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[2026] NSWSC 1189
Supreme Court of NSW
2026-09-30
Faulkner J
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: El-Rihani v Sbeiti [2026] NSWSC 1189
Hearing dates: 9–12 March 2026
Final submissions received 29 April 2026
Date of orders: 30 September 2026
Decision date: 30 September 2026
Jurisdiction: Equity - Real Property List
Before: Faulkner J
Decision: The Plaintiff to serve on the Defendants a minute of the orders which he contends ought to be made to give effect to these reasons by 28 October 2026.
Any Defendant who contends for different orders to serve on the Plaintiff and the other Defendants a minute of those orders by 11 November 2026.
The proceedings be listed for directions on 17 November 2026.
Liberty to apply.
Catchwords: REAL PROPERTY – alienation of property – s 37A of the Conveyancing Act 1919 (NSW) – whether dispositions of various properties were made with intent to defraud creditors
REAL PROPERTY – s 37A of the Conveyancing Act 1919 (NSW) – whether plaintiff is a person prejudiced by alienation of property with intent to defraud creditors – where plaintiff sued defendant seeking order in the nature of a mandatory injunction that defendant perform contractual obligation to pay money to a third party – defendant ordered to pay money to third party – defendant fails to comply with order of the Court – defendant claims to be unable to pay – plaintiff wishes to take steps to enforce order that defendant pay third party (not the plaintiff) – whether plaintiff is a person prejudiced by defendant’s alienation of property with intent to defraud creditors
REAL PROPERTY – s 37A of the Conveyancing Act 1919 – whether plaintiff is a person prejudiced by alienation of property with intent to defraud creditors – plaintiff and defendant previously carried on business together through corporate entity – plaintiff and defendant make deed to end their business relationship – plaintiff and defendant agree that corporate entity to be deregistered as a solvent company – plaintiff and defendant agree each to contribute to fund with which to pay corporate entity’s liabilities – defendant fails to make contributions to fund – defendant claims to be unable to contribute – whether plaintiff is a person prejudiced by defendant’s alienation of property with intent to defraud creditors
Legislation Cited: Bankruptcy Act 1924-1932 (Cth), s 60
Conveyancing Act 1919 (NSW), ss 7, 37A
Corporations Act 2001 (Cth), ss 461, 601AA
Evidence Act 1995 (NSW), s 140
Federal Court Rules 2011 (Cth), r 41.02
Law of Property Act 1936 (SA), s 86
Limitation Act 1969 (NSW), ss 54, 63
Real Property Act 1900 (NSW), s 57
Supreme Court Act 1970 (NSW), s 63
Uniform Civil Procedure Rules 2005 (NSW), r 5.3
Cases Cited: Bahr v Nicolay [No 2] (1988) 164 CLR 604; [1988] HCA 16
Barton v Deputy Federal Commissioner of Taxation (1974) 131 CLR 370; [1974] HCA 43
Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34
Cadogan v Cadogan [1977] 3 All ER 831; [1977] 1 WLR 1041
Cannane v J Cannane Pty Limited (in liquidation) (1998) 192 CLR 557; [1998] HCA 26
Chen v Marcolongo [2009] NSWCA 326
Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389
El Rihani v Hotait (No 3) [2023] FCA 595
Electricity Generation Corp t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7
El-Rihani v Hotait [2020] FCA 912
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
Grapple Pay Pty Ltd v Conroy [2025] NSWCA 171
Green v Schneller (2001) 164 FLR 82; [2001] NSWSC 897
Hall v Poolman (2007) 215 FLR 243; [2007] NSWSC 1330
Israel Discount Ban v ACN 078 272 867 Pty Ltd (in liq) (formerly Advance Finances Pty Ltd [2019] FCAFC 90
Jaken Properties Australia Pty Ltd v Naaman (2023) 112 NSWLR 318; [2023] NSWCA 214
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Mackay v Douglas (1872) LR 14 Eq 106
Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3
McGrath v Troy as Administratrix of Estate of Wade [2010] NSWSC 1470
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37
Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd [2024] FCAFC 17
Royal v El Ali [2016] FCA 782
Silvera v Savic (1999) 46 NSWLR 124; [1999] NSWSC 83
Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278; [2006] HCA 6
Williams v Lloyd (1934) 50 CLR 341; [1934] HCA 1
Category: Principal judgment
Parties: Hussain El-Rihani (Plaintiff)
Amne Sbeiti (First Defendant)
Billal Hotait (Second Defendant)
Bill.H Pty Limited (Third Defendant)
25 Jersey Road Matraville Pty Limited (Fourth Defendant)
Dr Ali Sbeiti (Fifth Defendant)
Representation: Counsel:
T Lynch SC / M Harker (Plaintiff)
M Klooster (First and Second Defendants)
Solicitors:
HWL Ebsworth Lawyers (Plaintiff)
Mitry Emerson Lewis Lawyers (First and Second Defendants)
SMB Law (Third and Fourth Defendants)
File Number(s): 2024/00173904
Publication restriction: Nil
In opening, Counsel for the Plaintiff described these proceedings as the most recent part of long hard-fought litigation between two former business partners. The Plaintiff, Mr El-Rihani, and the Second Defendant, Mr Hotait, were previously in business together as property developers. By 2015 their relationship had deteriorated. In 2016 they decided to part ways. The disentanglement of their affairs was complex. They documented the separation in a number of documents which included a Separation Deed which they made on 19 December 2016.
The outworking of the separation was not smooth and soon gave rise to multiple proceedings variously between Mr El-Rihani, Mr Hotait, family members and corporate entities associated with them. Mr Hotait commenced the first proceedings on 1 September 2017 which were brought in the Federal Court against Mr El-Rihani and a company through which some property developments had previously been undertaken. Mr El-Rihani commenced his own proceedings in this Court on 14 March 2018 which were transferred to the Federal Court. There have been other proceedings.
Of particular relevance to the present case is that, on 6 June 2023, the Federal Court acceded to an application by Mr El-Rihani to order Mr Hotait to pay into a specified trust account five amounts which together total $2,073,343.93. Mr Hotait was ordered to make the payments by September 2023. Mr Hotait was not obedient to the orders of the Court. He did not make any of the payments.
Mr Hotait once had more assets than he claims to have today. He owns a company called Bill.H Pty Ltd which previously owned a property, but on 17 May 2018 the company transferred the property to Mr Hotait’s wife. On 8 October 2019 another company owned by Mr Hotait transferred another property to Mr Hotait’s wife. Mr Hotait is still the registered proprietor of a third property situated on Shelley Street, Sydney, but on 4 November 2023 he entered into a contract to sell that property to his wife. The terms of the contract are not orthodox. They do not require the payment of any money to Mr Hotait. Completion of the sale has been restrained pending the outcome of these proceedings.
Mr El-Rihani alleges that each of these transactions, together with an earlier secured loan agreement between Mr Hotait and his wife’s father, was an alienation of property with intent to defraud creditors. Mr El-Rihani claims that he is a person prejudiced by the alienations and that by virtue of s 37A of the Conveyancing Act 1919 (NSW) they are voidable at his instance. By these proceedings he seeks relief to implement the avoidance.
The resolution of Mr El-Rihani’s claims calls for an understanding of the chronology of events which have happened. The circumstances of the four transactions, including the secured loan between Mr Hotait and his wife’s father, can then be considered to determine whether there has been an alienation of property with intent to defraud creditors. Finally, it is necessary to decide whether Mr El-Rihani is a person prejudiced by the alienations.
These proceedings were commenced in May 2024 by an application in the Commercial List, originally for orders to restrain Mr Hotait’s wife from on-selling properties which had been transferred to her by Mr Hotait’s companies.
Mr Hotait’s wife, Ms Sbeiti, is the First Defendant. She had earlier been the subject of an application by Mr El-Rihani for preliminary discovery under Uniform Civil Procedure Rules 2005 (NSW) r 5.3.
Mr Hotait is the Second Defendant. Mr Hotait and Ms Sbeiti have common representation in these proceedings. They resist the relief sought by Mr El-Rihani.
The Third Defendant is Bill.H Pty Ltd which I will refer to as “BHPL”. Subject to some of the details below, it is sufficient for current purposes to say that at all relevant times BHPL has been a company owned by Mr Hotait and of which he is the sole director. Mr Hotait describes it as “his” company. At one stage Mr Hotait took steps to deregister BHPL but Mr El-Rihani was able to have it reinstated.
The Fourth Defendant is 25 Jersey Road Matraville Pty Ltd which I will refer to as “JRPL”. Mr Hotait initially owned 50% of the shares in JRPL and was one of two directors but by the material time he had become the sole shareholder and director. Mr Hotait also took steps to deregister JRPL but Mr El-Rihani was able to have it reinstated.
Liquidators were appointed to each of BHPL and JRPL in about June 2024. The liquidators have submitted to the orders of the Court save as to costs. The companies have not been active in the proceedings. The liquidators may nonetheless want to be heard on the form of the final relief should it be found that an alienation of the property by either company has been avoided.
The Fifth Defendant is Ms Sbeiti’s father, Dr Sbeiti. Dr Sbeiti lives abroad. Orders for substituted service were made which have the effect that Dr Sbeiti is taken to be served notwithstanding the want of personal service. Dr Sbeiti has not participated in the proceedings. He has not filed a defence or appeared at the hearing, either in person or by legal representation. No affidavits have been read from Dr Sbeiti.
The Australian Securities and Investments Commission was previously named as a defendant for the purposes of obtaining orders to reinstate BHPL and JRPL. It is no longer a party.
The property development business previously undertaken by Mr El-Rihani and Mr Hotait does not need to be described in any detail, other than to observe that multiple projects were undertaken through multiple corporate vehicles. One such corporate vehicle was Parramatta Project Pty Ltd which was associated with Mr El-Rihani. Another was Beauchamp Developments Pty Ltd which was associated with Mr Hotait. Those two companies were also party to the Separation Deed which Mr El-Rihani and Mr Hotait made on 19 December 2016. The Separation Deed is a commercial document. Its provisions are to be construed by reference to the Deed’s text, context and evident commercial purpose: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46] (French CJ, Nettle and Gordon JJ). It is to be given a businesslike operation: Electricity Generation Corp t/as Verve Energy v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 at [35] (French CJ, Hayne, Crennan and Kiefel JJ).
The Recitals of the Separation Deed stated:
“A. Hotait and El Rihani, through their nominated entities and personally, have engaged in various joint business ventures in the property development and construction industry.
B. Hotait and El Rihani have agreed to separate from each other and to do all things necessary to procure their nominated entities to separate from each other to bring about the end of their joint business ventures.
C. The parties have reached an agreement in accordance with the terms of this document.”
The operative provisions addressed the specific circumstances of a number of corporate entities through which Mr Hotait and Mr El-Rihani had, in the words of Recital A, engaged in various joint ventures in the property development and construction industry. For each such entity provision was made for untangling the business relationship by detailed prescription of numerous necessary tasks, including payments to be made inter se, assets to be transferred, liabilities to be discharged and litigation concluded, property to be distributed, shareholder resolutions to be passed and debts to be paid, including taxes. The corporate entitles would not all be dealt with in the same way. Parramatta Project (cl 8) and Beauchamp Developments (cl 9) were evidently intended to continue in business. The Separation Deed provided for the exclusion of either Mr Hotait or Mr El-Rihani from the future business of the entity. Other corporate entities were evidently intended not to carry on and provision was made for their deregistration. In each such case, the Separation Deed contemplated that the entity would be the subject of a deregistration under s 601AA of the Corporations Act 2001 (Cth) (see the references to ASIC Form 6010, for example in cl 5.5) for which solvency is a requirement (s 601AA(2)(e)).
The corporate entity of relevance to the subsequent controversy is Skyworks NSW Pty Ltd. It is referred to as “Skyworks NSW” in the Separation Deed but I will refer to it as “Skyworks”. Unlike the other entities which were the subject of express agreement in the Separation Deed, Skyworks had a building licence. It was the contracted builder on a number of projects, some with Parramatta Project and some with Beauchamp Developments. Where any such contract existed there was vertical integration within the business of Mr Hotait and Mr El-Rihani, with one corporate entity acting as the developer and Skyworks acting as the builder. Building defects which hitherto had been addressed within the one business would have to be addressed differently after the separation was implemented. Skyworks was also the contracted builder for some other entities (cl 5.1(c)). The evidence does not reveal whether those other entities were also part of the business of Mr Hotait and Mr El-Rihani or whether they were arms length third parties or a mixture of both.
The agreement about Skyworks was set out in cll 5, 10 and 11. These provisions reveal an intention that Skyworks’s building business would be brought to an end. Provision was made for the termination of Skyworks’s extant building contracts with Parramatta Project and Beauchamp Developments, either immediately (e.g. cl 8.16) or upon refinancing of the relevant project (cll 9.16 and 9.17). No express provision was made for building contracts with other entities but there is evidence that Skyworks had not commenced any new projects since early 2015. Provision was also made for the eventual cancellation of Skyworks’s building licence. The cancellation was to be done “in a manner which does not damage the prospects of [Mr Hotait and Mr El-Rihani] obtaining alternative building licences in the future” (cl 5.4(c)).
“10.5 In the event that any liability exceeds the amount held in the Trust Account at any given time, [Mr Hotait] and [Mr El-Rihani] each agree to contribute equally to the amount exceeding the amount held up to a maximum of an additional $100,000.00 each on each occasion. If:
(a) [Mr Hotait] cannot advance the additional funds required, [Mr El-Rihani may advance the shortfall and such advance shall be a debt due and payable and accrue interest of 5% per annum payable by [Mr Hotait] until such time that the advance plus all interest is repaid. To the extent that any monies remain outstanding from [Mr Hotait] to [Mr El-Rihani], that indebtedness shall constitute a charge over any real property held by Beauchamp Developments and/or [Mr Hotait] and such charge may be registered by [Mr El-Rihani] as a charge and constitutes in [Mr El-Rihani] a caveatable interest. [Mr Hotait] and Beauchamp Developments shall neither raise complaint nor require the lapsing of a caveat or a charge, as the case may be, where [Mr El-Rihani] registered such interest pursuant to this Deed. This chargeable interest accrues and is applicable under the Real Property Act 1900 (NSW) and applicable interstate land registration acts and under the common law.”
Clause 10.5(b) contained a reciprocal provision to address the circumstance where a liability of Skyworks exceeded the amount held in the Trust Account and Mr El-Rihani could not advance additional funds.
The following paragraphs of cl 10 provided machinery for the conclusive determination of the liabilities of Skyworks to be paid from the Trust Account, in the first instance by agreement between Mr El-Rihani and Mr Hotait but otherwise by binding expert determination. Further provision was made in cl 11 for any payments required in response to claims from third parties as a result of defective workmanship and materials. Clauses 10 and 11 gave rights to Mr El-Rihani (and also to Mr Hotait) in relation to the application of the funds in the Trust Account. Mr El-Rihani was given rights which would enable him to ensure that Skyworks’s liabilities were paid even if Mr Hotait objected or did not co-operate.
Clause 10.14 addressed the ultimate fate of any surplus funds in the Trust Account:
“10.14 Upon either of the following events occurring:
(a) the expiry of all building defect warranty periods which Skyworks NSW must comply by contract, statute or common law (excluding tort) and receipt of all funds payable to Skyworks NSW; or
(b) agreement between the parties in writing,
the following shall occur:
(i) the funds held in the Trust Account shall be distributed to the parties equally (if there are funds available for distribution). For this purpose, the parties agree to provide written authority to Madison Marcus Law Firm Pty Ltd to deal with the funds held in the Trust Account in accordance with this clause; and
(ii) Skyworks NSW is to be deregistered in accordance with clause 5.3.”
Clause 5.3 provided that once the funds in the Trust Account had been distributed, Skyworks was to be deregistered unless the parties otherwise agreed. As already observed, the parties agreed that Skyworks would be voluntarily deregistered as a solvent corporation under s 601AA.
Apart from facilitation of the receipt of funds and the payment of Skyworks’s future liabilities, the Trust Account had no role to play in separation of the business interests of Mr Hotait and Mr El-Rihani. As already observed, cl 10.1 contained the acknowledgement of the parties that money would be held in the Trust Account “on behalf of” Skyworks.
Elsewhere in the Separation Deed (cl 3.1(a)) provision was made for Mr El-Rihani to make a payment to Mr Hotait of just over $1m as part of the disentanglement of the business relationship. Mr El-Rihani made the payment in December 2016.
By the end of 2015 Skyworks had ceased further work but still had potential liabilities for the future. The Occupation Certificate for Skyworks’s last project was dated 15 December 2015. Defect liability periods would continue to run for some years. As required by cl 10.4, Mr El-Rihani and Mr Hotait each made an initial contribution of $200,000 into the Trust Account. Money was subsequently paid away to discharge some of Skyworks’s liabilities.
By March 2017, further funds were required. On 17 March 2017 Mr El-Rihani contributed a further $100,000 to the Trust Account. Despite cl 10.5 of the Separation Deed Mr Hotait did not make an equivalent contribution. In cross-examination Mr Hotait sometimes used the word “elected” to describe his non-contribution but that word is suggestive of a choice which finds no support in the wording of the Deed. By the first sentence of cl 10.5 Mr Hotait promised to make further contributions in the circumstances described in the sentence. Clause 10.5(a) also addressed Mr El-Rihani’s rights once the breach occurred, but it did not relieve Mr Hotait of his anterior obligation to contribute. In that respect cl 10.5(a) was consistent with cl 5.4(f) and, in the case of Skyworks’s tax liabilities, cl 5.6. Mr Hotait’s failure to make further payments to the Trust Account was a breach of his promises in cl 10.5(a).
Clause 10.5(a) gave Mr El-Rihani a right to pay Mr Hotait’s unpaid contributions. The provision was subsequently construed by Farrell J of the Federal Court as giving Mr El-Rihani the right only where Mr Hotait failed to pay because he was unable to do so and not where Mr Hotait chose not to. If the right was enlivened and Mr El-Rihani made the payment, Mr Hotait would then owe a debt to Mr El-Rihani as well as an obligation to pay interest. Mr Hotait further agreed that the debt would constitute a charge over any real estate held by Mr Hotait and might be notified by a caveat.
The evidence in these proceedings is unclear about the circumstances in which Mr Hotait failed to pay. In cross-examination Mr Hotait made references to making an election. He also said on a number of occasions that he was unable to pay in 2017, although he also said that he chose to use money which was available to him for other purposes, including the $1m which he received from Mr El-Rihani in December 2016 under cl 3.1(a) of the Separation Deed. His evidence left the distinct impression that he chose to be unable to pay. Perhaps in tension with an inability to pay, he also professed a firm belief that he was not obliged to contribute to something which he called “past liabilities” of Skyworks. He referred to fraudulent invoices. Ultimately it does not matter for the purpose of deciding the issues in these proceedings.
In any event, on 28 March 2017 Mr El-Rihani paid a further $100,000 to the Trust Account. He subsequently claimed that the payment was made under cl 10.5(a). As at March 2017 Mr Hotait was the registered proprietor of an apartment on Shelley Street in Sydney. On 15 May 2017 Mr El-Rihani lodged a Caveat over the Shelley Street Property. On 5 March 2019 the Caveat appears to have been replaced by another Caveat in circumstances which are not explained in the evidence.
“139 The obligation to contribute to the Trust Account under cl 10.5 of the Deed of Separation is triggered by the existence of a liability exceeding the amount held in the Trust Account at any given time with the correlative obligation being imposed on Mr Hotait and Mr El Rihani to contribute up to $100,000 on each occasion when that trigger occurs. There is nothing in cl 10 which indicates that their individual obligation imposed by cl 10.5 is reliant on the other performing his obligations.
140 If liabilities of Skyworks NSW exceeded the amount in the Trust Account at the time the Requests were made and no contributions have since been made to the Trust Account, it may be that both Mr El Rihani and Mr Hotait are in breach of their obligations under cl 10.5. It is unnecessary for the Court to determine whether there is a breach for the purpose of determining the separate questions. Having said that, where a party who is liable to make a contribution fails to do so because the other party has indicated unwillingness to contribute that party’s share of the amounts required under cl 10.5, in an action to enforce the obligations under that clause, a Court is likely to make an order that the unwilling party make its contribution conditional on the party seeking to enforce the obligation also making its contribution.
141 Properly construed, the permission contained in subclauses (a) and (b) of cl 10.5 for a party to contribute funds on behalf of the other party is triggered only where the other party cannot, as opposed to will not, make the required contribution. That is both clear from the language used in those subclauses and from the consequence that interest becomes payable by the party which did not contribute from the time the other party makes a contribution under one of those paragraphs of cl 10.5.”
“THE COURT ORDERS THAT:
1. It is a condition of Mr Hotait’s obligations in Order 2 that Gavel & Page confirms by an email sent to Mr Hotait’s email address on or before 5 pm (Sydney time) on the Wednesday immediately preceding the Friday on which Mr Hotait is required to pay an amount specified in paragraphs (a) to (e) of Order 2 (relevant amount) to the Trust Account that the relevant amount has been received into the Trust Account from Mr El Rihani in cleared funds. Any funds paid by Mr El Rihani as contemplated by this order will be paid subject to the escrow arrangement set out in Order 3.
- Mr Hotait must pay or cause to be paid the following amounts in cleared funds to the Trust Account by 5 pm (Sydney time) on the following specified dates:
(a) $200,000 by Friday, 16 June 2023;
(b) $600,000 by Friday, 30 June 2023;
(c) $600,000 by Friday, 28 July 2023;
(d) $600,000 by Friday, 25 August 2023; and
(e) $73,343.93 by Friday, 22 September 2023.
3. Any funds paid by Mr El Rihani to Gavel & Page as contemplated by Order 1 will be held by that firm subject to the following escrow arrangement:
(a) Mr El Rihani must not call for repayment of the relevant amount paid by him any time before 5 pm on the Monday immediately following the time specified in Order 2 as the time by which Mr Hotait must pay the same relevant amount;
(b) If Mr Hotait pays the relevant amount in cleared funds into the Trust Account by the time specified in Order 2, the escrow applying to the relevant amount contributed by Mr El Rihani ends immediately and the relevant amounts contributed by Messrs Hotait and El Rihani must be held in the Trust Account subject to the Deed of Separation; and
(c) If Mr Hotait does not pay the relevant amount in cleared funds into the Trust Account by the specified date in Order 2, the relevant amount paid by Mr El Rihani remains subject to escrow and Mr El Rihani may request their return at any time after 5 pm on the relevant Monday. The relevant amount contributed by Mr El Rihani will not be held subject to the Deed of Separation unless and until Mr Hotait pays the same relevant amount to the Trust Account to be held subject to the Deed of Separation.”
Shortly before each of the five dates specified in Order 2 Mr El-Rihani made his payment to the solicitors who were administering the Trust Account. On each occasion the Order 1 condition was fulfilled. Mr Hotait failed to make the payments specified in Order 2. By reason of Order 3(b) Mr El-Rihani’s payments were never held in the Trust Account subject to the Deed of Separation. In each instance Mr El-Rihani was entitled to request the return of his money and he did.
Mr Hotait was also ordered to pay Mr El-Rihani’s costs of the proceedings as “agreed or taxed”. On 4 June 2025 the costs were certified to be $610,000. Mr Hotait has not paid the costs.
There has been no appeal from either Judgment of Farrell J.
Following Mr Hotait’s failure to comply with the Orders Mr El-Rihani took steps in the Federal Court to have them enforced. On 14 December 2023 the Federal Court ordered Mr Hotait to serve an affidavit on Mr El-Rihani in which he disclosed his assets. Mr Hotait did so on 22 December 2023. The evidence does not reveal what has happened with the Federal Court proceedings since then. On 26 April 2024 the Court ordered Ms Sbeiti to give preliminary discovery of documents relating to the consideration paid by her for the purchase of two properties from companies owned by Mr Hotait (see below). Ms Sbeiti was not obedient to the Order of the Court.
As mentioned above, on 5 April 2024 Mr El-Rihani commenced proceedings in this Court in order to obtain preliminary discovery from Ms Sbeiti.
The present proceedings were commenced by Mr El-Rihani on 10 May 2024.
The first property is the apartment on Shelley Street in Sydney of which Mr Hotait is the registered proprietor. He purchased it in July 2012. A current title search records a mortgage to National Australia Bank Limited. Mr Hotait has been in default of the mortgage for a number of years. In September 2022 NAB issued a notice under s 57(2)(b) of the Real Property Act 1900 (NSW) but there is no evidence of more recent action by NAB. The amount owed to NAB is unknown.
The objective facts relevant to the two transactions with the Shelley Street Property are as follows.
Mr Hotait and Ms Sbeiti married in July 2009 following which Ms Sbeiti came to live in Australia. The Shelley Street Property is apparently their family home where they live with their children.
Apart from the fact that Ms Sbeiti was born on 12 June 1985 in Bucharest, Romania (and hence was 24 when she arrived in Australia), there is no evidence about her background. She gave evidence in the proceedings and was cross-examined. She presented as an intelligent, confident and capable person. Her spoken English is fluent although there was the occasional word which she said she did not understand, namely “ruse” and “annexed”. There is nothing to suggest that her written English is otherwise.
From some point in 2013 Ms Sbeiti has worked in property development in Sydney. In paragraph 5 of her Affidavit dated 28 March 2025 she says:
“I work as a project manager in the building and construction industry. I have worked in the building and construction industry for 12 years.”
Ms Sbeiti accepts that she operated her own property development business, separate to Mr Hotait.
On 1 May 2013 Ms Sbeiti opened a bank account in her own name. There is no suggestion that the account was not Ms Sbeiti’s account both in form and in substance.
The evidence includes a bank statement for Ms Sbeiti’s account for the period 1 May 2013 to 7 October 2021. The first transaction occurred on 4 June 2013 when a deposit was made into the account in the amount of $99,995. There is no dispute that the deposit was made by her father, Dr Sbeiti. The narrative recorded on the bank statement is “Transfer To His Daughter”. The narrative is a description of the transaction given to the transmitting bank, presumably in Lebanon where Dr Sbeiti lives.
On 10 October 2013 a company was registered with the name Sbeiti Pty Ltd. Ms Sbeiti was the sole director of the company. She was also the sole shareholder.
Apart from some relatively minor amounts, the next significant transfer into Ms Sbeiti’s bank account occurred on 9 December 2013. There is no dispute that Dr Sbeiti made that deposit. The bank statement records a deposit of $149,995 with the narrative “Selling Apartment (owner Ali and Amne)”. Amne is the name used by Ms Sbeiti in her Affidavit dated 28 March 2025.
On 18 December 2013 a Development Application was lodged for a development at 1137 Anzac Parade, Matraville. I will refer to this as the “Anzac Parade Property”. Ms Sbeiti signed the Development Application in which she was personally named as the applicant together with Sbeiti Pty Ltd. The Development Application included an estimate of the costs of the development which was $485,100. That figure did not include the cost of purchasing the land.
On about 30 January 2014 Sbeiti Pty Ltd entered into a contract to purchase the Anzac Parade Property. A cheque in the amount of $168,134.71 was drawn on Ms Sbeiti’s bank account in favour of the vendor which it may be inferred was for some or all of the deposit. The purchase completed on 14 February 2014 when the Anzac Parade Property was transferred to Sbeiti Pty Ltd. There is no dispute that part of the purchase price was paid from funds in Ms Sbeiti’s bank account which at that time were made up almost entirely of funds deposited by Dr Sbeiti. In response to that suggested application of Dr Sbeiti’s funds, Mr Hotait said that it “looks like it may be correct”. The evidence does not reveal where the balance of the purchase price came from.
On 17 April 2014 a deposit was made into Ms Sbeiti’s account in the amount of $14,990. The narrative on the bank statement is “From Sbeiti Ali & Florina”. Ali is Dr Sbeiti’s first name. There is no dispute that Dr Sbeiti made that deposit.
The bank statement shows that four further deposits totalling $183,773.11 were received into Ms Sbeiti’s account on 27 May, 21 September, 21 October 2015 and 21 April 2016. The bank statement narratives do not provide any details for those deposits, although each has a code commencing with “Intt” which is likely to be an abbreviation for “international”. In any event, there is no dispute that those four deposits were also made by Dr Sbeiti. All up the total amount which Dr Sbeiti deposited into Ms Sbeiti’s account was $448,753.11.
“Direct Credit Hotait P/l Atf 068834 amouna”.
Amouna is the name used by Ms Sbeiti for her email address on the Development Application.
After Sbeiti Pty Ltd purchased the Anzac Parade Property in February 2014 the property was developed into two residences. Some of the development costs were paid from Ms Sbeiti’s bank account. Approximately $168,134.71 in costs were paid from that source. The bank statement records numerous and frequent withdrawals of cash from about April 2014 onwards, each withdrawal being for a relatively minor round figure. The cash withdrawals continued until about June 2016.
At the conclusion of the development work the two residences were sold. The two transactions by which the residences were sold were in fact the sale of shares in Sbeiti Pty Ltd. The sales occurred in June and July 2016.
Apart from interest, the last deposit into Ms Sbeiti’s bank account ($89,990) occurred on 21 April 2016. As 2016 progressed, fewer withdrawals occurred. The last cash withdrawal ($3,000) occurred on 24 May 2016 which left the bank account with a balance of $4,704.52. The last transfer out of the bank account occurred on 26 September 2016 which left a balance of $33.48. Since that date the account has been virtually dormant.
Dr Sbeiti frequently came to Australia from 2013 to 2016.
With reference to Dr Sbeiti, paragraphs 54 to 56 of Mr Hotait’s Affidavit contain the following statements:
“54 On one of his trips to Sydney in 2013, I showed him some of the development projects I was working on. Dr Sbeiti offered to loan money to me if I ever needed it for business purposes. He said he would lend me money on the basis that I would pay him back either when I could, or if he needed it, upon his request.
55 On or about 4 June 2013, I asked Dr Sbeiti if I could borrow $100,000 to assist me with a development project. Dr Sbeiti told me that since the loan was for business purposes, I would need to pay him interest. I agreed.
56 Dr Sbeiti paid $99,995 into my wife’s bank account with Bank of Sydney. I gave directions to my wife on where to transfer the money.”
The $99,995 deposit is referred to at [55] above.
Mr Hotait says in paragraph 57 of his Affidavit that on or about 9 December 2013 he asked Dr Sbeiti for a further loan of $150,000 and that Dr Sbeiti agreed on the same terms. In paragraph 58 Mr Hotait says that Dr Sbeiti again paid money into his wife’s bank account to whom he again gave directions where to pay the money. This is the deposit referred to at [57] above.
Mr Hotait says that he asked Dr Sbeiti for a further loan of $15,000 on or about 14 April 2014. Mr Hotait’s evidence in paragraph 59 of his Affidavit is as follows:
“On or about 14 April 2014, when Dr Sbeiti was in Sydney, I asked Dr Sbeiti to borrow $15,000. Dr Sbeiti raised with me his concern that he had loaned me what was a lot of money to him. He asked me for security for loan. I agreed to offer him a charge over my property at 1001/35 Shelley Street, Sydney, NSW 2000 (Shelley Street). I obtained a Word document setting out a draft Loan Agreement. I cannot recall now from where I obtained this document. However, I recall working with Dr Sbeiti on amending it. At pages 378 to 390 of BH-1 is a copy of the Loan Agreement we entered into (Loan Agreement). My friend, Mohammed Ammar, witnessed both our signatures.”
As referred to in paragraph 59 of Mr Hotait’s Affidavit, the evidence includes an eleven-page document entitled “Loan Agreement”. It is between Dr Sbeiti, who is described as the “lender”, and Mr Hotait, who is described as the “borrower”. The Loan Agreement is dated 17 April 2014. It is now common ground between the parties that the Loan Agreement was entered into on the date it bears.
There are two recitals in the following terms:
“A. The Borrower has requested the Lender to lend to the Borrower the sum of $264,980.00 for the purpose of Business capital to purchase and develop 1137 Anzac Parade Matraville and subsequent developments.
B. The Lender has agreed to advance to the Borrower the Principal Sum upon having the repayment of the Principal Sum with interest secured in the following manner.”
“2. LOAN AND REPAYMENT
In consideration of the Principal Sum advanced by the Lender to the Borrower (the receipt of which the Borrower acknowledges) the Borrower agrees that they will repay the Principal Sum or so much of the Principal Sum as remains unpaid on the 17th day of April 2015, being Twelve (12) Calendar months from the date of this agreement.”
The “Principal Sum” is defined as “the sum of $264,980.00, and any further advances made by the lender”.
Clause 3 makes provision for the payment of interest. Absent default, interest was to be calculated at 4% per month, payable monthly. The Loan Agreement includes a calculation of the monthly payment on the Principal Sum of $10,599.20. The interest rate would double to 8% per month if payment was late.
Clause 6 provided as follows:
“6. SECURITY
The Borrower agrees to provide the Property described in Clause 1.1(d) as Security. The Security shall be in the form any encumbrance, mortgage, caveat, pledge, lien, hypothecation, security or other similar interest or any deferred purchase or title retention on, or with respect to, the properties described in Clause 1.1(d) or any other property, assets or revenues of any kind now owned or accruing (as the case requires) or acquired or earned (as the case requires) in the future by the borrower, which both parties will agree to as being an alternative security. If a default occurs, the principal, together with all interest accrued on the loan and not then paid and all other amounts payable under this agreement and unpaid shall, at the option of the lender and notwithstanding any delay or previous waiver of the right to exercise that option, immediately become due and payable upon demand by the lender. In addition, if the lender exercises that option, the security will become immediately enforceable.”
The property over which security was given is the Shelley Street Property.
Mr Hotait says that the four further deposits referred to at [61] above were further advances to him by Dr Sbeiti.
Despite cl 2 of the Loan Agreement, the sums deposited by Dr Sbeiti into his daughter’s account were not paid back on 17 May 2015. Despite cl 3 of the Loan Agreement, Mr Hotait did not pay $10,599.20 to Dr Sbeiti each (or any) month. He did not pay any interest to Dr Sbeiti, either during the term of the loan or subsequently, either at 4% per month or at 8% per month. There is no evidence that Dr Sbeiti ever complained about not receiving regular interest payments.
There is no evidence of any communication about the loans between Mr Hotait and Dr Sbeiti for over six years until 2021. In paragraph 63 of his Affidavit, Mr Hotait says:
“At some time in 2021, Dr Sbeiti called me to ask for his money back. He told me that he had major financial problems caused by covid. I told him that I did not have the money to repay him. I had a number of similar conversations throughout 2021, which became more and more heated.”
Dr Sbeiti commenced proceedings against Mr Hotait in this Court on 20 December 2021. The Statement of Claim, which was verified by Dr Sbeiti on 17 December 2021, claimed a principal sum of $448,753.11 plus interest for a total $2,962,903.46. Dr Sbeiti also sought to enforce his security interest by seeking orders for possession of the Shelley Street Property and leave to issue a writ of possession.
On 11 October 2022 Dr Sbeiti lodged a Caveat over the Shelley Street Property to protect his security interest. The estate or interest claimed by Dr Sbeiti was stated to be:
“Mortgage
By virtue of: Loan Agreement
Dated: 21/07/2016
Between ALI SBETI
And BILLAL HOTAIT
Details Supporting The Claim: The Caveator has a caveatable interest by virtue of loan agreement between the caveator and the registered proprietor.”
Dr Sbeiti’s Caveat refers to a loan agreement dated 21 July 2016. His solicitors subsequently stated that the date was an administrative error and that the only Loan Agreement between Dr Sbeiti and Mr Hotait is dated 17 April 2014.
An Amended Statement of Claim was filed on 3 November 2022 joining NAB to the proceedings as the first registered mortgagee of the Shelley Street Property.
Mr Hotait did not defend the proceedings brought by Dr Sbeiti. On 1 December 2023 Dr Sbeiti obtained a Default Judgment against Mr Hotait for $2,924,355.07 plus costs of $2,396. Mr Hotait has not paid Dr Sbeiti.
In 2023 Mr Hotait placed the Shelley Street Property on the market. Selling agents were retained and the apartment was marketed. An auction was set for 4 November 2023.
On 3 November 2023 solicitors acting for Dr Sbeiti, Piper Alderman, wrote a letter to Mr Hotait. It recited at some length to the background circumstances, such as Mr Hotait’s debt to Dr Sbeiti. The letter also referred to Dr Sbeiti’s support for his daughter, son-in-law and grandchildren continuing to live in the Shelley Street Property. The letter referred to a proposed arrangement which contemplated that Ms Sbeiti would be the successful bidder at the action, Mr Hotait would dispense with the requirement that Ms Sbeiti pay a deposit, NAB would be repaid (presumably with loan funds from an incoming mortgagee) and Dr Sbeiti would consent to the transfer to his daughter on condition that she assumes Mr Hotait’s liabilities to Dr Sbeiti under the Loan Agreement. The outcome would be that Ms Sbeiti would become the registered proprietor of the Shelley Street Property. Mr Hotait would not receive any funds from the sale although his debts to NAB and Dr Sbeiti would be discharged. The letter stated that it did not constitute an offer but asked Mr Hotait to confirm that he agreed with the “approach”. In particular, his agreement was sought to him not requiring his wife to pay him a deposit. On 3 November 2023 the solicitors acting for Mr Hotait, VC Lawyers, wrote to Piper Alderman and said that Mr Hotait agreed to the proposal. VC Lawyers also said that NAB agreed to the proposal.
The auction took place on 4 November 2023. Ms Sbeiti was the successful bidder. Mr Hotait and Ms Sbeiti each signed a contract which specified a purchase price of $3.7m with no deposit.
The completion date specified in the contract was 16 December 2023. It has not however been possible for Mr Hotait to complete because Mr El-Rihani has a Caveat over the Shelley Street Property. Mr Hotait remains the registered proprietor to this day.
The second property of interest to Mr Hotait’s creditors is located at Fitzgerald Avenue in Maroubra. On 8 February 2008 Mr Hotait’s company BHPL purchased the Fitzgerald Avenue property for $1.1m. Either from the outset or by subsequent refinance, BHPL held the property with the assistance of a loan from Bendigo and Adelaide Bank Limited. Mr Hotait says in his Affidavit that BHPL purchased the property with the intention of developing it into four townhouses.
Mr Hotait goes on to say that by 2016 his endeavours to undertake the development had encountered some difficulties. His Development Application had been rejected by the local council and he was having trouble raising finance for the construction. By mid-2017 BHPL was in default with the bank. Mr Hotait received an email from the bank’s Senior Relationship Manager as follows:
“We have had numerous communications regarding arrears on your account and the last was you promised to make a payment by Monday.
