In Bosanac v Commissioner of Taxation [2022] HCA 34 the High Court of Australia examined the equitable presumptions of resulting trust and advancement.
A declaration of trust may be presumed where two parties contribute to the purchase price of Property, but legal title to the property is put only in the name of one of them. Equity presumes it was intended that the person holding legal title would do so for both contributors – or that the purchaser did not intend to gift their contribution to the other person.
Where it applies, the presumption of advancement operates to prevent a resulting trust from arising due to the relationship between the two parties. The benefit provided by one party to the other at the cost of the first was intended to be provided by way of “advancement”; absent evidence to the contrary, the relationship supplies a reason for why a gift was intended.
In a discussion of the presumption the Court expressed that
The presumption of advancement, understandably, is especially weak today
[2022] HCA 34 at [22]
Background
In 2006, Ms Bosanac purchased a property (”the property”) for $4,500,000 with a $250000 deposit paid out of Mr and Ms Bosanac’s joint loan account. The balance of the purchase price was paid from joint borrowings and $4,500,000 of bank loans jointly in the names of Mr and Ms Bosanac.
Federal Court
In 2015, the Commissioner of Taxation issued Mr Bosanac notices of amended assessment for the financial years ending 30 June 2006 to 30 June 2013. Mr Bosanac was liable for a substantial tax debt. To satisfy Mr Bosanac’s outstanding tax liabilities the Commissioner of Taxation sought a declaration that Ms Bosanac held 50 per cent of her interest in the Property on trust for Mr Bosanac.
This declaration was sought to satisfy Mr Bosanac’s outstanding liabilities for the amended income tax assessments, shortfall charges, administrative penalties and interest charges.
At first instance, Justice McKerracher held that a presumption of advancement arose and that it had not been rebutted by the Commissioner: [2021] FCA 249.
Federal Court of Australia – Full Court
On appeal the Full Federal Court held that as the Bosanacs
- bought the property for their joint use;
- intended the property to be their matrimonial home;
- paid the deposit from a joint loan account;
- and balance of the purchase price was borrowed jointly
the property was held on resulting trust:
[2021] FCAFC 158 at [22]“the objective facts together with the inferences properly drawn from those facts, lead to the conclusion that Mr Bosanac did not intend that his contribution to the purchase of their matrimonial home at Dalkeith be by way of gift to Ms Bosanac for her ‘advancement’. Rather, it should be inferred from the facts as found that both he and Ms Bosanac intended that Mr Bosanac would have a 50% beneficial interest in the Dalkeith Property.”
High Court of Australia
The High Court of Australia granted Ms Bosanac leave to appeal the decision of the Full Federal Court on 12 April 2022.
The Commissioner sought to take advantage of the presumption of resulting trust, where a person who advances purchase monies for property, held in the name of another person, intends to have a beneficial interest in the property: Calverley v Green [1984] HCA 81; (1984) 155 CLR 242 at 246.
The presumption of resulting trust is subject to an exception that, in the case of purchases by a husband in the name of a wife, or a parent (or in loco parentis), there is a presumption of advancement or, in other words, a presumption that the purchaser intended that the beneficial interest would pass with the legal interest: Nelson v Nelson(1995) 184 CLR 538 at 547-548.
The Commissioner contended that the presumption of advancement of a wife by her husband, which operates to preclude a resulting trust from arising, is no longer part of the law of Australia in relation to the matrimonial home following Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278 at 302-303.
The High Court distinguished Cummins:
“the objective facts in that case established that the intention of both parties was that they would hold the property jointly”
At [119]
despite the greater financial contributions to the purchase price made by Mrs Cummins. Mr Cummins was registered as a joint proprietor when the Hunters Hill property was purchased, whereas Mr Bosanac never had a legal interest in the property.
Further, in Cummins, the husband was not lodging tax returns when the transfer occurred and under s 121(1)(b) of the Bankruptcy Act 1966 transfers of property in an attempt to delay or defraud the creditors or the creditors trustee may be a voidable transaction.
Additionally Mrs Cummins was unsuccessful in establishing a resulting trust in her favour of a tenancy in common in unequal shares. Therefore, the joint tenancy established when the purchased the Hunters Hill property stood.
In Bosanac there was no question at the time of the purchase of the property that Mr Bosanac was in a solid financial position, which meant that it could not be inferred that the property was bought in the sole name of Ms Bosanac so that Mr Bosanac could avoid creditors.
The High Court considered that the primary judge’s findings support an inference on the balance of probabilities of an intention on the part of Mr Bosanac and Ms Bosanac that Ms Bosanac was to be the sole legal and beneficial owner of the property: at [71]-[77]
The Commissioner submitted that the Court abolish the presumption of advancement as having no acceptable rationale and being anomalous, anachronistic, and discriminatory. The Court refused, observing at 95
“the presumption is “too well entrenched as [a] ‘land-mark[]’ in the law of property to be simply discarded by judicial decision”
