NSW Trustee and Guardian v Obeid

JUDGMENT

1. The NSW Trustee and Guardian brought these proceedings in 2020, seeking possession of a property at Heckenberg, which Ms Obeid then occupied. She later voluntarily surrendered possession of the property. What remains now to be determined are issues arising under a cross claim filed by Mr Khaled Elskaf in December 2020, in which he claimed he has an equitable interest in the property.
2. Mr Khaled Elskaf's brother Mr Ali Elskaf bought the property in 2007. In 2011 the NSW Crimes Commission obtained a restraining order against him under s 10A of the Criminal Assets Recovery Act 1990 (NSW). In May 2017 Harrison J made assets forfeiture and unexplained wealth orders under that Act against Mr Ali Elskaf, under which the property was forfeited to the Crown and over $4 million was ordered to be paid to the Treasurer: New South Wales Crime Commission v Elskaf [2017] NSWSC 681.
3. Mr Ali Elskaf did not seek to be heard in opposition to that application, even, it appears, in relation to his brother's claimed interest in the property: s 25 of the Criminal Assets Recovery Act. The result was that the NSW Trustee became the registered proprietor of the property on 28 May 2008: s 23(1)(b) of the Criminal Assets Recovery Act and s 32 of the Real Property Act 1900 (NSW).
4. It was only in March 2020 that Mr Khaled Elskaf claimed that he had an equitable interest in the property. He later filed a motion in the 2011 proceedings, seeking to restrain the Trustee from dealing with and/or disposing of the property. He also became a party to these proceedings and in December 2020 filed his cross claim. There he sought: "1. A declaration that the Cross-Claimant is the equitable proprietor of the property situate xxxxxxxxxxxxxxxxxxxxxxxxxxxxx, NSW, being Lot xxx in DPxxxxxx. 2. A declaration that the Cross-Defendant holds the whole or such portion as the Court thinks fit of the property situate xxxxxxxxxxxxxxxxxxxxxxxxxxxxx, NSW, being Lot xxx in DPxxxxxx on constructive trust for the Cross-Claimant. 3. Injunction restraining the Plaintiff from dealing with and/or disposing of the property situate xxxxxxxxxxxxxxxxxxxxxxxxxxxxx, NSW, being Lot xxx in DPxxxxxx, pending further or other Order of the Court. 4. An order requiring the Plaintiff to do all things necessary to transfer the legal title of the property situate xxxxxxxxxxxxxxxxxxxxxxxxxxxxx, NSW, being Lot xxx in DPxxxxxx to the Cross-Claimant. 5. In the alternative to order 4, an order pursuant to s.66G, Conveyancing Act 1919 on such terms as the Court thinks fit as to the proceeds of sale of the property situate xxxxxxxxxxxxxxxxxxxxxxxxxxxxx, NSW, being Lot xxx in DPxxxxxx. 6. In the alternative, damages or equitable compensation for breach of trust. 7. Cross-defendant to pay the cross-claimant's costs. 8. Any further or other order the Court deems it fit to make."
5. While an express trust was also there pleaded, that claim was not pursued. It was also pleaded that the Trustee was a volunteer who held the property on trust for Mr Khaled Elskaf, because it knew or ought to have known that Mr Ali Elskaf held the property on trust for him. That claimed knowledge was also abandoned.
6. In January 2021 Harrison J dismissed the 2020 motion, having concluded that the Trustee's title to the property was indefeasible: NSW Trustee and Guardian v Obeid [2021] NSWSC 4. Both in those proceedings and in these, it was accepted that before it became the registered proprietor the Trustee did not have notice of Mr Khaled Elskaf's claimed equitable interest.
7. That interest was assumed for the purpose of the interlocutory application: at [9]. In these proceedings the existence of the claimed equitable interest is in issue.
8. Harrison J considered that only a single issue then had to be resolved. Namely, "whether Khaled Elskaf is entitled to interlocutory relief, based upon his asserted equitable interest in the property, enjoining the Trustee as a volunteer from dealing with the property, when the Trustee acquired its registered legal title without notice of his claim": at [10].
9. Mr Khaled Elskaf contended in these proceedings that his Honour was incorrect in that observation. That was because it had also been argued that once the Trustee had been put on notice of his equitable interest in the property in 2020, a constructive trust had arisen, by which it was bound and that his Honour had failed to consider that argument.
10. Nevertheless, the judgment not having been appealed or overturned, it was accepted that it bound the parties. In the result at the hearing of the cross claim there was no issue that the Trustee was entitled to sell the property as it did. It was thus orders requiring the Trustee to disgorge the proceeds of the sale which were finally pursued.
11. They were opposed by the Trustee. It also raised the question of whether, in truth, it had become the registered proprietor as a "volunteer", given that had been the result of orders which had been made by the Court under the regulatory scheme established by the Criminal Assets Recovery Act. On the Trustee's approach that could have an impact on the indefeasibility of the title which it had acquired, given the provisions of s 42 of the Real Property Act.

The issues

1. The parties were ordered to file a memorandum of issues and facts as well as an outline of submissions, but Mr Khaled Elskaf did not comply with those orders until the evening before the hearing, after the NSW Trustee had provided its submissions.
2. The NSW Trustee had there submitted that the issues appeared to it to be: "1. Whether pursuant to section 42 of the Real Property Act 1900, the cross-defendant, upon being registered as proprietor of the Property on 28 May 2018, obtained title "absolutely free from all other estates and interests" that were not recorded on the title? Given that the interest claimed the cross-claimant was not recorded, whether the Trustee took title free of any claim that cross-claimant might have had? 2. Whether the cross-claimant has established that prior to the cross-defendant becoming registered as the proprietor of the Property on 28 May 2018, Ali Elskaf held title to the Property subject to the interest of the cross-claimant?"
3. On the Trustee's approach the first issue had already been decided by Harrison J and as to the second, the evidence did not establish that Mr Khaled Elskaf had any interest in the property.
4. Mr Khaled Elskaf's position in written submissions was that: "2. The first question to be determined is the extent to which a volunteer is in a different position to a purchaser for the purposes of s.42 of the Real Property Act 1900 (re indefeasibility). 3. The second question (and not of any less importance) is the position of the NSW Trustee and Guardian as holder of the subject land at Heckenberg subject to a constructive trust which arose after registration of the Plaintiffs title and when it became aware of the Cross Claimant's equitable interest."
5. Mr Khaled Elskaf accepted, however, that given what Harrison J had already decided, it was the second issue which had to be the focus of these proceedings.
6. On his case the evidence did establish his claimed interest, identified in written submissions to have been a resulting trust before the Trustee became the registered proprietor and afterwards, when it became aware of his equitable interest, a constructive trust.

Conclusion

1. For reasons which I will explain I am satisfied that the orders sought by Mr Khaled Elskaf cannot be made.

Did the NSW Trustee obtain title free of any interest which Mr Khaled Elskaf may have had under s 42 of the Real Property Act?

1. In resolving what was in issue it must be born in mind that s 42 provides, relevantly: 42 Estate of registered proprietor paramount (1) Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded except - (a) … (a1) .. (b) … (c) … (d) … (2) … (3) This section prevails over any inconsistent provision of any other Act or law unless the inconsistent provision expressly provides that it is to have effect despite anything contained in this section.

What did Harrison J decide in his January 2021 judgment?

1. It is also necessary to consider what Harrison J decided.
2. The Trustee became the registered proprietor as the result of the orders Harrison J made under the Criminal Assets Recovery Act in his May 2017 judgment, after Mr Ali Elskaf was examined by the Registrar about his affairs. They included the circumstances in which he had obtained a loan to purchase the property. But Mr Ali Elskaf did not defend the orders sought, nor has he made any application under s 25 in respect of the orders which bind him.
3. When Harrison J had to consider Mr Khaled Elskaf's later filed motion, his Honour concluded that the Trustee had "acquired its interest without notice of Mr Khaled Elskaf's alleged equitable interest" and that it had "in my view unarguably acquired its registered legal title free of any interest that Mr Khaled Elskaf maintains that he has": at [26].
4. Those conclusions rested on the Trustee having not had any notice of Mr Khaled Elskaf's claimed interest before it became the registered proprietor and s 42 of the Real Property Act protecting the indefeasibility of the title it had acquired, without having had such notice.
5. At [2] his Honour had observed that in order to succeed on his claim, Mr Khaled Elskaf had to demonstrate that the law as summarised in the passage quoted from Butt's Land Law in relation to "Exceptions to Indefeasibility" was wrong. There it was said at [12.560]: "However, the New South Wales Court of Appeal held in Bogdanovic v Koteff (1988) 12 NSWLR 472 that under the Real Property Act 1900 (NSW) the benefits of indefeasibility enure as much for volunteers as purchasers for value. In the court's view, any argument that a volunteer's registered title could be no better than his or her predecessor's could not stand in the face of s 42 Real Property Act 1900 and the concept of 'immediate indefeasibility of title' enunciated by the Privy Council in Frazer v Walker [1967] 1 AC 569 and adopted by the High Court in Breskvar v Wall (1971) 126 CLR 376. Although those cases did not concern volunteers, the Court of Appeal held that the judicial exegesis of indefeasibility to be found in them was inconsistent with any distinction between volunteers and purchasers for value. The High Court, in a case some years later, clearly assumed (although without deciding) that volunteers receive the same quality of indefeasibility as purchasers for value: Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [188], [198]. The Court of Appeal in Bogdanovic left open the question whether volunteers are subject to unregistered interests of which they had notice when they acquired their interest. Although there appears to be no basis for distinguishing between registered proprietors (whether for value or volunteers) with notice and those without notice given the unambiguous wording of s 43, the heading to the section specifically refers to the 'Purchaser from registered proprietor' (italics added). But subject to this possible qualification, in New South Wales a volunteer's title is as indefeasible as a purchaser's for value, except for claims based on the exceptions set out in the Real Property Act."
6. His Honour explained the parties' submissions, which addressed authorities in which Bogdanovic v Koteff (1988) NSWLR 472 had been followed, despite in Mr Khaled Elskaf's submission Bogdanovic still expressly leaving open the "frailty of a Torrens title acquired by a volunteer" at [17] and that at [18]: "If the Trustee's contention that it took the property 'absolutely free' is correct prospectively from date of registration of title, then the ramifications of such a submission would be enormous because it would mean that a registered proprietor could never become a trustee. This would mean that, among many other conceivable examples, the provisions of the Duties Act 1997 relating to trusts over land had no work to do. The acquisition of title for the purposes of s 42 of the Real Property Act can only mean that the registered proprietor is protected from then extant interests - not those which arise later (including those in the nature, as here, of constructive trusts)."
7. Harrison J did not accept the contention that after acquired notice of an equitable interest could defeat the registered title of a volunteer, having considered what Leeming JA had observed in Fistar v Riverwood Legion and Community Club Ltd (2016) 91 NSWLR 732; [2016] NSWCA 81 at [82]. Namely that "I do not understand the passage in Farah Constructions at [190]-[198] about the inapplicability of principles governing the receipt of trust property to title derived from registration under Torrens legislation to qualify the principles governing tracing in equity, or the personal liability of a volunteer to account for the value of the traceable proceeds of trust property retained by him or her": at [21].
8. At [22]-[24] Harrison J observed that "Ali Elskaf presumably remains personally liable to his brother for the repayment of the money expended on his behalf in accordance with any agreement between them that Khaled Elskaf can establish", before turning to what was discussed in Fistar at [12] and Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462 at [241]-[243]. Those authorities led his Honour to conclude that Mr Khaled Elskaf's claim was misconceived.
9. In Fistar it was explained at [12] that s 42 prevented a proprietary claim, but not a claim of unjust enrichment. Pertinently to what is now in issue, in Sze Tu it was observed at [241]-[243]: "As mentioned, the equitable obligation of a volunteer recipient of stolen funds does not arise until the recipient is put on notice of an unauthorised receipt of funds. If notice comes after the volunteer recipient acquires an indefeasible title, then the notice is too late to impose an equitable obligation on the recipient, as a constructive trustee, to restore the property to the victim of the theft. It is not to the point that the recipient is a volunteer. Authority in this Court is that indefeasibility may be asserted by a volunteer: Bogdanovic v Koteff at 479-480 (Priestley JA; Hope and Samuels JJA agreeing); Gerard Cassegrain & Co Pty Ltd v Cassegrain [2013] NSWCA 453; 305 ALR 612 at [81]-[83] (Beazley P; Macfarlan JA agreeing). The present case is distinguishable from the result in Heperu where, as Allsop P noted at [167], no issue had been raised at trial or on appeal by way of a defence under s 42 of the Real Property Act. Subsequently in Break Fast Investments Pty Ltd v Giannopoulos [2011] NSWSC 1508, Black J addressed the defence of indefeasibility in relation to a Black v Freedman claim. There, prior to being placed on notice, a recipient had applied what was claimed to be stolen funds to pay down a mortgage over a property in respect of which he was the registered proprietor. Black J concluded (at [102]-[103]) that the recipient's indefeasible title was an answer to a Black v Freedman claim. Although the facts in Break Fast Investments Pty Ltd (No 5) v Giannopoulos are different from the present case, his Honour's reasoning reflects, in my view, a correct application of principle." (Emphasis added)"
10. These binding authorities led his Honour to conclude at [25]-[26] that: "25. Khaled Elskaf's claim is misconceived. There is no serious question to be tried. I include in that opinion my view that there is no reason to suspect that a single judge sitting at first instance in this Court would not be bound to follow these authorities. The registered title of the Trustee taken even as a volunteer but without notice of Khaled Elskaf's alleged equitable interest must prevail. Nor is the Trustee's indefeasible title somehow subject to attack upon the basis of, or by analogy with, the equitable principles of tracing. 26. The simple but significant fact is that the Trustee acquired its interest without notice of Khaled Elskaf's alleged equitable interest. None of his submissions, and none of the authorities upon which he seeks to rely, comes to terms with that fundamental difficulty. Indeed, the question left open (as it were) by the Court of Appeal in Bogdanovic was whether volunteers are subject to unregistered interests of which they had notice when they acquired their interest. The Trustee has in my view unarguably acquired its registered legal title free of any interest that Khaled Elskaf maintains that he has. It cannot seriously be contended that there is any issue to be tried."

