AB Developments (Australia) Pty Ltd v El-Sayed

[2016] NSWSC 1613

Supreme Court

New South Wales

Medium Neutral Citation:	AB Developments (Australia) Pty Ltd v El-Sayed [2016] NSWSC 1613
Hearing dates:	7 to 9 November 2016
Date of orders:	17 November 2016
Decision date:	17 November 2016
Jurisdiction:	Common Law
Before:	Beech-Jones J
Decision:	(1)   Judgment for the Defendant against the First Plaintiff. (2)   Judgment for the Defendant against the Second Plaintiff. (3)    The proceedings stand over to 9.30am on 29 November 2016 before Beech-Jones J for mention.
Catchwords:	Loan advance – subrogation – defendant’s father approached second plaintiff seeking funds to discharge security over defendant’s property – source of funds was second plaintiff’s cousin – funds advanced – funds used to discharge security – whether second plaintiff loaned funds to defendant – whether second plaintiff subrogated to rights of creditor – found that cousin lent funds to defendant’s father – subrogation claim fails
Cases Cited:	Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd (2003) 59 NSWLR 452 Circuit Finance Australia Limited (Receivers and Managers appointed) (in liquidation) v Panella & Anor [2011] NSWSC 311 Cochrane v Cochrane (1985) 3 NSWLR 403 Fox v Percy [2003] HCA 22; 214 CLR 118 Re Cleadon Trust Ltd [1939] Ch 286
Texts Cited:	Equity Doctrines & Remedies, 4th ed, pp 358-9
Category:	Principal judgment
Parties:	AB Developments (Australia) Pty Ltd (First Plaintiff) Abdul Hamdan (Second Plaintiff) Ahmed El-Sayed (Defendant)
Representation:	Counsel: A Duc (Plaintiffs) P Barham (Defendant)   Solicitors: Edgeworth Legal Pty Ltd (Plaintiffs) Smith Leonard Fahey Lawyers (Defendant)
File Number(s):	2014/312841

Judgment

1. HIS HONOUR: The principal claim in these proceedings was brought by the first named plaintiff, AB Developments (Australia) Pty Ltd (“AB”), against the defendant, Ahmed El-Sayed, for the recovery of a sum in excess of $1,000,000 said to be owing under a Deed of Loan allegedly guaranteed by Ahmed El-Sayed and secured over a mortgage of a home owned by him and his brother Azzam at Antwerp Street, Auburn (the “Antwerp Street property”). At the commencement of the hearing the Court was advised that this claim was not pressed. Accordingly, judgment will be entered in favour of Ahmed El-Sayed against AB.

2. The remaining claim was made by the second plaintiff, Abdul Hamdan, against Ahmed El-Sayed for recovery of an amount of $100,000 that Abdul Hamdan claims that he lent to Ahmed El-Sayed in January 2011 to help him discharge a security over the Antwerp Street property. In the alternative, Mr Hamdan seeks to recover that amount by making a claim in subrogation.

3. For the reasons that follow I reject Abdul Hamdan’s claim. In particular, I am not satisfied that Mr Hamdan lent any money. Instead I find that the amount of $100,000 was lent by his cousin, Gazwan Hamdan, and at most Abdul Hamdan guaranteed repayment of that amount. I am also not satisfied that Ahmed El‑Sayed borrowed the money. Instead I am satisfied that his father Khaled El‑Sayed borrowed $100,000 from Gazwan Hamdan to discharge a debt owed by an associated company, K & K El‑Sayed Pty Ltd (“K & K”), that was secured over the Antwerp Street property. The use of borrowed money by Khaled El‑Sayed to effect a discharge of the security in those circumstances does not give rise to any right of subrogation.

Approach to the witnesses

4. It was common ground that on or about 11 January 2011 there was a discussion between Khaled El-Sayed and Abdul Hamdan about an advance of $100,000. It was also not in dispute that on or about that day Abdul Hamdan spoke to his cousin, Gazwan Hamdan, about the latter providing $100,000, and that on the following day Gazwan Hamdan attended at a bank with Khaled El-Sayed and provided Khaled with a bank cheque for $100,000.00 made payable to the National Australia Bank (“NAB”). It is also not in dispute that Khaled El-Sayed provided the cheque to the NAB who applied it in partial discharge of a mortgage over the Antwerp Street property.

