On 12 October 2022 the High Court of Australia in Bosanac v Commissioner of Taxation [2022] HCA 34 confirmed the continued operation of the presumption of advancement as part of the general law in Australia. The decision reversed the finding of the Full Court of the Federal Court of Australia in Commonwealth of Taxation v Bosanac (No 7) [2021] FCAFC 158 that a husband held a 50% beneficial interest in a matrimonial home registered solely in his wife’s sole name. You can read our analysis of the earlier decision here.
Background
Mr and Mrs Bosanac were married at all relevant times. In 2006, Mrs Bosanac entered into a contract to purchase a property in Perth for $4.5 million (“Dalkeith Property”). The deposit and purchase price were paid from jointly borrowed funds which were secured over the Dalkeith Property and other properties registered in Mr Bosanac’s name. The Dalkeith Property was registered in Mrs Bosanac’s name.
The Commissioner of Taxation was a creditor of Mr Bosanac and sought a declaration that he held a 50% equitable interest in the Dalkeith Property. The Commissioner relied on “the presumption of resulting trust,” that a person who contributes funds towards the purchase of a property registered in the name of another intends to have a beneficial interest in that property.
Mrs Bosanac argued that the “presumption of advancement” applied to negate the Commissioner’s argument. Where it applies, the presumption of advancement operates to prevent a resulting trust from arising because the relationship between the relevant parties provides a reason against presuming a resulting trust. The presumption has historically been applied in respect of transfers from husband to wife and parent to child.
Both presumptions can be rebutted by evidence of the parties’ actual intentions.
The earlier decisions
At first instance, the trial judge dismissed the Commissioner’s application and found that the presumption of advancement arose is Mrs Bosanac’s favour.
However, the Full Court of the Federal Court of Australia considered there were facts which tended strongly against the presumption of advancement in favour of a resulting trust. In particular, the transaction involved a substantial borrowing by Mr Bosanac for which he would be liable in circumstances where he had no legal title to the Dalkeith Property. Accordingly, the Full Court granted the declaration sought.
The High Court decision
On appeal before the High Court, the Commissioner raised new arguments. In effect, the Commissioner asked the High Court to abolish the presumption of advancement in relation to a benefit provided by a husband to his wife on the basis it is “anomalous, anachronistic and discriminatory.”
Whilst the Court acknowledged that the maintenance of either presumption, especially that of advancement, has been the subject of criticism and commentary, it considered that the better course is to leave any reform of the law in this area to the legislature. However, the Court noted it should not be seen as accepting that the presumptions, when applied, will carry much weight.
In particular, Kiefel CJ and Gleeson J noted at [31] that:
“Much has changed with respect to the various ways in which spouses deal with property. When evidence of this kind is given, inferences to the contrary of the presumptions as to intention may readily be drawn…”
Their Honours went on to state that the respective strengths of the presumptions will vary from case to case depending on the evidence, and the presumption of advancement is “understandably weak” today.
Ultimately, the Court found that neither presumption operated in the circumstances. In particular:-
- Mr and Mrs Bosanac had a history of holding their real and other property in their own names. Apart from a few bank accounts, there was no substantial jointly held property.
- The Dalkeith Property was never registered in Mr Bosanac’s name. Accordingly, there was no transfer of the property from Mr Bosanac to Mrs Bosanac.
- Mr Bosanac did not advance all of the monies for the purchase of the Dalkeith Property.
- There was a history of the use of the properties held by Mr and Mrs Bosanac in their own names as security for joint loans.
- This was not the first time the parties had shared a marital home that was registered in the name of only one of them.
Having regard to the above, the Court found there was nothing to suggest an intention that any substantial property was to be held by the parties jointly. Further, the inference to be drawn was that, by being a party to the joint loans and using his own property as security, Mr Bosanac intended to facilitate the purchase of the Dalkeith Property which was to be held by his wife. Accordingly, the Court allowed the appeal and set aside the declaration made in the Commissioner’s favour.
Take Aways
While the High Court has confirmed the continued operation of the presumption of advancement as part of the general law of Australia, at least two judges of the Court (Kiefel CJ and Gleeson CJ) have referred to the presumption as “weak.” Similar statements were made by Gordon and Edelmann JJ in their joint judgment in respect of the presumption of resulting trust.
Accordingly, while the presumptions remains, it is likely they will be capable of being displaced by relatively slight evidence. Further, while the case did not involve a bankruptcy scenario, it will obviously have a bearing on how Courts will approach similar applications involving bankrupt individuals and their spouses.
