U&D Future Concepts Pty Ltd v Meadow Heights Shopping Centre Group Pty Ltd
[2025] VCC 1626
•11 November 2025
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-24-03515
| U&D FUTURE CONCEPTS PTY LTD (ACN 143 126 685) as trustee of the U&D FUTURE CONCEPTS TRUST | Plaintiff |
| v | |
| MEADOW HEIGHTS SHOPPING CENTRE GROUP PTY LTD (ACN 140 611 409) as trustee of THE MEADOW HEIGHTS SHOPPING CENTRE UNIT TRUST (and others according to the attached Schedule of Parties) | Defendants |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20-23 and 29 October 2025 | |
DATE OF JUDGMENT: | 11 November 2025 | |
CASE MAY BE CITED AS: | U&D Future Concepts Pty Ltd v Meadow Heights Shopping Centre Group Pty Ltd and Ors | |
MEDIUM NEUTRAL CITATION: | [2025] VCC 1626 | |
REASONS FOR JUDGMENT
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Subject:ALLEGED BREACH OF TRUST BY TRUSTEE OF UNIT TRUST
Catchwords: Alleged breach of trust by trustee of unit trust – plaintiff unit holder required to subscribe cash for units – other unit holders allocated far larger numbers of units without cash subscription – breach of trustee’s duty to act impartially between beneficiaries – no disclosure to cash subscribing unit holders of the numbers of units allocated without cash subscription or the identity of the unit holders – further breach of trust by trustee in raising money against trust estate to “cash out” a unit holder which made no initial subscription of cash with distribution made against only 30 per cent of value of subscription constituted by undistributed profits – director of unit trust company liable as having knowingly assisted breaches of trust – tracing distributions in breach of trust used to pay down mortgages on the matrimonial homes of director’s son and daughter and son-in-law, and director’s matrimonial home – no tracing through overdrawn accounts – tracing claim fails – no claim against children and son-in-law “in personam” because distribution “spent” immediately when paid into overdrawn mortgage account – director’s wife a knowing participant – no declaration of constructive trust relative to voluntary transfer to her of Director’s share in matrimonial home – not established that subject matter of transfer constituted traceable proceeds of the breach of trust – payments in relief of mortgage on director’s home not capable of being traced through overdrawn account
Legislation Cited: Property Law Act 1958 (Vic)
Cases Cited:Barnes v Addy (1874) LR 9 Ch App 244
Bishopsgate Investment Management Ltd (in liquidation) v Homan [1995] Ch 211
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471
Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89
Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA 1628
GP Building Holdings Pty Ltd v Voitin [2022] VSCA 210
Heperu Pty Ltd v Belle (2009) 76 NSWLR 230
Target Holdings Ltd v Redferns (a firm) [1996] AC 421
Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285
Judgment: (1) Within 14 days the plaintiff must bring in a Short Minute to give effect to these reasons
(2)Costs reserved
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Sharify | Haitch Legal |
| For the Third Defendant | Mr J Kohn with Mr S Blashki (20 October only) | Douros Jackson Lawyers |
| Other Defendants self-represented |
HIS HONOUR:
Background
1By a contract of sale dated 16 September 2009, CPT Custodian Pty Ltd as vendor agreed to sell retail properties constituting the Meadow Heights Shopping Centre at 55 Paringa Boulevard, Meadow Heights, to Mirage Co Pty Ltd “and/or nominee”. (Court Book (“CB”) 791) The price was $12,000,000, payable by a 5 per cent deposit of $600,000 with the residue payable 90 days after the day of sale. A special condition (No 41) stated, inter alia (Clause 41.1):
“Settlement of this Contract may not occur before 21 December 2009 unless the Vendor obtains the Mortgagee Approvals.” (CB 829)
2Clause 41.5 said:
“If the Vendor does not give notice to the Purchaser that it has obtained the Mortgagee Approvals, then the Settlement Date will be 21 December 2009 in accordance with special condition 25.” (CB 829)
3The phrase “Mortgagee Approvals” was defined to mean:
“the approval of the Mortgagee in accordance with the provisions of the Loan Note Sale Agreement dated 21 December 2006 to which the Mortgagee and the Vendor are parties (among others) to the sale of the Property by the Vendor before 21 December 2009.” (CB 803)
4The mortgagee was Sandhurst Trustees Limited. (CB 803)
5Mr Muhsin Tercan (who was the third defendant in this proceeding) and Mr Gazi Sener (referred to as Mr Gazi, the second defendant in this proceeding) guaranteed the obligations of Mirage Co Pty Ltd, which, as Trustee of the Mirage Co Unit Trust, is the fourth defendant in this proceeding.
6Mr Deha Senbay said he has known Mr Gazi for 25 years as a fellow member of Melbourne’s Turkish community. He said Mr Gazi has “got a shop in the Dallas Shopping Centre”, and that he had been “family friends” with Mr Gazi, and “was even invited to his son’s wedding”. (Transcript (“T”) 64, Lines (“L”) 11-16) He said that Mr Gazi had spoken to his (Mr Senbay’s) brother Umit “back in 2009 or 2010” (ibid, L18-19) about an investment opportunity. He said that his brother had told him “there was an opportunity about buying a shopping centre” (T65, L24-25), and as a consequence he (Mr Deha Senbay) spoke to Mr Gazi “briefly”. (Ibid, L24-27) According to Mr Senbay, he was told “they were going to issue units and each unit was around $250,000”. (Ibid, L29-31) Mr Senbay said he was told by Mr Gazi:
“there was an opportunity ... $250,000 per unit ... positive gearing, and then he never mentioned anything about who other buyer is or who the other unit shareholders are.” (T68, L6-10)
7According to Mr Senbay, there was no mention of the loan being used to purchase the shopping centre. (Ibid, L20-21) He said:
“The only thing that was discussed was the rent, the rent income we would receive, nothing about anything else.” (Ibid, L26-28)
8Mr Senbay said that the return offered was 6 to 7 per cent, in contrast to the 4 per cent return which he was receiving from certain residential properties which he owned. (T69, L1-4) He said that the return being offered was not a net return, “because there were always expenses coming out”. (Ibid, L5-7) This was a gross return. (Ibid, L13) The return might be reduced by issues such as repair costs or vacancies of some of the shops. (Ibid, L19-26) The subscription sought, according to Mr Senbay, was “$250,000 plus whatever the stamp duty was.” This additional charge was approximately $20,000. (T70, L6-12) He said he and his brother contributed a half each of the required $250,000.
