Royal v El Ali

overview 3 Isaac & Jacob, Saracen, Ottoman and EasyChoice were each owned and controlled by Mr El Ali before the challenged share transfers. EasyChoice was the vehicle through which Mr El Ali conducted his mortgage broking business. Saracen and Ottoman were the vehicles through which Mr El Ali acquired and owned properties. Isaac & Jacob was, and still is, the sole unitholder of the Voyager Point Unit Trust, the Helensburgh Unit Trust and the Ottoman Investments Unit Trust. Saracen was the trustee of the Voyager Point Unit Trust and the Helensburgh Unit Trust. Ottoman was the trustee of the Ottoman Investments Unit Trust. Isaac & Jacob holds the units in the Voyager Point Unit Trust and Helensburgh Unit Trust as trustee for the Elali Family Trust, a discretionary trust of which Mr El Ali is a specified beneficiary, and holds the units in the Ottoman Investments Unit Trust as trustee for the Second Elali Family Trust, a discretionary trust of which Mr El Ali is within the designated class of beneficiaries. Mr El Ali, at all relevant times, was, and still is, the appointor of both family trusts. As appointor, Mr El Ali has, under the terms of both family trusts, the power to remove and appoint the trustee. 4 In March 2010 the Royals commenced proceedings in the Supreme Court of New South Wales against Mr El Ali on a debt claim for the payment of the sum of $925,000 plus interest ("the debt proceedings"). 5 On 1 October 2010, the Royals obtained freezing orders ("the freezing orders") in the debt proceedings against Mr El Ali and Saracen. The terms of the freezing orders against Mr El Ali restrained him from disposing of, dealing with, or diminishing the value of any of his assets up to the unencumbered value of $925,000 plus interest (quantified in the sum of $229,417.50). Exclusion was made for paying his ordinary living and reasonable legal expenses and dealing with, or disposing of, his assets in the ordinary and proper course of his business. The terms of the freezing orders against Saracen restrained it from disposing of, dealing with, or diminishing the value of any of its assets up to the unencumbered value of $1,099,456.17 and had similar exclusions. Mr El Ali was ordered to file and serve an affidavit setting out his assets and liabilities within 14 days from the making of the freezing orders. 6 In both orders the term "assets" was defined to include: (1) … (a) all your assets whether or not they are in your name and whether they are solely or co-owned; (b) any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and (c) … (2) the value of your assets is the value of the interest you have individually in your assets. It was not in dispute that the shares held by Mr El Ali in Isaac & Jacob, Saracen, Ottoman and EasyChoice, as well as the properties owned by Saracen and Ottoman, were "assets" covered by the terms of the orders. 7 At the time that the freezing orders were made, Saracen was the registered proprietor of the Voyager Point and Potts Point properties and Ottoman was the registered proprietor of the Kogarah Unit 2 property (as well as units 1 and 3) and had entered into a contract to purchase the Taren Point property. It was not in dispute that Saracen owned the Potts Point property in its own right. In dispute is whether Ottoman and Saracen owned the other properties in their own rights (as the applicants contended) or in their capacities as trustees of the respective trusts (as the respondents contended). 8 On 19 October 2010 Mr El Ali transferred his shares in Isaac & Jacob and Ottoman to Mr Nazloomian (who was described in evidence as a friend of Mr El Ali). The transfers were for nominal consideration and were purportedly effected as security for outstanding loans from Mr Nazloomian to Mr El Ali and his companies, including Ottoman. Mr Nazloomian also replaced Mr El Ali as the sole director of both companies. The applicants' case (which was denied by Mr El Ali) was that Mr El Ali effected the transfer of the Isaac & Jacob shares in knowing breach of the freezing orders and with intent to defraud his creditors. The applicants have not sought to impugn the transfer of the Ottoman shares to Mr Nazloomian as the shares were later transferred back to Mr El Ali. 9 On 22 November 2010 (after the share transfers and outside the time ordered) Mr El Ali affirmed his affidavit of assets and liabilities. He disclosed that he was the director and shareholder of Saracen and EasyChoice (as well as other companies that are not presently relevant). He listed in his assets and liabilities the Voyager Point and Potts Point properties, as well as a property at Helensburgh ("the Helensburgh property") (also owned by Saracen), as follows: Details Extent of Interest Value Encumbrances/Liabilities [Helensburgh property] Saracen $3.6 m NAB Mortgage $1,540,000 [Voyager Point property] Saracen $4.5 m CBA Mortgage $1,384,466.62 [Potts Point property] Saracen $700,000 Nil

10 He also disclosed that until 19 October 2010 he had been a director of, and held shares in, Ottoman and Isaac & Jacob. He deposed that the reason he had resigned as director of those companies was: … due to the credit defaults which have been recorded against me personally. This prevented me from borrowing funds to purchase real estate. The transfer of the shares … was part of the overall transaction replacing me as director of the companies referred to … above [which included Ottoman and Isaac & Jacob]. 11 He deposed that Ottoman was the registered proprietor of Kogarah Units 1, 2 and 3 which he valued at $670,000 each and that Units 1 and 3 (but not Unit 2) were mortgaged, each securing the amount of $545,000. He also deposed that Ottoman had entered into two contracts for the purchase of property as follows: (a) on 23 July 2010, a contract to purchase a property at Lot 3, Stonny Batter Road, Minto ("the Minto property") for the purchase price of $3.8 million, on which a deposit of $38,000 had been paid with completion due on 30 November 2010; and (b) on 15 September 2010, a contract to purchase the Taren Point property for the purchase price of $2.025 million with a deposit paid of $50,625 and a completion date 130 days after the date of contract. 12 On 26 November 2010 the freezing orders were varied by consent to allow Mr El Ali to sell two residential properties (which are not presently relevant). 13 On 14 December 2010, Mr Nazloomian resigned as the director of Ottoman and transferred the shares in Ottoman back to Mr El Ali, who was also re-appointed sole director. 14 On 15 December 2010 (or thereabouts) Ottoman purported to appoint Mr Stojanovski as the new trustee of the Ottoman Investments Unit Trust and on 16 December 2010, Ottoman transferred the Kogarah Unit 2 property to Mr Stojanovski for $1. The transfer was said to be effected as security for an advance of $1 million from Mr Stojanovski to Ottoman to fund the balance due on the purchase of the Minto property. The applicants' case (which was denied by Mr El Ali) was that these transactions were effected by Mr El Ali in knowing breach of the freezing orders and with intent to defraud his creditors. 15 The debt proceedings were heard by Macready AsJ on 11-13 April 2011 with judgment reserved. 16 On or around 21 April 2011 Ottoman purported to appoint Mr Zreika as the new trustee of the Ottoman Investments Unit Trust in place of Ottoman and a transfer form for the transfer of the Taren Point property from Ottoman to Mr Zreika for consideration of $1 was stamped at the Office of State Revenue ("OSR"). On 29 April 2011, the Ottoman purchase of the Taren Point property was completed. On 5 May 2011, Ottoman was registered as the owner on the title. On the same day, the transfer from Ottoman to Mr Zreika was also registered. The applicants' case (which was denied by Mr El Ali) was that these transactions were effected by Mr El Ali in knowing breach of the freezing orders and with intent to defraud his creditors. 17 Judgment in the debt proceedings was delivered on 3 June 2011. Macready AsJ found Mr El Ali liable to the Royals in the sum of $1,099,456.74. On 23 June 2011, orders were entered giving effect to the judgment delivered on 3 June 2011. The orders included the continuation of the freezing orders against Mr El Ali and Saracen for a period of 28 days and a stay on the judgment for a period of 28 days pending the filing of an appeal foreshadowed by Mr El Ali. Mr El Ali filed a notice of intention to appeal but ultimately did not appeal. 18 The freezing orders and the stay were due to expire on 21 July 2011. On 18 July 2011, on the Royals' application, McDougall J in the Supreme Court of New South Wales continued the freezing orders "until further order". The orders were made ex parte in the absence of Mr El Ali and Saracen. 19 On 13 August 2011 the Royals served a bankruptcy notice on Mr El Ali. On 22 August 2011, Mr El Ali resigned as the director of Ottoman and Saracen and transferred the shares in those companies for nominal consideration to his nephew, Mahmoud, who was also appointed the sole director of each company. On 7 September 2011, Mr El Ali also resigned as the director of EasyChoice and transferred the shares in that company to Mahmoud, who was also appointed the sole director of that company. The applicants' case (which was denied by Mr El Ali) was that these transfers were made by Mr El Ali for nominal consideration in knowledge of the judgment against him and the extension of the freezing orders, and done with the intent of defrauding Mr El Ali's creditors. Mr El Ali has denied that he knew about the extension of the orders at the time that the transfers were effected. He claimed that he did not become aware of the extension of the freezing orders until about 12 September 2011. He has also denied that the transfers were effected with the intent of defrauding his creditors, claiming that the shares in EasyChoice were transferred to Mahmoud because Mahmoud wanted to take over EasyChoice and recapitalise it, and that the shares in Saracen and Ottoman were transferred to Mahmoud because Mr El Ali did not consider that either Saracen or Ottoman had any value left in them. 20 On 12 September 2011, the Royals' solicitors, Holman Webb, wrote to Mr El Ali putting him on notice that the Royals were in the process of enforcing the judgment debt against him and "anticipate[d] that as a result a trustee in bankruptcy will be appointed in respect of all [his] assets", and also putting him on notice that the transfer of the shares in Saracen was "in all likelihood" in breach of the freezing orders made in October 2010 and July 2011, and demanding that Mr El Ali rectify the "likely breach" by immediately taking all necessary steps to have the shares transferred back to him. 21 The Royals filed a creditor's petition against Mr El Ali on 20 September 2011. 22 On 23 September 2011, Holman Webb wrote a letter to Mahmoud in similar terms to the 12 September 2011 letter to Mr El Ali. 23 On 8 October 2011, the creditor's petition was served on Mr El Ali. The petition was originally listed for hearing on 3 November 2011 but for reasons that were left unexplained in the evidence the petition was not heard until 16 December 2011. 24 On 10 October 2011, Holman Webb sent follow up letters to Mr El Ali (through his solicitors) and to Mahmoud seeking an undertaking that all necessary steps be taken to have the shares in Saracen transferred back to Mr El Ali. On 11 October 2011, Holman Webb sent another letter to Mr El Ali's solicitors enclosing various court documents, including the freezing orders of 18 July 2011. 25 On or about 17 October 2011, the Saracen shares were transferred back from Mahmoud to Mr El Ali. On or about 24 October 2011, Mr El Ali's solicitors informed Holman Webb that this had happened. 26 On 4 November 2011 Holman Webb wrote again to Mr El Ali's solicitors, this time demanding that the shares in EasyChoice be transferred back to Mr El Ali. That did not happen. 27 On 8 November 2011 there was a hearing of the creditor's petition. The evidence did not explain what transpired at the hearing save that a sequestration order was not made that day. 28 In the meantime, Mr El Ali had, on 1 November 2011, re-transferred the Saracen shares back to Mahmoud. Consideration of $17,500 was said to have been given. On 21 November 2011 Holman Webb sent another letter to Mr El Ali's solicitors and to Mahmoud noting that subsequent to 17 October 2011, Mr El Ali had again transferred the shares in Saracen to Mahmoud. The applicants' case (which was denied by Mr El Ali) was that the share transfer was made by Mr El Ali in knowledge of the judgment against him and the extension of the freezing orders and done with the intent of defrauding Mr El Ali's creditors. 29 On 24 November 2011, Mr El Ali's solicitors informed Holman Webb that the only asset of Saracen was the Potts Point property which currently had a value of $25,000, there was a caveat on the property supporting a loan of $22,500 in relation to the purchase of the property and Saracen was a "mere trustee" in respect of the Helensburgh and Voyager Point properties. They also stated that their instructions were that Mr El Ali had sold his shares in Saracen to Mahmoud for $17,500 which "appears to be at better than estimated market value" and that Mr El Ali required the funds to enable him to continue to fund his defence of the proceedings and believed that he was entitled to have sold his shares for that purpose. 30 On 8 December 2011, Mahmoud, in his capacity as the sole director of Saracen, executed a Deed of Retirement and Appointment appointing Mr Zreika in place of Saracen as trustee of the Voyager Point Unit Trust. Also on 8 December 2011, Saracen transferred the Voyager Point property to Mr Zreika for $1. The applicants' case (which was denied by Mr El Ali) was that these transactions were effected by Mr El Ali in knowing breach of the freezing orders and with intent to defraud his creditors. 31 On 16 December 2011, a sequestration order was made against the estate of Mr El Ali. 32 The remaining disposition that has been challenged by the applicants as a disposition with intent to defraud Mr El Ali's creditors occurred in November 2012 when Saracen transferred the Potts Point property to Mr Nazloomian for $30,000, purportedly in reduction of the loan amounts then outstanding to Mr Nazloomian.

the proceedings 33 There are two proceedings which have been heard together, with evidence in one being evidence in the other. 34 In proceeding NSD 1731 of 2013 the Royals and the Trustee are the applicants and Mr El Ali, Mahmoud, Mr Zreika, Saracen, Ottoman and Mr Stojanovski are the respondents. The transactions the subject of this proceeding are, in chronological order: (a) The resignation of Ottoman as trustee, and the appointment of Mr Stojanovski as the new trustee, of the Ottoman Investments Unit Trust on 16 December 2010. (b) The transfer by Ottoman of the Kogarah Unit 2 property to Mr Stojanovski on 16 December 2010. (c) The resignation of Ottoman as trustee, and the appointment of Mr Zreika as the new trustee, of the Ottoman Investments Unit Trust on 21 April 2011. (d) The transfer by Ottoman of the Taren Point property to Mr Zreika on or about 21 April 2011. (e) The transfer by Mr El Ali of his shares in Ottoman to his nephew Mahmoud on 22 August 2011. (f) The transfer by Mr El Ali of his shares in Saracen to his nephew Mahmoud on 1 November 2011. (g) The resignation of Saracen, and the appointment of Mr Zreika as the new trustee, of the Voyager Point Unit Trust on 8 December 2011. (h) The transfer by Saracen of the Voyager Point property to Mr Zreika on 8 December 2011. 35 In proceeding NSD 771 of 2014, the Trustee is the applicant and Mr El Ali, Mahmoud, Mr Nazloomian, Saracen and Isaac & Jacob are the respondents. The transactions the subject of this proceeding are, in chronological order: (a) The transfer by Mr El Ali of his shares in Isaac & Jacob to Mr Nazloomian on 19 October 2010. (b) The transfer by Mr El Ali of his shares in EasyChoice to his nephew Mahmoud on 7 September 2011. (c) The transfer by Saracen of the Potts Point property to Mr Nazloomian on 22 November 2012. 36 In both proceedings, the Trustee and the Royals were represented by Dr Birch SC and Ms Thew of counsel. Mr Carey of counsel appeared for Mr El Ali. Mr Barlin of counsel appeared for Mahmoud, Mr Zreika, Saracen and Ottoman, and Mr Fernon of counsel appeared for Mr Nazloomian, Mr Stojanovski and Isaac & Jacob.

outline of the applicants' case 37 The applicants' case was that Mr El Ali alienated the shares in the three companies and the properties owned by Saracen and Ottoman with the relevant intent to defraud creditors within the meaning of s 37A of the Conveyancing Act. Section 37A of the Conveyancing Act provides as follows: (1) Save as provided in this section, every alienation of property, made whether before or after the commencement of the Conveyancing (Amendment) Act 1930, with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced. (2) This section does not affect the law of bankruptcy for the time being in force. (3) This section does not extend to any estate or interest in property alienated to a purchaser in good faith not having, at the time of alienation, notice of the intent to defraud creditors. 38 In relation to the transfers of shares, the applicants, in addition, also relied on s 121 of the Bankruptcy Act. Section 121 of the Bankruptcy Act relevantly provides: Transfers to defeat creditors Transfers that are void (1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: (a) the property would probably have become part of the transferor's estate or would probably have been available to creditors if the property had not been transferred; and (b) the transferor's main purpose in making the transfer was: (i) to prevent the transferred property from becoming divisible among the transferor's creditors; or (ii) to hinder or delay the process of making property available for division among the transferor's creditors. Showing the transferor's main purpose in making a transfer (2) The transferor's main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent. Other ways of showing the transferor's main purpose in making a transfer (3) Subsection (2) does not limit the ways of establishing the transferor's main purpose in making a transfer. Transfer not void if transferee acted in good faith (4) Despite subsection (1), a transfer of property is not void against the trustee if: (a) the consideration that the transferee gave for the transfer was at least as valuable as the market value of the property; and (b) the transferee did not know, and could not reasonably have inferred, that the transferor's main purpose in making the transfer was the purpose described in paragraph (1)(b); and (c) the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent.

outline of the respondents' case 39 The respondents have denied that the applicants are entitled to relief under either s 37A of the Conveyancing Act or s 121(1) of the Bankruptcy Act. 40 The four primary defences are that: (a) there was no intent to defraud creditors; (b) the real estate (save for the Potts Point property) was not property that would have been available to Mr El Ali's creditors, if those properties had not been disposed of, because the properties were the trust property of the Ottoman Investments Unit Trust and the Voyager Point Unit Trust and Mr El Ali did not hold any beneficial estate or interest in those properties at any material time; (c) in the alternative, if those properties do constitute property divisible amongst his creditors, the properties at the time of disposition were encumbered to such an extent that there was no relevant value in those properties at the time of disposition and, accordingly, the properties and the shares in Saracen and Ottoman were worthless and there was no diminution of the property available to creditors by reason of those dispositions; (d) the shares in EasyChoice were also worthless at the time of disposition and there was no diminution of the property available to Mr El Ali's creditors by reason of the transfer of those shares. 41 Mr Stojanovski and Mr Nazloomian also relied on the defence under s 37A(3) of the Conveyancing Act. 42 Mr Stojanovski contended that he acquired Kogarah Unit 2 by way of security for a loan that he made to Ottoman and entered into the transaction in good faith without notice of an intention to defraud creditors. 43 Likewise Mr Nazloomian contended that he acquired the shares in Isaac & Jacob as security for loans that he made to Mr El Ali and/or his related companies and entered into the transaction in good faith without notice of an intention to defraud creditors. He contended also that he acquired the Potts Point property for valuable consideration and entered into the transaction in good faith without notice of an intention to defraud creditors. He also relied on the defence under s 121(4) of the Bankruptcy Act with respect to his acquisition of the shares in Isaac & Jacob, contending that he acquired the shares in Isaac & Jacob for value and did not know, or have reason to believe, at the time of the transfer that Mr El Ali was insolvent or about to become insolvent. 44 An alternative defence was raised on behalf of Mr Stojanovski in closing submissions in relation to the transfer of the Kogarah Unit 2 property to him and leave of the Court is required to amend the defence. As the proposed amendment was opposed it is appropriate to deal with the question of leave when considering the other defences advanced by Mr Stojanovski.

credit issues 45 Mr El Ali, Mahmoud, Mr Zreika, Mr Stojanovski and Mr Nazloomian each gave evidence-in-chief by way of affidavit and the credit of all of them was put into issue by the applicants. The applicants submitted that the Court should make adverse credit findings against each of them and should largely reject their evidence concerning the reasons for the transfers. Given the serious nature of the allegations, their evidence is to be tested by reference to the principles in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 and a very high level of satisfaction should be reached before making the findings urged by the applicants.

