Meshumar v Otmy

Amended statement of claim

1. By his amended statement of claim filed on 5 May 2015, Mr Meshumar relevantly seeks the following relief: 4. Declaration that: a. The plaintiff holds one third (1/3) equitable interest in the property located at and known as 11/104-106 Campbell Parade, Bondi Beach in the State of New South Wales, folio identifier 11/SP49165 (the Property). b. The first defendant is responsible for all loan and any other repayments or payments under the mortgage registered on the Property. 5. Appoint (sic) order pursuant to s 66G of the Conveyancing Act, 1919 (NSW) that Trustees for the sale of (sic) Property be appointed. 6. Order (sic) the taking of accounts between the plaintiff and the first defendant concerning all receipts and payments in relation to the Property. [Plus consequential relief]
2. The formulation of the declaration sought in par 4(a) of the prayers for relief does not make the basis of the one third equitable interest claimed by Mr Meshumar clear. However, in par 10 of the pleading Mr Meshumar alleged a number of statements made by Mr Sadra in September 2010, including at (c) that Mr Sadra would sell to Mr Meshumar a one third equitable interest in Unit 11 for $200,000 and at (d) that following the payment of the $200,000, Mr Meshumar would become an equitable owner of a one third interest in Unit 11 "which Mr Sadra would hold on trust for the plaintiff".
3. Mr Meshumar did not plead that he and Mr Sadra entered into any contract. Rather, he alleged that he paid the $200,000 to Mr Sadra on the basis of a number of "statements" made by Mr Sadra. Although some of the statements would have the effect that upon payment of the money Mr Sadra would immediately hold a one third interest in Unit 11 on trust for Mr Meshumar, other statements took the form of promises, by reason of the use of the word "would" in relation to some action of Mr Sadra in the future. Thus, Mr Sadra would be liable to pay the mortgage; Mr Sadra would indemnify Mr Meshumar if the mortgagee claimed against Mr Meshumar's one third interest; Mr Meshumar would only be liable for one third of the outgoings other than mortgage payments; Mr Meshumar would be entitled to one third of the rent after deduction of his share of outgoings; Mr Sadra would keep Unit 11 for at least three years; Unit 11 would then be sold; and Mr Meshumar would then receive one third of the sale proceeds after deducting only the sale and marketing costs.
4. In this way, Mr Meshumar pleaded a claim that once he paid the $200,000 to Mr Sadra, Mr Sadra would immediately hold one third of the title to Unit 11 on trust for Mr Meshumar, but the terms of the trust, including promises made by Mr Sadra, were as contained in the statements made by Mr Sadra.
5. One thing that is clear about Mr Meshumar's claim is that it is not pleaded as a contract claim, in the sense of the contract described by Tobias JA in Thompson v White [2006] NSWCA 350; (2006) 13 BPR 24,537 at [140]-[143]. There, his Honour found that the trial judge had found that there was a contract between the three parties under which a property would be acquired in the name of the appellant on the basis that a house would be constructed upon it which would then be sold and the profit divided between the three parties in equal shares. The agreement did not purport to create any immediate interest in the property in the two respondents, and it was not intended to vest any interest in them in the future. Consequently, the agreement was enforceable even though it was not evidenced in writing, and s 23C of the Conveyancing Act 1919 (NSW) did not have any application to the agreement. The agreement in that case was therefore enforceable notwithstanding that it was oral.
6. Although it may have been arguable that the facts as alleged by Mr Meshumar gave rise to an agreement of this sort, he clearly claimed a proprietary interest in Unit 11 on the basis that he was the beneficiary of a trust, and the case was conducted on that basis.
7. Although Mr Meshumar alleged that Mr Sadra stated that he "would sell to [Mr Meshumar] one third of the equitable interest in the property for $200,000", Mr Meshumar did not treat this statement in the balance of his amended statement of claim as giving rise to a promise to convey a one third interest in Unit 11 (as, for instance, by means of a transfer of the property into the names of the three men as tenants in common). The allegation that this statement was made appears to be treated as being a basis for the creation of the trust.
8. It seems to be clear from the way par 10 of the amended statement of claim has been drafted that Mr Meshumar alleges that Mr Sadra created an immediate express trust by means of the oral statements that he made, in conjunction with Mr Meshumar paying to Mr Sadra the $200,000. This conclusion is confirmed by Mr Meshumar's closing written submissions which make it clear that he claims that the trust was fully constituted upon Mr Meshumar's payment of the $200,000 to Mr Sadra (par 22).
9. In par 12(b) of his amended statement of claim Mr Meshumar pleaded "an express, implied, resulting and/or constructive trust was created". Given that Mr Meshumar had already pleaded that Mr Sadra said, albeit orally, that he would hold the property on trust as to one third for Mr Meshumar, it appears that in reality Mr Meshumar has only alleged that he became the beneficiary of an express trust. The basis upon which any trust was said to be implied has not been made clear. Mr Sadra was already the owner of Unit 11, and it does not appear how a resulting trust could have been created, as Mr Meshumar did not pay any money to the person who sold Unit 11 to Mr Sadra. The amended statement of claim did not make the nature or basis for the creation of a constructive trust clear.
10. Relevantly for present purposes, the amended statement of claim goes on to allege how title to Unit 11 was transferred by Mr Sadra to Mr Otmy, and how Mr Meshumar alleged his beneficial interest in the property continued in existence after the transfer and the registration of Mr Otmy as proprietor.
11. In essence, Mr Meshumar pleaded in par 16 that, before Mr Sadra transferred the title to Unit 11 to Mr Otmy, Mr Otmy assured Mr Meshumar that Mr Otmy would look after Mr Meshumar's share in Unit 11, that Mr Meshumar would continue to get one third of the rent less outgoings, and that even though Mr Otmy's name would be on the title to Unit 11, nothing would change with respect to Mr Meshumar's interest in that property. Mr Meshumar then pleaded in par 16A that in reliance on those statements he did not take certain steps that he could have taken to protect his position.
12. Mr Meshumar alleged the circumstances in which Mr Sadra transferred the legal title to Unit 11 to Mr Otmy in par 17. He alleged that upon the registration of the transfer on 27 February 2012 Mr Otmy became the holder of Mr Meshumar's one third equitable interest in Unit 11 on trust for Mr Meshumar. Significantly, he also alleged in par 17(d) that Mr Sadra retained an equitable interest in Unit 11 as to about one third. The effect of these allegations was to put a case that following the transfer each of the three men had a one third interest in Unit 11.
13. Consequently, Mr Meshumar alleged in par 18, that Mr Otmy became the legal owner of Unit 11 "on the basis that" he held a one third equitable interest in Unit 11 on trust for Mr Meshumar.
14. Mr Meshumar did not explicitly identify the nature of this trust in par 18 of the amended statement of claim, but in par 35 he alleged that the trust imposed on Mr Otmy was an express one. Then, in par 38 of the amended statement of claim Mr Meshumar alleged that Mr Otmy held one third of his beneficial interest in Unit 11 on a constructive trust for Mr Meshumar.
15. The manner in which Mr Meshumar pleaded the continuation of his one third beneficial interest in Unit 11 upon the transfer of the title to the property to Mr Otmy, together with the retention of a one third beneficial interest by Mr Sadra, implies that Mr Sadra transferred the property to Mr Otmy on terms that he would hold the beneficial interest in the property in those proportions. That suggests that the basis of the creation of the trust was the principle recognised by the Court of Appeal of England and Wales in Rochefoucauld v Boustead [1897] 1 Ch 196. Mr Meshumar relied upon that principle in his final submissions, as well as the principle upon which the High Court in Bahr v Nicolay (No 2) (1988) 164 CLR 604; [1988] HCA 16 found the existence of an equity that survived the registered proprietor's indefeasible title.
16. In par 17(e) of the amended statement of claim, Mr Meshumar pleaded that, when Mr Sadra transferred title to Unit 11 to Mr Otmy on 20 February 2012, Mr Otmy granted a first registered mortgage to Australia and New Zealand Banking Group Ltd to secure a debt of about $500,000. That borrowing was in large part applied to repay a mortgage that was registered against the title to Unit 11 to secure a loan to Mr Sadra.
17. One of the terms of the alleged express trust (pleaded in par 36(a) and (b) of the amended statement of claim) was that Mr Otmy and/or Mr Sadra would be liable to repay the mortgage and would indemnify Mr Meshumar in relation to the mortgage. In so far as Mr Otmy is concerned, this term appears to flow out of the alleged statements made by him that he would look after Mr Meshumar's share in Unit 11, and that nothing would change with respect to Mr Meshumar's interest in the property. There is no allegation that Mr Otmy said expressly that Mr Meshumar would be exonerated from any liability to repay any part of the new mortgage.
18. In his closing submissions, Mr Meshumar asked the Court to make the declaration sought in par 4(a) of his prayers for relief. No mention was made of the declaration sought in par 4(b) that Mr Otmy is responsible for all mortgage payments. If the Court did make the declaration in the terms of par 4(a) the declaration may arguably have the effect that Mr Otmy holds the title to Unit 11 on a bare trust for Mr Meshumar as to one third, although the better view is that the relief claimed would have the ambiguous result of not dealing with the consequences of the mortgage.
19. In Khoury v Khouri (2006) 66 NSWLR 241; [2006] NSWCA 184 (Khoury) Hodgson JA noted at [24], in respect of a claim that the appellant had agreed to create a trust over land in favour of the respondent, that the trial judge had simply made a declaration that the respondent was entitled to a beneficial interest in the property. His Honour observed that it would have been a better procedure for the trial judge to consider whether the respondent was entitled to specific performance, and in dealing with that remedy to determine how the existing mortgage over the property should have been dealt with. On this issue Bryson JA observed at [31] that the effect of the declaration may be to treat the appellant as bare trustee for the respondent, without dealing with the difficulties that the existing mortgage might create if the respondent called for a transfer of his interest in the property. These observations are material to the issue that I have raised above in so far as the amended statement of claim contains no indication of how Mr Meshumar says the Court should deal with the mortgage that Mr Otmy granted over Unit 11.
20. It will be necessary to consider the effect of this mortgage in relation to the relief that should be granted, if Mr Meshumar establishes his claim that Mr Otmy holds Unit 11 partly on trust for Mr Meshumar. Mr Meshumar has not made any submissions concerning how the Court should take into account the mortgage granted by Mr Otmy. Mr Meshumar has sought the taking of accounts. It would be necessary in addition for the Court to deal with the existence of the mortgage granted by Mr Otmy and any repayments that have been made in respect of it.
21. It should be recorded that in pars 5 to 7 of his amended statement of claim Mr Meshumar alleged that Mr Otmy owed him a fiduciary duty at all material times because he had consulted Mr Otmy, who was a psychologist, for assessment and treatment in relation to the attention deficit hyperactivity disorder (ADHD) from which Mr Meshumar suffered. Mr Meshumar did not seek to make any case out of this allegation at the hearing.

Amended defence

1. While Mr Otmy made a number of admissions concerning various uncontroversial allegations, he comprehensively denied the allegations that are the basis of Mr Meshumar's claim; in particular, the allegations in par 12 of the amended statement of claim concerning the creation of a trust agreed to by Mr Sadra in respect of a one third interest in Unit 11, and also the allegations in pars 16, 16A, 17 and 18 as to how Mr Otmy became subject to a trust in favour of Mr Meshumar.
2. In relation to the creation of both of the alleged trusts, Mr Otmy pleaded in pars 12 and 18 of the amended defence that, by reason of the absence of writing signed by Mr Sadra or by Mr Otmy, Mr Meshumar was prevented by ss 23C and 23D of the Conveyancing Act from having acquired any interest in Unit 11.
3. It is to be noted that Mr Otmy did not plead that because he was the registered proprietor of Unit 11 his title to the property was indefeasible under s 42 of the Real Property Act 1900 (NSW), and no reliance was placed upon that provision in his submissions. It is possible that this surprising course has resulted from the fact that Mr Meshumar in pars 29 and 30 of his amended statement of claim alleged affirmatively that Mr Otmy's title to Unit 11 was not indefeasible because his conduct amounted to fraud within the meaning of ss 42 and 43 of the Real Property Act 1900 (NSW). Mr Otmy denied these allegations in his defence. Mr Meshumar's final written submissions responded to an argument that Mr Otmy's title to Unit 11 was indefeasible by application of s 42 of the Real Property Act, even though that defence was not raised by Mr Otmy and the issue was not mentioned in his submissions. Mr Otmy clearly contested Mr Meshumar's claim that he had an interest in Unit 11 and that the circumstances gave rise to a personal equity against Mr Otmy that would penetrate the cloak of indefeasibility: see the discussion by Gleeson JA (with whom Meagher and Barrett JJA agreed) in Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462 at [224] to [229]; and the consideration of the circumstances in which a personal equity will defeat indefeasibility by Austin J in Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312; [2003] NSWSC 851 at [95] to [104]. In effect, Mr Otmy has elected to fight Mr Meshumar on the facts in respect of this issue.

Reply

1. Mr Meshumar filed a reply in which he pleaded in response to par 12 of the amended defence that, notwithstanding the absence of writing, he was entitled to enforce the trust agreed to by Mr Sadra by application of the doctrine of part performance; based upon his payment of the $200,000, the grant by Mr Sadra to him in August 2011 of a power of attorney in respect of Unit 11, and the payment to him between 22 March 2011 to 27 February 2015 of a share in the rent payments received from the letting of the property. Mr Meshumar did not claim that the express trust declared by Mr Sadra was manifested by some writing signed by Mr Sadra, so the effect of s 23C of the Conveyancing Act will be that the trust was not validly created, unless Mr Meshumar succeeds in establishing part performance.
2. Mr Meshumar also raised in his reply, in answer to pars 12 and 18 of the amended defence, a claim that by reason of Mr Otmy's knowledge of Mr Meshumar's one third equitable interest in Unit 11 by reason of the trust created by Mr Sadra, and the representations made by Mr Otmy before the transfer of the title to Unit 11 to him, and Mr Meshumar's reliance on those representations, Mr Otmy is estopped from denying Mr Meshumar's one third interest in Unit 11.

Preliminary observations

1. The heart of Mr Meshumar's case is his claim that Mr Otmy holds the title to Unit 11 as to one third on trust for Mr Meshumar.
2. He makes that claim on the basis that Mr Sadra made a declaration of trust in favour of Mr Meshumar that gave Mr Meshumar a one third beneficial interest in Unit 11, and that Mr Otmy became subject to an equivalent trust obligation in favour of Mr Meshumar.
3. Mr Meshumar must therefore prove that two transactions were entered into and were effective and that the terms of the trusts were as alleged by Mr Meshumar.
4. Mr Meshumar must overcome the problem that both transactions were entirely oral and that Mr Otmy relies upon s 23C of the Conveyancing Act in respect of both. Mr Meshumar's response is to rely upon the principle of part performance and the claim that the trust imposed upon Mr Otmy was a constructive one.
5. Mr Meshumar's task is burdened with the fact that he claims to have paid Mr Sadra $200,000 in cash, and there is no objective evidence of the existence of that cash or its payment or use, and there would be no evidence of it at all but for one concession made by Mr Sadra that was impliedly endorsed by Mr Otmy.
6. Moreover, the testimony of Mr Meshumar on the one hand and Mr Otmy and Mr Sadra on the other are starkly inconsistent. Possibly, what is most advantageous to Mr Meshumar's case is that Mr Otmy and Mr Sadra have so completely denied Mr Meshumar's evidence that they have failed to provide any explanation for aspects of his evidence that are supportive of his case.
7. As Mr Meshumar must prove that one oral express trust was effectively declared in his favour as a bridge to proving that Mr Otmy holds Unit 11 on trust for Mr Meshumar as a result of oral dealings, it is perhaps not too colourful a metaphor to bring to mind the conduct of Lord Nelson immortalised as 'Nelson's Patent Bridge for Boarding First Rates', whereby during the Battle of Cape St Vincent on 14 February 1797 Nelson as captain of the 74-gun HMS Captain achieved the surrender of the Spanish 120-gun San Joseph over the deck of the 80-gun San Nicolas, which he had led his men to board and caused to surrender.
8. It will be appropriate at the outset to refer to the principles that have been accepted by the Courts concerning the standard of proof that must be satisfied before a Court will accept that a plaintiff in Mr Meshumar's position has proved his case. As these principles are not controversial, and are well-established by many authorities, it will be convenient to set out the following observations by Sackar J in Campbell v Campbell [2015] NSWSC 784 at [73] to [79], with which I respectfully agree. Nothing is to be served by a trial judge in my position providing his own restatement of these principles. Given the ultimate importance in this case of findings involving the credit of the witnesses, it will be appropriate to set out an extract from his Honour's observations at some length: [73] In Watson v Foxman (1995) 49 NSWLR 315 and 319, McLelland CJ in Eq made the following remarks: … human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience. [74] I made the following observations in Craig v Silverbrook [2013] NSWSC 1687 at [140]-[142]: … 142 In the recent decision of McGraddie v McGraddie [2013] UKSC 58; [2013] 1 WLR 2477, the UK Supreme Court emphasised that, especially in cases where a trial judge is faced with a stark choice between irreconcilable accounts, the credibility of the parties' testimony, and the trial judge's assessment of the character of witnesses and the manner in which the witnesses give evidence, is of primary importance. Those observations are particularly relevant to the present case. Similar observations have been made in Australian authorities (Fox v Percy at [23]; Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 at [41] per McHugh J and see generally comments in Ritchie's Uniform Civil Procedure NSW at SCA s 75A.20). [75] In Camden v McKenzie [2008] 1 Qd R 39 at [34] Keane JA (as he then was) made the observation that "the rational resolution of an issue involving the credibility of witnesses will require reference to, and analysis of, any evidence independent of the parties which is apt to cast light on the probabilities of the situation." This remark was cited with approval by Leeming JA (with whom Barrett JA and Tobias AJA agreed) in New South Wales v Hunt (2014) 86 NSWLR 226 at [56]. [76] Hallen J recently set out the relevant principles in Evans and Braddock [2015] NSWSC 249 at [70]-[77]. After referring to Watson v Foxman, his Honour said: … 72 I also remember what was said by Emmett J (as his Honour then was) in Warner v Hung, in the matter of Bellpac Pty Ltd (rec's and mgrs aptd) (in liq) (No 2) [2011] FCA 1123 ; (2011) 297 ALR 56, at [48]: When proof of any fact is required, the Court must feel an actual persuasion of the occurrence or existence of that fact before it can be found. Mere mechanical comparison of probabilities, independent of any belief in reality, cannot justify the finding of a fact. Actual persuasion is achieved where the affirmative of an allegation is made out to the reasonable satisfaction of the Court. However, reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequences of the fact to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, and the gravity of the consequences flowing from a particular finding are considerations that must affect whether the fact has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony or indirect inferences (see Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-2). 73 The credibility of a witness and his, or her, veracity may also be tested by reference to the objective facts proved independently of the evidence given, in particular by reference to the documents in the case, by paying particular regard to his, or her, motives, and to the overall probabilities: Armagas Ltd v Mundogas S A (The "Ocean Frost") [1985] 1 Lloyd's Rep 1, per Robert Goff LJ, at 57. Also see, In the matter of Kit Digital Australia Pty Ltd (in liq) [2014] NSWSC 1547, per Black J, at [7]. 74 A Court, in cases involving events which occurred long before the litigation, usually prefers to rely upon contemporaneous, or near contemporaneous, documents, which will often provide valuable and, usually, more revealing, information than what may be flawed attempts at recollection of those facts by persons with an interest in the outcome of the litigation: Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200, per Jagot J, at [1247]. Greater weight is usually accorded to such documents, as often they provide a safer repository of reliable fact, particularly when it is clear that they have been prepared by a person with no reason to misstate those facts in the documents and where there is no suggestion that the documents are other than genuine: Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160, per Kenneth Martin J, at [157]. … 76 The circumstances of this case, make what was written by Tamberlin J in Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd (trading as Uncle Ben's of Australia) (Federal Court of Australia, Tamberlin J, 29 June 1995, unrep), at 122-123 (in a passage cited with approval by the High Court when it upheld his Honour's decision: Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd [1999] HCA 15 ; (1999) 161 ALR 599, at [15]) appropriate to remember: [Given the lapse of time] between the events and conversations raised in evidence and the hearing of the evidence before me, the only safe course is to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence. In circumstances where the events took place so long ago, it must be an exceptional witness whose undocumented testimony can be unreservedly relied on. The witnesses in this case unfortunately did not come within that exceptional class. The discussions referred to in evidence were capable of bearing quite opposed meanings depending on subtle differences of nuance and emphasis, and a proper appreciation of the significance of those matters must necessarily be considerably diminished over such a long period of time. … [79] In Neale v Bank of Western Australia [2014] NSWSC 315, Hammerschlag J at [198] made the following observations: 198 Where a party seeks to rely upon spoken words as a foundation for a cause of action the conversation must be proved to the reasonable satisfaction of the Court. This means that the Court must feel an actual persuasion of its occurrence or its existence. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy(1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319.
9. While it is necessary for the Court to feel an actual persuasion of the occurrence or existence of the facts before they can be found, the Court should be wary of abandoning the fact-finding task because of its difficulty. That task has been most difficult in this case. At the end of the day, the Court must analyse as carefully and rationally as it can all of the testimonial and objective evidence to make a judgment as to whether the evidence does justify the finding of particular facts on the balance of probabilities.
10. This exercise will require a detailed examination of the evidence which I will now undertake. It will be convenient to make many of the necessary comments on the evidence in context. When I have completed the task, I will give consideration to the primary findings that should be made. First, however, I will deal with the credit that should be accorded to the testimony of the witnesses who were called at the hearing.

Credibility of witnesses' evidence

1. The parties have made detailed submissions concerning the credibility of their own and the opponent's witnesses. It will assist in an understanding of the following consideration of the facts if I briefly state at the outset the conclusions that I have reached concerning the apparent credibility of each of the witnesses.

Mr Meshumar

1. From the way Mr Meshumar gave his evidence I would be inclined to believe him, at least to the extent of accepting that the evidence he gave reflected his genuine beliefs. I say inclined, because the substance of his version of relevant events, denied outright as it was by Mr Otmy and Mr Sadra, could not be accepted as sufficient to satisfy the test described by Hammerschlag J in Neale v Bank of Western Australia unless it was adequately corroborated by objective evidence. I formed the inclination to accept that Mr Meshumar was attempting to give truthful evidence on the basis of my perception of his demeanour in the witness box. That opinion must, however, accommodate the fact that many aspects of Mr Meshumar's evidence were unsatisfactory if considered objectively and clinically.
2. The thrust of Mr Otmy's case, and the evidence that he and Mr Sadra gave, is that the whole of the essential parts of Mr Meshumar's evidence was a concoction. I reject the suggestion that Mr Meshumar's case is a fantasy made up by him to enlist the Court as his agent in carrying out an outrageous fraud against Mr Otmy. I am satisfied that a substantial part of Mr Meshumar's evidence ought on balance to be accepted, but the grievous problem Mr Meshumar's evidence faces is the absence of crucial corroboration in many instances, the patchwork nature of much of the evidence, and the fact that some of the objective evidence does not sit consistently with Mr Meshumar's claims (a good example being the evidence of payments made to Mr Sadra, to which I will come below). The consequence is that confidence in the whole of Mr Meshumar's evidence is undermined by an inability of the Court to discern which of his evidence is reliable and which is not. The Court is driven to rely primarily on the objective evidence, and to use that evidence as the prism for deciding what parts of Mr Meshumar's evidence should be accepted.
3. The evidence is that Mr Meshumar suffers from ADHD, and this appears to have been reflected in the manner in which he gave some of his evidence. In his final written submissions, Mr Meshumar relied upon an extract from a letter dated 27 November 2007 written "To whom it may concern" by a representative of Disability Services at the University of Sydney, where Mr Meshumar was a student at the time. The letter included the statement: This letter is by way of introduction to let you know the extent of [Mr Meshumar's] disability. [Mr Meshumar's] disability may affect him in the following ways: Reduced ability to process written material Reduced capacity to write quickly Reduction in memory and ability to concentrate (Note that this letter was included in an exhibit to Mr Meshumar's affidavit of 5 May 2016. It appears that it was omitted from the Court book and was not formally tendered into evidence. In his submissions in reply, Mr Otmy did not object to the use of this material).
4. On 10 February 2013, Mr Otmy himself provided a report, as a consultant psychologist, to the presiding judge in a case in the District Court involving a traffic infringement by Mr Meshumar. The report included: This letter serves as testimony of Mr Meshumar's condition of ADHD resulting in his behavioural and social difficulties. … Mr Meshumar's difficulties as they are listed above are direct result of the ADHD Syndrome from which he suffers. Being hyper active and having short attention span, he is easily distracted, and is unable to maintain concentration for long periods of time. This affects his ability to manage his decision making process and maintaining his rationality in stressful social interactions. I found Mr Meshumar's difficulties to be severe. ADHD is also affecting his emotional conduct. Being of short temper and impulsive Mr Meshumar sometimes finds himself in "hot water" situation that could be easily avoided if he had better control of his verbal expressions. This is more likely to occur in situations that are emotionally loaded such as conflicts or confrontations. … In my opinion Mr Meshumar is a very intelligent person and is capable of the highest achievements.
5. It is not feasible to attempt to explain the position in detail, but I believe that Mr Meshumar's condition affected many aspects of his evidence, which was often disjointed and not strictly responsive, even though Mr Meshumar appeared to be attempting to respond properly to questions from the cross examiner.
6. Mr Meshumar has a quite competent command of English, but it is likely that some residual deficiencies in his capacity to understand and to express himself in English led to some of his responses having logical and syntactical shortcomings. While some of his responses in cross-examination were not entirely satisfactory, I formed the opinion on the whole that he attempted to give truthful evidence according to his memory. His memory was clearly deficient in a number of respects; for example, he could not remember when he paid the $200,000 to Mr Sadra when he gave instructions to his solicitor, and had to work the date out by reconstructing from the date that he was first paid what he claimed was a share of the rent from Unit 11, having regard to his case that Mr Sadra had agreed to pay a share of rent from 6 months after the date of his agreement with Mr Meshumar. As will be seen, Mr Meshumar also gave instructions to his solicitor as to the terms of his agreement with Mr Otmy and Mr Sadra that were inconsistent with the case that he ran at trial.
7. On matters that are controversial the Court would hesitate to act on Mr Meshumar's evidence in-so-far as it was based solely on his recollection, and was not corroborated by objective evidence. That is not so much because I consider Mr Meshumar to be an untruthful witness, but because his memory is insufficiently reliable. The Court must also allow for the self-interested nature of Mr Meshumar's evidence.

Mr Otmy

1. Mr Otmy gave his evidence in a focused and straightforward way that would ordinarily be considered to be credible. However, the critical parts of his evidence took the form of simple denials of assertions made by Mr Meshumar, and consequentially consisted of evidence that is relatively easy for a witness to give without the need for elaborate or consistent explanation. Significant parts of Mr Otmy's evidence cannot stand consistently with that given by Mr Meshumar. The resolution of the issue of whose case should be accepted will depend upon a careful analysis of all of the objective evidence, as that will be the only way to choose between them.
2. The credibility of a witness does not of course depend solely upon the witness' performance in the witness box. The appropriate finding on credibility of a witness who is also a party will often depend upon the entirety of the case put by the witness. As has happened in this case, and will be considered in context below, a number of significant parts of the objective evidence called for explanation by Mr Otmy, as that evidence tended to support the validity of Mr Meshumar's case, notwithstanding the obvious evidentiary deficiencies in that case. In various respects Mr Otmy dealt with the contrary evidence by making bald and unsubstantiated assertions that the evidence related to some other transaction to that to which it appeared to relate, or he made a blasé response without engaging with the significance of the evidence. On the whole, I am not satisfied that Mr Otmy responded fully and truthfully to the objective evidence, and I am no more inclined to act upon his uncorroborated oral evidence than I am to act upon the equivalent evidence given by Mr Meshumar.
3. The reality is that in this case the Court faces the task of having to resolve stark differences in the testimony of the two parties which in both cases is significantly unsatisfactory and unreliable although for different reasons.

Mr Sadra

1. I found Mr Sadra to be a muddled and unhelpful witness, who made a number of offhand and improbable responses to important questions that were put to him. It is clear that Mr Sadra was in Mr Otmy's camp. Yet Mr Otmy did not call Mr Sadra as a witness, and Mr Meshumar found it necessary for him to do so on subpoena. I do not consider Mr Sadra's evidence to be reliable. The basis of that finding will be apparent from the extracts from the examination and cross-examination of Mr Sadra that are set out below.
2. It is also material that Mr Otmy and Mr Sadra have had a continuing financial relationship since Mr Sadra transferred Unit 11 to Mr Otmy, including through the period of Mr Sadra's bankruptcy. The nature of that relationship was not a central issue and was not explored in detail, but it appears that Mr Otmy has trusted Mr Sadra to act as his agent, on an informal basis, to supervise the letting of Unit 11, the making of mortgage repayments, the payment of outgoings, and the payment of the balance of the rent to Mr Otmy.
3. That may be thought to be an unusual relationship, but this serves to focus on the fact that the whole of Mr Meshumar's case is based upon conduct that according to ordinary Australian norms is highly unusual. There are some factors at play in this matter, such as the relationship between Mr Otmy and Mr Sadra, which suggest that the financial and business practices of these three members of the Israeli expatriate community may not accord entirely with ordinary Australian norms. This can be no more than a supposition, and is not a basis for the Court to draw positive conclusions. It is more a justification for the Court to moderate a natural inclination to draw conclusions based upon departures from what might be considered to be normal Australian modes of behaviour. That makes it the more important for the Court to focus on what is established by the objective evidence.

Ms Berman

1. Ms Kris Anne Berman is a former girlfriend of Mr Meshumar. She freely conceded that she hoped he would win his case. She was also clearly in Mr Meshumar's camp as she sat with him through much of the proceedings. Ms Berman gave evidence of a number of conversations in which Mr Otmy made admissions that are damaging to his case. Ms Berman appeared to me to be a candid and credible witness, although it is necessary to remember that she gave evidence of the terms of brief conversations that occurred some time ago, and the evidence of even candid witnesses can be fallible in such circumstances.
2. I do not accept Mr Otmy's submission that, as Ms Berman was not a witness to any of the conversations giving rise to the alleged transactions, her account of them was a 'Chinese whispers' version, coloured by the fact that she had been in a relationship with Mr Meshumar. Nor do I accept Mr Otmy's submission that Ms Berman was an unreliable witness who was trying to tailor her evidence, even if only unconsciously. It is true that Ms Berman was only present when a small number of conversations took place between Mr Meshumar and Mr Otmy that are relevant to the present dispute. As will be seen, Ms Berman gave evidence of conversations that she overheard which are objectively consistent with Mr Otmy acknowledging that Mr Meshumar had a proprietary interest in Unit 11.

Ms Stack

1. Ms Tatiana Stack was the solicitor for Mr Meshumar for a considerable period. She gave evidence of a number of conversations with both Mr Otmy and Mr Sadra in relation to documents that she had been instructed by Mr Meshumar to draft and have executed. Ms Stack was an impressive witness, who was candid and careful in the evidence that she gave. Ms Stack appeared to me to be speaking from a genuine recollection of relevant events, although her memory may be no less fallible than the memory of most witnesses. However, Ms Stack prepared contemporaneous file notes of the conversations that she had, and I accept that the file notes were prepared conscientiously, and although they are brief, they provide the most reliable objective evidence of the relevant events. (Mr Otmy submitted in his final written submissions that Ms Stack's file notes were not contemporaneous with the events giving rise to the alleged transactions but were made years after them. No reference to the evidence was given for this submission and I do not accept it).

Background

1. I propose to start with a chronological examination of the evidence and a preliminary analysis in context of the significance of important aspects of the evidence.
2. I interpose that I have attempted to set out extracts from the transcript and the terms of all communications, in particular emails and texts exactly, without drowning the extracts in the expression "sic".
3. Both Mr Meshumar and Mr Otmy agreed that they met when Mr Meshumar travelled to Australia in 2003. Mr Meshumar claimed that they developed a close personal friendship but according to Mr Otmy they were 'only friends'. They also each agreed that Mr Otmy, in his capacity as a psychologist, treated Mr Meshumar between 2007 and 2009 for ADHD.
4. A conversation that Mr Meshumar recounted in his principal affidavit that he had with Mr Otmy in about 2009 may be of some relevance to the subsequent course of events. Mr Meshumar observed to Mr Otmy that many people seemed to be making serious money from property, and that he wanted to buy something too. Mr Otmy replied that Mr Meshumar would have to wait until he became a permanent resident because under Australian law "you cannot buy property unless you are permanent resident or a citizen". Mr Otmy did not respond in his evidence to this conversation. The parties did not explore the correctness of this advice given by Mr Otmy. The advice that Mr Meshumar claimed he was given by Mr Otmy may not be strictly true, as if Mr Meshumar was a temporary resident he could buy an established dwelling if he used it as his residence in Australia and got approval from the Foreign Investment Review Board. It is not necessary to delve into the authority for that proposition, as Mr Otmy's advice may be taken to be substantially true in relation to the acquisition by a temporary resident, such as Mr Meshumar, of a proprietary interest in an established dwelling, which Unit 11 was, for the commercial purpose of renting it. The belief that Mr Meshumar and Mr Otmy shared, that Mr Meshumar was not entitled to acquire any ownership rights in respect of an established dwelling, may explain certain unusual features of the transactions that occurred later.

August 2010 - Mr Meshumar loans $20,000 to Mr Sadra

1. Mr Meshumar said that Mr Otmy introduced him to Mr Sadra in May 2010. He said that Mr Otmy proposed that he loan Mr Sadra $20,000 and set up a meeting at a café in Bondi to discuss the possibility. Mr Otmy confirmed Mr Meshumar's account of events in this respect. He said in his principal affidavit that he himself was not in a position to lend $20,000 to Mr Sadra at that time, and further said that he had never lent any money to Mr Sadra. As will be seen, Mr Otmy's claim that he had never lent any money to Mr Sadra is inconsistent with a claim subsequently made by Mr Otmy that he advanced $310,000 to Mr Sadra. This inconsistency substantially diminishes the credibility of Mr Otmy's evidence. Mr Otmy sought to explain his mistake by reference to the exigencies of his need to confirm the contents of his draft affidavit electronically when he was in Israel. The problem with this response is the magnitude and obviousness of the error. The alleged error is significant because if Mr Otmy in fact paid the relevant amount to Mr Sadra in return for an interest in Unit 11, which is Mr Meshumar's case, then it would be the principal affidavit that was true rather than Mr Otmy's subsequent correction.
2. Each of Mr Meshumar, Mr Otmy and Mr Sadra gave evidence that they met at the café in Bondi and discussed the possibility of Mr Meshumar lending $20,000 to Mr Sadra.
3. Mr Meshumar said that he met with Mr Otmy a few days after the meeting at the café to further discuss the possibility of loaning money to Mr Sadra. He said that he told Mr Otmy that he was worried about losing the money but that Mr Otmy assured him that Mr Sadra would repay him. Mr Meshumar also said that Mr Otmy brought up the possibility of him buying an interest in one of Mr Sadra's properties at this meeting. According to Mr Meshumar, Mr Otmy said that Mr Sadra was thinking of selling shares in one of the units in the Campbell Parade building, and told him that loaning him the $20,000 could be a good way to get a foot in the door.
4. Mr Otmy agreed that he met with Mr Meshumar and discussed the possibility of his loaning $20,000 to Mr Sadra, but denied that they discussed his purchasing property in the Campbell Parade building. He said they only discussed the possibility that making the loan could lead to further business opportunities, and said that he may only have been 'vaguely aware' that Mr Sadra even owned some of the residential apartments in the Campbell Parade building at the time.
5. Mr Meshumar said that he agreed to lend the money to Mr Sadra in late August 2010. He said that he put together a loan agreement from various precedents that he found online and that Mr Sadra signed the agreement with Mr Otmy present as a witness on 1 September 2010. Mr Otmy confirmed that he witnessed the execution of the loan agreement.
6. It is of some significance that Mr Meshumar appreciated the wisdom of having the $20,000 loan recorded in a loan agreement, and that he was able to prepare an adequate document by resorting to online precedents. Mr Meshumar's case is that he subsequently paid $200,000 in cash to Mr Sadra for a one third interest in Unit 11, without insisting that the transaction be evidenced in writing before he made the payment. As will be seen, Mr Meshumar gave evidence that after he had made the payment he made repeated requests that Mr Sadra confirm the transaction in writing, but that evidence does not provide a satisfactory explanation as to why Mr Meshumar did not require a written agreement before he made the payment.
7. Mr Meshumar said that he paid Mr Sadra the $20,000 in the form of two cheques on 2 September 2010. Mr Sadra confirmed this claim. He also confirmed that their agreement was that the loan would be repaid over one year at 10% interest by way of weekly instalments of $423.08.
8. The evidence, in the form of Mr Meshumar's National Australia Bank statements, shows that 52 payments of $423.08 were made into Mr Meshumar's account, over the period between 9 September 2010 and 5 September 2011.

September 2010 - Mr Meshumar claims to have paid $200,000 to Mr Sadra

1. Mr Meshumar said that a week after paying Mr Sadra the $20,000, he met with Mr Otmy and discussed again the prospect of purchasing an interest in a unit in the Campbell Parade building. Mr Meshumar said that Mr Otmy told him that Mr Sadra wanted to sell part of Unit 11 and that they should go in one third each. According to Mr Meshumar, Mr Otmy said that the property was worth $600,000.
2. At this time Mr Meshumar was not an Australian permanent resident. He said that he raised the issue with Mr Otmy as to how he could buy an interest in Unit 11 without being a permanent resident, and Mr Otmy responded: "We will pay Meir and it will stay in his name. This will save us a lot of money, there are major costs when you sell a property". Mr Meshumar questioned whether Mr Sadra could be trusted "with that much money". He said that Mr Otmy again vouched for Mr Sadra, saying: "Meir won't double cross me. We go way back. There is nothing to worry about".
3. Mr Otmy denied that this conversation occurred. He reiterated that he did not know that Mr Sadra owned residential properties in the Campbell Parade building and said that, following the meeting where Mr Meshumar and Mr Sadra signed the loan agreement, Mr Meshumar and Mr Sadra formed an independent business relationship that he was not involved in.
4. Mr Otmy did not provide any objective evidence of any independent business relationship between Mr Meshumar and Mr Sadra. Mr Otmy's assertion concerning the existence of the relationship provided him with a cloak to assert his ignorance of the significance of communications between Mr Meshumar and Mr Sadra, in which the evidence shows Mr Otmy was engaged, and in which he claimed to be a mere go-between. The Court is entitled to be suspicious of Mr Otmy's claims that he was unaware of the content or significance of communications that he passed between the other two men.
5. Mr Meshumar described a series of meetings and discussions that led to him and Mr Otmy purchasing interests in Unit 11. The first occurred in September 2010 at the Sababa café in Bondi. Mr Meshumar described meeting Mr Otmy at the café and Mr Sadra being seated at another table. He said that, when Mr Sadra stood up to speak with them, they had a conversation in the following terms. As the effect, if any, of the conversation may be sensitive to the precise words that were used, I will set out the material part of the conversation given by Mr Meshumar in his principal affidavit: I said: Hi Meir. Are you looking to sell your unit? Meir said: Yes. I said: What's going on? How much do you want for it? Meir said: I am going through a hard time at the moment and I need to sort out some problems. I think a fair price for Campbell Parade is $600,000. I don't want to sell the whole property though. I want to keep one third and sell the remaining two thirds to you and Avshalom for $200,000 each. That way we will each own one third of the property. What do you both think? I said: I'm in. Otmy said: it's a deal.
6. Mr Meshumar said they shook hands before Mr Sadra returned to his own table and he and Mr Otmy left.
7. This conversation, as recounted by Mr Meshumar, is objectively consistent with the parties agreeing that Mr Sadra would immediately sell a one third interest in Unit 11 to each of Mr Meshumar and Mr Otmy and retain a one third interest himself. There was no discussion about the parties formally documenting or recording the transaction. Mr Meshumar's version of the conversation does not assert that Mr Sadra used the word "trust" or any other expression consistent with the formation of an intention to create an express trust. That is not surprising given that the three parties were expatriate Israelis. As will be seen, Mr Meshumar gave evidence that at this time he was not even familiar with the concept of a "deed". It thus appears that the formulation of the pleading in par 10(d) of the amended statement of claim that Mr Sadra stated, in substance, to Mr Meshumar that he would hold the one third interest "on trust" for Mr Meshumar was a lawyer's gloss on the evidence.
8. In the middle of September, Mr Meshumar moved to Vaucluse. He said that Mr Otmy visited him and they discussed how the mortgage liability and income from Unit 11 should be split. He said that they each resolved to speak to Mr Sadra.
9. Mr Meshumar said that he visited Mr Sadra at his shop in Bondi a few days later. He said that Mr Sadra agreed to pay him one third of the income from the property but asked to delay starting to make payments for six months. He also said that Mr Sadra assured him that he would not be in any way liable under the mortgage.
10. In late September, Mr Meshumar said that he met with Mr Otmy, again at his home in Vaucluse. He said that he told Mr Otmy that he wanted to be bought out of Unit 11 in three years, at which time he would be a permanent resident and be able to buy his own property. He said that he proposed that Mr Otmy and Mr Sadra agree to buy him out in three years or take the property to auction, and that Mr Otmy agreed to speak to Mr Sadra about it.
11. Mr Meshumar said that he spoke to Mr Sadra later in September to confirm that Mr Otmy had discussed the three-year buy out with him. He said that Mr Sadra confirmed that they would buy him out or auction the property in three years, but warned him that he would have to pay one third of the sales and marketing costs.
12. Mr Meshumar said that he agreed to the terms with Mr Sadra such that, by the end of September, the deal was finalised. He said that he met with Mr Sadra and offered to provide him with a bank cheque for $200,000. However, according to Mr Meshumar, he also had a lot of cash at the time, and Mr Sadra asked to be paid in cash.
13. As a result, Mr Meshumar said, Mr Sadra came to his home in Vaucluse to pick up the money, which he said he had prepared in $5,000 bundles. He said that Mr Sadra began counting the money but stopped without finishing because he was running late for an appointment. He said they shook hands and that Mr Sadra congratulated him on becoming a one third owner of the property.
14. Although, as I have observed above, the initial conversation between Mr Meshumar and Mr Sadra was expressed simply in terms of an immediate partial transfer of the ownership of Unit 11 to Mr Meshumar and Mr Otmy, the better view of the whole of the evidence concerning the communications between the parties up to the time when Mr Meshumar said that he paid his $200,000 in cash to Mr Sadra is that, on Mr Meshumar's version of events, the parties entered into an agreement that provided in part for a partial transfer of ownership, but also dealt with how the rent from the property would be shared, and when the property would be sold and the proceeds of sale shared (or alternatively when Mr Meshumar would be bought out by Mr Otmy and Mr Sadra). According to Mr Meshumar's version, it was also a term of the agreement that Mr Sadra alone would be responsible for repaying the existing mortgage over Unit 11.
15. In accordance with leave granted by the Court, in his oral evidence in chief Mr Meshumar said that he had asked for a document that confirmed the interest he had in Unit 11 on many occasions after he paid the $200,000. He had a conversation to this effect at least five times with Mr Sadra from September 2010 up to the time in 2012 when Mr Sadra transferred the property to Mr Otmy. On each occasion Mr Sadra responded in words to the effect: "Sure thing, don't worry. Your third is secure, you shouldn't be worried at all, I'll make sure it will happen". Mr Meshumar said that he also asked Mr Otmy on numerous occasions to get Mr Sadra to provide a written agreement to him, and said "later on, I found it's called a deed".
16. In cross-examination, Mr Meshumar attempted on a number of occasions to explain why he did not insist upon the transaction being documented by referring to his status as only a temporary resident in Australia who was not entitled to own pre-existing residential property. He said that he was told that he could not own property and "We'll keep it in a secret". He claimed that he was told that the transaction had to be in secret and "Yes, we'll keep it in hush-hush". Mr Meshumar said that statements to this effect were made to him by Mr Otmy on a number of occasions.
17. Mr Otmy and Mr Sadra denied that any of these events occurred.
18. In his affidavit, Mr Otmy said repeatedly that he never discussed jointly investing in Unit 11 with Mr Meshumar, and during cross-examination he steadfastly denied any such suggestion.
19. Mr Otmy denied that he was aware that Mr Sadra wanted to sell part of Unit 11 in September 2010. He denied that he told Mr Meshumar about the possibility of purchasing an interest. He denied that they met and agreed to become one third owners. He denied that Mr Meshumar told him that he had paid Mr Sadra in cash. He denied that he was aware of the terms of the agreement between Mr Meshumar and Mr Sadra.
20. Mr Sadra did admit to having discussions with Mr Meshumar concerning the sale of Unit 11, but said that they had discussions about everything. He said they discussed business deals, purchasing businesses and purchasing shops, and that the purchase of Unit 11 was part of these broader discussions. When asked when the discussions began, Mr Sadra said: "Well, maybe around the early, you know, [20]11 or something like that, or around that time when he ask me to provide him with something".
21. Mr Sadra's evidence of these discussions and their consequences was not clear. He appeared to concede that he and Mr Meshumar agreed that Mr Meshumar would purchase an interest in Unit 11. However, he said that Mr Meshumar "wanted some documents" and went on to say that "he always ask for documents, every time we did something he wanted some documents, he loved documents".
22. The cross-examination of Mr Sadra on this subject was as follows (which incidentally tends to show that while Mr Sadra could communicate in English, his English syntax was not at all clear): Q. Can you recall what was said during the meeting with Mr Meshumar? A. We were just, as I said, discussing business deals, you know, and I was open minded to do all different stuff, and as I said, we're talking about business, purchasing business, shops, you know, setting up, and the unit was part, I mean, if you're interested. Q. All right. A. He said he was interested. Q. He said he was interested in purchasing A. But the same as he was interested in, you know, the other stuff that I was showing him. Q. All right. Is that as far as the discussion went? A. No, I took him very seriously and, you know, just in order to, you know, to feel that he is not alone, like I'm giving him something bad. So he suggest to put Avshalom as options. But we've never been short in the option. Q. All right. When you say he was interested in purchasing unit 11, was it all of unit 11 or just a part of unit 11? A. As I said, you know, we were talking about, you always pull me out of there. I'm trying to explain to you what's, you know - I was the chemistry, you know, that we had. So, and you're separating the entities. So if we're talking about the unit, I told him if he wants to buy the unit, it's possible and then he was interested. But in order to secure himself, he wasn't really sure, you know, he wasn't trusting me maybe. So there are some times you put somebody else in the carriage in order to feel comfortable. Q. All right, and what did you say A. And in order to do it he said so I would do it and I said, "Okay, I'll bring you something that you'll feel, you will see," and that's how I ended up bringing this arrangement agreement. In order to move forward, within interesting buying, he always ask for documents, every time we did something he wanted some documents, he loved documents. Q. All right. So once you had those discussions with Mr Meshumar, did you then go and see Mr Klimt to have the document drawn up? A. When we discuss everything I've been told by Mr Klimt on the phone, you know, at the time he's like at apartment, I met him, I'm not really sure of the time. But I need something to show if an arrangement like that can be. Then I gave him some points, you know. Q. So you spoke with Mr Meshumar - correct me if I'm wrong here - but you spoke to Mr Meshumar first about selling him the property. A. Yes. Q. Then you spoke to Mr Klimt, and you told him what the proposed arrangement was, and thirdly, then he provided you with the draft deed. A. I spoke to Ofir, I saw what he's comfortable with, then I spoke to Peter Klimt and told him a rough idea what's - you know, I need something to show. Don't worry about my details and we go from there. Q. And the fact that there's the $310,000 referred to in that deed matches the amount that Mr Otmy had transferred to you. That's just a coincidence? A. Maybe, I'm not really sure. Q. Okay. But you accept you provided instructions to Mr Klimt and as a result of that he provided you that draft deed? A. He just did something then I think.
23. Mr Sadra said that he arranged for a draft deed to be drawn up by his solicitor, Peter Klimt. I will return to this draft deed shortly.
24. Counsel for Mr Meshumar asked Mr Sadra whether or not Mr Meshumar gave him any money beyond the $20,000 loan discussed earlier. Mr Sadra denied receiving money for any other purpose.
25. Counsel for Mr Meshumar then made an application under s 38 of the Evidence Act 1995 (NSW) for leave to cross examine Mr Sadra. I granted the application.
26. Counsel for Mr Meshumar pressed Mr Sadra about his meeting with Mr Otmy and Mr Meshumar in September 2010. Mr Sadra agreed that they met at Sababa Café in Bondi. Counsel for Mr Meshumar put it to Mr Sadra that he had told Mr Meshumar that he wanted to sell two-thirds in Unit 11 to him and Mr Otmy for $200,000 each. Mr Sadra denied this. He also denied having discussions at his shop in Bondi with Mr Meshumar about the rent and mortgage liabilities, and went on to deny all of the evidence given by Mr Meshumar in relation to his paying $200,000 in cash for a one-third interest in Unit 11.
27. In summary, Mr Meshumar claims to have paid $200,000 in cash for a one third interest in Unit 11 and both Mr Otmy and Mr Sadra deny that he did so.
28. In relation to the $200,000 in cash, there is no direct evidence that it ever existed. Mr Meshumar affirmed his primary affidavit in the proceedings on 5 May 2016. In this affidavit he did not provide any details of where he obtained the $200,000. It was not until the day before the hearing (14 May 2017) that he affirmed a further affidavit in which he explained where he got the money.
29. In this further affidavit, Mr Meshumar said that, between February 2005 and March 2010, his mother regularly transferred him two instalments of about $450 each week from Israel via Western Union. He said that over that period he accumulated approximately $235,000 and said that he kept the money, when he lived at Bondi, under the carpet, and when he lived at Bellevue Hill, in his closet under a lot of clothes.
30. Despite claiming to have received the money via Western Union, Mr Meshumar did not provide any evidence from Western Union in support of his claim. He explained in his further affidavit that he had contacted Western Union and that Western Union had told him that it could not track accounts for transactions over five years old.
31. Despite claiming to have received the money from his mother, Mr Meshumar did not obtain from her an affidavit confirming that she had transferred the money to him in the way that he claimed. He said in his affidavit that she had transferred him the money in two instalments each week because she did not like carrying large amounts of cash. During cross examination, Mr Meshumar gave various reasons as to why she sent him money: because she wanted to set him up in Australia; because he needed to show security of support to study at an Australian university; and because his mother received a pension in Israel that was contingent upon her not having a large amount of money in her bank account.

October to February 2011 - The draft deed and the contract for sale

1. Mr Meshumar said that in late 2010 he had a conversation with Mr Otmy about rumours involving Mr Sadra. He said that he had heard rumours that Mr Sadra owed a lot of money and was in a very bad way financially. He said that he told Mr Otmy that he needed written confirmation of his one third ownership of Unit 11, and that Mr Otmy said that he would speak to Mr Sadra about it.
2. The events between October 2010 and February 2011 are complicated when documents provided under subpoena by Mr Adam Stack and Mr Peter Klimt, at that time of Adam Stack & Co and Klimt & Associates respectively, are taken into consideration.
3. On 8 December 2010, Adam Stack & Co sent a fax to Klimt & Associates that was in the following form: Date: 8 December 2010 Pages: 1 (including this page) To: Klimt & Associates … Re: Otmy purchase from Sadra Property: 11/102 Campbell Parade, Bondi Beach … We refer to the above matter and confirm that we act for Avshalom Sher Otmy. We are instructed to ask for the following amendments to the Contract: 1. The Purchaser's name and our details be inserted on the front page of the Contract; 2. Completion date be changed to 31 January 2011, with a view to an earlier settlement if possible; 3. In clause 11 '10%' be changed to '8%'; 4. In clause 19, after (b) the words 'This clause is to apply Mutatis Mutandis for the benefit of the Purchaser' be inserted; 5. An updated title search for the property be provided. We await your reply. …
4. A file note by Mr Stack dated 22 December 2010 stated the following: Meeting with [Mr Otmy] Paid $20,000 & released to [Mr Sadra] Ppty as investment Settlement date OK He has $ No bank required all funds in his a/c ready to go. .. Deposit NB: Already paid & released but says held by lawyer …
5. On 6 January 2011, Adam Stack & Co sent a letter to Mr Otmy that was in the following form: 6 January 2011 … Re: Your purchase from Sadra Property: 11/102 Campbell Parade, Bondi Beach We are pleased to confirm that contracts were exchanged on 23 December 2010. The deposit will be held by the Vendor's solicitor in their trust account in accordance with the contract. The contract is now binding upon both you and the Vendor, and settlement is to take place within six (6) weeks from that date of exchange, that is, by 31 January 2011. New South Wales Government stamp duty of $14.410.00 will be payable on the contract and the contract and transfer will need to be stamped by 23 March 2011 to avoid any interest. We note that you have satisfied yourself prior to exchange of contracts that the improvements on the Property are structurally sound and free from pests and borers. Subject to your instructions, we have ordered the following statutory searches on the Property: - … We will also be seeking replies to requisitions on the title of the Property from the Vendor's solicitors on matters we consider relevant to the transaction. We will also be preparing and forwarding to the Vendor's solicitors the executed Transfer in anticipation of settlement after stamp duty has been paid. … On the day of the settlement we will arrange for a person to attend the settlement on your behalf, to pay the settlement monies as directed by the Vendor and receive the necessary documents to enable the Property to be transferred into your name. You will not be required to attend settlement yourself. We will keep you advised of developments and will let you know when a settlement time can be arranged.
6. On 25 January 2011, Adam Stack & Co sent a fax to Klimt & Associates that was in the following form: Date: 25 January 2011 Pages: 4 (including this page) To: Klimt & Associates … Re: Otmy purchase from Sadra Property: 11/102 Campbell Parade, Bondi Beach We refer to the above matter and confirm settlement is scheduled to take place on 31 January 2011. Please find attached the following: 1. Draft settlement figures for your client's approval; 2. Section 306 Certificate; and 3. Section 66 Certificate. Please advise cheque details.
7. On 25 January 2011, Mr Klimt sent an email to Mr Sadra that stated the following: Dear Meir, Further to my telephone conversation with you this morning I note that although under the contract settlement is to take place on 31st January both you and the purchaser are still dealing with financial matters with the result that you have told me that you do not believe either party can settle on the date set by the contract. I understand this has been discussed with the purchaser. For your information and on the basis of the advice given to me by the discharging lender for a settlement to take place on or shortly before 4th February 2011 I estimate the applicable figures would be as follows: To monies payable to discharge the mortgage including all interest and fees on the basis that there have been no payments made by you since 23rd December 2010 viz $424,753.42 Approximate amount payable by the purchaser as the balance of purchase money and adjustments as specified in the attached draft settlement sheet (figures on which will vary slightly) $397.100.94 Approximate balance required to discharge mortgage $ 27,652.48 Please let me know when you are in a position to finalise at which stage I will obtain up to date final figures and arrange with you to sign the appropriate transfer documents.
8. Also in evidence was a contract for sale in respect of Unit 11 for an amount of $420,000. This contract was dated 23 December 2010. It listed Mr Sadra as vendor and Mr Otmy as purchaser and was signed by Mr Sadra as vendor.
9. These documents appear to establish that Mr Sadra and Mr Otmy were in the process of arranging a transfer of the title to Unit 11 from Mr Sadra to Mr Otmy during December 2010 and January 2011. However, despite the fact that Mr Sadra and Mr Otmy exchanged contracts, the sale of Unit 11 did not take place. It appears that Mr Otmy and Mr Sadra may have executed a deed of rescission in relation to the contract for sale, as a file copy of an unsigned deed of rescission was tendered by Mr Meshumar.
10. Mr Otmy was questioned about these documents during cross-examination. When asked if he accepted that a contract existed between himself and Mr Sadra in respect of Unit 11, Mr Otmy said 'No'. He said that he signed the contract for sale at Mr Sadra's request, and that it was 'another exercise' in Mr Sadra's business.
11. Mr Otmy also denied paying the $20,000 deposit that Mr Stack referred to him as having paid in his file note dated 22 December 2010. Mr Otmy asked to be shown a transaction to confirm the payment. Whilst there is no record of a $20,000 transaction in any of Mr Otmy's banking records prior to 22 December 2010, he had paid $50,000 to Mr Sadra on 18 November 2010, and this payment was made by way of bank transfer and was recorded in his bank statements.
12. Mr Sadra gave evidence that the purpose of the contract for sale was to protect Mr Otmy's interest in respect of the $50,000. He gave this evidence unprompted when asked if he had only contracted to sell Unit 11 to Mr Otmy once. The exchange between counsel for Mr Meshumar and Mr Sadra was as follows: Q. You've only ever contracted to sell the property to him once. Is that right? A. No. I think I did another one in 2010, but I don't think he was involved too much in it. Q. He wasn't involved too much in it? A. Yes. I just did it I think when he gave me some money at the beginning, I just felt that I need to do something to secure his interest, and I ask Peter Klimt to do a contract. Q. So in order to secure Mr Otmy's interest, you executed a contract to sell the property to him. Is that right? A. In 2013, yes. Q. Did he ask you to do that? A. No. Q. What was your concern to protect his interest at that time? A. I think it's the nature of the human being. I mean, he gave me something. He had no guarantee. I felt comfortable that I would at least give him the option. Q. What had he given you? A. He gave me $50,000. Q. To protect him, you executed a sale and purchase agreement with him? A. Yes. There was not much in the purchase agreement. It's not that he's ending with the $200,000 or $300,000. Q. Did the sale go ahead? A. No. Q. Why did it not go ahead? A. It didn't go ahead; he wasn't interested. Q. He wasn't interested. A. He wasn't interested. It wasn't a subject for him. I don't think he knew. I just ask him, "Go sign." He didn't even know what he was doing. Q. So you just gave him the sale and purchase agreement to sign. A. I didn't give him anything. I ask Peter Klimt to do a draft contract. He send it I think to Adam - maybe Adam. Q. Do you know whether that contract was signed? A. Pardon me? Q. Do you know whether Mr Otmy signed the sale and purchase agreement? A. Probably sign sometimes. Q. I think you said before he wasn't too interested in it. Is that right? A. Not interested. I don't think he was - I would just ask him to go and sign something there, and he went and probably signed it. It didn't get into details of what is it. Q. Can you recall whether he had his own lawyer acting for him? A. I think Adam Stack. Q. Did he pay you a deposit? A. Which one? Q. Did Mr Otmy pay you a deposit. A. He gave me, as I said, the 50,000. That's it. Q. No more than that. A. No. Q. Are you certain about that? A. Pardon me? Q. Are you certain that he did not give you a deposit? A. Yes.
13. When counsel for Mr Meshumar showed Mr Sadra the file note by Mr Stack dated 22 December 2010, the following exchange occurred: Q. This is obtained from the solicitor from Mr Otmy's conveyancing file. It says there, "Paid 20,000 and release to [Mr Sadra]." A. Yes. Q. Does that cause you to change the answer you just gave? A. No. Q. Is that wrong, is it? A. That one he gave me 50; so the 20 is in the 50 anyway.
14. While the evidence does establish that the contract for the sale of Unit 11 by Mr Sadra to Mr Otmy was not completed, and was probably rescinded, it is difficult to accept Mr Otmy's assertion in cross-examination that the contract did not exist, and that what he signed was no more than 'another exercise' in Mr Sadra's business. At the least, Mr Otmy did not provide any explanation of his involvement in entering into the contract (which involved him in retaining a solicitor in the conventional way and becoming liable to pay that solicitor's fees) that would make it rational for the Court to accept that the creation of the contract was no more than 'another exercise'.
15. Virtually everything associated with the contract for Mr Sadra to sell Unit 11 to Mr Otmy is mysterious. It should be acknowledged that in rational terms the very existence of the contract in December 2010 and January 2011 for Mr Sadra to sell Unit 11 to Mr Otmy is apparently inconsistent with either gentleman knowing that in September 2010 Mr Meshumar paid $200,000 for a one third interest in the property with Mr Otmy and Mr Sadra. Yet Mr Otmy effectively disowned the contract as being intended to reflect a real transaction, and Mr Sadra said that he had instigated the transaction for Mr Otmy's benefit effectively against Mr Otmy's will. Neither Mr Klimt nor Mr Stack was called to give any evidence to explain this transaction.
16. In early 2011, according to Mr Meshumar, he and Mr Otmy had a further conversation about his wanting to have something in writing. Referring to the loan for $20,000, Mr Meshumar said that he told Mr Otmy: "I am having all these problems with [Mr Sadra] not paying me the loan properly and it's stressing me out". He said that Mr Otmy told him: "Just be patient, it will come. Don't worry about [Mr Sadra]".
17. Mr Meshumar said that he also spoke to Mr Sadra about his concerns, later in early 2011. He said that he had a conversation with Mr Sadra, either at Sababa Café or at Mr Sadra's shop, in which Mr Sadra said that he was preparing a written agreement.
18. Following these conversations, in about February 2011, Mr Meshumar said that he met with Mr Otmy and that Mr Otmy gave him a draft deed that he said was given to him by Mr Sadra. Mr Sadra had this draft deed drawn up by his solicitor, Peter Klimt. Mr Meshumar tendered a copy of it as part of his evidence, along with an email from Mr Klimt to Mr Sadra dated 14 February 2011 attaching a draft of the deed.
19. The draft deed, as received by Mr Meshumar, was in the following form: THIS DEED made 2011 BETWEEN: MEIR SADRA of 11/49 Bennett Street, Bondi in the state of New South Wales (Meir) of the first part OFIR MESHUMAR of PO Box 7414 Bondi Beach 2026 (Ofir) of the second part AND: AVSHALOM OTMY of PO Box 7414 Bondi Beach 2026 (Avshalom) of the third part WHEREAS: A. Meir is the registered proprietor of 11/102 Campbell Parade, Bondi Beach2026 (being property comprised in Folio Identifier 11/SP49165) (hereinafter called the Unit). B. Ofir and Avshalom have advanced monies to Meir (the loan). C. In consideration of the loan Meir and Ofir and Avshalom have agreed upon the terms and conditions upon which Meir continues to hold the title to the unit and receive repayment of the loan. D. The parties have agreed to reduce to writing the terms of their agreement. NOW THIS DEED WITNESSETH: 1. Meir acknowledges have received from Ofir and Avshalom Three hundred and ten thousand dollars ($310,000.00) as the loan (the loan). 2. In consideration of the loan Meir hereby assigns to Ofir and Avshalom a sixty six percent (66%) interest in any income obtained from the unit and Ofir and Avshalom agree to pay sixty six percent (66%) of all levies made by the Owners of strata Plan 49165, all council and water rates levied in respect of the unit and any land tax charges during the currency of this Deed. 3. This Deed shall continue for a period of five (5) years from the date hereof at which time the unit shall be submitted for sale by public auction and sold at the best price obtained at such auction. 4. The net proceeds of sale of the unit shall be divided as follows: a. As to Ofir and Avshalom shall be entitled to receive sixty six percent (66%) to be divided equally between them and receipt of such payment shall be accepted by them in full satisfaction of Meir's liability in relation to the loan; b. Meir shall be entitled to the balance PROVIDED HOWEVER that Meir shall be liable for any liabilities in respect of the Unit exceeding thirty three percent (33%) of the net sales price. 5. Any rights and liabilities granted and imposed on any party to this agreement may not be assigned by them. 6. The provisions of this Deed shall be varied only by mutual consent of ail parties hereto. 7. Each party shall pay their own legal costs of and incidental to this Deed and any duty shall be paid equally between the parties. IN WITNESS WHEREOF THE PARTIES HAVE HEREUNTO SET THEIR HANDS AND SEALS ON THE DAY AND YEAR FIRST HEREINBEFORE WRITTEN
20. Mr Meshumar said that he refused to sign the deed because it described himself and Mr Otmy providing Mr Sadra with a loan of $310,000 but did not state that he was an owner of Unit 11. He said that Mr Otmy told him that it did not matter and that it was just a technicality.
21. Mr Meshumar also said that he refused to sign because the deed said that he and Mr Otmy were to share in the profits equally, and it was clear from the figure of $310,000 that Mr Otmy had only put in $110,000, and further because the deed stated that Unit 11 would be sold in five years rather than three.
22. Mr Sadra was shown this deed during cross-examination and confirmed that Mr Klimt prepared it based upon his instructions. However, he said that he arranged for Mr Klimt to prepare the deed in anticipation of a possible agreement with Mr Meshumar, rather than to reflect an agreement that already existed.
23. Counsel for Mr Meshumar drew Mr Sadra's attention to that the fact that his bank statements, obtained under subpoena, showed that he had received $50,000 from Mr Otmy on 18 November 2010, and a further $260,000 from Mr Otmy on 3 February 2011. When asked if it was just a coincidence that the $310,000 recorded in the deed matched the amount he had received from Mr Otmy, Mr Sadra said: "Maybe, I'm not really sure".
24. Mr Sadra's evidence in relation to the $310,000 was inconsistent. Within the space of a few minutes, he agreed that he had received $310,000 from Mr Otmy, agreed that he told Mr Klimt that he had received $310,000 from Mr Otmy and Mr Meshumar, denied that he had received $310,000 from Mr Otmy and Mr Meshumar, and denied that he told Mr Klimt that he had received $310,000 from Mr Otmy and Mr Meshumar.
25. In his 5 June 2016 affidavit, Mr Otmy did not mention the payments of $50,000 and $260,000 that he made to Mr Sadra. As noted earlier, in the context of explaining that he could not afford to lend Mr Sadra $20,000 in August 2010, Mr Otmy said that he had never lent money to Mr Sadra.
26. Mr Otmy reversed his position in cross-examination and said that the payments of $50,000 and $260,000 were loans. When counsel for Mr Meshumar drew his attention to the part of his affidavit where he said that he had never lent money to Mr Sadra, Mr Otmy conceded that his affidavit was incorrect.
27. Counsel for Mr Meshumar asked Mr Otmy a number of questions about the draft deed. Mr Otmy denied that Mr Sadra had provided a copy of the draft deed to him. He denied that he himself provided a copy to Mr Meshumar. He denied that Mr Meshumar told him that he would not sign the document because it did not record him as a joint owner of Unit 11. He denied that of the $310,000 that he paid to Mr Sadra, $200,000 belonged to Mr Meshumar.
28. It appears that counsel for Mr Meshumar put to Mr Otmy that $200,000 of the $310,000 payment included in the draft deed belonged to Mr Meshumar because: (a) the draft deed included one amount of $310,000 said to be from Mr Meshumar and Mr Otmy and gave them an equal interest in the proceeds of sale from Unit 11; and (b) Mr Meshumar gave evidence that he thought the effect of the deed was that he had paid $200,000 and Mr Otmy had paid $110,000, but that they would receive an equal interest in the proceeds of sale of Unit 11 despite contributing different amounts.
29. However, the fact that Mr Otmy denied that the $310,000 listed in the draft deed incorporated $200,000 of Mr Meshumar's money is consistent with Mr Meshumar's case. Mr Meshumar gave evidence that he paid $200,000 in cash to Mr Sadra. He did not give evidence of having paid that money to Mr Otmy.
30. Furthermore, Mr Otmy's bank statements demonstrate that Mr Otmy did in fact pay $310,000 to Mr Sadra. He paid $50,000 to Mr Sadra on 18 November 2010 and $260,000 to Mr Sadra on 3 February 2011.
31. Considering the proof of these payments and Mr Meshumar's evidence that he paid $200,000 to Mr Sadra in cash, it appears to be more likely that the draft deed recorded Mr Otmy's payment to Mr Sadra but not Mr Meshumar's alleged payment of $200,000.
32. Why it may have done so is unclear, as neither Mr Sadra nor Mr Otmy was questioned on this point. Mr Meshumar, for his part, appears to have always thought the $310,000 included in the draft deed incorporated the $200,000 that he claims to have paid to Mr Sadra. From this it may be inferred that he was unaware that Mr Otmy had paid $310,000 to Mr Sadra. This is consistent with evidence given by Mr Meshumar that Mr Otmy told him that he could not afford to lend Mr Sadra any money in August 2010.
33. These events cloud the issue more than they illuminate it. A draft deed was prepared by Mr Klimt. Mr Sadra gave the instructions upon which Mr Klimt prepared the document. It recorded the fact of Mr Sadra already having received the $310,000. That payment was made by Mr Otmy out of his own money. There is no record of a separate receipt of $200,000 from Mr Meshumar, or any other amount. The draft deed has been prepared upon the basis that $310,000 represents 66% of the unencumbered value of Unit 11, as cl 4 was probably intended to have the effect that Mr Sadra would be liable for the mortgage (although the wording is not entirely clear). It seems to have been intended that Mr Sadra's 33% would go in repayment of any mortgage, and Mr Sadra would be required to pay the amount of the mortgage that was not repaid by that means. That would imply that the value was $465,000.
34. Despite the considerations that tend against Mr Meshumar having put in any money, it is clear from Recital B and cl 1 that both Mr Meshumar and Mr Otmy were treated as having paid the $310,000. By cl 2, Mr Sadra assigned 66% of any income jointly to Mr Meshumar and Mr Otmy, and the same percentage of the net proceeds of sale of Unit 11 after 5 years was to be divided equally between Mr Meshumar and Mr Otmy.
35. The confusion that arises out of the assumption that Mr Meshumar had contributed to the $310,000 paid by Mr Otmy to Mr Sadra is inexplicable on the evidence.
36. Another obvious point to be made from the draft deed is that it does not contemplate the immediate transfer of any beneficial interest in Unit 11 from Mr Sadra to Mr Meshumar and Mr Otmy. It treats the payment of the $310,000 as a loan. It also would, if executed, identify a fund out of which Mr Meshumar and Mr Otmy would be repaid. That arrangement would probably have created an equitable charge, save for the fact that Mr Meshumar and Mr Otmy were not to be repaid only the amount of the supposed loan. They were to be paid 66% of the unencumbered sale value, less only marketing costs. The draft deed in this respect appears to have been intended to create a hybrid transaction that had part of the features of a loan and part of the features of an assignment of an interest in Unit 11.
37. It is also clear that if Mr Meshumar did not make any payment to Mr Sadra, either directly or through Mr Otmy, then the draft deed still contemplated that Mr Meshumar would receive one third of the income and one third of the gross sale price of Unit 11 for nothing.
38. The final observation that should be made about the draft deed is that it is known that Mr Otmy paid $310,000 to Mr Sadra; Mr Meshumar claims that he paid $200,000 to Mr Sadra; Mr Meshumar also claims that Mr Sadra told him that Unit 11 was worth $600,000; so that all of these numbers do not add up if the underlying proposal was that Mr Meshumar, Mr Otmy and Mr Sadra would each, one way or another, be entitled to an equal one third share in the ultimate value of Unit 11, save for Mr Sadra's responsibility for the existing mortgage.
39. The last communication in evidence concerning the contract for the sale of Unit 11 to Mr Otmy that has been discussed above is Mr Klimt's 25 January 2011 email to Mr Sadra that referred to the deferral of the settlement that was to take place on 31 January 2011. Between 25 January 2011 and 14 February 2011, Mr Sadra must have given Mr Klimt the instructions that caused him to prepare the draft deed that has been considered above. That draft deed recited the receipt by Mr Sadra of money from Mr Meshumar and Mr Otmy (albeit described as a loan) and made provision for the sharing of rent and the proceeds of sale from Unit 11 on a basis consistent with equal one-third ownership by the three men.
40. It is notable that the initial payment from Mr Otmy's account of $50,000 to Mr Sadra occurred on 18 November 2010. Albeit in a confused way, Mr Sadra in his evidence gave the $50,000 payment as the impetus for his initiating the preparation of the contract of sale. The later payment of $260,000 from Mr Otmy's account to Mr Sadra was made on 3 February 2011. Thus, the payment was made after the date for completion of the contract but before Mr Klimt prepared the draft deed. Although the evidence supports the conclusion that the $260,000 was Mr Otmy's own money, it follows from the terms of the draft deed that Mr Sadra's instructions to Mr Klimt treated the whole $310,000 as having been received from Mr Otmy and Mr Meshumar jointly.
41. These confused circumstances are not made any clearer by any attempt by Mr Otmy or Mr Sadra to establish any alternative transaction to explain why Mr Otmy paid $310,000 of his own money to Mr Sadra (save for Mr Otmy's belated explanation that it constituted an undocumented loan to Mr Sadra).

March to August 2011 - Payments to Mr Meshumar and Mr Otmy

1. Between March and August 2011, Mr Sadra made a number of payments to Mr Meshumar and Mr Otmy. Each of these payments was proven to have occurred by reference to the parties' bank statements. They are set out in the table below: Date Amount Description Received by 22 March 2011 $800 MeirBondi 106 Mr Meshumar 11 April 2011 $400 Avshalom Unit Bondi Mr Otmy 29 April 2011 $206 Meir Ion rent Mr Meshumar 29 April 2011 $206 Ion rent avshalom Mr Otmy 13 June 2011 $1,010 Ion rent meir Mr Meshumar 13 June 2011 $1,010 avshiIon Mr Otmy 6 July 2011 $864 Ion unit ofir Mr Meshumar 7 July 2011 $864 Ion unit avshi Mr Otmy 5 August 2011 $1,138 Ion U rent Ofir Mr Meshumar 8 August 2011 $1,138 Ion unit avshi Mr Otmy

1. The payments appear by their descriptions to refer to a loan (written as 'lon') or to rent. In some cases the payments were described as 'lon rent' or 'lon unit'. Although Mr Sadra was not asked to confirm that he meant 'loan' when he used the word 'lon', the regular payments he made to Mr Meshumar in respect of the $20,000 loan were described by phrases 'meir', 'meir lon' and 'lon ofir sprink' (with the payments being made by Sprink Pty Ltd).
2. During cross-examination, counsel for Mr Meshumar asked Mr Sadra why he used the word 'rent' to describe some of the payments. The following exchange occurred: Q. Do you see the entry that's the third payment from the bottom of the bank statement, 13 June 2011? A. Yeah. Q. There's a payment there, Meir Sadra. A. Yes. Q. It's for 1,010. A. Yes. Q. It says, "Loan rent, Meir." A. Yeah. Q. Why does it say "rent"? A. I mean, the way I put it or I've been asked to put it since a few was, you know, sublet units and to travellers, so he was getting rent all the time, so he was comfortable for me to put it as the description. Q. He was getting rent from you? A. Not from me. He was subletting. He's got on business. Q. Did this payment relate to subletting? A. No. As I said, you asked me what it means, "Loan rent, Meir." I said he was comfortable for me to put when I give him money so in his account it will look like a loan rent, was comfortable because he was lending to other people as well, was subletting. Q. You're saying he asked you to put it as rent. A. To put it this way. Q. What did that payment relate to? A. As I said, I mean, we had a few activities. It might be that this one is a loan, you know, to fund some purchases. Q. Then turn to page 759. Four from the bottom there's an entry there for $864. A. Yeah. Q. It says, "Unit," there. A. Yeah. Q. The same answer, that's why-- A. It was, yeah. Q. Now turn to tab 101, page 799, about the middle of the page, 26 March 2014. A. Yeah. Q. It says there, "ME, AV, 11U." A. Yeah. Q. What does ME stand for? A. What? Q. What does ME stand for? A. Probably me. Q. Then AV? A. AV probably can be Avshalom, something like that. Q. Then 11U? A. It's from the unit, the source of the money. Q. So the source of that 1100 was rent from unit 11. A. No. It's for me to know where I took the money from. Q. Where did you get the money from? A. Cause it's not my money, so then I have to put it back to the-- Q. It's not your money? A. No, it's not my money. I was using Avshalom's money to pay. Q. His rent money? A. His rent money to pay my expenses. Q. Had you asked him whether you could do that? A. No. Q. You collected his rent money and you just spend it as you-- A. I don't spend. As I said, that's all in the relationship that we had, that sometimes it's fine I'm using it for my own purposes and put it back. Q. The rental funds that you collected for him you used for your own purposes. A. Well, sometimes, yeah.
3. Mr Sadra appeared to be suggesting that he used Mr Otmy's money for his own purposes, paid Mr Otmy back with money that he himself got from renting Unit 11, and noted that it was 'rent' to remind himself of where the money came from.
4. Counsel for Mr Meshumar also asked Mr Otmy about the transactions that involved payments of money to him. Mr Otmy denied that any of the transactions were in respect of rent received from Unit 11.
5. Although there is evidence that Mr Sadra operated a shop, there is no specific evidence that Mr Sadra had any source of income other than rent received in respect of Unit 11, or that the payments that he made to Mr Otmy were in relation to some other transaction under which Mr Otmy could expect to receive payments from Mr Sadra. There is no evidence to support Mr Otmy's bald denials that he was paid a share of the rent from Unit 11.
6. All of these payments were made before the transfer of Unit 11 to Mr Otmy. Apart from the first payment to Mr Meshumar of $800, the four subsequent payments were made approximately monthly to Mr Meshumar and Mr Otmy in equal amounts. The fact that the payments were made is only consistent with Mr Sadra acting under the belief that he was liable to make equal payments to both men. The reason why the payments were made is not clearly identified, because of the garbled references to 'lon' and 'rent'.
7. None of these payments related to the original loan of $20,000 by Mr Meshumar to Mr Sadra, as that loan was repaid by the payments to which I have referred above.
8. These payments to Mr Meshumar cannot be explained other than by reference to a loan secured on Unit 11, or a payment of a share in the rent of that property on the basis that Mr Meshumar was entitled to a share in the beneficial ownership of the property. At the least this evidence provides some corroboration that Mr Meshumar had an objective basis for believing that he had some sort of equal interest with Mr Otmy in Unit 11.

Payments beyond August 2011

1. Mr Meshumar gave evidence that on 6 February 2012 he checked his bank account and was shocked to realise that he had not received his one third share of the rental income from Unit 11 since August 2011. He telephoned Mr Sadra immediately. Mr Sadra said that he had made the payments and that Mr Meshumar should check again. If there was anything missing, Mr Sadra would fix it up. Mr Meshumar said that he then called Mr Otmy and said: "[Mr Sadra] hasn't paid me anything since August 2011. [Mr Sadra] tells me he has paid it. I've checked my bank account - nothing was paid". According to Mr Meshumar, Mr Otmy then said that he would speak to Mr Sadra and sort it out.
2. On 23 February 2012, Mr Meshumar sent a text to Mr Sadra that said: "Sorry missed earlier call. I've done a search on $846.16 no result not even for $840-$850 and not for $1269.24 which is triple of $423.08".
3. Between September 2011 and December 2013, Mr Meshumar's bank statements record only one payment from Mr Sadra, a payment of $5,000 dated 23 March 2012 and described as 'meir lon'. It does not appear that an equal payment was made to Mr Otmy.
4. The existence of Mr Meshumar's 23 February 2012 text and the making of the payment by Mr Sadra of $5000 to Mr Meshumar on 23 March 2012 provide some objective corroboration linking Mr Meshumar's claim that he was entitled to share in the rent from Unit 11 to the payments made to him.
5. As will be seen, Mr Sadra transferred Unit 11 to Mr Otmy on 22 February 2012. Accordingly, the $5000 payment made on 23 March 2012 was made about one month after the transfer. The monthly payments that had been paid to Mr Meshumar between March and August 2011 were not in regular amounts. That may have been because of the need by Mr Sadra to deduct outgoings (although the evidence does not explain the irregular payments).
6. There was a gap in the making of payments between 5 August 2011 and the payment of the $5000 on 23 March 2012, a period of about eight months. Neither Mr Sadra nor Mr Otmy gave any explanation for this payment to Mr Meshumar. It looks like a catch up payment.
7. Whatever its purpose, it was made after the transfer of Unit 11 to Mr Otmy. While there is clear evidence from Mr Meshumar's bank statements that he received this money, and must have received it from Mr Sadra or someone acting for him (because of the description 'meir lon'), the evidence does not establish the source of the payment.
8. While the evidence does not establish that the payment was made with Mr Otmy's approval, it at least establishes that Mr Sadra understood after the date of the transfer that Mr Meshumar remained entitled to be paid by Mr Sadra.
9. There was then a gap in payments from March 2012 to January 2014.
10. Between January 2014 and April 2015, Mr Meshumar received payments from Mr Sadra and a number of persons that were associated with Mr Sadra. These persons included his wife, Revital Sadra, the corporate trustee of his family trust, MEKR Australia Pty Limited, and a person named Efraim Kachlon. This was during a period when the evidence shows that Mr Sadra was acting as Mr Otmy's informal agent in relation to the management of Unit 11.
11. Mr Sadra said that Mr Kachlon was someone with whom Mr Meshumar had a business relationship. However the bank statements record payments by Mr Kachlon to both Mr Meshumar and Mr Otmy, referring to '11U' or 'u 11', which suggests that Mr Kachlon was somehow involved in Unit 11.
12. The payments made to Mr Meshumar, as shown in his bank statements, are set out in the following table: Date Amount Description Paid by 8 January 2014 $950 meir lone Efraim Kachlon 16 January 2014 $200 m maintain MEKR, Australia Pty Limited 24 January 2014 $200 Maintenance Meir MEKR Australia Pty Limited 3 February 2014 $400 repair me avs MEKR Australia Pty Limited 19 February 2014 $900 Avshi Me lone Revital Sadra 26 March 2014 $1,100 Me Av 11U Revital Sadra 1 May 2014 $1,058 MeAv 11U Efnam Kachlon 12 May 2014 $1,176 Me Av u 11 Efnam Kachlon 30 May 2014 $1,100 Me Av u 11 Efnam Kachlon 23 June 2014 $900 Me Av u 11 Efnam Kachlon 26 June 2014 $925 Pay mekr Australia MEKR Australia Pty Limited 27 June 2014 $1,100 Me Av u11 Efnam Kachlon 2 July 2014 $925 Pay Mekr austral la MEKR Australia Pty Limited 9 July 2014 $925 Pay Mekr austraha MEKR Australia Pty Limited 16 July 2014 $925 Pay Mekr austraha MEKR Australia Pty Limited 23 July 2014 $925 Pay Mekr austraha MEKR Australia Pty Limited 30 July 2014 $925 Ofir pay mekr MEKR Australia Pty Limited 1 August 2014 $925 Ofir pay mekr MEKR Australia Pty Limited 4 February 2015 $1,117 Avshi me rent unit Meir Sadra 27 February 2015 $800 Avshi me rent u11 Meir Sadra 13 April 2015 $900 Ofir rent unit 11 Meir Sadra

1. A number of the descriptions of the reasons for these payments use the word "lone" but it is notable that the last three that were made by Mr Sadra refer to "rent" for Unit 11. There was a gap in payments of more than six months between 1 August 2014 and 4 February 2015. I will return to the significance of this matter below.
2. Six payments were made to Mr Meshumar by Efraim Kachlon between 8 January and 27 June 2014. Mr Otmy's bank statements show that on 16 July 2014 a transfer of $1200 was made into his account that was described as "from Efraim Kachlon Meir Poula". The reference to Poula is to a woman who leased Unit 11 for the purpose of sub-letting it for short stay accommodation. Five transfers into the account were made between 11 August 2014 and 1 December that were described as "from Efraim Kachlon Avshi U11 rent" or similar wording. It seems clear that the transfers made by Efraim Kachlon to both Mr Meshumar and Mr Otmy concerned rent for Unit 11 in some unexplained way.

August 2011 - The power of attorney

1. Mr Meshumar said that, in the middle of 2011, some friends of his suggested that he needed a power of attorney to be able to sell Unit 11 if his name was not on the title. He said that he spoke to Mr Otmy about this in July 2011. He said that Mr Otmy said that he would speak to Mr Sadra about it.
2. Mr Meshumar said that he met with Mr Sadra at his shop in Bondi in August 2011. He said that Mr Sadra told him that he was arranging a deed and power of attorney with a solicitor and would have something to give him soon. In about August or September 2011, Mr Meshumar says that Mr Otmy came to his house and gave him a power of attorney dated 22 August 2011 that was signed by Mr Sadra and witnessed by Adam Stack. Mr Meshumar tendered a copy of this power of attorney into evidence.
3. This power of attorney gave Mr Meshumar the power: To do all things and act on behalf of [Mr Sadra] in relation to the property at 11/104-106 Campbell Parade, Bondi Beach, being Lot 11 in Strata Plan 49165 ("the Property"), including the leasing of the Property, appointment of a licensed real estate agent to manage the Property, signing all documents necessary to lease the Property, directing the agent in relation to payment of rent and negotiating the terms of the lease and the sale of the Property including signing all documents necessary to affect the sale of the Property (including the Contract for Sale and transfer of the Property), appointing a solicitor to act on the sale of the Property, appointing a licensed real estate agent to list the Property, signing all documents necessary to discharge the mortgage over the Property, directing the sale proceeds and collecting the proceeds from the sale of the Property.
4. Mr Meshumar said that he also asked Mr Otmy about the deed (an amended version of which he was still pursuing). He said that Mr Otmy replied: "one thing at a time. We need to have focused on securing the property from [Mr Sadra's] creditors. It's much more pressing, let's sort that out first".
5. Mr Otmy said that neither of these conversations occurred. He said that he occasionally passed messages and envelopes between Mr Meshumar and Mr Sadra but that he never opened them and therefore could not be absolutely certain that one of them did not enclose the power of attorney. However, he said that he did not recognise the power of attorney, and did not recall ever having seen it prior to the commencement of the proceedings.
6. Mr Sadra gave evidence that he granted the power of attorney to Mr Meshumar because Mr Meshumar told him that he could sell Unit 11 for a good price. When asked whether he understood at the time that he signed the power of attorney that Mr Meshumar would be entitled to direct the sale proceeds and collect the sale proceeds from any sale of Unit 11, Mr Sadra said "no", and said that he read the document but did not pay attention to it to "that extent".
7. I do not accept Mr Sadra's explanation that he gave such a wide-ranging power of attorney to Mr Meshumar simply because Mr Meshumar said he could sell Unit 11 for a good price. This explanation in my view was offhand and incredible, even in the context of this milieu of improbable actions. Mr Sadra offered no explanation of why he decided to risk leaving the decision as to the sale price entirely to Mr Meshumar, when it would have been a simple matter for Mr Meshumar to advise Mr Sadra of any high price offered for the property, so that Mr Sadra could decide for himself whether or not he should accept the offer.
8. I also do not accept Mr Otmy's evidence that he acted as a mute and ignorant go-between in delivering an envelope containing the power of attorney to Mr Meshumar. Given the long-term and relatively close relationship between Mr Otmy and Mr Sadra, I find it improbable that Mr Otmy would have casually agreed to act as a courier without first being told of the nature and effect of the document that Mr Sadra had asked him to convey to Mr Meshumar. It is probable that Mr Sadra would have told Mr Otmy that the envelope contained a power of attorney in relation to Unit 11, and that is really all that Mr Otmy needed to know, as little more detail would be gleaned by reading the document.
9. The evidentiary significance of the granting of the power of attorney to Mr Meshumar is, however, elusive. It was not a natural step for Mr Sadra to take if the purpose was only to record or acknowledge that Mr Meshumar had a one-third interest in Unit 11 on the terms that he has claimed in these proceedings. The power of attorney was an entirely inappropriate instrument if that was the purpose, as it plainly did not provide evidence that Mr Meshumar was entitled to an interest in the property. Furthermore, the granting of the power of attorney appears divorced from any practical context, as the evidence does not show that there was any need for it, and of course it was never exercised. In the circumstances the significance of the grant of the power of attorney is too obscure to support any precise findings concerning the case propounded by Mr Meshumar, save for the conclusion that it shows that at the time it was granted there must have been a relatively close relationship between Mr Meshumar and Mr Sadra, and that it is likely that Mr Meshumar was party to some unspecified commercial arrangement in relation to Unit 11.

September 2011 to February 2012 - Transfer of Unit 11 to Mr Otmy

1. Mr Meshumar said that by late 2011 he had become concerned that Mr Sadra's financial position could affect his interest in Unit 11. He said that he had a conversation with Mr Otmy where he said that he had heard from a lot of people that Mr Sadra owed money in the hundreds of thousands. He said that he told Mr Otmy that he was worried that Mr Sadra's financial position could affect each of them because, if Mr Sadra was headed for bankruptcy, someone could go after the property which was still in his name. Mr Meshumar said that Mr Otmy agreed that this was a problem and said that they needed to do something about it.
2. Counsel for Mr Meshumar asked Mr Otmy about this conversation. He asked Mr Otmy whether Mr Meshumar told him that he had heard rumours about Mr Sadra owing money to people in the hundreds of thousands of dollars. Mr Otmy accepted the Mr Meshumar may have said that.
3. Mr Sadra agreed that he was under financial pressure. He agreed that, as at February 2012, each of his credit cards was overdrawn. He agreed that by the end of February he had a lot of outstanding creditors.
4. Mr Meshumar said that he spoke with Mr Otmy about Mr Sadra again a few weeks after their initial conversation. According to Mr Meshumar, Mr Otmy said: I have heard a lot of bad things to about [Mr Sadra]. I'm going to transfer the Property into my name soon. I will look after your share, and you will get your one third share of the income from rent paid less outgoings. [Mr Sadra] will remain to look after the property, deal with tenants and make rental payments. He has been doing it for a while and knows the building really well. Nothing changes, but my name will be on the title of the property. It's a wiser action, we need to secure our share in the property against the people [Mr Sadra] owes money to.
5. Mr Meshumar said that he replied "Okay", because he believed he had no choice but to agree in order to secure his share in Unit 11. Mr Otmy denied saying any of these things.
6. Between November 2011 and February 2012, Mr Sadra agreed to sell Unit 11 to Mr Otmy for $620,000. Settlement of the sale occurred on 22 February 2012 and Mr Otmy became the registered proprietor of Unit 11 on about 27 February 2012.
7. Mr Otmy gave evidence that Mr Sadra arranged everything to do with the sale of the unit for him. He arranged for him to borrow $500,000 from the ANZ Bank via a broker and arranged for the preparation of all of the transfer documents. Since the transfer of Unit 11, Mr Sadra has continued to collect the rent into his own personal bank account and paid the strata, insurance, mortgage and other outgoings.
8. It should be noted at this point that the payout figure for the prior mortgagee was $420,304.31. After payment of the transaction costs, a significant part of the remainder of the $500,000 was apparently paid to Mr Otmy. If it be assumed that each of Mr Meshumar and Mr Otmy had paid $200,000 to Mr Sadra in about September 2010 for a one third interest in Unit 11 on the basis that it was then worth $600,000, the borrowing of $500,000 in February 2012 on the security of Unit 11 would have substantially diminished the value of each owner's equity in the property, if it was indeed worth the agreed purchase price of $620,000.

