Michel Fahmy Aziz Guirguis (by his tutor Laila Guirguis) v Oliga Aziz Girgis

MACFARLAN JA: I agree with White JA.

WHITE JA: This is an appeal from orders of the Equity Division (Lindsay J) (Guirguis v Girgis [2020] NSWSC 1468).

The appellant was the plaintiff in the court below. He and the respondent are brother and sister. The respondent is a resident of Egypt. The appellant sought declarations that the respondent held two properties of which she is the registered proprietor on trust for him. He sought orders requiring the respondent to transfer the properties to him.

In December 1995 the appellant purchased two units in Cronulla and registered the units in the respondent’s name using a power of attorney she executed on or about 28 February 1994.

In about September 1997, the appellant purchased two units in Port Hacking Road Sylvania and again, using the power of attorney, arranged for the properties to be registered in the respondent’s name.

In about November 2004, the appellant purchased two units in West Street Hurstville. Using the power of attorney, the appellant registered the Hurstville units in the respondent’s name.

The appellant maintains, and the respondent denies, that the Cronulla units were purchased with his funds in the form of cash.

In 2010 the respondent was made bankrupt because the appellant failed to arrange for the payment of strata fees. In consequence, one of the units in Port Hacking Road Sylvania was sold by the respondent’s trustee in bankruptcy. The other unit in Port Hacking Road Sylvania was sold by the appellant using his power of attorney in about 2014. One of the Cronulla units was transferred by the appellant using the power of attorney to his wife for no consideration in about August 2016. In June 2017 the appellant sold one of the West Street Hurstville units.

Two units remain registered in the respondent’s name: one in Kingsway Cronulla and one in West Street Hurstville.

The primary judge made orders pursuant to a cross-claim brought by the respondent. His Honour declared that the appellant had no right, title or interest in the remaining units. He ordered that the caveats lodged by the appellant in respect of those properties be withdrawn. He declared that the appellant acted in breach of fiduciary obligations he owed to the respondent as her attorney when he transferred the other Cronulla unit to his wife for no consideration, and reserved for further consideration the question of whether any, and if so what, orders should be made for the appellant to account for his dealings with property as attorney for the respondent. His Honour also reserved for further consideration what, if any, orders should be made in respect of claims made by the respondent that the appellant holds the proceeds of sale of the unit in Port Hacking Road Sylvania and the unit in West Street Hurstville that were sold by the appellant in 2014 and 2017 on trust for the respondent.

The respondent had sought an order that the appellant’s wife held the Cronulla unit that had been transferred to her for no consideration on trust for the respondent and an order for its retransfer to her. The primary judge found that the appellant’s wife did not become registered as proprietor of that property by fraud and dismissed that part of the respondent’s cross-claim. There is no cross-appeal from that decision.

Neither the appellant nor the respondent gave oral evidence. The appellant at the time of trial was aged 87 and was incapacitated. The respondent is aged 89 and lives in Egypt. She twice applied for orders that her evidence be taken by audiovisual link. Those applications were opposed and were unsuccessful. The primary judge observed (at J [10]):

The appellant married his first wife in Egypt in or about 1969. He migrated to Australia in 1970 and brought his first wife over from Egypt to live with him in Australia about a year later. He deposed that he was divorced from his first wife in or about 1988. There were protracted proceedings in the Family Court resulting ultimately in that Court making orders for the division of property on 10 May 1996. (The respondent says that the date given by the appellant as the year of divorce (1988) was wrong and that the appellant separated from his first wife in 1992 which is in accordance with the reasons for judgment of the Family Court, but we were told that the judgment was not admitted as evidence of the truth of the facts asserted in it, but only as evidence of the orders made.)

