Bosanac v Commissioner of Taxation – Presumption of advancement

Bosanac v Commissioner of Taxation [2022] HCA 34

Kiefel CJ, Gageler, Gordon, Edelman and Gleeson JJ

Date: 12 October 2022

Decision: In favour of Ms Bosanac

Representation for the Taxpayer: Counsel

Representation for the Commissioner: Counsel

Synopsis of decision

This case involved a claim by the Commissioner that a resulting trust existed over the equity in one‑half of a property owned by Ms Bosanac. The Commissioner sought a declaration of a resulting trust in order to apply the alleged beneficial interest in the property towards the satisfaction of an outstanding tax debt of Mr Bosanac.

The High Court affirmed the continuation of the presumption of advancement, which overrides the presumption of resulting trust. In effect, this means that the presumption of resulting trust Is subject to the presumption of advancement. The decision overturned the decision of the Full Federal Court, agreeing with the findings of the primary judge.

Facts

Background

Bernadette and Vlado Bosanac married in 1998. In 2006, Ms Bosanac purchased a property in Dalkeith, Perth, WA (the property). The property was registered solely in Ms Bosanac’s name, and became the matrimonial home.

The purchase monies were paid from joint loan accounts. At all times, both parties intended that the property was to be owned solely by Ms Bosanac. Mr Bosanac never claimed an interest in the property.

When Ms and Mr Bosanac separated in 2012 or 2013, they continued to reside together at the property until September 2015, when Mr Bosanac moved to a new residential address.

During the marriage, Ms and Mr Bosanac shared some bank accounts but owned substantial assets which they held in their separate names. Some of these properties were used as security for the joint loans.

The Commissioner was a creditor of Mr Bosanac and brought proceedings seeking a declaration of a resulting trust over the equity in one-half of the property. This would treat Ms Bosanac as holding that interest in the property on trust for Mr Bosanac.

Legal principles

The Commissioner sought to take advantage of, and apply, the common law and equitable principles of the ‘presumption of resulting trust’ and the ‘presumption of advancement’. The presumption of resulting trust is subject to the presumption of advancement which operates as an exception to the first presumption.

Under the presumption of resulting trust, a person who advances purchase monies for property, that is held in the name of another person, intends to have a beneficial interest in the property.¹ The presumption of resulting trust can be rebutted by evidence from which it may be inferred that there was no intention on the part of the person providing the purchase money to have an interest in land (or other property) held on trust on their behalf.

The presumption of resulting trust is subject to an exception — the presumption of advancement — under which a presumption applies that the purchaser intended that the beneficial interest would pass with the legal interest. This presumption most commonly applies where a husband purchases property in the name of a wife, or a parent in the name of a child.²

The Commissioner contended that the presumption of advancement of a wife by her husband — which operates to preclude a resulting trust from arising — is no longer part of the law of Australia in relation to the matrimonial home following the decision of the High Court in Trustees of the Property of John Daniel Cummins v Cummins [2006] HCA 6 (Cummins).

Proceedings

On 29 April 2016, the Federal Court entered summary judgment against Mr Bosanac in the sum of $9,344,111.89 in respect of his liabilities for income tax, shortfall interest charge, administrative penalties and general interest charge.³

In 2021, the Commissioner sought a declaration to the effect that Mr Bosanac had an equitable interest to the extent of 50% of the available equity in the property. The declaration was sought to facilitate recovery of part of the judgment sum by the Commissioner.⁴

In dismissing the Commissioner’s application, McKerracher J concluded that:

• the presumption of advancement in relation to the matrimonial home was not precluded by Cummins; and
• it could not be inferred from the available evidence that Mr Bosanac intended to retain a beneficial interest in the property.

This meant that the presumption of advancement continued to stand unrebutted. In arriving at his decision, McKerracher J also noted that Mr Bosanac ‘was a sophisticated businessman … who may be taken to have appreciated the significance of the name in which real property is held.’⁵

The Commissioner appealed this decision to the Full Federal Court. On appeal to the Full Federal Court, Kenny, Davies and Thawley JJ found in favour of the Commissioner and declared that Ms Bosanac held 50% of her interest in the property on trust for Mr Bosanac.⁶ Their Honours held that the decision in Cummins did not qualify the presumption of advancement, but the presumption is liable to be displaced or rebutted by evidence, including evidence of the nature of the particular transaction. The following facts tended strongly against the presumption and in favour of a trust being intended by both Ms and Mr Bosanac:

• Mr Bosanac assumed a substantial liability without acquiring any beneficial interest;⁷
• the property was intended to be the matrimonial home for the joint use and benefit of Ms and Mr Bosanac, even though the property was registered in the wife’s name alone;⁸ and
• the funds for the purchase came from joint borrowings.⁹

Ms Bosanac appealed the Full Federal Court’s decision to the High Court, pursuant to a grant of special leave.

Issue

The sole issue between the parties was whether Ms Bosanac held half of her interest in the property on behalf of Mr Bosanac where the purchase monies were paid jointly by Ms and Mr Bosanac. This depended upon whether the two competing equitable presumptions applied: the presumption of resulting trust and the presumption of advancement.

The Commissioner argued that the property was held on resulting trust for Mr Bosanac. That is, Ms Bosanac held one-half of the property on trust for Mr Bosanac. If this was the case, the Commissioner could lay claim to Mr Bosanac’s beneficial interest to satisfy Mr Bosanac’s significant tax debt.

Ms Bosanac argued that the presumption of advancement applied such that Mr Bosanac held no beneficial interest in the property.

Decision

In a unanimous decision (delivered in three separate judgments), the High Court held that the presumption of advancement applied so that Mr Bosanac did not own any share of the property and the property was not available to creditors of Mr Bosanac.

In arriving at their decision, Kiefel CJ and Gleeson J found that Ms Bosanac’s desire to purchase and register the property in her name alone were sufficient facts to rebut any presumption that her interest in the property was attributable to the relationship of husband and wife and his intention to benefit her. Their Honours considered that the following factors outweighed the fact that Ms and Mr Bosanac were both parties to the loan agreements and both were liable to repay the loans (which explained the Commissioner’s claim for a one-half interest in the property):

• the property was never registered in Mr Bosanac’s name;
• there was no transfer of the property from Mr Bosanac to Ms Bosanac;
• Mr Bosanac did not advance all the monies for the purchase of the property;
• Ms and Mr Bosanac had previously shared a matrimonial home which was registered in the name of only one of them; and
• there was a history of the use of the properties held by each of Ms and Mr Bosanac in their own names as security for joint loans.

While it could be accepted that the property was to be the matrimonial home in which Ms and Mr Bosanac would reside and which they would both enjoy, the Full Federal Court had not suggested that that fact alone was sufficient for a conclusion as to intention.

Their Honours said at [40]:

There is nothing in the history of Ms and Mr Bosanac’s dealings with property to suggest an intention that any substantial property was to be held jointly. The inference to be drawn in the present case is that, in being a party to the loan accounts 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. This is consistent with the history of their dealings.

In agreeing with their Honours, Gageler J noted the Commissioner’s need to contend with the stand-off between the presumption of resulting trust and the counter-presumption of advancement and considered the two contentions advanced by the Commissioner. The Commissioner contended that the counter-presumption of advancement should be abandoned as a doctrine of equity. The alternative contention was that the counter-presumption ought now to be trumped by an inference which ought to be recognised to arise where a husband and a wife each contribute to the purchase by one of them of a matrimonial home, such that the husband and the wife ought to be presumed to intend each to have a one-half beneficial interest.⁹

His Honour concluded that if the doctrines of equity were redesigned to accord with the societal expectations of contemporary Australia, the default position would be that a purchaser of property would be assumed to be its sole legal and beneficial owner, whether or not someone else might have contributed to the purchase price. This would necessitate proof of an actual intention to create a trust for the purchaser to hold the whole or some part of the beneficial interest in the property on trust for a contributor to the purchase price, and there would be no presumption of resulting trust and accordingly no occasion for a counter-presumption of advancement.¹¹

