Re McGowan & Valentini Trusts

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST

S ECI 2019 05066

IN THE MATTTER of the PETER VALENTINI TRUST (also known as the Peter Valentini Family Discretionary Trust)

and

IN THE MATTER of the ANNA MCGOWAN TRUST (also known as the Anna McGowan Family Discretionary Trust)

and

IN THE MATTER of an application pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) for the determination of questions arising in the execution of the trusts and as to the composition of any class of persons having a beneficial interest in the property subject to the trusts

I.N. & G. NOMINEES PTY LTD (ACN 005 480 419) as trustee for the Peter Valentini Trust and as trustee for the Anna McGowan Trust

First Plaintiff

and

ANNA MCGOWAN AND PETER VALENTINI in their capacity as executors of the will of the late IRIS NORMA FLETCHER

Second and Third Plaintiffs

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JUDGE:	MACAULAY J
WHERE HELD:	Melbourne
DATE OF HEARING:	12 May 2020 and 24 August 2020
DATE OF JUDGMENT:	31 March 2021; revised 19 November 2021
CASE MAY BE CITED AS:	Re McGowan & Valentini Trusts
MEDIUM NEUTRAL CITATION:	[2021] VSC 154

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EQUITY — Trusts — Determination of questions arising in the execution of trusts — Rule 54.02 Supreme Court (General Civil Procedure) Rules2015 (Vic) — Questions arising in the administration of two private family trusts established by deeds.

EQUITY — Where the company appointed as trustee of trusts was not incorporated at the time of execution of the trust deeds — Where deed executed by persons who became director and secretary of the nominated corporate trustee upon its subsequent incorporation —Whether trusts failed due to the non-existence of the intended corporate trustee at the establishment of the trusts —Whether the intended corporate trustee became the trustee of the trusts upon its subsequent incorporation — Raftland Pty Ltd v Commissioner of Taxation (2006) 227 ALR 598.

EQUITY — Whether strangers to the trust, without appointment, became actual trustees of an express trust by taking custody and administration of real property for the benefit of the beneficiaries — Soar v Ashwell [1893] 2 QB 390, Clay & Ors v Clay & Ors (1999) 20 WAR 427, Perpetual Trustee Co Limited v Thomas (1903) 3 SR (NSW) 277 considered — Whether trustee had declared trusts in respect of real property it held — Whether requirements of s 53 Property Law Act 1958 (Vic) were complied with — Whether written manifestation and proof of declaration of trusts could be found in combination of documents including affidavits sworn for the purpose of the proceeding — Secretary, Department of Social Security v James (1990) 95 ALR 615.

EQUITY — Where property held on express trusts had vested absolutely in the beneficiaries — Where trust fund was not transferred to beneficiaries upon vesting but with their consent remained subject to amended trusts — Whether subsequent to vesting the trustee retained power to amend the trusts to enlarge the beneficiary class and extend the vesting date —Whether the trusts so amended were the continued original trusts or were new trusts — Hancock v Rinehart (2015) 106 ACSR 207 — Clay & Ors v James & Ors [2001] WASC 18 —Re Ball’s Settlement Trusts [1968] 1 WLR 899 — Kearns v Hill (1990) 21 NSWLR 107 — Re Holt’s Settlement [1969] 1 Ch 100 — Re Dion Investments Pty Ltd (2014) 87 NSWLR 756.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Dr Philip Bender	Coulter Roache Lawyers

TABLE OF CONTENTS

Introduction........................................................................................................................................ 1

Five problems................................................................................................................................ 3
1. Non-existence of ING on the date the 1977 Deeds were executed.................................... 3
2. Victoria Street purchased by Giuseppe and Norma............................................................ 4
3. No declarations of trust by ING.............................................................................................. 4
4. Trusts ‘continue’ after property vested absolutely.............................................................. 4
5. After vesting, trusts amended in reliance on power in 1977 Deeds.................................. 4
Questions for advice..................................................................................................................... 5
Practical context in which the questions arise.......................................................................... 7
Evidence......................................................................................................................................... 7
Who are the interested parties?................................................................................................... 8

What is the effect of the non-existence of ING at trust creation?............................................. 9

Creation of the Trusts................................................................................................................. 10
Appointment of trustee.............................................................................................................. 12
Conduct of the Trusts after 1978............................................................................................... 18

What is the effect of Victoria Street having been purchased by Giuseppe and Norma?.. 23

What is the effect of there being no declarations of trust by ING?....................................... 30

What is the effect of the trust assets vesting in 1988 and 1991?.............................................. 33

Existence of the power to amend the trust deed following vesting..................................... 34
Limit on the power to amend following vesting?................................................................... 38

What is the effect of the Trusts being amended by the 1991 Deeds?.................................... 42

What are the names of the Trusts?................................................................................................ 53

Conclusion......................................................................................................................................... 53

HIS HONOUR:

Introduction

I. N. & G. Nominees Pty Ltd (‘ING’ or the ‘Trustee’), the apparent trustee of two discretionary family trusts, seeks the advice of the Court pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic). Along with the second and third plaintiffs (whose interests are explained below), the Trustee (the first plaintiff) seeks advice for the determination of questions arising in the execution of trusts and as to the composition of the classes of persons having a beneficial interest in the property subject to the trusts.

In brief summary, the questions concern: whether the trusts were validly created; if validly created, whether various parcels of land became property of the trusts; whether the trusts continued notwithstanding that the property vested absolutely in the beneficiaries in 1988 and 1991 respectively; and if so, upon what terms did the trusts continue after 1991 when the Trustee purported to amend the deeds.

Giuseppe Valentini and Iris Norma Valentini (who later remarried and became Iris Norma Fletcher, known as Norma) had two children: Anna Valentini (whose married name is Anna McGowan), born 7 January 1958, and Peter Valentini, born 14 February 1961. Giuseppe and Norma were farmers and property owners. By separate deeds dated 14 February 1977 Giuseppe and Norma created two trusts, one for each of their children Anna and Peter (the ‘1977 Deeds’). The settlor in each case was Doris Searle (the ‘Settlor’ or ‘Doris’), a sister of Norma. The 1977 Deeds appointed ING as trustee, and ING appeared to execute the deeds accepting its appointment by the application of the company seal and signature of Giuseppe and Norma apparently as its directors.

The trusts expressed in the 1977 Deeds are known as the Anna McGowan Trust (‘Anna McGowan Trust’) and the Peter Valentini Trust (‘Peter Valentini Trust’) (each a ‘Trust’ and together referred to as ‘the Trusts’). The property settled in the respective Trusts was to vest absolutely in Anna and Peter when they each turned 30 years old; in Anna’s case on 7 January 1988 and in Peter’s case on 14 February 1991.

Anna married Craig McGowan in 1977. Peter married Lesley (now Lesley Valentini). Giuseppe died on 26 November 1989 after which Norma married Bruce Fletcher. Norma died on 5 March 2020, leaving a will she made on 22 January 2019 which appointed Anna and Peter as executors of her will and trustees of her estate.

ING was registered on the companies register on 25 September 1978. Although named in the two trust deeds as the trustee, ING had not been registered at the time of the execution of the 1977 Deeds. At incorporation, Giuseppe was appointed sole director and Norma was appointed company secretary. Norma was later appointed the second director in November 1981. The current directors of ING are Anna and Craig, and Peter and Lesley. Anna and Peter have been directors since just before their father’s death in 1989, and Craig has been ING’s company secretary since 1989. In 2020, Lesley and Craig were also appointed as directors of ING.

On 23 June 1991, after the date when, according to the terms of the 1977 Deeds, the property of the Trusts vested absolutely in Anna and Peter respectively, the Settlor and ING (by its directors) executed further Deeds of Settlement (the ‘1991 Deeds’) purporting to amend the 1977 Deeds including by widening the class of discretionary beneficiaries and extending the vesting date. Thereafter, ING has continued to manage the property of the Trusts on the amended terms through to the present time.

Over time, five properties were acquired and have been dealt with in the accounts of ING as if they were the beneficial assets of the Trusts in equal share. They are:

(a) 122 Victoria Street, North Geelong (‘Victoria Street’), sometimes referred to as ‘Weddell Rd’, having street frontage both carriageways;

(b) 4-5 Breakwater Rd, Belmont (‘Breakwater Road’);

(c) 110-112 Bailey Street, Grovedale (‘Bailey Street’);

(d) 765 Portarlington Rd, Leopold (‘Leopold Property’); and

(e) units 1 & 2, 23 Larnook St, East Prahran (‘Larnook Street Units’) (all five properties will together be referred to as the ‘Properties’ and all, except Victoria Street, will be referred to as the ‘Other Properties’).

ING is the first plaintiff in this proceeding as it seeks advice as the trustee. Iris Norma Fletcher, now deceased, was named as the second plaintiff at the time the proceeding was commenced because she (and, now, her estate) was the registered proprietor of Victoria Street which had traditionally been treated as a trust asset.[1] Following her death, Norma was removed as a director of ING and on 12 June 2020 probate of her will was granted to Anna and Peter who, as executors of Norma’s will and trustees of her estate, conducted the case on behalf of her estate.[2]
[1]As appears below, on one view Norma held Victoria Street on sub-trusts for the Trusts. She was added as the second plaintiff to seek the Court’s advice concerning the determination of questions concerning those potential sub-trusts. Having since died, Anna and Peter were added as the executors of her will as second and third plaintiffs respectively.
[2]The case was heard over two sitting days, both of which were subsequent to Norma’s death but the first being before probate had been obtained. On that first day, Anna and Peter were present when counsel made submissions and, on the second sitting day, after probate had been granted, Anna and Peter adopted the submissions made on the first sitting day as being those made for the estate of the second plaintiff.

Five problems

There are five ‘problems’ which, individually and also in combination, create numerous possible scenarios for these Trusts. Different scenarios, if applicable, give rise to different past and future consequences for the Trusts: including for the way in which the income and expenses associated with the trust assets have been reported, and the consequential distribution of tax liabilities (income tax, land tax, capital gains tax and stamp duty).

The five ‘problems’ are:

1. Non-existence of ING on the date the 1977 Deeds were executed

First, when the two trust deeds were executed in February 1977 the named corporate trustee, ING, did not yet exist as it was not registered until 19 months later. Thus, issues arise concerning the validity of the Trusts and the identity of the trustee.

2. Victoria Street purchased by Giuseppe and Norma

Secondly, a property which has been treated as part of the Trusts’ assets (Victoria Street) is not owned by ING but was purchased by and registered in the names of the later-to-be directors of ING, Giuseppe and Norma, and remained in their joint names until passed by survivorship application to Norma. There was no express declaration of trust in favour of ING in relation to Victoria Street signed by Giuseppe and Norma. Thus, an issue arises concerning the beneficial ownership of Victoria Street and who now has the power to deal with it.

3. No declarations of trust by ING

Thirdly, although the Other Properties are registered in the name of ING, there are no express, signed declarations of trust made by the company over any of those properties which, nevertheless, have always been treated as if they were assets of the Trusts. Issues arise concerning the beneficial ownership of the Other Properties and who has the power to deal with them.

4. Trusts ‘continue’ after property vested absolutely

Fourthly, although the property of the Trusts vested ‘absolutely’ in each beneficiary in 1988 and 1991 respectively, for another 30 years the Trustee has continued to deal with the trust property as if the Trusts continued and the property had remained subject to the original (but see next) 1977 Deeds (ie, as if the property remained at the discretionary disposition of ING as trustee). Issues arise concerning the legal and beneficial ownership of the property of the Trusts after the two vesting dates, and the continued existence of the Trusts (and powers of ING in respect of property) thereafter.

5. After vesting, trusts amended in reliance on power in 1977 Deeds

Fifthly, by the 1991 Deeds, Doris (as settlor), ING (as trustee) and Anna and Peter (in each case an ‘Original Beneficiary’ and together the ‘Original Beneficiaries’) purported to significantly amend the 1977 Deeds, purportedly pursuant to the power of amendment in those deeds. Those amendments introduced a wider class of beneficiaries into each Trust, extended the vesting date and varied the Trustee’s powers. The trust property has since been dealt with by ING in accordance with the 1991 Deeds (eg, distributions of income have been made to persons who were not beneficiaries under the 1977 Deeds, but only under the 1991 Deeds). Issues arise as to the terms upon which the Trusts continued after the 1991 Deeds (assuming they continued at all).