Events immediately following the transfer

1. In March 2012, Mr Meshumar said that he met with Mr Sadra and Mr Otmy and that Mr Otmy handed him an A4 sheet of paper with some documents clipped to it and handwriting on the first page (the A4 document). He said that he recognised it as the handwriting of Mr Sadra.
2. Mr Meshumar said that Mr Sadra had written down on the paper the items that needed to be paid in respect of the transfer of the property. He said that Mr Sadra told him that he needed to pay 8% of the mortgage and that Mr Otmy told him that he needed to pay the transfer fees and stamp duty. Mr Meshumar said that he told them that he did not understand why he needed to pay more money. He said that he told them that he bought one third of the property and was still owed rent. He said that Mr Sadra told him that he had paid $5000 in back rent and that they all divide the rental income equally.
3. The receipt by Mr Meshumar of $5000 on 23 March 2012 is consistent with Mr Sadra having said that he had paid $5000 in back rent to Mr Meshumar.
4. Mr Meshumar tendered a copy of this document into evidence. The meaning of the A4 document requires some analysis by reference to the evidence.
5. The writing on the document appears to be in the same handwriting.
6. At the top of the document there is written what appears to be the initials "O.V.M." and under that "up to 2/3/12". The initials most probably refer to Mr Meshumar. The reference to the date suggests that the purpose of the document was to record a reconciliation of transactions relevant to Mr Meshumar.
7. The writing on the document appears to be in three separate blocks relating to different issues.
8. On the left-hand side of the page, under the reference to Mr Meshumar, there is a list of outgoings, presumably relating to Unit 11, which I interpret to refer to council rates, water rates, body corporate, management fees and stamp duty. The amount stated in relation to stamp duty is $27,200. In fact, the memorandum of costs and disbursements given by Klimt & Associates to Mr Sadra dated 21 February 2012 in relation to the sale of Unit 11 to Mr Otmy states total disbursements as being $27,279.76. Of that amount, $23,635 related to stamp duty. The figure of $27,200 on the A4 document evidently was intended to refer to the disbursements paid on the sale of the property. The inclusion of these disbursements suggests that the author of the document had made a calculation of how the outgoings and disbursements from the sale of Unit 11 were to be divided. The total of the operating costs and disbursements is $36,153.
9. The second part of the document is set out immediately under the calculation of the total costs and disbursements. It begins with "500 K", which I take to refer to the amount borrowed by Mr Otmy to finance the purchase of Unit 11 (which is stated to be $499,590.40 in a letter from Klimt & Associates to the prior mortgagee dated 16 February 2012).
10. Under the reference to "500 K", are written three divergent lines pointing downwards to "M", "OVM" and "A", which were evidently intended to refer to Mr Sadra, Mr Meshumar and Mr Otmy. In a column under Mr Sadra's initial are written 410 and 82%. Under Mr Meshumar's initials are written 36,200 and 8%. Under Mr Otmy's initial are written 53,800 and 10%. It is apparent that the reference to 410 was meant to signify 410,000. The amount of 36,200 appears to be intended to be the same as the 36,153 total of the operating costs and disbursements.
11. Of the $500,000, $410,000 has been attributed to Mr Sadra. That amount is almost the same as the $420,304.31 that was repaid to the prior mortgagee out of the $500,000.
12. On its face, this part of the A4 document appears to attribute responsibility for the $500,000 mortgage between Mr Sadra, Mr Meshumar and Mr Otmy in the proportions 82% to 8% to 10%, and that these percentages have been influenced by an assumption that Mr Meshumar would make a contribution by paying the total of the operating costs and disbursements.
13. On the right-hand side of the page is a column of figures that is most likely intended to deal with the rent received in respect of Unit 11. At the top it refers to 19 weeks between 1/8 and 19/12, and a further 8 weeks from 7/1 to 2/3. There is then a calculation of 19×750 plus 8×750. There is some evidence that the rent for Unit 11 was $750 per week. There is an additional, unexplained 2150, as well as an amount described as "Waverley 607". The total is 23,007. Again, there are three divergent lines pointing down towards the initials "M", "A", and "O". Under each of the initials is the equal amount, 7668, which represents the 23,007 split three ways.
14. In the column under Mr Meshumar's initial, an amount of 1269 is added to the 7668 to give 8937. Under that is written "P 5000". I infer that is a reference to the $5000 in rent paid by Mr Sadra to Mr Meshumar on 23 March 2012. That gave an apparent balance owing to Mr Meshumar of $3937.
15. If this document is authentic, and was prepared by Mr Sadra and discussed in the presence of all three men, then it would be powerful evidence that there was an agreement between the men that each would share equally in the net rent from Unit 11. Further, each would be responsible for a share in the $500,000 mortgage that was unequal by reason of the fact that a substantial part of the amount borrowed had been used to repay a debt owed by Mr Sadra, which was secured by the original mortgage over Unit 11. It would also corroborate Mr Meshumar's evidence that he was asked to contribute the amount of the outgoings and disbursements.
16. Mr Sadra admitted that he had written some of the words on the page. When pushed further, however, he also said that there was nothing that he could see which caused him to think that anything on the page was not his own handwriting. Later he said that the handwriting did not belong to Mr Otmy.
17. Counsel for Mr Meshumar put to Mr Sadra that the letter "M" stood for Meir Sadra, that the letter "A" stood for Avshalom Otmy, and the letters "OVM" stood for Ofir Meshumar. Mr Sadra said that the letter "A" could be Avshalom, and said that the letter "M" could be himself, but said that he could not see the relationship between the letters "OVM" and Mr Meshumar. Counsel for Mr Meshumar also asked Mr Sadra whether he provided the document to Mr Meshumar. Mr Sadra denied that he provided the document to Mr Meshumar but was unable to explain how it came to be in Mr Meshumar's possession.
18. Mr Otmy was cross-examined briefly by Mr Meshumar's counsel concerning the significance of the A4 document. He denied that the document was discussed at any meeting that he attended with Mr Meshumar and Mr Sadra. He denied that any writing on the document was his. He admitted that he received "about $60,000-odd" back from the amount of $500,000 that was borrowed.
19. I am satisfied on the evidence that Mr Sadra wrote all, or substantially all, of the entries on the A4 document. The document was plainly given to Mr Meshumar, as he was able to tender the document. It is entirely beyond the realm of co-incidence that the entries on the A4 document could refer to any transaction other than an arrangement that Mr Meshumar, Mr Otmy and Mr Sadra would broadly be equally liable for the costs of owning Unit 11 (save for Mr Sadra's responsibility for a proportion of the mortgage equal to the amount of the prior mortgage that had been paid out), and that they would share the rent from the property equally. The terms of the A4 document are consistent with Mr Meshumar's evidence that he was asked to pay the transaction costs, and on the assumption that he paid those costs his responsibility for the balance of the mortgage would be slightly less than that of Mr Otmy. The A4 document appears clearly to contain a reconciliation of the entitlement of the three men to share in the rent from Unit 11.
20. There is an inherent plausibility in Mr Meshumar's claim, given the contents of the A4 document and its preparation by Mr Sadra, that the document was discussed between Mr Meshumar, Mr Otmy and Mr Sadra. Otherwise, it is difficult to see the point in the preparation of the document, as it was not simply a record of past transactions, but at least in part was intended to justify Mr Meshumar paying the transaction costs in return for being responsible for a lower share of the mortgage than Mr Otmy.
21. The probabilities justify a finding that notwithstanding Mr Otmy's denial, the A4 document was discussed between the three men. The document provides powerful objective evidence in support of Mr Meshumar's claim that there was an arrangement between the three men that they would each have an equal one third interest in Unit 11, subject to Mr Sadra's continuing responsibility for the amount of the original mortgage.
22. The only submission that Mr Otmy made in his final written submissions concerning the significance of the A4 document was that it was created by Mr Sadra and is ambiguous, and was not given to Mr Otmy. It was, he submitted, therefore irrelevant, but if that submission was not correct, it was a very 'inexact proof' of unascertained matters. I do not accept this submission, and in particular I consider that it does not properly grapple with the fact that the document was prepared by Mr Sadra and contains the information set out in it. For the reasons that I have explained in some detail above, the A4 document taken purely on its face is uncannily consistent with the precise details of the transaction that Mr Meshumar contends in this case was agreed to by himself, Mr Otmy and Mr Sadra.
23. It may be observed that Mr Meshumar did not offer any explanation as to how, given the information of which he became aware as a result of the receipt of the A4 document, he understood that his $200,000 one-third interest in Unit 11 could have survived the sale by Mr Sadra to Mr Otmy. The evidence is unclear as to whether Mr Meshumar was informed that the sale price under the contract was $620,000. If he knew that, then he ought to have understood that the amount of equity that he and Mr Otmy had in Unit 11 was only $120,000, assuming that the sale price represented the real market value of the property. This was an issue that was not explored in the proceedings, and is but another obscurity that does not fit neatly into the overall narrative.

2012 to 2014 - Mr Meshumar proposes to sell Unit 11

1. On 24 May 2012, Mr Meshumar received an email from Mr Otmy. It forwarded a brief chain of emails starting with an email from Klimt & Associates to Mr Sadra dated 21 February 2012 that Mr Sadra had forwarded to Mr Otmy. This email attached a letter which set out the costs and disbursements related to Unit 11 between 2008 and 2012. It appears that it was not until 21 February 2012 that Mr Klimt invoiced Mr Sadra for earlier dealings with Unit 11, including the earlier contract to sell the property to Mr Otmy that was not completed, as well as the costs of the transfer that took place. This memorandum of costs and disbursements is the document that established the total of $27,279.76 referred to in the A4 document prepared by Mr Sadra that has been discussed above.
2. The fact that Mr Otmy forwarded the memorandum of costs and disbursements to Mr Meshumar on 24 May 2012 raises the question of why Mr Otmy would have done that, if the position was that Mr Otmy was the sole beneficial owner of Unit 11, and Mr Meshumar had no rights in respect of the title to that property.
3. Mr Meshumar said that in about May or June 2012, Mr Otmy said to him on a number of occasions that he should pay the stamp duty and cost of transferring Unit 11. Mr Meshumar said that he told Mr Otmy that he was not going to pay anything until the rent was sorted out and he had a document confirming his ownership. He said that Mr Otmy told him to be patient, that Mr Sadra was going through a really hard time, and that the worst case scenario was that he would get the rent when the property was sold. Mr Meshumar said that he told Mr Otmy that he understood but also asked him to talk to Mr Sadra.
4. Mr Otmy said that this conversation never occurred. He also said that he sent Mr Meshumar the email on 24 May 2012 because Mr Meshumar had asked him what kinds of costs were involved in buying and selling real estate. In his affidavit, Mr Otmy set out the conversation in which, according to him, Mr Meshumar made this request. Although, according to Mr Otmy, Mr Meshumar started by asking what kinds of costs were involved in buying and selling real estate, he went on to confine the question by adding: "I mean stamp duty, lawyers, that sort of thing. What do you have to pay when you buy a property in addition to the actual price?" Mr Meshumar then raised the example of when Mr Otmy bought Unit 11 from Mr Sadra.
5. That is not at all a convincing explanation for why Mr Otmy would have sent Mr Klimt's memorandum of costs and disbursements to Mr Meshumar. Apart from the fact that the costs and disbursements of purchasing a property will be likely to depend upon the price, this particular memorandum was extremely unusual because it appears to have covered the costs and disbursements of three transactions in relation to Unit 11, the first two of which were not completed. The memorandum did not provide any reliable information concerning the costs involved in a single property transaction. In any event, the memorandum dealt with the costs of sale and not the costs of purchase. Furthermore, Mr Otmy did not have a solicitor on the transaction, so he did not incur any costs at all. The memorandum would be completely useless as an indication to Mr Meshumar of the costs that he might incur if in the conventional way he retained a solicitor to act for him on the purchase of a property.
6. This unconvincing explanation by Mr Otmy of conduct that objectively appears to involve Mr Otmy providing Mr Meshumar with evidence of the costs of the transfer of Unit 11 to him is, in my view, another example of unsatisfactory evidence from Mr Otmy that he did not squarely face up to, and tends to leach credibility from Mr Otmy's stonewall denial of most of the significant parts of Mr Meshumar's evidentiary case.
7. It is convenient to note at this point that Mr Sadra was made bankrupt by the filing of a debtor's petition on 13 March 2013. He was discharged from bankruptcy on 14 March 2016.
8. In late 2013, Mr Meshumar said that he told Mr Otmy that he wanted to sell his share in the property because he had now owned it for three years. He said that he told Mr Otmy that either Mr Otmy or Mr Sadra could buy him out or they could take the property to auction. He said that Mr Otmy told him that it would be better for them to wait because they would make more money, and that Mr Sadra was not in a position to buy out his share. Mr Meshumar said that he reiterated that he wanted to get out of it. He said that Mr Otmy told him to be patient because he might be able to buy out his share himself.
9. Mr Meshumar's then girlfriend, Kris Anne Berman, gave evidence that in late 2013, shortly after she met Mr Otmy at Mr Meshumar's unit at Vaucluse, Mr Meshumar said: "Kris, this is [Mr Otmy], remember I told you about him we own a unit at Campbell Parade together with [Mr Sadra]". In Ms Berman's evidence of the conversation, Mr Otmy did not contradict this statement.
10. On 7 October 2013, Mr Meshumar sent the following text message to Mr Otmy: "Remind me to talk to you about [Mr Sadra]. First we need to finalize the other flat or the loan and second he owes to ppl something like 250k-300k".
11. Mr Meshumar said that he began to feel really worried by late 2013. He said that he had a conversation with Mr Otmy in the presence of Ms Berman. In this conversation, Mr Meshumar said that he pressed Mr Otmy to make Mr Sadra catch up on the rent payments. Ms Berman also gave evidence of this conversation taking place. She deposed to being present during the following conversation: [Mr Meshumar] said: Do you know when [Mr Sadra] is going to catch up on all the missing payments? [Mr Otmy] said: I thought he was catching up. [Mr Meshumar] said: Mate, you need to talk to him about this. All I get is irregular rental amounts, paid sometimes when [Mr Sadra] feels like it. I don't think it's ever been up to date. On some occasions [Mr Otmy] said: Let me sort it out with [Mr Sadra]. I will make sure he gets an account of everything that is owed to you. I don't want you to feel bad about it. On other occasions [Mr Otmy] just said: I'll sort it out with [Mr Sadra].
12. In response, Mr Otmy said that he did not specifically recall the conversation and said that, if the conversation did occur, he would have thought that it related to other dealings between Mr Meshumar and Mr Sadra. There was no evidence that Mr Meshumar and Mr Sadra had engaged in any other dealings to which this conversation could have related. He also noted that his conversations with Mr Meshumar were almost always conducted in Hebrew, even in the presence of Ms Berman (who could not understand Hebrew).
13. During cross-examination, Ms Berman said that the conversations of which she gave evidence were all conversations that took place in English and were not conversations in Hebrew that were later translated to her by Mr Meshumar.
14. It should be noted that all of the emails and texts that were transmitted between Mr Otmy and Mr Meshumar that are in evidence were written in English.
15. On 2 January 2014, Mr Sadra sent the following text message to Mr Meshumar: "Hi Ofir happy new year Send bank account lost the other one need to bank you". Mr Meshumar responded with his bank details and a happy New Year message.
16. Mr Meshumar said that he met with Mr Sadra and Mr Otmy at a café in Bondi in about May 2014. He tendered into evidence a copy of an SMS exchange between himself and Mr Otmy that he said related to organising the meeting. This exchange read: 16 May 2017 Mr Otmy: No need sorry..but we meeting up. Maybe with [Mr Sadra]? Mr Meshumar: K 23 May 2017 Mr Meshumar: Can I call u now? Mr Otmy: No Bondi today.
17. Mr Meshumar said that, when they met at the café, he told Mr Otmy and Mr Sadra that he wanted them to buy out his share in Unit 11 or take it to auction. He said that Mr Sadra said that he could not pay because he did not have the money, but that Mr Otmy said he would sell a property that he owned in West Hoxton and use the proceeds to buy out Mr Meshumar's share. Mr Meshumar also said that he pressed Mr Sadra about the rent again.
18. In November 2014, Mr Meshumar said that he contacted Daniel Ungar of Ray White Real Estate at Double Bay, as well as Mr Sean Jacobson of LJ Levi Real Estate in Rose Bay, about the value of the property. Mr Otmy gave evidence that he listed his West Hoxton property for sale at about the same time.
19. Ms Berman gave evidence of being present at a conversation with Mr Meshumar and Mr Otmy in late 2014, while Mr Otmy was in the course of selling his West Hoxton property. The most relevant part of the conversation was: I said: … Will you move into the Campbell Parade unit after you buy [Mr Meshumar] out or keep it as rental? [Mr Otmy] said: I'm not sure about moving to Bondi, maybe Byron after I do a bit of travel. The first step is selling West Hoxton and after that [Mr Meshumar] and I will get the Campbell Parade sorted out. [Mr Meshumar] said: I'll just be happy not needing to chase [Mr Sadra] any more. It will be better if it's just the two of you and I'm out. You [referring to Mr Otmy] have managed to deal with it but I can't handle it any more.
20. Mr Meshumar said that Mr Otmy telephoned him in late January 2015 to tell him that he had sold the West Hoxton property. He said that Mr Otmy said that they should meet to discuss the sale of Mr Meshumar's share in Unit 11.
21. Mr Otmy said that this conversation did not occur.
22. Mr Meshumar said that he met with Mr Otmy in late January 2015. He said that the two of them started looking up sales prices of properties similar to Unit 11 on the Internet. Mr Meshumar said that Ms Berman was present whilst they were doing this. Both Mr Meshumar and Ms Berman gave evidence that Ms Berman asked Mr Otmy whether he was still buying Mr Meshumar's share in Unit 11. They both said that Mr Otmy said words to the effect of: "We haven't made a decision yet". Mr Meshumar said that he and Mr Otmy agreed to get three opinions as to the market value of Unit 11.
23. By early February 2015, Mr Meshumar had not received any payments from anyone related to Mr Sadra since 1 August 2014. On 4 February 2015, Mr Otmy sent Mr Meshumar a text message asking for his bank account details. Mr Meshumar's evidence does not explain what prompted Mr Otmy to send this text. Mr Meshumar responded by a return text message which gave his bank account details, and then said: "Second from July I didn't get any rent on Campbell pde"… In turn, Mr Otmy replied by saying: "Thanks I will ask Meir".
24. All that Mr Otmy said in his primary affidavit about this exchange of texts was: "I do not specifically recall receiving the text message referred to by the Plaintiff and I do not know what it relates to".
25. Mr Sadra then made a payment of $1117 into Mr Meshumar's bank account against the description "PYMT Ofir lone Ofir rent unit 11". On the same day he caused $1950 to be paid into Mr Otmy's account. This is a convenient place to note that Mr Sadra caused two more payments to be made to Mr Meshumar's account. The first was a payment of $800 on 27 February 2015, which was described as "PYMT OFIR MESHU Ofir lone rent u 11". The last payment was an amount of $900 on 13 April 2015 described as: "PYMT OFIR MESHU Ofir rent unit 11".
26. Mr Otmy's reply text, whereby his only response to Mr Meshumar's complaint that he had not received any rent in respect of Unit 11 since July 2014 was to say that he would ask Mr Sadra, constitutes an implied admission by Mr Otmy that Mr Meshumar was entitled to a share in the rent. This admission is the more telling because it was made in relatively innocuous, day-to-day circumstances. Given the amount of time that had elapsed since Mr Meshumar received the last payment, I would infer that Mr Otmy contacted Mr Sadra and said something that prompted him to make the payment on 4 February 2015. The circumstances justify an inference that the payment was made on the basis that Mr Meshumar was entitled to a share of the rent. Mr Sadra again used the words "lone" and "rent" in the same breath.
27. On 9 February 2015, Mr Meshumar sent Mr Otmy a text message that said "got two ppl coming 11 am and 1 pm". Mr Meshumar said that this message was to confirm that two real estate agents (Mr Jacobson and Mr Unger) would be attending the property on 10 February 2015.
28. On 17 February 2017, Mr Jacobson sent an email to Mr Meshumar to thank him for the opportunity to present his firm's marketing proposal and selling strategy. Mr Jacobson described Unit 11 as being "your property". This was the first email in a chain of emails taking 11 pages in total. Mr Jacobson sent further emails on 17 February 2015, 2 March, 3 March, 4 March and 11 March 2015. All the later emails in the chain were addressed by Mr Jacobson to Mr Sadra, Mr Otmy and Mr Meshumar. There are various references to "your property". If Mr Otmy read these emails, it would have been clear to him that Mr Jacobson was treating all three men as the owners of Unit 11.
29. Also on 17 February 2017, the strata manager for the block of units that contained Unit 11 sent to all owners a letter that concerned work to remediate the facade of the building and fire order work that was the subject of an order from the Council. On the same date, Mr Otmy forwarded a copy of the email to Mr Meshumar. No reason has been suggested by Mr Otmy as to why he would have taken that step if Mr Meshumar did not have any interest in Unit 11.
30. The strata manager sent out a notice of an extraordinary general meeting of all owners on 24 February 2015, together with an attachment that included a proposed levy on building owners and draft documents in respect of a $1.7 million proposed loan facility to fund the necessary works. On the same day Mr Sadra forwarded the covering email and attachments to both Mr Otmy and Mr Meshumar.

February to April 2015 - Mr Meshumar instructs Ms Tatiana Stack

1. In late February 2015, Mr Meshumar retained Ms Tatiana Stack of Shore Stack Lawyers to assist him in confirming his rights in respect of Unit 11. Ms Stack prepared a draft deed of acknowledgement between Mr Meshumar, Mr Sadra and Mr Otmy to confirm Mr Meshumar's interest in Unit 11. The recitals contained in the deed reflected the material facts alleged by Mr Meshumar: A. In about May 2011, the above named parties entered into a co-ownership agreement (Agreement) in respect of the property located at and known as 11/104-106 Campbell Parade, Bondi Beach, New South Wales being lot 11 in strata plan 49165 (Property). B. Immediately before the making of the Agreement, Meir was the registered proprietor of the Property. C. Under the Agreement, Ofir paid Meir the sum of $200,000 in cash as consideration for one third (1/3) equity stake in the Property and Avshalom paid Meir the sum of $110,000 and agreed to take a mortgage to finance the transfer of the Property from Meir into Avshalom's name alone as consideration for one third (1/3) equity stake in the Property. D. Following entry of the parties into the Agreement, each of the parties obtained ownership of and as at the date of this Deed continues to own one third (1/3) equity stake in the Property. E. This Deed is entered into by the parties by way of acknowledgement of the Agreement and its terms as set out in these Recitals and otherwise in this Deed
2. Ms Stack later amended the deed to remove Mr Sadra as a proposed party. The recitals contained in the amended deed were as follows: A. in about May 2011, Avshalom purchased the property located at and known as 11/104-106 Campbell Parade, Bondi Beach, New South Wales being lot 11 in strata plan 49165 (Property). B. At the time of Avshalom's purchase of the Property, Ofir paid the sum of $200,000 in cash as consideration for a one third (1/3) equity stake in the Property (Equity Stake) and Avshalom acknowledged that he would hold the Equity Stake in the Property on behalf of Ofir. C. This Deed is entered into by the parties by way of acknowledgement of Ofir's beneficial ownership of the Equity Stake in the Property as set out in these Recitals and otherwise in this Deed.
3. These later recitals are inconsistent with the case made at the hearing by Mr Meshumar. Mr Otmy did not purchase Unit 11 in May 2011. He did so on 22 February 2012. Mr Meshumar did not pay $200,000 in cash to Mr Otmy. He claimed to have paid $200,000 to Mr Sadra in about September 2010 when Mr Sadra was the owner of Unit 11. Mr Otmy did not say in May 2011 that he would hold the one third share in Unit 11 on behalf of Mr Meshumar.
4. Clause 1 of the draft deed was a covenant that the matters set out in the recitals were true and correct. Clause 2 was an agreement that before the purchase of Unit 11 by Mr Otmy its fair value was $600,000. Clause 3 recorded that from the time of the purchase Mr Meshumar had been receiving one third of the income from Unit 11. (This was not true, as Mr Meshumar had only intermittently received part of the rent from the property). Clause 4 was an acknowledgement that at the time of purchase the parties agreed that in 3 years, or later upon the request of either party, the parties would sell Unit 11, and Mr Meshumar would be entitled to receive one third of the price less transaction costs.
5. The terms of the draft deed must reflect the instructions given by Mr Meshumar to Ms Stack at the time, and also must reflect his recollection of events as at that time.
6. Mr Meshumar said during cross-examination that he instructed Ms Stack to remove Mr Sadra from the deed because Mr Sadra had been made bankrupt.
7. On about 2 March 2015, Mr Meshumar gave a copy of the deed to Mr Otmy. Mr Meshumar said that Mr Otmy said that he would talk to Mr Sadra about the deed. Mr Otmy recalled them having a conversation to the following effect: Me: What is this? Ofir: It's a document that says I own a third of the Campbell Parade unit. Me: What are you talking about? Where does this come from? Ofir: I bought it from Meir. Me: What do you mean? I don't know anything about this. You've never said anything like this before. Neither has Meir. What are you talking about? Talk to Meir. This has nothing to do with me.
8. On 4 March 2015, Mr Otmy sent an email to Mr Meshumar, copying in Mr Sadra and Mr Adam Stack, which said: hi Mr. Meshumar i would like to informe you that after our conversation yesterday and the paperwork you given me i will no longer have verbal communication with you. your paper work will be sent to you with our contentions and we expect any future commmunication to be in writing. i also asks you to direct your replys to Meir as i no longer want to hear from you senserely avshalom
9. Mr Otmy said in evidence that he was furious with Mr Meshumar after their conversation on 2 March 2015, and that this email was the last time they communicated. On its face, Mr Otmy's email is a rejection of the draft deed prepared by Ms Stack. However, when read closely it is not necessarily an absolute rejection of the assertion that there was any form of binding arrangement. Mr Otmy said: "your paperwork will be sent to you with our contentions", which is consistent with Mr Otmy having rejected the particular terms proffered on behalf of Mr Meshumar. That is understandable, as the draft deed contained the errors to which I have referred above. Mr Otmy foreshadowed that he and Mr Sadra (see the reference to "our contentions") would respond with their contentions as to what the terms of the arrangement were.
10. On 7 March 2015, Mr Sadra sent an email to Mr Meshumar which forwarded Mr Otmy's earlier email, and stated: Hi Ofir can you inform us who is your solicitor, or person that represent you in order for us to respond to your legal documents ,and explain our view on the mater. Thank you Meir
11. This email of Mr Sadra's also is not an absolute rejection of Mr Meshumar's position. It is consistent with Mr Sadra understanding that there may be some arrangement between the three men that would justify an explanation of "our view on the matter".
12. On 10 March 2015, Ms Stack sent an email to Mr Stack (solicitor for Mr Otmy) seeking confirmation that Mr Stack was acting for Mr Otmy and had received the draft deed of acknowledgement. Evidence obtained from Mr Stack demonstrates that he forwarded the email to Mr Otmy that day and asked "what do you want me to do?"
13. Mr Otmy responded to Mr Stack on 12 March 2015 and said the following: hi that document is with Meir he is correcting it and was asking ofir for his attorny address so he can send it back. meantime all you need to do is wait until we agree about this document details and will send it to you for leagal approval. all communication shuold be directed to Meir as i go overseas soon for 2.5 months ta
14. Mr Otmy advised Mr Stack that Mr Sadra was "correcting" Ms Stack's draft deed, which is not consistent with an outright rejection of the existence of any arrangement between the three men.
15. Ms Stack gave evidence that she had the following telephone conversation with Mr Otmy on 16 March 2015: I said: Hi, it's Tatiana from Shore Stack Lawyers, I believe that you are not presently represented in relation to this matter. I am just going to ask you some questions in relation to the Deed of Acknowledgement that we understand was handed to you by our client Mr Meshumar. Have you received a copy? He said: Yes. However, Meir is looking after that Campbell Parade Property for me so you should be speaking to him. I said: You are the registered proprietor of the Campbell Parade Property, in which, as we have been instructed, Ofir, he owns a third. Do you acknowledge this to be the case? He said: Look you should be speaking to Meir I am going overseas soon, there is no problem with Ofir's ownership of a third in the Property, however Meir will be here when I am away. I said: What is Meir's number? He said: It is 0413 055 888. I said: Thank you.
16. Ms Stack also made a file note of their conversation which recorded: Date 16 March 2015 T/C to AO Avshalom --> Meir looks after all matters re Campbell Parade Property, Meir's no 0413 055 888 - (AO said - all good will, Ofir not to worry about his interest in ppty) T/C to client - advised re above
17. Mr Otmy said that he recalled having a conversation with Ms Stack but denied saying words to the effect of 'there is no problem with Ofir's ownership of a third in the property'.
18. Ms Stack acknowledged in cross-examination that the words "there is no problem with Ofir's ownership of a third in the Property" which she claimed in her affidavit she could remember Mr Otmy saying were not specifically set out in her file note. However, Ms Stack did record a statement substantially to that effect when she wrote "Ofir not to worry about his interest in ppty". Ms Stack adhered to her evidence, and the only significant difference between her testimony and her file note was her professed recollection that during the telephone discussion Mr Otmy had acknowledged that the interest was a third interest in Unit 11.
19. I accept that Ms Stack's file note is an accurate summary of what Mr Otmy said. On that basis it records an admission by Mr Otmy that Mr Meshumar had an interest in Unit 11 that would be recognised. Although I found Ms Stack to be an impressive and credible witness, I accept that she may have inadvertently transposed what Mr Sadra subsequently said to her which specifically accepted that Mr Meshumar had a one third interest, when she later prepared her affidavit as to what she recalled Mr Otmy said to her on the subject.
20. A significant aspect of the conversation between Ms Stack and Mr Otmy (which is recorded in both her recollection of the conversation in her affidavit and in her file note) is that Mr Otmy told her that Mr Sadra was looking after Unit 11 for him and that she should speak to him on the subject of the arrangement concerning the ownership of the property. Although the detailed terms of Mr Sadra's agency are not know, the evidence establishes that Mr Otmy allowed Mr Sadra to act as his agent in all dealings with Unit 11, and by this conversation Mr Otmy effectively advised Ms Stack that Mr Sadra was his agent for the purpose of dealing with Mr Otmy's response to the draft deed prepared by Ms Stack.
21. Ms Stack said that Mr Sadra telephoned her on 17 March 2015 and that they had a conversation to the following effect: I said: Hi, Tatiana speaking. He said: Hi, I am Meir Sadra. I said: Thank you for your call, let me just open the file please. I have spoken to Avshalom in respect of our client's one third interest in Unit 11. He said to me that you would be in contact with us on his behalf. He said: Yes, we wanted to discuss that with you. Ofir does not understand it. I said: What do you mean? Do you accept that Ofir owns a third of the Campbell Parade property and his interest is not subject to any encumbrances? He said: Look we don't have a problem with Ofir's ownership of a third of the Campbell Parade Property However, we agreed to sell the Campbell Parade Property in five years Why would Ofir want to sell the Property anyway, rather than wait 2 more years as we agreed If the property is sold now, he may have a problem with the tax office. I said: Could you please clarify? He said: Ofir paid cash for his interest in the property. Also if Ofir receives a large amount of cash from the sale, he may have problems declaring it. Listen, Ofir's investment is safe in the Property and he shouldn't be looking to sell it. I said: I am not sure I understand that point. What do you say was the commencement date of the ownership agreement in relation to the Campbell Parade Property? He said: When the property was transferred to Avshalom - in February 2012 I said: That's not consistent with our instructions He said: Will Ofir consider taking our offer to buy his interest in the property out for $220,000? It's a good deal, otherwise Ofir needs to pay for the fire upgrade to the building I said: How much does he have to pay? He said: The cost of the upgrade is about $2,000,000 for the whole building. Ofir would have to pay a third of what each owner in the building has to pay, $142,000 divided by 3 - that's about $50,000.00. I said: I will discuss this with Ofir. In terms of Ofir's ownership of a third in the property, it is not apparent to me that tax implications should be of concern. Ofir can address these with his accountant. Can I please get your email address? I will get back to you after I speak with Ofir. He said: It is meirsadra@yahoo.com. I said: Thank you. I will be in touch.
22. Ms Stack also made a file note of this conversation. It recorded: T/C to Adam Stack - Adam is not acting for Mier or Avshalom T/C client - provided Avsh's number 17 March 2015 T/C with Meir Meir - Ofir is entitled to 1/3 of the income of the property Ofir is entitled to get commission 1/3 of the value of the property at the end of 5 year term, which expires on February 2017 If we want to sell, we sell, if no agreement - the property will be sold and each will have 1/3 of the property Ofir pays 1/3 of expenses in respect of the property Tax issues - TS - why relevant? No declaration…the matter can still proceed, Ofir owner of 1/3 If you breach the agreement, you can walk away with a smaller amount No intention to sell the property now Mier offer $220K, otherwise $40K or so contribution to the fire upgrade 2mil all up, 142K each unit -->1/3 --> 50K each owner email to contact - meirsadra@yahoo.com.au All up $300K/$400K to clear T/C client - advised re above
23. Mr Sadra accepted that he may have had a conversation that matched the description given by Ms Stack. However, when counsel for Mr Otmy suggested that the discussion may have related to a proposed future deal rather than a deal that had already taken place, Mr Sadra agreed. I find that Mr Sadra accepted that he had the conversation with Ms Stack in accordance with her evidence. The evidence does not objectively support the suggestion that there was any future proposal to which the conversation could have related. In any event, the terms of the conversation both as related by Ms Stack and as recorded in her file note clearly concerned an existing state of affairs that arose out of some earlier transaction.
24. On 19 March 2015, Ms Stack sent an email to Mr Sadra. The email referred to their discussion earlier that day and enclosed a draft of the deed of acknowledgement. Ms Stack sent a copy of the email to Mr Otmy. It stated: Dear Meir, Further to our discussion earlier today, please find attached proposed draft Deed of Acknowledgement that our client handed to Avshalom on or about Wednesday, 4 March 2015. We will forward you a draft Power of Attorney shortly. As you have proposed making amendments to the documents, we need to re-draft the Power of Attorney in word form to allow for this. Please feel free to elaborate on your position generally, preferably in writing. In respect of the current issues with the property, requiring substantial rectification works, please kindly forward to us a copy of all strata/body corporate documentation in you possession related to that issue so that we can properly advise our client.
25. The draft deed of acknowledgement that was attached to this email was the second version to which the proposed parties were Mr Meshumar and Mr Otmy. It contained the errors to which I have referred above.
26. Although this letter did not refer to the detail of Ms Stack's conversation with Mr Sadra, it does confirm that Ms Stack was engaged in a process whereby the detail of the proposed deed of acknowledgement would be negotiated in the light of Mr Sadra's expected response.
27. On 25 March 2015, Ms Stack received an email from Mr Sadra that attached an email that he had received from the strata manager of 102-106 Campbell Parade. Mr Sadra said: Hi Tatiana, I am writing in relation to Ofir Meshumar. It is important that the following information is made clear to him so he is aware of the funds that need to be contributed. I have attached the minuets from the strata meeting held 3rd of March. I will also forward you a few key points for the deed that you wish to draft. Thanks Meir
28. Counsel for Mr Meshumar asked Mr Sadra about this email. Mr Sadra's explanation as to why he sent it was not clear: Q. So you sent that to Ms Stack, Mr Meshumar's lawyer, that it was important that the information there be made clear to him so he is aware of the funds that need to be contributed. A. To start, I didn't know who was, you know, whoever, I mean, the solicitor that approached me. I thought by providing this document and put a few writing, I'm supporting his story, whatever he's telling them. Q. So you're content to go along with the story. Is that right? A. Yes. How do you mean? I don't know. Q. You were happy to go along with some sort of fictional story. A. I just thought I doing a favour by supporting his version, whatever he told them, that is about some person or whatever. Q. You were happy to say that to his lawyer, were you? A. I didn't know it's his lawyer. I actually thought it's some people from the development. Q. But if you just turn back to page 78, and if you go to the bottom of the page, that's where Ms Stack attaches a copy of the draft deed, right? A. Sorry, 78? Q. Tab 78, the first page, you go towards the bottom of the page. A. 648 is the page? Q. Yes. See where it says, "Dear Meir"? A. Yes. Q. "Further to our discussion earlier today, please find attaches proposed draft deed of acknowledgment that our client handed to Avshalom." A. Yes. Q. Then if you turn over the page to 649, an email sent from Tatiana Stack, and it says, "Principal solicitor at Shore Stack Lawyers." A. Yes. Q. Did you understand that Ms Stack was a lawyer? A. Yes, I understood that she's a lawyer. Q. Sorry, I thought your answer before A. No, I didn't say, but I wasn't sure which she's his lawyer or, you know, the people that he's engaged with. Q. All right. But you were happy to make representations to a lawyer, whether his lawyer or someone else's lawyer, that you thought were false. A. I didn't see it like that. Sometimes we support each other with the story, but we don't go along with it.
29. I consider Mr Sadra's rationalisation of his communications with Ms Stack to be improbable. In particular, I do not accept that Mr Sadra provided the email from the strata manager merely to do Mr Meshumar a favour by supporting some illusory transaction that he had told his solicitor about. Ms Stack clearly asked in her 19 March 2015 email for documentation to explain the substantial rectification works, and Mr Sadra responded so that it would be clear to Mr Meshumar what funds he would need to contribute. Mr Meshumar could only have had that need if he had a proprietary interest in Unit 11.
30. On 9 April 2015, Ms Stack sent an email to Mr Sadra requesting that he provide her with his key points in respect of the draft deed. Mr Sadra responded on the same day and copied in Mr Otmy and Mr Meshumar. He said: Hi Tatiana Key point 1. Will confirm receiving money from Ofir. 2. will confirm Offir receiving 1/3 share equity in unit (lot 2 -106 campbell parade Bondi beach ). 4. The share value will be determined by bank valuation of the property. 4. The term of the agreement is for five (5) years, expiring on the 25/02/17. 5. At the end of the term Ofir is entitled to sell his share.
31. Mr Sadra appears to have confirmed that Mr Meshumar had a one third interest in Unit 2 of 102-106 Campbell Parade rather than Unit 11.
32. Counsel for Mr Meshumar asked Mr Sadra about the anomaly of the reference to Unit 2 rather than to Unit 11: Q. Firstly, the lot reference there, you intended to refer to lot 11, didn't you? A. No. Q. The deed that was sent to you concerned lot 11. Correct? A. Yes. Q. Mr Otmy was the owner of unit 11, wasn't he? A. Yes. Q. Mr Otmy had no interest in unit 2? A. No. Q. You don't have an interest in unit 2, do you? A. It belongs to my brother. Q. So it's not your property, is it? A. It's not my property. Q. You have no interest in unit 2 currently? A. No. Q. Or prior. In the period 2010 until now have you had any interest in unit 2? A. The only reason is that it belongs to my brother. That's the only interest.
33. Mr Sadra did not explain why the email referred to Unit 2. When counsel for Mr Otmy asked Mr Sadra whether the email indicated that there was a proposal on foot in relation to a deal involving Unit 2, Mr Sadra said: 'No'.
34. It is not clear on the evidence what the position was in relation to Unit 2. As the transcript extract shows, Mr Sadra gave evidence that he had no interest in Unit 2 apart from the fact that it belonged to his brother. Counsel for Mr Otmy suggested to each of Mr Meshumar, Ms Stack and Ms Bergman that there was a proposed deal in relation to Unit 2. Mr Meshumar said that the only deal related to Unit 11. Ms Stack said that the only dealings she was involved in related to Unit 11. Ms Berman said that she never heard Mr Meshumar speak of a deal in relation to Unit 2.
35. When asked about the email sent by Mr Sadra to Ms Stack, Mr Meshumar suggested that Mr Sadra must have referred to Unit 2 by mistake. When asked about the same email, Mr Otmy admitted that he was copied into the email but said that he was not sure that he read it at the time. He said that he had left it to Mr Sadra to correspond on his behalf. When it was put to him that the reference to Unit 2 was simply a typographical error, he responded: 'No'.
36. I am satisfied that the reference to "lot 2" was a typographical error and that Mr Sadra intended to refer to Unit 11. The evidence is not consistent with Mr Sadra having any rational basis for intending to refer to Unit 2. Mr Sadra's email is a clear statement of Mr Sadra's understanding that Mr Meshumar had a one third equity in Unit 11 for which he had paid money to Mr Sadra.
37. The email shows that it was Mr Sadra's position that the parties had agreed that Unit 11 would be held by them for five years expiring on 25 February 2017, after which Mr Meshumar would be "entitled to sell his share". To the extent that there is any unresolved difference between Mr Meshumar on the one hand and Mr Otmy and Mr Sadra on the other, as to whether Unit 11 was to be held for three or five years, the longer period has now expired.
38. On 10 April 2015, Mr Otmy replied to Mr Sadra's email of 9 April 2015, which had been copied to Mr Otmy, in a brief email that said: thanks that is what we want!!
39. This is a significant response by Mr Otmy. It is an implied admission of the correctness of the statements made by Mr Sadra in his email. I have noted above that the draft deed of acknowledgement prepared by Ms Stack on Mr Meshumar's instructions contained errors when measured against the case that Mr Meshumar has sought to make in these proceedings. The resistance of Mr Sadra and Mr Otmy to the terms of the draft may in part be a reflection of the errors in it, and also that Mr Sadra and Mr Otmy wished to achieve a different outcome in relation to the terms of the agreement concerning what the parties would do with Unit 11. For instance, Mr Meshumar wanted a sale after 3 years, while Mr Sadra and Mr Otmy wanted a five-year term.
40. Importantly, par 1 of Mr Sadra's email is the only specific evidence, other than Mr Meshumar's oral evidence, that Mr Meshumar ever paid any money to Mr Sadra. Paragraph 2 is a specific acknowledgement that the effect of whatever transaction took place was that Mr Meshumar became entitled to a one third share in the equity in Unit 11. In his final written submissions, Mr Otmy claimed that the only evidence of Mr Meshumar ever paying $200,000 in cash to Mr Sadra was in Mr Meshumar's own testimony. In my view Mr Sadra's 9 April 2015 email is evidence that Mr Sadra did receive money from Mr Meshumar, although the amount received was not stated.
41. Also in his final written submissions, Mr Otmy attempted to explain away Mr Sadra's 9 April 2015 email by describing it as "equivocal" and asserting that it was "couched in the future tense". He claimed it was "nothing more than part of Mr Sadra and the plaintiff's 'wheeling and dealing'". I do not accept this submission. I can discern nothing in Mr Sadra's 9 April 2015 email, or Mr Otmy's 10 April 2015 reply, which suggests that either man was doing anything other than responding genuinely to the enquiries initiated by Ms Stack. I see nothing in the emails that would justify a conclusion that they did not reflect Mr Sadra's and Mr Otmy's understanding of so much of the arrangement that they had with Mr Meshumar as is dealt with in Ms Stack's second draft deed and the two emails.
42. Mr Otmy's submissions did not grapple with the effect of his 10 April 2015 response to Mr Sadra's email of the following day. I conclude that Mr Otmy effectively ratified the response made on his behalf by Mr Sadra, in that he accepted that Mr Meshumar had paid money to Mr Sadra for a one third interest in Unit 11, but that Mr Otmy contended that the arrangement between the parties was in accordance with the last three numbered points in Mr Sadra's 9 April 2015 email.
43. On 22 April 2015, Ms Stack sent a letter to each of Mr Otmy and Mr Sadra advising them of Mr Meshumar's intention to commence proceedings to recover his alleged interest in Unit 11.

Events following April 2015

1. On 10 June 2015, Mr Meshumar lodged a caveat in respect of Unit 11. The caveat was apparently prepared by Ms Stack on Mr Meshumar's instructions. It claimed: "A one third interest in the land, free of any encumbrances". The facts upon which the claim was made was stated as follows: The agreement entered into by the Caveator, AVSHALOM SHER OTMY (registered proprietor) and MEIR SADRA (former registered proprietor) in about August/September 2010 inter alia granting the Caveator a one third equitable interest in the Land, free of any encumbrances for valuable consideration fully paid by the Caveator to the said OTMY and SADRA.
2. Mr Meshumar accepted in cross-examination that in-so-far as this statement of facts appears to suggest that consideration was paid to Mr Otmy as well as Mr Sadra it was incorrect, and Mr Meshumar effectively said that he did not know why his lawyer had expressed the facts in the way that she did following his instructions to her.
3. On 14 December 2015, he commenced these proceedings.

Consideration of evidence

1. It is appropriate to begin the consideration of the significance of the evidence by recalling the way in which Mr Meshumar has pleaded his case. He has alleged that in a transaction between himself and Mr Sadra in return for payment of $200,000 in cash Mr Sadra orally declared an express trust in his favour of a one third interest in Unit 11. That transaction occurred on the basis of a number of statements by Mr Sadra as to what "would" happen in the future. Mr Meshumar then alleged, as a separate transaction, that Mr Sadra transferred Unit 11 to Mr Otmy following Mr Otmy having made oral assurances to Mr Meshumar to the effect that his beneficial interest in the property would be preserved, which caused Mr Meshumar to believe that there was no need for him to take any steps to preserve his beneficial interest in Unit 11, so that he did not attempt to do so. Consequently, Mr Meshumar says that it was unconscionable for Mr Otmy to refuse to recognise Mr Meshumar's interest in the property, so that he now holds Unit 11 on a constructive trust as to one third for Mr Meshumar.
2. Mr Meshumar did not plead that any agreement was entered into in the sense of an enforceable contract with either or both of Mr Otmy and Mr Sadra. Notwithstanding the evidence that he gave concerning the involvement of all three men in the initial transaction that he alleged occurred, Mr Meshumar did not plead that there was a contractual joint venture between the three men. Nor did Mr Meshumar plead that the transfer of the title to Unit 11 from Mr Sadra to Mr Otmy was a variation of the original joint venture agreement to accommodate the perceived risk of Mr Sadra's bankruptcy. Mr Meshumar did not in any event grapple in his pleading with the consequences of Mr Otmy having granted a mortgage to secure a loan of $500,000 to enable completion of the purchase of Unit 11 for $620,000. I mention the fact that Mr Meshumar did not plead his case in contract as it is evident from my analysis of the evidence above that it may at least have been arguable that the three men entered into some form of contractual joint venture.
3. Mr Meshumar's consideration of the significance of the evidence available to him caused him to understand and claim that Mr Sadra made an oral express declaration of trust. Whether or not that was part of a separate transaction or a wider joint venture agreement, his claim became susceptible to being defeated by the absence of writing, unless Mr Meshumar was able to establish part performance or an estoppel or constructive trust that binds Mr Otmy. If the initial declaration of trust is found to be invalid or unenforceable, then Mr Meshumar faces the possibility that even if he establishes that Mr Otmy gave him the alleged assurances before Unit 11 was transferred to him, Mr Meshumar's case may fail because it is found that Mr Meshumar had no interest in Unit 11 that could be preserved. That finding would give rise to an issue as to whether the effect of Mr Otmy having given the assurances was that he became bound by a constructive trust to give effect to the interest in Unit 11 that he knew Mr Meshumar was claiming, whether or not that interest was technically enforceable.
4. It is clear that Mr Meshumar has claimed that the initial source of his interest in Unit 11 was an oral express trust declared by Mr Sadra in return for payment of $200,000, and not a common interest trust of the type recently considered by Slattery J in Smilevska v Smilevska (No 2) [2016] NSWSC 397 at [159]-[165]. Such a trust is a constructive trust and accordingly is by reason of s 23C(2) of the Conveyancing Act effective notwithstanding the absence of writing in its creation. The present is a case where Mr Sadra as owner of Unit 11 is alleged to have declared that he held a one third interest in the property on trust for Mr Meshumar in return for payment, and it is not a case that Mr Sadra and Mr Meshumar formed a common intention as to the proportions in which Mr Sadra would hold the title to the property for the benefit of the two men, on the basis of which the two men then contributed in some agreed way to the acquisition of the property. It may be wondered why the two situations are treated so differently, but it is clear that s 23C applies to the case pleaded by Mr Meshumar.
5. I will now consider whether the evidence establishes the transactions alleged by Mr Meshumar, putting aside until later the effect of the absence of writing and the other defences raised by Mr Otmy.
6. I begin by observing that I have not found the testimony given by the principal witnesses, Mr Meshumar, Mr Otmy and Mr Sadra, to be sufficiently reliable to provide a sound foundation for making critical findings of fact, and I have primarily derived my conclusions from a careful analysis of the objective evidence that is available. That process of reasoning has been supported by my ability, with appropriate reservations, to rely upon the evidence given by Ms Stack and Ms Berman. The present is a relatively extreme example of a case that requires the approach described by Sackar J in Campbell v Campbell that I have outlined above. It requires a careful approach to the analysis of the objective evidence.
7. A primary aspect of Mr Otmy's defence was to submit that the evidence given by Mr Meshumar was insufficient to establish that, in or about late 2010, he had available $200,000 in cash, or that he paid that amount to Mr Sadra in return for a one third interest in Unit 11. I accept the submission that Mr Meshumar's testimonial evidence was not sufficient for that purpose, and that the proper course will be to reject his evidence if Mr Meshumar's claim is not corroborated by sufficient objective evidence.

Alleged payment by Mr Meshumar for a one third interest in Unit 11

1. The first matter to consider is whether or not Mr Meshumar paid $200,000 to Mr Sadra in exchange for a one third interest in Unit 11. First, I will address considerations that weigh against Mr Meshumar. Second, I will address considerations that weigh in Mr Meshumar's favour. Third, I will explain the conclusions that I have drawn from the evidence.

Considerations that weigh against Mr Meshumar

1. The following considerations cause me to conclude Mr Meshumar's testimony by itself was insufficient to prove that he paid $200,000 to Mr Sadra in the context of the transaction asserted by Mr Meshumar.
2. It is inherently improbable in the dealings of ordinary reasonable people that they would pay $200,000 in cash to a person with whom they only had occasional dealings without evidence in the form of a receipt or some document of title to the interest intended to be acquired as a result of the payment.
3. The sage observations by Bryson JA in Khoury cannot too often be repeated: [33] … It seems very remarkable and strange that the parties did not put their arrangements in writing … It must be obvious to anyone with any business experience and to any adult who gave any thought to his or her own interests that an arrangement involving significant sums of money about something so important as ownership of a family home should be written down. There has been a law requiring dealings with land to be in writing if they are to be effective in England for well over three centuries, and in Australia for as long as there has been a legal system here, and what that law requires is no more than reasonable people would do if they considered their own interests.
4. In the present case Mr Meshumar did not seek or obtain a receipt or a document of title before he paid, as he claimed, the $200,000 in cash to Mr Sadra.
5. Mr Meshumar's conduct in preparing and requiring Mr Sadra to sign a loan agreement in relation to the loan of $20,000 shows that Mr Meshumar was aware that prudent conduct required that appropriate documentary evidence be produced in relation to a transaction that may need to be enforced, and that he was capable of preparing adequate documentation himself.
6. Mr Meshumar's explanation that he was persuaded not to insist upon documentation of the acquisition of the interest he claimed in Unit 11 because he was only a temporary resident and was prevented by law from acquiring an interest in a pre-existing dwelling has some force, but that force is not compelling having regard to the obvious risks involved in paying $200,000 in cash to a relative stranger without documentary proof.
7. In any event, Mr Meshumar could have demanded that Mr Sadra sign a single receipt that Mr Meshumar could have kept with his confidential papers.
8. Nowhere in the evidence is to be found any mark of the existence or payment of the $200,000 in cash, and were it not for the single acknowledgement by Mr Sadra on 9 April 2015 that he would confirm receiving money from Mr Meshumar (and Mr Otmy's apparent endorsement of that statement in his 10 April 2015 response) there would have been no evidence at all of the existence or payment of that cash.
9. There is evidence in the form of the draft deed prepared by Mr Stack on 14 February 2011, and in Mr Meshumar's evidence of his understanding of that draft deed, that Mr Meshumar and Mr Sadra thought that Mr Otmy's two payments of $50,000 and $260,000 were the source of both Mr Meshumar's and Mr Otmy's payments to Mr Sadra (whether they were a loan as suggested at the time by Mr Sadra, or a payment for two thirds of the ownership of Unit 11 as contended for by Mr Meshumar). Yet Mr Otmy produced evidence that the payments were made from his own funds, and this seems ultimately to have been accepted by Mr Meshumar. Not only did the payment of $310,000 not fit neatly into the requirement that $400,000 be paid for a two thirds interest in a $600,000 property, but there remained no positive evidence that traced the existence or payment of any amount of $200,000 in cash.
10. The proposition that Mr Meshumar had $200,000 or more in cash in September 2010 depends entirely on his own uncorroborated testimony.
11. Mr Meshumar said that he was given the cash by his mother, but did not call his mother to give evidence to confirm that she had remitted the money to him, and her absence as a witness was not explained.
12. Whether or not Mr Meshumar and his legal representatives did not act quickly enough to obtain evidence from Western Union of the alleged remittances by Mr Meshumar's mother, the fact is that Mr Meshumar was not able to tender any documentary evidence that the remittances had been made.
13. Mr Meshumar gave four separate explanations for why his mother remitted to him such a large amount over the years in numerous separate amounts of the order of $450 twice per week. The four reasons are not necessarily inconsistent, but taken as a whole they call for suspicion. The first reason was that Mr Meshumar's mother did not like carrying large amounts of cash. The second reason was that she wanted to set Mr Meshumar up. The third reason was that she wanted to show that Mr Meshumar had the ability to support himself as a student and as a temporary resident in Australia. The final reason was that she did not wish to retain any substantial balance in her bank account because that might impact on the pension that she was entitled to receive from the government of Israel.
14. If one of Mr Meshumar's mother's purposes was to provide him with funds to demonstrate to authorities in Australia that he had the ability to support himself, that purpose was not furthered by Mr Meshumar keeping the money in cash under a carpet or under a pile of clothes in his wardrobe.
15. Further, it was plainly inherently risky for Mr Meshumar to retain such a large sum of money in cash in his apartment, and even allowing for the evidence of Mr Meshumar's impulsiveness (and even allowing for possible cultural differences, of which there is no evidence and I make no positive finding) the very assertion by Mr Meshumar that he retained the money in cash requires considerable suspicion.
16. The elements of the transaction that Mr Meshumar claims he entered into with Mr Otmy and Mr Sadra in September 2010 are inherently commercially unsound. Unit 11 was said to be worth $600,000, but the amount of the prior mortgage that was paid out in February 2012 was about $420,000. Mr Meshumar's case is that he and Mr Otmy agreed to pay $200,000 each on the basis that they would each be entitled to an interest equal to one third of the unencumbered value of the property. Mr Sadra was to be solely responsible for the mortgage. If Mr Meshumar's case is to be accepted, Mr Sadra received $200,000 from him and $310,000 from Mr Otmy, which is far in excess of the $400,000 required. Mr Meshumar did not even attempt to explain these numbers, which do not add up.
17. Mr Meshumar gave no explanation for why he and Mr Otmy would have entered into a transaction under which they would carry the risk that Mr Sadra (who they suspected to be in financial difficulty) would not be able to repay the mortgage.
18. In a similar way the arrangements that Mr Meshumar claims he made with Mr Otmy and Mr Sadra when the title to Unit 11 was transferred to Mr Otmy in February 2012 were commercially unsound. If, as happened, $500,000 was borrowed on mortgage to finance the purchase of Unit 11 at a price of $620,000, any assurance by Mr Otmy that Mr Meshumar's interest in the property would be preserved was at risk because there was only equity of $120,000 to support two one third interests for which $200,000 each had been paid.
19. Mr Meshumar's recollection cannot be accepted as being sound given that in connection with the preparation by Ms Stack of her draft deeds of acknowledgement Mr Meshumar apparently gave her instructions that were materially inconsistent with the case he put during the hearing.
20. It may be noted at this point that Mr Otmy's reliance on the existence of the ADHD from which Mr Meshumar suffers to argue that Mr Meshumar was an unreliable witness is two-edged. It is true, as I have noted above, that Mr Meshumar's psychological disability appears to have diminished the effectiveness of his evidence in this case. However, it also shows that Mr Meshumar was impulsive and prone to emotional behaviour. While the matter cannot be judged scientifically, allowance should be made for the possibility that some of the conduct of Mr Meshumar upon which he relies in support of his case should not be so starkly considered to be improbable conduct for a person of ordinary reasonable commercial prudence, as Mr Meshumar's disability could well have affected his judgment.
21. The inability of Mr Meshumar to satisfactorily prove in a positive way that he had $200,000 in cash that he paid to Mr Sadra does not exclude the possibility that the events occurred as Mr Meshumar claimed. Some people do accumulate large amounts of cash. Some people do engage in cash transactions notwithstanding that it is imprudent to do so. Mr Meshumar was a relatively recent immigrant to Australia with only a temporary resident entitlement at the time. He was part of what was described as the Israeli expatriate community in the eastern suburbs. He had the psychological disabilities that have been described above.

