Leahy v Attorney-General for New South Wales concerns a charitable trust in Australian and English trusts law. The High Court of Australia examined it in 1958 and the Privy Council in 1959. The case addressed the validity of donating to an unincorporated organisation, concluding that gifts in trust can only be made for charitable purposes or objectives.

Rule against perpetuities

Central to the case was the rule against perpetuities, a common law principle stating that “no interest is valid unless it must vest, if at all, no later than twenty-one years after a life in being at the creation of the interest.” The rule against perpetuities does not affect purely charitable trusts or, more precisely, an immediate gift of capital to a charity, even if the trust may endure indefinitely. However, a gift to a specified class that includes charitable and non-charitable entities is subject to the rule against perpetuities.

The common law rule was modified in New South Wales by s 37D of the Conveyancing Act, which stipulated:

  • (1) No trust will be deemed invalid due to the inclusion of a non-charitable and invalid purpose alongside a charitable purpose regarding the application of the trust funds or any portion thereof.
  • (2) Such trust shall be interpreted and enforced as though no direction or allowance for the trust funds for any non-charitable and invalid purpose had been or could have been considered.

A trust must benefit the public to be classified as charitable. Donations for religious purposes are only considered charitable if they serve the public interest and not solely the members of a religious group.

Background 

Francis Leahy was an affluent Australian grazier who passed away in 1955, leaving behind a widow, Doris Leahy, and seven children. His estate was valued at A£348,000, including various grazing lands and a block of flats in Goulburn. Doris Leahy was granted a life interest in one of the flats, and specific bequests were designated for some children.

The bulk of the estate was entrusted to various Catholic orders. Clause 3 authorised the trustees to choose an “Order of Nuns of the Catholic Church or the Christian Brothers.” Clause 5 mandated that the residue be allocated for a convent for a desired order of nuns selected by the trustees. 

Supreme Court of NSW

In Donnolly v Leahy, unreported on 11 April 1957, The executors—Donnelly, Wright, and Mullen—sought guidance from the Supreme Court of NSW to determine whether these Will provisions were void due to uncertainty. The respondents included Doris Leahy, the seven children, and the Attorney-General of NSW.

In the Supreme Court, Myers J upheld the validity of clause 3, stating that the selection of an order of nuns or the Christian Brothers constituted an immediate gift in favour of the chosen body or its members, regardless of its charitable nature. The trust established by clause five was deemed in perpetuity and thus invalid unless its purposes were charitable. Myers J noted it was possible to identify every order of nuns within the class; however, some orders were charitable while others were not. Since the Will lacked an expressed charitable intention, it could not be protected under s37D of the Conveyancing Act, rendering the trust for the residue void.

High Court

The Attorney-General appealed to the High Court regarding the decision that the trust for the residue in clause 5 was void. In contrast, Doris Leahy and the seven children appealed the ruling that the bequest to an order of nuns or the Christian Brothers in clause 3 was valid. 

In Attorney General (N.S.W.) v. Donnelly  [1958] HCA 1; (1958) 98 CLR 538, the High Court affirmed the validity of both clauses. Williams, Webb, and Kitto JJ agreed with Myers J that clause 3 was valid as an immediate gift in favour of the selected body. They upheld the appeal concerning clause 5, declaring that the trust for the residue was preserved under s 37D.

Dixon CJ and McTiernan J held that if not for s37D, both clauses would have been invalid. Notably, while the class was not exclusively charitable, it was predominantly charitable, effectively excluding any non-charitable purpose and converting it into a wholly charitable trust.

Privy Council

Doris Leahy and the seven children were granted permission to appeal to the Privy Council. At that time, there was no option for dissent or separate judgments in the Privy Council. Instead, the advice to the Queen was based on the majority of judges who heard the appeal, with one judge designated to write the judgment. Decisions from the Privy Council were commonly expressed on narrow grounds, a tendency linked to reflecting the consensus of the majority of judges. In Leahy v Attorney-General (NSW) [1959] UKPCHCA 3; (1959) 101 CLR 611

Viscount Simonds delivered the judgment for the Privy Council, confirming the High Court’s verdict but on different grounds.

 The Privy Council concurred with the High Court’s ruling that clause 5 was invalid due to perpetuity issues, but it found that s 37D preserved it. A donation to the orders of nuns was deemed so predominantly charitable that it was reasonable to assume the testator had a charitable intent. 

Concerning clause 3, the Privy Council observed the

 “artificial and unusual idea of an unincorporated society which, while not legally a separate entity, is often regarded as a continuous entity and inaccurately seen as something more than just a collection of its members.” 

The Privy Council determined that clause three did not constitute a gift to the individual members as the beneficial owners of the property. Rather, clause 3 established

 “a trust not only for the advantage of the current members of the selected order but also for the benefit of the society as a continuing entity and for the advancement of its mission” 

For the following reasons: the bequest was stated as being made to the order of nuns rather than to particular individuals; the members of the selected order could be quite numerous, making it hard to believe the testator intended to benefit them personally; and the testator likely could not have intended for the right to “immediate possession” of a homestead with 20 rooms to be exercised by all the nuns in the order. 

Clause 3 established a trust to benefit individuals who may join the selected order of nuns or Christian Brothers. Since the orders of nuns included entities with a religious purpose rather than a charitable one, the trust violated the rule against perpetuities. The Privy Council agreed with Dixon CJ and McTiernan J that the validity of the gift was preserved by s 37D of the Conveyancing Act.

The post Leahy v Attorney-General (NSW): Charitable Trusts, Religious Orders, and the Rule Against Perpetuities appeared first on heirs & successes.