The evidence relating to the transfers of Mr el ali's shares in isaac & jacob and ottoman to Mr Nazloomian 46 Mr El Ali and Mr Nazloomian described each other in evidence as friends. Mr El Ali stated that he had known Mr Nazloomian for many years and "had come to think very highly of him". Mr Nazloomian deposed that he had developed a "very close and trusting commercial relationship" with Mr El Ali and they generally had "care towards each other's financial and personal wellbeing". Mr Nazloomian described Mr El Ali as a "very honourable man" and stated that he trusted him. 47 They first met in the 1990s when Mr El Ali, then a lending manager at Sunway Metcorp, handled Mr Nazloomian's application for an extension of credit. After Mr El Ali started up EasyChoice in 2000, Mr Nazloomian kept in contact with him and had regular business dealings with him, which included lending money to Mr El Ali and his companies for various ventures. It was uncontroversial that as at October 2010, Mr Nazloomian was owed approximately $1.2 million in respect of those loans. 48 Mr Nazloomian deposed that in or about October 2010, he was pressing Mr El Ali for repayment of his loans and Mr El Ali asked him to consider being the director and shareholder of Isaac & Jacob and had a conversation in which Mr El Ali told him to the effect that: That way you will control the assets it holds, and have some comfort that you are in control of all the assets available. It would give you comfort about the outstanding loan accounts you have. 49 Mr Nazloomian deposed that he was aware at that time that Isaac & Jacob was the trustee of the Elali Family Trust and the Second Elali Family Trust and that its sole function was to act as the trustee of those trusts. He deposed that he was "extremely honoured by the level of trust" that Mr El Ali had in him and that Mr El Ali was "prepared to hand over control to give [Mr Nazloomian] comfort and security over outstanding loans [he] held". Mr Nazloomian deposed that he thought that he would be able to carry out the duties required in managing the trusts, and that "to oversee the management of the assets" would give him some security and so he decided to accept Mr El Ali's offer. 50 Unsatisfactorily Mr Nazloomian left wholly unexplained why the shares in Ottoman were also transferred to him and why he assumed the role as sole director of that company. Nor did he give any evidence as to why he transferred the Ottoman shares back to Mr El Ali on 14 December 2010 and resigned as director of that company. The only evidence about these share transfers came from Mr El Ali. 51 Mr El Ali gave a different version of events. Mr El Ali deposed that he retired as the director of Isaac & Jacob and Ottoman in October 2010 because he did not consider that it was in the interests of either company or the beneficiaries of the two Elali family trusts or the Ottoman Investments Unit Trust "who were ultimately my family" for him to continue as a director of either company at that time. He also considered that it was not in the interests of individuals such as Mr Nazloomian who had loaned money to Ottoman "or indeed any of Ottoman's creditors" for him to remain as its sole director and secretary. He deposed that he formed that view on the basis that he became aware, in about July 2010, that his own credit history was impacting upon the ability of Ottoman to secure funding which Ottoman needed to complete the purchase of the Minto property. He deposed that he recalled that he was provided with a credit report on himself by one lender which recorded that he had a very low credit score and a number of defaults recorded against his name and that his directorship of Ottoman, EasyChoice, Isaac & Jacob and Saracen was also recorded in the report. He deposed that he had been required to provide a director's guarantee for each loan made to Ottoman and was aware that lenders were generally reluctant to lend to single director private companies in circumstances in which the director has a poor credit history. He further deposed that the due date for completion of the Minto property contract was 15 November 2010 and Ottoman was, by the middle of October 2010, still not in a position to complete as it had not yet obtained finance. He also deposed that he was "becoming increasingly distracted at this point by litigation", referring to the debt proceedings as well as a dispute with the Commonwealth Bank of Australia ("CBA"). Mr El Ali deposed that both he and Saracen had become involved in a dispute with the CBA which involved two sets of proceedings also commenced in the Supreme Court of New South Wales in 2010 in relation to the possession of the Voyager Point property as well as residential properties that he owned himself and owned together with his partner. He deposed that he considered that "these distractions" were impairing his ability properly to look after the affairs of both Ottoman and Isaac & Jacob and therefore came to the view by around mid-October 2010 that Ottoman was more likely to obtain finance to complete on the Minto property contract if someone else was the director of those companies. He deposed that he asked Mr Nazloomian if he would become the director of both Ottoman and Isaac & Jacob because he had known him for a long time and "had always thought highly of him and [he] trusted him". Mr El Ali deposed that also, in his opinion, Mr Nazloomian was "very prudent and calculating" and to Mr El Ali's knowledge "held good assets, stable employment, a good credit rating and was not involved in any litigation". He deposed that in his opinion Mr Nazloomian was "therefore more likely to be viewed favourably by potential lenders". 52 Mr El Ali's account of the conversation that took place between Mr Nazloomian and him was that when he asked Mr Nazloomian to take on both roles, he said words to the effect of: John, I am not going too well with all the litigation and lack of income to complete the purchases that would add equity to the family trusts and to repay the debts we owe to you and others. Would you take over? This way you could look after Elali family interests and your own. 53 Mr Nazloomian was said to have agreed and to have said: I am honoured by the level of trust that you and your family have bestowed upon me. 54 Mr El Ali further deposed that in retiring as the director of Ottoman and Isaac & Jacob, it was not his intention to defraud anybody or to transfer or diminish his assets. He gave two reasons. First, he did not consider that the properties held by Ottoman were his own assets but belonged to the Ottoman Investments Unit Trust and ultimately to the Second Elali Family Trust. Secondly, he was not intending to diminish the assets of those trusts but to the contrary, by removing himself as a director of both companies, he intended to increase them. That evidence, however, left wholly unexplained why he transferred the shares as well as resigning as director and why he transferred the shares for the nominal consideration of $1. 55 As to why in December 2010, Mr El Ali re-assumed the position as director of Ottoman and Ottoman shares were transferred back to him, Mr El Ali deposed that throughout November and early December 2010, Ottoman had been experiencing difficulty in arranging completion of the Minto property contract due in part to its inability to obtain finance but also as the result of the vendor's unwillingness to provide its prompt consent to Ottoman's development application in relation to the Minto property. He deposed that settlement had been due on 15 November 2010. On 30 November 2010, the vendor of the Minto property served a notice to complete under the Minto contract but Ottoman did not have finance in place and was unable to complete. Mr El Ali deposed that it was looking increasingly like the acquisition of the Minto property would fall through and he expected that Ottoman would likely be sued by the vendor of the Minto property as a result. He deposed that in those circumstances he did not consider that he could prevail upon Mr Nazloomian to continue as the director of Ottoman and they had a conversation in the following terms: [Mr El Ali]: John, it looks like the receivers for the Minto property are not willing to talk, they want more money and are probably aware of the increase in value for the property if Ottoman's development proposal is approved. It is very likely they will rescind the contract, retain the deposit and pursue the company and possibly its director. This is not what you would have expected and it is not fair. I'll resume the directorship and try to defuse the situation. Mr Nazloomian: I've tried to help you and your family. I did not and would not want to be sued especially when it was you who entered into the contract and all that I have done is trust you. Yes it would be better for you to take Ottoman back but I will hang on to Isaac & Jacob; there is no legal action against it. 56 I do not think that either witness gave candid evidence, nor did I find their evidence credible. 57 I do not accept Mr Nazloomian's explanation that he "felt [he] would be able to carry out the duties required in managing the trusts, would be able to oversee the management of the assets which would give [him] some security, and so [he] decided to accept [Mr] El Ali's offer". That explanation was not supported by the evidence and is contradicted by his own conduct. According to Mr Nazloomian, taking up Mr El Ali's offer put him in a position to monitor his loans to Saracen and Ottoman by knowing what assets were being sold. In cross-examination Mr Nazloomian stated that: … it gave me a window into the assets, and if they were coming and going, so that I would at least know if there was any profits made from any sales, then I could say "Hey, Nathan. Here's some money that has come in. How about retiring some debts with me?" However, when challenged in cross-examination on what he knew about the property dealings by Saracen and Ottoman, he admitted that he had no knowledge that Saracen and Ottoman had disposed of properties between 2010 and 2012 (save for the Potts Point property which Mr Nazloomian acquired from Saracen in 2012). He also admitted that he had not reviewed the financial accounts of Saracen or Ottoman or seen their books. It was then put to him that it was not true that he was holding the Isaac & Jacob shares because he would have some commanding view of the arrangements of Mr El Ali and could protect his interests. He denied this. It was also put to him that he did not have very much knowledge about what either company was doing. He denied this also. But both denials have no credibility in light of his earlier answers and his responses to further questions that were put, in which he agreed that he did not know whether Saracen held a property at Voyager Point and did not know that Ottoman had transferred Taren Point. It is clear that he had no idea about what either Saracen or Ottoman were doing and clear that Mr Nazloomian did not use his position as shareholder and controller of Isaac & Jacob "as a window" into Saracen's and Ottoman's affairs, when that was his ostensible purpose for taking the shares. Nor did the evidence show that Mr Nazloomian managed the two family trusts of which Isaac & Jacob was the trustee. 58 I infer that Mr Nazloomian's role was essentially to do as instructed by Mr El Ali. Other than to sign documents presented to him for signature, there was no evidence that Mr Nazloomian otherwise performed any duties as director of Isaac & Jacob, notwithstanding his assertion that he was "in control". Mr Nazloomian could not recall ever reading the trust deed of either family trust, did not know who the beneficiaries of those trusts were, other than that the trusts were Mr El Ali's "private trusts", and his only knowledge about the trusts came from what he was told by Mr El Ali. Tellingly, when in December 2011 he signed the Deed of Retirement and Appointment as director of Isaac & Jacob, by which Saracen resigned as trustee of the Voyager Point Unit Trust and Mr Zreika was appointed as the new trustee, he did so simply at the direction of Mr El Ali. His signature as director of Isaac & Jacob was required under the terms of the trust deed for the Voyager Point Unit Trust, which provided that the change of trustee could only be effected with the consent of the unitholder, viz: Isaac & Jacob. Mr Nazloomian gave consent on behalf of Isaac & Jacob when he had never met Mr Zreika, and was unable to explain the commercial purpose of the change. He denied that he had no idea when he signed the document what its commercial purpose was but when challenged in questioning, he claimed Mr El Ali had told him what the commercial purpose was behind the change in trustee, but he could not recall the details of the conversation. His answers given to that line of questioning were evasive and unconvincing. I do not accept that Mr Nazloomian knew what the commercial purpose was when he signed and find that the document was signed by him simply at the direction of Mr El Ali. There was no evidence to indicate that Mr Nazloomian, as the director of Isaac & Jacob, exercised any independent judgment concerning the change in trustee. To the contrary, the evidence showed, and I find, that Mr El Ali remained in effective control of Isaac & Jacob and directed its affairs. 59 Also impacting on Mr Nazloomian's creditworthiness was his lack of candour in his evidence. As stated he never explained why the shares in Ottoman were also transferred to him and why he subsequently transferred them back to Mr El Ali. Nor did he disclose in his evidence-in-chief that, at the time he was asked by Mr El Ali if he would be the director and shareholder of Isaac & Jacob and Ottoman, he knew that Mr El Ali was being sued by the Royals, and indeed had been given regular updates by Mr El Ali on the legal proceedings, and also knew that Mr El Ali was under financial pressure from other creditors. None of this was disclosed in his two affidavits. When it was put to Mr Nazloomian that when he "took the shares [he] took them because [he] knew that Mr El Ali was under financial pressure and he needed to put the shares for his private family trust into safe hands while he dealt with those problems", Mr Nazloomian agreed. Mr Nazloomian agreed in cross-examination that he considers that Mr El Ali is "honour bound to do what he can for [Mr Nazloomian] in the future to repay" the money that Mr Nazloomian has loaned him and that he expects that Mr El Ali will ultimately repay him in full. I infer from his answer that by helping Mr El Ali out, Mr Nazloomian believes that ultimately he will get paid in full. 60 Mr El Ali was not candid in his evidence and I did not find him a witness of truth. He went to great lengths to explain why he resigned as director of Isaac & Jacob and Ottoman but he left wholly unexplained in his evidence-in-chief why he also transferred his shares in those companies to Mr Nazloomian. There is nothing at all in his affidavits about why he transferred the shares. Even if I were to accept that I should read his evidence as also dealing with the share transfers (ie even if I accept that the share transfers were "part of the overall transaction replacing [him] as director of [Ottoman and Isaac & Jacob]" as he deposed in his 22 November 2010 affidavit of assets and liabilities), I do not accept the reasons given by him in his evidence as to why he transferred his shares in Ottoman and Isaac & Jacob on 19 October 2010. I explain why in the following paragraphs. 61 First, I found Mr El Ali's evidence about his knowledge of the effect of the freezing orders unconvincing and contrived. He admitted that he knew about the 1 October 2010 freezing orders before he transferred the shares in Isaac & Jacob and Ottoman to Mr Nazloomian on 19 October 2010. There is some evidence that he had also read the orders before then, although his evidence in this regard was unclear and contradictory. Nonetheless, it was clear from his evidence that he was aware of the terms of the orders when he disposed of his shares. When cross-examined on his understanding of the orders he stated that it was his belief that the Ottoman shares were not the subject of the freezing orders and not affected by the freezing orders because "Ottoman didn't have much money and the freezing orders referred to equity" and also because "Ottoman was not part of the [debt] proceedings". He asserted that it was his understanding at the time that he was only restrained from dealing with property that had equity in it, and he "did not give away equity" because he believed, when he transferred the shares, that Ottoman held its assets on trust. Mr El Ali claimed to believe that the company itself had nothing and therefore that the Ottoman shares were not affected by the freezing orders "because nothing out of nothing is nothing, so there was no value". Mr El Ali was, however, unable to explain how he came to hold that belief which has no support in the terms of the orders themselves. Moreover, there was nothing said by him in any of his affidavits that he had the belief that the freezing orders did not prevent him from disposing of the shares, notwithstanding it was part of the case pleaded against him that he transferred the shares in breach of the freezing orders. I reject his evidence about his understanding of the freezing orders. 62 Moreover I find it implausible that the obtaining of the freezing orders against Mr El Ali and Saracen and the transfers by Mr El Ali of shares in Isaac & Jacob and Ottoman were independent, unconnected events and do not accept that the transfers are to be explained by the reasons asserted by Mr El Ali in his evidence. I have already rejected Mr Nazloomian's version of events as credible. Mr El Ali's version of events was also not credible. Critically and tellingly, contrary to Mr El Ali's assertion that he transferred the shares because he considered that the distractions of the litigation then pending against him were impairing his ability properly to look after the affairs of the two companies, the evidence all pointed to Mr El Ali remaining actively involved in both companies' affairs despite the change in control and ownership to Mr Nazloomian, including with respect to the Minto property purchase. The impelling matter that needed to be attended to was the finance to enable the Minto property purchase to be completed. It was not Mr Nazloomian, however, who was attending to that, but Mr El Ali (by his own admission), and it was because Mr El Ali was having difficulty in arranging the finance and it looked like the acquisition of the Minto property would fall through that Mr El Ali asked for the Ottoman shares back. Mr El Ali's explanation as to why, in the first place, he asked Mr Nazloomian to take over Ottoman is contradicted by his own conduct in continuing to attend to the affairs of that company as if he was still the sole director and shareholder. 63 Thirdly, I do not accept the timing of the share transfers to be coincidental to the freezing orders that had been made on 1 October 2010. I note that the three Kogarah Units were acquired by Ottoman on 23 August 2010. Whilst Mr El Ali was not asked any questions about the timing of the share transfers with the completion of the acquisition of those properties, it is inherently unlikely that the decision to transfer the Ottoman shares was unconnected with the acquisition of valuable property by Ottoman. 64 Accordingly I reject the submission for Mr El Ali that he provided "an entirely reasonable explanation" for his decision to transfer the shares in Isaac & Jacob and Ottoman on 19 October 2010. I did not find Mr El Ali's evidence in this regard reliable and his evidence about his understanding of the freezing orders, which I have also rejected, reflects generally on his creditworthiness. In the light of the rejection of the reasons given by Mr El Ali and Mr Nazloomian for the share transfers and the finding that Mr El Ali continued to remain in effective control of Isaac & Jacob and directing its affairs, I accept the submission for the applicants that the only plausible explanation for the share transfers to Mr Nazloomian in October 2010 was because he was a trusted friend who would mind the shares whilst Mr El Ali dealt with his creditors.