In relation to the Commissioner’s alternative contention, his Honour rejected the suggestion that the counter-presumption of advancement should give way to an inference of equality where a husband and a wife each contribute to the purchase by one of them of a matrimonial home.¹² His Honour declined to recognise a standardised inference arising where a husband and a wife each contribute to the purchase by one of them of a matrimonial home, remarking that this: ‘is in effect an invitation to create a counter-counter-presumption.’ He went on to say that: ‘The weight to be given to the fact of a contribution having been made to the purchase price in drawing an inference as to actual intention will vary according to the totality of the circumstances of the case.’¹³

In also agreeing with their Honours, Gordon and Edelman JJ agreed that the three factors identified by the Full Federal Court (see above, factors that the Court considered were inclusive of Mr Bosanac’s intention that the property not be a ‘gift’ to Ms Bosanac) were inconsistent with an objective intention to declare a trust in favour of Mr Bosanac as to 50% of Ms Bosanac’s interest in the property. Gordon and Edelman JJ also agreed that the fact that Ms and Mr Bosanac were married at the time of the purchase of the property was not determinative and as best reinforced the inference that the parties’ objective intention was for Mr Bosanac to facilitate the acquisition by Ms Bosanac of the property.¹⁴ They also remarked: ‘The presumption of resulting trust does not arise. It has no role to play.’¹⁵

Significance of decision

The case primarily concerns the ability of a creditor to seek a repayment of outstanding loans from other assets the debtor may not own outright. The High Court’s decision affirms the view that a creditor is not necessarily entitled to claim that a spouse who owns legal title of a property, owns 50% of the property beneficially on behalf of their spouse. In the context of debt recovery actions by the Commissioner, where one partner owns legal title to a property and the presumption of advancement applies, the Commissioner cannot claim that the other partner owns half of the property.

As always, the facts and circumstances of each case will dictate the outcome. In this instance, the High Court was satisfied that the Bosanacs were able to demonstrate a clear intention that the purchase of the property was always intended to be solely in Ms Bosanac’s name. This is despite the fact that Mr Bosanac partly funded the purchase of the property. The outcome may be different if one or both partners do not demonstrate this intention.

The case is a reminder for tax practitioners that they should closely examine the facts and circumstances when managing debt collection cases involving the Commissioner, or any creditor. If the relevant intention can be demonstrated, the fact that the purchase of a property is fully funded by joint loans does not preclude a presumption of advancement. That is, if a major asset is in one partner’s name, the Commissioner may not always be able to apply the presumption of resulting trust and seek to liquidate the asset to repay a debt, even if both partners’ funds were used to purchase the asset.

The case is also important from a general asset protection perspective, providing useful guidance about how to ensure that assets are appropriately safeguarded from creditors.

Finally, given the legal nature of these arrangements, including the purchase of a property and the recovery action undertaken by the Commissioner, it is recommended that relevant parties obtain legal advice before proceeding.

Footnotes

¹ Calverley v Green [1984] HCA 81; (1984) 155 CLR 242 at 246.

² Napier v Public Trustee (WA) 1980 55 ALJR, Nelson v Nelson 1995 184 CLR 538.

³ Commissioner of Taxation v Bosanac [2016] FCA 448.

⁴ Commissioner of Taxation v Bosanac (No 7) [2021] FCA 249.

⁵ Bosanac v Commissioner of Taxation [2022] HCA 34, at [9].

⁶ Commissioner of Taxation v Bosanac [2021] FCAFC 158.

⁷ Ibid, at [15].

⁸ Ibid, at [19].

⁹ Ibid, at [20].

¹⁰ Bosanac v Commissioner of Taxation [2022] HCA 34, at [54].

¹¹ Ibid, at [57].

¹² Ibid, at [61] and [62].

¹³ Ibid, at [64].

¹⁴ Ibid, at [126].

¹⁵ Ibid, at [125].