In an affidavit made on 8 October 2017 the appellant deposed as follows:

In her affidavit of 26 September 2018 the respondent deposed that in 1991 she discussed with her husband migrating to Australia. She deposed that she and her husband sold a farm and a house they owned in Egypt in order to use the funds to invest in real estate in Australia in anticipation of travelling there. She deposed that in late 1993 she had a telephone discussion with the appellant to the following effect:

The respondent deposed that in early 1994 she gave another brother, Guirguis Fahmy Aziz, who lived in the United States but was visiting Egypt, A$100,000 in cash and asked him to take the money and give it to the appellant as he was travelling to visit the appellant in Australia. She deposed that she received a telephone call from that brother in which he told her that he had handed the money over to the appellant. That brother died on 5 December 2000.

The respondent deposed that the appellant visited Egypt in about July 1997 and she handed the appellant another A$100,000, evidently in cash. She deposed that in December 1998 her daughter took A$50,000 cash and US$10,000 to give to the appellant. Her daughter gave evidence to the same effect.

The respondent deposed that in 2002 when the appellant again visited Egypt, she gave him another A$100,000. She said she paid a total amount of A$350,000 and US$10,000 to the appellant for the purpose of his purchasing properties for her in Sydney.

The appellant deposed that the respondent contributed no funds to the purchase or maintenance of the Cronulla properties purchased in about December 1995. He deposed that the two Cronulla properties were purchased for $400,000 in cash without borrowing any money from the bank. He deposed that he gave the builder $300,000 in cash in one lump sum payment and the remaining $100,000 was paid off by instalments of $25,000 in under a year.

The respondent submitted, both before the primary judge and on appeal, that this evidence could not be accepted because the appellant had made affidavits of his financial circumstances in the family law proceedings with his wife in which he deposed to having only minimal cash (the affidavits of his financial circumstances referred to his having only $10 of cash).

The appellant submits that even on the respondent’s case, she did not provide sufficient funds for the purchase of the two Cronulla units in December 1995. The title search of Unit 3 of the property at Kingsway Cronulla records that the transfer of the property to the respondent was registered on 13 December 1995. The purchase price was $200,000. The transfer of Unit 9 at the Kingsway property in Cronulla was also registered on 13 December 1995. The transfer to the respondent records that the purchase price was $220,000. In each case the transfer recorded that the consideration had been received. The certificates of title to each property record the registration of a mortgage on 9 February 1996. (J [116]). Neither party tendered that mortgage. (The same dealing number for the mortgage is recorded on both certificates of title).

A Mr Jeff Barton was the builder and developer of the blocks of units in Kingsway Cronulla and West Street Hurstville. He made an affidavit on 23 March 2018 in which he deposed that he could not recall how the two Cronulla units were purchased. He deposed to having a conversation with the appellant at the time of the purchase of the Cronulla units in which the appellant told him that he would purchase the units with a power of attorney and said “I am going through a nasty divorce with my wife, she is taking me for everything, I have lost my family I am not going to lose everything I have worked hard for”.

In cross-examination Mr Barton said he had a very vague memory that the appellant paid cash for one of the units and then borrowed for the other one, “…but it’s not something that I can really – I’m not 100% on that”.

In his family law proceedings, the appellant provided verified statements of his financial circumstances. On 29 October 1993 he deposed to having a current weekly income of $293 and having no money in any savings account with a bank or building society or otherwise, and cash of only $10.

In an affidavit filed on 8 March 1996 the appellant deposed to having received an amended assessment from the Australian Taxation Office for unpaid income tax of $824,845.90 dating back to 1980 and to having been served with a creditor’s petition by Westpac Bank for a debt of $277,550.90 and having also been served with bankruptcy notices by two other creditors in the sums of $12,475.88 and $10,359.66. He said he had no money with which to pay any of these claims other than his share of equity in real estate properties jointly owned with his then wife.

The appellant made no disclosure of having the cash which he now says he used to purchase the Cronulla units in December 1995. He disclosed no interest in the Cronulla units.

