El-Cheikh v Miraki

The Witnesses

1. Omar is or has been a director of or involved in companies that conduct activities in the construction or labour hire industry. At the relevant time, he was director of El-Cheikh Group and Iconic Group Australia Pty Ltd (Iconic Group). El-Cheikh Group was incorporated for the purpose of acquiring an interest in the Property. Omar's brother, Walid El-Cheikh (Walid), is the sole shareholder and director of Iconic Group.
2. Navid works in the construction industry, operating through at least two corporate entities, including Barton Contractors Australia Pty Ltd (Barton) and Iconic Constructions. However, Navid is not a director or shareholder of either Iconic Constructions or Barton.
3. Omar has known Navid since 2014. He and Navid initially bonded over a shared love of cars and their similar upbringings. From the time that Omar met Navid until the dispute that gave rise to these proceedings, Navid and Omar spent a lot of time together and formed a strong friendship. During the relationship between Omar and Navid, Omar often lent money to Navid in amounts ranging from $9,000 to $200,000.
4. There were inconsistencies between the evidence of Omar and that of Sepideh and Navid. However, the primary judge formed the impression that Omar was, on the whole, a reliable witness whose evidence was to be preferred over that of Sepideh and Navid, where their evidence was in conflict. His Honour was satisfied that Omar appeared to be doing his best to assist the Court, was measured and articulate in his recollection of events and candid when he did not know the answer to a question put to him. Most of Omar's evidence was not seriously challenged by Sepideh and Iconic Constructions. Further, Omar's evidence was generally consistent with the documentary evidence before his Honour.
5. The primary judge did not accept Sepideh's evidence as reliable unless inherently likely, against interest or supported by contemporaneous documentary evidence. His Honour rejected Sepideh's attempts to minimise her role in or understanding of what was happening. While his Honour accepted that Navid was the main driver of the transaction with Omar, his Honour did not accept that Sepideh was completely ignorant of the matters the subject of the proceedings. His Honour concluded that the reliability of Sepideh's evidence should be treated with caution in the absence of corroboration by contemporaneous documents. Further, his Honour found that Sepideh was both deliberately evasive and equivocal in the way she presented her evidence and was motivated by a strong dislike of Omar.
6. The primary judge accepted that Navid was a deeply unimpressive and unsatisfactory witness. His Honour was left with the impression that Navid displayed a complete unwillingness to engage with questions he perceived as adverse to his or Sepideh's interest. Navid was equivocal in his evidence and frequently argumentative and his demeanour and answers suggested that he treated the entire Court process as something of a joke or not worthy of serious attention. Navid's responses to questions were often non-responsive, wholly irrelevant and unhelpful in determining the disputed facts in issue before his Honour. His Honour was required to intervene and tell Navid on at least 18 separate occasions to answer the question put to him in cross-examination. Further, his Honour had no doubt that there were occasions when Navid was willing to say anything to discredit Omar or at the very least to ensure that Omar's version of events was obfuscated. His Honour was satisfied that Navid was making no serious effort to tell the truth and did not accept him as a witness of truth.
7. It is necessary to consider the evidence-in-chief given by Omar by way of affidavit against the background of those conclusions reached by the primary judge. The narrative set out below is based on Omar's affidavit of 12 February 2019.

The Purchase of the Property

1. Prior to June 2015, the Iconic Group was conducting its activities from Omar's private residence. In around June 2015, Omar spoke to Navid about the need for Omar to find new office space to run the operations of Iconic Group. Navid invited Omar to move into a spare room in his office premises until Omar found something better. Navid's office premises were in the same building complex as the Property. Navid had owned his office premises but had sold them shortly before that time on terms that Navid could continue to occupy them under a leasing arrangement. Omar moved the Iconic Group's operations into Navid's office premises in July 2015.
2. In or around June 2016, Omar found that the Property was for sale. The Property had facilities that were sufficient to satisfy the needs of Iconic Group and in addition had enough space for Navid also to run his operations. Navid and Omar had a conversation in which they agreed that they should look at the Property and that it could be a great thing "to do together".
3. In or around early July 2016, Omar and Navid, escorted by a sales and leasing agent from Coutts Real Estate, inspected the Property, which was unoccupied at the time. Navid and Omar then discussed the terms of a possible purchase with the agent and a representative of the owner, NLM Holdings Pty Ltd (NLM). They agreed on a purchase price of $1,700,000 with a 10 per cent deposit payable upon exchange and settlement after seven weeks.
4. Navid and Omar discussed the need to exchange contracts quickly. At that time, Navid owed Omar money. Omar told Navid that he wanted to use some of the money that he was owed to satisfy his share of the deposit. Navid said that he would see what he could come up with at short notice as to his share.
5. On about 11 August 2016, Navid and Omar had a conversation in which Navid said that he was not going to be able to come up with the full amount for the deposit. He said that he was going to be $70,000 short. Omar said that he really wanted the Property and would put up the extra $70,000 for the deposit. On 12 August 2016, Navid visited Omar at his home and Omar gave Navid $70,000 in cash. Omar said that it was unclear what Navid did with the $70,000.
6. Contracts for the sale and purchase of the Property were exchanged on 12 August 2016. The contract was in the 2016 edition of the standard form approved by the Law Society of New South Wales and the Real Estate Institute of New South Wales. The vendor was NLM and the purchaser was Sepideh. The price was $1,700,000 with a deposit of $170,000. On exchange, the deposit of $170,000 was paid with funds drawn from the bank account of Barton by an international money transfer to the account of Coutts Real Estate Sales Trust Account. The date for completion was 30 September 2016. Sepideh's solicitor, as noted in the contract, was Mr Noah Alkhair of Conveyancing Plus Legal. While the contract disclosed that NLM was entering into the contract in its capacity as trustee of a trust, there was nothing in the contract to suggest that Sepideh was purchasing the Property in any capacity other than in her own right.
7. In or around August 2016, Navid and Omar discussed how the purchase of the Property would be structured and had a conversation to the following effect: "Omar: We will go fifty in the purchase of the property. I will put in $400,000.00, you will put in $400,000.00 and we will borrow the remainder from the bank. You currently owe me $230,000.00, and on top of that, I have covered your share of the deposit, as well as my own. As such, I have already given to you my $400,000.00. Navid: Yes ok, on settlement I will pay my $400,000.00, as well as an additional $230,000.00 to cover the remainder of your contribution, and that way we will be equal. Omar: We also need to work out how to structure this purchase so that we are both protected I would rather my share of the property be held by my family trust, or in a newly created trust. Navid: We could put the property in my wife's name, so that we are both protected. Omar: I am happy if we form a trust for the purpose of holding the property, and for now, name your wife as the trustee of the trust. Once it is up and running though, we need to replace your wife with a corporate trustee. I also will need all of the documents drawn up by my lawyer so that I am protected. Navid Ok, get your lawyer to prepare the documents."
8. Omar sought advice from his lawyer, Mr Joseph Di Mauro of DSA Law and his accountant, Mr Mark Bartolo of MBC Accountants and Business Direction, as to how the purchase should be structured from a risk minimisation perspective and instructed them to prepare documents. They prepared two documents. One of the documents became the Trust Deed and the other became the Unit Holder Agreement. On 6 September 2016, Mr Bartolo arranged for registration of the Trustee, which he suggested should assume the role of corporate trustee of the Trust. The Trust Deed was executed on the same day. The Unit Holder Agreement was signed later in circumstances described below.
9. On 30 August 2016, Navid and Omar had a conversation to the following effect: "Navid: I need to borrow $200,000.00. It will only be for a short period. Is that alright? Omar: I can lend it to you, but I want it re-paid quickly. You already owe me a lot of money." Later that day, Omar gave Navid $200,000 in cash which was deposited in Sepideh's account with the ANZ Bank.
10. In the days before the proposed completion of the contract for sale and purchase, Navid and Omar had a conversation to the following effect: "Navid: I am not going to be able to come up with enough to fulfil our contribution to the funds for settlement, as the settlement of the Nowra property has been delayed and I am getting mucked around by people that owe me money. Omar: I don't want to lose my deposit or the property. What if I cover your share by increasing my loan to you, but we will have to get the legal documents changed, and there will have to be interest payable on the loan, even without default. I expect you to pay me $50,000.00 in interest, and I will need you to pay me back the entire loan amount within a month. Navid: Ok, that should be fine. Nowra should settle within that period." Following that discussion, Omar instructed Mr Di Mauro to prepare a loan agreement.
11. On 22 September 2016, Mr Bartolo sent an email to Mr Alkhair dealing with "legal structure for factory purchase". In the email, Mr Bartolo said that the Trustee, in its capacity as trustee for the Trust, must be the purchaser and not Sepideh. He said that the vendor needed to be advised and that there was also a requirement to seek an extension for at least 45 days. Nothing appears to have been done about the name of the purchaser. However, the time for completion appears to have been extended.
12. At 2.09 pm on 11 October 2016, Mr Bartolo sent an email to Omar, Mr Di Mauro and Mr Alkhair in the following terms: "Subject: Update On Property settlement matters Hi All, Just confirming matters as I understand it and post discussions with: 1. Omar 2. Noah As at 11/10/16 approximately 1.00pm 1. Property will be purchased by Sepideh. 2. The attached structure will not be utilized at this stage. (See attachment 1) 3. The property will be transferred to this structure down the track and Joseph and Noah have worked out an efficient way to make this happen. 4. Noah has confirmed to me that the Loan agreement will be executed by Sepideh within 24-48 hours. See Second attachment. 5. If Noah has any further issues with the Loan Agreement he will contact Joseph directly. 6. Sepideh may not be able to contribute her capital of $400k. If so then Omar will contribute the extra $400k and the loan agreement will be modified to reflect this increase contribution by Omar. This modification will be attended to by Joseph and Noah. As Omar has to leave again for an overseas trip on the weekend, the loan agreement and any other necessary documentation, as noted below, must be signed this week without fail. If anyone disagrees with the above please advise in writing via email today. Joseph, Specific matters for you: 1. Please advise if there is anything else that needs to be created and signed this week. I understand you wanted a JV agreement. If so, this needs to be created now and sent to Noah ASAP so it can be executed at the same time as the loan agreement. 2. Joseph if security by way of second mortgage or caveat is to be lodged once settlement occurs, then please ensure that the necessary documentation is prepared now and signed by the parties before Omar leaves on the weekend. …".
13. At 2.22 pm on 11 October 2016, Mr Di Mauro sent a reply to Mr Bartolo, Mr Alkhair and Omar as follows: "Subject: RE: Update On Property settlement matters Hi All, I note that Sepideh is purchasing the property as trustee of the Gladstone Unit Trust and that in due course there will be a change of trustee. I also note that as Omar is contributing funds towards the purchase of the property he will be registering a mortgage on the tile [sic] in due course, but that in the interim he will register a caveat over the property, which will rank second only to the funds being advanced by the first mortgagee. I also note that Sepideh will agree to not transacting any business of the trust without the written approval of both the unit holders (the unit holders are as per the diagram circulated by Mark Bartolo). All can you please confirm that we are all in agreement to the above."
14. At 5.27 pm on 11 October 2016, Navid forwarded to Omar a letter from Australia New Zealand Banking Group Limited (ANZ Bank) of that date setting out an offer of a "Business Loan Facility" to be provided by ANZ Bank to Sepideh. The terms were as follows:

• the facility amount was $1 million;
• the term was 15 years;
• the purpose was the purchase of property for commercial use;
• repayment was interest only for the first five years;
• a first registered mortgage was to be given by Sepideh over the Property; and
• guarantees and indemnities were to be given by Sepideh and Barton.

1. Later in the evening of 11 October 2016, Omar and Navid exchanged text messages as follows: "Navid to Omar: Bro The mortgage document need to be done ASAP to make sure they Rase [sic] the funds for settlement Need to be Signed by my wife I have to drive her to Campbelltown Omar to Navid: Speak to Noah. It is all in his hands. He can do it in 1 hour so I don't know what the delay is. I hope it's all done by tomorrow. Navid to Omar: Maybe push them to get the loan document ready Omar to Navid: My guys are done. It's with Noah brother He should have sorted this a week ago Pls just call him first thing and push him Navid to Omar: Ok let's talk tomorrow The good thing is that the loan is approved by ANZ".
2. On the morning of 12 October 2016, Mr Alkhair sent an email to Omar and Mr Bartolo, with copies to Mr Di Mauro and Sepideh. The email said as follows: "Subject: RE: Update On Property settlement matters Good morning all, I refer to the various correspondences and confirm that in principal [sic] Mrs Sepideh Miraki is agreeable to the following: 1. That She is purchasing the property as trustee of the Gladstone Unit Trust and that in due course there will be a change of trustee, 2. That Sepideh will not transact any business of the trust without the written approval of both the unit holders (the unit holders are as per the diagram circulated by Mark Bartolo). 3. That Omar is contributing funds ($850,000.00) towards the purchase of the property. 4. That in consideration of Omar's contribution Sepideh and Omar will enter into a loan agreement confirming the loan advance, 5. That Sepideh will grant her irrevocable consent that Omar may register a mortgage and/or a caveat whilst the loan funds remain outstanding. 6. That prior to the advance of loan funds, Sepideh will enter into the Mortgage & Caveat in the form attached herein, 7. The Mortgage and Caveat will be registered or remain unregistered at the sole discretion of Omar. I will correspond with Mrs Miraki later today for the purposes of executing all proposed documents and I welcome you to contact me should you have any queries or if I can assist in anyway [sic]."
3. Later in the day on 12 October 2016, a meeting took place at the residence of Sepideh and Navid. The meeting was attended by Omar, Sepideh, Navid, Mr Alkhair and Mr Khalid El-Cheikh, another of Omar's brothers. At the meeting, the following documents were executed:

• Form of Offer by Sepideh to Omar (the Offer);
• The Loan Agreement;
• Mortgage over the Property from Sepideh to Omar (the Mortgage);
• Caveat over the Property (the Caveat); and
• The Unit Holder Agreement.

