David Lombe as trustee of the bankrupt estate of Salah Eddine Dib v Mohamed... [2011] NSWSC 1062 | Case summary | Zoe

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David Lombe as trustee of the bankrupt estate of Salah Eddine Dib v Mohamed Dib & Anor

[2011] NSWSC 1062

Supreme Court of NSW|2011-05-05|Before: Slattery J

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Source facts

Court

Supreme Court of NSW

Decision date

2011-05-05

Before

Slattery J

Source

Original judgment source is linked above.

Judgment (16 paragraphs)

[1]

Introduction 1These proceedings arise out of a family dispute. Mr Salah Dib and Mr Mohamed Dib are brothers. Mr Mohamed Dib is married to Mrs Sanaa Dib. They have seven children, the eldest of whom are Mr Hasan Dib and Mr Yousef Dib. Being members of the same family the witnesses and parties to these proceedings share the one surname. Without intending any disrespect to them I will to refer to all family members by their first names. 2The main issue in the proceedings is the nature of the arrangements made within the Dib family for the August 2003 purchase of a property in Denham Court Road, Leppington ("the Leppington property") in the names of the sons, Hasan and Yousef. Put simply, Salah claims that he advanced $69,000 to assist in the purchase upon the basis that his brother, Mahomed, and his sister-in-law, Sanaa would repay the advance to him when the Leppington property was later transferred to them from Hasan and Yousef. 3Mahomed and Sanaa dispute that any such arrangement was made or should be inferred. They accept that Salah (but together with Hasan) advanced $69,000 to contribute to Hasan and Yousef's purchase of the property for $926,000. But they say that the advance was part of a scheme to help Salah, who had changed his mind about purchasing the Leppington property, to extricate himself from his own liability as a co-purchaser of the property. They further say: that they did not make an arrangement to pay the $69,000 (or any part of it) back to Salah upon their later acquisition of the Leppington property; that in August 2003 they had no interest in ultimately acquiring the Leppington property for themselves; but that they merely responded to Salah's request for him to be removed as the purchaser of the property and that the $69,000 advance was the price of assisting him to shed his existing liability to the vendors under the contract for the purchase of the property. 4A key difference between the two sides' versions is whether in August 2003 Mahomed and Sanaa were actively interested in later acquiring the Leppington property for themselves. Salah contends that they were very interested. Mahomed and Sanaa say they were not. 5In June 2005 the two brothers, Hasan and Yousef did in fact transfer the Leppington property to their parents, Mohamed and Sanaa for a consideration of $750,000. Salah says: that this transfer fulfilled the agreed scheme originally formed in August 2003; and that, he retains an equitable interest in the Leppington property to secure Mahomed and Sanaa's obligation to repay the $69,000. Mohamed and Sanaa say, on the contrary: that they purchased the Leppington property in June 2005 just to rescue their sons, who were by then in serious and continuous default on their mortgages over the Leppington property; and that, they now have no liability to repay Salah any part of the $69,000. 6The issues are rather more complicated, both factually and legally, than this short summary. First though it is useful to identify the parties. In December 2009 Salah commenced these proceedings as plaintiff seeking a declaration of an interest in the Leppington property. He joined Mahomed and Sanaa as the first and second defendants respectively. But Salah went bankrupt in August 2010 and these proceedings were therefore stayed: Bankruptcy Act s 60(2). Salah's trustee in bankruptcy, Mr David Lombe, elected under the Bankruptcy Act to continue the proceedings. On the first day of the hearing Mr Lombe as Salah's trustee in bankruptcy, was substituted in his place as the plaintiff. 7If made out factually, the plaintiff's case raises issues of: whether the plaintiff has an equitable interest in the Leppington property founded on doctrines of resulting trust, equitable charge, or equitable estoppel; or in the alternative, whether Mahomed and Sanaa are liable to the plaintiff for breach of the alleged August 2003 contract to repay the $69,000 to Salah, when they became registered proprietors of the Leppington property. 8Despite the relatively small sum at stake in the proceedings, they raised many issues and the matter took about three days total hearing time. In the result I prefer Mahomed and Sanaa's version for the reasons explained below. The plaintiff's various causes of action fail. Therefore it has not been necessary to consider all the issues that the parties debated, upon the assumption that Salah's version of events were accepted. 9Ms N. Obrart of counsel appeared for the plaintiff, Mr Lombe. Mr A. Cheshire of counsel appeared for the defendants. 10What follows is a more detailed analysis of the parties' competing contentions, setting out the uncontested facts and making findings upon the competing versions of events from each side.

