Supreme Court New South Wales Medium Neutral Citation: Perpetual Trustee Company Ltd v Attorney General for the State of New South Wales (The Will of the Hon George Nesbitt) (No 3) [2018] NSWSC 1784 Hearing dates: On the papers Decision date: 21 November 2018 Jurisdiction: Equity Before: Leeming JA Decision: BY CONSENT, make the following orders amending the orders made on 1 November 2018: 1. Set aside order 3(b). 2. Replace references to 18 and 1/18 in order 3(d)(i) by references to 16 and 1/16 respectively. 3. Replace references to "30 June 2017" in orders 3(d)(i) and (ii) by references to "30 June 2016". 4. Replace the words "-2017" by the words "until the distribution to the School of the funds held in that account" in orders 3(d)(i) and (ii). 5. Replace the words "Academic Awards" by "Academic" in order 3(d)(i). Note that the appendix to this judgment reproduces the orders of 1 November 2018 (including consequential changes to the example) as amended by the orders made today. Catchwords: TRUSTS – charitable trusts – cy-près scheme – variation by consent Legislation Cited: Charitable Trusts Act 1993 (NSW), Part 4 Uniform Civil Procedure Rules 2005 (NSW), rr 36.15, 36.16 Cases Cited: Perpetual Trustee Company Ltd v Attorney General for the State of New South Wales (The Will of the Hon George Nesbitt) (No 2) [2018] NSWSC 1646 Category: Consequential orders (other than Costs) Parties: Perpetual Trustee Company Ltd (Plaintiff) Attorney General for the State of New South Wales (First Defendant) The State of New South Wales through its Department of Education (Second Defendant) CASPA Services Ltd (Third Defendant) Representation: Solicitors: Bedson Legal (Plaintiff) Crown Solicitor's Office (First and Second Defendants) File Number(s): 2017/286679 Publication restriction: None Judgment 1. LEEMING JA: On 1 November 2018, final orders were made for the administration of the George Nesbitt High School Scholarship, Adina Nesbitt High School Scholarship, and George and Adina Nesbitt High School Scholarships cy-près: Perpetual Trustee Company Ltd v Attorney General for the State of New South Wales (The Will of the Hon George Nesbitt) (No 2) [2018] NSWSC 1646. After business hours on 15 November 2018, a notice of motion attaching proposed revised orders sought to be made by consent was filed electronically. It is not necessary to determine whether there would be power under UCPR r 36.16 to accede to the motion (noting the restrictions in rr 36.16(3A) and 36.16(3C)). Because the application is consented to by all relevant parties, there is power under r 36.15(2). 2. The notice of motion was accompanied by a short explanation for two of the changes, which are addressed below. There were another three changes proposed, which were unaccompanied by any explanation, one of which appeared to contain an error. On 19 November 2018, in response to an inquiry from my Associate, the parties advised that they did not press two of the changes, and now proposed a different third change. 3. Annexure "A" is a marked-up version of the proposed revised orders (as refined by the parties on 19 November 2018). 4. Two of the changes are substantial, in the sense that they will affect the timing, and the amount, of distributions to some scholarship recipients. I have formed the view that I should provide reasons for why I accede to the changes, because otherwise there will be no explanation for the discrepancy between the operative orders and those in my judgment of 1 November 2018. That said, the result of the changes for any individual scholarship recipient is apt to be relatively minor. 5. The first change concerns the distribution of eight years of accumulated income for the George Nesbitt High School Scholarship and the Adina Nesbitt High School Scholarship. In circumstances described in the previous judgments, the trustee has accumulated the income for the financial years ended 30 June 2010 to date. I determined that a pool should be created of the entirety of the income and interest for the financial years ended 30 June 2010 to 30 June 2017, which would be divided among the scholarship winners for the 8 academic years 2010 to 2017: Perpetual Trustee Company Ltd v Attorney General for the State of New South Wales (The Will of the Hon George Nesbitt) (No 2) at [20]. I also noted that there was a point which might not have been fully worked out in the draft orders provided to me, in that scholarships were awarded on calendar years, while the Trustee accounted on financial years. 6. I had assumed that there would be a difficulty based on the changeover from making the award based on Year 12 results to one based on Year 11 results: unless some special provision were made, a cohort would miss out. The result was that my orders authorised four awards for 2010 — to the Year 11 and Year 12 duxes — and the pool was divided by 18. I may have misunderstood it, but I believe that the parties adopted a similar approach prior to the orders made on 1 November 2018. This was reflected in [17]-[18] of my second judgment: "The 2010 changeover year Thirdly, it became clear that the trustee was proposing to treat the students in 2010 and 2011 differently from the rest. Formerly, and until the 2009 academic year, the scholarships had been awarded to the most proficient students in Year 12. The trustee and the Attorney proposed to base awards on Year 11 performance. That seems sensible; it will be straightforward to administer, the will does not specify any particular year for the awards, and their presentation the following year to the girl and boy in Year 12 is apt to have a constructive impact on the rest of the school, entirely in keeping with the spirit underlying Mr Nesbitt's gift. However, that meant that the most proficient year 12 students in 2010 had (a) missed out on a scholarship under the regime before the cy-près scheme was in place, but (b) would also miss out under the cy-près scheme because awards would be based on year 11 results. Rather than