Application for exoneration by a trustee

Sir Colin MacKenzie, was an Australian anatomist, benefactor, museum administrator and director who died in 1938; his wife Lady Winifred MacKenzie died on 21 February 1972.

Lady Winifred Iris Evelyn MacKenzie left a will dated 4 April 1966 and codicil dated 14 February 1969 (‘the will’) establishing the Sir Colin and Lady MacKenzie Trust Fund – a charitable trust (‘the trust’); the income of the trust was to be applied one third in favour of the committee administering the Sir Colin MacKenzie Sanctuary (‘the gift to the sanctuary’) upon the condition that its name never be altered from the ‘Sir Colin MacKenzie Sanctuary’; and two thirds for the provision of prizes and grants for studies in comparative anatomy (‘the gift for anatomical studies’)

Since the early 1980s, the sanctuary has been commonly known as ‘Healesville Sanctuary’; this name is used for advertising and promotional purposes. In June 2002 the registration of the name ‘Sir Colin MacKenzie Sanctuary’ lapsed; it was re-registered in February 2014.

Trustee’s Enquiry

The trustee of the trust (‘the trustee’) sought answers to the following questions concerning the administration of the trust:

(a) whether the name of the Sir Colin MacKenzie Sanctuary has been altered from the ‘Sir Colin MacKenzie Sanctuary’;

(b) whether the result of any such alteration is that the gift has lapsed; and

(c) if so, how funds gifted to the sanctuary ought to be applied.

The second issue is whether the alteration of the name of the sanctuary was contrary to the condition imposed by the will. If so, the gift will be said to have lapsed.

The Sanctuary

The will directed that, if the name of the sanctuary is altered, the funds which comprise the gift to the sanctuary become a part of the gift for anatomical studies.

The Court ordered that the gift to the sanctuary according to clause 3(ii)(A) of the will lapsed on 27 June 2002. The funds gifted are to be applied as part of the gift for anatomical studies according to clause 3(ii)(B).

Clause 3(ii)(B) of the deceased’s will provides that the allocation of prizes and grants shall be decided by the committee.  

In September 2010 the Court declared that the gift in clause 3(ii)(B) could no longer be carried out according to the direction in the will and authorised the trustee to administer the gift for anatomical studies cy près.

The will makers intention

In construing the intention of the testator the Court should give regard to the text of the will only, and not speculate as to the testator’s broader intentions by reference to extrinsic evidence. 

A condition of the will clearly and unambiguously imposes a condition that the name of the sanctuary never be altered from the ‘Sir Colin MacKenzie Sanctuary’  the alteration of the name of the sanctuary from the ‘Sir Colin MacKenzie Sanctuary’ was a breach of the condition imposed the will. Accordingly, the gift to the sanctuary has lapsed when the name ‘Sir Colin MacKenzie Sanctuary’ ceased to be registered on 27 June 2002.

Correspondence received on 30 September 2009 appeared to confirm that the name had been changed. Although nothing indicates that the plaintiff acted with anything less than good faith in making payments on 22 October 2009, 2 May 2011 and 2 May 2012 those payments were not made reasonably as the plaintiff was on notice that the sanctuary no longer complied with the condition attached to the gift.

The trustee sought exoneration from liability pursuant to  s 67 Trustee Act 1958 (Vic); it had acted honestly, reasonably and ought fairly to be excused. 

The Court considered that after about seven of the ten years, the trustee was placed on notice that there may have been a breach of the terms of the gift and ought to have ceased distributions. 

A more onerous burden is placed upon professional trustee companies to satisfy the Court that it is entitled to relief; therefore although it was not intentional, negligent, or dishonest the trustee should have sought judicial advice as to how the trust funds ought to be administered.

The Court’s decision

The Court concluded that the trustee ought to be excused from liability for distributions made in breach of trust before it was put on notice, but not afterwards. The Attorney-General, as protector of charities, should decide whether to pursue a claim for breach of trust against the trustee to recover losses and interest for the period when it was not excused from liability.

The Court found the distributions were made in breach of the trust ordering that the trustee pay to make good the loss caused by the breach and put the trust in the same position as if the breach had not been committed.

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