Harrison J's conclusions about the operation of s 42

1. While it was formally submitted that Harrison J had erred in the conclusions reached about the operation of s 42 of the Real Property Act, no further submissions were advanced. Harrison J's judgment not having been appealed, the parties remain bound by the conclusions reached on the matters over which they joined issue.
2. It is accordingly unnecessary to say more about the operation of s 42 of the Real Property Act than that Harrison J came to similar conclusions to those reached by Sackville AJA in Arambasic v Veza (No 4) [2014] NSWSC 1109 and Lindsay J in Guirguis v Girgis [2020] NSWSC 1468 at [2], both of which his Honour referred to.
3. While Mr Khaled Elskaf's position was that a "hole had been left in the law by Bogdanovic" and that a different view had been taken of the position in Victoria, to which Sackville AJA referred in Arambasic, the consistent view which has been taken is that Bogdanovic is binding and must be followed.
4. I can see no basis on which any different conclusion could properly now be arrived at.

Harrison J did consider the claimed constructive trust

1. Still Mr Khaled Elskaf contended that Harrison J failed to determine what had been advanced in relation to the claimed constructive trust. It was also submitted that what was decided in Sze Tu as to constructive trusts at [241] was incorrect, obiter and not binding.
2. In the face of Harrison J's observations at [25]-[26], it cannot be accepted that his Honour failed to consider the arguments advanced in relation to the claimed constructive trust. Considering himself bound by what was held in Sze Tu, he did not accept those arguments.
3. What was decided in Sze Tu was contrary to Mr Khaled Elskaf's claim that despite not having had notice of the equitable interest he asserted, that interest could prevail over the Trustee's indefeasible title, when it later received notice of that interest, because a resulting constructive trust then arose. Harrison J also concluded that this title was not "subject to attack upon the basis of, or by analogy with, the equitable principles of tracing", which would otherwise permit the money orders which he pursued, in the alternative, to be made: at [25].
4. In the result I am not persuaded that his Honour failed to consider this aspect of the case advanced by Mr Khaled Elskaf.

Was the claimed equitable interest in the property established on the evidence?

1. Whether Mr Khaled Elskaf has proven his claimed interest must now be determined.

The principles

1. There was no issue between the parties that a person who provides the purchase money, may obtain an equitable interest in the property acquired with those funds. Whether such an interest is acquired depends not only on the provision of the money, but also on what otherwise occurred before, at the time of, or immediately after the purchase: Calverley v Green (1984) 155 CLR 242; [1984] HCA 81 at 262. At 246 it was observed: "Where a person purchases property in the name of another, or in the name of himself and another jointly, the question whether the other person, who provided none of the purchase money, acquires a beneficial interest in the property depends on the intention of the purchaser. However, in such a case, unless there is such a relationship between the purchaser and the other person as gives rise to a presumption of advancement, i.e., a presumption that the purchaser intended to give the other a beneficial interest, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, there arises a resulting trust in favour of the purchaser. Similarly, if the purchase money is provided by two or more persons jointly, and the property is put into the name of one only, there is, in the absence of any such relationship, presumed to be a resulting trust in favour of the other or others. For the presumption to apply the money must have been provided by the purchaser in his character as such - not, as a loan."
2. It has been held that the presumption does not arise where the purchase is taken in the name of a sister: Noack v Noack [1959] VR 137. Here the acquisition of Mr Khaled Elskaf's claimed interest was in the property acquired by his brother. But both his claimed payment for the property and the intention that he would acquire an interest in it are, however, disputed.
3. The evidence led by Mr Khaled Elskaf about his payment of the purchase price in 2007 and what he and his brother then intended was scant. He called no evidence from his brother to support his claims and gave no account of any of their discussions. There was no explanation given for this, nor any suggestion that Mr Ali Elskaf was not available to give evidence.
4. In Amit Laundry Pty Ltd v Jain [2017] NSWSC 1495 Ward CJ in Eq as her Honour then was, explained the role which available presumptions can play in disputed cases such as this. What her Honour explained at [109]-[111] was not disturbed on appeal: "In the present case, there are potentially three "presumptions" in play: first, the presumption that beneficial ownership is commensurate with the legal title (about which there was no dispute); second, a presumption of resulting trust; and, third, a presumption of advancement. It is in the identification of the relevant factual matrix that presumptions have a role to play, in that a particular "presumption" may assist in the face of deficiencies or gaps in the evidence. So understood, it has been said that presumptions are "the bats of the law, flitting in the twilight, but disappearing in the sunshine of actual facts" (Mackowik v Kansas City St J & C B R Co 94 SW 256, 262 (1906), quoted approvingly in Neilson v Letch (No 2) [2006] NSWCA 254 at [26]; Mason P, with whom McColl and Basten JJA agreed). As to onus, the burden of rebutting a presumption of resulting trust (once the facts giving rise to the presumption have been established) lies on the party denying the existence of the trust (here, Rajil); conversely, the burden of rebutting a presumption of advancement (once the relevant relationship attracting the presumption has been established) lies with the person asserting the existence of a trust (here, Amit Laundry) (see Calverley at 252 (Gibbs CJ)."
5. At [13] her Honour noted that a claim based on an express trust presupposes an actual, express or inferred intention to create a trust, while a resulting trust typically arises where there is a dearth of evidence or deficiencies in the evidence. There the bare facts established by documents was that there had been unequal contributions to the acquisition of the real property and the other evidence that at the time of acquisition there was a shared intention by family members as to the ownership and occupation of the property: at [114]-[115].
6. As her Honour explained at [165], what was intended must be inferred from what the parties do or say.

The evidence

1. In this case the only evidence which supports the claimed interest is Mr Khaled Elskaf's challenged assertions that it was he who paid for the property when it was purchased and provided the funds later used to discharge the loan used to purchase the property.
2. Mr Khaled Elskaf was cross examined about the truth of his evidence that it was he who had paid to purchase the property and repay the ING loan, but he made no concessions, despite what the documents showed.

Who paid for the property?

1. But there was no issue that it was Mr Ali Elskaf who entered and completed the purchase transaction in 2007, having obtained a first homeowners grant and a loan from ING for $235,622 which he used to purchase the property and that he also later made interest payments on the loan.
2. Contrary to Mr Khaled Elskaf's evidence, the contemporaneous records establish that it was Mr Ali Elskaf who paid the entire purchase price, using his own funds and ING borrowings. The records also establish that it was Mr Ali Elskaf who repaid the loan in 2008, again using funds taken from his account.
3. Documents which might have supported Mr Khaled Elskaf's case, such as bank records which would have evidenced the source of the funds he claimed he used to purchase the property, were not tendered. Nor was evidence called from Mr Ali Elskaf, despite the closeness of the relationship Mr Khaled Elskaf described, nor from Ms Safa Elskaf, Mr Khaled Elskaf's former wife. She could also have given relevant evidence, the only bank record on which Mr Khaled Elskaf relied being in relation to one of her accounts, which he claimed he had used during the marriage.
4. In his first affidavit Mr Khaled Elskaf asserted that: 1. it was he who had paid the 10% deposit of $28,650 when contracts were exchanged on the property in September 2007; 2. he also then paid the shortfall in the purchase price of about $30,000 on settlement on 5 October, the balance being paid by the ING borrowings; and 3. on 25 February 2008 he paid the balance then owed to ING of $228,800 by a card entry, using funds from Ms Safa Elskaf's account.
5. Mr Khaled Elskaf also deposed that: "The property was never transferred into my name as registered proprietor as due to the high level of trust we have within the family. Ali and I share a very close bond as brothers and as such I was not concerned that Ali would do wrong by me".
6. Ms Safa Elskaf's bank statement was annexed to this affidavit. It showed, however, that the funds taken from this account in February 2008, were paid into Mr Ali Elskaf's Westpac bank account, kept in the name "Mr Ali Elskaf t/as Ace Auction Motors" and that her account was then left in debit.
7. There was no issue that Mr Ali Elskaf used those funds to repay the ING loan, but other records suggest that he later repaid them.
8. In Mr Khaled Elskaf's November 2020 affidavit he said, however, that Mr Ali Elskaf's payments of $100,000 in March 2008 and $80,000 in June 2008 to Ms Safa Elskaf and JFK Developers Pty Ltd were not referrable to payments he had made in relation to the property. But he did not disclose what they were paid for. He also said that there was no evidence that $60,000 withdrawn on 21 April 2009 from Mr Ali Elskaf's account was paid to JFK Developers. That is also not consistent with the bank records, which show that all these payments were made.
9. In his April 2022 affidavit Mr Khaled Elskaf again said that his brother Ali Elskaf had not made any payments referrable to amounts he had paid for the property. But he still did not disclose what Mr Ali Elskaf's payments were made for. Nor did he reveal any other financial dealings between he, Ms Safa Elskaf, JFK Developers and Mr Ali Elskaf, which could explain the payments made to them after the ING loan was repaid.
10. In the absence of such an explanation, which Mr Khaled Elskaf must have been able to advance, despite the passage of time, which was argued to explain his inability to recall the details of the payments he had made for the property in 2007, the proper inference is that this would not have assisted his case: Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 as explained in Sanchez-Sidiropoulos v Canavan [2015] NSWSC 1139 as to that principle, at [38]-[39].
11. That inference also arises in respect of the absence of evidence led from either Mr Ali Elskaf or Ms Safa Elskaf, or any explanation of why they were not called, as well as the absence of any supporting contemporaneous documents evidencing the payments Mr Khaled Elskaf claims he made.
12. This has to be considered in a context where evidence, including contemporaneous documents which contradicted or were inconsistent with his evidence, was led by the Trustee without objection or challenge.
13. The affidavits of Ms Ozaras, the Trustee's solicitor, attached various judgments, searches, declarations, notices, including those given to Ms Obeid, the sale contract and various bank, ING and ASIC records. She also explained how it was that Ms Obeid came to vacate the property, after claiming that she had been subjected to threats and had continued to pay rent, despite the orders made by Harrison J in relation to forfeiture of the property.
14. In his affidavit, Mr Nguyen, a risk analyst employed by Westpac, explained records which evidenced the account Mr Ali Elskaf operated and attached various contemporaneous documents which contradicted Mr Khaled Elskaf's evidence.
15. In his affidavit Mr Bull, employed by the NSW Crime Commission as a Senior Forensic Accountant in the Financial Investigations Division, explained documents obtained by the Commission in its investigation into Mr Ali Elskaf and provided to the Trustee to use in these proceedings. They included those annexed to Ms Ozaras' affidavits, as well as ASIC documents relating to Ace Action Motors Pty Ltd and JFK Developers, which he also explained. Mr Bull also analysed the bank records and the settlement statement of the purchase of the property.
16. Mr Bull's examination had also not identified any deposits between May and October 2007 being made into Mr Ali Elskaf's account by Mr Khaled Elskaf, Ms Safa Elskaf or JFK Developers. He also explained how trace documents were obtained to identify the source of payments made into Ms Safa Elskaf and JFK Developers' accounts, from Mr Ali Elskaf's accounts.
17. The result was that it has to be concluded that the relevant contemporaneous documents, including bank and other records, did not support Mr Khaled Elskaf having made the payments he claimed he made in 2007 and 2008 in respect of the property. Instead, they evidence payments made by Mr Ali Elskaf, including: 1. a cheque for $28,650, the amount of the deposit, drawn on the day of the exchange in 2007 on withdrawal of funds from Mr Ali Elskaf's Westpac account; 2. ING advancing $235,622 to Mr Ali Elskaf, who then used these borrowings, taken from his mortgage account, on 5 October 2007 to settle the purchase, together with funds obtained as a first home buyer's grant; 3. that day Mr Ali Elskaf also withdrawing $23,293.83 from his Westpac account, that being the shortfall for the balance due on settlement of $257,850; 4. Mr Ali Elskaf's Westpac account also reflecting monthly interest payments later being made to ING, commencing 1 November 2007; 5. on discharge of the mortgage in 2008 after: 1. $228,800 was transferred from Ms Safa Elskaf's account to Mr Ali Elskaf's Westpac account on 25 February 2008; 2. $228,800 being transferred from Mr Ali Elskaf's Westpac account on 28 February to his ING mortgage account, leaving a debit balance; 3. further interest being recorded in the ING account; and 4. on 7 March 2008 a further $1,398.21 being transferred from Mr Ali Elskaf's Westpac account to ING.
18. There is also no documentary evidence that Mr Khaled Elskaf ever deposited funds into his former wife's account, or that he had the authority he claimed, to operate that account.
19. Other documents also reflect that Mr Ali Elskaf later transferred from his Westpac account to the accounts of Ms Safa Elskaf and JFK Developers, of which Mr Khaled Elskaf was the sole director, secretary and shareholder, sums totalling $240,000. Such payments were consistent with repayment of borrowings to both Ms Safa Elskaf and Mr Khaled Elskaf. They included: 1. $100,000 paid to JFK Developers on 27 March after a staff assisted withdrawal from Mr Ali Elskaf's account; 2. a bank cheque for $60,000 deposited into the JFK Developers account on 21 April 2009; and 3. $122,000 paid to Ms Safa Elskaf on 16 June 2008, by two cheques for $80,000 and $42,000.
20. Without explanation, Mr Khaled Elskaf's evidence that these payments were made for some other undisclosed purpose, is simply not persuasive.
21. In the result, on the balance of probabilities it cannot be concluded that it was Mr Khaled Elskaf who paid for the property, as he claimed.

No evidence of intention

1. Nor does the evidence establish the necessary intention.
2. Aspects of Mr Khaled Elskaf's affidavits and those of his two brothers which sought to explain the circumstances in which he claimed he paid for the property and acquired an interest in it, were not read. Mr Khaled Elskaf's own evidence and that given by his brothers about relevant matters was thus sparse and in his brothers' case, shed no real light on what was in issue.
3. Both Mr Ali Elskaf and Mr Khaled Elskaf could also have given evidence of what, if anything, they discussed at the relevant times, around when the property was acquired and later, when the loan was repaid. But Mr Khaled Elskaf gave no evidence about this, nor was Mr Ali Elskaf called. The two brothers who did give evidence, also shed no light on what was then discussed.
4. What was read of Mr Ahmed Elskaf's affidavit was that there had been a family meeting in early 2008 at his parents' home, present at which were his parents and his five brothers. He later purchased the next door property. Mr Mohammed Elskaf's evidence was that he was aware that his brothers Mr Ali Elskaf and Mr Ahmed Elskaf had purchased their properties and that he had attended both the auction at which Mr Ali Elskaf had purchased his property and the 2008 family meeting at which his brothers and parents were present.
5. That evidence simply did not support the conclusion that Mr Ali Elskaf and Mr Khaled Elskaf ever had the intention on which the claimed interest in the property depends.