9Mr Mustafa Okur – a real estate agent, a member of the Turkish community, and a friend of Mr Gazi – gave a similar account of how he became involved in an investment in the Meadow Heights Shopping Centre via Mr Gazi. He said Mr Gazi “had a ... gift shop in Dallas shopping centre” and that he and Mr Gazi were from the same town in Turkey, namely Corum. (T99, L24-29) Mr Okur said Mr Gazi told him that he was “going to buy the [Meadow Heights] shopping centre and he asked me to buy a share”. (T100, L1-2) This share was to be by way of units in a unit trust. Mr Okur said he subscribed for two, making a total investment of $500,000. (Ibid, L3-7) According to Mr Okur, Mr Gazi told him that investment in the unit trust was:
“open for community. [Scil, the Turkish community] He didn’t tell me his main director or anything.” (Ibid, L12-13)
10According to Mr Okur, Mr Gazi predicted “a good return ... 6 to 9 per cent return for rental.” (Ibid, L16-17)
11Mr Abdurrahman Kuzucu describes himself as “a business manager at a college” with a background in electronic engineering and education. (T113, L6-9) Like Mr Senbay and Mr Okur, Mr Kuzucu had known Mr Gazi as a member of the Melbourne Turkish community for many years. (Ibid, L18-19) Mr Kuzucu said that Mr Gazi approached him offering an opportunity to invest in the Meadow Heights Shopping Centre. (Ibid, L26-28) The discussion might have taken place in Mr Gazi’s shop in Dallas. (Ibid, L29-30) Mr Kuzucu said Mr Gazi told him that “We’re buying a shopping centre and we’re looking for shareholders ... we’d like you to invest, and if you want to be an investor it will be good returns, et cetera.” (T114, L3-6) Mr Kuzucu could not remember what returns were projected or promised. He remarked “in any investment you’d expect there to be capital gains and obviously we were expecting rental from the property.” (Ibid, L10-12) Mr Kuzucu agreed that Mr Gazi did not mention capital gains, “but that’s just obviously something you’d assume.” (Ibid, L13-15) Mr Kuzucu said that as to rental, he was given to understand a return of “roughly about 10 per cent or something like that.” (Ibid, L23) He said Mr Gazi did not mention who the other investors/unit holders would be. (Ibid, L26-28)
12Ms Aysegul Sertel described how she and her husband, Mr Ilker Abak, came to invest in the shopping centre unit trust in 2009. She is a psychologist by profession. (T124, L28) She and her husband, she said, invested $250,000, together with a further $38,000 for stamp duty. (T125, L3-7) Once again, this subscription seems to have derived from a meeting with Mr Gazi in his shop at Dallas. She said Mr Gazi told her “that it would be a proper business with structure and that gave me confidence.” (Ibid, L16-17) She said he told her that the other unit holders would be “a combination of community members”, but no names were mentioned. (Ibid, L20-22) She said there was no mention of a loan being raised to assist with the purchase of the shopping centre. (Ibid, L23-24)
13On 17 November 2009, the first defendant, Meadow Heights Shopping Centre Group Pty Ltd (Meadow Heights), was incorporated. (Supplementary Court Book (“SCB”) 61) By a document styled “Sale of Real Estate Nomination Form” dated 24 November 2009, the purchaser under the real estate contract, Mirage Co Pty Ltd, nominated Meadow Heights Shopping Centre Group Pty Ltd as purchaser. (CB 901) Mirage, Meadow Heights, the vendor CPT Custodian Pty Ltd, and the guarantors Messrs Muhsin Tercan and Gazi Sener, entered into a deed of variation of the sale contract. It extended the date for completion of the contract and payment of the residue of purchase price to 26 February 2010 and increased the sale price, which was modified so as to read “$12,300,000 (exclusive of GST if applicable)”, with the deposit being modified from $600,000 and increased to $900,000. (CB 916)
14The first defendant, Meadow Heights Shopping Centre Group Pty Ltd, executed a document styled “Unit Trust Deed” and dated 4 February 2010 as trustee, along with Mr Gazi, Mr Muhsin Tercan, and Mirage Co Pty Ltd, which were described as the “original unit holders” (CB 923-964). According to Item 6 of the first schedule, Mr Gazi held 1,000 units; Mr Muhsin Tercan held 1,000 units; and Mirage held 1,000 units. (CB 958) Certificates for that unit-holding were to be found in the second schedule to the deed. (CB 951-961) The “settled sum” to be identified as Item 5 of the first schedule (CB 958) was blank.
15By its defence in this proceeding, Meadow Heights admitted that “in or about March 2010 [the $250,000 referred to by Mr Senbay] was paid into the trust account of [Meadow Heights’] then solicitors.” (CB 44) Also according to the defence, “in or about March 2010” the $20,000 on account of stamp duty referred to by Mr Senbay was paid into Meadow Heights’ then solicitors’ trust account. (Ibid)
16Meadow Heights then issued a series of unit certificates, in each case signed by Mr Muhsin Tercan and Mr Gazi Sener as directors of the trustee company. Their signatures were headed with the words “Signed in accordance with the rules that govern the execution of documents by the Trustee Company on 21/02/2011”. The certificates were as follows:
(a) Certificate No 5, Kemal Sevinc, 250,000 $1.00 ordinary shares fully paid
(b) Certificate No 11, Abdurrahman Kuzucu, 250,000 $1.00 ordinary shares fully paid
(c) Certificate No 6, Mahmut Tunc, 100,000 $1.00 ordinary shares fully paid
(d) Certificate No 7, Mustafa Okur, 500,000 $1.00 ordinary shares fully paid
(e) Certificate No 4, Ahmet Savran, 250,000 $1.00 ordinary shares fully paid
(f) Certificate No 10, Ilker Abak, 250,000 $1.00 ordinary shares fully paid
(g) Certificate No 11, Ali Kuzucu, 250,000 $1.00 ordinary shares fully paid
(h) Certificate No 12, U&D Future Concepts Pty Ltd, 250,000 $1.00 ordinary shares fully paid
(i) Certificate No 9, Recep Tercan, 600,000 $1.00 ordinary shares fully paid
(j) Certificate No 3, Mirage Co Pty Ltd, 1,400,000 $1.00 ordinary shares fully paid
(k) Certificate No 1, Gazi Sener, 4,313,976 $1.00 ordinary shares fully paid
(l) Certificate No 2, Muhsin Tercan, 4,313,976 $1.00 ordinary shares fully paid
(m) Certificate No 8, Murat Demiral, 500,000 $1.00 ordinary shares fully paid
(n) Certificate 11, Abdurrahman Kuzucu, 250,000 $1.00 ordinary shares fully paid
(o) Certificate 10, Ilker Abak, 250,000 $1.00 ordinary shares fully paid.
