I contributed to the purchase price – is the property mine?

By Mark Petrucco and Jeremy Roby 

The High Court of Australia has affirmed the operation of the presumption of advancement, in its recent decision of Bosanac v Commissioner of Taxation^[1]. In this article, we examine the High Court’s position that a court will principally look to the objective evidence of the parties’ intentions to determine whether a resulting trust arises, recognising a beneficial interest in favour of a party who contributed part of the purchase price but whose name is not on title. In doing so, the court will examine the parties’ words or conduct at the time of, or immediately after, the purchase.

Where the objective evidence is neutral, truly equivocal or uninformative, then a ‘weak’ presumption arises that the parties intended to have a beneficial interest in the property in the proportion to their respective contributions to the purchase price. This is sometimes referred to as a ‘purchase money resulting trust’.

However, that presumption does not arise in certain recognised categories of relationship (such as the archetypal category of husband purchasing for a wife, or parents purchasing for child). In those cases, there is a similarly ‘weak’ presumption that the purchaser intended to gift the benefit to the legal owner. This is sometimes known as the ‘presumption of advancement’.

What were the facts?

Mr and Ms Bosanac married in 1998, purchased a property in Perth in 2006 (Dalkeith property), separated in 2012 or 2013 but continued to reside together at the Dalkeith property until 2015 when Mr Bosanac moved out. In April 2006, Ms Bosanac offered to purchase the Dalkeith property for $4,500,000, subject to approval of a $3,000,000 bank loan. In May 2006, Ms Bosanac’s offer was accepted.

The deposit for the purchase of the Dalkeith property was paid from a joint loan account in the names of Mr and Ms Bosanac. In October 2006, Mr and Ms Bosanac jointly applied for two loans, one for $1,000,000 and the other for $3,500,000. The loans were used to pay the balance of the purchase price and the surplus funds were paid into the joint account.

The property was registered in Ms Bosanac’s name only, and Mr Bosanac never claimed an interest in the property. The security for the two loans were mortgages over four properties, including the Dalkeith property. Importantly, Mr and Ms Bosanac historically shared some bank accounts, but had substantial assets in their own names.

The Commissioner of Taxation (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 Dalkeith property on the basis that Ms Bosanac held that 50% interest in the property on trust for Mr Bosanac under a purchase money resulting trust.

What were the arguments before the Court?

Mr Bosanac took no active part in the proceedings, and neither he nor Ms Bosanac gave evidence at the hearing before the primary judge. The primary judge found that the presumption of advancement stood unrebutted (and therefore found for Ms Bosanac). The Commissioner appealed to the Full Court of the Federal Court who disagreed with the primary judge and found that the inferences available from the objective evidence were that Mr and Ms Bosanac intended to each have a 50% interest in the Dalkeith property and therefore found for the Commissioner.

On appeal to the High Court, the Commissioner advanced two contentions. The principal contention was that the presumption of advancement should no longer be recognised in Australian law because it ‘has no acceptable rationale, and is anomalous, anachronistic and discriminatory.’ ^[2] The alternative contention was that the presumption of advancement should be defeated by an inference which should be recognised where a husband and wife each contribute to the purchase by one of them of a matrimonial home then their interests should be one half each, regardless of the amounts contributed by them.

What was the result? And why is it important?

As to the principal contention, the High Court held that the presumption of advancement is too entrenched in Australian law and that it would only be appropriate for the legislature to abolish its operation. As to the second contention, the High Court held that the Commissioner’s argument was based on an erroneous understanding of a previous decision of the High Court^[3] and rejected it.

The High Court held that based on the facts of Bosanac, the objective intentions of the parties indicated that Mr Bosanac intended that Ms Bosanac would have full beneficial ownership of the Dalkeith property. As such, there was no purchase money resulting trust and Mr Bosanac did not have an interest in the Dalkeith property against which the Commissioner could seek to recover his debt.

In coming to that conclusion, the High Court found the following facts to be significant: Mr Bosanac was a sophisticated businessman who would have known the significance of the name in which real property is held, Mr and Ms Bosanac each held substantial assets in their own names, and Mr and Ms Bosanac had previously purchased separately owned properties using joint loans.

The High Court’s decision does not displace the well-known principles relating to the presumptions of resulting trusts and advancement. Rather, in describing those presumptions as ‘weak’, it underscores the importance of analysing the objective facts to determine the parties’ intentions and ultimately who has beneficial ownership in property.

To avoid the operation of resulting trusts and advancement, parties should clearly document, before or immediately after the transaction, their intentions as to who it is intended will have beneficial ownership in the property. This may have the effect of dissuading creditors from taking a position similar to the Commissioner in Bosanac.

^[1] Bosanac v Commissioner of Taxation [2022] HCA 34 (Kiefel CJ, Gageler, Gordon, Edelman and Gleeson JJ)
^[2] Bosanac v Commissioner of Taxation [2022] HCA 34 at [29] (Kiefel CJ and Gleeson J).
^[3] Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278.