Malass v Alam

Catchwords: REAL PROPERTY — caveats — leave to lodge further caveat under s 74O — contracts entered into for purchase of cryptocurrency tokens — multiple causes of action — where interest in property is protected by alternative property with caveat — whether serious question to be tried — balance of convenience — comparison of potential harm to caveator if order not made and to caveatee if order made

Legislation Cited: Australian Consumer Law, s 243
Australian Securities and Investments Commissions Act 2001 (Cth), s 12GM
Corporations Act 2001 (Cth), s 766A, 766C, 911A, 1325
Real Property Act 1900 (NSW), s 740

Cases Cited: Addenbrooke Pty Ltd v Duncan (No 2) (2017) 121 ACSR 406; [2017] FCAFC 76
Jaken Properties Australia Pty Ltd v Naaman (2024) NSWCA 265
Li v Perpetual Holdings Pty Ltd [2025] NSWSC 175
Marinkovic v Pat McGrath Engineering Pty Ltd (2004) 61 NSWLR 150; [2004] NSWSC 571
Mijo Developments v Royal Agnes Waters [2007] NSWSC 199
Re BBY Ltd (in liq) and BBY Holdings Pty Ltd (in liq) [2022] NSWSC 29
Salvo v New Tel Limited [2005] NSWCA 281
The Croatian Club Limited v Westwood Capital Pty Limited [2024] NSWSC 895
Walker v Australian Forestry Holdings Pty Ltd [2018] NSWSC 1535

Texts Cited: The Law of Tracing, Hafeez-Baig and English, Federation Press 2021

Category: Procedural rulings

Parties: Sandy Spyrakis the registered trustee for the bankrupt estate of Rabi Malass (Plaintiff)
Radwan Alam (First Defendant)
Alam & Itaoui Investments Pty Ltd (Second Defendant)
Zeina Itaoui (Third Defendant)
ECTO Services Pty Ltd (Fourth Defendant)

Representation: Counsel:
T Castle SC / C Egan (Plaintiff)
S Balafoutis SC / B Dziubinski (Defendants)
Solicitors:
Origin Lawyers (Plaintiff)
NY Lawyers (Defendants)

File Number(s): 2024/00040785

Publication restriction: Nil

JUDGMENT

1. By motion filed 29 January 2026, the plaintiff Sandy Spyrakis the registered trustee for the bankrupt estate of Rabi Malass seeks leave in respect of a claim now revested in Rabi Malass (Malass) pursuant to s 74O(2)(a) of the Real Property Act 1900 (NSW) (RPA) to lodge a further caveat over the interests of the second defendant (A&I) as a registered proprietor of the property known as X Avondale Road, Avondale NSW 2530 (Property), in respect of what Malass contends is an equitable charge arising by reason of his claim to trace the proceeds paid into the Property as claimed in these proceedings.

2. The motion was heard on the afternoon of 20 February 2026. Tim Castle SC and Charlotte Egan appeared for Malass. Stefan Balafoutis SC and Bart Dziubinski appeared for the first defendant, Radwan Alam (Alam). Each party relied on affidavit and documentary evidence. No deponent was required for cross-examination.

3. For the reasons set out below. I am not satisfied that leave should be granted to lodge a further caveat in circumstances where Malass’ interest in the Property is adequately protected by the defendants’ offer of a charge over an alternate property, together with a caveat over that property. The parties should agree orders to give effect to these reasons.

Relevant principles under s 74O

4. Understandably, there was no dispute as to the relevant principles.

5. In Walker v Australian Forestry Holdings Pty Ltd [2018] NSWSC 1535 at [43]-[47], Ward CJ in Eq (as the learned President then was) stated:

[43] There was no dispute as to the applicable legal principles on an application brought under s 74O(2) of the Real Property Act for leave to lodge a further caveat where a previous caveat claiming the same estate, interest or right has lapsed or been withdrawn.

[44] The court must be satisfied that the claim to be entitled to lodge the caveat has or may have substance (Schibaia v Elias [2013] NSWSC 1485 at [47] per McDougall J) and approaches the application in a manner similar to that which it would undertake had the caveator applied for an interlocutory injunction to protect the interest (see Summit Acceptance Pty Ltd v Wild [2011] NSWSC 659 at [17] per White J, as his Honour then was; Xabregas v St George Bank Ltd [2017] NSWSC 200 at [59]; 18 BPR 36,885 per Darke J). However, additional discretionary considerations then arise (Summit Acceptance Pty Ltd v Wild (at [17])).