17On 14 April 2010, the plaintiff U&D Future Concepts Pty Ltd was incorporated. The name appears to derive from the given names of the brothers Senbay. (SCB 521-526)
18The Court Book contains documents styled “Application for Units”, each bearing date 12 February 2010, as follows:
(a) Abdurrahman Kuzucu, 250,000 fully-paid units
(b) Ahmet Savran, 250,000 fully-paid units
(c) Gazi Sener, 4,313,976 fully-paid units
(d) Ilker Abak, 250,000 fully-paid units
(e) Kemal Sevinc, 250,000 fully-paid units
(f) Mahmut Tunc, 100,000 fully-paid units
(g) Mirage Co Pty Ltd, 1,400,000 fully-paid units
(h) Muhsin Tercan, 4,313,976 fully-paid units
(i) Murat Demiral, 500,000 fully-paid units
(j) Mustafa Okur, 500,000 fully-paid units. (CB 967-976)
19National Australia Bank issued a letter of offer dated 19 April 2010 to Meadow Heights for a loan of $10,110,000 to be secured by a registered first mortgage over the Meadow Heights Shopping Centre, together with a fixed and floating charge over the assets of the unit trust company Meadow Heights, together with guarantees from Mr Gazi and his wife, Mr Muhsin Tercan and members of their families, and associated entities, including fixed and floating charges over Mirage Co Pty Ltd and various pieces of real estate owned by the Tercan and Sener families and companies and trusts controlled by them. (CB 1137-1140) This loan was drawn down presumably at settlement of the purchase of the shopping centre on 13 May 2010. (CB 1430)
20It would seem that after Meadow Heights took control of the shopping centre there were periodic distributions of profits representing the rental income derived by Meadow Heights. The Court Book contained a letter from Meadow Heights’ then-solicitors, Zindilis Barristers & Solicitors, undated and addressed “To whom it may concern”, stating:
“We have been advised that U & D Future Concepts Pty Ltd will acquire a 2% share of the purchasing entity, being Meadow Heights Shopping Centre Group Pty Ltd. This equates to one share, totalling $250,000. We have also been advised that U & D Future Concepts Pty Ltd has paid all stamp duty applicable in respect of the share acquisition.
All unitholders who acquire a 2% share of the purchasing entity, will receive a net return of approximately 9% per annum provided that all shops on the premises are tenanted.
Should you have any queries, please do not hesitate to contact us.” (CB 1134)
21Neither Mr Deha Senbay nor Mr Umit Senbay recognised this document. (T72, L27-29; T92, L12-26) Mr Gazi gave evidence that at some point he “combined” the Meadow Heights Unit Trust with a unit trust operated by Mirage Co Pty Ltd. (T187-191) Mr Gazi agreed that Mirage Co Pty Ltd was a trustee of another unit trust called the Mirage Unit Trust. (T190, L28-29) Its principal assets were properties in Blair Street which were sold in 2015. (T191, L1-2) Some of those unit holders apparently were not paid out following the sale of those properties but were treated as unit holders in the Meadow Heights Unit Trust. (Ibid, L7-10) There was no evidence of any consent from the existing Meadow Heights Unit Trust unit holders. If this evidence be treated literally, from the moment of the “combination” the share of rental income available to existing unit holders such as the plaintiff in this proceeding would have been diminished by the fact that there were two additional (former Mirage) unit holders now apparently in receipt of part of the rental income. The plaintiff makes no complaint along these lines, however. Its counsel, Mr Sharify, explained it as follows:
“MR SHARIFY: Your Honour, it’s not a mathematical analysis but my understanding of the unit trust and my understanding of how the directors ran it was it was promoted to the eventual unit holders including my clients as giving a range of return on rent between 7 to 9 or 6 to 10, and what they tried to do was keep people happy by meeting that expectation.
HIS HONOUR: Yes.
MR SHARIFY: And it’s not even the case that they actually paid themselves in accordance with 4.3 million units, that’s not what’s happened. What they’ve done is they’ve kept the paid unit holders happy - - -
HIS HONOUR: To meet the promised returns, yes, rather than following any strict shares as per the unit holding, yes.
MR SHARIFY: Precisely.
HIS HONOUR: I understand what you say.
MR SHARIFY: And from a commercial point of view, Your Honour can see the logic behind that perhaps.” (T277, L1-19)
22I interpret this concession as meaning that whilst Messrs Gazi and Muhsin Tercan held the lion’s share of the units in the unit trust – almost 10 million, dwarfing all other unit-holding – the rental income was distributed so as to meet the projections made by Mr Gazi in preliminary discussions in 2009 rather than allocating the lion’s share of that rental income to the units held by Mr Gazi and Mr Muhsin Tercan.
23Mr Gazi said that he and his wife paid $225,000 towards the stamp duty on the transfer of land relative to the shopping centre. He said that this was “my share”. (T203, L2-4) He said that these funds were derived from his “business” – presumably the shop in Dallas. (Ibid, L11-12) The plaintiff’s counsel, Mr Sharify, then took Mr Gazi to an affidavit which he had sworn in a proceeding in the Supreme Court which also raised issues relating to the shopping centre unit trust. At paragraph 36 of the affidavit, affirmed on 7 October 2022, Mr Gazi said:
“In total the purchase of the Shopping Centre was funded as follows:
a. funds from investors: $2,850,000
b. funds advanced by NAB: $10,120,000” (SCB 124)
24Mr Gazi agreed that these figures totalled $12,970,000. (T203, L29-31) He agreed that this represented the cost of the shopping centre including the stamp duty (T204, L1-4). Mrs Sener, “chipping in” without objection from the plaintiff’s counsel, said that an additional $300,000 was payable by way of penalty interest for late settlement. (Ibid, L7-17) Ultimately, Mr Gazi agreed that this $300,000 by way of penalty interest was part of the total cost of the shopping centre of $12,970,000. (Ibid, L27-29) Mr Gazi then conceded that the $225,000 on account of stamp duty which he said he and his wife had paid was in fact the $300,000 penalty interest, and therefore part of the total figure of $12,970,000. (T205, L6-13)
25Mr Sharify then took Mr Gazi to a set of calculations at CB 3172. In contrast to the figures just discussed, this page showed the total stamp duty and purchase price as totalling $12,977,952. That table is as follows:
PURCHASE PRICE $ 12,300,000.00
STAMP DUTY $ 677,952.00TOTAL INVESTMENT $ 12,977,952.00
TOTAL
Unit Holdings
Gazi Sener
33.241%
$ 4,313,976.00
4,313,976
Ahmet Savran
1.926%
$ 250,000.00
250,000
Kemal Sevinc
1.926%
$ 250,000.00
250,000
Mahmut Tunc
0.771%
$ 100,000.00
100,000
Mirage Co Pty Ltd
10.788%
$ 1,400,000.00
1,400,000
Mustafa Okur
3.853%
$ 500,000.00
500,000
Muhsin Tercan
33.241%
$ 4,313,976.00
4,313,976
Murat Demiral
3.853%
$ 500,000.00
500,000
Recep Tercan
4.623%
$ 600,000.00
600,000
Ilker Abak
1.926%
$ 250,000.00
250,000
Abdurrahman Kuzucu
1.926%
$ 250,000.00
250,000
U & D Future Concepts Pty Ltd
1.926%
$ 250,000.00
250,000
$ 12,977,952.00
100.000%
$ 12,977,952.00
12,977,952
(CB 3172)
26It will be seen that this allocates some 33.24 per cent of trust equity to Mr Gazi, a similar percentage to Mr Muhsin Tercan, and 10.78 per cent to Mirage Co Pty Ltd. Mr Sharify asserted, without contradiction from Mr Gazi, that these were Mr Gazi’s “own calculations”. (Ibid, L19) He observed that the figure $12,977,952 corresponded “to the total unit holdings”. (T206, L1-2) The units allocated to Mr Gazi, Mr Tercan, and Mirage, and $100,000 to Mr Recep Tercan, did not represent any outlays of cash, actual or virtual, by those unit holders at the time.
27Seeking to summarise the thrust of Mr Sharify’s cross-examination at this point, I told Mr Gazi that the challenge to him was “you didn’t kick in [any cash]”. (Ibid, L19) Mr Gazi replied:
“How – if we put anything how we bought the shopping centre without paying anything? ... but we organise everything, we work for nothing for – I do it for these people, we work for all – we come together, Mr Tercan and myself, our families come together, we make this structure before I met these people. ... I work for nothing.” (Ibid, L21-30)
28I enquired if his contention was that he and the other “non-cash” unit holders had contributed “sweat equity”, and Mr Gazi replied:
“I work really hard, sir, last 13 years, I was always, my wife always out, we have to check the shopping centre 24/7.” (T207, L3-7)
29Aside from a claim to “sweat equity”, it would also appear that these “non-cash” unit holders had contributed by providing guarantees and guaranteed security in support of the bank borrowing. (Ibid, L14-16)
30In 2018, according to Mr Gazi, three or four unit holders wished to leave – presumably being “cashed out”: namely Mr Muhsin Tercan, Mr Okur, and Mr Abdurrahman Kuzucu. (Ibid, L19-24) Mr Gazi said that Mr Muhsin told him he wanted to leave “Because I want to retire”. (Ibid, L29) According to ASIC records, Mr Muhsin Tercan resigned as a director on 1 March 2017, having served as such since 17 November 2009. He then returned to office as a director on 10 May 2017, making a final resignation on 3 August 2018. (SCB 62) Asked the reason for this “coming and going”, Mr Gazi offered no explanation. (T208-210) There then followed a complex set of transactions.
31On 3 August 2018 Mr Gazi, Meadow Heights as unit trustee, Mr Muhsin Tercan, and SLE Finance Pty Ltd entered into a deed styled “Unit Transfer Deed”. (CB 2802ff) Mr Muhsin Tercan was described as the transferor, and SLE was the transferee. According to Clause 2 of the deed, under the heading “Purpose of Deed”, it was stated at 2.1(c): “The Transferor has agreed to transfer the Units [in the unit trust] to the Transferee in accordance with this Deed.” (CB 2807)
32By virtue of Clause 6.3 of the deed, Mr Gazi warranted to “the Transferor” [viz Mr Muhsin Tercan]:
“(c)There is not now nor will there be in the future any Claim upon the Transferor by the Trustee or any other person for or on behalf of the Trust or arising from any breach by the Trustee of any obligations to third parties.” (CB 2810)
33Mr Gazi also warranted that income in the sum of $234,000 had been paid to Mr Muhsin Tercan “for the year ending 30 June 2018”. He also warranted that “The unpaid amount on the Units transferred pursuant to this deed as a Completion is $3,672,605.19, which liability is assumed by the Transferee [SLE] on Completion.” (CB 2810)
34The plaintiff, U&D, alleged at paragraph 26 of its Statement of Claim that for the income years ending 30 June 2011 to 30 June 2018, distributions of income from the unit trust totalling $1,042,203 had been made in favour of Mr Muhsin Tercan. In the course of his opening remarks, Mr Kohn, who appeared as leading counsel with Mr S Blashki on behalf of the third defendant, Mr Muhsin Tercan, said that these amounts of income credited to his client had not been received in the form of cash, but rather went in reduction of the unpaid face value of his client’s units in the unit trust. He said it was his client’s case that he had received “unpaid units” despite their having been designated as “fully paid”. (T49, L1-6; T53, L24 – T54, L1) The purchase price for the unit was $3,340,000. (CB 2816)
35The transfer form described Mr Muhsin Tercan’s 4,313,976 units as being “partly paid”. (CB 2818-9)
36Also executed on 3 August 2018 was a document styled “Call Option Deed” between SLE, Mr Gazi, and Meadow Heights. SLE was described as the “owner”. Mr Gazi was described as the “purchaser”. (CB 2637ff) Clause 3.1 of the deed stated “The Owner [viz SLE] hereby grants to the Purchaser [viz Mr Gazi] an option to purchase the Option Units”, which were described as 5,191,181 ordinary units in the trust. The exercise price was $4,052,830, and the option was open for exercise from the date being 12 months and 14 days after 3 August 2018 and ending 13 calendar months after that date. The Completion Date was expressed as “The day that is 14 months after the date of this Deed.” (CB 2647) A further document executed on the same day, viz 3 August 2018, was styled “Specific Security Agreement” and was made between Mr Gazi and SLE. (CB 2649ff) This constituted a mortgagor charge over what were described as the “Rights”, meaning Mr Gazi’s rights relative to 3,436,771 “ordinary units” in the unit trust. (CB 2654)
37A further document executed on the same day was styled “Call Option Deed”. (CB 2686ff) The parties were SLE, Mr Gazi, and Meadow Heights as unit trustee. Mr Gazi was described as the owner; SLE was the purchaser; and Clause 3.1 of the deed provided:
“The Owner hereby grants to the Purchaser an option to purchase the Option Units for the Exercise Price.” (CB 2690)
38The units were described as 3,436,771 ordinary units in the Trust. The exercise price was $2,211,215, and the option period was the period from the day 16 months and 14 days after the date of the deed, viz 3 August 2018, ending 17 calendar months after that date. (CB 2696)
39There was a further deed of unit transfer executed. Mr Gazi said that in accordance with the call option, he had purchased 5,191,181 units from SLE for a price of $4,052,830. (T200, L24-31) He commented: “This is after Muhsin left?” (T201, L6) Mr Gazi agreed that he had Meadow Heights borrow the money to finance his purchase of Mr Muhsin Tercan’s units, the borrowing being from Westpac Banking Corporation. (T205, L26-29) The effect was that Mr Gazi was the holder of 44 per cent of the units in the unit trust, namely 5,727,985. (T216) Mr Gazi was able to acquire more than the original 4.3 million units which Mr Muhsin Tercan owned which were transferred to SLE because SLE had purchased 877,205 of Mr Gazi’s units for $1. (T218) Mr Gazi said he made a reallocation of units to other people, some of them being Mr Muhsin Tercan’s former units. He did this “because my accountant prepared everything like this” (T219-220; especially L4-5 of T220).