You have exceeded your promises and we have no choice but to start defaulting and commence legal proceedings.
Please don’t contact me to advise that a payment will be made today as this will not cut it.
A letter will be sent out to you to advise of the default.”
The email is dated 17 August 2017. It may be inferred that the email was the last in a series of communications. It is to be inferred that by the date the email was sent BHPL had been in default for some considerable time.
“41 By the time I was married to my husband, [BHPL] already owned the property located at 159 Fitzgerald Avenue, Maroubra, NSW 2035 (Fitzgerald Avenue). My husband was wanting to undertake a development project at the time. I recall that my husband was not having success with the project and had a development application to the council rejected.
42 From about 2016, I started paying for [BHPL]’s and interest payments on the loan [BHPL] had with Bendigo and Adeliade Bank Limited (Bendigo Bank).
43 I also paid for most of the construction certificate requirements, including demolition, engineers’ fees, and Council fees. I paid approximately $27,000 for the development application made to Council.”
Ms Sbeiti payments towards BHPL’s loan from Bendigo Bank is evidenced by a transaction history statement for the loan account. The statement reveals various payments made in 2016 and 2017 by “Wei Developments”. Wei Developments Pty Ltd is Ms Sbeiti’s company, in the sense that she is the sole director and shareholder. Wei Developments made its first deposit into BHPL’s account on 14 September 2016. The transaction history statement records that Wei Developments made seven deposits all for a total of $102,956.10. It also records that on 26 June 2015 BHPL transferred $4,000 to Wei Developments.
The payment of the local council fees is evidenced by a Randwick City Council receipt dated 2 September 2016 which records that Ms Sbeiti paid $27,747.17 by cheque to the Council on that date. The receipt states it was “in payment for…159 Fitzgerald Avenu[e]”. In her Affidavit, Ms Sbeiti says that around this time she began taking over as project manager of the development of the Fitzgerald Avenue property.
There is no contemporaneous or documentary evidence of Ms Sbeiti or Wei Developments paying any demolition or engineers’ fees for the project.
As Mr Hotait sought to solve his problems with obtaining construction finance for the Fitzgerald Avenue project, he says that he thought that his prospects would be improved if Ms Sbeiti replaced him as the director of BHPL. Mr Hotait expanded on this in cross-examination, saying that he thought having Ms Sbeiti as the director would help because his “name wasn’t the best”. The ASIC search shows that Ms Sbeiti replaced Mr Hotait as director for a three-week period in November 2017 and for another three-week period in March-April 2018 after which Mr Hotait has resumed his role as the sole director to date. There was another occasion on 10 June 2017 when Ms Sbeiti signed a building contract as director of BHPL even though she was not the director at that time.
“I recall my husband was also having difficulty obtaining finance to fund the construction. In 2017 and 2018, my husband and I tried replacing me as director of [BHPL] in order to try to obtain finance, but it did not work. Eventually, my husband and I agreed for me to purchase Fitzgerald Avenue.”
“37 On or about 28 March 2018, I arranged for my wife to replace me as director of [BHPL] again. Later that day, Balance Securities issued loan documentation for the Balance Facility and then my wife signed that loan and security documentation. At pages 92 to 314 of BH-1 is a copy of the loan and security documentation for the Balance Facility.
38 At this point, my wife and I had a choice, either:
a. proceed with the Balance Facility (which had interest rates of 10.95% per annum or 18.95% default rate, and high fees); or
b. sell 159 Fitzgerald to my wife so she could obtain a cheaper loan from RAMS (the interest rate was 4.87% per annum).
39 Because it was cheaper, and also because my wife had been doing a lot of the work towards the development of 159 Fitzgerald for [BHPL], including funding, my wife and I agreed that we should transfer 159 Fitzgerald to her. I replaced my wife again as director of [BHPL] in order to proceed with the sale.”
In late-May 2018 BHPL transferred the Fitzgerald Avenue Property to Ms Sbeiti. The documentary evidence about the circumstances in which the transfer occurred is patchy. The evidence includes a Transfer which was dated 17 May 2018 and “relodged” on 1 June 2018. It was signed by Mr Hotait as sole director of the vendor, BHPL.
The Transfer specified the consideration for the transfer to be $2m but the figure cannot be accepted at face value. Ms Sbeiti obtained a RAMS home loan for $1.6m which she drew down on 17 May 2018. There does not appear to be any dispute that the amount of the consideration specified in the Transfer was adopted by Mr Hotait and Ms Sbeiti for the purpose of demonstrating a sufficient loan-to-value ratio for the incoming RAMS mortgage. Mr Hotait admitted in cross-examination that the purchase price for the Fitzgerald Avenue Property was higher than the market value of the property. Specifically he said:
“So I guess it’s a $2 million sale of the property which was over and above the valuation. We, we had to get that figure there. That was the highest amount of money that we had to sell the property for in order to, to get the funding.”
The solicitors acting for BHPL on the transaction, VC Lawyers, issued payment directions the day before settlement. The directions were as follows:
$775,759.14 to the Bendigo Bank to pay out the existing mortgage;
$2,607.66 to lawyers, conveyancers and real estate agents;
$95,510 to the Chief Commissioner of State Revenue;
$400,888.40 to BHPL;
$723,116.80 to Wei Developments.
The total of these amounts is $2m.
A number of observations need to be made about the payment directions. The discharge of the loan from Bendigo Bank was a $775,759.14 benefit to BHPL. The bank statement shows that the loan was repaid on 17 May 2018 and the loan account closed.
By directing that $95,510 be paid to the Chief Commissioner of State Revenue, BHPL effectively paid for the stamp duty on the transfer. Stamp duty is normally paid by the purchaser, not the vendor. The $95,510 payment was for Ms Sbeiti’s benefit.
Whilst the payment direction from BHPL’s solicitors required $400,888.40 to be paid to BHPL there is no dispute that that payment was never made. Paragraph 44 of Mr Hotait’s Affidavit says:
“As best that I recall, my wife drew a cheque for $400,888.40 payable to [BHPL]. However, it was not cashed as the balance of the purchase price was paid later as my investment with the mining operation referred to below.”
Mr Hotait’s explanation as to why the cheque was not cashed differed in cross-examination. He said in cross-examination that “that cheque wasn’t cashed at that time so that [Ms Sbeiti] could prolong her finish of her other developments and pay me back later”. He also said that Ms Sbeiti “would use that money to…pay off other debts”.
There is no dispute that the balance of the loan funds from RAMS, $723,116.80, was actually paid to Wei Developments. Given that Wei Developments was Ms Sbeiti’s company this means that the balance of the RAMS loan was effectively paid by Ms Sbeiti to herself.
The evidence about why the balance of the funds borrowed from RAMS was paid to Wei Developments is vague. As set out above, Wei Developments had contributed $130,703.27 (= 102,956.10 + 27,747.17) to the Fitzgerald Avenue project. It may also be accepted that Ms Sbeiti had participated in the management of the project but there is no evidence of BHPL being billed for that work or that there was any expectation that Ms Sbeiti would be paid, especially if it was intended that she continue with the project in the future. A payment of $723,116.80 as reimbursement for Ms Sbeiti’s past contribution to the project would have been out of all proportion to her contributions.
At paragraph 43 of his Affidavit Mr Hotait says:
“The RAMS loan was used to pay for:
a. discharging the Bendigo Bank facility (at page 373 of BH-1 is Bendigo Bank's direction to pay);
b. other costs associated with the sale;
c. the balance of loan from RAMS was deposited into Wei Developments' bank account as I wanted to use this for [BHPL]'s investment in the mine discussed below.”
“The purchase price for Fitzgerald Avenue was paid by:
(a) paying approximately $776,236.14 to Bendigo and Adelaide Bank Limited (Bendigo Bank) to discharge a mortgage granted by [BHPL] on or around 17 May 2018;
(b) by Wei Developments making payments on my behalf as my husband directed me, being:
(i) a payment of $457,500 to my husband's business associate, Josh Sleiman, on 15 November 2018; and
(ii) a payment of $774,000 to a Porsche motor dealer on behalf of Mr Sleiman, also made that day.”
The total of the payments referred to in paragraph (b) is $1,231,500.
Mr Hotait’s evidence in paragraph 43(c) of his Affidavit and Ms Sbeiti’s evidence in paragraph 50(b) of her Affidavit was contradicted by Mr Hotait’s evidence in cross-examination as set out at [105] above. It was also contradicted by other answers given by Mr Hotait in cross-examination when he twice said that apart from the bank debt the purchase proceeds were retained by Wei Developments for its own projects, including the completion of the development at the Fitzgerald Avenue Property. Ms Sbeiti also said that the money was retained to keep alive the development of the Fitzgerald Avenue Property but she may have been confused by the question.
In any event, neither Mr Hotait nor Ms Sbeiti explains why money to be used in the future for a mining investment by BHPL or to pay Mr Hotait’s business associate was not simply paid to BHPL in May 2018 when settlement took place for the sale of the Fitzgerald Avenue Property to Ms Sbeiti.
“47 In or around 2016, Mr Sleiman had returned to Australia from Indonesia in order to raise capital. He showed me pictures of his mining operations. I was impressed. It sounded like a good opportunity to make money and so I agreed I would invest once I had some money. I indicated to Mr Sleiman that I would do that through [BHPL].
48 In 2018, whilst I was co-occupying the office space in Kent Street with Mr Sleiman, I agreed with Mr Sleiman that [BHPL] would invest $1.6 million into his mining operation.”
“In 2018, while I was based in Sydney to raise investment for mining projects in Indonesia, I shared an office with Bill. During that time, discussions began between Bill and I regarding Bill’s potential investment into one of my projects.”
The documentation about BHPL’s multimillion dollar investment with Mr Sleiman is meagre and not that which would be expected for a serious business undertaking, even between friends. Only two documents have been put into evidence.
First, there a document entitled “Joint Venture Agreement” which is dated 10 February 2018. The parties to it are Peakglobal and BHPL. Mr Hotait says in his Affidavit that Mr Sleiman prepared the document and provided it to him “recently”. It is a short document which contains two pages of terms. It is evident that it was prepared without legal input. The Joint Venture Agreement refers to something defined as the “KSM Target” although it is unclear if that is an Indonesian corporation or a geographic area. It is stated that KSM Target had shown “preliminary signs of potential”. Peakglobal would engage geotechnical and mining consultants to “verify the prospect target” and proceed with a regional and geological desktop study. The study was to include an Independent Technical Report. Mr Hotait explained in cross-examination that “upon [the] realisation of any precious metal or material”, Mr Hotait and Mr Sleiman would get it valued and have a convertible note issued.
In order to fund the proposed project, the Joint Venture Agreement provided that BHPL and Peakglobal were equally to provide a “capital injection” of $3.2m. It is unclear from the words of the document if that figure was the amount of each party’s provision or whether it was the sum of both. Mr Sleiman evidently understood the latter. The capital injection was to be provided by 15 February 2019. The Joint Venture Agreement stated that BHPL understood and agreed that a further capital injection of $1.5m would be required by 1 December 2020 “for further drilling and development work”. It was not specified how BHPL was required to pay either amount or indeed to whom each was to be paid. Mr Hotait accepted in cross-examination that it was a “high risk venture”.
The second document is an Independent Technical Report dated 1 October 2018. It was prepared by SRK Exploration Services Ltd for an entity call “PT. Kalteng Seruyan Mineral”. There is nothing in the text of the document which connects it with Peakglobak, Mr Sleiman, BHPL or Mr Hotait. The Report addressed PT.Kalteng Seruyan Mineral’s project located in southwest Borneo and found that it was “not considered to have sufficient technical merit to justify the completion of further exploration”.
Mr Hotait’s investment in the Indonesian mining project is not otherwise documented. There are no communications between Mr Hotait and Mr Sleiman, nor any communications between Peakglobal and any third party, including any of the entities referred to in the Independent Technical Report. There is no evidence of Peakglobal or any other entity being billed for or paying for the Report. There are no tax documents.
Although the Independent Technical Report contemplated that the project would not proceed as at October 2018, payment obligations imposed by the Joint Venture Agreement apparently still needed to be fulfilled. Mr Sleiman says the following about BHPL’s payment obligations in paragraphs 10 to 13 of his Affidavit:
“10 In November 2018, I provided Bill with payment instructions. Between 15 November 2018 and 20 November 2018, [BHPL] made the following payments.
| Date | Amount | | 15 November 2018 | $457,500.00 | | 15 November 2018 | $774,000.00 | | 19 November 2018 | $175,000.00 | | 19 November 2018 | $25,000.00 | | 20 November 2018 | $185,000.00 | | TOTAL | $1,616,500.00 |
11 I directed that a portion of the funds, specifically AUD $774,000, be paid directly to a Porsche dealership in Sydney for the purchase of a vehicle in my name. Bill and I agreed that this payment would form part of [BHPL]’s capital injection under the Joint Venture Agreement.
12 In consideration of this arrangement, I matched the full amount received–both personally and towards the Porsche purchase–with equivalent funds already available in Indonesia, thereby ensuring the project’s capitalisation remained consistent with the agreed 50/50 contribution structure.
13 At all times, I and [Peakglobal] treated Bill’s payments as part of his capital commitment under the Joint Venture.”
“50 On 15 November 2018, I directed my wife to transfer two amounts in respect of the balance:
a. $457,500 paid to Mr Sleiman’s bank account; and
b. $774,000, paid to a Porsche dealership at Mr Sleiman’s direction.
51 In relation to the Porsche dealership payment, Mr Sleiman asked me to pay for his new Porsche, because it would be easier if I paid this for him here and he would use money he already had in Indonesia.”
The purpose of payments by (or on behalf of) BHPL was “capital injection” for the mining project in Indonesia. There is no explanation as to how the funding of a Porsche would serve that purpose.
There are three documents which evidence that the two payments referred to in paragraph 50 of Mr Hotait’s Affidavit were made. The first is a one-page transaction statement on a Westpac letterhead. Ms Sbeiti says that the statement is for Wei Developments’ bank account. All the transactions have been redacted except for two which are recorded as having occurred on 15 November 2018. Each is described as a cash withdrawal in the amounts of $457,500 and $774,000. There is no documentary evidence of the purchase of a Porsche. There is no explanation about why the purchase of the Porsche or the $457,500 payment was apparently made in cash.
There is also document entitled “local telegraphic transfer details” dated 15 November 2018. It records telegraphic transfer of $774,000 from Wei Developments to Porsche Retail Group Australia Pty Ltd. The instructions to the recipient are “Peakglobal Pty Ltd”. The final document is a two-page document which was admitted into evidence as Exhibit 1. It contains punctuation, numbers, abbreviations and words. There are no complete sentences, or any sentences at all. Amongst the things printed on the document are “AUD774000,00”, “Wei Developments (NSW) Pty Ltd”, “Sleiman J”, “loan”, “Peakglobal Pty Ltd” and “Porsche Retail Group Australia Pty Limited”. Whilst a system to the arrangement of the punctuation, numbers, abbreviations and words might be assumed it is not apparent. There is no evidence of the provenance or the purpose of the document. Neither evidence nor submissions were directed to the meaning of the document. It is not probative to the issues in the case.
Ms Sbeiti and Mr Hotait contend that the payments of $457,500 and $774,000 constitute valuable consideration for BHPL’s sale of the Fitzgerald Avenue Property to Ms Sbeiti. When added to the $723,116.80 paid to discharge BHPL’s loan from the Bendigo Bank, they total $1,954,616.80.
Ms Sbeiti says in paragraph 54 of her Affidavit that since acquiring the Fitzgerald Avenue Property she has project managed the development of the four townhouses. The development was completed in 2019. The strata plan was registered in early 2025.
Pursuant to orders made by Stevenson J on 13 December 2024, the Fitzgerald Avenue Property was sold. The net proceeds of the sale, totalling approximately $1,208,039.61, were paid into Court.
JRPL was registered on 8 May 2015. At the time of registration, the directors were Mr Hotait and Michael Michos. Mr Hotait owned 50% of the shares and the other 50% of the shares were owned by Mr Michos and members of his family.
On 10 October 2019 Mr Michos ceased to be a director of JRPL. On about 17 October 2019 the Michos family ceased to own shares. Since then Mr Hotait has been the sole director and 100% shareholder.
No one from the Michos family gave evidence in these proceedings.
JRPL purchased 25 Jersey Road pursuant to a joint venture between Mr Hotait and the Michos family to build two residences on the land. The building was to be a duplex the subject of a strata plan. JRPL obtained a loan from Westpac Banking Corporation in order to fund the construction.
Roc Build Pty Ltd is a building company owned by Mr Hotait. It undertook the construction works for the project. Ms Sbeiti says she did the bookkeeping for Roc Build and maintained an excel workbook which tracked the costs of the development. Ms Sbeiti explains the procedure for payment of expenses for the development in paragraphs 21 to 22 of her Affidavit:
“21 Although invoices were made out to Roc Build, it was convenient for me to use Wei Developments as the nominee to directly pay the suppliers and subcontractors because the supplier and subcontractor payment details were saved into its internet banking system. As Westpac advanced funds in response to payment claims, I would transfer those funds into Wei Developments' bank account and pay the suppliers from Wei Developments. At pages 1 to 57 of AMS-3 are copies of the Westpac loan statements for [JRPL]’s loan.
22 In some cases, another person or entity directly paid the invoice directly. With exception to invoices paid by Roc Build, Wei Developments reimbursed that person or entity.”
During 2018 JRPL exhausted the Westpac loan and went into default. Thereafter the shareholders had personally to contribute to the construction costs.
Ms Sbeiti also contributed to the construction costs (through Wei Developments) by making payments to Roc Build’s subcontractors as well as to Westpac as interest on the loan. In March 2019 Ms Sbeiti calculated that Wei Developments had contributed $505,903.19 as at that point in time. At paragraph 25 of her Affidavit she explains how she calculated that figure:
"I calculated this by:
(a) adding up the payment claims Westpac had paid, which totalled $744,525.78;
(b) adding up the supplier and subcontractor costs, which totalled $1,089,745.12;
(c) subtracting the Westpac payment claims from the supplier and subcontractor costs, which gave me the amount I had contributed through Wei Developments as $345,219.34; and
(d) adding the interest payments on Westpac's facility that I had paid through Wei Developments, which at the time totalled $160,683.85."
The evidence includes a rough spreadsheet evidencing Ms Sbeiti’s undertaking of the above calculation.
Ms Sbeiti later recalculated her total contributions towards the construction works to be approximately $513,000 to account for "additional invoices [that] had to be paid for the development". There is no evidence which accounts for the additional $7,000. In any event, the $513,000 figure was ultimately accepted by the Michos family to be the correct figure for Mr Hotait’s contribution to construction costs.
At some time in 2019, most likely after March, JRPL, Mr Hotait and the Michos family made a deed which I will refer to as the “Joint Venture Deed”. The executed Joint Venture Deed is not in evidence. An unexecuted version is in evidence which Mr Hotait says he recalled all the parties signing. It records some details about of the joint venture and how the parties had agreed to progress the development. The Recitals stated:
“RECITALS
A. [JRPL] has purchased and now owns 25 Jersey Road, Matraville NSW 2036 (the Property).
B. The percentages of ownership of the shares in [JRPL] are as follows: Billal for 50%, Annelyn for 12.5%, James for 12.5%, and Michael for 25%.