The appellant submitted that his affidavits in the family law proceedings against his former wife were false, consistently with his intention to conceal his assets from her and from his creditors

On the respondent’s evidence, she had not provided him with sufficient cash by the time of the purchase of the Cronulla units to enable the appellant to purchase either unit. It is possible that the appellant, using the power of attorney, may have caused the respondent to borrow monies secured by the mortgage registered on 9 February 1996 and that there may have been some explanation for why that mortgage was not registered at the same time as the transfers were registered. However, that is speculative.

The transfer of Unit 10/112-118 Port Hacking Road Sylvania to the respondent is dated 12 September 1997 and was registered on 19 September 1997. The transfer of Unit 10/120-122 Port Hacking Road Sylvania to the respondent is dated 5 December 1997 and was registered on 18 December 1997. The purchase prices for the units were $215,000 and $220,000 respectively. Part of the purchase price was provided by mortgage finance through Aussie Home Loans. The appellant applied for and obtained two home loans in the amount of $130,000 each in the name of the respondent, presumably using the power of attorney (J [119]). If, as the respondent deposed, she handed to the appellant $100,000 in cash on his visit to Egypt in July 1997, there was nonetheless a shortfall between the purchase costs of the two Sylvania units, the cash the respondent said she provided in July 1997, the monies raised through the borrowing the respondent made (acting through the appellant as her attorney) from Aussie Home Loans, and any rent derived from the Cronulla unit that was not occupied by the appellant.

The appellant deposed that he used his earnings from a service station which he managed to pay off the home loans for the Sylvania properties. That evidence was not admitted as evidence of the asserted fact, but the appellant produced copies of deposit slips and cheques and mortgage account statements which showed his making payments in reduction of the mortgage debts of $38,000 on 28 November 2000, $30,500 on 30 April 2001, $10,000 on 2 July 2001, $20,000 on 2 July 2001, $16,000 on 22 October 2001, and $26,400 on 29 June 2001.

The two Hurstville units were purchased in 2004 from a company controlled by Mr Barton. The units were purchased at the same time and the transfers were registered on 11 November 2004. The transfers are undated. The purchase price of each unit was $535,000. A new mortgage was registered in respect of each acquisition. Those mortgages were not tendered by either party. The appellant deposed that he gave the vendor a $10,000 deposit and borrowed the balance of the monies to complete the purchase from the Commonwealth Bank. He annexed to his affidavit what he called a sample of statements from the Commonwealth Bank showing loan repayments made towards the Hurstville properties. Those bank statements show that the borrower was the respondent.

Between the purchase of the Sylvania properties in 1997 and the purchase of the Hurstville properties in 2004, according to the respondent, the appellant was provided with $100,000 cash in 2002 on a second visit to Egypt.

The respondent deposed that she paid a total amount of A$350,000 and US$10,000 to the appellant for the purpose of purchasing the properties in Sydney.

As indicated above, neither the appellant nor the respondent was cross-examined. This was because it was accepted that the appellant was not fit to give evidence. There was no evidence of such an impediment in the case of the respondent. The solicitors for the respondent proposed that her evidence be taken by audiovisual link to Egypt but this application was opposed by the appellant. The primary judge upheld the appellant’s objection to taking the respondent’s evidence by audiovisual link to Egypt.

The appellant objected to the reading of the respondent’s affidavit on the ground that the respondent was not available for cross-examination. The primary judge indicated that if that objection were taken, then there may have been a need to reconsider previous rulings to enable the respondent to give her evidence by audiovisual link, particularly as it emerged only after those rulings that the plaintiff would not be able to be cross-examined. The primary judge deferred ruling on the “global objection” until the other evidence was adduced (including ruling on objections to the affidavit). Likewise the “global objection” to the affidavit of the respondent’s daughter, Violette Galil Habashi, was deferred until the parties had an opportunity to put before the court evidence relevant to that objection. Ultimately, the affidavits were received without objection about the deponent’s unavailability for cross-examination (J [10]).

The primary judge accepted the respondent’s evidence of payments. His Honour said (J [140]):

The appellant challenges these findings. He submits that there was no occasion for him specifically to deny the respondent’s evidence and that of her daughter about his receipt of payments of cash from the respondent. In his affidavit he deposed that the respondent contributed no funds to the purchase or maintenance of the properties and submitted that it was unnecessary for him to repeat those denials. He submitted that it was inherently unlikely that he or his brother or his niece would have smuggled large volumes of cash into Australia. He submitted that the respondent did not explain with any specificity how she obtained the cash that she said she paid him. He submitted that it was unlikely that the respondent would have been able to obtain such large quantities of cash in Australian dollars in Egypt.

The respondent did describe in general terms how she and her husband obtained cash to provide to the appellant for the purchase of properties in Australia (see [15] above) but I accept that there is an inherent improbability in the idea that their brother, or the appellant, or the respondent’s daughter would carry on their person A$100,000 in cash or A$50,000 and US$10,000 in cash when travelling to Australia. The respondent gave no explanation as to why monies were not sent by bank transfer from her account in Egypt to the appellant’s bank account in Australia. There may have been foreign exchange controls which precluded such transfers but there was no evidence of that.

The appellant’s evidence of being prepared to engage in property transactions involving large transfers of cash is a neutral consideration. It is not corroborative of the respondent’s evidence.

The October 1995 correspondence of the appellant’s solicitors with the Australian Treasury to which the primary judge referred contains an acknowledgement that the respondent was purchasing the Cronulla home units. The Australian Treasury advised that there were no objections to the proposal that the respondent purchase the two Cronulla units and that should the respondent wish to sell the properties to another foreign person, separate approval for such a sale would be required. Any such sale would be treated as the acquisition of developed residential real estate and subject to the restrictions applicable to such properties (J [97]).

That letter is not corroborative of the respondent’s evidence that she made the cash payments to which she deposed. Nor is it inconsistent with that evidence.

The appellant’s acknowledgement that when he visited the respondent in Egypt in 2002 he showed her all the papers relating to the properties he had purchased in Australia is some slight evidence that he acknowledged her ownership of the properties, but it does not corroborate the respondent’s evidence of having made cash payments towards their purchase.

On the other hand, the appellant’s failure to provide to the respondent an account of the monies used in the purchase and for the management of the properties of which the respondent was the legal owner and which he purchased in her name as her attorney is a reason for doubting the appellant’s account of the source of the money used for the purchases.

The other substantial reason for doubting the appellant’s version of how monies were obtained for the purchase of the properties is that his version is inconsistent with his sworn testimony as to his assets in the family law proceedings. His assertion in these proceedings that he perjured himself in the family law proceedings and in his statement of affairs in his bankruptcy means that little credit can be given to his evidence in these proceedings.

It is surprising that the appellant did not take the opportunity to cross-examine the respondent by audiovisual link. The respondent at the time of the trial was aged 89 and had never left Egypt. To require her to travel to Australia to give evidence, albeit in the company of her daughter, seems prima facie unreasonable. But the primary judge declined to order that her evidence be taken by audiovisual link. Nonetheless, there was ultimately no objection to the reading of the respondent’s affidavit.

Considering that the appellant’s position was that he was prepared to perjure himself in the family law proceedings and in his statement of affairs, and that he asserted that the arrangements were made for the fraudulent purpose of hiding his assets from creditors, whereas no such accusation is made against the respondent, in the absence of seeing either witness, a judge would naturally be inclined to prefer the evidence of the respondent over the evidence of the appellant.

A material consideration is that the hearing took place between 25 and 27 February, on 10 and 26 March, 16 April and 17 June 2020. From March 2020, all hearings were being conducted by audiovisual link. It would have been open to the appellant to have withdrawn his opposition to taking the respondent’s evidence by audiovisual link and ask for that to be done. He would then have been able to cross-examine the respondent on her evidence. There is no suggestion on appeal that an audiovisual link to Egypt could not have been arranged. The appellant did not take up the opportunity to test the respondent’s evidence.

