In Catalyst Townsville SPV No 1 Pty Ltd v The Presbyterian Church of Queensland (receivers and managers appointed) & Anors [2025] QSC 255, the Supreme Court of Queensland made findings in three proceedings between the Presbyterian Church of Queensland (Corporation) and Catalyst Townsville SPV No 1 Pty Ltd (Catalyst Townsville), Catalyst Corinda SPV No 2 Pty Ltd (Catalyst Corinda) and Catalyst Carina SPV Pty Ltd (Catalyst Carina) (together, Catalyst parties) on the existence of a specific charitable purpose trust, ultra vires arguments regarding trustee powers, and allegations of unconscionable conduct in the financing arrangements.
Key Takeaways
- To establish the validity of a specific charitable purpose trust, there must be clear evidence of an intention to create such a trust. This may be demonstrated by a declaration of trust, deed of gift, testamentary bequest, or other trust instrument. In the absence of such evidence, the nature of the property holding must be determined by reference to the manner in which the asset holder dealt with the property.
- Unconscionable conduct in equity focuses on a party exploiting a special disadvantage impairing the other’s judgement. Statutory unconscionability under the ASIC Act and the Australian Consumer Law is broader but likewise targets conduct falling significantly outside societal norms of acceptable commercial behaviour.
- The use of trust property for a charitable purpose does not constitute a breach of trust merely because the property is converted or realised. The critical consideration is whether the actions were taken in good faith, in accordance with the governing constitutional processes, and for the purpose of furthering the charitable objects of the trust.
- The Religious Educational and Charitable Institutions Act 1861 (Qld) (RECI Act) does not itself create trusts or vest property. It simply facilitates the creation of trustee corporations and enables them to hold property on trust.
Case Background
The Corporation was a corporate aggregate comprising three religious office-holders and was incorporated by letters patent issued pursuant to the RECI Act, which was distinct from the unincorporated religious association also known as “the Presbyterian Church of Queensland” (Church). The Corporation served as a trustee for the Church’s charitable purposes.
The Church is governed by the General Assembly. In May 1998, the General Assembly approved a constitution for ‘PresCare’, which states that one of PresCare’s objects is to provide aged and/or health care and community services to the public. PresCare supervised and administered the operation of the relevant retirement and aged care facilities (RACFs), and it is not a separate legal entity.
The Catalyst parties were each the trustee of a specific trust and subsidiaries of a common parent company. They engaged in transactions with the Corporation in relation to the mortgage, sale and lease of land for the development of the RACFs.
The disputes between the parties arose from:
- the sale of the Townsville land to Catalyst Townsville;
- the interim refinance loan and mortgage over the Carina land, followed by settlement of the Carina sale on 9 April 2020 with proceeds used to repay the interim loan;
- the agreements (referred to by the parties as triple-net leases) entered into between the Corporation and each of Catalyst Townsville and Catalyst Corinda, under which the Corporation agreed to lease the Townsville and Corinda lands from the respective Catalyst parties; and
- development agreements entered into between the Corporation and each of Catalyst Townsville and Catalyst Corinda, under which Catalyst Townsville and Catalyst Corinda agreed to advance substantial funds for the construction of RACFs on the Townsville and Corinda lands respectively, to be repaid by the Corporation over a 10-year period.
The Corporation faced financial difficulties and was unable to meet its obligations under the above-mentioned agreements. Accordingly, in May 2021 the Court appointed Michael Owen and Philip Carter as receivers and managers (Receivers) of all the assets, property, and undertakings of the Corporation.
The Catalyst parties commenced proceedings against the Corporation for unpaid rent and outstanding instalments that became immediately due on termination of the Heads of Agreement (HOA). The HOA was executed on 9 April 2021 and terminated on 12 May 2021, which made the funding payout amounts immediately due: Townsville $12.39m and Corinda $14.36m. For Corinda, the funding payout schedule and true‑up were provided on 4 June 2021.
The Receivers denied the claims of the Catalyst parties and alleged that:
- The Corporation held the relevant land as trustee of a specific charitable purpose trust, referred to as the PresCare Constitution Trust (PC Trust), established under the PresCare Constitution. Alternatively, it held the relevant land as trustee of the Aged Care Trust (AC Trust).
- Further and alternatively, the Corporation held the land as trustee for the general charitable purposes of the Church, as authorised by the RECI Act.
- Accordingly, the Catalyst parties could not enforce any of their claims because:
- the Corporation lacked authority to enter into the agreements with them;
- the Corporation breached its duties as a trustee when it entered into such agreements;
- each agreement was imprudent, hazardous, and wholly unsuitable for a trustee of a charitable purpose trust;
- the transactions between the Corporation and the Catalyst parties were not beneficial to the charitable purposes of the PC Trust or the AC Trust;
- Catalyst Townsville and Catalyst Carina purchased the land from the Corporation with knowledge of circumstances that would have indicated to an honest and reasonable person that the Corporation was a trustee of charitable trust property and that the transactions were in breach of trust; and
- the Catalyst parties acted unconscionably by entering into the agreements with the Corporation and by commencing the proceedings against the Corporation.
