Article by: Billy Duan

High Court’s Recent Decision on Ownership of a Matrimonial Home – Are Matrimonial Assets Protected from a Partner’s Creditor?

The High Court of Australia’s recent decision in Bosanac v Commissioner of Taxation [2022] HCA 34 affirms the ancient principle of “presumption of advancement” is still good law in Australia. Creditors should be aware matrimonial assets may not always be jointly owned.

Background:

Ms and Mr Bosanac married each other in 1998. In 2006, Ms Bosanac purchased a residential property at Dalkeith (the “Dalkeith Property“) for $4,500,000.00. The purchase money was funded through two joint loan accounts under which both Ms and Mr Bosanac were liable. However, the Dalkeith Property was registered in Ms Bosanac’s name only.

The securities used to acquire the loans were real estate properties separately owned by Ms and Mr Bosanac. There was a history of them using separately owned properties as securities, but there was nothing suggesting that the couple used these securities to acquire any real estate properties in joint names.

In 2012 or 2013, Ms and Mr Bosanac separated, but continued to live together at the Dalkeith Property as a matrimonial home until 2015 and did not divorce at that time.

The Federal Court Proceedings

Mr Bosanac owed tax debts and enforcement action was taken against him by the Federal Commissioner of Taxation (the “Commissioner”). In reliance of the principle of “presumption of resulting trust”, the Commissioner applied to the Federal Court seeking a declaration that Mr Bosanac owned 50% interest in the Dalkeith Property and Ms Bosanac is holding that 50% on trust for Mr Bosanac.

The Federal Court dismissed the Commissioner’s application and ruled the “presumption of advancement” works in Ms Bosanac’s favour and Mr Bosanac had no interest in the matrimonial home. Nevertheless, this decision was overturned by the Full Federal Court of Australia on appeal.

What Are These Presumptions?

The “presumption of resulting trust” is where a person advances the purchase money for a house that is ultimately registered under another person’s name or a person transfers his/her interest in a house to another for free, the “presumption of resulting trust” can operate to suggest the transferor or the contributor of purchase money intends to have an interest in the property.

For example, if B forged A’s ID and signature and transferred A’s house into B’s name, the Court has the power to declare that B is merely holding the house for A’s benefit.

The “presumption of advancement” is not in fact a presumption, but rather used to disprove the above. It has an English origin from the 15th – 17th century that basically says where the above scenario occurs between husbands and wives, parents and children, the transfer may be deemed valid and parties intended the registered proprietor is not holding the property for the benefit of another.

The High Court’s Decision

Soon after the decision of the Full Court of the Federal Court, Ms Bosanac sought leave of the High Court to appeal the earlier decision. At the same time, the Commissioner argued that the “presumption of advancement” should be abolished entirely as it is a creature of the old days and it is anomalous, anachronistic and discriminatory.

After examining the evidence of Ms and Mr Bosanac’s history of acquiring properties in separate names, the High Court unanimously ruled in Ms Bosanac’s favour and found the parties intended Ms Bosanac to be the sole legal and beneficial owner of the Dalkeith Property. The High Court held that:

1. Mr Bosanac was a “self-styled venture capitalist” and a wealthy and “sophisticated businessman”;
2. This is not a case where Mr Bosanac transferred his interest to Ms Bosanac to defeat his creditors;
3. This is not a case that the couple intended to share all of their matrimonial properties jointly; and
4. Whilst Ms and Mr Bosanac are joint borrowers of the loans, they used separately owned properties as securities.

In addition, the High Court refused the Commissioner’s contention that the “presumption of advancement” should be abolished. It was held both the “presumption of resulting trust” and “presumption of advancement” are anachronistic, and the root of the anachronism originates from the former rather than the latter. However, given the long-standing history of these principles, the High Court expressed a view that it is a matter for the legislature to decide whether to displace them.

RMO’s Comments and Takeaways

While some assurances may be afforded to spouses by the High Court’s ruling in the case, the High Court held that these presumptions are rebuttable by evidence and the matter is still a factual inquiry. Surrounding factors such as a contributor’s background will impact the Court’s finding.

These presumptions cannot prevail over the objective facts and the existence of a familial relationship is not determinative, however it goes towards proving the registered proprietor is the intended legal and beneficial owner of a property.

Only if the evidence leads to a neutral conclusion, the “presumption of resulting trust” will operate.

Are your partner’s creditors going after the matrimonial assets? Speak with one of the commercial litigation lawyers here at Ryan Murdoch O’Regan for more information on joint assets protection.

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This article is for your information and interest only. It is not intended to be comprehensive, and it does not constitute and must not be relied on as legal advice. You must seek specific advice tailored to your circumstances.