C. In the purchase of the Property, the shareholders initially contributed 20% of the cost of acquisition as follows: Billal for the 10%; and Annelyn, James, and Michael (collectively referred to as the “Michos Family”) for the other 10%. The remaining 80% of the acquisition cost was funded through bank borrowing.
D. [JRPL] has engaged Roc Build Pty Ltd to develop, subdivide, and construct (collectively referred to as “the Development”) on the Property.
E. [JRPL] has borrowed $850,000 to cover the cost of the Development.
F. The cost of construction, including the architectural drawings, has now ballooned. The parties have agreed that [Mr Hotait] will with his private funds cover the shortfall in the cost of the Development.
G. After the completion of the Development, [JRPL] is to sell the Property, and the proceeds of the sale are to be distributed in accordance with this Deed.”
The principal operative provision of the Joint Venture Deed was to impose an obligation on Mr Hotait to pay all the future development costs.
Later in the year construction was completed and the development was placed on the market. The two houses did not receive much interest. JRPL struggled to sell them at a price which was acceptable to the shareholders.
On 12 June 2019 a member of the Michos family wrote to Mr Hotait with a proposal on how to proceed, saying that the “issues with Jersey Road” was increasing pressure from Westpac in light of JRPL’s default on the loan. Fearful of a mortgagee sale which could achieve a poor result in the current market climate and create a bad credit reputation for Mr Hotait and the Michos family, the proposal was for the Michos family to purchase the front house from JRPL and transfer their shares to Mr Hotait, together with a payment to balance out the extra value of the front house and the respective contributions to the development costs made by Mr Hotait and the Michos family. For the purposes of the proposal, Mr Hotait’s contribution was taken to be $513,000 as previously calculated by Ms Sbeiti.
The proposal was evidently accepted by Mr Hotait. In about October 2019 JRPL transferred the front house to a member of the Michos family and they assigned all their shares in JRPL to Mr Hotait. The payment to balance out the parties was implemented by the Michos family making a larger contribution to the $2,025,047 payment to Westpac to discharge JRPL’s loan. JRPL contributed $772,023 and it may be inferred that the Michos family contributed the rest.
Simultaneously with the settlement with the Michos family, JRPL sold 25A Jersey Road to Ms Sbeiti. The contract specified a purchase price of $1,525,000 which Ms Sbeiti says was agreed with the Michos family and which was “based on the only offer that had been received whilst the property had been on the market”. That evidence requires a qualification because Mr Hotait says that the only offer was for the front house, not the rear house acquired by Ms Sbeiti. An email from a member of the Michos family refers to a negotiation for the front house at $1,685,000 with a long settlement period which suggested an effective value of about $1,645,000 when the prolonged holding costs are taken into account. The contemporaneous documents show that both Mr Hotait and the Michos family thought that the rear house was worth less, whether it be by $75,000 (Mr Hotait) or by $50,000 (the Michos family). In any event, the agreement of the Michos family to the price paid by Ms Sbeiti to JRPL is not probative of the true value of the rear house because the scheme adopted for the settlement between them and Mr Hotait did not depend on the value of either house but only on the differential between them (ultimately agreed at $75,000).
Mr Hotait and Ms Sbeiti say in their respective Affidavits that there were two reasons for the sale of 25A Jersey Road by JRPL to Ms Sbeiti. First, Mr Hotait’s difficulties in obtaining loans meant that it would be easier for Ms Sbeiti to obtain a loan with which to pay the purchase price to JRPL. Secondly, the $513,000 already paid by Wei Developments for the construction costs could form part of the purchase price.
The contract for the sale of 25A Jersey Road by JRPL to Ms Sbeiti was dated 20 August 2019 and specified the date for completion to be 14 days after the registration of the strata plan. Other evidence shows that the purchase settled on 8 October 2019.
Ms Sbeiti obtained a loan of $1,220,000 from La Trobe Financial to fund the purchase. The lender took a mortgage over 25A Jersey Road. Apart from the lender’s establishment fees, the loan proceeds were disbursed as follows. First $73,180.81 was used to pay Ms Sbeiti’s transaction costs, including stamp duty of $71,947. Secondly, $7,727.86 was used to pay JRPL’s transaction costs. Thirdly, $772,023.37 was paid to Westpac as Mr Hotait’s contribution to the discharge of JRPL’s loan. Fourthly, $340,013.20 was paid to Wei Developments.
A dispute arose during the hearing as to who paid stamp duty for the purchase. Counsel for Mr El-Rihani spent some time in cross-examination attempting to establish that stamp duty was not paid by Ms Sbeiti, and rather it was paid by JRPL. When it was put directly to Ms Sbeiti she accepted that JRPL paid the required stamp duty amount. Despite that apparent concession, as pointed out in Mr Hotait’s and Ms Sbeiti’s Written Closing Submissions, the objective evidence, namely the PEXA record, reveals that the La Trobe loan funds obtained by Ms Sbeiti were paid into PEXA and then were subsequently disbursed as required for the purchase. The PEXA record shows that the destination of the stamp duty amount of $71,947 was to be the Office of State Revenue. On this occasion, Ms Sbeiti paid her own stamp duty albeit with money which she borrowed from La Trobe.
It may be accepted that at the settlement of the sale of 25A Jersey Road JRPL received $779,751.23 made up of the money paid to discharge the bank debt and the vendor’s transaction costs. JRPL did not directly receive the balance of the specified purchase price which was $745,248.77. The effect of Mr Hotait and Ms Sbeiti’s submissions is that JRPL indirectly received the balance of the purchase price because Wei Developments made a number of payments for the benefit of Mr Hotait, namely:
(a) $513,000 which had already been paid as Mr Hotait’s contribution to the construction costs for the joint venture project with the Michos family; (b) $30,000 towards Mr Hotait’s legal costs in defending the Federal Court proceedings by which Mr El-Rihani sought to enforce Mr Hotait’s obligations under the Separation Deed – this money was paid in three instalments on 22 February, 8 April and 16 October 2019; and (c) $200,000 for the settlement of a building defect claim made against Mr Hotait in relation to another development – this money was paid in two payments on 19 April 2019 and 23 April 2019.
The total of these figures is $743,000.
Mr El-Rihani submits that the grant of the charge over the Shelley Street Property was an alienation of property for the purposes of s 37A of the Conveyancing Act 1919 because by that grant Dr Sbeiti acquired an equitable security interest in the Shelley Street Property. So too the contract to sell to Ms Sbeiti because by that contract she acquired an equitable interest in the Shelley Street Property. Those submissions are to be accepted. Dr Sbeiti’s proprietary interest arising from the charge is uncontroversial as is Ms Sbeiti’s acquisition of an equitable interest commensurate with her ability to obtain an order for specific performance of sale contract: Bahr v Nicolay [No 2] (1988) 164 CLR 604; [1988] HCA 16 at 612 (Mason CJ and Dawson J). In any event the word "property" is defined in s 7 of the Conveyancing Act 1919 to include real and personal property, any estate or interest in any real or personal property, any thing in action and any other right or interest. There is no doubt that there was an alienation of property on each occasion. Mr Hotait and Ms Sbeiti do not submit to the contrary.
Mr El-Rihani submits that the deposits made by Dr Sbeiti into his daughter's bank account were payments to Ms Sbeiti in circumstances where she, not Mr Hotait, was undertaking the development of the Anzac Parade Property. They were not loans to Mr Hotait and there is no evidence that the money was ever used for Mr Hotait's purposes. The evidence of Mr Hotait and Ms Sbeiti to the contrary ought not to be accepted. In those circumstances the grant of the charge over the Shelley Street Property made no commercial sense, especially with the high interest rate in the Loan Agreement, and it is to be inferred that it was granted with intent to defraud creditors.
There is no evidence that Mr Hotait was experiencing financial pressure before early 2017 but Mr El-Rihani submits that Mr Hotait’s intent in April 2014 was nonetheless to put the Shelley Street Property beyond the reach of future, prospective or contingent creditors who may thereafter become entitled to execute against it.
Mr El-Rihani submits that Mr Hotait's liability to Dr Sbeiti under the Loan Agreement and the security created by the charge "enabled" the sale of the Shelley Street Property to occur without receipt of any consideration by Mr Hotait. The sale occurred relatively soon after the final orders were made in the Federal Court proceedings by which Mr Hotait was required to pay over $2m into the Trust Account. It is to be inferred from those circumstances that Mr Hotait entered into the sale contract with intent to defraud creditors which by November 2023 were actual creditors, including Mr El-Rihani.
Mr El-Rihani submits that from early 2017 Mr Hotait was in financial difficulties as demonstrated by the fact that in March 2017 he claimed not to be able to make further contributions to the Trust Account as required by cl 10.5 of the Separation Deed. In that context he submits that Mr Hotait, as the sole shareholder and director, caused BHPL to transfer the Fitzgerald Avenue Property to Ms Sbeiti with intent to defraud creditors. The necessary intent is to be inferred from the circumstances that the transfer occurred at a time when Mr Hotait was in dispute with Mr El-Rihani about his payment obligations and BHPL did not receive any consideration for the transfer other than the discharge of the relevant bank debt. He submits that the there is no explanation for why BHPL did not receive any consideration other than the purported fulfilment of BHPL's investment obligations with Peakglobal which should not be accepted.
Mr Hotait and Ms Sbeiti submit that the primary issue in the case is whether Mr El-Rihani has established that Mr Hotait had the necessary intention for each of the transactions. They emphasise that Mr El-Rihani bears the onus of proof. They submit that intention is to be determined objectively by reference to all the circumstances of the case.
Mr Hotait and Ms Sbeiti correctly submit that Mr Hotait’s intention is to be determined as at the date when each of the relevant alienations occurred.
Mr Hotait and Ms Sbeiti submit that in 2013 they did not have separate businesses because Ms Sbeiti lacked development experience. Rather, they say that there was a flexible arrangement between them to try to make money through their development businesses for the benefit of their family, including their children. They emphasise that Dr Sbeiti’s loans of money to Mr Hotait and entry into the Loan Agreement occurred when Mr Hotait was not under financial stress and there was no dispute between him and Mr El-Rihani. They emphasise that the events occurred four years before Mr El-Rihani commenced proceedings against Mr Hotait.
Mr Hotait and Ms Sbeiti accept that Dr Sbeiti paid money into his daughter’s bank account without receipt of any consideration but say that that is explicable in the family context. They do not directly address the want of consideration for the charge granted by Mr Hotait. They accept that the interest rate in the Loan Agreement was high but not extortionate given the short term of the loan. They say that Mr Hotait did not make any repayments to Dr Sbeiti because he wanted to try to get more out of the borrowed money than he was paying in interest. They also emphasise that after heated arguments Dr Sbeiti ended up suing Mr Hotait and lodged a caveat over the Shelley Street property.
They further submit that the arrangement for the sale of the Shelley Street Property to Ms Sbeiti occurred long after the Loan Agreement was entered into and was such as would ordinarily occur when someone owes a family member a significant amount of money.
Mr Hotait and Ms Sbeiti accept that a Jones v Dunkel inference arises from Dr Sbeiti’s failure to give evidence because he would have been expected to be called but say that it cannot be inferred that Dr Sbeiti’s evidence would have been positively damaging to Mr Hotait’s case (Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8). Nor can the inference be used to supply gaps in Mr El-Rihani’s case.
Mr Hotait and Ms Sbeiti submit that the circumstances taken as a whole do not admit the finding that Mr Hotait had the relevant intent when the two transactions relevant to the Shelly Street Property occurred.
As for the Fitzgerald Avenue Property, Mr Hotait and Ms Sbeiti submit that full consideration for the purchase was paid by discharging BHPL’s bank debt, by Wei Developments’s payment of approximately $130,000 of the development costs and by making the payments to Mr Sleiman in November 2018. They say that there is nothing inherently improbable or otherwise unreliable in Mr Sleiman’s unchallenged evidence that Mr Hotait invested in a mining project in Indonesia. Once that is accepted, it cannot be concluded that Mr Hotait caused BHPL to transfer the Fitzgerald Avenue Property to his wife with intent to defraud creditors.
37A Voluntary alienation to defraud creditors voidable
(1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced.
(2) This section does not affect the law of bankruptcy for the time being in force.
(3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of the intent to defraud creditors.
An intent to delay or hinder creditors is sufficient for the purposes of s 37A(1): Marcolongo v Chen at [19]. Intent to defraud creditors need not be the sole intention: Marcolongo v Chen at [57].
The necessary intention will not be found merely because an alienation is made to discharge one debt instead of another. In Grapple Pay Pty Ltd v Conroy [2025] NSWCA 171, the Court of Appeal (Adamson, Ball and Free JJA) said at [64]:
“A debtor who transfers property for valuable consideration for the purpose of, or in the course of, discharging a debt or debts does not fall within s 37A(1), since the debtor’s net position remains the same. While a creditor who is not paid as a result of the transaction may have missed out on being paid, and foregone the opportunity to enforce the debt against the property which the debtor has transferred to a third party (as occurred in the present case), that does not provide a sufficient basis to infer that the disposition was made with the intent to defraud that creditor. This has been the law at least since Middleton v Pollock; ex parte Elliott (1876) 2 Ch D 104 (Middleton v Pollock) when Jessel MR said, at 108:
…whatever may be the morality of the case, as far as I know, there is no law which prevents a man in insolvent circumstances from preferring one of his creditors to another, except the bankruptcy law. Under the bankruptcy law, no doubt a man in insolvent circumstances is not entitled, without pressure, at all events, to pay one creditor and to leave the other creditors unpaid. But Mr. Pollock was not a bankrupt, and the bankruptcy law has no application to him.”
An intent to defraud creditors does not require dishonesty, in the sense that there need not be animus shown by an awareness that the transaction would have an effect on the ability of creditors to recover: Marcolongo v Chen at [31] and [35].
The party making the alienation must have the necessary intention at the time the alienation occurs: Cannane v J Cannane Pty Ltd (in liq*)* (1998) 192 CLR 557; [1998] HCA 26 at [10] (Brennan CJ and McHugh J). The intention need not be to defraud present creditors only but includes an intention to defraud future, contingent or prospective creditors: Chen v Marcolongo [2009] NSWCA 326 at [108] (Young JA). Where the alienation is made with intent to defraud future creditors, s 37A will apply even if the disponor is solvent at the time of the alienation and even where there is no existing indebtedness. It is sufficient if the disponor is aware of some impending liability: Barton v Deputy Federal Commissioner of Taxation (1974) 131 CLR 370: [1974] HCA 43 at 374 (Stephen J); Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278; [2006] HCA 6 at [31] (Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ). It is sufficient if a person fears that his or her activities may generate creditors and puts property beyond the reach of such possible persons: Chen v Marcolongo at [108]. In Mackay v Douglas (1872) LR 14 Eq 106 the necessary intention was inferred in circumstances where the disponor alienated property shortly before embarking on a new and hazardous business even though no particular future creditor was in mind. An intention to defraud creditors generally is sufficient; it is not necessary to intend to defraud a particular creditor: The Grapple Pay case at [62].
The existence of the necessary intention is a question of fact. The party seeking to avoid the alienation must prove the fact: Cannane v J Cannane at [10]. Although dishonesty is not required the necessary intention is a grave matter to be proved in accordance with the principles in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34. Having regard to the gravity of the allegation, the Court must feel an actual persuasion that the disponer had the necessary intent before it can be found. The circumstances must give rise to a reasonable and definite inference: Trustees of the Property of Cummins v Cummins at [34].
In their Written Submissions, Mr Hotait and Ms Sbeiti correctly point out that the best guide to ascertaining the relevant intention is the contemporaneous materials, objectively established facts and the apparent logic of events: (2003) 214 CLR 118; [2003] HCA 22 at [31] (Gleeson CJ, Gummow and Kirby JJ).
The background which I have set out above includes some references to the evidence of Mr Hotait and Ms Sbeiti. I have included those references to provide necessary structure to the narrative. However, Mr Hotait’s evidence is not reliable and I have not accepted it unless it is against his own interests or consistent with the contemporaneous documents. Having regard to the allegations made against him, Mr Hotait’s short Affidavit addresses the multimillion dollar transaction in terms which are superficial, imprecise and piecemeal. In cross-examination Mr Hotait answered questions in a way which was evasive or non-responsive. He was often vague where precision was expected. Many of his answers contradicted other answers which he had previously given. He sometimes contradicted the evidence in his Affidavit, for example when he volunteered that he spoke to Dr Sbeiti about the loan when he was travelling despite the fact that in paragraphs 54 and 59 of his Affidavit he says that the most important conversations occurred when Dr Sbeiti was visiting Sydney. He gave a tepid explanation for the contradiction which did not improve the reliability of his evidence.
A particular aspect of Mr Hotait’s evidence which bespeaks unreliability is that when he was confronted with a proposition which was prejudicial to his interests he said that he did not remember. Sometimes he said so immediately after answering a series of question on the same topic with no apparent lack of recollection. Frequently Mr Hotait said that he did not remember with such rapidity that it was clear that he had not even tried. I was left with the impression that Mr Hotait chose to be unable to remember matters which did not suit his case.
Ms Sbeiti’s Affidavit contains 57 paragraphs. The first 40 paragraphs address the development at 25 Jersey Road. They set out a relatively cogent description of the development and her purchase of 25A Jersey Road. She refers to and exhibits documents relating to the development, like invoices for suppliers and subcontractors and self-explanatory bank records. Ms Sbeiti’s evidence on this topic survived cross-examination and is to be accepted.
The next 14 paragraphs of Ms Sbeiti’s Affidavit contain a number of statements about her purchase of the Fitzgerald Avenue Property. Unlike her evidence about 25 Jersey Road where Ms Sbeiti was able to explain the development costs paid by Wei Developments to the last cent, Ms Sbeiti’s evidence about her purchase of the Fitzgerald Avenue Property is vague, piecemeal and lacking in documentary support. It does not have the cogency which might give it the ring of truth, an observation which applies both to the Affidavit and to the answers which she gave in cross-examination.
The last three paragraphs of Ms Sbeiti’s Affidavit address the loan by her father to her husband. In evidence which is flatly contradicted by the contemporaneous documents, including her bank statement, Ms Sbeiti simply says:
“55 Between 2013 and 2016, my father loaned money to my husband by making six payments totally $448,753.11. My only involvement was having money paid into my bank account because it was easier for my father to transfer money to me as a direct family member. At pages 127 to 134 of AMS-2 is a copy of my bank statement with the Bank of Sydney where the relevant payments are highlighted.
56 After I received the money, my husband gave me directions on where to pay the amounts. I no longer recall where the funds were paid.
57 Neither my father nor my husband told me what the funds were for.”
As a preliminary matter, the clear inference to be drawn from the evidence is that Ms Sbeiti undertook the development of the Anzac Parade Property as her own project. The objective facts about the acquisition, development and sale of the Anzac Parade Property are set out above. Leaving aside the Loan Agreement dated 17 April 2014 between Mr Hotait and Dr Sbeiti, the contemporaneous documentary record for the project uniformly tells a coherent story of a project independently undertaken by Ms Sbeiti. The ASIC records about Sbeiti Pty Ltd, the bank statement about Ms Sbeiti’s account and the Development Application are consistent. The Defendants have not adduced any documentary evidence about Mr Hotait playing a role in the development of the Anzac Parade Property.