The evidence relating to the transactions between Ottoman and Mr Stojanovski 65 Mr Stojanovski and Mr El Ali are business associates who first met sometime around 2006. The explanation given by both of them for the transfer by Ottoman of the Kogarah Unit 2 property to Mr Stojanovski was that it was conveyed as security for a loan of $1 million from Mr Stojanovski to finance completion of the purchase of the Minto property by Ottoman. That loan was said to have been made on 23 December 2010. 66 Ottoman was served with a notice to complete the Minto property purchase by the vendor's solicitors on 30 November 2010. On 3 December 2010, Ottoman's solicitors wrote to the vendor's solicitors advising that Ottoman would endeavour to proceed to completion by 15 December 2010. On 14 December 2010, Mr El Ali was again appointed as sole director and shareholder of Ottoman. I have already rejected Mr El Ali's explanation as to why he transferred those shares to Mr Nazloomian in the first place and found that the reason for the transfer to Mr Nazloomian was because he was a trusted friend who would mind the shares whilst Mr El Ali dealt with his creditors. The re-transfer to Mr El Ali is explained by the fact that finance was needed to complete Ottoman's acquisition of the Minto property. 67 According to Mr Stojanovski, in or about early December 2010 he had a conversation with Mr El Ali to the effect that Mr El Ali told him that he had exchanged contracts on a property at Minto and was struggling to secure funding and asked whether Mr Stojanovski would be interested in "coming in on the purchase". Mr Stojanovski asked how much was needed and was told $1 million. Mr Stojanovski asked what security he would get and was told that Mr El Ali could give him security over three commercial properties at Kogarah and a caveat over the Minto property. Mr Stojanovski deposed that he agreed, "as long as [he] [got] the caveats and security upfront" and Mr El Ali said he would "draft up a deed" that detailed their agreement and set out the terms. Mr El Ali gave no evidence-in-chief about this but confirmed in cross-examination that he had discussions with Mr Stojanovski about the possibility that he might advance some funds towards the purchase of the Minto property. 68 Mr Stojanovski deposed that he met with Mr El Ali sometime later in around mid-December 2010 and that Mr El Ali told him that he would make him the trustee of the Ottoman Investments Unit Trust and transfer Kogarah Unit 2 to him as the new trustee, which would give him total control of the asset and that Mr Stojanovski said "that's fine. As long as it is in my name." Again Mr El Ali gave no evidence-in-chief about this but emails confirm that by 15 December 2010, Mr El Ali had instructed his solicitors to prepare, amongst other documents: (a) a Deed of Appointment of New Trustee appointing Mr Stojanovski as the new trustee of the Ottoman Investments Unit Trust in replacement of Ottoman; (b) three "consented caveats" over Kogarah Units 1, 2 and 3, showing the interest of Mr Stojanovski (and his brother) as a purchaser of Unit 2 from Ottoman; and (c) a "consented caveat" over the Minto property showing the interest of Mr Stojanovski (and his brother) as a lender. 69 On 15 December 2010, the notice to complete the Minto property purchase was extended to 17 December 2010. 70 Also on 15 December 2010, Mr El Ali (on behalf of Ottoman) and Mr Stojanovski signed a number of documents. The documents included a Deed of Appointment of New Trustee, a transfer form for the transfer of the Kogarah Unit 2 property from Ottoman to Mr Stojanovski for $1, caveats over Kogarah Units 1 and 3 showing the interest of Mr Stojanovski as a purchaser of Units 1 and 3 from Ottoman and a caveat over the Minto property. Mr Stojanovski's evidence was that he did not obtain any legal advice before signing these documents. 71 The Deed of Appointment of New Trustee prepared by Mr El Ali's solicitors had left blank for completion the date of the Ottoman Investments Unit Trust deed and the number of the clause pursuant to which Ottoman was empowered to appoint a new trustee. It may be inferred that the solicitors did not review the trust deed for the purpose of preparing the document, although it does appear that the trust deed was requested from Mr El Ali. The significance is that the Deed of Appointment recorded cl 30, in handwriting, as the relevant clause empowering Ottoman to appoint Mr Stojanovski as the new trustee. In fact, Ottoman did not have that power as under cl 30, the appointment of a new trustee could only be made by the unitholder (ie, Isaac & Jacob). 72 The next day, Mr El Ali submitted the transfer form and the ineffective Deed of Appointment of New Trustee to the OSR. The transfer was stamped with $50 duty pursuant to s 54(3) of the Duties Act 1997 (NSW) ("Duties Act") as a transfer made in consequence of the appointment of a new trustee. Mr El Ali in cross-examination agreed that he had pointed out cl 27 of the trust deed to the OSR but not cl 30. The transfer of Kogarah Unit 2 was stamped with nominal duty of $50 pursuant to s 54(3) of the Duties Act. 73 Section 54(3) provides that duty of $50 is chargeable in respect of a transfer made in consequence of the appointment of a new trustee if the Chief Commissioner is satisfied, relevantly, that: … (b) none of the trustees of the trust after the appointment of a new trustee is or can become a beneficiary under the trust; and (c) the transfer is not part of a scheme for conferring an interest, in relation to the trust property, on a new trustee or any other person, whether as a beneficiary or otherwise, to the detriment of the beneficial interest or potential beneficial interest of any person. 74 Clause 27 of the Ottoman Investments Unit Trust deed provided that the trustee is "both absolutely and irrevocable (sic) prohibited from being a unitholder or otherwise directly or indirectly benefitting under this deed" save for its rights to reimbursement and remuneration. It may be inferred that the relevant officer was satisfied that both conditions were met (based at least upon cl 27) because only $50 duty was imposed. Having been stamped, the transfer was then registered with the Lands Title Office on 21 December 2010. 75 Mr El Ali initially disagreed in cross-examination that he was responsible for the documents submitted to the OSR but said that he believed he "assisted". On pressing, he agreed that it would be a fair statement that he did the work. Mr El Ali also agreed that he had, by late 2010, considerable experience with the operation of the OSR. He had been involved in a number of property dealings before late 2010 and had also been involved in a mortgage broking business. He agreed that he was aware that stamp duty was levied on the transfers of property at a rate that was a percentage of the purchase price of the property. He agreed also that he was aware that a transfer made in consequence of the appointment of a new trustee was chargeable with only $50 in duty if the trustee did not benefit under the trust. 76 Ottoman did not complete the purchase of the Minto property by 17 December 2010 and on that day, the Minto contract was terminated by the vendor. According to Mr El Ali, negotiations still continued after that date, although the contract had been terminated. 77 Also on or around that date, Mr Stojanovski and Mr El Ali (on behalf of Ottoman) executed a Deed of Agreement which Mr El Ali had prepared. It was submitted for Mr Stojanovski that this deed contained the agreement for the provision of a loan of $1 million and for the Kogarah Unit 2 property to be assigned to Mr Stojanovski as security holder and entitled him to hold the property until he had been repaid. 78 The Deed of Agreement was expressed to be made on 13 December 2010 but it was accepted it was not made before 17 December 2010. The recitals recorded that Mr El Ali was the sole director of Ottoman, which was described as the nominated purchaser of the Minto property, and Mr Stojanovski was "an established investor with strong building experience". The recitals also recorded that Mr El Ali invited Mr Stojanovski to participate in "the project" by providing a cash investment of $1 million to complete the proposed purchase of the Minto property and that Mr Stojanovski accepted the offer to participate and the parties had agreed "to form an affiliation in accordance with the terms of this deed". 79 The document recorded that: (a) the Minto property was to be purchased by Ottoman as trustee for the Ottoman Investments Unit Trust; (b) the purchase price was $3.8 million and settlement was to have been effected on 30 November 2010. A development application to sub-divide the property was expected to be finalised by the end of January 2010 (but presumably meant 2011); (c) a market valuation completed at 2 December 2010 reflected a value "as is" of $4.13 million and of $4.9 million with approval for three lots sub-division; (d) the vendor had terminated the contract for sale on 17 December 2010; (e) funding to complete the purchase price was expected to be generated as to $3 million from Mr El Ali "and associates" secured by way of a first registered mortgage over the Minto property and that Mr Stojanovski "and associates" were to provide a "direct Cash investment" of $1 million "secured in (sic) way of transfer ownership" of the Kogarah Unit 2 property and caveats over Kogarah Units 1 and 3 and a "consented Caveat" over the Minto property "in the event the purchase proceed (sic) to settlement"; (f) under the heading "Security", that Mr El Ali had agreed "to supply" Mr Stojanovski with a "written consent" for a caveat over the Minto property, "transfer ownership" of the Kogarah Unit 2 property, caveats over Kogarah Units 1, 2 and 3, and an executed contract for the sale of the Kogarah Unit 2 property; and (g) also under the heading "Security", that: Any net sale proceeds to the value of $1,000,000 of the [Kogarah Units] are to be disbursed to or as directed by [Mr Stojanovski]. Any amount disbursed would be [utilised] to reduce [the] value of [the] initial [investment] by [Mr Stojanovski] and associates but it would not reflect or effect (sic) the agreed profit share of 25% of net profit before tax or 25% of net amount received as a result of negotiations with the vendor. 80 Further terms were that: (a) Mr Stojanovski agreed to lodge a withdrawal of caveat to effect a sale of Units 1 and 3 "subject to the sale being in line with market expectation of greater than $700,000 for each and every floor"; (b) Mr Stojanovski also agreed to provide an executed transfer to effect a sale of the Kogarah Unit 2 property "subject to the sale being in line with market expectation of greater than $700,000"; (c) Mr El Ali agreed "to be held personally liable for" the initial investment by Mr Stojanovski and associates with Ottoman; and (d) should Mr Stojanovski elect to recall the loan of $1 million on 1 May 2011 or later, Mr El Ali must within 30 days provide Mr Stojanovski with $1 million "in way of Cash plus interest calculated at 10% annually." 81 Then on 21 December 2010, another Deed of Appointment of New Trustee was signed by Mr El Ali (on behalf of Ottoman) and Mr Stojanovski. This deed was identical to the Deed of Appointment signed on 15 December 2010. As best can be made out on the evidence, it appears that this document was executed along with transfer forms for the transfer of the Kogarah Units 1 and 3 from Ottoman to Mr Stojanovski, also for $1 each, and that this Deed of Appointment and the transfer forms for Units 1 and 3 were lodged with the OSR for payment of duty on 23 December 2010. Mr El Ali deposed that: However the appointment was never finalised and Kogarah Units 1 and 3 were never transferred to [Mr Stojanovski] in his capacity as the trustee of the Ottoman Investments Unit Trust, because the [OSR] delayed stamping of the relevant documents and requested further information. 82 The reason given by Mr El Ali for the two Deeds of Appointment being executed was that the earlier deed had related to Kogarah Unit 2 and the later deed related to Kogarah Units 1 and 3, though he accepted in cross-examination that neither deed referred to any particular property. Mr Stojanovski in cross-examination stated that the 15 December version "was requisitioned by the LPI [Lands Titles Office], and then we had to sign a new trust around the 20th - around the 23rd. So there was another trust deed signed after this date". Mr Stojanovski made no mention of this in his evidence-in-chief. Furthermore, wholly unexplained was why Units 1 and 3 were to be transferred to Mr Stojanovski when this was not recorded in the Deed of Agreement. I found neither explanation for the second Deed of Appointment satisfactory but in any event the fact is that Units 1 and 3 were not transferred to Mr Stojanovski. 83 Mr El Ali and Mr Stojanovski claimed that, in the meantime, on 23 December 2010, Mr Stojanovski gave Mr El Ali two bank cheques for $500,000. According to Mr Stojanovski's evidence, Mr El Ali had phoned him on 23 December 2010 and said that now that he (Mr Stojanovski) had the security that he wanted, he (Mr El Ali) needed the cheques urgently. Mr Stojanovski stated in cross-examination that he was aware at the time that the vendors had terminated the Minto contract for sale, but he believed that Ottoman still had "two weeks" to complete the purchase and believed that there were "some negotiations going on" "to continue with [the contract]". Mr Stojanovski's evidence was that he believed that Mr El Ali was going to use the $1 million to settle on the Minto property. Mr Stojanovski deposed that at all times he believed that the transfer of the Kogarah Unit 2 property was as security for his loan to Ottoman as trustee of the Ottoman Investments Unit Trust. The Court was asked to reject that evidence. 84 It was argued for the applicants that the explanations of Mr Stojanovski and Mr El Ali for the transfer of the Kogarah Unit 2 property were "riven with self-contradiction" and should not be accepted. It was submitted that on the one hand, they say that the property was transferred as security for the loan of $1 million but, on the other hand, say it was the consequence of the appointment of Mr Stojanovski as trustee of the Ottoman Investments Unit Trust. It was submitted that Mr Stojanovski and Mr El Ali either have misled the Court as to the reasons for the transfer or they wilfully misled the Chief Commissioner to claim a concessional duty on the transfer. Conversely it was submitted for Mr Stojanovski that the Court should accept that the loan transaction was the fundamental underlying basis for the transfer of property and that the Court should accept Mr Stojanovski's evidence that the property was transferred to him as security for the advance of $1 million. I disagree with the latter submission. 85 I find that Mr Stojanovski did not in fact lend the $1 million to Ottoman (or otherwise). There is evidence that two bank cheques payable to the National Australia Bank ("NAB") were drawn from funds in Mr Stojanovski's account on 23 December 2010. The applicants did not dispute that the documentary evidence demonstrates the existence of those two bank cheques and that the photocopy of them bears the handwritten annotations of Mr El Ali to the effect that he received them. There is, however, no evidence that the cheques were ever banked by Mr El Ali. One of the key issues in the proceeding is whether, as the applicants alleged, consideration of $1 only was given for a property with a net value of $670,000. Mr El Ali's evidence was that he banked the $1 million into the Saracen bank account on or about 23 December 2010, that the $1 million "assisted in many other ventures to pay deposits for other stuff as well", including "the deposits for Wollongong, which we lost at the time" and the $1 million was thereafter "lost". All that evidence was given in cross-examination. In examination-in-chief, Mr El Ali deposed merely that "on 23 December 2010, [he] received two cheques, each in the amount of $500,000 from Stojanovski". He did not depose to what he did with those cheques. I am prepared to infer from Mr El Ali's failure to lead evidence on this critical issue that such evidence would not have assisted him. There are, in addition, other facts from which it may reasonably be inferred that the loan was not ultimately made. 86 First, completion of the Minto property never occurred. There was no need for the advancement of the funds. 87 Secondly, in April 2011, Mr Stojanovski was aware that settlement of the Minto property had not occurred. Yet Mr Stojanovski advanced an amount of approximately $400,000 to assist Ottoman to complete the purchase of the Taren Point property. I find it improbable that Mr Stojanovski would have advanced further funds had it been the case that he was owed the $1 million which, on his evidence, he had advanced for the purposes of the purchase of the Minto property when he knew that the Minto property had not been completed and when the fact was that, by that time, all negotiations had stopped. More so, given that Mr Stojanovski's own evidence was that Mr El Ali had told him that Ottoman had also received a notice to complete for the Taren Point property and needed more money. It is an uncontroverted fact, nonetheless, that Mr Stojanovski made the advance of $400,000 to assist in the completion of the purchase of the Taren Point property when, on his evidence, he had already lent $1 million for a property purchase that had not proceeded. 88 Thirdly, it is also uncontroversial that Kogarah Units 1 and 3 were sold in 2014 and that Mr Stojanovski withdrew the caveats on Units 1 and 3 to enable those properties to be sold. Notwithstanding the terms of the Deed of Agreement which provided for Mr Stojanovski to be paid out of the proceeds of sale in relation to his loan of $1 million, no amount was paid to Mr Stojanovski from the sale of those units. 89 Fourthly, although the Kogarah Unit 2 property continued to be registered in his name, Mr Stojanovski took no steps to realise the property in order to recoup his loan amounts. On his evidence, he expected that the loan would be for a short term of three to four months and that he would be repaid within that time. Several years later, though he had still not been paid, he had not taken any steps to realise his security. Additionally, he has never put in a proof of debt in the estate of Mr El Ali for the $1 million loan, notwithstanding that the Deed of Agreement provided that Mr El Ali personally guaranteed the repayment of the loan. 90 Fifthly, whilst Kogarah Units 1 and 3 have been sold, Unit 2 has not been. Mr Stojanovski's evidence was that Unit 2 had also been put up for sale but I do not accept that evidence. Mr Stojanovski admitted in evidence that he had never appointed an agent to sell Unit 2 and there is no objective evidence to show that he did put the unit up for sale. 91 Sixthly, in around October 2012, Mr Stojanovski entered into a lease with ECHL Pty Ltd ("ECHL") (another company wholly owned by Mr El Ali and later by Mahmoud). The lease was signed by Mahmoud for ECHL and it was negotiated by Mr El Ali. The term of the lease was identified as three years with an option to renew for a further five years with rent to be $78,000 per year in monthly instalments. Mr Stojanovski agreed in cross-examination that ECHL had never paid any rental and there was no evidence that Mr Stojanovski took any steps to enforce payment of the rental. The context in which the lease was executed was that Mr Stojanovski was seeking a loan from the ANZ Bank. Although Mr Stojanovski denied that the lease was executed to lead the ANZ Bank to believe that he was receiving an income stream from the property, I reject that denial. Nothing in the evidence supports a finding that Mr Stojanovski ever expected an income stream from the lease. 92 Seventhly, it is also implausible that Mr Stojanovski would have left the property vacant without using it for income producing purposes since 2010 if it were the case that there was $1 million outstanding to him. Mr Stojanovski did not offer any explanation as to why no step was ever taken by him to realise the property or to use the property as an income stream. 93 Eighthly, not only did Mr Stojanovski agree to lend another $400,000 (on his evidence) but he also agreed to a first registered mortgage over the Kogarah Unit 2 property to secure a loan from Yasoo Drachma Pty Ltd ("Yasoo") of around $600,000 which was used in the funding of the purchase of the Taren Point property in April 2011. I find it implausible that Mr Stojanovski would have lent an additional $400,000 when, according to him, his previous loan of $1 million had not been repaid and implausible that he was prepared to allow a first mortgage to be taken by Yasoo over the Kogarah Unit 2 property to secure the loan of $600,000 when that property, as at November 2010, had approximately a net value of $670,000 according to Mr El Ali's November 2010 affidavit of assets and liabilities. In other words, if he was holding that property as security for the $1 million loan, it is inconceivable that he would permit it to be mortgaged to secure a loan from a third party to fund the Taren Point property purchase. Furthermore, as stated, by April 2011, the negotiations for the Minto property had ceased. It is implausible that Mr Stojanovski would have lent more funds in April 2011 if, as Mr El Ali asserted in his evidence, he had used the $1 million for other purposes. 94 Finally, Mr Stojanovski's claim to be owed $1 million is implausible given that he was unaware at trial that Mr El Ali's nephew, Mahmoud, had become and remains the director of Ottoman, which is the trustee of the Ottoman Investments Unit Trust. If there was $1 million owing to him by that trust, it would be expected that he would have made enquiries as to who was in control of the trust and taken steps to recover the debt owed to him. He has done neither. 95 Nor do I accept that Mr Stojanovski ever believed that his appointment as trustee had anything to do with giving him security over the property. Mr El Ali admitted in cross-examination that Mr Stojanovski "never took on the trusteeship". His explanation was that it was because all the assets could not be transferred to Mr Stojanovski. I take this to be a reference to Units 1 and 3. However, there is no mention of the transfer of Units 1 and 3 in the Deed of Agreement, whether in consequence of the appointment of Mr Stojanovski as trustee or otherwise and indeed, there is no mention at all of the appointment of Mr Stojanovski as trustee as part of the arrangements relating to the advancement of monies by Mr Stojanovski for the completion of the Minto property purchase. In addition, putting to one side for the moment that Mr El Ali has conceded that both Deeds of Appointment were ineffective, there was nothing in the evidence to show that Mr Stojanovski ever performed any duties as trustee, believing that he had been duly appointed. The evidence that was elicited from him in cross-examination was to the contrary. Although Mr Stojanovski in cross-examination maintained that he believed that he had been appointed trustee, he admitted that he had not done anything in relation to managing the affairs of the trust. He was also asked whether he still considered that he was the trustee of the trust to which he replied "no". When asked when he ceased to be the trustee of the trust, he stated "as soon as I ceased to carry out any activities on behalf of the trust - of the beneficiaries of the trust". When further pressed, he stated in self-justification that there were no activities that needed to be carried out in December 2010. Given the control that Mr El Ali continued to exercise over the affairs of Ottoman and the Ottoman Investments Unit Trust, and the lack of any evidence to show that Mr Stojanovski at any time performed any duties as trustee, I reject Mr Stojanovski's version of events as implausible. Moreover, Mr El Ali gave a different version of events. On his version of events, the change of trusteeship did not proceed because the OSR "sent further documents requiring further changes or additional requirements. [Mr Stojanovski] refused to take on the mortgages in his name because [Units 1 and 3] were mortgaged, and everything was, in [his] understanding of it, was called off". It is salient, nonetheless, that Mr El Ali appeared not to regard Mr Stojanovski as ever holding the position of trustee of the Ottoman Investments Unit Trust. This is borne out by the fact that in April 2011, Mr El Ali had Mr Zreika appointed as trustee of the Ottoman Investments Unit Trust in lieu of Ottoman. 96 In summary, I reject the evidence of both Mr Stojanovski and Mr El Ali as to why Mr El Ali transferred the title to Kogarah Unit 2 (being the only unit which was not encumbered) to Mr Stojanovski. The examination of the evidence of both Mr Stojanovski and Mr El Ali did not present a plausible explanation for the transactions. Both witnesses were shown not to be credible and their accounts are not accepted. I find that Mr Stojanovski did not make the advance of $1 million, and find that Mr El Ali remained in effective control of the Kogarah Unit 2 property and the transfer was orchestrated by him to put that property beyond the reach of his creditors at a time when proceedings were pending against him and he was aware of the freezing orders against Saracen and him.

