Commissioner of State Revenue v Lam & Kym Pty Ltd [2004] VSCA 204

2. I agree with the disposition of this matter as proposed by Nettle, J.A. for the reasons advanced by him in his judgment.

7. This is an appeal from a judgment given in the Commercial and Equity Division on 2 May 2003. The judge allowed an appeal by the respondent against the disallowance of its objection to an assessment of stamp duty dated 5 January 2001. The question at issue is whether the execution by the respondent of an instrument described as a Declaration rendered the respondent liable to duty under s.64A(3) of the Stamps Act 1958.[1]

11. The facts of the matter are in short compass. By Deed of Settlement dated 13 August 1991 Kenneth Ang as settlor constituted H.L. Iskandar Nominees Pty Ltd as trustee of the Huynh Family Trust to stand possessed of the Trust Fund on discretionary trusts for two classes of objects therein described as "the Primary Beneficiaries" and "the Discretionary Beneficiaries". "The Primary Beneficiaries" were defined as including Ngoc Lam Huynh and Thi Thanh Nga Nguyen "and the

parents, grandparents uncles, aunts, spouses, former spouses, widows, widowers, and, children of the primary beneficiaries and the parents, grandparents, uncles, aunts, spouses, former spouses, widows, widowers, and children and grandchildren of such children." "The Discretionary Beneficiaries" were defined as the Primary Beneficiaries, a broad range of relations of the Primary Beneficiaries, additional persons, companies and trusts and a range of Christian charities. The Deed provided for the trustee to make annual distributions of income in its discretion, with power to accumulate, and that from the Vesting Day the trustee should stand possessed of the Trust Fund for such of the Discretionary Beneficiaries and for such interests and in such proportions as the Trustee might appoint in writing before the Vesting Day or, in default, for such of the Primary Beneficiaries as might then be living as tenants in common in equal shares.

15. Clause 5(a) of the Deed contained a power in the following terms:

"The Trustees may at their absolute discretion notwithstanding anything to the contrary herein contained or otherwise provided: (a) At any time or times and from time to time before the Vesting Day out of the capital of the Trust Fund held on trust as aforesaid but not out of any moneys referred to in paragraph (d)[2] of this clause raise any sum or sums and pay the same in addition to any income or share of income to which he or she may from time to time be entitled to any person being one of the Discretionary Beneficiaries for his or her own use and benefit or apply the same to or for the benefit of such person in such manner as the Trustees in their absolute discretion shall think fit. (b) ... (c) ... (d) ... (e) ..."

19. Clause 21 of the Deed provided that the Trustee might at any time by deed of appointment or other deed revoke add to or vary all or any of the trusts therein limited or the trusts limited by any variation or alteration or addition made thereto from time to time.

22. On 6 June 1996 the respondent in its capacity as trustee of the Huynh Family Trust became registered as proprietor of an estate in fee simple in the land situate at 28 Main Street, Box Hill in Victoria.

25. By deed poll executed on or about 15 December 1999 the respondent varied the Huynh Family trust deed by deleting clause 5(a) and substituting the following clause:

"(a) at any time or times and from time to time before the vesting day raise any sum out of the capital of the Trust Fund (but not out of any monies referred to in paragraph (d) of this clause) and pay or apply the same or transfer the whole or any portion of the Trust Fund in its existing form of investment to or for the advancement or benefit of any of the Discretionary Beneficiaries (whether absolutely or by way of re-settlement upon such trusts as the Trustees think fit ) and any such payment or transfer to or in trust for any of the discretionary beneficiaries shall without any receipt constitute a full and final discharge to the Trustees in respect thereof." (Emphasis added).

29. By Declaration executed on or about the same day the respondent declared that:

"The Trustee hereby declares that the property described in Certificate of Title Volume 9516, Folio 732 known as 28 Main Street, Box Hill is hereafter held separately in trust for the Primary Beneficiaries named in the Trust Deed and for the Primary Beneficiaries and their parents, children, grandchildren, uncles, aunts, brothers, sister, nieces, nephews and the spouses of any of those person[s] as Discretionary Beneficiaries to the exclusion of all other beneficiaries of the Huynh Family Trust (including any beneficiary that the Trustee may otherwise nominate under Clauses 1(a) (2)(iii), (v) or (vi) of the Trust Deed) but otherwise upon the same trusts and subject to the same powers and condition[s] and for the same period as are set out in the Trust Deed."