Completion of the Purchase

1. On 13 October 2016 Sepideh executed loan documents for the ANZ Bank both in her own right and as the director and secretary of Barton.
2. On 17 October 2016, Mr Alkhair wrote to Sepideh saying that settlement of the purchase of the Property was to take place on 18 October 2016. The letter said that on settlement the ANZ Bank was providing $989,519.70 and that the balance of $642,535.18 needed to be paid by Sepideh. Mr Alkhair requested that on the day before settlement Sepideh provide him with a bank cheque for the sum of $642,535.18 payable to NLM as trustee of the Molnar Unit Trust.
3. On the same day, Mr Alkhair wrote to the ANZ Bank confirming that settlement was to take place on 18 October 2016. The letter gave directions for eight separate bank cheques totalling $989,519.70 for outgoings, stamp duty costs and balance of the purchase price.
4. Despite the additional amount that Omar lent to Navid, Navid still required further funds to satisfy his contribution to the purchase price in that he was still required to come up with a further sum of $230,000, being the original amount of his debt to Omar and the additional part of Omar's contribution. Navid borrowed funds from Anthony Fiorenza, who owns a company called Impero Pacific. On 17 October 2016, $200,000 was transferred from an account of Impero Pacific to Barton.
5. On 17 October 2016 Omar and Navid together attended the branches of the Commonwealth Bank and ANZ Bank at Cherrybrook. Omar had with him $450,000 in cash that he had put together over the previous few days. Of that cash, the sum of $290,000 was deposited into the account of Barton at the Commonwealth Bank and the sum of $160,000 was deposited into an account of Sepideh at the ANZ Bank. In the presence of Omar, Navid purchased a bank cheque by withdrawal of the sum of $502,535.18 from the Commonwealth Bank account of Barton and a bank cheque for $140,000 by withdrawal from the ANZ Bank account. They were provided to Mr Alkhair and were applied in payment of the balance of the purchase price to NLM. Omar made an entry in his diary for 17 October 2016 as follows: "NV - 450 - settlement". It was common ground that the reference to "NV" was a reference to Navid.
6. Completion of the contract for sale and purchase of the Property took place on 18 October 2016. On completion, cheques were made available in accordance with the instructions given by Mr Alkhair in his letters of the previous day.

Subsequent Events

1. Sepideh attaches some significance to exchanges of texts between Navid and Omar in March 2017. Thus, on 17 March 2017, Omar sent a text to Navid saying that: "… need my money and I need it NOW!!! I can never get a … straight answer out of you!!!". Navid replied saying he would make calls as soon as he finished a meeting. After further exchanges, Omar sent a further message to Navid relevantly as follows: "… I have been nothing but good to you. On top of all the money you owe me you are driving my wife's car for over a month now and still haven [sic] paid for it and you have the nerve to keep ignoring me and not returning my calls. You promised me that by end of this week you will have my money and now your phone's off!!! Bro keep playing these games but don't get upset when I come past your house cause I'm unable to get a hold of you any other way. … honor [sic] your word and commitments. A man that has no word is not a man and all you've been doing to me for the past year is lie … Enough is enough!!!"
2. There were further exchanges of texts between Omar and Navid on 18 and 19 March 2017. Essentially Omar was chasing Navid and Navid was avoiding his calls.
3. On 20 March 2017, Omar sent a message to Navid asking: "Any news brother?" He followed that up with further requests without any response. On the morning of 21 March 2017, Omar sent texts to Navid saying: "Bro I just want to known [sic] what day this week you will have my funds for me? You know I need it urgently!!! …I don't give a shit about Iranian New Year!!! You always have some excuse!!! I need my money urgently!!! Will you have it this week? Yes or no enough of your bullshit bro!!! I'm sick of your bullshit Navid, you have no respect, no honor [sic] and no morals. You are not a friend. You have ruined our friendship not there ever was one on your side. I have always helped and supported you no matter what you needed and all you've ever done is lie and fuk me over time and time again." After Navid sent a text saying he would call "to meet up". Omar sent a text saying: "No it's not wrong bro. I have to fukn practically beg you for my own money back. Our agreement was 1 month. It's now more than 5 months and your latest excuse is Iranian New Year. Fukn seriously bro!!!" Navid then sent a text as follows: "I made the 5th payment for the office + I prepared and re painted the office and the Epoxy work in the Wearhouse [sic]. Is done by me on top of that the motor for the ROLEH door I put it in and paid for by me + I'm paying you $50K on top of your $450K that you put in settlement for me Bro you insulted me and my wife & im [sic] doing my best to get this sorted but you don't let me take some breath. It is very wrong what you do Please have some tablet maybe And let me do what I have to do get this sorted This is effecting [sic] my marriage & my health at the moment Don't Rock the boat pls". Omar then sent a text is as follows: "I insulted you and your wife ??? You and your wife are driving around in my wife's fukn car over a month after you bought it and still haven't paid me one fukn cent even though you said 2 days you will pay for it, but I've insulted you and your wife have I ??? You really are a piece of shit bro, all the good I've done by you and your family and you want to bring up bullshit like paying bills hahahah what an fukn joke. Anyway bro the only person affecting their marriage is you not me!!! Honor [sic] your fukn word and commitments and you'd have no problems with your wife or health. I have to beg you for my fukn money don't i Navid? At the very least acknowledge all the good I've done by you and how many times I have lent you money just to help your situation. There was never anything in it for me but this is too much bro you have totally fukd our friendship because your a liar and have no word!!! I insulted you and your wife … your hilarious brother!!!"
4. The exchanges are relied upon as indicating that the sum of $450,000 that was provided by Omar to Navid in October 2016 was a separate advance to Navid and not an advance as contemplated by the Loan Agreement. Clearly enough, the exchange concerned the sum of $450,000 in cash provided by Omar to enable completion of the purchase of the Property to take place. That is clear from Navid saying "I am paying you $50K on top of your $450K that you put in settlement for me". That is to say, although Sepideh was named as purchaser in the contract for sale and purchase, Navid regarded himself as being personally interested in the purchase. There is nothing in the exchange to suggest that the cash given by Omar to Navid was anything other than for the purposes of the purchase of the Property. Indeed, it confirms that fact.
5. On 11 April 2017, Mr Alkhair wrote to DSA Law referring to correspondence with respect to a proposal that Omar purchase from Sepideh her share of the Property. Mr Alkhair said that his client was in principle agreeable to the proposition "subject to satisfactory negotiated sale price". Mr Alkhair said that he was instructed that, based on the following items, Sepideh estimated that a reasonable sale price would be in the order of $658,000, calculated as follows: 1. the amount of $18,000 was paid by Sepideh in preparatory work to secure the loan from ANZ Bank; 2. $30,000 that had been paid to date to the ANZ Bank for repayments of the loan, it being previously agreed that the rental paid by Omar's tenant company would pay for the loan; 3. $30,000 that represented office furniture and equipment being used by Omar's tenant company; 4. $40,000 that represented non-structural renovation and cosmetic works completed at the Property by Sepideh, including the painting of the Property and a proxy floor grinding to the warehouse floor; 5. $40,000 that represented 50% of the purchase costs including stamp duty and legal fees; 6. $400,000 that represented approximately 50% of the increase in market value of the Property since the date of the purchase; and 7. $100,000 that represented the interest that Omar was charging Sepideh pursuant to the Loan Agreement. Although Sepideh asserted in cross-examination that the letter was written without her knowledge, having regard to the credit findings made by the primary judge, there is every reason to conclude that the letter was written with her knowledge. The terms of the letter make perfectly clear that the Loan Agreement was regarded as regulating the arrangements concerning the proposed joint purchase of the Property.

The Documents

1. Before addressing the issues, it is necessary to say something about the Trust Deed and each of the documents signed on 12 October 2016. I shall then address the reasons of the primary judge.

