El-Cheikh v Miraki

The first plaintiff, Omar El-Cheikh, and Navid Ardestani-Miraki (the husband of the first defendant, Sepideh Miraki) met at a car wash in North Rocks. They struck up a business relationship based on their common interest in trading in luxury cars and exchanging large quantities of cash. These proceedings require the Court to consider what happened as a matter of legal rights and obligations when they decided to purchase a commercial office unit located at X/XX Gladstone Road, Castle Hill (the “Property”). For convenience and without any disrespect, in these reasons the Court will refer to the parties and others by their given names.

The Property was purchased in the name of Sepideh on 18 October 2016 for $1,700,000. I will refer to Sepideh and Navid collectively as the Mirakis. As the arrangements for the purchase progressed, a unit trust had been established on 6 September 2016. It was called the Gladstone Rd Unit Trust (the “GRUT”). It had two subscribers who were intended to become equal unitholders: the second plaintiff, El-Cheikh Group Pty Ltd (“El-Cheikh Group”) (a corporate vehicle of Omar), and the second defendant, Iconic Constructions Australia Pty Ltd (“Iconic Constructions”) (a corporate vehicle of the Mirakis). The trustee was Gladstone Rd Enterprises Pty Ltd (“Gladstone Rd Enterprises”), a company of which Sepideh was the sole director, secretary and shareholder. While Navid was an essential witness in the case, neither he nor Gladstone Rd Enterprises was a party.

There was no disagreement that Omar and the Mirakis discussed purchasing the Property together, from which they would then operate their respective businesses. Nor was it disputed that a loan agreement was entered into between Omar and Sepideh on 12 October 2016 (the “Loan Agreement”), which contemplated Omar advancing $900,000 to Sepideh to be applied to the purchase of the Property. The parties also agreed that Omar and the Mirakis discussed the possibility that their purchase of the Property would be structured through a trust with Sepideh initially appointed as trustee, to be replaced by a corporate trustee at a later time when the newly acquired office space was in operation.

Having moved into the Property in October 2016, by December 2016 relations between Omar and the Mirakis began to break down. By the time these proceedings were commenced in May 2017, two very different narratives had emerged about the purchase of the Property.

The relief the plaintiffs sought in these proceedings was intended to vindicate two fundamental contentions. The first was that Omar had advanced $450,000 in cash to Sepideh under the Loan Agreement which, pursuant to the terms of that agreement, gave him a security interest in the Property and other assets of Sepideh. He also said that Sepideh held the Property as trustee for the GRUT, in which El-Cheikh Group had rights as a unitholder.

The Mirakis’ case was that Sepideh held the Property for herself absolutely and that Omar had not advanced the cash as he alleged. Alternatively, if the Court found that Omar had provided the cash, he had done so not pursuant to the Loan Agreement but rather, in accordance with their usual practice, Omar had loaned the cash to Navid pursuant to an oral agreement between the two men.

Both of the plaintiffs’ fundamental contentions fail.

The plaintiffs’ claim that Sepideh holds the Property as trustee of the GRUT fails because that trust never came into existence. This is because the subscription payments for units in the GRUT were intended to be the initial trust property of the GRUT. Neither El-Cheikh Group nor Iconic Constructions ever subscribed for their units in the GRUT, so there was never any trust property to be the subject of the GRUT and those companies never became unitholders.

Omar has satisfied the Court that he did advance $450,000 in cash, $430,000 of which was used in the purchase of the Property. However, he has not discharged his onus of proof that the advance was made pursuant to the Loan Agreement. Several matters, including concessions made by Omar under cross-examination, mean that the possibility of an oral agreement between Omar and Navid is sufficiently substantial to provide a credible, alternative explanation for the $450,000 advance so that Omar has not discharged his burden of proof on this issue.

Mr M Cleary of Counsel appeared for the plaintiffs. Mr D Allen of Counsel appeared for the defendants.

The relief sought by Omar at trial was set out in Amended Points of Relief filed on 18 March 2018:

By the end of the hearing the issues had been further refined:

In closing submissions Mr Cleary identified seven issues for the Court’s determination:

Mr Allen met these issues with two points. First, he submitted that the GRUT had never been constituted. Second, insofar as the Court accepted that Omar had advanced $450,000 in cash, Mr Allen contended Omar had not advanced the funds to Sepideh pursuant to the Loan Agreement, but rather had provided the cash to Navid pursuant to a separate, oral agreement between he (Omar) and Navid.

The Court will determine the case by reference to the issues as presented by the parties in their closing submissions. In doing so, I should also note that there was no dispute that large amounts of cash passed between Omar and Navid, including in relation to the purchase of luxury cars. The Court accepts Omar recorded each cash loan he made, usually in a diary or otherwise in a note (such as on his mobile phone). These records were brief notations, but would typically set out details of the date of the loan, the borrower and the loan amount. However, the case both as pleaded and presented does not require the Court to arrive at any reconciliation or accounting of those transactions. The only cash advances in issue were those said to have been made by Omar on 17 October 2016, totalling $450,000 towards the purchase of the Property.

Nearly all factual matters were put in issue between the parties. The respective credit of Omar and the Mirakis was seriously challenged by the other.

However, in what follows attention has only been given to those matters which the Court considers dispositive. It is neither practical nor necessary to set out in detail every competing factual dispute raised. Where any reference is made to findings on contentious matters, they are cross-referenced to that part of the judgment where reasons for the finding are given. To the extent that any other facts set out below were not agreed by the parties, I am satisfied on the balance of probabilities that they could not be sensibly disputed.

These proceedings concern the purchase of the Property. To understand everything that follows, and with so much in dispute, it is convenient to begin with the incontrovertible documentary record about that transaction itself.

The contract for sale of the Property was dated 18 August 2016 and was in the standard NSW form for the sale and purchase of land 2016 edition (the “Sales Contract”). The vendor was NLM Holdings Pty Limited (“NLM”). NLM’s agent was listed as “Coutts”. The purchaser was described as “Sepideh Miraki” simpliciter. Her solicitor was recorded as “Noah” of Conveyancing Plus Legal. There was no dispute this referred to a Mr Noah Alkhair, the solicitor acting on behalf of the Mirakis on the conveyance of the Property.

The Sales Contract set out the purchase price of $1,700,000 (“Purchase Price”), being a deposit of $170,000 (“Deposit”) and the balance of $1,530,000. Completion was specified to occur on 30 September 2016.