33. By notice of assessment dated 5 January 2001 the Commissioner assessed the respondent to duty in respect of the Declaration, pursuant to s.64A(3), in the sum of $178,950.

37. The judge below held that the Declaration did not give rise to a liability to duty under s.64A(3). His Honour stated his reasons as follows:

"11. It seems to me that [the Declaration of Trust] does not (to adopt the words in clause 5(a)) "raise any sum out of the capital of the trust fund"; and it is even clearer (it seems to me) that no sum has been paid or applied, and no portion of the fund in its existing form has been transferred to or for the advancement or benefit of, anyone. The fact that, by clause 5(a), the trustee was empowered to do these things is nevertheless significant. Given that it had such power, it necessarily had the lesser power - which it exercised through the medium of the declaration - to hold the Box Hill land "separately in trust". 12. The effect of this separation was in my opinion very limited. At most, certain contingent rights were removed, with the result that certain contingent beneficiaries no longer held any contingent interest in the Box Hill land. Other beneficiaries retained their interests, which by reason of the declaration became slightly less contingent than before. 13 ...Reliance was placed upon the statement in the declaration that "the property ... is hereafter held separately in trust". 14. In my opinion, this reliance is unjustified. I must look to the reality behind the words;[3] and that is that no separate trust exists. The Box Hill land is held by the same trustee on the same trusts as the balance of the trust fund known as the Huynh Family Trust, of which it continues to form part. It is "separate" only in that some of those with a contingent beneficial interest in the balance of the fund no longer have a contingent beneficial interest in the land. Of equal importance, the Box Hill property did not by reason of the declaration become subject to a trust for another. It was already subject to a trust for the class of beneficiaries which now, following the declaration, continue to have a contingent interest in it. The only difference is that some discretionary beneficiaries with a contingent beneficial interest in the land before 15 December 1999 were by the declaration deprived of that interest. It seems to me that it would be impossible properly to describe that result as "real property (becoming) subject to a trust for another by reason of a declaration of trust "." ... 17. ...the trusts which apply to the Box Hill property are not only precisely as before, but there is no new trustee and no new starting point of the beneficiaries' rights: that starting point remains the original deed of 13 August 1991. The trustee has merely exercised its power to decide which beneficiaries will continue to hold contingent interests in a particular portion of the trust fund."

42. Dr Hardingham contended on behalf of the Commissioner that that judge's reasons for decision were affected by a mis-characterisation of the Declaration. In Dr Hardingham's submission it was plain that the respondent had amended clause 5(a) of the Trust Deed so as to empower itself "to set aside the whole or any part of the Trust Fund described in the Trust Deed upon trust for any one or more of the Discretionary Beneficiaries described in the Trust Deed." There was no dispute that the Declaration was executed in pursuance of that power. Thus, said Dr Hardingham, the Declaration was properly to be characterised as subjecting 28 Main Street to new trusts in favour of some but not all of the Discretionary Beneficiaries, and on that basis it fell squarely within s.64A(3).

45. Mr Merralls who appeared with Mr Bearman for the respondent, did not seek to uphold the judge's reasoning. He accepted that the Declaration subjected 28 Main Street to trusts different from those upon which it had been held and he disavowed any suggestion that the new and old trusts were so similar as to mean that the true legal characterisation of the declaration was a variation of existing trusts (as opposed to the subjection of property to new trusts).

48. He contended, however, that the words "declaration of trust" in s.64A(3) had what he described as the "conventional meaning" of a declaration of trust made by a declarant who holds a beneficial interest at least commensurate with the beneficial interest sought to be created by the declaration. In his submission it followed from the fact that the respondent was the trustee of the Huynh Family Trust and held 28 Main Street as trustee of that trust that it did not have any beneficial interest.[4] Thus, in Mr Merralls' contention, s.64A(3) simply did not apply. He added that it was a corollary of that contention that s.64A(3) did not apply to property vested in a declarant unless it were vested beneficially.

51. In the alternative Mr Merralls contended that even if s.64A(3) were capable of applying to a declarant lacking a beneficial interest commensurate with the beneficial interest sought to be created by the declaration, the Declaration was not a declaration of trust according to proper legal acceptation: for the reason that it was executed in exercise of a power of appointment, and that s.64A(3) should be construed as referring only to an instrument which according to proper legal acceptation would be regarded as a declaration of trust.

54. In my opinion the respondent was well advised not to seek to uphold the reasoning of the judge below. Although we have not had the benefit of argument on the point, I have difficulty in seeing why it should be doubted that amended clause 5(a) provided expressly for execution of the declaration. More importantly, however, I am unable to agree with his Honour's conclusion that it is impossible properly to describe the result of the Declaration as "real property (becoming) subject to a trust for another by reason of a declaration of trust". The question of whether an instrument is duly stamped or as to what stamp duty is required is in general to be determined by what appears upon the face of the instrument to be its legal operation. What appears on the face of the Declaration is that it is a declaration of trust which subjects the land which was previously held upon trusts for several classes of beneficiaries to new trusts for the benefit of a new and more limited class of beneficiaries.

57. No doubt it is correct to say that the court is not bound by the apparent tenor of an instrument and will decide according to the real nature of the transaction, if necessary by receiving extrinsic evidence.[5] But that does not mean that the court is entitled to treat an instrument of which the true legal effect is one thing as if it were an instrument of which the true legal effect is another; even if the result achieved by the former might have been achieved by the latter without liability to duty.[6] As Ormiston, JA put it in Coles Myer v Commissioner of State Revenue Vic[7] (in a case in which the question was whether transfers of shares executed to effect a market buy-back were dutiable as transfers of marketable securities):

"The issue remains what is the real nature or substance of the instrument? In order to characterise it as a transfer or not, one must see what a transfer of the kind here in question effectuates. It is not to be determined necessarily by the label on the instrument, or even by statutory language which chooses to use the word "transfer", being the word which might otherwise bring it to duty. It is a question whether the document which calls itself a "transfer" in fact satisfies that description in law." (My emphasis).

62. Turning then to the substance of Mr Merralls' contentions about the conventional meaning of a declaration of trust, it is convenient to begin by noting a few things about the terms of s.64A(3) and the way in which the section has been construed in the past.

65. The first is that "Real property " was defined in s.63 of the Act as including any estate or interest in real property, and "person" was defined in s.3 as including a body corporate. Consequently, s.64A(3) was capable of applying to a corporate declarant and to any interest or estate in real property vested in a declarant.[8]

68. Secondly, until amendment in 1999, s.64A(3) provided that:

"(3) Where - (a) real property is vested in a person; and (b) that person is a trustee of a trust; and (c) the real property becomes an asset of the trust - the person shall, not later [than] 14 days after the real property becomes an asset of the trust - (d) furnish to the Commissioner....etc."

It was held in A & G Lamattina & Son Pty Ltd v Commissioner of State Revenue[9] that s.64A(3) in that pre-amended form was capable of applying to a declaration of trust executed by a trustee of an existing trust.

73. Thirdly, and although nothing is said about it in the explanatory memorandum or second reading speech, it appears that the only purpose of the 1999 amendment was to overcome part of the decision in McKinnon Wallace Holdings Pty Ltd v Commissioner of State Revenue[10]. In that case, Phillips, J.A. said of s.64A(3) as it then stood:

"...For the appellant it was submitted that para (b) speaks of a trust in existence before the real property `becomes an asset of the trust', and I think that that is so. Thus, if an interest in real property is vested in A and then steps are taken whereby that interest in real property `becomes an asset of' a trust of which A is already trustee, s.64A(3) is called into play. It is not called into play where the real property in question is simply subjected to a trust which then and there comes into existence for the first time - which is what happened here. Had that been the intention, subs.(3)(b) and (c) could have been much more plainly expressed to that end. For example, instead of paras (b) and (c) para. (b) might have required simply that `the real property becomes subject to a trust for another'."[My emphasis].[11]

Comparison of the pre and post amendment forms of the section reveals that the amendment followed exactly the form of words which Phillips, J.A. said were needed in order to make the section apply to situations in which the transaction in question itself creates the trust.

78. Consequently, unless A & G Lamattina & Son Pty Ltd v Commissioner of State Revenue were wrongly decided, the limited scope of the 1999 amendment suggests that s.64A(3) applied in its amended form to land vested in a declarant in the capacity of trustee.

82. Mr Merralls did not contend that the decision in A & G Lamattina was wrongly decided. He submitted, however, that it was concerned with the section when it was in a different form and so offered little guidance as to the meaning of the section in its amended form. I do not agree. Byrne J gave three reasons for his Honour's conclusion that the section pre amendment was capable of applying to cases in which the declarant was a trustee, and all of them appear to me to be equally applicable to the section in its amended form.