The Trust Deed

1. The Trust Deed was expressed to be made on the day specified in item 1 of Schedule 1 to the Trust Deed, between the party named and described as the Trustee and the party or parties named and described as the Subscribers in Schedule 1. Item 1 of Schedule 1 stated that the date of the Trust Deed was 6 September 2016, that the name of the Trust was "Gladstone Rd Unit Trust", that Gladstone Rd Enterprises Pty Ltd was the Trustee and that the initial Subscribers were Iconic Constructions and El-Cheikh Group.
2. The Trust Deed recited that:

• The Subscribers would pay to the Trustee the sum of $50 each in return for Units to be issued by the Trustee;
• The Trustee would deposit the sums of $50 in a bank account with the intention that such deposits and any further amounts received and deposited would be held upon the trusts and subject to the terms contained in the Trust Deed;
• The Trust Deed was made with the intention that it would bind the Trustee and each of the persons who have or may become Unitholders, that the trusts declared would have effect to the extent provided for in the Trust Deed for the benefit of each Unitholder and that it would be a fixed trust as defined in s 3A of the Land Tax Management Act 1956 (NSW). There was no evidence that a bank account was ever established or that either of Iconic Constructions or El-Cheikh Group paid any sum to the Trustee by way of subscription for Units.

1. By cl 3 of the Trust Deed, the Trustee declared that, as from the date of the Trust Deed, it would hold the Trust Fund for the Unitholders upon the trusts and with and subject to the powers and provisions contained in the Trust Deed. The term "trust fund" was defined as meaning the sum of the following:

• the amounts to be paid to the Trustee by a Subscriber, calculated by multiplying the number of Units to be issued to the Subscriber in item 6 of Schedule 1 by the value of the Initial Units as set out in item 5 of Schedule 1;
• monies paid to and accepted by the Trustee upon the issue of new Units;
• the accumulations of income directed or empowered to be made by the Trustee and all accretions to the Trust Fund and the investments and Property from time to time representing those monies and any reinvestments of cash or property of the Trust Fund; and
• any further amounts or property received by the Trustee pursuant to the trusts under the Trust Deed, including without limitation the proceeds of any borrowings made by the Trustee.

1. Item 5 of Schedule 1 specified that the value of the Initial Units was $1 per unit. The term "unit" was defined as an undivided part or share of the Trust Fund and in the nature provided for in the Trust Deed. The term "unitholder" was defined as meaning any person registered pursuant to the Trust Deed as the holder of a Unit.
2. Clause 4 of the Trust Deed dealt with the issue and application of Units and provided that the beneficial interest in the Trust Fund was vested in the Unitholders for the time being in proportion to the number of Units each holds. Clause 4.3 provided that, upon paying the Subscription Amount to the Trustee, each Subscriber would be registered as the holder of the number of Units set out next to the name of that Subscriber in item 6 of Schedule 1 and those Units, when issued, would be the initial Units and they would be the Initial Unitholders. Clause 5 dealt with unit certificates and the register of Unitholders. Clause 5.3 provided the Trustee would keep a register of Unitholders including the names and addresses of Unitholders and the number of Units in respect of which each is registered. There was no evidence of any register of Unitholders ever being established.
3. Clause 8.11 conferred power on the Trustee to borrow or raise or concur in raising from any person any money which the trustee thinks expedient for any purpose in relation to the execution of the trusts or powers conferred upon the Trustee by the Trust Deed. By cl 8.13, the Trustee was authorised to give any security including a mortgage or charge over or any part of the Trust Fund for payment of money or the performance of any contract, obligation or undertaking.
4. Clause 16 of the Trust Deed dealt with meetings and provided that the Trustee may at any time convene a meeting of the Unitholders for the purpose of obtaining the consent of the holders of the prescribed number of Units or of the prescribed number of Unitholders. Clause 16.14 provided that a resolution or form of consent in writing signed by all of the Unitholders would be as valid and effectual as if it had been passed at a duly called or constituted general meeting of Unitholders.
5. Clause 20 of the Trust Deed dealt with the change or retirement of the trustee of the Trust. By cl 20.2, any trustee could be removed and any trustee could be appointed by a resolution passed by the holders of not less than 75% of the Units.

The Offer

1. The Offer was addressed to Omar and set out the terms of a proposed "1st Registered Mortgage" over the Property. The Offer referred to a Principal Sum of $900,000, with that sum written in handwriting and the sum of $850,000 crossed out. The term of the loan was stated to be 60 months commencing on 12 October 2016. The interest rate was specified as 6% per annum with a penalty interest rate of 12% per annum. Interest was payable monthly in advance for the term of the loan at the rate of $4,250 per month if paid on time and $8,500 per month if paid after the due date.

The Loan Agreement

1. The relevant parts of the Loan Agreement are set out in Appendix 1 to these reasons. The parties to the Loan Agreement were Omar as "the Lender" and Sepideh "the Borrower". It seems likely that the Loan Agreement was prepared by Mr Di Mauro in September 2016, since the typed document begins as follows: "THIS DEED is made the …….. day of …….. September …. 2016". Thus, it was probably prepared by Mr Di Mauro following the conversation between Omar and Navid concerning the proposed formation of a trust. The Loan Agreement is expressed to be signed, sealed and delivered by each of Omar and Sepideh and was signed by each of them as a deed. Sepideh's signature was witnessed by Mr Alkhair and Omar's signature was witnessed by Khaled, his brother.
2. Mr Di Mauro made an error when setting out the amount of the loan in the Loan Agreement. Omar explained the error in his affidavit in the following terms: "67. Whilst initially, before I gave Navid the additional loan, he owed me $230,000.00 that amount was to be allocated towards my contribution to the purchase price, along with the deposit, of which had already been paid (either from monies owed to me by Navid, and money that I had given to him on the day that the deposit was paid). These amounts, at least following settlement, were no longer amounts owing to me, but rather, amounts that I had contributed towards the purchase of the property, or rather, were the consideration that I paid for my share in the property. 68. As such, whilst the loan agreement reflects a debt of $900,000.00, once the purchase of the property had settled, the loan agreement should have been amended to reflect a loan amount of $500,000.00 (being the initial loan amount of $900,000.00 minus the amount contributed to the purchase price on my behalf)." Omar was not cross-examined about that evidence. Curiously, the primary judge did not refer to that explanation in his reasons.
3. The Loan Agreement was in typescript except for handwritten alterations. The "amount of loan" set out in the schedule to the Loan Agreement was altered by hand and is reproduced in italics in Appendix 1. The primary judge observed that the alteration had been made and initialled by Sepideh but that it was not necessary for the Court to come to any view about the reasons for the increase.
4. Clause 1.9 of the Loan Agreement provided that it was to be read subject to any special conditions referred to in the schedule. The schedule contained special conditions, as set out in Appendix 1. It is significant that the special conditions provided that the parties were to enter into a joint venture agreement evidencing an agreement that the parties each contributed $400,000 towards the purchase of the Property, with the purchase to be solely in the name of Sepideh and that Omar, as lender, was to be entitled to register a second mortgage over the Property to secure his interest in the Property. The special conditions also included a provision that Sepideh would execute all necessary or desirable documents in order to give effect to the agreements contained in the special conditions and to secure the advance as and when called upon to do so by Omar.
5. The schedule to the Loan Agreement contained a reference to prior encumbrances in the following terms: "Loan for the balance of the purchase price and associated purchase costs after allowing for the initial contributions of $400,000 by both the borrower and the lender".