Considerations in Mr Meshumar's favour

1. The following are countervailing considerations to those that would tend to cause the Court to reject Mr Meshumar's claim.
2. The effect of the communications between Mr Stack, Ms Stack, Mr Meshumar, Mr Otmy and Mr Sadra that took place between 2 March and 10 April 2015 that I have discussed above at pars 245 to 278 provide strong, if not compelling evidence, and on Mr Otmy's part admissions, that as at that time both Mr Otmy and Mr Sadra thought that Mr Meshumar was entitled to a one third interest in Unit 11 and that he had paid consideration to Mr Sadra for that entitlement.
3. I primarily put weight on Mr Otmy's statement to Ms Stack on 16 March 2015 that "not to worry about his interest in ppty" (par 253), and Mr Otmy's 10 April 2015 confirmation (par 275) of Mr Sadra's 9 April 2015 email in which he said to Ms Stack: "1. Will confirm receiving money from Ofir. 2. Will confirm Offir receiving 1/3 share equity in unit" (par 267).
4. My preparedness to act on the admissions made by Mr Otmy to Ms Stack is enhanced by my acceptance of her as being a highly credible witness.
5. With respect to the admissions made by or on behalf of Mr Otmy, it is well established that the Court is not obliged to act upon them or treat them as being conclusive, and the party making the admissions may lead evidence to explain or qualify the apparent effect of the admission: Damberg v Damberg (2001) 52 NSWLR 492; [2001] NSWCA 87 at [151], where Heydon JA (as his Honour then was, and with whom Spigelman CJ and Sheller JA agreed) said: There is the informal out-of-Court admission, but this may be contradicted by other evidence. The Court can choose between the admission and the other evidence, and indeed the Court is not bound to accept the admission as correct even if it is not contradicted.
6. My preparedness to accept the effect of the admissions and to act upon them has been substantially reinforced by the fact that Mr Otmy did not in my view make any serious attempt to explain or qualify the effect of the admissions, when he should have been in a position to do so if there was some alternative explanation.
7. Mr Otmy was not able to suggest any alternative interpretation that should be placed on that evidence, and was only able to respond by evasion or unsubstantiated assertions that the communications related to some extraneous or proposed transaction.
8. Mr Otmy invited Ms Stack to communicate with Mr Sadra to learn his and Mr Sadra's response to the terms of the second draft deed of acknowledgement prepared by Ms Stack, and whether or not Mr Otmy formally clothed Mr Sadra with the authority to speak on his behalf, Mr Otmy effectively admitted the core of the matters acknowledged by Mr Sadra by Mr Otmy's 10 April 2015 email.
9. These communications occurred in a serious context in which Mr Otmy and Mr Sadra knew that Mr Meshumar was attempting with the aid of his solicitor to obtain agreement to a deed of acknowledgement of his rights in respect of Unit 11, which justifies the Court in placing substantial weight on the statements of understanding and admissions made by Mr Otmy and Mr Sadra.
10. In deciding that I should act upon the admissions made by Mr Otmy, I have not ignored the effect of his 4 March 2015 email to Mr Meshumar (par 245 above) in which he responded to being given a copy of the draft deed of acknowledgement prepared by Ms Stack by saying that he would no longer have any verbal communication with Mr Meshumar, who should deal with Mr Sadra. On one view, that email could be interpreted as being a rejection of the contents of the draft deed. However, it included a request that Mr Meshumar direct his communications to Mr Sadra, and was followed by the making of the admissions that I have relied upon.
11. Although only a single passing event, Mr Otmy's response on 4 February 2015 to Mr Meshumar's complaint about not having received any payments since 1 August 2014, in which Mr Otmy said that he would ask Mr Sadra, followed as it was by the making of a number of payments into Mr Meshumar's account, is telling evidence, as it is inconsistent with Mr Otmy believing that Mr Meshumar had no interest in Unit 11 (see pars 230 to 233 above). The evidence is all the more telling because Mr Otmy was unable to provide any response to it, beyond saying that he could not recall receiving Mr Meshumar's text, and did not know what it related to.
12. Although not as compelling as that evidence, the circumstances in which Mr Sadra on Mr Otmy's behalf involved Mr Meshumar in dealing with the problem of having to contribute to the remediation costs of the building in which Unit 11 was situated (pars 236 and 237 above) are supportive of a conclusion that Mr Otmy and Mr Sadra treated Mr Meshumar as having a liability to contribute to any levy imposed on the unit holders.
13. The evidence that Mr Meshumar was effectively treated as an owner of Unit 11 along with Mr Otmy and Mr Sadra for the purpose of exploring the potential sale price for the unit (pars 234 and 235 above) is perhaps somewhat less persuasive, but is still some evidence that Mr Otmy treated Mr Meshumar as having an ownership interest in Unit 11.
14. Although the evidence given by Ms Berman of the express and implied admissions made by Mr Otmy that Mr Meshumar was a part owner of Unit 11 (see pars 216, 218 to 220 and 226 to 229 above) may not have carried great weight in the absence of the other evidence that I am discussing, it does tend to establish that on a number of occasions Mr Otmy made consistent admissions that support Mr Meshumar's case.
15. The document that I have called the A4 document, and that I have analysed at pars 190 to 198 above, is uncannily consistent in relatively precise detail with the arrangement between the parties concerning the ownership of Unit 11 that is alleged by Mr Meshumar. I have found that the document was prepared, or substantially prepared, by Mr Sadra. As the document not only recorded past events concerning the receipt of rent for Unit 11, as well as the costs of the transfer of the property to Mr Otmy, but also provided for the future responsibility for the new mortgage in a differential manner as between the three men, it is inherently likely as Mr Meshumar claimed that Mr Otmy participated in the discussion of the document along with Mr Meshumar and Mr Sadra. Far from the A4 document being ambiguous and irrelevant as Mr Otmy claimed, it is hard to conceive how Mr Sadra could have prepared a document containing the information in the A4 document at about the time of the transfer of Unit 11 to Mr Otmy, if it did not record information relevant to the ownership of the property and the respective entitlements of the three men. I consider the existence of this document to be very telling in Mr Meshumar's favour.
16. Although of lesser significance, the fact that Mr Otmy provided to Mr Meshumar the correspondence from Mr Klimt that provided evidence of the costs set out in the A4 document that Mr Meshumar claimed he was asked to pay by the other two men supports the conclusion that I have reached concerning the significance of the A4 document, and also supports Mr Meshumar's claim generally (see pars 208 to 213 above). Mr Otmy's unconvincing rationalisation of the reason for his sending the information to Mr Meshumar adds weight to the natural inference that Mr Otmy was treating Mr Meshumar as having a liability to contribute to the costs of the transfer of Unit 11 to him.
17. The granting by Mr Sadra to Mr Meshumar of the power of attorney considered in pars 168 to 176 above should also not be left out of account, even though the power of attorney was not a direct or effective way of acknowledging that Mr Meshumar had a proprietary interest in Unit 11.
18. The unsatisfactory nature of the evidence given by Mr Meshumar to support his claim that he had $200,000 in cash and gave it to Mr Sadra is counterbalanced to a considerable extent by the unsatisfactory nature of the evidence given by Mr Otmy concerning his payment of $310,000 to Mr Sadra. As I have recorded above, Mr Otmy initially deposed that he had not made any loans to Mr Sadra, and he subsequently corrected that evidence to say that he made loans totalling $310,000. If those payments were loans, they were not documented. Mr Otmy did not provide any positive evidence concerning the terms of the loans. He did not explain how the loans were dealt with in conjunction with the transfer of Unit 11 to him, if they in fact were dealt with as part of that transaction. The sale price was $620,000, but Mr Otmy borrowed $500,000 to pay out the prior mortgage of $420,304.31. Of the $500,000, an amount of $68,826.94 was apparently paid to Mr Otmy. While it is true that there is no objective trace of the $200,000 in cash that Mr Meshumar claimed that he paid to Mr Sadra, there is equally no explanation by Mr Otmy concerning the arithmetic of his transaction with Mr Sadra that would explain how the $310,000 payment was dealt with as part of the transfer of Unit 11, or any other transaction between Mr Otmy and Mr Sadra. The explanations given by the parties for the transactions that they claimed to have occurred are unsatisfactory on both sides.
19. Finally, the payments that Mr Sadra made to Mr Meshumar, both before and after the transfer of the title to Unit 11 to Mr Otmy, tend to corroborate Mr Meshumar's claim that he was entitled to a proprietary interest in Unit 11 (see pars 145 to 146, 154 to 167 and 230 to 232 above). I acknowledge that there were initially claims by Mr Sadra that the payments were repayments of a loan but that claim appears to have disappeared by the time Mr Sadra was communicating with Ms Stack.
20. I am satisfied that the payments were made as a share of the rent paid by tenants of Unit 11. I am not satisfied that the fact that many payments appear actually to have been made by parties other than Mr Sadra establishes that the source of the payments was other than rent from Unit 11 (although Mr Sadra's evidence leaves open the possibility that the payments were made to replenish money that Mr Sadra had used for his own purposes from rent receipts). The evidence did not establish that there was any transaction between Mr Meshumar and Mr Sadra that did not concern Unit 11 that could have been the reason for the payments.
21. I am satisfied that the reason for the irregularity of the payments was Mr Sadra's financial difficulty and his propensity to rob Peter to pay Paul. While it is true that there was patent ambiguity in how many of the payments were described (such as in the description "lon rent"), that ambiguity is ultimately resolved by the evidence of Mr Sadra's statements to Ms Stack. Finally, although there were not a substantial number of payments to Mr Meshumar and Mr Otmy of identical amounts, the evidence that such payments were made provides some support for the conclusion that Mr Sadra understood that Mr Meshumar and Mr Otmy had equal proprietary interests in Unit 11.

Determination

1. The collective effect of the objective evidence has been to displace to some degree the suspicion and scepticism that are a natural result of a rational consideration of the aspects of Mr Meshumar's evidence considered in pars 294 to 310 above. The disbelief generated by that consideration is not equivalent to disproof, and the evidence generated by the conduct of Mr Otmy and Mr Sadra has led me to feel an actual persuasion as to the existence of an arrangement between Mr Meshumar, Mr Otmy and Mr Sadra in relation to the commercial exploitation of Unit 11.
2. Mr Otmy's defence relied heavily on the submission taken from Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-2 (referred to in par 76 of the extract from Campbell v Campbell set out in par 41 above) that reasonable satisfaction that a particular fact has been proved should not be produced by inexact proofs, indefinite testimony or indirect references. Much of Mr Meshumar's positive case was attacked on the basis that it fell foul of the injunction in Briginshaw.
3. That may be truly said about many individual components of Mr Meshumar's case. But shortcomings in individual components of a plaintiff's case do not require the Court to reject that case without having proper regard to the totality of the evidence.
4. Although I have been prepared to find that there was in fact a commercial arrangement between Mr Meshumar, Mr Otmy and Mr Sadra, that finding does not of itself establish the terms of the commercial arrangement, and in particular whether it included Mr Sadra making an oral declaration of trust of a one third interest in Unit 11 in favour of Mr Meshumar. My acceptance that Mr Otmy made admissions (and Mr Sadra made statements to the same effect) that Mr Meshumar had paid Mr Sadra and had a one third ownership of the property, does not establish the legal effect of whatever transaction was entered into by the three men.
5. It must be remembered that Mr Meshumar pleaded his case on the basis that Mr Sadra said to him before the $200,000 was paid over that he would sell a one third interest in Unit 11 to Mr Meshumar, and also that he would hold one third of the title on trust for Mr Meshumar (par 9 above). Those statements are not consistent. The former takes the effect of a promise to sell. As I have noted, Mr Meshumar did not seek relief on the basis that he had an enforceable contract against Mr Sadra.
6. Mr Meshumar's evidence was that, before he made the payment of $200,000 to Mr Sadra, he had a conversation with Mr Otmy about how he could buy an interest in Unit 11 (par 74 above) and Mr Otmy said: "We will pay Meir and it will stay in his name". That conversation was in terms of a purchase, and Mr Otmy suggested that the title to Unit 11 should stay in Mr Sadra's name. That did not explicitly contemplate that Mr Meshumar and Mr Otmy would receive some immediate proprietary interest in the property. The discussion between the three men that was at the heart of the agreement is set out in par 77 above. Mr Meshumar said that he asked whether Mr Sadra wished to "sell" his unit. Mr Sadra responded in terms of selling two thirds to Mr Meshumar and Mr Otmy for $200,000 each. That language is also more consistent with an agreement to sell rather than the creation of an immediate proprietary interest by way of a declaration of trust.
7. On the other hand, Mr Meshumar's evidence was that at the time he gave the $200,000 in cash to Mr Sadra "Mr Sadra congratulated him on becoming a one third owner of the property" (par 85 above).
8. There is no evidence that Mr Sadra in explicit terms made any declaration of trust, and there is no particular reason to think that any of the three men conceived of the transaction in terms known to equity as a trust. Of course, the use of the word "trust" is not essential and it would be sufficient if there were words or some manifestation of an intention on Mr Sadra's behalf to hold Unit 11 on the basis that all three men were entitled to a proprietary interest in it.
9. One difficulty in finding what was done and what was intended is that I do not consider it to be safe to rely upon Mr Meshumar's evidence of what was precisely said in conversations, and Mr Otmy and Mr Sadra flatly denied that the conversations occurred at all.
10. Some light may be shone on this difficult question by an examination of the draft deeds that were prepared on behalf of Mr Sadra by Mr Klimt on 14 February 2011 (par 122 above), and at a later time by Ms Stack on behalf of Mr Meshumar in February 2015 (pars 238 to 241 above). Those documents are a reflection of the instructions given by Mr Sadra and Mr Meshumar to their solicitors.
11. Although Mr Klimt's draft purported to characterise the payment acknowledged by Mr Meshumar and Mr Otmy as a loan, by cl 2 it assigned 66% in any income from Unit 11 and required them to pay 66% of identified costs. The period of the arrangement was specified in cl 3 to be five years, and cl 4 would have entitled Mr Meshumar and Mr Otmy to receive 66% divided equally between them from the proceeds of sale of the property, in discharge of the loan, and Mr Sadra was to be solely responsible for any liabilities in respect of Unit 11 exceeding 33% of the net sales price. This draft deed contemplated more than a charge to secure a loan, as it would have given Mr Meshumar and Mr Otmy a right to receive one third each of the net sale price of the property, not just repayment of any money loaned.
12. There is no reason to think that Mr Sadra gave Mr Klimt instructions that were inconsistent with his understanding of the arrangement he had with Mr Meshumar and Mr Otmy. At that stage there was no dispute between the three men. Mr Sadra appears to have thought that the arrangement was a hybrid between a loan and an assignment of the fruits of ownership of Unit 11, being the rent and the ultimate sale price. The draft deed is not consistent with Mr Sadra having declared, or intending to declare, an immediate trust in favour of Mr Meshumar and Mr Otmy. At the least the terms of the draft deed suggest that there was no certainty on the question of the beneficial ownership of Unit 11.
13. The first draft of the deed of acknowledgement prepared by Ms Stack recited that Mr Meshumar had paid Mr Sadra the sum of $200,000 in cash in consideration for a one third equity stake in Unit 11, and that following the parties' agreement each of them obtained ownership of and continued to own a one third equity stake in the property. Although this draft contained inconsistencies with the way that Mr Meshumar has put his case, and assumed that Mr Otmy had only paid $110,000 to Mr Sadra, it did contemplate that the agreement entailed that each of the three men would have an equal one third equity stake in Unit 11. The second draft of the deed of acknowledgement was consistent with the first in this respect, although the removal of Mr Sadra as a proposed party apparently introduced additional errors into the draft. Both versions of Ms Stack's draft deed of acknowledgement provided for Unit 11 to be sold in "3 years, or later, upon request of either party", and for the proceeds of sale after costs of sale to be distributed in equal third shares.
14. These draft deeds support a conclusion that Mr Meshumar and Mr Sadra gave instructions to their respective solicitors at least to the effect that the arrangement was that after the sale of the property each of Mr Meshumar, Mr Otmy and Mr Sadra would be entitled to one third of the proceeds of sale after payment of the costs of sale. There appears to have been some difference in the instructions concerning the length of time that Unit 11 would be held before sale, although the difference between Mr Sadra (five years) and Mr Meshumar (three years, or later on request) may not be significant.
15. Ms Stack's drafts plainly contemplate that Mr Meshumar had an "equity stake" in Unit 11, but the use of that term suggests that Ms Stack was not confident on the basis of her instructions to describe the interest as a present proprietary interest as the beneficiary of an express trust.
16. If the Court starts with the evidence given by Mr Meshumar of his discussions with Mr Sadra and Mr Otmy at about the time he says he paid the $200,000 to Mr Sadra, and then distills the common features from the draft deeds, and finally adds the substance of the admissions made by Mr Otmy in early 2015, it is possible to discern some elements of the arrangement between the three men.
17. As I prefer the evidence of Mr Meshumar to that given by Mr Otmy and Mr Sadra, and notwithstanding that I regard Mr Meshumar's evidence as being far from perfect, I am prepared to hold on the balance of probabilities that the discussions between the three men were in terms of Mr Sadra "selling" one third interests in Unit 11 to Mr Meshumar and Mr Otmy, and that the parties used that concept to mean that the two men would gain an immediate share in the ownership of the property, without regard to any conveyancing niceties. I am sure that the men had no regard to equitable notions of trusts but they did intend that Mr Sadra would remain the full owner of Unit 11 in name only. I do not believe that Mr Meshumar and Mr Otmy would have made substantial loans to Mr Sadra given what they knew about his financial difficulties.
18. Just as there is a high degree of improbability in Mr Meshumar giving Mr Sadra $200,000 in cash, there is not so much less probability in Mr Otmy lending Mr Sadra a substantial sum, whether it be the whole of the $310,000 or some lesser amount.
19. It is at least clear that the $310,000 was paid to Mr Sadra, and it is probable that whatever amounts were paid to him were paid on the basis that both men would acquire an immediate proprietary interest in Unit 11, and that the arrangement was that Mr Sadra would hold the title for the benefit of the three of them equally, and that in consequence Mr Sadra declared orally an express trust in favour of each of Mr Meshumar and Mr Otmy for a one third interest in the property. Their interest was greater than that of purchasers under an oral agreement for sale, and also greater than a right merely to share in a proportion of the sale price of Unit 11 when it was ultimately sold.
20. I find that the terms agreed to by the three men initially were substantially as follows: 1. Mr Sadra, as the legal owner of Unit 11, would deal with the title to that property in accordance with the arrangement. 2. Mr Meshumar and Mr Otmy would each pay a sum of money to Mr Sadra. 3. Mr Meshumar and Mr Otmy would each be entitled to receive one third of the net rental of Unit 11 after payment of outgoings (in Mr Meshumar's case by arrangement with Mr Sadra, after 6 months). 4. Mr Sadra would remain liable for the existing mortgage debt over Unit 11. 5. Mr Sadra would hold Unit 11 for 3 or 5 years (the period is unclear), subject to any other agreement between the parties, when any one or more could buy out the others, or the property would be sold. 6. Mr Meshumar and Mr Otmy would each be entitled to one third of the market value of Unit 11, or if it was sold, the sale price after deduction only of the costs of sale.
21. I find that Mr Sadra's failure to make consistent and regular payments of the rent to Mr Meshumar and Mr Otmy had the effect that the terms of the arrangement changed over time so that Mr Meshumar and Mr Otmy became entitled to receive any unpaid shares of the rent from Unit 11 from Mr Sadra's share of the value or proceeds of sale.
22. I have referred in sub-par (2) above to a term that Mr Meshumar and Mr Otmy would pay a sum of money to Mr Sadra, without referring to the precise amount agreed, because I am uncertain on the evidence as to what those amounts were. I accept that Mr Sadra received payment from Mr Meshumar and Mr Otmy of an amount that satisfied him that he should hold Unit 11 on the basis that Mr Meshumar and Mr Otmy would be entitled to a one third interest each in the rent and the property.
23. As I have acknowledged on a number of occasions, on the one hand there is no direct evidence that Mr Meshumar paid Mr Sadra $200,000 (except for Mr Meshumar's own testimony), but also there is no explanation of how the $310,000 paid by Mr Otmy to Mr Sadra related to the payment for any interest in Unit 11, or any other transaction between Mr Otmy and Mr Sadra. The impossibility of confidently determining on the evidence how Mr Sadra was paid by Mr Meshumar and Mr Otmy for their interest in the venture does not in my view rationally justify the Court in ignoring the objective evidence that the three men did in fact agree to enter into the venture.
24. The Court is faced with a stark question in determining the consideration provided by Mr Meshumar to Mr Sadra for the benefit of the venture entered into by the three men. As considered above, the short point is that there is no objective evidence of the existence or payment of the $200,000 and its payment is denied by Mr Sadra.
25. As I said above when considering the issue of Mr Meshumar's credibility, from his demeanour in the witness box and the sense that a judge may often form that a witness is attempting to give truthful evidence, I was inclined to believe him, but the inherent improbability of his evidence and the lack of direct corroboration creates a considerable barrier to that acceptance.
26. On the other hand, Mr Sadra stated in his email to Ms Stack that he had received money from Mr Meshumar, and Mr Otmy did not disagree with that statement.
27. I have been greatly troubled by the fact that Mr Meshumar's unequivocal evidence is that he personally paid Mr Sadra $200,000 in cash, but the only evidence of any relevant sum being paid to Mr Sadra is the two sums totalling $310,000 that were paid out of Mr Otmy's bank account into the bank account of Mr Sadra. At virtually the last minute in the case Mr Otmy produced evidence overnight that seemed to establish that the whole of the $310,000 was Mr Otmy's own money. There is also the consideration that Recital C of the draft deed of acknowledgement prepared by Ms Stack on Mr Meshumar's instructions expressly stated that the $310,000 represented a payment of $200,000 by Mr Meshumar and the payment of $110,000 by Mr Otmy (par 237 above). The draft deed also asserted that Mr Meshumar paid money to Mr Otmy.
28. In these circumstances I have come to the view that the evidence permits the Court to find on the balance of probabilities that Mr Meshumar provided a substantial consideration to Mr Sadra for his share in the venture, but I am not prepared to make a positive finding that Mr Meshumar paid the $200,000 in cash as he claimed. Nor do I feel able to make any positive finding as to the source of any money paid by Mr Meshumar to Mr Sadra. I have come to the view that the evidence is incomplete and I do not know the reason for that incompleteness. There is sufficient objective evidence inconsistent with Mr Meshumar having paid the $200,000 in cash to Mr Sadra to prevent a finding in Mr Meshumar's favour on the balance of probabilities. However, my finding is that one way or another Mr Meshumar provided adequate consideration satisfactory to Mr Sadra in the first instance and Mr Otmy in the second.

Transfer of title to Mr Otmy

1. It is now necessary to consider what relevantly happened in connection with the transfer of the title to Unit 11 from Mr Sadra to Mr Otmy.

Alleged promise by Mr Otmy to recognise his one third interest in Unit 11

1. It must first be acknowledged that the true commercial basis for the transaction whereby the title to Unit 11 was transferred to Mr Otmy is entirely obscure. That is true whether or not one starts from the assumption that the venture between the three men existed. It was Mr Otmy's case that there was no venture, the payment of $310,000 that he made to Mr Sadra was a loan, and the purchase of Unit 11 was an arm's length transaction. If that were the case, in return for the transfer of Unit 11 for a price of $620,000, Mr Otmy, who had already loaned Mr Sadra $310,000, borrowed $500,000 (of which only $68,826.94 was returned to him), so Mr Otmy had expended about $741,000 to receive title to a property with a sale price of $620,000.
2. It must be accepted that, if the transactions were also intended to support the continuation of the property interest claimed by Mr Meshumar for which he had paid $200,000, the transaction becomes even more commercially improbable. It is not possible on the evidence to resolve the commercial improbability. First, it cannot be known whether the $620,000 was a genuine estimate of the true market value. Secondly, the evidence does not permit a reliable assessment of the true nature and purpose of the payments of $50,000 and $260,000 that Mr Otmy made to Mr Sadra. Thirdly, the numbers may appear somewhat more commercially sound if it is assumed that as part of the venture Mr Sadra would continue to be solely responsible for the $420,304.31 of the mortgage debt that was repaid on settlement, which is an amount that had been borrowed entirely for Mr Sadra's benefit. Strange though that conclusion may be, it seems preferable to finding that Mr Otmy paid out the prior mortgage on settlement without any account being taken of the fact that he had already loaned $310,000 to Mr Sadra. Whatever else may be said, no explanation was given by Mr Otmy as to why he borrowed $500,000 on the basis that $68,826.94 would be returned to him.
3. It is against this background of uncertainty that I have made the following findings of fact.
4. First, I accept the substance of Mr Meshumar's evidence that as time went by Mr Meshumar and Mr Otmy became increasingly alarmed about Mr Sadra's financial position, and they began to fear the possible loss of their investment in Unit 11 if Mr Sadra became bankrupt, and that as a result of his appearing to be the sole owner of Unit 11 the property may have been sold for the benefit of his creditors. A decision was made between Mr Otmy and Mr Sadra that title to the property would be transferred solely to Mr Otmy. Whatever they may have chosen to do, the property could still not be transferred to Mr Meshumar.
5. Second, I accept the substance of Mr Meshumar's evidence concerning his discussion with Mr Otmy to the effect that, even though the title to Unit 11 would be transferred into Mr Otmy's name, Mr Otmy would look after Mr Meshumar's share, and would ensure that he continued to receive a one third share of the income from rent paid less outgoings. This finding follows from my preference for Mr Meshumar's evidence over that given by Mr Otmy, and from the fact that the admissions and conduct of Mr Otmy after the transfer are consistent only with Mr Otmy's acceptance that Mr Meshumar had a continuing proprietary interest in Unit 11. It also follows from my finding that the parties entered into an arrangement in relation to Unit 11 in the first place. Once it has been found that the venture was created in the first place, it becomes probable that some such conversation as that deposed to by Mr Meshumar would have occurred once a decision had been made that the title to the property the subject of the venture would be transferred from Mr Sadra to the sole name of Mr Otmy. Furthermore, if Mr Otmy was of the belief in early 2015 that Mr Sadra had transferred the title to Unit 11 to him free of any interest in the property in Mr Meshumar, he would be expected to have immediately denied any claim to the property made by Mr Meshumar through Ms Stack. Instead, Mr Otmy conceded Mr Meshumar had an interest in the property.
6. Third, I accept that if Mr Otmy had informed Mr Meshumar before the transfer that Mr Meshumar would cease to have any interest in Unit 11 after it was transferred to Mr Otmy, Mr Meshumar would have taken steps to protect his position. Those steps would at least have included seeking legal advice, and the consequence would most probably have been that a caveat would have been lodged against the title to Unit 11, which would have prevented the transfer of the property to Mr Otmy and probably precipitated proceedings such as the present without the need for the Court to deal with the consequences of the transfer. Mr Otmy did not make any serious challenge to Mr Meshumar's evidence that he would have taken steps to protect his interest in Unit 11 if he had not relied upon Mr Otmy's assurances that his interest would be protected in any event. His response was limited to making an argument that Mr Meshumar did not suffer a detriment by reason of his failure to prevent the transfer.

What was the nature of the venture after the transfer to Mr Otmy?

1. Having accepted that Mr Otmy made assurances to Mr Meshumar before the transfer of title to Unit 11, and having accepted that Mr Meshumar would have taken steps to attempt to enforce his interest in Unit 11 had Mr Otmy not made those assurances, it is necessary to consider the terms upon which Mr Otmy held Unit 11 upon becoming registered proprietor. This is a difficult forensic issue to determine. Mr Meshumar gave evidence of his conversations with Mr Otmy but there is no direct evidence of any communications between Mr Otmy and Mr Sadra. The issue is made more difficult because Mr Otmy and Mr Sadra denied all of Mr Meshumar's claims point blank and did not in any way deal with the various facts and admissions that tended to corroborate Mr Meshumar's claims.
2. The question is whether the evidence nonetheless justifies a finding that, when Mr Sadra transferred the title to Unit 11 to Mr Otmy, it was on the basis that he would be the sole registered proprietor of Unit 11 but would hold the property on the pre-existing terms including as to equal beneficial ownership by the three men. Mr Meshumar claimed that Mr Sadra transferred Unit 11 to Mr Otmy on the basis that all three men would continue to own equal shares of the property. Mr Otmy claimed that the transfer of Unit 11 was a straightforward sale of the property by Mr Sadra to him such that he holds 100% of the legal and equitable interest.
3. I do not accept that the transfer of Unit 11 was a straightforward sale of the property by Mr Sadra to Mr Otmy. There are a number of factors relevant to the sale and the conduct of the parties afterwards that are not consistent with a straightforward sale. First, the balance of the purchase price after repayment of the pre-existing mortgage debt was not paid to Mr Sadra, and there is no evidence that it was treated as a partial repayment of any debt owed by Mr Sadra to Mr Otmy. In fact, an amount of $68,826.94 was paid to Mr Otmy.
4. Second, the A4 document, which must have been prepared after the transfer because it contains information concerning the transaction costs, contains detailed figures that appear to be consistent only with an agreement as to how the three men would share the rent and the costs of owning Unit 11.
5. Third, Mr Sadra continued to manage Unit 11 as he had when he was the registered proprietor, and it appears that he exercised free reign as to how the property was managed.
6. Fourth, Mr Meshumar continued to receive payments that I have found on the balance of probabilities were funded out of the rent received from Unit 11, even though the payments were intermittent and irregular in amount, and Mr Otmy personally participated in the making of those payments after Mr Meshumar complained to him that Mr Sadra had stopped making the payments.
7. Fifth, the admissions and other statements that were made by Mr Otmy and Mr Sadra in early 2015 in response to Ms Stack's request that the deed of acknowledgement be executed are not only consistent with Mr Meshumar's claim that he had paid Mr Sadra for a one third interest in Unit 11, but they are also consistent with the continuation of that interest after the transfer to Mr Otmy. The manner in which Mr Otmy and Mr Sadra consulted on the subject as if they both had a stake in responding to the position adopted by Mr Meshumar is also consistent with both men having a continuing interest in the beneficial ownership of Unit 11.
8. Although it is clear that the transfer of Unit 11 was not a straightforward sale of the property by Mr Sadra to Mr Otmy, it does not necessarily follow that Mr Otmy held Unit 11 subject to Mr Meshumar and Mr Sadra having one third interests. The evidence concerning the real legal basis of any continuing venture between Mr Meshumar, Mr Otmy and Mr Sadra from the time of the transfer of Unit 11 to Mr Otmy is very tenuous. While a careful consideration of the objective evidence justifies a conclusion that there was a continuing venture, it does not establish with any precision at all what steps were actually taken to continue the venture to provide a proper foundation for determining the nature and the legal effect of the venture, or its enforceability.
9. The objective evidence allows inferences to be drawn in a very general way about what the three men understood the nature and effect of the venture was. If Mr Meshumar's claim had been made in contract there would have been a real likelihood that the terms of the contract could not have been established with sufficient certainty. As Mr Meshumar's claim is based upon the creation of trusts, the issues of whether the alleged trusts were created, and whether in the circumstances any attempt to create a trust was ineffective, or whether a trust that was created is unenforceable, will ordinarily depend upon the actions of the parties understood with some precision. The evidence may justify a finding that Mr Otmy and Mr Sadra understood that Mr Meshumar had the broad rights that he now claims, but in circumstances where Mr Otmy denies the claims pleaded by Mr Meshumar, the dispute must be determined on the basis of the legal consequences of the parties' actions, not upon the basis of any party's understanding.
10. This is a very significant matter, because while Mr Meshumar was able to give evidence of his conversations with Mr Otmy before Unit 11 was transferred to him, there is no evidence at all concerning the basis upon which Mr Sadra transferred the property to Mr Otmy, save only for the fact that the transfer was made. Mr Meshumar's claim is based upon the assumption that the Court will find that he was the beneficiary of an express trust declared by Mr Sadra as to one third of the beneficial interest in Unit 11, and that his interest continued to the time Unit 11 was transferred to Mr Otmy, so that Mr Meshumar could have prevented the transfer of Unit 11 to Mr Otmy on a basis that would extinguish Mr Meshumar's interest. Mr Meshumar does not appear to have addressed the possibility that the Court would find that the declaration of trust made by Mr Sadra in his favour was either ineffective or unenforceable. If the Court makes either of those findings, then that might have the effect of undermining the basis upon which Mr Meshumar claims the Court should impose a constructive trust on Mr Otmy. That is a matter that I will address below.
11. The fact is that neither the amended statement of claim nor the evidence addresses in any real way the circumstances of the transaction whereby Mr Sadra transferred Unit 11 to Mr Otmy. There is no allegation and no evidence that there was any enforceable agreement between Mr Sadra and Mr Otmy that Mr Otmy would recognise and implement Mr Meshumar's one third beneficial interest in Unit 11. The amended statement of claim is not specific on the issue of whether at the time of the transfer there was an oral agreement between Mr Sadra and Mr Otmy that Mr Sadra would hold the title to Unit 11 on trust for himself and Mr Meshumar and Mr Sadra in equal one thirds, but there is no evidence on this issue. Given the stance taken by Mr Otmy and Mr Sadra of wholly denying Mr Meshumar's version of relevant events, it may always have been a difficult if not an impossible matter for Mr Meshumar to put evidence before the Court to the effect that the transfer was made by Mr Sadra on some basis that would have created or continued the trust interest in Mr Meshumar's favour. The fact is that Mr Meshumar did not attempt to lead evidence on this issue, and did not ask questions on it in cross examination of either Mr Otmy or Mr Sadra.
12. As appears from the reasons that are laid out above, I have been prepared to find upon the objective evidence that both Mr Otmy and Mr Sadra understood that there was a venture in existence that gave Mr Meshumar broadly the principal rights that he has claimed. It does not follow that the evidence justifies a finding concerning the nature and effect of the venture or whether it was enforceable at law. Given the way the amended statement of claim has been pleaded and the absence of any real attempt to establish the legal basis upon which Mr Sadra transferred Unit 11 to Mr Otmy, I could not make any finding that he did so on the basis that Mr Otmy gave him a contractual undertaking to continue to recognise Mr Meshumar's beneficial interest in Unit 11, or a finding that there was some oral agreement that Mr Otmy would hold the property on trust for himself, Mr Meshumar and Mr Sadra. One reason for me taking this course is that the objective evidence concerning the existence of the venture is consistent with the legal arrangements between the three men being entirely contractual.
13. I will consider the legal significance of these findings below, after I have dealt with the question of the validity and enforceability of the oral trust declared by Mr Sadra in favour of Mr Meshumar.