85. His Honour began with s.64A(3)(a) and the extended definition of "real property" in s.3, and then continued:

"Given the extended definition of real property, this pre-condition [scil. "where real property is vested in a person (A)"] on its face, is satisfied if an interest other than a legal estate is owned by A. This conclusion may follow even if such a definition were not available for "vest" may, where the context permits, refer to an interest other than a legal interest: Muswellbrook Coal Co Ltd v Minister for Mineral Resources and Energy (1986) 6 NSWLR 654 at 657-8 per Waddell, C.J. in Eq."

With respect I agree with that proposition and I add that Mr Merralls did not advance any reason why the same should not be said of s.64A(3)(a) as amended.

90. Byrne J next moved to s.64A(3)(c) and an argument that the conception of something which "becomes an asset of the trust" was inapposite in a situation where land was vested in a person in the capacity of trustee and that person declared that he or she would henceforth hold the land on different trusts. His Honour said:

"To my mind, the word `becomes' does not bear [an interpretation which would restrict it to cases where the effect of the declaration was to change the nature of the declarants interest in the land]. It merely indicates that, by some unspecified means, property which was not previously an asset of the trust is now such an asset. So far as `asset of the trust' is concerned, it should be noted that the expression used is not `asset of the trustee'. It is in accord with normal usage, even the usage of conveyancers, to speak of property becoming an asset of a trust where the property is held upon the terms of the trust, whether this be achieved by a conveyance to the trustee of an existing trust or by a declaration of trust. Moreover, [it] may be appropriate so to describe the position notwithstanding that the property is itself only an equitable interest: Timpson's Executors v Yerbury [1936] 1 KB 645 at 664, per Romer, L.J., or property which is already held on some trust."

Again with respect I agree, and I add that the change of words effected by the 1999 amendment, from "becomes an asset of the trust" to "becomes subject to a trust", seems to me to make the point of his Honour's observation even more applicable to the section in its amended form than in its pre-amendment guise.

95. Byrne J's third step was to pose the question of whether anything appeared from the words of the section which suggested that the sort of transaction which was the subject of consideration fell outside the class of transactions described in the section. His Honour could not see that there were any, and nor can I. It may be allowed, however, that whereas at the time of his Honour's decision the section referred simply to real property vested in a person becoming an asset of a trust of which that person was a trustee, at relevant times the section referred to real property vested in a person becoming subject to a trust "by reason of a declaration of trust by that person". That brings me back to Mr Merralls' contention concerning the conventional meaning of declaration of trust.

99. Mr Merralls based the argument upon an observation of Mason J in the DKLR Holdings Case[12]. The facts there were that a company owning land requested an associated company to act as trustee for it on the terms of a declaration of trust. The directors of the first company resolved that the proposed trustee would hold only the legal estate in the land and that the first company would not part with the beneficial ownership. The proposed trustee executed the declaration of trust by which it declared that it would hold the land upon trust absolutely for the first company and would do all such things as were necessary to vest the land back in its name and would deal with the land solely as it should direct. The first company then executed a memorandum of transfer of the land to the trustee "in consideration of nominal [consideration]". The question was whether the declaration of trust fell within par. 2 of the heading "Declaration of Trust" in the Second Schedule to the Stamp Duties Act 1920 (NSW). It provided that a declaration of trust for the purposes of s.65 of the Act meant:

"Any instrument declaring that any property vested or to be vested in the person executing the same is or shall be held in trust for the person or persons or purpose or purposes mentioned therein notwithstanding that the beneficial owner or person entitled to appoint such property may not have joined therein or assented thereto."

It was held by Gibbs CJ, Stephen, Mason and Brennan JJ, Aickin J dissenting, that the declaration of trust fell within par.2 of the heading "Declaration of Trust" because the property to which it related was property "to be vested" in the trustee.