The Mortgage

1. A standard form of mortgage (the Mortgage) was executed by Sepideh and Omar as Mortgagor and Mortgagee respectively. In addition, other documents concerning the Mortgage were executed by Sepideh as follows:

• a Disbursement Order authorising Omar's lawyers, DSA Law, to take steps to complete the Mortgage, with handwritten alterations initialled by Sepideh altering the amount of the principal from $850,000 to $900,000;
• a Statutory Declaration by Sepideh;
• an Authority to Complete and Acknowledgement by Sepideh; and
• an Acknowledgement by Sepideh with a hand alteration amending the amount of the principal from $850,000 to $900,000 in one place, but leaving it at $850,000 in another place. All of the documents were dated 12 October 2016.

1. By the Mortgage, Sepideh mortgaged to Omar all her estate and interest in the Property and covenanted that the provisions of memorandum AJ843928H are incorporated in the Mortgage. That memorandum does not appear to be in evidence. Provision is made in the Mortgage for an annexure but the space for identification of the annexure is completed "N.A.".
2. By the Disbursement Order, Sepideh authorised DSA Law to complete the Mortgage by inserting the date of the advance as the date of the Mortgage, in all other respects as may be required so as to protect the "Mortgagee" and to disperse "the undermentioned Mortgage Principal" as required in the mortgagee's solicitor's opinion to be paid in it. The "Mortgage Principal" where it appears in four places is altered from $850,000 to $900,000 in handwriting.
3. By the Statutory Declaration, Sepideh declared that she had not sold or agreed to sell the Property, had not except for any encumbrances referred to in the Mortgage charged or encumbered the Property, no part of the Property was subject to accruing rights by adverse possession, no part of the Property has been leased to any person, Sepideh has not received any notice, declaration or order relating to the Property and there were no monies owing for rates and taxes or any other account in respect of the Property.
4. By the Authority to Complete and Acknowledgement, Sepideh:

• authorised DSA Law to complete, amend and fill in any blanks and the date wherever appropriate in the Mortgage and any other documents to be executed;
• undertook to comply with any Land Titles Office or State Revenue Office requisitions; and
• acknowledged having read and received a copy of memorandum AJ843928H.

1. By the Acknowledgment, Sepideh, acknowledged that she understood the terms of the "Security" and the "Transaction", that she had received a copy of memorandum AJ843928H, she had had the opportunity of reading the Security prior to its execution, the acknowledgement had been signed by her prior to executing the Security and acknowledged that she had applied for a loan in the amount of $850,000. The "Security" was defined as the Property and the "Transaction" was defined as a loan of $900,000 by Omar to Sepideh secured by a first registered mortgage over the Property.

The Caveat

1. The Caveat referred to the Property, named Sepideh as the registered proprietor and named Omar as the caveator. By the Caveat, Omar claimed to be entitled to the following estate or interest in the Property: "Equitable & legal interest in the Property pursuant to the advance of loan funds of $900,000.00". The sum of $850,000 was typed and struck out in handwriting and the figure $900,000.00 was handwritten. The interest was claimed by virtue of the following facts stated in the Caveat: "On the 13th of October 2016 the caveator did advance to the registered proprietor the total amount of $900,000 by way of loan funds, to assist with the purchase of the Property known as [address of the Property and title reference]".
2. The Caveat contained a statutory declaration by Omar that, to the best of his knowledge, information and belief, he had a good and valid claim to the estate or interest described above and that the address of Sepideh stated in the Caveat was her contact address. At the foot of the Caveat was a consent signed by Sepideh whereby, as registered proprietor named in the Caveat, she consented to the Caveat for the purpose of s 74O of the Real Property Act 1900 (NSW). Section 74O relevantly applies if a caveat lodged under Pt 7A of the Act subsequently lapses. Section 74O(2) provides that a further caveat to which s 74O applies has no effect, relevantly, unless the further caveat is endorsed with the consent of the registered proprietor of the estate or interest affected by the further caveat. It is significant that, by signing the consent, Sepideh must be taken to have been fully aware of the Caveat.

The Unit Holder Agreement

1. The Unit Holder Agreement bears no date, although it is common ground that it was signed by the parties on 12 October 2016. The parties to the Unit Holder Agreement are Sepideh as "Trustee", El-Cheikh Group as "Unitholder 1" and Iconic Constructions as "Unitholder 2". The Unit Holder Agreement recited that: "A. As at the date hereof the units in the trust are held as to 50% by Unitholder 1 and as to 50% by Unitholder 2. B. The unit trust deed governs the conduct of the business by the trustee and the relative rights and obligations of unit holders. C. The parties wished to set out the full terms and conditions upon which the business was to be conducted and the rights and obligations which will attach to the unit holder's respective holdings in the unit trust."
2. The term "business" was defined as the business of the Gladstone Rd Unit Trust and any other business approved by special resolution of the directors from time to time. The term "Trust" was defined as meaning the Gladstone Rd Unit Trust and the term "Trustee" was defined as Sepideh or any additional substitute or replacement trustee.
3. Clause 3 provided for the unit holdings of each unit holder as at the date of the agreement to be specified. At the time when the Unit Holder Agreement was signed it appears that the number of units to be held by Unitholder 1 and Unitholder 2 was left blank. However, in a further copy of the Unit Holder Agreement in evidence the blank spaces were filled up with "50" for each of Unitholder 1 and Unitholder 2.
4. On 5 November 2016, Mr Alkhair sent an email to Mr Bartolo saying that Mr Di Mauro had made several attempts "to have this finalised". He attached to his email a copy of the executed Unit Holder Agreement, which he said would be stamped that week. He asked Mr Alkhair to advise of the following: 1. Clause 3 - Unit Holding Structure; and 2. Clause 8 - Dividends - will the first dividend be paid at the end of the 2016/2017 financial year. Mr Alkhair said that, upon confirmation of the above, the agreement would be stamped and forwarded to Mr Bartolo and Mr Di Mauro. The email ended with the following: "With respect to the change of trustee and lodgement of the second mortgage, please clarify your clients instructions in relation to this."
5. On 14 November 2016, Mr Alkhair wrote to Hazlett Information Services, who were holding the original Unit Holder Agreement and a cheque in the sum of $500.00 in favour of the Office of State Revenue. Mr Alkhair enclosed a copy of the front page of the stamped contract for sale and purchase of the Property, a duties statement and certified copies of identification of the clients. Mr Alkhair relevantly said: "We respectfully request that you date the 12th August 2016 and submit same to the [Office of State Revenue] for stamping." That appears to have been intended as a request to stamp the original Unit Holder Agreement.
6. A requisition dated 23 November 2016 was subsequently received from the Office of State Revenue requesting provision of "the declaration of trust", noting that the Unit Holder Agreement was not a declaration of trust and was not liable to duty. It is unclear whether the Trust Deed was subsequently stamped.

