is maintained. 6. Second, the orders include an order for the costs of the parties, including the Attorney General, to be paid out of the Scholarship Trust. Those costs will be payable as expenses or liabilities of the Scholarship Trust. In making the costs order proposed by the parties, the Court is satisfied that the Attorney General's role in these proceedings was helpful, the Scholarship Trust itself is substantial, and the reason for the application arose from the consequences of the terms of the gift as provided by Mrs Backhouse. The Court is satisfied those circumstances make it appropriate for the Attorney General to receive his costs on the indemnity basis. In reaching this conclusion, I respectfully adopt and apply the decision of Leeming JA (sitting as a judge of this division) in Perpetual Trustee Ltd v Attorney General of NSW (Will of Hon G Nesbitt) [2018] NSWSC 1456 at [129]–[135]. Orders 1. The orders of the Court, made by consent, are: 1. Order that the property held subject to the charitable trust known as the "Lorna and Clive Backhouse of Mount Tomah Scholarship" ("the Scholarship Trust") established pursuant to clause 5(f) of the Will of the late Lorna May Backhouse dated 4 January 1996 be administered in accordance with an administrative scheme, the terms of which are provided for in Annexure "A" of these Orders. 2. Order that the Plaintiff is entitled to its costs out of the Scholarship Trust on the indemnity basis. 3. Order that the Defendant is entitled to its costs out of the Scholarship Trust on the indemnity basis. ANNEXURE A The Lorna and Clive Backhouse of Mount Tomah Scholarship RECITALS A. Lorna May Backhouse of 'Brunaye–lez–Arbres', Old Bell's Line of Road, Mount Tomah, via Bilpin, in the State of New South Wales died on 31 May 2010. B. On 21 September 2011, the Supreme Court of New South Wales granted to Conrad Egon Silvester of XXX, XXX, probate to the Last Will and Testament of Lorna May Backhouse dated 4 January 1996 (the Will). C. Clause 5(f) of the Will appoints the Royal Botanic Gardens and Domain Trust (RBGDT) as trustee of a trust. D. RBGDT is a statutory corporation established under section 5 of the Royal Botanic Gardens and Domain Trust Act 1980 (NSW) (the Act). RBGDT holds the lands identified in Parts 1, 2 and 3 of Schedule 2 to the Act for the objects identified in section 7 of the Act. E. An area of land at Mount Tomah, commonly known as the 'Mount Tomah Garden', is identified in Part 3 of Schedule 2 to the Act. The RBGDT conducts activities on the Mount Tomah Garden land pursuant to the Act. F. The advancement of knowledge in horticulture and/or plant physiology is within the objects stated in section 7 of the Act. G. On 7 February 2018, the RBGDT commenced proceedings no 2018/40809 in the Supreme Court of New South Wales (the Proceedings). Pursuant to Prayer 4 of the Amended Summons filed in the Proceedings on 30 April 2018, the RBGDT seeks an order that the property of which it is trustee be administered in accordance with an administrative scheme to be settled for that purpose. H. The Attorney General for the State of New South Wales authorised the Proceedings as 'charitable trust proceedings' pursuant to section 6(1)(a) of the Charitable Trusts Act 1993 (NSW). The Attorney General is named as the defendant to the Proceedings and appears in his capacity as the protector of charitable trusts. I. Clauses 1–8 below, set out the terms of the administrative scheme created by order of the Court pursuant to the Court's inherent jurisdiction conferred under section 23 of the Supreme Court Act 1970 (NSW) on 29 October 2018. J. The Court's order was made with the consent of the parties to the Proceedings. TERMS OF THE SCHOLARSHIP TRUST 1. Definitions The following terms are defined: Mount Tomah Garden is the land identified in Part 3 of Schedule 2 to the Royal Botanic Gardens and Domain Trust Act 1980 (NSW). RBGDT is the Royal Botanic Gardens and Domain Trust which is the statutory corporation established under section 5 of the Royal Botanic Gardens and Domain Trust Act 1980 (NSW). 2 Creation of the Scholarship Trust Clause 5(f) of the Last Will and Testament of Lorna May Backhouse dated 4 January 1996 (the Will) creates a charitable trust known as the 'Lorna and Clive Backhouse of Mount Tomah Scholarship' (the Scholarship Trust). 3. Trustee of the Scholarship Trust The trustee of the Scholarship Trust is the Royal Botanic Gardens and Domain Trust (RBGDT). 4. Property of the Scholarship Trust (a) The Property of the Scholarship Trust is constituted by the amount of $1,173,886.76, received by the RBGDT between November 2010 and November 2012 pursuant to clause 5(f) of the Will. (b) As at 30 June 2018, the Property of the Scholarship Trust comprised a sum of $1,387,588.00, of which: (i) $1,173,886.76 constituted the capital of the Scholarship Trust (the Core Fund); and (ii) $213,701.24 constituted the accumulated income of the Scholarship Trust. 5. Purpose of the Scholarship Trust The purpose of the Scholarship Trust is to provide one or more scholarships annually to employees of the RBGDT to support: (i) travel; and/or (ii) the undertaking of courses of study; (iii) working at other institutions or botanical gardens; and/or (iv) other educational or work activities — which will advance the knowledge of the scholarship recipient and the RBGDT, in horticulture and/or plant physiology of relevance to the Mount Tomah Garden. 6. Distributions (a) All employees of the RBGDT are eligible to be considered for the award of a scholarship which is within the purpose of the Scholarship Trust. (b) Each calendar year, the RBGDT must establish and conduct an application and selection process for the award of the scholarships which is accessible to all employees of the RBGDT. (c) The RBGDT must establish a Scholarship Selections Committee to conduct an annual decision–making process to select the recipients of the scholarships. This Committee must comprise at least three members, one of which will be the senior RBGDT officer with responsibility for the Mount Tomah Garden. (d) The scholarships are to be paid, applied or set aside from the Property of the Scholarship Trust provided that any distribution for a scholarship does not cause the amount of the Core Fund to fall below the amount specified in clause 4(b)(i) above. (e) In the event that no scholarship applicant is selected, or no scholarship applications are received, there is to be no distribution for a scholarship, and all of the income derived from the Property of the Scholarship Trust in that calendar year is to be accumulated pursuant to paragraph 7(c). 7. Trustee's powers and duties (a) As trustee of the Scholarship Trust, the RBGDT is subject to all the duties of a trustee under the Trustee Act 1925 (NSW) and is vested with all of the powers granted to a trustee under the Trustee Act. (b) The RBGDT must separately identify and account for: (i) the Core Fund; (ii) any other funds subject to the Scholarship Trust, whether in the form of income or accumulations to the Core Fund. (c) The RBGDT has the power to accumulate any income derived from the Property of the Scholarship Trust. (d) Notwithstanding subparagraph 7(b), RBGDT may mix the Core Fund as referred to in clause 4(b)(i) with any other funds held subject to the Scholarship Trust for the purposes of investing those funds. (e) The expenses and liabilities of the Scholarship Trust are to be paid in the following order of priority — (i) first, out of the annual income derived from the Property of the Scholarship Trust; (ii) secondly, out of the accumulated income from time to time of the Scholarship Trust (to the exclusion of the Core Fund); and (iii) thirdly, if the amounts in clauses 7(e)(i) and (ii) have been exhausted, then out of the Core Fund. 8. Notification of variations to the Scholarship Trust The RBGDT must provide reasonable notice in writing of any proposed variation or termination of the Scholarship Trust to the Attorney General for the State of New South Wales. ********** Amendments 02 November 2018 - [19] Minor typographical error 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: 02 November 2018