New South Wales Supreme Court CITATION : El-Kazzi v Kassoum [2009] NSWSC 99 HEARING DATE(S) : 8, 9, 22 and 23 December 2008 JUDGMENT DATE : 4 March 2009 JURISDICTION : Equity Division JUDGMENT OF : Ward J at 1 DECISION : Plaintiffs' claim dismissed. CATCHWORDS : CONTRACTS – general contractual principles – parties – identification of parties – whether plaintiffs are parties to loan agreement as lender – plaintiffs carrying on business under business name registered in the name of a third party – loan agreement describes lender by business name – held that plaintiffs are parties to loan agreement as lender – parties intended lender to be whomever was actually carrying on business under business name - REAL PROPERTY – Torrens title – indefeasibility of title – exceptions – fraud – whether plaintiffs' equitable charge over property survived transfer to defendants – whether transfer affected by equitable and/or statutory fraud – whether a colourable sale intended to deprive plaintiffs of benefit of equitable charge over property – held that there was no equitable or statutory fraud. LEGISLATION CITED : Business Names Act 2002 Real Property Act 1900 CATEGORY : Principal judgment Asset Co Ltd v Mere Roihi [1905] AC 176 Australia & New Zealand Banking Group Ltd v Barns (1994) 13 ACSR 592 Avco Finance Services Ltd v White [1977] VR 561 Bahr v Nicolay (No 2) (1988) 164 CLR 604 Bank of South Australia Ltd v Ferguson (1998) 192 CLR 248 Barrier Wharfs Limited v W Scott Fell & Co Limited (1908) 5 CLR 647 Bassett v Nosworthy (1673) 23 ER 55 Black v Garnock (2007) 230 CLR 438 Breskvar v Wall (1971) 126 CLR 376 Butler v Fairclough (1917) 23 CLR 78 Cradoch v Scottish Providence Institution (1893) 69 LT 380 Double Bay Newspapers Pty Ltd v Air Holdings (1996) 42 NSWLR 409 Earl of Chesterfield v Janssen (1751) 2 Ves Sec 12 Elderly Citizens Homes of SA Inc v Balinaves (1988) 72 SASR 210 Farah v Say-Dee (2007) 230 CLR 89 Film Bars Pty Limited v Pacific Film Laboratories Pty Limited (1979) 1 BPR 9251 CASES CITED : Heggies Bulkhaul Limited v Global Minerals Australia Pty Limited (2003) 59 NSWLR 312; [2003] NSWSC 851 Hope v Hope [1977] 1 NZLR 582 J & H Just (Holdings) Pty Limited v Bank of New South Wales (1971) 125 CLR 546 Miller Associates (Australia) Pty Ltd v Bennington Pty Ltd [1975] 2 NSWLR 506 Mills v Stokman (1967) 116 CLR 61 Montagu v Earl of Sandwich (1885) 32 Ch D 525 Oertel v Hordern (1902) 2 SR (NSW) Eq 37 Person to Person Financial Services Pty Ltd v Sharah [1984] 1 NSWLR 745 Pethybridge v Stedikas [2007] NSWCA 154 Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd (2007) 64 ACSR 31 Press v Mathers [1927] VLR 326 Re Johnson & Anor; Ex parte Greendale Engineering and Cables Pty Ltd (1968) 11 FLR 335 Re Price (1931) 26 TasLR 158 Stuart v Kingston (1923) 32 CLR 309 Swiss Bank v Lloyds Bank [1982] AC 584 Torrens Re-Development & Research Pty Ltd v Oakworth Developments Pty Limited [2008] NSWSC 1096 Waimiha Sawmilling Co v Waione Timber Co [1926] AC 101 Waitomo Wools (NZ) Limited v Nelsons (NZ) Limited 1 NZLR 484 TEXTS CITED : Fisher and Lightwood's Law of Mortgage, 2nd Australian Edition Sykes, The Law of Securities, 5th ed Charbel El-Kazzi (First Plaintiff) PARTIES : Walid Estephan (Second Plantiff) Peter Kassoum (First Defendant) Labibe Kassoum (Second Defendant) FILE NUMBER(S) : SC 5709/06 COUNSEL : M W Young (Plaintiffs) G George (Defendants) SOLICITORS : Bransgroves (Plaintiffs) Pateman Legal (Defendants) - 67 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WARD J WEDNESDAY 4 MARCH 2009. 5709/06 CHARBEL EL-KAZZI & ANOR V PETER KASSOUM & ANOR Hearing dates 8, 9, 22 and 23 December 2008. JUDGMENT 1 In these proceedings the plaintiffs, Charbel El-Kazzi and Walid Estephan ("El-Kazzi/Estephan") seek a declaration that they have an equitable mortgage (or equitable charge) over real property contained in Folio Identifier 11/66326 known as 707 Punchbowl Road, Punchbowl ("Punchbowl property") or, in the alternative, compensation for equitable fraud and an order that the obligation to pay equitable compensation constitute a charge over the land. 2 The defendants, Peter and Labibe Kassoum ("the Kassoums"), as joint tenants, at all relevant times held a half share of the Punchbowl property, that half share held as tenants in common with the owners of the remaining half share (Khalil Moujalli, the brother of Labibe Kassoum, and his wife Laila Moujalli ("the Moujallis")). On 23 August 2006 the Kassoums obtained the remaining half interest in the Punchbowl property by way of a transfer to them, as joint tenants, from the Moujallis for consideration in the sum of $325,000. 3 El-Kazzi/Estephan allege that the transfer (and its registration) was a deliberate attempt by the Kassoums to rid the Punchbowl property of an equitable charge which El-Kazzi/Estephan held over the property and that this amounted to statutory and/or equitable fraud. 4 The Moujallis and the Kassoums are closely related. The Moujallis have for some months been living in the Kassoums' home and appear to have had considerable assistance from the Kassoums' son-in-law (Mr Peter Ghaleb) in obtaining legal advice at the time their own home was repossessed. The Kassoums confirmed that the Moujallis were in Sydney at the time of the hearing. There is nothing to suggest that they could not have been called to give evidence by the Kassoums. (Indeed, affidavits were filed on their behalf which were ultimately not read.) I can therefore only assume that nothing the Moujallis could have said about the loan would assist the Kassoums. Background facts 5 In 1995 the Punchbowl property was purchased by the Kassoums and the Moujallis. On the land is a two storey property zoned for business use. For some time the Moujalli and Kassoum families together operated a fruit shop from one of a number of shops located at the Punchbowl property. There are currently three ground floor retail shops (two of which are occupied by the fruit shop) and five office suites on the first floor. 6 In 1995, Peter Kassoum sold his share of the fruit shop business to Khalil Moujalli. However, the Kassoums retained their half share interest as registered proprietors in the Punchbowl property and continued to derive rental income from the property. Loan 7 On 9 July 2004, the Moujallis signed a document titled "Loan Agreement – with Guarantee" ("Loan Agreement") recording their agreement to the making of a loan to them in the sum of $160,000 by a lender identified as "Kulnura Finance". Although the Loan Agreement made provision for one, there was no guarantor identified in the Schedule to the Loan Agreement. 8 Under the terms of the Loan Agreement, the sum of $160,000 was to be advanced for a period of three months at an interest rate of $5,000 per month. The loan was therefore repayable in October 2004. The primary security for the loan was a mortgage over land owned by the Moujallis at Greenacre. It is accepted that this loan remains outstanding in full. 9 Clause 12 of the Loan Agreement provided for additional security by way of a charge in favour of the lender over all the Moujallis' "separate right title and interest to all real estate" then held or later acquired by them. In its terms clause 12 provided: 12 Charged Property As additional security for the due and punctual payment of all amounts due under the Loan Agreement and to ensure compliance with all covenants to be performed by the borrowers, the borrowers as beneficial owners do hereby charge in favour of the lender all the separate right title and interest to all real estate held or hereafter to be held by them and consent to a caveat or other registration instrument being lodged to register such charge. 10 Insofar as clause 12 contains consent to the registration of a charge, it would seem that the parties may have contemplated that something more than an equitable charge might be created. If so, and if clause 12 encompasses an agreement to grant a legal charge over the property, it would amount to an equitable mortgage, as was initially claimed in the pleadings. However, in the end I think nothing turns on this. 11 A number of disputes have arisen in relation to the loan the subject of the Loan Agreement: first, as to who made the loan; secondly, as to whether the loan was made to the Moujallis; and thirdly, as to whether the loan was in fact for the sum of $160,000. Who made the loan? 12 The Loan Agreement states that the lender is Kulnura Finance and names Kulnura Finance as the party to the agreement. There has never been a separate legal entity known as Kulnura Finance. Rather, Kulnura Finance was, for the period 24 October 2003 to 24 October 2006, a registered business name (BN 980 13597) (see Ex A p 207). 13 The business name search describes the current business status of the name as "ceased". It was submitted by Counsel for the Kassoums (Mr George) in his opening that El-Kazzi/Estephan, in prosecuting a claim under a Loan Agreement in the name of Kulnura Finance, could not say that they were not now carrying on business under that name (which, as the name is unregistered, would be a contravention of the Business Names Act 2002) and therefore these proceedings should not be continued unless that contravention was remedied. I was informed by Counsel for El-Kazzi/Estephan (Mr M W Young) that they are no longer carrying on business as Kulnura Finance. I understood Mr Estephan to confirm this. 14 Institution or the maintenance of proceedings to recover a debt (here, incurred some time ago when the business name was registered) is not of itself "carrying on business" (s 3(2) Business Names Act). I saw little utility in making an order (as I was invited to do) that the business name be re-registered solely for the purpose of conducting the proceedings, nor is it necessary having regard to s 3(2) of the Act, and I declined in the exercise of my discretion to do so. 15 The business names search in evidence before me disclosed that over that period there were three persons carrying on business under that name, though at different times: Darryl John Cooper as of 24 October 2003 to 21 December 2005; and then, for the period 21 December 2005 to 4 October 2006, each of El-Kazzi/Estephan. Accordingly, at the time of entry into the Loan Agreement, Mr Cooper was the only person disclosed in the Business Names Register as the person carrying on business under the name of Kulnura Finance. The Kassoums submitted that El-Kazzi/Estephan had no standing to make any claim. 16 Mr Estephan's evidence was that it was he who "actually registered that name with Darryl Cooper". He said this was for the reason that he was doing a bit of short term lending at the time with his own money and did not want it to be known that he was the one providing the money (as he said people would then have been treating him differently) (t/s 5 June 2009 p 8). Mr Estephan gave evidence that he had engaged in the practice of making short term loans, sometimes out of his own funds (having a loan book at the relevant time of somewhere in the order of $200,000 or $300,000) and sometimes out of funds provided by "investors" (such as his uncle, Mr El-Kazzi). Mr Estephan also gave evidence that his uncle, Mr El-Kazzi, put in money with him to lend to various people. 17 In a line of cases extending back to the judgment of Dixon AJ (as his Honour then was) in Press v Mathers [1927] VLR 326, it has been held that a register of business names (or, in the case of Press v Mathers, of firm names) is not conclusive of who is in fact carrying on business under that name and subject to any liability incurred in the course of that business. 18 In Re Johnson & Anor; Ex parte Greendale Engineering and Cables Pty Ltd (1968) 11 FLR 335 Gibbs J (as his Honour then was) set out the reasoning underlying those decisions: In argument before me particular reliance was placed on s 5(1) of the Act, and it was submitted that since a person is forbidden to carry on business under a business name unless the business name is registered in relation to that person and each other person in association with whom that person is so carrying on business, the fact of registration involves a representation to the whole world that the persons whose names are registered are carrying on the business under the business name. It may be true that such a representation is made to the world by a person whose name is registered under s 5, or, pursuant to a notification of change in persons in relation to whom a business name is registered, under s 12. However in the present case the petitioning creditor did not learn of the representation or alter its position on the faith of it. The Business Names Act does not provide that such a representation is to be conclusively taken as true; indeed, the register is only prima facie evidence of matters contained in it — s 24. The doctrine of estoppel does not apply, and there is nothing in the Business Names Act that imposes liability upon the debtors for transactions carried out under the business name, but with which the debtors had nothing to do. 19 Conversely, it seems to me that there is nothing in the Act that compels the conclusion that persons in fact entering into transactions under a particular (registered) business name, but who are not themselves persons in relation to whom the business name is registered, cannot assert rights arising under those transactions. 20 The real question is who are the parties to the contract comprised by the Loan Agreement. In Pethybridge v Stedikas [2007] NSWCA 154, Campbell JA said: Identification of the parties to the contract must be made in accordance with the objective theory of contract: Ryledar Pty Ltd & Anor v Euphoric Pty Ltd [2007] NSWCA 65 at [262]–[266] and cases there cited. It was the Respondent who bore the legal onus of proving that the Appellant was the other party to the contract that had undoubtedly been entered for the performance of the work on the two carparks. It was relevant, for that purpose, to establish who was carrying on business under the name C & D Asphalt Service . That is because the correct conclusion to draw from the objective evidence is that a reasonable observer of the communications that led to the entering of the contract, together with the background facts known to the parties, would conclude that the parties intended that the contract would be with whomever it was that was carrying on business under the name C & D Asphalt Service . It is the effect of s 24 Business Names Act 1962 that, if there had been no other evidence on the topic, tender of the extract from the Business Names Register would have been sufficient to establish that it was the Appellant who was carrying on business under the name C & D Asphalt Service . A principle that can be drawn from Press v Mathers, Re Johnson, Re ABC Plastik and Aikman v Brown is that, once it has been proved who is carrying on business under a particular business name, the evidence leading to that conclusion may overcome the merely prima facie evidence that arises from s 24 Business Names Act 1962. (My emphasis) 21 Here, the evidence from Mr Estephan (uncontested by any evidence from the Moujallis) was that he and Mr El-Kazzi were carrying on business under the name Kulnura Finance when he signed the Loan Agreement with the Moujallis. If accepted, this would overcome any inference otherwise arising from the Business Names Register. 22 Mr Estephan's evidence in that regard is supported by a note of a later meeting with the Moujallis (or at least Mr Moujalli) in which a loan from "Charbel" is recorded as one of the Moujallis' debts which they were seeking to refinance (Exhibit B). 23 There is a question as to whether it is permissible to have regard to evidence of subsequent communications for the purpose of determining the parties to a contract. 24 In Pethybridge, Campbell JA discussed the issue as follows, though it was not there necessary for his Honour to decide the point: There was some argument about whether it was permissible to have regard to subsequent communications for the purpose of deciding with whom the contract was entered. The present state of the law throughout Australia on whether and if so when it is possible to use post-contractual conduct as an aid to construction of the contract is not yet settled: see the authorities cited in Cheshire and Fifoot's Law of Contract, 8th Australian edition, p 392–393 ; Cross on Evidence, 7th Australian edition, para [39290]; Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 186 ALR 289 at 318 [109], per Kirby J. The more restrictive view, favoured in this Court, is that subsequent communications cannot be looked to as an aid to construction of a contract, but can be looked to as an aid to deciding whether a contract has been entered into at all: Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 163–164; [2001] NSWCA 61 at [25]–[26]; Magill v National Australia Bank Ltd (2001) Aust Contract R 90-131 at 91,609–91,610, [2001] NSWCA 221 at [50]–[53] per Ipp AJA (with whom Meagher and Heydon JJA agreed); Walker v Andrew (2002) 20 ACLC 1476 at 1483–1484 , 116 IR 380 at 388, [2002] NSWCA 214 at [39]; Independent Timber Importers v Mercantile Mutual Insurance (2002) 12 ANZ Ins Cas 61-543 at 76,367, [2002] NSWCA 304 at [17]; El-Mir v Risk [2005] NSWCA 215 at [66]. It was argued that, in the present case, even on that more restrictive view, it is permissible to look to the subsequent communications, because the question of whether the contract was entered into with the Appellant, or with Torpoint, is, in substance, no different to a question of whether there was a contract entered into with the Appellant at all. It is not necessary to form a view about the correctness of the argument I have just mentioned. That is because, even if one did look to the subsequent communications, they would not lead to any different conclusion. 25 It my view it would be permissible here to take into account the subsequent communications between the Moujallis and Mr Estephan in relation to the "Charbel" loan, for the reason that the communications in late 2005 appear to amount to an acknowledgement not just of the debt but also the entity or person to whom it was owed (Film Bars Pty Limited v Pacific Film Laboratories Pty Limited (1979) 1 BPR 9251; Barrier Wharfs Limited v W Scott Fell & Co Limited (1908) 5 CLR 647 at 668-9, 672). However, it is not necessary to rely on the subsequent communications as the conclusion I have drawn from the evidence of Mr Estephan (and the absence of any contrary evidence from the Moujallis) in relation to the circumstances in which the loan was made is that El-Kazzi/Estephan were the persons in fact making the loan to the Moujallis in the name of "Kulnura Finance" in this transaction. 26 The Loan Agreement was signed for and on behalf of Kulnura Finance by Mr Estephan, who was described as "Director – Wally Estephan". It seems to me that there is a further potential issue (although this was not argued before me) arising from the manner in which the Loan Agreement was executed; namely as to whether (to use the language of Campbell JA) the intention of the parties, objectively ascertained, was that the lender was to be whomever was actually carrying on business under the name Kulnura Finance at the time or whether the lender was to be a corporate entity known as Kulnura Finance. 27 If the latter, ie the parties had intended the contract to be with a corporate entity, then the Loan Agreement would be a nullity. A "contract" where the alleged principal is either non-existent or unable to be bound by the signatory (and unless the signatory becomes personally bound) is of no effect (Miller Associates (Australia) Pty Ltd v Bennington Pty Ltd [1975] 2 NSWLR 506; Australia & New Zealand Banking Group Ltd v Barns (1994) 13 ACSR 592; Torrens Re-Development & Research Pty Ltd v Oakworth Developments Pty Limited [2008] NSWSC 1096). 28 The fact that Mr Estephan purported to sign as a director, rather than as a principal, might suggest that a corporate entity was intended to be the lender. However, there was no ACN reference in the document nor do the terms of the agreement (or the execution clause itself) suggest that the parties intended the contracting party be a company (as opposed to the parties standing behind or trading under a business name). The absence of any evidence from the Moujallis as to the circumstances in which the agreement was entered into, coupled with the evidence as to the subsequent acceptance of the debt by the Moujallis (see Ex B), leads me to conclude that the parties' intention was that the Moujallis would enter into the Loan Agreement with whomever was carrying on business under the name Kulnura Finance at the relevant time (that being El-Kazzi/Estephan). 29 I am satisfied that (despite the fact neither Mr El-Kazzi nor Mr Estephan was recorded on the Business Names Register as the person(s) carrying on business under that name at the relevant time) when Mr Estephan entered into the Loan Agreement with the Moujallis in the name (and purportedly as director) of Kulnura Finance he did so (and was understood by the Moujallis as having done so) on his own behalf and on behalf of Mr El-Kazzi and that El-Kazzi/Estephan are the persons with the rights and benefits under, and now in a position to enforce, that Loan Agreement. Was the loan made to the Moujallis? 30 In the Kassoums' outline of submissions dated 4 June 2008, it was submitted that there was some evidence that the loan was not a loan to the Moujallis at all but, rather, a loan to their son, Fred. However, I saw no evidence to warrant such a finding. Mr Estephan gave evidence that he handed the loan sum (by cheque and cash) to Mr Fred Moujalli. However, he did so at the Moujallis' fruit shop (where the Moujallis carried on business). There is nothing to suggest that the Moujallis did not sign the Loan Agreement; and, significantly, neither of the Moujallis gave evidence (nor did I see any evidence of any assertion by them in any written correspondence to that effect) that he or she did not sign the Loan Agreement or did not receive the sum advanced (whether or not the sum was delivered via Fred), even though the Moujallis are closely associated with the Kassoums and could have done so had that been their position. 31 It was suggested to Mr Estephan that in fact this was the same advance as that (for $169,000) in respect of which a Mr Zeyad El-Azzi subsequently lodged a caveat over the Punchbowl property. That, too, was denied by Mr Estephan. There is evidence (Ex B) which supports Mr Estephan's contention that the Moujallis accepted there were in fact two separate loans: one from El-Kazzi/Estephan and one from El-Azzi. Mr Estephan said he brokered this loan and Mr El-Azzi and Mr Estephan were family friends. Ex B, is a handwritten note by Mr Estephan taken at a meeting with at least Mr Moujalli in December 2005, recording the various sums or debts Mr Moujalli was looking to refinance, or pay out, at that time. The sums noted on the document, according to Mr Estephan, represent the discount (if any) at which Mr Moujalli was hoping to settle debts at that time (there being a figure of $140,000 against the "Charbel" loan). 32 Finally, and it is not clear to me how this was relevant, it was suggested that the money was advanced to refinance the Moujallis' debts at that stage. Mr Estephan denied this; said there was no debt at that stage; and gave cogent evidence as to the purpose of the $160,000 loan, namely that the $160,000 loan was to provide construction finance in respect of a property the Moujallis had acquired in Belfield; the money being advanced only on approval of a DA (on 8 July 2004) for construction; and that the later advance of $169,000 by Mr El-Azzi (which Mr Estephan brokered in his role of finance broker) was also for the purpose of construction finance. This is consistent with Exhibit B, which ascribed separate amounts to each of "Charbel" and to El-Azzi under the heading "Belfield". How much was in fact advanced? 33 The evidence given by Mr Estephan was that the sum of $160,000 was advanced as to $150,000 by a cheque drawn from Mr El-Kazzi on a Homeside Lending account with the National Australia Bank and as to $10,000 by way of cash from himself. In evidence (Ex C) was a cheque butt bearing the date "09/07/04" and the annotation "Moujalli $150,000", together with a copy of an account balance summary showing a debit from an account in the names of Jean Boustany, Omaima Baz and Charbel El-Kazzi in that same amount. Mr Estephan gave evidence that Mr El-Kazzi's account had a line of credit split between those three people and this was the account on which Mr El-Kazzi was working at the time. I was informed that Mr Boustany is Mr El-Kazzi's brother-in-law. I am not aware of the connection between those persons and Mr Baz. 34 There was no bank or other record produced in relation to the cash component of the advance. Mr Estephan was not sure whether he had drawn this out of one of his accounts or if it had been drawn from cash he kept in his safe at home. (His evidence was that he liked saving money in his safe and that as at July 2004 he kept about $30,000/$40,000 in cash there.) 35 Mr Estephan obtained no receipt for any part of the $160,000 advanced. His evidence was that he dropped off the cheque and cash at the fruit shop in Punchbowl and gave it to the Moujallis' son, Fred Moujalli. 36 It was put to Mr Estephan that only $150,000 was in fact advanced to the Moujallis, the balance of $10,000 being retained by him. While the manner in which Mr Estephan rejected that proposition was somewhat casual ("No, I don't think so"), that seemed to be the manner in which generally he gave his oral evidence. Mr Estephan's attitude to the making (and later recovery) for a not insignificant sum of money itself seemed quite casual (for example, in response to one question as to where the cash had come from he said, "I'm not sure. From one of the other loan accounts or wherever I had money lying around"). El-Kazzi/Estephan in fact later claimed for only three months' interest on the loan which, on its face, had been outstanding for a considerably longer period. This is perhaps explicable by the fact that this was a loan to people (the Moujallis) with whom Mr Estephan says there had been a 25 year family friendship (albeit one which Mr Estephan says was ruined by the events which occurred). 37 There is no evidence to support the contention advanced by the Kassoums, which seemed at best to be speculation. As already noted, neither Khalil nor Laila Moujalli gave evidence in the proceedings to deny receipt of the whole of the sum of $160,000. 38 Ex B (which seems to confirm that one or both of the Moujallis accepted that a loan had been made to them by "Charbel" of at least $140,000) takes the matter no further in this regard as it does not correspond to the $150,000 cheque amount, so is equally consistent with the loan being for the full $160,000 or for the lesser amount described in the note. As there is no doubt that a sum of $150,000 was withdrawn by cheque made payable to the Moujallis (and later debited from Mr El-Kazzi's joint account), the reference to a lesser sum in Ex B does not lead me to conclude that $160,000 was not in fact the amount received by the Moujallis as provided for under the Loan Agreement and as asserted by Mr Estephan. Conclusion re loan 39 I am satisfied that on or about 9 July 2004 El-Kazzi/Estephan advanced the sum of $160,000 to the Moujallis in accordance with and on the terms of the Loan Agreement signed by the Moujallis and signed by Mr Estephan in the name of Kulnura Finance (though incorrectly describing himself as a director). 40 I do not accept the submission for the Kassoums that an assignment of the chose in action represented by the rights under the Loan Agreement from Mr Cooper to El-Kazzi/Estephan would be required in order for the latter to have the benefits provided, inter alia, under clause 12 of the Loan Agreement. Caveats 41 Although there was provision under the Loan Agreement whereby the Moujallis acknowledged that the lender could lodge a caveat in respect of the charge (clause 12), no caveat was lodged by or on behalf of El-Kazzi/Estephan over the Punchbowl property until 12 May 2005. Even then, that caveat described the estate or interest claimed in the land as "Judgment obtained in the District Court 12 April 2006" following the filing of a writ to be recorded on the land pursuant to a (default) judgment obtained 12 April 2006 for $199,475.16. 42 The caveat, as filed, did not disclose an interest in the land (s 105 Real Property Act; Black v Garnock (2007) 230 CLR 438 – an interest arising under a writ for levy of property does not give rise to an interest in land). 43 Meanwhile, two caveats had been lodged on the title of the Punchbowl property – the first by Mr El-Azzi and the second by Mr Tom Powers, each claiming an interest arising in respect of other loans made to the Moujallis. There was some suggestion that at least the El-Azzi loan had been fraudulently obtained by Fred Moujalli. However, there was no evidence before me as to any challenge made by the Moujallis in respect of any of those loans. 44 The caveat lodged by Mr El-Azzi on or about 5 November 2004 claimed an equitable interest pursuant to a Loan Agreement dated 5 November 2004, under which Mr El-Azzi advanced the sum of $169,000. The El-Azzi loan agreement was in the same form as the Loan Agreement (and presumably prepared by Mr Estephan since Mr Estephan had brokered the loan). 45 The caveat lodged by Mr Powers on or about 4 May 2005 claimed an interest in the Punchbowl property by way of an equitable mortgage. The principal amount advanced by Mr Powers on 2 March 2005 was $1,160,000.00, with interest accruing monthly at $21,266.67 (although there was provision for a default rate of interest). Mr Powers does not appear to have had any connection with Mr Estephan. Moujallis' financial difficulties 46 It is submitted for the Kassoums that it may be inferred that by mid to late 2005 the Moujallis had concerns as to their financial position. I accept that this was the case. In mid 2005, Mr Powers commenced proceedings in this Court (2614/05) against the Moujallis, the Kassoums and other members of the Moujalli family seeking orders, among others, for the sale of the Punchbowl property. The Kassoums were joined to the proceedings presumably as interested parties, since an order was sought for the compulsory sale of the Punchbowl property, but no claim was made over the Kassoums' half share as such. The debt claimed by Mr Powers was for a significant sum. 47 On or about 30 June 2005, agreement was reached between Mr Powers, on the one hand, and the Moujalli and Kassoum defendants in the Supreme Court proceedings, on the other hand, under which certain payments were required to be made to Mr Powers in accordance with the deed and the mortgage was to be discharged on or before 2 October 2005. 48 Under the deed (Ex A Tab 8) Mr Powers was to hold in escrow certain consent orders (which had been signed by the defendants) for possession and sale of various properties (including the Punchbowl property). Mr Powers was not to file the consent orders unless and until there was default under the terms of the deed. Upon the sums, as defined, being paid, Mr Powers was to execute terms of settlement/consent orders to dismiss those proceedings (and another set of proceedings 11419 of 2005). 49 Mr Kassoum says that Mr Moujalli asked him to sign the Powers' deed (or the consent sale orders) and said words to the effect that if Mr Kassoum signed it and lost anything, then Moujalli would sell his house and refund the money for him. Mr Kassoum appears to have thought (or said he was advised by his then solicitor) that if he wanted to keep the Punchbowl property he had to sign the deed (a proposition which seems legally untenable though from a practical view might have been supportable if what was intended was that otherwise the property would be sold). Be that as it may, from the above it is clear that as at June 2005, the Moujallis must have been concerned about their financial position and the Kassoums were on notice that the Moujallis were in financial difficulties. 50 From the time the consent orders were signed (or perhaps from the time Mr Powers or his solicitors first commenced to take steps to obtain possession of the Punchbowl property pursuant to the consent orders), Mr Kassoum and his son-in-law, Mr Ghaleb, appear to have assumed that Mr Powers was the effective owner of the Punchbowl property (even though the Kassoums remained entitled to their one half share unencumbered by any interest of Mr Powers). This may explain why Mr Ghaleb appears to have taken a primary role, at least by December 2005, in seeking to negotiate with Mr Powers (through Mr Powers' lawyer, David Milne) a basis on which Mr Powers might defer exercising a writ of possession obtained by him in respect of the Punchbowl property and might be prepared to accept payment to forego his rights to the Moujallis' half share of the Punchbowl property if it were to be transferred to the Kassoums. 51 It would appear that the Moujallis defaulted on repayments due under the Powers' deed of settlement in October 2005 and that Mr Powers then commenced the process of enforcing his rights under the deed to lodge consent orders for possession of the various mortgaged properties. 52 Mr Estephan gave evidence that he saw the Moujallis in or about October 2005, after they came back from a trip to Lebanon, at which he became aware that there was an issue between the Moujallis and their son, Fred, and at which they asked Mr Estephan to refinance their property in Punchbowl in order to repay the $160,000 loan. According to Mr Estephan, he took steps to prepare the refinancing (apparently on a basis which was to involve the Kassoums) in the course of which he obtained "100 point identification" for Mr Kassoum, but that the refinancing did not proceed when the Moujallis found out there were other debts accumulated from other people. (From that, it would appear that Mr Estephan must have had this meeting at or before the time of the meeting in or about December 2005 which led to the creation of Exhibit B.) 53 Mr Kassoum, for his part denied any knowledge of the refinancing and maintained that the identification evidence was obtained without his knowledge or consent. He suggested that it had been obtained from his accountant (although it seems unlikely that an accountant, if acting properly in accordance with his or her duties, would have provided such information without client consent). 54 It is accepted that a meeting took place between the Moujallis and Kassoums in or about October/November 2005 (again, placed as being at a time after the Moujallis returned from their trip to Lebanon) at or about which time it seems clear that the Kassoums learned in more detail the then extent of the Moujallis' financial problems. 55 Both Mr Kassoum and Mr Ghaleb in evidence accepted that by 2006 they knew of the $160,000 El-Kazzi/Estephan loan (although there was some dispute as to when they first heard of it – whether in mid or late 2005). Evidence of the Kassoums 56 Mrs Kassoum gave evidence that she cannot read or write English. She was upset and embarrassed in the witness box by her illiteracy. The only relevance of this is that I treat Mrs Kassoum's affidavit evidence with some caution as it was expressed in terms which I think it very unlikely Mrs Kassoum would herself have used. I accept Mrs Kassoum's evidence that over the course of her 50 year marriage she left all business or financial matters to her husband and that she signed the various documents in evidence that bore her signature without knowing in any detail or at all what they were, doing so on the basis that she accepted and trusted her husband. 57 Mr Kassoum's English was better than that of his wife, but he was still not sufficiently fluent to be able to give all his evidence without the assistance of an interpreter. Again, this suggests that I should treat his affidavit evidence with some caution. 58 Mr Kassoum, in the witness box, accepted that he was made aware at all times what Mr Ghaleb was doing in relation to the negotiations in respect of the Punchbowl property. In particular, Mr Kassoum said that a letter written by Mr Ghaleb in July 2006 to Mr Powers, set out what he (Mr Kassoum) knew about everything (although it seems unlikely that he had reviewed the letter in any detail, if at all, as opposed to being told about it by Mr Ghaleb). 59 Insofar as any necessary knowledge or intention is concerned, I accept Mr Young's submission that Mrs Kassoum should be taken to have the knowledge/intention of her husband and that Mr Ghaleb's knowledge can in turn be imputed to each of the Kassoums, as their agent. Sale of Moujallis' interest in Punchbowl property 60 After the October/November 2005 meeting, the Kassoums consulted Mr Ghaleb and a solicitor (Patrick Sattout) "to see what we can do to protect our share in the Punchbowl property". 61 Mr Ghaleb was involved in communications with Mr Powers or his solicitor in December 2005 with a view to persuading Mr Powers to withdraw his caveat over the Punchbowl property so as to permit the transfer to the Kassoums of the half share held by the Moujallis. 62 Presumably, therefore, there must have been a discussion between the Kassoums (or Mr Ghaleb on their behalf) and the Moujallis in late 2005, whereby it was agreed that the Kassoums would acquire the Moujallis' half share in the Punchbowl property (otherwise Mr Ghaleb would have been unable to put forward a settlement proposition to Mr Powers on behalf of the Moujallis with any objective basis to expect such a proposal would be achievable). Given his connection with the Kassoums and, through them, the Moujallis, I infer that Mr Ghaleb conducted his discussions with Mr Powers with the authority not only of the Kassoums but also of the Moujallis. 63 By email dated 6 December 2005, Mr Ghaleb wrote to Sheriff Cassab, a solicitor retained by the Moujallis (through, according to Mr Ghaleb's evidence, his own introduction) in relation to the preparation of a sale contract in which Mr Ghaleb writes, "I understand that you have already spoken to Patrick Sattout". It also refers to a $300 deposit (although in evidence Mr Kassoum and Mr Ghaleb seemed to agree that no deposit had been paid on the acquisition of the Moujallis' half share in the property). 64 By email dated 7 December 2005, Mr Ghaleb wrote on a "without prejudice" basis: What we are offering is whatever we get from the sale of Belfield and the value of Khalil and Leila's share in [Punchbowl], we think that is worth up to $500,000. and asked that Mr Milne request Mr Powers to accept the contract rate (of interest) and waive penalties. At that stage, Mr Ghaleb appears to have been writing on behalf of both the Moujallis and the Kassoums. 65 By email dated 8 December 2005, Mr Ghaleb wrote to Mr Milne referring to a possible payment "this month" from the Kassoums and added the following: Note: $500,000 should be available to you As soon as Kassoum gets finance 66 The email correspondence referred to above suggests that Mr Ghaleb was at that stage representing not only that the Moujallis' interest was worth up to $500,000, but also that the purchase price for the Moujalli interest would be $500,000. 67 In response, by facsimile transmission on 9 December 2005 (Ex A p 53) from David Milne and Associates, Mr Milne noted that orders for possession were filed in court and would take effect on 16 December. He went on to say that Mr Powers, subject to satisfying himself that the price for another property (Belfield) was "fair and reasonable", and payment of $500,000 being received by 31 December 2005 and a further $820,000 by 31 January 2006, would agree to stay execution of the writ of possession for the properties, including Punchbowl, until 31 July 2006. Mr Milne said that Mr Powers would revisit his position on 1 July 2006. 68 There followed a series of emails (Ex A p 65) between Mr Ghaleb and Mr Sattout (the Kassoums' solicitor) in relation to the steps for the preparation of a contract for sale between the Moujallis and the Kassoums. On 16 December 2005, Mr Ghaleb wrote to Sattout: The contract of sale punchbowl from Moujalli to Kassoum is just about ready. He is only waiting on the valuation of the shop. I am not sure, were you going to organise a valuer? Although this refers to a valuation of the "shop", it seems clear from the correspondence that the Moujallis and Kassoums understood that the price for the Moujallis' half interest was to be finalised by reference to a valuation of the property as a whole. 69 By email of 20 December 2005 (Ex A p 66), Cassab Legal wrote to Mr Ghaleb: Could you please advise whether the valuation has now been finalised and confirm the price with us. 70 Presumably, the need for a valuation was, at the very least, to satisfy Mr Powers of the reasonableness of the price to be paid for the Moujallis' half interest, just as he had wished to be satisfied that the price for the Belfield property was fair and reasonable. 71 The flurry of activity (and apparent urgency) relating to the preparation of the sale contract in December 2005 would appear to be due to a desire by Mr Ghaleb (and hence the Kassoums) to avoid the forced sale of the various properties by Mr Powers. Once agreement was reached in December 2005 for Mr Powers to forbear on the writ of execution until July 2006, the urgency seems to have been abated somewhat. 72 Interestingly, in the December 2005 communications, at least on the evidence before me, nothing appears to have been said by Mr Ghaleb to Mr Powers or Mr Powers' solicitor as to the Kassoums being willing to purchase the Punchbowl property only if there was clear title (notwithstanding that the El-Azzi caveat was also on the title by then) or that they were prepared only to pay $325,000 for the interest in the Punchbowl property (the December correspondence suggesting, rather, that Mr Powers might expect to obtain something up to $500,000 from the sale, based on whatever the valuation might turn out to be). 73 A valuation of the Punchbowl property was obtained from a G Adams of Sydney Valuation Services in January 2006. Mr/Ms Adams was not called to give evidence in the proceedings. The valuation in question was said to be issued "for stamp duty purposes" and the fair market value of the land (again said to be for "Stamp Duty Purposes") was assessed at $650,000 as at January 2006. 74 The Adams' valuation, dated 10 January 2006, appears to have been calculated solely on the capitalisation of actual (or, for part of the tenancies, potential) gross annual rental income for the premises, applying an 8% capitalisation rate. Mr Azar, the expert valuer whose later report was tendered at the hearing on behalf of the Kassoums, said that the capitalization rates used by Mr/Ms Adams were wildly out of the ball park of figures he would have considered appropriate. 75 The Adams' valuation, insofar as can be determined from its content, was based solely on current or estimated rentals for the subject property. Although reference is made to an "analysis of comparable sales and other relevant dates" no information is given as to what was taken into account by Adams or the methodology, if any, by which the capitalisation rate was adopted. I consider the Adams' valuation to be unreliable. I also note neither Mr Azar nor Mr Sorrenson suggested that he would be comfortable with someone relying upon a valuation of his to support a sale price some eight months later. 76 It was suggested that the fact that the valuation was sought for stamp duty purposes was something which might lead the valuer to adopt a lower figure for the property out of a range of possible values. Objection was raised to questions of this kind on the basis that no fraud on the State Revenue had been pleaded. Neither Mr Kassoum nor Mr Ghaleb accepted that this might be seen in effect as indicating to the valuer that a value at the lower end of an acceptable valuation range would be preferable (nor did Mr Ghaleb seem prepared to accept what common sense would surely suggest, namely that a purchaser acquiring at a price based on a valuation would be happier if the valuation was lower rather than higher). Neither did they accept that they had given instructions to the valuer to carry out the valuation "for stamp duty purposes". 77 Mr George submits that I can infer that the valuer was instructed by the Moujallis, since Sattout was their lawyer. However, other evidence suggests that Sattout was also from time to time (and perhaps even then) also the Kassoums' lawyer, so I am not sure that such an inference should be drawn. 78 That said, as there is no evidence that Mr Kassoum or Mr Ghaleb gave the instructions for the Adams' valuation, and as it purported on its face to be a valuation of "Fair Market Value" (albeit adding also that it was "for Stamp Duty Purposes"), I do not think any adverse inference should be drawn from the stated basis of valuation. 79 On 10 January 2006, the Kassoums applied to the National Australia Bank for a loan. Mr Ghaleb gave evidence that he prepared the loan application. He attributed an estimated market value of the owners' half share in the Punchbowl property of $400,000. This was, in effect attributing a value of $150,000 more to the overall value of the Punchbowl property than the Adams' valuation would have suggested (assuming, for present purposes, that a half share is worth 50% of the overall value – something which Counsel for the Kassoums, Mr George, submitted was not the case but that being a point on which both expert valuers seemed to disagree with him). 80 Mr Ghaleb's evidence as to when he received the Adams' valuation was unsatisfactory. He said first that he received it a few days after it was sent to the solicitor; then referred to a fax imprint on the copy document put before him in the witness box and asserted that he had received the document on 5 February 2007. When the likelihood of this was put to him (that date being over a year after the valuation and well after the actual transfer of the property), he conceded he was mistaken. While I accept that this was a mistake on Mr Ghaleb's part, I was left with the impression that he was keen to emphasise a lapse of time between receipt of the Adams' valuation and the application to the National Australia Bank, which I would infer was because he was conscious that the loan application (on the hypothesis that the Adams' valuation was correct) had overstated the Kassoums' interest considerably. 81 Mr Ghaleb gave evidence that he was "shocked" and "surprised" at the Adams' valuation. He said he thought it would have been $350,000 or $300,000 to $350,000. However, in December 2005 he seems to have been trying to persuade Mr Powers that it could be up to $500,000. I therefore did not find this evidence particularly convincing. 82 Mr Kassoum similarly could not remember when he received the valuation but accepted (which may or may not be the case) that he would have waited until he received the valuation before putting in the National Australia Bank loan application. Mr Kassoum's evidence as to the value of the Punchbowl property at that time ("What is the difference?") suggested that, at best, a cavalier attitude was taken to the estimation of value at that time, with a view to securing a bank loan in the desired amount. Mr Kassoum appeared prepared to accept that he had given an estimate of value calculated to enable him to obtain finance in the amount required (and suggested that "everybody" would have done that at some time). I can only assume from that evidence that as at January 2006, the estimate put by Mr Kassoum on the value of the Punchbowl property was a fairly arbitrary one. 83 The evidence is consistent with both Mr Kassoum and Mr Ghaleb considering, at the very least as at late December 2005 and probably also as at January 2006, that the Moujallis' half interest could be worth up to $400,000 and that they were relying on a value of that order to obtain bank finance for the acquisition. If a 70% loan to value ratio was adopted, this would tally with the $400,000 estimate proffered to the bank, since the amount lent by the bank in due course was $280,000. 84 By letter dated 20 February 2006, CPC Lawyers (it is not clear whether then acting for the Moujallis or the Kassoums) put forward a proposal in relation to the moneys owing to Mr Powers that encompassed the purchase by the Kassoums of the Moujallis' half share for $325,000; for that amount to be paid and/or released to Mr Powers in reduction of the debt owed by the Moujallis to him; and for the withdrawal of Mr Powers of his caveat. A six month period of grace was then sought to enable CPC Lawyers' client to ascertain "what situation the various court proceedings they intend to bring are at" or alternatively a refinancing of the outstanding loan. The letter further advised that Fred Moujalli and "the Broker Wally Estaphan [sic]" had been reported to the police (some four weeks before). This would again indicate that, by the end of January 2006, Mr Kassoum and Mr Ghaleb were aware that Mr Estephan had brokered at least one loan to the Moujallis which was still outstanding (Mr Estephan, of course, concedes that he acted as broker for the El-Azzi loan). 85 In March 2006, Mr Ghaleb was engaged in email correspondence with Mr Powers on behalf of Khalil Moujalli's brother, Aziz Moujalli, and his family in relation to a proposal that Mr Powers withdraw a caveat and release Aziz from any obligations in relation to his family home at West Ryde, noting that "you will still have the caveat on his and his brother's interests in Strathfield as well as The Fruit Shop". Mr Powers indicated he would accept such a proposal (though for a slightly higher payment than had been proposed) but reserved "the right to charge the full amount if your court case is successful against the solicitor [sic]". (It would seem that the court case to which reference was there made was action then contemplated by the Moujallis against Navado Lawyers regarding their entry into the "original mortgage" – (see Ex A p 87).) 86 Mr Ghaleb's evidence that he only helped the Moujallis in relation to the threatened repossession of their own home lacks credibility, given his apparent close involvement in negotiations on behalf not only of the Kassoums but also of Aziz Moujalli and his family and of the Moujallis themselves. For this and the reasons noted earlier, I did not find Mr Ghaleb to be a credible witness. 87 On 4 April 2006 (Ex A p 89) Mr Ghaleb was advised by the National Australia Bank that a business loan of $280,000 had been approved for the Kassoums with loan documents to be ready for execution on 6 April 2006. 88 Mr Ghaleb then proceeded to negotiate with other solicitors apparently acting for the Moujallis in relation to the proposed removal of the El-Azzi caveat on the Punchbowl property. By email on 6 April 2006 Mr Ghaleb referred to an agreement by the Kassoums "who are purchasing the shop" [ie the Punchbowl property] "and have agreed to pay El-Azzi $95-$100 [presumably $95,000 - $100,000] to remove the caveat." That email went on to state: El-Azzi has no caveatable interest in the Kassoums properties. The original caveat on the shop was a forgery, however, both khalil and Kassoum agreed to pay and to have it removed and save the expense of a court case etc. … As for El-Azzi, he should think himself lucky for receiving anything, as again, there is no capacity for him after Powers on the shop and he definitely has no chance of success against the Kassoums. So if push comes to shove, I would be tempted to call his bluff. … … the original caveat is a complete forgery, the only argument they may have is that $85,000 was passed through Khalil and Leila's account. 89 In response, a solicitor, Mr James Antoneras, acting for the Moujallis sought a copy of the "agreements" "signed" by the Moujallis and Kassoums (perhaps suggesting he was not aware of any) and noted he assumed he would act for the Moujallis on the deed and Cassab and Associates for the Kassoums. 90 The lawyers for El-Azzi accepted the offer put to them of $95,000. 91 By email on 10 April 2006 Mr Ghaleb advised Mr Antoneras that Cassab had drawn up the contract of sale of Punchbowl and that "No settlement date has been organised as yet, but there is no hold up from the Kassoums" and noted "[t]he quicker El-Azzi release the caveats of Kassoum the quicker they will get their money." 92 From this it would appear that the Kassoums funded the payout of the El-Azzi debt (though they and the Moujallis were asserting that there was some fraud in relation to the caveat lodged by El-Azzi in respect of that loan). 93 As noted earlier, default judgment was obtained by El-Kazzi/Estephan against the Moujallis in the District Court in April 2006 in the sum of $199,475.16 for moneys which had been claimed under the Loan Agreement. Following default judgment, a writ for levy of property was taken out on 12 May 2005 and a caveat was then lodged by El-Kazzi/Estephan over the Punchbowl property noting the secured interest as being the District Court judgment. 94 By email on 17 May 2006, Mr Ghaleb advised Mr Sattout that with a $220,000 line of credit ($55,000 of which had already been loaned to the Moujallis) the National Australia Bank business loan of $280,000 meant that there was a total facility of $500,00 of which $325,000 was for purchase of the "shop" (to go to Powers) and a "loan" from the Kassoums to the Moujallis for "$95,000 El-Azzi". 95 Following bank advice that the Kassoum business loan had to be drawn down by 20 July (or else a new application was necessary), Mr Ghaleb contacted Mr Powers for a discussion without solicitors, saying he thought he might have a "solution" (29 June 2006). 96 It is clear that by July 2006, Mr Ghaleb was aware that El-Kazzi/Estephan had lodged a caveat over the Moujallis' share of the Punchbowl property, noting in an email on 6 July 2006 (Ex A p 144) to Mr Powers that currently on the Punchbowl property were a number of caveats, including one by El-Kazzi/Estephan on the half share owned by the Moujallis. In that email, written on a without prejudice basis Mr Ghaleb referred to recent communication and a subsequent conversation with his lawyer and confirmed the position as he said he saw it at the moment. He referred to the sale of the Belfield property for approximately $800,000 and payment of $280,000 for discharge of Aziz in relation to his family home at West Ryde and noted the debt was $700,000 and growing. He noted that Mr Powers' security included a half share of the Punchbowl property and said: Peter and Labibe Kassoum have not borrowed any money from yourself or anyone else. Peter and Labibe Kassoum agreed to help out Khalil and Leila Moujalli (and this they did with dubious legal advise) by agreeing to sign consent orders drawn by your solicitors to vacate the property and allow a sale by you should you wish to do so. They did not agree legally or otherwise to pay you or anyone else any money. 97 Significantly, Mr Ghaleb stated that: Your Mr. Milne has stated that the Kassoums through their solicitor have promised to pay you $325,000. I confirm that the Kassoums solicitor has made this offer to the Moujalli's and their solicitor James Antoneras has been the one negotiating with you Mr. Milne. The negotiations took a long time (I have no idea why?). The Kassoum's have been ready to purchase for over 3 months. I can confirm that the Kassoums are prepared to buy Khalil and Leila's share based on a valuation confirming that the whole property is worth $650,000. They will be borrowing the money from a Bank and they bank will only give them $325,000 based on their income and security . I interpose to note that this last assertion seems inconsistent with Mr Ghaleb's understanding that the total facility available to the Kassoums was $500,000. The Kassoums are however only able to obtain the loan from the Bank if they give the whole property of Punchbowl for security. As such they will need the property to be unencumbered. We are advised by our legal, that the caveat placed by Ziad El-Azzi will be able to be removed by the Kassoums. However the caveat placed by Walid Estephan and Charbel El-Kazzi is on Khalil's share only you can remove it as you are now the owner of that share. The options as I see it are as follows: 1. You take proceedings to remove the caveat by Walid Estephan and Charbel El-Kazzi. 2. Sell Khalil's and Leila's share by private treaty to the Kassoums. 3. Sell at Auction. 98 The email goes on to say:- If you choose to sell at auction the Kassoums are prepared to bid up to $650,000 for the whole of the property … [but only] if the tenants in the building are still there. They will not attend or bid if the property is vacated. 99 The first table in the email noted, in relation to the Greenacre property, that this had been: Seized by the Bank and no capacity to pay yourself nor any other caveat holder – including one held by Kulnura Finance which is Walid Estephan and Charbel El-Kazzi . (My emphasis) 100 Mr Kassoum agreed, when giving evidence, that the table in the email set out what Mr Ghaleb and he knew about the security over the property as at July 2006. Therefore, as at that date, at least, the Kassoums were aware that El-Kazzi/Estephan were the individuals behind Kulnura Finance and that there was security of some kind claimed by Kulnura Finance or El-Kazzi/Estephan over the Moujallis' half share in the Punchbowl property. 101 Not surprisingly, perhaps, it would appear that the lodgement on title of the El-Kazzi/Estephan caveat caused a difficulty with the proposed settlement of the El-Azzi and Powers claims over Punchbowl. Steps were then taken to remove that (and the El-Azzi) caveat. 102 Mr Ghaleb suggested that Mr Powers issue lapsing notices for that purpose. Mr Milne, by email on 12 July 2006, corrected Mr Ghaleb's misapprehension as to who could issue a lapsing notice. However, he duly prepared lapsing notices on behalf of the Kassoums both for that caveat and the El-Azzi caveat, which notices he forwarded to Mr Ghaleb advising that should he not hear as to an arrangement for the applications for lapsing notices to be signed on or before 14 July he would proceed to lodge the orders for possession with the LPI. 103 By email on 26 July 2006 from Mr Ghaleb to Mr Sattout, Mr Ghaleb referred to: The ongoing saga with the Kassoums trying to purchase the ½ share of the Punchbowl property from Khalil and Labibe Moujalli and said that The obstacle has always been the caveats on the said property. but noting that the caveats were going to be "lapsed" by Mr Powers. 104 While from Mr Sattout's response it appears he only understood this to be a reference to the El-Azzi caveat, Mr Ghaleb (and through him Mr Kassoum) was aware at the time that there was also a caveat lodged by El-Kazzi/Estephan. 105 A lapsing notice under s 74J of the Real Property Act 1900 was served on El-Kazzi/Estephan by way of service on their solicitor on 27 July 2006. (At the same time a lapsing notice was served on Mr El-Azzi). 106 Mr Estephan's evidence is that he does not recall seeing a copy of that lapsing notice, which seems unlikely given that his solicitor would have had a duty to bring this to his attention as soon as practicable following its receipt. Mr Estephan further said that when proceedings commenced he was under the impression that the caveat was still on the property, but he then conceded he might have been told about the lapsing notice by his solicitors (Diamond Conway) in 2006. 107 On 16 August 2005, the National Australia Bank wrote to the Kassoums advising as to its agreement to provide a National Business Options Consolidation Loan limited to $280,000. 108 Interestingly, contrary to Mr Ghaleb's assertions to Mr Powers and others, the new securities listed in connection with this loan did not include the Punchbowl property and there is no specific condition relation to that property being unencumbered (although I cannot ascertain the extent to which this may have been a condition of earlier loan arrangements). 109 Mr Kassoum gave evidence that he wanted to purchase the Moujallis' half share of the Punchbowl property in order to protect his income stream out of the property. It would seem that he was concerned that Mr Powers would move to enforce the writ for possession he had and sell the Punchbowl property. It seems to me quite credible that in those circumstances Mr Kassoum was keen to acquire the other half of the Punchbowl property so as to preserve his half share of the rental stream and prevent being forced to sell the Punchbowl property, and that he sought to do so at a price which would be acceptable to Mr Powers (who had lodged a caveat over the property and who had commenced proceedings against, inter alios, Mr Kassoum). 110 On 22 August 2006, the Kassoums and the Moujallis entered into a deed by which the Moujallis agreed to borrow (and acknowledged receipt of) the principal sum of $175,000; agreed to repay it on 21 August 2009 and charged their property existing or future with the repayment of the principal and interest. 111 The transfer was registered on 23 August 2006. It emerged during the hearing that a contract for sale had been signed between the parties on that same day. Any lack of formality is perhaps understandable given that the parties were related and it was perhaps therefore not of concern to them what particular terms and conditions would otherwise govern the sale. 112 On 8 May 2008 Mr Khalil Moujalli was made bankrupt. Issues 113 Various issues were raised by the Kassoums in their defence of the claim and I consider each in turn. · Can El-Kazzi/Estephan establish that they, as Kulnura Finance, advanced the loan? 114 As noted above, I accept Mr Estephan's evidence as to the circumstances in which the Loan Agreement was entered into with the Moujallis and the loan was made. 115 Mr George submits that the claim by El-Kazzi/Estephan fails at its inception because they cannot establish that they are "Kulnura Finance" or that "Kulnura Finance" advanced the loan to the Moujallis. It is said that logic predicts this outcome as otherwise anarchy would prevail; dealings between parties "A" and "B" would be the subject of proceedings by unrelated parties and privity of contract would be an unknown concept. 116 I do not accept (nor did Campbell JA in Pethybridge seem to be concerned) that such consequences would flow from a finding that, notwithstanding the deficiencies in the business name registration, "Kulnura Finance" was used by El-Kazzi/Estephan as their business name in the context of their dealings with the Moujallis. The Moujallis apparently knew they were dealing with a lender associated with Mr Estephan (since his name was disclosed, erroneously, as a director of Kulnura Finance) and no evidence was adduced from them to the contrary. Both Mr Kassoum and Mr Ghaleb were aware of the connection as at July 2006. 117 If, as I find as a matter of fact, El-Kazzi/Estephan provided funds in the name of Kulnura Finance and Mr Estephan signed a Loan Agreement with the Moujallis, trading in effect under the name "Kulnura Finance", then the only potential for anything approaching anarchy would be if another person (the missing Mr Cooper, perhaps) also sought to enforce rights under that Loan Agreement. I would infer, from the absence of any information to suggest otherwise, that Mr Cooper has not suggested that the moneys were lent by him or that he is entitled to any rights under the Loan Agreement. 118 On the evidence of Mr Estephan, he and Mr Cooper arranged to set up and register the name Kulnura Finance, and he and Mr El-Kazzi used that name when they lent the money to the Moujallis. As between Mr Estephan and Mr Cooper I would infer that there was at least an understanding that Mr Estephan could from time to time use that business name. Even if there was no such arrangement, the evidence clearly points to the loan having been advanced by El-Kazzi/Estephan and the Moujallis having understood Kulnura Finance to be Mr Estephan's business (from the execution clauses in the Loan Agreement). I accept that for present purposes "Kulnura Finance" should be understood as referring to El-Kazzi/Estephan. · Was there an agreement by the Moujallis to charge their property? 119 I do not accept the further submission that there was no agreement by the Moujallis to charge their property in favour of El-Kazzi/Estephan (trading, as I accept they were at the time, as Kulnura Finance). 120 Clause 12 of the Loan Agreement, in its terms, constitutes an equitable charge. Counsel for the Kassoums concedes that it is a "boiler plate" charging provision. 121 The language of clause 12 is more immediate in its effect ("do hereby charge") than, for example, the language used in the Loan Agreement considered in Avco Finance Services Ltd v White [1977] VR 561 at 564 ("I agree … to charge") and in that case the clause was sufficient to confer a valid equitable charge. Clause 12 speaks in terms of the present creation of a charge (not an agreement to grant a charge in future). 122 To constitute an equitable charge of real property what is required are words specifically appropriating that property to the discharge or a debt or obligation. It is not necessary that any general words of charge be used (Cradoch v Scottish Providence Institution (1893) 69 LT 380 at 382). Here, the clause specifically provides that the real property identified is so charged as security for the payment of all amounts due under the Loan Agreement. 123 Mr George submitted that the pleading failed to distinguish between an equitable charge and an equitable mortgage, citing Montagu v Earl of Sandwich (1885) 32 Ch D 525. In that regard I note the caution with which it is urged (Fisher and Lightwood's Law of Mortgage, 2nd Australian Edition para 2.8) that the older cases be treated insofar as the assimilation of mortgages and charges is concerned. 124 The exhortation to caution followed reference to the suggestion (citing Cradoch, Montagu and Avco) that where a security is intended and the land charged is specified an equitable mortgage may be created. 125 The distinction between an equitable charge and an equitable mortgage was made clear in Swiss Bank v Lloyds Bank [1982] AC 584 as turning on whether there is an intention to create a security over the property in favour of the mortgagee (as opposed to appropriating property to the discharge of a debt; which confers no security interest as such but a right of realisation by judicial sale). 126 In Sykes, The Law of Securities (5th edition) it is said that the essence of the distinction between a pure hypothecation (equitable charge) and a mixed hypothecation (equitable mortgage) is that while the equitable mortgagee has available to it the rights of foreclosure, the equitable chargee does not. 127 Here, unless the consent given in clause 12 to lodgement of a caveat or other registration instrument "to register such a charge" could be construed as an agreement to create a security interest over the Moujallis' property (which may be a construction which is open but which was not contended for by El-Kazzi/Estephan), what has been created by clause 12 is an equitable charge, not an equitable mortgage. Nevertheless, Mr Young, in his submissions, accepted that the interest acquired by his clients was that of an equitable charge. · Could the charge apply to the Moujallis' half interest? 128 Mr George submitted, in his initial outline of submissions, that the charge so created was only over property interests held by the Moujallis as "beneficial owners" and which they had the right "to use and enjoy" and did not encompass property in which they held only a half interest since they had no entitlement to "use and enjoy" such property. I do not accept that submission. 129 First, the words "as beneficial owners" seem to me, properly construed, to qualify the description of the "borrower"; ie the Moujallis in their stated capacity as beneficial owners charge "all their separate right title and interest" in the real estate held by them. They clearly had a legal interest as to a one half share, in the Punchbowl property. In the absence of anything to suggest that they held this interest on trust, their legal interest would carry with it the beneficial interest in that half share. 130 Secondly, I see no basis for the submission that the Moujallis had no entitlement, as owners of a half share of the property, to use and enjoy the property. If that were the case then it would follow no one would have the right to use and enjoy the property, since the Kassoums likewise could have no right to use or enjoy it. That is inconsistent with the evidence that the Kassoums and the Moujallis, as registered proprietors, did jointly exercise the rights of use and enjoyment by leasing parts of the property to various tenants. 131 Nothing in clause 12 suggests that all the Moujallis were charging was property which they wholly owned, as opposed to granting a charge over whatever right, title and interest they held in respect of real property whether that be a partial or whole interest. · Was the right to charge only a contractual right, which was lost once the right to caveat evaporated? 132 Mr George further submitted that the right to charge the land was a contractual right; that the only security that Kulnura Finance might have taken over the Moujallis' interest in land was a caveat; and that once possession of the land passed to the Kassoums, the right (being a personal one) was lost and the caveatable interest evaporated. Again I do not accept that submission. 133 Clause 12 did not give Kulnura Finance (or El-Kazzi/Estephan) simply a right to caveat the land; it created an equitable charge over the land. That charge does not "evaporate" once possession of the land passes. I note in this regard the statement made in paragraph 4.22 of The Law of Mortgage that unregistered instruments of security retain their force even after sale of the property over which they are secured in that they will operate as a charge over the proceeds of sale, citing Hope v Hope [1977] 1 NZLR 582 and Avco Financial Services Ltd. 134 If what Mr George intended was to submit that the right to lodge a caveat in respect of such a charge was no longer of any benefit once the property was sold, then I would accept that submission. The right to caveat is not itself a "security". However, I do not think it alters the fact that what was created by clause 12 was an equitable charge. · Indefeasibility 135 Section 42 of the Real Property Act 1900 provides that registration confers indefeasible title to the registered proprietor. Therefore, ordinarily, on registration of the transfer to them on 23 August 2006, the effect of s 42 is that the Kassoums would obtain an indefeasible title to the balance of the Punchbowl property free of all other unregistered interests such as the equitable charge granted in favour of El-Kazzi/Estephan. Section 42 expressly provides that the knowledge of any unregistered interest is not by itself imputed as fraud. The Kassoums rely on s 43(1) of the Real Property Act as providing them with further protection insofar as they had no need to enquire about how the purchase money was to be applied or as to any unregistered dealing. 136 However, El-Kazzi/Estephan rely upon the express exception to s 42 of the Real Property Act namely that of statutory fraud – a concept said to be wider than common law fraud but narrower than equitable fraud (Bahr v Nicolay [No 2] (1988) 164 CLR 604 at 614). 137 It is submitted on behalf of the Kassoums that El-Kazzi/Estephan were never entitled to register any interest on the Register because they had no registrable document and therefore cannot rely on the fraud exception in the Act. It was said by Mr George that s 42 relates to the priority of registered or registrable dealings and that the fraud exception cannot arise where El-Kazzi/Estephan have no registrable interest in the property. 138 I do not accept that submission. Section 42 of the Act in effect confers, on registration, indefeasible title against all other estates or interests not recorded in the folio. There is nothing in s 42 to suggest that this should be read as "free from all other estates and interests that could have been but are not so recorded", nor do the submissions by Mr George suggest that such a construction would apply. The section provides that registration is paramount so that an unregistered interest is defeated by registration, except if the registration was the product of fraud. There is nothing to warrant a finding that the fraud exception applies only when the priority claim is between a registered proprietor and the holder of an unregistered (but nevertheless registrable) interest. 139 Mr George further submits that the fraud that gives rise to the exception is actual fraud, namely an intention to deceive and nothing short of a fraudulent intention suffices. 140 The Privy Council, in Assets Co Ltd v Mere Roihi [1905] AC 176 at 210, dealing with the New Zealand Torrens legislation said: [B]y fraud in [this Act] is meant actual fraud, that is, dishonesty of some sort, not what is called constructive or equitable fraud – an unfortunate expression and one very apt to mislead, but often used, for want of a better term, to denote transactions having consequences in equity similar to those which flow from fraud. 141 That passage was accepted in the High Court by Isaacs J in Butler v Fairclough (1917) 23 CLR 78 and has been repeated in subsequent High Court decisions: (Bahr v Nicolay (No 2) at 614 per Mason CJ and Dawson J; Breskvar v Wall (1971) 126 CLR 376 at 387 per Barwick CJ; Bank of South Australia Ltd v Ferguson (1998) 192 CLR 248 at 255; Farah v Say-Dee (2007) 230 CLR 89 at 169). 142 The standard expression of what is required to show statutory fraud is that there be actual fraud involving personal dishonesty or moral turpitude. Some, but not all, species of equitable fraud are encompassed with the concept of statutory fraud; see Mason CJ and Dawson J in Bahr v Nicolay at 614 by reference to Latec Investments: These comments do not mean all species of equitable fraud stand outside the statutory concept of fraud. Far from it. In Latec Investments Ltd v Hotel Terrigal Pty Ltd (in liq) (1965) 113 CLR 265, Kitto J (at 273–4) held that a collusive and colourable sale by a mortgage company to its subsidiary was a plain case of fraud. According to his Honour (at 274), "there was pretence and collusion in the conscious misuse of a power", this being a "dishonest course". 143 It is clear that mere registration of a document while having notice of an unregistered interest is not in itself statutory fraud (s 43, Oertel v Hordern (1902) 2 SR (NSW) Eq 37, and Mills v Stokman (1967) 116 CLR 61 at 78). In Stuart v Kingston (1923) 32 CLR 309 at 359, Starke J said: Fraud will no longer be imputed to a proprietor registered under the [Act] unless some consciously dishonest act can be brought home to him. 144 Young CJ in Eq in Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd (2007) 64 ACSR 31 considered what was needed, in addition to knowledge of the existence of an unregistered interest, for conduct to amount to statutory fraud (or to give rise to a personal equity). His Honour noted, as a starting point, that there was fraud if the designed object of a transfer was to cheat a person out of a known existing right or if there was a deliberate and dishonest trick causing an interest not to be registered; that such an act was dishonest and the dishonesty could not be assumed solely to arise by reason of knowledge of an unregistered interest, referring to Waimiha Sawmilling Co v Waione Timber Co [1926] AC 101 at 106–7. 145 What El-Kazzi/Estephan allege does go beyond mere knowledge of (or shutting one's eyes to) an unregistered interest. Here, it is alleged that there is the fourth kind of fraud referred to in Earl of Chesterfield v Janssen (1751) 2 Ves Sec 12 at 100, in effect, an underhand bargain. El-Kazzi/Estephan allege that the Moujallis and the Kassoums together committed equitable fraud, falling within the test for statutory fraud, in that they entered into an agreement between themselves with their eyes open and with that agreement intended to operate as an imposition and deceit on other persons not party to that agreement, namely, El-Kazzi/Estephan or other creditors (and perhaps even the Office of State Revenue). El-Kazzi/Estephan assert a duty on the part of the Kassoums not to defraud another of any interest in or rights in respect of land. However, the "deceit" was not clearly articulated. 146 If the factual basis for the El-Kazzi/Estephan allegation of deceit is sustained, then that would constitute a conscious act of dishonesty so as to supply the additional ingredient necessary for both statutory and equitable fraud, but what needs to be established is the element of deceit or trickery. "Touchstones" of a non-fraudulent transactions 147 Before reaching a conclusion as to whether, on the facts of this case, fraud (in the sense of an "underhand bargain" sufficient to amount to actual fraud) has been established, I should address the submission made for El-Kazzi/Estephan that one can test this by considering how the transaction matched up to the "touchstones" of the opposite of a fraudulent transaction (that being described as a transaction that could be viewed as bona fide for value and without notice). Perhaps in response to this, reliance was placed by the Kassoums on s 45 of the Real Property Act, it being submitted that the Kassoums were bona fide purchasers for value and that s 45(2) protects them against any allegation that the acquisition of their interest in the land was the product of fraud. 148 It was submitted by El-Kazzi/Estephan that the contract was not bona fide (that it was entered into on the same date as the transfer; there was no negotiation (between the parties) as to price; the deposit clause was struck out; the price was defined by a very specific valuation some six months earlier, specified to be for stamp duty purposes; and the parties were closely related.) Those matters of themselves do not establish equitable or statutory fraud; at best they might support the submission that this was a "colourable sale". 149 It is said that it must have been clear to the Kassoums (and their agent Mr Ghaleb, whose knowledge is to be imputed to them: Asset Co Ltd v Mere Roihi that there were a series of people claiming an interest in the property and that the Kassoums were trying to do as little as possible to get the property transferred. It is submitted that they knew that a caveat had been in place (conceded by Mr Young to be a very poor specimen of draftmanship prepared by the plaintiffs' former solicitors); they knew the caveat had been removed; and they had no belief that the caveat had been paid out. Mr Young submits that it cannot be said that simply because the caveat was bad they were "entitled" to ignore it; that they knew El-Kazzi/Estephan had claimed a debt and they had no evidence that the debt had been satisfied, but simply relied upon a legal device – the lapsing notice – to enable them to take a transfer without dealing with the interest of El-Kazzi/Estephan. It is said that this was a "colourable" transaction, dressed up as an authentic transfer, on notice of the El-Kazzi/Estephan's interest. 150 While Mr George responds to this by pointing to the evidence from Mr Kassoum and Mr Ghaleb to the effect that they did not read the caveat and had just heard it was there, if that is in fact the case then it is hard to draw the inference (which Mr George suggested could be drawn) to the effect that the Kassoums could have inferred by reason of the caveat lapsing that El-Kazzi/Estephan had no interest in the land; at best they might have assumed El-Kazzi/Estephan were not taking steps to maintain their caveat in relation to such an interest. 151 The question as to just what the Kassoums should be taken to have known at the time of the sale on 23 August 2006 was hotly contended. Mr George conceded that the Kassoums "probably" knew that creditors were pressing the Moujallis for payment of debts but says the Kassoums should not be assumed to have known that El-Kazzi/Estephan claimed an interest in the land (particularly when all that was in fact then on the title was a caveat asserting a right to payment of a judgment debt). 152 Whether or not the Kassoums knew as at 23 August 2006 what the caveatable interest claimed by El-Kazzi/Estephan was, what they did know was that El-Kazzi/Estephan had lodged a caveat on the title (and that they claimed to be creditors of the Moujallis and the Moujallis had acknowledged as much). However, of itself this does not support a finding of lack of good faith. 153 As to whether the sale was "for value", for the Kassoums it is said that they paid market price for the half interest acquired by them as at 23 April 2006. That does not seem to me to be supported by the valuation evidence which I consider below. Even if the Adams' valuation had been correct as at January 2006, it cannot be disputed that no attempt was made to update or confirm that valuation when the half share was transferred some eight months later. Both valuers who gave expert evidence in the proceedings stated that their valuations applied for a period of no more than three months. A January 2006 valuation might therefore be seen as inherently unreliable to support a sale in August 2006. Nevertheless, I do not consider that this factor points to equitable fraud. Clearly, some value (and indeed, as it turns out, something approaching market value) was paid for the Moujallis' half interest. 154 In any event, the difficulty I have with the "touchstones" approach is that there is a range of conduct which may fall between that of being a bona fide purchaser for value without notice and that of someone guilty of statutory (or equitable) fraud. Other than when considering cases in relation to old system title (where equitable fraud was found in circumstances where a party who was not the bona fide purchaser for value had asserted priority of the legal title over an earlier equitable interest – see Stuart v Kingston at 359) the concept of the bona fide purchaser for value without notice concept does not appear ordinarily to inform the case law on statutory fraud. 155 It seems to me that such a test may lead to confusion between the criteria for fraud and the criteria for the purposes of the doctrine of priorities. 156 So, for example, it was submitted, in relation to the "for value" touchstone, that no one in this case had made any serious attempt to ascertain the market value of the interest as at the date for sale. However, market value is not ordinarily relevant to the "for value" criterion in a priorities context. What is required for that purpose is that there be more than nominal valuable consideration, the holder of the legal interest not having acquired it as a volunteer (Bassett v Nosworthy (1673) 23 ER 55 at 56). 157 Similarly, conduct while on notice of an existing unregistered interest might be regarded as evidencing a lack of bona fides but would not, on the authorities noted above, amount to fraud. 158 Cases within in the fourth category of fraud in Earl of Chesterfield v Janssen require that there be more than a lack of bona fides. Rather, they require a degree of dishonesty or moral turpitude. 159 I do not find the "touchstones" approach helpful in this regard. (I address later in these reasons the issue as to whether the land was sold at an undervalue in August 2006.) · Was there statutory or equitable fraud? 160 This brings me to the critical issue – has it been established that there was either statutory or equitable fraud on the part of the Kassoums in this case? 161 It was submitted by Mr Young that here there was sufficient suspicion (and a prima facie case of fraud) so as to render it incumbent on the allegedly fraudulent party (the Kassoums) to explain what was going through their minds. Whether or not that be the case, and it was incumbent on them to do so, in fact the Kassoums did give evidence as to the motivation underlying their purchase. 162 Their evidence was that they wanted to purchase the Moujallis' half interest in order to secure full ownership of the land for their own benefit. It was contended that they purchased at a price which they were informed was market value and that there was no evidence that they set out to cheat El-Kazzi/Estephan. 163 It was conceded by both of the Kassoums that they wished to help the Moujallis if they could. However, it was not conceded that the help which was contemplated (or provided) was help, in effect, to remove any of the Moujallis' property from the reach of the Moujallis' creditors or to cheat those creditors. 164 The help which Mrs Kassoum contemplated was clearly what might be termed emotional support, including the provision of home-cooked food to the family. The help which Mr Kassoum seems to have contemplated becomes apparent when regard is had to what was done by Mr Ghaleb on his behalf to negotiate settlements with various of the Moujallis' creditors, namely financial assistance to help the Moujallis pay out their creditors. 165 It is, in my view, significant that the proposal that the Kassoums acquire the remaining half share in the Punchbowl property seems first to have arisen in late 2005, at a time when Mr Powers was threatening to proceed with a sale of the Punchbowl property (and before any caveat was lodged by El-Kazzi/Estephan). In June 2005, the Kassoums had signed consent orders allowing Mr Powers to take possession of the property and for its sale, in circumstances which later transpired to be the case. The Kassoums, and Mr Ghaleb, seem to have regarded Mr Powers as the effective owner of the Moujallis' half interest from that time. 166 I accept that the Kassoums wanted to protect their interest in the property and the income stream it generated, even though on any sale by Mr Powers as mortgagee they would have been entitled to half the proceeds of sale and could have reinvested that money. 167 I do not infer, as Mr George submitted I should, that the Kassoums purchased the Moujallis' interest out of an emotional attachment to the property arising from long ownership. The attitude of the Kassoums, as expressed in the correspondence from Mr Ghaleb, and from Mr Kassoum's responses in the witness box seems to have been one of financial realism. If the price to pay out Mr Powers had been too high, I am satisfied that the Kassoums would not have done so, no matter what emotional attachment they may have felt to the property. 168 I have come to the view that at the same time the Kassoums also wanted or agreed to purchase the Moujallis' half share in order to assist the Moujallis to pay out their creditors. 169 Mr Ghaleb, in his answers in cross-examination, appeared to be seeking to distance his involvement with the Moujallis. Mr Ghaleb gave evidence that he only assisted the Moujallis in relation to their financial difficulties with their own home, ie when they were being locked out of their own home. I do not accept that evidence. Contrary to his assertions, Mr Ghaleb seems to have played a large role in negotiations with various creditors/solicitors on behalf not only of the Kassoums but also of the Moujallis. 170 I did not find Mr Ghaleb a satisfactory witness. I have already noted that he gave conflicting answers in relation to his knowledge of the Adams' valuation of the Punchbowl property in circumstances where it seemed to me he was aware of the potential difficulty caused by the higher value attributed to the property on the National Australia Bank application forms and thus seemed keen to distance the timing of his knowledge of the valuation. Further, a review of his correspondence in late 2005 and early 2006 shows, in my view, a propensity on his part to provide what might best be characterised as inaccurate or incomplete information to those with whom he was negotiating in relation to the property, such as in relation to the amount of the loan facility or funds available to the Kassoums to help the Moujallis pay out their creditors. 171 Mr Ghaleb denied in the witness box that the name Kulnura Finance was known to him, until he was shown the letter of 9 July 2007 and was, in effect, forced to concede the point. He gave evidence at first that he had introduced Mr Cassab to the Moujallis, though he then said that they had known each other all along. He gave evidence in the witness box of prior discussions with Mr Kassoum as to a property value of $350,000, yet was prepared to include an estimate of worth at $400,000 in the application form to the National Australia Bank. 172 Mr Ghaleb's affidavit said nothing about an awareness of the Moujallis' financial difficulties before November 2006. In paragraph 6 he said, "I was concerned because my in-laws are self funded retirees and relied on the income from the Fruit shop in order to survive". This was, on any view of the matter, an overstatement and not supported by Mr Kassoum's evidence that he had other rental income as well. In paragraph 20 of Mr Ghaleb's affidavit, the assertion that the customer statement of position for National Australia Bank was "completed" by his in-laws is also inaccurate since his evidence was that the agreement was completed by him and simply signed by his in-laws. 173 Mr Ghaleb's evidence was inconsistent with that of Mr Kassoum as to whether Mr Kassoum knew Mr Ghaleb had sworn an affidavit in the proceedings and as to whether Mr Ghaleb had told Mr Kassoum about Kulnura Finance. 174 There was at best confusion in his evidence as to whether he had or had not seen (or just heard of) the El-Kazzi/Estephan caveat. Moreover, it is inconceivable to me that Mr Ghaleb seriously believed that Mr Powers might already have paid out or been prepared to pay out the El-Kazzi/Estephan loan in order for the caveat to be removed, without any express agreement that he would do so; particularly when this was at a time when Mr Ghaleb was still trying to persuade Mr Powers to accept $325,000 on basis that the Kassoums would not bid more for the property at auction. 175 Nor do I accept that the Kassoums' position was that they were only prepared to pay $325,000 (and no more) for the Punchbowl property interest. At one stage it would seem that they had decided it might be worth up to $500,000 for Mr Powers. Rather, I consider it more likely that, having organised the bank loan and negotiated a price with Mr Powers, they were keen to stick with that sum. 176 Mr Kassoum's evidence was contradictory in various respects. At first, he denied he had heard of Kulnura Finance. Then he said that as at July 2006 he was aware of an entity or business known as Kulnura Finance. He did not remember exactly when he knew about the El-Kazzi/Estephan caveat but he agreed he knew about it by 23 August 2006. Mr Kassoum's affidavit overstated his reliance on the rental income "to survive" and his manner in the witness box was at times defensive. Mr Kassoum relied heavily upon Mr Ghaleb in the negotiations leading up to the sale, as is made clear by the documentary evidence. 177 It is further submitted by Mr Young that if there was no genuine belief that it was an actual fair market price, this is a strong indication of lack of a genuine sale and that the Kassoums did not genuinely believe that $325,000 was the proper price for the Moujallis' half interest. 178 If the market was falling, as I thought Mr George submitted at one stage it was over the period, $650,000 cannot logically have been the value of the property both in January and August 2006. Even if the market was constant, the valuation evidence suggests that the Punchbowl property was worth at least $670,000 at August 2006. For the reasons noted below I would have found it to be higher. 179 I consider it likely that the Punchbowl property was sold at an undervalue in August 2006 and that Mr Kassoum and Mr Ghaleb either believed at the time this was the case or were indifferent to whether that was the case. One day after the date of the valuation (though as noted above there is an issue as to when the valuation was actually received) Mr Ghaleb prepared, and Mr Kassoum signed, a schedule for submission to the National Australia Bank to the effect that the estimated value was significantly higher. Mr Ghaleb, only two months before, had expressed the view in his negotiations with Mr Powers that the value of that half interest might be up to $500,000. 180 However, I think this evidence simply points to the conclusion that the Kassoums wished to acquire the half interest for the lowest possible price that Mr Powers would accept. It does not lead me to accept that there was any trickery or deception practised by the Kassoums as against El-Kazzi/Estephan. 181 I cannot accept (as submitted in further submissions on 24 December 2008 after the conclusion of the hearing) that the Kassoums were "induced" to act to their prejudice (ie to acquire the balance of the land) by some expectation engendered by El-Kazzi/Estephan's failure to maintain their caveat that they had no interest in the Punchbowl land. Nor do I accept the submission that once the caveat lapsed the Kassoums "were entitled to conclude the plaintiffs had no interest in the land". There is no evidence that they in fact turned their minds to whether El-Kazzi/Estephan at that stage (or before) had any maintainable interest in the Punchbowl property. 182 Rather, I consider the evidence clearly shows that Mr Ghaleb (and through him the Kassoums) sought to precipitate the lapsing of the El-Kazzi/Estephan caveat and then to take advantage of the opportunity presented by its lapsing for the Kassoums to become registered on the title without first having to deal in any way with the El-Kazzi/Estephan's claimed debt. However, the method by which that opportunity presented itself involved no trickery or deception. 183 As with the El-Azzi caveat, it seems to me that the Kassoums issued the lapsing notice in accordance with the procedure available to registered proprietors to seek to effect the removal of a caveat on their land so as to enable them (if successful in so doing) to acquire the property and thus put it beyond threat of sale by Mr Powers. Had the El-Kazzi/Estephan caveat remained on the title, the Kassoums may well have sought to negotiate a settlement with them as they did with El-Azzi. Unfortunately for El-Kazzi/Estephan, due to inadvertence or otherwise they took no steps to preserve their caveat on the title and hence lost that opportunity. 184 The mere fact that the Kassoums invoked the mechanisms available to seek the removal of disputed caveats from the title to their land does not amount to trickery or deception; nor does the fact that they proceeded to complete the purchase when the caveat lapsed. 185 Such opportunistic behaviour does not, in my view, establish that the acquisition of the Moujallis' half interest was a transaction designed or intended to cheat El-Kazzi/Estephan of their claimed interest in the property. 186 The real genesis of the purchase, as it emerges from the contemporaneous communications between the parties, was for the Kassoums to assist the Moujallis to pay out their creditors. 187 I find it significant in this regard that the "deal" was in effect struck before any caveat had been lodged by El-Kazzi/Estephan over the property, and the "deal" as such did not change over the period from late 2005 to the sale in August 2006. 188 The making of a loan of $175,000 to assist the Moujallis is consistent with the Kassoums wanting to help the Moujallis pay out their creditors (and avoid a forced sale of the Punchbowl property). It is also consistent with the manner in which Mr Ghaleb was negotiating with a number of parties, including El-Azzi's lawyers. 189 As to the manner in which the transaction was conducted, it does appear that there was an element of "dressing up" of the transaction to make it appear that it was at arms' length. It would seem that Mr Ghaleb introduced the Moujallis to the solicitor who prepared the sales contract (Cassab) and may have given instructions for both vendor and purchaser. It was said that there was no deposit paid (though there was some doubt on the evidence on this point) and that there was no negotiation or haggling over the price or terms of the contract. However, I suspect that this (together with the insistence on there being a valuation to confirm the price) may have been more due to a concern that if the Moujallis were in financial difficulties then any such transaction might later be scrutinised by a trustee in bankruptcy, than as part of any attempt to cheat El-Kazzi/Estephan out of any claims they had over the property (particularly when the valuation was sought some three months before the caveat was lodged). 190 I do not accept that the evidence discloses that this was a sham transaction; or that, despite the transfer, there was some agreement that the Moujallis might retain or regain their interest in the property so as to support a claim of trickery or deceit. There was no additional element of dishonesty to take this beyond a case where a party acquires its interest with notice (or knowledge) of an existing unregistered interest. 191 I therefore do not accept that the plaintiffs have established statutory or equitable fraud on the part of the Kassoums. Value of the Punchbowl property 192 There were in evidence before me two expert valuation reports: one from Mr Azar for the Kassoums (who valued the Punchbowl property as at 23 August 2006 at $645,000) and the other from Mr Sorrenson, for El-Kazzi/Estephan (who valued the property as at that date at $810,000). 193 The valuers participated in a joint conference, at which it was agreed that the appropriate valuation methodology was the capitalisation method namely capitalisation of actual/potential net annual rental income, with a cross check by way of comparison with available sales evidence. After discussion, Mr Sorrenson was prepared to accept that a fair and reasonable value for the subject property could be $750,000 at the lower end of an acceptable range and Mr Azar thought that it could be $670,000 at the higher end of the acceptable range. 194 Where the experts disagreed was as to the selection of the capitalisation rates (7.25% per Mr Azar or 5.75 – 6% per Mr Sorrenson); the selection of comparable sales (although they considered there was sufficient overlap, as shown in Exhibit 6, to permit their evidence to be tested against each others); and as to whether the analysis of comparable sales should be by reference the rate per square metre of gross building area (Mr Sorrenson) or the rate per square metre of improved land area (Mr Azar). 195 Both valuers rejected the premise for a submission foreshadowed by Mr George to the effect that, when valuing a half share in real property (much, perhaps, as when valuing a minority shareholding) a discount should be applied and one should not simply take the figure which is half of the overall valuation of the property. (i) Capitalisation rate 196 Both valuers accepted that the higher the capitalisation rate, the lower the value of the property. The evidence of Mr Azar was that capitalization rates tended to match interest rates so that if interest rates fell then capitalization rates would tend to fall as well. Mr Azar gave evidence that he thought that capitalization rates in 2006 had been "fairly stable". I would infer from what he said in the witness box that he would accept that whatever the property was valued at as at August 2006, it is likely it would have been worth at least the same at the beginning of that year. 197 The capitalisation rate adopted by the respective valuers was derived from their analysis of a number of sales. 198 Although the experts differed as to the comparable sales (which I consider below), the real difference between the experts in relation to capitalisation rates seemed to be what (if any) adjustment was necessary from the gross yield otherwise produced by reference to the available comparables. I understood Mr Sorrenson's evidence to be that an adjustment was necessary to reflect a management or maintenance allowance for the property over the period for which someone purchasing the property would expect to calculate its return on purchase. Mr Sorrenson looked at a return on initial equity over 15/16 years and said that it was totally impractical to assume a property would be fully let over that period so that an adjustment would also be needed to take that into account. 199 While allowances for management/maintenance outgoings (and for the possibility of vacancy) appear to have been included in Mr Sorrenson's calculations of net income or yield from the property (as indicated in a comparative valuation check sheet handed up to me by Mr George during submissions), I understood Mr Sorrenson's evidence to be that there was the need for an adjustment of the overall capitalisation rate (ie to reduce the gross yield from, say, 7.5%/7.3% to 5.75%/6%) even after such an allowance was made in calculating the net income. Mr Azar did not appear to include a management/vacancy allowance in the deductions for outgoings, though he did include maintenance costs. Nor did he appear to build those allowances into the capitalisation rate he applied. 200 Mr Sorrenson said that the same methodology had been applied by him when considering 779 Punchbowl Road (a property sold in March 2006 with a return yield calculated by him at 7.39%), but that the difference between it and the subject property was that the latter was fully developed, although his report was criticised for not having included the process relating to that valuation methodology. 201 Mr Sorrenson was criticised for adopting a capitalisation rate between 5.75% and 5% when the prevailing interest rate was 6%. It was put to him that capitalisation rates would be assumed to be higher than Reserve Bank cash rates at any particular time because an investor would want to see a premium (say from 2-4%) over the bank interest rate and therefore one should assume that if bank interest rates went up so, too would the capitalisation rate. Mr Sorrenson did not accept that proposition. In that regard, Mr Sorrenson's explanation (that real property investors also look to capital appreciation) seemed to me to be quite logical. 202 Both valuers' reports were the subject of criticism as to errors (there being at least two numerical errors in the transposition of gross returns/yields in Mr Sorrenson's report and there being various errors identified in Mr Azar's report (see Mr Sorrenson's affidavit of 19 October 2007)). 203 The underlying logic for an adjustment downwards from a gross 7.5% yield seemed to me to be rational. It did not appear to me that the transposition errors had materially affected Mr Sorrenson's overall analysis and he explained cogently in the witness box the methodology he had used. However, the extent of any adjustment appears to be a matter for opinion on which experts may legitimately differ, just as the subjective adjustment in assessing the comparability of properties may produce different results. Therefore, as I understand it, any figure arrived at by the capitalisation exercise needs to be tested by references to the per square metre cross check (which I consider below). (ii) Comparable sales 204 According to Mr Sorrenson one of the best comparables was 816 Punchbowl Road which was sold in June 2006 and was a two storey shop and residence. This was sold at a price reflecting a gross yield of at least about 7.58%. It is said by Mr Sorrenson to have had a square metre land value of $1,967 per square metre. 205 Mr Sorrenson considered 816 Punchbowl Road to be in a relatively comparable trading position. Mr Azar disagreed and contended that 816 Punchbowl Road was in a superior position but conceded that it was a comparable. 206 Both valuers calculated the return yield for that property at over 7.5% (Mr Azar said it was 7.58%; Mr Sorrenson said the gross yield for that property was 7.85%). The yield on the other comparable sale accepted by both valuers (779 Punchbowl Road) was in the order of 7.3%/7.4%. 207 Mr Azar relied upon a broad range of properties, many of which did not appear to be directly comparable. In this regard, Mr Azar's valuation is said to be compromised by the fact that he had used both one and two storey properties in his comparables (a factor which Mr Azar contended was balanced by reference to the square metre cross check). 208 On the material before me, I would accept Mr Sorrenson's assessment that the sales of the two other properties in Punchbowl Road (816 and 779) provided the most reliable comparables (producing a gross yield of somewhere in the order of 7.35 - 7.5%). 209 The question was how much adjustment was needed to reflect the allowances necessary to be taken into account when arriving at a net yield. As noted, Mr Sorrenson adjusted the capitalisation significantly (down to 5.75% - 6.00%). Mr Azar adjusted it far less (down to 7.25%). The appropriateness of these adjustments is, as I understand it, best tested by the cross check mechanism. (iii) Cross check 210 It was difficult to test the respective valuers' positions against each other, as they each adopted a different basis for the cross check. As noted above, the valuers were in disagreement as to whether the appropriate check valuation was improved land value (ie the square metre area of improved land or "improved dirt", as Mr Azar said) as Mr Azar contended or on the value per square metre of the building, ie lettable area. 211 Mr Sorrenson says the more reliable method is the latter, ie based on lettable floor area since a two storey building should logically produce more rental than a one storey building. Mr Azar, in response, says that this can be unreliable. If drawn from the lettable area disclosed on the face of registered leases, I would have thought the improved land value method should be reasonably reliable. 212 The difference can be illustrated by the fact that the check method based on improved land value on Mr Azar's valuation of $645,000 produced a rate of approximately $1,854 per square metre, but on a gross building area check a valuation of $645,000 would have translated (on Mr Sorrenson's calculations) to approximately $927 per square metre. 213 Mr Azar said that capitalised at 7.25% the subject land would represent an improved land value rate of $1,854.57 per square metres which was considered to be "within market range". However, Mr Azar conceded in cross-examination that the range of properties used by him the subject property was the lowest number. Therefore, Mr Azar's square metre land value of $1,854 per square metre for the subject property was, objectively, outside the range of properties he considered, assuming (as seems logical) that the subject property itself cannot be included in the range for comparative purposes. Something cannot be said logically to fall within a range by extending that range – a proposition which Mr Azar would not accept. 214 Mr Azar asserted that the fact of a greater lettable area would be taken into account by or reflected in a higher overall purchase price (ie that the sales price would itself reflect the difference in lettable floor area) and so a value per square metre of building area was appropriate. 215 The relevance of this point of dispute is that the Punchbowl property was more heavily improved than the comparables at 816 and 779 Punchbowl Road. On that basis it seems logical to me that a cross check based on the lettable floor area value (and not, simply on the basis of improved land value) is likely to be more reliable. 216 In that regard, Mr Azar was unwilling at first to concede that in general if there was double the lettable floor area of a building this would significantly increase the value of the building. He suggested that as a general principle this might not be the case because the property in question might be over-capitalised. However, Mr Azar did subsequently concede that he had inspected the Punchbowl property and that the second storey did increase its value. Conclusion as to value 217 There was no immediate comparison between the results of the respective cross check methodologies used by the valuers, as they each proceeded on a different basis. 218 What seemed to me to be the most reliable basis on which to proceed (and one which accords with the methodology advocated by both valuers) was to start with the indication of gross yield determined from comparable sales (7.3% - 7.5%) and to adjust that as necessary to reflect the differences in the property (the subject property being a more developed or improved property in a similar or perhaps slightly inferior trading position to the closest comparables at 816 and 779 Punchbowl Road) and, accepting Mr Sorrenson on this point, the need to take into account expenses and contingencies of the kind indicated by Mr Sorrenson. 219 Any such adjustment involves a degree of subjectivity. Having considered the evidence of both valuers, I would have been inclined to adopt a perhaps more conservative adjustment than Mr Sorrenson (say, adopting a yield of 6.75% - 7% rather than a yield of 5.75% - 6%). 220 On Mr Sorrenson's net income figures that would produce a property value at between $718,903.70 and $693,228.00 and on Mr Azar's net income figures between $696,962.96 and $672,071.43. On a 6.5% yield the property values would increase to between $746,663.85 (Sorrenson) and $723,769.23 (Azar) (in each scenario assuming the valuers' underlying arithmetical calculations are correct). In either case, the market value would be higher than the maximum which Mr Azar was prepared to concede ($670,000), although a 6.75% yield would be very close to the lower end of his range. (Mr Sorrenson was prepared to concede a minimum price of $750,000.) 221 If I had to place a value on the property as at 23 August 2006, I would have placed it at the lower end or just below the range Mr Sorrenson had indicated, namely somewhere in the order of $720,000 - $750,000, which equates to a 6.75% - 6.5% yield. (I note this produces a result of not much less than Mr Kassoum and Mr Ghaleb had told the bank they considered the likely value of the property in January 2006.) 222 This supports the conclusion that the sale was at an undervalue in August 2006. While I accept that this may be a factor to be taken into consideration when considering whether the sale is otherwise sufficiently "colourable" to warrant a finding of equitable fraud, for the reasons set out above I do not believe there was the necessary fraudulent intent or design on the part of the Kassoums, even taking into account this factor, to warrant a finding of fraud. · Did the Powers' interest have priority? 223 Given my finding as to the lack of equitable or statutory fraud it is not strictly necessary for me to address the final submission or "last defence" made for the Kassoums which was that even if the El-Kazzi/Estephan charge survived the Kassoums' registration as owners, any equity El-Kazzi/Estephan had in the land was inferior to and did not have priority to the interests of the other (earlier) caveators, Powers and El-Azzi, or the Kassoums (and hence no loss was suffered as a result of the transaction because the Powers' loan would have exhausted all of the sale proceeds). However, I should note that I do not accept that submission. 224 Mr George submitted that an equitable charge is not much better than a mere equity and gives no right to land itself but simply gives rise to an entitlement to order for judicial sale or to approve receivers. 225 However, in Waimiha it was said that a charge involves some deduction from the rights of ownership in the property, rather than a mere interference with a right to possession – Waitomo Wools (NZ) Limited v Nelsons (NZ) Limited 1 NZLR 484 at 490 (adopting Re Price (1931) 26 TasLR 158 at 160). 226 Whatever be the appropriate characterisation of an equitable charge, both Mr Powers and Mr El-Azzi had equitable interests in remarkably similar terms to, and granted later than, the El-Kazzi/Estephan charge. Although Mr Powers' caveat referred to an equitable mortgage, it seems that in fact he had only an equitable charge on the same basis that it was contended by the Kassoums that El-Kazzi/Estephan had no more than an equitable charge. The statement of claim lodged by Mr Powers makes this clear. Mr Powers' amended statement of claim pleaded that it was a term of the loan and mortgage that in the event of default the monies owing "shall be charged on any real property owned by [the Moujallis and Aziz Moujalli] and that [Powers] has the right to take possession and sell the real property". 227 The Powers' loan and mortgage documentation were not in evidence. If the relevant clause (s) was (or were) to the effect pleaded, then it would appear that what Mr Powers was granted was an equitable charge over, inter alia, the Punchbowl property. 228 The El-Azzi mortgage contained the same charging clause as for El-Kazzi/Estephan and Loan Agreement same typeface and format. Presumably the same precedent was used by Mr Estephan who was the broker for that loan. 229 As a practical matter it has been said (Law of Mortgages, para 4.22) that the date on which caveats are lodged will rarely be significant. Moreover, see the dicta of Hamilton J in Capital Finance (where his Honour was assessing priority as between two unregistered interests, an equitable mortgage and a statutory charge) gave no indication that the former was a "better" equity per se. Accordingly, Mr Young submitted that even if Mr Powers' interest was that of a full equitable mortgage, that would simply go to the relief available; in terms of priorities it would be equal to that of an equitable charge. 230 As between unregistered interests, the general law of priorities is that where the equities are equal, the first in time prevails: 'qui prior est tempore potior est jure". 231 In Butler v Fairclough Griffith CJ said: In the case of a contest between two equitable claimants the first in time, all others being equal is entitled to priority. But the claimant who is first in time may lose priority by any act or omission which had or might have had the effect of inducing a claimant later in time to act to his prejudice. 232 Isaacs J said: The protection given by the Act to an unregistered and perhaps, unregistrable transaction is coupled with the price of diligence in guarding others against loss through ignorance of the transaction. 233 What is the alleged postponing conduct? In J & H Just (Holdings) Pty Limited v Bank of New South Wales (1971) 125 CLR 546 it was recognised that a failure to caveat may render the equities not equal though it would not necessarily be the case that the first to caveat would prevail. 234 The Kassoums rely on cases where the failure to caveat led to the prior interest being postponed – Person to Person Financial Services Pty Ltd v Sharah [1984] 1 NSWLR 745; Double Bay Newspapers Pty Ltd v Air Holdings (1996) 42 NSWLR 409. Mr George submits in effect that this is a case of "caveat or perish". Mr George submits that El-Kazzi/Estephan well knew what a caveat was, and its importance, because Kulnura Finance did lodge a caveat to record an interest in the Greenacre property (relying upon the Loan Agreement for its provenance). 235 Insofar as the Kassoums argue that a failure by El-Kazzi/Estephan to caveat their interest led to their acquiring the property, it seems to me that had the intent of the Kassoums in fact been to cheat the plaintiffs out of their claimed interest they could hardly rely on a lapsed caveat as protection. 236 It was suggested by Mr Young that an inference could be drawn that El-Azzi, at least, was aware of the El-Kazzi/Estephan interest, since Mr Estephan had brokered his loan. That does not seem to me necessarily to follow. However, neither is there any evidence to suggest that El-Azzi placed reliance, when entering into his loan, on the lack of any prior interest. 237 As for Mr Powers, there is no evidence either way to suggest whether he placed any reliance on lack of a caveat over the Punchbowl property when entering into his loan. There was no evidence as to what searches or enquiries Mr Powers made before he entered into the loan or as to the circumstances in which it was made. Mr Young submits that fact that Powers was so aggressive in promoting his interest does not elevate his interest outright. His promptness in protecting and enforcing his rights (compared with the apparent willingness of El-Kazzi/Estephan to allow time for the Moujallis to make arrangements to pay) and the size of the loan, suggests that he may as a matter of prudence have made those enquiries, but there is no proper basis on which I could draw that inference. There is simply no evidence that Mr Powers checked to see if any other interest/charge on Punchbowl property before making his loan. (It might equally be that he thought it unnecessary for him to do so, since the principal securities he obtained related to other properties.) 238 In Elderly Citizens Homes of SA Inc v Balinaves (1988) 72 SASR 210 it was significant in assessing priorities that the holder of the earlier interest had filed and then withdrawn a caveat. Here, on the available evidence, it seems doubtful that the initial failure to caveat or the lapsing of the caveat could be said to have led to the other equitable interest holders having taken any action justifying postponement of the earlier interest in time. Mr Powers must have been on notice of a caveat on title at the time he entered into the settlement with the Moujallis, his solicitors having prepared the lapsing notice for its withdrawal. · Relief for statutory fraud 239 If there had been statutory fraud, then the Kassoums would take the land subject to the charge of which they had notice. The High Court said of statutory fraud in Bank of South Australia v Ferguson at 256: The points of significance for the present litigation are that (i) statutory fraud embraces less, not more, than the species of fraud which, at general law, founds the rescission of a conveyance; and (ii) statutory fraud is not itself directly generative of legal rights and obligations, its role being to qualify the operation of the doctrine of indefeasibility upon what would have been the rights and remedies of the complainant if the land in question were held under unregistered title. · Relief for equitable fraud not amounting to statutory fraud 240 Again this does not arise, given my findings above and since the fraud alleged, if established, would have amounted to statutory fraud. However, if there had been equitable fraud of a kind which nevertheless did not amount to statutory fraud, then El-Kazzi/Estephan would have been entitled at the least to compensation for the loss suffered by them by reason of the transaction. That loss, it seems to me, would be loss of the opportunity to rank ahead of the other equitable interest holders on any sale of the property by Mr Powers as mortgagee. 241 Since Mr Powers was pressing to sell the Punchbowl property, it seems reasonable to assume that if the transfer to the Kassoums had not gone ahead he would have proceeded to execute his power of sale. An issue would then have arisen as to priority out of the proceeds of sale. If, as I think, the equitable interest of El-Kazzi/Estephan would have had priority over the Powers' interest, then by reason of the sale which transpired they have been deprived of the (likely) result that they would have recovered the amount of the loan and interest thereon. This, in my view, would have been the measure of any compensation for equitable fraud. Conclusion 242 The plaintiffs have not established equitable or statutory fraud. I dismiss the plaintiffs' claim. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.