The Trust

1. The primary judge observed that Navid was not a party to the proceedings and that no relief was sought against him. His Honour also observed that it was not alleged in the pleadings that Navid was acting on behalf of Sepideh, such that an agreement made between Omar and Navid would be binding on Sepideh. Therefore, it was not immediately obvious to his Honour as to why there was an issue in the proceedings as to whether Omar and Navid agreed to purchase the Property together through a trust. Nevertheless, his Honour accepted that Omar and Navid had agreed, in the sense of a commercial understanding rather than a legally enforceable arrangement, that they would purchase the Property through a trust. His Honour considered that the correspondence in evidence made it clear that they had embarked upon the purchase together. Indeed, Navid accepted in cross-examination that the conversation deposed to by Omar about "50/50" and that a trust structure would be used, occurred.
2. The primary judge then considered whether the Property was purchased by Sepideh as trustee for the Trust. His Honour observed that the contract for sale and purchase of the Property gave no indication that Sepideh was purchasing the Property other than for herself legally and beneficially. His Honour concluded that Omar and El-Cheikh Group had not discharged the onus of proving anything different.
3. Further, the primary judge found that the Trust was never constituted because, in the absence of evidence that either El-Cheikh Group or Iconic Construction, as Subscribers, had paid their respective Subscription Amounts to the Trustee, there was no trust property. His Honour held that no trust existed until at least the first unit holder subscribed for units and found that neither of the Subscribers paid the Subscription Amount. His Honour concluded that there could be no resolution of the unit holders of a trust that had not been fully constituted. His Honour found that neither El-Cheikh Group nor Iconic Constructions became a unit holder in the Trust. Although the Unit Holder Agreement recited that the Subscribers were Unit Holders, the Unit Holder Agreement was executed only as an agreement under hand and not as a deed: therefore, no question of estoppel by deed arose. His Honour observed that there had been no other form of estoppel pleaded as arising from the terms of the Unit Holder Agreement or any other conduct of the parties.
4. The primary judge considered that the question of whether the Property was purchased by Sepideh as trustee for the Trust could only be answered by consideration of the Trust Deed. His Honour considered that that question was not answered by the fact that Sepideh conceded that she signed the various documents at the meeting on 12 October 2016 because the Property was planned to go under her name and then later be transferred to a corporate trustee. Further, his Honour did not consider that the question was answered by Sepideh's acceptance that in signing all the documents she understood that she and Omar were buying the Property together. His Honour did not consider that Omar and El-Cheikh Group were assisted even if all parties understood that what was being proposed was that Sepideh would purchase the Property as trustee, as Mr Alkhair stated in his email to Omar and Mr Bartolo of 12 October 2016.
5. The primary judge considered that the Unit Holder Agreement was an ill-fitting adaption of a precedent intended to do something else. For example, cl 4 deals with "management of the company" when there is no definition of "company". Further, while Sepideh is named as trustee, the definitions, such as the definition of "Board" as meaning the Board of Directors of the Trustee, clearly contemplate a corporate trustee.
6. The primary judge rejected the contentions advanced on behalf of Omar and El-Cheikh Group for the following reasons:

• El-Cheikh Group or Iconic Constructions were not unit holders;
• The Unit Holder Agreement contains no express language of appointment of a trustee, merely defining Sepideh as Trustee by putting that word after her name;
• The recitals in the Unit Holder Agreement say nothing about the purpose of the agreement being to appoint a trustee or to remove an existing trustee;
• The closest that the Unit Holder Agreement comes to language of appointment is cl 4(b), which provides that the Trust was to be managed by "the trustee": the reference to "manage" adds nothing to the functions of the Trustee under the Trust Deed.

1. The primary judge concluded that, unless cl 4(b) of the Unit Holder Agreement could be construed as giving effect to the parties' intention of appointing Sepideh as trustee by implication, the clause was surplusage with no legal effect. His Honour gave three reasons as to why the principles of construction that words should not be construed as meaningless or effectual did not apply:

• A trustee does much more than "manage" the trust and the concept of "managing" was not sufficiently wide to sustain an implication of appointment to the office of trustee with all that entails;
• The Court should avoid a construction that brings about a doubt in the administration of a trust; in the absence of express removal, express appointment of a new trustee without the word "additional" may leave doubt about that matter; and
• If Sepideh was appointed as trustee of the Trust and the Trustee had not been removed, by the operation of cl 9.2 of the Trust Deed, Sepideh could only have acquired the Property jointly with the Trustee, which did not occur in this case.

1. Further, the primary judge did not accept that the Unit Holder Agreement answered the description of a "resolution or form of consent" as those words might reasonably be construed because they appear in cl 16 of the Trust Deed, which is devoted to the conduct of meetings of unit holders. His Honour attached significance to the fact that none of the words "resolve", "resolution" or "consent" appears anywhere in the Unit Holder Agreement in relation to the Trustee. Rather, the word "resolution" appears only in relation to the conduct of unit holders inter se.
2. For those reasons, the primary judge concluded that Sepideh did not acquire or hold the Property on the terms of the Trust. While it is clear that the intention of the parties was that, ultimately, the Property would be held on trust for El-Cheikh Group and Iconic Constructions in equal shares on the terms of the Trust, for the reasons given by his Honour, the Property was not held by Sepideh on the terms of the Trust. Therefore there remains a question as to the beneficial ownership, in circumstances where the Property is not held on the terms of the Trust.
3. In their amended points of claim filed on 16 March 2018, Omar and El-Cheikh Group sought a declaration that Sepideh holds the Property on trust for the Trust under the terms of the Unit Holder Agreement. In their notice of appeal filed on 16 March 2021, they sought a declaration in those terms. At the invitation of the Court, the orders sought on appeal were reformulated on behalf of Omar and El-Cheikh Group and a declaration in those terms was included in the reformulation. In all three claims for relief, Omar and El-Cheikh Group also sought an order that an account be taken in respect of monies received and disbursed in relation to the Trust. Thus, no claim has been made as to beneficial ownership of the Property, or the proceeds of sale of the Property, as an alternative to the claim for a declaration that the Property was held on the terms of the Trust. His Honour did not decide that question and that question has not been the subject of argument on the appeal.
4. The question of beneficial ownership is complicated not only by the failure to establish the Trust and vest the property in the Trustee but also by the provisions of the Loan Agreement. The initial intention appears to have been to establish the Trust, with El-Cheikh Group and Iconic Constructions as equal unit holders, and to have the Trustee acquire beneficial ownership of the Property on the terms of the Trust. However, the special conditions of the Loan Agreement tend to suggest that that intention changed, and the beneficial ownership of the Property was to be vested in Omar and Sepideh in pursuance of a proposed joint venture.
5. Thus, under the special conditions contained in the Loan Agreement, Omar and Sepideh were to enter into a joint venture agreement in relation to the Property and Sepideh was to distribute to Omar "his 50% share of profits" free of any liability for capital gains tax. The special conditions provided that Sepideh was to pay any capital gains tax arising on the sale of the Property for both Sepideh and Omar. No question has been raised as to the possible effect of s 261 of Income Tax Assessment Act 1936 (Cth), which renders void a covenant or stipulation in a mortgage that has or purports to have the effect of imposing on the mortgagor the obligation of paying income tax on interest to be paid under the mortgage.

