The High Court decision in Bosanac is a noteworthy one for family (and trust / equity, debt and tax lawyers alike).

For family lawyers, the decision is a timely reminder of the need to consider the potential application of the principles of equity when advising clients about transferring real property between family members for financial / estate planning purposes. In these cases, it is important that the transaction and party intentions are documented properly and contemporaneously. The case possibly also represents a line in the sand in terms of possible legislative reform in this area… watch this space…

Background law

There are two kinds of trusts referred to in this case:

• The presumption of a resulting trust

The basic premise is that equity assumes that people do not usually intend to make gifts of real property.

The effect of this is that the recipient is said to hold the property on trust for the donor unless the presumption can be rebutted on the facts.

It may arise, for example, where a person (A), causes a property to be registered in another person’s (B) name where B pays nothing for it, and where A did not intend for B to become the sole beneficial owner of the property. In these instances, the principles of equity imply that B holds A’s interest on trust.

• The presumption of advancement

Where this presumption applies, the property is treated as being handed over to the recipient and the recipient assumes full legal title and does not hold the property on trust for the donor.

We typically see this situation arise when a parent transfers property to a child or one spouse transfers it to another with the clear intention that they are handing over the beneficial and legal interest in the property (as a gift).

The Courts will look for any obligation (in equity or in law) on the part of the donor to advance the interests of the recipient and any evidence about the intention of the donor.

The nature of the relationships between the donor and the recipient is critical. Australian case law (albeit very dated) has supported the presumption of advancement only from (a) husbands to wives, (b) male fiancé to his female fiancé and (c) parents to their children.

Both these types of trusts can be rebutted with evidence that supports the intention of the donor and recipient at the time of the transaction.

The Bosanac litigation

In October 2022, the High Court handed down its judgment for an appeal from Ms Bosanac against the Commissioner of Taxation.

The facts

The Bosanacs married in 1998 and separated in 2012 or 2013. Their former matrimonial home, the “Dalkeith Property” was purchased in 2006 in Ms Bosanac’s name only. The deposit of $250,000 for the purchase was paid with funds from a joint loan account, and the couple jointly borrowed $4.5 million to pay the remainder of the purchase price.

During the marriage, the Bosanacs accrued and held substantial assets in separate names.

In 2015, Mr Bosanac moved out of the Dalkeith property.

Around this time, the Commissioner of Taxation audited Mr Bosanac’s financial affairs and  discovered that Mr Bosanac had failed to lodge tax returns from 2006-2013, and in 2016, he was ordered to pay over $9 million in tax debt. Mr Bosanac declared bankruptcy, and the Commissioner of Taxation, as his creditor, sought to claim possession of his assets.

The legal background

Since Mr Bosanac was not a registered proprietor of the Dalkeith property, no creditors could enforce their interests against the property.

The resulting trust argument  

At trial, the Commissioner of Taxation sought a declaration that half of the equity in the Dalkeith property belonged to Mr Bosanac because a resulting trust existed over the property.

The Commissioner of Taxation contended that Mr Bosanac did not intend for his wife to be the sole registered proprietor of the Dalkeith property, and that therefore he should have a beneficial interest in half of the property.

Ms Bosanac resisted the claim from the Commissioner of Taxation. Ms Bosanac asserted that the resulting trust was rebutted by the presumption of advancement.

The presumption of advancement argument

The Commissioner of Taxation contended that the presumption of advancement is no longer part of Australian property law, following the decision of the High Court in Trustees of the Property of Cummins v Cummins.

Federal Court (trial judge and Full Court appeal)

At first instance, the [Federal] Court dismissed the Commissioner’s application.

This decision was overturned in the Full Court of the Federal Court, which suggested that the presumption of advancement was not overturned by Cummins, but that it could be displaced by evidence of a contrary intention.

The Full Court held that the presumption was rebutted for a variety of reasons, including that Mr Bosanac assumed substantial liability through the loan without acquiring a beneficial interest in the Dalkeith property, and it was intended that there was to be joint use and benefit from the matrimonial home.

The Full Court declared Ms Bosanac to hold 50% of the property on trust for her ex-husband.

Ms Bosanac appealed, and the Commissioner of Taxation invited the High Court to abolish the presumption of advancement on the basis that it had no acceptable rationale and was anachronistic.

The High Court appeal

The High Court held that there was no resulting trust arising. What is interesting is that this decision was reached on the facts and not by establishing / applying the presumption of advancement.

The facts that, said the High Court, supported the conclusion that Ms Bosanac was the sole beneficial owner of Dalkeith. The key facts were as follows:

• Mr Bosanac was a sophisticated businessman who must have appreciated that the name in which the property was held had significant consequences.
• The Bosanacs had historically purchased and held their matrimonial assets separately and in their own names
• The Bosanacs had a pattern, established over time, to take out debt / mortgages in both names and use other properties (often held by the other spouse) as security for the debt
• Ms Bosanac was the sole contracting party for the purchase: she made the offer which was accepted by the vendor and there was no reason to think that she was put up to purchase by Mr Bosanac.

The High Court refused to abolish the presumption of advancement, asserting that it is an entrenched land-mark of the law in Australia. If this was to occur, said the High Court, it would need to be achieved through statutory reform in Parliament. As at the date of writing, the Government has not made any statement on this.

The High Court also acknowledged that these trusts are very weakly applied today and are only of practical significance in rare cases where the totality of evidence is incapable of supporting the drawing of an inference about what the purchaser intended.

In reaching this conclusion, the High Court departed significantly from the decision of the Full Federal Court.

• Two of the five justices (Kiefel CJ and Gleeson J) held that it was not open to the Full Court to draw the inferences they did on the facts before them as this analysis was not sufficient to support the intention as between Mr and Ms Bosanac.
• Justice Gageler observed that to concentrate on the actions and inferred intention of Mr Bosnanac, as the Full Court did, is to downplay the actions and inferred intention of Ms Bosanac.
• Gordon and Edelman JJ held that the correct starting position was always to look at the facts and determine what, if any, objective intention could be extracted from that analysis.

Ultimately, neither trust applied, and Ms Bosanac’s appeal was allowed on the basis that the parties intended for her to be the sole beneficial owner of the property.