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Third Party’s Rebuttal of Presumption of Advancement

It is a commonplace in Canadian law that when spouses separate and one holds title to the matrimonial home, the other spouse will almost invariably claim that he is entitled to an interest in the property under a resulting trust. He cannot claim entitlement under the presumption of advancement except in British Columbia and Manitoba, which have not abolished the presumptions of resulting trust and advancement,[1] whereas the other jurisdictions have abolished the presumption of advancement as between spouses in whole or in part.[2] But suppose that the non-titled spouse does not make a claim to an equitable interest in the property for whatever reason. Can a third party claim that he has such an interest? Yes, indeed, it can, although that must surely be, if not a unicum, at least a highly unusual event. The third party will typically be a creditor of the non-titled spouse, such as the fiscal authorities.

The issue arose in the recent Australian case, Commissioner of Taxation v Bosanac.[3] The facts as found by the judge of first instance (called the ‘primary judge’) showed that Mr and Ms Bosanac purchased a property which became their matrimonial home. They paid the deposit of $250,000 from a joint loan account, and then jointly borrowed $4.5 from a mortgage company to pay the balance of the purchase price. Neither spouse gave evidence before the primary judge. Ms Bosanac did file two affidavits in the proceeding but did not read or rely on them in opposition to the Commissioner’s case. However, the primary judge did allow in part of her affidavits that constituted admissions of fact that the property was the matrimonial home, which was not in any event in serious dispute. The primary judge found that the parties had been married for about eight years, that they bought the property for their matrimonial home, that they both moved into it not long after the purchase, and that Mr Bosanac vacated the property in 2015, having separated from his wife two or three years earlier.

The reasons do not disclose the claim of the Commissioner, but it seems obvious that the fiscal authorities had a financial claim against Mr Bosanac and presumably sought to recover it from his alleged interest in the matrimonial home. Hence the Commissioner claimed that Mr Bosanac held a 50% interest in the matrimonial home under a resulting trust.

The case raised the well-known presumptions of resulting trust and advancement. In Australia the presumption of advancement continues to apply to transfers of property between and purchases of property by spouses.[4] Thus, the case does not have broad application in all of Canada, but the observations of the court on the two presumptions and especially on how they can be rebutted by relevant evidence is instructive. It is of course axiomatic that the presumptions yield to contrary facts, but the importance of the case is that they are rebutted not just by the facts, but also by proper inferences drawn from them.

The Federal Court of Appeal noted, ‘The facts are established either by direct evidence or they may be inferred from facts directly proved when those proved facts make it reasonably probable that the inferred fact exists’. Further, it said, ‘The role of presumptions is not to obscure an identification of what was actually intended or to force a conclusion which the evidence sufficiently demonstrates to be incorrect’.[5]

In fact, we should not place too great an emphasis on the presumptions, for as Lord Upjohn once said, the presumption ‘is no more than a long stop to provide the answer when the relevant facts and circumstances fail to yield a solution’.[6] Or, as Deane and Gummow JJ put it, the presumption operates ‘to place the burden of proof, if there be a paucity of evidence bearing upon such a relevant matter as the intention of the party who provided the funds for the purchase’.[7] And further, as Deane J stated, ‘the presumption may be found to be of practical significance only in those cases where the evidence, including evidence of the actual relationship between the parties, does not enable the court to make a positive finding of intention’.[8]

Based on the facts the primary judge concluded that the presumption of advancement in favour of Mr Bosanac had not been rebutted.

The Commissioner appealed on two grounds. The first was that a passage in an earlier case qualified the presumption of advancement. I do not address this ground since the Federal Court of Australia disagreed with it. The second ground was that in any event the appropriate inference to draw from all the evidence was that Mr Bosanac intended to retain a 50% interest in the property.

The appeal to the Federal Court of Australia was by way of rehearing and on such a rehearing the court can correct an error committed by the primary judge. In this particular case the court was asked to review the inferences drawn from the facts by the primary judge.[9] The primary judge had held that the fact that the property was the matrimonial home and that Mr Bosanac assumed a substantial liability by signing the loan documents was not a sufficient basis to infer that he intended to retain a beneficial interest. This was because there was no evidence that the mortgage company required both parties to sign the loan documents.[10] The primary judge reached this conclusion despite noting that in Calverley Gibbs CJ considered that such evidence rebutted the presumption of advancement,[11] while Deane J thought the same evidence to be ‘amphibolous’[12] because it can be regarded as either an explanation of the acquisition of a beneficial interest in the property or as an explanation of the title holder being only a trustee.[13] The Federal Court of Australia concluded that in reaching this conclusion, the primary judge improperly excluded from consideration the fact that Mr Bosanac took on a large financial obligation without receiving a beneficial interest in return. That was a relevant consideration in considering whether the presumption advancement had been rebutted.