Conclusion

1. There was no suggestion that there was an express trust. Nor did the evidence establish that a resulting trust ever came into existence.
2. Given the documentary evidence, it is not possible to conclude, on the balance of probabilities, that the necessary intention existed or that Mr Khaled Elskaf paid for the property, repaid the ING loan, or even that the money advanced to Mr Ali Elskaf out of Ms Safa Elskaf's account, which he used to repay the ING loan, was not later repaid.
3. As I have explained, the documents establish that it was Mr Ali Elskaf who entered the purchase transaction, paid the deposit and later what remained of the purchase price out of funds drawn from his own account, which he had not received from Mr Khaled Elskaf, Ms Safa Elskaf or JFK Developers, together with funds which he borrowed from ING and the first home buyer's grant. He then made interest payments to ING until he repaid the loan, using the funds advanced out of Ms Safa Elskaf's account.
4. In coming to the conclusions I have reached it is not necessary to conclude that Mr Khaled Elskaf was entirely untruthful in his evidence. His affidavits were consistent with him not having a good recall of what occurred in 2007 and 2008. The documentary evidence showed that his recollection was not reliable. His failure in cross examination to concede that his affidavit evidence was inaccurate was also not credible, given what the contemporaneous documents established.
5. On all of the evidence it is sensible to infer that Mr Ali Elskaf did repay the money he received from the account of Ms Safa Elskaf in February 2008. There was no evidence of any other purpose for those payments, other than Mr Khaled Elskaf's claim that they were made for some other, undisclosed, but unrelated purpose. If there was such a purpose, it could easily have been disclosed.
6. In the result, absent both an explanation of why the payments were made after repayment of the loan and documentary evidence consistent with the payments being made for some other unrelated purpose, that Mr Khaled Elskaf's unsupported evidence about this was credible, cannot be accepted.
7. A contribution to the purchase price, of the requisite character, is a "factual precondition" to a successful assertion that there is a presumption of resulting trust: Hamed v Elddin [2016] NSWCA 9 at [23]. That precondition was not here met, despite Mr Khaled Elskaf claiming that it was he who paid for the property.
8. Further, payments made to repay a mortgage secures a release of a charge over the property, rather than being a contribution to the purchase price: Calverley at [257]-[258]. Such a payment could thus not establish the claimed beneficial interest in the property.
9. The evidence is also not capable of establishing that Mr Ali Elskaf and Mr Khaled Elskaf ever discussed or intended, at the relevant time, in proximity to its acquisition in 2007, that Mr Khaled Elskaf would acquire an interest in the property that Mr Ali Elskaf had paid for. Nor that he would acquire such an interest when the ING borrowings were repaid by Mr Ali Elskaf in 2008. Mere attendance at a family meeting cannot establish this.
10. There was simply no evidence of a shared intention at the relevant time, in proximity to the acquisition of the property, that Mr Khaled Elskaf would have a beneficial interest in it, unlike the circumstances which arose for consideration in Amit Laundry and Muschinski v Dodds (1985) 160 CLR 583; [1985] HCA 78.
11. In the result I am satisfied that the evidence does not establish that what occurred before, at the time of or immediately after either the purchase or repayment of the loan, gave Mr Khaled Elskaf any equitable interest in the property. To the contrary, it is inconsistent with him having acquired such an interest.
12. It thus cannot be concluded that any resulting trust ever came into existence, as Mr Khaled Elskaf claimed.

Did a constructive trust arise after the Trustee became aware of the claimed equitable interest?

1. In case I am wrong in these conclusions, I will also deal with this issue.
2. There was finally no issue between the parties about the difference between a resulting trust, which has to be established by evidence of the existence of the necessary intention at the relevant time and the constructive trust which Mr Khaled Elskaf claims arose when the Trustee was put on notice of his equitable interest, after it became the registered proprietor of the property.
3. Mr Khaled Elskaf submitted that "a registered proprietor who is a volunteer who becomes aware of a prior interest (in this case express or resulting trust) and acts contrary to that trust, will itself become trustee via the application of a remedial constructive trust which reflects the trust extinguished upon registration". Reliance was placed on Fistar at [45], to which Harrison J had not referred.
4. This was resisted by the Trustee, which contended that s 42 and the indefeasibility of title it obtained on becoming the registered proprietor as the result of its provisions, it not having had prior notice of Mr Khaled Elskaf's interest, precluded this result and the relief finally pursued, a disgorgement order following the sale of the property.

