In our April bulletin we discussed some of the implications for charitable bequests where the named charity to receive a benefit under a will had ceased to exist after the testator’s death because it had been wound up after transferring most of its assets to another charity.  In that case the issue was whether the successor charity was entitled to the bequest.

The Court said that the deed of gift that effected the transfer of assets operated only for some of the assets; it was not a transfer of all the assets and undertaking of the original charity and so it could not be said that the recipient of the assets was in truth a successor organisation. This defect meant that the gift of the deceased had to be applied by cy près i.e. to another charity with similar purposes.

The case[1] shows how important it is in a merger situation for the merger documents to be drafted correctly and for the terms of bequest to give flexibility to testators to name an alternative charity in case the named charity ceases to exist.

The decision of Re Graham (Deceased) came back to the Supreme Court a few weeks ago to decide the cy près application.

Facts

There were competing charities vying for a substantial bequest that had been left in the deceased’s will to the Stroke Association of Queensland Inc (SAQ).

The charity that received some of SAQ’s assets, Synapse Australia Ltd claimed that it ought to receive the sole benefit even though it may not have been a true successor of SAQ (as found in the earlier decision this year).

But there were other contenders for the prize.

Decision

The Court said that because SAQ existed at the time of the testator’s death but ceased to exist before the gift was paid to it (i.e. after it had transferred assets to Synapse Australia and wound up), the gift did not fail because it existed for charitable purposes. As such, the gift had to be applied cy près.

A cy près application requires close consideration of the testator’s intention. In that regard the Court found that the testator had a clear wish to benefit a “stroke charity”.  The question was which one.

Along with SAQ, another charity, National Stroke Foundation, was noted to have very similar purposes to those of SAQ and the Court found that both charities could reasonably assert that their objects more closely corresponded with the testator’s intention than the other.

Both charities were rewarded equally in the Court’s ultimate decision.

Lessons from the decision

As a general rule:

  • Bequests should be left to existing registered charities, avoid if possible establishment of a charitable trust within a will.
  • It is important to check registration arrangements for the chosen charity with the ACNC and to ensure that the bequest clause corresponds with the requirements for the charity, usually found on the charity’s website.
  • Expressing a general charitable intention in the terms of the bequest ensures that the bequest will not fail even if the beneficiary ceases to exist and there is no obvious successor.
  • But to avoid the need for a cy près application if the named charity ceases to exist, giving testators the power to determine an alternative charity is a failsafe provision in a well drafted bequest clause.

[1] Re Graham (Deceased) 2020 QSC27