The evidence relating to the transfer of THE TAREN POINT PROPERTY FROM ottoman to Mr ZREIKA 97 Mr Zreika is another business associate of Mr El Ali. They met about 10 years ago. Mr Zreika and Mr El Ali have claimed that the Taren Point property is held by Mr Zreika as trustee of the Ottoman Investments Unit Trust and that the property was transferred to him in that capacity. 98 The contract for the Taren Point property had been entered into in September 2010. Settlement was due in February 2011 but did not complete then. Various correspondence passed between the solicitors between February and April 2011 about settlement and on 8 April 2011, a notice to complete the sale of the Taren Point property was served on Ottoman requiring completion of the sale by 29 April 2011. Mr El Ali deposed that ultimately sufficient finance to complete the purchase of the Taren Point property was obtained but only with the assistance of Mr Stojanovski, Mr Zreika and Mr Nazloomian. 99 Mr El Ali deposed that he was told "at some point in April 2011" by a lending manager at Bankwest that the bank would not lend to him or to Ottoman the funds required to complete the purchase because of Mr El Ali's poor credit rating, but the bank could lend 60% of the value of the property to Mr Zreika who was a customer of the bank. Mr El Ali deposed that he concluded from this that Ottoman was still unable to borrow on behalf of the Ottoman Investments Unit Trust because of him. 100 He deposed that he then spoke with Mr Zreika whom he had known for many years and who was a trusted friend who had also loaned money to him and to Ottoman and EasyChoice in the past. Mr El Ali's evidence of the conversation with Mr Zreika was in the following terms: [Mr El Ali]: [Mr Zreika] I'm in need of your help. Ottoman can't raise the finance to complete on the Taren Point Contract. EasyChoice is not doing well and the bank will not lend to companies associated with me. My family needs someone else to take over as the trustee in Ottoman's place. [Mr] Zreika: Nathan I would like to help if I can but what do you want me to do? [Mr El Ali]: I would like you to be the trustee for the Ottoman Trust. You would take over the Taren Point deal and see it through to completion and development. In doing so you would be looking after my family's interest in the development, but also your own position as our ability to repay your loans will be improved if it succeeds and you could share in the profit. [Mr] Zreika: What about the properties in Kogarah; aren't they part of the trust? [Mr El Ali]: Technically yes, but there is no value left in them. The trust has negative equity in those properties and they can stay with Ottoman. [Mr Stojanovski] has the title to level 2 as security for his loan. Levels 1 and 3 are mortgaged to Rapid Capital and I expect they will take possession any time now. The only asset of any value left is Taren Point. That's what I'm asking you to look after. [Mr] Zreika: Of course Nathan; you know I would like to help your family out. 101 Mr El Ali deposed that he "caused" Ottoman to transfer the Taren Point property to Mr Zreika for consideration in the amount of $1 and a Deed of Retirement and Appointment of New Trustee was entered into pursuant to which Mr Zreika replaced Ottoman as the trustee of the Ottoman Investments Unit Trust. Mr El Ali deposed that "again" it was not his intention to defraud anybody or to transfer or diminish his assets and he did not consider that any property held by Ottoman was his own or even Ottoman's but belonged to the Ottoman Investments Unit Trust and ultimately to the Second Elali Family Trust. Furthermore, Mr El Ali deposed "in causing Ottoman to retire as trustee I was not intending to diminish the assets of those trusts. To the contrary, by removing myself and Ottoman from the equation I intended to increase them". 102 On 21 April 2011, a transfer form for the transfer of the Taren Point property from Ottoman to Mr Zreika for consideration of $1 was stamped at the OSR with $50 duty. Curiously the transfer was signed before completion of the contract to purchase (which was on 29 April 2011) and, it appears, the Deed of Appointment appointing Mr Zreika as the trustee of the Ottoman Investments Unit Trust in place of Ottoman, which bears the date 28 April 2011. Mr El Ali explained that a Deed of Appointment appointing Mr Zreika as the trustee of the Ottoman Investments Unit Trust in place of Ottoman was executed on 21 April 2011 (but was undated) with Alan El Ali witnessing Mr Zreika's signature, but he did not take a copy of that document. He thought he would need a second "original" to give to the OSR so he had another version executed, and the second time Peter Tan witnessed Mr Zreika's signature because Alan El Ali was not available. Mr El Ali's evidence did not explain why the copy witnessed by Alan El Ali was not signed by Mr Nazloomian (on behalf of Isaac & Jacob as the unitholder) whereas the version dated 28 April 2011 had Mr Nazloomian's signature. This is yet another example of irregularity and inconsistency in the documentation relied on by Mr El Ali in this case. 103 Mr Zreika's evidence was not essentially different from Mr El Ali's evidence on this part of the events. He deposed that he first met Mr El Ali approximately 10 years ago when Mr El Ali was a finance broker and he used Mr El Ali's services to secure finance for his business and other financial needs. He deposed that over the years they had remained in contact both socially and in relation to their respective business interests. 104 Mr Zreika's version was that he recalled having a conversation with Mr El Ali in or around April 2011 at which Mr El Ali told him that the Ottoman Investments Unit Trust had bought a property at Taren Point but needed the finance to settle and asked whether he could "help out". Mr Zreika deposed that he asked whether he would be buying the property in his own right or would be "doing it for the trust" and was told that the property was in the Ottoman Investments Unit Trust so he would need to hold it on trust. According to Mr Zreika, he told Mr El Ali that if he was going to raise finance to fund the settlement then he would need to do that in his own name with the lenders and asked how that would work, and that Mr El Ali replied that Mr Zreika could have the property transferred to him on settlement and at the same time sign a document saying that he was holding it on trust for the Ottoman Investments Unit Trust. He deposed that Mr El Ali also told him that when the property was redeveloped and on-sold, Mr Zreika would get "all the loans paid out from the settlement proceeds and split the profit with the trust 50/50", and Mr Zreika said that sounded good and he would do it. Mr Zreika deposed that he understood at the time that on the settlement of the property at Taren Point he would be holding the title in the Taren Point property "both as Trustee of the Ottoman [Investments Unit] Trust, and as security trustee for [his] own benefit as a secured creditor with respect to the Taren Point Property". He further deposed that he has held the Taren Point property in his name on this basis since completion of the sale of the Taren Point property on 29 April 2011. 105 Mr El Ali's evidence was that he also had a conversation with Mr Stojanovski at about this time "largely because it was looking increasingly like the Minto deal would not go forward" and that Mr Stojanovski said that he was not interested in the Kogarah Units and did not want to be a lender long-term, but the Taren Point property was of interest to him due to the fact that it could be subdivided and he could build a house for himself on one side and for his brother on the other side. Mr El Ali gave evidence that he asked Mr Stojanovski if he could advance "the family" around $427,000 to complete the purchase because Ottoman was not able to obtain the full funding "or, in fact, any funding whatsoever" and Mr Stojanovski agreed to advance the money provided he could obtain a further security and "have the right to re-purchase the property or purchase the property if he [was] in a position to do so". Mr El Ali deposed that Mr Stojanovski made an "advance" and exhibited a bank statement on the account of "Stoj & Co Pty Ltd" showing two withdrawals totalling $200,000 (rounded) on 29 April 2011 which he had signed, acknowledging receipt of those funds. The "security" taken by Mr Stojanovski was a caveat lodged by him on the title of the property, claiming an "equitable interest as purchaser" under a contract of sale between Mr Zreika as vendor and Mr Stojanovski as purchaser. Although Mr El Ali gave no evidence-in-chief regarding that contract of sale, he was plainly aware of the contract as on 28 April 2011, his solicitors had provided him with that contract for signing by the parties and also with a transfer. The consideration under that contract was also expressed to be $1. 106 Mr Stojanovski gave evidence to similar effect. He deposed that in January 2011, Mr El Ali showed him the Taren Point property and that whilst inspecting the Taren Point property he thought that the property was unique and saw value in it. He deposed that sometime around mid-April 2011 he met with Mr El Ali and Mr Zreika during which meeting Mr El Ali told him that Mr Zreika was lending money towards the purchase of the Taren Point property but more finance was required and enquired of Mr Stojanovski whether Mr Stojanovski would "lend some more money for this property". Mr Stojanovski deposed that he told Mr El Ali that he would need further security because he had already given $1 million and Mr El Ali said "you can have a caveat along with a signed contract and signed transfer to allow you potentially full control of the property" and that Mr Stojanovski said "ok". Shortly afterwards, he had a further conversation with Mr El Ali in which Mr El Ali told him that they were getting funding from Bankwest and another finance company but needed about $400,000 to complete the purchase. He was asked whether he "can do that?' to which he replied "ok". Mr Stojanovski also deposed that he was also told that the other finance company was "coming in as second mortgagee and in order for it to hand over its money, it needs security" and wanted to take a first mortgage over the Kogarah Unit 2 property for a short term only. Mr Stojanovski apparently agreed to that. 107 He deposed that Mr El Ali subsequently provided him with an indicative letter of offer for a loan from Yasoo of around $600,000 for the purpose of completing the purchase of the Taren Point property on terms that included that the loan be in the joint names of Ottoman, Mr El Ali, Mr Zreika and Mr Stojanovski and that Yasoo take a first mortgage over the Kogarah Unit 2 property to be released once Bankwest had settled the Taren Point property. Mr Stojanovski was also provided with a letter from the lender's solicitors to Mr El Ali enclosing the loan agreement and collateral documents. 108 On Mr Stojanovski's chronology of events, he signed the mortgage document for the loan from Yasoo on 28 April 2011. On 29 April he met with Mr El Ali who gave him a signed transfer, signed contract for sale and caveat for the Taren Point property which he countersigned. He then withdrew a total of $200,000 from his NAB account by way of bank cheque in favour of St George Bank and the OSR and another $180,000 from a Westpac account also by way of bank cheque in favour of St George Bank which he gave to Mr El Ali, together with $7,000 cash that Mr El Ali had also asked for. They then attended settlement at which he observed Mr El Ali "meet with other people and carry out the settlement and attend to stamping". He deposed that he then went with Mr El Ali to the Land Titles Office so that the "documents could be lodged for registration". 109 Finally, Mr Stojanovski deposed that in addition to the bank cheques and cash of $7,000 already provided, he provided Mr El Ali with another $40,000 in cash which Mr El Ali said he needed for "various fees and expenses for the loan and legal fees". Mr Stojanovski deposed that in total he provided $427,000 and he has not been repaid any of the monies that he lent. It does not appear, however, that the Taren Point property was ever transferred to Mr Stojanovski. Rather it continues to be registered in the name of Mr Zreika. Further, Mr Stojanovski's caveat over the Taren Point property has lapsed, though Mr Stojanovski's evidence is that he did not know why and had instructed his solicitors to have it re-lodged. 110 On Mr Zreika's version of events, he was the one who approached Mr Stojanovski. He deposed to a conversation with Mr Stojanovski in around April 2011 in which he told Mr Stojanovski that Mr El Ali had said that he (Mr Stojanovski) might be interested in providing some finance to him (Mr Zreika) to complete a contract later that month for a property at Taren Point for the Ottoman Investments Unit Trust and that he needed to borrow around $400,000. Mr Stojanovski was said to have replied that he knew that trust as he had already lent $1 million in relation to a development at Minto that did not look as though it was going ahead and that if he was to lend more money he would need to be secured. Mr Zreika's evidence was that he told Mr Stojanovski that the deal was that he (Mr Zreika) "will raise the finance and then hold the property for the trust and also to protect [his] investment" and that he could give Mr Stojanovski "a signed contract for sale of land for [him] to lodge if [he] think it necessary along with a caveat to protect [his] interest as a purchaser in the meantime". Mr Stojanovski was said to have agreed. In cross-examination Mr Zreika stated that he did not intend to sell the Taren Point property to Mr Stojanovski for $1, but that Mr Stojanovski wanted to hold the contract "as a security". When pressed, Mr Zreika stated that he "had to trust" Mr Stojanovski and that if he was not going to pay him back, he would not have sold him the property for $1 but would have negotiated with him. 111 It was not controversial that Mr El Ali also approached Mr Nazloomian who also agreed to advance a sum of $106,000 towards the purchase of the Taren Point property. Apart from deposing that Mr Nazloomian advanced those funds, Mr El Ali did not otherwise give evidence about his approach to Mr Nazloomian. Mr Nazloomian's evidence was that Mr El Ali told him if the contract was terminated by the vendor then he (Mr El Ali) and Ottoman would be sued, possibly for hundreds of thousands of dollars, as resale by the vendor could be for less than the price paid by Ottoman of $2.025 million. Mr Nazloomian stated that he considered that the Taren Point property appeared to be "good value" and "an improved opportunity for [him] to recover loan accounts owed against improved equity of [the] El Ali group" and that he agreed "considering [his] new status as the director and shareholder of [Isaac & Jacob] and the closeness of [his] relationship with [Mr] El Ali, the El Ali family and [his] familiarity with [Mr] Zreika". Mr Zreika said nothing in his evidence other than reference to the fact of the loan from Mr Nazloomian. 112 In summary, it appears that settlement of the property was funded by a Bankwest loan in Mr Zreika's name (which was secured by a mortgage over Taren Point), a loan from Yasoo in the name of Mr El Ali, Mr Zreika, Mr Stojanovski and Ottoman (secured by a mortgage over the Kogarah Unit 2 property), and the balance of the funds came from Mr Stojanovski and Mr Nazloomian. 113 I found the evidence of both Mr Zreika and Mr El Ali unsatisfactory and unconvincing concerning the circumstances of the transfer of the Taren Point property to Mr Zreika. On their version of events, the transfer occurred because Ottoman was unable to secure the finance to complete the purchase of the property because of Mr El Ali's poor credit rating. I reject that explanation. 114 Mr Zreika's evidence-in-chief was that in order to fund the settlement of the purchase of the Taren Point property, he arranged for funds from a number of parties, namely a Bankwest home loan contract dated 23 March 2011 obtained by him for $989,000, the Yasoo loan pursuant to which the sum of $617,059.77 was advanced, the advance of $427,000 from Mr Stojanovski and the advance of $106,000 from Mr Nazloomian. The evidence that he was the person who arranged that finance was shown to be plainly incorrect in cross-examination. He accepted in cross-examination that Mr El Ali had arranged those loans (although in respect of the Bankwest loan he said that Mr El Ali had "assisted" him to obtain the loan). Consistently, both Mr Stojanovski and Mr Nazloomian gave evidence that it was Mr El Ali who arranged the loans from them. 115 Mr Zreika was shown generally to be an unreliable witness. Apart from changing his evidence in cross-examination on the critical question as to who arranged the finance, his credit was also impugned by his evidence about the reason for the transfer of the Voyager Point property from Saracen to him, which I deal with later in these reasons. In all, I did not find him to be a person whose testimony could be relied upon. On his own evidence, Mr Zreika was prepared to mislead. Mr Zreika admitted (subject to a certificate granted under s 128 of the Evidence Act 1995 (Cth) in respect of the admission) that he had made a false statutory declaration in June 2012. The statutory declaration had been sought by Gee Bee Airfreight Pty Ltd ("Gee Bee Airfreight") as part of a process of providing finance in regard to the Taren Point property in June 2012. Mr Zreika declared that he held and owned the Taren Point property for business purposes and that the property would be "free from encumbrances" at the time of the loan, without declaring that he held the property on trust (as he asserts in this proceeding), and declared that he had not sold the property, agreed to sell it, offered it for sale or granted any option relating to it, without disclosing that he had contracted to transfer the property to Mr Stojanovski for $1. He sought to explain away the declaration by stating that he signed the statutory declaration without having read it or understood what it said. I do not accept that self-justification which has no support in the evidence. 116 Mr El Ali's evidence that Ottoman could not secure the requisite finance because of his poor credit rating was not believable, given that part of the funding came from a loan from Yasoo to, amongst others, Mr El Ali and Ottoman, for the purpose of financing the completion of the Taren Point property contract. Yasoo had also financed Ottoman's purchase of the Kogarah Units to the amount of $980,000 and taken a mortgage over Units 1 and 3 as security. The fact was that Mr El Ali was able to obtain the finance, despite his "poor credit rating". 117 Neither Mr El Ali nor Mr Zreika gave any evidence about the loans from Bankwest and Yasoo other than to refer to the fact that the loans were made, in contrast to the detail offered by them about the circumstances in which Mr Stojanovski and Mr Nazloomian also agreed to advance funds. Mr El Ali tendered no corroborating evidence in support of his assertion that Bankwest would not lend to him and, in particular, failed to adduce evidence from David Tran of Bankwest in respect of the conversation in which Mr Tran was said by Mr El Ali to have told Mr El Ali that the bank would not lend to him or to Ottoman. 118 Curiously, the Bankwest loan in respect of which Mr Zreika was the borrower had already been approved as at the date that Mr El Ali purportedly asked him to take over the Taren Point property deal and see it through to completion and development, which was said to have happened in "around April 2011". The Bankwest loan had a disclosure date of 23 March 2011 and the offer was expressed to lapse by 22 April 2011. It was submitted for the applicants that, presumably, Mr Zreika had already obtained this loan from Bankwest for other purposes, contradicting the evidence of Mr El Ali that he approached Mr Zreika after Bankwest had suggested that it may be able to provide finance to Mr Zreika. One of the conditions of the loan, however, was for the bank to take a mortgage from Mr Zreika over the Taren Point property. Wholly unexplained in the evidence was how this came about as at 23 March 2011 and in light of this document, Mr El Ali's chronology of events does not make sense. The failure of either witness to explain the circumstances of that loan is a glaring omission in view of the centrality of that loan to the matrix of facts upon which both Mr El Ali and Mr Zreika rely in defence of the claims made against them by the applicants. I am prepared to find, from the timing of that loan and from Mr Zreika's admission in his cross-examination, that Mr El Ali was involved in arranging that loan with Bankwest and that Mr El Ali had approached Mr Zreika before April 2011, contrary to Mr El Ali's and Mr Zreika's evidence-in-chief. I am also prepared to find that Mr El Ali only approached Bankwest after he had spoken to Mr Zreika, contrary to Mr El Ali's evidence-in-chief. Mr Zreika said nothing about when Bankwest was approached. It may also be inferred that the 21 April 2011 transfer from Ottoman to Mr Zreika was executed on that date because the loan offer from Bankwest to Mr Zreika expired on 22 April 2011. The evidence otherwise did not explain why that transfer occurred on that date, when Ottoman was not the registered proprietor of the property. Settlement of the Taren Point property did not take place until 29 April 2011 and the transfer to Ottoman was registered on 5 May 2011. Further, I am prepared to infer from the unexplained failure by Mr El Ali to adduce evidence from Mr Tran at Bankwest that such evidence would not have assisted his case. 119 Furthermore, the evidence does not show that Mr Zreika carried out any functions or duties as the trustee of the Ottoman Investments Unit Trust other than at the direction of Mr El Ali. On the face of the evidence it is clear that Mr El Ali has remained the person in control and directing the affairs of Ottoman and the Ottoman Investments Unit Trust. Significantly, apart from arranging the finance for the completion of the Taren Point property purchase, Mr El Ali was the one who organised the refinancing in June 2012. In June 2012, Mr Zreika entered into a loan agreement with Gee Bee Airfreight to borrow $1.75 million to refinance the Taren Point property. Mr El Ali was the person who conducted the negotiation leading to the new loan arrangements with Gee Bee Airfreight, although purporting to act on behalf of Mr Zreika. Mr El Ali confirmed in cross-examination that he had negotiated with Gee Bee Airfreight "in big part" but not in full although he later confirmed that he had "facilitated" the refinancing transaction of the Taren Point property. The Gee Bee Airfreight loan in turn was refinanced in June 2013 with NAB. Again, the person who was involved in the refinancing was Mr El Ali, not Mr Zreika. Mr Zreika maintained in cross-examination that he "made the decisions" but it is clear from the evidence that it was Mr El Ali, not Mr Zreika, who was the controlling force behind this refinancing as well. It was put to Mr El Ali in cross-examination that the refinancing from Gee Bee Airfreight was all arranged by him. His response was "not totally". It was put to him that he was the one who was principally responsible for taking all action in regard to procuring that finance and principally responsible for the discussions that took place when the finance was paid out. He responded that he "assisted". I do not accept Mr El Ali's answer that he was merely "assisting" Mr Zreika. He agreed that he had written extensive correspondence on Mr Zreika's behalf to solicitors and financiers. When put to him that he had "done everything … in order to organise and arrange what was going to happen with [the Taren Point] property", his response was that he continued to assist. He agreed that he has had conversations with Mr Zreika about what Mr Zreika is planning to do with the Taren Point property and that he makes suggestions about how Mr Zreika might realise the property. When asked whether Mr Zreika has a plan that he has conveyed to Mr El Ali about what he intends to do with the property, Mr El Ali responded that he did, which was "to add value to it, repay himself and everyone else and move on with life". Mr El Ali's responses were evasive and contradicted by the evidence that he was the one who arranged the finance. Furthermore there is no evidence that Mr Zreika has any plans with respect to the Taren Point property. I find that Mr El Ali was the person who was calling the shots. 120 It follows that I reject both Mr El Ali's and Mr Zreika's evidence as to the reason for Mr Zreika's appointment as trustee and the transfer of the Taren Point property to him. I find that Mr El Ali remained the directing and controlling force of the Ottoman Investments Unit Trust, notwithstanding the appointment of Mr Zreika as trustee. I infer that Mr El Ali approached Mr Zreika to act as trustee in place of Ottoman because Mr Stojanovski had not been prepared to act as trustee and accept the submission for the applicants that Mr Zreika is in effect "warehousing the property" for Mr El Ali. Completion of the acquisition of the Taren Point property occurred at a time when judgment in the debt proceedings was reserved and Mr El Ali was aware of the freezing orders against Saracen and him. It is reasonable to infer and I find that the transfer from Ottoman to Mr Zreika was orchestrated by Mr El Ali to put that property also beyond the reach of his creditors.

