The High Court in Bosanac v Commissioner of Taxation [2022] HCA 34 culminated a protracted debate on whether to apply the presumption of resulting trust or presumption of advancement in the context of a matrimonial home.

Instead of applying either presumption, the High Court articulated the “weakness” of both presumptions and highlighted the importance of analysing the objective facts of the situation.

Background and judicial history

The background and judicial history are:

Ms and Mr Bosanac married in October 1998.
In April 2006, Ms Bosanac purchased a property, to be used as the matrimonial home (Home), in her own name.
The deposit was paid via a pre-existing joint loan account in the names of Ms and Mr Bosanac, and the rest of the purchase price was paid via new joint loans in the names of Ms and Mr Bosanac.
Ms and Mr Bosanac moved into the home in late 2006. The couple separated in 2012 or 2013, but they continued to live in the Home until 2015, when Mr Bosanac moved out.
The Australian Taxation Office (ATO) was a creditor of Mr Bosanac and sought declaratory relief that Mr Bosanac held a 50% equitable interest in the Home through a resulting trust. The ATO argued there was a presumption of resulting trust.

The Federal Court decided there was a presumption of advancement, instead of resulting trust, and the ATO appealed to the Full Federal Court.
The Full Federal Court overturned the Federal Court decision, concluding that because there was no advancement, there was a resulting trust.
The High Court granted Ms Bosanac special leave to appeal the Full Federal Court decision.

What are the presumptions?

A presumption of resulting trust arises because equity assumes that we do not intend to make gifts through financial contributions to buying a property. So, if A bought property and puts it in B’s name, then equity will presume that B holds that property on resulting trust for A.

The presumption of advancement is one circumstance where the presumption of resulting trust does not arise. The presumption of advancement assumes that, because a certain relationship exists between A and B, A does intend to gift B the full ownership.

These relationships are limited to advancements from husband to wife (not de facto), fiancé to fiancée, and parent to child. The presumption of advancement has attracted criticism for being sexist, discriminatory, and anachronistic.

Both presumptions can be rebutted by evidence of A and B’s intentions at the time of purchase.

The High Court decision

The High Court unanimously rebutted the presumption of resulting trust. Critically, the High Court did not rebut using the presumption of advancement but by examining the objective facts of the situation to infer Ms and Mr Bosanac’s objective intentions.

The High Court highlighted that the key question is what inference is to be drawn from the available facts. This is done by looking at the couple’s words or conduct at the time of the transaction or immediately afterwards (if they constitute part of the transaction).

In reaching the conclusion that the objective intention was for Ms Bosanac to be the sole beneficial owner of the Home, the High Court highlighted the following factors:

The history of the couple holding their major assets in their own names instead of holding them jointly (see paragraphs 35, 73, and 123).
The history of the couple taking out joint loans and using each other’s property as security for new purchases (see paragraph 40).
The fact that Ms Bosanac was the sole proprietor of the Home (see paragraph 124).
The fact that Mr Bosanac was a “sophisticated businessman” who must have understood the consequence of having the Home in Ms Bosanac’s name only (see paragraph 72).
The actions of Ms Bosanac: who was the only party contracted to buy the Home, who made the offer to the vendor and who exposed herself to liability for repayment of the severable loans (see paragraph 77).

The High Court commented on how the presumptions of resulting trust and advancement were “landmarks” of Australian law and any changes should be by parliament instead of courts. Despite this, all Justices commented on how the presumptions are “anachronistic”, “weak”, and only relevant in rare cases where after examining all the evidence, courts still cannot draw an inference on intention (see paragraphs 22, 67, and 98).

Gordon and Edelman JJ went one step further and said that the presumptions are only relevant when “the objective facts are neutral, truly equivocal, non-existent or uninformative as to the objective intention of the parties” (see paragraph 110).

The High Court also factually distinguished Bosanac from the earlier High Court decision in Cummins, where the High Court rebutted a presumption of resulting trust and held that the husband and wife held equal shares in a matrimonial home. In Cummins, the couple contributed unequally to the purchase of a property and the property was originally bought in that couple’s joint names. Years later, the husband transferred his legal and beneficial interest to the wife with the intention of placing it beyond the reach of his creditors (see paragraphs 26 and 27).

What did the High Court say on the Full Federal Court’s approach?

The Full Federal Court’s decision and approach had significant practical implications for resulting trusts and the presumption of advancement. The High Court emphatically disagreed with this decision.

Interestingly, all three judgments disagreed with the Full Federal Court’s decision in different ways.

Kiefel CJ and Gleeson J disagreed with the Full Federal Court’s conclusion drawn from the facts. They commented that the factors employed by the Full Federal Court do not provide a “strong foundation” for any inferences on intention (see paragraph 37).

Gageler J disagreed with the Full Federal Court’s approach of concentrating on the actions and inferred intention of only Mr Bosanac. He noted doing so “is to downplay the actions and inferred intention of Ms Bosanac” (see paragraph 76).

Gordon and Edelman JJ disagreed with the Full Federal Court’s framing of the question. They noted that the Full Federal Court asked the wrong question. The Full Federal Court should have started with the facts and used those facts to establish an objective intention. Instead, the Full Federal Court “relied in particular on three facts it considered were conclusive of Mr Bosanac’s intention” (see paragraph 126). Gordon and Edelman JJ then stated (with respect!) that the Full Federal Court did not consider the entirety of the facts.

Takeaway

This case highlights that courts will move away from any presumptions and instead look at all the relevant facts to infer intention.

Importantly, attention must be paid to the intention of both parties to determine whether a resulting trust will arise.

A consequence of this case is that the purchaser of the property, the new sole proprietor, is even more entrenched as the sole legal and beneficial owner. Having others contribute to the purchase price is less likely to change that.

For more information, please contact:

James Gao
Graduate Lawyer
T +61 3 9611 0166
E jgao@sladen.com.au

Daniel Smedley
Principal | Accredited Specialist in Tax Law
M +61 411 319 327 | T +61 3 9611 0105
E: dsmedley@sladen.com.au

Neil Brydges
Principal Lawyer | Accredited Specialist in Tax Law
M +61 407 821 157 | T +61 3 9611 0176
E: nbrydges@sladen.com.au

Edward Hennebry
Senior Associate
T +61 3 9611 0113 | M +61 405 847 261
E: ehennebry@sladen.com.au