[45] In De Meyrick v Dimitriou [2011] NSWSC 1291, Brereton J, as his Honour then was, said (at [5]-[6]):

[5] Pursuant to a notice of motion filed on 30 September 2011, the plaintiff now moves primarily for leave pursuant to s 74O to lodge a further caveat, in substantially the same form as the lapsed caveat. On such an application, considerations similar to those relevant to applications for interlocutory injunctions apply [Fitzgibbons v Shaftsbury [2011] NSWSC 525, (at [3])]. Primarily, they are whether the proposed further caveat has or may have substance; and considerations pertaining to the balance of convenience [Warner v Andrews [2011] NSWSC 956 (at [5] and [10])]. A determination that the caveat has or may have substance is a necessary but not sufficient condition for the caveat to be extended (s 74K), or for leave to be granted to lodge a fresh caveat (s 74O): the Court retains a discretion to order that the caveat not be extended, be withdrawn, or to refuse leave to lodge a fresh caveat if the balance of convenience favours such a course.

[6] In addition, on an application under s 74O, it will be relevant to understand the circumstances in which the earlier caveat lapsed, including whether permitting a new caveat to be lodged would cause detriment in those circumstances. This overlaps with the balance of convenience.

[46] The caveator thus bears the onus of demonstrating that there is a serious question to be tried in the sense that there is a probability, sufficient in the circumstances to justify leave, that it is presently entitled to the interest claimed in the caveat (see Summit Acceptance Pty Ltd v Wild at [17]; Warner v Andrews [2011] NSWSC 956 at [5], [10] per Brereton J; Beecham Group Laboratories Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622; [1968] HCA 1 per Kitto, Taylor, Menzies and Owen JJ).

[47] If the caveator can successfully demonstrate this, it must then show that the injury it would likely suffer, if leave to lodge the caveat were to be refused, outweighs the injury that the registered proprietor would suffer if leave were to be granted (De Meyrick v Dimitriou at [5]). The “convenience” of the registered proprietor in being able to deal with the land must be balanced, among other things, against the “inconvenience” of the caveator’s claim losing priority to any interest which might be created by the registered proprietor (Redman Construction Pty Ltd v Tarnap Pty Ltd [2005] NSWSC 1011 at [31]; 12 BPR 23,395 per Brereton J).

Overview of the relevant facts

The claims made in the proceedings

6. It is convenient to begin with an overview of the claims made in the proceedings as they provide the launching pad for Malass’ claim of a caveatable interest. The following summary is taken from the Amended Statement of Claim filed 20 November 2024 (ASC). Although a proposed Further Amended Statement of Claim was attached to submissions served by Malass shortly prior to the hearing, no application to amend was made prior to the hearing of the motion and it proceeded by reference to the allegations in the ASC.

7. Malass and Alam are childhood friends. The third defendant, Zeina Itaoui is Alam’s wife. A&I is owned by the third defendant.

8. At the heart of the proceedings are certain contracts entered into between Malass and Alam for the purchase of cryptocurrency tokens by Malass from Alam.

9. The first contract is referred to as the @Pay Agreements where it is relevantly alleged that:

(a) in the period 28 August 2021 to 10 November 2022, Malass entered into four agreements with Alam on behalf of himself or alternatively a partnership between he and his wife, for the purchase of @Pay Tokens for $1 million or alternatively for amounts specified by Alam; (b) the terms of the agreements included that Alam would sell to Malass, and Malass would buy from Alam, $1 million worth of @Pay Tokens; (c) Alam would repurchase from Malass any @Pay Tokens at any time on request by Malass; (d) during the period 28 August 2021 to 10 November 2022 Malass made payments to Alam totalling $4,125,000; (e) Malass received some, but not all of, the @Pay Tokens he was entitled to receive; and (f) from around February 2024, the @Pay Tokens received by Malass ceased to be supported by the @Pay company such that they are no longer of any value and no replacement tokens were provided by @Pay.