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The Mt Pritchard property 12In November 2002 Salah and Hasan, uncle and nephew, purchased the Mt Prichard property as an investment property as tenants in common in equal shares. They funded the purchase partly through a mortgage advance of $300,000 from Permanent Custodians Limited ("the Permanent Custodians Loan"), organised through Australian Mortgage Options ("AMO") . 13Salah and Hasan were jointly and severally liable on the Permanent Custodians Loan. But their liability to Permanent Custodians was divided into two separate accounts, or as the parties called them, "splits". Salah was responsible for the repayment of "Split 1", which had a drawdown figure of $145,000.00 (numbered 1085870/1); and Hasan was responsible for Split 2, with a drawdown figure of $155,000.00 (numbered 1018750/2). The split of the $300,000 borrowing between Hasan and Salah was for the borrowers' convenience. The terms of the Permanent Custodian loan allowed Permanent Custodians to place the burden of repaying the whole $300,000 on one or other account holder. 14After Salah and Hasan completed the purchase of the Mount Pritchard property, Hasan received $10,000 by arrangement with Salah. This explains the unequal repayment obligations under the facility. But the precise reasons for this advance of $10,000 to Hasan are in dispute. Salah says that Hasan wanted $10,000 as a loan for expenses relating to his engagement. In contrast Hasan says that he was concerned that he would miss out on the first home loan buyer's grant, because Salah was not a first home buyer. According to Hasan, Salah's solution to this was that they could borrow $10,000 more than the purchase price, which Hasan could enjoy as an incentive. The precise differences in the evidence between the parties are not material on this issue. But Hasan did receive the $10,000, which accounts for the different amounts in Split 1 and Split 2 of the loan. 15Hasan and Salah disagree which one of them was the author of the idea to purchase an investment property such as the Mount Pritchard property. But their stories reach the same conclusion: they agreed to buy a tenanted investment property together. 16Salah says that in October or November 2002 Hasan said to him:- "Uncle, I am engaged. I want to buy a property, but I am unable to borrow all of the money on my own. Will you go in with me? When I can prove an ability to service the loan, I will buy back your share, you will make a profit as the price will go up". Thus the impression that Salah gives is that Hasan initiated the idea in order to accelerate his acquisition of capital, in light of his recent engagement. 17Hasan's perspective is quite different. He says that Salah pressed upon him the purchase of the Mount Pritchard property saying, "there is a property in Mount Pritchard. It's a bargain - we should buy it". 18In my view, both versions are partly right. Hasan was interested in looking for an investment property as he was then planning to get married. But the older and more experienced Salah actually found the property, determined that it was "a bargain", and was insistent on that purchase. 19Having seen both Salah and Hasan in the witness box, it is obvious to the Court that Salah had the greater expertise in real estate investment. This is to be inferred not just from Salah's seniority. He was about twice Hasan's age. Salah, who had owned at least three investment properties and was studying a Graduate Certificate of Business Management whilst working as an office manager for Dib Lawyers, presented a man far more familiar with the ways of the business and investment world than Hasan. 20Salah did not just find the Mount Pritchard property but he arranged another aspect of the transaction, its funding through the Permanent Custodian's loan. Salah had contacts with Australian Mortgage Options, who sourced the loan. 21The Mount Pritchard property purchase settled on 13 November 2002, when the $10,000 was made available to Hasan. Salah's willingness to arrange for this sum to be applied for Hasan's benefit is an indicator that he, Salah, thought that he would receive collateral benefits from the transaction. Other than as a simple act of additional generosity between uncle and nephew, it is difficult to explain Salah's agreement to this money being made available to Hasan. Salah expected to benefit from the transaction through a half share of the rental income and the capital gain on his half share of the property after it was sold, or after Hasan acquired Salah's half share. 22I accept Hasan's evidence that Salah explained to him that the Mount Pritchard property should generate enough rent to pay the mortgage and that Salah's lawyers would be able to arrange a contract so it would not be necessary to pay a deposit. I accept Hasan's evidence that prior to his deciding to buy the Mount Pritchard property with his uncle, Salah, that Hasan said to Salah,"I don't know this business like you do so I will just follow your lead. It all sounds good. Maybe we can sell it soon after purchase for a quick profit". In the end they agreed to be responsible each for half of the loan repayments and to share the rental proceeds equally. I also accept Hasan's evidence that the lawyer who acted on the conveyance, Mr Nasseh Aouad was unknown to Hasan before this purchase; that he was Salah's lawyer before that and that Salah introduced Mr Aouad to Hasan. 23Salah and Hasan found tenants for the Mount Pritchard property but, in fact, some small loan repayments were still required. The Century 21 Real Estate Agency in Fairfield divided the rent from the property equally and forwarded it on to Salah and Hasan. I accept Hasan's evidence that he left it up to Salah to decide when they could sell the property to make a profit. But Salah always declined to sell. Permanent Custodians eventually repossessed and sold the Mount Pritchard property in November 2009.