Questions for advice

Against the background of these issues, problems and the possible scenarios that arise from them, ING asked the following questions for advice (taken from the originating motion by which the proceeding was commenced but adopting defined terms as per these reasons):

(a)Were the Peter Valentini Trust and Anna McGowan Trust validly constituted under two deeds both dated 14 February 1977 […] although [ING]’s then directors executed those deeds on its behalf [and] even though [ING] was not incorporated until on or about 25 September 1978?
(b)Alternatively to (a), were two trusts created by conduct or otherwise after the incorporation of [ING] on terms and conditions reflecting those in the 1977 Deeds?
(c)In respect of the property known as Lot 1 on Plan of Subdivision 115783 and situated at 122 Victoria Street, North Geelong, Victoria (also known as the Weddells Road property), being the property described in Volume 09143 Folio 495 [Victoria Street]:
(i)Was [Victoria Street] held on trust from about 1977 or about 1978 on the terms of the 1977 Deeds, or otherwise, and held in equal shares on the Peter Valentini Trust and Anna McGowan Trust, or on sub-trusts for the benefit of those trusts, notwithstanding that the property was registered on or about 17 November 1977 in the names of [Norma] and Giuseppe Valentini, rather than in the name of [ING]?
(ii)Further, were the requirements of section 53 of the Property Law Act 1958 (Vic) met such that [Victoria Street] was held in equal shares on the Peter Valentini Trust and Anna McGowan Trust, or on sub-trusts for the benefit of those trusts?
(iii)Alternatively, was [Victoria Street] from about 1977 or about 1978 held in equal shares on constructive trusts for the benefit of the Peter Valentini Trust and Anna McGowan Trust?

(d)Was the legal effect of the two deeds both dated 23 June 1991 […] to validly amend the 1977 Deeds and continue the Peter Valentini Trust and the Anna McGowan Trust on the same trusts […], or was the effect of those 1991 Deeds and / or the subsequent conduct of [ING] to create new trusts over the trust property of the [Trusts] (‘New Trusts’)?
(e)If the 1991 Deeds did create New Trusts, or there were New Trusts otherwise created, were those New Trusts to be administered under the terms set out in the 1977 Deed as modified by the 1991 Deeds?

(f) Is [Victoria Street] currently held in equal shares:
(i)For the benefit of each of the [Trusts], or alternatively, the New Trusts or in equal shares on sub-trusts for the benefit of the [Trusts], or alternatively, the New Trusts; or
(ii)On constructive trusts for the benefit of the [Trusts], or alternatively, the New Trusts?

(g)Are the following properties […] currently held in equal shares for each of the [Trusts], or alternatively, for the New Trusts:
(i)The property situated at 4-6 Breakwater Road, Belmont, Victoria, being the property described in Volume 8875 Folio 001 and Volume 8875 Folio 002;
(ii)The property situated at 110-112 Bailey Street, Grovedale, Victoria, being the property described in Volume 9411 Folio 906 and Volume 9411 Folio 907;
(iii)The property situated at 765 Portarlington Road, Leopold, Victoria, being the property described in Volume 9630 Folio 881;
(iv)The properties situated at Units 1 and 2, 23 Larnook Street, East Prahran, Victoria, being the property described in Volume 9587 Folio 228;

(h)In answering item (g) above:
(i)Are the Other Properties held on those express trusts and were the requirements of section 53 of the Property Law Act 1958 (Vic) met?
(ii)Alternatively, are the Other Properties held in equal shares on constructive trusts for the benefit of each of the [Trusts], or alternatively, the New Trusts?

(i)Is the name of one of the current trusts the Peter Valentini Trust, or the Peter Valentini Family Discretionary Trust?
(j)Is the name of the other current trust the Anna McGowan Trust, or the Anna McGowan Family Discretionary Trust?

Practical context in which the questions arise

Among the affidavits referred to below, some were concerned with demonstrating the practical importance of obtaining the Court’s advice on the questions posed. It is unnecessary to refer to all of the many various ways in which the existence of the ‘problems’ has given rise to genuine, practical dilemmas for the plaintiffs and their legal and accounting advisors in providing advice and making decisions in relation to the property arguably subject to the Trusts. It suffices to say that, based on the evidence, I am well satisfied that the Court should proceed to give the advice sought.

Evidence

The plaintiffs provided the following affidavits and exhibits in the course of the proceeding:

(a) Affidavits of Anna McGowan sworn 16 October 2019 (‘First Anna McGowan Affidavit’), 11 May 2020 (including exhibits) and 15 August 2020 (including exhibits) (‘Third Anna McGowan Affidavit’);

(b) Affidavits of Craig Douglas McGowan sworn 16 October 2019 (including exhibits) (‘First Craig McGowan Affidavit’) and 15 August 2020 (including exhibits) (‘Second Craig McGowan Affidavit’);

(c) Affidavits of Daniel James Black affirmed 15 October 2019 (including exhibits) (‘First Black Affidavit’) and 6 November 2019 (including exhibits);

(d) Affidavits of Giovanni Saija sworn 24 September 2019 (including exhibits) (‘First Saija Affidavit’) and 17 August 2020 (including exhibits) (‘Second Saija Affidavit’);

(e) Affidavit of Iris Norma Fletcher sworn 16 October 2019 (‘Norma Affidavit’);

(f) Affidavit of Jessica Daisy Regina Eagles affirmed 19 August 2020 (including exhibits) (‘Eagles Affidavit’); and

(g) Affidavits of Peter Valentini sworn 22 October 2019 (‘First Peter Valentini Affidavit’) and 17 August 2020 (including exhibits) (‘Second Peter Valentini Affidavit’).

Who are the interested parties?

Following the first hearing on 12 May 2020, ING initiated communications with a number of persons and authorities who could potentially be interested in the proceedings. The following persons and authorities were informed and asked about their intentions to participate in or join the proceedings:

(a) Beneficiaries under the 1991 Deeds: On 3 August 2020, ING instructed Coulter Roache Lawyers (‘Coulter Roache’), the current solicitors for ING (and of the trustees of the estate and executors of Norma’s will), to send letters to the following beneficiaries of the trusts under the 1991 Deeds to inform them of the proceedings and to enquire whether they intended to participate or make submissions: Lauren Tremul (in her personal capacity and on behalf of her children), Katherine Rosendorff (in her personal capacity and on behalf of her children), Julia Valentini, Sarah Valentini, Christopher Valentini and James Valentini. Only Sarah and Lauren responded with Sarah stating that she did not intend to participate and Lauren stating she had no further contributions or questions.[3]
[3]Eagles Affidavit [6]-[9], exhibits JDE-3, JDE-4 and JDE-5; Second Peter Valentini Affidavit [15], exhibit PV-1; Third Anna McGowan Affidavit [33], exhibit AM-5.

(b) Bruce: Around 16 July 2020, Anna and Peter, in their capacity as trustees of Norma’s estate, instructed Coulter Roache to send a letter to Bruce as one of the testamentary trust beneficiaries. The purpose of the letter was to notify Bruce of the proceedings and that Anna and Peter intended to seek to substitute Norma as the second plaintiff in the proceedings, as well as to enquire whether Bruce intended to bring a claim against the estate for further provision from Norma’s estate under the Administration & Probate Act 1958 (Vic). Following this, Bruce signed a Deed of Release whereby he accepted a property at 24 Vanessa Avenue and funds that Norma had held at Bendigo Bank in full satisfaction of his entitlement to Norma’s estate.[4]

(c) State Revenue Office Victoria (‘SRO’): In May 2020, Coulter Roache, on ING’s instructions, emailed a letter to the SRO informing it of the proceeding and enquiring about the SRO’s intention to participate or make submissions. In August, Coulter Roache sent a further letter providing an update to the SRO and offering to provide the further filed evidence and submissions. At the time of the evidence and the hearing on 24 August 2020, the SRO had not responded to either of those letters.[5]

(d) Australian Taxation Office (‘ATO’): In May 2020, ING instructed Coulter Roache to inform the ATO of this proceeding and to enquire about the ATO’s intention to be joined to the proceedings. Coulter Roache emailed a further update including documents relevant to the proceeding to the ATO on 17 August 2020, again seeking to confirm whether the ATO sought to be joined to the proceedings. The ATO declined to be joined.[6]

[4]Eagles Affidavit [10]-[13], exhibits JDE-6 and JDE-7; Third Anna McGowan Affidavit [13]-[16], exhibits AM-3 and AM-4.

[5]Eagles Affidavit [15]-[18], exhibits JDE-8 and JDE-9; Second Craig McGowan Affidavit [38], exhibit CM-3.

[6]Eagles Affidavit, [19]-[21], exhibits JDE-10 to JDE-12; Second Craig McGowan Affidavit [30], exhibit CM-2.

It is now convenient to deal with the questions in the context of the five ‘problems’ set out above.

What is the effect of the non-existence of ING at trust creation?

The two questions for advice which fall to be considered under this heading are:

(a)Were the Peter Valentini Trust and Anna McGowan Trust validly constituted under two deeds both dated 14 February 1977 […] although [ING]’s then directors executed those deeds on its behalf [and] even though [ING] was not incorporated until on or about 25 September 1978?
(b)Alternatively to (a), were two trusts created by conduct or otherwise after the incorporation of [ING] on terms and conditions reflecting those in the 1977 Deeds?

Potentially, the non-existence of the corporate trustee, ING, at the date of execution of the 1977 Deeds may have had the effect that the Trusts were never created. Alternatively, the Trusts may have been validly created but with other trustees (namely, Giuseppe and Norma) over the whole period, or only until ING became registered. ING may then have become the Trustee by virtue of one of a number of theories including by conduct or ratification.

Creation of the Trusts

In order to create an express trust, there must be certainty of intention, subject matter of the trust and beneficiaries of the trust.[7]
[7]Kauter v Hilton (1953) 90 CLR 86, 97; Korda v Australian Executor Trustees (SA) Limited (2015) 255 CLR 62, [7].

Original documents retrieved from the strong room of Coulter Roache, include the original deeds of trust, the 1977 Deeds, made by Doris purporting to establish the Trusts in favour of Anna and Peter.

The 1977 Deeds were transferred to Coulter Roache in about 2003 when Vaughan Lamb joined the firm. Mr Lamb had previously been a solicitor for ING when at the firm Lamb Cassidy and Simmonds. The solicitor whose name appears on the back sheet to each of the 1977 Deeds was yet another legal practitioner practising under the name, ’R.T. Grills’.

Each deed is substantially in the same terms save for the names and particulars of each Original Beneficiary. Each deed has been typed although certain details have been completed by hand. Each deed contains a number of alterations inserted above or below the typed words which have been initialled by the signatories to the deed. In the case of the deed establishing the Anna McGowan Trust, the opening paragraph, with handwritten insertions and handwritten or typed alterations (shown in italics inside square brackets) is as follows:

THIS DEED made the [14th] day of [February] One thousand nine hundred and seventy – [seven] BETWEEN DORIS SEARLE of 52 Clark Avenue Belmont Geelong in the State of Victoria ~~Married Woman~~ [widow] (hereafter called “the Settlor”) of the one part and I. N. & G. NOMINEES PTY. LTD of 21 Yarra Street Geelong aforesaid (hereafter called “the Trustee”) (which expression where the context so admits shall mean and include the trustee or trustees for the time being of the settlement created by this Deed) of the other part WHEREAS the Settlor wishes to make for ANNA ~~VALENTINI~~ [McGowan] of ~~6 Eton Road Belmont~~ [27 VANESSA AVE HIGHTON] Geelong aforesaid Student Teacher (hereinafter called “the Original Beneficiary”) and for the other persons who may benefit hereunder the provision is hereby made and for the purpose of giving effect to such wish has paid to the Trustee the sum of 10 DOLLARS and the Trustee has consented to become Trustee thereof upon the trust and subject to the powers hereinafter provided AND WHEREAS the Settlor desires that the Trustee shall have power from time to time to vary the said trusts and the objects thereof in manner hereinafter provided.

In the case of the deed establishing the Anna McGowan Trust, paragraph 12 thereof similarly contains an alteration to her surname from Valentini to McGowan. In the case of the deed establishing the Peter Valentini Trust the opening paragraph also contains hand written insertions dating the deed as 14 February 1977 and, as with the Anna McGowan Trust, an amendment to the status of the Settlor from ‘married woman’ to ‘widow’.

