FEDERAL COURT OF AUSTRALIA

Amirbeaggi as trustee of the bankrupt estate of Hanna v Hanna (No 3) [2024] FCA 1171

ORDERS

THE COURT ORDERS THAT:

1.    The parties are to confer and provide to the Associate to Goodman J within 14 days:

(a)    agreed orders, giving effect to these reasons for judgment, including as to costs; or

(b)    failing such agreement, competing orders and written submissions (not exceeding five (5) pages) in support thereof.

2.    In the event that competing orders and written submissions are filed, the parties are to file any written submissions (not exceeding three (3) pages) in reply within a further 14 days, with such submissions to indicate whether the party consents to the determination of orders being made on the papers.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    The parties are to confer and provide to the Associate to Goodman J within 14 days:

(a)    agreed orders, giving effect to these reasons for judgment, including as to costs; or

(b)    failing such agreement, competing orders and written submissions (not exceeding five (5) pages) in support thereof.

2.    In the event that competing orders and written submissions are filed, the parties are to file any written submissions (not exceeding three (3) pages) in reply within a further 14 days, with such submissions to indicate whether the party consents to the determination of orders being made on the papers.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GOODMAN J

A.    INTRODUCTION

1    Mr Hendra Abdalla (Mr Abdalla) and Mr John Hanna (Mr Hanna Snr) were partners in the development of eight townhouses at a property in Hinchinbrook in New South Wales (Hinchinbrook property). Upon the registration of a strata plan for those townhouses in November 2016, Mr Hanna Snr and Mr Abdalla became the registered proprietors – as tenants in common in equal shares – of inter alia the properties identified by folio identifiers 17/SP93648 (unit 16), 18/SP93648 (unit 17), 22/SP93648 (unit 21) and 23/SP93648 (unit 22).

2    These reasons for judgment address two proceedings, which were heard together, and which arise out of dealings with those units. Those dealings occurred in a context in which on 11 July 2017, a sequestration order was made against Mr Hanna Snr and Ms Shabnam Amirbeaggi was appointed as the trustee of Mr Hanna Snr’s bankrupt estate.

3    Proceeding NSD1722/2019 was commenced by the trustee against various parties including Mr Abdalla. Following the settlement of various claims and cross-claims, the remaining claims for determination are within a cross-claim advanced by Mr Abdalla concerning the transfer of unit 16 from Mr Abdalla and Mr Hanna Snr to Jarvis J Pty Ltd and the subsequent transfer of unit 16 from Jarvis to Mr Anthony Hanna (a son of Mr Hanna Snr).

4    Proceeding NSD1285/2020 concerns unit 21 and in particular the transfer of that property from Mr Abdalla and Mr Hanna Snr to Mr Andrew Hanna (another son of Mr Hanna Snr). Following the settlement of various claims in this proceeding, the remaining claims are contained in a cross-claim advanced by Mr Abdalla against Andrew Hanna and Ms Eman Shonoda, the wife of Mr Hanna Snr and the mother of Anthony and Andrew Hanna.

5    It is unnecessary to deal with a third proceeding, NSD540/2022, which was also heard together with the above proceedings, beyond noting that it settled on the penultimate day of the hearing.

B.    FINDINGS OF FACT

6    The substantive evidence adduced before the Court comprised written evidence of the trustee, Mr Abdalla, Ms Sherine Metry (Mr Abdalla’s solicitor), Ms Melanie Holt (a forensic handwriting expert), Mr Stephen Berry (an expert property valuer), Andrew Hanna, Ms Tina He of Jarvis, Anthony Hanna and Ms Shonoda. Mr Abdalla, Ms Metry, Andrew Hanna, Ms He and Ms Shonoda were cross-examined. There was also a substantial body of documentary evidence. No evidence was adduced from Mr Hanna Snr.

7    Set out below are my findings on the salient facts based upon that evidence.

B.1    Relevant persons

8    From about 2013 to 2017, Mr Abdalla and Mr Hanna Snr were partners in a venture for the development and sale of units on the Hinchinbrook property.

9    Mr Abdalla’s participation in that venture was assisted by the provision of finance by Mr Ossama Botros and Mr Mina Kamel. At all material times Mr Abdalla was represented by solicitors, being Mr Esam Metry or Ms Sherine Metry of SKM Lawyers.

10    Mr Hanna Snr and Ms Shonoda are married and have two adult sons, Andrew and Anthony Hanna.

11    Ms Shonoda is an accountant, and has worked in accounting roles since 2010. At all relevant times she was the sole proprietor of two properties at Kellyville, Sydney (Kellyville properties). She has also been involved in property ventures with Ms Tina He. Jarvis is a company associated with Ms He.

B.2    Commencement of the Hinchinbrook property venture and the Lawson property venture

12    On 20 September 2013, Mr Hanna Snr and Mr Abdalla completed the purchase of the Hinchinbrook property for $1 million. That property was zoned in a manner which allowed the construction of eight townhouses, or units.

13    In or about January 2014, Mr Hanna Snr and Mr Abdalla obtained a joint loan from Bendigo and Adelaide Bank Ltd in the sum of approximately $2 million. The estimated cost of construction was $1.7 million. At about that time, construction works at the Hinchinbrook property commenced.

14    Around late 2014, Mr Hanna Snr and Mr Abdalla identified a property at Lawson in New South Wales (Lawson property) as suitable for development and, in early 2015, they purchased the Lawson property for $320,000.

B.3    Mr Hanna Snr’s financial issues

15    On 26 November 2015, the Australian Taxation Office (ATO) sent a letter to Mr Hanna Snr confirming that it had completed an audit for the period 1 July 2011 to 31 March 2015, the result of which was that Mr Hanna Snr was required to pay $254,925.10 in additional “activity statement liability” and penalties. Ms Shonoda read this letter and was aware that Mr Hanna Snr was indebted to the ATO for an amount exceeding $250,000 and that he was unable to pay it.

16    Following the receipt of this letter, Ms Shonoda negotiated on behalf of Mr Hanna Snr with the ATO, to little avail.

17    On 8 December 2015, two judgments of the Local Court of New South Wales were entered against Mr Hanna Snr in favour of Scahill & Co Pty Ltd in amounts of $11,173.93 and $8,475.80.

18    On 15 December 2015, a bankruptcy notice was issued against Mr Hanna Snr in relation to one of the judgment debts referred to in the previous paragraph; and on 16 December 2015, Scahill caused the bankruptcy notice to be served on Mr Hanna Snr.

19    On 15 February 2016, the ATO wrote to Mr Hanna Snr, informing him that it had started debt collection action in relation to a debt owed by him of $302,673.54.

20    In or about March 2016, the construction of the eight townhouses at the Hinchinbrook property was completed.

21    On or about 5 March 2016, the ATO issued a garnishee notice to Bendigo and Adelaide Bank Limited, a copy of which was also sent to Mr Hanna Snr, in relation to an unpaid debt of Mr Hanna Snr in the amount of $305,322.92. Ms Shonoda was unaware of this.

22    On or about 22 March 2016, the ATO issued a garnishee notice to the Commonwealth Bank of Australia, a copy of which was also sent to Mr Hanna Snr, in relation to an unpaid debt of Mr Hanna Snr in the amount of $306,618.21.

B.4    Commencement of negotiations concerning the conclusion of Hinchinbrook property venture; and the continuation of Mr Hanna Snr’s financial issues

23    On or about 23 May 2016, Mr Abdalla had a conversation with Mr Hanna Snr in which Mr Abdalla indicated: that he wished to be paid for the additional contributions he had made to the Hinchinbrook joint venture; his solicitor had advised that he and Mr Hanna Snr needed a joint venture agreement and deed of partition; and that he would have his solicitor draft it and send it to Mr Hanna Snr to sign. Mr Hanna Snr responded by saying that he would not sign an agreement because it was unnecessary in view of the relationship between them.

24    On 28 November 2016, Strata Plan 93648, which covered the Hinchinbrook property, was registered. At that time, Mr Hanna Snr and Mr Abdalla were, as tenants in common in equal shares, the registered proprietors of the lots in the Strata Plan.

25    On or about 7 December 2016, Scahill served Mr Hanna Snr with a copy of an amended creditor’s petition by email, pursuant to substituted service orders made by the then Federal Circuit Court of Australia on 29 November 2016. This creditor’s petition sought $4,973.93 in respect of a judgment debt in one Local Court proceeding and $8,475.80 in respect of a judgment debt in another Local Court proceeding. Ms Shonoda could not recall whether she was aware of the service of this petition.

26    On or about 20 December 2016, the sale of units 15, 18, 19 and 20 was completed. The sale prices were $570,000, $550,000, $560,000 and $560,000 respectively. The proceeds of these sales were used to discharge, in full, the loan debt owed by Mr Hanna Snr and Mr Abdalla to Bendigo and Adelaide Bank, with the consequence that the title to these units was unencumbered. Ms Shonoda was aware of these sales and the prices achieved.

27    This left four units – numbered 16, 17, 21 and 22 – in the names of Mr Hanna Snr and Mr Abdalla as tenants in common in equal shares.

28    On 10 January 2017, the ATO notified Mr Hanna Snr that it had allowed in part his objection dated 13 May 2016. As a result, Mr Hanna Snr’s liability to the ATO was reduced by $14,847 to $334,673.58.

29    In early 2017, or around March 2017, Mr Hanna Snr told Ms Shonoda that he and Mr Abdalla had agreed to part ways; and that each would take two of the four remaining units with Mr Abdalla to take units 17 and 22 and Andrew Hanna to take units 16 and 21. There was also discussion concerning amounts owed to Mr Abdalla and the Lawson property.

30    On 2 March 2017, Ms Shonoda sent an email from Mr Hanna Snr’s email address to Mr Metry and Mr Abdalla:

1) Please find attached the updated calculations since our last meeting, showing the amounts to be paid to [Mr Abdalla] by [Mr Hanna Snr] about $112K for Hinchinbrook and $135K for Lawson

The above amounts based on that the $18,000 yet to come from Unit 18 will be paid to [Mr Abdalla].

The above amounts exclude any legal expenses to deal with Visual Building incoming Supreme Court cases for Hinchinbrook on 16th March and Lawson’s Caveat please advise if you have paid any more expenses not mentioned in the attached spreadsheet.

2) As you’re probably aware, neither Anthony or Andrew’s loan had been approved yet I even submit an application for myself to another financier and still awaiting approval thus we don’t know which names will be on these 2 titles yet

3) The issue of providing security to cover Hedra’s loan: We are happy to submit for your consideration another 2 real estate assets which values more than Hinchinbrook.