While special condition 45 of the Sales Contract disclosed that NLM was entering into the contract in its capacity as trustee of the Molnar Unit Trust, there was nothing in the Sales Contract to suggest that Sepideh was purchasing the Property in any capacity other than in her own right.

The Deposit was paid with funds from the bank account of Barton Contractors Australia Pty Limited (“Barton”), a company of which Sepideh was the sole director and shareholder. This conclusion arises from a Commonwealth Bank of Australia (“CBA”) money transfer form in evidence (curiously an international money transfer) dated 12 August 2016 recording the transfer of $170,000 from Barton to Coutts Real Estate Sales Trust Account. A corresponding debit in that amount (plus a $30 bank fee) on 12 August 2016 appeared in Barton’s CBA bank statement, also in evidence.

Omar contended he had provided the funds for the Deposit by means of forgiveness of a cash debt owed to him by Navid and by provision of additional cash. This contention falls within those matters that I have referred to in paragraph [15] above as not ultimately being something which the Court was required to determine.

Settlement of the purchase in fact took place on 18 October 2016. On 17 October 2016, Sepideh’s solicitor, Mr Alkhair, wrote to her (copying Navid and Omar) confirming (emphasis in original):

The document attached to Mr Alkhair’s email, “Cheque direction for settlement.pdf”, confirmed that on settlement ANZ would be providing $989,519.70 and that the balance of the Purchase Price she would need to provide to him was $642,535.18.

In evidence were two bank cheques in favour of NLM totalling the $642,535.18 requested by Mr Alkhair, both dated 17 October 2016: one drawn on the CBA for $502,535.18 (the “CBA Cheque”) and the other drawn on the ANZ Bank (“ANZ”) for $140,000 (the “ANZ Cheque”). Both of these banks had branches in the Cherrybrook Shopping Centre. By reason of the evidence referred to in the following paragraphs, the Court finds that the CBA Cheque was paid for with funds from Barton’s CBA “Business Transaction Account” and the ANZ Cheque was paid for with funds from Sepideh’s personal ANZ “Progress Saver Account”.

In relation to the CBA Cheque, there was a CBA deposit receipt for Barton’s CBA account from the Cherrybrook Shopping Centre branch timed at 3.15pm on 17 October 2016 for $290,000, with an available balance thereafter of $507,053.43.

As noted above in paragraph [22], the bank statement for Barton’s CBA account was also in evidence. It showed that as at 11 October 2016 the account was overdrawn. This was regularised by two deposits on 12 October 2016: $1,000 described as “Loan to BCA” (which I infer to mean Barton) and a deposit of $16,800 from “Iconic Constructions Australia (NSW” (sic). There was no evidence before me of a company with that name (not to be confused with the second defendant, Iconic Constructions), but nothing turns on this. These deposits left a balance of $16,553.43.

On 17 October 2017 two further deposits to Barton’s CBA account are recorded: a cash deposit of $290,000 (which was the deposit referred to in paragraph [27] above) and a deposit of $200,000 described as “Impero Loan” from “Impero Pacific G” (I infer “Group”). There was then a withdrawal on the same day of $502,550.18 which the Court has no doubt was used to purchase the CBA Cheque, inclusive of a $15 bank cheque fee charged by the CBA.

In relation to the ANZ Cheque, there was in evidence an ANZ withdrawal receipt from the Cherrybrook Shopping Centre branch timed at 3.27pm on 17 October 2016 for $140,010 and showing a balance remaining of $11,735.65. The account from which this amount was withdrawn was the ANZ “Progress Saver Account” of Sepideh (the receipt includes the account number, which matches with other correspondence in evidence from ANZ to Sepideh, showing the account to have been in her name).

There is then also in evidence an ANZ bank cheque receipt from the same Cherrybrook branch timed at 3.30pm on 17 October 2016, recording a bank cheque having been purchased by Navid Ardestani for $140,000 in favour of NLM. There was a bank statement in evidence for Sepideh’s ANZ account which shows for 17 October 2016 an initial balance of $11,745.65, the deposit of $140,000 and the withdrawal of $140,010 (I infer the difference of $10 is the bank cheque fee charged by ANZ).

The case as it was argued at hearing became about Omar’s claim that he had given $450,000 in cash to Navid which had been used to fund the purchase of the CBA Cheque and the ANZ Cheque.

Around the time Omar and Navid met in 2014, the Mirakis operated a painting and construction business through two companies, Barton and Iconic Constructions. Although Sepideh was recorded as the sole director and secretary of both companies (at that time), it was apparent that Navid conducted the companies’ day-to-day affairs. Navid operated their business from an office unit located in an industrial business park at X/XX Gladstone Road, Castle Hill (the “Miraki Office Unit”). The Miraki Office Unit had been purchased in Sepideh’s name some time in 2014.

Omar had set up a labour-hire business which came to be operated by Iconic Group Australia Pty Ltd (“Iconic Group”), a company registered in October 2015. He was (and remains) Iconic Group’s sole director, secretary and shareholder. Although the business was initially conducted from Omar’s residence in Carlingford, in or around June 2015 Omar accepted an invitation from Navid to move Iconic Group’s operations to the Miraki Office Unit.

Notwithstanding the close relationship formed between Omar and Navid over a relatively short period of time, Omar and Sepideh had limited contact with each other. Navid’s dealings with Omar were a point of conflict with Sepideh and Sepideh made clear more than once in her evidence that she did not look favourably on the friendship.

In or around early June 2016, Omar became aware that the Property was listed for sale. This new office space was on the other side of the same industrial business park in which the Miraki Office Unit was located and was significantly larger in size. It was a two-storey building with 530 square metres of internal space, including both office and warehouse space.

Omar introduced Navid to the Property as a larger space from which they could operate their respective businesses.

At some time in early July 2016, Omar and Navid inspected the Property. On this occasion or shortly thereafter, the property’s sales agent, Mr Ray Mayer of Coutts Real Estate, told them the Purchase Price was $1,700,000. Following the inspection, on 18 July 2016 Mr Mayer sent two emails to Omar, the first attaching a floor plan of the Property and the second a brochure setting out more detail on the office space. The Mirakis were not included on this correspondence, which is consistent with the initial contact in relation to the Property having been made with Mr Mayer by Omar.

Omar and Navid subsequently began serious discussions regarding their potential purchase of the Property. So much is evident from an email sent by Mr Mayer to Omar on 25 July 2016 requesting “details for the [sales] contract”, including “Purchaser / ABN / Solicitors (sic) Details” and requesting a holding deposit of $2,000. Again, the Mirakis were not included on this correspondence. However, their (or at least Navid’s) involvement was obviously understood by the vendor, who on 28 July 2016 sent an email to Mr Mayer requiring “further information from Navid and Omar relating to the Lease Agreement documents”. Around this time it had become apparent the parties would need to enter into a short-term leasing agreement in order to facilitate the purchase of the Property.

The Court accepts that by early August 2016 a decision had been made by Omar and the Mirakis to purchase the Property for the Purchase Price of $1,700,000. On 9 August 2016, the vendor of the Property, Mr Molnar, emailed Mr Mayer (emphasis in original):

Mr Mayer forwarded this email to Omar on 9 August 2016 shortly after its receipt from Mr Molnar, with Omar in turn forwarding the email to Navid later that evening. Omar and Navid were clearly working together to purchase the Property.

The Court accepts (and neither party challenged) that at some point, the initial dates for contract exchange and settlement of the Property set out above were pushed back to 18 August and 18 October 2016 respectively.

It was common ground that Omar and Navid had many discussions as to how they would finance and structure the purchase of the Property, as well as to how they would subsequently manage the office space.

The parties accepted that Omar and Navid talked about purchasing the Property in partnership together and in equal shares. Mr Cleary referred to this discussion during the hearing as the “50/50 Conversation”. In his affidavit sworn 12 February 2019, Omar said that in or around August 2016 he and Navid had a conversation to the following effect:

By reason of the email set out in paragraph [63] below and special condition 1.b to the Loan Agreement (see paragraph [75] below), and in accordance with the Court’s findings as to credit (see paragraphs [111] to [147] below), the Court finds that Omar and the Mirakis agreed upon this “50/50” arrangement. The Court finds that Omar and the Mirakis agreed to contribute $400,000 each (or $800,000 in total) towards the Purchase Price, with the balance to be obtained by way of finance from the bank (as to which see paragraphs [60] to [62] below). As set out in paragraph [15] above, the case as both pleaded and presented does not require the Court to arrive at any reconciliation or accounting of the $230,000 or funds Omar alleges he provided for the Deposit.

The parties also agreed that incidental to the “50/50 Conversation” was a discussion that the Property be purchased and held through a trust. Again, in his affidavit sworn 12 February 2019, Omar contended that as part of the conversation set out at paragraph [44] above, words to the following effect were said:

Although a key issue to be resolved in the case at bar was whether this is what in fact legally transpired, there can be no dispute that the parties at least initially committed to, and took steps towards effecting, the trust arrangement.

By reason of the matters set out in paragraphs [63] to [65] below, the Court is further satisfied the parties agreed that the Property would initially be held in the name of Sepideh as trustee of the newly created trust, to be replaced with a corporate trustee at a later point.

As I have already set out in paragraphs [22] and [23] above, exchange of the Sales Contract took place on 18 August 2016. The Sales Contract identified the “purchaser” of the Property as “Sepideh Miraki”, with the contact address provided being that of the Mirakis’ residential home in West Pennant Hills (the “Miraki Residence”).

The Deposit was also paid on exchange of the Sales Contract. As set out in paragraph [23] above, there was no dispute that the Deposit was paid on the day from the bank account of the Mirakis’ business, Barton. However, as set out in paragraph [15], as the case was ultimately presented it is unnecessary for the Court to resolve the question of who in fact financed the Deposit.

In accordance with the parties’ decision to purchase and manage the Property through a trust (see paragraph [48] above), on 6 September 2016 a trust deed (the “GRUT Deed”) (described as a Fixed Unit Trust (NSW Land Tax) Deed) was executed which set out the terms for a newly created fixed unit trust, being the GRUT. The GRUT Deed included:

Before turning to the material provisions of the GRUT Deed, it is convenient to make four brief observations in relation to the parties to that deed.

First, there was no dispute that under the GRUT Deed, Omar and the Mirakis were each to hold their half share of the Property through their respective nominee companies, El-Cheikh Group and Iconic Constructions. Second, El-Cheikh Group was incorporated on 6 September 2016 for the purpose of the purchase of the Property, with Omar’s brother, Walid El-Cheikh, as its sole director, secretary and shareholder. Third, Gladstone Rd Enterprises was also incorporated on 6 September 2016 with Sepideh as its sole director, secretary and shareholder. Finally, the Court is satisfied that Gladstone Rd Enterprises was incorporated in accordance with Omar and the Mirakis’ intention that it would take over the role of (corporate) trustee of the GRUT from Sepideh (see paragraph [48] above).

The GRUT Deed included:

The GRUT Deed was in typescript, except for the “Date of Deed” inserted by hand in Schedule 1 and reproduced in italics above.

As set out in Schedule 1, Iconic Constructions and El-Cheikh Group were the only two initial subscribers to the GRUT, both entitled to 50 units valued at $1 per unit (being a total initial subscription value of $50). However, there was no evidence that either has paid the subscription fee. The address provided for Gladstone Rd Enterprises was that of the Miraki Residence.

There was no dispute that the GRUT Deed had been executed by Sepideh (on behalf of Iconic Constructions and Gladstone Rd Enterprises) and Walid (on behalf of El-Cheikh Group). The Court accepts the submission put by the plaintiffs that the GRUT Deed was validly executed by the parties to it on or around 6 September 2016, being the date it bears.

On 22 September 2016 Omar’s accountant, Mr Mark Bartolo, emailed Sepideh’s solicitor, Mr Alkhair, saying, inter alia:

There is no evidence about whether any of this was sought to be done. In any event, there is no doubt that upon settlement on 18 October 2016 the Property was transferred into the name of Sepideh.

An offer from ANZ addressed to Sepideh dated 11 October 2016 was received for a business loan (the “ANZ Loan”). Navid forwarded a copy of the ANZ Loan by email to Omar later on 11 October 2016. This is consistent with the parties still being in agreement to fund the Purchase Price through a final combination of personal savings and finance (see paragraph [45] above).

The ANZ Loan had a total facility limit of $1,000,000, was in Sepideh’s name, was provided for the purpose of “[p]urchase of property for commercial use” and was to be secured by a mortgage over the Property and a guarantee from Barton. There was no dispute that the “property purchase” referred to was the purchase of the Property.