40Mr Gazi had been pressed with evidence from some unit holders, in particular Ms Sertel, who complained of a failure on the part of Meadow Heights as unit trustee to provide information or documents as to the unit trust holdings of her and her husband and the larger unit trust structure. He was also taken to certain documents which included email complaints made by or on behalf of other unit holders to similar effect.
41Mr Gazi said that he had made proper information available to unit holders, holding up two disparate sheets of paper which I marked collectively as Exhibit 1. The first was a page headed “Share Holders”, which I understood to be a list of unit holders (other than Mr Gazi, Mr Muhsin Tercan and Mirage – that is, unit holders who put in cash), showing their subscriptions to the unit trust and their outlays for stamp duty. I understood this page to represent the situation as at acquisition of the shopping centre in 2010. A second page, dating from a much later date, and apparently an extract from a set of unit trust accounts, had a list of unit holders and percentage entitlements. On that page, under the heading “Distribution of Trust Income”, the author, presumably the accountant or tax agent who had prepared the document, stated:
“We note you have previously been unable to provide us with a complete unit holder register. You have however, provided various unit holding certificates and a draft register which we have reviewed and attempted to complete in accordance with your previous instructions. Accordingly, we note after numerous telephone discussions and email correspondences you have confirmed the below unit holder register is correct per your confirmation in emailed [sic] dated 18 September 2023. Furthermore, please take note of the accounting versus tax distribution to each of the unit holders for your review as well as the enclosed ATO statement of distribution which we understand you are obliged to onforward to the relevant unitholders directly.
We note, remaining in line with the unit holder register, Meadow Heights Shopping Centre Group Unit Trust distributed its trust income of $3,850,914 as follows”.
42There followed a table. At a later stage in his cross-examination, Mr Gazi said that the attached table “records the situation after 2018” (T221, L3-7):
Unit Holder – Trustee
Beneficiary
Units Held
Ownership %
Accounting Distribution
Tax Distribution
Gazi Sener
Gazi Sener Family Trust
5,727,985
44.14%
3,507,068
1,699,793
Mirage Co Pty Ltd
Mirage Co Unit Trust
2,333,374
17.98%
1,428,570
692,394
Ahmet Savran
Savran Family Trust
416,637
3.21%
255,045
123,614
Kemal Sevinc
Sevinc Family Trust
416,637
3.21%
255,045
123,614
Mahmut Tunc
Mahmut Tunc
166,707
1.28%
101,700
49,292
Mustafa Okur
Okur Family Trust
833,360
6.42%
510,090
247,229
Recep Tercan
Recep Tercan Family Trust
999,981
7.71%
612,585
296,905
Ilker Abak
Abak-Sertel Family Trust
416,637
3.21%
255,045
123,614
Ali Kuzucu
Kuzucu Family Trust
416,637
3.21%
255,045
123,614
U&D Future Concepts Pty Ltd
U&D Future Concepts Pty Ltd
416,637
3.21%
255,045
123,614
Erdal Demir
Erside Family Trust
833,360
6.42%
510,090
247,231
12,977,952
100%
7,945,329
3,850,914
43According to the Statement of Claim, on 20 January 2022 Meadow Heights sold the shopping centre for $22,000,000 to BAE Corp Nominees Pty Ltd as Trustee for the BAE Corp Family Trust “pursuant to a contract entered into on 8 October 2021”. (CB 29, paragraph 37) In its defence, Meadow Heights admitted these matters. (CB 48, paragraph 37) Mr Deha Senbay, one of the directors of the plaintiff U&D, said “I don’t know the exact year, but when the shopping centre was sold, or before it was sold, there were rumours ... and that’s when I became aware of it.” (T78, L23-26) His brother Umit, the other director, said that he heard that the shopping centre had been sold “from waiting outside, the people who are talking, from the mosque, and that’s when I find out”. (T93, L11-14) According to the evidence of another unit holder, Mr Okur, he found out about the sale of the shopping centre “before one week from settlement. I didn’t hear from Gazi Sener or Muhsin, ... they didn’t mention they had sold it.” (T104, L26-29)
44The Court Book contained a pro forma letter on the letterhead of Meadow Heights Shopping Centre dated 27 January 2022 and addressed to “Dear Unit Holder” in the following terms:
“I am pleased to inform you of the sale of the Meadow Heights Shopping Centre for $22 million.
The settlement of the sale recently completed, and the net sale proceeds, once all encumbrances like the mortgage and other expenses including sale expenses are paid, will be paid into the shopping centre’s account by the end of this week. Once monies are received, I will immediately arrange for each unit holder’s capital contribution(s) to be returned to the unit holder via their nominated bank account.
Given the only asset of the unit trust, being the shopping centre, has been sold and the unit trust has achieved its purpose, I intend to take steps to finalise the affairs of the shopping centre and close down the trust.
The shopping centre (and trust) will retain monies to pay any ongoing expenses, costs, and taxes payable to finalise the affairs of the shopping centre and trust.
Monies will be retained in the shopping centre’s bank account to cover these costs. It is unlikely that a further contribution of monies will be required from unit holders to meet these costs. Once all expenses, costs and taxes are paid, the remaining monies will be distributed to unit holders based on their percentage of units.” (CB 3067)
45Mr Okur said he did not remember receiving this letter. Mr Deha Senbay of U&D said he was “never sent” this letter. (T73, L8) His brother Umit likewise said he had never seen the letter. (T93, L7-13)
46Mr Deha Senbay said he received a letter by email from Meadow Heights dated 11 March 2022 (T73, L17-22) which stated as follows:
“Dear U&F [sic] Future Concepts Pty Ltd, Att:Deha Senbay
I refer to previous communications and confirm the Meadow Heights Shopping Centre has been sold and settlement has been completed. On or about the 27th of January 2022, your initial capital investment in the Meadow Heights Shopping Centre Group Trust (Trust) was returned.
This letter is provided to inform you of your distribution from the Trust.
Given your unit holdings, you will receive a payment of $38520.00 on or about the 11th of March 2022. This payment represents your distribution of the profits achieved by the Trust following the sale of the shopping centre (and takes into account the payment of all expenses and taxes).
Any residual monies left in the Trust’s bank account once all trust related expenses, costs and taxes are paid will be distributed to unit holders on or before 30 June 2022.