4) Due to the agreed low contract price and transfer for Hinchinbrook, the proposed incoming loan will be 80% of that said contract and transfer

In Anthony’s case it will be even lower due to his age

5) The limited amount that can be borrowed on both Hinchinbrook requires to be enough to enhance Lawson value to be able to payoff the existing mortgagee (ANZ Bank) to clear Hedra’s name from the mortgage.

not withstanding all of the above, [Mr Abdalla’s] loan will be paid in the following terms:

1.    About $112K within 6 weeks from the date of the loan agreement

2.    $135K within 12 weeks from the date of the loan agreement

3.    Caveats with my consent as sole owner to be lodged on [the Kellyville Properties]

If the above is acceptable to you, please advise and I will provide the title details for both Kellyville properties please communicate with me as [Mr Hanna Snr] is not well

31    That email attached a document, which Ms Shonoda had prepared, which set out the expenses incurred by each of Mr Hanna Snr and Mr Abdalla with respect to the Hinchinbrook and Lawson properties. That document concluded with statements that Mr Hanna Snr owed Mr Abdalla $112,356.74 for the Hinchinbrook property and $135,000 for the Lawson property. There is no dispute as to the accuracy of these calculations.

32    On 6 March 2017, Mr Abdalla composed and sent an email to Mr Hanna Snr and Ms Shonoda, copying Mr Metry:

I DO not agree about all this

1)my money in Hinchinbrook job and the Caveats in that site.

2)I will settle next week for unit 22&17 if you want to settle for unit 16&21 with me we do agreement before for whatever name you choose for whatever unit you want.

3) the court fees for the 16 March is split between us like normal be we need to agree about it first.

4) we need to meet really urgent With Sam at his office tomorrow or day after the finish off everything I want that money today before tomorrow.

33    I infer that the reference to “Sam” is to Mr Metry.

B.5    Entry into the Deed

34    On 14 March 2017, Mr Metry sent an email to Mr Abdalla and Mr Hanna Snr attaching, inter alia:

(1)    a draft deed titled “Equitable Mortgage” bearing Mr Abdalla’s signature;

(2)    transfer forms for the transfer of units 16 and 21 to Ms Shonoda;

(3)    a transfer form for the transfer of unit 17 to Mr Botros; and

(4)    a transfer form for the transfer of unit 22 to Mr Kamel.

35    These documents had been prepared by Mr Metry upon the instructions of Mr Abdalla.

36    On 27 March 2017, Mr Metry sent an email to Mr Hanna Snr and Mr Abdalla attaching a draft deed. Ms Shonoda saw and read the draft deed after Mr Hanna Snr printed it and gave it to her.

37    On 4 April 2017, Mr Abdalla and Mr Hanna Snr met at Mr Hanna Snr’s residence. Mr Botros and Mr Kamel were also present. Ms Shonoda was present for only part of the meeting, during the signing of the draft deed.

38    At the 4 April 2017 meeting (at the latest) Mr Hanna Snr and Mr Abdalla agreed that units 17 and 22 would be owned by Mr Abdalla and units 16 and 21 would be owned by Mr Hanna Snr. Following a discussion in which Mr Hanna Snr acknowledged that Mr Abdalla was owed $247,356.74, Mr Hanna Snr signed the draft deed and handed it to Mr Abdalla, together with the original certificates of title for units 17 and 22.

39    By the end of that meeting, the draft deed had been signed by Mr Hanna Snr, Mr Abdalla and Ms Shonoda. I will refer to the signed version as the Deed.

40    The Recitals to the Deed were:

A.     [Mr Hanna Snr] and [Mr Abdalla] are the proprietors of the following properties which are held by them as tenants in common:

i.     [unit 16]

ii.     [unit 21]

iii.     [the Lawson Property]

(Collectively referred to hereinafter as “the Properties”)

B.     [Mr Hanna Snr] agrees to transfer his part interest in the properties to [Ms Shonoda] for nil consideration.

C.     [Mr Abdalla] agrees to transfer his part interest in the properties to [Ms Shonoda] for a total consideration in the sum of $247,356.74 (hereinafter referred to as “the Advance”).

D.     [Ms Shonoda] is therefore hereby indebted to [Mr Abdalla] in the sum of the Advance which is due and payable pursuant to the ‘Terms of Repayment’ set out herein.

E.     For the purposes of this Agreement, [Mr Abdalla] is also referred to as “the Mortgagee”.

F.     The Terms of Repayment of the Advance, which will be payable by the [Ms Shonoda] and Second Mortgagor are as follows:

i.     The first instalment in the sum of $112,356.74 is payable on the date six (6) weeks from the date of this agreement.

ii.     The second instalment in the sum of $135,000.00 is payable on the date twelve (12) weeks from the date of this agreement.

G.     For the purpose of securing the Advance, [Ms Shonoda] has agreed to execute this agreement and thereby consent to the form of security set out hereunder.

H.     [Ms Shonoda] hereby consents to the security in the nature of an unregistered mortgage and registered by Caveat in favour of [Mr Abdalla] over the following properties to which [Ms Shonoda] is the sole registered proprietor thereof:

[the Kellyville Properties]

(Collectively referred to hereinafter as “the Security”)

I.     [Ms Shonoda] hereby consents to the registering of Caveats over the Security by [Mr Abdalla].

J.     Upon [Mr Abdalla] banking and receiving clear funds of the second instalment and any interest if any payable, he shall hand to [Ms Shonoda] a duly executed Withdrawal of Caveat, in registrable form.

(emphasis in original)

41    Although Recital F of the Deed refers to a “Second Mortgagor”, that expression is not defined in, or otherwise referred to in the Deed.

42    The operative provisions of the Deed do not address the transfer of the “Properties” as defined. Rather, those provisions deal with the security provided by Ms Shonoda with respect to the payment of the consideration of $247,356.74.

43    Ms Shonoda’s evidence was that: (1) she does not know why SKM included recital B in the Deed; (2) as far as she was concerned, the purpose of the Deed was to ensure that she acquired Mr Abdalla’s interest in unit 16 and unit 21 of the Hinchinbrook property and his interest in the Lawson property and to provide him with security that is, the caveats over her Kellyville properties; and she did not consider the Deed to effect a transfer of any interest held by Mr Hanna Snr to her.

44    As at 4 April 2017, Ms Shonoda:

(1)    was aware of the Local Court judgments for $11,173.93 and $8,475.80 against Mr Hanna Snr;

(2)    understood that two of the four units remaining at the Hinchinbrook property (including Mr Hanna Snr’s interest therein) were to be transferred to Mr Abdalla, but did not understand that Mr Abdalla proposed to transfer those units to Mr Botros and Mr Kamel;

(3)    according to her evidence (the veracity of which is discussed further below):

(a)    “had no idea” and “no idea whatsoever” that Mr Hanna Snr may become bankrupt in 2017;

(b)    did not tell Mr Abdalla that Mr Hanna Snr may soon become bankrupt because she did not know that it was about to happen;

(4)    was aware that Mr Hanna Snr’s debt to the ATO remained unpaid, but she did not consider that the ATO would bankrupt him for that debt; and

(5)    understood that unit 16 was to be transferred to her. Ms Shonoda denied that this transfer was done to defeat Mr Hanna Snr’s creditors.

45    Ms Shonoda did not converse with Mr Abdalla alone and the conversations she had with him in the presence of Mr Hanna Snr did not extend beyond pleasantries. At no time did Ms Shonoda have any communication with Mr Abdalla or SKM regarding the draft Deed.

B.6    Events subsequent to entry into the Deed

46    On 7 April 2017, Mr Abdalla met with Mr Hanna Snr at Mr Hanna Snr’s residence with Mr Botros. Mr Abdalla handed Mr Hanna Snr a transfer form for each of unit 17 and unit 22, which Mr Hanna Snr signed. At that meeting Mr Abdalla also signed transfer forms for units 16 and 21, which were transfers to Ms Shonoda, that she witnessed. The latter two transfer forms do not appear to be in evidence. Nor does it appear that they were lodged for registration.

47    On 18 April 2017, Mr Abdalla lodged caveats over the Kellyville properties.

48    On 8 May 2017, a contract for the sale of unit 21 from Mr Hanna Snr and Mr Abdalla to Andrew Hanna was signed by Mr Hanna Snr and Mr Abdalla, and their signatures were witnessed by Ms Shonoda. The consideration recorded on the face of this contract was $299,000.

49    Andrew Hanna’s signature does not appear on the copy of the contract for sale that was signed by Mr Hanna Snr and Mr Abdalla and there does not appear to be a counterpart contract bearing Andrew Hanna’s signature in evidence. However, in cross-examination Andrew Hanna agreed with the proposition that on 8 May 2017 he signed a contract for the sale of unit 21.

50    On the same day, Andrew Hanna applied for a new home grant in relation to unit 21. That application identified Andrew Hanna as the purchaser of unit 21, that there was a contract for sale dated 8 May 2017, and that it had a dutiable value of $299,000.

51    On 10 May 2017, Andrew Hanna’s solicitor, Mr Babu of Neil Lawyers, sent an email to Mr Metry:

HANNA purchase from ABDALLA & MHANNA

Property: Unit 21, 7 Altair Place, Hinchinbrook

We refer to the above matter and to the contract exchanged over phone on the 08 May 2017 and are instructed to request the Vendor/Vendor’s letter/Statement confirming that the property in brand new which have never been sold or occupied before.

The Purchaser is eligible for the NSW New Home Grant and awaits the above letter urgently to effect stamping.

The purchaser wish to have an early settlement and your immediate attention will be highly appreciated.

Please find attached the copy of the exchanged contract.

52    The attachment to that email was the version of the contract signed by Mr Hanna Snr and Mr Abdalla (rather than a version signed by Andrew Hanna).

53    Ms Metry’s evidence was that she spoke with Mr Abdalla concerning this email and a response to it. On 10 May 2017, Ms Metry responded to Mr Babu:

We refer to the abovementioned.

We have been instructed by our client that the subject property is a new home being sold for the first time and has never previously been occupied as a residence.

Should you have any queries please do not hesitate to contact the writer.

B.7    Transfer AM426124D (unit 21)

54    On 6 June 2017, Transfer AM426124D was recorded by New South Wales Land Registry Services on the title of unit 21. It is common ground between Mr Abdalla and Andrew Hanna that, by dint of Transfer AM426124D, legal title to unit 21 was transferred from Mr Hanna Snr and Mr Abdalla to Andrew Hanna upon the basis that the consideration applicable to that transfer was $299,000.

55    Transfer AM426124D bears the signatures of:

(1)    Mr Hanna Snr and Mr Abdalla, as transferors;

(2)    Ms Shonoda as witness of the signatures of the transferors;

(3)    Andrew Hanna, as transferee; and

(4)    a further partially illegible witness’s name as witness of the transferee’s signature.

56    Transfer AM426124D also bears notations that:

(1)    stamp duty of $10 had been paid, and “New Home Grant 25/5/17”; and

(2)    it had been lodged by “Neil Lawyer”. As noted above, Mr Babu, Andrew Hanna’s lawyer, worked for Neil Lawyers.

57    Although Mr Abdalla initially denied that he had signed Transfer AM426124D, following his receipt of the expert report of Ms Holt (in which she opined that it is very likely Mr Abdalla’s signature on Transfer AM426124D is authentic), he accepted that he did sign that transfer.

58    Mr Abdalla received no payment for the transfer of unit 21.

59    On 11 July 2017, a sequestration order was made against Mr Hanna Snr and the trustee was appointed as the trustee of his bankrupt estate. At around the date of the sequestration order, Mr Hanna Snr owed debts totalling over $400,000.

60    On 13 July 2017, Mr Anthony Hanna (on behalf of Ms Shonoda) transferred $112,000 to Mr Botros (at the apparent direction of Mr Abdalla).

61    On 26 August 2017, Mr Abdalla sent Mr Hanna Snr an email which attached the front page of a contract for the sale of a property he had apparently entered into as purchaser. Mr Hanna Snr said to Ms Shonoda:

Hedra sent me this email and rang me later and said you have to now pay the monies for Lawson.

62    Mr Hanna Snr then pointed to the name on the front page of the contract and the conversation continued.

Ms Shonoda:     Who is this?

Mr Hanna Snr:     I don’t know. He wants you to pay them. I guess the deposit to purchase property from them. You have to pay them $100,000 by bank cheque to the vendor name in the contract, take it with you to the bank.

Ms Shonoda:     Okay. I will have to borrow money from Anthony again.

Mr Hanna Snr:     Just ask.

Ms Shonoda:     Okay.

63    On 30 August 2017, Ms Shonoda paid $100,000 (using funds borrowed from Anthony Hanna) to Ada Boyan, as directed by Mr Abdalla. Thus, $212,000 of the $247,356.74 consideration referred to in the Deed had been paid; and $35,356.74 remained (and remains) outstanding.

B.8    Transfer AN40118X (unit 16)

64    On or about 16 January 2018, Transfer AN40118X was recorded by New South Wales Land Registry Services against the title of unit 16. It appears to bear the signatures of:

(1)    Mr Hanna Snr and Mr Abdalla as transferors;

(2)    Ms Shonoda as witness of the transferors’ signatures;

(3)    Mr Edmond El Khoury, on behalf of Jarvis as transferee; and

(4)    a further partially illegible witness’s name as witness for the transferee’s signature.

65    Mr Abdalla’s evidence is that he did not sign Transfer AN40118X, and I will refer to his apparent signature on that transfer as the impugned signature. I accept that evidence, which is supported by Ms Holt’s expert report in which she concluded that the evidence made available to her strongly supported the hypothesis that someone other than Mr Abdalla signed his name on Transfer AN40118X.

66    Mr Abdalla also did not authorise anyone to sign Transfer AN40118X on his behalf and he did not know of its existence until after the transfer occurred. He has never approved the transfer of unit 16 to Jarvis.

67    Ms Shonoda – whose signature appears on Transfer AN40118X apparently as a witness to the impugned signature and to the signature of Mr Hanna Snr – was cross-examined about the impugned signature:

Mr Allen:    If you then go to tab 48 page 215 [i.e. Transfer AN40118X], does your signature appear on that page?

Ms Shonoda:    Yes.

Mr Allen:    When did you sign that document?

Ms Shonoda:    After John signed the documents.

Mr Allen:    Humour me. Could you tell me the date he signed that document?

Ms Shonoda:    No, can’t recall.

Mr Allen:    You do recall when you signed that document, don’t you?

Ms Shonoda:    I can’t recall the exact dates.

Mr Allen:    You recall what year you signed it in, don’t you?

Ms Shonoda:    Yes.

Mr Allen:    What year did you sign it in?

Ms Shonoda:    Maybe late 2017, earlier 2018.

Mr Allen:    You would agree that you signed that document after John had become bankrupt?

Ms Shonoda:    Correct.

Mr Allen:    And you didn’t see Hedra Abdalla sign that document, did you?

Ms Shonoda:    No.

Mr Allen:    You would agree that you see J. It reads:

I certify I am an eligible witness and that the transferor signed this dealing in my presence.

Mr Allen:    Do you see that?

Ms Shonoda:    Yes, correct.

Mr Allen:    And the case is you didn’t see Hedra sign this document?

Ms Shonoda:    No, but I saw John sign the document.

68    Counsel for Mr Abdalla submitted that this passage of transcript – together with an earlier exchange: “And you saw Hedra sign that document, did you? --- Yes” – amounts to a “confession” by Ms Shonoda that, despite having purported to witness Mr Abdalla’s signature on Transfer AN40118X, she had not in fact done so. Counsel for Mr Abdalla also submitted that this proved that:

(1)    the forgery of Mr Abdalla’s signature on Transfer AN40118X, particularly in light of the evidence of Mr Abdalla that it was not his signature, the evidence of Ms Holt that the signature was unlikely to be Mr Abdalla’s and (it was submitted) the fact that the impugned signature did not resemble Mr Abdalla’s signature; and

(2)    Ms Shonoda is dishonest, a participant in a fraud involving the placement of the impugned signature on Transfer AN40118X, and a witness whose evidence ought not be believed unless such evidence is corroborated by objective evidence or constitutes an admission against interest.

69    I do not accept these submissions, for the following reasons.

70    First, the question “And you saw Hedra sign that document, did you?” to which Ms Shonoda replied affirmatively, was not asked in relation to Transfer AN40118X for unit 16, but instead in relation to Transfer AM426124D for unit 21 (in respect of which Mr Abdalla accepts that his signature is genuine).

71    Secondly, Ms Shonoda’s evidence that she saw Mr Hanna Snr sign Transfer AN40118X is of itself insufficient to support the conclusions that Mr Abdalla’s counsel submitted should be reached with respect to the impugned signature (of Mr Abdalla). That evidence could mean that Ms Shonoda saw Mr Hanna Snr place his own signature on Transfer AN40118X; or it could mean that Ms Shonoda saw Mr Hanna Snr sign Mr Abdalla’s name on Transfer AN40118X. In my view, the first meaning is far more likely. If the second meaning was intended by the question asked, it should have been put in unambiguous terms.

72    Thirdly, the evidence does not establish whether the impugned signature was placed on Transfer AN40118X before or after Ms Shonoda signed it. It may well be the case that Ms Shonoda signed Transfer AN40118X at a time when it contained only the signature of Mr Hanna Snr as a transferor; that she saw and certified the signature of Mr Hanna Snr; and that the impugned signature was added subsequently.

73    Finally, in reaching the above conclusions I have taken into account the objective probabilities presented by the evidence, together with the gravity of the allegations made; s 140 of the Evidence Act 1995 (Cth); and the observations of Mason CJ, Brennan, Deane and Gaudron JJ in Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170 at 170 to 171.

74    Transfer AN40118X, on its face, provided for the transfer of unit 16 from Mr Hanna Snr and Mr Abdalla to Jarvis for a consideration of $650,000. Jarvis paid no consideration for the transfer, by agreement with Ms Shonoda. Ms Shonoda paid the stamp duty and registration expenses. Mr Abdalla received no payment or consideration from or on behalf of Jarvis in respect of any interest Mr Abdalla held in unit 16.

75    Unit 16 was transferred to Jarvis to assist it in obtaining finance with respect to a project in which Ms Shonoda and Ms He were partners, which ultimately did not proceed.

B.9    19 February 2018 letter of demand

76    On 19 February 2018, Mr Abdalla’s solicitor wrote to Mr Hanna Snr and Ms Shonoda in the following terms:

RE: LETTER OF·DEMAND & NOTICE OF INTENTION TO SUE

We refer to the abovementioned and that we act for [Mr Abdalla].

Deed of Equitable Mortgage·

We refer to the Deed of Equitable Mortgage dated 4 April 2017. to which you and our client are parties (the Deed).

We advise that you are in serious breach of 1hc Deed. We set out below the facts relating to your breach. If you do not remedy the same forthwith we are instructed to commence proceedings against you.

The Deed purports to be an agreement that our client and [Mr Hanna Snr] were to transfer their interests in the following properties to Ms Shonoda:

i.    [unit 16]

ii.    [unit 21]

iii.    [the Lawson Property]

Our client agreed to accept the sum of $247,356.74 in consideration for the transfer of his interests in the aforementioned properties.

The Hinchinbrook Property

We refer to Transfer AN40118X (the Transfer) relating to [unit 16].

The signature on the Transfer does not belong to our client. Our client suspects his signature has been forged by [Mr Hanna Snr]. We also note that the said signature was witnessed by Ms Shonoda.

We have advised our client to report this matter to NSW Police unless you provide a valid explanation for the above immediately.

We draw your attention to the following:

1.    Our client was not notified of, and does not consent to, the transaction referred to in the Transfer.

2.    Our client has received no consideration pursuant to the Transfer for his interest in [unit 16].

3.    The Transfer breaches Clause 6.1 (a) of the Deed be (sic) granting an interest in [unit 16] to an unrelated third party.

4.    You have breached the Deed by failing to transfer [unit 16] to Ms Shonoda, but rather to an entity referred to as Jarvis J Pty Ltd, not a party to nor mentioned in the Deed.

5.    You have breached the Deed by failing to pay to our client the sum specified in the Deed.

The Lawson Property

Pursuant to the Deed, the parties are required to take reasonable steps to give effect to the transfer of the Lawson Property to Ms Shonoda.

We are instructed that despite our client’s repeated demands you have you have taken no steps to give effect to the subject transfer provided for in the Deed.

Further, we are instructed that in the interim, [Mr Hanna Snr] has reneged on his obligations to the Mortgagee. As a result of your delay and [Mr Hann Snr’s] conduct, our client has been solely responsible for loan repayments and ongoing over the past 12 months in the sum of $15,000.00 he has made on your behalf.

Our client demands that you repay him for the loan repayments and attend to your obligations to pay the loan repayments until such time as the Deed is given effect.

[Mr Hanna Snr’s] Bankruptcy

We further note that as a result of the bankruptcy NSW2536 of 2017/5, caveats have been recorded against [unit 16 and the Lawson Property] by the liquidator, being for your personal debts to the Australian Taxation Office.

We note that this a further breach of Clause 6.1 (b) of the Deed.

Despite our client’s insistence, you have failed to remedy such.

Demand

Our client demands that you remedy the aforementioned breaches immediately. We require that you pay to our client following amounts within seven (7) days:

1.    $35,356.74 outstanding pursuant to the Deed

2.    $15,000.00 for loan repayments paid by our client for the [Lawson Property].

We advise that should you fail to attend to the same and ignore this correspondence, we are instructed to:

a.    Commence legal proceedings for breach of the deed with no further notice to you, in addition to a claim for damages and costs. Please note that our client has suffered loss and damage from your breaches which he has quantified as an estimated $44,000.00;

b.    Report your conduct to the NSW Police.

We will rely on this correspondence on the question of costs.

(bold emphasis in original; italic emphasis added)

77    Ms Shonoda was cross-examined by counsel for Mr Abdalla on this letter as follows:

... When you directed Tina He to Jarvis J transfer the property to Anthony you knew that the transfer to Jarvis J was a forgery, didn’t you?---No.

You know when the property was transferred to Anthony, didn’t you, that Hedra complained that the transfer to Jarvis J was obtained by a fraudulent transfer, didn’t you?---He said that, yes, but it’s not.

Could you go – could the witness be shown the Jarvis J court book.

Could I show you this document? Could I show you this document? ...

78    Ms Shonoda was then shown the 19 February 2018 letter:

Have you read that document yet?---Yes, yes.

You’ve seen this document prior to today, hadn’t you?---Yes.

And you read the document on or about 19 February 2018, didn’t you?---A few days after, maybe.

...

Could you go over the page of the document. And you see in the second paragraph it says:

The signature of the transfer does not belong to our client.

You read those words, didn’t you?---Yes.

And you would agree that statement of fact is the statement of truth?---Can I say something?

Yes, you can answer the question. Answer the question, please. You would agree that the statement - - -?---That’s correct, but Hedra signed - - -

Thank you. Thank you. Did I - - -?--- - - - signed another deed on behalf of - - -

Did I ask you to give a speech?--- - - - of John.

79    During 2018, the trustee commenced proceeding NSD1218/2018 in this Court, against Jarvis in respect of the transfer to Jarvis of the 50 per cent interest in unit 17 that had previously been held in the name of Mr Hanna Snr.

80    On 3 April 2019, unit 16 was transferred from Jarvis to Anthony Hanna for no consideration, albeit the transfer form recorded a consideration of $600,000. Ms Shonoda paid the stamp duty and other costs. Jarvis transferred unit 16 to Andrew Hanna because Ms Shonoda requested that Ms He cause this to occur.

81    On 16 June 2021, Mr Abdalla settled proceeding No. 2020/00021795 in the Supreme Court of New South Wales (concerning unit 17) and part of proceeding NSD1722/2019 in this Court (concerning unit 22) on the basis that he pay the trustee 50 per cent of the value of each of those units.

82    Mr Abdalla’s evidence, which I accept, was that:

(1)    at no time did Mr Hanna Snr tell him that he had financial problems with the ATO. Nor did he ever mention any bankruptcy proceedings being taken against him; and

(2)    of the $247,356.74 mentioned in the Deed, he received $212,000, but has not received the remaining $35,356.74.

83    On a date which is unclear from the evidence but which preceded 22 September 2021, the trustee, Mr Abdalla, Mr Botros and Mr Kamel entered into a Deed of Settlement and Release, which effected the settlement of various proceedings. Under the Deed of Settlement, Mr Abdalla, Mr Botros and Mr Kamel were to pay $800,000. Mr Abdalla paid $110,635 of the $800,000. Mr Kamel paid the rest from the re-sale by him of unit 22.

84    Mr Abdalla incurred legal costs of $127,300.82 in connection with the various proceedings that were settled under the Deed of Release including legal costs relating to that Deed.

B.10    Credit

85    Subject to one exception, the determination of the facts set out above did not require an assessment of the credit of any of the witnesses; and counsel for the various parties did not seek credit findings.

86    The exception concerns the impugned signature, in respect of which counsel for Mr Abdalla invited the Court to find that Ms Shonoda was dishonest and a participant in a fraud. As I have explained above, I decline to make such a finding.

C.    PROCEEDING NSD 1722/2019 – MR ABDALLA’S CLAIM AGAINST JARVIS

87    Against the factual background described above, I turn now to consider Mr Abdalla’s claim against Jarvis. Mr Abdalla’s oral and written closing submissions did not address the case as pleaded. Instead, the case against Jarvis was framed in the following terms:

(1)    Mr Abdalla held title to unit 16;

(2)    he did so because Ms Shonoda did not pay the full amount of the purchase price for unit 16 and a vendor is entitled to retain title of a property until the purchase price for the property has been paid, relying upon Golden Mile Property Investments Pty Ltd (in liq) v Cudgegong Australia Pty Ltd [2015] NSWCA 100; (2015) 89 NSWLR 237 at 261 [100] (Emmett JA; Macfarlan and Gleeson JJA agreeing);

(3)    Transfer AN40118X constituted a fraud against Mr Abdalla, as Mr Abdalla’s signature on that document was forged;

(4)    Ms Shonoda was put on notice of that fraud by the 19 February 2018 letter (although, it was contended a notice was not required as Ms Shonoda already knew of the fraud, as she was a participant in it. For the reasons previously set out, I do not accept this alternative proposition);

(5)    subsequent to receiving such notice, Ms Shonoda organised for unit 16 to be transferred to Anthony Hanna;

(6)    when property is transferred without the consent of the owner and the transferee is a volunteer or has notice that there is a lack of consent to the transfer then the property in the hands of the transferee is vested in a trust in favour of the owner, relying upon Black v S Freedman & Co [1910] HCA 58; (1910) 12 CLR 105 and Fistar v Riverwood Legion and Community Club Ltd [2016] NSWCA 81; (2016) 91 NSWLR 732 at 741 ([39] to [47]) (Leeming JA, with whom Bathurst CJ and Sackville AJA agreed);

(7)    Jarvis had knowledge of the fraud and Mr Abdalla’s lack of consent to the transfer of his interest because Ms Shonoda had such knowledge, and Ms Shonoda’s knowledge is to be imputed to Jarvis, despite the fact that Ms Shonoda was not a director or officer of Jarvis, relying upon the views expressed by Brennan, Deane, Gaudron and McHugh JJ in Krakowski v Eurolynx Properties Ltd [1995] HCA 68; (1995) 183 CLR 563 at 582 to 583, in circumstances where Ms Shonoda admitted that she made the decision that Jarvis would accept the transfer and then transfer unit 16 to Anthony Hanna; and Ms He acted as directed by Ms Shonda and was a mere functionary to execute Jarvis’s decisions as made by Ms Shonoda; and

(8)    accordingly, Jarvis is liable to Mr Abdalla in respect of the interest that Mr Abdalla had held in unit 16 and which Jarvis held on trust for Mr Abdalla but transferred to Anthony Hanna. Mr Abdalla contends that Jarvis is liable to him for either one-half of the price recorded on Transfer AN40118X ($325,000) or one-half the value ascribed by Mr Berry ($315,000).

88    There is an issue as to whether the Court should determine Mr Abdalla’s case as re-framed in circumstances where the re-framed case has not been pleaded.

89    In Garner v Central Innovation Pty Limited [2022] FCAFC 64, the Full Court of this Court (Charlesworth, Stewart and Halley JJ) explained at [68] to [71]:

68    The principles in relation to the function and rules of pleading and the purpose of particulars are well settled.

69    In Banque Commerciale SA, en liquidation v Akhil Holdings Limited (1990) 169 CLR 279, the High Court emphasised that the rules of pleadings are directed at ensuring that a party should be given a fair opportunity to meet the case advanced against it. Their Honours explained (at 286 – 287):

The function of pleadings is to state with sufficient clarity the case that must be met: Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (In liq.), per Isaacs and Rich JJ. In this way, pleadings serve to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her and, incidentally, to define the issues for decision. The rule that, in general, relief is confined to that available on the pleadings secures a party’s right to this basic requirement of procedural fairness. Accordingly, the circumstances in which a case may be decided on a basis different from that disclosed by the pleadings are limited to those in which the parties have deliberately chosen some different basis for the determination of their respective rights and liabilities. See, e.g., Browne v Dunn; Mount Oxide Mines.

Ordinarily, the question whether the parties have chosen some issue different from that disclosed in the pleadings as the basis for the determination of their respective rights and liabilities is to be answered by inference from the way in which the trial was conducted. It may be that, in a clear case, mere acquiescence by one party in a course adopted by the other will be sufficient to ground such an inference.

(footnotes omitted)

70    A hearing that departs from the pleadings is not necessarily an unfair hearing. It is necessary to consider what issues were fairly fought between the parties: Sullivan v Trilogy Funds Management Ltd (2017) 255 FCR 503 (at [265(1)]) citing Gould v Mount Oxide Mines Ltd (in liq) (1916) 22 CLR 490 (at 517); Vale v Sutherland (2009) 237 CLR 638 (at [41]); Banque Commerciale SA (at 296 – 297); Betfair Pty Ltd v Racing New South Wales (2010) 189 FCR 356 (at [51]).

71    The principal focus on procedural fairness, rather than rigidity in the application of formal pleading rules, was illustrated in the decision of the Full Court in NRM Corporation Pty Ltd v Australian Competition and Consumer Commission [2016] FCAFC 98 (Flick, Murphy and Griffiths JJ). Their Honours explained (at [26]):

First, the fact that findings may be made — and even liability established — upon the basis of evidence which goes beyond a pleaded case is not of itself reason to set aside a decision. To so recognise is not to deny the importance of pleadings; it is simply to recognise that a party must be given, by one means or another, adequate notice of the case it has to meet. …

(bold and italic emphasis in original; underline emphasis added)

90    To the cases cited by the Full Court might be added the decision of the High Court of Australia in Laws Holdings Pty Ltd v Short (1972) 46 ALJR 563. In that case, the dispositive estoppel-based argument was not pleaded and was not raised until closing submissions. The High Court held that in the circumstances of that case and in particular the sufficiency of opportunity afforded to the other party, the successful party was nevertheless entitled to rely upon that argument.

91    The question is one of procedural fairness, which must be determined by reference to the facts of the particular case. Relevantly, in this proceeding:

(1)    the re-framed case was not pleaded;

(2)    the re-framed case was mentioned in Mr Abdalla’s written submissions filed in advance of the hearing and not mentioned by Mr Abdalla’s counsel in oral opening;

(3)    both Ms Shonoda and Ms He gave evidence to the effect that Jarvis acted at the direction of Ms Shonoda with respect to the transfers to and by Jarvis of unit 16;

(4)    Ms Shonoda was questioned in cross-examination concerning her knowledge of the contended fraudulent conduct concerning the impugned signature;

(5)    the re-framed case was addressed in the written submissions filed on behalf of Mr Abdalla on the day before oral closing submissions were heard, and in those oral closing submissions;

(6)    the legal representative of Jarvis did not object to the Court considering the re-framed case on the basis that it travelled beyond the case as pleaded for Mr Abdalla (or on any other basis); and

(7)    the re-framed case was not the subject of any application to amend Mr Abdalla’s pleadings; and

(8)    after the Court subsequently invited further submissions on whether the re-framed case ought be entertained, Jarvis indicated that it did not wish to be heard.

92    I am satisfied that there is no procedural unfairness in dealing with the unpleaded claim against Jarvis, particularly when: that claim was set out in the written opening; evidence relevant to it was received without objection; and no objection to the case travelling beyond the pleading was made during the hearing, or in response to the Court’s invitation for further submissions.

93    I turn now to the re-framed case against Jarvis. The facts which are germane to this case are set out above, and in particular:

(1)    in April 2017 an agreement was reached between Mr Abdalla and Mr Hanna Snr pursuant to which they would dissolve the partnership between them on the basis that:

(a)    Mr Hanna Snr would have title to units 16 and 21;

(b)    Mr Abdalla would have title to units 17 and 22;

(c)    Mr Abdalla would receive payment of $247,356.74;

(2)    also in April 2017, Mr Hanna Snr, Mr Abdalla and Ms Shonoda entered into the Deed;

(3)    on or about 16 January 2018, Jarvis became the registered proprietor of unit 16, by reason of the lodgement of Transfer AN40118X. That transfer was a transfer from Mr Hanna Snr and Mr Abdalla as transferors to Jarvis as transferee, but the signature of Mr Abdalla on that transfer form was a forgery;

(4)    Transfer AN40118X on its face provides for a consideration of $650,000. However, the evidence establishes that by agreement with Ms Shonoda, Jarvis paid no consideration and Ms Shonoda paid the stamp duty and registration expenses;

(5)    Ms Shonoda was not aware of the forgery of Mr Hanna Snr’s signature before the registration of Transfer AN40118X;

(6)    on or about 19 February 2018, Ms Shonoda was put on notice of the forgery of Mr Hanna Snr’s signature; and

(7)    on 3 April 2019 Jarvis transferred unit 16 to Anthony Hanna.

94    There is no challenge to the legal title that was held by Jarvis and then transferred to Anthony Hanna. The claim brought is an action against Jarvis on the basis that it was a volunteer who became the trustee – upon being put on notice on or about 19 February 2018 of the forgery – of the interest previously held by Mr Hanna Snr in unit 16.

95    The interest that Mr Hanna Snr held in unit 16 was taken from him without his knowledge by dint of the forgery. It is well-established that in such circumstances the wrongdoer holds Mr Hanna Snr’s interest on trust for Mr Hanna Snr: Black; Fistar at 740 to 741 ([36] to [39]).

96    It is also well-established that a person who receives trust property, otherwise than as a bona fide purchaser for value without notice, but innocently, and thereafter acquires notice of the trust and deals with the trust property in a manner inconsistent with the trust will be obliged to account in equity for the trust property (or such as remains at the time when notice of the trust is received): see Fistar at 738 to 739 ([30] to [31]), 742 to 743 ([45] to [47]), and the authorities there cited.

97    The starting point is whether Mr Abdalla held title to unit 16 at the time of Transfer AN40118X in January 2018. Mr Abdalla submitted that he did in circumstances where he was yet to receive the consideration for the transfer. In contrast, Jarvis submitted that Mr Abdalla was merely a bare trustee of the title in unit 16.

98    For the following reasons, I am satisfied that as at January 2018, Mr Abdalla held full legal title to his interest in unit 16.

99    First, as at that time, he was a registered proprietor of unit 16.

100    Secondly, although he had agreed to transfer his interest in unit 16 to Ms Shonoda, the transfer of that interest (and his interest in unit 21) was dependent upon payment of $247,356.74. As at January 2018, this amount had not been paid in full.

101    Thirdly, and contrary to the submissions made on behalf of Jarvis, entry into a contract for the sale of unit 16 (and unit 21) did not of itself render Mr Abdalla a bare trustee of his interest in that unit. Although a trust relationship might arise at a particular point in the sale process, the contractual nature of the relationship between a vendor and a purchaser needs to be firmly borne in mind. In Golden Mile, Emmett JA explained at 261 to 263 ([98] to [105]):

General principles

98    The relationship between the vendor and purchaser at the moment of entry into a valid contract for sale of land has in the past been described in the terms of a trust. Thus, it has been said that, at that moment, “the vendor becomes in equity a trustee for the purchaser of the estate sold … [i]n other words, the position of the vendor is something between what has been called a naked or bare trustee, or a mere trustee (that is, a person without beneficial interest), and a mortgagee who is not, in equity (any more than a vendor), the owner of the estate”.

99    Clearly enough, where one person holds land on trust for another, that other person would be regarded as having an equitable interest in that land. While a vendor of real property under a valid contract of sale may become a trustee of the property for the purchaser, there is a question as to the time when such a trust relationship arises and as to the precise character of that relationship. Until it is known whether the contract will be performed, the vendor is not in the position of a constructive trustee, although the vendor may be described as a trustee sub modo. That is to say, the vendor under an unconditional contract may be regarded as a trustee, conditionally upon nothing happening to prevent performance of the contract. The vendor may be regarded unconditionally as a trustee for the purchaser when the contract is performed by the purchaser by payment of the purchase price. When title is made out and the purchaser has paid the purchase price under a contract in respect of which the remedy of specific performance is available, the vendor becomes a constructive trustee of the property sold.

100    However, the use of the language of trust to describe the respective positions of the vendor and purchaser has fallen out of favour. Where there are rights outstanding on both sides of a contract for the sale of land, the description of the vendor as a trustee tends to conceal the essentially contractual relationship that governs the rights and duties of the respective parties. While, in some sense, the equitable estate in the land passes to the purchaser, the vendor has a right to payment of the purchase price and has a charge or lien on that estate as security for payment of the purchase price, together with the right to retain possession of the land until the price is paid. The purchaser must either pay the purchase price or lose the equitable interest acquired on making the contract.

101    Before completion, the principles developed in equity for relief against forfeiture would protect the equitable interest that the purchaser has in the land against loss consequent upon termination of the contract. In the same way as failure to redeem a mortgage upon the promised date for repayment did not destroy the equity of redemption, without the proper exercise of a power of sale or a foreclosure order, failure to complete a contract for purchase on the date fixed for completion did not bar the intervention of equity to order specific performance of the contract.

102    That is to say, at the time when the purchase price is paid under an unconditional contract for sale, a change in the relationship between vendor and purchaser takes place, although the change may take place earlier in some circumstances. The change is that an interest in the subject matter of the contract vests in the purchaser and that interest will be protected by a court of equity. Certainly, when nothing remains to be done in order to define the respective rights of the parties with respect to the equitable interest, a court of equity will protect the rights of the provider of the purchase price, on the basis that the seller is in the position of a trustee under a bare trust, although the intrusion of the notion of a trust may be superfluous. In other words, whether or not the relationship of the vendor to the purchaser is that of trustee to cestui que trust, a court of equity will treat the purchaser as having an interest that it will protect. That interest may fairly be characterised as an equitable interest.

Time at which the purchaser may be entitled to equitable remedies

103    Once a contract for sale of land has been entered into, beneficial ownership is, in a sense, split between the seller and buyer on the provisional assumption that specific performance is available and that the contract will in due course be completed, if necessary by a court ordering specific performance. As the contract proceeds to completion, the equitable interests can be viewed as passing to the buyer in stages, as title is made and accepted and as the purchase price is paid in full. In order to consider whether specific performance, or any other equitable remedy, would be ordered at a time prior to completion of such a contract, it is necessary to understand the respective rights of the vendor and the purchaser.

104    The purchaser’s interest comprises four separate rights or “equities”. First, the purchaser has an interest in the land that is enforceable against third parties and that can take priority over holders of competing interests. Second, the purchaser has an equitable right that the vendor exercise due care to preserve and maintain the land pending completion. Third, the purchaser has an equitable right to the rents and profits received by the vendor between the agreed date for completion and the actual date of completion (but the vendor has that right during the period between the date of contract and the agreed date for completion). Fourth, the purchaser has an equitable lien for repayment of the purchase price in the event of non-conveyance by the vendor. Of those four rights, the first and last are in rem rights over the land the subject of the contract. The vendor also has four such rights: to receive rents before completion, to retain damages recoverable against others for wrongs to the vendor’s land before completion, to receive the purchase money on completion, and, in default, to enforce a lien for the purchase money.

105    Importantly, whether or not these “equities” arise, and the extent to which they may be enforced, depends on the time at which the enquiry is made, that is, for example, immediately after formation of the contract, or at a later point when the purchaser is ready, willing and able to tender the purchase price, or at a point after payment of the purchase price. Before completion, the purchaser has an equitable interest in the land that reflects the extent to which equitable remedies are available to protect the purchaser’s contractual rights. The fact that the point may not yet have arrived that the purchaser can obtain a decree of specific performance does not mean that the purchaser is not entitled to other equitable remedies: the purchaser could, for example, obtain negative injunctions to enforce any of the four “equities” referred to above.

(footnotes omitted; emphasis added)

102    See also BB Australia Pty Ltd v Danset Pty Ltd [2018] NSWCA 101 at [51], where Barrett AJA (Meagher JA and Simpson AJA agreeing) stated at [51]:

Authoritative observations in Chang v Registrar of Titles (1976) 137 CLR 177; [1976] HCA 1 [12] , Kern Corporation Ltd v Walter Reid Trading Pty Ltd (1987) 163 CLR 164; [1987] HCA 20, Stern v McArthur (1988) 165 CLR 489; [1988] HCA 51 and, more recently, Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315; [2003] HCA 57 make it impossible to say in Australia today that the vendor under an uncompleted contract for the sale of land is a “trustee” for the purchaser. What can, however, be said is that the purchaser under such a contract has an equitable interest in the land commensurate with the availability of equitable relief to protect the purchaser’s position in relation to the land

(footnotes omitted)

103    Thus, although a vendor may be considered a bare trustee once the purchase price has been paid, that point was not reached. The purchase price remained unpaid as at January 2018 (and remains unpaid). It is also highly doubtful that a court would have granted a remedy of specific performance in such circumstances.

104    The next question to be determined is whether Jarvis received unit 16 in January 2018 as a bona fide purchaser for value without notice of the fraud. I am satisfied that Jarvis did not have notice of the fraud at the time that it received unit 16. There is no evidence, and Mr Hanna Snr did not suggest, that Ms He had notice of the forgery. Rather, Mr Hanna Snr submitted that Ms Shonoda had knowledge of the forgery and that such knowledge should be attributed to Jarvis. For the reasons earlier discussed, I am not satisfied that Ms Shonoda had knowledge of the forgery prior to 19 February 2018.

105    However, I am not satisfied that Jarvis was a purchaser for value. Rather, Jarvis received unit 16 as a volunteer in circumstances where the evidence of both Ms Shonoda and Ms He was that Jarvis provided no consideration for the transfer of unit 16 to it.

106    The next question to be determined is whether Jarvis was on notice of the forgery before it transferred unit 16 to Anthony Hanna in April 2019. Again, there is no evidence, and Mr Hanna did not suggest, that Ms He had such notice.

107    Mr Hanna Snr submitted that, by the time of the transfer to Anthony Hanna, Ms Shonoda had knowledge of the forgery and that such knowledge should be attributed to Jarvis. I am satisfied, as discussed earlier, that Ms Shonoda was on notice of the forgery from about 19 February 2018.

108    In SSABR Pty Ltd v AMA Group Limited [2024] NSWCA 175, Stern JA (Ward P and Price AJA agreeing), explained at [149] to [152]:

149. The leading authority as to the attribution of a state of mind to a company is the statement of Bright J in Brambles Holdings Ltd v Carey (1976) 15 SASR 270 at 279, cited with approval by the majority in Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; [1995] HCA 68 at 582-583 (Brennan, Deane, Gaudron and McHugh JJ) (“Krakowski”):

“Always, when beliefs or opinions or states of mind are attributed to a company it is necessary to specify some person or persons so closely and relevantly connected with the company that the state of mind of that person or those persons can be treated as being identified with the company so that their state of mind can be treated as being the state of mind of the company.”

150. As was found in Krakowski (at 582), in some circumstances the knowledge of the company must depend upon the knowledge of a particular person or persons who were most closely involved with the relevant transaction, in that case the “persons who were responsible for the initial negotiations and who set the scene in which the relevant representation had been made.”

151. Lord Hoffman in Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500 at 506-511 explained that the test for attribution of a state of mind to a company will always depend upon context, and the purpose for which that attribution is sought. As his Lordship explained, it was never intended that the “directing mind and will” test would be the universal rule for the purposes of attribution. As Leeming JA observed in Anderson v Canaccord Genuity Financial Ltd [2023] NSWCA 294 at [234], the position as set out by Lord Hoffman has attracted a considerable weight of Australian appellate authority. As Beach J observed in Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 266 FCR 147; [2018] FCA 751 at [1660], the appropriate test for attribution of a state of mind to a company depends upon the interpretation of the relevant rule of responsibility having regard to its context and purpose.

152. In the context of rectification in equity, the relevant enquiry is as to the actual subjective state of mind of a corporation in entering into a particular contract, namely the relevant decision-maker. As held by Patten LJ in Hawksford Trustees Jersey Ltd v Stella Global UK Ltd [2012] 2 All ER (Comm) 748 at [35], [39], [41]-[43], cited with approval by Mann J in Murray Holdings Ltd v Oscatello Investments Ltd [2018] EWHC 162 (Ch) at [195]-[198] (“Murray Holdings”), and which the primary judge relied upon (at J[85]), that person will be the person who had the authority to bind the company to the contract, albeit that there may be circumstances where, in practice, the formal decision-maker has so deferred to the judgment of someone else that that person is in reality the person whose judgment was critical to the company entering the agreement. …

109    In the present case the relevant enquiry concerns the state of knowledge held by Jarvis as to the forgery when Jarvis transferred unit 16 to Anthony Hanna. In circumstances where Ms He, the director of Jarvis deferred to Ms Shonoda in connection with that transfer and indeed made the transfer at the direction of Ms Shonoda, Ms Shonoda’s state of mind is to be attributed to Jarvis. It is not necessary that Ms Shonoda be the ultimate decision-maker on behalf of Jarvis with respect to the transfer of unit 16 to Anthony Hanna. It is sufficient that she was “so closely and relevantly connected with” that transfer that her knowledge for that transaction can be treated as the knowledge of Jarvis: see Krakowski at 582; Hoh v Ying Mui Pty Ltd [2019] VSCA 203 at [335] (Beach and Hargrave JJA and Sifris JJA). Ms Shonoda was, to adopt the language used by Bathurst CJ (with whom Hoeben CJ at Common Law and Leeming JA agreed) in Gregg v R [2020] NSWCCA 245; (2020) 355 FLR 348 at 436 [490], the person who was responsible for Jarvis transferring unit 16 to Anthony Hanna.

110    As noted previously, Ms Shonoda was aware of the forgery prior to the time that Jarvis transferred unit 16 to Anthony Hanna. It follows that Jarvis was aware of that forgery and as such held Mr Hanna’s interest in unit 16 on trust for him and is liable to him for dealing with that trust property by transferring it to Anthony Hanna. In circumstances where no accounting has been sought, the appropriate remedy is the payment by Jarvis of the value of that interest as at about the date of the transfer, namely $315,000.

D.    PROCEEDING NSD 1285/2020 – MR ABDALLA’S CLAIM AGAINST ANDREW HANNA

111    I turn now to consider proceeding NSD1285/2020. In that proceeding, Mr Abdalla advances cases against Andrew Hanna and Ms Shonoda pursuant to the second further amended notice of cross-claim and the second further amended statement of cross-claim. In this section of these reasons for judgment I address Mr Abdalla’s claims against Andrew Hanna. His claims against Ms Shonoda are dealt with in Section E below.

112    Mr Abdalla pleaded several cases against Andrew Hanna including cases founded on allegations of fraudulent conduct by Andrew Hanna and a case based upon contract for non-payment of the consideration under the contract for sale of unit 21. In final submissions, the only case pressed was the contractual case. The essence of that case is that: (1) a written contract for the sale and purchase of unit 21 was entered into between Mr Hanna Snr and Mr Abdalla as vendors and Andrew Hanna as purchaser at a price of $299,000; (2) on or about 6 June 2017, unit 21 was transferred to Andrew Hanna; and (3) in breach of the written contract for the sale and purchase of land, Andrew Hanna did not pay the sum of $299,000 and he is liable to pay that amount to the trustee and Mr Abdalla jointly; alternatively to Mr Abdalla.

113    Andrew Hanna denied any contractual liability to the trustee or Mr Abdalla.

114    Counsel for Andrew Hanna submitted that the claim in contract was not open to Mr Abdalla on the pleadings. I do not accept this submission. The contractual claim ultimately pressed was set out in the second further amended statement of cross-claim (to which Andrew Hanna responded by his defence to that pleading) and a similar contractual claim, albeit based upon the market value of unit 21 rather than the contract price, had been present in paragraph 12 of the statement of cross-claim since its inception. Further, the second further amended notice of second cross-claim included a prayer for an order that judgment be entered in favour of Mr Abdalla against Andrew Hanna in the sum of $299,000.

115    The evidence establishes that:

(1)    on 8 May 2017 a standard form contract for the sale of land with respect to unit 21 was signed by Mr Hanna Snr and Mr Abdalla as vendors. That contract recorded a sale price of $299,000. The evidence does not appear to include a counterpart contract signed by Andrew Hanna;

(2)    in cross-examination Andrew Hanna agreed that on 8 May 2017 he signed a contract for the sale of unit 21;

(3)    on or prior to 6 June 2017:

(a)    Andrew Hanna’s solicitor represented in correspondence with Mr Abdalla’s solicitor that contracts for the sale and purchase of unit 21 had been exchanged;

(b)    Andrew Hanna applied for a new home grant in relation to unit 21 and his application included a representation that there was a contract for sale of unit 21 dated 8 May 2017;

(c)    stamp duty of $10 was paid by Andrew Hanna on a concessional basis due to the new home grant;

(d)    Transfer AM426124D was lodged with New South Wales Land Registry Services by the solicitor for Andrew Hanna;

(4)    on 6 June 2017, Transfer AM426124D was recorded by New South Wales Land Registry Services on the title of unit 21. The transfer was signed by Mr Hanna Snr and Mr Abdalla as transferors and by Andrew Hanna as transferee; and

(5)    as a result, Andrew Hanna became the registered owner of unit 21.

116    Counsel for Andrew Hanna submitted that there was no evidence that the contract for sale signed by Mr Hanna Snr and Mr Abdalla on 8 May 2017 had also been signed by Andrew Hanna. I accept that the counterpart does not appear to be in evidence and that the contract attached to Mr Babu’s 10 May 2017 email was not signed by Andrew Hanna. However, it does not follow that Andrew Hanna did not sign such a contract. The evidence described in the previous paragraph leads to the almost inescapable inference that it was. In particular it is most unlikely that –– (1) Andrew Hanna would have applied for a new home grant with respect to unit 21 (which application included a representation that there was a contract dated 8 May 2017), or have signed Transfer AM426124D; (2) Andrew Hanna’s solicitor would have referred in correspondence to the contract having been exchanged on 8 May 2017, sought the assistance of Mr Abdalla’s solicitor with respect to the new home grant, lodged Transfer AM426124D with New South Wales Land Registry Services, or caused the payment of stamp duty on Transfer AM426124D –– unless Andrew Hanna had signed the counterpart contract.

117    The matters described in the previous two paragraphs establish that a contract for the sale of unit 21 for a consideration of $299,000 was entered into between Mr Hanna Snr and Mr Abdalla as vendors, and Andrew Hanna as purchaser. Thus, I am satisfied that Andrew Hanna was contractually obliged to pay $299,000 to the trustee and to Mr Abdalla for unit 21.