Sepideh subsequently signed and returned the “Acceptance and Consent” to the ANZ Loan some time on 13 October 2016. She signed both in her own right and as the director and secretary of Barton.

At 2.09pm on 11 October 2016, Mr Bartolo circulated an email providing an update on outstanding settlement matters. The email was sent to Omar, Mr Joseph Di Mauro (Omar’s solicitor) and Mr Alkhair. It said (emphasis added):

Shortly after receipt of the above email, at 2.22pm Mr Di Mauro sent the following reply to Mr Bartolo, Mr Alkhair and Omar:

Early in the morning of 12 October 2016, Mr Alkhair sent an email to Omar and Mr Bartolo, copied to Mr Di Mauro and Sepideh. It said:

Given the identical subject line, Mr Alkhair’s reference to “various correspondences” and that the email was stated as being provided to “confirm” Sepideh was “agreeable” to the settlement matters listed, the Court infers this email was sent in response to Mr Di Mauro’s email of 11 October 2016 (see paragraph [64] above).

Sepideh’s evidence was that the first time she was made aware of the above email and, more importantly, its contents was in the course of the current proceedings. In accordance with the Court’s findings on Sepideh’s reliability as a witness (see paragraphs [125] to [129] below), the Court does not accept this evidence. In any event, the matters to which Mr Alkhair referred were subsequently discussed by the parties in person at a meeting held later that evening at the Miraki Residence (the “12 October Meeting”). Sepideh did not challenge that the 12 October Meeting took place.

At 12.41pm on 12 October 2016 Navid forwarded by email to Omar a request from a finance broker in connection with the ANZ Loan which required “evidence of funds to complete”. This is again consistent with the joint nature of Omar and Navid’s enterprise to purchase the Property.

At the 12 October Meeting, Omar, the Mirakis, Mr Alkhair and another of Omar’s brothers, Khalid El-Cheikh, met to finalise and execute a number of documents required for the upcoming settlement of the purchase of the Property.

The documents executed by the parties at the 12 October Meeting included:

Pausing here, it is convenient to note the Court does not accept Sepideh’s contention that the documents detailed in the preceding paragraph were “foisted” upon her by the other parties present at the 12 October Meeting, or that she did not understand the effect of what she was signing. No issue of unconscionable conduct or non est factum was pleaded by Sepideh in her defence. Consistently with the Court’s findings on Sepideh’s credit (particularly those matters set out in paragraph [140] below), I am satisfied, and certainly on the balance of probabilities, that Sepideh understood the general effect of the impact or effect of the documents she signed.

I will now address each of these documents in turn.

By reference to the emails of 11 and 12 October 2016 set out in paragraphs [63] to [65] above, the Court accepts Omar’s evidence that at some point prior to Mr Alkhair’s email circulated on the morning of 12 October 2016, Navid had informed Omar that he (Navid) and Sepideh were having difficulties raising sufficient funds to pay their 50% contribution, or $400,000, towards the Purchase Price.

In order to ensure the upcoming settlement went ahead, Omar and the Mirakis agreed to enter into the Loan Agreement, pursuant to which Omar would lend Sepideh funds to cover their contribution to the Purchase Price. Although undated, the parties accepted (as does the Court) that the Loan Agreement was executed by both Sepideh and Omar at the 12 October Meeting, with both initialling each page of the document.

The terms of the Loan Agreement included:

The Loan Agreement was in typescript, except for the “Amount of Loan” set out in the “Schedule”, which was amended by hand and reproduced in italics above. This amendment increased the amount from $850,000 to $900,000, with the change initialled by Sepideh. It is not necessary for the Court to come to any view about the reason for the increase.

The Loan Agreement was signed by Sepideh and witnessed by Mr Alkhair. There is no evidence to suggest that the joint venture agreement referred to in the Special Conditions was ever brought into existence.

As security for the monies advanced under the Loan Agreement, Sepideh granted a mortgage in favour of Omar for all her “estate and interest” in the Property (the “Mortgage”).

A standard form mortgage was executed by Omar and Sepideh (as mortgagee and mortgagor, respectively), witnessed by Mr Alkhair and Omar’s brother, Khalid. In evidence before the Court were a number of additional documents concerning the Mortgage, including:

Also in evidence was a document titled “Offer”, the terms of which included:

As before, the Offer was in typescript, except for the “Principal Sum” amount which was again amended by hand from $850,000 to $900,000 and reproduced in italics above. The change was initialled by Sepideh.

It was accepted by the parties that although the Mortgage was executed and all documents in paragraph [76] above signed at the 12 October Meeting, the Mortgage was never lodged for registration. This is unsurprising, given the ANZ Loan was secured by a first mortgage over the Property.

As further security for the monies to be advanced under the Loan Agreement, the parties also completed a caveat to be lodged against the Property in favour of Omar (the “Caveat”). The Caveat was registered on 10 November 2016.

The Caveat stated that Omar’s “equitable & legal interest” in the Property was claimed by virtue of the following stated facts:

Again, the amount of $850,000 had been crossed-out and amended by hand to $900,000, with the change initialled by Sepideh. No instrument (for example, the Loan Agreement) is referred to as being relied on in the Caveat. Further, as will be apparent in the factual findings below at paragraphs [92] and [93], Omar did not advance any “loan funds” as such until 17 October 2016.

The Caveat was signed by Omar, witnessed by Mr Alkhair and dated 12 October 2016. Sepideh signed the consent to the Caveat as the (future) registered proprietor of the Property.

As set out in paragraph [51] above, on or around 6 September 2016 the parties had executed the GRUT Deed. The GRUT UHA now purported to set out the terms upon which the business of the GRUT was to be conducted, and the obligations which attached to the unitholders’ (being El-Cheikh Group and Iconic Constructions) respective holdings in the unit trust.

The terms of the GRUT UHA included:

Although the GRUT UHA was undated, there was no dispute it was signed by Sepideh at the 12 October Meeting in two places: in her own right as the “trustee” described in the document and on behalf of Iconic Constructions. Walid, however, was not present at the 12 October 2016 Meeting and as such did not sign the GRUT UHA on behalf of El-Cheikh Group until a later date. So much is evident from the email correspondence circulated by Mr Alkhair to Omar, Mr Bartolo and Mr Di Mauro the next day, on 13 October 2016:

Although the evidence before the Court does not disclose the exact date Walid signed the GRUT UHA, neither party challenged (and the Court accepts) that at some point before settlement of the purchase of the Property, the GRUT UHA had been validly executed by all the parties to it.