The conclusion is supported by paragraph 5 of Ms Sbeiti’s Affidavit in these proceedings. By specifying twelve years as the period during which she has worked as a project manager, Ms Sbeiti evidently dated the commencement of her work by reference to a particular project. The project with the Anzac Parade Property coincides precisely.
The independence of Ms Sbeiti’s property development work which is implicit in paragraph 5 is consistent with other passages in the evidence. Ms Sbeiti came to own other corporate entities including Wei Developments. It was registered in July 2014. In paragraph 6 of her Affidavit, Ms Sbeiti says:
“I am the sole director / shareholder of Wei Developments (NSW) Pty Ltd (ACN 601 013 478) (Wei Developments). At pages 1 to 5 of AMS-2 is a copy of an ASIC Current & Historical Extract for Wei Developments. I use Wei Developments as my corporate nominee from time to time.”
“My wife operates a development company, Wei Developments (NSW) Pty Ltd (ACN 601 013 478) (Wei Developments). My wife uses Wei Developments for developing properties and providing construction project management services.”
The conclusion that it was Ms Sbeiti who undertook the development of the Anzac Parade Property is further supported by the fact that Ms Sbeiti does not address the project in her Affidavit. Paragraphs 32 to 36 of the Amended Commercial List Statement contain contentions about the acquisition of the Anzac Parade Property by Sbeiti Pty Ltd and the use of funds deposited into Ms Sbeiti’s bank account for that purpose. The contentions were made in the context of the allegation that Dr Sbeiti’s charge is voidable. Paragraph 32 of the Commercial List Response filed on behalf of Ms Sbeiti and Mr Hotait contains contrary contentions about Mr Hotait’s involvement in the project. An issue thus identified, Ms Sbeiti’s failure to address her role in the development of the Anzac Parade Property is inexplicable. I infer that had she addressed the issue it would have exposed facts which were unfavourable to her and Mr Hotait. Neither does Mr Hotait address the development of the Anzac Parade Property in his Affidavit, other than to say that the contentions in paragraphs 32 to 34 of the Amended Commercial List Statement “looks like it may be correct”. Mr Hotait does not give any evidence about having a role or an interest in the Anzac Parade Property. I infer that had he addressed that topic his evidence would not have assisted his case: Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418 (Handley JA).
The only suggestion that Mr Hotait had a role in the project at the Anzac Parade Property arose in the cross-examination, first of Mr Hotait and then of Ms Sbeiti as each was confronted with the documentary evidence in the bank statement for Ms Sbeiti’s account. As it became apparent to each witness that the bank statement made clear that the money deposited by Dr Sbeiti went towards the project at the Anzac Parade Property, including the payment of the deposit, he or she sought to imply a role for Mr Hotait in that project which up to that point had been entirely absent from the evidence. Neither witness’s evidence on this topic is reliable.
Given the evidence, the inference to be drawn on the issue is clear. Ultimately, the only submission put forward by Mr Hotait and Ms Sbeiti for why it may be inferred that the development was undertaken by Mr Hotait is that in 2013 he had more development experience than Ms Sbeiti. That may be accepted as an objective fact. Even so, the inference for which Mr Hotait and Ms Sbeiti contend does not arise. Nothing in the evidence, apart from an answer given in cross-examination by Ms Sbeiti, suggests that she called upon her husband for any advice. There is no evidence that he gave her any advice. Absent supporting evidence, the fact of Mr Hotait's superior experience is overwhelmed by the evidence to the contrary. Given these matters, I find that it was Ms Sbeiti who undertook the development of the Anzac Parade Property.
The question of the character of the seven deposits made by Dr Sbeiti is to be considered in the light of my finding that Ms Sbeiti undertook the development of the Anzac Parade Property on her own account.
There is no dispute, nor could there be on the contemporaneous documents, that Dr Sbeiti made the deposits into his daughter’s bank account. The bank account was evidently opened and operated for the purposes of Ms Sbeiti’s development of the Anzac Parade Property. That inference arises from the objective facts which are set out above. Specifically, the bank account was Ms Sbeiti’s account, the life of the bank account was broadly co-terminus with the life of the development, the deposit for the purchase of the Anzac Parade Property was paid by a cheque drawn on the account and there is no evidence of the account being used for any other purpose.
In this regard, I have observed above that apart from Dr Sbeiti the main source of deposits into Ms Sbeiti’s, account was identified by the notation “Direct Credit Hotait P/l Atf 068834 amouna”. Those deposits appear to have originated from Mr Hotait or a relative of his but the narrative makes clear that they were received beneficially by Ms Sbeiti. They are in the nature of distributions from a trust of which Ms Sbeiti was a beneficiary. Deposits from such a source are consistent with the bank account being used for Ms Sbeiti’s purposes, not Mr Hoitait’s purposes.
As deposits into an account in Ms Sbeiti’s name and being operated for her purposes, it is to be inferred that the monies deposited by Dr Sbeiti were payments to Ms Sbeiti. Without the need for any further explanation, such payments are explicable because of the parent-child relationship. The inference of payments to Ms Sbeiti is also strongly supported by the narrative for the first three deposits which were:
“4/06/2013 Transfer To His Daughter…
9/12/2013 Selling Apartment (owner Ali and Amne)…
17/04/2014 From Sbeiti Ali & Florina …”
There is no descriptive narrative for the final four deposits but, once it is accepted that they were also made by Dr Sbeiti, the most likely conclusion is that they had the same character as the first three deposits. There is nothing to suggest otherwise.
For these reasons, I find that all seven of the deposits made by Dr Sbeiti into his daughter’s bank account were payments made to her beneficially.
Mr Hotait and Ms Sbeiti contend for a different version of the events, namely that the deposits were loans by Dr Sbeiti to Mr Hotait. Without the aid of documentary support, Mr Hotait and Ms Sbeiti each address the payments in his or her Affidavit. I have referred above to paragraphs 54 to 61 of Mr Hotait’s Affidavit where he says that he asked Dr Sbeiti for loans and that money was paid into his wife’s bank account in response to those requests. There is no evidence about why Mr Hotait asked for each loan or what use he had for the money on each of the dates when he says that he asked for it. At paragraph 62 of his Affidavit Mr Hotait says that he cannot specifically recall how the funds from Dr Sbeiti’s loan were used although use in the development of the Anzac Parade Property looks like it may be correct.
I have also referred above to paragraphs 55 to 57 of Ms Sbeiti’s Affidavit. The affidavit evidence of Mr Hotait and Ms Sbeiti on this issue flies in the face of the contemporaneous documents. In particular, their evidence is contradicted by the narrative recorded on the bank statement for the first three deposits made by Dr Sbeiti. The narrative for 4 June 2013 specifically stated that the deposit was for Ms Sbeiti, who was described not by name but by familial relationship (“his daughter”). There was no reference to Mr Hotait nor to a loan. The narrative for 9 December 2013 identified the source of the money, namely the sale of an apartment of which Ms Sbeiti was herself a part owner. The payment was more consistent with a return to Ms Sbeiti of her own money than with a loan by Dr Sbeiti to Mr Hotait. The narrative for 17 April 2014 also identified the source of the money, that time Dr Sbeiti together with someone called “Florina”. There was again no reference to Mr Hotait nor to a loan. Florina was not a party to the Loan Agreement and there is nothing to suggest that Florina participated in any loan to Mr Hotait. Mr Hotait and Ms Sbeiti’s evidence is also contradicted by the money being used in the development of the Anzac Parade Property once it is accepted the development was being undertaken by Ms Sbeiti, not by Mr Hotait (as I have found).
Mr Hotait and Ms Sbeiti’s evidence also suffers from inexplicable vagueness which deprives it of persuasive and even probative value. Mr Hotait says he does not specifically recall how the money was used yet the debt which he claims was established by Dr Sbeiti’s loans has now resulted in a judgment debt against him for almost $3m. Ms Sbeiti claims also to suffer from the same lack of memory, yet she claims that she has now assumed responsibility for the $3m debt as part of her purchase of the Shelley Street Property. There does not seem to be any doubt that it is a large debt within Mr Hotait’s financial context, yet neither he nor Ms Sbeiti can remember how it came to be incurred in the first place. Their evidence is implausible.
Dr Sbeiti is a Defendant in these proceedings. In a letter dated 3 June 2024 to Mr El-Rihani’s solicitors, solicitors acting for Dr Sbeiti addressed the “bona fides of the loan” and stated that Dr Sbeiti would give evidence about making the payments to Mr Hotait, including Mr Hotait’s direction that the payments be made into Ms Sbeiti’s bank account. There is nothing to suggest that the letter was not written on Dr Sbeiti’s instructions. Despite the letter, Dr Sbeiti has not given evidence in these proceedings, either in the interests of his daughter and son-in-law or in his own interests in having his charge upheld over the Shelley Street Property. No explanation has been given for his failure to do so. I draw the inference that, had Dr Sbeiti been called to give evidence about the matters referred to in his solicitor’s letter dated 3 June 2024, his evidence would not have assisted Mr Hotait or Ms Sbeiti.
In reaching that conclusion, I have not lost sight of the Loan Agreement or the subsequent events including Dr Sbeiti’s resort to the processes of the Court in order to obtain a judgment against Mr Hotait. Recital A to the Loan Agreement is the only documented reference to Mr Hotait being involved in the development of the Anzac Parade Property and to Dr Sbeiti’s first three deposits being a loan to Mr Hotait. Even then, the link between Recital A and the first three deposits depends upon the precise specification of the amount of the Principal Sum in cl 1.1 ($264,980) which equates to the sum of the relevant figures recorded in Ms Sbeiti’s bank statement.
During the course of the hearing I upheld an objection by Mr Hotait to a line of questioning which went to the true date upon which the Loan Agreement was entered into. I found that the questioning led to a serious allegation which had not been adequately foreshadowed in the Commercial List Statement. Procedural fairness precluded Mr El-Rihani from relying on a contention that the Loan Agreement was entered into after his business relationship with Mr Hotait came to an end in December 2016. There was no subsequent application for leave to amend. No submission was made in closing that the Loan Agreement was entered into on a date other than that which it bears.
Mr Hotait and Ms Sbeiti further point out that there is no suggestion that the Loan Agreement is a sham. That may be accepted in the sense that by entry into the Loan Agreement Mr Hotait promised to pay money to Dr Sbeiti and gave a charge over the Shelley Street Property to secure his performance of that promise. Those facts, however, do not resolve the question whether Dr Sbeiti’s seven deposits were loans to Mr Hotait. The first two deposits were made well before the Loan Agreement was entered into. The objective facts about them are clear. They were payments made beneficially to Ms Sbeiti. The fact that Mr Hotait and Dr Sbeiti subsequently entered into the Loan Agreement which (not expressly but by implication) addressed the first two deposits as loans does not now warrant a different conclusion. The same applies to the third deposit. It was made by Dr Sbeiti and Florina for the purposes of the development being undertaken by Ms Sbeiti. The Loan Agreement did not make it otherwise, nor would it have done so if Florina had been a party to the Loan Agreement, which she is not. There is no connection between the Loan Agreement and Dr Sbeiti’s last four deposits. The definition of “Principal Sum” refers to the possibility of further advances. There is no evidence that the last four deposits into Ms Sbeiti’s account were advances under the Loan Agreement other than what may be inferred from paragraph 61 of Mr Hotait’s Affidavit where he says that the deposits were made “after entering into the Loan Agreement”. That slender evidence is not a sufficient basis to find that the last four deposits into Ms Sbeiti’s bank account were loans to Mr Hotait.
The real issue arising from the Loan Agreement is whether Dr Sbeiti gave consideration in exchange for the charge over the Shelley Street Property which Mr Hotait granted in cl 6. Neither the payment of $99,995 on 4 June 2013 nor the payment of $149,995 on 9 December 2013 was consideration for the charge. Both payments had already been made when the charge was granted. In any event both were made beneficially to Ms Sbeiti who on the evidence had no obligation to repay Dr Sbeiti. The payment on 9 December 2013 was in part Ms Sbeiti’s own money. At least to the extent of the first two deposits, Dr Sbeiti received the charge as a volunteer. If his seven deposits are looked at as a whole, he received the charge at an undervalue by the inclusion of the first two.
As is the nature of the case, Mr Hotait’s intention at the time he granted the charge to Dr Sbeiti is to be inferred from all the circumstances in which it was given. I have referred above to the Grapple Pay case at [63] where there is a list of matters from which the inference may be drawn. The list is not intended to be an exhaustive specification of the circumstances from which the necessary inference may be drawn. It is not necessary to show that one of the listed matters applies in the particular case. As Starke J said in Williams v Lloyd (1934) 50 CLR 341; [1934] HCA 1 at 363, the badges of fraud are many. The question is whether the particular alienation was made with intent to defraud creditors. It is a question of fact.
I have found that, at least in part, Mr Hotait did not receive consideration for the granting of the charge. Another relevant circumstance is that the charge was granted in favour of a member of Mr Hotait’s family. At the very least he gave the charge at an undervalue by including within the sum charged money which Dr Sbeiti had already paid to his daughter. Mr Hotait’s interest in the Shelley Street Property was depleted by encumbering it with a security for the repayment of the first two deposits. In 2014 the Shelley Street Property was Mr Hotait’s principal asset. Even though it was already encumbered by the mortgage to NAB, in the ordinary course the Shelley Street Property might have been expected to be a ready source of recovery by any creditors of Mr Hotait. Defrauding Mr Hotait’s creditors was the natural and probable consequence of granting the charge to Dr Sbeiti. There is nothing in the evidence to explain why the depletion of Mr Hotait’s interest in the Shelley Street Property would not have been expected to prejudice Mr Hotait’s creditors. This is a case where it may be presumed that Mr Hotait intended the natural and probable consequence of his own act: Chen v Marcolongo at [223]-[224].
Another circumstance of this case which I consider relevant to Mr Hotait’s intention is the fact that the Loan Agreement included wording which conflicted with the objective facts. There is no evidence of Dr Sbeiti making the advance of the Principal Sum referred to in Recital A or the definition of “Principal Sum” in cl 1.1(c). Clause 2 contains an acknowledgment that the Principal Sum had been advanced yet the objective facts are to the contrary. False statements in the recitals of the mortgage were said in Wiliams v Lloyd to support the inference that the mortgage had been given with intent to defraud creditors (at 361-362). See also Chen v Marcolongo at [216].
In other respects the terms of the Loan Agreement are suggestive of contrivance. Such as cl 2 which provided that the loan would be for a fixed term of twelve months when the contemporaneous and subsequent events show that there was no apparent intention on the part of Mr Hotait to repay or on the part of Dr Sbeiti to receive at any particular time. Affidavit evidence from Mr Hotait about the genesis of the loan says that there was no intention that the loan would be repaid at any particular or definite time. Next, cl 3 of the Loan Agreement imposed a monthly interest obligation which was 96% per annum, reducing to 48% per annum if there was no default. Yet there is nothing to explain why Mr Hotait needed and wanted to borrow money on terms which are the hallmark of a desperate borrower. On the contrary, Mr Hotait submits that the Loan Agreement was entered into at a time when he “was not in any form of financial stress or otherwise faced financial difficulties”. Nor is there anything to explain why Dr Sbeiti considered such an extravagant return was necessary from his daughter’s husband. Even though the cost of the credit was extremely high, Mr Hotait now says that he is not able to recall why he needed the loan from Dr Sbeiti. The submission by Mr Hotait and Ms Sbeiti that such high interest rates are not unheard of may be accepted, but the commerciality of such rates is generally confined to cases of short-term borrowing as a temporary measure until more sustainable finance can be procured or the project completed. Here, if the evidence of Mr Hotait is to be accepted, he agreed to the high interest rates at the commencement of the development of the Anzac Parade Property and they were prolonged thereafter for what Mr Hotait appears to have said in cross-examination was working capital for other projects. Even though the Loan Agreement was not a sham, the willingness of Mr Hotait to enter into the Loan Agreement on such terms is less consistent with an intention to document a legitimate finance transaction than it is with an intention rapidly to generate a large secured debt which was owed within the family and which might subsequently be asserted in priority to any debts to Mr Hotait’s external creditors. Rather than undermine the inference, the existence of the Loan Agreement supports the inference of an intention to defraud creditors. Entry into the Loan Agreement is presupposed in Mr El-Rihani’s complaint.
Mr Hotait’s entry into the contract to sell the Shelley Street Property to his wife is a continuation of the same fraudulent intention. Apart from the discharge of Mr Hotait’s debt to NAB, the only consideration which Mr Hotait will receive for the transfer of the Shelley Street Property to his wife is the discharge of his debt to Dr Sbeiti. The efficacy of the transfer depends upon Mr Hotait’s unquestioning acceptance of Dr Sbeiti’s charge and debt which it secures. Absent the charge and debt, Dr Sbeiti would not be able to erect a proprietary interest in the Shelley Street Property with which to challenge Mr El-Rihani’s claim under the Federal Court Orders. Mr Hotait continues to accept Dr Sbeiti’s charge despite the intention to defraud creditors with which he originally granted it and the knowledge the charge was granted for no consideration or at least at an undervalue. Mr Hotait is also aware that Dr Sbeiti claims that the charge secures a debt constituted by the Default Judgment obtained for Dr Sbeiti’s claim for the sum of all the deposits plus interest, including default interest at 8% per month. It is debt to Mr Hotait’s wife’s father who naturally wishes Mr Hotait and his family to continue to reside in their family home. The substance of the sale is that Mr Hotait receives a discharge of this debt to Dr Sbeiti rather than money to apply towards payment of his creditors.
A further consideration which is relevant to Mr Hotait’s intent as at the date Mr Hotait entered into the contract with his wife, 4 November 2023, is that Mr Hotait had become subject to the Orders of the Federal Court pursuant to which he was ordered to pay over $2m to the Trust Account. For all intents and purposes, the contract between Mr Hotait and his wife follows directly and relatively promptly upon Mr Hotait’s payment obligation being crystalised in that way.
Once again the sale of the Shelley Street Property occurred within Mr Hotait’s family, with his wife receiving the transfer of the property.
On the balance of probabilities, the inference to be drawn is that Mr Hotait entered into the contract to sell the Shelley Street Property to his wife with intent to defraud creditors. That finding may be made with all the more confidence in circumstances where neither Mr Hotait’s nor Ms Sbeiti’s Affidavits address the transaction. Neither is there any evidence from Dr Sbeiti about the transaction despite his central role. No explanation has been given for these stark omissions from the evidence.
By reason of these matters the contract to sell the Shelley Street Property to Ms Sbeiti is voidable under s 37A of the Conveyancing Act 1919.
The sale of the Shelley Street Property in 2023 was the natural outworking of the grant of the charge to Dr Sbeiti. The fact that the sale has now occurred and the implications it will have for Mr Hotait’s creditors provides further support for the inference that Mr Hotait originally granted the charge in 2014 with intent to defraud creditors. So too the fact that in 2018 Mr Hotait caused BHPL to transfer the Fitzgerald Avenue Property to Ms Sbeiti (see below). The more recent acts give colour to Mr Hotait’s general intent which may be taken into account when considering his intent in 2014: Williams v Lloyd at 362.