Both deeds are signed by ‘D. Searle’ and each purports to bear the common seal of ING with the signatures of ‘G. Valentini’ and ‘N. Valentini’ as the directors. The back sheet of each deed is also dated in handwriting, 14 February 1977. Norma swore an affidavit for the purpose of this proceeding on 16 October 2019, about five months before she died. In her affidavit, Norma said that she recognised hers and Giuseppe’s signatures on the documents. Anna McGowan and Peter Valentini both said that they recognised their parents’ and their aunt’s signatures on the 1977 Deeds.

On this basis, and for the further reasons discussed below in connection with the incorporation of ING having post-dated the signing of the deeds, I find that the deeds were executed on 14 February 1977 by Doris, and Giuseppe and Norma.

By paragraph 1 of each deed the Settlor directed that the settled sum of $10.00, and any other property from time to time paid or transferred to it with the intention of augmenting the settled property (the ‘Trust Fund’), be held by the trustee for the Trusts expressed in the deed. By paragraph 2 of each deed the beneficiaries were identified as the ‘Original Beneficiary’, being Anna or Peter respectively, until they attain the age of 30 years whereupon the property (both income and capital) passes to them absolutely or, if they shall have died beforehand, to their children or sibling or as otherwise provided by the express terms of the deed.

In my view, the 1977 Deeds squarely meet the requirements of the three certainties as set out above: first, there is certainty of intention because the Settlor expressly declared two trusts, namely the Anna McGowan Trust and the Peter Valentini Trust; secondly, the deeds also set out with certainty the identity of the beneficiaries, namely Anna McGowan and Peter Valentini (or in the case of death, their children or each other) respectively; and, thirdly, the deeds set out with certainty the trust property, namely, a settled sum of $10 on each Trust and property subsequently paid or transferred to the trustee with the intention that it becomes trust property.

Appointment of trustee

The critical issue for the purposes of the first ‘problem’ is whether the validity of the creation of the Trusts is affected by the named trustee, ING, not being in existence at the time of execution of the 1977 Deeds. On this issue, I begin by returning to the evidence in a little more detail concerning the circumstances surrounding the execution of the 1977 Deeds and the timing of that event relative to the incorporation of ING.

Except for the reference to ING which was not incorporated until later, other indications in the two 1977 Deeds point to them having been executed on 14 February 1977. Each was prepared by the same solicitor, R.T. Grills. Although the material filed with the Court does not contain any direct evidence of the genesis of these Trusts, there is indirect admissible evidence concerning that subject.[8] Peter said that in the late 1970s, when he was a teenager, his father told him that he had changed accountants and that his new accountant, Frank De Stefano, advised him to set up a family trust.[9] Anna said that she first became aware of the Anna McGowan Trust in the ‘late 1970s’ when she discovered she was not entitled to Government assistance payments due to her income from the Trust, with her father explaining that he had set up the Trust, on advice, for tax purposes.[10]
[8]Evidence Act 2008 (Vic) s 63.
[9]First Peter Valentini Affidavit [5].
[10]First Anna McGowan Affidavit [9].

In both deeds the name of the corporate trustee, ING, appears in three places. Two of the references are in the opening paragraph (extracted above) and the execution page to which I have referred. The third reference is in paragraph 6(a) which states: ‘the directors of the said G. & I. Nominees Pty. Ltd and after their death the legal personal representatives’. I assume that this particular reference to the company, containing only the initials of Giuseppe and Iris (namely, Norma) in reverse order to that which appears elsewhere in the deeds, is an error.[11]
[11]It is to be noted that in 1970, Giuseppe and Norma established a company called G & I Valentini Pty Ltd (Eagles Affidavit [3], exhibit JDE-1). That company also held various properties, as recorded in a list later prepared by Craig McGowan (in 1993) in which he distinguished leased properties owned by ING from those owned by G & I Valentini Pty Ltd (First Craig McGowan Affidavit, exhibit CM-4). Potentially, the erroneous reference to ‘G & I Nominees Pty Ltd’ in the 1977 Deeds signifies some confusion between the two companies. Further, the existence of that other company and the signs of possible confusion between it and ING, provide grounds to speculate whether those matters were the source of a belief that the intended corporate trustee was already in existence in 1977.

Despite reference to ING in the 1977 Deeds, and the apparent existence of a company seal which was applied to the documents, the historical records of the Australian Securities and Investments Commission (‘ASIC’) establish that the company was not registered until 25 September 1978.[12] The records also show that Giuseppe was the sole director of the company until 9 November 1981 on which date Norma was appointed as its second director. Norma’s signature to the two deeds on 14 February 1977, as ‘director’, must have been applied on an assumption that she was either a director of an existing company or would be a director once the company was registered; an assumption that was incorrect on both counts (although, as previously stated, Norma was appointed company secretary at inception).
[12]First Black Affidavit, exhibit DB-2.

The Memorandum and Articles for ING, also prepared by R.T. Grills, shows that the original subscribers to the two shares in the company signed the document on 28 August 1978.[13] The objects of the company included to hold property as trustee on behalf of others and to undertake and execute any trusts ‘either with or without any declared trust’ and to undertake the office of trustee.
[13]The Memorandum and Articles of Association are included in exhibit DB-1 to the First Black Affidavit.

The fact that the Anna McGowan Trust deed contains an alteration to her surname from Valentini to McGowan corroborates other indications in the document that it was signed in 1977 rather than 1978. Craig deposed that he ‘married Anna in 1977’.[14] Although the evidence contained in the material filed before the Court is no more precise than that as to the date of marriage, the inference is that the deed was drafted while she was single but executed following her marriage. Other than indications from the deeds themselves, there was no evidence as to when Doris became a widow: so the alteration to her status in the documents provides no independent guide as to when the 1977 Deeds were executed.
[14]First Craig McGowan Affidavit [3].

Not long before 14 February 1977 — on 13 October 1976 — Giuseppe and Norma signed a contract of sale of land to purchase Victoria Street. The contract provided that the residue of purchase monies, after payment of the deposit, was to be paid 60 days from the date of sale.[15] In fact, the Certificate of Title for the property shows Giuseppe and Norma to have been registered as the joint proprietors of Victoria Street on 17 November 1977, suggesting that settlement of the sale probably took place after the creation of the Trusts.[16]
[15]The contract of sale is included in exhibit DB-1 to the First Black Affidavit.
[16]The Certificate of Title is included in exhibit DB-1 to the First Black Affidavit.

If Giuseppe and Norma had intended that Victoria Street be purchased for and held on behalf of the Trusts for Anna and Peter, perhaps that intention was thwarted by the lack of any nomination clause in the contract of sale, or by the fact that ING had not been incorporated before settlement or, at least, before the registration of the transfer of land at the titles office. Alternatively, perhaps Giuseppe and Norma only hit upon the idea of establishing trusts for their children after signing the contract of sale of land for Victoria Street. These are matters of speculation. What appears to be plain is that the Trusts were established after Giuseppe and Norma contracted to purchase Victoria Street and, albeit with the intention that they incorporated ING to be the trustee of the Trusts, before that company was established.

From this evidence, it appears probable that, at the time the 1977 Deeds were executed, Giuseppe and Norma intended to establish ING but had not yet undertaken the legal processes to do so (or, perhaps, mistakenly believed that they had already done so).[17] They had a name for it, they assumed each of them would be its directors and it appears they had even had a company seal made up for it. But the fact of the matter is, the company did not actually exist at the time of the execution of the 1977 Deeds. Unfortunately, it seems that the solicitor engaged to prepare the 1977 Deeds (and who ultimately prepared the Memorandum and Articles of Association for ING) overlooked the fact that the company named as the trustee and which appeared to execute the deeds had not been registered.
[17]See n 11 above.

Equity will not allow a trust to fail for want of a trustee because, generally, that would be contrary to the settlor’s intention. An exception may exist where the settlor intended the trust to continue for only as long as the designated trustee continued in that capacity. But, provisions in a trust deed which permit additional or substitute trustees to be appointed allow one to infer that the settlor did not hold that particular intention in which case the preferable inference is that the settlor did not want the trust to fail for lack of a trustee.[18]
[18]Raftland Pty Ltd v Commissioner of Taxation (2006) 227 ALR 598, 613 [66].

Clauses 6 and 7 of the 1977 Deeds permit the appointment of new or additional trustees and specify in whom that power of appointment resides. Applying the principle recorded in the preceding paragraph, I infer that the Settlor’s intent was that the Trusts should not fail for want of a trustee. It further follows that despite ING not having been incorporated at the time of the execution of the 1977 Deeds, the Trusts created by them should not fail for want of a trustee.

Accepting and applying that principle, questions nonetheless arise as to the existence and identity of the trustee in the periods before and after ING’s incorporation. It is convenient to consider the two periods one by one.

While acknowledging there are several potential ways to analyse what occurred, the plaintiffs submitted that the preferable analysis is that:

(a) between the creation of the Trusts in February 1977 and the incorporation of ING in September 1978, Giuseppe and Norma constituted themselves as trustees of the Trusts; and

(b) upon its incorporation ING stepped into the role of the pre-incorporation trustees and, itself, became the trustee of the Trusts.

A person may be found to be the actual trustee of an express trust (as distinct from a constructive trustee), without appointment, by taking upon the custody and administration of the estate and thereby becoming subject to all the liabilities of an express trustee.[19]
[19]Clay & Ors v Clay & Ors (1999) 20 WAR 427, [131]; Soar v Ashwell [1893] 2 QB 390; Perpetual Trustee Co Limited v Thomas (1903) 3 SR (NSW) 277; JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Butterworths, 8^th ed, 2016) [15-03].

There is sparse evidence as to what happened concerning the administration of the Trusts in the 19-month period after execution of the 1977 Deeds. Clearly, Giuseppe and Norma signed the deeds themselves, albeit in the erroneous belief that they were doing so as directors of an existing company. From this it may be inferred that in some capacity they agreed to undertake the role of administering the Trusts.

A broadly analogous situation arose in Rubino Investments Pty Ltd as trustee for the Rubino Family Trust v Chief Commissioner of State Revenue[20] (‘Rubino’) which came before the Appeal Division of the New South Wales Civil and Administrative Tribunal. As in the present case, a declaration of trust had been made before the incorporation of the appointed corporate trustee and the question was whether, in those circumstances, a valid trust had been created. As it transpired, it was unnecessary to answer the question, so the remarks made by the Senior Member were obiter. Nevertheless, the Senior Member’s opinion is worth repeating –

It seems to me that even if the intended trustee had not been incorporated at the date of settlement, nevertheless the party executing the trust deed on behalf of the intended trustee prior to its incorporation becomes a trustee of the settled sum upon receipt, and holds the sum on trust. The corporate trustee … would ordinarily step into the place of the pre-incorporation trustee upon registration with ASIC and the ratification in some manner of the trust relationship.
In the present situation in any case the trustee had been incorporated before the transfers the subject of this dispute were executed and I infer knew the capacity in which it accepted the transfers.[21]

[20][2018] NSWCATAD 133.

[21]Ibid [27], [28].

In short, the Senior Member concluded that, having signed the trust deed on behalf of the intended but non-existent corporate trustee, the putative directors held the settled property on trust subject to the trusts expressed in the deed. Cautious to acknowledge that surrounding circumstances in any given case may provide reason not to apply that statement as the determinative principle, I nevertheless think the principle articulated by the Senior Member in Rubino represents a useful ‘working principle’ for a situation such as the one that presents itself in this case – at least insofar as it addresses the pre-incorporation period. I see no particular reason not to apply this principle, and, in fact, it seems to be in accordance with good common sense. To apply it to the circumstances at hand would not offend the Settlor’s intention and it would place the settled property in the charge of those individuals who actually executed the deeds and who, but for the non-incorporation of the company, would likely have had the individual responsibility of managing it.

An alternative view of the situation is that the Trusts existed with no trustee for 19 months. As noted, there is little, if any, unambiguous evidence of trust activity within that period from which to infer that someone undertook the trustee role. However, I think the better approach is to find that the Trusts created by the 1977 Deeds did not lack a trustee in the period between creation and the incorporation of ING. By signing the deeds as the natural persons who were to take responsibility for administering the Trusts, albeit thinking they were to do so as directors of a company rather than as individuals, Giuseppe and Norma sufficiently signified their agreement to accept, in the absence of ING as the trustee, the liabilities of trustees and to hold the settled property on trust for the Original Beneficiaries.