Mr Alkhair sent an email to Sepideh at 2.28pm on 17 October 2016, copied to Navid and Omar, confirming details for the upcoming settlement. Attached to the email was a cheque direction, providing that the balance of the Purchase Price to be provided at settlement was $642,535.18. A copy of that email is set out in paragraph [24] above.

Shortly after Mr Alkhair’s email was circulated, Omar and Navid met outside the Cherrybrook branch of the CBA. For the reasons set out in paragraph [164] below, the Court accepts that Omar had with him a bag which contained $450,000 in cash that he gave to Navid.

As set out in paragraphs [26] to [31] above, the Court is satisfied that Navid applied $430,000 of those funds towards purchasing the CBA Cheque and the ANZ Cheque.

It is convenient to pause and make one observation in relation to the ANZ Cheque. It was Omar’s evidence that when he and Navid arrived at the Cherrybrook branch of the ANZ, Omar gave Navid the remaining $160,000 cash. However, on this occasion and unlike what occurred at the CBA branch, Omar did not accompany Navid to the ANZ bank teller.

As set out in paragraph [31] above, the bank statement in evidence discloses that only $140,000 was then deposited by Navid into the ANZ “Progress Saver Account” of Sepideh. Mr Allen contended the $20,000 discrepancy between Omar’s evidence and the documentary record supported Sepideh’s claim that no money was ever advanced by Omar pursuant to the Loan Agreement. While the Court accepts only a deposit of $140,000 was made, consistent with the Court’s respective credit findings on Omar and the Mirakis (see paragraphs [137] and following below), the Court is nevertheless satisfied, on the balance of probabilities, that Omar did in fact give Navid a total of $160,000 cash at the ANZ bank. However, only $140,000 was applied toward the Purchase Price.

The CBA Cheque and ANZ Cheque together provided the $642,535.18 Mr Alkhair had instructed was required for settlement (see paragraph [24] above).

After the two bank cheques were drawn, Omar and Navid went to a nearby Gloria Jeans café to have a cup of coffee and celebrate the fact they had the settlement funds. On this occasion, Omar took a photograph of Navid with the two bank cheques sitting on the table in front to him. There was a dispute in the evidence as to what happened next, but the Court is satisfied that one way or the other the bank cheques were provided to Mr Alkhair that evening.

Settlement of the purchase of the Property occurred on 18 October 2016.

Following settlement of the Property, Omar and the Mirakis moved their respective businesses into the Property.

Various alterations and renovations to the office space were subsequently undertaken, such as the removal of old fittings and installation of new signage, blinds and a security system. A company was also retained to provide regular cleaning services. There was a dispute in the evidence as to what works were in fact carried out and who paid for them, however as a result of the plaintiffs no longer pressing Orders 11 and 12 of the Amended Points of Claim (see paragraph [12] above), nothing ultimately turns on this.

Attempts were also made to finalise a number of outstanding matters regarding the finance, structure and management of the Property.

Mr Bartolo renewed efforts to have Gladstone Rd Enterprises assume the role of trustee of the GRUT, purportedly taking over from Sepideh. Despite a number of emails between Mr Bartolo, Mr Di Mauro, Omar and Mr Alkhair on the matter from early November 2016, the change of trustee never happened.

On 8 November 2016, the Caveat signed at the 12 October Meeting (see paragraphs [83] to [86] above) was lodged against the Property by Mr Alkhair.

Attempts were also made by Mr Alkhair to have the GRUT UHA lodged and stamped by the NSW Government Office of State Revenue (“OSR”). However, a requisition notice issued by the Chief Commissioner of State Revenue on 23 November 2016 stated the GRUT UHA was not a declaration of trust (and therefore not liable to duty), and requested the actual declaration of trust be provided to the OSR. There is no evidence as to whether this was ever done.

From on or around February 2017, Omar began to seek repayment of the $450,000 which he said had been advanced to the Mirakis under the Loan Agreement. The Court accepts that, at this point, no repayments or interest payments had been made by the Mirakis on the funds provided by Omar on 17 October 2016.

There can be no dispute on the evidence that what started off as small arguments between Omar and Navid regarding monies owed became a significant source of tension between the two. It was this conflict, together with the emerging dispute as to whether the Property was held by Sepideh in her personal capacity or as trustee for the GRUT, that triggered the eventual breakdown in relations between the parties.

Of some real significance to the present dispute was this text message from Navid to Omar on 21 March 2017 as the latter had been pressing for resolution of the issues between them: “+ I’m paying you $50K on top of your $450K that you put in settlement for me”. This is an admission against interest by Navid which strongly corroborates Omar’s evidence that he (Omar) provided the $450,000 in cash on 17 October 2016.

On 13 April 2017 the Mirakis locked Omar out of the Property. Sepideh subsequently served a lapsing notice in relation to the Caveat. The Caveat has been extended pending determination of these proceedings.

The plaintiffs commenced these proceedings on 24 May 2017 by summons.

The Property remains registered in Sepideh’s name.

This is the first of the issues identified by Mr Cleary (see paragraph [13] above).

The case at bar involves conflicting versions of events on almost every fact in issue. Given the breakdown in relations between the parties, it was not surprising there was little on which they agreed. However, given the lack of contemporaneous documentation on certain critical issues and what frequently became a “he-said-she-said” explanation of events, the credit of the protagonists became a central issue.

I considered the principles applicable to findings of credit in Maria Saravinovksa v Krste (Chris) Saravinovski; Chris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 964 at [464] – [473]. Those ten principles may be briefly summarised as follows.

First, at the forefront of the Court’s approach has been the oft cited statement of McLelland CJ in Equity in Watson v Foxman (1995) 49 NSWLR 315 at 318-319:

Second, the concept of actual persuasion was elucidated by Emmett J (as his Honour then was) in Warner v Hung, in the matter of Bellpac Pty Ltd (Receivers and Managers appointed) (In liquidation) (No 2) (2011) 297 ALR 56; [2011] FCA 1123:

Third, there is the statutory successor of the rule in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 in s 140 of the Evidence Act 1995 (NSW):

Fourth, evidence is to be preferred which is inherently probable in the circumstances or is given by a witness against their interest.