5. What was in dispute was the terms of the conversations between those persons and their effect. I set out below the relevant evidence that each witness gave on this topic. At the outset, I indicate that I accept that Gazwan Hamdan and Ahmed El-Sayed were witnesses of truth and generally reliable in the evidence they gave. However, I am sceptical of the evidence of both Abdul Hamdan and Khaled El-Sayed. I do not accept their evidence unless it is supported by independent evidence or at least the probabilities. The particular aspects of their evidence that warrant that approach are set out below. Otherwise, I record that in resolving the issues of fact in dispute I have given primary weight to “contemporary materials, objectively established facts and the apparent logic of events”: Fox v Percy [2003] HCA 22; 214 CLR 118 at [31] (per Gleeson CJ, Gummow and Kirby JJ).

The Four Witnesses

6. Before outlining the evidence of the four witnesses that was directly relevant to Abdul Hamdan’s claim, I note that the parties adduced some evidence that mainly concerned the principal claim made by AB, both as part of the context in which the discussions over the advance of $100,000 occurred and as supposedly raising matters affecting the respective witnesses’ credit. These parts of the evidence were confusing and did not assist much. For example, parts of the affidavits that were read referred to particular building “jobs” or “sites” but other parts that explained which entity undertook those “jobs” or “sites” were not read although some isolated paragraphs were cross examined upon. [1]

   1. For the sake of completeness I note that the portions of the affidavits read at the hearing were as follows: Abdul Hamdan sworn 23 October 2014 at [1] to [18] (except paragraph 8, first sentence of [14] and first sentence of [18]) and [21] to [24]; pages 71 to 72 of AB1; Abdul Hamdan sworn 8 July 2015 at [1] to [3(a)];Tab 17); Gazwan Hamdan sworn 20 July 2015 at [1] to [6] (s 136 order re para 5 and page 71 of AB1); Affidavit of Khaled EL-Sayed sworn 1 March 2016 at [1] to [6] and [70] to [79]; Affidavit of Ahmed El-Sayed sworn 8 March 2016 at [1] to [9] and [73] to [111(f)], [25], [34] to [38], [63] to [67] first occurring, [111](g) to (i); pages 23 to 31, 175 to 200 of AES1; Affidavit of Abdul Hamdan sworn 11 May 2016 at [26] and Affidavit of Khaled El-Sayed sworn 3 November 2016 with annexures A to C

7. Some of the matters addressed by this evidence are described at [35] to [39] below. Of present relevance is that, based on this material, it appears that at all relevant times Abdul Hamdan was the general manager of AB but not its director. AB’s principal business was formwork. In November 1988, A K Property Group NSW Pty Ltd (“AKPG”) was incorporated. Ahmed El‑Sayed is its director. It purchased a property in Macquarie Road, Auburn in March 2010 and developed it. Otherwise, entities associated with or known to either Khaled El-Sayed or Mr Sidney Hawach or both were pursuing a development in Brady Street, Merrylands in the name of an entity referred to by the parties as “Brady Street Developments”. AB undertook formwork on that site.

Abdul Hamdan

8. In his affidavit sworn 23 October 2014, Mr Hamdan stated: [2]

“In January 2011 I had a conversation with Khaled El-Sayed to the following effect:

KE:   I need to [borrow] $100,000 to refinance Ahmed’s house [ie, the Antwerp property] for NAB to BankWest, Can you lend the money?

