High Court asset protection 101 – house in name of spouse

The decision of the High Court of Australia in Bosanac v Commissioner of Taxation [2022] HCA 34 (Bosanac) reaffirms the viability of protecting real property assets by registering them in the name of a spouse.

Background to Bosanac case – the purchase in the female partners name

In April of 2006 Ms Bosanac caused for a residential property in the affluent suburb of Dalkeith, Perth, to be purchased by means of a complex series of loans.  She offered to purchase the property for $4,500,00 subject to obtaining a loan approval in the amount of $3,000,000 and $250,000 deposit.  Later that same year Mr and Ms Bosanac applied for two (2) loan accounts in their joint names and eventually received loans of $1,000,000 and $3,500,000.  The amounts received into these loan accounts were applied to the balance of the purchase price of the Dalkeith property, with any surplus funds paid into the joint loan account.

The Dalkeith property was registered solely in Ms Bosanac’s name.

Mr Bosanac’s debts to the Commissioner of Taxation

The Commissioner of Taxation (Commissioner) was a creditor of Mr. Bosanac and sought to have established a resulting trust over half of the equity in the Dalkeith property.  The effect of such a trust would be that Ms. Bosanac held half of the equity in the Dalkeith property for Mr. Bosanac’s benefit and therefore his ownership in the property could be pursued by the Commissioner.

The legal basis for this position is founded, amongst other decisions, upon the case of Calverley v Green [1984] HCA 81 wherein the High Court held at [3]:

“Where a person purchases property in the name of another, or in the name of himself and another jointly, the questions whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. …  it is presumed that the purchaser did not intend the other person to take beneficially.  In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser.”

In the same case, it was noted that the assumption of a resulting trust may be rebutted by evidence suggesting, in its place, a presumption of advancement.  Such presumption might occur as between a wife and husband to the preclusion of any resulting trust.

The Commissioner argued, however, that the case of Trustees of the Property of Cummins v Cummins (Cummins) had the effect of removing the presumption of advancement from Australian law.

The case in Cummins

Cummins involved a similar set of facts to the Bosanac decision, including a traditional matrimonial relationship and purchase of real property.  The Commissioner relied on the following passage from Cummins in advancing its argument that the presumption of advancement no longer had effect, at [71]:

“It is often a purely accidental circumstance whether money of the husband or of the wife is actually used to pay the purchase price to the vendor, where both are contributing by money or labor to the various expenses of the household. It is often a matter of chance whether the family expenses are incurred and discharged or services are rendered in the maintenance of the home before or after the purchase.

Where a husband and wife purchase a matrimonial home, each contributing to the purchase price and title is taken in the name of one of them, it may be inferred that it was intended that each of the spouses should have a one‑half interest in the property, regardless of the amounts contributed by them.“

Notwithstanding the obvious force of what is stated above, there are points of distinction between the cases of Bosanac and Cummins which led the High Court to consider that the presumption of advancement may, in certain circumstances, continue to have legal effect.  They are:

• the title of the property in Cummins, being a matrimonial home, was jointly held by both husband and wife;
• the conventional basis of the Cummins’ dealings treated the matrimonial home as beneficially owned equally. That is, the purchase was so regular and plainly observable to only be capable of being perceived as two people, a husband and wife, who had jointly purchased the property;
• the Bosanac’s had a history of holding their substantial real and other property in their own names;
• the Dalkeith property was never registered in Mr Bosanac’s name;
• Ms Bosanac had a history of residing in properties, matrimonial homes, which were registered in only one of their names;
• Ms Bosanac had a history of using properties held by each of them to secure joint loan accounts; and
• Bosanac was a sophisticated businessman who appreciated the significance of the Dalkeith property being held in Ms. Bosanac’s name.

The importance of intention

The High Court ultimately held that in some cases an inference may be drawn that spouses intended to jointly hold real property but that in the present case the holding arrangements had been structured in such a way that the presumption of advancement applied.  It was clear that Mr. Bosanac had no intention of holding legal interests in the Dalkeith property.

Windeyer J in Hepworth v Hepworth [1963] HCA 49 observed that “an intention, proved or presumed, that a trust should exist is at the base of every trust’.  What might be considered the ‘default intention’ is what was said by Gageler J in Bosanac at [57]:

“Were the doctrines of equity to be redesigned to accord with the societal expectations of contemporary Australia, the default position would be that a purchaser of property would be assumed to be its sole legal and beneficial owner.  That would be so whether or not someone else might have contributed to the purchase price.  For the purchaser to hold the whole or some part of the beneficial interest in the property on trust for a contributor to the purchase price would require proof of an actual intention to create a trust.  There would be no presumption of a resulting trust and there would accordingly be no occasion for a counter-presumption of advancement.”

Takeaways on asset protection in business

The intention of the property holders will be at the front of mind when making a decision as to how the property is to be construed as being held.  A Court will attempt to determine an intention based on the evidence before it which, as can be seen in the Bosanac case, might give rise to a presumption of advancement if it is clear that a person advancing monies did not intend to take a legal interest in property.  Notwithstanding that position, the Court made it clear that a resulting trust, conveying in effect joint ownership, is also an open finding in cases like these if the evidence conveys such an intention.

Links and further references on asset protection

Cases related to asset protection

Bosanac v Commissioner of Taxation [2022] HCA 34

Calverley v Green [1984] HCA 81

Hepworth v Hepworth [1963] HCA 49

Trustees of the Property of Cummins v Cummins

Further information about asset protection

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Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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