104. In the course of his judgment, Mason J referred to a passage from the earlier joint judgment of the High Court in Tooheys Ltd v Commissioner of Stamp Duties (NSW)[13] in which it was said that :

"...Because of the inclusion of the words 'vested or to be vested' and the words `is or shall be held in trust', the description extends to cases where no property is as yet vested in the proposed trustee, and it extends to cases in which no trust presently operative is declared. Thus it extends, in my opinion, to instruments which would not be classified, in the ordinary language of an equity lawyer, as being declarations of trust. The question [of whether a deed came under Heading 2] is not, therefore, whether this deed is, in the ordinary sense of the term, a declaration of trust, but whether it satisfies the statutory description. It is only to be expected that this description would go beyond the ordinary sense of the term, since `ordinary` declarations of trust are included in the definition of `conveyance' and are thus chargeable without recourse to the provision now under consideration."

"...Ordinarily a declaration of trust signifies a declaration which operates to create a trust - it is made by a person who holds or will hold a beneficial interest at least commensurate with the beneficial interest sought to be brought into existence by the trust. There is a possibility here that the declaration is made by the appellant as a person who will acquire no more than a legal estate and who will quite apart from the declaration be a bare trustee for [the first company]." "... ...The appellant does not, as I understand his case, argue that a declaration by a holder of the bare legal estate takes the declaration outside par.(2), no doubt for the sound reason that such a declaration literally answers the description contained in the paragraph."

110. Mr Merralls' argument was that it was implicit in what Mason J said about the conception of a declaration of trust that an equity lawyer would simply not ascribe the appellation "declaration of trust" to a declaration of trust executed by a person who did not and would not have a beneficial interest at least commensurate with the beneficial interest sought to be brought into existence. Further, said Mr Merralls, and in contradistinction to par.2 of the heading "Declaration of Trust" in the Second Schedule to the Stamp Duties Act 1920 (NSW), there were no indications in s.64A(3) that "declaration of trust" is used in a sense other than of instruments which would be classified in the ordinary language of an equity lawyer as being declarations of trust.

113. In my opinion the simple answer to Mr Merralls' argument is that if Lamattina was correctly decided, as I think to be the case, s.64A(3)(a) in its pre-amendment form applied to land that was vested in a person as trustee. Therefore, unless the status quo was somehow affected by the 1999 amendment, s.64A(3) in its amended form continued to apply to land vested in a person as a trustee. That would amount to an irrefutable indication that "declaration of trust" in s.64A(3)(b) included a declaration of trust executed by a trustee in respect of land which was vested in him or her as trustee. In other words, whether or not "such an instrument is in the ordinary sense of the term a declaration of trust,... it satisfies the statutory description".

116. A further answer is that Mr Merralls' argument reads too much into what Mason, J said about ordinary conceptions of a declaration of trust. If I may say so with respect, his Honour should be understood as saying no more than that because the only thing conveyed to the declarant was a bare legal estate, the conveyance of itself constituted the declarant as trustee for the conveyor - by reason of the equitable estate retained by the conveyor. In that event any "declaration of trust" executed by the conveyee could be no more than an acknowledgment of the existing resulting trust and so not a declaration of trust according to ordinary acceptation.

119. As Dr Hardingham pointed out, however, the facts here are very different. It is not in dispute and it could not be disputed that the Declaration executed by the respondent did as a matter of law subject the land which had previously been held on the trusts of the Huynh Family Trust to new trusts for a more limited range of beneficiaries. Furthermore, as Dr Hardingham also pointed out, that result came about as a consequence of the trustee having sufficient dispositive power over or in respect of the land to subject the land to new and different trusts. In that sense the respondent did have a sufficient interest, even if not a beneficial interest, to subject the land that it held to new equitable interests.[14] The events which occurred thus accord with Mason J's description of what a declaration of trust ordinarily signifies.

122. A third answer to Mr Merralls' argument is that it appears to be founded upon the fallacy identified by Lord Radcliffe in Livingstone's Case[15], that for all purposes and at every moment of time the law requires the separate existence of two different kinds of estate or interest in property, the legal and the equitable. As his Lordship said, there is no need to distinguish between the legal and equitable interests in property in which the whole right is in the one person as it is in an executor or, it may be added, the trustee of a discretionary trust. Brennan J made a similar point in DKLR[16] by emphasising that an equitable interest is not carved out of a legal estate but impressed upon it. Consequently, where an executor or trustee has dispositive power over the property the court recognises and controls the power by calling into existence and protecting equitable rights and interests in the property. The power of disposition and the rights and interests thereby created are correlatives of each other.

