(b) What, if any, were joint venture assets?
123There was no joint venture. Therefore there were no joint venture assets. And there is no need to consider whether Mohammad has misapplied joint venture assets. But the contest in the 2008 proceedings about whether the Marsfield property, Unit 17 and the Oporto property were joint venture assets now takes a different form. Although Amir's joint venture case has failed it is still necessary to resolve the ownership of these three properties. In the 2008 proceedings and the 2011 proceedings Mohammad says that he owns the Marsfield property and Unit 17 legally and beneficially, as does Amir, whether or not there was a joint venture agreement between the two. And Amir denies that the Oporto property is Trust property. Thus the 2011 proceedings require a decision whether these three properties were actually held on behalf of the Trust. Although the 2011 proceedings raise this issue, the factual contest behind it substantially overlaps in time and content with the joint venture contest; so it is dealt with here.
124The Court concludes in this section that the Marsfield and Oporto properties and Unit 17 were all Trust assets. Both the conversations at the time and the movement of funds support this conclusion. And Mr Russell's analysis shows that the probable source of funds for the acquisition and the discharge of the mortgage obligations for each of these properties was the revenue from the motel business.
125Mohammad has advanced substantial evidence as to what he claims are his own contributions to the acquisition of properties such as Unit 17 and the Marsfield property. This judgment does not determine the validity of all of those claims. The method adopted in these reasons is to ascertain whether Trust funds have been used to purchase these properties. If that is established, as the Court here finds that it is, it is for a subsequent inquiry for Mohammad to establish the extent of his own contributions and whether any just allowances should be made to him for his management of Trust property: Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18. The material of this kind that Mohammad advances will be more relevant to this next stage of inquiry.
126The Marsfield property. The Marsfield property was purchased in December 1999 for $410,000 in Amir and Mohammad's names as tenants-in-common. They borrowed $307,000 for its purchase. The acquisition occurred just before the Sydney Olympic Games. Mohammad concedes, and I accept, that the balance of the purchase price of $103,000 was met by using advance accommodation bookings at the motel business for the Sydney Olympic Games.
127There is no record that the $103,000 that Amir and Mohammad applied to purchase the Marsfield property was a distribution from the Trust. Nor is there any record of any loan of these funds from the Trust to Mohammad or Amir. I infer that Amir and Mohammad applied Trust funds, not their own funds, to the acquisition of the property. They did not document a distribution by formal resolution in conformity with Trust Deed clause 19. There is no indication that they were holding the Marsfield property as nominees of the Trust, in conformity with Trust Deed cl. 10, but I do not accept either Mohammad's or Amir's evidence that they acquired the Marsfield property beneficially themselves.
128The Trust's cash (from St George account 649) was utilised to meet the mortgage payments for the Marsfield property. Mr Russell's findings about the mortgage payments for the Marsfield property, which I accept, are that some $128,686.80 was paid on account of mortgage instalments for that property between 23 January 2004 and 7 January 2008, the period for which statements were available for Mr Russell's analysis. The evidence is less clear for the period before and after these dates. But the pattern of Amir and Mohammad's payments between January 2004 and January 2008 is a strong indication of their long-standing finance habit with respect to this property. Due to this payment habit and the doubtful quality of their evidence, especially Mohammad's, I do not accept their uncorroborated oral evidence that they were responsible for making payments from their own resources for any part of the purchase price or for the mortgage payments or outgoings for this property.
129If the parties request it the Court may direct an inquiry as to whether Amir or Mohammad can prove a financial contribution to this property. But that inquiry will be limited, as a result of these findings, to proving by vouchers, bank statements or other objective materials, their actual payments on account of the maintenance or acquisition of this property. The directions at the conclusion of these reasons provide for such an enquiry, if it is required.
130The Marsfield property was refinanced four times. Amir participated in some of the refinancing. These refinancings are dealt with in transactions 1, 3 and 4 in the 2011 proceedings. Each of those refinancings followed a familiar pattern. Trust funds were used over time to reduce the mortgage obligations over the Marsfield property, which was then re-encumbered by subsequent refinancing, thereby utilising the additional equity the Trust provided to borrow in Amir and Mohammad's names.
131Unit 17. Mohammad and Amir purchased Unit 17 in February 2000 and became its registered proprietors as joint tenants. Their decision to purchase as joint tenants indicates that it was purchased with some mutual domestic purpose in mind. Mohammad says the purchase price of Unit 17 was $296,000, of which Perpetual Trustees Victoria loaned $222,000 to himself and Amir. He and Amir had to find between themselves the unfunded differential of $74,000. Mohammad does not give a satisfactory account of the source of the unfunded $74,000 required to complete this purchase. I infer its source was Trust funds. The motel business was still receiving at this time substantial advance accommodation booking for the Sydney Olympics. Mohammad and Amir had already shown themselves ready to apply Trust funds received on account of Olympic bookings to the purchase of the Marsfield property. It is probable that they did the same to make up the purchase price of Unit 17. But Karami's case is that Unit 17 was acquired with a total borrowing of $369,000 from Perpetual Trustees Victoria. It appears that Amir and Mohammad applied a part (some $222,000) of this $369,000 to the purchase of Unit 17. And the balance was used for other purposes.
132Unit 17 was refinanced on three occasions. The last of these refinancings was with Bankwest in November 2005, to support the much disputed loan advance of $352,000. The Court's findings elsewhere are that Mohammad and Amir were aware of this last refinancing.
