The High Court decision of Bosanac v Commissioner of Taxation [2022] HCA 34 has confirmed that the presumption of advancement is an entrenched part of Australian law despite the Commissioner of Taxation’s (Commissioner) submission to abolish the principle on the basis of that it has no acceptable rationale, and is anomalous, anachronistic and discriminatory.
Background facts
Mr and Mrs Bosanac had purchased a house for use as their matrimonial home in Dalkeith, WA. The deposit funds came from their joint bank account, the mortgage was in both their names, however the property was registered solely in the wife’s name.
Following an audit by the ATO, it was determined that Mr Bosanac had a substantial tax debt. As a result, the Commissioner sought a declaration that Mr Bosanac had a 50% beneficial interest in the Dalkeith property, despite it being registered only in his wife’s name.
The issue was – what did Mr and Ms Bosanac intend as to the beneficial ownership of the property at the time of purchase? This is generally determined by reference to the following presumptions in equity:
- Resulting trust – this presumption arises when two parties contribute to the purchase price, but legal title is only recorded in the name of one. In those circumstances, equity presumes that the person holding legal title does so for both contributors; and
- Presumption of advancement – this presumption operates to prevent a resulting trust from arising where the relationship between the parties provides a reason for concluding that a gift was intended.
A presumption of trust is a useful tool for creditors and bankruptcy trustees to attack assets not held in the name of the debtor, especially in circumstances where evidence of the actual intention of the parties may be difficult to ascertain.
In the first instance decision in the Federal Court of Australia, the trial judge found that the presumption of advancement arose and had not been rebutted, and therefore the property was not held beneficially for the husband. This was despite Mr Bosanac contributing to the deposit and assuming a considerable personal liability under the mortgage. Weight was placed on the fact that Mr Bosanac and Mrs Bosanac had owned other assets separately, and that Mr Bosanac was a sophisticated person of business so would have understood the consequences of not having an asset in his name.
This decision was reversed on appeal before the Full Federal Court, which held that it was the intention of the parties that 50% of the property was held beneficially for Mr Bosanac. The Court emphasised the fact that the deposit was taken from a joint loan account, and Mr Bosanac had accepted substantial personal liability for the mortgage and effectively each contributed half of the purchase price.
This was a significant decision as it reversed the presumption of advancement and showed that where a husband contributed to the purchase of an asset, it may not be sufficient to protect that asset from creditors merely by the asset being held in the wife’s name.
High Court appeal
The Commissioner’s key submissions on appeal called for abolishing the presumption of advancement altogether. The Commissioner submitted that the doctrine was outdated and had not kept pace with societal values where the presumption of advancement applies from husband to wife, but not from wife to husband. Ms Bosanac’s submissions in reply rejected the abolition of the doctrine noting that the underlying rationale for a number of equitable doctrines have evolved over time and remain unsettled, which should not mean that they should be abolished because they sit uneasily with modern principles.
The High Court delivered three separate judgments (Kiefel CJ and Gleeson J, Gageler J & Gordon J and Edelman J). All were in agreement that the appeal should be allowed, and the decision of the Full Federal Court set aside, with the result that the original judgment of the Federal Court stood, namely that the property was not held beneficially for the husband. In the end, the Commissioner’s claims failed. It was held that the presumption of advancement remains an entrenched part of Australian law, and although the criticisms about the presumption not reflecting contemporary standards of relationships were recognised, they were too enshrined in Australian law to be simply abolished.
However, all three judgments clearly emphasised that the presumptions played a more limited role in the ultimate determinations and that while the presumption remains intact, it will not overcome the objective intention of the parties.
Gageler J described the presumption of resulting trust and the presumption of advancement as being of practical significance only in rare cases where the totality of the evidence is incapable of supporting the drawing of an inference about what the parties intended when purchasing the property (at [67]). The question of intention as to whether a trust arises is entirely one of fact.
When applying this reasoning to the Bosanac’s, it was held that the clear inference was that the parties’ objective intention was that Mr Bosanac was doing no more than facilitating Ms Bosanac’s acquisition of the Dalkeith property. He did so by assisting in paying the deposit and entering into the joint loans for the purpose of funding the purchase, as his wife did not have the personal finances to do it on her own. Therefore, the appeal was allowed.
The key takeaway from this case is clear: the influence of the presumption of advancement is arguably weakening in Australia and cannot be simply relied upon without considering the surrounding circumstances. Instead, the Court will look to the objective intention of the parties at the time of the acquisition to determine whether any presumption applies.
