Across the Commonwealth: The Rise of the Evidential Approach in Resulting Trust and the High Court of Australia Case of Bosanac v Commissioner of Taxation and Another (2022) 405 ALR 424

Introduction

In the search for a modern approach to resulting trusts, the High Court of Australia case of Bosanac v Commissioner of Taxation and Another (2022) 405 ALR 424 demonstrates the willingness of equity to move away from the traditional use of legal presumptions and instead, adopt a greater preference of an evidential approach to establishing resulting trusts. This is anticipated to have greater synergy in legal principles, specifically in the context of Malaysian trust law.

What is a Resulting Trust?

A resulting trust is a type of trust that operates by law in a situation where a person pays for the purchase of a property but the name of another person appears on the title of that property. In these circumstances, the law may presume that the person who paid for the property did not intend to do so as a gift and a trust will “result” back to the person who purchases the property. The effect of this is that the person who paid for the property will obtain a beneficial interest even though the legal title of that property lies in the name of a different person unless sufficient evidence is led to rebut the presumption of law that arises from that scenario.

The Facts of Bosanac v Commissioner of Taxation and Another (2022) 405 ALR 424

The facts of the case revolve around the question of whether the appellant in that case, Bernadette Bosanac (“Ms. Bosanac”), held an interest in a residential property on in trust for her husband, Mr. Bosanac (“Mr. Bosanac”) notwithstanding the purchase money being contributed jointly by both parties. In essence, the High Court of Australia’s decision challenged the utility of relying on the presumption of resulting trust and the presumption of advancement and emphasized the need to consider objective intentions rather than relying on such legal presumptions.

Sometime in 2006, Ms Bosanac purchased a residential property in Dalkeith, Perth that acted as the matrimonial home (the “Property”) using funds from a joint loan account shared with her husband, Mr Bosanac. The couple separated around 2012 but continued living together in the Property until September 2015. The Property was registered in Ms. Bosanac's name and Mr Bosanac never claimed an interest in it. The respondent, the Commissioner of Taxation who was a creditor of Mr. Bosanac, initiated proceedings seeking, amongst others, a declaration of a resulting trust over one-half of the Property's equity in favour of Msr. Bosanac.

At first instance, McKerracher J, found a resulting trust arose in favour of Mr. Bosanac but a presumption of advancement was found in favour of Ms. Bosanac that was not rebutted by the Commissioner of Taxation. Therefore, McKerracher J dismissed the Commissioner's application in Commissioner of Taxation v Bosanac (No 7) (2021) 390 ALR 74. However, on appeal to the Full Court of the Federal Court of Australia, the judgment of McKerracher J was reversed. It was determined that the presumption of advancement had been sufficiently rebutted and that the Property had intended to be the matrimonial home which was paid using funds from the couple’s joint borrowings. As a result, the Full Court declared that Ms. Bosanac held a 50% interest in the Dalkeith property onin trust for Mr. Bosanac. This was reported in Commissioner of Taxation v Bosanac (No 7) [2021] FCAFC 158. Ms. Bosanac was then granted special leave to appeal to the High Court of Australia.

The High Court of Australia’s Findings in Bosanac v Commissioner of Taxation and Another (2022) 405 ALR 424

The High Court of Australia held, amongst others, that there was evidence suggesting that the parties' objective intention rendered the presumptions under the resulting trust inapplicable. Critically, the High Court had much to say about the lack of utility of using presumptions in determining the existence of a resulting trust.

Two key legal presumptions were at the center of the High Court’s deliberations on the utility of the underlying presumptions of a resulting trust (the “Underlying Presumptions”): 

• the presumption of resulting trust which assumes that contributors to the purchase of property do not intend to make gifts; and 

• the presumption of advancement which presumes that certain relationships, such as husband and wife, indicate the existence of an intention to gift full ownership.

The High Court of Australia allowed Ms. Bosanac’s appeal and emphasized that the critical consideration ought to lie in the parties’ objective intentions from the available facts. In this case, the Court found that the objective intention was for Ms. Bosanac to be the sole beneficial owner of the Property, with Mr. Bosanac merely facilitating the acquisition. The High Court highlighted some of the following objective facts that resulted in its decision:

• The history of the couple holding major assets in their own names instead of holding them jointly in their names;

• The history of the couple taking out joint loans and using each other’s property as security for those transactions;

• The fact that Ms. Bosanac was the sole proprietor of the Property;

• The fact that Mr. Bosanac held himself out to be a “sophisticated businessman” who must have understood the consequence of having the Property set out in Ms Bosanac’s sole name; and

• The actions of Ms Bosanac who remained the only party contracted to buy the Property, who made the offer to the vendor, and who exposed herself to liability for repayment of loans.