Responsibility for the new mortgage

1. One factor that cannot be ignored is that Mr Otmy borrowed $500,000 to fund the transfer of Unit 11, and granted a valid mortgage over the property that was registered on the title. The evidence establishes that the amount borrowed by Mr Otmy was used to pay out the prior mortgage of $420,304.31, and to pay various transaction costs. A balance of $68,826.94 was paid out to Mr Otmy personally.
2. As I have observed above, Mr Meshumar seeks a declaration that he holds a one third equitable interest in Unit 11, and it is evident that that claim is made on the basis that Mr Otmy is a constructive trustee for Mr Meshumar. Mr Meshumar has said nothing in his submissions about the additional declarations sought in the prayers for relief in the amended statement of claim that Mr Otmy is responsible for all loan and other repayments under the mortgage. The position is unclear, but I have proceeded on the basis that, even though Mr Meshumar has not asked for this second declaration in his submissions, he has not positively abandoned it, and if the Court made the declaration that he does seek without any qualification Mr Meshumar might claim that he was entitled to an absolute one third interest in Unit 11.
3. There is no evidence at all that would support a finding that, as a result of conversations before the transfer of Unit 11 to Mr Otmy, Mr Otmy agreed to be solely responsible for payment of the new mortgage.
4. Mr Meshumar's case did not grapple with the consequences of the new mortgage or the necessary effect that it would have on the nature of the venture between the three men.
5. On the probabilities, it is most likely that the three men intended that the venture would continue with the principal change being that Mr Otmy would hold the title to Unit 11 rather than Mr Sadra. Support for that conclusion may be found in my analysis of what I have called the A4 document (pars 185 to 207 above). The consideration at par 194 suggests that it was contemplated that Mr Sadra would be responsible for $410,000 of the amount borrowed. Of the balance of the $500,000, Mr Otmy received $68,826.94 personally. The document suggests that Mr Meshumar was asked to pay $36,200 which was approximately equal to the transaction costs of the transfer.
6. The evidence does not establish the extent, if at all, that the three men acted upon the terms contemplated by the A4 document.
7. Mr Meshumar's evidence was that he did not accept that he should pay the $36,200 or any other amount, so as the evidence stands Mr Meshumar did not accept any change to the venture that was contemplated by the A4 document.
8. As Mr Meshumar's case did not grapple with the changes to the venture that may have followed the transfer of Unit 11 to Mr Otmy, and Mr Otmy denied any involvement with the A4 document, and both he and Mr Sadra denied being participants in any venture with Mr Meshumar, the Court is not in a position to determine the terms upon which the three men agreed that the title to Unit 11 would be held after its transfer to Mr Otmy. If Mr Meshumar's case had been in contract, there would have been a real question concerning the certainty of the terms. Perhaps different questions arise if the issue is whether Mr Otmy is bound by a constructive trust to hold the title to Unit 11 in a way that preserves Mr Meshumar's interest in Unit 11.
9. It must be observed that Mr Meshumar's evidence was that he was given the assurances by Mr Otmy before the transfer of Unit 11 on 22 February 2012, and the A4 document was produced and discussed in March 2012. The refusal by Mr Meshumar to agree to the terms suggested by the document might therefore not affect the equities subject to which Mr Otmy gained title to Unit 11.
10. It is at least necessary to find that even if the title to Unit 11 was transferred to Mr Otmy on the basis that the initial venture would continue, and that Mr Sadra would continue to be responsible for repayment of the amount of the pre-existing mortgage that secured borrowings in his favour, both Mr Meshumar and Mr Otmy took an equal risk that Mr Sadra would not be able to meet that responsibility.
11. As has been noted, Mr Sadra has in the intervening period been made bankrupt and has been discharged from his bankruptcy, and I would infer that any obligation that he had to Mr Meshumar and Mr Otmy in relation to the venture has been discharged.
12. The consequence would be that even if both Mr Meshumar and Mr Otmy have subsisting beneficial interests in Unit 11, those interests will be in the equity after discharge of the mortgage debt and be subject to the rights of the mortgagee.
13. Consequently, even if Mr Meshumar were to succeed in his claim in these proceedings that he is entitled to a beneficial interest in Unit 11, it would not be appropriate for the Court to make the declaration in the terms that he seeks. Any declaration would have to accommodate the existence of the mortgage on the property. It would also have to accommodate all repayments of mortgage that have been made, as well as many other matters such as receipts and payments of rent, outgoings, and expenditures on such matters as owners corporation levies.
14. Mr Meshumar has sought an order for an accounting concerning all receipts and payments in relation to Unit 11. In my view, if Mr Meshumar otherwise succeeds in these proceedings, a full accounting should take place, and the Court should defer making any declarations concerning the nature of Mr Meshumar's beneficial interest in Unit 11 until the accounting has been completed, and the real substance of his interest is known.

Enforceability of trust declared by Mr Sadra

1. If Mr Meshumar and Mr Sadra engaged in a transaction, as found above, whereby Mr Sadra declared that he held the title to Unit 11 on trust as to one third for Mr Meshumar on certain terms, the first question is whether that trust was valid and enforceable.
2. It is clear that Mr Sadra did not sign any writing whereby the trust could be proved, as required by s 23C of the Conveyancing Act. That section provides: 23C Instruments required to be in writing (1) Subject to the provisions of this Act with respect to the creation of interests in land by parol: (a) no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent thereunto lawfully authorised in writing, or by will, or by operation of law, (b) a declaration of trust respecting any land or any interest therein must be manifested and proved by some writing signed by some person who is able to declare such trust or by the person's will, (c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person's will, or by the person's agent thereunto lawfully authorised in writing. (2) This section does not affect the creation or operation of resulting, implied, or constructive trusts.
3. The effect of the absence of writing is that the transaction could not take effect as a present enforceable declaration of trust: see Khoury per Hodgson JA at [14].
4. Section 23E of the Conveyancing Act relevantly provides: 23E Savings in regard to secs 23B, 23C, 23D Nothing in section 23B, 23C, or 23D shall: … (d) affect the operation of the law relating to part performance.
5. Mr Meshumar claims that the declaration of trust in his favour is valid and enforceable because of part performance of the declaration within s 23E(d). The acts of part performance relied upon are (a) his payment of $200,000 to Mr Sadra in September 2010; (b) the grant to him by Mr Sadra of the power of attorney in respect of Unit 11 in August 2011; and (c) the payment by Mr Sadra of rent payments to Mr Meshumar between 22 March 2011 and 27 February 2015.
6. Before I consider the operation of the doctrine of part performance in this context, it will be relevant to deal with the juridical effect of the application of s 23C in this case, as that may be material to whether or not a constructive trust should be imposed upon Mr Otmy.
7. The trust that Mr Meshumar claims Mr Sadra declared in his favour was an immediately effective oral declaration of trust of land. It has been held that s 23C(1)(a) does not apply, notwithstanding that it could be argued that the creation of a trust is a disposition of land, and instead the declaration is governed by s 23C(1)(b): see Secretary, Department of Social Security v James (1990) 95 ALR 615; Hagan v Waterhouse (No 2) (1991) 34 NSWLR 308 at 385-6; Khoury at [61]; Baloglow v Konstanidis [2001] NSWCA 451 at [185]; and Thompson v White (above) at [134].
8. While s 23C(1)(a) provides that "no interest in land can be created or disposed of except by writing", s 23C(1)(b) only requires that "a declaration of trust respecting any land…must be manifested and approved by some writing". I respectfully accept that the effect of this difference in wording is as stated by the learned editors of Meagher, Gummow and Lehane's Equity, Doctrines & Remedies (5 ed) (Meagher, Gummow and Lehane) at [7-030] as follows: … whereas a transaction which is within para (a), or for that matter, para (c), of s 23C(1) is entirely ineffective unless in writing, a transaction which is within para (b) need only be 'manifested and proved' by some writing. The transaction may be oral provided that it is evidenced by a writing, which need not be contemporaneous with the transaction but may be brought into existence later…
9. Consequently, if the absence of writing in the present case attracts the application of s 23C(1)(b), the consequence will be that the trust that was created is unenforceable, not that it is void. In this way s 23C(1)(b) has a comparable mode of operation to s 54A of the Conveyancing Act, which provides that "no action or proceedings may be brought upon any contract" unless there is the prescribed writing.
10. Thus, if the oral declaration of trust in this case was unenforceable when made because it could not be "manifested and approved by some writing" signed by Mr Sadra, it was a matter for Mr Sadra, or any other person against whom Mr Meshumar sought to enforce his beneficial interest in Unit 11, as to whether or not they would treat the valid but unenforceable trust as being effective, or rely upon the absence of writing to establish the beneficial interest was unenforceable.
11. The doctrine of part performance has generally been applied in the context of the enforcement of contracts for the sale or disposition of interests in land which did not satisfy the applicable derivative of the Statute of Frauds, in the present case s 54A of the Conveyancing Act, by reason that the contract, or some memorandum or note thereof, is not in writing signed by the person to be charged or by some person authorised by that person. As I have noted above, Mr Meshumar did not plead any contract between himself and Mr Sadra, even though the evidence that he led may have supported the existence of a contract. Mr Meshumar's decision not to plead the existence of a contract is not easily explicable given his need to rely upon part performance. Hence, Mr Meshumar has relied upon part performance to overcome the effect of s 23C rather than s 54A.
12. The course taken by Mr Meshumar makes it necessary to investigate whether Equity applies part performance to make good assurances that are ineffective for want of writing, and if so, how the doctrine may operate particularly in relation to the acts that may constitute part performance of an assurance. They are not straightforward questions, as the principles that govern part performance have been developed in a manner that is explicitly connected to the enforcement of contracts that have not been made or evidenced in writing.
13. Indeed, part performance is so consistently addressed in the authorities and by text writers as being a doctrine applicable to the issue of whether Equity may grant specific performance of an oral contract for the sale or disposition of an interest in land that it seems to be assumed that that is the only field of operation of the doctrine: see for example Meagher, Gummow and Lehane at [20-180].
14. The learned editors of that text even discuss at [20-220] doubts that have been raised in the authorities about whether part performance is only relevant to whether specific performance can be ordered, and not where some other equitable relief such as an injunction to enforce remaining obligations under a contract that has wholly been performed by one party is sought. The editors concluded that part performance should be relevant to claims for such other relief, but they clearly did so in the context that the basis of the claim was in contract.
15. In Khoury, Bryson JA observed at [90]: The whole law of part performance is established by judicial authority, and discerning underlying principle is an obscure process. The existence of the doctrine of part performance is expressly recognised in the terms of the Conveyancing Act, not only in relation to s 54A which is the successor to s 4 of the Statute of Frauds, but also in relation to s 23C, which is the successor of provisions in relation to which part performance appears to have been little discussed, if discussed at all. Part performance of a contract is a subject relating to enforcement of contracts such as s 54A deals with, and less readily can be seen as a subject relating to the effectiveness of assurances; yet if an assurance was given under a contract there seems to be room to remedy any defect by specific performance, and hence for the operation of doctrine of part performance in relation to s 23C…
16. Although Bryson JA was clearly not examining the full extent of the reach of the doctrine of part performance in the context of the effectiveness and enforceability of assurances, the only situation that his Honour mentioned was that in which the failed assurance was made under a contract, which is a case where it is reasonably clear that if the contract has been part performed Equity may grant specific performance of it notwithstanding the absence of writing, and that remedy will result in the execution of an instrument that complies with s 23C and creates a valid assurance. The question is whether there is room for the application of the doctrine of part performance where there is a bare assurance without a contractual obligation to make the assurance.
17. I do not take his Honour's observation that part performance is less readily seen as a subject relating to the effectiveness of assurances, and his reference to an assurance being given under a contract, as being intended to mean that there is no room for the application of part performance unless there is a separate contract for the assurance that is capable of being enforced by specific performance, if the assurance made pursuant to the contract is ineffective because of the absence of writing required by s 23C. Equity provides a means for giving effect to invalid assurances by means of the remedy of specific performance in the following situation, as stated by the learned editors of Meagher, Gummow and Lehane at [6-050]: A purported assignment, for value, of legal property, which fails at law, or a contract, for value, to assign legal property, effects an equitable assignment when the consideration is paid or executed. This is a case where equity regards as done that which ought to be done… The effect of a valid equitable assignment of a legal interest in property after payment or execution of the consideration is to constitute the assignor a trustee of the property for the benefit of the assignee. It is not relevant in that case to ask whether the contract (or the purported immediate assignment, treated as a contract) is one of a kind of which specific performance would be ordered. Whether it is or not, equity, once the assignee has done what is required of the assignee, regards that as done which ought to be done by the assignor.
18. Further, at [6-065]: A purported immediate assignment of a legal right or title may fail for want of compliance with the requirements of the common law, or statute, as to its effective transfer. The registered proprietor of an estate in fee simple in land under the Torrens system may, for instance, purport to convey that estate by deed. The deed will be ineffective at law to convey the estate: that may be done only in the manner prescribed by the legislation. But if valuable consideration is given, the conveyance, though ineffective at law, is effective in equity.
19. Once it is determined that the assignment is effective in Equity, though not at law, in this manner, Equity will order specific performance to require the assignor to execute whatever instrument is necessary to make the assignee the legal owner of the property.
20. Presumably, in cases where there is no contract but a failed assurance by reason of want of writing, Equity will grant specific performance if acts of part performance sufficiently referable to the assurance can be proved, where the nature of the acts capable of being part performance are to be determined by analogy to those that would constitute part performance of an unenforceable contract.
21. The extracts set out above from Meagher, Gummow and Lehane are not directly applicable in the present case, as they concern failed assignments of legal property, whereas the present case concerns a failed declaration of trust, albeit over legal property. Ordinarily, Equity will recognise an effective declaration of trust without the need for any instrument and, as the trust is effective in Equity's original jurisdiction, it may not be necessary for Equity to grant specific performance to require the trustee to execute a written declaration of trust.
22. However, although specific performance is often said to be the primary equitable remedy that may be granted where part performance makes an otherwise unenforceable contract enforceable, specific performance is not the only remedy that may be granted by Equity in these circumstances. The declaration is an equitable remedy and in cases where it is sufficient for Equity to issue a declaration that there is a valid trust over legal property notwithstanding the failure of an express declaration of trust, then part performance should be sufficient to support the making of the declaration.
23. It is implicit in the express statement in s 23E(d) that nothing in ss 23B, 23C or 23D shall affect the operation of the law relating to part performance that part performance may operate in the field covered by those sections. As the sections deal with the effectiveness or enforceability of assurances of one type or another, s 23E(d) would be unnecessary if part performance had no operation in the context of the effectiveness or enforceability of assurances. The sections would not in that case affect part performance anyway. Baloglow v Konstantinidis [2001] NSWCA 451 at [162] (Giles JA, Mason P agreeing) and Khoury at [53] (Bryson JA) establish that s 23C applies only to assurances while s 54A, but not s 23C, applies to agreements to assure property in the future. Thus, the preservation of part performance in s 23E(d) cannot be explained on the basis that s 23C applies to agreements to assure as well as assurances.
24. In the former case, Giles JA said at [162]: … Section 54A excepts the operation of the law relating to part performance, material to an executory agreement, while s 23C excepts the operation of the law relating to trusts, material to property rights…
25. I do not think that his Honour in referring only to the preservation of the operation of resulting, implied and constructive trusts in s 23C(2) meant to exclude the possibility that the preservation by s 23E(d) of the operation of the law relating to part performance means that part performance may operate in the context of s 23C.
26. In Khoury at [73]-[86], Bryson JA, with the concurrence of Handley and Hodgson JJA, analysed the history of the doctrine of part performance and the leading authorities, which led his Honour to describe the following statement by Brennan J (as his Honour then was) in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 432; [1988] HCA 7 as being "a restatement in classic terms of a formulation which has been repeatedly approved in the High Court, and has not received any disapprobation". Brennan J relevantly said: "In order that acts may be relied on as part performance of an unwritten contract, they must be done under the terms and by force of that contract and they must be unequivocally and in their nature referable to some contract of the general nature of that alleged: Regent v Millett (1976) 133 CLR 679, at 683…"
27. While I accept that statement of principle to be binding on me, I do not take it to mean that the acts of part performance must be done by the plaintiff in actual performance of an obligation under the contract. If an act of part performance had to be the performance of a term of the contract it would be difficult to identify any act that could constitute part performance of a failed assurance other than perhaps the provision of the consideration for the assurance, which would almost always mean the payment of the price.
28. As the Court of Appeal of the Supreme Court of Victoria has recently said in Vlahos Pty Ltd v Vlahos [2017] VSCA 166 at [103] (Kyrou JA, Tate and McLeish JJA agreeing) (footnotes omitted) (Vlahos): [103] In order to satisfy the requirement that the acts of part performance must be done under and pursuant to the terms of the contract, it is not necessary that the acts should have been done in compliance with an obligation in the contract. Thus, the giving and taking of possession of land will amount to part performance notwithstanding that under the contract the purchaser was entitled rather than bound to take possession.
29. While it is not necessary for the acts of part performance to have been done in compliance with an obligation in the contract, it is not sufficient simply that the acts have been made possible by the existence of the contract. I respectfully adopt the statement made by the editors of Meagher, Gummow and Lehane at [20-185] concerning the required connection between the alleged acts of part performance and the contract (footnotes omitted): "… It would seem that neither view is correct and that expressed by Hutley JA in Millett v Regent is correct, namely that an act may be sufficient if permitted by the contract alleged, though neither required nor expressly authorised by it".
30. In an ex tempore judgment on appeal to the High Court in Regent v Millett (1976) 133 CLR 679 at 683-4 Gibbs J (as his Honour then was) said, with the agreement of the other members of the Court: The change of possession of land has been described as "the act of part performance par excellence" - Williams: The Statute of Frauds, Section IV, p 256. Of course, it may be proved that the taking of possession was referable to some other authority than the contract alleged. That was the situation in McBride v Sandland (1918) 25 CLR at 84-85). However, in the present case the circumstances under which possession was given indicate contract, to echo the words in McBride v Sandland, and the possession was unequivocally referable to some such contract as that alleged. The taking of possession was pursuant to the contract. It is true that the contract did not require the respondents to take possession, but if it were necessary that the acts of part performance should have been done in compliance with a requirement of the contract, the utility of the equitable doctrine would be reduced to vanishing point, and many cases which have proceeded on the opposite view would have been wrongly decided. The Judicial Committee, in White v Neaylon ((1886) 11 App Cas 171) indeed appears to have held that the effecting of improvements on property which were neither required nor permitted by the contract may be acts of part performance; but however that may be, it is clear that if a vendor permits a purchaser to take the possession to which a contract of sale entitles him, the giving and taking of that possession will amount to part performance, notwithstanding that under the contract the purchaser was entitled rather than bound to take possession. (emphasis added)
31. See also Bryson JA in Khoury at [85]. Customarily, the purchaser is not required by a term of the contract to take possession; rather it is an act permitted following delivery of possession by the vendor.
32. The immediate point of these observations is that, as the doctrine of part performance in its application to contracts that are unenforceable for want of writing requires only that the acts be permitted by the contract, there is scope when applying the doctrine to assurances that have failed to find that the assurance has been part performed by the doing of acts that are permitted by the intended, but failed, assurance.
33. There may be difficulty, in the case of particular failed assurances, to identify acts capable of being part performance. If the assurance involved a declaration of trust over land for a payment by the beneficiary, there may be cases where the only act of performance by the beneficiary is the payment. That problem does not appear to arise in the present case, because even though Mr Meshumar did not plead a contract, he did in effect plead that the trust was to be on agreed terms, which in practical terms could work in an equivalent way to a contract by Mr Sadra to sell a one-third interest in Unit 11 to Mr Meshumar on terms that he would be entitled to receive one-third of the net rent pending transfer of his share of the property to him, or the sale of the property and the payment of his share of the net price.
34. Khoury establishes in a manner binding upon me a number of principles that are relevant to the determination of whether Mr Meshumar has partly performed the failed declaration of trust in his favour.
35. First, the acts of part performance must be unequivocally and in their nature referable to some assurance of the general nature of that alleged: see Khoury at [86] and Vlahos at [100].
36. The requirement that the reference must be unequivocal has consistently been applied by this Court: see Geradis v Gerges [2008] NSWSC 134 at [9] (Barrett J); Lai See Law v Yan Mo [2009] NSWSC 639 at [98] (Bergin CJ in Eq); Vu v Nguyen [2011] NSWSC 1369 (Slattery J); Re Oliver Brown Pty Ltd (No 2) [2012] NSWSC 1222 at [37] (Black J); and Arambasic v Veza (No 4) [2014] NSWSC 1109 at [147] (Sackville AJA).
37. The important aspect of this requirement in the present case is that not only must the acts of supposed part performance be unequivocally referable but they must also in their nature be referable. The requirement concerning the nature of the acts requires that the necessary reference be apparent from the nature of the acts and limits the extent to which the Court can explore and rely upon even objective evidence that might be able to connect the acts to an assurance of a particular nature. The Court must be able to find the reference directly from a contemplation of the nature of the acts.
38. Secondly, until the High Court decides otherwise, payments of the whole or part of the purchase price, or the payment that was the consideration for the declaration of trust, are unavailable as acts of part performance: see Khoury at [90].
39. It may be observed that in Khoury at [77], Bryson JA, extracted part of the seminal judgment of the House of Lords in Maddison v Alderson (1883) 8 App Cas 467 at 474-476, which in part gave as the rationale for the doctrine of part performance: "In a suit founded on such part performance, the defendant is really "charged" upon the equities resulting from the acts done in execution of the contract, and not (within the meaning of the statute) upon the contract itself. If such equities were excluded, injustice of a kind which the statute cannot be thought to have had in contemplation would follow".
40. Faced with the statutory injunction not to enforce a contract not made or evidenced in writing, because the absence of writing might facilitate fraudulent claims, the Courts were faced with the problem that it might be equally fraudulent for parties to oral contracts that were in fact made to deny the enforceability of the contracts. The solution adopted by the Courts was to take the view that acts of part performance by the plaintiff gave rise to a separate equity against the defendant, and that to avoid direct non-compliance with the statute the Courts gave effect to the separate equity which had the consequence that the contract would be performed. It might be thought that the defendant would be charged with an equity when the plaintiff performed some act that was detrimental to the plaintiff (just as would be the case to support an estoppel). Such an act would be the payment of the price, but it is established that this act does not justify the defendant being charged with the need to perform the contract. Many of the acts that are universally accepted as being sufficient to constitute part performance, such as the acceptance of possession or rent, benefit the plaintiff.
41. It is as if the law has not clearly made up its mind about whether acts of part performance should create an equity against the defendant if the acts have caused the plaintiff to suffer a detriment on the basis that the contract was enforceable, or whether what is really required is objective evidence of acts so unequivocally consistent with the existence of some such contract as is alleged, and without the need for evidence of oral communications, that the Court can be confident that the claim based upon the contract is not fraudulent. Some of the acts that are accepted as being good part performance are really strong objective evidence of the existence of the contract, rather than acts whose performance should bind the defendant because they have involved a detriment to the plaintiff. Be that as it may, it is clear as the law stands that the payment of all or part of the price is not a valid act of part performance.
42. In Khoury at [89], Bryson JA made the following observations relevant to the question of what acts may be accepted as showing part performance: In the present case there are no acts of ownership such as taking possession, paying rates or paying for the upkeep or improvement of the property, or receipt of rent or profits, or any other act at all. Acts of part performance have been almost universally closely related to possession and use or tenure of the land itself, such as where a purchaser is put into possession by the vendor, or allowed to take possession by the vendor, or where the purchaser carries out improvements. They have not necessarily been acts which the contract requires to be done. Acts on the land can much more readily be seen as unequivocally referable to the contract than payments of money…
43. Of particular relevance to the present case is his Honour's statement that "receipt of rent" can be an act of part performance. Bryson JA did not refer to authority on this point, and the only one I have found is the decision of Palmer J in Merrag Pty Ltd v Khoury [2009] NSWSC 915, where his Honour said at [79], in an obiter dictum, that the giving of "the muniments of title and the benefit of rental income" from the subject property prior to completion of the contract, although not done "in compliance with a requirement of the contract" would have been sufficient to constitute part performance by the party who asserted the existence of the contract. It is important to note that his Honour reached this conclusion in circumstances where the evidence showed that the agent who managed the leasing of the property paid the rent directly to the party who asserted the existence of the contract.
44. I take Bryson JA's observations to mean that, if the delivery of possession of land is taken to be part performance par excellence, in cases where the land that is the subject of the contract is subject to a pre-existing lease, the most that can be delivered to a purchaser is the reversion so that the right to receive the rent will be an equivalent act of part performance to the entry into possession of the land.
45. If that is correct, it should follow that what is required is that the vendor permits the purchaser to receive the actual rent either from the lessee or from some agent who has received the rent from the lessee to hold for the party entitled to receive the rent.
46. It is also pertinent to the present case to note the following statement of principle by Hodgson JA in Khoury at [17]: It seems clear that the circumstances in which acts were done are to be considered in order to consider whether the acts pass this test; but in my opinion, there cannot be included in these circumstances alleged oral agreements either between the parties in question or with others: that would entirely subvert s 54A…
47. Finally, the approach that is required of the Court in determining whether particular acts satisfy the doctrine of part performance is as stated in Vlahos at [104] as follows (footnotes omitted): In Thwaites v Ryan, Fullagar J said the following about the order in which evidence about part performance should be considered: [I]t is wrong first to postulate the contract pleaded and then to ask if the alleged acts were a part performance of it, or of a contract of its general nature … One must first seek to find such a performance as must imply a contract, and then proceed to ascertain the general nature of such contract as the performance implies, and then to compare that result, if one gets to it, with the general nature of the contract pleaded.
48. Applying these principles to the present case, and assuming that the doctrine of part performance can justify the enforcement of an oral declaration of trust of land made unenforceable by s 23C of the Conveyancing Act, I have concluded that the acts relied upon by Mr Meshumar are not valid acts of part performance.
49. First, it is clearly established that payment of the purchase price is not capable of being an act of part performance of a contract, and for that reason could not be part performance of an assurance in the nature of a declaration of trust. This means that, even if it is assumed that Mr Meshumar did pay $200,000 in cash to Mr Sadra, and putting aside the difficulties with the evidence that have been discussed above, the payment of the $200,000 is not something that the Court can accept as evidence of part performance.
50. Secondly, I do not accept that the granting by Mr Sadra of the power of attorney that he executed in Mr Meshumar's favour is capable of being an act of part performance. Not only is the granting of the power of attorney not unequivocally referable to some such transaction as that alleged by Mr Meshumar, but it is not in any significant way referable to such a transaction at all. People from time to time grant powers of attorney to other people to deal with their property, including land, for all manner of reasons arising out of the need for the owner of the property to act through an agent. The granting of an absolute power of attorney by a trustee of land to a beneficiary who is entitled to one third of the beneficial interest in the land is not a natural consequence of the declaration of the trust, and is essentially divorced from it.
51. Finally, although I have held on the balance of probabilities on the available evidence that the intermittent receipts relied upon by Mr Meshumar as payments of rent did in a broad sense come from payments made by tenants of Unit 11, I have also found that the payments were made by Mr Sadra and other parties associated with him. They were not paid directly by the tenants to Mr Meshumar, nor were they paid to him by some managing agent who collected the rent. Moreover, it has not been established that the payments were made directly from rent. As I have found, Mr Sadra often robbed Peter to pay Paul and it is likely that many of the payments were made to make good shares of rent to which Mr Meshumar would have been entitled if the transaction was enforceable, but could have come from anywhere. Plainly, many of the payments were made by parties other than Mr Sadra. Even if Mr Sadra should be treated as if he were a managing agent, the evidence does not support a finding, even in a single case, that Mr Sadra paid one third of the rent from Unit 11 directly to Mr Meshumar, or even one third of the net rent after deduction of outgoings. The evidence does not support a finding that, without collateral findings, Mr Meshumar effectively had the benefit of the reversion because he was paid a third of the rent directly through Mr Sadra, or agents of Mr Sadra. In these circumstances the making of the payments to Mr Meshumar was not equivalent to him being given possession of Unit 11, and the significance of the payments is inherently equivocal. They could as easily have been repayments of a loan as being payments of shares in the rent from Unit 11.
52. The consequence of this reasoning is that if Mr Meshumar had sought to enforce the oral declaration of trust made by Mr Sadra in his favour over Unit 11, he would have failed because the declaration has not been manifested and cannot be proved by some writing signed by Mr Sadra.
53. However, it does not follow that Mr Otmy's defence, in par 12(b) of his defence, that Mr Meshumar could not have acquired any interest in Unit 11 in the absence of writing signed by Mr Sadra has been made good. On the contrary, Mr Meshumar acquired an interest but that interest was not enforceable against Mr Sadra.
54. This is an appropriate place to note that, in par 12(c) of his defence, Mr Otmy also relied upon s 23D to claim that if Mr Meshumar did acquire an interest in Unit 11 it was an interest at will only. I consider this provision to have no application to oral declarations of trust in land for the same reason that s 23C(1)(a) has been held to be inapplicable.

