Is the presumption of advancement part of general law of Australia?

Bosanac v Commissioner of Taxation [2022] HCA 34 (12 October 2022)

Intro:-

This is an appeal from the Full Court of the Federal Court of Australia.

Facts:-

This appeal concerns the purchase by Ms Bosanac of a residential property in Perth ("the Dalkeith property") in 2006. She and Mr Bosanac married in 1998. They separated in 2012 or 2013 but continued to reside together at the Dalkeith property until September 2015, when Mr Bosanac moved to a new residential address.

Ms Bosanac appears to have instigated the purchase of the Dalkeith property. In April 2006 she offered to purchase it for $4,500,000 subject to her obtaining approval for a loan of $3,000,000 from a bank. The offer was accepted in May 2006. The contract for sale required Ms Bosanac to pay a deposit of $250,000 within 30 days. The deposit was provided from an existing joint loan account in the names of Ms and Mr Bosanac.

In October 2006, Ms and Mr Bosanac applied for two loans in the sums of $1,000,000 and $3,500,000. The balance of the purchase price was paid from two loan accounts in their joint names, and after settlement the surplus funds in these accounts were paid into the joint loan account from which the deposit had been drawn. The Dalkeith property was registered in Ms Bosanac's name alone. Mr Bosanac has never claimed an interest in the property.

The securities required by the bank for the loans were mortgages over the Dalkeith property and three other properties – units at Mount Street and a property at Hardy Street. The unit at 10/41-43 Mount Street was owned by Mr Bosanac. Ms Bosanac owned the Hardy Street property. The Dalkeith and Hardy Street properties were used as securities again almost a year later when the loans were refinanced.

The primary judge in the Federal Court, McKerracher J, found that during the marriage Ms and Mr Bosanac shared some bank accounts, but had substantial assets which they held in their separate names. Mr Bosanac had a substantial share portfolio. There was evidence of the use of separately owned properties as security for joint loans. There is nothing to suggest they were used to acquire joint assets. His Honour said, "this does not appear to be an instance of a husband and wife sharing all of the matrimonial assets jointly, or pooling their shareholdings ... [although] ... some bank accounts were shared".

The reasoning below

The Commissioner is a creditor of Mr Bosanac. The primary judge noted that there was no suggestion that the Dalkeith property was registered in Ms Bosanac's name alone with a view to Mr Bosanac avoiding his commitments to his creditors.

The Commissioner brought proceedings seeking a declaration of a resulting trust over the equity in one‑half of the Dalkeith property, which is to say that Ms Bosanac held that interest in the property on trust for Mr Bosanac.

The Commissioner sought to take advantage of the law's presumption, known as a presumption of resulting trust, that a person who advances purchase monies for property, which is held in the name of another person, intends to have a beneficial interest in the property. That presumption is subject to an exception that, in the case of purchases by a husband in the name of a wife, or a parent (or person who stands in loco parentis) in the name of a child, there is a presumption of advancement or, in other words, a presumption that the purchaser intended that the beneficial interest would pass with the legal interest. 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 this Court in Trustees of the Property of Cummins v Cummins.

The primary judge dismissed the Commissioner's application. His Honour held that the presumption of advancement in relation to the matrimonial home was not precluded by Cummins, and arose in Ms Bosanac's favour. The evidence did not support an inference that Mr Bosanac intended to have an interest in the Dalkeith property and the presumption of advancement stands unrebutted. In that regard, his Honour observed that at the time of the registration of the property in Ms Bosanac's name, Mr Bosanac was a sophisticated businessman, a "self‑styled venture capitalist", who may be taken to have appreciated the significance of the name in which real property is held.

The Full Court (Kenny, Davies and Thawley JJ) took a different view. 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. There were facts which 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; the Dalkeith property was intended to be the matrimonial home for the joint use and benefit of Ms and Mr Bosanac; and the funds for the purchase came from joint borrowings. The Full Court declared that Ms Bosanac holds 50 percent of her interest in the Dalkeith property on trust for Mr Bosanac.

Ms Bosanac appeals from the decision of the Full Court pursuant to a grant of special leave. Ms Bosanac contends that the Full Court should have found, as the primary judge did, that there was no basis to infer that Mr Bosanac had an intention to have a beneficial interest in the property.

Issue:-

Did Ms Bosanac hold half of her interest in the Dalkeith property on trust for Mr Bosanac, where the purchase money was paid jointly by Ms and Mr Bosanac?