The objective facts about the application of the proceeds from the sale of the Fitzgerald Avenue Property are set out above. The true value of the property is unknown because the $2m sale to Ms Sbeiti was not at arm’s length and Mr Hotait said that it was above the market price. Nonetheless, the conclusion to be drawn from the objective facts is that BHPL did not receive any benefit from the sale other than the $775,759 paid to discharge BHPL’s debt to the bank (plus the negligible payment of BHPL’s transaction costs). The rest of the purchase price, whether it be viewed as $2m or $1.6m, was paid by Ms Sbeiti to her own company or never paid at all.
Only two matters are put to contradict that conclusion. First, it is said that Wei Developments had previously paid some of BHPL’s expenses but there is no evidence of such payments above $130,703. Even if it is assumed in favour of the Defendants that upon settlement of the sale of the Fitzgerald Avenue Property Ms Sbeiti discharged BHPL’s debt to Wei Developments, the payment (and retention) of the rest of the sale proceeds to Wei Developments (and by Ms Sbeiti) significantly depleted BHPL’s assets.
Secondly, it is said that the two cash payments made on 15 November 2018 to Mr Sleiman were consideration for the sale of the Fitzgerald Avenue Property. It is said that those payments discharged BHPL’s debts to Mr Sleiman under the Joint Venture Agreement for the mining investment. Even if the payments were made as payments by BHPL under the Joint Venture Agreement the submission does not pay sufficient attention to the temporal framework and cannot be accepted. The settlement of the sale of the Fitzgerald Avenue Property occurred on 17 May 2018 at which time BHPL transferred the property to Ms Sbeiti without receiving the sale proceeds (other than those applied to discharge the loan from Bendigo Bank). There is no suggestion that Wei Developments received or Ms Sbeiti retained the unpaid sale proceeds on trust for BHPL or Mr Hotait. The sale proceeds were simply not paid to the vendor of the property, BHPL. At settlement, BHPL’s assets were simply depleted. That fact was not changed retrospectively when Ms Sbeiti subsequently paid $1,231,500 (= 457,500 + 774,000) to Mr Sleiman.
In any event, I do not accept that there was any connection between the transfer of the Fitzgerald Avenue Property to Ms Sbeiti and payments made by Wei Developments to Mr Sleiman or Porsche in November 2018. The evidential basis for a connection is wholly lacking. I have addressed the documentary evidence above. For the reasons given above, I do not accept the affidavit evidence of Mr Hotait and Ms Sbeiti on this topic. Their evidence of a connection was in any event inconsistent with more than one explanation given by Mr Hotait, and possibly by Ms Sbeiti, about the use which was made of the unpaid purchase price by Wei Developments. Mr Sleiman was not required for cross-examination on his Affidavit where he says that in November 2018 he directed BHPL to make payments under the Joint Venture Agreement, including $774,000 “towards the Porsche purchase”. He says that BHPL made those payments. He does not give any evidence about payments by Wei Developments, let alone the proceeds of the sale of the Fitzgerald Avenue Property.
For the purposes of s 37A(1) of the Conveyancing Act 1919, the intention of Mr Hotait is to be taken to be the intention of BHPL when selling the Fitzgerald Avenue Property to Ms Sbeiti: Marcolongo v Chen at [64] (Heydon J). He was the only director.
The inference to be drawn from the objective facts which pertained as at 17 May 2018 is that BHPL transferred the Fitzgerald Avenue Property to Ms Sbeiti with intent to defraud creditors. As set out above, Mr Hotait personally was experiencing significant financial difficulties at the time of the sale. He owned 100% of the shares in BHPL which meant that the assets of BHPL would in the ordinary course be available to pay Mr Hotait’s creditors. To put it another way, the defeat or delay of Mr Hotait’s creditors was the natural and probable consequences of the sale of the Fitzgerald Avenue Property by BHPL.
The alienation was made in favour of Ms Sbeiti who was a family member. Ms Sbeiti was not a volunteer because she paid BHPL’s debt to Bendigo Bank. The sale nonetheless had the effect of depleting the assets of BHPL (and hence Mr Hotait) and to the same extent increasing the assets of Ms Sbeiti.
There is another aspect of Mr Hotait’s dealings with the Fitzgerald Avenue Property which is consistent with his intention to defraud creditors. Mr Hotait said that the sale price specified in the sale documentation was above the market value of the property for the purpose of obtaining funding. The admission revealed a willingness to engage in dishonest conduct as part of the same transaction which it is now alleged was undertaken to defraud creditors.
The objective facts all point in the same direction. The apparent logic of events is that Mr Hotait caused BHPL to sell the Fitzgerald Avenue Property to Ms Sbeiti with intent to defraud creditors.
No attempt has been made by Mr Hotait and Ms Sbeiti to avoid that conclusion by pointing out that the transfer was undertaken by BHPL and not by Mr Hotait personally. They were correct in not taking that approach. Section 37A is directed to alienations of property with intent to defraud creditors. If the necessary intent is present, it does not matter which entity undertakes the alienation: Royal v El Ali [2016] FCA 782 at [202] (Davies J).
It is not possible on the evidence to make a finding about the market price of 25A Jersey Road when JRPL sold it to Ms Sbeiti on 11 October 2019. Although the property had been marketed together with the front house at 25 Jersey Road, there were no real offers let alone a concluded agreement. There appears to have been a negotiation for the front house at $1,685,000 but the hoped-for purchaser wanted an extended settlement period. In June 2018 the Michos family thought that the front house was worth $1,650,000. Everyone agreed that the rear house at 25A Jersey Road was worth less.
As the party contending that the sale to Ms Sbeiti was undertaken with intent to defraud creditors, Mr El-Rihani bears the onus of proof on this issue. He has not demonstrated that the sale of 25A Jersey Road for $1,525,000 was at an undervalue.
Nor has it been demonstrated that JRPL did not receive most of the sale price. There is no dispute that $772,023 was paid by Ms Sbeiti to Westpac as Mr Hotait’s contribution to the discharge of JRPL’s debt to Westpac. The payment was for the direct benefit of JRPL and, upon him becoming the 100% shareholder of JRPL, the indirect benefit of Mr Hotait.
It is also the case that JRPL received the direct benefit of the discharge of JRPL’s $513,000 debt to Wei Developments as was evidently part of Ms Sbeiti’s consideration for the purchase of 25A Jersey Road. In contrast to other parts of the case, the documentary evidence about Wei Developments paying $513,000 towards the development work at Jersey Road has some substance. Moreover, the figure may be accepted as correct because it was accepted by the Michos family as part of the negotiated settlement of the joint venture in the second half of 2019. Given the scheme of the agreed settlement, it was in the interests of the Michos family to minimise the contributions made on behalf of Mr Hotait and there is no apparent reason why they would have accepted the $513,000 figure unless there was a proper basis for doing so.
It is true that the discharge of JRPL’s $513,000 debt to Wei Developments equally benefitted the Michos family, but an allowance for their share of the benefit was made in the calculation of the greater share of the Westpac debt to be paid by the Michos family, together with the debt JRPL had to the Michos family for their $55,000 contribution to the development costs. In his Closing Submissions Mr El-Rihani accepts that some set off is legitimate for these development costs. When those offsetting allowances are taken into account, the consideration directly received by JRPL as a company wholly owned by Mr Hotait was $1,285,023 (= 772,023 + 513,000). It also received $7,727.86 in vendors transaction costs which were also paid out of Ms Sbeiti’s loan funds. The total of these figures is $1,292,752.
There are other ways of looking at these figures, such as dividing in half the total debts of JRPL which were discharged at the settlement, which gives a figure of $1,296,523 (= 50% of 2,025,047 + 513,000 + 55,000). These figures are consistent with Mr Hotait’s own contemporaneous workings. The outcome is broadly the same.
In his Closing Submissions Mr El-Rihani has put forward another calculation but it does not make full allowance for the $513,000 paid by Wei Developments (nor for the off-setting contributions of $55,000 made by the Michos family).
It follows that the sale of 25A Jersey Road to Ms Sbeiti had the effect of directly reducing the assets of JRPL be approximately $232,248 (= 1,525,000 - 1,292,752).
Mr El-Rihani submits that the reduction of JRPL’s assets was greater by reason of the payment of $71,947 in stamp duty from the proceeds of Ms Sbeiti’s loan but for the reasons given above that is not correct.
Whilst JRPL’s assets were reduced, Mr Hotait’s overall assets were not depleted. Although the documentary evidence is limited, there does not appear to be any dispute that prior to October 2019 Wei Developments paid $200,000 to settle a defects liability claim against Mr Hotait and $20,000 for legal costs incurred by Mr Hotait. On 16 October 2019 it paid another $10,000 for Mr Hotait’s legal costs. Both Mr Hotait and Ms Sbeiti say that Wei Development made the payments “on behalf of” Mr Hotait. Beyond that there is no evidence about the terms upon which the payments were made.
I think it more probable than not that the payments were not made by Wei Developments gratuitously. Rather, at the time they were made they brought with them an obligation that Mr Hotait repay Wei Developments. That conclusion better accords with the findings I have made above about the development at 1137 Anzac Parade which was undertaken by Ms Sbeiti in her own interests. There was a history of substantial intermingling of the resources of Mr Hotait and Ms Sbeiti, but the evidence as a whole makes clear that there was not a common pool upon which either might draw without obligation to the other.
I am satisfied that upon the sale of 25A Jersey Road to Ms Sbeiti, Mr Hotait discharged liabilities he had to Ms Sbeiti by virtue of the payments made by Wei Developments on his behalf before October 2019. The final payment of $10,000 for legal fees on 16 October 2019 (for which presumably a tax invoice had been issued beforehand) was sufficiently close to the settlement of the sale of 25A Jersey Road to be considered in substance part of the same transaction. The fact that part of the consideration for the purchase of 25A Jersey Road was constituted by the discharge of $230,000 of Mr Hotait’s debts answers Mr El-Rihani’s submission that only $1,193,345 was paid at settlement. From the perspective of JRPL as a corporate entity that may be approximately correct (the correct figure is $1,292,752) but the pertinent issue for the purposes of s 37A is whether Mr Hotait’s assets were depleted.
There is not a precise equality between the sale price specified in the contract and the consideration received by Mr Hotait but the difference is immaterial. It follows that Mr Hotait’s assets were not depleted in any material respect by JRPL’s sale of 25A Jersey Road to Ms Sbeiti.
I accept Mr El-Rihani’s submission that the intention of Mr Hotait is to be taken to be the intention JRPL for the purposes of the sale of 25A Jersey Road to Ms Sbeiti. The contract was signed on 20 August 2019 when a member of the Michos family was still a director of JRPL, but the whole point of the settlement of the joint venture with the Michos family was for Mr Hotait to become the sole owner of JRPL as the owner of 25A Jersey Road. For the purposes of the simultaneous sale to Ms Sbeiti, Mr Hotait was the critical mind.
There are two objective facts which support Mr El-Rihani’s submission that the sale to Ms Sbeiti occurred with intent to defraud creditors, namely Mr Hotait’s financial difficulties at the time and the fact that the sale was made to a family member. There is also the fact that by 2019 Mr Hotait had granted the charge over the Shelley Street Property and caused BHPL to transfer the Fitzgerald Avenue Property to Ms Sbeiti, in each case with intent to defraud creditors. In 2023 he entered into the contract to sell the Shelley Street Property with the same intent, all of which evidence Mr Hotait’s general intent, which may be taken into account when considering his intent in 2019: Williams v Lloyd at 362.
Beyond these circumstances there is little to support this part of Mr El-Rihani’s case. Properly analysed, the sale of 25A Jersey Road was not at an undervalue and the sale did not have the effect of depleting Mr Hotait’s assets. Nor can it be said that the depletion of Mr Hotait’s assets was the natural and probable result of the sale when the discharge of Mr Hotait’s debts to Wei Developments is taken into account. Unlike the other transactions, there was a plausible commercial reason why Ms Sbeiti would receive 25A Jersey Road, namely the discharge of Mr Hotait’s liabilities to Wei Development which existed at the time, including liabilities which were specifically referrable to the development at 25 Jersey Road, and Ms Sbeiti’s superior ability to raise finance to pay Mr Hotait’s share of the Westpac debt. The commercial purpose is supported with Ms Sbeiti’s affidavit evidence on this topic which does not suffer from the same deficiencies as her other evidence. Mr Hotait may have intended to give preference to Wei Developments over his other creditors, but such an intention is not sufficient for the purposes of s 37A(1).
Mr El-Rihani submits that a further objective matter which is relevant to the enquiry is the fact that the settlement of the joint venture with the Michos family originally intended that Mr Hotait would receive one house and the Michos family would receive the other. Mr El-Rihani says that the transfer to Ms Sbeiti rather than to Mr Hotait was a “change” from the original proposal. The objective facts are correct but they are not relevant for present purposes. The proposal which originated from the Michos family naturally only addressed a settlement between the respective interests of the parties to the joint venture, Mr Hotait and the Michos family. It was not part of the proposal to address Mr Hotait’s separate arrangements within his side of the settlement.
Where there is an alienation of property with intent to defraud creditors, s 37A does not operate the make the alienation void. It provides that the alienation is voidable. Until it is avoided the alienation is effective: Cannane v J Cannane at [11].
An alienation within s 37A is not voidable at large but only at the instance of a person prejudiced by the alienation. Some of the cases address this issue in terms of standing to bring proceedings (e.g. Chen v Marcolongo at [193]).
Mr El-Rihani submits that he is a person prejudiced by Mr Hotait granting a charge over the Shelley Street Property to Dr Sbeiti and the subsequent contract to sell the property to Ms Sbeiti, and also by BHPL’s transfer of the Fitzgerald Avenue Property to Ms Sbeiti. He puts forward two separate reasons. First, he relies on the costs order made by the Federal Court in his favour on 6 June 2023. The costs have been assessed but not paid. Mr El-Rihani has an unpaid judgment debt for $610,000. Secondly, Mr El-Rihani submits that he is prejudiced because the properties are not available to enforce the Orders that Mr Hotait pay $2,073,343.93 into the Trust Account.
Before considering those two submissions, it is useful to identify third and fourth reasons upon which Mr Hotait does not rely. Thirdly, had Mr Hotait paid money into the Trust Account in June 2023 it would have been applied to pay the creditors of Skyworks who have been established to be such creditors by Farrell J’s second Judgment. Submissions were made at the hearing in these proceedings that Mr El-Rihani was himself one such creditor of Skyworks for some relatively minor sums which presumably have still not been paid. Mr El-Rihani has expressly disclaimed reliance on such a claim as a basis for concluding that he is a person thereby prejudiced for the purposes of s 37A: Written Submission dated 30 March 2026, paragraph 1.4.
Fourthly, reference is made above to two $100,000 payments made by Mr El-Rihani into the Trust Account in March 2017. The evidence does not reveal the nature of those payments or what became of them. Specifically, it is unclear whether the second payment was made by Mr El-Rihani under cl 10.5(a) of the Separation Deed. Had it been, it may have been argued that Mr Hotait was liable directly to Mr El-Rihani to repay $100,000 plus interest since March 2017. However, subsequent events are unknown. There are references in Farrell J’s second Judgment to a partial agreement being reached between the parties after the first Judgment and also to the abandonment of a claim for the $100,000 payment in the Federal Court proceedings. In cross-examination Mr Hotait said that he “repaid” Mr El-Rihani for a sum such as this although it was not clear precisely what he was referring to. Mr El-Rihani has not referred to the $100,000 payment when addressing his prejudice in these proceedings. Absent express reliance by Mr El-Rihani, it is not fair to Mr Hotait to consider this matter further.
Turning then to the unpaid costs it may immediately be accepted that the transactions involving the Shelley Street Property and the Fitzgerald Avenue Property have depleted the assets available to Mr El-Rihani to recover his costs directly (in the case of the Shelley Street Property) and by the devaluation of the shares which Mr Hotait owns in BHPL (in the case of the Fitzgerald Avenue Property). Mr Hotait and Ms Sbeiti do not submit otherwise. They accept that “Mr El-Rihani may be a person prejudiced in respect of the costs component of Farrell J’s orders”.
They submit, however, that Mr El-Rihani is precluded from relying on the costs order because he does not seek any relief in his Amended Summons which is directed to such a claim. The terms of the Amended Summons do not preclude this part of Mr El-Rihani’s claim. By the Amended Summons Mr El-Rihani seeks declarations that the transactions involving the Shelley Street Property and the Fitzgerald Avenue Property are void. To that extent, relief is sought which is relevant to his unpaid costs. It is true that by Prayer 22 of the Amended Summons Mr El-Rihani further seeks an order that $2,073,343.93 from the net proceeds from the sale of the properties be paid into the Trust Account and thereafter returned to Mr Hotait and BHPL. Prayer 22 does not seek payment on account of the unpaid costs. If it be necessary, Prayer 22 may be amended to bring the prayer into line with the way the case was argued. I think it is not necessary because by Prayer 25 Mr El-Rihani seeks such further or other order as the Court thinks fit.
In this regard the Amended Summons is to be considered in the light of the Commercial List Statement which was filed on the same day. There is no formal pleading but the Commercial List Summons makes tolerably clear that Mr El-Rihani’s unpaid costs are relevant to the issues in the case. Reference is made in paragraph A7 to the Order that Mr Hotait pay $2,073,343 into the Trust Account, which Order is defined as the “Federal Court Order”. In paragraph C48 Mr El-Rihani contends that the Federal Court Order not only required Mr Hotait to pay money into the Trust Account but also to pay Mr El-Rihani’s costs. There is no reason why the references to the Federal Court Order which appear elsewhere in the Commercial List Statement ought not generally to be understood as including the requirement to pay Mr El-Rihani’s costs. That includes the contentions in paragraphs C76 and C77 which are to the effect that by reason of the transactions with the Shelley Street Property and the Fitzgerald Avenue Property, Mr El-Rihani is unable to realise value through writs to enforce the Federal Court Order.
Mr Hotait and Ms Sbeiti do not claim that they will suffer prejudice if Mr El-Rihani is permitted to assert this part of his claim. The first reason given by Mr El-Rihani for why he is a person prejudiced is to be accepted. The Court is to grant all such remedies to which Mr El-Rihani is entitled so that all matters in controversy between the parties may be completely and finally determined: s 63 of the (NSW).
Mr El-Rihani further submits that he is a person prejudiced because Mr Hotait’s property is not available to enforce the Federal Court Orders to pay $2,073,343.93 into the Trust Account. The Federal Court Orders were made on Mr El-Rihani’s application. It is submitted that once the Orders were made, Mr Hotait owed a payment obligation to Mr El-Rihani, albeit that the payments were to be made to a third party (the solicitors’ Trust Account). Mr El-Rihani was entitled to enforce the Orders, including by calling in aid the execution processes of the Federal Court. Those processes include sequestration of Mr Hotait’s property and the issuance of writs of execution. Mr El-Rihani emphasises that no one else is able to enforce the Orders.
Mr El-Rihani submits that on the proper construction of s 37A “prejudiced” means defeated, hindered, delayed or defrauded in obtaining recourse to the property which had been alienated with the necessary intent. Mr El-Rihani accepts that in the typical case the prejudice will be suffered by a creditor of the disponor, but he submits that s 37A is not limited to such a case. He gives the example of a trustee in bankruptcy. Mr El-Rihani submits that such a construction is supported by cases such as Green v Schneller (2001) 164 FLR 82; [2001] NSWSC 897 (Barrett J) where the requirement of prejudice was described in terms which did not specifically refer to prejudice to a creditor. In Chen v Marcolongo at [27] Allsop P did not specifically refer to creditors and said that s 37A would apply where an alienation “would leave the claimant without a likely adequate fund against which to proceed”.