10. The next series of agreements were allegedly entered into in about October 2021 when Malass entered into five agreements with Alam, on behalf of himself or alternatively a partnership with his wife, for the purchase of LOV Tokens:

(a) the terms of the alleged agreements were similar to that in relation to the @Pay agreements; (b) between 23 October 2021 and 8 April 2022, Malass paid $585,000 to Alam; and (c) again, Malass received some but not all of the LOV Tokens he was entitled to receive.

11. The third set of agreements were entered into in about October 2021, when Malass entered into an agreement with Alam, again on behalf of himself or alternatively the partnership with his wife for the purchase of what were described as FIBSwap Tokens.

12. The terms of the FIBSwap agreement included:

(a) that Malass would pay AU$1.1 million to Alam in return for 55 million FIBSwap Tokens; (b) until the FIBSwap Tokens became available, Alam would provide Malass with @Pay Tokens approximately equivalent in value to AU$ 1.1 million; (c) if the FIBSwap project did not proceed, Alam would repay the sum of $1.1 million to Malass in exchange for the @Pay Tokens/FIBSwap Tokens provided by him and provide security by way of real property to Malass for the repayment obligation; (d) pursuant to the FIBSwap agreement, Malass paid $1,120,000 to Alam between January 2022 and April 2022; and (e) Malass did not receive any @Pay Tokens he was entitled to receive commensurate with the FIBSwap payments pursuant to the FIBSwap agreement or any FIBSwap Tokens.

13. There is no need to set out the defences to those allegations. The defendants do not dispute the existence of contracts to purchase tokens but the terms of those agreements are in dispute.

14. A variety of causes of action are alleged.

15. First, it is contended that by disposing of any or all of the tokens to Malass under the agreements set out above, Alam, either on his own behalf or on behalf of the partnership with his wife, provided a financial service to Malass within the meaning of s 766A(1)(b) and s 766C(1)(e) of the Corporations Act 2001 (Cth) (Corporations Act). Further, at the time of the entry of each or all of the agreements, Alam and/or each of Alam and his wife as partners in a partnership, carried on a financial services business within the meaning of s 911A of the Corporations Act, and neither of them held an Australian Financial Services Licence (AFSL) at the time, in contravention of s 911A of the Corporations Act.

16. For this contravention, Malass contends that he is entitled to rescind each of the agreements and has given notice that he wishes to rescind each of the agreements.

17. In addition to claiming damages or compensation, Malass contends that following rescission of the agreements, any payments received by Alam, the third defendant and/or any company controlled by them, as well as any property acquired using the proceeds of those payments, are held on resulting trust for Malass, or alternatively on a constructive trust (see [62] of the ASC). In support of this last allegation, particulars are provided in the following terms:

(i) By reason of the rescission of the Agreements, the purpose for which each of the Payments was made failed, and those payments or any property acquired with the proceeds of those payments is held on a resulting, or alternatively constructive trust, in accordance with the principles in Barclays Bank Limited v Quistclose Investments Limited [1970] AC 567 as explained in Salvo v New Tel Limited [2025] NSWCA 281 and other Australian authorities. (ii) The knowledge of Mr Alam and Ms Itaoui that neither of them had an AFSL, with the consequences the agreements were in breach of CA s 911A will be attributed to each of the defendants as a company of which either or both of them was a director.

18. Second, Malass contends that he entered into the various agreements and made payments as a result of various misleading and deceptive, or false or misleading representations made by Alam in contravention of the Australian Consumer Law (ACL), the Australian Securities and Investments Commissions Act 2001 (Cth) (ASIC Act) and/or the Corporations Act. By reason of the contraventions of that legislation, Malass claims orders under s 243 of the ACL, s 12GM of the ASIC Act and/or s 1325 of the Corporations Act, setting aside each of the agreements, orders for compensation and/or restitution of the loss suffered by Malass, and:

An order that each of the defendants transfer an interest in any property acquired by them with the proceeds of any payment made by Mr Malass under any of the @Pay agreements, LOV Agreement and FIBSwap Agreement, commensurate with the contribution made to the acquisition of each such property from those proceeds of payment made by Mr Malass.

(see [81(c)] of the ASC)

19. Next, Malass alleges an Overarching Agreement between himself and Alam (and/or the partnership between Alam and his wife) pursuant to which Alam, on his own behalf and on behalf of the partnership with his wife, acted as Malass’ fiduciary agent in respect of each payment until the apps associated with the relevant tokens became operative. The particulars contend that the agreement was, in substance, analogous to an escrow arrangement pending the respective apps becoming operative.

20. Further or alternatively, Malass alleges that, in circumstances where the tokens were not provided, Alam, his wife or their partnership held the payments as an agent for Malass for the sole purpose of acquiring tokens and otherwise on resulting trust.

21. Malass further claims that, to the extent any defendant holds property acquired using the proceeds of the payments impressed with a trust in his favour, he is entitled to trace those proceeds into that property, and to an equitable lien over it as security for repayment of the proceeds.

22. It is then contended that part or all of the payments under the respective agreements were applied by Alam to the purchase of three properties and a boat, including the Property. In relation to the Property, it is not in dispute that the second defendant purchased a one half share of the Property as a tenant in common for $1,500,000, of which $1 million was contributed by Malass. At the request of Alam, Malass paid $1 million into the trust account of a law firm, RM Legal Pty Ltd (RM Legal), which was then used as part of the purchase price for the Property. The Property was purchased for $3 million.

23. Malass seeks an order requiring each defendant to transfer to him an interest in any property acquired using the proceeds of payments made by Malass, and held on trust for him, proportionate to the contribution made from those proceeds to the acquisition of each property.

24. A further claim in fraud is alleged based on the representations. The same relief in relation to any property acquired by the defendants with the proceeds of any payment made by Malass is sought as in relation to the misleading and deceptive or false representations outlined above. Much of what is alleged by Malass in the amended statement of claim is disputed by the defendants.

25. In total, Malass contends he paid in the order of $5.83 million to Alam over a 15-month period. The claim for damages is now apparently $8.241 million.

Some of the evidence in the proceedings

26. Considerable evidence has already been served in the proceedings. Some was sought to be relied upon on the present application. The evidence included a small part of an affidavit that the plaintiff made 21 July 2024 in which Malass deposed:

I believe that irrespective of who I paid the money to, the payments were investments in the @Pay project or the LOV Chain project and would get me an interest in those projects or businesses in the form of tokens. I always understood that the moneys I was paying were either being used to effectively pay Radwan back for investments he had already made, for which I would be given the same number of tokens that he had been allocated for that investment by @Pay, or being used by Radwan to meet the expenses of the projects or to contribute to the capital of the businesses, but that it was helpful to Radwan, for whatever reason, that I pay it into the entities he directed. If the particular funds I was paying was to cover the costs of the businesses, I believe that Radwan would make sure that the same amount of money as I had invested was paid into the @Pay business or the LOV Chain business at or around the same time I paid them.

27. In circumstances where it is not in dispute that the money used to purchase the Property was sourced from money paid by Malass to a law firm (RM Legal) at the request of Alam, Malass deposed, relevantly:

Shortly after making the initial payments to the law firms, I recall the substance of the conversation with Radwan as follows:

Rabi: Why am I paying to trust account.

Radwan: What do you think @Pay is? It’s a proper legitimate business. I can’t do it all. It has lawyers and advisors.

History of the proceedings and earlier caveats

28. The proceedings have some relevant history.

29. They were originally commenced by Malass on 1 February 2024. The claim then vested in Sandy Spyrakis, who was appointed as trustee in bankruptcy for Malass on 26 April 2024. On 28 November 2025, however, Malass’ bankruptcy was annulled, entitling him to continue the proceedings in his own name.

30. In 2023 and early 2024, prior to the commencement of these proceedings, the former solicitors for Malass lodged caveats over a number of properties owned by the defendants, including the Property.

31. The original caveat lodged on the title to the Property claimed an interest “by way of mortgage” by virtue of a “loan agreement”. That caveat was withdrawn and another lodged on or about 3 April 2024. In this new caveat, Malass identified his alleged equitable interest in the Property as being an “Estate in Fee Simple” by virtue of a “Beneficial Interest in Trust” on the basis that the “caveator contributed monies to the purchase of the land by the registered proprietors”.

32. Lapsing notices were subsequently served in respect of those caveats.

33. On 23 July 2024, Mr Spyrakis elected to continue these proceedings and by notice of motion made an application to the Court (Parker J) seeking freezing orders and leave to lodge further caveats.

