The complex and long-standing equitable doctrines of a presumption of a resulting trust and the “presumption” of advancement were recently debated before a five Justice bench of the High Court of Australia in Bosanac v Commissioner of Taxation.1
The doctrines pertaining to a resulting trust and advancement have been used in various disputes, particularly regarding real property, arising from circumstances relating to matrimonial and spousal issues, deceased estates, bankruptcy, corporate insolvency, and various other circumstances.
Background
The relevant factual background was stated as follows:
- Ms Bosanac married Mr Bosanac in 1998;
- Ms Bosanac purchased a residential property in Perth (the “Dalkeith Property”) in 2006 for $4,500,000.00;
- Ms Bosanac paid the initial deposit of $250,000.00 from an existing joint loan account in the names of Ms and Mr Bosanac;
- Ms and Mr Bosanac applied for two loans, one in the sum of $1,000,000.00 and the other in the sum of $3,500,000.00 and the balance of the purchase price was paid from those funds. Those loans were secured over other real properties owned individually by Ms Bosanac or Mr Bosanac; and
- Ms Bosanac and Mr Bosanac separated in 2012 or 2013 but continued to reside together at the Dalkeith Property until September 2015.
The primary proceedings were commenced in the Federal Court of Australia. Both Ms and Mr Bosanac were represented during this proceeding, but neither gave evidence before the primary judge. There was no suggestion that the Dalkeith Property was registered solely in Ms Bosanac’s for the purpose of avoiding creditors of Mr Bosanac. The Commissioner sought to argue that the presumption of a resulting trust arose, in that by registering the legal title of the Dalkeith Property in solely the name of Ms Bosanac, despite there being equal contributions, part of the interest in the Dalkeith Property was held beneficially for Mr Bosanac.
The primary judge in the Federal Court determined that Mr Bosanac held no beneficial interest in the Dalkeith Property. His honour held the “presumption” of advancement in relation to a matrimonial home arose in favour of Ms Bosanac, in that the intention of Mr Bosanac was to “gift” both his beneficial and legal interest in the Dalkeith Property to his then wife.
The Full Court of the Federal Court of Australia took a different view on appeal by the Commissioner. Their honours found that the “presumption” of advancement is liable to be displaced by evidence, including evidence of the nature of the particular transaction. It was found that there were facts which proved strongly against the “presumption” of advancement in favour of a trust being intended, including that Mr Bosanac assumed a substantial liability without accruing any beneficial interest, the Dalkeith Property was to be the matrimonial home for the joint use and benefit, and the funds of purchase came from joint borrowings.
The Full Court of the Federal Court of Australia declared that Ms Bosanac held a 50% interest in the Dalkeith Property on trust for Mr Bosanac. In practical terms, this would mean that the Commissioner could recover unpaid taxation liabilities of Mr Bosanac from his beneficially held interest in the Dalkeith Property.
Ms Bosanac appealed the above decision to the High Court of Australia pursuant to a grant of special leave and argued that it should have been found (as the primary judge did) that there was no basis to infer that Mr Bosanac intended to have a beneficial interest in the Dalkeith Property.
A resulting trust and advancement
In Australia, the principal of indefeasibility operates, which is a process of title to real property by registration, by which a person holds title against the world. This indefeasible title is of course subject to some exceptions, one of which being equitable rights against the person who holds such legal title. An equity can arise which is commonly known as a “resulting trust”, which is a result of a person who advances the purchase money for a property, and in this case, the Dalkeith Property. A presumption arises that the person holding legal title to the property holds a part (or in some cases all) of the property beneficially for the person who advanced the purchase monies.
The presumption of a resulting trust can be rebutted by evidence from which it can be inferred that there was no intention on the part of the person providing the purchase money to have an interest in the property. The presumption cannot prevail over the actual intention of the party paying the purchase price established by the overall evidence.
The “presumption” of advancement allows an inference as to intention to be drawn from the fact of certain relationships, one of which is a marriage (but not a de facto relationship). Historically, the “presumption” was limited to advancements from wife to husband, but through the passage of time given the realities of modern society, it has been recognised that this “presumption” applies to married spouses more generally. The “presumption” of advancement assumes that any transfer from persons, in this case to a marriage, is by way of gift. Once more, this too can be rebutted by evidence of actual intention.
There is some contention as to whether the “presumption” of advancement is in fact a presumption or is no more than a “circumstance of evidence”, which goes towards all the circumstances relevant to the presumption of a resulting trust, and thus is akin to a “counter presumption”. The High Court of Australia has continued to find that the “presumption” of advancement is one circumstance of fact in which a presumption of resulting trust does not arise and should be properly characterised as a counter presumption.