In summary, I find that the Trusts were validly created on 14 February 1977 despite the fact that the named trustee ING did not exist at that date. I also think that, by reason of their execution of the 1977 Deeds on behalf of the intended (but not yet existing) Trustee, the better view is that Giuseppe and Norma became trustees of the Trusts at inception. But, whether or not Giuseppe and Norma were trustees in the intervening period, the more vital question is whether ING became trustee of the Trusts upon ING’s incorporation.

For reasons which follow, I find that it did, essentially applying the same principle to which I have already referred: that is, that a person can become trustee of an express trust by their conduct in administering the trust and thereby taking on the liabilities of trustee. In overview, my reasons are these:

(a) the Settlor intended that ING should be the trustee;

(b) ING’s soon-to-be director, Giuseppe, and company secretary, Norma, executed the deeds by which it was to be appointed as trustee;

(c) the better view is that Giuseppe and Norma undertook the role of trustee only because the intended corporate trustee was not incorporated, yet nevertheless proceeded to have it incorporated with one of its objects being to undertake the office of a trustee; and

(d) as will now be summarised, ING appears to have acted as trustee of the Trusts in the years following its incorporation.

Conduct of the Trusts after 1978

ING purchased and was registered as the proprietor of Breakwater Road (in two parts, in June and August 1979); Bailey Street (in two parts, in February 1984 and June 1985); the Leopold Property (in February 1984); and the Larnook Street Units (in February 1994).

In her affidavit, Norma identified her own signature and those of Giuseppe and Doris on the two 1977 Deeds and recalled that the Trusts were set up ‘for tax reasons’. Norma also identified her and Giuseppe’s signatures on the contract of sale for the purchase of Victoria Street, saying that it had been their intention that the property be purchased for the Peter Valentini Trust and the Anna McGowan Trust. She was unable to explain why the contract listed herself and Giuseppe as purchasers, rather than ING, or why the property was registered in their individual names, saying that she had always understood that Victoria Street was held for the Trusts. Norma further recalled that Breakwater Road, Bailey Street, and the Leopold Property were purchased by ING for the two Trusts, and also recalled the purchase of the Larnook Street Units but otherwise could not recall details about their purchase.[22]
[22]Norma Affidavit [7]–[15].

Peter said that his father had told him about the Trusts over the years ‘but not in detail’. Peter said that his father had told him ‘during a number of discussions’ that Breakwater Road, Bailey Street and the Leopold Property had all been purchased and were held by ING for the two Trusts in equal shares.[23] Although he could not say precisely when, he said that his father had also told him that Victoria Street was owned by the Trusts. So far as he understood, Victoria Street had always been owned for the Trusts in equal shares.[24]
[23]First Peter Valentini Affidavit [17], [18].
[24]First Peter Valentini Affidavit [6], [14], [15].

Anna McGowan had the same understanding, saying that it had been the subject of discussion with Giuseppe ‘around the dining table’ that all the properties (then, Victoria Street, Breakwater Road, Bailey Street and the Leopold Property) were held by ING for the Trusts.[25]
[25]First Anna McGowan Affidavit [17]–[19].

Craig McGowan, husband of Anna and son-in-law of Giuseppe and Norma, said he was first told of the existence of the Trusts in the early 1980s ‘as different properties were acquired by ING for the [T]rusts’. Leaving aside Victoria Street for the moment, because Breakwater Road was purchased in June 1979 and Bailey Street and the Leopold Property were purchased in February and May 1984, reference to the purchase of properties ‘in the early 1980s’ is at least a reference to the last two-mentioned properties. In about 1989, before Giuseppe died and Craig was appointed company secretary, Giuseppe asked Craig to manage the assets of the Trusts. Together with Giuseppe, Craig visited Victoria Street, Breakwater Road, Bailey Street and the Leopold Property (the Larnook Street Units had not yet been purchased) and Giuseppe told him that all were owned by ING and held for the two Trusts. Giuseppe told Craig that the Trusts were there to protect the assets for Anna and Peter and their respective children and he referred to them collectively as the ‘family trust’.[26]
[26]First Craig McGowan Affidavit [5] and [7]–[9].

These recollections strongly suggest that the activities of ING in purchasing properties in its own name were activities conducted in its capacity as trustee for the Trusts. As for Victoria Street, I will consider the evidence concerning the purchase and management of that property in more detail when considering the status of that property separately. But, it is fair to say that despite the legal ownership of the property resting with Giuseppe and Norma, Victoria Street appears always to have been dealt with and thought of by them as being a property under the control of ING as trustee for the Trusts.

As for any financial, accounting or trust records which might verify the operation of the Trusts and ING’s activity as trustee for them, for reasons set out below, none were produced for the period during which most of the Properties were acquired.

The current accountant for ING, Anna and Peter (and their respective families) is Giovanni Saija. Mr Saija first commenced acting for them in 2000 when he set up his own accounting practice. Prior to that time he had been employed as an accountant by Frank De Stefano & Associates and had worked on the preparation of some of the financial statements and income tax returns for the Trusts. The few records that pre-date 2000 are documents prepared by Frank De Stefano & Associates but none pre-date the financial year ending 30 June 1996. Frank De Stefano’s practice was wound up in or around 2000 and Mr Saija received whatever documents the previous accounting practice had still retained.[27] Mr Saija wrote to the ATO via the Tax Agent Portal on 25 July 2018 requesting copies of taxation returns for the years ended 1977 to 1998 (inclusive) for the Anna McGowan Trust and the Peter Valentini Trust. In reply the ATO wrote, somewhat ambiguously, that according to its records ‘the requested documents are unavailable’.[28]
[27]I take judicial notice of the fact that as per R v De Stefano [2003] VSC 68, Frank De Stefano, accountant and former mayor of Geelong, was sentenced in the Supreme Court of Victoria in 2003 for 10 years imprisonment on conviction for thefts of over $8 million from clients of his accountancy practice. His accountancy practice came to an end when he surrendered himself to police on 19 April 2000.
[28]Second Saija Affidavit, exhibit GS-2.

So, in short, assuming they existed, no taxation returns or financial statements for ING or the Trusts have been able to be retrieved and put in evidence for the period between 1978 and 1996. That period includes the period 1989 to 1996 while Anna, Craig and Peter were officers of ING.

The earliest documents that were produced in evidence were electronic versions of the combined financial statements for the Trusts for the years ending 30 June 1996 and 30 June 1998. Those financial statements recorded the Trusts as jointly owning the Properties in equal shares. The income tax returns for the Trusts for the 1999 financial year were prepared (by Frank de Stefano & Associates) on the basis of each of the Trusts sharing equally the income and expenses of the trust property (rental return and farming enterprise) and jointly owning the assets of the Trusts. In those tax returns, ING is explicitly recorded as being the Trustee and the returns are signed by Norma, then a director of ING.

Tax returns for the Trusts for the financial years 2000 through to 2005 were prepared (now by Mr Saija’s firm) on the same basis as the 1999 returns. From 2005 onwards, upon Mr Saija’s advice, the returns of the Trusts were prepared on the basis of the Trusts operating the businesses and holding the assets in partnership, each having ING as Trustee.

Other than financial statements and tax returns, there is an assortment of other records pertaining to the Trusts that pre-date the earliest available financial statement. These records are:

(a) a typed, unsigned ‘Declaration of Trust’ prepared by R.T. Grills by which Giuseppe and Norma were to declare that they held Victoria Street on trust for ING on the basis that the money used to purchase the land was ING’s money – although not completed, the typed words show that the declaration was to bear a date in a year commencing ‘one thousand nine hundred and seventy-[…]‘;[29]
[29]First Craig McGowan Affidavit, exhibit CM-1.

(b) financial records of the Trusts which pre-dated 1989 and apparently showed the Properties (other than the Larnook Street Units) being recorded as assets of the Trusts (seen by Craig McGowan in 1989 about the time he became company secretary, but no longer in existence);[30]
[30]First Craig McGowan Affidavit [13].

(c) spreadsheets of assets owned and leased by the Trusts prepared by Craig McGowan in 1992, 1993, 1994 and 1999 showing ING to be the entity owning the various real estate properties previously referred to (including Victoria Street of which ING was not the registered proprietor), receiving the income and paying the expenses in relation to them and, in the case of the 1992 document named ‘Summary of Assets I.N. & G 1992’, explicitly referring to ING ‘as trustee of the Anna McGowan Trust and Peter Valentini Trust’;[31]

(d) a lease of Victoria Street dated 30 November 1989 which, although describing the lessors as Giuseppe and Norma, also bore the company seal of ING;[32] and

(e) the 1991 Deeds executed by ING which, by their terms in each case, described ING as trustee of the Trusts and as having executed the 1977 Deeds as Trustee.[33]

[31]First Craig McGowan Affidavit [14]-[18], exhibits CM-2 to CM-6.

[32]First Black Affidavit, exhibit DB-1; Norma Affidavit [17] referring to exhibit DB-1 to the First Black Affidavit.

[33]First Black Affidavit, exhibit DB-1; Norma Affidavit [19] and [20] referring to exhibit DB-1 to the First Black Affidavit; First Anna McGowan Affidavit [14] referring to exhibit DB-1; First Peter Valentini Affidavit [11] and [12] referring to exhibit DB-1 to the First Black Affidavit.

From the totality of the evidence referred to thus far in these reasons, I conclude that, immediately upon its incorporation, ING took on the custody and administration of the property settled upon the Trustee under the 1977 Deeds and thereby became subject to all the liabilities of an express trustee of the Trusts set out in those deeds. Thereafter, at least until 1988 and 1991 respectively, ING continued to act in the capacity as trustee of the Trusts. To reach that conclusion it is unnecessary, in my view, to analyse the situation by reference to notions of the ratification of the pre-incorporation conduct. The combination of factors referred to in paragraph [47] above provides ample evidence from which to conclude that ING became the actual trustee of the express Trusts.

The plaintiffs drew my attention to the observations of McMillan J in Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc, [34] in which her Honour disregarded the events prior to the incorporation of a purported corporate trustee when evaluating whether that company to which property had been transferred had declared a trust over it. The declaration or creation of the trust itself is not the issue at this point. Here, the relevant intention for the creation of the trust is that of the Settlor and, as already stated, there is ample evidence that she intended to create the Trusts. Further, as I have already found, in the circumstances that existed the Trusts did not fail due to the non-existence of ING when the Trusts were created.
[34][2018] VSC 413, [460].

I answer question (a) as follows: Yes – the better view being that Giuseppe and Norma became the trustees of the Trusts until 25 September 1978, however, in any event, upon its incorporation on that date ING became the trustee of the Trusts. In view of my answer to question (a), it is unnecessary to answer question (b).

What is the effect of Victoria Street having been purchased by Giuseppe and Norma?

For convenience, I repeat the questions applicable to this problem:

(c)In respect of the property known as Lot 1 on Plan of Subdivision 115783 and situated at 122 Victoria Street, North Geelong, Victoria (also known as the Weddells Road property), being the property described in Volume 09143 Folio 495 [Victoria Street]:
(i)Was [Victoria Street] held on trust from about 1977 or about 1978 on the terms of the 1977 Deeds, or otherwise, and held in equal shares on the Peter Valentini Trust and Anna McGowan Trust, or on sub-trusts for the benefit of those trusts, notwithstanding that the property was registered on or about 17 November 1977 in the names of [Norma] and Giuseppe Valentini, rather than in the name of [ING]?
(ii)Further, were the requirements of section 53 of the Property Law Act 1958 (Vic) met such that [Victoria Street] was held in equal shares on the Peter Valentini Trust and Anna McGowan Trust, or on sub-trusts for the benefit of those trusts?
(iii)Alternatively, was [Victoria Street] from about 1977 or about 1978 held in equal shares on constructive trusts for the benefit of the Peter Valentini Trust and Anna McGowan Trust?

Victoria Street was purchased by and registered in the names of Giuseppe and Norma before ING was registered as a company. No signed, written declaration of trust can be produced to show that they declared a trust over the land in favour of ING or anybody else. This circumstance raises the question whether Victoria Street ever became trust property. Nevertheless, it has always been treated as if it was trust property with the income from it having been distributed to the Trusts over the years. Doubtless, those distributions have had an effect on the incidence of income taxation, on the income received from the property, and may have had other land tax consequences. Further, Norma has recently died. She died leaving a will which disposes of the residue of her estate to named beneficiaries. This brings into sharp focus the beneficial ownership of Victoria Street, that is to say, whether the property is to be distributed under the testamentary trusts or whether it was held by Norma as either custodian or bare trustee in favour of the Trusts.

