Recently, the High Court unanimously agreed that a husband had no legal or beneficial interest in a property owned wholly by his wife, despite him contributing to the purchase price. The debtor (“Mr Bosanac”) and his wife (“Ms Bosanac”) jointly paid purchase money for a property, however, it was registered to Ms Bosanac alone, and Mr Bosanac never claimed an interest to the title of the property.
The Commissioner of Taxation (“the Commissioner”), in this case, was a creditor. The Commissioner argued that Australia no longer accepts the presumption of advancement, and therefore any property given from a husband to his wife is assumed to be also in his interest, in other words, a resulting trust.
Presumption of Advancement
This is a legal presumption regarding the transfer of property. Essentially, where the transfer has been made from a husband to wife, or father to child, for example, it may be assumed that this was a gift, without the need for mutual benefit or consideration in exchange.
This has been abolished between husbands and wives in New Zealand and held not to apply between father and adult child in Canada.
Resulting Trust
A resulting trust is based on the presumed intention of parties rather than express intentions. When a party contributes to the purchase of a property, but has no legal title thereafter, a resulting trust may arise; this grants an interest to the contributor.
An example scenario may include a parent contributing to the purchase of their adult child’s first home. The question may arise as to whether the parent intended for the contribution to be entirely a gift (presumption of advancement), or whether the parent offered purchase monies with the goal of retaining an equitable interest in the property (resulting trust).
Decision
In this case, the objective intention and actions of the parties was offered as evidence to rebut the assumption of a resulting trust. The Court stated, “not only was it acquired in [Ms Bosanac’s] name and registered in her name, but it was her property”. The Court decided that the objective intention of Mr Bosanac’s contribution to the purchase price was not consistent with that of obtaining an interest in the property.
Significance
This case was originally brought to the Federal Court by the Commissioner of Taxation, seeking judgment against Mr and Ms Bosanac for amounts payable in respect of income tax and other penalties. The Commissioner subsequently sought to prove Mr Bosanac’s interest in the property so as to recover these debts.
Because the presumption of advancement was held to apply to the contribution by Mr Bosanac to the purchase price of the property, he consequently had no interest in the property in question and therefore it cannot be subject to recovery by the Commissioner with respect to judgment debts.