The presumption of a resulting trust, and the counter presumption of advancement in a similar set of circumstances, are used to infer facts which go to establishing evidence of the intention of parties to a transaction.
Absent any evidence of actual intention, by application of the counter presumption of advancement, the advancement of the loan monies by Mr Bosanac to Ms Bosanac could be assumed to be by way of gift, and in those circumstances, there is an inferred actual intention of Mr Bosanac that he did not intend to acquire a beneficial interest in the Dalkeith Property, therefore rebutting the presumption of the resulting trust.
Is the presumption of advancement still good law
The Commissioner sought to contend that as a result of a “purchase money resulting trust”, it was intended that Mr Bosanac held a beneficial interest in the Dalkeith Property.
Quite boldly, the Commissioner sought to contend that the High Court of Australia should conclude that the general law does not recognise the counter presumption of advancement in relation to a benefit provided by husband to a wife and asked the court to abolish the counter presumption of advancement on the basis that it has no acceptable rationale. Another submitted rationale to abolish the counter presumption is that such counter presumption is anachronistic and discriminatory.
In circumstances where the actual intention of Ms and Mr Bosanac could not be ascertained due to them not giving evidence, displacing the counter presumption of advancement was critical to the case of the Commissioner. Proof of intention of Ms and Mr Bosanac could and would need to be made from the circumstances.2
One relevant circumstance was that there was a history of Ms and Mr Bosanac holding substantial real property in their own names. The purchase of the Dalkeith Property solely in the name of Ms Bosanac was consistent with this trend. Although, this purchase was slightly different, in that joint funds from loan monies were pooled, and this raised the contention by the Commissioner for a one-half beneficial interest of Mr Bosanac in the Dalkeith Property. This fact was given significant weight by the full Federal Court. Another fact given weight by the full Federal Court was that Mr Bosanac took on a substantial liability without a corresponding benefit being received, such as the liability of the loan and using his own real property to secure the loans.
The above contentions, which were accepted by the full Federal Court to draw an inference that Mr Bosanac intended to hold a beneficial ownership in the Dalkeith Property, were rejected by the High Court of Australia. It was determined that the inference to be drawn in this case was that by facilitating the advance of the loan monies and using his property as security for them, Mr Bosanac intended to facilitate his wife’s purchase of the Dalkeith Property, which was to be held in her name. The following further facts were also given weight in the determination of intention:
- that Mr Bosanac was a sophisticated businessman who must have appreciated the significance of the Dalkeith Property being registered in his wife’s name;
- that this was not a case in which the husband and wife shared all of the matrimonial assets jointly, and was in fact a circumstance to the contrary; and
- there was considerable evidence of the use of severally owned properties as security for joint loans, and the purchase of the Dalkeith Property was not inconsistent with this.
The court also found that the weight of history was too great for a redesign of the magnitude suggested by the Commissioner, and that the presumption of a resulting trust and the counter presumption of the presumption of advancement were “landmarks” in the law.3 Many prudent persons, on pragmatic legal advice, had based their asset protection and estate planning around such landmarks existing. The court did not want to interfere with those long-standing principles, and unless and until they are together reappraised as an exercise in law reform and abolished or modified by legislation the presumption of a resulting trust and the counter presumption of advancement are here to stay.
Decision
While there were three separate reasons given by the bench of the High Court of Australia, the same conclusion was unanimously reached, in that the appeal was allowed, the decision of the full Federal Court was set aside, and in its place, it was ordered that the appeal be dismissed and the appellant (being the Commissioner) pay Ms Bosanac’s costs of the appeal.
In circumstances where the presumption of a resulting trust and the counter presumption of advancement are here to stay, their application to disputes arising from circumstances relating to matrimonial and spousal issues, deceased estates, bankruptcy, corporate insolvency, and various other circumstances will continue to prevail.
Any person, whether they are the holder of the legal title of property, or have advanced purchase monies or other consideration, should carefully consider obtaining appropriate legal advice regarding the protection, or the recovery, of their interest in such property.
Marino Law has extensive experience acting for parties advancing or opposing such presumptions. Should you require assistance, please contact one of our highly experienced litigation lawyers.
1 [2022] HCA 34.
2 Martin v Martin [1959) 110 CLR 297 at 304.
3 Charles v Marshall (1956) 95 CLR 353 at 364; Calverley v Green (1984)155 CLR 242 at 266; Nelson v Nelson (1995) 184 CLR 538 at 547 – 549.
