We recently acted for a trustee in bankruptcy in proceedings before the Supreme Court of Queensland in a matter concerning the doctrine of the presumption of advancement.

The principal matter in dispute was whether the presumption of advancement applied to the matrimonial home such that a trustee of the bankrupt estate of one spouse could maintain a caveat lodged over the matrimonial home owned solely by the other spouse by reason of contributions made by the bankrupt prior to his bankruptcy. Those contributions included towards the initial purchase price, repayments of both principal and interest owing to the bank as well as expenses in maintaining the upkeep of the property.

The answer was a resounding yes, in favour of Rose Litigation Lawyers’ trustee in bankruptcy clients.

The Court was required to determine: (a) whether the trustees had a prima facie case such that there was a serious question to be tried and (b) whether the balance of convenience favoured the maintenance of the caveat.

The prima facie case

The case advanced by the trustees was that, by reason of the bankrupt’s contributions, the other spouse held part of her interest in the property on a resulting and/or constructive trust for the bankrupt. The trustees say their position is supported by, amongst other cases, the case of Cummins (a bankrupt) v Cummins (2006) 227 CLR 278, where there is commentary in the decision (and the transcript) about the presumption of advancement not being applicable to the matrimonial home.

Conversely, the bankrupt’s spouse argued that all contributions by the bankrupt were gifts and subject to the presumption of advancement. Principal reliance was placed upon the decision in Commissioner of Taxation v Bosanac (No 7) [2021] FCA 249. The trustees argued that there are compelling reasons as to why Bosanac should be approached with caution.

Firstly, it is a single judge decision and it cannot displace the reasoning of the High Court in Cummins.  Secondly, the Commissioner of Taxation has appealed to the Full Federal Court against the decision in Bosanac and that appeal has yet to be heard.  Thirdly, even in Bosanac the learned primary judge acknowledged (at [184]) that the state of the law was ‘not without difficulty’ and he only concluded that the presumption was engaged and that it had not been rebutted after a full trial on the merits. The trustees argued they should be given the same opportunity.

His Honour agreed with the trustees and said, as to the question of a prima facie case:

The short answer, it seems to be, is this:  that as was recognised in the most recent case on the Federal Court [Commissioner of Taxation v Bosanac (No 7)], which is subject to an appeal, it [being the respondent trustees’ case] is clearly arguable.  And when it’s clearly arguable, there’s a serious question to be tried.  That decision is not binding on me, and it does not follow that it is correct.  And in those circumstances, I am not going to deprive the trustee in bankruptcy of the opportunity to argue it at a trial when it’s fully argued.

The application then turned to the question of whether the balance of convenience favoured the maintenance of the caveat, and his Honour ultimately made the orders which were proposed by the trustees, being orders which allowed for maintenance of the caveat, subject to certain terms. Costs were reserved to the trial judge.