Commissioner of Taxation v Bosanac (No.7) – [2021] FCA 249, Presumption of advancement applicable to matrimonial home? Rebutted? – Does Cummins (2006) 227 CLR 278 qualify presumption?

By Alicia Hill, Principal, MST Lawyers

The recent decision of Commissioner of Taxation v Bosanac (No.7) [2021] FCA 249 revisits the ‘presumption’ of advancement in a situation where both spouses contributed equally to the purchase of the matrimonial home through joint loans but the property’s title was placed in the wife’s name only.

The Commissioner of Taxation commenced proceedings seeking a declaration that the wife held 50% of the property on trust for the husband without any evidence of the intention behind the purchase or calling the husband to support the Commissioner’s case.

The facts

Mr and Ms Bosanac were married on 3 October 1998.

On 27 April 2006, Ms Bosanac offered to purchase the Dalkeith Property for $4,500,000, subject to her obtaining approval for a loan of $3,000,000 from Westpac.

On 3 May 2006 the offer to purchase was accepted. The sale contract required Ms Bosanac to pay a deposit of $250,000 within 30 days (2 June 2006).

On 2 June 2006, $250,000 was withdrawn from a pre-existing joint loan account in the names of Mr and Ms Bosanac and inferred to have been the deposit to be paid in accordance with the sale contract for the Dalkeith Property.

On 24 October 2006, Mr and Ms Bosanac applied for 2 new joint loans from Westpac in the amount of $3,500,000 and $1,000,000. Westpac offered the loans and required securities over the Dalkeith Property and other properties.

On 1 November 2006, a settlement statement required Ms Bosanac to pay $4,252,948.38 at settlement.

On 3 November 2006, the Dalkeith Property was transferred into the name of Ms Bosanac as sole registered proprietor. On the same day Westpac sent a letter to Mr Bosanac confirming a joint loan account in the amount of $3,500,000 had been opened and that amount and the Customer’s contribution of $998,570 were applied towards the settlement. According to Westpac a surplus of $243,650.12 was paid into a joint transaction account of Mr and Ms Bosanac. A mortgage was registered over the Dalkeith Property.

Mr and Ms Bosanac moved into the Dalkeith Property in late 2006. ATO records show that Mr and Ms Bosanac resided at the Dalkeith Property together until 9 September 2015, when Mr Bosanac provided a new residential address.

Mr and Ms Bosanac separated in 2012 or 2013, however they continued to live together until about mid-2015 and did not divorce at that time.

On 29 April 2016 the Commissioner of Taxation (CoT) obtained summary judgement against Mr Bosanac for $9,344,111,89 plus costs.

On 12 August 2016 execution of the judgement was stayed until further order.

On 17 December 2019 the stay was lifted and declaration was sought in this case to facilitate recovery of part of the judgement sum in favour of the CoT.

Issues

The Commissioner argued that:

  • where the parties contribute equally to the purchase of a matrimonial home, to be occupied and utilised by them both, that the ‘presumption’ of advancement should not exist or had been carved out by the decision of Cummins;
  • this was a natural development of the law of equity to meet societal standards building on prior developments of the ‘presumption’ of advancement in support of the Court rejecting its application to the present facts including:
    • extended to apply to purchases in contemplation of marriage;
    • determined not to apply to defacto couples;
    • extended to apply to gifts from a mother to her child.
  • the following facts rebutted the application of the presumption to the present facts:
    • the Dalkeith Property was the matrimonial home where they resided for a period of 7 years;
    • Mr Bosanac’s contribution to the purchase price took the form of borrowed funds from Westpac and those funds were borrowed on condition that MS Bosanac would register a mortgage in favour of Westpac over the Dalkeith Property to secure loan funds;
  • both Mr and Ms Bosanac were jointly and severally liable to pay the entirety of the funds advanced, therefore Mr Bosanac assumed substantial liability without the benefit of having his name registered as proprietor on title; and
  • here is evidence of shared bank accounts and some sharing of other property assets.

Ms Bosanac argued that:

  • there was no reason to depart from the application of the ‘presumption’ of advancement in these circumstances;
  • Cummins should not be seen as authority to separate the presumption from applying to acquisition of the matrimonial home.

The main issues in dispute were:

  • Does the presumption of advancement apply in respect to the purchase of the matrimonial home? and
  • Does Cummins[1] qualify the presumption of advancement to exclude matrimonial homes from its application? 

This case note will provide a summary of the Court’s findings with respect to the other issues in dispute.

Decision

Justice McKerracher found:

  • the presumption of advancement would apply to the purchase of the matrimonial home and that the High Court had not provided a rejection of the law’s application in that respect.
  • the argument of the CoT was not persuasive on the review of the case law to deny the application of the ‘presumption’ of advancement and Cummins could not be interpreted in the manner that the CoT suggested it should be;
  • the CoT had not adduced sufficient evidence to rebut the presumption’s application that Mr Bosanac intended to retain a beneficial interest in the Dalkeith Property;
  • the notion that a husband is presumed to gift property to his wife, while the same may not be presumed of a wife to a husband, between same sex spouses or between de facto partners, may grate with modern ideals and expectations of equality. But as things currently stand the presumption of advancement remains part of Australian law even for the matrimonial home[2].

His Honour also went further to say “It is not for a judge sitting at first instance to depart from such long-standing legal concepts”.

Conclusion

This case clarifies the position of the law as it presently stands in Australia but also flags the possible further development of the law in this area by either appellate, or High Court interpretation in light of current societal expectations or norms, or legislative intervention.

If you have any queries, please contact Alicia Hill on (03) 8540 0292 or alicia.hill@mst.com.au

 

[1] Trustees of Property of Cummins (a bankrupt) v Cummins (2006) 227 CLR 278 [2006] HCA 6

[2] At [231].