I confirm the Trust has achieved its purpose and will be wound up in an orderly manner shortly. There will be no further payments or distributions.” (SCB 47)
47Mr Senbay identified what appears to be a page from the accounting journal of the plaintiff (SCB 4). He said that he believed this document had been prepared by U&D’s accountant from a practice separate from Hume Taxation Services which acted as accountant and tax agent for Meadow Heights. (T76, L25-31) The journal identified outlays by U&D of $250,000 for “Purch Units – Meadow Heights UT” and $20,000 for “Stamp duty paid”, both said to have been made on 1 July 2010. Mr Senbay said this was stamp duty on the purchase of the shopping centre by the trustee Meadow Heights for his company’s share thereof. (T77, L15-28)
48Mr Senbay said he was unaware of the transactions in 2018 whereby Mr Tercan exited involvement with the defendant and was “paid out” for his unit until “the legal cases started”. (T78, L18-20) The “legal cases” were the present proceeding, which was filed last year, and an earlier proceeding in the Supreme Court brought by Mr Okur and five other unit holders in 2022.
49Mr Senbay said that U&D’s subscription of $250,000 was funded 50 per cent from him and 50 per cent from his brother Umit; viz, $125,000 each. As to his share, he said “I borrowed, mortgage”. (T79, L26 – T80, L1) In addition to the return of U&D’s original subscription of $250,000, it was paid an additional $38,000. (T94, L30-31) More specifically, according to the allegations in U&D’s Statement of Claim admitted by Meadow Heights, the additional capital distribution to U&D was $38,520. Mr Gazi received a distribution of $4,339,750, likewise as alleged by the plaintiff and admitted by Meadow Heights. Additionally, as alleged in the Statement of Claim and admitted in the defence filed on behalf of all, save the third defendant (Mr Muhsin Tercan), Mr Gazi transferred $200,000 to the fifth defendant, Saliha Sener; $470,000 to the sixth defendant; $600,000 to the seventh defendant, Dilara Sener; and $1,110,236 to the eighth defendant, Gazsal Investments Pty Ltd as Trustee of the Gazsal Investments Unit Trust (a company controlled by Mr Gazi and his wife Mrs Sener). According to the plaintiff, these sums were funded from Mr Gazi’s distribution from the Meadow Heights Unit Trust. This was not denied by Mr Gazi or Ms Sener.
50The payment of $200,000 to the fifth defendant, Mrs Sener, was described in the relevant bank statements as a “dowry”. (T236, L31 – T237) Mr and Mrs Sener had been married for over 30 years at this point. By a transfer instrument dated 22 February 2022, Mr Gazi transferred his interest in his matrimonial home to his wife for no monetary consideration. (CB 3072-3; T238, L25 – T239, L7)
51In 2022, Mr Okur and five other plaintiffs brought proceedings in the Supreme Court arising out of the events which I have narrated. This proceeding was settled on undisclosed terms (Proceeding No S ECI 2022 02257). Giving evidence in this proceeding, Mrs Sener began saying “I just want to put on the record that that money that we put into our children’s accounts as gifts were redrawn to help us pay for the expenses and the settlement.” (T280, L28-31) She said that she and her husband had “drawn down all the equity” in their house (T281, L15); likewise, the equity in their children’s houses (Ibid, L16-17).
This proceeding
52On 18 June 2024, solicitors acting for the plaintiff U&D filed the writ commencing this proceeding. It was commenced only after the resolution of the Supreme Court proceeding.
53In this proceeding, all defendants other than Mr Muhsin Tercan were represented by the law firm Hicks Oakley Chessell Williams. That firm ceased to act before the trial. Mr Muhsin Tercan was separately represented by law firm Douros Jackson Lawyers, and Mr Kohn and Mr Blashki of counsel represented him at trial.
54Mr Kohn, Mr Tercan’s leading counsel, filed an Outline of Opening Submissions and made a lengthy statement in response to the opening by plaintiff’s counsel Mr Sharify. In so far as the plaintiff complained that Mr Tercan had been “cashed out” in 2018 for an amount exceeding $3,000,000, Mr Kohn noted that whilst Mr Tercan had made no cash outlay for the acquisition of his units, which were designated as “fully paid”, as at 2018 he had to his credit, in the books of the unit trust, income distributions slightly in excess of $1,000,000, with the balance of his payout to be attributed to the increase in capital value of the shopping centre. (T54-55)
55After lunch on Day 1 of the trial, I stood the matter down at the request of counsel for the plaintiff and the third defendant. At 2.45pm they announced that the matter as between those parties had been resolved, seeking orders that the proceeding as between those parties be struck out with a right of reinstatement with no order as to costs. Once again, the terms of settlement were not disclosed.
56In a general sense, the grievance of the plaintiff U&D and the other unit holders who brought proceedings in the Supreme Court is obvious enough. Mr Okur put the matter in a nutshell:
“After 11 years I got my 500 [viz $500,000] back and 77,000 as a profit, not even a profit because I paid $27,000 stamp duty. ... And I paid interest to the bank for that. ... and at the end ... when you buy the property ... for 12 million and you sold it for 22 million ... And you give peanuts to the holder, it’s not fair, you have to be fair.” (T108, L18-20, L30-31; T109, L5-10)
57In the course of final submissions, Mr Sharify said that the settlement entailed payment to U&D by Mr Tercan of $65,000 in full settlement of U&D’s claim. During the trial, the sixth and seventh defendants, being Mr Gazi’s son and daughter, attended remotely by Zoom on some occasions. For the most part they were absent. Mr Gazi and his wife represented themselves. Their company Gazsal Pty Ltd, the eighth defendant, was unrepresented.
58Further, it is plain that the unit trust operated on the basis of “inside” unit holders and “outside” unit holders. The “insiders” were the directors of Meadow Heights, Messrs Gazi, Muhsin Tercan and Mr Gazi’s company Mirage. These received the lion’s share of the capital distributions in one way or another: in Mr Gazi’s case, with the allocation of over 4,000,000 units with no cash subscription whatsoever – not even a contribution towards stamp duty on the acquisition of the shopping centre. The “insiders” appeared not to have been forthcoming with information, with vital matters such as the cashing-out of Mr Muhsin Tercan and the sale of the shopping centre becoming known only ex post facto and, if the plaintiff’s witnesses are to be believed, only by rumour rather than official notification. Mr Gazi and his wife, in control of the defendant trustee company Meadow Heights, were parsimonious with information. The plaintiff’s witnesses described their inability to prise comprehensive documentation from the trustee, Meadow Heights, and those controlling it. During his evidence, Mr Gazi flourished two what I described as “disparate pages” which became Exhibit 1 as an example of what he regarded as full and proper disclosure. The “outsider” unit holders were deprived of access to the full accounts of the unit trust.