34. The orders made by Parker J on 23 July 2024, included a freezing order against the defendants prohibiting them from removing, disposing of or diminishing the value of their defendants’ assets in Australia up to the unencumbered value of $5,650,000, less any equity in three properties – at Parramatta Road, Auburn (Auburn Property), Fitzroy Street, Burwood (Burwood Property) and Trinity Park in Queensland (Trinity Park Property). The orders also permitted Malass to lodge further caveats in respect of the Auburn Property and the Burwood Property.

35. In the lead up to the orders made on 26 August 2024, the parties through their solicitors engaged in discussions to seek to resolve the matter. As a result of those discussions, Malass agreed to the removal of the current freezing orders, and the settlement of his motion, provided the defendants’ granted a caveat over a new property at Darkes Forest (Darkes Forest Property), coupled with an undertaking prohibiting any dealing with that property by the defendants in any manner that may diminish its value.

36. As a result, on the making of the orders on 26 August 2024, Malass had caveats over the Auburn Property, the Burwood Property and the Trinity Park Property, together with the new Darkes Forest property.

37. At the time of filing the motion on 23 July 2024, Malass’ solicitor deposed that she did not consider that Malass had sufficient evidence to assert a caveatable interest in the Property and accordingly the caveat over the Property was allowed to lapse.

38. After issuing a subpoena to RM Legal which received part of the payments, and reviewing the documents produced, Malass’ lawyers lodged a further caveat over the Property on 9 December 2024.

39. On 13 January 2026 a lapsing notice in relation to the caveat lodged in December 2024 was served. Whilst orders were made extending the operation of that caveat, it lapsed because the orders were not served on Land & Registry Services within time. A further caveat has since been placed on the title to the Property but it is accepted by Malass that this caveat must be removed and the appropriate procedural approach is for the present application under s 74O to be made: see, for example, The Croatian Club Limited v Westwood Capital Pty Limited [2024] NSWSC 895 at [65], [82] and [87].

40. The defendants did not dispute, for the purposes of the present application, that $1 million was paid by Malass or an entity or entities related to him into the trust account maintained by RM Legal and that on 17 December 2021, those moneys, together with other moneys in the RM Legal trust account were used to acquire the Property. The Property was purchased for $3 million and A&I has a one half interest as tenant in common.

Other Security

41. One of the key matters relied upon by the defendants is the security already held by Malass over properties associated with the defendants. The table set out below summarises the position.

Sale of A&I’s interest in the Property

42. A&I now wish to sell its 50% interest in the Property. The solicitor for the defendants deposed to the following matters in this regard:

37 I have been informed by Zeina ltaoui (who is the sole director and shareholder of the second defendant, which owns a half share of the Avondale Property), and believe to be true, that:

(a) in 2025, she and Bilal Moussa (the brother of the owner of the other half interest in the property) entered into an agreement pursuant to which the second is to sell its half share in the Avondale Property to him for $1,600,000, with settlement to occur in February 2026; and

(b) Bilal Moussa has told her that he will not settle the sale until the title is free of caveats.

38 I have also been informed by Ms ltaoui, and believe to be true, that the proceeds of the sale of the half share in the Avondale Property are intended to be used, in part, for the legal costs and expenses associated with these proceedings.

43. A recent valuation of the Property was also in evidence, valuing it at $3,950,000. In circumstances where Malass contends that $1 million of the $3 million purchase price for the Property came from his funds, he claims the value of his interest is approximately $1.3 million.

Competing short minutes

44. Each party put forward the orders which they contended I should make.

45. Malass submitted that I should make the following orders:

46. Upon the plaintiff giving the usual undertaking as to damages, order that the plaintiff have leave under s 74O of the Real Property Act 1900 to lodge a further caveat over the property at and known as X Avondale Road, Avondale, NSW, 2530 (Avondale Property) in the terms of caveat AVX (Caveat).

47. Note the undertaking of the plaintiff that it will remove the Caveat to permit the proposed sale by the second defendant of its interests in the Avondale Property to Bilal Moussa to $1.6 million payable in full to the second defendant on completion (Sale), on the condition that the second defendant undertakes to the Court and to the plaintiff to place $1.3 million of the sale proceeds into its solicitors’ trust account until the final determination of these proceedings.

48. The defendants essentially proffered alternate security should that be necessary.

49. The first alternate security offered, which was apparently only offered shortly prior to the hearing on 20 February 2026, was in the following terms:

The Court notes that [second defendant], as registered proprietor of the land at X Parramatta Road, Auburn, NSW (being Lot X in Deposited Plan X) (Auburn Property) agrees to charge the Auburn Property as security for the payment of any sum found by this Court in this proceeding as representing the interests of the plaintiff in X Avondale Road, Avondale, NSW by reason of matters pleaded in the plaintiff’s amended statement of claim (as amended from time to time) (Auburn Charge).

48. It was also proposed that Malass could lodge a caveat over the Auburn Property to secure the Auburn Charge. As set out above, Malass already has a caveat lodged over the Auburn Property. This was originally lodged when Malass asserted an interest in the Auburn Property. It was not in dispute, however, that this interest was no longer claimed such that Malass would no longer be able to maintain a caveat over the Auburn Property.

49. The defendants also put into evidence a valuation of the Auburn Property dated 5 February 2026 in the sum of $1.6 million, which remains unencumbered.

50. The second alternate security was a charge by a company known as Ecto Services Pty Ltd over a property at X-X Princes Highway, Heathcote (Heathcote Property). A land tax valuation for $1.31 million was in evidence. There is a mortgage on title in favour of the third defendant which would be removed if a charge in favour of Malass was put in place.

Determination

51. As set out above, there was no dispute as to the relevant principles.

52. The parties were at odds on both substantive issues:

(a) whether there is a serious question to be tried that Malass has the interest claimed in the Property; and (b) assuming that there is a serious question to be tried, whether the balance of convenience favours the making of the order.

Serious question to be tried

53. In relation to the first issue, it is important to remember, as Ward CJ in Eq said in Walker at [48]:

Although a caveator must do more than satisfy the Court that its claim is not frivolous, such a standard provides a “relatively low” threshold… and that test will generally be met unless there is no real or sensible prospect that the plaintiff is presently entitled to the interest it claims.

54. The defendants disputed that Malass had met this low threshold. It was contended that, notwithstanding the receipt and use of the $1 million in funds, there is no caveatable interest over the Property because A&I did not receive the money as security or on trust. The money was received in exchange for cryptocurrency tokens sold to Malass. The alleged agreements were said not to establish a fiduciary duty relationship or a trust over the proceeds of sale of the tokens received by Alam – the terms simply confer a right on Malass to sell the token back to Alam at the original purchase price.

55. I have set out above the various causes of action pleaded by Malass and the relief claimed in respect of those causes of action.

56. The present hearing, of course, is not the occasion to determine whether Malass will succeed on his claim. In particular, I am in no position to make any determination on whether the fiduciary duty alleged will be found to exist. The claim is presently pleaded. No attempt has been made to strike those allegations out or summarily dismiss any alleged fiduciary duty claim.

57. In circumstances where it is not disputed that $1 million of the Payments was used as part of the purchase price for A&I’s interest in the Property, the relief includes a claim that A&I’s share of the Property is held on resulting trust for Malass or alternatively, on a constructive trust for Malass. The principles in Barclays Bank Limited v Quistclose Investments Limited as explained in Salvo v New Tel Limited [2005] NSWCA 281 are cited in support of this contention.

58. The authorities were recently considered by Peden J in Li v Perpetual Holdings Pty Ltd [2025] NSWSC 175. At [44] her Honour extracted the following relevant principles from Gleeson J’s decision in Re BBY Ltd (in liq*) and BBY Holdings Pty Ltd (in* liq*)* [2022] NSWSC 29 at [43]-[62]:

[44] Without intending to depart from the authorities, it is useful to summarise Gleeson J’s statement of the relevant principles in Re BBY Ltd (in liq*) and BBY Holdings Pty Ltd (in* liq*)* [2022] NSWSC 29 (BBY) at [43]-[62] (citations omitted):

1. Quistclose trusts involve the situation where money is advanced from A to B, with the mutual intention that the funds should not become part of the assets of B, but should instead be used for an exclusive purpose. In these cases, there will be implied (absent evidence of a contrary intention) a stipulation that where the purpose fails, the money is to be repaid to A, and the arrangement will give rise to a trust.