Mr El-Rihani submits that he is indisputably prejudiced by Mr Hotait’s failure to make the payments required by the Federal Court Orders.
On the other hand, Mr Hotait and Ms Sbeiti submit that for a person to be prejudiced by an alienation with intent to defraud creditors, that person must be owed a debt. The proposition is said to be supported by the following passage in [203] of the Judgment of Young JA in Chen v Marcolongo:
“As to locus standi, whilst there is a grey area, which may include claims by liquidators, may include claims by remaindermen etc, it seems to me the authorities support the general proposition that at the date of hearing or at the date of filing the summons, a person prejudiced is a person who is owed a debt, (Cadogan v Cadogan at 1048). I have not seen any case where this has not been so.”
“66 The Banks’ first submission is that the plaintiffs, as the alleged disponers of the funds the subject of the s 37A applications, do not have standing to seek relief under s 37A because they were not “person[s] thereby prejudiced” within the meaning of s 37A(1). The Banks submit that a person prejudiced within the meaning of the section is a person who is owed a debt at the time of the hearing or the filing of the proceedings: Chen v Marcolongo (2009) 260 ALR 353 at [193]-[207]; HP Mercantile Pty Ltd v Dierickx [2012] NSWSC 1005 at [86]-[87]; Sutherland v Jot Property Solutions Pty Ltd [2016] 1 Qd R 353 at [31]. The Banks submit that the plaintiffs are not in this category. The Banks acknowledge that this point was not argued at first instance, but submit that it is a pure question of law, and they ought to be permitted to argue it on appeal in accordance with Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438 and Coulton v Holcombe (1986) 162 CLR 1 at 7-8.
67 In response, the plaintiffs submit that there is authority for the proposition that a disponer company in liquidation, via its liquidator, is a party prejudiced by the alienation, because its assets have been disposed of to the detriment of its creditors. The plaintiffs rely, in particular, on Williams v Lloyd (1934) 50 CLR 341 , which concerned claims by the Official Receiver that certain dispositions were void against him under both s 37A of the Conveyancing Act and s 94 of the Bankruptcy Act 1924 (Cth). In that case, Starke J (at 362) rejected the suggestion that the Official Receiver could not avail himself of s 37A of the Conveyancing Act, stating that the “official receiver represents the creditors, and dispositions void against creditors are void against trustees or receivers lawfully appointed”. The plaintiffs also rely on Cannane v J Cannane Pty Ltd (in liq) (1998) 192 CLR 557 at [11], where Brennan CJ and McHugh J referred to the avoidance of transactions by the official receiver or a liquidator. The plaintiffs also rely on a number of cases that have applied or followed Williams v Lloyd. Although the liquidator of the plaintiffs is not a party to the present proceeding, the plaintiffs indicated that they would be willing to add the liquidator as a plaintiff.
68 In our view, there is merit in the Banks’ submission regarding standing. As presently constituted, the plaintiffs to the proceeding are the disponer companies and not the liquidator of those companies. On no view is the disponer company in the present circumstances a “person thereby prejudiced” by the disposition. It is the grantor of the transaction to be set aside. For this reason, the Banks’ submission regarding standing is correct.
69 The question then is whether, if the liquidator of the plaintiff companies were added as a plaintiff, this would overcome the problem. This is a difficult question. We incline to the view that the answer is “No”. A liquidator is not directly to be aligned with a trustee in bankruptcy, unless a statutory provision so provides: cf s 565 of the former Corporations Law. Of course, a liquidator can be given standing to pursue statutory Corporations Act claims, but we are not dealing with such provisions. But the matter is arguable and the plaintiffs only have to establish a prima facie case on standing (among other things) as part of establishing a prima facie case on relief. Thus, it would be sufficient for present purposes for the plaintiffs to join the liquidator as a plaintiff. In circumstances where the point was not taken at first instance, and is capable of being addressed in the manner indicated, it would not be appropriate to grant leave to appeal on the basis of the Banks’ submissions regarding standing.
70 Further, and in any event, the matter can be put beyond doubt by the plaintiffs joining a creditor (eg, the DCT) as a plaintiff. As we understood the plaintiffs’ position, they are willing to do what is necessary to cure the standing question. Again, as the standing point was not taken at first instance, and is capable of being addressed by joining a creditor as plaintiff, it would not be appropriate to grant leave to appeal on the basis of the Banks’ standing submissions.”
Apart from the costs order, Mr Hotait and Ms Sbeiti submit that Mr El-Rihani is not owed a debt as a result of the Federal Court Orders. They further submit that Mr Hotait is not the person who owes the relevant debts. The relevant debts, it is submitted, are owed by Skyworks pursuant to claims made within defects liability periods for its last projects as subsequently identified and quantified in Farrell J’s second Judgment. Whilst a creditor of Skyworks may be prejudiced by the alienation of Mr Hotait’s property, Mr El-Rihani is not prejudiced.
Mr Hotait and Ms Sbeiti accept that a different approach was taken in Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd [2024] FCAFC 17 (Banks-Smith, O’Sullivan and Feutrill JJ) which was a case where the appointor for a trust exercised her power to replace the trustee with a new trustee. The appointment was found to have been made with intent to defraud creditors. Upon the appointment the property of the trust vested in the new trustee who proceeded to pay it away, despite the fact that the former trustee had made some payments on behalf of the trust which had not yet been reimbursed. The former trustee had a right to be reimbursed out of the assets of the trust but the Court held that there was no “debt” payable to the former trustee and the former trustee was not a creditor. The Court nonetheless found that for the purposes of s 86 of the Law of Property Act 1936 (SA) the former trustee was “the party prejudiced” by the appointment of the new trustee. In reaching that conclusion that Court observed that the purpose of s 86 and the corresponding provisions in other jurisdictions is to counter the defrauding of creditors for which a liberal construction is required. Support for the Court’s construction was held to be found in the grey areas to which Young JA referred in the passage set out above. Supportive “indications” were also to be found in passages from the separate Judgments of Leeming JA and Kirk JA in Jaken Properties Australia Pty Ltd v Naaman (2023) 112 NSWLR 318; [2023] NSWCA 214 at [35], [220] and [223] (Leeming JA, Kirk JA agreeing), although the applicability of s 37A to the appointment of a new trustee with intent to defraud the former trustee’s right of indemnification was not argued in the Jaken litigation.
Despite the reasoning of the Full Federal Court in Ridge Estate v Fairfield Pastoral Holdings, Mr Hotait and Ms Sbeiti submit that the approach taken by Young JA in Chen v Marcolongo is to be preferred.
In any event, Mr Hotait and Ms Sbeiti submit that the Orders which required Mr Hotait to pay money into the Trust Account were subject to a condition that Mr El-Rihani first make an equivalent contribution. Mr El-Rihani made his contributions on time and in full but he subsequently retrieved his contributions when Mr Hotait did not pay his share. It is said that once that happened Mr Hotait ceased to be subject to a payment obligation. Absent “fresh orders”, Mr El-Rihani has not thereafter been a person prejudiced by the earlier alienation of Mr Hotait’s property. Mr Hotait and Ms Sbeiti further submit that making fresh orders would now be otiose because the underlying liabilities of Skyworks have become statute barred and Skyworks has been deregistered.
41.02 Condition precedent not fulfilled
(1) If an order is made in favour of a party subject to the fulfilment of a condition, the party cannot enforce the order until the condition is fulfilled.
They submit that Mr El-Rihani’s subsequent retrieval of his matching payments has resulted in the Order 1 condition being “removed”.
For two separate reasons I do not accept that Mr El-Rihani ceased to be a person prejudiced for the purposes of s 37A when he retrieved his money from the solicitors administering the Trust Account.
First, as a matter of construction the condition in Order 1 of the Federal Court Orders was fulfilled upon the email confirmation to which Order 1 refers. In these proceedings Mr El-Rihani has proved that the emails were sent and Mr Hotait and Ms Sbeiti do not suggest otherwise. The final sentence of Order 1 refers to the escrow arrangement set out in Order 3 but the reference does not change either the form or substance of the condition. The condition was fulfilled and Mr El-Rihani is still entitled to enforce Mr Hotait’s payment obligation under Order 2 in accordance with r 41.02(1).
That construction of the Federal Court Orders seems consistent with subsequent events in the Federal Court to the extent that they are revealed by the evidence in these proceedings. After Mr El-Rihani retrieved his money from the solicitors administering the Trust Account he made an interlocutory application for an order that Mr Hotait serve an affidavit which discloses his assets. It may safely be assumed that the interlocutory application was made by Mr El-Rihani and acceded to by the Federal Court as part of the enforcement of Mr Hotait’s obligations under Order 2. There is nothing to suggest that the Federal Court considered r 41.02(1) to be a bar to Mr El-Rihani enforcing Order 2.
Secondly, r 41.02 goes on to provide:
…
(2) However, the party may apply to the Court for an order for the revocation of the condition or the variation of the order.
Whilst Mr Hotait and Ms Sbeiti submit that there is a need for “fresh orders”, this rule appears to provide a ready mechanism for Mr El-Rihani to proceed with the enforcement of the existing Federal Court Orders despite (indeed, because of) Mr El-Rihani’s subsequent retrieval of his payment after Mr Hotait failed to pay his share. Mr Hotait and Ms Sbeiti nonetheless submit that there are three reasons why further orders from the Federal Court would now be otiose.
First, they submit that all Skyworks’s building defects warranty periods have now expired so that cl 10.14(a) of the Separation Deed applies. Clause 10.14(a) is set out above. It requires the Trust Account essentially to be closed and Skyworks to be deregistered upon (1) receipt of all funds payable to Skyworks (see cl 5.2) and (2) the expiry of all Skyworks’s building defects warranty periods. There is no dispute that the first of these requirements has been fulfilled. Mr Hotait and Ms Sbeiti assert that the second requirement has also been fulfilled but the evidence does not permit the necessary finding of fact. Mr Hotait says in his Affidavit that Skyworks issued its last Occupation Certificate in December 2015 which is by now more than eight years ago. However, no submissions have been made from which it may be concluded that it necessarily follows that all Skyworks’s building defects warranty periods have expired.
In any event, a more fundamental problem with the submission is that even if cl 10.14(a) applies the Trust Account still has work to do. When cl 10.14(a) applies, cl 10.14(b) requires two things to be done, namely closure of the Trust Account and deregistration of Skyworks. Cl 10.14(b) does not specify the order in which those two things are to be done. The Separation Deed read as a whole makes clear that the Trust Account cannot be closed in accordance with cl 10.14(b)(i) until after Skyworks has been deregistered. That is because cl 10.14(b)(ii) requires Skyworks to be deregistered in accordance with cl 5.3. Clause 5.3 provides:
“Upon satisfaction of an event contemplated by clause 10.14 and the distribution of all funds held in the Trust Account (if any), the parties must cause Skyworks NSW to be deregistered unless the parties unanimously agree to sell Skyworks NSW.”
Clause 5.4 provides that “for the purpose of clause 5.3” Skyworks is to be deregistered on terms which include the payment of all outstanding liabilities of Skyworks (cl 5.4(f)). So that cl 10.14 operates harmoniously with cll 5.3 and 5.4, the Trust Account must continue to be available to perform its function under cll 10 and 11 (provision of a source of funds for the payment of Skyworks’s liabilities) until after the deregistration of Skyworks, or at least until after all the financial tasks specified in cl 5.4 have been attended to. Further orders for the enforcement of the existing Federal Court Orders may have utility even if cl 10.14(a) applies.
The second reason why Mr Hotait and Ms Sbeiti submit that further orders from the Federal Court would be otiose is that the underlying debts of Skyworks have been extinguished by s 63 of the Limitation Act 1969 (NSW). Once again the evidence does not permit the necessary finding of fact. Insufficient information is known about the process by which the final liabilities of Skyworks have arisen over recent years or how they have been addressed by Skyworks. Any liabilities which have been acknowledged by Skyworks, as cl 11 of the Separation Deed contemplated may happen and which for commercial reasons may have happened in any event, may not have expired by virtue of s 54 of the Limitation Act 1969. Any liabilities of Skyworks which have merged with Court orders made against Skyworks or which are subject to current Court proceedings, as cl 5.4(g) contemplated may happen, may not be subject to any limitation period. There may be other reasons why Skyworks has liabilities for which the limitation period has not yet expired.
Further the availability of a limitation period to defeat an otherwise good claim against Skyworks would be a defence upon which Skyworks may choose not to rely. An external manager of Skyworks may be obliged to rely upon such a defence (McGrath v Troy as Administratrix of Estate of Wade [2010] NSWSC 1470 at [58] (White J)) but the scheme of the Separation Deed is such that Mr El-Rihani and Mr Hotait reserved to themselves control over the conclusion of Skyworks’s building business (El-Rihani v Hotait [2020] FCA 912 at [123]). With an eye to their future participation in the property development industry, it may not suit the commercial purpose of Mr El-Rihani or Mr Hotait, or both, for Skyworks to conclude its building business with unpaid liabilities, even if those liabilities are referrable to claims which have been extinguished by s 63 of the Limitation Act 1969.
In any event, this submission by Mr Hotait and Ms Sbeiti conflates Skyworks’s liabilities to underlying claimants with Mr Hotait’s liability under the Federal Court Orders. Mr El-Rihani’s prejudice arises from his inability to enforce the latter. Without more it cannot be said that Mr El-Rihani is not a person prejudiced by the alienation of Mr Hotait’s property simply because of the effluxion of time since Skyworks ceased building work.
Section 37A(3) provides that the section does not extend to any estate of interest in property alienated to a purchaser in good faith not having, at the time of the alienation, notice of intent to defraud creditors.
Dr Sbeiti’s interest in the Shelley Street Property by reason of the charge given in cl 6 of the Loan Agreement is at jeopardy in these proceedings. Dr Sbeiti has not participated in the proceedings. There is no suggestion that Dr Sbeiti received the charge in good faith not having, at the time of the receipt, notice of Mr Hotait’s intent to defraud creditors.
Ms Sbeiti’s interest in the proceeds from the sale of the Fitzgerald Avenue Property and her interest as purchaser of the Shelley Street Property are also at jeopardy in these proceedings. On 18 November 2024 a Commercial List Response was filed on her behalf. Ms Sbeiti did not specify the application of s 37A(3) as an issue likely to arise in the proceedings. It is not contended that Ms Sbeiti received either of the relevant interests in good faith not having, at the time of the receipt, notice of Mr Hotait’s intent to defraud creditors.
As set out above, where there is an alienation of property with intent to defraud creditors, s 37A does not operate to make the alienation void. It provides that the alienation is voidable. Upon an application under s 37A, the Court can achieve the effect of avoiding the alienation by such measures as seem appropriate in the particular case: Silvera v Savic (1999) 46 NSWLR 124: [1999] NSWSC 83 at [72] (Hodgson CJ in Eq).
In this case my present view is that declarations are appropriate in relation to the two transactions involving the Shelley Street Property and the transfer of the Fitzgerald Avenue Property to Ms Sbeiti. In the former case the declarations are necessary to inform any subsequent dispute about priority between the competing claims to property, especially where Dr Sbeiti has obtained a judgment debt. Ms Sbeiti has on-sold the Fitzgerald Avenue Property and the net proceeds have been paid into Court. A declaration may not be necessary but it may be convenient for the purposes of a subsequent order about the payment out.
Beyond that the position is less clear. Mr El-Rihani, Mr Hotait and Ms Sbeiti seek to be heard on the final orders to be made. The liquidators of BHPL and JRPL have filed a Commercial List Response in which they identify the application of the proceeds from the sale of the Fitzgerald Avenue Property as an issue which is likely to arise in the case.
In those circumstances it is appropriate for all parties to be given time to consider my reasons and, if necessary, to make further submissions on the final orders to be made.
The orders to be made are as follows:
The Plaintiff to serve on the Defendants a minute of the orders which he contends ought to be made to give effect to these reasons by 28 October 2026.
Any Defendant who contends for different orders to serve on the Plaintiff and the other Defendants a minute of those orders by 11 November 2026.
The proceedings be listed for directions on 17 November 2026.
Liberty to apply.
**********
El-Rihani
Sbeiti
[1938] HCA 34
[1998] HCA 26
[2003] HCA 22
(1988) 164 CLR 604
(1974) 131 CLR 370
(1938) 60 CLR 336
(1998) 192 CLR 557
(1991) 22 NSWLR 389
(2014) 251 CLR 640
(2003) 214 CLR 118
(2001) 164 FLR 82
(2007) 215 FLR 243
(2023) 112 NSWLR 318
(1959) 101 CLR 298
(2011) 242 CLR 546
(2015) 256 CLR 104
(1999) 46 NSWLR 124
(2006) 227 CLR 278
(1934) 50 CLR 341
(2009) 260 ALR 353
(1950) 81 CLR 418
(1986) 162 CLR 1
As the parties subsequently agreed in the Federal Court, it was intended that Skyworks would be used as a vehicle to run-off residential building defects warranty claims. The trust account of a named firm of solicitors (which had drafted the Separation Deed) was nominated as the “Trust Account” (cl 1.1). All funds presently held and all payments subsequently received by Skyworks were immediately to be paid into the Trust Account (cl 5.2). By cl 5.4(f) Mr Hotait and Mr El-Rihani agreed to “pay all outstanding liabilities of Skyworks”. The purpose of that payment was expressed to be to ensure the deregistration of Skyworks (cl 5.4). The payment of Skyworks’s outstanding liabilities and the specification of the other tasks to be attended to for Skyworks (cl 5.4) shows that the parties intended that Skyworks would be deregistered in accordance with s 601AA. Mr Hotait and Mr El-Rihani separately agreed equally to contribute to the tax liabilities of Skyworks (cl 5.6).
Detailed provision was made for the Trust Account and the payment of Skyworks’s future liabilities in cl 10. Clause 10.4 provided that each of Mr El-Rihani and Mr Hotait would pay $200,000 into the Trust Account upon execution of the Separation Deed. Clause 10.1 contained the acknowledgement that money would be held in the Trust Account “on behalf of” Skyworks. Clause 10.2 provided that the funds held in the Trust Account were held “on account of future liabilities of [Skyworks], including, but not limited to, potential building defect liabilities arising from construction works undertaken by [Skyworks] in the state of New South Wales”. Clause 10.3 provided for the parties to authorise the firm of solicitors to pay Skyworks’s liabilities from the Trust Account.
Clause 10.5 addressed the circumstance where the Trust Account did not have sufficient funds to meet the liabilities of Skyworks. It relevantly provided as follows:
At some point Mr Hotait articulated his argument that he was not liable to make contributions under cl 10.5 of the Separation Deed. His argument was that Skyworks did not have any “future liabilities” for the purposes of cl 10.2. As subsequently contended with more particularity, Mr Hotait argued that cl 10.2 did not cover any liabilities which had already been notified to Skyworks but which were still unpaid when the Separation Deed was made. There was a further issue about liabilities which had arisen but which were not invoiced until after the Separation Deed was made. The dispute over Mr Hotait’s contributions unresolved, and notwithstanding the machinery in cl 10, on 14 March 2018 Mr El-Rihani commenced proceedings against Mr Hotait. They were the only two parties to the proceedings. Mr El-Rihani alleged that Mr Hotait’s failure to make further contributions was a breach of the Separation Deed. Mr Hotait had the new proceedings transferred to the Federal Court where he already had his own proceedings to wind up Skyworks.