The court went on to state, ‘the presumption of advancement does not operate to preclude examination of the quality of the particular transaction in connection with which the presumption arises in order to determine whether the evidence as a whole shows the presumption to be inconsistent with what is in fact intended’.[14] Moreover, the absence of direct evidence by Mr Bosanac did not preclude the court from finding that the facts found by the primary judge on the evidence that was before the court rebutted the presumption of advancement.

Further, the loans incurred by the spouses tended ‘strongly against the presumption of advancement applying in this case’, since Mr Bosanac took on a substantial liability without acquiring a corresponding interest in the property.[15] The court went on to say, ‘the objective facts, together with the inferences properly drawn from those facts, lead to the conclusion that Mr Bosanac did not intend that his contribution to the purchase of their matrimonial home … be by way of gift to Ms Bosanac for her ‘advancement. Rather, it should be inferred from the facts … that both he and Ms Bosanac intended that Mr Bosanac would have a 50% beneficial interest in the … Property’.[16]

The court acknowledged that subsequent events do not prove the parties’ intentions when they purchased the property. However, it noted that Mr Bosanac later borrowed money on the security of the property and that supported the court’s inference that, at the time of the purchase, the spouses intended the property to belong to both of them.[17]

The court acknowledged that the most significant fact in favour of the operation of the presumption of advancement was that the property was placed in Ms Bosanac’s name. But the presumption was rebutted by the evidence.[18] That meant, of course, that Ms Bosanac held title in trust as to a 50% interest in favour of Mr Bosanac and this would enable the fiscal authorities to recover whatever claim they had against him from his interest in the property.

Although the observations of the court were made in respect of the rebuttal of the presumption of advancement, they will apply mutatis mutandis to the rebuttal of the presumption of resulting trust.

[1]    Family Law Act, S.B.C. 2011, c. 25; Family Property Act, C.C.S.M., c. F25.

[2]    The family law statutes in New Brunswick, Newfoundland, Nova Scotia, Saskatchewan, and Yukon limit the presumption of advancement to assets held by the spouses as tenants in common following the severance of a joint tenancy between them: Family Property Act, S.S. 1997, c. F-6.3, s. 50; Marital Property Act, R.S.N.B. 2012, c. 107, s. 15; Matrimonial Property Act, R.S.N.S. 1989, c. 275, s. 21; Family Law Act, R.S.N.L 1990, c. F-2, s. 31; Family Property and Support Act, R.S.Y. 2002, c. 83, s. 7. The statutes in Alberta, Northwest Territories, Nunavut, Ontario, and Prince Edward Island allow the presumption of advancement to be raised for assets owned jointly by the parties: Matrimonial Property Act, R.S.A. 2000, c. M-8, s. 36; Family Law Act, R.S.O. 1990, c. F.3, s. 14; Family Law Act, R.S.P.E.I. 1988, c. F-2.1, s. 14; Family Law Act, S.N.W.T. 1997, c. 18, s. 46; Family Law Act, S.N.W.T. (Nu.) 1997, c. 18, s. 46.

[3]    [2021] FCAFC 158 (‘Bosanac’). I am grateful to Joel Nitikman for drawing my attention to this case.

[4]    See Calverley v Green (1984) 155 CLR 242 at 248-49 per Gibbs CJ, 264-65 per Murphy J, and 265-66 Per Deane J; and see Nelson v Nelson (1995) 184 CLR 538 at 605 per McHugh J.

[5]    Bosanac, para. 6.

[6]    Vandervell v Inland Revenue Commissioners, [1966] UKHL 3, [1967] 2 AC 291 at 313.

[7]    Nelson v Nelson, supra, at 547.

[8]    Calverley, supra, at 270-71.

[9]    Bosanac, para. 13

[10]   Ibid., para. 14.

[11]   Calverley, supra, at 251.

[12]   What a delightfully descriptive word! It means ‘ambiguous or equivocal’.

[13]   Calverley, supra, at 271.

[14]   Bosanac, para. 16.

[15]   Ibid., para. 21.

[16]   Ibid., para. 22.

[17]   Ibid., para. 23.

[18]   Ibid., para. 27.

This paper is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This paper is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

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