Section 53 of the Property Law Act 1958 (Vic) (‘Property Law Act’) sets out the requirements for writing in respect of the creation of interests in land. It provides as follows:

Instruments required to be in writing
(1)Subject to the provisions hereinafter contained with respect to the creation of interest in land by parol—
(a)no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;
(b)a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by his will;

(c)a disposition of an equitable interest or trust subsisting at the time of the disposition must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorized in writing or by will.

(2)This section shall not affect the creation or operation of resulting, implied or constructive trusts.

There has been some debate as to whether a declaration of trust over land attracts the operation of both sub-sections (a) and (b) of s 53(1) with the result that such a declaration must satisfy the requirements of both sub-sections.[35] Whereas sub-section (a) is concerned with the creation or disposal of an interest in land, it has been held that sub-section (b) is concerned with the enforceability of a declaration of trust over land however made (acknowledging, however, that a declaration of trust of land both creates and disposes of an interest in it).[36]
[35]JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Butterworths, 8^th ed, 2016) [7-03]; JD Heydon, MJ Leeming and PG Turner, Meagher Gummow and Lehane’s Equity Doctrines & Remedies (LexisNexis Butterworths, 5^th ed, 2015) [7.030]; Adamson v Hayes (1973) 130 CLR 276; Secretary, Department of Social Security v James (1990) 95 ALR 615 (‘DSS v James’); Meshumar v Otmy (2018) 97 NSWLR 615, 644 [402] (‘Meshumar’).
[36]Gentsis v Forty-first Advocate Management Pty Ltd [2004] VSC 398, [89]; Versaci v Rechichi [2019] VSC 747, [67]; Meshumar (n 35), 644-5 [404].

The prevailing view in the authorities is that, in order to avoid sub-section (b) being seen as otiose or imposing requirements additional to sub-section (a), sub-section (a) is construed as not extending to declarations of trust of land.[37] Unlike the creation of a trust in land, which must be in writing, a declaration of trust respecting land, however made, need only be ‘manifested and proved by some writing signed by some person who is able to declare such trust’.[38] In addition, it has been held that these requirements may –

…be satisfied by a combination of documents capable of being read together. Any informal writing may stand as evidence of the existence of a trust including correspondence from third parties, a telegram, an affidavit or an answer to interrogatories.
The date of creation of the writing is not material. It may come into existence at any time after the declaration of the trust.[39]

[37]DSS v James (n 35), 622; Thompson v White [2006] NSWCA 350, [134]; Meshumar (n 35), 644 [403].

[38]Byrnes v Kendle (2011) 243 CLR 253, [48], citing Kauter v Hilton (1953) 90 CLR 86, 98.

[39]DSS v James (n 35), 622, cited with apparent approval in Schweitzer v Schweitzer [2010] VSC 543, [15]; Kelly v Commissioner of Taxation [2013] FCAFC 88, [57]; Plummer v Attorney-General of New South Wales [2018] NSWSC 869, [97].

Nevertheless, careful attention needs to be paid to whether the documents or combination of documents signed by the person able to declare the trust actually manifest and prove the trust of land claimed to have been declared, including the salient terms of the trust. Whereas oral evidence may be capable of persuading a tribunal of fact that a declaration of trust was made, that oral evidence cannot also be used to fill gaps in the written record for the purpose of manifesting and proving the declaration and the terms of the trust that is sought to be enforced.[40]
[40]DSS v James (n 35), 623-4.

It follows that one should bear steadily in mind two distinct concepts – first, the declaration of a trust of land made by the owner of the legal interest in favour of the beneficiary and, secondly, the manifestation and proof of that declaration of trust in writing signed by a person who was able to make it. The declaration of trust may be proved by oral statements or inferred from circumstances. However, for the equitable interest thereby created to be enforceable and have effect, the formalities of s 53(1)(b) of the Property Law Act must be complied with.

Accordingly, I will first deal with the evidence as to whether any declaration of trust was made in respect of Victoria Street. I will then turn to the evidence of compliance with s 53(1)(b) of the Property Law Act in respect of such declaration.

The plaintiffs submitted that there is a solid body of evidence that Giuseppe and Norma had an intention to hold Victoria Street for the Trusts expressed in the 1977 Deeds. I agree with that submission. Most of the evidence relied upon to support the inference that Giuseppe and Norma declared a trust over Victoria Street in favour of the Original Beneficiaries has already been referred to. That evidence includes:

(a) Giuseppe’s statements made to Anna, Peter and Craig that Victoria Street was owned by or held for the Trusts;[41]
[41]See above paras [50]-[52].

(b) Norma’s evidence in this proceeding that Victoria Street had been purchased for the Trusts and that she had always understood it was held for the Trusts;[42]
[42]See above para [49].

(c) the statements of assets of the Trusts prepared by Craig in the 1990s (having been told by Giuseppe that Victoria Street was owned by the Trusts) recording Victoria Street as an asset of the Trusts;[43]
[43]See above para [59(c)].

(d) the typed, unsigned ‘Declaration of Trust’ which, inferentially, Giuseppe and Norma must have instructed R.T. Grills to prepare, by which they were to declare that they held Victoria Street on trust for ING;[44]

(e) the financial accounts and taxation returns of the Trusts prepared since mid-1996 through to the present time which consistently list Victoria Street (along with the Other Properties purchased by and registered in the name of ING) as an asset of the Trusts with the property and expenses thereof treated consistently with the terms of the 1997 Deeds;[45] and

(f) the 1989 lease of Victoria Street which bore the company seal of ING alongside the signatures of Giuseppe and Norma as lessors.[46]

[44]See above para [59(a)].

[45]See above paras [57] and [58].

[46]See above para [52(d)].

Further, the SRO has been treating Victoria Street as an asset of ING as trustee, although there appears to be an error as Victoria Street has been treated by the SRO as being held for only one of the Trusts.

From this body of evidence I am well satisfied that Giuseppe and Norma intended that Victoria Street be held by them on trust pursuant to the 1977 Deeds and Giuseppe and Norma are to be taken as having declared such a trust.

A further issue to be addressed is what the plaintiffs described as the ‘structure’ of the Trust so declared. The first alternative they put forward was that Giuseppe and Norma held Victoria Street on a bare trust for ING which, in turn, held the equitable interest on trust for the Original Beneficiaries. That is to say, there were two trusts. The other was that Giuseppe and Norma held Victoria Street as nominee or custodian for ING (as trustee of the Trusts) without holding the property on any separate sub-trust.[47] That is to say, there was only one continuous trust. In my view, the former alternative is the appropriate analysis on the facts of this case as there is insufficient evidence to support the custodian analysis.
[47]That is, the structure adopted by the majority in Commissioner of State Revenue v Lend Lease Funds Management Pty Ltd (2011) 33 VR 204, 239 [147] in the particular circumstances of that case.

The second and perhaps more critical question is whether there is evidence of compliance with the formalities of s 53(1)(b) of the Property Law Act. Again, in my view, those formalities have been met by the following documents either alone or in combination:

(a) the affidavit of Norma sworn in 2019, when she was the sole registered proprietor of Victoria Street and a director of ING, whereby she deposed that it was her and Giuseppe’s intention to purchase Victoria Street for the Trusts, that they intended the property to be held for the Trusts and that she understood it was held for the Trusts. This is a document signed by her as a person who (in 1977 and 1978) was able to declare the trust over the property and who at all material times had knowledge of the terms of the 1977 Deeds to which she must be taken to be referring when she refers to ‘the trusts’;[48]
[48]Norma Affidavit [7]-[11], [18].

(b) the 30 June 1999 income tax return for the Anna McGowan Trust, which was signed by Norma, attaching an income distribution resolution, also signed by her, together with the combined financial statements for the two Trusts. Those statements disclose Victoria Street as a trust property, and the capital accounts in the financial statements show 50% of the total trust profit going to each of the Trusts consistent with the trust terms;[49]

(c) the November 1989 lease of Victoria Street signed by both Giuseppe and Norma which has the company seal of ING impressed upon it;[50] and

(d) the 1977 Deeds signed by Norma and Giuseppe and the 1991 Deeds signed by Norma (which refer to the 1977 Deeds) which record the terms of the Trusts.[51]

[49]Norma Affidavit [21] referring to exhibit GS-1 to the First Saija Affidavit.

[50]Norma Affidavit [17] referring to exhibit DB-1 to the First Black Affidavit.

[51]Norma Affidavit [7] and [8], [19] and [20], referring to exhibit DB-1 to the First Black Affidavit.

From all of these documents taken together, against the background of the extrinsic evidence referred to in these reasons, I am satisfied that there is sufficient writing signed by Norma, being a person who was able to declare the trust, which manifests and proves a declaration of trust over Victoria Street in favour of ING in its capacity as trustee of the Trusts and which sufficiently identify the trust terms.

I would add one comment about relying upon the affidavit of Norma for these purposes. In Draper v Official Trustee in Bankruptcy, Besanko J held that it is –

… well-established that an affidavit executed after, and even well after, the alleged declaration or agreement may be sufficient to satisfy the requirements of [the NSW equivalent of s 53(1)(b) of the Property Law Act]. It would seem that this principle applies even though, because of the supervening bankruptcy of the alleged trustee, the affidavit is sworn by the alleged trustee at a time when he appears to have an interest in a finding that there is a trust or, at least, is supporting a finding to that effect, although on the rehearing the respondent will not be precluded from submitting that because of the words used in [the equivalent of s 53(1)(b)] the writing is only effective if signed by the person able to declare the trust at a time when he or she was able to declare the trust.[52]

[52]Draper v Official Trustee in Bankruptcy (2006) 156 FCR 53, 89-90 [159] (citations omitted).

In any given case, the forensic value to be placed on a statement made in a document long after the date the declaration was supposedly made may vary according to the particular circumstances. This may be especially so if the statement is made in a court document for proceedings brought to establish the trust. Factors which may affect the weight to be given to the statement may include the extent to which the declaration is contentious or supported by or in conflict with other extrinsic evidence, and the perceived interest the supposed trustee has in supporting the existence of the claimed trust. But the short point seems to be that in principle an affidavit made well after the relevant event and for proceedings concerning the very existence of the trust in question is capable of constituting ‘writing’ for the purpose of s 53(1)(b) of the Property Law Act. In this particular case, I see no reason not to accord Norma’s statement in her 2019 affidavit persuasive weight.

Were I not satisfied that an enforceable declaration of trust had been made, the plaintiffs submitted that I should find that Giuseppe and Norma and, after Giuseppe’s death, Norma alone held Victoria Street on a constructive trust for the Original Beneficiaries and upon the same terms. Having reached a decision favourable to the plaintiffs on their primary argument, it is unnecessary for me to consider the alternative. I merely record that I find the alternative argument based on there being a constructive trust less attractive.

I answer question (c) as follows:

(i) From about September 1978, Victoria Street was held by Giuseppe and Norma (and after Giuseppe’s death in 1989, by Norma alone) on sub-trusts for the benefit of the Trusts established by the 1977 Deeds and upon the terms set out in those deeds.

(ii) Yes, on sub-trusts for the benefit of the Trusts.

(iii) Not necessary to answer.

What is the effect of there being no declarations of trust by ING?

For convenience, I repeat the questions applicable to this problem:

(g)Are the following properties […] currently held in equal shares for each of the [Trusts], or alternatively, for the New Trusts:
(i)The property situated at 4-6 Breakwater Road, Belmont, Victoria, being the property described in Volume 8875 Folio 001 and Volume 8875 Folio 002;
(ii)The property situated at 110-112 Bailey Street, Grovedale, Victoria, being the property described in Volume 9411 Folio 906 and Volume 9411 Folio 907;
(iii)The property situated at 765 Portarlington Road, Leopold, Victoria, being the property described in Volume 9630 Folio 881;
(iv)The properties situated at Units 1 and 2, 23 Larnook Street, East Prahran, Victoria, being the property described in Volume 9587 Folio 228;

(h)In answering item (g) above:
(i)Are the Other Properties held on those express trusts and were the requirements of section 53 of the Property Law Act 1958 (Vic) met?
(ii)Alternatively, are the Other Properties held in equal shares on constructive trusts for the benefit of each of the [Trusts], or alternatively, the New Trusts?

