A Question of Trust

Koprivnjak v Koprivnjak [2023] NSWCA 2

In Koprivnjak v Koprivnjak [2023] NSWCA 2, the New South Wales Court of Appeal dismissed an appeal concerning a dispute over a father's claim to the beneficial ownership of a property held by his daughter. The father, who paid the deposit and made ongoing financial contributions to the loan, failed to establish that the property was held on trust. The case involved the "presumptions" of advancement and resulting trust and follows the recent High Court case of Bosanac v Commissioner of Taxation [2022] HCA 34 [see When mine is yours and yours is mine]. Whilst the High Court in Bosanac confirmed that the presumption of advancement remained a part of Australian law, the plurality determined that the presumption was 'weak' and the proper enquiry as to beneficial interests in a property started with an assessment of the parties' intentions.

Background

In 2011, Natalie Koprivnjak purchased a rental property for $300,000. Natalie's father, John Koprivnjak, paid the deposit of $75,000. Natalie gave a mortgage to her father to secure what was described as a loan.'  The balance of the purchase price was paid by Natalie by way of loan from the NAB secured by a mortgage granted in its favour. John continued to contribute to the property by paying for renovations, repairs and maintenance. Additionally, through a company he owned, John made monthly deposits of $1,400 to Natalie's personal bank account from which she made the mortgage repayments. In 2020, the property was sold as part of a Family Court proceeding arising out of the breakdown of the marriage between John and his wife, Natalie's mother. A dispute arose between John and Natalie as to the beneficial ownership of the property. The proceeds of sale, being $475,589.13, were transferred to a controlled monies account pending determination of the dispute.

Trial at First Instance

In the original proceedings, John claimed that Natalie held:

• 25% of the property on a resulting trust for him due to his contribution to the purchase price; and
• 75% of the property on a common intention constructive trust based on a common understanding between him and Natalie by reason of his contributions to discharge the mortgage in favour of NAB and property maintenance.

Alternatively, John claimed he was entitled to repayment of $75,000. Natalie agreed that the loan was repayable with interest. Justice Peden at first instance rejected John's claim that a trust arose and found that $75,000 was advanced to Natalie as a loan. Her Honour stated that the relationship between the parties gave rise to the presumption of advancement and this placed the burden of proof on John to show a contrary intention. John relied upon text messages with his daughter '€“ as admission against interest - including the following:

[From Natalie]"You bullied your 18yr old daughter to have her name on a house and mortgage so you could avoid tax... then when you don't get your way you stop paying the intested [sic] on a house you bought in someone elses [sic] name without their full consent'€¦"

Justice Peden was, however, unpersuaded that the text messages were conclusive that Natalie held the property on trust for her father. Critical to her Honour's reasoning was the fact that much of the evidence post-dated the purchase and, so, did not assist in determining the parties' intention at the time of purchase. The only contemporaneous document tendered had described the monies advanced as a 'loan', which was contrary to the existence of a resulting trust.

Grounds of Appeal

John appealed the decision contending, amongst other grounds, that the primary Judge erred in:

• failing to recognise that the presumption of advancement had been rebutted with the consequence that Natalie held the property on resulting trust; and
• failing to accept that certain text messages between the parties demonstrated a common intention for the property to be held on trust.

Decision of the Court of Appeal

The Court of Appeal, comprised of Griffiths AJA, Leeming and Mitchelmore JJA dismissed the appeal, finding that John had failed to establish that the primary Judge made any error. The Court held that the documentary evidence relied on by John was not determinative of the relevant issue, whether looked at in isolation or in conjunction with other evidence, because they had come into existence after the purchase of the property and did not contain admissions by Natalie against her interests. Griffiths AJA (with whom Leeming and Mitchelmore JJA agreed) found:

• A rental agreement post-dated the acquisition of the property by 12 months. The mere fact that John was identified as a contact person did not in itself, or in conjunction with other matters, demonstrate that he had a beneficial interest in the property. Additionally, the rental payments were made to Natalie's bank which was consistent with her case, that there was a loan.
• A copy of the original insurance policy was not in evidence. Rather, John produced a document named 'Confirmation of Policy Document' which stated that both parties were insured in relation to the property. Similarly, to the rental agreement, the document post-dated the acquisition of the property. Additionally, it was apparent that John's name was used in the insurance policy to obtain a discount on the premium due to him having other policies with the insurer.

The Court also found that there were several ambiguities in text messages exchanged in 2016 and 2017. In most of these texts, there was uncertainty as to whether they were referring to the property the subject matter of the dispute or another property owned jointly by Natalie and her siblings. The texts also had to be considered in the context of the breakdown in the personal and family relationships (due to the separation of John and Natalie's mother). Griffith AJA did conclude however that the primary judge erred in not finding the text sent by Natalie stating that John had "bullied [his] 18yr old daughter to have her name on a house and mortgage so [he] could avoid tax" as an admission against her interests. Despite this, the Court attached limited weight to the text message as the context in which it was sent remained unclear. The Court reiterated that in determining the objective intention of the parties, the principles set out in Bosanac should be followed. The Court must first examine the objective facts and look into the parties' words or conduct at the time of the transaction (or immediately thereafter as to constitute part of the transaction) to ascertain the parties' objective intention regarding the beneficial ownership of the property. The Court opined that the determination of the parties' objective intention is to be based on documents created contemporaneously with the purchase, for example the settlement sheet, the application for first home owner's grant, stamp duty relief and loan documents. In this case, the only contemporaneous document that was available to the Court was squarely against John's claim, namely the mortgage recording a loan to Natalie. The mere fact that John made contributions to the purchase price was not enough to establish a resulting trust. The Court observed the inconsistency in him asserting a trust and his own evidence that "every father would help their children". The Appeal Court agreed with the primary Judge that no common intention constructive arose as the evidence as a whole did not indicate a common intention for the balance of the proceeds of sale to be held by Natalie for John. For these reasons, the Court rejected both claims and the appeal was dismissed.

Key Takeaways

This case will be of particular interest to bankruptcy trustees where a bankrupt has contributed to the purchase of a property held by a spouse or child, but is not named as a registered proprietor. To establish a beneficial interest in a property to which an individual has contributed financially, that individual must prove that an intention existed for the property to be held on trust at the time of purchasing the property. ' Subsequent evidence is only relevant if it is an admission against interest. A court must start with examining the objective facts '€“ such as contemporaneous documents - and enquire into the parties' words or conduct at the time of the transaction (or immediately thereafter as to constitute part of the transaction). ' The High Court in Bosanac said that the presumption of advancement in modern Australia is now weak and would only arise in the absence of any evidence of the parties' intentions.