Presumption of advancement – lessons from a recent NSW Court of Appeal decision

In a recent NSW Court of Appeal case, the Court considered the application of the presumption of advancement in relation to a house purchased in the name of a daughter with significant financial assistance from her father. The decision demonstrates the evidentiary hurdles that need to be established by someone seeking to establish a beneficial interest in a property.

What is the presumption of advancement?

The “presumption of advancement” operates as a presumption in equity, in the context of specific familial relationships. The presumption is a person who provided part or all of a purchase price intended to do so as an ‘advancement’ or gift.

The presumption of advancement may be rebutted. A related concept is that of a resulting trust. A resulting trust may be presumed where the legal title of the property does not reflect the contributions to the purchase price so that the person with legal title holds the property on trust for the person(s) who made the contribution(s).

The case – Koprivnjak v Koprivnjak [2023] NSWCA 2.

In 2011, the daughter/respondent purchased a rental property in Shoal Bay for $300,000. She was the named registered proprietor of the property. The appellant/father provided his daughter $15,000 for the deposit and a further $60,000 towards the purchase price from his company’s bank account.

The balance of the purchase price was by paid by a loan taken out by the daughter with NAB, which was secured by a mortgage over the property. After the purchase, the father contributed money towards renovations and property maintenance costs and his company made monthly payments of $1,400 to his daughter’s bank account, which she used to make mortgage repayments. Some of the renovations had been conducted by the father’s associates for free or at “mate’s rates”, where there were limited invoices or receipts.

The house was sold in 2020. The father and his ex-wife broke up and there was a dispute between him and his daughter about the beneficial ownership of the property. The sale proceeds were paid into a trust account until the dispute about whether the father or daughter owned the property was resolved.

Primary judgment

In the original proceedings, the father claimed that:

• his daughter held 25 per cent of the property on trust for him because he contributed to the purchase price
• the remaining 75 per cent was held under a constructive trust based on a common understanding relating to his assistance with mortgage payments and property maintenance costs.

The father alternatively sought to enforce a mortgage between him and his daughter executed in 2011. The mortgage entitled the father to the sum of $75,000, interest and money representing improvements made to the property.

Her Honour Justice Peden rejected the trust claim as the father failed to discharge his onus of establishing a trust to rebut the presumption of advancement. Justice Peden accepted the loan claim and ordered that the loan and interest be paid to the father from the sale proceeds and the remainder of the sale proceeds be paid to his daughter.

Grounds of appeal

On appeal, the father relied on documentary evidence not tendered at trial, including a rental agreement and insurance documents concerning the property which contained his name and contact details.

The father also contended that certain text messages with his daughter demonstrated a common intention that his daughter held the property on trust for him.

Judgment

The Court of Appeal dismissed the appeal with costs. The Court found that the additional documentary evidence did not assist the father’s case, holding that:

• the rental agreement was dated 12 months after the settlement of the property. While the rental agreement contained both the father and daughter’s contact details under the heading “Principal details & contact information”, the daughter’s bank account details were provided for payment. The Court found that merely because the father was identified as a contact person on this document, it did not itself or in conjunction with other matters, show that he had a beneficial interest in the property
• a copy of the original insurance policy was not in evidence. A copy of a “confirmation of insurance policy document” stated the insured(s) were both the father and daughter. The Court found the father’s name was used to obtain a discount on the premium due to other policies with the insurer
• the father’s evidence contained a number of significant omissions. The evidence did not include contemporaneous documents, e.g. copies of documents relating to the first home owner’s grant, stamp duty exemption, land tax and the settlement sheet and payment directions concerning the purchase of the property. Such information would have been directly relevant in determining beneficial ownership
• the father referred to text messages exchanged with his daughter in 2016 and 2017 referring to the house. In one of the text messages, the daughter said she had helped her father “with the house and it has done nothing but cause me problems and waste my time ...”

The Court found the text message evidence was ambiguous and it was unclear whether the property referred to was the same as the property in question (it could also relate to another property purchased by the daughter with financial assistance from her father) or what ‘help’ was being referred to. The messages were also exchanged in the context of a breakdown of family relationships and a number of years after the property was purchased.

The father argued the primary judge failed to look at the evidence globally to determine whether there was a trust, but failed as he did not establish any appellable error.

Key takeaways

• An evidentiary hurdle that often appears in these types of cases is the party wanting to establish a beneficial interest in a property needs to prove the intention was for the property to be held on resulting trust, determined at the time of purchasing the property.
• The correct inquiry in determining a property’s beneficial ownership is set out in the High Court case in Bosanac. 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. Documents around the time of the purchase are crucial to determining who has beneficial ownership of the property.

If you need any assistance with how the presumption of advancement or a resulting trust might affect your clients or property, please get in touch with our team using the contact details below.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Greg Wrobel

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