The Loan Agreement

1. The primary judge was satisfied that Omar had given $450,000 to Navid and that $430,000 of the $450,000 given by Omar was applied to the purchase of the Property through the purchase of the bank cheques that were handed over at settlement. However, his Honour was not satisfied that that sum was an advance pursuant to the Loan Agreement.
2. The primary judge observed that whether something is done pursuant to an agreement requires consideration of the objective facts. His Honour accepted that, in the ordinary case, the obvious inference from the fact that a party enters into an agreement to pay $xx and then in fact pays $xx is that payment of $xx was made pursuant to the agreement. However, his Honour considered that the way in which the parties to the proceedings conducted their financial relationship meant that the answer to the question of whether Omar advanced the sum of $450,000 pursuant to the Loan Agreement was not obvious.
3. The primary judge observed that, while it was not disputed that Omar and Sepideh had entered into the Loan Agreement, which recorded that $900,000 was to be advanced to Sepideh, Sepideh contended that no loan in that amount was advanced at all to Sepideh, let alone in her capacity as trustee. Somewhat surprisingly, his Honour regarded the possibility that Omar lent money to Navid pursuant to a separate oral agreement that he had made with Navid to be sufficiently substantial to provide a credible alternative explanation for the $450,000 advance. His Honour referred to five matters advanced on behalf of Sepideh in support of that conclusion.
4. First, his Honour observed, it was characteristic of the way that Omar and Navid did business together that they passed large amounts of cash between themselves. Be that as it may, however, it is clear that, in relation to the purchase of the Property, Omar sought particular protection in relation to the proposed venture. Thus, in cross-examination, he was asked what effect he wanted the Loan Agreement to have. He responded: "Just, just to protect me. Obviously I was advancing a significant amount of money. I just wanted to be protected, which is why anybody would hire a lawyer in the first place."
5. Secondly, it was contended that Omar conceded in cross-examination that he had lent the sum of $450,000 to Navid pursuant to the terms of an oral agreement between the two of them. Omar was cross-examined about the exchange of text messages in March 2017 referred to above. In particular, he was asked whether he was demanding $450,000 from Navid because he had agreed to pay that sum within one month and was complaining that he had not repaid the $450,000. When asked whether if he did in fact advance any money, he advanced the money to Navid, Omar responded: "The, the money was advanced for the sole purpose of purchasing this factory unit. … I gave the money to [Navid] … which was deposited into the bank accounts." Thus, it is clear that Omar regarded the cash provided on 17 October 2016 as being an advance for the purposes of the purchase of the Property and not as additional accommodation being given separately to Navid for an unspecified purpose.
6. Omar was asked whether he was in agreement with Navid that Sepideh would pay the money back in one month from the sale of a property at Worrigee that they were settling on. He accepted that, in October 2016, he had a conversation with Navid, in which Navid said that, if Omar would lend him some money, he would repay Omar that money within one month from the proceeds of the sale of a separate property.
7. The primary judge considered that those answers in cross-examination were evidence that there was a separate loan agreement with Navid. However, the discussion in October made abundantly clear that the $450,000 in cash that was given by Omar to Navid was for the purchase of the Property. Sepideh and Omar solemnly signed the Loan Agreement as a deed. It beggars belief that the money given by Omar to Navid was intended for some transaction other than that contemplated by the Loan Agreement.
8. Thirdly, the primary judge referred to Omar's diary note. His Honour considered that that was contemporaneous evidence that the funds had been lent to Navid. However, the reference to "settlement" could refer to nothing other than the completion of the purchase of the Property. It was Sepideh who was going to complete the purchase of the Property, not Navid. The reference to "NV" was clearly no more than a reference to the fact that the cash was handed to Navid, who then went with Omar to the branches of the ANZ Bank and the Commonwealth Bank to purchase bank cheques for the purposes of the settlement of the purchase of the Property.
9. Fourth, the primary judge referred to the further text exchange on 21 March 2017. An exchange some six months after the transaction in question can have no bearing on the transaction itself. It is clear enough that, in so far as Omar was speaking to Navid about repayment, he was, perhaps politically incorrectly, treating Navid as responsible as Sepideh's husband. Most importantly, however, the exchange of texts some six months after the event can have no bearing on what actually happened in October, as to which his Honour made findings. The only possible relevance of the texts six months later could have been doubt about the credibility of Omar, which was resolved in his favour.
10. Finally, the primary judge held that Omar's case in relation to the sum of $450,000 was wholly inconsistent with the terms of the Loan Agreement. Thus, the Loan Agreement referred to an advance of $900,000. His Honour considered that the "disparity" between that amount and the sum of $450,000 demonstrated that the sum of $450,000 was unrelated to the Loan Agreement. However, his Honour completely overlooked the explanation given by Omar in his affidavit. Thus, Navid owed Omar $230,000. On 30 August, Navid asked Omar for a further advance of $200,000 which was going to be repaid quickly. Then, in the days before completion, Navid asked for a further $50,000. While the amounts do not quite balance, there is no great disparity between the monies actually advanced by Omar and the sum of $900,000. The mistake made by Mr Di Mauro in the Loan Agreement was to fail to recognise that of the sum approaching $900,000, $400,000 was Omar's contribution to the purchase of the Property. In effect, that advance was repaid by being treated as a contribution to the purchase price of the Property.
11. The primary judge considered that the existence of an oral agreement between Omar and Navid explained why Omar had never asked for, nor complained about, Sepideh's failure to pay interest at the rate of $4,000 per month as provided for in the Loan Agreement. However, that indicates a misapprehension as to the terms of the Loan Agreement. Item 10 of the Schedule provided that the repayment date for the advance was five years after the date of the advance or upon sale of the Property. Item 11 provided that, if Sepideh paid the interest and principal on or before the due dates, Omar would accept "0% per annum" and a share of the profits from the sale of the Property. Item 12 provided for interest at the rate of $4,000 per month with the proviso that, if Sepideh complied with the terms of the advance, no interest was payable but Omar would be entitled to a share of profits derived from the sale of the Property. At the time of the hearing of the appeal, the Property had not been sold. Hence, an entitlement to a share of profits had not arisen. Thus, there was no entitlement on Omar's part to the payment of interest and no reason for him to complain about non-payment of interest.
12. The primary judge erred in concluding that Omar had failed to discharge the onus of demonstrating that the sum of $450,000 had been advanced pursuant to the Loan Agreement. Rather, the evidence points clearly to the conclusion that the $450,000 in cash that was given by Omar to Navid on 17 October 2016, most of which was applied in the purchase of bank cheques to enable Sepideh to complete the purchase of the Property, was clearly an advance made pursuant to and in contemplation of the Loan Agreement.
13. There may be a question as to Omar's entitlement under the Loan Agreement to interest on the advance of the sum of $450,000. The Loan Agreement is not entirely clear in that regard. Item 11 in the schedule to the Loan Agreement provided for interest at the rate of 12% per annum and Item 12 provided for interest at the rate of $4,000 per month. However, both Item 11 and Item 12 were subject to provisos, the effect of which appears to be that, if the principal was paid on the due date and Sepideh complied with the terms of the loan Agreement, no interest was to be payable. Rather, Omar was to be entitled to "a share of the profits" from the sale of the Property. Special condition 1(e) then provided that "his 50% share of the profits" was to be distributed to Omar free of any liability for capital gains tax. The intention appears to have been that, so long as there was no default by Sepideh under the Loan Agreement, no interest was to be payable to Omar and the consideration for the advance was to be "his 50% share of the profits". However, those questions were not raised in the appeal.

Conclusion

1. It follows from the above that the appeal should be allowed and the respondents should be ordered to pay the appellants' costs of the appeal. Orders 1, 2 and 3 made by the primary judge on 17 December 2020 should be set aside. In lieu thereof, I would make the following orders: 1. Direct the entry of judgment for the first plaintiff against the first defendant in the sum of $450,000. 2. Declare that the first plaintiff is entitled to 50% of the profits arising upon the sale of the Property. 3. Declare that in calculating the amount of such profits, the first defendant is to bear any liability for capital gains tax arising upon the sale of the Property. 4. Declare that the surplus arising upon the sale of the Property, if any, after payment to the first plaintiff of 50% of the profits, is owned by the first plaintiff and the first defendant in equal shares. 5. Order the defendants to pay the plaintiffs' costs of the proceedings to date.
2. The matter should be remitted to the Equity Division for the taking of any further steps necessary in order to give effect to the orders, such as the taking of accounts or the calculation of "profits" or interest. If either party seeks a variation of the above orders either as to costs or in order to resolve further issues raised by the appeal, application should be made in the usual way within 14 days of the making of the orders.