I acknowledge the force of the appellant’s submissions as to the objective unlikelihood that cash payments would have been made to the appellant in the way to which the respondent deposed. Nonetheless, the primary judge did not err in accepting the respondent’s evidence that those payments were made.

In any event, for the reasons which follow, that question is not determinative of the appeal.

Even on the respondent’s evidence, it is evident that the appellant provided some of the monies for the purchase of the properties.

The appellant pleaded a case of express trust based upon the conversation to which he deposed took place in 1993 ([14] above). By a letter of particulars dated 15 November 2018, the appellant’s solicitors contended that the circumstances also gave rise to a resulting trust or in the alternative, a constructive trust based on the common intention of the parties. The facts giving rise to the alleged resulting trust were pleaded, namely that the appellant provided the funds for the purchase of the property and the respondent made no contribution to either the purchase or maintenance of the properties. The cause of action to which those circumstances could give rise did not have to be pleaded unless they would take the respondent by surprise. The letter of particulars of 15 November 2018 and the appellant’s opening submissions raised a claim that “the circumstances” gave rise to a resulting trust or to a constructive trust based on the common intention of the parties. Although the appellant did not amend his claim for relief to seek alternative relief that the appellant was entitled to a beneficial interest in the properties proportionate to his contribution to the purchase costs pursuant to a resulting trust, or in any other proportion based on a common intention constructive trust, that claim was litigated.

The appellant made no submissions on appeal as to a common intention constructive trust. But the appellant did submit that even on the respondent’s evidence, the primary judge ought to have found that the appellant contributed some of the monies for the acquisition of the properties and there was a presumption that the respondent held the properties on a resulting trust for him in accordance with the shares in which the parties contributed to those costs. I accept that submission. The question is whether that presumption has been rebutted.

There was no issue as to the principles to be applied. They may be summarised as follows (Foundas v Arambatzis [2020] NSWCA 47):

The parties’ actual intentions may be determined by what they said and did when the property was purchased, and by their later conduct insofar as it throws light on what those intentions then were. Subsequent declarations of intention are admissible only against interest (Calverley v Green at 262 and 269; Charles Marshall Pty Ltd v Grimsley at 365; Bryson v Bryant (1992) 29 NSWLR 188 at 215).

The primary judge’s dispositive reasoning was as follows:

At para [145] quoted above, the primary judge rejected the appellant’s case that the respondent held properties on trust for him pursuant to an express trust. I agree with that conclusion and on appeal the appellant did not seek to demonstrate any error in that finding. Rather, the appellant’s submissions were directed to whether the primary judge ought to have found that there was a resulting trust. The primary judge’s findings (at J [145] and [146]) are also directed to that issue. His Honour found that the appellant’s intention was that he should not have assets that would be vulnerable to a claim by his wife or creditors through his bankruptcy, but that the properties acquired would be held beneficially by his sister pursuant to an informal family arrangement, not governed by legal formality, in which he could enjoy the fruit of the investments through her goodwill.

I agree. The appellant wanted to keep the assets out of the reach of existing and future creditors and out of the reach of his wife. That could only be done lawfully by his having no beneficial ownership of the properties but instead relying on his sister to allow him to enjoy such of the fruits of the property as she might allow. As he held a power of attorney from his sister which he could exercise for his own benefit, the scope for obtaining such advantages was substantial, for so long as the power of attorney remained unrevoked.