Even those properties which were purchased in the name of ING are not the subject of any express declaration of trust in favour of the Trustee. Again, the income from those properties has been distributed according to the Trusts resulting in favourable income taxation treatment in that the income tax liability has been spread amongst several taxpayers. In these cases the application of s 53 of the Property Law Act arises again, namely, the absence of any writing to transfer the beneficial interest in the land to the Trusts.

The plaintiffs submit that I should also find that ING declared trusts in respect of each of the Other Properties in favour of the Trusts on the terms of the 1977 Deeds and that they are currently held either subject to the Trusts or to what are referred to as the ‘New Trusts’, namely the trusts arguably established by the 1991 Deeds. They also submit that the formalities of s 53(1)(b) of the Property Law Act have been complied with in relation to those declarations.

Insofar as the questions in relation to this problem ask me to differentiate between the property being held for each of the Trusts or each of the New Trusts, that refinement will await my analysis and conclusion in relation to the fourth and fifth problems. Otherwise, I agree with the plaintiffs’ submissions. I only need to state my reasons briefly because, in substance, they are based on much the same evidence and reasoning as that which was relied upon in answering the questions concerning Victoria Street.

I am satisfied that, upon being registered as proprietor of each of the Other Properties, ING declared the trusts as submitted. I make that finding from the combination of the following facts and circumstances:

(a) the establishment of the Trusts with the apparent intention that ING should be the Trustee;

(b) the subsequent incorporation of ING;

(c) the purchase by ING of the Other Properties;

(d) the statements made by Giuseppe (either as sole director or as a co-director of ING) to Anna, Peter and Craig that the Properties were owned by or held for the Trusts;

(e) Norma’s evidence in her affidavit (given in her capacity as a director of ING) that each of the Other Properties (except the Larnook Street Units about which she had no relevant recollection) was purchased for the Trusts; and

(f) the statements of assets and the financial and accounting records of ING (previously referred to) which reveal that the Other Properties were treated as the property of the Trusts with the income derived from them being treated consistently with the terms of the Trusts.

Additionally, I am satisfied that there is writing signed by ING which manifests and proves those declarations of trust. In conjunction with the 1977 Deeds and the 1991 Deeds which record the terms of the Trusts, both signed by ING (or the putative officers of ING), the income tax returns of the Trusts from 1999 onwards, signed by ING by its officers, which record the Other Properties as property of the Trusts and the income to have been distributed consistently with the terms of the Trusts, are, alone, sufficient writing to comply with s 53(1)(b) of the Property Law Act. In addition, there is also Norma’s affidavit to which I have already referred.

Subject to my answer to the questions concerning the consequence of the vesting of the trust property in 1988 and 1991 and the purported amendments of the Trusts in accordance with the 1991 Deeds, I answer questions (g)(i)-(iv) and (h)(i) affirmatively and find it unnecessary to answer question (h)(ii).

I now turn to the two remaining ‘problems’.

What is the effect of the trust assets vesting in 1988 and 1991?

For convenience, I repeat the questions applicable to this (and the fifth) problem:

(d)Was the legal effect of the two deeds both dated 23 June 1991 […] to validly amend the 1977 Deeds and continue the Peter Valentini Trust and the Anna McGowan Trust on the [Trusts] or was the effect of those 1991 Deeds and/or the subsequent conduct of [ING] to create new trusts over the trust property of the [Trusts] (New Trusts)?
(e)If the 1991 Deeds did create New Trusts, or there were New Trusts otherwise created, were those New Trusts to be administered under the terms set out in the 1977 Deed as modified by the 1991 Deeds?

These questions raise the issue of what became of the Trusts as a consequence of two related events: first, the vesting of the trust property in Anna and Peter absolutely upon them reaching 30 years of age in 1988 and 1991 respectively and, secondly, the amendment of the 1977 Deeds pursuant to a purported exercise of the powers of amendment in those deeds after the vesting of the trust property.

The amendment power set out in the 1977 Deeds was relied upon to create the 1991 Deeds and, thereafter, ING dealt with the property that had been the trust property under the 1977 Deeds as if its ability to do so was governed by the (more permissive) terms of the 1991 Deeds.[53] Those terms, for example, permitted distribution of income to a much wider class of beneficiaries than did the terms of the 1977 Deeds. The 1991 Deeds were made in each case with the signed consent of ING, the Settlor and the relevant Original Beneficiary.
[53]Evidence in the Second Craig McGowan Affidavit [51]–[56], disclosed some anomalous payments that had been made to Norma and Bruce Fletcher, believed to have been either made or recorded by mistake, but these were not sufficient to detract from the general proposition that distributions made by the Trustee since the 1991 Deeds were consistent with the Trusts having been amended by those deeds.

Several issues arise from these events, namely:

(a) following the vesting of the trust property in Anna and Peter absolutely, did the Trustee have the power to amend the 1977 Deeds at all or beyond a limited extent;

For that reason, I find that the very broad provisions of the power of amendment in the 1977 Deeds ― to amend ‘at any time or times […] in any way all or any of the trusts provisions or conditions’ ― should be construed as permitting a variation to the class of beneficiaries and the vesting date, even after vesting, provided such amendment is exercised for the benefit and with the consent of the Original Beneficiaries. Where the Original Beneficiaries themselves consent to such an amendment, the exercise of the power in that way is taken to be in their interests and authorised by the deed. Such an amendment is not in breach of trust. Rather than analysing Anna’s and Peter’s actions as condoning a breach of trust, I think the better view is that:

(a) the full power of amendment survived the vesting of the trust assets; and

(b) with the consent of the entitled Original Beneficiaries (who were of full age and capacity), the Trustee retained the power to amend the 1977 Deeds to vary the class of beneficiaries and extend the vesting date after the vesting of the trust assets.

What is the effect of the Trusts being amended by the 1991 Deeds?

Having reached the conclusion that the Trustee retained the power, generally, to amend the 1977 Deeds despite vesting, it remains to be considered whether the amendments actually made by the Trustee in the form of the 1991 Deeds resulted in the continuation of the Trusts or created new trusts altogether.

It is useful to commence with a comparison of the provisions of the two sets of deeds. In summary, in 12 clauses the 1977 Deeds provided as follows:

·clause 1 declared that the trustee should hold the settled property on the trusts set out in the deed;
·clause 2 defined the trusts for the Original Beneficiary of the capital and income of the trust fund until they each attained the age of 30 years, with trusts in favour of their children (should they die) or their siblings (should there be no children);
·clause 3 declared trusts in favour of persons nominated by Giuseppe, either by deed in his lifetime or by his will, in the event that the preceding trusts should fail;
·clause 4 set out the trustee’s powers of investment, purchase and acquisition, lending, and means of protecting the trust assets;
·clause 5 set out additional trustee powers to borrow or raise money, sell assets, spend money, engage in the conduct of a business and participate in a corporation, take or give interest over property and engage in other commercial activities;
·clause 6 set out the power to appoint new additional trustees;
·clause 7 set out the power to remove trustees;
·clause 8 set out the trustee’s power of amendment;
·clause 9 empowered the trustee to become a director or employee of a company in which the trustee holds investments;
·clause 10 saved the trustee from liability for loss other than by dishonesty or wilful commission or omission in breach of trust;
·clause 11 entitled a trustee, if it is a solicitor or accountant, to be paid professional costs and fees from the Trust Fund; and
·clause 12 required that the Trust be referred to as the ‘Anna McGowan Trust’ or ‘Peter Valentini Trust’ (as the case may be).

In 17 clauses and three schedules, the 1991 Deeds provided as follows:

·recitals which referred to the 1977 Deeds, the power pursuant to clause 8 thereof to amend the deed and the Trustee’s intention to ‘alter, vary, rescind and add to the provisions and conditions [of that deed]’ and to continue the Trust on the terms in the new deed with the sanction and assent of the Settlor and Original Beneficiary;
·agreement between the Settlor, Trustee and the relevant Original Beneficiary to cancel the clauses in the 1977 Deeds and replace them with the clauses in the 1991 Deeds (as summarised below);
·clause 1 defines ‘the Beneficiaries’ to mean the ‘Appointor’ (ie, Anna or Peter as the case may be), the Appointor’s spouse and children and the children of the Appointor’s spouse, the children of the children of the Appointor or of the children of her/his spouse, any issue of Giuseppe, a spouse of the issue of Giuseppe or the children of any issue of Giuseppe, a charitable institution, a corporation in which any beneficiary owns more than 50% of the shares, and a trustee of any trust which the trustee nominates as a beneficiary;
·clause 1 also defines the ‘day of distribution’ (ie, vesting date) by reference to the death of the last survivor of a specified monarch;[67]
[67]This new provision does not appear to give rise to any risk of offending against the law of perpetuities judged either at the date of the 1977 Deeds or the 1991 Deeds.
·clause 2 defines the trusts upon which the trustee shall hold the trust fund providing wide powers to pay the income thereof to any beneficiary, parent or guardian of a beneficiary with additional powers to invest or accumulate income;
·clause 3 declares that the provisions of s 37 of the Trustee Act1958 (Vic) should not apply to the trust fund;
·clause 4 requires that on the day of distribution the trustee should distribute the trust fund to beneficiaries in such proportions as the trustee thinks fit;
·clause 5 directs the application of any part of the trust fund or income thereof in respect of which no trust has been declared;
·clause 6 gives additional powers to the trustee deal with the trust fund for the benefit of any infant beneficiary;
·clause 7 sets out other powers and discretions of a broad ranging nature which the trustee may exercise alone or jointly with other persons;
·clause 8 saves the trustee from liability other than from wilful dishonesty;
·clause 9 empowers of the trustee to obtain a valuation of the property comprised in the trust fund which binds interested persons;
·clause 10 limits the trustee’s liability in respect of stock or shares invested in any proprietary or private company;
·clause 11 gives the Appointor the power to remove and appoint trustees;
·clause 12 permits the trustee to exercise powers and discretions notwithstanding a direct or personal interest in the mode of exercising such powers;
·clause 13 entitles any corporate trustee to retain a commission not exceeding 5% of the income of the trust fund;
·clause 14 empowers a beneficiary by written notice to exclude him or herself from being a beneficiary;
·clause 15 empowers the trustee to revoke, add to or vary all or any of the trusts on which the trust fund is held including a variation that relates to the management or control of the trust fund or the trustee’s powers and discretions, subject to certain limitations including that any variation should not be in favour or for the benefit of the Settlor or Trustee or effect any entitlement set aside for any beneficiary prior to the variation, and then only with the consent of the Appointor;
·clause 16 indemnifies the trustee out of the assets of the trust fund for liabilities incurred in the execution of the trusts or as a consequence of the failure to execute the trusts;
·clause 17 is a provision in relation to licences held under the Liquor Control Act 1987 (Vic); and
·the third schedule prescribes the name of the trust, that is ‘the Anna McGowan Family Discretionary Trust’ or the ‘Peter Valentini Family Discretionary Trust’ as the case may be.

From this summary of provisions, it can be seen that the variations effected by the 1991 Deeds included:

(a) the enlargement of the class of beneficiaries from Anna and Peter alone (and in the event of their deaths, their children and siblings) to themselves plus a wider range of their relatives together with corporations or trusts associated with that class;

(b) an associated extension of the discretion of the Trustee to distribute the Trust Fund among the members of that enlarged class of beneficiaries;

(c) a change to the vesting date; and

(d) variations to the administrative powers of the Trustee including to the power of amendment itself.

The learned authors of Lewin on Trusts[68] summarised the scope of the power of amendment of trust deeds in the following way:
[68]Lynton Tucker, Nicholas Le Poidevin and James Brightwell, Lewin on Trusts (Thomson Reuters, 20^th ed, 2020).