Appendix 1 The terms of the Loan Agreement included the following: "… WHEREAS The Borrower has requested the Lenders to make available certain loans advances or financial accommodation to the Borrower for business purposes which the Lenders have agreed to do subject to and upon the terms and conditions specified in this Loan Agreement. NOW THIS DEED WITNESSES AS FOLLOWS: 1 DEFINITIONS AND INTERPRETATION In the interpretation and application of this Loan Agreement, unless inconsistent with or repugnant to the context, the following shall apply: 1.12 "Lenders" means and includes the person(s) or legal entity referred to in the Schedule as the Lenders; 1.13 "Borrower" means and includes the person(s) referred to in the Schedule as the Borrower; 1.14 "Guarantor" means and includes any party or parties to the Securities other than the Lenders or the Borrower whether an actual Guarantor or not; … 1.17 "Initial Amount of the Loan" means and includes the amount referred to as such in the Schedule being that part of the Principal Sum of the Loan paid by the Lenders to the Borrower on the Date of Advance; 1.18 "Loan" means and includes all loans advances or financial accommodation of any nature whatsoever from the Lenders to the Borrower and shall include without limitation the Initial Amount of the Loan, all monies, debts and liability of any nature whatsoever due or owing or which may become owing whether previously presently or at some future date by the Borrower to the Lenders and shall further include any interest, fees, costs, charges, losses, damages or expenses due to or incurred by the Lenders of any nature whatsoever relation to, touching upon or arising out of this Loan Agreement or out of the Securities; 1.19 "Event of Default" means and includes an event referred to as such in clause 6; … 1.22 "Mortgaged Property" means and includes any property of any nature whatsoever being the subject of any Securities; and shall be deemed to include any real estate property whether presently owned or subsequently acquired during the period of this Agreement either by the Borrower or any Guarantor; … 1.24 "Repayment Date" means and includes the date specified as such in the Schedule or any extension of that date agreed to in writing by the parties. … 3 BORROWER'S WARRANTIES 3.1 The Borrower warrants to the Lenders that: … 3.8 In the event that the Borrower is the Trustee of any Trust, it enters into this Loan Agreement for and on behalf of and with the power and authority of each and every such Trust of which it is Trustee and in the event that the Borrower enters into this Loan Agreement and any Securities in its capacity as a Trustee or in any manner whatsoever on behalf of another interested party that such trust or capacity is valid and binding and that any deed or documentation constituting or evidencing same is fully enforceable and that copies of all such deeds and documentation have been provided to the Lenders together with any amendment, substitution, variation or replacement of such deeds and documents. The Lenders shall not be prejudiced or affected by any breach or oversight by the borrower in this regard. … 4 BORROWER AND GUARANTORS COVENANTS The Borrower and guarantors covenant with the Lenders that they shall: 4.1 repay to the Lenders or at its direction the Loan upon the Repayment Date; … 5 SECURITIES In consideration of these presents and of the Lenders agreeing to make the Loan, the Borrower covenants with the Lenders that it shall grant or procure to be granted the Securities in favour acknowledges and agrees that: … 5.3 For the avoidance of any doubt, the Borrower hereby charges as beneficial owner in favour of the Lenders all its right, title and interest in or derived from, the Mortgaged Property and all its assets as security for payment to the lenders of the Loan. … 6 EVENTS OF DEFAULT Notwithstanding anything contained in this Agreement, the Loan shall at the option of the Lenders become immediately due and payable and each of the Securities shall immediately become enforceable at the option of the Lenders upon the happening of any one of the following events of default, without the necessity for any notice or demand by the Lenders and notwithstanding any delay or previous waiver by the Lenders of the right to exercise such option. An Event of Default shall be deemed to have occurred if: … 6.2 default is made by the Borrower in the due and punctual payment of interest or any other monies at any time due and payable by the Borrower to the Lenders whether demanded or not. … 6.14 in respect of any trust or settlement of which the Borrower or Guarantor is at the date of this Agreement the Trustee, any one or more of the following events occurs without the prior consent in writing of the Lenders, namely: 6.14.1 the Trust or Settlement is determined or terminated; 6.14.2 any power of determination, revocation, addition, appropriation or advancement save and except any such power which relates to the income of such trust or settlement is exercised by the Trustee; 6.14.3 the Trustee's right of indemnity is in any way restricted, diminished or impaired; any distribution of corpus is made; 6.14.4 the Borrower or Guarantor (as the case may be) retires or is removed as sole Trustee; … SCHEDULE Item 1 Lenders: Omar El-Cheikh Item 2 Lenders Address: XX XXXX Street Rydalmere NSW 2116 Item 3 Borrower: Sepideh Miraki Item 4 Borrower's address [The Miraki Residence] Item 5 The Guarantor N/A Item 6 The Guarantor's address N/A Item 7 Establishment/Procuration Fee: $0.00 Legals/Lodgement Fee: $3,500 plus GST Brokerage Fee: $0.00 Item 8 Amount of Loan: $900,000.00 S.M. $850,000.00 Item 9 Date of Advance: Upon signing hereof and completion of all loan documentation Item 10 Repayment Date: 5 (five) years after date of Advance or upon the sale of the property Item 11 Interest: 12% per annum, provided always that if the Borrower pays the interest and principal on or before the due dates the lender shall accept 0% per annum and a share of the profits from the sale of the property. Item 12 Payment of Interest: $4,000 interest per month payable monthly in advance provided always that if the Borrower shall comply with the terms of the advance then no interest is payable but the lender shall be entitled to a share of the profits derived from the sale of the property Item 13 Security Property Being the property known as [the Property] Item 14 Non refundable Application fee: $0.00

Prior Encumbrances: Loan for the balance of the purchase Price and associated purchase costs after allowing for the initial contributions of $400,000 by both the borrower and the lender Special Conditions

1. The parties hereto shall enter into a joint venture agreement whereby the parties shall evidence the following agreement between the parties a. All decisions related to the property must be agreed to by the Borrower and the Lender including i. The amount of any borrowing to be secured on the property ii. The use of the property iii. The rental to be charged iv. Any works to be carried out on the property v. The time of sale of the property b. The parties hereto shall each contribute $400,000 towards the purchase of the property, with the purchase to be solely in the name of the Borrower. c. The Lender shall be entitled to register a second Mortgage over the property to better secure his interest in the property. d. The fact that the parties shall each contribute equally to any short fall (sic) in the outgoings and mortgage payments after allowing for the renal received from the property e. The fact that the Borrower shall pay the capital gains tax applicable on the sale of the property for both the Borrower and the Lender and shall then distribute to the Lender his 50% share of the profits free of any liability for capital gains tax.
2. The Borrower shall execute all necessary or desirable documents in order to give effect to the agreements contained herein and to secure the advance, as and when called upon to do so by the Lender.
3. The Borrower shall not in any way pledge charge or otherwise encumber the property without the express written permission of the Lender." DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 November 2021