Resulting Trusts and the Presumption of Advancement in Parent–Child Property Transactions

Resulting Trust (General Rule):  A resulting trust is said to arise where:

a. one person pays the purchase price of a property but is not recorded on title; or

b. two or more persons advance the purchase price of property in different shares, it is presumed that the person or persons to whom the legal title is transferred holds or hold the property upon resulting trust in favour of those who provided the purchase price in the shares in which they provided it (Calverley v Green [1984] HCA 81 at [3] per Deane J (“Calverley”)).

In the context of family law matters, a parent may argue that they hold a beneficial/equitable interest in property. If they are able to establish a resulting trust in their favour, their beneficial interest may be declared and removed from the divisible property pool (reducing the family law property pool).

The presumption of resulting trust is a presumption, which may be rebutted by either evidence of actual intention (to the contrary), or by the presumption of advancement.

Presumption of Advancement (Family Exception): The presumption of advancement is an exception that applies only in certain family relationships, imputing that the transfer or contribution was intended as a gift to the title-holder (meaning there is no presumed trust in favour of the contributor. The effect of the presumption of advancement is that the property remains part of the property pool that is available for both parties during family law proceedings (the opposite impact compared to a resulting trust). Under Australian law, relationships that attract the presumption of advancement traditionally include transfers from parent to child, as well as husband to wife and male fiancé to fiancée. In such cases, the usual presumption of a resulting trust is displaced – instead, the law presumes the donor meant to advance the recipient by giving them full beneficial title, not just legal title. In other words, where a parent provides purchase money for a property registered in the child’s name, equity initially presumes the parent intended a gift, conferring both legal and beneficial ownership on the child. This principle dates to older common law notions that certain relationships carry a moral obligation to provide for the other party, hence payments in those contexts are viewed as benevolent gifts rather than trust contributions.

Deane J in Calverley explains at [4] “The third “presumption”, usually called the “presumption of advancement”, is not, if viewed in isolation, strictly a presumption at all. It is simply that there are certain relationships in which equity infers that any benefit which was provided for one party at the cost of the other has been so provided by way of “advancement” with the result that the prima facie position remains that the equitable interest is presumed to follow the legal estate and to be at home with the legal title or, in the words of Dixon CJ, McTiernan, Fullagar and Windeyer JJ in Martin v Martin (1959) 110 CLR 297 at 303, that there is an “absence of any reason for assuming that a trust arose…”

Although the presumption of advancement was historically formulated in a patriarchal era (e.g. father-to-child), Australian courts have recognized that it applies to any parent–child relationship, including a mother who contributes funds for a property held by her child. The New South Wales Court of Appeal’s decision in Brown v Brown [1993] NSWCA 38 confirmed that a transfer from a mother to her child engages the presumption of advancement just as a father’s transfer would. This modern position erases the old distinction and treats the parent’s contribution – whether by the father or mother – as a presumptive gift to the child in the absence of evidence to the contrary.

Rebutting the Presumptions: Evidence of Actual Intention

Both presumptions are rebuttable. The presumptions dictate who carries the onus of proof about the parties’ actual intention of ownership. In relation to the presumption of advancement, once the relationship (parent–child) is established and the parent’s contribution proven, the onus shifts to the contributing parent to rebut the presumption of gift if they wish to claim a beneficial interest. The parent must convince the Court that, despite the familial relationship, the real intention at the time of purchase was not to gift the money but to retain an interest (for example, that the payment was a loan, or the child was to hold part of the property on trust for the parent). If the parent cannot prove a contrary intention, the presumption of advancement stands and the transaction is treated as a gratuitous transfer to the child.

The case of Bosanac v Commissioner of Taxation [2022] HCA 34 (“Bosanac”) reaffirmed the application of these presumptions in Australia and that the Court must start with the objective facts and enquire into the parties’ words or conduct at the time of the transaction (or immediately after the transaction) to determine the parties’ objective intention. At [22] of Bosanac the following was stated:

“The presumption of advancement, understandably, is especially weak today. In Pettitt, Lord Hodson considered that when evidence is given it will not often happen that the presumption will have any decisive effect. In the same matter, Lord Upjohn considered that given both presumptions are but a mere circumstance of evidence, they may readily be rebutted by comparatively slight evidence.”

At [106] the Court said:

“As a resulting trust is an inference drawn in the absence of evidence, it is necessary to start with the objective facts. It is a factual inquiry. The question may be framed in these terms: what were the parties' words or conduct at the time of the transaction or so immediately thereafter as to constitute part of the transaction – the objective fact.”

At [67] the Court said:

“Where evidence relevant to intention is adduced, the presumption and the counter-presumption are therefore of practical significance only in rare cases where the totality of the evidence is incapable of supporting the drawing of an inference, one way or the other, on the balance of probabilities about what contributors and purchasers actually intended when they participated in the purchase transaction.” (Writer’s emphasis)

The objective facts and contemporaneous conduct and records are key. Documents and communications around the purchase time carry significant weight in showing what was intended at the time of the transfer/purchase. Evidence of acts and declarations of the parties to the transaction before or at the time of the transaction or so close in time to be considered part of the transaction, are relevant.

In a recent NSW Court of Appeal case, Koprivnjak v Koprivnjak [2023] NSWCA 2 (“Koprivnjak “) a father who paid part of the purchase price failed to produce any contemporaneous evidence that he intended to retain ownership; he even labeled the payments as a loan to his daughter in bank records, undermining his claim that he was a co-owner. The Court held he had not rebutted the presumption of advancement, so the daughter was entitled to keep the property (apart from a sum formally documented as a loan).

Current Law and Observations

Despite academic criticism that the presumption of advancement is outdated or discriminatory, it remains good law in Australia. The United Kingdom has abolished the presumption of advancement on equality grounds, but no such reform has been enacted in Australia. The High Court of Australia in Bosanac reaffirmed that the presumption of advancement still operates. The focus is the evidence of actual intention of the parties (in relation to beneficial/equitable interest) at the time of the transaction rather than the presumptions, if there is no evidence of actual intention at the time of the transaction or immediately after - then the presumption and the counter presumption apply.

Resources

• Calverley v Green [1984] HCA 81 

• Brown v Brown [1993] NSWCA 38

• Bosanac v Commissioner of Taxation [2022] HCA 34

• Koprivnjak v Koprivnjak [2023] NSWCA 2

• Calverley v Green [1984] HCA 81