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In the Matter of David Wayne Swan [2014] SASC 65 – A cautionary tale of a charitable trust

I am often approached by clients who would like to leave gifts to charities in their Will. I was interested to read a recent decision of the Supreme Court of South Australia concerning the validity of a gift made to a hospital. The decision confirms the necessity of ensuring the Willmaker’s wishes are clear, and that the possibility that the charity may no longer exist when they pass away is adequately addressed.

Background

The background of the case is as follows:

  1. Ms B made a Will in 1971 which, among other bequests, granted a life interest in her property, including her household items, to her son, Mr B. The remainder interest in the property was bequeathed to “the Hospitals Department”, a department of the South Australian government at the time;
  2. The balance of Ms B’s Estate was to be held on trust to maintain her property, maintain her son, and accumulate any income for 21 years. The income was then to be distributed to “the Hospitals Department”;
  3. Ms B directed in her Will that upon her son’s death, the residue of her Estate (after payment of her son’s funeral and headstone expenses) was to be distributed to “the Hospitals Department”;
  4. Clause 8 of Ms B’s Will stated that the bequests to “the Hospitals Department” were to be utilised by the “Director General of Medical Services” for “the benefit of sufferers from kidney diseases or complaints”;
  5. Ms B passed away in 1974;
  6. On 15 October 2009, the trustee of Ms B’s Estate forwarded a cheque for $266,435.40, being the residue of her Estate, to the “SA Health Commission”;
  7. The “Hospitals Department” was no longer a department of the South Australian Government, as it had been at the time Ms B made her Will;
  8. The “SA Health Commission” has also ceased to exist;
  9. Mr S, the Chief Executive of SA Health, sought an order that on its construction, clause 8 of Ms B’s Will established a charitable trust, and that the Court should approve a trust variation scheme to give proper effect to the terms of that charitable trust;
  10. Ms B is survived by her daughter-in-law, and her daughter-in-law’s sister.

What did the SA Health submit?

SA Health submitted the following:

  1. Ms B’s Will was effective to create a charitable trust;
  2. If the gift to SA Health failed, it would result in an intestacy of the residue of Ms B’s Estate;
  3. That the gift of the residue of her Estate was valid at the time of Ms B’s death;
  4. That Ms B had exhibited a charitable intention, and therefore a charitable trust;
  5. That want of appointment of a trustee does not affect the validity of the charitable disposition, and that the Health Services Charitable Gifts Board would be a suitable trustee.

What did Counsel for Ms B’s surviving family members submit?

  1. Counsel representing Ms B’s daughter-in-law, and her daughter-in-law’s sister, submitted that if her clients were to have no entitlement upon intestacy, then the Court must be satisfied that clause 8 of Ms B’s Will enables the Court to find that Ms B expressed a general charitable intention;
  2. In the event that the Court found a general charitable intention, then the Court must be satisfied that effect be given to the intention, notwithstanding that the Hospitals Department no longer exists.

What did the Judge decide?

  1. The Judge found that Ms B had expressed a general charitable intention in her Will, and that it was unlikely that she intended the gift to fail in the event that the Hospitals Department no longer existed at the time when the gift was to be distributed;
  2. The Judge found that a charitable trust had been established, and that the gift did not fail;
  3. The Judge ordered a Deed to be drawn up to include the following terms:
  • That the trust funds be applied for the benefit of any patient of a hospital incorporated under the Health Care Act 2008 (SA) who is suffering from kidney disease or complaint;
  • That the trust funds will be used to provide benefits that those patients would not normally receive as patients of those hospitals.

If you are considering leaving charitable gifts in your Will, it is recommended that you obtain the advice of an experienced Estate planning lawyer. Please do not hesitate to contact me should you require assistance.

Chloe Kopilovic

Written by—

Chloe Kopilovic

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