125. In the same way in this case, the respondent had sufficient dispositive power to subject the land to new trusts by means of a declaration that it would thenceforth stand possessed of the land upon those trusts. By the execution of the Declaration, that is what it did. Equity would unquestionably recognise and give effect to the new trusts thus created. In those circumstances, I do not accept that the respondent's lack of beneficial interest is reason to exclude the Declaration from the range of what an equity lawyer would ordinarily describe as a declaration of trust.

128. I add that Lord Radcliffe's reasoning is further supported by the analysis of the High Court in Buckle[17]. That case concerned a supplementary deed that varied a deed of settlement under a discretionary trust so as to vest the trust property on a specified date in certain named beneficiaries failing the prior exercise of a power of appointment. Before the variation, the named beneficiaries had had interests as members of a class which were contingent on their being alive on the specified date, again failing the exercise of the power of appointment. The Court said there that:

"In the present case, under the Deed of Settlement as it stood before the Supplemental Deed, no interests in corpus had vested. The Trust Fund was vested in the trustee, impressed with such trusts as were created by or pursuant to the Deed of Settlement. There was no hiatus or gap as to any outstanding beneficial interest in the Trust Fund. The assets comprising the Trust Fund were not impressed with trusts which gave rise to equitable interests therein which were so extensive as to leave the trustee with no more than the bare legal title. The trustee might accurately be described as the owner of those assets, but as subjected to the equitable obligations imposed by the Deed of Settlement. The second and third respondents had no vested interests in corpus but they did enjoy rights to due administration of the trusts of the Deed of Settlement which a court of equity would protect."[18] [Emphasis added].

132. In the result, I reject the contention that the nature of the trustee's interest was such as to put the Declaration of Trust beyond the conventional meaning of a declaration of trust and I reject the suggested corollary that s.64A(3) was incapable of application to a declaration of trust in respect of property to which the declarant is not beneficially entitled.

136. I turn to Mr Merralls' alternative contention that clause 5(a) as amended constituted a special power of appointment and that the exercise of a special power of appointment whether at law or under a discretionary trust is an act of a different species to a declaration of trust . That contention proceeded by a number of steps.

139. Mr Merralls took us first to passages from Jacobs' Law of Trusts in Australia[19]; Sir Frederick Jordan's Selected Legal Papers (Chapters on Equity in New South Wales)[20]; Ford and Lee, Principles of the Law of Trusts; Lewin on Trusts[21]; Underhill and Hayton, Law Relating to Trusts and Trustees[22]; Parker and Mellows: The Modern Law of Trusts[23]; Pettit, Equity and the Law of Trusts[24]; the American Law Institute, Restatement 3d.,The Restatement of the Law Trusts[25]; and Scott and Fratcher, The Law of Trusts[26]. He argued that each of those texts in one way or another lays down that there are several ways in which a trust may be created, namely, by transfer inter vivos or by will or by a declaration of trust or by the exercise of a power of appointment, and that each of those methods is mutually exclusive. In my opinion the first part of that proposition is accurate but, for reasons to which I shall come, I consider that the second is not.

142. The next step of the argument was to say that the power conferred upon the trustee under clause 5(a) of the Trust Deed as amended by the Supplementary Trust Deed was a special power of appointment according to proper legal acceptation. I do not necessarily disagree with that although I think it may be more accurate to describe the clause as combining powers of appointment and advancement.

145. The third step of the argument was to say that it is clear that the trustee acted under clause 5(a) in executing the Declaration, and so in exercise of a power of appointment. That much is unexceptionable.

148. The final step was to say that since the methods of creating a trust by declaration of trust and creating a trust by exercise of power of appointment are mutually exclusive, it must follow that the Declaration was not a declaration of trust strictly so called but rather the constitution of trusts by exercise of power of appointment strictly so called. In my view, that is not so.

151. As I see it, the problem with the first and final steps of the analysis is that they are based upon a misconception of what the texts mean by the creation of a trust by exercise of a power of appointment. Each of the texts records that a non-testamentary trust may be created by transferring property to the proposed trustee to hold upon trust for the proposed beneficiary or, without transfer of property, by declaration of trust. Those methods of creation are mutually exclusive in the sense that one cannot effectually transfer property to another to hold upon trust and at the same time declare that one holds it oneself on trust. They are also exhaustive because, as the texts make clear, they are the only methods for the inter vivos creation of trusts[27]. Consequently, when then the texts later go on to discuss the creation of trusts in exercise of a power of appointment, they are not concerned with methods of creation - for, as has been stated, the only methods of creation are transfer and declaration - but rather with power to create a trust, and in particular with power to create a trust in respect of property of another in exercise of a power of appointment. The point which is made in those later sections of the texts is that a general power of appointment impliedly empowers the donee to appoint to a trustee to hold on trust for the object chosen in exercise of the power and that, according to the terms of a special power of appointment, a special power of appointment may also empower the donee of the power to appoint to a trustee for the benefit of the chosen object, as opposed to appointing directly to the chosen object.