Such an intention is inconsistent with the appellant’s having any beneficial ownership of the properties. He submitted that his intention was to hold the beneficial interest in the properties but to conceal it. But he acted inconsistently with that asserted intention. The respondent deposed that in early 2011 she received a telephone call from the appellant. He said to her that he needed a will signed by the respondent stating that if she died, he could live in Unit 9 in the Kingsway at Cronulla and that the other properties would go to the respondent’s children. The respondent attached to her affidavit a copy of the will which apparently was provided to the respondent by the appellant for her execution. The copy of the will is undated but was apparently signed by the respondent before a lawyer in Egypt in El-Mahalla El-Kubra, an Egyptian city in the Nile Delta. The will is evidently drawn by an Australian lawyer. It can be inferred that it was prepared by a solicitor on the appellant’s instructions. The will provided:

There was a substitute appointment of the respondent’s children if the appellant or his wife were unable or unwilling to act as executors and trustees.

Clause 3(a) provided:

By clause 3(b), the respondent left household chattels to the appellant and his wife.

By clause 3(c), she gave the rest of her Australian estate to her children.

The appellant made no affidavit in response to this evidence.

The provision of the draft will for the respondent to sign was a clear acknowledgement by the appellant of the respondent’s beneficial ownership of the properties. There is no suggestion that the respondent had any property in Australia other than the properties acquired in her name through the use by the appellant of his power of attorney. In providing the draft will for the respondent to execute, the appellant acknowledged her ownership of those properties but secured for himself and his wife a right of residence in the Cronulla unit if she predeceased him. The will is also corroborative of the respondent’s version of her conversation with the appellant.

The second piece of corroborative evidence are tax returns from 2017 that the appellant arranged, through his use of the power of attorney, to be lodged for the respondent. The tax returns were not trustee returns. They recorded the respondent as being the person who derived rental income.

The appellant challenged the primary judge’s finding at J [149] (quoted above at [55]) that “to the extent that [the appellant] may have contributed to a purchase from his own resources…his contribution was, in legal terms, in the nature of a gift.” The appellant submitted that no case had been run at trial that the appellant had made gifts to his sister. That is true. At trial, counsel for the respondent made no submissions directed to the rebuttal of a presumption of a resulting trust. Nor was that addressed in the respondent’s written submissions on appeal. Nonetheless, the primary judge’s observation was a simple corollary of his Honour’s conclusion that the parties did not intend the appellant to have any beneficial interest in the properties acquired. There was no suggestion that any monies advanced by the appellant for the purchase of the properties were by way of loan to his sister. His Honour’s conclusion that, to the extent the appellant contributed monies to the purchase of properties from his own resources, his payment would be characterised as a gift was correct. If the presumption of resulting trust is rebutted, the presumption is that the money was paid by way of gift and not as monies lent (Heydon v Perpetual Executors Trustees and Agency Co (WA) Ltd (1930) 45 CLR 111 at 113; Coshott v Sakic (1998) 44 NSWLR 667 at 671 and cases there cited).

In summary, the primary judge was correct in finding that even on the appellant’s version of his conversation in 1993, no express trust arose. In any event, the appellant was not a person of credit and the conversations took place so long ago it may be doubted whether either party could accurately recollect what was said. But the appellant’s case did not wholly depend upon his establishing the existence of an express trust. Even on the respondent’s case, the presumption of a resulting trust arose. But for the reasons given by the primary judge and for these reasons, that presumption is rebutted. I would dismiss the appeal with costs.

EMMETT AJA: The question in this appeal is whether the respondent held on trust for the appellant two properties of which the respondent is the registered proprietor. The two properties were purchased by the appellant in the exercise of power of attorney granted to him in February 1994 by the respondent, who is his sister. The appellant contended that the properties were purchased with his funds on the basis that he would be the beneficial owner under an express trust or that they are held on a resulting trust for him.

In proceedings brought in the Equity Division, a judge of that Division declared that the appellant had no right, title or interest in the properties and ordered the withdrawal of caveats lodged by the appellant in respect of the properties. The appellant appeals to this Court from those orders.

I have had the advantage of reading in draft form the reasons of White JA for concluding that the primary judge made no error in finding that no express trust arose from a conversation alleged by the appellant and that any presumption of a resulting trust was effectively rebutted. I agree, for those reasons, that the appeal should be dismissed with costs.