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Finding the Leppington Property 24The parties agree that they began to discuss the Leppington property purchase in about July 2003. Beyond that they mostly disagree about how they found the property. Each attributes the idea of the purchase to the other. 25Salah says that Sanaa and Mohamed approached him with the idea of purchasing a property in Dennam Court Road, Leppington and that they formulated the idea that Hasan would be the purchaser because of Mohamed's poor credit rating. Salah has Sanaa saying to him in Mohamed's presence:- "There is a property up for sale in Denim Court Road which we want to buy and we think it is a good purchase. Would you come in as a buyer as you have other properties to borrow against to make out our application to buy this property stronger and you would also contribute money towards the purchase price. Hasan will be the purchaser as Mohamed has a bad credit rating. The property will be transferred from Hasan to Mohamed when Mohamed has a better credit rating". Salah says that in answer to this that he agreed to have a look at the property. Salah also says that when he saw the Leppington property he agreed to buy it. 26Some support for his view emerges from objective but limited evidence about an aspect of Mohamed's financial circumstances. A letter from Trendwest South Pacific Finance Pty Limited ("Trendwest") addressed to Mohamed, dated 25 September 2003, refers to his "default on your financial obligations and forfeiture proceedings which were commenced on 25 August 2003". Trendwest does not appear to be a credit rating agency but the provider of time-share holidays or some similar investment facility. All this letter shows is that some, although not all, aspects of Mohamed's obligations to Trendwest remained unsatisfied. 27Hasan, Mohamed and Salah's version is quite different. Hasan says that Salah approached him to buy the Leppington property, which was near a childcare centre that Salah, Mohamed and Sanaa were then running in partnership together. Hasan explains that Salah raised the idea with him in the following terms:- "There is a property near the childcare centre which is going for auction soon. It will sell at a bargain - we should buy it. Your father has been saying for a while he wants to help you and your brother start investing in property. Why don't you see if he will loan you money from the proceeds of Condell Park?" At that time Mohamed and Sanaa lived with their children at a residence in Condell Park which they were proposing to sell. 28According to Hasan, Salah suggested the Leppington property would sell for about $900,000; that each of them would need to raise $90,000; and that would bring the amount not requiring to be financed to $180,000, allowing them then to borrow 80 per cent of the anticipated purchase price. Hasan says that when he expressed doubts about his father's capacity to borrow the $90,000 required, Salah raised the suggestion that another $50,000 could perhaps be raised by refinancing the Mount Pritchard property. 29On Hasan's version in August 2003 he and Salah inspected the property which, with Hasan's limited investment experience, he thought was worth buying. After the inspection Hasan's version is that Salah said to him in response to Hasan's enquiry about what the property was worth: "Over $900,000 but it won't sell for more than that. We should attend the auction anyway. I spoke with the agent and they will accept a 5 per cent deposit at auction and a long settlement period so that we can arrange the rest of the 20 per cent. I will pay the 5 per cent at auction." 30There are many reasons to accept Hasan's account of these pre auction conversations rather than Salah's. Principal among those reasons are the following. 31First, Salah has all the dealings with the real estate agent for the Leppington property, Mr Greg Andison. There is no evidence of Hasan being the point of contact with the real estate agent, or of Mohamed or Sanaa taking that role upon themselves either. Salah says, he really was a passenger in Mohamed and Sanaa's ambition to buy this property, which they had selected, which they thought was a good purchase and for which they were looking for a co-investor. It might be expected if this were right that one of Hasan, Mohamed or Sanaa would take the lead role with the agent. Their passivity seems difficult to explain on Salah's version. 32Secondly, both Sanaa and Mohamed support their son's version. I prefer their account on this over Salah's. I accept Sanaa's evidence that in July - August 2003 she became aware that Salah and Hasan were considering buying a second investment property and that they took her to visit the Leppington property to assist in assessing it. It was logical that Hasan's parents would be involved to some extent on Hasan's version, because there was a prospect that they would be asked to loan him $90,000. But in my view Sanaa was also invited to inspect the Leppington property because Hasan and Salah assessed her to be an astute judge of property value. Her business experience as a childcare centre operator and a certain practical shrewdness were evident in the witness box. Sanaa's evidence, which I accept: was that Hasan told her that he and Salah were proposing to purchase the Leppington property; and that she offered the informal view to her brother in law and her son that if they could secure it for $800,000 "it would be a good buy". I accept Sanaa's evidence that she and Mohamed did not approach Salah to purchase the Leppington property. And I accept her evidence that she did not indicate to Salah that she and Mahomed were proposing to become purchasers later. 33Thirdly, the course of events objectively favours Sanaa and Mohamed's version. Between an open for inspection in July 2003, when Sanaa looked over the property and the auction on 23 August 2003, the evidence from Sanaa, which I accept, is that she did not see the property at all. This is hardly the conduct of a mother who had selected the property and was planning ultimately to purchase and to move into it with many of her and her husband's seven children. Both Sanaa and Mohamed appeared to the Court to be people who would ordinarily take a close interest before auction in any property that they wanted to purchase as a family residence. 34Fourthly, Mohamed's evidence, which I also accept, is that he did not see the property before the day of the auction itself, 23 August 2003. This too is not at all consistent with Salah's version. Mohamed did not strike me as either so negligent of his own best interests, or so ready to delegate everything to his wife that he would fail to inspect his intended home before auction. 35Fifthly, Salah's evidence about his introduction to the Leppington property in the proceedings does not sit well with an affidavit he swore in the caveat proceedings on 1 October 2009 (Exhibit 2). In that affidavit Salah gives an account of Hasan approaching him about the Leppington property with the proposal to increase the loan on the Mount Pritchard property. In the caveat proceedings affidavit he does give an account of his discussion with Mohamed and Sanaa which is in similar terms to the account given in his affidavit in these proceedings, but the affidavit entirely omits the earlier conversation with Hasan. Salah did not give a very satisfactory account of why this earlier conversation with Hasan was left out of his affidavit in these proceedings; certainly not an account which was at all convincing to the Court. 36Indeed, the subject of Salah's introduction to the Leppington property was a point of particular weakness in his evidence. At one point Mr Cheshire cross-examined him about how the idea of funding the Leppington property emerged, and did so in the following terms:- "Question: So did Hasan ever saying anything to you like I would like you to increase the loan on the Mount Pritchard property to raise an additional sum of about $70,000 to be used by [Yousef] and me to purchase the property for our parents at [the Leppington property]?" 37Salah responded to this question by saying "No" the problem is though that this is the very conversation that he deposed to having with Hasan in the affidavit he, Salah, swore in the caveat proceedings. His attempts to explain his denial of what he himself had sworn in the caveat proceedings were very unsatisfactory.

[5]

The Purchase of the Leppington Property 38The auction for the Leppington Property took place on 23 August 2003. Some basic facts are not in dispute in the parties' conflicting accounts of the auction day. Salah, Hasan, Mohammed and Sanaa were all present. Hasan was the successful bidder in the sum of $926,000.00. Mohamed was asked to but did not provide a cheque to the auctioneer for the $46,300 deposit. Instead, he wrote out a cheque for $17,500. Hasan, Salah and Sanaa all signed the contract for the purchase of the Leppington property. Between the auction and settlement, Salah was omitted as a purchaser in further contentious circumstances that will be considered in the next section. 39Of the two competing versions of the events on 23 August 2003 Salah's is the most surprising, in part because of its brevity. Salah's whole account in his principal affidavit of 23 February 2011 of what must have been an eventful day merely says: that he, Hasan, Mohamed and Sanaa attended the auction; and that he, Hasan and Sanaa signed the contract. The executed front page of the contract shows just that. 40Salah added a little more in his affidavit in reply. He says: that he went to the auction without his cheque book as he did not intend to pay any deposit monies; that he had not been asked to pay any part of the deposit; and, that it was not his intention to do so. He says that arriving without a cheque book was consistent with his professed lack of personal interest in the property. 41Hasan, Sanaa and Mohamed give a more detailed account of that rather hectic day. I prefer their version over Salah's. What follows below my findings which are a blend of what each of the three says, based upon all of their evidence, which was generally consistent among themselves. Hasan's version is the most complete and it is his narrative that completes the other versions. No part of what follows is expressed as any one individual's version but it represents my findings as to what happened that day, based on Hasan's, Sanaa's and Mohamed's versions. 42An important factor in deciding between the competing versions about the auction is the simple question of how each of the parties arrived there. I accept that there were no plans for Mohamed and Sanaa to attend the auction until Hasan telephoned them from the auction the day it was being held. Hasan explains that soon after he and his uncle arrived on site and registered as bidders that his uncle said to him, "I just realised I haven't brought my cheque book". Puzzled as to how they would then be able to pay the deposit, Hasan says that Salah suggested to him, "you had better ring your father and see if he can come along and bring his cheque book. We can put him on the contract until we make up the deposit some other way". 43Hasan then rang his mother, Sanaa. He asked her and Mohamed to come down to the site because the auction was "about to start" and Salah "has left his cheque book at home". Sanaa immediately rang her husband and asked him to come "with me to watch the auction". Before he left she rang him again and said "your brother has forgotten to bring his cheque book to the auction. They need you to bring yours in case they buy the property". Being not far away they arrived at Denham Street, Leppington shortly before the auction commenced. 44When the auction started Hasan did the bidding for both of them so that he could get experience. Hasan, Sanaa and Mohamed say that Salah was bidding against Hasan. Salah denies this and on this aspect of the events of 23 August 2009 I accept his denial. Hasan does not suggest that Salah was bidding against him. Only Sanaa and Mohamed do this. But their evidence about Salah in this respect is coloured by the falling out that they had with him about two years later. This rift is detailed below. At least it does seem to be common ground that Hasan and Salah were not standing together during the bidding. This seemed to contribute to the property being knocked down at a higher price than Salah had expected. 45When the auction was over Hasan was the successful bidder at $926,000, which would imply the need for a 10 per cent deposit of $92,600 or a 5 per cent deposit of $46,300. Salah expressed to Hasan after the auction his opinion that the property had "sold for much higher than we had expected" from which he concluded, "I think we need a third buyer". He suggested that Mohamed become a purchaser on the contract and pay 5 per cent of the purchase price ($46,300) that day. 46This family scheme needed to be tested against what the auctioneer was prepared to countenance. The draft contract published before auction provided for a 10 per cent deposit in accordance with the Law Society Contract for the Sale of Land - 2000 edition. I accept Hasan's evidence that he and Salah then had a conversation with the auctioneer about the deposit that was required. 47Salah confessed to the auctioneer that he had not brought his cheque book and asked to "pay on Monday". He was greeted with the predictable response, "no way", followed by the auctioneer's request for "5 per cent now". Salah negotiated with the auctioneer to give him a cheque from Mohamed for 5 per cent of the purchase price, provided the auctioneer did not bank it until Monday, when it could be replaced with another cheque from Hasan and Salah. 48But, when approached, Mohamed resisted falling into line with this arrangement. Salah complained that the price was too high and explained to Mohamed that a third person was needed on the contract because Hasan and he could not finance it alone. Added to this was the small problem of the forgotten cheque book. Salah proposed that Mohamed put down the 5 per cent deposit perhaps rationalising what was by then a legal necessity, "at $926,000 it's still a good buy". Mohamed protested that his brother was imposing on him. Salah wisely admitted a mistake but made clear, "I can't buy half this property". It was in my view Mohamed who then came up with the idea that Yousef would be a co-purchaser. He seemed to be more comfortable with the idea of putting in some funds, if he was advancing the interests of he and Sanaa's two eldest sons, Hasan and Yousef. But Mohamed made clear that he could not afford to pay $46,300 then and there, so the agent should not be allowed to bank the cheque. 49Unsurprisingly the agent insisted that only persons present at the auction could sign the contract and become parties. Yousef was rejected as a purchaser because he was not there. So Salah proposed putting someone else's name down on the contract, provided they could sign that day. He suggested that another purchaser could be substituted later. I accept that what then happened in this little family gathering at the auction was: that Salah was still openly enthusiastic about the investment; that Mohamed agreed to loan Yousef and Hasan 20 per cent of the purchase price; and that advance could occur when he and Sanaa had sold the Condell Park property. This Mohamed and Sanaa thought would start both of their sons in investing together. 50The arrangement was that the two sons, Hasan and Yousef, would become one-third investors in the Leppington property with Salah. Together they needed to provide 20 per cent of the purchase price or $185,200, before settlement in about 12 weeks, anticipating as they did that financiers would be unwilling to lend more than 80 per cent of the purchase price. Mohamed agreed to lend each of his sons their respective one third (about $62,000) each, using the proceeds of the Condell Park property which was due to settle in November that year. I accept that Salah then added, "don't worry - if there is a shortfall, Hasan and I will re-finance the Mount Pritchard property. We can raise about $70,000 from that". 51Yousef agreed by telephone to go along with the family consensus. Salah, Hasan and Sanaa signed the front page of the contract and the special conditions. Sanaa cannot recall how her name came to be on the contract. But I infer that as a result of making the agreement that I have accepted she agreed to be a nominal purchaser until Yousef's name could be substituted for hers. But Mohamed could not provide a cheque for the full 5 per cent deposit, so Salah asked the auctioneer to accept a cheque for $17,500 instead, on the basis that it would not be banked until Monday anyway. 52I accept Hasan, Mohamed and Sanaa's version over Salah's. First, there is a very natural verisimilitude in their evidence. Sanaa gives evidence of calling her husband and warning him of the sudden and urgent need to attend the auction. She gives an account of having the following conversation with him, one that contains its own element of marital realism:- "Sanaa: 'Your son has just called from the auction. He wants us to attend.' Mohamed: 'I don't want to do. I am at work and I'm busy'. Sanaa: 'You have to go, your son has asked for your help. Salah has forgotten his cheque book and he also asked me that you attend and bring your cheque book in case he is successful'." Mahomed then agreed to attend with Sanaa. 53Secondly, Hasan's version does not really give a sensible account of the chaos of the day and why he ended up as a purchaser. If Mohamed had a poor credit rating there is still no strong reason for Salah to be involved as a party to the contract. Sanaa and Hasan who were both there could have signed as purchasers. Rather, Hasan's signature on the contract points to his having an interest in purchasing the property as an investment at that time. Nor does Salah's version give a credible account of how Mohamed came so unprepared for the purchase of his own residence that he was only able to supply a cheque for $17,500. Mohamed did not strike me as that irresponsible. In my view, he was merely reacting to a wholly unexpected crisis that Salah had created for him.

