By Alison Sadler, Lawyer
Mr George Dombroski and his sister, Ms Pamela Dombroski, lived at a property in Balaclava, New South Wales, and owned various properties together in Mittagong. Mr Francis Mougel was a friend and carer of George and Pamela.
On 14 August 2001, Mr Dombroski and Mr Mougel established the Dombroski Foundation Ltd (Foundation) as a public company limited by guarantee and a registered charity.
The purpose of the Foundation was discussed between Mr Dombroski, Ms Dombroski and Mr Mougel prior to its establishment. It was agreed that the Foundation’s purpose was to maintain and develop the properties which they owned, and to apply those properties for charitable purposes. Mr Dombroski and Ms Dombroski wanted the properties to remain accessible for the good of the community by:
- maintaining community gardens;
- providing access to an open range of artistic activities;
- providing spiritual and philosophical studies; and
- providing residence for visitors, thereby creating a “sanctuary”.
Conversely, Mr Mougel submitted to the Court that Mr Dombroski wanted the Foundation to protect the properties from being developed for purposes other than for the good of the community. Mr Mougel also claimed that he and Mr Dombroski wanted the Foundation to have a social aspect and develop a humanitarian presence in the community.
After the establishment of the Foundation, Mr Dombroski donated several parcels of land to be used for the purposes of the Foundation. Mr Bohdan Bilinsky, Mr Dombroski’s solicitor, asserted that it was always assumed in his discussions with Mr Dombroski that the Foundation held its assets subject to a charitable trust. Mr Dombroski’s purpose in donating the land to the Foundation was so that the land would be used for the purposes set out in the objects clause of the Foundation’s Constitution. Clause 2 of the constitution provides as follows:
“The objects for which the Foundation is established are:
- To provide facilities for research into, application of, education and promotion of a Healthy Lifestyle through various forms.
- To develop sustainable agriculture through the use of organic, biodynamic and permaculture principles and techniques.
- To create and maintain domestic and market gardens and orchards for the purpose of providing healthy and meaningful activities for persons in need of special care.
- To provide work experience and activities for persons who are socially disadvantaged or in need of receipt of rehabilitation such as persons in crisis or subject to drug and alcohol addiction.
- To co-operate with other social organisations and community support agencies in providing assistance and support to persons who are socially disadvantaged or in crisis.
- To carry out research into alternative energies and ecologically sound technologies including research into an application of solar and wind energies, and to publish and promote the results of the research and generally to provide and encourage educational facilities in relation to such technologies.
- To provide access to an open range of artistic, spiritual and philosophical studies to the community generally including studies such as philosophy, spirituality, astrology, poetry, study into various religions and study into past civilisations.
- Promoting, cultivating and facilitating various forms and methods of artistic development for members of the community by providing materials, venues, workshops, tuition and exhibition into sculpture, music painting and colour therapy, art of movement, yoga and meditation…
- To do all matters and things incidental to any of the above object or which may otherwise be required for the promotion, achievement or fulfilment of the objects of the Foundation.”
The Foundation established a property known as the “Harmony Village”, located on one of the Dombroski’s Mittagong properties. The Harmony Village offered counselling, self-development courses, lectures, artistic activities, gardening activities and temporary accommodation for people in crisis, including individuals with addiction and mental health issues.
The Foundation also hosted events for an organisation known as the “Christian Community”. However, the constitution of the Foundation did not reference religion as a charitable purpose.
The issue for the court to consider was whether the properties gifted by Mr Dombroski and Ms Dombroski were held pursuant to a charitable trust.
The Foundation submitted that:
- the Foundation was a charitable organisation;
- the property, including the real properties, gifted to the Foundation in the past was held on a charitable trust for the charitable purposes set out in clause 2 of the Foundation’s constitution; and
- income received and any other property derived by the Foundation during the course of using such gifts was trust property.
Both the Foundation and the Attorney General agreed that the original purposes of that charitable trust have ceased to provide a suitable and effective method of using the trust property within the meaning of section 9 of the Charitable Trusts Act 1993 (NSW), and that the trust property should be applied cy-près (Cy-près means the Court will make orders to vary the provisions of a charitable trust because the original purposes of the trust cannot be fulfilled or can no longer be carried out).
The Court determined:
- The Foundation was a charitable organisation, by referring to the principles set down in Federal Commissioner of Taxation v Word Investments Ltd  HCA 55, that is, a holistic enquiry to discern the organisation’s purpose, rather than a separate analysis of each specific activity undertaken by the organisation, was appropriate;
- That all the properties held by the Foundation was held by it on a charitable trust for its charitable purposes;
- A cy-près scheme under section 9 of the Charitable Trusts Act 1993 (NSW) should be applied, as the original purposes of the trust had ceased to provide a suitable and effective method of using the Foundation’s properties, in whole or in part, having regard to the “spirit of the trust”; and
- The “spirit of the trust” was the advancement of education in philosophies and practices having the goal of a healthy lifestyle.
The Court held that if property is gifted to a charity, irrespective of the charity’s structure (i.e. incorporated association, public company limited by guarantee or trust), and even if made unconditionally, it is likely that the property will be treated as trust property. Unfortunately, this will mean that a Court order is likely to be required for the application of property for any purpose other than the specific purposes identified in the charity’s constitution.
 Harmony – Dombroski Foundation Ltd v Attorney General in and for New South Wales  NSWSC 1276.