133The pattern of refinancing Unit 17 was similar to that for the Marsfield Property. Mr Russell has found that periodic mortgage instalments totalling $61,699.99 were paid from Trust funds from St George account 649, the motel business operating account. Trust funds were used to increase Amir and Mohammad's equity in the property which in turn was reduced for the benefit of Amir and Mohammad by the three refinancings. But as with the Marsfield Property, Mohammad and Amir's habit of making mortgage payments from account 649 fully accounts for all Unit 17 mortgage payments that Mr Russell can identify during the period. I infer that Mohammad and Amir followed the same payment habit for Unit 17 at other times.
134Mohammad claims he made mortgage payments for Unit 17 from his own resources and from loan funds he organised. He identifies the alleged sources of such payments between January 2001 and October 2002. But I do not accept Mohammad's evidence as to this, except to the extent that it is supported by objective materials that unequivocally show that he sourced non-Trust funds for the payments.
135The Oporto property. Amir and Mohammad purchased the Oporto property on 25 May 2001 and were at the time of trial its registered proprietors as tenants-in-common. At the time of trial there was little equity left in this property. Amir and Mohammad were in default to the mortgagee and were not making mortgage payments. It was expected that the property would be repossessed. At a short hearing after the trial on, 14 June 2013, the Court was told that indeed the Oporto property had been sold. But as the Oporto property was itself refinanced a number of times and thereby was a source of funds for Mohammad and Amir's benefit in subsequent transactions, in the 2011 proceedings, it is necessary to resolve the contest whether (as Mohammad and Karami say) the Oporto property was held for the Trust; or whether (as Amir says) he and Mohammad owned it legally and beneficially. On this issue I prefer Mohammad and Karami's case.
136I accept that Mohammad negotiated the purchase of the Oporto property in Late January, early February 2001 and settled on a purchase price of $1,000,000 with the vendor for which a deposit on $97,500 was payable on 3 February 2001. I accept, as the objective material supports, that this deposit was paid by drawing a cheque in that sum on Trading's CBA account 115, which was then in credit some $27,824. Together with the deduction of transaction fees and other small adjusting items, CBA account 115 immediately went into debit of $69,605.89 at close of business on 2 February 2001. On 5 February 2001 after deduction of what the CBA described as an "overdrawing approval fee" of $20, some $97,500 was credited to CBA account 115 bringing it back to a credit balance of $28,142.86 at the close of business on 5 February.
137These banking transactions are generally consistent with Mohammad's story as to how the deposit for the purchase of the Oporto property was funded. He says, and I accept, that after negotiating a price of $975,000 the vendors decided they would only sell for $1,000,000, which explains the odd lower deposit amount. Mohammad says, and I accept: that Trading paid a cheque of $97,500 as a deposit; and that Trading "did not have sufficient funds in its account at that time to meet that cheque when it would be presented" which was clearly correct. But Mohammad accounts for the re-crediting of account 115 on 5 February by his transferring "$97,500 from my personal savings account to [Trading's] account".
138Trading's account 115 shows a credit of $97,500 on 5 February 2001 as a "Funds Transfer - Net Bank Credit". But I am not prepared to infer these funds came from Mohammad rather from than Trading's other resources in the absence of any Trust or other record clearly showing a transfer from Mohammad. There is no such record in the evidence.
139Even if that could be demonstrated, in the absence of a resolution by Trading showing the nature of this credit I do not infer in Mohammad's favour that he was using Trading as his agent for the transmission of his own funds to the vendor of the Oporto property. In the absence of such records I do not infer that this transaction was for Mohammad's benefit rather than Trading's benefit, given the fiduciary position he was in with respect to Trading. If the funds came from Mohammad, the correct analysis of this transaction is that Mohammad made an advance to Trading which in turn used Trust funds to make a deposit on the acquisition of the Oporto property. Such an analysis of the transaction is consistent with the way that Trading subsequently funded the payment of the mortgages over the Oporto property, to which the Court now turns.
140The Oporto property was refinanced in November 2005 with Bankwest and in January 2007 with Citibank. The refinancing with Citibank is dealt with later in these reasons - "Particular 3 - the January 2007 refinancing". A familiar mortgage repayment pattern emerges with the Oporto property: the Trust's funds, sourced from Trading's St George account 649 were used to pay off the mortgages over the Oporto property to Perpetual Trustees Victoria, to Bankwest, and to Citibank. Mr Russell's analysis shows that between 23 January 2004 and 7 January 2008 total repayments of at least $470,276.89 were made to these mortgagees of the Oporto property. Mortgage payments during that period are accounted for as being sourced, as to $214,839.63, from St George account 649, as to $54,536.78 from Mohammad's personal bank account, and as to $200,930.48 from Ashrafi Holdings Pty Ltd ("Holdings") bank account.
141The mixture of the money of Mohammad and his company Holding's in these repayments to the Oporto property mortgagees does not greatly complicate matters. In the absence of any contemporaneous Trust records describing the character of these transactions, I do not infer that Mohammad made these payments to acquire an interest in the Oporto property. The Oporto property was Trust property from the beginning. As Mohammad did not keep appropriate records I am not prepared to infer in his favour, that the Trust was conceding any beneficial interest in the Oporto property to him in exchange for his advances to its mortgagees.