2. Quistclose trusts are not a distinct species of trust and must satisfy the requirements for any private trust.

3. The question of whether a trust arises depends on the parties’ mutual intention, assessed objectively, by reference to the parties’ outward manifestations of their intentions.

4. Where the language of the parties is inexplicit, the Court may infer the relevant intention from the nature of the transaction and from the circumstances attending the relationship between the parties.

5. The parties’ mutual intention is central. The test is not merely whether the parties intended the money to be at the free disposal of the borrower. Equally, it is not sufficient to merely show that the parties intended that the funds were to be used only for a specified purpose communicated between the parties. Rather, there must be certainty of intention to create a trust in the nature of a Quistclose trust.

59. It is far from obvious, in my view, that Malass will be able to satisfy these requirements at a final hearing. Whether he can, however, is a factual question.

60. A more solid foundation for the tracing relief into the Property is, in my view, based on the claim for rescission of the various agreements. In Addenbrooke Pty Ltd v Duncan (No 2) (2017) 121 ACSR 406; [2017] FCAFC 76 at [538], Gilmour and White JJ stated:

Thirdly, the imposition of a constructive trust in the present circumstances would be inconsistent with principle. At common law and in equity a party who is induced by fraudulent misrepresentation to enter into a contract is permitted to rescind that contract: Alati v Kruger (1955) 94 CLR 216; [1955] ALR 1047. When such a rescission occurs, the transaction is treated as if it had never been effected, with the consequence that a misrepresentor is held to hold the property transferred pursuant to the contract on a constructive trust for the misrepresentee: Greater Pacific Investments Pty Ltd (in liq) v Australian National Industries Ltd (1996) 39 NSWLR 143 at 153. But rescission is necessary in order for a constructive trust to arise in these circumstances because the misrepresentee cannot leave the contract on foot and, at the same time, assert a beneficial interest in the property transferred pursuant to it: Daly at 389 (Brennan J).

(see also The Law of Tracing, Hafeez-Baig and English, Federation Press 2021 at [5.21]-[5.23] and the authorities there referred to)

61. The fact that an order for rescission may be necessary to establish the claimed interest is not a bar to a caveatable interest arising now: see Mijo Developments v Royal Agnes Waters [2007] NSWSC 199 at [35]-[49] (Mijo Developments).

62. In my view, Malass has met the relatively low threshold of establishing a serious question to be tried.

Balance of convenience

63. I turn now to consider the balance of convenience.

64. The competing positions are summarised above.

65. Malass proposes that the caveat be lodged but lifted to enable a sale of the Property on the undertaking of A&I to place $1.3 million of the proceeds into a solicitors’ trust account pending determination of these proceedings. The sum of $1.3 million has been chosen as representing what Malass contends is his entitlement given the current market value of the Property (circa $3.9 million) and that $1 million of Malass’ money was used to buy the Property in the first place for a price of $3 million.

66. The defendants propose alternate security in the form of a charge over the Auburn Property, supported by a caveat on title to the Auburn Property. In the alternative or in addition, a charge was offered over the Heathcote Property supported by a caveat.

67. Malass contended that unless his proposal was adopted his position would be prejudiced in that he will lose his right to trace into the Property or its proceeds if he is successful.

68. Malass proffers the usual undertaking as to damages in support of his proposal, although he accepts that he has only recently been discharged from his bankruptcy and is unable to point to any assets that he has. His senior counsel contended that having worked so hard to have his bankruptcy annulled, he would be unlikely to go back into bankruptcy. There was, however, no evidence to suggest that he is currently working.

69. The defendants contended, in substance, that Malass would not be prejudiced, if the caveat was not lodged on title to the Property given the alternate security offered over the Auburn Property and the existing security which Malass already has over property owned by the defendants. It was made clear that the intent of the alternate security offered by the defendants in respect of the Auburn Property was intended to mirror any interest which Malass would have in the Property if he succeeded in his tracing claim.

70. In this sense, it was not simply providing security but was intended to mirror Malass’ claimed proprietary interest in the Property.

71. Against this, if the proposal advanced by Malass was adopted, the defendants would be denied access to the net proceeds of sale of the Property which the defendants intend to use to pay for their legal fees in these proceedings. The amount proposed to be locked up pending these proceedings is substantial - $1.3 million.

