Australian Islamic Society of Bosnia Herzegovina Incorporated v Muhamed Kumalic

These proceedings concern a common issue among faith based groups. While some denominations in New South Wales have the benefit of specific legislation creating statutory trustees to hold property, others at least began with what, in law, were trustees holding land and other property for the benefit of the congregation as an unincorporated body. Members of the congregation would donate funds to acquire the property for a place of worship, school, community centre, or such like, which would then be purchased by some of the congregants as trustees.

That is what occurred in this case. In the late 1970s and early 1980s a group of Bosnian Muslims came together as the Islamic Society Hurstville (ISH). Properties were purchased in the names of members of ISH.

For the reasons which follow, the Court is satisfied that ISH became the plaintiff Society by incorporation under the Associations Incorporation Act 1984 (NSW) (the Act). By amended statement of claim filed on 19 May 2023, the Society seeks relief to perfect its registration as the registered proprietor of a property at Smithfield (Smithfield Property) and two adjacent properties at Penshurst (Penshurst Properties) originally purchased for the benefit of ISH. Orders to effect that result will be made.

Mr S Philips of Counsel appeared for the Society. I gratefully acknowledge the assistance I have received from both his full written submissions and thorough presentation of the evidence. For reasons I will next explain, there was no appearance for the defendants.

The defendants are the surviving joint registered proprietors of the properties in issue. The first defendant is Mr M Kumalic, to whom I shall refer as such.

The second and third defendants are Mr A Talic and Mr H Muhovic, respectively. I shall refer to them as the Submitting Defendants. As that description suggests, they filed submitting appearances and were not represented at today's hearing.

In addition, after these proceedings were commenced, the Submitting Defendants entered into a Deed of Settlement and Release with the Society dated 21 February 2023. The Deed includes:

As the Deed records, Mr Kumalic has adopted a position different to that of the Submitting Defendants. This appears from these paragraphs of his defence which he filed to an earlier iteration of the Society's pleading, in which Mr Kumalic essentially admitted the Society's contentions subject to these matters:

Mr Philips informed me, and I accept, that Mr Kumalic has played no part in these proceedings other than to file his defence. While his defence is verified, he has never been legally represented and has filed no evidence or submissions. I am satisfied, including as a result of emails sent by my associate, that everything has been done to ensure Mr Kumalic was aware of today's hearing. He was called outside the Court, but he did not appear either personally or by a legal representative.

Entirely correctly in my respectful view, Mr Philips conducted today's hearing by reference to two matters:

Given the submitting appearances and Mr Kumalic's non-appearance, an issue arose as to the need for a contradictor. Mr Philips drew my attention to the decision of Bell P (as the Chief Justice then was, and sitting at first instance) in Church of the Foursquare Gospel (Australia) Ltd v New Hope Church Swansea Inc. [2019] NSWSC 519. His Honour said:

To the extent that it is necessary for me to express a view, it is that the presence of a proper contradictor goes to the Court’s discretion to make a declaration, rather than being an essential pre-condition. However, the case at bar presents a somewhat similar situation to that which the Chief Justice addressed in [17] of his reasons.

The Society has filed fulsome evidence both to prove the basis of its entitlement to the relief which it seeks, but also especially to demonstrate that it is, in layman’s terms, the “same organisation as ISH” or, as an old system conveyancer might put it on a question of good root of title, the successor in title to ISH’s assets, including the Smithfield Property and the Penshurst Properties. This extra evidentiary impetus provided by the Society having to meet Mr Kumalic’s limited defence gives the Court an additional “degree of confidence”, respectfully to adopt the Chief Justice’s expression, in making the declarations sought.

The Society relied on several affidavits of members and officers, and more than 300 pages of records going back to the 1980’s. In relation to each necessary finding which follows, there are a number of documents which support each such finding. I shall refer only to the most telling where necessary.

The Court finds:

By reason of the facts set out above, the Court finds as follows.

Section 2 of Schedule 2 of the Act includes:

The Smithfield Property and the Penshurst Properties were beneficially owned by ISH. Upon incorporation under the Act, by reason of s 2 of sch 2, that beneficial ownership vested in the Society as it is now known. The omission of the transfer of legal ownership of those properties falls within s 2(1)(d). The defendants held their respective legal interests in the Smithfield Property and the Penshurst Properties on trust for ISH. They therefore now hold those interests on trust for the Society and subject to the Society’s right as beneficial owner to call for the legal title (subject to appropriate indemnification of the trustees). Again by reason of s 2 of sch 2 of the Act, the Society is entitled to declarations recognising that beneficial ownership.

Section 71 of the Trustee Act 1925 (NSW) (TA) includes:

Requests for the purposes of s 71(2)(i) of the TA were sent to the defendants in relation to the subject properties on 24 February 2022. By reason of the findings made in [18] above, the defendants were the trustees of those properties for the purposes of that sub-section of the TA. The requests have not been complied with and the Society is therefore entitled to vesting orders under s 71.

The final matter I need to refer to in relation to relief is the question of indemnification of Mr Kumalic for any liabilities that he may have properly incurred or will incur as a trustee of the subject properties. During the course of argument, I indicated to Mr Philips that if the Court was otherwise disposed to grant the relief sought, it would require undertakings to the effect of the indemnities which the Society has agreed to give the Submitting Defendants under the Deed (see [7] above). Mr Philips did not wish to be heard against that requirement.

In the course of the short adjournment before I delivered these reasons, Mr Philips prepared short minutes of order which included an undertaking, substantially to the same effect as clauses 4.1D and E of the Deed. Such minor differences as there are between that undertaking and the terms of the Deed primarily reflect the fact that, unlike the Submitting Defendants, Mr Kumalic has not retained legal representation, has not incurred legal costs, and has otherwise not taken part in these proceedings beyond filing a defence.

For these reasons, the Court upon the Plaintiff giving the undertaking noted below, makes the following declarations and orders: