Davidson v Chirnside

The case of *Davidson v Chirnside* involved an appeal to the High Court of Australia from a decision of the Supreme Court of Victoria concerning stamp duty. The dispute arose from an indenture executed by the trustees of a will, appointing new trustees for a £40,000 fund that had been set aside for the testator's daughter, Margaret Fair Calvert. The Collector of Imposts assessed stamp duty on this indenture, viewing it as a deed of settlement, while the taxpayer argued it was merely an appointment of new trustees and thus exempt.

The central legal issues before the High Court were whether the indenture constituted a "deed of settlement or gift" within the meaning of Division VIII of the Schedule to the *Stamps Act 1892* (Vic.), and if so, whether it was exempt from duty under section 28 of the Act as an instrument of appointment. The Collector contended that the indenture created new trusts and was therefore a settlement, while the taxpayer argued that it did not alter the beneficial interests and was solely an appointment of trustees, with the original trusts declared in the will remaining in effect.

The High Court, in allowing the appeal, reasoned that the instrument's taxability must be determined by its face, not by extrinsic evidence. It held that any instrument purporting to be the charter of future rights and obligations regarding property, and containing limitations typically found in settlements, should be considered a settlement or agreement to settle under the Act, irrespective of whether it creates a new beneficial interest. The Court overruled the contrary principle established in *Wiseman v. Collector of Imposts*, stating that an instrument can be a deed of settlement even if it does not create a new beneficial interest. Furthermore, the Court interpreted "power of appointment" in section 28 broadly to include any authority to dispose of property by deed, and "instrument of appointment" to encompass any instrument making such a disposition.

The Court found that while the indenture appointed new trustees and declared that they would hold the fund upon the trusts of the will, it also served to settle the fund by establishing a new charter of rights and obligations. Crucially, the testator's will had authorised his trustees to settle the fund, and the indenture exercised this power. Although the beneficiaries' beneficial interests remained substantially the same, the instrument itself constituted a new settlement. However, the Court also determined that the indenture was an instrument of appointment in favour of persons specially named in the will as objects of a power of appointment, and as duty had already been paid on the property in respect of which the power was given, the indenture was exempt from further taxation under section 28. The decision of the Supreme Court was affirmed, but on different grounds.