When mine is yours and yours is mine


When mine is yours and yours is mine

In Commonwealth of Taxation v Bosanac (No 7) [2021] FCAFC 158, the Full Court of the Federal Court of Australia has delivered a judgment which is sure to impact on the acquisition of property in a matrimonial relationship and potentially increase the property available to creditors in a bankrupt estate.

In this case, the Commissioner of Taxation (“COT”) sought a declaration that a taxpayer held an equitable interest in a property registered in the name of his former wife.  In a successful appeal, the Full Court considered that the evidence rebutted a presumption of advancement, and that the taxpayer and his then spouse intended, at the time of purchase, to each hold  a 50% beneficial interest in their matrimonial home.

The Facts

In 2006, Mr and Ms Bosanac contributed $250,000 from a joint loan account towards the purchase of a property for $4.5m (“Property”).  The balance of the purchase price was paid by way of a joint loan secured against the Property.  The Property was registered in Ms Bosanac’s sole name.  Mr and Ms Bosanac then jointly borrowed $4.5 million to pay the balance of the purchase price, secured against the Property.  Mr Bosanac later used the Property to secure borrowings of $3.6 million.

In April 2016 (after Mr and Ms Bosanac had separated), the COT obtained summary judgment against Mr Bosanac for approximately $9m, plus costs.  In 2019, the COT sought a declaration as to Mr Bosanac’s interest in the Property, to facilitate recovery.

The Issue

The issue on appeal was whether Mr Bosanac held an equitable interest in the Property.  In determining that issue, the Full Court posed the following question: what did Mr and Ms Bosanac intend as to the beneficial ownership of the Property at the time of purchase?

The court observed that the question of the parties’ intention was to be determined by reference to the facts, and the following presumptions of equity:

  1. The presumption of a resulting trust – this presumption arises when two parties contribute to the purchase price of a property, but legal title is recorded in the name of only one of them.  In those circumstances, equity presumes that the person holding legal title does so for both contributors (or that  no gift by one to the other was intended).
  2. The presumption of advancement – this presumption operates to prevent a resulting trust from arising because the relationship between the parties provides a reason for concluding that a gift was intended.   The presumption can be rebutted by evidence of a contrary intention.

In determining the issue of Mr and Ms Bosanac’s intention at the time the Property was acquired, the Full Court acknowledged that a matrimonial relationship is one that attracts the presumption of advancement.  However, the Full Court observed that the presumption of advancement does not preclude an examination of the actual relationship between the parties, or of other facts relevant to the parties’ intention.

While the Bosanac’s did not give evidence as to their actual intention at the time of purchase, the Full Court inferred, from the surrounding facts and circumstances, that they purchased the Property for their joint use and benefit as their matrimonial home.  Further, having regard to the substantial liability assumed by Mr Bosanac at the time of purchase, the Full Court considered that “this circumstance tends strongly against the presumption of advancement applying in this case.”

The Full Court observed:

“…the gifting by a husband to his wife of one of a number of houses, owned outright, is qualitatively quite different from borrowing to acquire and gift a house. There is significance in the fact that the transaction in this case involved a substantial borrowing by Mr Bosanac for which he would be liable in circumstances where he had no legal title to the property purchased with those borrowings…”

The Full Court considered that the subsequent use of the Property to secure Mr Bosanac’s borrowings supported the inference that,  at the time of purchase, the Bosanacs intended the Property would be available to benefit both of them, notwithstanding that it was registered only in Ms Bosanac’s name.

Accordingly, the court inferred that at the time of the purchase Mr Bosanac and Ms Bosanac intended that Mr Bosanac would have a 50% beneficial interest in the Property that was to be their matrimonial home.

Take Aways

This case highlights that the family home held in the wife (or spouse’s) name may not be as protected from creditors’ claims against the husband as was thought.

The Full Court in Bosanac has shown its willingness to draw inferences from limited evidence to rebut the presumption of advancement.

It must be borne in mind that the husband and wife did not give any evidence of their actual intentions at the time of purchase.  Perhaps that evidence could have assisted Ms Bosanac.  Even so, it appears that a considered assessment of objective facts might still be capable of giving rise to inferences that a court is prepared draw against the interests of the sole proprietor.

It may now be prudent for a married couple to document their intentions to prevent an incursion into the matrimonial property.  Conversely, bankruptcy trustees are now more likely to take a closer look at all circumstances at the time of purchase, rather than concede a presumption of advancement.