Bequests to charitable institutions can be fraught with difficulty and at high risk of failure: charitable institutions may be registered in a different name to the one in which they are publicly known by; change name; merge or restructure; or cease to exist entirely over the course of the life of the deceased. Further, an error or change may only arise after a benefactor has died, leading to uncertainty as to the proper recipient of their bequest.
In such cases, where the bequest creates a trust for a charitable purpose, courts of equity and legislative intervention have stepped in to mitigate the harsh effects which would otherwise be occasioned by lapse of the trust.
Three recent cases of the Supreme Court of South Australia have considered the contours of the Court’s remedial jurisdiction, in the form of administrative schemes, cy-prés schemes, and trust variation schemes under section 69B of the Trustee Act 1936 (SA) when addressing the validity of bequests to charitable institutions which have ceased to exist. These decisions concern some of South Australia’s most well-known institutions, namely the University of Adelaide, the South Australian Health and Medical Research Institute, and the Women’s and Children’s Health Network.
The exercise of the Court’s remedial jurisdiction is important not only for the continuation of a trust for charitable purposes, but also to provide certainty to trustees of charitable bequests that their administration of the trust will not attract liability for breach of trust.
Background
The modern development of the cy-prés doctrine originated in the High Court of Chancery in England in the 1850s, as part of the Court’s jurisdiction over testamentary charitable bequests.[1] The Court of Chancery had equitable power to direct a scheme (known as a cy‐prés scheme) varying the purpose of a charitable trust if, due to a change in circumstances, the original purpose of a charitable trust has become impossible or impracticable to fulfil.
Purpose trusts are trusts for which there is no beneficiary. Funds are deposited in trust in order to see that a particular purpose is fulfilled: people may benefit, but only indirectly. Subject to some limited exceptions, purpose trusts established for non-charitable purposes are void or ineffective.[2]
A parallel jurisdiction has been developed where, although the purpose of the charitable trust remains, its administrative provisions are no longer able to be fulfilled. In such cases, the Court may impose a scheme for the administration of the trust assets (known as an administrative scheme) where it is “expedient” to do so.[3]
The distinction between administrative schemes and cy-prés schemes was recently described by one judge of the Supreme Court as “between means and ends”.[4] That is, an administrative scheme clarifies, supplements or alters the machinery for the carrying out of existing charitable purposes. A cy-près scheme (and now a s 69B scheme – as discussed below) alters those purposes. In the 1860s, the Supreme Court of South Australia was conferred with the like equitable jurisdiction of the High Court of Chancery.[5]
Since 1980, the South Australian Supreme Court has had an additional statutory power to approve a scheme for the alteration of a charitable trust. Section 69B of the Trustee Act 1936 (SA)[6] permits the Court to approve a scheme for the alteration of a charitable trust which involves a variation of its purpose.
Section 69B is broader than the equitable power under the cy-prés doctrine as it extends beyond the criteria of impossibility or impracticability of the original purpose being achieved.[7] Section 69B exists in parallel with, and not in replacement of, the inherent equitable power.[8]
The South Australian legislation requires that the variation of the terms of the trust accords, as far as reasonably practicable, with the “spirit of the trust” (s 69B(6)(a)).
The concept of the “spirit of the trust”:[9]
Charitable Institution Bequests
One of main contexts in which cy-prés or trust variation schemes arise is where there is a charitable bequest to an institution which was in existence at the time the will was made (a) but which was not in existence at the time of the deceased’s death; or (b) and was in the existence at the time of the deceased’s death, but has ceased to be in existence since that time.[10]
The Supreme Court of South Australia has recently handed down three decisions, addressing both contexts.
Re University of Adelaide [2023] SASC 8
This case involved an application before Auxiliary Justice Dart for orders varying the terms of a charitable trust made for the purpose of research into botany. The trust was created by a testamentary bequest to the University of Adelaide in 1982, for use as the Chairman of the Department of Botany shall determine. Approximately 17 years after the benefactor’s death, structural changes to the University resulted in the Department of Botany merging with other departments and the position of Chairman ceasing to exist. Several years later, the University applied funds from the trust for the construction of a DNA research laboratory in the Adelaide Botanic Gardens.[11] Some 18 years after that, the University proposed changes would see an updated definition of botany, by reference to its ordinary and natural meaning, and allow funds to be allocated as the University shall from time to time determine.
With respect to variation of the trust, Dart AJ characterised the structural changes as an “administrative” issue, rather than one that went to the continued existence of the trust.[12] His Honour considered that there was no need to make a scheme under s 69B because the original purpose of the trust, the pursuit of the study of botany, could still be satisfied.[13] Auxiliary Justice Dart accepted that both proposed changes were expedient. With respect to the definition of botany, his Honour observed that the proposed changes would provide a “clear reference point” for administration of the trust in the future.[14] His Honour also accepted that absent a Chairman of the Department of Botany, it was expedient for the University, as trustee, to make decisions with respect to the application of the trust’s assets.[15] In this manner, the fund could continue to be used to advance the study of botany into the future.
University of Adelaide v Attorney-General (SA) [2023] SASC 17
This case involved an application by the University of Adelaide for approval of a scheme pursuant to s 69B, and the Court’s inherent jurisdiction, to vary the purposes of the ‘Mortlock Trust’. The Mortlock trust was created by a testamentary bequest to the University in the 1950s, for use in connection with the Waite Agricultural Research Institute (WARI). Evidence before the Court established that the WARI’s purpose was to ensure that South Australia remained at the cutting edge of scientific developments in agriculture. During structural changes to the University some 50 years after the bequest, the WARI ceased to operate as an institute and was subsumed into the Faculty of Science. In 2010, the Waite Research Institute (WRI) was established, with research activities relating to plant breeding and biology, farming, wine science, agronomy and agriculture economics. The University’s application sought to vary the Mortlock Trust to expand its purpose to include those of the WRI.
Justice McDonald approved a trust variation scheme pursuant to s 69B. In so doing her Honour observed that “the evolution of science and technology that has occurred over the last 70 years is not something that Mortlock could have predicted.”[16] Justice McDonald accepted that the interests of the charity could be better promoted by an altered scheme, consistent with more modern usage but which maintained the spirit of the Mortlock Trust.[17]
LK Law acted for the University of Adelaide in these proceedings.
Estate of Philp (Deceased) [2024] SASC 104
Most recently, Justice Bampton granted a trust variation scheme pursuant to s 69B in respect of gifts to the Balaklava Family Church and the Women’s and Children’s Health Research Institute (WCHRI). The latter gift was specifically directed towards research units for cardiology and renal medicine. Prior to the benefactor’s death in 2021, it was pointed out to him that the Balaklava Family Church did not exist, to which he is reported to have said, “they will work it out”.[18]
Unlike the cases discussed above, the institutions to whom the benefactor had directed his estate ceased to exist during his lifetime. Justice Bampton therefore first considered whether the gift had lapsed. Under the “lapse rule”, a gift made by will made to a charitable institution which has ceased to exist within the testator’s lifetime will lapse unless:[19]
Justice Bampton considered evidence with respect to two potential successors to the Balaklava Family Church – Engage Church Kadina and Encounter Church Balaklava. Her Honour found that the former was the entity with which the deceased had been involved throughout his life and was properly considered the successor body to the Balaklava Family Church.[20] It was therefore not necessary to make a cy-prés or trust variation scheme with respect to that portion of the will.
Justice Bampton heard evidence that the WCHRI was wound up in 2017, and its assets transferred to the Women’s and Children’s Health Research Fund, which directs funds to the University of Adelaide, the South Australian Health and Medical Research Institute (SAHMRI) and the Women’s and Children’s Health Network (WCHN).[21] The functions identified in the will had been subsumed by SAHMRI and WCHN. Her Honour accepted that the benefactor had intended to benefit those charitable purposes generally, and that applying the gift to WCHN and SAHMRI accorded with the spirit of that gift.[22]
Looking Ahead
The cases discussed above reflect the broad and complex nature of the law of charity. These complexities are likely to be an ever-increasing problem as charitable institutions merge and rationalise,[23] or as the recipients of historic bequests modernise.