AH:   I will ask my cousin, you promise me that you will give me the money back.” (emphasis added)

2. CB at 50, [17]

9. The emphasised portions of this conversation suggested that Khaled El‑Sayed stated that he was to be the borrower. When he was cross-examined about this conversation, Mr Hamdan agreed that Khaled El-Sayed told him that “he [ie, Khaled El-Sayed] needed the $100,000”. [3]

   3. T 08/11/16.27

10. When he was asked further about the conversation with Khaled El-Sayed, Abdul Hamdan described it as follows: [4]

“…him [Khaled] you say yes I give you the money back but no him personal guarantee Ahmed you have to be guarantor for this because this money go for him house, for him mortgage. You say for me please, is not support me but, but this $100,000, Ahmed do you want to lose him house because the National Bank they have big problem and I have to move the house from National to Australia Bank something like that. I said, Khaled, I’m no have the money. Let me speak to my cousin, I can get it from you–from him to you and I be the guarantor. He say for me okay and I speak to my cousin.” (emphasis added)

4. T 08/11/16, at p 37.40

11. Again, the first emphasised portion of this evidence suggests that Khaled El‑Sayed was proposed to be the borrower. The second emphasised portion raises some doubt as to whether Abdul Hamdan was to lend the money to Khaled El-Sayed or simply procure it from his cousin with Abdul Hamdan guaranteeing repayment.

12. In cross-examination, Mr Hamdan described the conversation he had with his cousin, Gazwan Hamdan, as follows: [5]

“…I go for my cousin and I ask him and my cousin you say, ‘Yes, is you guarantee, I give to him.’ And I say to him, ‘Yes.’ Still to now I pay interest.”

5. T 08/11/16, at p 38.30

13. Next, in his affidavit of 23 October 2014, Mr Hamdan stated that he “gave” Khaled El-Sayed a bank cheque in the amount of $100,000. He identified a cheque dated 12 January 2011 as a copy of the cheque. [6] In cross-examination, Mr Hamdan agreed that he did not personally provide Khaled El-Sayed the cheque but instead called his cousin, Gazwan, and asked him to meet Khaled El-Sayed at the bank and provide him with a cheque. In describing that arrangement, Mr Hamdan said that he told his cousin: “You make it for him [Khaled] the cheque and El-Sayed take it for the solicitor, and, and Gaz you get also from me to make this cheque, yes. I give him, he say yes, do it and I guarantee for this money.” [7]

    6. CB at 51, [18]

    7. T 08/11/16 at p 39.30

14. Abdul Hamdan swore another affidavit on 11 May 2016. This affidavit replied to the affidavits sworn by Khaled El-Sayed and Ahmed El-Sayed. In responding to that part of Ahmed El-Sayed’s affidavit that described this transaction, Abdul Hamdan stated he “now remembered” [8] that the day after he spoke to Khaled El-Sayed he had a conversation with Ahmed El-Sayed in the presence of Khaled El-Sayed at the Brady Street site in Merrylands to the following effect (in Arabic):

“[ABDUL HAMDAN]:   I can get $100,000 from Gazwan but I’ll have to pay interest.

[AHMED EL-SAYED]:   Please help me, I need the money to change one bank to another bank to save my house for my kids. I’ll give you the money back in four weeks and I’ll pay you the interest, no problem.

[ABDUL HAMDAN]:   Okay I’ll organise to get the cheque tomorrow.”

8. CB at 771, [26]

15. Ahmed El-Sayed denied this conversation occurred (see [23]). Abdul Hamdan was cross-examined about how it was that he failed to refer to what appears to be such an important conversation in his affidavit sworn 23 October 2014 yet was only apparently able to recall it after he had received Ahmed’s affidavit and revisited the topic two years later. He said that “when you [invest] with someone money, three, four years, every day, you remember something, you can’t remember everything in one day”. [9] Although it can be accepted that the various affidavits addressed a significant number of topics concerning the dealings between these parties, including those not directly related to this transaction, I did not find this explanation convincing. It would have been apparent to Abdul Hamdan when he swore his affidavit in October 2014 that any conversation he had with Ahmed El-Sayed about repayment of money by the latter was crucial, yet this conversation was not referred to. I am not satisfied that it occurred.

    9. T 08/11/2016 p 44.3

Gazwan Hamdan

16. In his affidavit sworn 20 July 2015, Gazwan Hamdan recounted receiving a telephone call from Abdul Hamdan stating as follows: [10]

“[ABDUL HAMDAN]:   Khaled, needs $100,000 to refinance Ahmed’s [house] in Antwerp Street. Can you lend me the money?

[GAZWAN]:      I do not know him that well.