Consideration:-

The presumptions

A trust of a legal estate in property taken in the name of another is taken to "result" to the person who advances the purchase money[. The categories of resulting trust include trusts arising from A's payment for the conveyance of rights to B; the voluntary transfer of rights inter vivos from A to B; and the transfer of rights on a failed declared trust. The term "resulting trust" states a legal response to proved facts. The presumption of a resulting trust developed by analogy from the rule of the common law that where a feoffment, or conveyance, is made without consideration, the feoffment results to the feoffer. It arose from the common practice of the 15th to 17th centuries of those having fee simple estates in land to put them in use (the precursor to the trust) for themselves. Because words of trust were not included on the face of the conveyance and because the transfers were gratuitous, the court supplied a presumption of a declaration to uses.

There were various advantages to the practice, including avoiding the hardship of feudal times, and avoiding escheat and forfeiture to the Crown in time of war, such as the Wars of the Roses.

The presumption 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 for him or her. The presumption cannot prevail over the actual intention of the party paying the purchase price as established by the overall evidence, and where more than one person pays the purchase price, as here, regard is necessarily had to evidence of each of their intentions.

The presumption of advancement allows an inference as to intention to be drawn from the fact of certain relationships. It applies to transfers of property from husband to wife and father to child, but in Nelson v Nelson this Court accepted that there is no longer any basis for maintaining a distinction between a father and mother so far as concerns transfers of property to a child. Originally the relationships were considered by themselves sufficient to afford "good consideration" for the conveyance, but a rationale for the presumption has come to be found in the prima facie likelihood that a beneficial interest is intended in situations to which the presumption has been applied.

On one view, the presumption of advancement is not strictly a presumption at all. It may be better understood as providing "the absence of any reason for assuming that a trust arose". At an evidentiary level, it is no more than a circumstance which may rebut the presumption of a resulting trust or prevent it from arising. It too may be rebutted by evidence of actual intention.

In the United Kingdom, s 199 of the Equality Act 2010 (UK) is expressed to abolish the presumption of advancement on the basis that it involves unlawful discrimination, but it has not yet been brought into effect. The presumption therefore remains. It has been observed that it may not make much real difference to the relative positions of husbands and wives, since the approach in recent cases is to seek to determine the real intentions of the parties.

This Court's decision in Nelson reflects views about a more modern society. In that case, Dawson J observed that there was no reason now to suppose that the probability of a parent intending to transfer a beneficial interest in property to a child is any the less the case with respect to a mother than a father. Toohey J pointed to current family law legislation respecting the obligation of parents to maintain children. The decision in Nelson might be thought to raise the question whether, assuming the presumption of advancement is to be maintained, it should now apply to transfers of property not just from wife to husband, given the position that many wives now have respecting income and property, but also as between spouses more generally given the recognition by statute of de facto relationships in proceedings concerning property and same‑sex marriage.

Important as these matters are, they were not in issue on this appeal and were not the subject of any argument. The question which arises on this appeal is common to both presumptions. It concerns the intention of Ms and Mr Bosanac when the property was registered in Ms Bosanac's name. And relevant to both presumptions is what weight they may now have.

The weight of the presumptions

The maintenance of either presumption, especially that of advancement, has been the subject of commentary and criticism. In Calverley v Green, Gibbs CJ pointed out that they do not always lead to a result which is what would be expected in ordinary human experience and gave as an example the circumstance of a woman making deposits of money for her niece and nephew. His Honour observed, with respect to the presumption of a resulting trust, that it would not usually be thought that the niece and nephew were to hold the monies on trust for her. In Dullow v Dullow, Hope JA (Kirby P and McHugh JA agreeing) expressed the view that it "seems rather ridiculous that troubles in England at the end of the Middle Ages should be the basis, in the late twentieth century, for making findings of fact".

In Calverley v Green, Gibbs CJ considered that the principle on which the presumption of advancement rests was not "convincingly expounded in the earlier authorities". Lord Reid, in Pettitt v Pettitt, was of a similar view. His Lordship said that it was unclear how it first arose: either the judges who first applied it thought that husbands so commonly made gifts to their wives that they simply assumed it, or that wives' economic dependence made it necessary as a matter of public policy to give them this advantage. Lord Reid then observed that "[t]hese considerations have largely lost their force under present conditions, and, unless the law has lost all flexibility so that the courts can no longer adapt it to changing conditions, the strength of the presumption must have been much diminished". This must surely be correct.

It is the concern of the courts to determine what was intended when property was purchased or transferred. It may once have been the case that evidence capable of rebutting the presumptions was not available. That is unlikely to be so today, especially in the context of dealings as between spouses where the relationship has been of sufficient length to permit a court to observe how the spouses have dealt with property as between themselves and managed their affairs. This evidence may take many forms, but it has always been understood that the strength of the presumptions will vary from case to case depending on the evidence.

The presumption of advancement, understandably, is especially weak today. In Pettitt, Lord Hodson considered that when evidence is given it will not often happen that the presumption will have any decisive effect. In the same matter, Lord Upjohn considered that given both presumptions are but a mere circumstance of evidence, they may readily be rebutted by comparatively slight evidence.