It is important that trustees pay close attention to the charitable purposes for which a trust was created and consider whether the ongoing application of the trust’s assets are in keeping with those purposes. If not, it may be necessary to take steps to vary the purpose of the trust.
Likewise, it is equally important for trustees to consider the mechanisms identified by the settlor of a trust. If those mechanisms are outdated and can no longer be fulfilled, it may be necessary to seek approval of an administrative scheme in order to modernise the administration of the trust in keeping with current regulations, guidelines, and best practice.
[1] “Cy-prés” is a translation of the Norman French phrase “cy-prés comme possible” meaning “as near as possible.” For a historical discussion of the doctrine see Simpson v Thorn Australia Pty Ltd (t/as Radio Rentals) & Ors (No 5) (2019) 141 ACSR 424 at [19] per Lee J; South Australian Employers’ Chamber of Commerce & Industry Incorporated v Commissioner of State Taxation [2017] SASC 127 at [97] per Blue J.
[2] See Lines v Lines & Ors [2003] SASC 173.
[3] Baptist Church of South Australia & Anor v Attorney-General for the State of South Australia [2018] SASC 14, [32] (Stanley J).
[4] Baptist Church of South Australia & Anor v Attorney-General for the State of South Australia [2018] SASC 14, [30] (Stanley J).
[5] See Equity Act 1866-7 (SA) (30 Vict No 20).
[6] See Trustee Act Amendment Act 1980 (SA) (‘Application of trust property cy-pres’) as varied by the Trustee (Variation of Charitable Trusts) Amendment Act 1996 (SA) (‘Alteration of purposes of charitable trust’).
There are statutory equivalents to section 69B of the Trustee Act 1936 (SA) in other States and Territories. See Charitable Trusts Act 1993 (NSW), ss 9-11; Trusts Act 1973 (Qld), s 105; Variation of Trusts Act 1994 (TAS), s 5; Charities Act 1978 (Vic), s 2; Charitable Trusts Act 1962, s 7.
These provisions were based upon the Charities Act 1960 (UK), s 13, which now appears as s 13, Charities Act 1993 (UK) s 13.
[7] See University of Adelaide v Attorney-General (SA) [2018] SASC 82 at [5]-[8] per Stanley J; Seaton, Noble & Motteram [2022] SASC 152.
[8] See Re Estate of Pitt (deceased); Aston v Mt Gambier Presbyterian Charge (2022) 84 SASR 109 at [40] per Duggan J. Section 69B(3)(b) further provides a mechanism for a trust variation scheme to be granted by the Attorney-General for South Australia where the trust’s assets do not exceed $300,000.00.
[9] See University of Adelaide v Attorney-General (SA) [2018] SASC 82 at [9]-[12], per Stanley J.
[10] Andrews v United Aborigines Mission (Unreported, Supreme Court of Australia, 8 July 1988, Matheson J), Australian Executor Trustees Ltd v Attorney-General for the State of South Australia and Ors [2010] SASC 348, Re Swan [2014] SASC 65, Estate of the Late Crosby [2019] SASC 189, In The Estate of Brine (Deceased) [2021] SASC 54 and the authorities cited therein.
[11] Auxiliary Justice Dart also considered an application pursuant to s 56 of the Trustee Act 1936 (SA) for orders relieving the University from liability for any breach of trust associated with the application of funds in this manner.
[12] At [17], [22].
[13] At [20].
[14] At [25].
[15] At [26].
[16] At [32].
[17] At [34].
[18] At [1].
[19] See Re Tyrie (No 1) [1972] VR 169 at 177-8.
[20] At [32].
[21] At [16].
[22] At [34].
[23] For example, two of South Australia’s largest Universities have recently merged into a new entity, scheduled for launch in January 2026: see The Adelaide University Act 2023 (SA) which gives effect to the merger between the University of Adelaide and the University of South Australia, into a new Adelaide University.
