02 November 2022
#Dispute Resolution & Litigation, #Private Client Practice
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The High Court’s decision in Bosanac v Commissioner of Taxation [2022] HCA 34 re-affirmed the “presumption of advancement” – a rule of law that operates to ‘presume’, in the context of specific familial relationships, that gifts of property or contributions to the purchase price of a property are intended as gifts (or ‘advancements’).
In three separate judgments, five Justices unanimously allowed an appeal from the Full Court of the Federal Court, rejecting arguments made by the Federal Commissioner of Taxation that the presumption of advancement was anachronistic and should no longer be considered good law.
The Court’s decision provides useful guidance on when a voluntary transfer of property, or the contribution of part of the purchase price of a property, will lead to the imposition of a “resulting trust” over the property in favour of the person who made the transfer or contribution.
Perhaps the most common situation where resulting trusts and the presumption of advancement might arise is the purchase of a matrimonial home, or other property transactions between family members.
A resulting trust might have legal and accounting consequences and create obligations and rights for both trustee and beneficiary. Further, where a trust does arise, it might create a new avenue for a creditor to pursue a debt against the beneficiary of the trust.
The case concerned Mr and Ms Bosanac, a married couple (now separated), who in 2006 took out joint loans to purchase a property in Dalkeith, WA. That property was purchased in Ms Bosanac’s name only, despite their joint liability for the loans used to buy the property.
There was evidence before the trial judge that both Mr and Ms Bosanac had, before this purchase, already bought other properties in their own names and had joint and individual bank and loan accounts. Further, both were sophisticated investors, particularly Mr Bosanac, who had a large share portfolio.
Mr and Ms Bosanac lived in the property until 2016, even after the couple had separated, after which Mr Bosanac moved out.
Mr Bosanac had tax debts and the Commissioner of Taxation sought to enforce those debts by seizing a one-half interest in the Dalkeith property. The Commissioner of Taxation argued that a resulting trust existed because Mr and Ms Bosanac had, at the time of the purchase, taken joint liability for repaying the loans used to purchase the property, even though the property was only in Ms Bosanac’s name. The Commissioner also argued that the “presumption of advancement”, which would have operated to ‘presume’ that the contribution made by Mr Bosanac to the purchase of the property was a gift to his wife, should no longer be considered good law.
The trial judge found that no resulting trust existed because the evidence adduced about the transaction showed that Ms Bosanac was the intended owner of the property. However, on appeal, the Full Court of the Federal Court overturned this, finding that the evidence showed an intention on behalf of both Mr and Ms Bosanac to put on trust one-half of the property for Mr Bosanac.
The Court recognised that both the presumption of a “resulting trust”, and the “presumption of advancement” are anachronistic and are less relevant in today’s society than when they were developed in the context of the War of the Roses.
Despite this, the Court re-affirmed that both principles still apply as they are “land-marks” of the common law, and too fundamental to replace without legislative intervention.
However, all of the judges stressed that the presumption of a resulting trust in these circumstances is a “weak” presumption. It will only apply where there is no other evidence in a particular case that demonstrates the intention of the person who makes a gift or contribution at the time of the relevant transaction, or if all the evidence together is equivocal about those intentions. As Gordon and Edelman JJ put it, “a resulting trust is an ‘inference drawn in the absence of evidence’”.
Further, each of the judgments stressed that the presumption of advancement is not really a “presumption” at all, but a “circumstance” of evidence. The fact that a gift or contribution is made by someone in a particular relationship is merely a piece of evidence that will tend towards there being a clear intention that no trust was meant to arise.
Although, currently, the “presumption” of advancement applies only in cases of gifts or contributions made by a husband to a wife, or by a parent to a child, the Court expressed that it would be open to broadening out the relevant categories, to align with modern values, if an appropriate case raised that issue.
Each of the judgments stressed that, in practice, it is not the ‘presumptions’ that will determine whether a resulting trust exists, but the facts of each particular case and the evidence provided by the parties.
In the above case, the fact that both Mr and Ms Bosanac were sophisticated investors with a history of separate investments demonstrated that there was an intention that the property was to be solely in Ms Bosanac’s name.
In the first instance, the Court will review the evidence to determine whether it reveals an intention to declare an “express trust” over the property, or alternatively shows that a trust was not intended. The existence of a relationship covered by the “presumption of advancement” is merely a circumstance which will lead a court to find that there is evidence to suggest a trust was not intended.
When there is no clear evidence about the intention of the person making the gift or contribution, a resulting trust will be presumed to arise.
If you have any questions about how a resulting trust might affect your clients, your property, or your tax liabilities, please get in touch with us below or send us your enquiry here.
Authors: William Madani & Jack Townsend
Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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