having that cohort of students miss out entirely, the trustee, supported by the Attorney, proposed that the 2010 income and interest would be split between four recipients, rather than two. As it happened, 2010 was the fund's best performing year, save for 2015, so that the result was less extreme than in might have been. Nonetheless, it would produce the result that the recipients of the cll 8(B)(I) and (II) scholarships for the 2010 year would each receive slightly more than $7,000, while the recipients for, say, 2012 would each receive slightly more than $12,000. That led to the following exchange: 'BERKI: ... So we thought that it was necessary to do the double award that year to have that smooth transition period over into what will be the scheme going forward. HIS HONOUR: But there is another slight capricious element of it although it's not nearly as bad as the 2015 one, that is because of the change from making the award in effect based on year 11 results as opposed to year 12 results everyone over the whole period, with the exception of those in 2010 and 2009 I think, will get a certain amount and those in 2009 and 2010 will get roughly half that amount. You say that's better than one year missing out entirely. BERKI: That was the thinking; it seemed to be an unavoidable problem to some extent.' The proposed orders supplied to my chambers on 26 October 2018 by the trustee, and supported by the Attorney, smooth the income over all eight years. That is appropriate. It is necessary to smooth the income recorded for 2015 over all years in any event for the reasons already given. Since to that extent it is appropriate to depart from the strict trust of income established by the will, there seems to me to be no sound reason for the adjustment for 2010 not to be borne over the whole of the period. Again, this may also be regarded as an aspect of equity favouring equality in the administration of a charitable trust." 1. However, the parties now consensually propose a different course. In essence, rather than dealing with the 2010 changeover year by doubling up the awards of that year, it is proposed instead to delay the awarding of the main scholarships. That is implemented in the following way. 1. First, orders are proposed which will establish a pool of income and interest for seven years, the financial years ended 30 June 2010 to 30 June 2016 inclusive. 2. Secondly, it is proposed that there be a distinction between the "school year scholarship" and the academic year on the basis of which the scholarship will be awarded. In each school year, there will be an award of each scholarship to a boy and girl student in Year 12 who was the male or female dux of Year 11 in the previous year. That complexity in fact carries with it the advantage that there is no need to double up to allow for the 2010 changeover. 3. The State's regime carries with it another consequence, which is that the school year scholarships for 2018 and onwards are to be paid using the prospective scheme, and that will include the 2017 Year 11 duxes. It follows that there will only be 16 recipients from the historical pool, being the two Year 11 duxes for the years 2009–2016 inclusive, and it is agreed that a pool of income over 7 years is appropriate for the historical scheme. 1. The question for me is not what is the most appropriate way of administering the trust. In order to determine that, it would be necessary to know far more than I presently do about the realities of its administration, and if one thing is clear, that would result in additional cost and delay. Rather, in circumstances where the School and the trustee, not to mention the Attorney General who has oversight over charitable trusts, are all agreed as to a particular course, not lightly should the Court stand in the way of a regime which on its face achieves the charitable purpose. Further, I note that insofar as this change only concerns the scholarship income for the limited period from 2010 to 2017, statute would give the Attorney power to establish a scheme independently of court approval: Charitable Trusts Act 1993 (NSW), Part 4. The power conferred on the Attorney to establish schemes for trusts in cases where the value of the trust property affected by the scheme does not exceed $500,000 reflects a legislative concern that the costs and delay inevitably involved in curial approval should be avoided where possible. 2. Hence, in light of the parties' consent, and not withstanding that this is a change of substance, rather than merely form, those orders will be made. 3. The second change of substance is much more minor. It is a change to the wording of the calculation of the scholarships for the academic years from 2010–2017. Rather than calculating interest until 2017, interest is to be calculated "until the distribution to the School of the funds held in that account". This is an appropriate change. 4. There is also a change, correcting an error on my part, in order 3(c)(i) when I referred to the "Academic Awards Proficiency Awards Account". The changes to the worked example are purely consequential. 5. For those reasons, the following orders will be made amending the orders made on 1 November 2018: 1. Set aside order 3(b). 2. Replace references to 18 and 1/18 in order 3(d)(i) by references to 16 and 1/16 respectively. 3. Replace references to "30 June 2017" in orders 3(d)(i) and (ii) by references to "30 June 2016". 4. Replace the words "-2017" by the words "until the distribution to the School of the funds held in that account" in orders 3(d)(i) and (ii). 5. Replace the words "Academic Awards" by "Academic" in order 3(d)(i). Note that the appendix to this judgment reproduces the orders of 1 November 2018 (including consequential changes to the example) as amended by the orders made today. Annexure A (33.8 KB, doc) ********** Amendments 28 November 2018 - Coversheet - Date of orders field deleted. 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: 28 November 2018