The evidence relating to the transfer of the shares held by Mr El Ali in ottoman, saracen and easychoice to mahmoud 121 The shares were all transferred for nominal consideration. 122 Mr El Ali deposed that by mid-2011, EasyChoice's business had more or less ground to a halt and he formed the view that it had no remaining value. It had effectively ceased trading in 2008 when it had been evicted from the premises that it leased under a "demolition clause" in the relevant lease and after that, EasyChoice was unable to secure suitable premises close to its main client base, and its capacity to trade was seriously diminished. 123 He deposed that around that time he had a conversation with his nephew Mahmoud, who told him he wanted to take over EasyChoice and recapitalise it. Mr El Ali deposed that he had doubts about whether that was possible, but he was happy for Mahmoud to try and said to Mahmoud that he could try but he should take over Saracen and Ottoman as well. He deposed that by that time he did not consider that either Saracen or Ottoman had any value left in them for the following reasons: (a) Saracen was a trustee and he did not believe that it owned any assets in its own right. Further, he considered that the assets that it held on behalf of the Voyager Point Unit Trust and the Helensburgh Unit Trust were by that stage "in negative equity" given the extent to which Saracen was indebted to the NAB and CBA; (b) by that time, Ottoman had retired as the trustee of the Ottoman Investments Unit Trust and the only property of the trust that he considered to be of any value, the Taren Point property, had been transferred to the new trustee, Mr Zreika; and (c) Ottoman continued to hold the title to Kogarah Units 1 and 3 but these were subject to mortgages. 124 Mr El Ali deposed that in those circumstances he did not perceive that he was diminishing his own assets by transferring his shares in Saracen and Ottoman to Mahmoud. He deposed that it was not his intention to defraud anybody or to transfer or diminish his own assets and did not consider that any property held by Ottoman or Saracen was his own or even Ottoman's or Saracen's, and that if there was any value left in any properties held by either company, so far as he was concerned, that value belonged to the trusts. 125 The Ottoman shares were transferred to Mahmoud on or about 22 August 2011, the Saracen shares were transferred to him on or about 23 August 2011 and the EasyChoice shares were transferred on or about 7 September 2011. At the same time, Mahmoud was also appointed the sole director of each company in place of Mr El Ali. Mr El Ali deposed that he was not aware at the time that McDougall J had extended the freezing orders on 18 July 2011 and that he first became aware of the extension of the orders when he received Holman Webb's letter dated 12 September 2011 putting him on notice that the Royals were seeking to enforce the judgment and that the transfer of the Saracen shares to Mahmoud was in breach of the July 2011 freezing orders. Mr El Ali deposed that upon receiving Holman Webb's letter dated 12 September 2011, he considered whether he had in fact breached the freezing orders and during the course of considering that issue, he became aware that Saracen had never accounted for the Potts Point property as being property of either the Helensburgh Unit Trust or of the Voyager Point Unit Trust, but as its own property. He deposed that he spoke with Mahmoud and on 17 October 2011, Mahmoud transferred the 10 ordinary shares in Saracen back to Mr El Ali for nominal consideration. On 1 November 2011 Mr El Ali transferred the 10 ordinary shares in Saracen back to Mahmoud. Mr El Ali and Mahmoud gave inconsistent evidence as to the reason why Mahmoud was said to have paid $17,500 for the shares. I deal with this later in these reasons. 126 In evidence is an email sent by Mr El Ali's solicitors to the Royals' solicitors dated 24 November 2011 conveying his instructions. The email was in response to letters from Holman Webb Lawyers to Mr El Ali and Mahmoud noting that Mr El Ali had transferred the shares in Saracen to Mahmoud and that following the Royals raising concerns as to the transaction, the shares were thereafter transferred back from Mahmoud to Mr El Ali. The solicitors noted that it had come to their attention that, subsequent to 19 October 2011, the shares again had been transferred from Mr El Ali to Mahmoud. The letter referred to the October 2010 freezing orders and the further orders made by McDougall J on 18 July 2011 over the assets of Mr El Ali and Saracen and noted that the freezing orders remained in place. 127 The email response stated that Mr El Ali's position was that the only asset of Saracen was the Potts Point property which was valued at around $25,000, there was a caveat on the Potts Point property supporting a loan of $22,500 in relation to the purchase of the property and that Saracen was a mere trustee in respect of the Helensburgh and Voyager Point properties. The email further advised that the instructions from Mr El Ali were that Mr El Ali "therefore" sold his shares in Saracen to Mahmoud for the sum of $17,500, on which stamp duty had been paid, and that sale appeared to be at better than estimated market value. The email further stated that Mr El Ali acquired the funds to enable him to continue his defence of the proceedings and that he believed that he was entitled to have sold his shares for that purpose under the freezing orders and that he was of the view that he had not taken any action in contravention of the freezing orders. 128 Mahmoud's evidence was that he lived with Mr El Ali from 1996 to 2003, after his father became ill and that Mr El Ali had been like a father to him. He deposed that in or about June 2009, he had a conversation with Mr El Ali to the following effect: [Mahmoud]: As you know I am looking for a new business to get involved with. I want to get out of doing manual work for a living. I would really like to do some mortgage broking and property investment, like you. There are lots of opportunities in what you do. Do you have any ideas? [Mr El Ali]: I am looking for someone to take over EasyChoice Home Loans. It isn't doing so well at the moment for a variety of reasons, but you are welcome to see if you can turn it around. If you are interested, you would also need to take on Ottoman Investments and Saracen Holdings. They are just companies that don't own anything and aren't doing any business at the moment. All or nothing so to speak. 129 Mahmoud deposed that he knew EasyChoice to be Mr El Ali's mortgage broking company and he was very interested in taking that over and he saw it as an opportunity to turn around a struggling business in an area that he wanted to be working in. He deposed that he was not particularly interested in taking on Ottoman or Saracen based on what Mr El Ali had said about them but that "even so" if he needed to take them on in order to be able to run EasyChoice, he was prepared to do so and he thought, at the time, that he could find someone else to take on Ottoman and Saracen and keep EasyChoice himself. 130 Mahmoud deposed that he told Mr El Ali that he was excited about the chance to get involved with the EasyChoice business but was not really interested in taking on Ottoman or Saracen, as he could not see a use for them but that Mr El Ali told him that he would need to take all three companies "or none of them". Mahmoud said that he agreed and Mr El Ali told him that he would need to pay something for the companies: "they aren't worth much at the moment, but they still have a value." 131 Mahmoud deposed that at the time he was about to travel to Syria to be with his new wife and it was agreed they would wait until he returned from Syria. He deposed that in late 2009 he travelled to Syria where he stayed for approximately one year and seven months. He returned to Australia around 11 July 2011. He deposed that upon his return he had a conversation with Mr El Ali in which he told Mr El Ali that he was now ready to take on EasyChoice and the other companies, and that Mr El Ali told him they would need to agree a price first. He also deposed that Mr El Ali said that the financial position of the companies had not changed since their discussion before Mahmoud went to Syria. Mr El Ali asked him how much he could afford to pay and Mahmoud told him he had about $17,500, "that is all". Mr El Ali was said to have replied "That's enough. Can you pay it all now?" and Mahmoud said no, he could pay "say $5,000 within a few weeks and the rest over a couple of months after that" and Mr El Ali said ok. 132 According to Mahmoud, in early August 2011, he visited Mr El Ali at his home in Hurstville Grove and paid him $5,000 in cash "as agreed" and over the next five or six weeks, he visited Mr El Ali at his home and paid the remaining $12,500 in cash of varying amounts. 133 Mahmoud deposed that the business conducted by EasyChoice was not going well at the time that he took it over in September 2011 and had essentially ceased trading by early 2012. On 28 May 2014, EasyChoice was placed into liquidation by a creditor. 134 As to the circumstances in which Mahmoud, in October 2011, transferred the Saracen shares back to Mr El Ali, Mahmoud deposed that in early October 2011, Mr El Ali told him that he had just discovered that Saracen did own some property, namely a laneway in Potts Point and "this means that the money you paid for the shares should have been recorded as consideration on the share transfer form" and that needed to be fixed up. According to Mahmoud, Mr El Ali told him that he would need to transfer the shares back to him for the amount of the consideration on the first form, and Mr El Ali would then transfer them back to him for consideration of $17,500 and that Mahmoud agreed to this. 135 Mr El Ali deposed that he was not aware at the time that the freezing orders had been extended by McDougall J on 18 July 2011, though he agreed in cross-examination that he was "possibly" "conscious that the freezing orders might have been extended at the time" but he did not know that they had been, and denied that the judgment against him was "operating on [his] mind during [his] dealing with [Mahmoud]". He said that he "continued business and continued to try to do the best [he] can". 136 I do not accept Mr El Ali's reasons for transferring the shares in Ottoman, Saracen and EasyChoice to Mahmoud. Nor do I accept Mahmoud's evidence that he wanted to take on the EasyChoice mortgage broking business to recapitalise it. The evidence of both witnesses was not credible and in my opinion wholly unconvincing. 137 I was asked to find that at the time of each of the transfers Mr El Ali knew about the extension of the freezing orders on 18 July 2011. I am not prepared to make that finding except in relation to the transfer of the Saracen shares back to Mahmoud around 1 November 2011. Even on Mr El Ali's own evidence, he was plainly aware by then of the existence of those orders and that they applied to the Saracen shares. In relation to the earlier transfers, the evidence was equivocal as to whether Mr El Ali in fact knew about the extension of the orders. The evidence showed that Mr El Ali had been put on notice of an application to be heard on 22 July 2011 but in fact the application was heard on 18 July 2011 pursuant to orders of McDougall J made on 14 July 2011. The evidence did not irrefutably show that Mr El Ali was on notice of the earlier date for hearing and Mr El Ali denied that he was. He did, however, in cross-examination, accept that he was "possibly" "conscious that the freezing orders might have been extended at the time" that the transfers were made. The re-transfer of the Saracen shares in the face of the freezing orders is another instance of a disposition made by Mr El Ali with the knowledge that he was restrained from doing so, which goes to his credibility generally in relation to his explanations for the property and share transfers. 138 Whether or not Mr El Ali had actual knowledge of the extension of the freezing orders made on 18 July 2011 when he made the earlier dispositions, it is implausible that Mahmoud asked to take over the EasyChoice mortgage broking business. At that stage, even on Mr El Ali's evidence, the business was defunct. EasyChoice had ceased trading, was "worthless" and "useless", was unlicensed under the National Consumer Credit Protection Act 2009 (Cth) ("National Credit Act") and had against it an infringement notice imposing a penalty of $27,500 for contravening s 30(2) of the National Credit Act issued by ASIC on 22 June 2011. Tellingly, Mahmoud had no qualifications to conduct a mortgage broking business and upon acquiring the shares in EasyChoice, apparently because he wanted to conduct the mortgage broking business, he took no steps to commence, or revive, the business apart from making an enquiry about courses in mortgage broking, which he never undertook. He spoke to no clients of the EasyChoice business, did not look at its website, did not look at its books and records and took no steps at all either to conduct the business or recapitalise it. Mahmoud's evidence as to the circumstances under which he came to take the shares in EasyChoice is contradicted by his inaction and complete failure to take any steps to conduct the business, let alone to recapitalise it. 139 It is also implausible that because Mahmoud was to carry on the EasyChoice business, he should take the shares in Saracen and Ottoman as well. Those companies had nothing to do with the EasyChoice business and further each of those companies owned valuable pieces of property. 140 The explanation given by Mr El Ali and Mahmoud for the transfer back and then re-transfer of the Saracen shares in October 2011 is also not plausible. Those transfers occurred in the context where Mr El Ali knew that the shares were subject to the freezing orders. Moreover, there was considerable confusion in the evidence both from Mr El Ali and Mahmoud as to whether and when Mahmoud allegedly paid the $17,500 to Mr El Ali. Mahmoud deposed that he had paid the $17,500 in consideration for the EasyChoice shares in or around August 2011 (and also received the Saracen and Ottoman shares at the same time). However, Mr El Ali deposed that no consideration was received in respect of the August 2011 transfer but rather this amount was agreed later as consideration for the Saracen shares because Saracen held the Potts Point property in its own right and Mr El Ali had not realised this at the time of the August 2011 transfer. Mahmoud seemed to change his position and gave evidence later that the reason he had paid $17,500 to Mr El Ali was because it "turned out" that Saracen owned the Potts Point property in its own right. This is also inconsistent with the instructions that Mr El Ali gave his solicitors that he transferred the shares to Mahmoud for $17,500 to raise funds for his legal defence. I am not satisfied on the evidence that the shares were transferred other than for nominal consideration. 141 Moreover, despite Mahmoud's evidence that he acted as director of Ottoman, EasyChoice and Saracen, there was no evidence supporting that claim. Indeed, the evidence all showed that Saracen and Ottoman continued to be run and controlled by Mr El Ali. Tellingly, Mahmoud knew nothing about the Voyager Point property disposition, which I deal with later in these reasons, although he was the director of Saracen at the time. Likewise, although he purported to be the person who sold the Helensburgh property, he was unable to provide any details concerning it. Mahmoud also knew nothing about the July 2011 freezing orders. 142 The evidence did not support the explanations given by Mr El Ali or Mahmoud for the share transfers to Mahmoud and I find that notwithstanding the share transfers, Mr El Ali remained in effective control of Ottoman, Saracen and EasyChoice.

The evidence relating to the transfer of THE voyager POINT PROPERTY FROM saracen to Mr ZREIKA 143 This property was transferred in December 2011 for $1. 144 Mr Zreika deposed that in or about late October 2011 he had a conversation with Mr El Ali during which Mr El Ali told him that Saracen had been having some problems with the CBA in relation to the Voyager Point property and asked Mr Zreika whether he may be able to refinance the property and take it on in his own name on the same basis that he did with the Taren Point property. Mr Zreika deposed that he replied "You mean as a trustee for the Voyager Point [Unit] Trust and also for me to make some money out of it as well?" and Mr El Ali responded "yes" and Mr Zreika agreed to do it. 145 On 8 December 2011, a transfer of the Voyager Point property from Saracen to Mr Zreika, for consideration expressed to be $1, was signed by Mahmoud on behalf of Saracen and by Mr Zreika. In addition, a document was executed appointing Mr Zreika as trustee of the Voyager Point Unit Trust. The document was signed by Mahmoud on behalf of Saracen, Mr Zreika and Mr Nazloomian on behalf of Isaac & Jacob (the unitholder). Isaac & Jacob's consent to the change of trustee was required by cl 11.6 of the Voyager Point Unit Trust deed. Documents subpoenaed from the OSR disclosed that Mr El Ali lodged the documents with the OSR and nominal stamp duty of $50 pursuant to s 53(4) of the Duties Act was paid on the transfer. The transfer was not lodged for registration on the title of the Voyager Point property, however. Mr Zreika deposed this was because, at that time, his intention was to proceed with the refinancing and hold the Voyager Point property "as trustee and as a way of protecting [his] investment in the property". However, "despite the intention … for [him] to seek refinance", the refinancing of the Voyager Point property did not ultimately occur. 146 The ostensible explanation for the transfer of the property to Mr Zreika for $1 in December 2011 was contradicted by Mr Zreika's own inaction. He took no steps to refinance and neither he nor Mr El Ali gave any explanation as to why no such steps were taken. The unexplained failure to give such evidence leads to an inference that such evidence would not have assisted their cases. It is clear however that the transactions effected in December 2011 were at Mr El Ali's initiative and direction, even though Mahmoud was the director of Saracen at the time. In cross-examination Mahmoud was unable to give a satisfactory explanation as to his understanding of what the transaction was all about, save that Mr El Ali was behind the disposition of the property and he did what he was told by Mr El Ali. So too did Mr Nazloomian, who had never met Mr Zreika before. Mr Nazloomian confirmed in cross-examination that he signed the Deed of Appointment (on behalf of Isaac & Jacob) at the request of Mr El Ali. 147 It is clear also on the evidence that despite the Deed of Appointment, Mr Zreika did not take on the role of trustee. Mr Zreika's evidence in cross-examination was that he never actually assumed the role of trustee in regard to the Voyager Point Unit Trust, notwithstanding the Deed of Appointment signed in about December 2011. He signed the document but he stated that he "never went ahead with being a trustee". He stated that when he signed this document he wanted to become the trustee but when he saw the complication with the CBA he did not want to have anything to do with it. Mr El Ali similarly admitted that Mr Zreika never became trustee of the trust and the Deed never took effect. 148 It was contended for Mr El Ali and Mr Zreika nonetheless that the sole intent of the transfer, considered as at 8 December 2011, was to deal with the CBA dispute and financing issue. It was submitted that the subsequent course of events showed this to be the case. They relied on the following evidence that was said to be "objective, unchallenged and un-contradicted": (a) as at 8 December 2011, the Voyager Point property was subject to a mortgage in favour of the CBA securing a loan of $1,285,000 made to Saracen in May 2010; (b) the CBA loan was in default from (at least) 3 February 2011; (c) by August 2011 Saracen was indebted to the CBA for $1,490,531.22; (d) on 15 January 2013 the property was valued at $900,000; (e) in December 2012, Saracen's dispute with the CBA was settled pursuant to a Deed of Settlement and Release; (f) under the CBA Deed, Saracen was required to pay $800,000 by 25 January 2013 to the CBA in return for which the CBA would discharge the mortgage over the property; (g) under the CBA Deed, if Saracen did not pay $800,000 by 25 January 2013, then default judgment would be given in favour of the CBA for $1,684,131.73 and CBA would be entitled to costs on an indemnity basis; and (h) Saracen sought to source the $800,000 before 25 January 2013. 149 It was submitted that the rational explanation for the 8 December 2011 transfer was that it was a step in achieving an outcome in the CBA dispute. It was submitted further that the only explanation for the delay in registration of Mr Zreika as registered proprietor of the property was the dispute with the CBA and indeed that a change in registration could not occur whilst CBA was the mortgagee. 150 According to Mr Zreika, in December 2012, Mahmoud told him that a deed had been entered into with the CBA and Mahmoud asked him whether he was able to help by paying the $800,000 which was needed to pay the CBA by 25 January 2013 in return for the CBA discharging its mortgage. Mr Zreika deposed to a conversation with Mahmoud in December 2012 to the following effect: [Mr Zreika]: How is it going with the Voyager Point property? Mahmoud: We've entered into a deed with the Commonwealth Bank. Saracen needs to pay the bank $800,000 by 25 January in return for the bank discharging its mortgage. If we don't they'll take the property and we will have to pay them $1.7 million. Are you able to help with paying the $800,000 by 25 January? [Mr Zreika]: Sure. But I don't want the hassle of being involved with the Trust. I want to buy the property in my own right. I don't want to get caught up with all the problems with the Trust. Mahmoud: That's okay. I want to clean up the Trust and deal with the problem once and for all as well. [Mr Zreika]: Okay, I'll make enquiries about finding the money to pay the bank on that basis. Once I do, the property becomes mine. Mahmoud: Okay. 151 Mahmoud gave largely similar evidence. 152 Mr Zreika deposed that he decided to use the transfer that had been prepared in December 2011 to have the property transferred to himself because the transfer had already been prepared and stamp duty had already been paid on it so that "there were a few less things for [him] to do". That transfer was registered on title on or about 29 January 2013. Mr Zreika further deposed that he did not intend by using that transfer to hold the property as trustee of the Voyager Point Unit Trust and that he purchased the property from Saracen in his own right. Mr Zreika was either deceitful in his action in relation to avoiding the duty payable on the transfer, knowing that he did not take the property as trustee, or he was lying to the Court about the reason for the use of that transfer. Mr Zreika acknowledged in his affidavit evidence that full stamp duty should have been paid on the transfer of the Voyager Point property from Saracen to him and deposed that he undertook to pay the full amount of the stamp duty plus interest plus penalties. Despite his acknowledgment and undertaking, he still has not done so. This is another example of Mr Zreika's preparedness to mislead and reflects adversely on his creditworthiness generally. 153 Mr Zreika claimed that he paid the $800,000 due to the CBA under the Deed of Settlement, pursuant to an arrangement he made with Mahmoud on behalf of Saracen. There was evidence that on 25 January 2013, Mr Zreika entered into a loan agreement with Gee Bee Airfreight (from which Mr Zreika had obtained a loan in June 2012 to refinance the Taren Point property) under which the sum of $900,000 was advanced and Gee Bee Airfreight took a mortgage over the Voyager Point property. The evidence disclosed that Mr El Ali was also involved in obtaining the loan from Gee Bee Airfreight to pay out the CBA loan. The applicants did not dispute that Mr Zreika obtained a loan in the sum of $900,000 from Gee Bee Airfreight on 25 January 2013 and that this loan was secured by a mortgage over the Voyager Point property. Whilst there was no direct evidence of the funds used to pay out the CBA, it may reasonably be inferred that the funds obtained from Gee Bee Airfreight were used for that purpose, having regard to the concurrent timing of the due settlement date under the CBA deed, the registration of the property in Mr Zreika's name, the loan from Gee Bee Airfreight and the registration of the mortgage over the property in favour of Gee Bee Airfreight. 154 The settlement of the CBA dispute however was not the whole matrix of facts relevant to the 8 December 2011 transfer. What happened next was as follows: 155 Mr Zreika deposed that having acquired the Voyager Point property he "decided to on sell the property". Mr Zreika used Mr El Ali's solicitors for that purpose. On 21 March 2013 he entered into a contract for sale between himself as vendor and Pronto Properties (NSW) Pty Ltd ("Pronto Properties") as purchaser for $1.7 million. The sale of the Voyager Point property to Pronto Properties was completed on 15 May 2013 and the proceeds of the sale of $1.7 million were applied by paying out the Gee Bee Airfreight loan secured over the Voyager Point property of $927,123.28 (comprising a principal sum of $900,000 and $27,123.28 in interest). 156 Pronto Properties was a company associated with Peter Walker, a solicitor at Walker Hedges & Co, the solicitors for Gee Bee Airfreight. Mr Walker was also director of Gee Bee Airfreight at the time. Mr El Ali was also involved in that deal. In cross-examination, Mr Zreika initially maintained that Mr El Ali "assisted" with negotiations with Pronto Properties and that they spoke to Peter Walker "together". However, Mr Zreika subsequently agreed that "Mr Nathan El Ali was … the person who was involved completely in organising and arranging the sale to Pronto Properties". 157 Mr Zreika's explanation as to why he was able to sell the property for $1.7 million in March 2013, when Mr El Ali had obtained a valuation of the Voyager Point property in January 2013 which valued the property at $900,000, was that Mr Walker "personally wanted that property. It wasn't valued at that price; he wanted it" and "we agreed". I find that explanation implausible. 158 Curiously and telling against Mr Zreika's credibility is that he used the proceeds of sale not only to pay out the $900,000 Gee Bee Airfreight loan secured by the mortgage over the Voyager Point property but he also used $600,000 towards payment of the loan outstanding to Gee Bee Airfreight which was secured by the Taren Point property. The following exchange occurred in cross-examination between Dr Birch SC and Mr Zreika concerning the payment of $600,000 to Gee Bee Airfreight: And as I understood the evidence that you gave yesterday, when you came to sell that property in March 2013, you maintain that that property was yours to do with as you saw fit; is that correct?---Yes. And so when those moneys went to Gee Bee Airfreight to reduce the loan under the Taren Point property, was that because you just decided that you wished to advance that fund?---I wanted to reduce the debt on the Ottoman property at Taren Point. But do you say that you could have, had you wished, have used that $600,000 in some other way?---Yes. I can but Peter Walker insisted that he wanted to reduce that loan in Gee Bee. Now, Peter Walker was a man associated with Gee Bee Airfreight; is that correct?---Yes. And when that money was used to reduce the mortgage on the Taren Point property, do you say that this was some form of loan by you of proceeds that belonged to you?---Yes. And did - and the Taren Point property was the property that was held in your name in any event. That's correct, isn't it?---On the trust. It was held on a trust at the same time. So is this what you understood you were doing, you were taking $600,000 that was essentially yours and lending it to yourself in your capacity as the trustee of the Taren Point property?---Not lending it to myself, paying off Gee Bee. Well, the - some - the money - - -?---Because he had taken action already that he wanted to reduce that loan. All right. Well, did you understand then that that $600,000 really had to be accounted for to the trust associated with the Taren Point property?---Yes. Do you say then that it really wasn't your money to do with as you wished at all?---No. No. No. No. No. It was my money from when I bought the property and I have sold it. That money is mine. But Peter Walker has taken action and he was - he issued a notice of possession of Taren Point, so I had to make him happy and I had to pay him $600,000. All right. Well, do you say that the - - -?---And at the same time he released $200,000 for me in ..... 1 March. Do you say that the trust will have to pay you back $600,000 one day?---Yes. And the view that you've maintained is that the money is being leant by you to the trust. Is that what you say to the court?---Yes. And will the trust be paying you interest when it pays you back?---Of course. And what's the rate of interest that it will be paying you back?---Well, that's just something I have to work out with them. Work out with whom?---The El Ali families - the trust. Why would you have - well, which members of the El Ali family would you be working it out with?---Mahmoud. Not Nathan?---No 159 Mr Zreika denied that the mortgage repayments were arranged by Mr El Ali stating that "he assisted, but I was there and I made the decisions". I reject that denial. The evidence disclosed that Mr El Ali was the person making the decisions. 160 Moreover, there was no documentation in evidence that records Mr Zreika having lent $600,000 to the Ottoman Investments Unit Trust, and Mahmoud had no idea what Mr Zreika did with the property, asserting that "it's nothing to do with Saracen anymore, had nothing to do with me". I accept that Mahmoud knew nothing about the sale of the Voyager Point property to Pronto Properties. 161 I reject the contention that the sole intent of the December 2011 transactions was to deal with the CBA dispute and financing issue. In the first place, nothing at all happened for a further 12 months and, in the absence of evidence which explained why nothing did happen, it is reasonable to infer that the timing of the transfer had everything to do with the impending sequestration order against Mr El Ali which was made on 16 December 2011, only 8 days after the transfer. Secondly, the evidence all pointed to Mr El Ali as the person continuing to call the shots in relation to the dealings with the Voyager Point property, with Mr Zreika and Mahmoud simply acting at his behest and direction. I find that Mr El Ali remained in effective control of the Voyager Point Unit Trust and of the property. I also find that Mr El Ali effected the transactions in December 2011, knowing at the time that the property was subject to the freezing order.