Fifth, evidence of independent witnesses, i.e. persons who have no reason to be partisan, may be decisive in resolving the conflicting evidence of interested parties.

Sixth, where a witness has been found to be lying about one thing that does not automatically mean that they are to be disbelieved about everything else. The Court is not bound to accept or reject a witness’ evidence in its entirety. This approach was expressed by O’Loughlin J in Cubillo v Commonwealth of Australia (No 2) (2000) 103 FCR 1; [2000] FCA 1084:

Seventh, and closely related to the preceding point, in Sangha v Baxter [2009] NSWCA 78 Basten JA (with whom Handley AJA agreed) cautioned against global credibility findings:

Eighth, disbelieving a witness that “X” was the case does not mean that “not X” has been proven. The Court respectfully adopts what fell from Gibbs J (as his Honour then was) in Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640 at 694; [1975] HCA 63 (citations inserted):

Ninth, the way evidence should be treated where that evidence is not the subject of cross-examination when cross-examination was required, was considered by Hallen J in Fulton v Fulton [2014] NSWSC 619:

Tenth, the Court can only do the best it can on the evidence which it has. Some issues may need not be resolved or should not be resolved. It may be that they cannot be resolved given the nature of the evidence which the parties have adduced. The evidence in the case at bar has many similarities to the family dispute considered by Robb J in Aytul Ak-Tankiz v Ferat Ak & Ramazan Ak [2014] NSWSC 1044. Of the evidence in that case, his Honour said:

On behalf of the plaintiffs, Mr Cleary contended the Court should not accept either Sepideh or Navid as reliable witnesses and, accordingly, should not accept their recollection of events. A number of submissions were made by Mr Cleary in relation to each of Sepideh and Navid, which can be summarised as follows.

First, Mr Cleary made a number of submissions to the effect that Sepideh put certain aspects of her evidence in a deliberately equivocal or evasive manner. Two examples were advanced:

Mr Cleary contended that in the face of answers such as the above, the Court ought to be sceptical about the reliability of evidence Sepideh gave in the witness box.

Second, it was submitted that there were a number of inconsistencies in critical parts of Sepideh’s evidence that the Court should not accept. In particular, Mr Cleary referred to an exchange between the Court and Sepideh during cross-examination, in which Sepideh conceded that when signing the documents at the 12 October Meeting, she knew Omar and Navid were intending to buy the Property together (T127.31-37):

This was to be contrasted with both Sepideh’s affidavit evidence in which she deposed to buying the Property in her personal capacity, as well as her previous evidence in cross-examination where she maintained she was buying the property for herself (T119.48-50):

Mr Clearly emphasised that the inconsistency in Sepideh’s evidentiary position was a further reason why the Court would not accept her as a truthful witness.

Mr Cleary contended there were a number of reasons why the Court would also not find the evidence of Navid to be reliable. These can be summarised as follows.

First, on many occasions during cross-examination Navid would not answer the question he was asked. Instead, he gave irrelevant or non-responsive answers. On many occasions this required the Court to intervene and direct Navid to answer the question put to him.

Second, and proceeding from the above, there were numerous times in cross-examination where the evidence Navid gave could not be accepted as a serious attempt to answer the questions put to him properly or truthfully. Mr Cleary contended that Navid gave the Court what could only be considered “nonsensical” answers and gave a number of examples in support, including:

Mr Cleary’s submission was that the cumulative effect of the above matters was that the Court should be satisfied both Sepideh and Navid’s recollection of events could not be trusted. This was to be contrasted with Omar who, Mr Cleary submitted, gave credible and truthful oral evidence during the hearing. As such, to the extent the Mirakis evidence was in conflict with that of Omar’s or the documentary evidence, Mr Cleary contended the Court would accept that evidence over the Mirakis’.

Mr Allen emphasised on a number of occasions in cross-examination that Omar was only able to provide estimates in the answers he provided to the Court or was “guessing” his evidence in the witness box. For example, when challenged by Mr Allen on his evidence that Navid had paid “[m]aybe $100,000 something like that” in relation to the purchase of a Porsche, Omar responded “there was a lot of transactions between me and Mr Miraki, so it’s, it’s hard to remember every single one” (T62.6-12).

Mr Allen also drew attention to inconsistencies in Omar’s evidence during cross-examination, which were said to be misleading in the impression they gave the Court. For example, Omar had maintained in his affidavit evidence and initially in cross-examination (T68.38-40) that he had given Navid $170,000 in cash to pay the Deposit. This was to be contrasted with Omar’s later clarification that he had not handed Navid $170,000 in cash on the one particular occasion, but that $100,000 of this was purportedly by means of forgiveness of a debt owed to him by Navid from a previous loan (T69.43-48).

The inference to be drawn from such lines of inquiry in Mr Allen’s cross-examination was that it was Omar whose recollection of events could not be trusted, and whose evidence should therefore not be preferred over the Mirakis.

There can be no doubt that there were inconsistencies in the evidence of Omar, Sepideh and Navid. However, the impression the Court has formed of Omar was that he was, on the whole, a reliable witness whose evidence was to be preferred over that of the Mirakis, where that evidence was in conflict.

Having observed Omar in the witness box, I am satisfied that he appeared to be doing his best to assist the Court. In contrast to Navid (see paragraph [142] and following below), Omar was measured, articulate in his recollection of events and candid when he did not know the answer to a question put to him. I accept Mr Cleary’s submission that most of Omar’s evidence was not seriously challenged by the defendants. Further, as will be apparent in the Court’s reasons below on contentious findings, Omar’s evidence was generally consistent with the documentary record before the Court.

Turning next to Sepideh, I accept Mr Cleary’s submissions (see paragraph [125] and following above) as to why her evidence could not be accepted as reliable unless inherently likely, against interest or supported by contemporaneous documentary evidence. I do not accept her attempts to minimise her role in or her understanding of what was happening, for example such as her evidence with respect to the events of the 12 October Meeting, given in cross-examination included (T121.17-28, 123.22-29):

Even accepting that Navid was the main driver of the transaction with Omar, I do not accept she was completely ignorant of the matters the subject of these proceedings. She struck me as an intelligent and strong individual. This is particularly apparent when taking into consideration Sepideh’s own affidavit evidence where she describes her occupation interchangeably as “company director” and “director”, her oral evidence that her main occupation includes being a “property investor” (T.96:8-9) and both her current and historical positions as a director and shareholder of several companies. Against this background, Sepideh’s repeated assertions that she didn’t know or understand what was going on regarding the purchase of the Property and the effect of associated legal documents cannot sensibly be maintained. Accordingly, I accept Mr Cleary’s submission that the Court ought to treat the reliability of Sepideh’s evidence with caution in the absence of corroboration by contemporaneous documents.