The authorities

1. In his reasons Harrison J did not refer to what was observed in Fistar at [45]. But indefeasibility of title did not arise for consideration in Fistar. It was concerned with a fraud, a victim having invested money with a fraudster who dissipated that money and then used other money stolen from a Club, to repay the victim. It was thus not concerned with the consequences of a registered interest in property acquired without notice of an equitable interest, to which s 42 of the Real Property Act applies. At [45] Leeming JA observed: "... A person who receives trust property, otherwise than as a bona fide purchaser for value without notice, but innocently, and thereafter acquires notice of the trust and deals with it in a manner inconsistent with the trust, will also be liable as a constructive trustee. Although this is similar to first limb Barnes v Addy liability, it is conceptually distinct, because it is the subsequent dealing, rather than the receipt of property, that founds liability, as Professors Dietrich and Ridge have observed: J Dietrich and P Ridge, Accessories in Private Law, (2015, Cambridge University Press) at 203. This class of liability was identified by Millett J in Agip (Africa) Ltd v Jackson [1990] Ch 265 at 291 and by the Court of Appeal in Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 at 474; see also L Tucker et al, Lewin on Trusts (19th ed 2015, Sweet & Maxwell) at 2103-9. The distinction drawn by Millett J in Agip was cited with evident approval in Sze Tu at [143]."
2. Sze Tu, to which Harrison J did refer, was concerned with indefeasibility of title flowing from registration of an interest in real property, as well as a constructive trust which was claimed to have arisen in circumstances where the registered proprietor, a volunteer, had no prior notice of the equitable interest there relied on. At [143] it was observed: "As Millett J explained in Agip (Africa) Ltd v Jackson at 291, when describing the liability of a person who receives for his own benefit trust property transferred to him in breach of trust: 'He is liable as a constructive trustee if he received it with notice, actual or constructive, that it was trust property and that the transfer to him was a breach of trust; or if he received it without such notice but subsequently discovered the facts. In either case he is liable to account for the property, in the first case as from the time he received the property, and in the second as from the time he acquired notice.'"
3. Here the Trustee received title to the property as the result of orders made under the Criminal Assets Recovery Act, not a breach of trust. But an innocent party may become a constructive trustee obliged to restore the asset, as discussed at [144]-[145], by reference to Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252 at [92], [154]-[155], where the remedial nature of constructive trusts was also discussed.
4. It was concluded in Sze Tu, nevertheless, that "If notice comes after the volunteer recipient acquires an indefeasible title, then the notice is too late to impose an equitable obligation on the recipient, as a constructive trustee, to restore the property to the victim of the theft": at [241].
5. It was thus here accepted that the indefeasibility of the Trustee's title could not be challenged. But still Mr Khaled Elskaf contended that s 42 of the Real Property Act did not preclude his pursuit of an in personam claim against the Trustee, given the resulting and constructive trusts which he claimed he had established on the evidence.
6. In Sze Tu it was unnecessary to decide whether the indefeasibility principle also precluded personal remedies against a third party liable as a constructive trustee, who had acquired the title to the property by registration: at [256]-[261] under the heading "Assuming indefeasible title, are the appellants liable to a personal claim?".
7. There reference was made to Super 1000 Pty Ltd v Pacific General Securities [2008] NSWSC 1222. There White J had to consider whether "no remedy, including a personal remedy for an account of profits, is available against Super 1000 because it registered its mortgage without fraud": at [219]. His Honour considered Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [193]-[195], where what was said by Tadgell JA in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 at 156 was referred to, as well as LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517; [2002] WASCA 291, which White J considered that he was bound to follow: at [234].
8. White J noted that Murray J had said in LHK Nominees at [194], that it would be open to the appellant trustee to pursue a claim for a "constructive trust in an entirely remedial sense, as opposed to the pursuit of a proprietary claim that, in the circumstances of the case, the appellant retained the equitable interest in the property". Further that at [195] such a constructive trust in the remedial sense was said to "refer to an equitable remedy for infringement of the plaintiff's personal equity": at [233].