Scope of power of amendment
A power of amendment must, like other limited powers, be used only for the purpose for which it was given. Points arising are as follows:
(1)In general, the purpose will be promoting the best interests of the beneficiaries (or some one or more of them) but that depends on the nature and purpose of the trust. The correct formulation has been held to be that the power must be used to promote the purpose for which the trust was created.
(2)It may be expressly confined in some way; for example, it may be restricted to amendments which do not materially prejudice the interests of the beneficiaries and a power to change the proper law of a settlement is often accompanied by a power to make such amendments (and only such amendments) as are necessary or desirable to cause it to comply with the new proper law.
(3)Otherwise, the use of a power of amendment must be confined to such amendments as can reasonably be considered to have been within the contemplation of the parties when the trust instrument was made, having regard to its nature and circumstances. Another way of expressing the point is that an amendment must not change the whole substratum of the trust or its basic purpose. The substratum or basic purpose may, however, undergo a gradual change and the validity of an amendment is to be judged, it seems, by reference to matters as they stood immediately before the amendment and not as they stood at the creation of the trust.[69]

[69]Ibid 33-079 (citations omitted). Similar principles are to be found in Geraint Thomas, Thomas on Powers (Oxford University Press, 2^nd ed, 2012) [16.25].

First, purely as a matter of construction of the very wide power of amendment contained in the 1977 Deeds, I see no reason to find that any of the amendments and variations contained in the 1991 Deeds go beyond the scope of the amendment power.

Secondly, certain authorities suggest that a power of amendment cannot be used to amend the amendment power itself.[70] The plaintiffs argue that even these authorities do not suggest that it is necessarily always the case that an amendment power cannot be used to amend the power itself. The plaintiffs further argue that the power of amendment in the 1977 Deeds is extremely broad and that it should be construed by reference to its natural meaning so as to permit amendment of the power itself. I accept these arguments. In any event, the scope of the ‘new’ power of amendment in clause 15 of the 1991 Deeds[71] is not relevant for the purposes of determining whether the critical changes to the structure of the Trusts effected by the 1991 Deeds fall within the amendment power in clause 8 of the 1977 Deeds. Moreover, to the extent it is relevant to consider the variation to the amendment power itself, on my reading of the amended power it is more rather than less restricted than the original power. Ultimately, if clause 15 of the 1991 Deeds falls outside of the scope of the Trustee’s amendment power under the 1977 Deeds that ought not result in the whole amending deed being struck down: at most, it may simply mean that the original power of amendment is retained.
[70]University of Adelaide v Attorney-General (SA) [2018] SASC 82, [17]; Jenkins v Ellett [2007] QSC 154, [15].
[71]See above para [119].

Another concern is whether the effect of the purported amendment destroys the ‘substratum’ of the Trusts.[72] In Re Ball’s Settlement Trusts, Megarry J held:–

If an arrangement changes the whole substratum of the trust, then it may well be that it cannot be regarded merely as varying that trust. But if an arrangement, while leaving the substratum, effectuates the purpose of the original trust by other means, it may still be possible to regard that arrangement as merely varying the original trust, even though the means employed are wholly different and even though the form is completely changed.[73]

[72]Kearns v Hill (1990) 21 NSWLR 107; Anloma Pty Ltd (ACN 001 327 448) as Trustee for the Sourry Family Trust [2018] NSWSC 1818, [50]; Lewis v Condon; Condon v Lewis [2013] NSWCA 204, [89].

[73]Re Ball’s Settlement Trusts [1968] 1 WLR 899, [905].

The authors of Lewin on Trusts equate this question with whether changes to the trust can reasonably be considered to have been within the contemplation of the parties when the trust instrument was made, having regard to its nature and circumstances.[74]
[74]See above para [121].

In Kearns v Hill,[75] Meagher JA considered the principle that, when determining the ambit of a variation clause, it is legitimate to consider its scope and evident purpose. His Honour observed, ‘but that consideration is not much use when the evident purpose of the power is to ensure maximum flexibility.’[76] Similarly, with reference to the proposition that the variation power would not extend to permit the destruction of the substratum, his Honour observed that it may be impossible to locate any substratum or that such substratum may be no more than to benefit the descendants of a named person.[77]
[75](1990) 21 NSWLR 107.
[76]Ibid 110.
[77]Ibid 111.

In my view, these various observations are apposite in the present case. The amendment power in clause 8 of the 1977 Deeds appears to have no other purpose than to ensure maximum flexibility for the Trustee in varying the Trusts and the deed provisions. Insofar as there is any discernible substratum in the Trusts, it was to benefit Anna and Peter, their children and siblings or, upon the failure of those Trusts, any other persons nominated by deed poll or will by their father. If more needs to be said, the purpose of the Trusts was, inferentially, a tax effective mechanism for spreading the income of the Valentini family enterprise in an advantageous way to the family as a whole.

Compared to those expressed in the 1977 Deeds, the Trusts expressed in the 1991 Deeds are of the same nature, benefit the same family (albeit a wider class) and appear to be directed to the same purpose. Although the 1991 Deeds broaden the discretionary nature of the Trusts and expand the class of potential beneficiaries to, in the main, a broader range of relatives and their controlled entities, nonetheless the Trusts had some discretionary elements and existed to benefit Anna and Peter and their relatives. I therefore accept the plaintiffs’ argument that the substratum of the Trusts has not been destroyed by the amendment. Put another way, having regard to the nature of the Trusts and the circumstances in which they were made, the changes effected by the 1991 Deeds may reasonably be considered to be within the contemplation of the parties to the 1977 Deeds at the time they were made. Further, the 1991 amendment fell within the scope of the amendment power in the 1977 Deeds having regard to its evident purpose of affording maximum flexibility to the Trustee to amend the deeds in the interests of the Original Beneficiaries.

Finally, and relatedly, it is necessary to differentiate between a purported amendment which results in the continuation of the original trusts, on the one hand, and an amendment which in fact creates new trusts, on the other. The plaintiffs relied upon a number of taxation cases to submit that for a new trust to not be created by amendments to a trust there needed to be continuity of: the trust property, the beneficiaries and the constitution of the trust.[78] Essentially, one must look at whether the trust continues in existence. Where the trust deed contains a power of amendment and that power is validly exercised then, so long as there is sufficient degree of continuity of the elements mentioned, the amended trust will not result in a new trust.
[78]FCT v Commercial Nominees of Australia Ltd (1999) 43 ATR 42; see in particular [55]–[57]; Commissioner of Taxation v Clark (2011) 79 ATR 550, [34], [36].

The plaintiffs submitted in this case that the amendments in the 1991 Deeds were validly made pursuant to a power of amendment, there was continuity of trust assets and of some beneficiaries and the 1991 Deeds made reference to and sought to continue the Trusts so that there was some continuity in their constitution. As a result, the plaintiffs submitted, there was no resettlement of the trust assets upon new trusts but, instead, the Trusts continued as amended.

In my opinion the plaintiffs’ submissions ought to be accepted. I have already found that, despite the vesting of trust assets, the power of amendment under the 1977 Deeds remained available for the Trustee to exercise and did not become void or stand cancelled. The power of amendment was broad and, on its proper construction, permitted the variations (including to the class of beneficiaries) contained in the 1991 Deeds. The amendment was made in conformity with and promoted the purposes of the Trusts. The substratum of the Trusts was not destroyed but, rather, the 1991 Deeds expanded upon and varied elements which already existed in the Trusts. And, finally, there is sufficient continuity in the trust assets, beneficiaries and constitution of the trusts such that the trusts under the 1991 Deeds should properly be seen as the continuation of the Trusts.

I am fortified in this conclusion by the approach taken in England to the statutory extension of the consent principle in Saunders v Vautier, embodied in the Variation of Trusts Act 1958 (England and Wales). Under that Act, the Court may supply consent on behalf of an absolutely entitled beneficiary who is not of full age and capacity to a variation to the trust where it is advantageous to the beneficiary to make such a variation.

In Goulding v James, Mummery LJ (for the Court of Appeal) explained the statutory jurisdiction by reference to decisions of Megarry J in earlier cases, holding:

The effect of Megarry J’s observations in those decisions is this. First, what varies the trust is not the court, but the agreement or consensus of the beneficiaries. Secondly, there is no real difference in principle in the rearrangement of the trusts between the case where the court is exercising its jurisdiction on behalf of the specified class under the 1958 Act and the case where the resettlement is made by virtue of the doctrine in Saunders v Vautier by all the adult beneficiaries joining together. Thirdly, the court is merely contributing on behalf of infants and unborn and unascertained persons the binding assents to the arrangement which they, unlike an adult beneficiary, cannot give. The 1958 Act has thus been viewed by the courts as a statutory extension of the consent principle embodied in the rule in Saunders v Vautier. The principle recognises the rights of beneficiaries, who are sui juris and together absolutely entitled to the trust property, to exercise their proprietary rights to overbear and defeat the intention of a testator or settlor, to subject property to the continuing trusts, powers and limitations of a will or trust instrument.[79]

[79]Goulding v James [1996] EWCA Civ 1156; [1997] 2 All ER 239, 247.

Sometimes the question has arisen whether in supplying that consent on behalf of the beneficiary, the resulting variation is a resettlement of trust property on new trusts or a continuation of the old. In one of the previous decisions to which Mummery LJ referred, Re Holt’s Settlement,[80] Megarry J had to deal with an argument that an arrangement that carried out its purpose of varying a trust by revoking all existing trusts and establishing a new set of trusts was not ‘merely’ revoking or varying trusts (which the statute authorised) but, instead, was producing the effect equivalent to a process of settlement and resettlement (which the statute did not authorise). In rejecting that argument, his Honour said –

Here the new trusts are in many respects similar to the old. In my judgement, the old trusts may fairly be said to have been varied by the arrangement whether the variation is effected directly, by leaving some of the old words standing and altering others, or indirectly, by revoking all the old words and then setting up new trusts partly, though not wholly, in the likeness to the old. One must not confuse machinery with substance; and it is the substance that matters. Comparing the position before and after the arrangement takes effect, I am satisfied that the result is a variation of the old trusts, even though effected by the machinery of revocation and resettlement.[81]

[80]Re Holt’s Settlement [1969] 1 Ch 100.

[81]Ibid at 117 (emphasis added).

Similarly, in Wyndham v Egremont,[82] Blackburne J considered an argument whether the extension of a vesting date and other variations of trust, to which the court had supplied a beneficiaries’ consent under the Variation of Trusts Act 1958 (England and Wales), amounted to a variation of the trust or an impermissible resettlement of the trust. His Honour observed that there was no bright line for determining whether it was one or another. He referred to what Megarry J had said in Re Ball’s Settlement Trusts extracted earlier in these reasons ([124]) and questioned how one was to properly discern the elements of the ‘substratum’ or ‘purpose’ of the original trust. In seeking to answer that question, his Honour, essentially, turned to the same criteria already identified in the decisions discussed above, namely an analysis of the extent of continuity of trust property, the trustee and the trusts themselves (i.e., the ‘constitution’).[83] Helpfully, his Honour quoted Lord Wilberforce’s remarks in Roome v Edwards, including this statement recommending a practical common-sense approach:

Since “settlement” and “trusts” are legal terms, which are also used by business men or laymen in a business or practical sense, I think that the question whether a particular set of facts amounts to a settlement should be approached by asking what a person, with knowledge of the legal context of the word under established doctrine and applying this knowledge in a practical and common-sense manner to the facts under examination, would conclude.[84]

[82][2009] EWHC 2076 (Ch).

[83]Ibid [22]–[24].

[84]Roome v Edwards [1982] AC 279, 292-3.

Turning to an Australian authority, in Re Dion Investments Pty Ltd,[85] Barrett JA (Beazley P and Gleeson JJA agreeing), contrasted the position whereby a variation was made pursuant to a variation power in a deed and one which was made upon the consent of all absolutely entitled beneficiaries of full age and capacity, saying –

Where the trust instrument contains a provision allowing variation by a particular process, the situation is one in which the settlor, in declaring the trust and defining its terms, has specified that those terms are not immutable and that the original terms will be superseded by varied terms if the specified process of variation (entailing, in concept, a power of appointment or a power of revocation or both) is undertaken. The varied terms are in that way traceable to the settlor’s intention as communicated to the original trustee.
Where the trust instrument contains no such variation provision, principles of equity may countenance variation of the terms of the trust with the unanimous consent of the beneficiaries if all are in being, sui juris and absolutely entitled. Under the principle in Saunders v Vautier (1841) 4 Beav 115; 49 ER 282 (affd (1841) Cr & Ph 240; 41 ER 482), beneficiaries in that position are entitled to put an end to the trust and to require that the trust property be transferred to them. Their capacity to produce that result also enables them to require, as an alternative, that the property be held by the trustee upon varied trusts; but, if they do so require, the situation may in truth be one of resettlement upon new trusts rather than variation of the pre-existing trusts (and the trustee may not be compellable to accept and perform those new trusts […].[86]

[85]Re Dion Investments Pty Ltd (2014) 87 NSWLR 753.