[ABDUL]:      It’s okay, (I will be liable).

[GAZWAN]:      OK.

[ABDUL]:   When we get it back I’ll reimburse you all the interest and I will keep you happy. The bank cheque needs to be payable to National Australia Bank.” (emphasis added)

10. CB 297 at [5]

17. Gazwan Hamdan recounted attending at the Westpac Bank branch at Auburn with Khaled El-Sayed to arrange a withdrawal of the funds in the form of a bank cheque for the sum of $100,000 payable to the National Australia Bank. [11]

    11. CB at 130

18. Under cross-examination, Gazwan Hamdan was asked to describe the conversation he had had with Abdul Hamdan in his own words. He stated as follows: [12]

“Yeah, yeah, the best like, along the lines. Khaled El-Sayed wanted money for his son to refinance his property and ‘could you lend it to him’ and I said to him ‘mate I don’t know him that well’. He says ‘don’t worry I’ll, I’ll be like‑along the lines of he will be the guarantor if I don’t get my money back.” (emphasis added)

12. T 08/11/16 at p 73.22

19. Gazwan Hamdan stated the conversation was in Arabic. When Gazwan Hamdan was asked whether he used the word “guarantor” he said that the Arabic equivalent of what his cousin said was “like ‘I’m responsible’”. [13]

    13. T 08/.11/16 at p 74.5

20. Otherwise, Gazwan Hamdan denied that he had ever received any repayments of the amount of $100,000 from Khaled El-Sayed (see [28]). [14]

    14. T 08/11/16 at p 74

Ahmed El-Sayed

21. Mr Ahmed El-Sayed said that the Antwerp Street property was owned by himself and his brother and had been purchased in 1999. His family lived there. He said that at some stage he and his siblings agreed to provide around 20 properties to support a NAB loan facility for which his father’s company, K & K El-Sayed Pty Ltd (“K & K), was the principal debtor. [15] One of the properties provided as security was the Antwerp Street property.

    15. T 09/11/16 at p 123-125

22. In his affidavit sworn 8 March 2016, Ahmed El-Sayed stated that in 2010 the NAB had threatened to take possession of his family’s home and that “I was forced to refinance the mortgage which my brother Azzam and I had taken out with NAB [in Antwerp Street] which was part of the security for K & K’s facility with the NAB”. He said that Khaled El-Sayed was “looking after the refinancing of the NAB facility”. In his oral evidence he stated that his belief was that he understood there was a problem with the NAB and that “all the properties [provided to support the security] were at risk” [16] but stated that “no one had come near my home as yet”. [17]

    16. T 09/11/16 at p 129.47

    17. T 09/11/16 at p 125.27

23. In both his affidavit and in his oral evidence, Ahmed El-Sayed stated that he left arrangements for the refinancing of the NAB facility to his father and he did not know that his father had borrowed $100,000 from Abdul Hamdan (or anyone else) to repay the NAB facility. He stated that he did not give consent to his father to borrow $100,000 from Abdul Hamdan on his behalf. [18] Ahmed El-Sayed stated that all that he knew was that a loan was provided from the Bank of Western Australia to discharge the NAB mortgage. In his oral evidence he denied having the conversation with Abdul Hamdan in the presence of his father as set out in [14] above. [19] It follows from the observation at [5], that I accept Ahmed El-Sayed’s evidence, including his denial that he spoke to Abdul Hamdan in the presence of his father as alleged by Abdul Hamdan.

    18. CB at 539, [103]

    19. T 09/11/16 at p 124.13

Khaled El-Sayed

24. Ahmed El-Sayed’s father, Khaled El-Sayed, swore two affidavits concerning the events surrounding the advance of the $100,000. He also gave oral evidence. In his affidavit sworn 1 March 2016, Khaled EL-Sayed stated that in 2010 the NAB commenced proceedings for possession of the Antwerp Street property which was owned by his sons Ahmed and Azzam. He stated that it was one of the securities provided to the NAB as security for a loan. In his affidavit he set out the details of that loan in a paragraph that was initially not read, but was cross-examined upon. [20] He referred to the loan being a “single loan account in the names of my wife Kharieh my sons Azzam and Ahmed and myself secured over all our family homes”. However in his oral evidence he stated that the loan was in the name of K & K. [21]