Second, I find that Sepideh was both deliberately evasive and equivocal in the way she presented her evidence and was motivated by a strong dislike of Omar. At no time did she give the impression that she was trying to recall the truth of what occurred as opposed to strenuously maintaining her version of events in her own and Navid’s interest. She made no attempt to conceal her animosity towards or contempt for Omar and I am satisfied that this coloured her evidence, as seen in the example at paragraph [125(2)] above as well as the following exchange in cross-examination (T118.21-41):

Turning finally to Navid, I accept Mr Cleary’s submission that he (Navid) was a deeply unimpressive and unsatisfactory witness. The Court’s reasons for this conclusion can also be summarised in two points.

First, having observed Navid in the witness box and his demeanour during cross-examination, I was left with the impression that Navid displayed a complete unwillingness to engage with questions he perceived as adverse to his or Sepideh’s interests. Navid was equivocal in his evidence and frequently argumentative. So much is clear from the examples set out in paragraph [132] above. His demeanour and answers suggested that he treated the entire court process as something of a joke or not worthy of serious attention.

The following exchanges in cross-examination are also illustrative of the manner in which Navid typically responded to the questions put to him (T141.42-44, 171.21-37):

Navid’s responses to questions were often non-responsive, wholly irrelevant and unhelpful in determining the disputed facts in issue before the Court. I was required to intervene and tell Navid on at least 18 separate occasions to answer the question put to him by Mr Cleary, often with limited success.

Second, there were occasions where I had no doubt that Navid was willing to say anything to discredit Omar, or at the very least ensure that Omar’s version of events was obfuscated. Again, this typically involved wholly irrelevant assertions or denials from Navid as demonstrated by the following exchanges in cross-examination (T146.32-147.6, T151.13-21):

I am satisfied that Navid was making no serious effort to tell the truth and do not accept him a witness of truth. Accordingly, where there is a conflict in the evidence, I have not accepted Navid’s evidence unless it accords with the probabilities, is against interest or is supported by contemporaneous documents.

Following the findings as to credit set out above, it is convenient next to turn to the other factual and legal matters identified by Mr Cleary as being in issue.

While Mr Cleary submitted this was a matter in issue, why it should be so is not immediately obvious. Navid is not a party to the proceedings and, it follows, no relief is sought against him. Nor is it pleaded in the Amended Points of Claim that Navid was acting on behalf of Sepideh (who is a party) such that an agreement between Omar and Navid would be binding on Sepideh. However, insofar as it forms part of the background to what occurred, and for what it may be worth, the Court accepts that Omar and Navid had agreed (in the sense of a commercial understanding rather than a legally enforceable arrangement) that they would purchase the Property through a trust.

Various correspondence I have set out earlier in these reasons makes it clear they were embarked upon the purchase together. Ultimately Navid accepted in cross-examination both the “50/50 conversation” and that a trust structure would be used. As to the first, Navid’s evidence was:

As to the second, despite his attempts at obfuscation, his acceptance of what was being put to him was clear enough (T157.18-158.43):

As I have set out in paragraphs [19] to [21] above, the Sales Contract gives no indication that Sepideh was purchasing the Property other than for herself legally and beneficially. The onus to prove anything different lay on the plaintiffs. For the reasons which follow, the Court has concluded that they have not discharged that onus.

Before turning to consider this specific issue, it is convenient to record that the Court accepts Mr Allen’s submission that the GRUT was never constituted because, on the evidence, there is no trust property. There is no evidence that either El-Cheikh Group or Iconic Constructions as Subscribers paid their respective Subscription Amount to the trustee (Gladstone Road Enterprises), those amounts being the initial trust property (see the GRUT Deed set out in paragraph [54] above, especially Recital A, the definition of “Trust Fund” and the declaration of trust in clause 3).

Given the simplicity with which this could have been proved by, relevantly, El-Cheikh, the Court finds that neither of the Subscribers paid the Subscription Amount. The consequence is an application of basic trust law. As one author put it succinctly:

Furthermore, Mr Allen submitted, and the Court accepts, that there could be no resolution of the unitholders of a trust that has not been fully constituted. He relied on this proposition in J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia, LexisNexis Butterworths, Australia, 2006:

In this case there was no claim for specific performance.

It follows from the foregoing that the Court finds that neither Subscriber became a Unitholder in the GRUT pursuant to clause 4.3 of the GRUT Deed (see paragraph [54] above). Although the GRUT UHA recites that the Subscribers were Unitholders (see paragraph [88] above), because it was executed as an agreement no question of estoppel by deed arises, nor was any other form of estoppel pleaded arising from the terms of the GRUT UHA or any other conduct of the parties.

Having expressed those conclusions, the issue posed by Mr Cleary nevertheless can only be answered by consideration of the GRUT Deed. Given the way the case was pleaded and argued, the issue is not answered by the fact that Sepideh conceded that she signed the various documents at the 12 October Meeting “because [the Property] was planned to go under my name and then later transferred to corporate trust” (T126:40-41) or that she accepted that in signing “all those documents” she understood that she and Omar were buying the Property together (T128:34-36). Nor are the plaintiffs assisted even if the parties all understood that what was being proposed was that Sepideh would purchase the Property as a trustee (see Mr Alkhair’s email set out in paragraph [65] above).

The GRUT Deed provided that the trustee was Gladstone Road Enterprises and, in clause 20.2, that “Any Trustee may be removed and any Trustee may be appointed by a resolution passed by the holders of not less than 75% of the Units”. Mr Cleary submitted that Sepideh had become trustee of the GRUT by reason of the GRUT UHA in one of two ways:

The GRUT UHA appears to be an ill-fitting adaption of a precedent intended to do something else, probably a shareholders’ agreement. So much is apparent, for example, from the heading in clause 4 “management of the company” when there is no definition of “company”, and that while Sepideh is defined as “trustee” the definitions in clause 2 clearly contemplate a corporate trustee (e.g. “2(c) Board means the board of directors of the trustee” and “2(g) Director means a director of the trustee”).