59Cross-examining Ms Sertel, Ms Sener put it to her that “your husband [Mr Abak] and yourself repeatedly came to the shop, are repeatedly kept on saying, ‘We want to know everything else.’ Do you think that’s fair, did you think it was a privacy matter?” (T135, L22-26) There must be a suspicion that the concern for the “privacy” of unit holders was dictated more by concern that knowledge of the numbers of units allocated and the circumstances and conditions upon which they were allocated, if it spread to the “outsider” unit holders, would create a feeling of grievance at what might be seen as inequities as between the “insiders” and the “outsiders”.
60It remains to be seen, however, whether the general feeling of grievance on the part of the plaintiff will equate with effective causes of action yielding the relief sought.
Statement of Claim
61By its Statement of Claim filed with the writ, U&D first alleged and described the circumstances in which the second defendant, Mr Gazi, approached investors to fund the purchase of the Meadow Heights Shopping Centre with his company, Mirage, entering into a contract for the purchase of the centre. Next, the unit trust is described, with the first defendant as trustee. Various provisions of the trust deed are recited and alleged, as well as the following duties said to have been incumbent on Meadow Heights in the circumstances:
“16.At all material times, the Trustee Company had a duty to:
A.Obey the terms of the Trust Deed;
B.To act in the best financial interests of all of the beneficiaries of the Unit Trust;
C.To not use its position as Trustee to obtain any advantage or gain for itself or a third party;
D.To act impartially between the beneficiaries, including between present and future beneficiaries of the Unit Trust;
E.To render accounts and provide verification on information in rendered accounts upon the request of the beneficiaries;
F.To exercise its discretionary powers fairly and honestly and for the purposes for which the discretionary powers were conferred and not to accomplish any ulterior purpose.”
(CB 21)
62It was said that the units issued to Mr Gazi, Mr Muhsin Tercan, Mr Gazi’s company Mirage, and Recep Tercan, were “fraudulently issued”.
63Next, it was said that in so far as income distributions were made to Mr Gazi, Mr Muhsin Tercan, and Mirage, such distributions “were in breach of trust as Gazi, Muhsin and Mirage were not Unit Holders or beneficiaries of the Unit Trust”. Therefore, these parties “were knowing recipients of the distributions ... within the meaning of the first limb of Barnes v Addy.” (CB 24-25)
64As to the transactions in 2018 and 2019 which saw Mr Muhsin Tercan resign as a director of the trustee Meadow Heights and be “cashed out” for his units, which the Statement of Claim described as “buy back transactions”, these were said to be breaches of trust because it was said Mr Muhsin Tercan was not a unit holder, as he had not paid the required $1 per unit for his units or alleged units, and it was said “clause 28 of the Trust Deed requires a unanimous resolution of unit holders for a unit holder to cancel units and be paid [their] value by the Trustee Company”. (CB 26-27) It was alleged these transactions were in breach of other specific provisions of the Trust Deed, and borrowing money from Westpac Banking Corporation “was for the purpose of benefiting Gazi and/or Muhsin, rather than the interests of all of the beneficiaries of the Unit Trust.” (CB 28) The funds used to repay Westpac “would otherwise have been available for distribution to [U&D] as Rental Income or as proceeds of the sale of the Shopping Centre.” (Paragraph 36a, CB 28-29)
65As regards the sale of the shopping centre, the termination of the trust and distribution of capital, according to the Statement of Claim: “The purported termination of the Unit Trust by the Trustee Company was in breach of clause 29 of the Trust Deed.” It said a unanimous resolution of the unit holders was required for the early determination of the trust. It was alleged further that in so far as Mr Gazi’s units or purported units were invalid, the distribution to him was a breach of trust. It was said that this was part of a fraudulent design, as witness the fact that “the Trustee Company did not inform the Plaintiff that the Trustee Company would issue the Fraudulently Obtained Unit Holdings” [viz, Mr Gazi’s units]. It was said that Mr Gazi was a knowing recipient of moneys paid in breach of trust “within the meaning of the first limb of Barnes v Addy”. It said, likewise, the distribution of $2,000,000 to Erdal Demir, “$1,325,000 of which were attributable to Erdal Demir’s unit holdings in Mirage”, was a breach of trust, as “Mirage was not a unit holder or a beneficiary of the Unit Trust.” This breach was said to have been fraudulent.
66Next, it was said that Mr Muhsin Tercan “knowingly assisted or procured the breaches of trust” associated with the issue of the non-cash units. It alleged he was a knowing assistor within the second limb of Barnes v Addy.
67Mr Gazi was said to have knowingly assisted all of the breaches of trust alleged, being a director of the Trustee Company, viz Meadow Heights, at all material times.
68Further, it was alleged that Mr Gazi and Mr Muhsin Tercan should be regarded as promoters “of the investment scheme in the Shopping Centre which was ultimately constituted by the Unit Trust”, and as such owed fiduciary duties to U&D which it was said they had breached by the issue of the “non-cash” unit holding and received secret profits. (CB 32-33)
69Finally (CB 34-38), claims were brought in reliance on the equitable process of tracing against the various defendant members of Mr Gazi’s family, including his wife, his son, and his daughter.
70By way of relief, the Statement of Claim sought a suite of orders against the defendant including equitable compensation, an account of profits, and declarations that the various properties whose mortgages had been paid down were held on constructive trust for the plaintiff.
Defence
71In their defence dated 2 August 2024, the defendants other than the third defendant (Muhsin Tercan) broadly admit the steps taken relative to the Unit Trust and the purchase of the shopping centre. They referred in particular to Clause 18 of the Unit Trust Deed, which provided that “no Unit Holder shall be entitled to the transfer to him of any property comprised in the Fund except as otherwise provided herein.” They admitted the issue of 4,313,976 units to Mr Gazi and a like number to Mr Muhsin Tercan, together with $1,400,000 to Mirage, but otherwise denied the allegations that such issues were invalid or unlawful or that their creation entailed breaches of duty by Meadow Heights. They referred to Clause 43b of the Trust Deed.
72As to the transactions in 2018, they said that Mr Muhsin Tercan, Mirage, and Gazi “constituted a majority of holders of units in the Unit Trust at 3 August 2018”, and that Muhsin Tercan and Gazi consented to the transactions.