Proof of intention

The question of intention is entirely one of fact, and concerns the intention manifested by the person or persons who contributed funds towards the purchase of the property. In Martin v Martin, it was observed that for the most part it can be assumed that proof of intention will be made out by the circumstances. Reference was made to what had been said by Cussen J in Davies v The National Trustees Executors and Agency Co of Australasia Ltd:-

"It is impossible to try to arrange into certain sets of categories certain facts, and say beforehand they will or will not become decisive or immaterial. The attention must be kept steadily fixed on the one fact in issue – What was at the time the intention of the purchaser or transferor? Anything which is relevant to that issue is admissible."

Cussen J went on to say that evidence of that person's thinking at the time might be accepted, although it would be received "with caution". That circumstance does not arise for consideration in the present case. There is no direct evidence as to the intention of either Ms or Mr Bosanac. The question is what inference is to be drawn from the available facts and in particular the history of the parties' dealings with property.

In Stewart Dawson & Co (Vict) Pty Ltd v Federal Commissioner of Taxation, the transferor was not in loco parentis to his granddaughter to whom he transferred shares, so the presumption of advancement did not arise. The question was whether he intended her to hold them on trust for him, as might be presumed in the first instance. Regard was had by Dixon J to the evidence of their relationship, what the transferor had already paid on her behalf, and the provisions the transferor made for his family generally. From these facts a strong inference was drawn that he meant to give her the shares absolutely.

There was a history of Ms and Mr Bosanac holding their substantial real and other property in their own names. Consistently with this, it was evidently the desire of Ms Bosanac to purchase the Dalkeith property and have it registered in her name alone. She was the moving party. These facts alone are sufficient 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.

The Dalkeith property was never registered in Mr Bosanac's name. There was no transfer of the property from Mr Bosanac to Ms Bosanac. He did not advance all the monies for the purchase of the Dalkeith property. Ms and Mr Bosanac were both parties to the loan agreements and both were liable to repay the loans. This may be thought to raise a question as to whether they intended that the property be held jointly. This explains the Commissioner's claim for a one‑half interest in the property.

Some of the factors identified by the Full Court as relevant to the question of whether it was intended by Ms and Mr Bosanac that the property be owned jointly and that a one-half interest in the property be held on behalf of Mr Bosanac do not provide a strong foundation for any inference as to intention. In many of the decided cases the purchase monies were borrowed, and little can in any event be drawn from this fact. It may be accepted that the Dalkeith property was to be the matrimonial home in which both spouses would reside and which they both would enjoy, but the Full Court did not suggest that that fact alone was sufficient for a conclusion as to intention. Moreover, this was not the first time that Ms and Mr Bosanac had shared a matrimonial home which was registered in the name of one only of them. At the time of the purchase of the Dalkeith property they resided in one of the units owned by Mr Bosanac.

The remaining factor alluded to by the Full Court is that Mr Bosanac made a substantial borrowing without a corresponding benefit being received. The loans were used to pay the purchase price, including the deposit, and he used some of his property to secure the loans.

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. That is what occurred when the Dalkeith property was purchased. There was no evidence of the use of joint loans to acquire property which was then jointly held. Indeed, apart from some shared bank accounts there does not appear to have been any substantial property in which Ms and Mr Bosanac had a joint interest.

In some cases, an inference may be drawn that spouses intended to hold real property jointly and for the rule as to survivorship to apply. It will depend upon the evidence as to the parties' dealings. This is not such a case. 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.

There was further evidence before the primary judge of a subsequent dealing with the loan accounts over the Dalkeith property, or rather loan accounts which resulted from refinancing. The new loans continued to be secured by that property together with property owned individually. A portion of the loans was used by Mr Bosanac for his share trading. Ms Bosanac permitted this course. It may be assumed for present purposes that evidence of subsequent dealings of this kind is admissible, as the primary judge held. The history of the spouses' dealings with property might suggest a use of property to secure joint loans which might benefit either or both of them, but it does not support an inference that either intended that property be held jointly. As the primary judge found, the "considerable evidence" was of separate ownership of property.

The finding by the primary judge that Mr Bosanac was a sophisticated businessman who must have appreciated the significance of property being held in Ms Bosanac's name is not unimportant. His Honour was correct to conclude that that understanding did not support.

Conclusion:-

The appeal should be allowed. The orders of the Full Court of the Federal Court of Australia made on 31 August 2021 and 31 January 2022 should be set aside and, in their place, there be orders that the appeal be dismissed and the appellant below pay the costs of the second respondent. The parties are agreed that there be no order for the costs incurred in this Court. an inference that Mr Bosanac intended to have a beneficial interest in the Dalkeith property.