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The Leppington Property - Between Auction and Settlement 54Salah precipitated another crisis after the auction. I find that in late September or early October he telephone Hasan and said, "I don't want to buy that Leppington property anymore. Why don't you and Yousef buy it yourselves?" Hasan was very reluctant to purchase the property on his own. 55Hasan's concern is understandable. By that time Salah had organised a deposit bond with GE Deposit Guarantee, and was financially supporting the transaction. On 27 August 2003 Salah, Sanaa and Hasan together had underwritten the first GE deposit guarantee in the sum of $46,300. That had been replaced on 17 November 2003 with a GE deposit guarantee for $75,000, which together with Mohamed's cheque for $17,500, made up a total of $92,500, or 10 per cent of the purchase price. 56After the auction Hasan and Yousef were active in looking for tenants for the property and looking for funding. But finding tenants who would pay enough to cover the outgoings was difficult. So to make the financing work, by November Mohamed and Sanaa agreed to move in and pay Yousef and Hasan $350 rent per week. 57Mohamed and Sanaa also offered to contribute funds from the sale of their Condell Park home but by late November 2003 Salah was becoming insistent saying to Hasan, "I cannot purchase this property. I need to be released". 58But Hasan responded pointing out perhaps the obvious: that Yousef and he could not afford this on their own; and that they could not get finance, nor could Mohamed. He then put to Salah, "I would need finance and about $70,000, if Yousef and I are to purchase alone". I accept Hasan's evidence that Salah said to him the following at this time: "Salah: 'I know I have left you in the lurch here. I will make sure that my friend Robert Projeski from Australian Mortgage Options will get you finance. As for the additional monies, I will agree to extend a new facility secured over Mt Pritchard for you to use. You can pay interest only on that. We will set it up in your name and you can make minimal repayments direct to the mortgage[e]. If I do all that, will you agree to release me as a purchaser?'" 59Hasan agreed and Salah set about arranging the facility and the documents. Salah rejects this account of his exit from the contract. But I do not accept his evidence on this. That evidence was that Mohamed and Sanaa approached him and said "we have now decided that we would like to buy the property only for us, as we want to keep it as the family home and we don't want any partners in the family home. Yousef and Hasan will buy the property and then transfer it to us when Mohamed's credit rating is better." Salah says he went along with this. 60Apart from my acceptance of Sanaa and Mohamed's denial of Salah's version, it does not make much sense. If their motivation was to keep the property as "the family home" despite the temporary inconvenience of Mohamed's credit rating, then it is difficult to see why Sanaa's name did not stay on the title. Her removal from the title in November 2003 is inconsistent with Salah's version. 61Moreover, Salah's version is inconsistent with an attendance note of the vendor's solicitors which records Salah as initiating his removal from the title. The undated note says, recording what appears to be a conversation with the real estate agent about problems with the settlement, " Andison told me, having spoken to the purchaser, that the initial problem was that the uncle who was one of the purchasers got cold feet and tried to pull out of the deal causing great friction within the family. They got a replacement, the nephew but then the uncle said he wanted to come back in because of the Government's announcement regarding the release of the Edmondson Park area ". 62Just why Salah was the moving party in pulling out is something of a puzzle. It is not something that the Court has to decide. But there is evidence that I accept that Salah obtained a valuation of the Leppington property for himself after the auction. I infer that Salah thought on reflection after the auction that they had paid too much for the property. But I reject Mohamed and Sanaa's more conspiratorial theories that Salah was secretly bidding against them at the auction. That makes no sense and I accept Salah's denial of the allegation, as correct. 63To give effect to the new arrangements to drop Salah out of the purchase, on 11 November 2003, Hasan and Salah executed with Permanent Custodians the 'Variation to Loan Contract Additional Advance' document that created Split 3 for $69,000. Hasan then became principally liable for the repayment of Split 3, as well as the original Split 2. 64Hasan received net proceeds of $66,504.36 from Split 3 together with other funds. He used that money to make up a bank cheque for $70,000 that was used on settlement of the Leppington property purchase. By prior arrangement the same day the vendors and the three original purchasers together with Yousef entered into a deed of novation substituting the new purchasers. 65On 5 December 2003 all family members and the vendors of the Leppington property executed the novation deed. The new purchasers, Hasan and Yousef also executed a replacement contract for the sale of the Leppington property. Upon settlement Yousef and Hasan became the registered proprietors of the property and Sanaa, Mohamed, Hasan and the entire family moved in; they have lived there ever since. 66Shortly after settlement the solicitors for the purchasers, NA Lawyers, wrote to Hasan on 10 December 2003, reporting on the final settlement figures. The plaintiff seeks to make some use of this letter, addressed to Mohamed and Sanaa. It was said to found an inference that they saw themselves as the ultimate beneficiaries of this purchase even at that early time. But I accept Hasan's evidence that he instructed his lawyers to send all correspondence care of his parents who by then had moved in to the Leppington property. They had also contributed, or were proposing to contribute, the proceeds of sale of Condell Park about that time. The letter does not assist the plaintiff's case.