72. Senior counsel for Malass, in seeking to downplay any suggestion of prejudice to the defendants in this regard, pointed to the fact that it had not been demonstrated that the defendants had no access to any other funds to pay their legal fees. This is in circumstances where it was not in dispute that the defendants owned a number of other properties which it was said could be used to raise funds to pay for legal fees.

73. Senior counsel for Malass also pointed out that the proposal of a charge over the Auburn Property was only raised shortly prior to the hearing and, as such, Malass had not had an appropriate opportunity to investigate the Auburn Property. It is possible, it was suggested, that third parties may have an unregistered interest in the Auburn Property which would rank ahead of the charge being offered by the defendants.

74. In my view, on the material before me, the balance of convenience favours the defendants.

75. In Marinkovic v Pat McGrath Engineering Pty Ltd (2004) 61 NSWLR 150; [2004] NSWSC 571, Campbell J stated at [56]:

This is an example of the way that the Court will not permit a caveat to be used as a device for exerting commercial pressure. In such a case the caveat is legitimately lodged in respect of a disputed claim, but forces the registered proprietor to pay out that claim even though it is disputed. The Court has consistently taken the attitude that where the caveat claims an interest in land as security for the payment of money, if the registered proprietor is prepared to put up an alternative security which is commercially adequate, then it will remove the caveat even though the caveat may be completely valid: Kingstone Constructions Pty Ltd v Crispel Pty Ltd (1991) 5 BPR 11,987 at 11,991; Gibson v Co-ordinated Building Services Pty Ltd (1989) 4 BPR 9630; Australian Property & Management Pty Ltd v Devefi Pty Ltd (1997) 7 BPR 15,255 at 15,257.

(see also Jaken Properties Australia Pty Ltd v Naaman (2024) NSWCA 265 at [72] endorsing the observations of Campbell J)

76. I accept that the principle stated by Campbell J is not directly applicable in the present case as Malass does not simply claim an interest in land as security for the payment of money, but rather an entitlement to directly trace into the Property or its proceeds if the interest of A&I is sold as is presently proposed. It is applicable in my view, however, where what has been offered by the defendants is functionally equivalent to the interest which Malass says he has in the Property.

77. I do not regard the fact that the defendants have not led any evidence of an inability to raise moneys elsewhere as significant, let alone determinative. The solicitor for the defendants gave unchallenged evidence that he was instructed that the proceeds of the sale of the half share of the Property are intended to be used, in part, for the legal costs and expenses associated with these proceedings. Absent any order allowing a new caveat to be lodged, the defendants would be at liberty to use the money as they wish, including to pay for legal costs in these proceedings. As set out above, the money that would be tied up is substantial - $1.3 million.

78. If Malass’ position can be protected by the offer of an alternate property in which to trace, the balance favours the defendants being permitted to have access to their moneys. That is the intent and effect of what is proposed by the defendants. The Auburn Property is unencumbered and valued at $1.6 million, more than the $1.3 million sought to be locked up on Malass’ proposal.

79. I do not regard Malass’ contention of potential unregistered interests in the Auburn Property as anything more than speculation.

80. I am also troubled by the fact that although an undertaking as to damages has been proffered, it is practically worthless given Malass’ financial position. This is relevant to the balance of convenience: Mijo Developments at [52].

81. In the circumstances, I am comfortably satisfied that the balance of convenience favours the Court accepting the defendants’ proposal.

Conclusion and Orders

82. For these reasons the orders sought in the motion should not be made, but rather orders made to give effect to the defendants’ proposal.

83. On costs, my initial view is that there should be no order as to costs of the application. Whilst no leave has been granted, this is because of an offer made very shortly prior to the hearing.

84. I will give the parties seven days to agree orders in accordance with these reasons, including as to costs.

85. If agreement cannot be reached, the parties are to provide to my Associate within seven days the orders for which each contends, supported by submissions of no more than five pages, whereupon I will determine the remaining issues on the papers.

86. The Court orders that:

87. The parties are to confer to seek to agree on orders in accordance with these reasons and provide any agreed orders to my Associate by no later than 12 March 2026; and

88. In the event that agreement cannot be reached, the parties are to each provide to my Associate, by no later than 12 March 2026, the orders for which they contend together with submissions in support of those orders of no more than five pages, upon which I will determine the remaining issues on the papers.

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Amendments

11 March 2026

Anonyomisation