The High Court further went atto lengths to criticize the utility of the Underlying Presumptions as “anachronistic”, “weak” and of limited practical significance. Additionally, Gordon and Edelman JJ held that the presumptions were only relevant in rare cases “the objective facts are neutral, truly equivocal, non-existent or uninformative as to the objective intention of the parties”. Notwithstanding these criticisms, the High Court of Australia refused to expressly abolish the Underlying Presumptions on the basis that such a task should not be taken judicially, and yet, the court appeared more willing to consider an expansion of categories of relationships which that attracted the use of resulting trusts.

The Underlying Presumptions in a Resulting Trust in Malaysia 

Being a former colony of the British Empire, much of Malaysian trust law relies on well-established common law and equitable principles relating to British trust law. However, Malaysia too had grown weary of the usefulness of relying on the Underlying Presumptions and now prefers adopting a more evidential approach in determining the existence of a resulting trust. The Malaysian Court of Appeal case of Ng See Liang v Ng Say Hoon @ Ng Say Huen [2009] MLJU 337 concurs with the view that the presumption of advancement “is a relatively weak presumption which can be rebutted on comparatively slight evidence” and the Federal Court case of Takako Sakao (f) v Ng Pek Yuen (f) & Anor [2009] 6 MLJ 751 states in clear terms that the court will only invoke the Underlying Presumptions if there is no evidence of an intention of a gift. The Federal Court held that:

[18] In our judgment, the primary function of the court in a case where a resulting trust is asserted or a gift is alleged arising from a disposition of property is clear. It is to determine whether the initial disponor intended to make a gift of the property be it movable or immovable, or whether he or she intended it to be held by the disponee in trust for some other person or persons, including the disponor or the disponee or both. A court when called upon to decide whether a resulting trust or a gift was intended in given circumstances should not begin by resorting to presumptions. It must meticulously examine the facts to objectively ascertain the true intention of the parties. If the intention of the parties when objectively determined was that the particular property was to be held on a resulting trust then that is the conclusion the court should declare. However, if the intention was that the disponee of the property was to have it as a gift, there can then be no question of a resulting trust being implied. It is only when there is absent any indication of what was intended by the parties that the court should resort to presumptions. Were it otherwise, the court may be arriving at an incorrect conclusion based on a presumption when the evidence points in quite the opposite direction.

However, there were some uncertainties about the standard of proof that was applicable in Malaysian law in order to determine the existence of a resulting trust. Previously, the standard of proof to determine the existence of a trust was “beyond a reasonable doubt” i.e. the criminal standard of proof based on the cases of Low Tin Yong @ Low Yong Lian v Low Yong Thuan [2016] 3 MLJ 332 and Hameeda Bee v Mrs P Seenivasagam [1950] 1 MLJ 267. This would have rendered the evidential approach futile as it have meant that a tribunal would have to revert to relying on the Underlying Presumptions if the evidence of an intention is not readily available. However, this issue was helpfully clarified in the recent Court of Appeal case of Ong Kong Beng & Anor v Ong Kong Leong & Ors [2022] 3 MLJ 536 which undertook a review of the Malaysian case law on this topic and accepted that the meaning of the term ‘beyond a reasonable doubt’ that was used in those cases did not refer to the criminal standard of proof but merely emphasized the need for a “high degree of proof demanded by the circumstances” that is to be established on a balance of probability. This clarity will likely enable the evidentiary approach to gain further traction in Malaysia and obtain consistency across the Commonwealth.

Conclusion

While the usage of resulting trusts have appeared, in recent times, to have gone out of fashion in favour of other types of trusts such as constructive trusts and the Quistclose Trusts, the debate that has been rekindled in the case of Bosanac (supra) demonstrate the willingness for the law to modernize itself and adapt to the current needs of the present circumstances. It therefore remains to be seen as to whether this trend shall continue on in the future.