The result

1. The question which here arises to be considered is different. But it seems to me that if, unbeknownst to the Trustee, a person did have an equitable interest in a property which became the subject of a forfeiture order as a result of which it became the registered proprietor and that interest later came to its attention, it is arguable that an in personam claim could be pursued against the Trustee.
2. Forfeiture orders made by the Court under s 22 of the Criminal Assets Recovery Act are made in respect of the interests "in property of a person", in this case Mr Ali Elskaf's interest. It is only that interest which is forfeited to the Crown and vests in the Trustee: s 23(1). Accordingly, s 22 would have permitted Mr Ali Elskaf to have sought to establish on application for the forfeiture order, that his interest in the property was limited and that it was his brother Mr Khaled Elskaf who had a beneficial interest, but he did not do so.
3. On the parties' approach, if the subject of the Court's order only has a legal interest in a property, despite there having been no such application, an order can have no impact on another person's beneficial interest in that property, including one which arises under a resulting trust.
4. A beneficial owner may, of course, have no notice of the application for or the making of a forfeiture order until after the Trustee becomes the registered proprietor. Even if they do, there may not be a right to be heard, given that the relief being pursued is not directed to their interest in the property, unless they have a right to relief on grounds of hardship under s 24. That does not depend on any interest in the property.
5. Section 25 of the Criminal Assets Recovery Act permits an application for exclusion orders to be made to the Court even after forfeiture, however, within specified times and specified circumstances.
6. There may also be the possibility of relief under s 23(4), that section dealing as it does with the effect of assets forfeiture orders, which the parties did not address. Section 23 provides: Effect of assets forfeiture order (1) On an assets forfeiture order taking effect in relation to an interest in property - (a) the interest is forfeited to the Crown and vests in the NSW Trustee and Guardian on behalf of the Crown, and (b) if the person forfeiting the interest was in possession, or was entitled to possession, of the property, the NSW Trustee and Guardian may take possession of the property on behalf of the Crown. (2) An interest forfeited under subsection (1) is to be disposed of by the NSW Trustee and Guardian in accordance with the directions of the Treasurer and the proceeds are to be paid to the Treasurer and credited to the Proceeds Account. (3) The Treasurer may delegate the power to give directions for the purposes of subsection (2). (4) The Supreme Court may, when it makes an assets forfeiture order or at any later time, make any ancillary orders that the Court considers appropriate. For example, the Court may make ancillary orders for and with respect to facilitating the transfer to the Crown of interests in property forfeited to the Crown under such an order.
7. The term "ancillary orders" is not defined in the Act other than in sch 1 Savings and transitional provisions, which is of no relevance.
8. But s 23(4) does permit an ancillary order to be made even after the Trustee became the registered proprietor. That is to be considered in light of s 12. It also permits the making of ancillary orders, when a restraining order is made or at any later time, "whether or not affecting a person whose interests in property are subject to the restraining order", including as to there specified matters. They include an order under s 12(1)(c1) relevantly directing: … a person who is or was the owner of an interest in property that is subject to the restraining order to furnish to the Commission or NSW Trustee and Guardian, within a period specified in the order, a statement, verified by the oath of the person making the statement, setting out such particulars of the property, or dealings with the property, in which the owner has or had an interest as the Court thinks proper.
9. The parties did not address the possibility of power to make the order here pressed as an ancillary order. But as discussed in New South Wales Crime Commission v Ollis (2006) 65 NSWLR 478; [2006] NSWCA 76, under this statutory scheme "there is some scope for unintended injustice, if the property of uninvolved parties cannot readily be removed from the scope of a restraining order": at [68].
10. In Woodcroft v Director of Public Prosecutions [2000] NSWCA 128 at [72] it was said of the equivalent provision to s 12, s 48(1) of the Proceeds of Crime Act 1987 (Cth) that an ancillary order "must be ancillary to something, here to the restraining order, in that it is incidental or supplemental to it", but that there was no point in attempting an exhaustive description of the situations in which an ancillary order varying the property the subject of a restraining order may be made.
11. In Ollis it was also said at [30]: "There is, however, ample work for s 12(1)(a) to do short of providing an alternative avenue for a defendant to apply for the exclusion of an interest in property from the restraining order, as an alternative to application for an exclusion order under s 25 of the Act. The Commission might apply to correct a misdescription or other slip, or if persuaded that the interest in property was wrongly made the subject of restraint or should no longer the subject of restraint. Apart from the instance given above of application by the owner of an interest in property, there may be other occasions for variation of a restraining order on the application of the owner of an interest in property the subject of the order, other than by an application amounting to an application for an exclusion order."
12. If, however, a person who had a beneficial interest in forfeited property made an application for an ancillary order, in this case disgorgement of the proceeds of sale, under this statutory scheme it would logically require evidence to be led as to how the claimed beneficial interest was acquired, if the Court was to exercise any discretion in favour of the applicant.
13. Proof that the interest was acquired with the applicant's own funds and not those received from the person the subject of the restraining and assets forfeiture orders, or at least from their unexplained wealth, might then provide a proper basis for orders in the applicant's favour. That is because "the suspicion on which the restraining order was founded must be positively displaced within the regime of s 25": Ollis at [33].
14. Whether a right to equitable relief exists, in addition to any right to make an application for an ancillary order under the legislative scheme, was also not addressed.
15. It is difficult to see, however, that if there is no right to relief as the result of an application for an ancillary order under the statutory scheme, that an application for equitable relief would not be available to a person who has a beneficial interest in a property that has become subject to a forfeiture order, which has not been considered by the Court. At least before the Trustee becomes the registered proprietor.
16. On such an application, it seems to me that similar considerations as to the source of the funds used to acquire the interest in the property would arise, if any available discretion was to be exercised by the Court, given how it was that the registered proprietor's interest in the property was acquired as the result of orders made by the Court under the statutory scheme.
17. If the necessary evidentiary basis for the claim was established on the evidence, like the situation referred to in Sze Tu at [238], it seems to me that the Trustee having been the recipient of the property the subject of the forfeiture order, later put on notice of the beneficial interest in the property, that is an interest which the Trustee would then in conscience be bound to recognise, even though the Trustee's title was indefeasible.
18. On the approach of Murray J in LHK Nominees, after registration and the resulting acquisition of indefeasible title, the Trustee would not be obliged to restore the property. But the beneficial owner would have the right to pursue an in personam claim against the Trustee in pursuit of a constructive trust. Such a trust is remedial and moulded to the circumstances of a particular case, in the way discussed by Brennan J in Muschinski and imposed by the Court, in an appropriate case.
19. That conclusion is also supported by Black J's approach in Break Fast Investments Pty Ltd v Giannopoulos (No 5) [2011] NSWSC 1508, where his Honour observed at [102]: "In Farah Constructions Pty Ltd v Say-Dee Pty Ltd , the High Court held that only certain legal or equitable causes of action against a registered proprietor operate as an in personam exception outside the language of s 42(1). The Court referred with approval to the judgment of Tadgell JA in Macquarie Bank Ltd v Sixty-Fourth Throne Pty Ltd [1998] 3 VR 133 and the majority judgments in the Full Court of the Supreme Court of Western Australia in LHK Nominees Pty Ltd v Kenworthy [2002] WASCA 291; (2002) 26 WAR 517. In Super 1000 v Pacific General Securities [2008] NSWSC 1222; (2008) 221 FLR 427, White J undertook a detailed review of the case law and observed that the effect of those decisions, particularly LHK Nominees Pty Ltd v Kenworthy , is that the in personam exceptions to indefeasibility under Real Property Act s 42 do not extend to claims arising under the knowing receipt limb of Barnes v Addy (1874) LR 9 Ch App 244. I agree with his Honour's reading of those cases and his explanation of their effect. In my view, that the same result must follow in respect of a claim under Black v S Freedman & Co which arises from the fact that a person is placed on notice of an unauthorised receipt of funds, which does not amount to an allegation of fraud in the sense of dishonesty, as distinct from an allegation that that person is bound in conscience to recognise the claimant's rights once they are placed on notice of them."
20. Obviously a constructive trust will not be "imposed in accordance with idiosyncratic notions of what is just and fair": Baumgartner v Baumgartner (1987) 164 CLR 137; [1987] HCA 59 at 148. But "general notions of fairness and justice are relevant to the traditional concept of unconscionable conduct, this being a concept which underlies fundamental equitable concepts and doctrines, including the constructive trust": at 148.
21. Thus I consider that even after the Trustee became the registered proprietor, on an equitable claim it would be open to conclude that it would be bound in conscience to recognise a beneficial interest in the property once put on notice of a right which a person had legitimately acquired, before the Court's order was made, the forfeiture order not having been directed to that interest and it not having been disclosed to the Court by the subject of the order.
22. That would permit, it appears to me, consistently with fundamental equitable concepts and doctrines, recognition of a constructive trust and an order of the kind here pressed to be made.
23. But I am satisfied that even if such a claim is available, it is not one which Mr Khaled Elskaf can successfully pursue. He has not established that he had a beneficial interest in the property, or the claimed resulting and constructive trusts, given that his claimed payments for purchase of the property and repayment of the ING loan have not been established. Nor has the source of the funds which he claims he used to make those payments been revealed.
24. In those circumstances the Court would not exercise any discretion which it had to make the order sought.
25. Orders
26. For the reasons given I am satisfied that the cross claim must be dismissed. I order accordingly.
27. The usual costs order under the Uniform Civil Procedure Rules 2005 (NSW) is that costs follow the event. In this case that is an order that Mr Khaled Elskaf bears the Trustee's costs as agreed or assessed. Unless the parties approach to be heard within seven days, that will be the Court's order.

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