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From Settlement to June 2005 67Hasan and Yousef soon had difficulties in repaying the Leppington property mortgage after settlement. Hasan could not meet his obligations on both Splits 2 and 3 on the Mount Pritchard loan. The mortgagee issued default notices to them. So, Sanaa and Mohamed intervened and helped their sons with their mortgage repayments in addition to paying rent for the family's occupation of the property. There was no written agreement requiring Mohamed and Sanaa to make the mortgage repayments. Nor was there a residential tenancy agreement between them and their sons accounting for their occupation of the property. I accept that this was just an informal family arrangement of parents helping children. 68But their repayment difficulties escalated. In mid 2005 Hasan placed the Leppington property on the market for $950,000.00. The estate agent informed Hasan that: the property was subject to a water easement and a one in one hundred years flood risk; was difficult to insure; and the highest offer received for it was only $800,000.00. Taking this information into account, after the expiry of the agent's term of engagement, Hasan and Yousef agreed to sell the property to Sanaa and Mohamed. 69This came about when Yousef and Hasan went to Mohamed and Sanaa and said, "We can't keep this up. We will end up losing the property. The most we could sell for would be around $800,000". After a few days consideration Mohamed and Sanaa came back to them and said, "We need to find somewhere to live permanently. We will purchase Leppington from you and Yousef to take away the pressure on the repayments. We are making most of the payments now anyway". Hasan and Yousef then agreed to sell the property to them for $750,000. Mohamed and Sanaa funded the purchase of the Leppington property with a mortgage for $808,000 from the Bank of Western Australia. They borrowed the entire purchase price, stamp duty and conveyancing costs. Settlement took place on 17 June 2005. 70I accept that Sanaa and Mohamed purchased the Leppington property as a matter more of necessity than as their first choice of home. They were content to use the property as their primary residence in order to save their sons from financial ruin. Mohamed and Sanaa did not tell Salah of the transfer to them of the Leppington property at the time. They say, and I accept, that there was no reason for them to do so. Salah says that they deliberately omitted to inform him of the transfer. I do not accept his evidence on this. 71First, Sanaa and Mohamed's version of what happened between settlement and June 2005 is much assisted by the fact that both of them give similar and credible accounts of conversations between themselves about making their sons an offer to buy the house for the amount that the real estate agent had indicated to them was the likely selling range, in the range of $750,000 to $800,000. I accept Mohamed's evidence that Hasan seemed to be relieved when told of their offer saying, "that would be good. It should be enough for me to pay off the mortgage". 72Secondly, there is another, perhaps more bitter, reason why Sanaa and Mohamed's evidence should be accepted. They had a detailed and in my view accurate, memory of how they sourced funds for their sons' purchase, to assist their sons' mortgage repayments and to pay rent. All these funds came from two sources. One was the proceeds of sale of the Condell Park property. But the other was from funds which they had reserved to build a house on a block of land close to a child care centre in which Sanaa and Mohamed were involved in Camden Valley way, Leppington. 73Sanaa's evidence about this was given with passionate conviction and was evidence that I entirely accept. Her story explains both her family's falling out with Salah and provides a further basis for the Court to conclude that the Leppington property was not where Mohamed and Sanaa chose to live. Her story is this. Sanaa and Mohamed were involved in a childcare centre in Camden Valley way, Leppington, which was owned and operated through a private company AHJ Pty Limited. Mohamed and Sanaa individually owned 90 per cent of the share capital of AHJ Pty Limited. Salah and Mohamed also owned 10 per cent of the share capital, jointly. Sanaa says, and I accept, that it was her lifelong dream to run a child care centre and a further goal to build a house on the block of land where the child care centre was situated, and in which she and Mohamed and their children would live. Due to differences with Salah the child care centre business collapsed. There was little point in building a house on the other block of land, apart from the difficulty of funding that due to the financial consequences of liquidating AHJ Pty Limited. Once Sanaa gave up her goal of building a family home near the child care centre, she gives a realistic account of deciding that those funds were then availale be used to support Hasan and Yousef. 74Thirdly, Sanaa explained another convincing reason for she and Mohamed giving financial assistance to Hasan. Due to difficulties in his personal life and the loss of his job, Hasan had become introspective. I accept that his parents thought it was especially important at this particular time that the Leppington property not be sold because of Hasan's inability to make mortgage payments. I accept that this was part of Mohamed and Sanaa's motivation for offering to purchase the property at the time that they did. 75Given the complexity of Mohamed and Sanaa's motivation for buying the house, I also accept Sanaa's evidence that she did not believe she was retaining any particular advantage by purchasing the property for $750,000 even though it had been purchased for $926,000 two years earlier. Sanaa says, and I accept, that she never believed the property was worth anywhere near $926,000. Her view was, and I accept, that because of the contributions they had already made to mortgage payments (although these do not seem to have been clearly quantified anywhere in the evidence) she believed that she was paying too much for the property anyway. 76Fourthly, another reason to accept Mohamed and Sanaa's version is that they did not show any particular attachment to the property after they acquired it. In 2006 they listed the property with Dunn & Horne Real Estate Pty Limited for sale for about $1 million. In the result the property was not sold. 77Before their purchase of the Leppington property, Sanaa and Mohamed had contributed $140,000 to Hasan and Yousef's purchase of the property together with an unquantified number but, at least several thousand dollars in mortgage payments.

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From June 2005 until Commencement of these Proceedings 78The parties also dispute what happened when, after June 2009, Salah found out that Hasan and Yousef had transferred the Leppington property to Mohamed and Sanaa. It seems that he made this discovery at some stage in 2006, although the precise time is not clear on the evidence. By this stage though Mohamed and Sanaa were in open hostility to Salah about the collapse of the child care centre business. Sanaa says, and I accept: that by 2005 ordinary family communication was not occurring between Salah on the one hand and Mohamed and Sanaa on the other; and, that they were both represented by solicitors through whom any necessary contact took between them took place. 79It is in part for that reason and also because I accept Sanaa and Mohamed as witnesses of truth that I reject Salah's account that when he found out about the transfer of the Leppington property Mohamed said to him, "I do not know how you found out about the transfer of the Leppington property. We will make up any arrears and pay off the loan in the future". He says that he accepted this and indicated that he was happy to continue making payments himself which he did until about mid 2008. Salah's account is improbable. His account makes Mohamed's statement sound like an admission that he (Mohamed) should not have transferred the property without telling Salah. Mohamed did continue to pay Hasan's arrears on the Mount Pritchard loan. But in my view that was merely part of Mohamed's and Sanaa's parental scheme to keep Hasan financially afloat in his own best interests. I draw no inference against Mohamed and Sanaa because of their continued payment of the Mount Pritchard loan. Their conduct is explained on another basis. 80I accept Mohamed's evidence that he had a conversation in mid 2005 with Salah that explained his continued making of the payments on Splits 2 and 3 of the Mount Pritchard loan. Mohamed says that his brother Salah said to him in about mid 2005, "Hasan is still over $6,000 behind on the loan on Mount Pritchard. The bank is going to repossess the property. Can you please make the payment for your son so we do not lose the property?" Mohamed says, and I accept, that following that discussion Mohamed attended the Burwood branch of Westpac with Salah and paid approximately $6,500 towards the Mount Pritchard loan with Permanent Custodians. 81On 17 August 2006 Salah caused a caveat to be placed on the Leppington property. In schedule 1 the caveat claimed an estate or interest in land described as "constructive or resulting trust". The facts stated in the caveat referred to the Permanent Custodians mortgage of 11 November 2002 and stated:- "Monies borrowed on mortgage by Hasan and Yousef Dib to purchase the Leppington property. Hasan and Yousef conveyed Leppington property to the registered proprietor without knowledge or consent to the caveator. The registered proprietor always had knowledge of the caveator's interest." 82Mohamed continued to pay the arrears on Splits 2 and 3 on the Permanent Custodians loan until about mid 2008 when the loan again fell into final default. The mortgagee then took possession of the Mount Pritchard property. 83On 14 September 2009 Salah was sent a Real Property Act s 74J, Notice to Caveator of Proposed Lapsing of Caveat by post. Salah disputed the Notice and commenced caveat proceedings and then these proceedings to establish his claimed interest in the Leppington property. 84As a consequence of Hasan and Salah's continuous default on the Permanent Custodians loan, about 20 November 2009, the mortgagee, exercised its powers of sale and sold the Mount Pritchard property for $292,000.00. At the time of this sale the three accounts with the mortgagee had a total outstanding balance of approximately $415,000.00.