The evidence relating to the transfer of THE potts POINT PROPERTY FROM saracen to Mr Nazloomian 162 This property was transferred by Saracen to Mr Nazloomian in November 2012 and registered in Mr Nazloomian's name in January 2013. The transfer form was signed by Mahmoud (on behalf of Saracen) and Mr Nazloomian and was for consideration expressed to be the sum of $1, though duty at ad valorem rates was in fact paid by Mr Nazloomian. The value for duty purposes was given as $30,000. The transfer was made in prima facie breach of the 2011 freezing orders which Mahmoud claimed not to know about. Whether or not Mr El Ali knew about the extension of the freezing orders when he transferred the shares in Saracen to Mahmoud, he certainly knew about the orders by September 2011. Either Mahmoud was not telling the truth that he knew nothing about the freezing orders or Mr El Ali kept that vital piece of information from Mahmoud. Either way, there was deceit by Mr El Ali who was plainly aware of the transfer of the Potts Point property to Mr Nazloomian. 163 Mr Nazloomian's evidence on the transfer of the Potts Point property was as follows. Mr Nazloomian kept a "running account" of his loans to Mr El Ali and as at October 2012 he was owed in excess of $1.5 million. This amount was said to include an amount of $440,000 that Mr Nazloomian recorded as a loan to "Nathan/Saracen" made in December 2009 for the development of the Helensburgh property. The loan was said to be for "finalising approvals for a resort." The loan was not otherwise documented. Mr Nazloomian lodged a caveat against the Potts Point property in April 2011, claiming an interest as "purchaser under uncompleted purchase contract" dated 21 January 2010. Mr Nazloomian deposed that he lodged the caveat "considering the monies he had loaned to the El Ali family and its trusts". 164 The evidence was that Mr Nazloomian, in October 2012, had a conversation with Mr El Ali in which Mr El Ali said that Mr Nazloomian should offer to buy the property for its value and set-off that amount against what Saracen owed him and that Mr Nazloomian agreed. In October 2012, a valuation of the Potts Point property was given by Property Logic (entitled "Stamp Duty Valuation") which gave an "as is" value of $30,000. Following the transfer, Mr Nazloomian set off $30,000 against the debt owed recorded in his running account. Mr Nazloomian knew at the time that Mr El Ali had been declared bankrupt. Mr Nazloomian also gave the full credit of $30,000 to Mr El Ali, not to Saracen, when he lodged a proof of debt against Mr El Ali's estate. 165 Although Mr Nazloomian alleged that his dealings regarding the Potts Point property were with Mr El Ali, Mr El Ali did not give evidence regarding the transfer to Mr Nazloomian. In cross-examination Mr Nazloomian gave evidence that he never discussed the Potts Point property directly with Mahmoud, although Mahmoud was the director of Saracen at the time. Mr Nazloomian agreed that "all the dealings in regard to [the Potts Point property] in the name of Saracen [were] with Mr Nathan El Ali himself" and stated that "all my dealings with all the companies, the focal point was always Nathan and still is Nathan". 166 Mahmoud denied that the discussions regarding the transfer of the Potts Point property were conducted between Mr Nazloomian and Mr El Ali, though he could not recall his conversation with Mr Nazloomian. His denial was unconvincing and cannot be accepted and I consider it implausible that he had any discussions with Mr Nazloomian concerning the sale of the Potts Point property given his complete lack of knowledge about the fundamental elements of the deal. 167 It is clear on the evidence that Mr El Ali was the initiator and directing mind and driving force behind the sale of the Potts Point property to Mr Nazloomian.

conclusions on credit 168 For the reasons given above I have concluded that none of the respondents was a witness of truth and I have largely not accepted the evidence of any of them. The testimony of each of them on key factual matters was contradicted on many occasions by their actual conduct which showed that their evidence-in-chief could not be accepted as credible, and I have not accepted their explanations for the transactions which are the subject of these proceedings. 169 Mr El Ali, in particular, was a most unsatisfactory witness who showed himself prepared to colour the truth during the course of evidence to advance his own interests.

summary 170 Based on the above analysis of the evidence in relation to each of the impugned transactions, I find that Mr El Ali remained at all times the controlling mind and directing force of Isaac & Jacob, Ottoman, Saracen and EasyChoice, notwithstanding the changes of directorships and share dispositions. I also find that it was Mr El Ali who procured each of the share and property transfers and that he did so in the knowledge of the proceedings against him by the Royals and the freezing orders made against Saracen and him (with the proviso in relation to the extension of the freezing orders on 18 July 2011 which I accept he did not learn about until mid-September 2011). Having rejected the explanations of the respondents for those transactions, I find that Mr El Ali procured those transactions to safeguard his assets from present or future creditors by placing them with friendly third parties.

Were the properties trust property? 171 In short compass, the respondents' case was that the Voyager Point, Taren Point and Kogarah Unit 2 properties were held under a series of unit and discretionary trusts and therefore were not "property" divisible amongst Mr El Ali's creditors for the purposes of s 116 of the Bankruptcy Act due to the nature of Mr El Ali's interest in the property (or, they say, lack of interest). As for the Potts Point property, Mr El Ali accepts that this property was not purchased by Saracen in its capacity as trustee but was purchased by Saracen in its own right. 172 The first issue here is not whether the trusts were constituted (which was not disputed) but whether the properties were acquired by Saracen and Ottoman in their capacity as the trustees of the Voyager Point Unit Trust and Ottoman Investments Unit Trust respectively, or in their own right.

The Voyager Point property 173 The respondents submitted that the Court should draw the inference that the Voyager Point property was acquired by Saracen as trustee for the Voyager Point Unit Trust based upon the following objective facts and circumstances: (a) Mr El Ali's ownership and control of Saracen; (b) the establishment of the Voyager Point Unit Trust on the same day that Saracen contracted to purchase the Voyager Point property (8 February 2008); (c) the name of the trust (ie the Voyager Point Unit Trust); (d) the unitholding of the trust, namely Isaac & Jacob as the trustee of the Elali Family Trust; (e) the terms of the trust deed - in this regard it was submitted that the acquisition of the Voyager Point property was clearly within the scope of Saracen's powers and in furtherance of the objects of the trust which were stated to include "to acquire, hold and deal with real and personal property"; (f) Saracen's position as a fiduciary - in this regard it was submitted that it ought to be assumed that Saracen acquired the property in its capacity as a trustee consistent with its duties and obligations to the beneficiaries of the Voyager Point Unit Trust and did not prefer its own interests in conflict with those duties and obligations; (g) the assessment of Saracen in its capacity as trustee of the Voyager Point Unit Trust for land tax in respect of the Voyager Point property for the 2009 and 2010 tax years under s 3 of the Land Tax Management Act 1956 (NSW) as a "special trust". For the purposes of s 3, a trust is a "special trust" if the trust property includes land, the trustee of the trust is the owner of the legal estate in the land and the trust is not a fixed trust: s 3A of the Land Tax Management Act. 174 There are a number of reasons for not drawing the inference urged by the respondents. 175 First, Mr El Ali's direct evidence went no further than to assert his belief, when he transferred the shares in Saracen to Mahmoud in September 2011, that Saracen did not own any assets in its own right. He did not give direct evidence about the circumstances of the establishment of the Voyager Point Unit Trust (other than the fact that it was established) or as to whether Saracen purchased the property in its own right or as trustee. Having regard to the adverse credit findings I have made against him, I place no weight on his assertion. Likewise, having regard to the adverse credit findings I have made against Mr Zreika, I place no weight at all on his evidence about his asserted conversation with Mr El Ali in which Mr El Ali was said to have asked whether he would take the Voyager Point property as trustee for the Voyager Point Unit Trust. Nor do I place any weight on the Deed of Retirement and Appointment accompanying the transfer of the property by Saracen to Mr Zreika as evidence that Saracen held the property as trustee, given that Mr Zreika never purported to act as trustee. 176 Secondly, it was not claimed that the only activities carried on by Saracen were in its capacity as trustee. To the contrary, on Mr El Ali's own admission, Saracen acquired and owned the Potts Point property in its own right, not as trustee. Mr Carey submitted this was to be explained by the fact that it was a speculative acquisition and such a speculative investment would not have been an appropriate investment for a trustee to make without express power. I find that submission argumentative, as none of the witnesses gave evidence that that was the reason why the Potts Point property was not purchased by Saracen in its capacity as trustee. Mr El Ali did give evidence that he considered at the time, and still does, that the purchase by Saracen was speculative, but it was not his evidence that the speculative nature of the purchase was the reason why it was purchased by Saracen in its own right. On his evidence, it was only in late 2011, more than three and a half years after entering the contract of sale in February 2008, that he "discovered" that the property was not owned by Saracen in its capacity as trustee. 177 Thirdly, the only documents produced by the respondents in asserted proof that the properties were trust properties were documents produced by the OSR and the evidence shows that these documents were generated by the OSR based on information provided to it by Mr El Ali. Mr El Ali did not put into evidence the material that was provided to the OSR on the basis of which the OSR assessed the Voyager Point Unit Trust as a "special trust". If there were primary documents to support that claim, it would be expected that such documents would have been put into evidence. They were not, and no explanation was provided as to why those documents were not produced. Absent knowing what in fact was put before the OSR, I am not prepared to accept the land tax assessments as sufficiently establishing the capacity in which Saracen acquired the property. The basis upon which the assessments were made is simply not known. 178 Fourthly, no books, records or accounts identifying the Voyager Point property as trust property, of the kind that would be expected, were put into evidence, such as tax records, accounting and financial records or business records such as minutes of meetings or resolutions notwithstanding the observation of Foster J in Royal v El Ali, In the Matter of the Bankrupt Estate of El Ali [2014] FCA 834 at [50]-[56]. Furthermore, there was no evidence of any kind (other than elicited through cross-examination) given about the records kept in relation to the affairs of the Voyager Point Unit Trust (or indeed of the Ottoman Investments Unit Trust, relevant to the Kogarah Unit 2 property and Taren Point property) although all those companies have an accountant at Nexia Court & Co, who, according to Mr El Ali, prepares the accounts for Saracen and with whom Mr El Ali has remained in contact. Mr El Ali gave the following evidence: DR BIRCH: Mr El Ali, in the last 10 years, have you had an accountant that you've retained ..... for you in regard to your own personal affairs?---I have to certain, you know, to certain extent, but I haven't done many tax returns lately. Well, in fact, you told the - your trustee in bankruptcy that you hadn't lodged tax returns for years. Do you recall telling him that in a note?---That is true. And as best you recall, when was the last time you did prepare a tax return?---Probably around 2005/2006. And since those dates, were those tax returns done for you by an accountant?---Yes. And since those dates, have you retained an accountant to otherwise give you any accounting advice about your personal affairs?---No. Have you retained an accountant on behalf of any of the companies that you've been involved in?---Yes, I did. And who was that accountant?---Nexia Court & Co. And which companies did you retain that accountant on behalf of?---Ottoman, Saracen, EasyChoice. And did that accountant prepare accounts for those companies as best you recall?---The best as I recall - yes. Right. And when was the last time that that accountant was retained to your knowledge on behalf of one or other of those companies?--- I - as far as I'm concerned it's continuous. So - well, let me go back a bit. If we go back to say 2010, beginning of that year, you were a director of Ottoman, Saracen and EasyChoice, for example. That's correct, isn't it?---That is correct. And do you say that the accountant was retained personally by you on behalf of those three companies at that time?---That is true. And you asked him to prepare accounts for those companies; is that correct?---Not necessarily. I asked him to prepare who was retained. Right. Well, to your knowledge, did he prepare accounts for those companies any time in calendar year 2010?---I don't recall if that was done in 2010. Had it been done in 2009?---In 2008, we had lots of financial issues, so I don't know when it was brought up-to-date. Well, you can't, sitting now in the witness box, think of any event that contributed to bringing it up-to-date since 2009; is that correct?---In 2008 and in 2009, I believe those years were completed during that period of time. Yes. What about 2010, do you say there were any accounts prepared in 2010?---I don't know whether that was prepared in 2010 or a later date. Well - - -?---That's what I'm saying. All right. So your belief is that there are accounts prepared for 2008 and 2009. Is that your belief?---That's correct. That's right. Right. They were prepared on your instructions to the accountant; is that correct?---That's correct. And you said to him at some point, "Please prepare accounts for my companies for 2008 and 2009 in those years; is that correct?---It wouldn't have been to that description. Well, how it would have happened?---The accountant would ask for details and the details would be sent through to him and would prepare the accounts. Right. And do you recall paying bills to the accountant back in 2008 and 2009?---During that period, I didn't handle the accounts. But I do recall receiving overdue payments and notices. When you say you didn't handle the accounts, you had someone that paid the bills on behalf of the companies; is that correct?---That is exactly correct you're ..... Yes. And after 2000 and - let's go to 2010 now. In 2010, do you recall any accounts being prepared for the companies?---I don't recall. Right. So sitting in the witness box today, you simply don't know whether accounts exist for Ottoman, Saracen or EasyChoice for the 2010 year?---No, they do exist. But whether they were prepared in 2010 or 2009, I don't know. Right. When you say they exist, you've seen them recently, is that the case?---I have come across them. Well, when did you come across them?---I've been - been - been lots of questions to answer and I've been answering questions about the financials. Right. In the preparation of this litigation which you've been involved in; is that correct?---The litigation, of course. You've been involved in preparation for this Federal Court case for some time; is that correct?---That is correct. Right. Did you view any accounts of Ottoman, Saracen or EasyChoice for the preparation of this case?---Yes, I did. Right. And were any of them for the year 2010 or later?---Yes. And the accountant that you've spoken of, have you spoken to him in the last 12 months?---Yes. All right. And he's someone who does work for companies associated with you today?---Not companies associated with me today, companies that I was associated with. Right. And he's - well, let me put it differently. Is he someone that you're in contact with?---When I get called, yes. All right. Now, did he ever prepare any accounts in regards to any trusts for you?---In the past he did. All right. Now, when you say "the past", when was the last time you recall him having prepared some accounts for you for a trust?---For me, it would have been 2008, 2009. So it was the last time he prepared any trust accounts on your instruction?---Me personally, on my instructions. All right. Did he prepare any trust tax returns for you?---During those periods, I would say so. All right. And, again, that would have been on your instruction, you believe?---I would say so. Mr El Ali once again gave evasive and non-responsive answers to direct questions on a topic of critical importance in this case. If the answers were truthful, the evidence does not explain why the accounting, financial and tax records and, specifically, the trust accounts for the Voyager Point Unit Trust, if they exist, were not put into evidence or why the accountant was not called. The failure to adduce such evidence, coupled with the failure to explain why that evidence was not adduced, takes on particular significance in view of the judgment of Foster J in Royal v El Ali; In the Matter of the Bankrupt Estate of El Ali [2014] FCA 834 to which I refer further below when considering the claim that the Taren Point and the Kogarah Unit 2 properties were held on trust by Ottoman. It would be expected that such primary records, if they exist, would be cogent proof substantiating that the Voyager Point property was held on trust by Saracen as trustee for the Voyager Point Unit Trust. I infer from the fact that such primary records were not put into evidence, and the accountant was not called (without explanation), that such evidence would not have assisted the respondents. I also reject the submission by Mr Barlin that because Mr El Ali was the sole director, shareholder and secretary, any internal documents would have been "artificial". Mr El Ali's position as sole director, shareholder and secretary of the company did not relieve the company of the obligation to keep books and records in compliance with the relevant laws where the property was said to be held on trust. To the contrary, the fiduciary duties owed by the company to the trust mandated that proper and correct records be kept. 179 Fifthly, the purchase of the Voyager Point property was financed by a loan from the CBA secured by a mortgage but there is no specific evidence that the CBA was aware at the time that Saracen was acquiring the property as trustee and not in its own right. The Deed of Settlement and Release between the CBA and Saracen entered into in December 2012 equivocally stated that "Saracen or Saracen Trustee Company is the actual owner of the Property". Moreover, "Saracen Trustee Company" was defined as "Saracen Holdings Pty Limited as trustee for the Helensburgh Unit Trust". I infer that the CBA had not itself independently verified the capacity in which the Voyager Point property had been acquired by Saracen. 180 I note also that the Voyager Point property transfer was not stamped until November 2009, almost two years after the Voyager Point Unit Trust deed was executed on 8 February 2008 and as there are no primary records (apart from the land tax assessments which have been addressed) which show that Saracen actually purchased the property in its capacity as trustee, I do not draw the inference that Saracen acquired the property in its capacity as a trustee merely because the Voyager Point Unit Trust has the same name. 181 In view of the lack of primary records to substantiate that Saracen acquired the property in its capacity as a trustee and the failure to provide any explanation as to why such evidence was not adduced, I am not prepared to find merely on the basis of the establishment, terms and unitholding of the trust nor the OSR's assessment of Saracen as special trust, that the property was actually acquired by Saracen in its capacity as a trustee. I am not satisfied on the evidence that Saracen did acquire the property in its capacity as trustee, not in its own right.

The Kogarah Unit 2 property 182 The respondents similarly submitted that the Court should draw the inference that the Kogarah Unit 2 property was acquired by Ottoman as trustee for the Ottoman Investments Unit Trust based on the fact of the establishment, terms and unitholding of the trust. The submission has no greater merit than the submission put with respect to the Voyager Point property. 183 First, having regard to the adverse credit findings I have made against them, I place no weight on the direct testimony of Mr El Ali or Mr Stojanovski nor on the Deed of Retirement and Appointment accompanying the transfer of the property, given that Mr Stojanovski never purported to act as trustee. 184 Secondly, there is the same lack of primary records, as discussed above regarding the Voyager Point property, to substantiate that Ottoman acquired the property in its capacity as a trustee, and no explanation was provided as to why such evidence was not adduced. In Royal v El Ali; In the Matter of the Bankrupt Estate of El Ali [2014] FCA 834, the respondents had submitted to Foster J that Mr El Ali had no interest in the Kogarah Unit 2 and Taren Point properties by reason that Ottoman held them as trustee for the Ottoman Investments Unit Trust. The submission was made in opposition to an application by the applicants for the amendment of the statement of claim to add claims including for declaratory relief in respect of the transfer of the Kogarah Unit 2 property from Ottoman to Mr Stojanovski on 16 December 2010 and the transfer of the Taren Point property from Ottoman to Mr Zreika on 21 April 2011, and for freezing orders to be made against Mr Stojanovski and Ottoman. Foster J was asked to infer that the properties had been acquired by Ottoman in its capacity as trustee based upon the establishment and terms of the Ottoman Investments Unit Trust, the trust deed for the Second Elali Family Trust and "the relevant transfers". Foster J did not accept those documents as sufficient proof. His Honour stated at [56]: No explanation was offered by the relevant respondents as to why more cogent proof and comprehensive evidence was not brought forward by them directed to this critical matter. Nor at the trial of the proceeding was "more cogent proof and comprehensive evidence" adduced or any explanation provided as to why that did not occur. I infer that such documentation does not exist to demonstrate that the Kogarah Unit 2 property was in fact acquired by Ottoman in its capacity as trustee of the Ottoman Investments Unit Trust.