154. Mr Merralls placed considerable reliance on Scott & Fratcher as the work which he said best demonstrated the point which he sought to make. But as it seems to me even that work is against the argument. While it does put the section on exercise of power of appointment under the general heading of the "Methods of Creating a Trust", and it does refer to it as such, it is clear from the body of the text that the only methods of creation suggested are transfer and declaration and that the section on powers of appointment is about empowerment. Thus it is written:

"A person who, although he does not have title to property, has a power of appointment over the property may wish to appoint it to trustees instead of appointing it directly to the persons whom he desires to benefit. No difficulty arises in the case of a general power of appointment ...Since the donee of the power may appoint to anyone he chooses, he may appoint in trust as well as directly. ... More difficult questions arise in the case of a special power, that is, a power to appoint only to or among the members of a limited class of persons. Whether the donee of such a power can properly appoint to trustees for one or more members of the class, or whether he must appoint, if at all, directly to members of the class, depends on the terms of the instrument under which the power is created..."[28]

158. The position is made even clearer in the leading English and Australian texts. Lewin on Trusts puts creation by transfer and declaration under the heading of "Principal Methods of Constitution of Express Trusts" and puts trusts created pursuant to the exercise of a power of appointment under the heading of "Powers Generally". Parker and Mellows puts creation by transfer and declaration under the heading "The Constitution of a Trust" and deals with the creation of a trust pursuant to a power of appointment under the heading of "Discretionary Trusts and Powers". Underhill and Hayton, Article 9 deals with the constitution of trusts by transfer and declaration. The power of a donee of power of appointment to create a trust in exercise of the power is dealt with later as a matter of power. Jacobs deals with constitution of trusts by transfer and declaration under the heading of "Constitution of Voluntary Trusts", "Transfer to a Trustee" and "Declaration of Trust" and deals with powers of appointment under the heading "Trusts and Powers". Tellingly, in the section headed "Constitution of Voluntary Trusts", the learned authors cite the following passage from the judgment of Turner LJ in Milroy v Lord[29]:

"...In order to render a voluntary settlement valid and effectual, the settlor must have done everything which according to the nature of the property comprised in the settlement was necessary to be done in order to transfer the property and render the settlement binding upon him. He may, of course, do this by actually transferring the property to the persons for whom he intends to provide, and the provision will then be effectual, and it will be equally effectual if he transfers the property to a trustee for the purposes of the settlement or declares that he himself holds it in trust for those purposes; and if the property be personal the trust may, as I apprehend, be declared either in writing or by parol. But in order to render the settlement binding one or the other of these modes must, as I understand the law of the court, be resorted to..."[My emphasis].

Finally, Ford & Lee, puts the position in these terms:

"In terms of method of creation, there can be two types of non-testamentary trust: * a trust arising from a transfer of property by a person having power to transfer it (whether as an owner, donee of a power or otherwise) to another person to hold that property on trust; or * a declaration of trust in which a person declares that he holds on trust certain property and thereby assumes the obligation of a trustee."[30]

164. Self evidently, the power of a donee of a power of appointment to constitute a trust in exercise of the power is dependent upon the terms of the power. As has been seen, if the power is general, it imports power to appoint to trustees for the benefit of the intended beneficiary of the power, and subject to the language of the power, it may equally empower the donee to declare that he or she will henceforth stand possessed of the subject matter of the power on trust for the benefit of the intended beneficiary. In the case of a special power, the extent to which the donee may go in the creation of trusts in exercise of the power is bound to be circumscribed more closely by the terms of the power, but even then there will be cases in which the donee is authorised to exercise the power either by transfer to a trustee to hold on trust for the benefit of the intended beneficiary of the power or to declare that the donee will henceforth stand possessed of the subject matter of the power on trust for the intended beneficiary.

167. According to the ordinary meaning of the English language, if in exercise of a power of appointment the donee of the power constitutes a trust by transfer of property to a trustee for the benefit of the object of the power, the trust thereby constituted is aptly described as a trust created by the transfer of property to a trustee. Equally, if in exercise of a power of appointment the donee of the power declares that he or she will henceforth stand possessed of the subject matter of the power on trust for the object of power, the trust thus constituted is aptly described as a trust constituted by declaration of trust. Contrary to the argument which was advanced on behalf of the respondent, there is in my opinion nothing in legal principle or in the texts to which we were referred or in common sense to suggest that any other view of the matter should be taken.

170. I consider that the Declaration was a declaration of trust according to the conventional meaning of that conception and that it was a declaration of trust within the meaning of s.64A(3).

174. In this case the trustee exercised the power accorded to it by the amended clause 5(a) of the Trust Deed by declaring that it would stand possessed of the land at 28 Main Street on trust for the limited range of beneficiaries defined in the Declaration of Trust. It is agreed on all hands that by those actions the trustee subjected the land to new trusts different to those upon which the land had been held until that point. The appellant does not contend, indeed counsel for the appellant expressly disavowed any suggestion, that the new and old trusts were so similar as to mean that the true legal characterisation of the declaration was a variation of existing trusts (as opposed to the subjection of property to new trusts).

177. In those circumstances and otherwise for the reasons which I have given I would allow the appeal. I would set aside the judgment the subject of appeal and order in lieu that the respondent's appeal against the Commissioner's disallowance of the objection to assessment dated 5 January 2001 be dismissed.

182. I have had the advantage of reading the reasons for judgment prepared by Nettle, J.A. I agree that for the reasons given the appeal should be allowed and orders made as stated by his Honour.

[1] The Act was repealed with effect from 1 July 2001 by the Duties Act 2000. At relevant times, s.64A(3) provided that:

"(3) Where - (a) real property is vested in a person; and (b) the real property becomes subject to a trust for another by reason of a declaration of trust by that person - the person shall, not later than 14 days after the real property becomes subject to the trust - (c) furnish to the Comptroller of Stamps a statement in the prescribed from accompanied by a statutory declaration setting out the prescribed particulars; and (d) pay to the Comptroller of Stamps as stamp duty on the statement a sum equal to the amount of stamp duty that would have been payable if the real property had been conveyed by an instrument of conveyance from the person to the other."

[2] Moneys set aside and held for a beneficiary under a legal disability.

[3] Davidson v Chirnside [1908] HCA 65; (1908) 7 CLR 324 at 344, per Isaacs J.

[5] Commissioner of Stamp Duties v Hopkins [1945] HCA 14; (1945) 71 CLR 351, 378; Comptroller of Stamps v Buckland [1959] VicRp 72; [1959] VR 517 at 520; Renwall Fabrics v Commissioner of Stamp Duties (Qld) [1983] 1 Qd 423 at 434, 82 ATC 4496 at 4504.

[6] Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co. Ltd (Quigley's Case) (1926) 38 CLR 272 at 277 -278; DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1982] HCA 14; (1982) 149 CLR 431 at 450, per Mason, J.

[7] [1998] 4 VR 728 at 747.

[8] cf. Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; (1998) 192 CLR 226 at 237-238.

[10] [1998] VSCA 59; [1999] 1 VR 397.

[12] DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) [1982] HCA 14; (1982) 149 CLR 431 at 459.

[13] [1961] HCA 35; (1961) 105 CLR 602 at 615.

[14] In the broad sense that includes rights of due administration.

[15] Commissioner of Stamp Duties (Queensland) v Livingstone [1964] UKPC 2; [1965] AC 694 (PC) at 712, B - E

[16] [1982] HCA 14; (1982) 149 CLR 431 at 474.

[17] [1998] HCA 4; (1998) 192 CLR 226 at 242 [37].

[20] Legal Books, Sydney, 1983 at pp.23-24.

[21] at [2000] to [2015] and [5050] to [5110].

[22] 15th Ed. at pp. 20-23 and 124-126.

[23] 7th Ed. 1998 at pp.128, 129 and 163-190.

[25] 2003, Vol 1, Part 2, Chapter 3, s 10.

[27] Of course excluding resulting and constructive trusts and trusts otherwise arising by operation of law.

[29] [1862] EngR 951; (1862) 4 De GF & J 264; 45 ER 1185.