The issue of land ownership in circumstances where the legal interest of a person does not reflect the actual contribution of that person toward the purchase of that property. The established principle in these circumstances as decided in Calverley & Green [1984] HCA 81 and restated in Bosanac v Commissioner of Taxation (2022) FLC 94-107, at [8], is that “a person who advances purchase monies for property, which is held in the name of another person, intends to have a beneficial interest in the property.” The result of which, is the creation of a trust by common intentions of the parties.

However, there are exceptions to this rule where the persons receiving the legal interest is related to the person providing the funds in certain ways. Per the High Court in Calverley at [55], “The “presumption of advancement”, where it applies, means that the equitable interest is at home with the legal title, because there is no reason for assuming that any trust has arisen.”

In these cases, such as in Bosanac, where the relevant parties were husband and wife, to the existence of a trust, the Court must rebut the presumption, per Kiefel CJ, and Gleeson J in Bosanac at [15], by “evidence of actual intention”. Per the Full Family Court in Davis & Peterson [2023] FedCFamC1A 13, at [30], “such intention is usually formed at the time of the transaction and may be established by the party claiming the beneficial interest having acted to their detriment (see, Khalif & Khalif [2021] FamCAFC 123). If established, it would be unconscionable for the other parties to deny the common intention.”

It was also held in Bosanac at [64] that a finding of such intention need not be based on any evidence from the person claiming the trust or providing the funds, just like in Bosanac, where the husband who provided funds to purchase a property in the sole name of the wife but, may be inferred “from the totality of the evidence” before the Court.

Other than a resulting, or common intentions trust as described in the foregoing paragraphs, per Grefeld & Grefeld [2012] FamCAFC 71, at [97], trusts may be “created by operation of law without reference to the parties’ intentions” in circumstances where “according to principles of equity, it would be unconscionable to allow a legal owner of property to enjoy sole beneficial ownership of that property.” See, also Muschinsky v Dodds (1985) 160 CLR 583 at 614–617, 620–621; Baumgartner v Baumgartner (1987) 164 CLR 137 at 148–150.”

However, in making such finding, the High Court in Muschinski cautioned that: “In assessing whether or to what extent such an assertion or retention of legal entitlement by Mr Dodds would constitute unconscionable conduct” the court is require to determine “whether [the] conduct should, by reference to legitimate processes of legal reasoning, be characterized as unconscionable for the purposes of a specific principle of equity whose rationale and operation is to prevent wrongful and undue advantage being taken by one party of a benefit derived at the expense of the other party”.  

The application of these principles can be a complex exercise and even experienced judges can get them wrong. For example, in a recent appeal in the Federal Circuit and Family Court Davis & Peterson [2023] FedCFamC1A 13, the Court at first instance was correct in pointing out the relevant legal principles but was criticized at appeal for considering the wrong facts, giving rise to an appealable error.

*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice before taking any course of action.*