On that basis, the Receivers sought equitable compensation and rescission of transactions with the Catalyst parties.
The Attorney-General intervened, suggesting the Corporation held the land as trustee of various charitable trusts, including a Religious Trust and the AC Trust. The Attorney‑General contended the AC Trust arose with W.R. Black’s 1929 gift of real property.
Catalyst argued that all transactions with the Corporation were valid, enforceable and within the Corporation’s power and authority as trustee.
Relevant to this article, the issues in dispute were:
- Whether the Corporation was the trustee of any specific charitable purpose trusts;
- Whether the Corporation held the land as trustee for the Church’s general charitable purposes;
- Whether the Corporation had power to complete the transactions with the Catalyst parties, and whether it breached its duties as a trustee by entering into such agreements;
- Whether the Catalyst parties had any knowledge of a breach of trust by the Corporation when they entered into the agreements with the Corporation; and
- Whether the Catalyst parties engaged in any unconscionable conduct by entering into the agreements with the Corporation and initiating the proceedings.
The Court's Findings
The Court found against the Receivers on all major contentions, holding that the property in question was held for the general charitable purposes of the Church (not on any specific trust), that the Corporation did not breach trust or act imprudently/in bad faith, and that the Catalyst parties acted properly throughout and were entitled to payment of the principal debts, interest, and contractually due outgoings, but not to additional occupation rent or similar claims.
1.) The Corporation did not hold certain land or any other relevant property as trustee of the PC Trust or the AC Trust:
- There was no evidence of an intention to create any specific charitable purpose trusts, such as declaration, deed of gift, or other trust instrument.
- There was no formal external manifestation by any person – be it the Corporation, the General Assembly, a donor or settlor – of an intention to dedicate property to those specific trusts with immediate effect. Records from the General Assembly were insufficient to draw such an inference.
2.) The Corporation held the relevant property on trust for the general charitable purpose of the Church:
- The effect of the RECI Act is that the Corporation acts only as a trustee for property, with its powers and rights being those necessary or incidental to that function and limited by both statute and trust law.
- In the absence of any contrary intention, if a person gifts or bequeaths property for the purposes of the Church or declared they held property for the purposes of the Church, the Court will presume that the property is held on trust for the religious purposes prescribed by the Church’s fundamental tenets of faith and its constitution.
- The Corporation only acted as a trustee for the Church’s charitable purposes. It had no purposes of its own.
3.) The Corporation had power to complete the dealings with the Catalyst parties within its capacity as trustee for the Church’s charitable purposes:
- On the basis that the Corporation had no purposes of its own and acted only as a trustee for the Church’s charitable purposes, the transactions were not imprudent or hazardous, and the Corporation had the power to complete them under the Church’s constitution, with no evidence of selling assets at an undervalue or acting outside its capacity as trustee for the Church’s charitable purposes.
- The Corporation acted in good faith, responsibly, and reasonably, and exercised the degree of caution expected of a trustee for such charitable purposes.
- The Corporation was able to acquire, use and dispose of the land and other property to pursue the Church’s charitable purposes in accordance with the Church’s constitutional process.
4.) The Catalyst parties did not have any subjective knowledge of a breach of trust
- The Catalyst parties did not have subjective knowledge of circumstances that would indicate to an honest and reasonable person that the Corporation’s entry into the transactions misapplied trust property or transferred it in breach of trust.
5.) The Catalyst parties did not engage in unconscionable conduct in their dealings with the Corporation or in the proceedings
- There was no information asymmetry, exploitation, situational disadvantage, undue pressure, or victimisation suffered by the Corporation in entering into the transactions with the Catalyst parties, as the Corporation had the benefits of internal and external advice on the transactions.
- The Receivers did not establish that the returns achieved by any of the Catalyst parties from their investments in the Townsville, Corinda, or Carina land sufficiently compensated for foregoing a different long-term rate of return so as to make it unconscionable for the relevant Catalyst party to rely on its contractual rights under the agreements with the Corporation.
- Evidence before the Court showed comparable aged‑care transactions used two payment streams – market‑based rent (from operating income) and a separate loan/capital repayment (from RADs)-with the Catalyst capitalisation rates within the observed range.
Outcome
The Court upheld the Catalyst parties’ claims for monetary amounts owed by the Corporation, dismissed the Receivers’ claims and defences, and found no unconscionable conduct by the Catalyst parties.
This case, once again, demonstrates the need for the parties to anticipate any future dispute, and the issues which might arise, at the time of negotiating the deal documentation. Some of the uncertainty, which required court attention, could have been agreed before the deal was cemented. At Ironbridge Legal, we can advise you during the negotiation of a contract around the potential future pitfalls which should be identified (for an eye-wide-open approach) and addressed in the contract. We advise secured lenders and borrowers about the scope of security, priority, and enforcement (if later required).
Further Information
For more information about claims by secured lenders, breach-of-trust and unconscionable conduct claims, please contact the author of this article:
