NSW Trustee and Guardian v Obeid

1. [1]

   HIS HONOUR: The seventh edition of Butt’s Land Law, under the general heading of Exceptions to Indefeasibility, contains the following discussion concerning volunteers at [12.560]:

2. [2]

   The NSW Trustee & Guardian is the registered proprietor of a property at Heckenberg. It became the registered proprietor as a volunteer in circumstances that are explained in what follows. Khaled Elskaf alleges that he acquired an equitable interest in the property before the Trustee became the legal owner of the property and that his equitable interest is enforceable against the registered proprietor because it did not provide value and so as a volunteer is vulnerable to his claim. Khaled Elskaf makes that claim even though the Trustee became registered without notice of that interest. In order to succeed on that claim, Khaled Elskaf must demonstrate that the law as summarised in the passage quoted above is wrong.

Background

1. [3]

   On 28 May 2018, the Trustee became the registered proprietor of the property situated in North Liverpool Road, Heckenberg. That was the end result of an order made by me on 21 June 2017 in separate proceedings pursuant to s 22 of the Criminal Assets Recovery Act 1990 forfeiting the Heckenberg property to the Crown: see New South Wales Crime Commission v Ali Elskaf [2017] NSWSC 681. Ali Elskaf is Khaled Elskaf’s brother.

2. [4]

   The present proceedings were commenced by the Trustee by statement of claim filed on 1 May 2020 seeking to recover possession of the property from Nazha Obeid who was then in occupation. Ms Obeid voluntarily surrendered possession of the property on 26 May 2020. On 18 June 2020, Khaled Elskaf filed a notice of motion in these proceedings seeking the following orders:

3. [5]

   That notice of motion was supported by the affidavit of John Stonham affirmed on 2 June 2020. Mr Stonham deposed to the following matters:

4. [6]

   Khaled Elskaf affirmed an affidavit on 5 August 2020. It is sufficient for present purposes to observe that he deposes to the same matters to which Mr Stonham referred.

5. [7]

   In due course, Khaled Elskaf became a defendant in these proceedings and filed a cross-claim on 16 December 2020 by which he claims the following relief against the Trustee:

6. [8]

   The cross-claim in essence pleads the facts to which both Mr Stonham and Khaled Elskaf have deposed. It maintains that Ali Elskaf’s interest in the property that was forfeited pursuant to my order was a bare legal title in the sense that it was limited to the interest then held by Ali Elskaf which was itself subject to the equitable interest in the property that Khaled Elskaf now asserts. The cross-claim also alleges that the Trustee was a volunteer, a proposition which for present purposes the Trustee does not contest. Finally, the cross-claim alleges that the Trustee “knows or ought to know that Ali Elskaf held the property on trust for the cross-claimant”.

7. [9]

   The Trustee contests the allegation that Khaled Elskaf has any equitable interest in the property or any such interest to which its legal title is subject. For present purposes, the Trustee is content to oppose Khaled Elskaf’s claim for interlocutory relief enjoining any dealing with the property upon the basis that the evidence upon which Khaled Elskaf relies is taken at its highest. However, it is important in that respect to observe that the Trustee completely denies that it took its registered title to the property with notice of Khaled Elskaf’s alleged equitable interest, as pleaded in the cross-claim. I also do not understand that there is any dispute that the Trustee became registered as proprietor of the property without any such notice. Indeed, Khaled Elskaf did not assert any beneficial interest in the property of the kind he now alleges, or in fact any interest at all, until 23 March 2020 when he filed a notice of motion in the previous proceedings. Mr Robison of counsel for Khaled Elskaf specifically disavowed any suggestion that the Trustee took with notice of Khaled Elskaf’s claimed interest before me on 17 December 2020 and to the extent that the cross-claim pleads that the Trustee had any such notice it is wrong and I propose to disregard it.

8. [10]

   Khaled Elskaf contends that there is a serious question to be tried. The single issue that arises for determination by me is whether Khaled Elskaf is entitled to interlocutory relief, based upon his asserted equitable interest in the property, enjoining the Trustee as a volunteer from dealing with the property, when the Trustee acquired its registered legal title without notice of his claim.

NSW Trustee’s submissions

1. [11]

   It is convenient to deal with these first.

2. [12]

   It was not until March 2020 that Khaled Elskaf first raised his alleged claim of an interest in the land with the Trustee. There is no suggestion that the Trustee had any prior notice of this claim before it became registered as the proprietor of the land on 28 May 2018. Nor is there any allegation of fraud affecting the registered legal title of the Trustee: s 42 Real Property Act. Accordingly, on 28 May 2018 pursuant to s 42 the Trustee became registered as the proprietor "absolutely free from all other estates and interests" that were not recorded on the title, subject to the exceptions specified in subsections (a) to (d).

3. [13]

   Even if Khaled Elskaf had a claim against his brother arising from the payment of money on his behalf as the result of which he allegedly acquired an interest in the property binding his brother in equity, and that he thereby became beneficially entitled to an interest in the property, upon registration as the proprietor the Trustee took title free from any such equitable claim. The Trustee relied upon the passage from Butt’s Land Law earlier quoted and the authorities referred to there

4. [14]

   In Arambasic v Veza (No 4) [2014] NSWSC 1109, Sackville AJA (sitting as a single judge in common law) said at [164]:

5. [15]

   In Guirguis v Girgis [2020] NSWSC 1468, Lindsay J said at [2]:

6. [16]

   As the High Court noted in Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22 at [188], [198], without deciding, volunteers receive the same quality of indefeasibility as purchasers for value:

Khaled Elskaf’s submissions

1. [17]

   Khaled Elskaf submitted that the serious question to be tried, and which should only be answered after a trial, is the extent to which a volunteer is in a different position to a purchaser for the purposes of s 42 of the Real Property Act. The existence and extent of the frailty of a Torrens title acquired by a volunteer was expressly left open in Bogdanovic v Koteff. Although Bogdanovic is the subject of citation in many cases which follow it for the general proposition that volunteers have the benefit of indefeasibility, the Trustee has not pointed to, and Khaled Elskaf has not been able to find, any authority to suggest that the position of a volunteer is precisely coextensive with that of a purchaser at all times without exception.

2. [18]

   Khaled Elskaf does not allege that the Trustee had knowledge of his interest in the property before it became registered proprietor. Rather, he says that even accepting that the Trustee has an indefeasible title, it nevertheless holds the property on trust for him. Khaled Elskaf submitted that “indefeasibility of title cannot be understood as barring the entrance into relationships of trust” and that “if it did mean this, then every trust over land must fail”. He submitted further that the proposition for which he contends is neither novel nor unorthodox. He made the following submission:

3. [19]

   Khaled Elskaf also relied upon what was said by Lindsay J in Guirguis v Girgis and what he sought to characterise as an acknowledgement of “the less than absolute concept of indefeasibility”. He referred to that part of Lindsay J's decision where his Honour said that:

4. [20]

   Khaled Elskaf submitted that this passage highlights the issue which ought to be tried in the present case, namely, what needs to be established by way of "exceptional circumstances".

Discernment

1. [21]

   Khaled Elskaf’s approach is based upon the proposition that after-acquired notice of an equitable interest could defeat the registered title of a volunteer. He placed reliance upon what was said by Leeming JA in Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81 at [82]:

2. [22]

   It seems to me with respect that this passage offers no comfort to Khaled Elskaf. The burden of his concern is that he has an equitable proprietary interest in the subject land. Ali Elskaf no longer owns it. The Trustee acquired its legal registered title to the property without notice of any interest that Khaled Elskaf now asserts. Ali Elskaf presumably remains personally liable to his brother for the repayment of the money expended on his behalf in accordance with any agreement between them that Khaled Elskaf can establish.

3. [23]

   In any event, this further passage from Fistar should be noted:

4. [24]

   In Sze Tu v Lowe [2014] NSWCA 462, Gleeson JA said this at [241]-[243]:

5. [25]

   These authorities are clear. They lead me to conclude that Khaled Elskaf’s claim is misconceived. There is no serious question to be tried. I include in that opinion my view that there is no reason to suspect that a single judge sitting at first instance in this Court would not be bound to follow these authorities. The registered title of the Trustee taken even as a volunteer but without notice of Khaled Elskaf’s alleged equitable interest must prevail. Nor is the Trustee’s indefeasible title somehow subject to attack upon the basis of, or by analogy with, the equitable principles of tracing.

6. [26]

   The simple but significant fact is that the Trustee acquired its interest without notice of Khaled Elskaf’s alleged equitable interest. None of his submissions, and none of the authorities upon which he seeks to rely, comes to terms with that fundamental difficulty. Indeed, the question left open (as it were) by the Court of Appeal in Bogdanovic was whether volunteers are subject to unregistered interests of which they had notice when they acquired their interest. The Trustee has in my view unarguably acquired its registered legal title free of any interest that Khaled Elskaf maintains that he has. It cannot seriously be contended that there is any issue to be tried.

Further issue

1. [27]

   At the commencement of these proceedings, Mr Robison submitted that I should disqualify myself from hearing his notice of motion upon the basis of apprehended bias. He submitted that the fact that I had made the original order forfeiting the property to the Crown was such that it could give rise to a question of whether a fair-minded lay observer might reasonably apprehend that I might not bring an impartial and unprejudiced mind to the resolution of the question I am required to decide.

2. [28]

   In my opinion, no such reasonable apprehension could arise. The decision made by me in the earlier proceedings did not concern Khaled Elskaf. There is no suggestion that he is or was concerned in or with the circumstances that led to the proceedings against his brother. There is no suggestion that Khaled Elskaf’s claim to an equitable interest in the property is adversely affected or tainted by reason of his brother’s activities. Moreover, the issue for determination before me was conspicuously conducted upon the basis that Khaled Elskaf’s evidence concerning the circumstances in which his asserted equitable interest came to be acquired was accepted and uncontested: he was not cross-examined. The strangely pleaded issue suggesting that the Trustee had notice of any such interest was not supported by any evidence and was quite properly not pressed.

3. [29]

   I do not consider that any fair minded lay observer might reasonably apprehend that I might not bring an impartial and unprejudiced mind to the resolution of the matters I have had to decide.

Orders

1. [30]

   Khaled Elskaf’s application to restrain the Trustee from dealing with and/or disposing of the land known as ** North Liverpool Road, Heckenberg pending conclusion of the proceedings is dismissed with costs.