118    As noted at [58] above, Mr Abdalla received no payment from Andrew Hanna with respect to unit 21. Thus, Andrew Hanna is in breach of that contract.

119    As to the amount recoverable for that breach, counsel for Mr Abdalla submitted that the whole of the purchase price was referable to Mr Abdalla’s interest in unit 21 (and that none of it was referable to Mr Hanna Snr’s interest). This conclusion was submitted to flow from the price of $299,000 (being in the order of one half of the value of the unit). I do not accept that submission. It is contrary to the written terms of the contract for sale which provides that the contract price is payable to both vendors. Further, the purchase price of $299,000 is otherwise unexplained on the evidence.

120    It follows that Mr Abdalla has established his claim for breach of contract and that Andrew Hanna is liable to pay to Mr Abdalla one half of $299,000, or $149,500.

121    Counsel for Andrew Hanna also submitted that if there was a valid contract for sale of unit 21 to Andrew Hanna, Mr Abdalla would be required to remit the proceeds of sale to Ms Shonoda on the basis that she was the beneficial owner of unit 21 prior to that sale because Mr Abdalla was a bare trustee of the title to unit 21 for Ms Shonoda.

122    That question does not arise for determination in this proceeding. There is no claim made by Ms Shonoda concerning such proceeds of sale for determination and any claim that Mr Abdalla held his interest in unit 21 as a bare trustee faces the same hurdles as the similar claim advanced by Jarvis and which was rejected above. In any event such a claim is a matter between the trustee, Ms Shonoda and Andrew Hanna and it does not provide Andrew Hanna with an answer to Mr Abdalla’s claim against him.

E.    PROCEEDING NSD 1285/2020 - MR ABDALLA’S CLAIM AGAINST MS SHONODA

123    I turn now to consider Mr Abdalla’s claims against Ms Shonoda in proceeding NSD1285/2020.

E.1    Contract claim

124    The first is a claim in contract. This case was pleaded for the first time in the second further amended statement of cross-claim filed just prior to the penultimate day of hearing. It was not addressed in oral closing submissions for Mr Abdalla and only briefly in writing. It can be dealt with briefly.

125    The essence of the contractual claim as pleaded appears to be that:

(1)    Ms Shonoda was party to a contract with Mr Hanna Snr and Mr Abdalla which contained an implied term that: (a) Mr Abdalla would not transfer title to units 16 and 21 until the consideration of $247,356.74 had been paid or was paid simultaneously with the lodging of the transfer; and (b) Mr Abdalla or his nominee, would obtain indefeasible title to units 17 and 22. Ms Shonoda denies this;

(2)    Ms Shonoda breached the contract because Mr Abdalla was not given indefeasible title to units 17 and 22. Ms Shonoda’s position is that – assuming, contrary to her primary position, there was such an agreement and such an implied term – there was no breach of such a term as Mr Abdalla received indefeasible title upon being the registered proprietor of the relevant units; and

(3)    by reason of that breach, Mr Abdalla is entitled to damages from Ms Shonoda of $800,000 plus interest, the $800,000 being the amount that he agreed to pay the trustee under a Deed of Settlement. Ms Shonoda denies any such liability.

126    I am satisfied that an agreement was reached between Mr Hanna Snr and Mr Abdalla that they would each take title to two of the four remaining units (i.e. units 16, 17, 21 and 22) and implicitly that each would take the steps required to achieve that result. However, I am not persuaded of the existence of a contract to which Ms Shonoda was a party and which contained the implied term for which Mr Abdalla contends.

127    The only relevant contract to which Ms Shonoda was a party on the evidence is the Deed. The Deed does not refer to the transfer of units 17 and 22. This is sufficient to dispose of the claim in contract.

128    It is artificial to then consider an implied term in the absence of a contract, but I do note the following. The suggested implied term is an implied term that Mr Abdalla or his nominee would obtain “indefeasible title” to units 17 and 22. The expression “indefeasible title” as advanced in Mr Abdalla’s claim is capable of several meanings. The first is that as at the date of registration, the title he received was “good and clear title” (to use the expression used in Mr Abdalla’s closing submissions). To the extent that such a meaning is advanced, it does not assist Mr Abdalla’s case because – assuming for present purposes that such a term is to be implied there can have been no breach of such a term, when as is common ground, the title to units 17 and 22 passed to Mr Botros and Mr Kamel respectively.

129    A second possible meaning, and one that is consistent with the way in which the submissions were advanced, is that the title to units 17 and 22 would be immune from future attack in the event that Mr Hanna Snr were to become bankrupt and his trustee were to challenge the transaction. The basis for such an implied term has not been explained in the pleadings or in the submissions advanced on behalf of Mr Abdalla. In particular, the criteria in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 267 – “(l) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.” – have not been addressed. In effect, Mr Abdalla’s argument is that Ms Shonoda promised him that the title to units 17 and 22 would be immune from future attack from any trustee in bankruptcy appointed to Mr Hanna Snr’s bankrupt estate. This in turn involves a promise that Mr Hanna Snr would not enter into bankruptcy. These things only need to be stated to make good the proposition that the term sought to be implied is not so obvious that it goes without saying. Nor could it be regarded as reasonable and equitable.

130    It follows that Mr Abdalla’s claim in contract against Ms Shonoda must fail. In any event, Mr Abdalla has not established that the payments made under the Deed of Settlement were due to the breach of such an implied term.

E.2    Misleading or deceptive conduct claim

131    Mr Abdalla’s second claim against Ms Shonoda is a claim that she contravened s 18 of the Australian Consumer Law (ACL) because she, in trade or commerce, engaged in conduct that is misleading or deceptive or is likely to mislead or deceive.

132    The analysis below addresses the misleading or deceptive conduct case as it was advanced in Mr Abdalla’s final submissions (which differed slightly from the manner in which it was pleaded).

E.2.1    The claim

133    The essence of the misleading or deceptive conduct case is that Ms Shonoda entered into the Deed without making known to Mr Abdalla that there was an impediment to Mr Abdalla receiving indefeasible title to units 17 and 22 (impugned conduct) in circumstances where, it is contended, she was aware of Mr Hannah Snr’s impending bankruptcy (alleged knowledge).

134    Mr Abdalla contends that disclosure of the alleged knowledge was required by the following circumstances:

(1)    Mr Hanna Snr and Mr Abdalla were in partnership;

(2)    Ms Shonoda was aware of the partnership;

(3)    Mr Hanna Snr and Mr Abdalla were taking an account of their interests in the partnership so they could divide the ownership of the four remaining units at the Hinchinbrook property;

(4)    Mr Hanna Snr and Mr Abdalla (and Ms Shonoda) agreed on the units that each would take;

(5)    Ms Shonoda gave an equitable mortgage under the Deed so that the division of ownership of the remaining four units could occur;

(6)    the equitable mortgage was part of a larger arrangement;

(7)    it was also part of the larger arrangement that each of Mr Hanna Snr and Mr Abdalla or their nominees would receive two of the remaining four units;

(8)    the purpose of the larger arrangement was for each of Mr Hanna Snr and Mr Abdalla or their nominees to receive good or clear title to two of the remaining four units;

(9)    in all probability Mr Hanna Snr would become bankrupt in the future;

(10)    Ms Shonoda knew that Mr Hanna Snr was insolvent and would become bankrupt; and

(11)    Ms Shonoda and Mr Hanna Snr were parties to a scheme by which Mr Hanna Snr was to divest his interest in the four units, first to Ms Shonoda, and then to Ms Shonoda and Andrew Hanna so that Mr Hanna Snr’s interest in the four units would not be available to his creditors,

and that the impugned conduct, considered in those circumstances, was misleading or deceptive conduct.

E.2.2    Relevant principles

135    The relevant principles to be applied when considering whether a person has contravened s 18 of the ACL were summarised by the High Court of Australia in Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; (2023) 277 CLR 186 at 225 to 226 ([80] to [82]), (Kiefel CJ, Gageler, Gordon, Edelman and Gleeson JJ):

[80]    The principles are well established. Determining whether a person has breached s 18 of the ACL involves four steps: first, identifying with precision the “conduct” said to contravene s 18; second, considering whether the identified conduct was conduct “in trade or commerce”; third, considering what meaning that conduct conveyed; and fourth, determining whether that conduct in light of that meaning was “misleading or deceptive or … likely to mislead or deceive”.

[81]    The first step requires asking: “what is the alleged conduct?” and “does the evidence establish that the person engaged in the conduct?”. The third step considers what meaning that conduct conveyed to its intended audience. As in this case, where the pleaded conduct is said to amount to a representation, it is necessary to determine whether the alleged representation is established by the evidence. The fourth step is to ask whether the conduct in light of that meaning meets the statutory description of “misleading or deceptive or … likely to mislead or deceive”; that is, whether it has the tendency to lead into error. Each of those steps involves “quintessential question[s] of fact”.

[82]    The third and fourth steps require the court to characterise, as an objective matter, the conduct viewed as a whole and its notional effects, judged by reference to its context, on the state of mind of the relevant person or class of persons.148 That context includes the immediate context – relevantly, all the words in the document or other communication and the manner in which those words are conveyed, not just a word or phrase in isolation – and the broader context of the relevant surrounding facts and circumstances. It has been said that “[m]uch more often than not, the simpler the description of the conduct that is said to be misleading or deceptive or likely to be so, the easier it will be to focus upon whether that conduct has the requisite character”. That said, the description of the conduct alleged and identified at the first step should be sufficiently comprehensive to expose the complaint, because it is that conduct that will ultimately, as a whole, be determined to be or not to be misleading or deceptive.

136    See also Elanor Funds Management Ltd v Alceon Group Pty Ltd [2024] FCAFC 121 at [92] to [95] (Bromwich and Thawley JJ; O’Sullivan J agreeing).

137    As to the approach to be taken where misleading or deceptive conduct is alleged to have arisen by non-disclosure, Gilmour and White JJ in Addenbroke Pty Ltd v Duncan (No 2) [2017] FCAFC 76; (2017) 348 ALR 1 explained at 118 to 120 ([480] to [483]):

Misleading or deceptive conduct by non-disclosure

[480] Conduct is misleading or deceptive, or likely to mislead or deceive, if it has a tendency to lead into error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; 304 ALR 186; 96 ACSR 475; [2013] HCA 54 (TPG Internet) at [39]. The question of whether conduct is leading or deceptive is one of fact to be resolved by a consideration of the whole of the impugned conduct in the circumstances in which it occurred: Campbell at [102] (citing McHugh J in Butcher at [109], to which reference will be made later); and Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; 270 ALR 204; [2010] HCA 31 (Miller) at [14] (French CJ and Kiefel J).

