The Advancement presumption is the idea that where a person voluntarily transfers property into the name of another, the law presumes that it was meant as a gift, and that the transferor retains no interest in the property.
This can be seen between father and child, and husband and wife.
Advancement replaces the presumption of resulting trust.
Resulting trust exists where property is transferred to another and is presumed to hold that property for the benefit of the transferor.
Trustees of the Property of Cummins (A Bankrupt) v Cummins (2006) 224 ALR 280 (“Cummins”)
In the case of Trustees of the Property of Cummins (A Bankrupt) v Cummins, Mr Cummins was a barrister who had not paid any income tax for most of his entire working life. Due to his tax debts, he became bankrupt and his estate was administered to the Appellants [Trustees of the Property of Cummins] as trustees. Prior to this, Cummins had transferred his joint tenancy in land to his wife, the Respondent.
Advancement as a Matter of Law
The main point of law discussed by the High Court was whether the title in the property vested with Mrs Cummins in a resulting trust, or if Mr Cummins continued to be a joint tenant in the property, overturning the presumption of advancement. This would have consequences in relation to section 121 of the Bankruptcy Act and the trustee’s ability to void the transfer.
Section 121 of the BA relates to transfers of property in an attempt to defeat creditors. If the transferor transfers property in an attempt to delay or defraud the creditors or the creditors trustee then it may be a voidable transaction.
The Decision in Cummins
The Court in the first proceeding decided that Mr Cummins knew (or ought to have known) that the failure to pay income tax would cause a large tax liability, and an inference was drawn that the transfer of the property was an attempt to defeat any claim therein.
Mrs Cummins appealed to the full court of the Federal Court seeking to overturn the decision. The submissions were that there could be no inference as to a tax liability as there was no evidence before the Court of any income earned by Mr Cummins. The appeal was allowed. The reason being that for an inference to be drawn, there must be evidence before the Court. The result being, if there is no tax liability, then there is no transfer of property pursuant to section 121 of the BA.
The matter was appealed to the High Court of Australia where the Court decided that an inference could be drawn as to tax liability due to the factual matrix of the case. Mr Cummins was a QC, was a shareholder of two barristers chambers, and filed tax returns for the years 1992 to 1999 – and the level of income deduced from this information was enough to allow for an inference of substantial earnings and subsequent unpaid taxation liability.
Upon this finding, the High Court found that the transfer was void pursuant to 121 of the BA, and that a joint tenancy still existed between Mr and Mrs Cummins.
The next question that the Court had to consider was the proportion of ownership between Mr Cummins and Mrs Cummins respectively rebutting the presumption of resulting trust.
Previously, the High Court in Calverley v Green (1984) 155 CLR 242 said:
Consistently … it has been held that if two persons have contributed the purchase money in unequal shares, and the property is purchased in their joint names, there is, again in the absence of a relationship that gives rise to a presumption of advancement, a presumption that the property is held by the purchasers in trust for themselves as tenants in common in the proportions in which they contributed.
However, the Court in Cummins decided that when the proprietors are husband and wife, who are joint tenants, the presumption is that they have equal ownership, regardless of the unequal financial contributions.
This meant that the submissions made by Mrs Cummins that she was the equitable owner of approximately 76% of the property, therefore leaving approximately 24% available to the bankruptcy trustee was disallowed.
The Court ordered that the original judgment made by Sackville J be reinstated; that Mr Cummins tried to transfer the property to mitigate his losses re: the taxation liability; the transaction was void pursuant to 121 of the BA; and the property is owned in equal 50/50 shares as joint tenants.