    20. Affidavit Khaled El-Sayed sworn 1 March 2016 at [12]; T 09/11/16 at p 88

    21. T 09/11/16 at p 88

25. Khaled stated that an associate, Sid Hawach, attempted to negotiate with the NAB for the release of the Antwerp Street property. In January 2011 he was advised by Mr Hawach that the NAB needed $575,000 to release it. [22] He said that he was only able to arrange a loan for $470,000 and he approached Abdul Hamdan at the Merrylands site about the other $100,000. He said they had a conversation to the following effect:

KHALED:   “I need to borrow $100,000 for Ahmed to refinance Antwerp Street. We are short $100,000.”

ABDUL:    “Don’t stress, I can get it for you.”

KHALED:   “Where from?”

ABDUL   “From Gazwan” (emphasis added)

22. CB at 342, [73]

26. Khaled states that a few days later he attended at the Auburn branch with Gazwan and obtained a cheque for $100,000 payable to the NAB.

27. Khaled revised this account in an affidavit sworn on 3 November 2016. He claims that he did not approach Abdul Hamdan as he previously stated. Instead he stated that Mr Hamdan was present when he spoke to Mr Hawach who told him that he was short $100,000. He also states that he did not say to Abdul Hamdan “I need to borrow $100,000 for Ahmed to refinance Antwerp Street we are short $100,000” but instead stated that he said “I need to borrow $100,000 to pay out all the mortgages we are short $100,000.”

28. Further, Khaled El-Sayed stated that when he collected the cheque from Gazwan, the latter stated to him: “Please Khaled when you got money can you give me the $100,000 back?” and that he, Khaled, said “Don’t worry. I’ll give it back to you”. He claims that about two months later he drew a cheque or cheques on the account of Brady Street Developments in favour of Gazwan Hamdan totalling the sum of $100,000 and gave them to him. [23] Gazwan Hamdan denied any such conversation or receiving repayment.

    23. Affidavit of Khaled El-Sayed sworn 3 November 2016 at [6]

29. As I have already stated, I did not form a favourable impression of Khaled El-Sayed’s evidence. In particular, three matters should be noted.

30. First, Khaled’s attempts to explain the discrepancies between the two affidavits are generally unconvincing. In the end, he resorted to asserting that his first affidavit was not read back to him. [24] I do not accept that explanation.

    24. T 09/11/16 at p 108.47

31. Second, I find Khaled El-Sayed’s assertion that he spoke to Gazwan Ahmed in the term stated in [28] and later paid back the $100,000 loan to Gazwan Ahmed to be completely untrue. It was strongly denied by Gazwan. If Khaled El-Sayed had paid the loan back it is to be expected that he would have mentioned that in his affidavit sworn 1 March 2016. No records were provided to support any suggestion that cheques were paid to Gazwan for this amount. A call was made upon the defendant for the cheques. The only documents referred to were some cheque butts which related to the previous years and for different amounts.

32. Third, the second affidavit of Khaled El-Sayed opened up a dispute about whether, in the initial conversation that he had with Abdul Hamdan, specific reference was made to Ahmed El-Sayed’s residence in the Antwerp Street property. Contrary to Khaled El-Sayed’s evidence, I am satisfied that property was referred to. Gazwan Hamdan’s recollection of his conversation with Abdul Hamdan about the loan is that Abdul Hamdan made reference to Ahmed El-Sayed’s residence which is suggestive of Adbul Hamdan passing on something told to him by Khaled El-Sayed (see [16]). It seems likely that in seeking a loan to bridge the gap in refinancing, Khaled El-Sayed would have made specific reference to the potential hardship that would be caused to Ahmed El-Sayed if that could not be achieved.

Documents

33. Very few documents were tendered that directly related to the matters in dispute. A cheque receipt from Westpac Bank and a copy of a bank cheque confirms that a bank cheque for $100,000 payable to the National Australia Bank was purchased on 12 January 2011. [25]

    25. CB 129 to 130

34. Attached to Khaled El-Sayed’s affidavit sworn 3 November 2016 is a customer settlement statement from the NAB referring to the total amount refinanced on the property at Antwerp Street Auburn as consisting of $598,500. Given that the amount refinanced on the further mortgage to the Bank of Western Australia for that house was approximately $470,000, it follows that the $100,000 payment was specifically applied to discharge the mortgage on the Antwerp Street property. The heading to the document refers to “Name: El-Sayed, K, K, A & A”. I infer that the initials “K, K, A & A” are a reference to the members of the El-Sayed family. The affidavit also attaches a letter from the NAB about the accounts dated 12 November 2010 which also refers to the four family members. None of these documents refer to K & K as a debtor.

Other Matters

35. For the sake of completeness I note three particular matters concerning some of the evidence that was adduced that did not directly relate to Mr Hamdan’s claim against Ahmed El-Sayed.

36. First, there was a dispute about the payment of a sum of $255,000 to Brady Street Developments in March 2010. Abdul Hamdan stated that around that time Abdul El-Sayed paid him $255,000.00 in repayment of moneys owed for formwork and that he, Abdul Hamdan, supplied the cheque to Mr Hawach who was pursuing the development at Brady Street as part of an “investment” in that project. [26] Both Khaled and Ahmed El-Sayed denied this. [27] Ahmed El‑Sayed stated that AKPG provided $255,000 direct to that project without any intervention of Abdul Hamdan and pointed to a disbursement statement of 5 March 2010. [28] It was not submitted that any aspect of this dispute had any direct bearing on the matters in dispute possibility save as to credit. I have not found it necessary to resolve this disagreement.

    26. CB 50 at [14] to [17]

    27. CB 540.2

    28. CB 575

37. Second, there was evidence adduced of various occasions between 2011 and 2013 when Abdul Hamdan advanced monies apparently from AB to AKPG for the pursuit of the development in Auburn. [29] Again, it was not submitted that any aspect of this evidence had any direct bearing on the matters in dispute and it is not necessary to consider it further.

    29. CB 531 at [71ff]

38. Third, on behalf of Ahmed El-Sayed it was contended that Abdul Hamdan procured a forgery of his signature on the Deed of Loan, Guarantee and Mortgage the subject of AB’s principal claim. Counsel for Ahmed El-Sayed contended that Abdul Hamdan’s conduct in doing so was a matter which significantly affected his credit. Ahmed El-Sayed denied signing those documents in February 2012 or at any time. Abdul Hamdan denied involvement in any forgery and contended that he witnessed Abdul El-Sayed sign those documents.

39. In support of the accusation of forgery, Counsel for Ahmed El-Sayed pointed to various documents obtained from AB and Abdul Hamdan’s solicitor suggesting that the Deed of Loan, Guarantee and Mortgage were drafted well after February 2012 when Abdul Hamdan claims that Ahmed El-Sayed signed them. [30] The material referred to provides considerable support for that contention but nevertheless I am not persuaded that Abdul Hamdan procured a forgery. That said, for other reasons I consider Abdul Hamdun’s evidence should be treated with caution and I accept Ahmed El-Sayed’s evidence.

    30. Exhibits 1 to 7

Findings

40. Before addressing the basis upon which Abdul Hamdan seeks recovery from Ahmed El-Sayed it is necessary to determine what was said between the parties and what was the effect of their discussions.

41. The evidence of the discussions between Abdul Hamdan are Khaled El‑Sayed is set out in [8] to [10], [25] and [28]. As noted, both were unsatisfactory witnesses. Nevertheless, three matters should be noted. First, I am satisfied that Khaled El-Sayed made it clear that he was borrowing the money. One common feature of all the accounts of that conversation, and the discussions with Gazwal Hamdan, is that Khaled El-Sayed was described as the borrower of the funds (see [8], [10], [16], [18], [25] and [27]).

42. Second, for the reasons stated at [32] I am satisfied that Khaled El-Sayed made reference to using the funds to avoid Ahmed El-Sayed losing his home, ie, he made it clear that the purpose of the loan was to discharge the security over the Antwerp Street property.

43. Third, it is unclear whether reference was made to Abdul Hamdan lending the money to Khaled El-Sayed or Gazwan Hamdan lending the money and Abdul Hamdan merely “guaranteeing” it. Bearing in mind the discussions between Gazwan and Abdul Hamdan, I consider it more likely that reference was made to Gazwan providing the funds to Khaled El-Sayed and Abdul Hamdan merely covering or guaranteeing the loan. The evidence of the discussions between Abdul Hamdan and Gazwan Hamdan is set out in [16] to [18]. I prefer Gazwan’s version and in particular I regard the version he gave in the witness box, as noted in [18], to be the most reliable. That conversation refers to Khaled El-Sayed as the borrower and Gazwan Hamdan as the lender.

44. As noted, I do not accept Khaled El-Sayed’s recollection of the conversation with Gazwan Hamdan or that he arranged to repay $100,000 to Gazwan.

45. While there is no documentary evidence concerning this, on balance I accept Ahmed El-Sayed’s evidence that the mortgage over the Antwerp Street property was security for a loan in respect of which K & K was the principal debtor. Based on the discharge statement noted in [34] I am satisfied that the $100,000 was specifically used to discharge the security over Antwerp Street and not any other property.

46. The first question that arises is, who was the borrower? There is no evidence capable of establishing any conferral of authority on Khaled El-Sayed to take out on a loan on behalf of Ahmed El-Sayed. The fact that Khaled El-Sayed was seeking to effect a refinance of the facilities that encumbered Ahmed El‑Sayed and his brother’s property at Antwerp Street does not mean that Khaled El-Sayed had the authority to enter into loans on their behalf. He may have arranged loans that they ultimately became parties to but they only became bound when they signed. As stated, one common feature of all the discussions was that Khaled El-Sayed was referred to as the borrower. I find that was the case.

47. The second question that arises is who was the lender? Although it is not clear, my preference for the conversation between Abdul Hamdan and his cousin noted in [18] leads to the conclusion that the latter was the lender. At most, Abdul Hamdan guaranteed the loan.

48. Thus, in the events that transpired, Khaled El-Sayed borrowed funds from Gazwan Hamdan and applied those funds to effect a discharge of a mortgage over the Antwerp Street property owned by his sons which secured the indebtedness of K & K.

The Second Plaintiff’s Case Fails

49. The primary case put on behalf of Abdul Hamdan was that he lent $100,000 to Ahmed El-Sayed which has not been repaid. It follows that this case must fail because the funds were not lent to Ahmed El-Sayed but instead to his father and they were not lent by Abdul Hamdan but by his cousin Gazwan. At most, Abdul Hamdan guaranteed the loan but as he has not paid it out, he cannot subrogate to his cousin’s rights.

50. The other basis on which Abdul Hamdan’s case was pleaded was that he was “entitled to the rights of the National Australia Bank pursuant to the NAB Mortgage and therefor as such an equitable mortgage over [Antwerp Street] as security for the first advance”.

51. I note that at times Counsel for Abdul Hamdan, Mr Duc, used the phrase “unjust enrichment” in relation to his client’s alternative claim but, given the pleaded case, that is not to be taken as anything other than an entitlement to subrogate. From the outset, Counsel for Ahmed El-Sayed, Mr Barham, objected to any widening of the basis upon which it was said that this claim could be made and Mr Duc confirmed that he did not seek to depart from the pleadings. A departure from the pleaded case would have caused an injustice to Ahmed El-Sayed. Even if a claim in restitution could arise in circumstances that do not involve subrogation (see Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd (2003) 59 NSWLR 452; Bofinger v Kingsway Group Ltd (2009) 239 CLR 269 at [97]), in response to such a claim Ahmed El-Sayed would have potentially been entitled to bring forward evidence of a number of dealings between the parties to defeat any suggestion that he was unjustly enriched by the payment of $100,000. Given the state of the pleadings that material was not sought to be adduced.

52. In his final submissions, Mr Duc contended for the form of subrogation which can arise from a party taking the benefit of an unauthorised borrowing undertaken on their behalf. Thus, he sought to rely on the following passage from the judgment of Clauson LJ in Re Cleadon Trust Ltd [1939] Ch 286 at 322 – 323:

“From those decisions a clear equitable principle is to be deduced which I will venture to state as follows: Let it be assumed that A requests B to advance money to C, A being a person who has no authority from C to make the request (whether because C is a company whose powers are limited in such a way as to make it ultra vires on C's part to make such a request, or whether because A, though professing to act as C's authorized agent to make the request, has in fact no such authority): let it be further assumed that B, in response to the request, in fact places the money under the control of C or C's agents, and C, or an agent authorized by C to pay off C's debt's uses the money or procures the money to be used in or towards discharge of C's debts. On these assumed facts a court of equity will treat B as entitled to be recouped by C a sum equal to the amount so used in or towards discharging C's debts.

…

It is to be observed that the equity cannot operate against C (the company or the principal) merely because C has in fact received a benefit from B's action in providing the money: that fact alone, as Falcke's case (1) has settled (so far as this Court is concerned), would not set up an equity against C. The equity must, it would seem, arise from the fact that C, by himself or by a person authorized to act, in the matter of payment of C's debts, for C, has used the money so as to obtain a benefit for C. The benefit has not been an unsought benefit conferred on C behind his back. It is a benefit which C has obtained for himself by using (either himself or by his agent) A's money as his own. It is his conduct in so using A's money which makes it unconscientious that he should retain the benefit while refusing recognition of A's just claim to recoupment.”

53. Mr Duc submitted that person “A” in the first part of this passage as applied to this case is Khaled El-Sayed, person “B” is his client, Abdul Hamdan, and person “C” is Ahmed El-Sayed. [31] Even if the findings noted above accorded with this analysis, it might be doubtful that the mere unsolicited payment to NAB satisfied the balance of the statement made by Clauson LJ in this passage.

    31. T 09/11/16 at p 139.12

54. However, it is not necessary to consider this or whether Mr Duc’s reliance on the above is consistent with the pleaded case because the above findings mean that this principle is not engaged. First, the finding that the lender of the funds was Gazwan Hamdan means that Abdul Hamdan is not party “B” as referred to in the above extract.

55. Second, the finding that Khaled El-Sayed borrowed the money in his own right, (and not purportedly on behalf of Ahmed El-Sayed), means that this case did not involve any “request” by Khaled El-Sayed to advance money to his son. Instead where Khaled El-Sayed borrowed the money in his own right and used that to pay off the mortgage secured over the Antwerp Street property he is taken to have been utilising his own funds and not “advancing” someone else’s money (Circuit Finance Australia Limited (Receivers and Managers appointed) (in liquidation) v Panella & Anor [2011] NSWSC 311 at [20] per Pembroke J; Meagher, Heydon & Leeming, Equity Doctrines & Remedies, 4th ed pp 358-9)

56. Otherwise, I note that this claim invokes an equitable doctrine and a limiting principle is that “there is no occasion for equity to intervene by way of subrogation where there is available to the third party a remedy at law or in equity sufficient to avoid an unconscionable result” (Cochrane v Cochrane (1985) 3 NSWLR 403 at 405 per Kearney J). From the outset, Khaled El-Sayed made it clear that he was borrowing the money, not his son, and that the object of the exercise was to discharge a mortgage registered over the Antwerp Street property owned by his sons and not to create any new security in favour of a third party. In those circumstances, the relevant remedy at law that is available, namely, an action in debt against Khaled El-Sayed, is sufficient to avoid an unconscionable result.

57. It follows that Abdul Hamdan’s claim against Ahmed El-Sayed fails.

Disposition

58. I will enter judgment for the defendant against both plaintiffs. As there may be some scope for argument concerning costs, I will stand over the proceedings for mention at 9.30am on 30 November 2016. If an outcome on costs is agreed prior to then the parties can notify my associate accordingly.

59. Accordingly the Court orders that:

(1)   Judgment for the Defendant against the First Plaintiff.

(2)   Judgment for the Defendant against the Second Plaintiff.

(3)   The proceedings stand over to 9.30am on 29 November 2016 before Beech-Jones J for mention.

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Endnotes

Decision last updated: 17 November 2016