[481] The High Court considered the principles concerning claims of misleading or deceptive conduct by non-disclosure in Miller. After referring to the statement of Gummow J in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 41; 110 ALR 608 at 619 that, “unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exits it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist”, French CJ and Kiefel J continued:

[20]    In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant, as in the present case, may be the existence of common assumptions and practices established between the parties or prevailing in the particular profession, trade or industry in which they carry on business. The judgment which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective. It is a practical approach to the application of the prohibition in s 52.

[21]    To invoke the existence of a reasonable expectation that if a fact exists it will be disclosed is to do no more than direct attention to the effect or likely effect of non-disclosure unmediated by antecedent erroneous assumptions or beliefs or high moral expectations held by one person of another which exceed the requirements of the general law and the prohibition imposed by the statute …It would no doubt be regarded as an unrealistic expectation, inconsistent with the protection of that “superior smartness in dealing” of which Barton J wrote in W Scott, Fell & Co Ltd v Lloyd, that people who hold things back for their own profit are to be regarded as engaging in misleading or deceptive conduct. As Burchett J observed in Poseidon Ltd v Adelaide Petroleum NL, s 52 does not strike at the traditional secretiveness and obliquity of the bargaining process. …

[22]    However, as a general proposition, s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence. …

(Citations omitted)

[482] On our understanding, the principles concerning misleading or deceptive conduct by non-disclosure or silence which emerge from the authorities and which are pertinent in the present appeal may be summarised as follows:

(a)    conduct involving silence or non-disclosure may, in some circumstances, constitute misleading or deceptive conduct;

(b)     in considering whether conduct is misleading or deceptive, silence or non-disclosure is to be assessed as a circumstance like any other;

(c)     mere silence without more is unlikely to constitute misleading or deceptive conduct. However, remaining silent will constitute misleading or deceptive conduct if the circumstances are such as to give rise to a reasonable expectation that, if some relevant fact does exist, it will be disclosed;

(d)    the existence or otherwise of such a reasonable expectation is to be determined objectively;

(e)     it is not possible to categorise all of the circumstances in which a reasonable expectation of disclosure may arise. Such circumstances may exist when either the law or equity imposes a duty of disclosure, when a statement conveying a half-truth only is made (see Winterton Constructions Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97; 111 ALR 649 at [75]), when the representor has undertaken a duty to advise, when a representation with continuing effect, although correct at the time it was made, has subsequently become incorrect, and when the representor has made an implied representation;

(f)    in considering whether a party engaged in commercial dealing may have a reasonable expectation that a fact, if it exists, will be disclosed, it is to be remembered that it will often be the case that one party to a commercial dealing has more knowledge about a relevant matter than the other and yet will not, in accordance with ordinary commercial expectations, be guilty of misleading or deceptive conduct in failing to make that knowledge known to the other.

[483] Ultimately, as indicated at the commencement of this reference to the principles, the determination of whether a failure to disclose a matter is misleading or deceptive requires an examination of all the circumstances. If in the circumstances, assessed objectively, a representee would have been entitled to expect or infer (have a reasonable expectation) that an undisclosed matter would be disclosed, that may well constitute misleading or deceptive conduct: Clifford v Vegas Enterprises Pty Ltd [2011] FCAFC 135 at [198].

E.2.3    Consideration

138    The impugned conduct is described at [133] above. It is common ground that such conduct occurred.

139    I am not satisfied that the impugned conduct was conduct “in trade or commerce”. It is alleged that Ms Shonoda engaged in such conduct in the course of providing security for the payment of the consideration referred to in the Deed, as a means of assisting her husband to dissolve the venture between himself and Mr Abdalla. This might be seen as tangentially connected with or in relation to trade or commerce being concerned with the dissolution of a partnership, as counsel for Mr Abdalla submitted, but it is not conduct “in” trade or commerce: see Concrete Constructions (NSW) Pty Limited v Nelson [1990] HCA 17; (1990) 169 CLR 594 at 603 (Mason CJ, Deane, Dawson and Gaudron JJ) and 614 (Toohey J).

140    This is sufficient to dismiss the claim under s 18 of the ACL. I will nevertheless deal briefly with whether the impugned conduct was misleading or deceptive.

141    I accept the first three propositions set out at [134] above. I accept the fourth proposition save for that which is parenthesised, as the evidence does not establish that Ms Shonoda was party to that agreement. I accept also the fifth to eighth propositions. However, I do not accept the ninth to eleventh propositions, for the reasons which follow.

142    As to the ninth and tenth propositions:

(1)    it is clear that Mr Hanna Snr had been in financial difficulty, that he owed approximately $250,000 to the ATO and that several judgments had been entered against him. It is also clear that Ms Shonoda was aware of the size of the debt owed by Mr Hanna Snr to the ATO;

(2)    however it does not follow that he was insolvent or that he was – as at the time of entry into the Deed – more likely than not to become bankrupt, much less that Ms Shonoda was aware of such matters. None of these matters have been made out on the evidence;

(3)    the fact that Mr Hanna Snr became bankrupt on 11 July 2017 does not provide a sufficient basis for the conclusion advanced by counsel for Mr Abdalla. Further, if one considers – as is necessary – the position as at the date of entry into the Deed:

(a)    Mr Hanna Snr was entitled to two of the four remaining units on the Hinchinbrook property, in circumstances where those units were unencumbered and other units located at the Hinchinbrook property had sold at prices in the range of $550,000 to $570,000;

(b)    I am not satisfied that Mr Hanna Snr would not have been supported financially by other members of his family if necessary; and

(4)    I accept Ms Shonoda’s evidence that she was not aware as at the time of entry into the Deed that Mr Hanna Snr would likely become bankrupt. In doing so, I take into account her evidence that she did not believe that the ATO would take the step of bankrupting Mr Hanna Snr over his taxation debt, together with the matters set out in the previous sub-paragraph.

143    As to the eleventh proposition, I am not satisfied that Ms Shonoda and Mr Hanna Snr were parties to a scheme by which Mr Hanna Snr was to divest his interest in the four units so that Mr Hanna Snr’s interest in the four units would not be available to his creditors. Again, the evidence does not establish what is a grave allegation, namely that Ms Shonoda and Mr Hanna Snr were involved in conduct designed to defraud Mr Hannah Snr’s creditors.

144    This is not to say that there was no evidence consistent with the proposition that Mr Hanna Snr intended as at the date of entry into the Deed to enter into bankruptcy in the near future. Recital B of the Deed expressly records that Mr Hanna Snr agreed to transfer his interest in units 16 and 21 and the Lawson property to Ms Shonoda. However, this is insufficient of itself to establish the requisite intention on the part of Mr Hanna Snr, or that Ms Shonoda had knowledge of it. Indeed, there is no reason to believe that Ms Shonoda had any greater knowledge of Mr Hanna Snr’s plans (if any) than Mr Abdalla did. After all, the Deed, including Recital B, was drafted by Mr Abdalla’s lawyers on the instructions of Mr Abdalla. Further, Ms Shonoda’s unchallenged evidence was that she did not know why Recital B had been included in the Deed and did not consider that it had effected any transfer of an interest held by Mr Hanna Snr to her.

145    Thus, I am not satisfied that Ms Shonoda was party to the scheme suggested by counsel for Mr Abdalla. It follows that I am not satisfied that Ms Shonoda had the alleged knowledge.

146    Thus, in summary, I accept that Ms Shonoda engaged in the impugned conduct and that she did so in circumstances where:

(1)    Mr Hanna Snr and Mr Abdalla were in partnership;

(2)    Ms Shonoda was aware of the partnership;

(3)    Mr Hanna Snr and Mr Abdalla were taking an account of their interests in the partnership so they could divide the ownership of the four remaining units at the Hinchinbrook property;

(4)    Mr Hanna Snr and Mr Abdalla agreed on the units that each would take;

(5)    Ms Shonoda gave an equitable mortgage under the Deed so that the division of ownership of the remaining four units could occur;

(6)    the equitable mortgage was part of a larger arrangement;

(7)    it was also part of the larger arrangement that each of Mr Hanna Snr and Mr Abdalla or their nominees would receive two of the remaining four units;

(8)    the purpose of the larger arrangement was for each of Mr Hanna Snr and Mr Abdalla or their nominees to receive good or clear title to two of the remaining four units; and

(9)    Ms Shonoda did not have the alleged knowledge.

147    That Ms Shonoda did not have the alleged knowledge is a highly relevant aspect of the circumstances and context in which the characterisation of the impugned conduct is to be undertaken: see Elevate NSW Pty Ltd v Canada Bay Private Hospital Pty Ltd [2019] FCA 1248; (2019) 138 ACSR 186 at 202 to 203 ([88] to [90]) (Griffiths J) and the authorities cited at 203 [88]. Indeed, I regard it as fatal to Mr Abdalla’s claim that Ms Shonoda engaged in conduct that was misleading or deceptive.

148    Further, I am not satisfied – if, contrary to the above conclusions, Ms Shonoda did have the alleged knowledge – that the circumstances required that she disclose the alleged knowledge to Mr Abdalla. There can have been no reasonable expectation of such disclosure in all of the circumstances. In particular, she was not in a business relationship with Mr Abdalla, nor was she a party to a contract with him, and the communications that they had had did not extend beyond pleasantries (save perhaps for the email set out at [30] above which she sent on behalf of Mr Hanna Snr when he was ill). Further, Mr Abdalla’s evidence did not suggest that there was anything in their interactions that would have provided a reasonable expectation of disclosure.

149    It follows that I am also not satisfied that the impugned conduct was misleading or deceptive and Mr Abdalla’s claim that Ms Shonoda engaged in misleading or deceptive conduct must fail.

150    As Mr Abdalla’s case against Ms Shonoda fails in its entirety, it is unnecessary to consider Ms Shonoda’s claim of set-off.

F.    CONCLUSION

151    Mr Abdalla has succeeded in his claims against Jarvis and Andrew Hanna, but failed in his claims against Ms Shonoda. In view of the manner in which the proceedings were conducted and the various aspects that succeeded, failed or were withdrawn, it is appropriate to invite further submissions before making costs orders. I will make orders accordingly.

Associate:

Dated:    11 October 2024