Estoppel against Mr Otmy

1. Mr Meshumar has pleaded in his reply, in response to Mr Otmy's reliance in his defence on s 23C, that Mr Otmy is estopped from denying his one third interest in the property.
2. I have accepted that Mr Otmy gave Mr Meshumar the assurances that I have considered above. Mr Meshumar gave evidence that, had he not received those assurances, he would have taken steps to protect his interest in Unit 11. Mr Otmy did not challenge that Mr Meshumar would have sought to take those steps. The reliance on the assurances alleged by Mr Meshumar is set out in par 3(d) of his reply in the following terms: in reliance on the Expectation, the plaintiff altered his position and did not: i. Seek, consider, and act upon legal advice in order to protect his position; ii. lodge a caveat in respect of the Property in respect of his equitable interest in relation to the Property; iii. prevent the transfer of the Property from Mr Sadra to the first defendant; or iv. otherwise taking steps to take steps to protect his interest in relation to the Property.
3. As I understand Mr Meshumar's case, it is that if he had not received the assurances and relied upon them, he would by one means or another, including by the lodgement of a caveat, have prevented Mr Sadra from transferring Unit 11 to Mr Otmy in circumstances that destroyed Mr Meshumar's interest in the property. Mr Meshumar's estoppel response proceeded upon the essential assumption that he had a valid and enforceable one third interest in Unit 11, by reason of the oral declaration of trust by Mr Sadra in his favour, and his ability to enforce that trust by reason of the doctrine of part performance. Mr Meshumar did not claim that he suffered some other subsidiary detriment by losing any opportunity to resist the transfer of Unit 11 to Mr Otmy, even if that resistance ultimately failed because Mr Meshumar could not enforce the trust against Mr Sadra.
4. That being the case, I accept the submission made by Mr Otmy that Mr Meshumar did not suffer a relevant detriment, because if he had lodged a caveat or taken proceedings to establish the validity of his interest against Mr Sadra, that claim would have failed because of the absence of writing and the unenforceability of the trust under s 23C(1)(b).

Imposition of constructive trust on Mr Otmy

1. There remains the case, however, as pleaded by Mr Meshumar in pars 17(c), 18 and 38 of the amended statement of claim, that Mr Otmy holds one third of his beneficial interest in Unit 11 pursuant to a constructive trust in favour of Mr Meshumar.
2. As I understand Mr Meshumar's case, he did not claim that the assurances made to him by Mr Otmy gave rise to an express trust. The assurances were made by Mr Otmy before the title to Unit 11 was transferred to him, and Mr Meshumar did not allege a contract to declare an express trust in his favour. Mr Meshumar did not provide any consideration to Mr Otmy for the assurances. Such a contract would have required writing in conformity with s 54A of the Conveyancing Act in order to be enforceable: see Khoury at [3]. Even if Mr Otmy had not promised to declare a trust, but instead had promised that his otherwise indefeasible title to Unit 11 would be subject to recognising and implementing Mr Meshumar's existing one third beneficial interest in Unit 11, that promise could not have given rise to an enforceable express trust because the absence of writing would not have complied with s 23C(1)(b): see Ryan v Starr [2005] NSWSC 170 per White J at [88]
3. Although Mr Meshumar did not elaborate the basis of the constructive trust in his amended statement of claim, it is apparent from his final written submissions that one of the bases upon which he proceeds is the constructive trust as found by the High Court in Bahr v Nicolay (No 2) (above). In that case the vendor of land had earlier entered into an enforceable agreement with the appellants to sell the subject property to them in certain circumstances. The agreement gave the appellants an equitable interest in the property to the extent that they would be entitled to specific performance. The vendor then transferred the property to different purchasers, who became the second respondents on the appeal, under a contract for sale that contained an express condition whereby those purchasers acknowledged the earlier agreement between the vendor and the appellants. The High Court found that the condition did not simply give the purchasers notice of the appellants' prior interest in the property, but provided that the transfer of title to the property was to be subject to the appellants' rights under the earlier agreement with the vendor, in the sense that those rights were to be enforceable against the purchasers.
4. Mason CJ and Dawson J at 618 found that the intention of the vendor and the purchasers was to create a trust relationship. They concluded at 618-619: …If the inference to be drawn is that the parties intended to create or protect an interest in a third party and the trust relationship is the appropriate means of creating or protecting that interest or of giving effect to the intention, then there is no reason in a given case an intention to create a trust should not be inferred. The present is just such a case. The trust is an express, not a constructive, trust. The effect of the trust is that the second respondents hold Lot 340 subject to such rights as were created in favour of the appellants by the 1980 agreement.
5. Wilson and Toohey JJ put the matter on the following basis at 638-639 (footnotes omitted): By taking a transfer of Lot 340 on that basis, and the appellants' interest under cl 6 constituting an equitable interest in the land, the second respondents became subject to a constructive trust in favour of the appellants: Lyus v Prowsa Developments Ltd; Binions v Evans. If it be the position that the appellants' interest under cl 6 fell short of an equitable estate, they none the less had a personal equity enforceable against the second respondents. In either case ss 68 and 134 of the TLA would not preclude the enforcement of the estate or equity because both arise, not by virtue of notice of them by the second respondents, but because of their acceptance of a transfer on terms that they would be bound by the interest the appellants had in the land by reason of their contract with the first respondent. In light of the conclusion that the appellants had, by reason of their contract with the first respondent, an equitable estate in Lot 340 and that, as against the second respondents, they have such an estate or in any event a personal equity, the question arises whether the appellants may now enforce their rights in regard to Lot 340.
6. Brennan J said at 655-656 (footnotes omitted): Therefore, although a purchaser who secures registration of a transfer of the fee simple merely with notice of a third party's right to purchase acquires on registration of his transfer a title freed of any obligation to the third party which equity would otherwise impose, a purchaser who has undertaken - whether by contract or by collateral undertaking - to hold his title subject to a third party's right to purchase remains bound by his undertaking after registration of his transfer. If he should repudiate the third party's right to purchase, equity imposes a constructive trust so that the registered proprietor holds his title on trust for the third party to the extent of the third party's interest. It might be thought that, if the undertaking from which the constructive trust originates is found in an oral collateral agreement, s 34 of the Property Law Act 1969 (WA) or the Statute of Frauds would preclude its enforcement. But an undertaking that a title to be acquired on registration of a transfer shall be held subject to the unregistered interest of a third party is not itself a disposition of the third party's interest; and s 34 of the Property Law Act requires only an instrument disposing of an interest in land to be in writing: Adamson v Hayes. As to the Statute of Frauds, Scott LJ held in Bannister v Bannister that it presents no obstacle to the imposition of a constructive trust in cases where the constructive trust has its origin in an oral agreement. If a statute enacted to prevent fraud could be raised by a purchaser as a cloak for unconscionable conduct, the statute would be put to a purpose for which it was not intended: Rochefoucauld v Boustead; Cadd v Cadd. Perhaps the theory which supports equity's willingness to modify the effect of the Statute of Frauds has not been convincingly expounded. Nevertheless it is a doctrine of long standing that the Statute does not preclude the imposition of a constructive trust when a transferee relies on the absolute character of the transfer to defeat a beneficial interest which, according to the true bargain between transferee and transferor, is to belong to another, and there is no reason that doctrine should be doubted: Organ v Sandwell.
7. It is not necessary in this case to consider or resolve the question of whether the trust that arises in this situation should properly be regarded as an express or a constructive trust. I note that in Ryan v Starr (above), White J dealt with the case before him on the basis that, although any express trust would have been unenforceable for want of writing, his Honour could apply the principles as stated by Wilson and Toohey JJ, and Brennan J, and deal with the matter on the basis that a constructive trust was created.
8. The facts of Bahr v Nicolay (No 2) may be distinguished from those in the present case in two respects. First, in that case it was assumed that the equitable interest in the property that the appellants had by reason of their prior contract with the vendor was an enforceable one, at least on the assumption that the appellants would be able to establish a right to an order for specific performance. In the present case I have held that the express oral trust that Mr Sadra declared in favour of Mr Meshumar, though valid, was unenforceable against Mr Sadra by reason of the absence of the writing required by s 23C(1)(b). Secondly, the obligation upon the purchasers arose under an express term of the contract between the vendor and the purchasers which contained a term that required the purchasers to recognise and give effect to the appellants' prior equitable interest. In the present case no finding can be made that there was any contract between Mr Sadra and Mr Otmy, or that such a contract contained a term that required Mr Otmy to recognise and give effect to Mr Meshumar's one third equitable interest in Unit 11.
9. It may be that if the evidence had established the existence of such a term in a contract between Mr Sadra and Mr Otmy, it may not have mattered that Mr Sadra's declaration of trust in favour of Mr Meshumar was unenforceable against him. The trust interest nonetheless existed, and Mr Sadra did not have to take advantage of its unenforceability against him. If, notwithstanding the unenforceability, Mr Sadra had obliged Mr Otmy by contract to recognise and give effect to Mr Meshumar's prior equitable interest, the constructive trust found by the members of the High Court in Bahr v Nicolay (No 2) may have arisen. That did not happen however.
10. Heggies Bulkhaul Ltd v Global Minerals Australia Pty Ltd (2003) 59 NSWLR 312; [2003] NSWSC 851 (Heggies Bulkhaul) was a case decided by Austin J, in which his Honour found a constructive trust of the general type recognised in Bahr v Nicolay (No 2) in circumstances where the obligation of the purchaser, who became registered proprietor to recognise a prior unregistered interest did not arise under a contract with the vendor, but arose under a separate collateral undertaking given to the holder of the unregistered equitable interest.
11. Austin J considered the judgments in Bahr v Nicolay (No 2) in the context of exceptions to the indefeasibility of the title of the registered proprietor of land and concluded: [103] For present purposes, what emerges from the judgments is that: (i) an unregistered interest may be asserted against the registered proprietor if there was fraud at the time of transfer or registration, under the fraud exception to s 42; (ii) if the registered proprietor subsequently engages in unconscionable conduct intended to deny or defeat the unregistered interest, the holder of the unregistered interest may obtain relief against the registered proprietor, either because the registered proprietor's conduct comes within the fraud exception to s 42, or because the conduct creates an equity which the holder of the unregistered interest may assert against the registered proprietor; (iii) but such an equity will not be created merely because the registered proprietor asserts his registered title after acquiring it with notice of the unregistered interest, the additional ingredient being some form of acknowledgement of the unregistered interest, or an agreement or undertaking to act in accordance with it, from which the registered proprietor later resiles [104] The Snowlong case is an example of facts held to contain the "additional ingredient". In that case the contract of sale of land disclosed the existence of an unregistered lease agreement for a term of five years plus options. A copy of the unregistered lease agreement was annexed to the contract, and under the contract the purchaser agreed to abide by the terms and conditions of the lease. Wood J carefully analysed the judgments in Bahr v Nicolay (No 2). His Honour found that the contract of sale gave rise to an undertaking by the purchaser to take title subject to a lease in the terms annexed to the contract. The case was not merely one of a purchaser having notice of a third party's rights, but rather it was a case where the purchaser agreed or undertook to recognise those rights. Applying the reasoning of Mason CJ and Dawson J, he found that the facts gave rise to an express trust, or in the alternative, the purchaser's subsequent repudiation of the undertaking would constitute fraud for the purposes of s 42. He expressed the view that the same result would be achieved if the reasoning of Wilson and Toohey JJ, or the reasoning of Brennan J, were to be applied.
12. In that case, the plaintiff was a lessee from the vendor, who had the benefit of options for renewal of the lease, but for reasons not presently relevant entered into a new agreement with the vendor for a new lease. The new agreement was evidenced by correspondence. The new lease contained modifications that suited the vendor. The plaintiff protected its unregistered interest by lodging a caveat. The purchaser was related to the vendor and Austin J found that the purchaser had actual notice of the plaintiff's equitable interest in the property by means of the agreement by the vendor to grant a new lease to the plaintiff. The vendor executed a transfer of land to the purchaser. The vendor then wrote a letter to the plaintiff (which Austin J found was known to the purchaser because of the relationship between the persons who controlled the vendor and the purchaser). His Honour found: [109] After AMES executed transfers of the land to Global, Mr Kekatos on its behalf wrote a letter to Mr Breeze at HBL dated 16 December 1999. The purpose of the letter was to seek the consent of HBL to the transfer, since HBL had lodged a caveat in respect of a joint venture agreement to which it was a party. The letter said that AMES had entered into arrangements to transfer the property of the quarry to "a company [namely Global] controlled by the respective wives of the current directors of this company". It sought HBL's consent to registration of the transfer to Global, and consent to a transfer of the current mortgage. It continued: As you may be aware the lease to your company is registered on the title to the property and will not be affected by any Transfer as stated above as the buyer will always take title subject to the registered lease. It is only in relation to the Caveat lodged in respect of the joint venture arrangement that we will require your written consent. [110] I infer that HBL consented to the transfer, which was subsequently registered. The letter of 16 December 1999 does not refer specifically to the agreement for a new lease that Mr Kekatos had himself negotiated with Mr Breeze only three months earlier. However, since the parties regarded the agreement for a new lease as an exercise of the first option to renew contained in the existing registered lease (as is evident from the terms of the September correspondence), the reference in the letter of 16 December to "the lease to your company" should be taken to encompass the agreement to renew the lease. Therefore by that letter Mr Kekatos was assuring Mr Breeze and HBL that the transfer would not affect either the old lease or the arrangements for a new lease. [111] Although in the circumstances the matter was not put to any of HBL's witnesses, it is appropriate to infer that HBL would not have consented to registration of the transfer if there had been any suggestion that its position in relation to the renewal of lease might have been affected, without first clarifying its position. [112] In my opinion Mr Kekatos' letter of 16 December 1999, construed as I have indicated, followed by HBL's consent to the transfer of the land, is comparable to the acknowledgements and undertakings held to be determinative in Bahr v Nicolay (No 2) and the Snowlong case. In those cases, however, the acknowledgements and undertakings were given on behalf of the registered proprietor. Here, Mr Kekatos purported to write the letter on behalf of AMES rather than Global. [113] There are, nevertheless, some additional facts which, in my view, lead to the inference that Global authorised the letter and is bound by the state of affairs which it sets out. Global had actual knowledge, at all relevant times, of the arrangements giving HBL an interest under an agreement for a new lease. The letter was written after execution of the transfers in favour of Global. It described Global as a company controlled by the wives of the current directors of AMES. The wives were in fact the directors of Global, but Mr Kekatos (who wrote the letter) was the chief financial officer and Wayne Stafford (who had day-to-day management of Global) was aware of its contents. Although there is no direct evidence that the directors of Global resolved to authorise the letter, those circumstances warrant the inference that the letter was authorised by Global. [114] The letter on its proper construction acknowledged the interest of HBL under the registered lease and under the arrangements for renewal. It contained a representation, and impliedly an undertaking, that HBL's interest would not be affected by the transfer. In my opinion, by application of the reasoning of Mason CJ and Dawson J in Bahr v Nicolay (No 2), the letter created an express trust under which, upon becoming registered proprietor, Global held the fee simple, already subject to the registered lease, in trust to grant a new lease to HBL pursuant to their agreement of September 1999. Further, in terms of their Honours' reasoning (especially in the passage at 615 extracted above), this was a case of an undertaking to recognise HBL's interest in a new lease, apparently honestly given, which induced HBL's consent and permitted registration of the transfer, but was subsequently repudiated in final submissions at the hearing, for the purpose of defeating HBL's prior interest. That repudiation was fraudulent for the purposes of s 42, because it had as its object the destruction of HBL's unregistered interest notwithstanding that the preservation of the unregistered interest was the foundation or assumption underlying HBL's consent to the registration of the transfer. [115] While, like Wood J in Snowlong, I prefer to adopt the analysis of Mason CJ and Dawson J, the same substantive result would follow, still on the basis that Global authorised the letter of 16 December 1999, by the application of the reasoning of Wilson and Toohey JJ, and the reasoning of Brennan J.
13. Thus, Austin J found that the purchaser was bound by a trust (his Honour preferred the analysis adopted by Mason CJ and Wilson J that led to the finding that the trust was express) in circumstances where the undertaking given by the registered proprietor to recognise the prior equitable interest in the property was made to the holder of that interest and not the vendor of the property. Provided that, before the purchaser has achieved registration, the purchaser has entered into a contract or undertaking to recognise and give effect to some pre-existing equitable interest in the property, it does not matter whether the contract or undertaking is made with the vendor or the holder of the earlier equitable interest.
14. It therefore does not matter that Mr Otmy's assurances were given to Mr Meshumar rather than to Mr Sadra, but it is necessary to address the question of whether the making of the assurances constituted an undertaking by Mr Otmy that gave rise to a constructive trust binding Mr Otmy, when he subsequently refused to recognise and give effect to Mr Meshumar's interest, and repudiated his undertaking, given that although Mr Meshumar's interest as a beneficiary of a trust over Unit 11 was valid, it was not enforceable against Mr Sadra as trustee for want of the writing required by s 23C(1)(b).
15. The view that Austin J preferred was that the effect of the correspondence that the purchaser authorised the vendor to engage in with the plaintiff was that an express trust was declared that was enforceable because of the presence of writing. It is not clear how his Honour would have analysed the presence of unconscionable conduct on the part of the purchaser, if he had preferred to base his decision on the imposition of a constructive trust. It is probable that the unconscionable conduct would have been found in the repudiation by the purchaser of the undertaking that was given to the plaintiff on the purchaser's behalf, that if the plaintiff consented to the registration of the transfer, which was not expressed to be subject to the purchaser's interest in the property, notwithstanding the lodgement of the caveat, the purchaser would recognise and implement the purchaser's interest. Austin J does not appear to have found that there was an enforceable agreement between the purchaser and the plaintiff in the contractual sense, but merely an undertaking. The effect of the undertaking was, however, to enable the purchaser to become registered proprietor with the benefit of indefeasibility, in circumstances where the holder of the prior interest had an enforceable right to prevent the purchaser being registered as proprietor in a manner that extinguished the prior interest, but did not exercise that right, but rather consented to the registration of the transfer on the basis of an undertaking by the purchaser to recognise and implement the prior interest. The unconscionable conduct that would support the imposition of a constructive trust would be the repudiation of the undertaking which was essential to the purchaser achieving an apparently indefeasible title to the property.
16. In Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462 Gleeson JA, with whom Meagher and Barrett JJA agreed, held: [228] Earlier in Heggies Bulkhaul v Global Minerals Australia [2003] NSWSC 851; 59 NSWLR 312, Austin J at [103]-[104] had contrasted those cases where a personal equity will not be created (those where the registered proprietor merely asserts his registered title after acquiring it with notice of the unregistered interest) with those cases which contain what his Honour referred to as the "additional ingredient" sufficient to create a personal equity. [229] Having reviewed the authorities, in particular Bahr v Nicolay, Austin J described the "additional ingredient" as conduct involving some form of acknowledgment of the unregistered interest, or an agreement or undertaking to act in accordance with it, from which the registered proprietor later resiles.
17. Austin J based his statement of principle on extracts from the judgments in Bahr v Nicolay (No 2). His Honour noted at [100], the statement by Mason CJ and Dawson J at 615, which described the unconscionable conduct as "an undertaking honestly given which induces the execution of a transfer and is subsequently repudiated for the purpose of defeating the prior interest. The repudiation is fraudulent because it has as its object the destruction of an unregistered interest notwithstanding that the preservation of the unregistered interest was the foundation or assumption underlying the execution of the transfer". At [101], Austin J noted the basis of the reasoning of Wilson and Toohey JJ at 638 that the prior estate or equity was enforceable against the registered proprietor "not by virtue of notice of them by [the registered proprietor], but because of their acceptance of a transfer on terms that they would be bound by the interest the appellants had in the land by reason of the contract with the [vendor]". At [102], his Honour set out an extract from the judgment of Brennan J at 654 which included: "the fraud which attracts the intervention of equity consists in the unconscionable attempt by the registered proprietor to deny the unregistered interest to which he has undertaken to subject his registered title".
18. As I understand the basis of the High Court's reasoning and the interpretation of that reasoning made by Austin J, the prior equitable estate or interest in the property will be enforceable against the registered proprietor because the registered proprietor has obtained registration, and thus putative indefeasibility of title, where the "foundation or assumption", or the "terms" were, or the registered proprietor had "undertaken" that the registered proprietor's title would be subject to the unregistered estate or interest. In Bahr v Nicolay (No 2) this state of affairs arose as a term of an enforceable contract between the purchaser and the vendor. In Heggies Bulkhaul it arose as a result of an undertaking given to the holder of the prior equitable interest that was not of a contractual nature. In both cases the crux of the issue was that the registered proprietor could not have achieved registration and apparent indefeasibility because the party to whom the undertaking was given was in a position to prevent the registered proprietor to obtain a title that was not subject to the prior equitable interest, but has not done so on the faith of the undertaking that the prior interest would be recognised.
19. In my understanding it is crucial to the repudiation of the undertaking being unconscionable that the party to whom the undertaking was made was in a legal or practical position to prevent the registration of the transfer that would destroy the prior equitable interest unless the undertaking was given. Absent this power, the mere giving of assurances to a party who claimed a prior interest in the property, which was not enforceable against the parties to the transfer of the property, would not take the case out of the situation where a personal equity will not be created where the registered proprietor merely asserts his registered title after acquiring it with notice of some unregistered interest.
20. In this case, as I have found that although the oral express trust that Mr Sadra declared in favour of Mr Meshumar was valid, but it was not enforceable because of the absence of writing, I also find that Mr Meshumar has not established that the assurances that Mr Otmy gave to him have created a personal equity that allows him to enforce any interest in Unit 11 as beneficiary of any trust against Mr Otmy. That is because, as Mr Meshumar's case has been presented, the effect of the unenforceability of Mr Meshumar's claim to a beneficial interest in Unit 11 is that he did not have an interest in the property that could support his caveat, and he could not have prevented Mr Sadra transferring Unit 11 to Mr Otmy absolutely in a manner that did not recognise Mr Meshumar's beneficial interest. It is fundamental to the preservation of the entrenched doctrine of indefeasibility of title by registration of dealings that notice of some existing, unregistered claimed interest does not lead to a finding that a refusal to recognise the prior claim is unconscionable, unless, there is a proper basis for that finding that does not undermine the effective operation of the doctrine. That basis may in particular circumstances exist where the prior claim was enforceable in a manner that allowed the claimant to prevent the opponent becoming registered proprietor. The unconscionability comes from resiling from some agreement or undertaking after registration where the registered proprietor would have been prevented from achieving apparent indefeasibility of title but for the making of the agreement or the giving of the undertaking.
21. In reaching this conclusion, I do not express any general view as to the circumstances in which the assurances given by Mr Otmy may have given rise to a personal equity that defeated his indefeasible title to Unit 11. Each case will depend upon its own facts. As I have noted, Mr Meshumar's beneficial interest was valid but it was not enforceable. In different circumstances, it may have been established that Mr Sadra recognised the validity of Mr Meshumar's interest notwithstanding its technical unenforceability. It may have been proved that Mr Otmy made his assurances to Mr Meshumar in circumstances known to Mr Sadra, where a conclusion could be drawn that Mr Otmy was aware that Mr Sadra would have protected Mr Meshumar's interest in Unit 11 were it not for Mr Otmy undertaking that he would give effect to Mr Meshumar's interest. It is not necessary to decide whether the repudiation by Mr Otmy of that undertaking would have given rise to a personal equity in Mr Meshumar. The point is that the unenforceability of Mr Meshumar's interest is not the critical issue. It is whether Mr Otmy only achieved the state of registered proprietor on the basis of an assumption or undertaking that the prior interest of Mr Meshumar would be given effect. In this case Mr Meshumar has not established the necessary personal equity against Mr Otmy.
22. Although Mr Meshumar apparently makes an alternative claim based upon the principle recognised in Rochefoucauld v Boustead (above), I have already found that Mr Meshumar's case did not in any real way attempt to establish that Mr Sadra transferred Unit 11 to Mr Otmy on the basis of some positive agreement with Mr Sadra that Mr Otmy would hold the title to the property on trust for the three men in equal one third shares. I therefore must reject that claim.

Mr Otmy's additional defences

1. I will now respond to a number of separate defences raised by Mr Otmy against the possibility that the Court might find that Mr Meshumar had some enforceable proprietary interest in Unit 11.
2. Mr Otmy put a defence based upon a claim that Mr Meshumar came to Court with unclean hands because the cash that he claimed he paid to Mr Sadra was accumulated from remittances that Mr Meshumar said he received from his mother in Israel that she paid to him in order to retain an entitlement to an Israeli pension to which the mother may not have been entitled if she retained too great an amount of cash. There are likely to be many reasons why this defence should be rejected. It was not seriously developed or explained, particularly in respect of the assertion that Mr Meshumar's mother's conduct was intended to evade some Israeli law. The conduct, even if it involved some illegality under a foreign law, was the mother's conduct and not the conduct of Mr Meshumar. In any event, it is sufficient to reject the defence to apply the principle stated by White J in Ciaglia v Ciaglia [2010] NSWSC 341; (2010] 269 ALR 175, where his Honour said at [48]: "To make out a defence of unclean hands the plaintiff's wrongful conduct must have an "immediate and necessary relation to the Equity sued for": Dewhirst v Edwards [1983] 1 NSWLR 34 at 51".
3. Mr Otmy put a second argument based upon the doctrine of unclean hands in that he said that the original transaction whereby Mr Meshumar obtained his interest in Unit 11 "was designed to subvert Australia's foreign ownership laws". It is true that Mr Meshumar acknowledged that he had been told by Mr Otmy that because of his temporary residence status he was not allowed to own property in his own name. Common sense requires an acceptance that the original transaction was entered into in the form adopted by the parties in part so that Mr Meshumar's name would not appear on the title to Unit 11 and he could nonetheless share in any increase in the value of the property. However, apart from this defence being raised by Mr Otmy, it was not developed and only stated in bare terms. The legal basis of the prohibition was not explored. I will assume that the source of the illegality relied upon by Mr Otmy was the Foreign Acquisitions and Takeovers Act 1975 (Cth). Section 134 of that Act provides: "An act is not invalidated by the fact that it constitutes an offence against or contravention of a civil penalty provision of this Act". In the complete absence of any explanation by Mr Otmy of how Mr Meshumar's conduct involved some contravention of what I assume to be that Act, and why the contravention involves him in having unclean hands, I would apply the statutory intent evident in s 134 of the Act to avoid the outcome that the Court will not recognise and enforce a proprietary interest that the Act treats as valid. I reject this aspect of Mr Otmy's defence.
4. A submission was made by Mr Otmy that the Court in its discretion should not grant the relief sought by Mr Meshumar because he did not pay his share of the $142,000 strata levy (being $47,333) or his one third share of the $36,000 transfer costs of Unit 11 to Mr Otmy. I do not accept that this submission would provide a justification for denying relief to Mr Meshumar. The evidence is unclear about what happened in relation to the payment of these costs. The better view on the evidence is that there was some discussion between the three men concerning Mr Meshumar's obligation to contribute to these costs, but the discussion occurred in the context that Mr Meshumar was seeking formal recognition of his interest in Unit 11, but that recognition was not forthcoming. It may be that if Mr Meshumar had succeeded in his claim in the accounting that would have taken place between Mr Meshumar and Mr Otmy the former would have been required to make an allowance in favour of the latter in respect of some share in these costs.

Conclusion

1. For the foregoing reasons I order that Mr Meshumar's claim is dismissed and that he should pay Mr Otmy's costs of the proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 16 February 2018