The Taren Point property 185 In addition to the inference that the respondents contend the Court should draw from the fact of establishment, terms and unitholding of the Ottoman Investments Unit Trust, the respondents also relied, as proof that the Taren Point property is held on trust, on: (a) a land tax assessment notice that issued to "Mahmoud Zreika ATF the Ottoman Investments Unit Trust" for the 2012 tax year in relation to the Taren Point property; (b) the Yasoo loan agreement which was entered into to fund the acquisition of the property which identified "Mahmoud Zreika in his own right and as trustee of the Ottoman Investments Unit Trust" as a borrower; (c) the Yasoo loan document (which was drawn down on 29 April 2011 when settlement occurred) which refers to "Ottoman Investments Pty Ltd ATF - Taren Point"; and (d) conversations deposed to by Mr Zreika and Mr El Ali. 186 As with the land tax assessments that issued to Saracen as trustee for the Voyager Point Unit Trust in relation to the Voyager Point property, I place no weight on the land tax assessment that issued to Mr Zreika as trustee for the Ottoman Investments Unit Trust in relation to the Taren Point property, as the material that was provided to the OSR on the basis of which the OSR assessed the Ottoman Investments Unit Trust as a "special trust" was not put into evidence. I make the same observation that if there were primary documents to support that claim, it would be expected that such documents would have been put into evidence. They were not, and no explanation was provided as to why those documents were not produced. Absent knowing what in fact was put before the OSR, I am not prepared to accept the assessment as sufficiently establishing the capacity in which Ottoman, and then Mr Zreika from Ottoman, acquired the property. 187 Likewise, I place no weight on the two Yasoo loan documents. In view of my finding that Mr El Ali was calling the shots in relation to arranging the finance for this property, I infer that Yasoo was simply acting on information provided to it by either Mr El Ali or by Mr Zreika, both of whom I have found lacked candour and honesty in their dealings. 188 I also place no weight on the Deed of Retirement and Appointment provided to the OSR in view of my finding that the evidence did not show that Mr Zreika carried out any functions or duties as the trustee of the Ottoman Investments Unit Trust. 189 Otherwise, no accounting, financial, tax or other business records were put into evidence and no explanation was provided for the failure to adduce such evidence. I infer that such documentation does not exist to demonstrate that the Taren Point property was in fact acquired by Ottoman in its capacity as trustee of the Ottoman Investments Unit Trust. 190 Absent such documentation, I reject the direct testimonies of Mr El Ali, Mahmoud El Ali and Mr Zreika whose evidence I found to be substantially unreliable.

Conclusion 191 In conclusion, I am not satisfied on the evidence that the Voyager Point property was acquired by Saracen as trustee for the Voyager Point Unit Trust or that the Kogarah Unit 2 or the Taren Point properties were acquired by Ottoman as trustee for the Ottoman Investments Unit Trust.

The other defences 192 In case I am wrong, I should deal with the defences raised by the respondents on the premise that the properties were held on trust. The following analysis proceeds on the assumption that the properties were held on trust.

Not "property" within the meaning of s 116 of the Bankruptcy Act 193 It was contended for the respondents that there can be no alienation of property with intent to defraud creditors within the meaning of s 37A of the Conveyancing Act because Mr El Ali merely has the right as the object of the two family trusts (the Elali Family Trust and the Second Elali Family Trust) to require the due administration of those trusts which is a personal, not proprietary, right which has not vested in the Trustee of Mr El Ali's estate. Reliance was placed upon Dwyer v Ross (1992) 34 FCR 463. 194 In that case, pending the hearing of a bankruptcy petition, an application was made for an order restraining the trustee of a discretionary trust from disposing of $1.6 million which was to be paid to the trustee and form part of the assets of the trust so as to preserve a fund from which the creditors may be paid. The application was refused. The trust in question was a discretionary trust and the Court held that if the debtor's estate was sequestrated, ss 58 and 116 of the Bankruptcy Act would not entitle the trustee in bankruptcy to the assets of the trust or "any aliquot share of them". The Court reasoned as follows: The nature of such a beneficiary's interest such as [the debtor] has was described by Lord Wilberforce in Gartside v Inland Revenue Commissioners [1968] AC 553 at 617-618 as follows: "No doubt in a certain sense a beneficiary under a discretionary trust has an 'interest': the nature of it may, sufficiently for the purpose, be spelt out by saying that he has a right to be considered as a potential recipient of benefit by the trustees and a right to have his interest protected by a court of equity. Certainly that is so, and when it is said that he has a right to have the trustees exercise their discretion 'fairly' or 'reasonably' or 'properly' that indicates clearly enough that some objective consideration (not stated explicitly in declaring the discretionary trust, but latent in it) must be applied by the trustees and that the right is more than a mere spes." Similarly, in Re Goldsworthy [1969] VR 843 at 848, Smith J said: "an object of a discretionary trust of the kind here in question is entitled merely to have the trustee's discretion honestly exercised and, if and when a decision has been made in his favour, to receive what the trustee has then decided he should receive." See also Sainsbury v Inland Revenue Commissioners [1970] Ch 712; Re Weir's Settlement Trusts [1971] Ch 145. I J Hardingham and R Baxt, Discretionary Trusts (2nd ed, 1984), par 606, put the matter in this way, with which I respectfully agree: "an object of a discretionary trust has no interest in any of the assets comprising the distributable fund for at no time, even after due administration, can he necessarily claim any asset or aliquot share; but he has a right of due administration entitling him to call upon the trustees to deal appropriately with the distributable fund; in a popular sense, he may be said to have an interest in the totality of the distributable fund. As far as each asset comprising the fund is concerned, he will have nothing more than an expectancy." The property of a bankrupt divisible in his bankruptcy includes property of every kind. See ss 5 and 116 of the Bankruptcy Act. As was stated in R V Williams, The Law and Practice in Bankruptcy (15th ed), p 237: "Broadly speaking, the bankrupt's estate consists of every beneficial interest which the bankrupt has (Smith v Coffin (1795) 2 H Bl 444; 126 ER 641); his entire universitas juris is by his adjudication taken from him and given to the trustee, who steps into his shoes and takes a title no better and no worse than the bankrupt's, and who, further, becomes the owner of everything which the bankrupt acquires between the adjudication and the moment when his discharge becomes effective." Such property may include a chose in action or entitlement which a beneficiary of a trust estate has to the due administration of a trust estate. See eg Re Pevsner; Ex parte Trustee in Bankruptcy (1983) 68 FLR 254; Silvia v Thomson (1989) 87 ALR 695; Thomson v Silvia (unreported, Federal Court, Davies J, 31 October 1990). In Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co Ltd (Watt's case) (1926) 38 CLR 12; Commissioner of Stamp Duties (Qld) v Livingston [1965] AC 694, entitlements to due administration of a trust estate were held to be personal property situated where the trustees against whom the rights could be enforced were resident. However, where the interest in the trust is a mere discretionary interest, the right to be considered for the purposes of a distribution, it is difficult to see that the right to enforce the due administration of the trust can be property which passes to the trustee in bankruptcy. The interest in the trust would seem to be a personal right which remains with the bankrupt. Of course, if a distribution of money or property is made to the bankrupt during the period of the bankruptcy, the trustee will be entitled to it as after-acquired property. See ss 58(2) and 116(1)(a) of the Bankruptcy Act. However that may be, if [the debtor's] estate is sequestrated, the operation of ss 58 and 116 of the Bankruptcy Act will not entitle the Trustee in Bankruptcy to claim the $1.6 million or any aliquot share thereof. The distribution of the income and assets of the Trust fund will continue to be a matter for the trustee of the Bylong Trust and in the trustee's discretion. Examples of the application of this principle will be found in Holmes v Penney (1856) 3 K & J 90; 69 ER 1035; Re Coleman (1888) 39 Ch 443; Re Bullock, Good v Lickarish (1891) 64 LT 736. It was contended by parity of reasoning that as a discretionary object of the Elali Family Trust and the Second Elali Family Trust, Mr El Ali had no proprietary interest in the property of those trusts which vested in the Trustee upon the sequestration of his estate. 195 Additionally it was argued that Mr El Ali's power of appointment under both family trusts was a personal not proprietary right and did not form part of his estate on bankruptcy. The authority cited for this proposition was Re Burton; Wily v Burton (1994) 126 ALR 557; [1994] FCA 1146. In that case, the bankrupt was the appointor under a discretionary family trust. The trust deed gave the appointor the power to remove a trustee and appoint a new trustee. The trustee in bankruptcy sought an injunction restraining the bankrupt from exercising his power of appointment under the trust and for a declaration that the power of appointment under the trust deed was property within the meaning of s 116 of the Bankruptcy Act and vested in the bankrupt's trustee in bankruptcy. The Court held that the power of appointment was not "property" which vested in his trustee in bankruptcy nor a power "as might have been exercised by the bankrupt for his own benefit" within the terms of s 116 of the Bankruptcy Act. The Court reasoned that the power of appointment is a fiduciary power which must be exercised in the interests of the beneficiaries for whose benefit the power was conferred. Accordingly, the Court reasoned, as the interests of the beneficiaries must be taken into account, and the power exercised in their interests, the power was not encompassed by para (a) and para (b) of s 116(1) of the Bankruptcy Act. The Court went on to state that if it were shown that the power would be likely to be used, not in furtherance of the trust, but to frustrate the bankrupt's personal creditors, an injunction could issue. 196 It must be accepted that Mr El Ali as an object of the family trusts has no beneficial interest in the property of the trusts. Likewise, the power to remove and replace a trustee is a power, not property: Lewis v Condon (2013) 85 NSWLR 99; [2013] NSWCA 204 at [94]. But neither case provides the answer for the respondents if the properties are held on trust, as the respondents contended. In this context, the issue is not whether Mr El Ali's interest as a mere object or his power of appointment constitutes "property" of Mr El Ali that is divisible amongst his creditors, but whether there has been an "alienation of property with intent to defraud creditors" (s 37A of the Conveyancing Act). The relevant dispositions of "property" for this purpose are the transfers of the Voyager Point, Taren Point and Kogarah Unit 2 properties. If trust property, the properties were ultimately held for the benefit of the two family trusts of which Mr El Ali is a member of the class of eligible beneficiaries. His bankruptcy would not preclude the making of distributions to him and, as the Court stated in Dwyer v Ross at 466, if a distribution of money or property is made to the bankrupt during the period of bankruptcy, the trustee in bankruptcy will be entitled to it as after-acquired property. The question therefore remains whether s 37A of the Conveyancing Act applies to the transfers of the Voyager Point, Taren Point and Kogarah Unit 2 properties.

An "excluded person" 197 The respondents also submitted that once Mr El Ali became a bankrupt, he became an "excluded person" within the definition of that expression under the family trust deeds and for that reason ceased to fall within the class of eligible beneficiaries provided for under those deeds. The answer to this claim is s 302B of the Bankruptcy Act which provides: 302B Certain provisions in trust deeds void (1) A provision of a trust deed is void to the extent that it has the effect of: (a) cancelling, reducing or qualifying a beneficiary's interest under the trust; or (b) allowing the trustee to exercise a discretion to the detriment of a beneficiary's interest; if the beneficiary becomes a bankrupt, commits an act of bankruptcy or executes a personal insolvency agreement under this Act. (2) This section does not apply to a provision that facilitates compliance with: (a) section 128B; or (b) section 128C; or (c) a notice under section 128E; or (d) an order under paragraph 128K(1)(b); or (e) a notice under section 139ZQ; or (f) an order under subsection 139ZT(2); or (g) an order under section 139ZU. 198 Whilst the term "beneficiary" is not defined in this context, in ordinary meaning the term includes a person who is the object of a discretionary trust: Leedale (Inspector of Taxes) v Lewis [1982] 3 All ER 808, 812-813; Kafataris v Deputy Commissioner of Taxation (2008) 172 FCR 242; [2008] FCA 1454, [42]-[44]; Yazbek v Commissioner of Taxation (2013) 209 FCR 416; [2013] FCA 39, [24]. The adoption of the ordinary meaning of the term is supported by the Explanatory Memorandum, Bankruptcy Legislation Amendment Bill 1996 (Cth) introducing the provision, which stated at [23]: … The Bill also proposes the insertion of a new section under which the provisions of trust deeds which provide for some forfeiture or qualification of the interest of a beneficiary in a trust fund in the event that the beneficiary becomes bankrupt or insolvent will be void against the trustee of the beneficiary's bankrupt or insolvent estate (item 189, proposed section 302B). There is no warrant for construing the term "beneficiary" other than in accordance with its ordinary meaning.

the claims under Section 37A of the conveyancing act and section 121 of the bankruptcy act 199 The expression "transfer of property" appears in s 121 of the Bankruptcy Act and the respondents did not dispute that the share transfers constituted "transfers of property" within the meaning of s 121 of the Bankruptcy Act. 200 Save for contending that the properties were held on trust and that Mr El Ali's interests in the two family trusts were not part of the fund available to Mr El Ali's creditors, it was not otherwise contended for Mr El Ali, Mahmoud El Ali, Mr Zreika, Saracen or Ottoman that the dispositions of the Voyager Point and Kogarah Unit 2 properties were not "alienations of property" within the meaning of s 37A of the Conveyancing Act, though Mr El Ali and Mr Zreika did contend for a different reason that the Taren Point property was not an "alienation of property" within the meaning of s 37A of the Conveyancing Act. I deal with that contention later in these reasons. 201 It was however contended for Mr Nazloomian and Mr Stojanovski that the transfer of the Potts Point property by Saracen to Mr Nazloomian and the transfer of the Kogarah Unit 2 property by Ottoman to Mr Stojanovski were not "alienations of property" within the meaning of s 37A of the Conveyancing Act by reason that the properties were not "property" of Mr El Ali but property of the two companies and, so the argument went, the companies' real estate was not property to which the Trustee had any entitlement. That argument was unsupported by authority and is, with respect, not correct. 202 The express terms of s 37A do not require that the alienated property be the property of the bankrupt. Rather, the criterion is the alienation of property with intent to defraud creditors. That criterion is not defeated in the present case merely because the companies, and not Mr El Ali personally, owned the properties (whether in their own right or as trustees). The evidence showed that it was Mr El Ali who caused Saracen and Ottoman to transfer the properties out of the companies to third parties, namely Mr Nazloomian and Mr Stojanovski. The alienation of property was by the acts of Mr El Ali and it is Mr El Ali's "intent" in doing so that is the relevant inquiry for the purposes of the application of s 37A. "Alienation of property" within the meaning of s 37A of the Conveyancing Act has "the widest possible application": Hall v Poolman (2007) 215 FLR 243; [2007] NSWSC 1330, [550]. In Hall v Poolman, Palmer J observed at [550]: The purpose of s 37A is to defeat fraud no matter by what device it is implemented. The reach of the section is not foreshortened by technical obstructions placed in the way of recovery proceedings in furtherance of the original fraudulent intent. The words of the section are of the widest possible application; they focus on the effect of what is done, not on the means by which it is done. The word "alienation" encompasses every conceivable means whereby property might be removed from the reach of a person's creditors. See also Deputy Commissioner of Taxation v Haritos (2014) 287 FLR 136; [2014] VSC 379 at [219] in respect of the corresponding provision in s 172 of the Property Law Act 1958 (Vic). Moreover, the alienation need not occur solely by reason of the acts of the fraudulent debtor. As Palmer J in Hall v Poolman observed at [551] and [553]: 551. If a person acts collusively with a fraudulent debtor in such a way as to cause ownership of property to move, or to remain away, from the apparently passive debtor, there nevertheless has been an alienation of property for the purposes of the section. In this regard, s 37A of the Conveyancing Act is wider in reach than s 121(1) of the Bankruptcy Act, which catches only "a transfer of property by a person who later becomes a bankrupt": cf Official Trustee in Bankruptcy v Mateo (2003) 127 FCR 217 at [61] per Wilcox J. … 553. "Alienation" includes taking steps to frustrate recovery of property under s 37A. It would defeat the purpose of the section if property, once removed from creditors' reach, could be kept permanently out of their reach by the collusive defensive acts of a third party, even though those acts could not have been undertaken by the fraudulent debtor. Section 37A therefore empowers the Court to declare void the acts of a collusive third party calculated to maintain the fraudulent alienation, and the Court may order the third party to re-transfer the property. In Hall v Poolman a transfer of shares in a company was held to constitute an alienation of property for the purposes of s 37A. 203 Accordingly, I reject the submission that the transfer of the Kogarah Unit 2 property by Ottoman to Mr Stojanovski and the transfer of the Potts Point property by Saracen to Mr Nazloomian were not "alienations of property" within the meaning of s 37A of the Conveyancing Act.

intent 204 A further area of dispute between the parties related to the issue of "intent to defraud" under s 37A of the Conveyancing Act and "main purpose" under s 121 of the Bankruptcy Act. 205 Section 37A was most recently considered by the High Court in Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3. The facts of that case, briefly stated, were that the appellant successfully sued the developer company of a site next door to the appellant's property for damage to her property caused by the removal of support to her land during the construction. Before judgment was handed down, the development was completed and sold and the appellant unsuccessfully sought an order that the developer retain part of the proceeds of sale. At the time, the developer had a second development underway whose value was greater than the developer's liabilities and the developer transferred that property to the first respondent, Mr Chen. One of the reasons for the transfer, but not the only reason, was the "avoidance" of the developer's liability to the appellant. The appellant was successful at first instance in obtaining an order pursuant to s 37A setting aside the transfer. The Court of Appeal allowed the appeal, essentially on the basis that s 37A was enlivened only by an "actual" or "predominantly" fraudulent intent or purpose to deprive creditors of their rights or fruits of their rights and that this required an "element of dishonesty", citing Cannane v J Cannane Pty Ltd (in liquidation) (1998) 192 CLR 557; [1998] HCA 26 ("Cannane") as authority that s 37A requires (as does s 121) an element of dishonesty: "It is an actual intent to deprive creditors of their rights or the fruits of their rights" (Chen v Marcolongo (2009) 260 ALR 353; [2009] NSWCA 326 at [17]). The High Court overturned the Court of Appeal decision. The majority (French CJ, Gummow, Crennan and Bell JJ) held that: (1) the reference to "defraud" included the hindering or delaying of creditors: at [32], [56]; (2) at [34], that the High Court in Cannane, in their references to "actual intent", were "adding the word 'actual' as a periphrasis to emphasise that, while the existence of intent might be inferred from the evidence, it was to be found as a fact"; (3) s 37A did not require for its operation that the proscribed intent be the sole or even dominant intent of the debtor; (4) the relevant intent can be inferred: at [25] the majority stated that an actual intention to delay or defeat creditors, even in the absence of direct evidence of intention, may be inferred if the disposition is voluntary, or for nominal rather than for valuable consideration, where the necessary consequence of the alienation is to put the property beyond the reach of the debtor's creditors. Likewise in Cannane, Brennan CJ and McHugh J at [12] said that an intention to defraud creditors may be inferred where a disposition results in a "subtraction of assets" available for payment of creditors. See too Agusta Pty Ltd v Provident Capital Ltd (2012) 16 BPR 30,397; [2012] NSWCA 26, [86]-[87]; PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515, 526; Jew v Holloway [2013] VSCA 260 at [13]-[18]; Westpac v The Bell Group (No 3) (2012) 270 FLR 1; [2012] WASCA 157, [540]; Commissioner of Taxation v Oswal (2012) 91 ATR 684; [2012] FCA 1507, [21]-[25]. 206 In ascertaining intent, the critical period to examine is the period leading up to the date of the transfer and the critical mind is that of the transferor. Where that transferor is a corporate entity, the critical mind is that of the person controlling the transferor's actions in effecting the transfer: Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3 at [64] (Heydon J).