On 6 June 2018 consent orders were made by the Federal Court pursuant to which Skyworks was placed in liquidation on the just and equitable ground in s 461(1)(k) of the Corporations Act 2001.
On 29 May 2019 Farrell J set down for hearing some separate questions designed to determine the proper construction of “future liabilities”. The separate questions were argued on 26 September 2019. In a Judgment handed down on 30 June 2020, her Honour rejected Mr Hotait’s narrow view of his obligations under the Separation Deed: El-Rihani v Hotait [2020] FCA 912. As a matter of construction Skyworks’s “future liabilities” were found to include all liabilities which were unpaid as at the date of the Separation Deed as well as liabilities which might be incurred or claimed after that date.
A further separate question was answered in the Judgment on 30 June 2020, namely whether the appointment of the Skyworks liquidator had frustrated the Separation Deed. Farrell J found not. Her Honour accepted that cl 10 and cl 11 of the Separation Deed contemplated that Mr Hotait and Mr El-Rihani would be the ongoing directors of Skyworks and that they would jointly have control over the payment of Skyworks’s liabilities through the Trust Account. Her Honour found that despite the language of cl 10.1, the Trust Account and the money in it were not the property of Skyworks. The principal reason for that finding was that Mr Hotait and Mr El-Rihani had reserved to themselves the right to agree to direct the solicitors to return the funds in the Trust Account to themselves even if Skyworks’s creditors had not all been paid (cl 10.14(b)). Further support came from the fact that cl 10.2 provided that the funds in the Trust Account were not held for Skyworks but “on account of future liabilities of Skyworks”, and that payments out of the Trust Account were to be made to creditors of Skyworks and not to Skyworks itself (cl 10.9 and cl 11.3). Farrell J found that the liquidator of Skyworks had no claim on the funds in the Trust Account, and neither did the creditors of Skyworks. For those reasons her Honour concluded that cll 10 and 11 of the Separation Deed were still capable of operation as were the obligations imposed on Mr Hotait and Mr El-Rihani under cl 5.4(f). Whilst deregistration in accordance with cl 5.5 was no longer possible, the solvent winding up of Skyworks was still possible. The placement of Skyworks into liquidation had not frustrated the Separation Deed.
Of the nature of Mr Hotait’s obligation to contribute under cl 10.5, Farrell J made the following observations:
Apart from the deposits from her father, the main source of other deposits into Ms Sbeiti’s account is identified by the following notation on the bank statement:
Mr El-Rihani submits that Mr Hotait's financial circumstances continued to deteriorate prior to the transfer of 25A Jersey Road to Ms Sbeiti. He points out that Mr Hotait's building licence was cancelled on 21 August 2018 and that he personally was subject to building defect claims. Third parties lodged caveats on the Shelley Street Property. JRPL was in default of its loan from Westpac and Mr Hotait was unable to make his share of contributions to the continuing construction costs without resorting to his wife's company. Mr El-Rihani submits that Mr Hotait's intent for the transfer of 25A Jersey Road to Ms Sbeiti is to be inferred from Mr Hotait's financial circumstances, together with the fact that the original proposal from the Michos family was for the property to be transferred to Mr Hotait, not Ms Sbeiti. JRPL and Mr Hotait did not receive any proceeds from the transfer of the property and no adequate explanation has been given.
As for 25A Jersey Road, Mr Hotait and Ms Sbeiti submit that the transfer was not a "fire sale" but was ultimately caused by external pressure from Westpac given that JRPL had defaulted on its loan. There was a risk of a mortgagee sale which would not produce a favourable result. Nor was it Mr Hotait's idea in the first place for JRPL to sell the duplex homes to the shareholders. They emphasise that the Michos family accepted Ms Sbeiti’s figure of $513,000 for the costs contributed by Mr Hotait which makes the figure objectively reliable. Once that is accepted and the $230,000 in Mr Hotait’s other liabilities is taken into account, it can be shown that JRPL received full consideration for the transfer of 25A Jersey Road.
Mr Hotait and Ms Sbeiti submit that Mr El-Rihani has not discharged his onus of proving that Mr Hotait had intent to defraud creditors when any of the transactions occurred.
The necessary intention may be inferred from the circumstances of the case: Marcolongo v Chen at [26]. Circumstances which have been found to support the inference include where the defeat or delay of creditors was the natural and probable consequences of the alienation, where the alienation was voluntarily, where the alienation was made for no consideration by a person suffering financial difficulties, where the alienation was made in favour of a family member and where the alienation was made in haste or in proximity to one or more events indicating financial stress on the part of the person making the alienation: the Grapple Pay case at [63].
Another circumstance from which the necessary intention may be inferred is where the alienation has the effect of depleting the value of the assets which the debtor would otherwise have to meet his or her debts: Cannane v J Cannane at [12] and [13].
There is no evidence from Florina.
The conclusion which I draw from the evidence as a whole is that Dr Sbeiti did not lend any money to Mr Hotait.
In fact it is to be doubted that Dr Sbeiti gave any consideration at all. He received the charge simultaneously with the deposit of $14,990 by himself and Florina. He had already received the charge at the time he made the last four deposits. For the reason already given those deposits were all made to Ms Sbeiti beneficially and not to Mr Hotait. Mr Hotait’s promise to repay (or more precisely, to pay) Dr Sbeiti was gratuitous as was the charge given to secure the promise.
As the Defendants emphasise, there is no evidence of Mr Hotait being concerned about Mr El-Rihani as a creditor as at 17 April 2014. There are references to the relationship between the two men deteriorating, but not until 2015. Mr Hotait assumed personal payment obligations under the Separation Deed but that did not occur until 19 December 2016. Nor is there evidence of Mr Hotait being concerned about other creditors in 2014. On the evidence before the Court, the first occasion when Mr Hotait is referred to as being concerned about paying his debts was in “early 2017”.
The absence of concern about creditors in 2014 is a material consideration but it does not outweigh the circumstances referred to above. By 2014 Mr Hotait had been engaged in the property development industry for about a decade. In the ordinary course he would have exposed himself to personal liabilities. Some of the developments appear to have been undertaken by Mr Hotait personally (Recital A of the Separation Deed). He said in his Affidavit that he incurred personal liabilities when developments were undertaken “using” his building licence. He evidently gave personal guarantees for development funding (cl 8.17(a)(i) of the Separation Deed). I accept that in April 2014 Mr Hotait had occasion to be concerned about his creditors, if not then current, then future or prospective.
As I have already observed, no adequate explanation has been given by Mr Hotait in these proceedings about his entry into Loan Agreement and the granting of the charge in cl 6. His evidence takes the form of a positive albeit wholly implausible description of the circumstances. He does not expressly deny that he entered into the Loan Agreement with intent to defraud his creditors although the denial may have been intended to be inferred. I have already observed the limited supporting evidence given by Ms Sbeiti and the failure to call Dr Sbeiti.
The clear inference to be drawn from all the circumstances of the case is that Mr Hotait granted the charge in cl 6 of the Loan Agreement with intent to defraud creditors. In drawing that inference, I have kept in mind s 140(2) of the Evidence Act 1995 (NSW) and the common law principles which that provision reflects. The inference I have drawn does not require dishonesty on the part of Mr Hotait but it is still a grave finding. The gravity of the finding of intent to defraud carries with it other grave findings, including entry into the Loan Agreement, not just by Mr Hotait but also by Dr Sbeiti, which contains statements which are contrary to the fact and the rejection of parts of the affidavits of Mr Hotait and Ms Sbeiti. Even so, the evidence in support of the inference is strong. The evidence gives rise to an actual persuasion of the fact.
Despite Mr Hotait’s general intent, Mr El-Rihani has not discharged his onus of proving that the sale of 25A Jersey Road to Ms Sbeiti was undertaken with intent to defraud creditors.
To a large extent, both party’s submissions focus on the authorities about whether s 37A requires that the person seeking to avoid the alienation of property must be a “creditor” to whom a “debt” is owed. Less attention was given to Mr Hotait’s obligations to Mr El-Rihani and then only subsequently to the conclusion of the hearing. As beneficial legislation enacted for the purpose of suppressing fraud, the outer limits of s 37A’s application are not usefully addressed in the abstract nor by rigid categories of hypothetical cases. Such an approach to the operation of s 37A may make it vulnerable to technical obstructions when focus is required on the effect of what has been done and not the means by which it was done: Hall v Poolman (2007) 215 FLR 243; [2007] NSWSC 1330 at [550] (Palmer J). In the present case, it is necessary to identify with precision the nature and content of Mr Hotait’s obligations under the Federal Court Orders and Mr El-Rihani’s rights and interests with respect to performance of those obligations. It will then be possible to determine whether Mr El-Rihani is a “person thereby prejudiced” by the alienation of Mr Hotait’s property.
Any payment obligation on the part of Mr Hotait arises under the Federal Court Orders made on 6 June 2023. Upon those orders being made Mr Hotait’s previous obligations under cl 10.5 of the Separation Deed merged. The submissions of Mr Hotait and Ms Sbeiti about whether Mr El-Rihani is a creditor and whether Mr Hotait is a debtor do not pay sufficient attention to the merger. Mr El-Rihani does not rely on the rights which he previously had under cl 10.5 for his claim to be a person prejudiced by the relevant alienations of property.
Nonetheless, Mr Hotait’s obligations under the Federal Court Orders have their origins in the Separation Deed. In their terms the Federal Court Orders require Mr Hotait to pay money “to the Trust Account”, which by necessary implication contemplates that the Trust Account will subsist and that the money paid into it will thereafter be subject to the ongoing terms of the Separation Deed. The Federal Court Orders also address whether matching payments by Mr El-Rihani will (Order 3(b)) or will not (Order 3(c)) be “subject to the Separation Deed”. It is therefore necessary to have regard to the provisions of the Separation Deed to determine whether Mr El-Rihani is prejudiced.
Absent further agreement between the parties (cl 10.14(b)), money in the Trust Account may only be used to pay Skyworks’s liabilities (cl 10.2). Use of the money for that purpose does not require further agreement because the machinery provisions in cll 10 and 11 permit one party unilaterally to use the money in the Trust Account to pay Skyworks’s liabilities. Specifically, Mr El-Rihani is able to cause Skyworks’s liabilities to be paid even if Mr Hotait objects or refuses to co-operate. As it is, Farrell J has conclusively determined that Skyworks has the liabilities addressed in the second Judgment, although it may be necessary for further determinations to be made in some areas, if necessary by recourse to the machinery in cll 10 and 11.
Whilst money in the Trust Account will not be paid out to Mr El-Rihani (on the contrary, he will have to match Mr Hotait’s payments in), he nonetheless has an interest in the Trust Account having funds with which to pay Skyworks’s liabilities. The scheme of the Separation Deed is that the Trust Account will provide a resource to fund the agreed task of paying all outstanding liabilities of Skyworks (cl 5.4(f)). The purpose of that agreement is to “ensure” deregistration of Skyworks under s 601AA as a solvent company. The Separation Agreement does not explicitly identify the commercial purpose of having Skyworks deregistered on those terms. There may be a hint in cl 5.4(c) where reference is made to Mr El-Rihani (and Mr Hotait) being able to continue in the property development industry without prejudice from the circumstances in which Skyworks’ business was brought to an end. Ultimately it does not matter. The Separation Deed records a commercial transaction between two businessmen. For valuable consideration, including his own reciprocal promises, Mr El-Rihani bargained for and received from Mr Hotait a promise to contribute equally to the payment of all Skyworks’s outstanding liabilities. That promise includes promises about how the money in the Trust Account is to be applied.
Having regard to the ordinary meaning of the word, it follows that Mr El-Rihani is “prejudiced” by not being able to obtain recourse to the property of Mr Hotait for the purposes of enforcing the Federal Court Orders. There is nothing in the terms of the Federal Court Orders or the circumstances in which they were made which warrants a different conclusion.
As a matter of construction, there is nothing in the words of s 37A(1) which confines the prejudice which must be suffered by a person before that person has standing to avoid the alienation of property. Additional words would have to be read into s 37A(1) for the prejudice to be limited to non-payment of a debt or to the detriment which might otherwise be suffered by a creditor. To read s 37A(1) down in such a way would be antithetical to the principle that the provision is the be given a liberal construction. It would also be incongruent with the context in which the phrase “person thereby prejudiced” is used within s 37A(1). Different words are used to describe those who it must be intent to defraud when the alienation occurred (“creditors”) and those who must be prejudiced (“any person”). It seems unlikely that the former was intended to confine the latter.
There is nothing in the authorities which requires the conclusion to be reached that Mr El-Rihani is not a person thereby prejudiced for the purposes of s 37A. There is no case where the Court has considered the application of s 37A to a plaintiff who has the benefit of a court order in the nature of a mandatory injunction which requires the defendant to pay money to a third person. Nor is there a s 37A case where the plaintiff and the defendant agreed to contribute to a fund from which the creditors of a third party would be paid. The parties have not referred to any such case under any of the Australian analogues or under any of the English ancestors of s 37A. It seems that the first time someone other than a creditor brought a claim under the English ancestors of s 37A was in 1977 which was almost 400 years after the original Statute of Elizabeth was enacted: Cadogan v Cadogan [1977] 3 All ER 831; [1977] 1 WLR 1041 at 1055 (Buckley LJ). In that case one member of the Court of Appeal held that it was arguable that the English analogue of s 37A applied beyond creditors (Buckley LJ at 1056) and another was strongly inclined to a construction which limited the “person thereby prejudiced” to creditors, including future creditors (Goff LJ at 1060).
Perhaps the closest case is Williams v Lloyd where one of the members of the High Court addressed the application of s 37A to a claim by an official receiver under the Bankruptcy Act 1924-1932 (Cth). Pursuant to s 60 of that Statute, upon sequestration the property of the bankrupt vested in the official receiver to be divided amongst the creditors of the bankrupt in accordance with the provisions of the statute. The official receiver would not himself or herself be a creditor. He or she represented the creditors. At 362, Starke J said that an official receiver may qualify as a person prejudiced for the purposes of 37A and that an alienation of property which is voidable at the instance of the creditors is voidable at the instance of the receiver.
There is a broad analogy between the position of an official receiver and the circumstances of the present case because the purpose of the Trust Account was to pay Skyworks’ liabilities. There are also differences. The Trust Account is not vested in Mr El-Rihani and he does not formally represent Skyworks’s creditors in the same way as did an official receiver under the Bankruptcy Act 1924-1932. Even so, under the Separation Deed Mr El-Rihani has assumed contractual obligations to pay Skyworks’s liabilities (cll 5.4(f) and 5.5) and has been given contractual rights to enforce the application of the funds in the Trust Account for that purpose (e.g. cll 10.6, 11.2, 11.3 and 11.6). It is further to be inferred that Mr El-Rihani has his own commercial interests in the creditors of Skyworks’s being paid. The alienation of the property to which Mr El-Rihani would otherwise have had recourse to enforce the Federal Court Orders has prejudiced him in a way which has some similarities with the prejudice to an official receiver. Starke J’s Judgment was cited with evident approval in Cannane v J Cannane at [11].
Mr Hotait and Ms Sbeiti ask too much of the passage from Young JA’s Judgment in Chen v Marcolongo which is set out above. His Honour’s description of the person prejudiced by reference to being owed a debt was responsive to the facts before the Court in Chen v Marcolongo. In separate proceedings Ms Marcolongo was suing the defendant for damages which she hoped would mature into a judgment debt owed to her. His Honour was not required to consider the circumstances in the present case. In any event, Young JA is not to be understood as laying down an inflexible rule as is apparent from the recognition of a grey area, which is where the present case lies. So too, the facts in Israel Discount Bank v ACN 078 272 867 bear no resemblance to those of the present case. In any event, the interlocutory context in which the issue of prejudice was addressed in that case means that no final determination was made of the “difficult question”.
In any event, as Mr Hotait and Ms Sbeiti accept, the Court took a more expansive view of the meaning of prejudice in Ridge Estate v Fairfield Pastoral Holdings where the plaintiff was found to be a person prejudiced for the purposes of the South Australian statute even though the plaintiff was not owed a debt. At [77] the Court did not accept that the requirement for prejudice was limited as said by Young JA in the passage set out above. As a case about a former trustee’s right to be indemnified, Ridge Estate v Fairfield Pastoral Holdings was different to the present case and different again to each of Chen v Marcolongo and Israel Discount Bank v ACN 078 272 867*.* This illustrates the need first to identify the nature and content of the rights and obligations of the parties when considering the applicability of s 37A.
There may be other circumstances where the alienation of property with intent to defraud creditors may cause prejudice to a person which arises from non-performance of the disponer’s obligation to pay a third party, such as an obligation to maintain insurance or an obligation to contribute to an ongoing joint expense. At least where the plaintiff’s prejudice is constituted by financial loss, there is no apparent policy reason why fraudulent alienation ought to be suppressed in such a case any less than in a case where the disponer owes a debt directly to the person prejudiced. There is no apparent policy reason why s 37A is not intended to apply to Mr El-Rihani’s case. Mr Hotait and Ms Sbeiti do not contend for any policy distinction.
Mr El-Rihani’s position answers the description of persons at whose instance an alienation of property may be avoided under s 37A, namely a “person thereby prejudiced”.
In reaching that conclusion I have not lost sight of the further submission by Mr Hotait and Ms Sbeiti about the condition in Order 1 of the Federal Court Orders to which Mr Hotait’s obligation to pay money under Order 2 was subject. Mr Hotait and Ms Sbeiti draw attention to Federal Court Rules 2011 (Cth) r 41.02(1) which provides:
A final problem with this part of the case is that as between Mr El-Rihani and Mr Hotait the Federal Court has already determined the issue about Skyworks’s underlying liabilities which was the subject of Farrell J’s second Judgment in 2023. Mr Hotait’s payment obligations under the Federal Court Orders were imposed in order to give effect to that Judgment. It is not open to Mr Hotait now to contend that due to the subsequent effluxion of time Skyworks no longer has the liabilities considered and found by the Court in 2023.
The third reason why it is said that further orders from the Federal Court would be otiose is that Skyworks has been deregistered. Without objection or contradiction by Mr El-Rihani, the fact is asserted by Mr Hotait and Ms Sbeiti. There is no evidence as to the fact of deregistration much less to the circumstances in which it occurred. It is not known whether Skyworks might be reinstated for the commercial purpose of paying its liabilities, or whether the commercial purpose of Mr El-Rihani or Mr Hotait might be served by the payment of Skyworks’s liabilities even if it is not reinstated.
It will ultimately be a matter for the Federal Court whether any residual condition to Mr Hotait’s payment obligations under Order 2 should be revoked or varied, or whether any further orders should be made. Nothing in the foregoing is intended to inform the exercise of discretion which may attend upon the determination of any application Mr El-Rihani makes in the Federal Court in the future. Any such application will be decided based on the evidence adduced in the Federal Court for the purposes of the application. For current purposes it is sufficient to conclude that Mr El-Rihani has a bona fide claim to enforce the existing Federal Court Orders and it has not been shown that there would not be any utility in the Federal Court making further orders in aid of the enforcement process. For the purposes of s 37A of the Conveyancing Act 1919, that is sufficient for Mr El-Rihani to be a person presently prejudiced by the fraudulent alienation of Mr Hotait’s property: Chen v Marcolongo at [27].