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The Trust Company (Australia) Ltd v Attorney-General (NSW) [2011] NSWSC 323 (Supreme Court of New South Wales, White J, 18 March 2011)

The plaintiff is the trustee of a trust established under the will of Caroline Milne Williams in 1939. The will directed that the trustee hold property on the George's River on trust, in order to convert the property into a convalescent home for children, to be known as the Kyle Williams Home. The will directed that furniture and other chattels be gifted to the Home, and that the residual of the estate be sold and the proceeds be held for the purchase of equipment, renovation, alteration or extension of the Home, and for its maintenance.

This application was to determine whether the trust established by Williams was a valid charitable trust, whether the original purpose of the gift had failed, and what would be a suitable cy-pres scheme for the funds of the trust, having regard to the spirit of the trust. The cy-pres scheme suggested was that the trust property be sold, with the net proceeds to be held by the trustees and the net income applied to charitable entities in New South Wales that provide care, support and rehabilitation to children suffering from illness or disability, including psychiatric and psychological conditions.

The first question was whether the proposed scheme was justified. His Honour held that it was clear that the testatrix had a general charitable intention, and that the trust was a charitable trust. The property had never been used for the purpose specified in the will, and had not been opened as a children's home until 1947, because of the intervening war. From 1947 to 1984, the property was leased for no rent to an organisation known as Legacy House, for the purpose of a children's home as distinct from a children's convalescent home.

From 1985 to 2003 the property was let for no rent to the Presbyterian Church of Australia (New South Wales). The property was operated by Presbyterian Social Services as a family group home for children and young people. This use ceased when the state government withdrew funding. Since 2003 the property has been unoccupied. Although the trustee advertised for expressions of interest, only one organisation, Ronald Macdonald House Charities (RMHC), has investigated the possibility of using the property for its purposes. However, although the property had possibilities, it was located at some distance from major children's hospitals, and required substantial capital investment to upgrade the property to a suitable standard, which RHMC could not afford.

The trustee holds income from the trust of about $1,476,000. This income could be used to update the property in a suitable way. However, the property is heritage listed, and this imposes limitations on the renovation that could be undertaken. His Honour concluded that the purposes of the trust could no longer be carried out, and with the trust evincing a general charitable intention, a cy-pres scheme would be suitable: section 9(1) of the Charitable Trusts Act 1993 (NSW).

His Honour stated that the proposed scheme of selling the property, and applying the income to other charities dealing with children was not necessarily the best way of settling the trust property. The plaintiff trustee had requested that the question be settled in the current application, but His Honour held that there should be a two-stage application, as is usual in cy-pres cases.

He was concerned that there had not been sufficient attempt to use the property to provide for the convalescence of sick children, within the spirit of the trust. The price range for the sale of the property was very large, and there might be a use, not specifically that of the will, that could fulfil the trust. His Honour directed that a scheme be settled between the trustee and the Attorney- General which could be brought to the court for approval.

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Implications of this case
Cy-pres applications are not infrequent in 'purpose trust' situations. There must be a general charitable intention present for a court to be able to replace the original trust with a cy-pres scheme. The assets of a trust can then be applied to a similar, perhaps updated, purpose which reflects the original spirit of the trust.

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