The Court rejects Mr Cleary’s submissions for these reasons:

This issue invites consideration of two issues: did Omar advance $450,000 and, if he did, did he do so pursuant to the Loan Agreement? For the reasons which follow, the Court is satisfied that he did advance $450,000 but is not satisfied that he did so pursuant to the Loan Agreement.

Turning first to the issue of the advance, Mr Cleary submitted that Navid had accepted in cross-examination (T163:24) that Omar had given Navid $270,000 in cash at the CBA bank teller window. However, Navid continued to assert that he had deposited $20,000 of his own cash at the CBA and that he had deposited $140,000 of his own money at the ANZ. Mr Cleary submitted that, as a matter of credit, the Court should prefer Omar’s evidence that he had given Navid $450,000 in cash, including with the consequence that Navid had failed to deposit $20,000 of that money. Mr Allen submitted that even if the Court accepted Omar’s version of events, the money had been advanced not pursuant to the Loan Agreement but rather in accordance with an oral agreement between Omar and Navid.

By reason of the following matters taken together, the Court accepts Omar’s version of events as to what occurred at the CBA and ANZ banks on 17 October 2016:

Finally in answer to the first question, on the basis of the bank records referred to in paragraphs [26] to [31] above, the Court finds that $430,000 of the $450,000 advanced by Omar was applied to the purchase of the Property through the purchase of the bank cheques that were handed over at settlement.

The second question is whether Omar advanced the funds pursuant to the Loan Agreement. Whether something is done pursuant to an agreement requires the Court to consider the objective facts. In the ordinary case it is usually not an issue because a party enters into an agreement to pay $X and then in fact pays $X. The obvious inference from those two primary, objective facts in the ordinary case is that the payment of $X was made pursuant to the agreement.

The way in which the parties to these proceedings conducted their financial relationship means that this is not an ordinary case and the answer to this second question is not obvious.

Mr Cleary’s submissions on this point ultimately depended on the sequence of events: the execution of the Loan Agreement on 12 October 2016; that the Loan Agreement was entered into so the purchase of the Property could go ahead; Omar’s provision of the $450,000 in cash on 17 October 2016 so that the settlement could proceed; the fact that those funds (or at least $430,000 of them) were used to purchase the Property. Mr Cleary’s argument required the Court to be satisfied by reason of these matters that Omar had advanced the funds pursuant to the Loan Agreement.

At the heart of Mr Allen’s submissions on this question was the undoubtedly correct general proposition that parties may make one contract but perform another. He did not dispute that Omar and Sepideh had entered into the Loan Agreement. That agreement recorded that $900,000 was to be advanced to Sepideh and, he submitted, pursuant to clause 3.8 (see paragraph [75] above) in her capacity as a trustee (which the Court has found she was not). He contended that no loan in that amount was advanced to Sepideh at all, let alone in her capacity as trustee. Rather, what instead happened was that Omar lent money to Navid pursuant to a separate oral agreement he had made with Navid.

Mr Allen referred to the five matters in support of these submissions.

First, it was characteristic of the way Omar and Navid did business together, which they both acknowledged in their evidence. Their dealings involved on any view the passing of large amounts of cash between them.

Second, Omar had conceded in cross-examination that he had lent the $450,000 to Navid pursuant to the terms of an oral agreement between the two of them (T77:39-78:10 and T89:22-50):

Mr Allen referred particularly to Omar’s clarification in the transcript extracted in the preceding paragraph of “Ms Miraki or Mr Miraki”, and his subsequent reference to Navid, as further evidence that the funds loan agreement was in fact with Navid.

Third, Omar’s diary note was “NV – 450 – SETTLEMENT”, where there was no dispute between the parties that “NV” was an abbreviation for “Navid”. This was contemporaneous evidence that the funds had been loaned to Navid.

Fourth, Mr Allen also referred to the full text message exchange between Omar and Navid of 21 March 2017:

Fifth, he submitted that the plaintiffs’ case in relation to the $450,000 was wholly inconsistent with the terms of the pleaded Loan Agreement:

The onus to prove that the $450,000 had been advanced pursuant to the Loan Agreement rested on the plaintiffs. They have failed to discharge that onus. I have carefully considered the matters advanced by both sides of the record on this question. However, having regard to the matters advanced by Mr Allen - in particular Omar’s evidence referred to in paragraph [172] above – I am unable to reach a state of actual satisfaction that on the balance of probabilities Omar advanced the $450,000 in cash to Sepideh pursuant to the Loan Agreement.

Because Navid was not a party to the proceedings, I do not consider it either appropriate or necessary to make a finding that there was an agreement between Omar and Navid of the kind advanced by Mr Allen. It is sufficient to record that I regard the possibility of such an agreement to be sufficiently substantial to provide a credible, alternative explanation for the $450,000 advance so that the plaintiffs have not discharged their onus on this question.

The remaining matters in issue identified by Mr Cleary (see paragraph [13] above) only arise if the Court was satisfied that the $450,000 had been advanced pursuant to the Loan Agreements. As the Court has not been satisfied of that matter, those issues are no longer relevant.

There are two matters which I should record for completeness.

First, although the Court is satisfied that $430,000 of Omar’s $450,000 was applied to the purchase of the Property, no other case was advanced by the plaintiffs that would entitle Omar to relief in relation to that. In particular, I had this exchange with Mr Cleary (T180:35-44):

Second, in the course of argument I raised with Mr Cleary whether it would be open to the Court to make any relief it might otherwise grant to El-Cheikh Group in relation to the GRUT conditional on that company paying the subscription amount under the GRUT Deed. Mr Allen opposed that course, including because he submitted that would be tantamount to giving specific performance, which had neither been pleaded nor argued. I accept that submission. Nor had Gladstone Rd Enterprises been joined to the proceedings. Furthermore, while it was not the subject of argument, I have real difficulty in seeing how even if El-Cheikh Group paid the subscription amount now, it could make any difference to the outcome of these proceedings as they were ultimately argued. Whether it wishes to make that payment now for other reasons is a matter for it.

I will give the parties an opportunity to agree upon orders to give effect to these reasons. Subject to any further submissions or applications, my preliminary view is that the proceedings should be dismissed with costs and an order made for the withdrawal of the Caveat.