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The Claim in Contract 86The plaintiffs submit that Salah's version of the July 2003 conversations, if accepted, is sufficient to found the conclusion that there was an agreement between Salah on the one hand and Mohamed and Sanaa on the other that Mohamed and Sanaa would repay Split 3 at the time that the Leppington property was ultimately transferred by Hasan and Yousef to Mohamed and Sanaa. 87There is no foundation for the plaintiffs claim in contract principally because I do not accept Salah's version of these conversations with Sanaa and Mohamed, before and after the auction. But there are other problems with the claim that would arise even if I did accept Salah's version of these conversations. 88First, the premise of the cause of action in contract is that Sanaa and Mohamed promised they would repay Split 3 at the time they took a transfer of the Leppington property. The difficulty with this claim is that, curiously, even on Salah's version neither before the auction nor in the conversation between auction and settlement do Mohamed and Sanaa actually make a promise that they will repay Split 3 when Yousef and Hasan transfer the property to them. Rather, it is a vague promise that Mohamed is going to obtain "enough money to cover the refinance and pay back the loan [Mount Pritchard Split 3]". But just when this would happen is not clear on Salah's version. Thus, in my view the contract claim fails both on Mohamed and Sanaa's version (which the Court has preferred) and on Salah's version. 89Second, a contract which may be inferred from Salah's version, is that Mohamed and Sanaa, if they were to repay Split 3 at the time they took a transfer of the property, were only undertaking to do so if that could be done out of the proceeds of sale. The promise made, even on Salah's version, did not necessarily extend to repaying $69,000 to Salah in addition to a purchase price of $750,000. 90Third, it is difficult to understand on Salah's version why he was quite so keen to give evidence about a promise to repay Split 3. Hasan was primarily liable on Split 3, not Salah. Although it can be conceded that Salah's interest in the Mount Pritchard property would bear an ultimate liability to Permanent Custodians in the event that Hasan was unable to repay Split 3. A more probable scenario is that he would have insisted that Hasan, either himself, or in conjunction with Yousef or his parents, would ensure that Split 3 was paid off. 91This also leads to the final problem in the plaintiff's contract claim, but which it is not necessary to decide. The effect of what Permanent Custodians did when it took possession and sold the Mount Pritchard property for $292,000 is that it: applied the $280,864 net proceeds of sale to the mortgage; leaving a deficiency of $148,000 over all three splits; but appropriated the sale proceeds to pay Split 1 and 3 down to zero, so there was no money owing in respect of Split 3. Permanent Custodians received funds of $141,212 from a mortgage insurer, Gemworth, which Permanent Custodians then applied to reduce the balance of Split 2 to zero. 92This meant that, subject to Gemworth exercising its rights of subrogation against Hasan and Salah jointly, there would be no loss suffered in any event. The evidence that Gemworth was actually likely to pursue a claim against Salah and Hasan is not persuasive. Even if it did, when rights of contribution between Hasan and Salah were taken into account, Salah would only potentially be entitled to 50 per cent of the amount claimed.

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The Claim in Constructive Trust 93The plaintiff submits that Salah's own financial contribution to the purchase price of the property is a matter from which it can be inferred that he and Mohamed and Sanaa had a common intention that he obtain a beneficial interest in the Leppington property. It is submitted that Salah could not reasonably be expected to have contributed $69,000 to the purchase price of the Leppington property if he were not to have an interest in it; afterall, it is said, he was left out of pocket and has subsequently gone bankrupt. 94The plaintiff submits that the Leppington property and its proceeds of sale are held on constructive trust for Salah (and now his trustee in bankruptcy) for the amount contributed plus interest from the date of contribution on the basis of a common intention constructive trust described in cases such as Shepherd v Doolan [2005] NSWSC 42 and Yan v Yang [2008] NSWSC 754. 95Equity will intervene to prevent the unconscientious denial by the legal owner of another party's rights where parties have agreed or it was their common intention that the claimant should have an interest in the property owned by the other and the claimant acted in his or her detriment on the basis of that agreement or common intention: Shepherd v Doolan [2005] NSWSC 42 at [31]. In a common intention constructive trust, a contribution, direct or indirect, to the cost of acquisition of the property is a matter from which an intention that the claimant have a beneficial interest in the property might be inferred; and, this is to be distinguished from the rebuttal of a presumption of beneficial ownership which arises under doctrines of resulting trust, where the presumption is also that the beneficial interest is in proportion with the contribution to the purchase price: Shepherd v Doolan [2005] NSWSC 42 at [38]. It is essential too that the claimant show that the claimant acted to his or her detriment in a way referrable to the agreement or intention that the claimant have an interest in the property: Shepherd v Doolan [2005] NSWSC 42 at [40]. 96Before dealing with the merits of this argument. I observe that this claim is advanced in the alternative to the plaintiff's contract claim. A contract claim that Salah be repaid the monies advanced is inconsistent with the claim that as a result of the advance of monies he had an interest in the Leppington property. Advancing inconsistent claims is not unknown to the law and the primary way the plaintiff put his case is as a claim for constructive trust, although these reasons have dealt with the contract claim first. 97There are many problems with the plaintiff's constructive trust claim. Principal among them are the following. 98First, the Court has found that Salah and Hasan had a conversation about the raising of further monies on the Mount Pritchard loan to allow the Leppington property to complete. This was not agreed between Salah on the one side and Mohamed and Sanaa on the other. Moreover, the contribution that came from Split 3 went into Yousef and Hasan's property, which they owned until June 2005. The Court has rejected Salah's contention that he, Mohamed and Sanaa all understood that the property was to be or was in all but name Mohamed and Sanaa's. In those circumstances the only agreement or common intention which could readily be inferred is one between Salah and Hasan and Yousef, that Salah have an interest in their property, the Leppington property. That means that putting this argument at its highest Salah may have been able to say that he had an interest in the proceeds of sale of the Leppington property when Hasan and Yousef sold to Mohamed and Sanaa: Walker & Ors v Corboy & Ors (1990) 19 NSWLR 302 at 388.4. But that does not mean that the Court should infer that there was a common intention for Salah to have an interest in property that Sanaa and Mohamed only acquired in June 2005. In my view there was no agreement for Salah to have such an interest and the circumstances do not warrant the Court to infer a common intention for that to occur. Especially because of the Court's finding that the issue of Split 3 was not discussed between Salah and Mohamed and Sanaa. 99Secondly, even on Salah's own version there was no discussion about him obtaining an equitable interest in the Leppington property. At one stage he suggested that he may have discussed this issue with Mohamed but it emerged that this was only in 2005 and not in 2003 and ultimately he abandoned this evidence altogether. Nor did the objective circumstances support the inferring of a common intention for Salah to obtain an interest in the property. This is particularly so given the execution of the novation deed removing Salah as a purchaser on the day of completion and substituting Yousef in his place. In the absence of a clear oral agreement, the objective circumstances more bespeak of Salah distancing himself from having any interest in the property. 100Thirdly, the necessary element of reliance is absent. The Court has found that Salah has contributed funds in order to secure the agreement of the other purchasers for his removal as a purchaser of the Leppington property, not so the sum would be repaid to him. Whether or not he would be repaid was a matter left entirely up in the air. Indeed his conduct is more consistent with him leaving the $75,000 in the purchase in order to facilitate his exit. He did not rely upon any promise to repay from Hasan, Mohamed or Sanaa. 101Fourthly, the problems with the constructive trust argument identified so far do not take issue with the plaintiff's contention that Salah did contribute to the purchase. But this assumption cannot readily be made out. The analysis which best accords with the Permanent Custodian's loan documentation is that Salah consented to Hasan extending his (Hasan's) obligation, jointly secured over the Mount Pritchard property, by a net amount of $66,503.36 (originally $69,000), which became Hasan's primary liability under Split 3. What then happened was that Hasan advanced these moneys, and a small amount of other funds, to make up the $70,000 advance to himself and Yousef, to complete the purchase. This was applied by Hasan obtaining a bank cheque for $70,000 payable to the vendor's of the Leppington property which was handed over on settlement. This analysis is also consistent with an early letter from Salah's solicitors to Hasan on 6 August 2006 in which they asserted on his behalf, "on or about 1 December 2003 Salah consented to you extending your obligation [on the Permanent Custodian's loan] by an amount of $66,503.36". 102Finally, because the fundamental elements of the constructive trust argument are not made out the Court does not have to consider the further issue that Mohamed and Sanaa raised, that any such interest in the property when it was in the hands of Hasan and Yousef would not, survive the transfer to Mohamed and Sanaa by reason of Real Property Act 1900, s 43. On this issue the defendants, in a late pleading amendment, alleged that Real Property Act, s 43, would prevent such an interest arising and referred the Court to Khan as trustee for the Kahn Family Trust v Hadid [No 2] [2008] NSWSC 119 at [106]. In response the plaintiff said that Mohamed and Sanaa had committed actual fraud and that the June 2005 transfer as against them was liable to be set aside. But this question does not now arise.

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The Plaintiff's Claim in Resulting Trust 103The plaintiff also submits that Salah's contribution to the purchase price of the Leppington property would create a rebuttable presumption that he has a beneficial interest in the property in proportion to what is said to be his contribution to the purchase price, being 7.4 per cent ($69,000 $926,000 x 100). The plaintiff further submits that if there is a rebuttable presumption that the plaintiff has a beneficial interest in the property of this kind that the presumption is not rebutted in this case. It is not necessary to consider the issue of rebuttal of the presumption because in my view the presumption of a resulting trust does not arise for several reasons. 104The applicable legal principles with respect to resulting trusts were stated by Aicken J (with whom Steven, Mason and Murphy JJ concurred) in Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158: - "The law with respect to resulting trusts is not in doubt. Where property is transferred by one person into the name of another without consideration, and where a purchaser pays the vendor and directs him to transfer the property into the name of another person without consideration passing from that person, there is a presumption that the transferee holds the property upon trust for the transferor or the purchaser as the case may be. This proposition is subject to the exception that in the case of transfers to a wife or a child (including someone with respect to whom the transferor or purchaser stands in loco parentis ) there is a presumption of advancement so that the beneficial as well as the legal interest will pass. Each of the presumptions may be rebutted by evidence." 105These principles do not apply in the present case for several reasons. 106First, Salah did not act as a purchaser of the Leppington property. For a resulting trust to arise it is necessary for "a purchaser" to pay the vendor and direct the transfer of the property into the name of another. See also Jacob's Law of Trust , seventh edition, Lexis Nexis Butterworths, 2006, [1210]. Here, Salah did not act as a purchaser. The novation deed removed Salah as a purchaser. The funds advanced through Split 3 were advanced to Hasan and then from Hasan to the vendors of the Leppington property in August 2003.