The "honest subjective belief" contention 207 It was contended that the Court should find that the transfers of real property were not made by Mr El Ali with an intention to defraud creditors within the meaning of s 37A of the Conveyancing Act because he honestly believed at the time that the properties were trust assets. There was evidence from Mr El Ali to that effect which, it was said, was not challenged and had "an entirely sound and rational basis". 208 Along similar lines, it was contended that the Court should find that the share transfers were not done with an intention to defraud creditors within the meaning of s 37A of the Conveyancing Act and that the "main purpose" was not to prevent the shares from becoming divisible property amongst his creditors or to hinder or delay the process of making property available for division amongst his creditors within the meaning of s 121 of the Bankruptcy Act because, at the time that he transferred the shares, Mr El Ali believed that the shares had no value (save for a small amount in Saracen) as Mr El Ali honestly believed that Saracen and Ottoman owned the properties as trustees. Reliance also was placed on Mr El Ali's evidence that in effecting the share transfers he was endeavouring to increase and/or preserve the assets of the trusts, not to diminish his own. 209 Counsel for Mr El Ali relied on the following passage from Cannane at [30]-[33] regarding the phrase "intent to defraud" which at that time appeared in s 121(1) of the Bankruptcy Act: 30. It is notoriously difficult to provide an exhaustive statement as to what is involved in the concepts of "fraud" and "intent to defraud". "Fraud" involves the notion of detrimentally affecting or risking the property of others, their rights or interests in property, or an opportunity or advantage which the law accords them with respect to property. Conversely, it is not fraud to detrimentally affect or risk something in or in relation to which others have no right or interest or in respect of which the law accords them no opportunity or advantage. And there is no intent to defraud if the person in question believes that others have no right or interest in or in relation to the property concerned and that the law accords them no opportunity or advantage with respect to that property. 31. It is to be remembered that the operation of s 121(1) depends on the intent of the bankrupt or, where it is applied in a company winding up, the intent of the company concerned. What is in issue in each case is, as Dixon J said in Williams v Lloyd; In re Williams, a "real intent". And as Starke J observed in the same case, "[f]raud ... is not to be presumed". That is not to deny that it may take very little to justify a finding of fraud or intent to defraud for the purposes of s 121(1) of the Act if the person or company concerned disposes of assets when facing financial difficulties. Even so, the real intent must be ascertained. 32. In the present case, the intention of Mr Cannane and JCPL with respect to the share transfers was not to detrimentally affect the assets then available for the payment of his or its debts or to prejudice or risk the right or interest of creditors in the fund constituted by those assets, or any opportunity or advantage which the law accorded them with respect to that fund. Rather, in each case, their intention was to ensure that the fund was not enhanced by the inclusion of the CCI shares or the assets to be derived from those shares in the event that the CCI venture was brought to a successful conclusion. 33. The creditors had no right or interest in or in relation to the CCI shares and the law accorded them no opportunity or advantage with respect to them unless Mr Cannane, JCPL or one or more companies in which one or other or both were shareholders later acquired those shares. In my view, the creditors were no more defrauded by the steps taken to ensure that they did not obtain any such right, interest, opportunity or advantage than they would have been if Mr Cannane had simply let the CCI venture lapse. More to the point, it cannot be said that the steps taken by Mr Cannane and JCPL were taken with intent to defraud for there is nothing to suggest that they believed that their creditors had any right or interest in or in relation to the CCI shares or that the law accorded them any opportunity or advantage with respect to them. (footnotes omitted) 210 There are three responses to this submission. 211 First, the facts of Cannane are distinguishable. In that case, the debtor transferred shares that he held in a shelf company to his wife and son at a time when the shares were worthless, though in anticipation of using the shelf company as the vehicle to acquire shares in another company, CCI, to on-sell to a listed public company in exchange for shares in that company and by that means achieve a "back door listing" of CCI. However, as the Court found, at the time that the debtor transferred the shares in the shelf company, the purchase of the CCI shares had not been arranged and the listed public company was not contractually bound to acquire the CCI shares. It was in that context that Gaudron J observed at [30] that "there is no intent to defraud [within the meaning of s 121 of the Bankruptcy Act] if the person in question believes that others have no right or interest in or in relation to the property concerned and that the law accords them no opportunity or advantage with respect to that property". The critical finding was that at the time of the transfer the creditors had no right or interest in or in relation to the CCI shares. To put it another way, the CCI shares were not then assets to which the creditors would have been entitled but for the debtor's alienation of his shares in the shelf company. As Brennan CJ and McHugh J explained, as the relevant intent must accompany the disposition, it must relate to the effect of disposing of property then existing. It is the debtor's intent to deprive creditors of assets against which (or against the proceeds of which) they would otherwise be entitled that enlivens the operation of s 121 of the Bankruptcy Act. Therefore, "a subtraction of assets which, but for the impugned disposition, would be available to meet the claims of present and future creditors is material from which an inference to defraud those creditors might be drawn". In the present case, the properties in question were already owned by the companies (save for the Taren Point property to which it is necessary to return) when the shares were transferred. 212 Secondly, the majority in Marcolongo v Chen held at [57] that "the section does not postulate a mixture of motives from which there must be extracted what is identified as a predominant intent to defraud" and at [32], it is "unnecessary to show that the debtor wanted creditors to suffer a loss or that the debtor had a purpose of causing loss". All that is required is an intention to hinder, delay or defeat creditors "and in that sense to show that accordingly the debtor had acted dishonestly". Thus, a finding that Mr El Ali held the belief that the shares and the properties had no value would not necessarily displace a finding of the requisite intent to defeat creditors for the purposes of s 37A of the Conveyancing Act or s 121 of the Bankruptcy Act. In PT Garuda Indonesia Limited v Grellman (1992) 35 FCR 515, the Full Federal Court quoted with approval from Lewis' Australian Bankruptcy Law that a dealing will be treated as fraudulent irrespective of the absence or presence of a conscious fraudulent intent if the necessary result of the dealing is to put the property beyond the reach of the debtor's creditors. 213 Thirdly, and moreover, having regard to the whole of the evidence, I am not satisfied that Mr El Ali in fact held the belief he asserted that the Voyager Point, Kogarah Unit 2 and Taren Point properties were held on trust by Saracen and Ottoman. I have rejected Mr El Ali's explanations for the property and share dispositions. I have found that the Deeds of Retirement and Appointment were not acted upon and, for the reasons already given, placed no weight on Mr El Ali's asserted belief in making the finding that the properties were not held on trust as claimed by him. For those same reasons I reject his evidence about his asserted belief that the properties were held on trust, reject the contention that he had a sound and rational basis for such a belief and also reject his evidence that in effecting the disposal he was endeavouring to increase and/or preserve the assets of the trusts, not to diminish his own assets which would be available for present and future creditors.

The "no value" contention 214 Further, it was submitted that in order for the Court to infer the relevant intent because the dispositions were for nominal consideration, the Court must be satisfied that the shares and properties in fact had value at the time of disposition and that Mr El Ali knew or must have known that to be the case. That submission is contrary to Cannane (1998) 192 CLR 557 and Marcolongo v Chen (2011) 242 CLR 546 as discussed above. 215 In any event, Mr El Ali, in his affidavit of assets and liabilities sworn in November 2010, valued Saracen's net equity in the Voyager Point property at around $3.1 million, valued the Potts Point property (which was not encumbered) at $700,000 and the Kogarah Unit 2 property, also not subject to a mortgage, at $670,000. The Taren Point property had not then been purchased. Mr El Ali agreed in cross-examination that as at December 2010 he considered that Saracen and Ottoman held "very substantial equity" in the parcels of real estate that they owned, albeit qualifying that answer "as trustee". This evidence shows that Mr El Ali thought at the time that those properties, and by inference the shares, did have value.

Were THE SHARES IN ISAAC & JACOB transferred TO MR NAZLOOMIAN with intent to defraud creditors? 216 I have rejected Mr El Ali's and Mr Nazloomian's explanations for the occasion and timing of the share transfer and found that notwithstanding the share transfers and despite Mr El Ali's resignation as the sole director of Isaac & Jacob, Mr El Ali remained in effective control of the company and was the person directing its affairs. Before the share transfer, the shares were held in Mr El Ali's name; constituted "property" and therefore would have been divisible among his creditors under s 116 of the Bankruptcy Act. However, the effect of the transfer was to put those shares beyond the reach of Mr El Ali's creditors at a time when litigation was pending in the Supreme Court against him, and both his assets and the assets of Saracen were subject to a freezing order. Given the absence of a credible explanation for either the occasion or timing of the transfer, I find that Mr El Ali made the transfer at that time for nominal consideration with the intent to defraud his creditors within the meaning of s 37A of the Conveyancing Act and find that the Royals, as creditors of Mr El Ali, were prejudiced by the transfer by reason of the divestiture of an asset that otherwise would have vested in the Trustee upon Mr El Ali's bankruptcy. I also find that his main purpose in making the transfer "was to prevent the [shares] from becoming divisible among [his] creditors" and/or "to hinder or delay the process of making property available for division amongst [his] creditors" within the meaning of s 121 of the Bankruptcy Act. 217 Mr Nazloomian relied upon the defences under s 37A(3) of the Conveyancing Act and s 121(4) of the Bankruptcy Act. Mr Nazloomian bears the onus of proving that either subsection applies: Wentworth v Rogers [2004] NSWCA 430, [64]-[68] (s 37A(3) of the Conveyancing Act); Ashton v Prentice; in the matter of Jury [1999] FCA 671, [67] (s 121(4) of the Bankruptcy Act). To satisfy the onus under s 37A(3) of the Conveyancing Act, Mr Nazloomian must show that he purchased the shares in good faith, not having at the time the shares were transferred to him notice of the intent to defraud. There are three elements to s 121(4): (a) the consideration given was at least as valuable as the market value of the property: s 121(4)(a); (b) the transferee did not know, and could not reasonably have inferred, that the transferor's main purpose in making the transfer was to prevent the transferred property from becoming divisible property among the transferor's creditors or to hinder or delay the process of making property available among the transferor's creditors: s 121(4)(b); and (c) the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent: s 121(4)(c). 218 It was submitted that the consideration paid for the shares ($1) represented market value because the only activity of the company was that of a trustee company and the shares had no commercial value. I am prepared to accept that submission. However, in view of my rejection of Mr Nazloomian's evidence as to why he took the shares, I am not satisfied in the circumstances that Mr Nazloomian was a purchaser in good faith without notice of the intention to defraud. Therefore, Mr Nazloomian has not made out any of the elements of s 37A(3) of the Conveyancing Act. Likewise I do not accept that the requirements of s 121(4)(b) and (c) were met. Mr Nazloomian knew that Mr El Ali was being sued by the Royals, knew or had reason to suspect that Mr El Ali was in financial difficulty because he was owed money by him and his companies and, having rejected Mr Nazloomian's explanation as to why he took the shares, it can reasonably be inferred that Mr Nazloomian knew that Mr El Ali's purpose in effecting the transfer was to prevent the shares from becoming divisible amongst his creditors.

Was THE kogarah unit 2 property transferred TO MR Stojanovski with intent to defraud creditors? 219 I have rejected Mr El Ali's and Mr Stojanovski's explanations for the transfer of the Kogarah Unit 2 property from Ottoman to Mr Stojanovski and found that notwithstanding the disposition and purported appointment of Mr Stojanovski as the trustee of the Ottoman Investments Unit Trust, the property (and affairs of the trust) both remained under the effective control of Mr El Ali. The effect of that transfer was also to put that property beyond the reach of Mr El Ali's creditors. Given the timing of the transfer and absence of a credible explanation as to why the property was transferred to Mr Stojanovski, I find that Mr El Ali made the transfer at that time for nominal consideration with the intent to defraud his creditors within the meaning of s 37A of the Conveyancing Act. I also find that the Royals, as creditors of Mr El Ali, were prejudiced by the transfer by reason of the divestiture of an asset belonging to a company of which Mr El Ali was the sole shareholder at the time. 220 Mr Stojanovski relied upon the defence under s 37A(3) of the Conveyancing Act. In view of the rejection of his evidence that the Kogarah Unit 2 property was transferred to him as security for a loan of $1 million to Ottoman and the rejection of his evidence that he advanced that sum to Ottoman, Mr Stojanovski has not made out the elements of the statutory defence. In so concluding I have taken into consideration the alternative argument put in final submissions on behalf of Mr Stojanovski following the concession by counsel for Mr Stojanovski that the Deeds of Retirement and Appointment were ineffective to appoint Mr Stojanovski as trustee of the Ottoman Investments Unit Trust. It was submitted that the evidence supported the finding that it was the intention of the parties that Mr Stojanovski hold the property, and that the property is held by him, as trustee by way of security for his loan of $1 million to Ottoman. Argument ensued as to whether the alternative claim was covered by the extant defence or whether an amendment was required. For the avoidance of doubt counsel for Mr Stojanovski sought the leave of the Court to amend the defence to add the allegation in answer to the allegation that the property was transferred to Mr Stojanovski for $1, as follows: … the transfer of [Kogarah Unit 2] was from [Ottoman]: (i) as retiring trustee for the Ottoman Investments Unit Trust to [Mr Stojanovski] as the new trustee; or alternatively (ii) to [Mr Stojanovski] as trustee for [Ottoman], either as trustee for the Ottoman Investments Unit Trust or otherwise; in consideration for and/or as security for the [Mr Stojanovski] loaning the sum of $1,000,000 to [Ottoman], as Trustee for the Ottoman Investments Unit Trust, to facilitate it purchasing property at 5 Stonny Batter Road, Minto, NSW (the "Minto Property") and 221 The proposed amendment was objected to and leave to amend should be refused on the basis that the proposed amendment in (ii) is embarrassing. Even if the amendment was allowed, it would not assist Mr Stojanovski having regard to the findings of fact made.

Was the taren point property transferred TO MR Zreika with intent to defraud creditors? 222 It was alleged against Mr El Ali and Mr Zreika that the transfer of the Taren Point property from Ottoman to Mr Zreika on 21 April 2011 constituted an alienation of property for the purposes of s 37A of the Conveyancing Act. It was submitted for Mr El Ali and Mr Zreika that no "property" was alienated because as at the time of the signing and stamping of the transfer from Ottoman to Mr Zreika on 21 April 2011, the sale of the property to Ottoman had not completed (which did not occur until 29 April 2011) and accordingly, the argument went, the only rights that Ottoman had as at 21 April 2011 in relation to the property were "mere contractual rights" as the purchaser of an uncompleted contract, and not a proprietary interest in the property. 223 The fact that the purchase had not been completed as at the time the transfer was executed does not gainsay the application of s 37A for the following reasons. 224 First, the term "property" for the purposes of s 37A has an expansive definition (see s 7 of the Conveyancing Act) as follows: "Property" includes real and personal property, and any estate or interest in any property real or personal, and any debt, any thing in action, and any other right or interest. The definition is sufficiently broad to include Ottoman's rights as purchaser under an uncompleted contract for sale of land. 225 Secondly, and more particularly, it is highly relevant to the intent of Mr El Ali at the time of the transfer that Mr El Ali was, at the time, procuring the finance to complete the purchase of the property by Ottoman, which occurred on 29 April 2011. As mentioned, it was not explained in the evidence why a transfer was signed and stamped before the completion of the purchase, but it must have been in anticipation of Ottoman completing the purchase and becoming registered proprietor of the property. On the evidence, the intent of Mr El Ali was that the title would be transferred to Mr Zreika on completion of the purchase. As the facts show, following completion of the contract, Ottoman was registered as owner on the title followed by Mr Zreika, both on 5 May 2011. The present case is distinguishable from the facts of Cannane on which counsel for Mr Zreika relied for the proposition that there was no relevant intent in relation to the property "then existing". The plain intention of Mr El Ali, as borne out by the sequence of events, was that Ottoman would complete the purchase of the Taren Point property. The effect of the transfer (which could not be operative until Ottoman had title to the property to transfer) was to alienate that property by ultimately resulting in the registration of title in Mr Zreika's name and thereby putting that property beyond the reach of Mr El Ali's creditors. 226 Given the timing of the transfer and absence of a credible explanation as to why the property was transferred to Mr Zreika, I find that Mr El Ali made the transfer at that time for nominal consideration with the intent to defraud his creditors within the meaning of s 37A of the Conveyancing Act. I also find that the Royals, as creditors of Mr El Ali, were prejudiced by the transfer by reason of the divestiture of an asset belonging to a company of which Mr El Ali was at the time the sole shareholder.

Were the shares in saracen, ottoman and easychoice transferred to mahMoud el ali with intent to defraud creditors? 227 I have rejected Mr El Ali's and Mahmoud El Ali's explanations for each of the share transfers and found that notwithstanding the share transfers, and despite Mr El Ali's resignation as the sole director of Saracen and Ottoman, Mr El Ali remained in effective control of those companies and was the person directing their affairs. However, the effect of each of the transfers was to put those shares beyond the reach of Mr El Ali's creditors. Given the absence of a credible explanation for any of the share transfers, I find that Mr El Ali made each of the transfers for nominal consideration with the intent to defraud his creditors within the meaning of s 37A of the Conveyancing Act and his main purpose in making the transfers "was to prevent the [shares] from becoming divisible among [his] creditors" and/or "to hinder or delay the process of making property available for division among [his] creditors" within the meaning of s 121(1) of the Bankruptcy Act. I also find that the Royals, as creditors of Mr El Ali, were prejudiced by the transfer by reason of the divestiture of an asset that otherwise would have vested in the Trustee upon Mr El Ali's bankruptcy.

Was the voyager point property transferred TO MR Zreika with intent to defraud creditors? 228 I have rejected Mr El Ali's and Mr Zreika's explanations for the transfer of the Voyager Point property from Saracen to Mr Zreika and found that notwithstanding the disposition and purported appointment of Mr Zreika as the trustee of the Voyager Point Unit Trust, the property (and affairs of the trust) both remained under the effective control of Mr El Ali. The effect of that transfer was also to put that property beyond the reach of Mr El Ali's creditors. Given the timing of the transfer and absence of a credible explanation as to why the property was transferred to Mr Zreika, I find that Mr El Ali effected the transfer at that time for nominal consideration with the intent to defraud his creditors within the meaning of s 37A of the Conveyancing Act. I also find that the Royals, as creditors of Mr El Ali, were prejudiced by the transfer by reason of the divestiture of an asset belonging to a company of which Mr El Ali remained the effective controller at all relevant times: Marcolongo v Chen (2011) 242 CLR 546; [2011] HCA 3, [64] (Heydon J), cited with approval in Deputy Commissioner of Taxation v Haritos (2014) 287 FLR 136; [2014] VSC 379, [223].

Was the potts point property transferred TO MR nazloomian with intent to defraud creditors? 229 I have already found that Saracen remained under the control and direction of Mr El Ali despite the purported transfer of ownership and control to Mahmoud. It is also noteworthy, and I have found, that the consideration given by Mr Nazloomian for the property (in the sum of $30,000) was credited against the amount that Mr El Ali owed Mr Nazloomian, not Saracen's debt. This is another example of Mr El Ali treating the assets as if they were his own to deal with as he saw fit. At the time of the transfer, Mr El Ali was bankrupt and the effect of that transfer was also to put that property beyond the reach of Mr El Ali's creditors. 230 It was submitted that there was no alienation of property with intent to defraud as Mr Nazloomian paid valuable consideration for the property. However, Mr Nazloomian knew at the time that Mr El Ali was bankrupt. Mr Nazloomian was plainly aware and had actual knowledge of Mr El Ali's insolvency when the property was conveyed to him: cf Coghlan v Alexander (1905) 5 SR NSW 441. I do not accept that Mr Nazloomian was a purchaser in good faith. 231 I find that Mr El Ali made the transfer at that time with the intent to defraud his creditors within the meaning of s 37A of the Conveyancing Act. I also find that the Royals, as creditors of Mr El Ali, were prejudiced by the transfer by reason that the property was put beyond the reach of Mr El Ali's creditors and I reject Mr Nazloomian's defence under s 37A of the Conveyancing Act.

deeds of retirement and appointment of trustee 232 It was conceded that the Deed of Retirement and Appointment appointing Mr Stojanovski as trustee of the Ottoman Investments Unit Trust and the Deed of Retirement and Appointment appointing Mr Zreika trustee of the Voyager Point Unit Trust were not effective. It is therefore unnecessary to make any finding with respect to whether those transactions are voidable pursuant to s 37A of the Conveyancing Act. 233 Counsel for Mr Zreika maintained that the Deed of Retirement and Appointment appointing Mr Zreika as trustee of the Ottoman Investments Unit Trust was effective. If effective, that transaction is also voidable pursuant to s 37A of the Conveyancing Act as part of the steps by which Mr El Ali alienated the Taren Point property with intent to defraud his creditors within the meaning of s 37A of the Conveyancing Act.

conclusion 234 The applicants are entitled to the relief sought against the respondents. The parties are directed to provide minutes of proposed orders giving effect to these reasons within seven days. I certify that the preceding two hundred and thirty-four (234) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Davies.

SCHEDULE OF PARTIES NSD 1731 of 2013 Applicants First Applicant: PETER PAUL ROYAL Second Applicant: JUDITH LOUISE ROYAL Third Applicant: MICHAEL GREGORY JONES IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF NATHAN EL ALI Respondents First Respondent: NATHAN EL ALI Second Respondent: MAHMOUD EL ALI Third Respondent: MAHMOUD ZREIKA Fourth Respondent: SARACEN HOLDINGS PTY LIMITED Fifth Respondent: OTTOMAN INVESTMENTS PTY LIMITED Sixth Respondent: OTSI STOJANOVSKI

NSD 771 of 2014 Applicant Applicant: MICHAEL GREGORY JONES IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF NATHAN EL ALI Respondents First Respondent: NATHAN EL ALI Second Respondent: MAHMOUD EL ALI Third Respondent: JOHN RENE NAZLOOMIAN Fourth Respondent: SARACEN HOLDINGS PTY LIMITED Fifth Respondent: ISAAC & JACOB PTY LIMITED