[86]Ibid [45]–[46].

The emphasised words in that passage take one back to the question, dealt with in the English cases to which I have referred, as to whether, in substance, the position after the variation has taken place is a continuation of the former trust or a new one. However, the passage also highlights a distinction that is important for this case. Here, the variations effected by the 1991 Deeds were not made only because absolutely entitled beneficiaries compelled the Trustee to act in accordance with their wishes to ‘overbear and defeat’ the Settlor’s intention. Rather, the Trustee acted (with the Original Beneficiaries’ assent) pursuant to a specified power of amendment so that the varied terms are traceable to the Settlor’s intention as expressed in the 1977 Deeds.

The application of these principles reinforce the conclusion I have reached. The 1991 Deeds were made consistently with the intention of the Settlor of the 1977 Deeds. Viewed as a matter of substance and in a practical and common-sense manner, their terms should be construed as continuing the original trusts rather than terminating them and creating new ones.

In light of these conclusions, and those reached in the context of the previous problem, I answer question (d) as follows: The legal effect of the 1991 Deeds was to validly amend the 1977 Deeds and to continue the Peter Valentini Trust and the Anna McGowan Trust as the same trusts. In view of that answer, it is unnecessary to answer question (e).

These same conclusions also enable me to complete those aspects of questions (f), (g) and (h) on which I had reserved my answer pending my consideration of whether or not new trusts had been created by the amendment. In each case I answer the question on the basis that the relevant properties were held for the benefit of the Trusts.

What are the names of the Trusts?

The final questions to be answered are:

(i) Is the name of one of the current trusts the Peter Valentini Trust, or the Peter Valentini Family Discretionary Trust?
(j)Is the name of the other current trust the Anna McGowan Trust, or the Anna McGowan Family Discretionary Trust?

Having regard to the principles referred to in these reasons, the findings I have made in relation to the scope of the power of amendment under the 1977 Deeds and the evident purpose of the making of those deeds, I have no hesitation in answering questions (i) and (j) as follows: the names of the Trusts following the amendment effected by the Third Schedule to the 1991 Deeds are now, respectively, the ‘Peter Valentini Family Discretionary Trust’ ‘Anna McGowan Family Discretionary Trust’.

Conclusion

Drawing together the conclusions I have reached in the paragraphs above, I answer each of the questions as follows:

Question Answer

(a)      Were the Peter Valentini Trust and Anna McGowan Trust validly constituted under two deeds both dated 14 February 1977 […] although [ING]’s then directors executed those deeds on its behalf [and] even though [ING] was not incorporated until on or about 25 September 1978? Yes – the better view being that Giuseppe and Norma became the trustees of the Trusts until 25 September 1978, however, in any event, upon its incorporation on that date ING became trustee of the Trusts.

(b)      Alternatively to (a), were two trusts created by conduct or otherwise after the incorporation of [ING] on terms and conditions reflecting those in the 1977 Deeds? In view of the answer to question (a), it is unnecessary to answer question (b).

(c)       In respect of the property known as Lot 1 on Plan of Subdivision 115783 and situated at 122 Victoria Street, North Geelong, Victoria (also known as the Weddells Road property), being the property described in Volume 09143 Folio 495 [Victoria Street]:

(i)        Was [Victoria Street] held on trust from about 1977 or about 1978 on the terms of the 1977 Deeds, or otherwise, and held in equal shares on the Peter Valentini Trust and Anna McGowan Trust, or on sub-trusts for the benefit of those trusts, notwithstanding that the property was registered on or about 17 November 1977 in the names of [Norma] and Giuseppe Valentini, rather than in the name of [ING]?

(ii) Further, were the requirements of section 53 of the Property Law Act 1958 (Vic) met such that [Victoria Street] was held in equal shares on the Peter Valentini Trust and Anna McGowan Trust, or on sub-trusts for the benefit of those trusts?

(iii)      Alternatively, was [Victoria Street] from about 1977 or about 1978 held in equal shares on constructive trusts for the benefit of the Peter Valentini Trust and Anna McGowan Trust?

(i)       From about September 1978, Victoria Street was held by Giuseppe and Norma (and after Giuseppe’s death in 1989, by Norma alone) on sub-trusts in equal shares for the benefit of the Trusts established by the 1977 Deeds and upon the terms set out in those deeds.

(ii)      Yes, on sub-trusts in equal shares for the benefit of the Trusts.

(iii)     Not necessary to answer.

(d)      Was the legal effect of the two deeds both dated 23 June 1991 […] to validly amend the 1977 Deeds and continue the Peter Valentini Trust and the Anna McGowan Trust on the same trusts […], or was the effect of those 1991 Deeds and / or the subsequent conduct of [ING] to create new trusts over the trust property of the [Trusts] (New Trusts)? The legal effect of the 1991 Deeds was to validly amend the 1977 Deeds and to continue the Peter Valentini Trust and the Anna McGowan Trust as the same trusts.

(e)       If the 1991 Deeds did create New Trusts, or there were New Trusts otherwise created, were those New Trusts to be administered under the terms set out in the 1977 Deed as modified by the 1991 Deeds? In view of the answer to question (d), it is unnecessary to answer question (e).

(f)       Is [Victoria Street] currently held in equal shares:

(i)        For the benefit of each of the [Trusts], or alternatively, the New Trusts or in equal shares on sub-trusts for the benefit of the [Trusts], or alternatively, the New Trusts; or

(ii)       On constructive trusts for the benefit of the [Trusts], or alternatively, the New Trusts?
Victoria Street is currently held in equal shares for the benefit of each of the Trusts.

(g)      Are the following properties […] currently held in equal shares for each of the [Trusts], or alternatively, for the New Trusts:

(i)        The property situated at 4-6 Breakwater Road, Belmont, Victoria, being the property described in Volume 8875 Folio 001 and Volume 8875 Folio 002;

(ii)       The property situated at 110-112 Bailey Street, Grovedale, Victoria, being the property described in Volume 9411 Folio 906 and Volume 9411 Folio 907;

(iii)     The property situated at 765 Portarlington Road, Leopold, Victoria, being the property described in Volume 9630 Folio 881;

(iv)      The properties situated at Units 1 and 2, 23 Larnook Street, East Prahran, Victoria, being the property described in Volume 9587 Folio 228;
Each of the Other Properties is currently held in equal shares for each of the [Trusts].

(h)      In answering item (g) above:

(i) Are the Other Properties held on those express trusts and were the requirements of section 53 of the Property Law Act 1958 (Vic) met?

(ii)       Alternatively, are the Other Properties held in equal shares on constructive trusts for the benefit of each of the [Trusts], or alternatively, the New Trusts?

(i)      Yes.

(ii)     Unnecessary to answer.

(i)       Is the name of one of the current trusts the Peter Valentini Trust, or the Peter Valentini Family Discretionary Trust? Following the amendment effected by the Third Schedule to the 1991 Deeds the trust formerly named the ‘Peter Valentini Trust’ is now named the ‘Peter Valentini Family Discretionary Trust’.

(j)        Is the name of the other current trust the Anna McGowan Trust, or the Anna McGowan Family Discretionary Trust? Following the amendment effected by the Third Schedule to the 1991 Deeds the trust formerly named the ‘Anna McGowan Trust’ is now named the ‘Anna McGowan Family Discretionary Trust’.

The plaintiffs should prepare draft orders to give effect to the advice given as set out in these reasons.

Question	Answer
(a) Were the Peter Valentini Trust and Anna McGowan Trust validly constituted under two deeds both dated 14 February 1977 […] although [ING]’s then directors executed those deeds on its behalf [and] even though [ING] was not incorporated until on or about 25 September 1978?	Yes – the better view being that Giuseppe and Norma became the trustees of the Trusts until 25 September 1978, however, in any event, upon its incorporation on that date ING became trustee of the Trusts.
(b) Alternatively to (a), were two trusts created by conduct or otherwise after the incorporation of [ING] on terms and conditions reflecting those in the 1977 Deeds?	In view of the answer to question (a), it is unnecessary to answer question (b).
(c) In respect of the property known as Lot 1 on Plan of Subdivision 115783 and situated at 122 Victoria Street, North Geelong, Victoria (also known as the Weddells Road property), being the property described in Volume 09143 Folio 495 [Victoria Street]: (i) Was [Victoria Street] held on trust from about 1977 or about 1978 on the terms of the 1977 Deeds, or otherwise, and held in equal shares on the Peter Valentini Trust and Anna McGowan Trust, or on sub-trusts for the benefit of those trusts, notwithstanding that the property was registered on or about 17 November 1977 in the names of [Norma] and Giuseppe Valentini, rather than in the name of [ING]? (ii) Further, were the requirements of section 53 of the Property Law Act 1958 (Vic) met such that [Victoria Street] was held in equal shares on the Peter Valentini Trust and Anna McGowan Trust, or on sub-trusts for the benefit of those trusts? (iii) Alternatively, was [Victoria Street] from about 1977 or about 1978 held in equal shares on constructive trusts for the benefit of the Peter Valentini Trust and Anna McGowan Trust?	(i) From about September 1978, Victoria Street was held by Giuseppe and Norma (and after Giuseppe’s death in 1989, by Norma alone) on sub-trusts in equal shares for the benefit of the Trusts established by the 1977 Deeds and upon the terms set out in those deeds. (ii) Yes, on sub-trusts in equal shares for the benefit of the Trusts. (iii) Not necessary to answer.
(d) Was the legal effect of the two deeds both dated 23 June 1991 […] to validly amend the 1977 Deeds and continue the Peter Valentini Trust and the Anna McGowan Trust on the same trusts […], or was the effect of those 1991 Deeds and / or the subsequent conduct of [ING] to create new trusts over the trust property of the [Trusts] (New Trusts)?	The legal effect of the 1991 Deeds was to validly amend the 1977 Deeds and to continue the Peter Valentini Trust and the Anna McGowan Trust as the same trusts.
(e) If the 1991 Deeds did create New Trusts, or there were New Trusts otherwise created, were those New Trusts to be administered under the terms set out in the 1977 Deed as modified by the 1991 Deeds?	In view of the answer to question (d), it is unnecessary to answer question (e).
(f) Is [Victoria Street] currently held in equal shares: (i) For the benefit of each of the [Trusts], or alternatively, the New Trusts or in equal shares on sub-trusts for the benefit of the [Trusts], or alternatively, the New Trusts; or (ii) On constructive trusts for the benefit of the [Trusts], or alternatively, the New Trusts?	Victoria Street is currently held in equal shares for the benefit of each of the Trusts.
(g) Are the following properties […] currently held in equal shares for each of the [Trusts], or alternatively, for the New Trusts: (i) The property situated at 4-6 Breakwater Road, Belmont, Victoria, being the property described in Volume 8875 Folio 001 and Volume 8875 Folio 002; (ii) The property situated at 110-112 Bailey Street, Grovedale, Victoria, being the property described in Volume 9411 Folio 906 and Volume 9411 Folio 907; (iii) The property situated at 765 Portarlington Road, Leopold, Victoria, being the property described in Volume 9630 Folio 881; (iv) The properties situated at Units 1 and 2, 23 Larnook Street, East Prahran, Victoria, being the property described in Volume 9587 Folio 228;	Each of the Other Properties is currently held in equal shares for each of the [Trusts].
(h) In answering item (g) above: (i) Are the Other Properties held on those express trusts and were the requirements of section 53 of the Property Law Act 1958 (Vic) met? (ii) Alternatively, are the Other Properties held in equal shares on constructive trusts for the benefit of each of the [Trusts], or alternatively, the New Trusts?	(i) Yes. (ii) Unnecessary to answer.
(i) Is the name of one of the current trusts the Peter Valentini Trust, or the Peter Valentini Family Discretionary Trust?	Following the amendment effected by the Third Schedule to the 1991 Deeds the trust formerly named the ‘Peter Valentini Trust’ is now named the ‘Peter Valentini Family Discretionary Trust’.
(j) Is the name of the other current trust the Anna McGowan Trust, or the Anna McGowan Family Discretionary Trust?	Following the amendment effected by the Third Schedule to the 1991 Deeds the trust formerly named the ‘Anna McGowan Trust’ is now named the ‘Anna McGowan Family Discretionary Trust’.

[2021] VSC 154

31 March 2021; revised 19 November 2021