73As to what was described as “the shopping centre venture”, they referred to the purchase of the centre, stating that:
“In or about August 2009:
a. Mirage, Gazi and Muhsin [Tercan] agreed:
i.Mirage would purchase the Shopping Centre;
ii.Gazi and Muhsin would share in the profits of running the centre and any future profit on the sale of the Shopping Centre;
iii.Gazi and Muhsin would guarantee the repayment of the borrowings incurred to purchase the Shopping Centre;
iv.Gazi and Muhsin would provide security for the guarantees and/or the borrowings required for the purchase of the Shopping Centre” (CB 51, paragraph 79)
74They said, at paragraph 84, attempts by these parties to raise the necessary finance to pay the “entire price” for the shopping centre were unavailing, and accordingly:
“In or around November 2009, Gazi and Muhsin agreed that they would approach members of the Turkish community to discuss the possibility of them investing money to purchase the Shopping Centre, by which the investors would receive a share in the purchasing company equal to the money they contributed to the purchase price plus an annual return on their investment depending on the amount invested.” (Paragraph 85, CB 52)
75They referred (paragraphs 86-87) to the incorporation of the first defendant, Meadow Heights, and its nomination as purchaser, and said that Meadow Heights, Gazi and Muhsin agreed that:
“i.any further investors would, once their investment was accepted by Gazi, Muhsin and Mirage, receive a percentage share in Shopping Centre Venture equal to the money they contributed to the purchase price plus an annual return on their investment depending on the amount invested; and
ii. Gazi and Muhsin would have the remaining share of the Shopping Centre Venture.” (CB 52)
76Next, they said (paragraphs 88-89, CB 54) that “in or about November 2009” Mr Deha Senbay and Mr Gazi “had a discussion” concerning investment in the shopping centre. This was described as the “Dallas Photo Discussion”. At paragraph 89 the following was said to have transpired:
“89. During the Dallas Photo Discussion:
a.Deha told Gazi that he had heard about the possibility of investing in the Shopping Centre from other people interested in investing and that he was interested in investing as well;
b.Gazi told Deha that he, Mirage and Muhsin wanted to buy the Shopping Centre and Deha could have an opportunity to do the same if he had money to invest;
c.Gazi told Deha that he and Muhsin had contributed money by the deposit through Mirage and had by arranging a bank loan through NAB using their own properties as security;
d.Gazi told Deha if he invested, the return on the investment to Deha would be about 7-8% per annum from the shop rents after expenses and paying bank loan payments;
e.Gazi told Deha that if he invested, he would have a share of the entity owning the Shopping Centre;
f.Gazi told Deha that his share of the entity would equal the amount Deha put in as a share of the price of the Shopping Centre including costs. Each investor putting in $250,000 would have a 2% share of the investment in the entity in return for that size investment;
g.Gazi told Deha that each investor would also have to contribute to the stamp duty on the Shopping Centre purchase;
h.Gazi told Deha that when the Shopping Centre was sold the proceeds would be shared proportionately to their contribution after paying back the bank and sale expenses.” (Paragraph 89, CB 53)
77They said the Unit Trust was established by the Trust Deed “on 4 February 2010” (paragraph 90, CB 53-54). They said Meadow Heights having been nominated as purchaser of the shopping centre “on or about 24 November 2009” (paragraph 87, CB 52):
“the Unit Trust received from [Meadow Heights] the Shopping Centre Venture comprising among other things:
i.the opportunity to purchase the Shopping Centre;
ii.the interest of [Meadow Heights] in the Shopping Centre as buyer under the Original Purchase Contract;
iii.the benefit of the deposit paid by Mirage under the Purchase Contract;
iv.the benefit of the security each of Muhsin, Gazi and Mirage had agreed to provide to secure finance to purchase the Shopping Centre.” (CB 54)
78They referred to various provisions of the Trust Deed as to the creation and issue of units. They referred to the “non-cash” units having been issued to Gazi, Muhsin Tercan, and Mirage “on or about 12 February 2010” (paragraph 93, CB 56), and “In or about February 2011 [Mr Senbay’s] units were issued to UDFC [the plaintiff] upon his request.” (CB 57) They said (paragraph 98, Ibid) that Mr Gazi managed the shopping centre until sold, and the Unit Trust “including the monthly distribution of payments to Unit Holders”; he managed the sale, and completion of the sale, of the shopping centre, and the sale by Muhsin of his units in the Unit Trust. According to paragraph 99 of the defence, from purchase until 2018 the net income of the Unit Trust was distributed to the plaintiff “proportionately to its Unit Holding” “by monthly bank cheque”.
79As to the exit of Mr Muhsin Tercan (paragraph 101, CB 57), the defence stated “In or about 2018, [Meadow Heights] sought a loan from Westpac Bank for the purpose of purchasing Muhsin’s units in the Unit Trust”, and, failing, sought finance “from a private lender, SLE Finance”. (Paragraph 102, CB 57)
80According to paragraph 103 of the defence, on 3 August 2018 Meadow Heights “took a loan from SLE Finance”, setting out detailed steps and requirements of the transaction, including a Call Option Deed as to the units then held by SLE granted to Mr Gazi. They admitted that he exercised that option “to acquire the units then held by SLE Finance”. (CB 60) Paragraph 104 states that Meadow Heights “took a loan from Westpac Banking Corporation ... of $4,495,530 which was taken for the purpose of ... paying the exercise price under the Call Option Deed; paying interest to SLE Finance ...; and paying income distributions due to SLE Finance as a unit holder” and also “to the costs of shopping centre bathroom and façade repairs and to addition to the business overdraft funds available for the operation of the centre.”
81According to paragraph 105, “In October 2019 the Westpac Loan was drawn down and used to repay SLE Finance in the sum of $4,052,830”, and SLE’s units were “redistributed ... proportionately to the remaining unit holders ...: 2,291,214 to Gazi; 933,374 to Mirage, and 166,637 to [the plaintiff].” Thereafter, the income of the Unit Trust was applied first in payment of Westpac, and second “proportionately to each of the Unit Holders then holding units based on their unit holdings”. (Paragraph 107, CB 60)
82Upon the sale of the shopping centre completed 20 January 2022, the purchase price was applied first to pay Westpac; secondly, “the Capital Contribution of each unit holder was returned”; and third, “proportionately to each of the Unit Holders then holding units based on their unit holdings, in the following amounts to the Unit Holder or at the direction of them”:
“Mustafa Okur $577,040.00
Ilker Abak $288,520.00
Ahmet Savran $288,520.00
Mahmut Tunc $166,000.00
Ali Kuzucu $913,520.00
Kemal Sevinc $288,520.00
Gazi Sener $3,700,000.00
Recep Tercan $745,250.00
U&D Future Concept $288,520.00
Erdal Demir $2,430,000.00”
(Paragraph 111, CB 61)
83Finally, they said that if the payments were held to be in breach of trust (which they nevertheless denied), then the defendants (aside from the third defendant) said “that the [sic] Gazi, Muhsin and Mirage are entitled to an allowance in respect of their contribution to the business of the Unit Trust, either on a taking of account or as restitution for that contribution.” (Paragraph 112, CB 61)
Conclusions
Claims against Mr Gazi’s children and their spouses
84The claims against the sixth defendant, Mr Sadik Sener, and his sister, Dilara Sener, may be dealt with speedily at the outset. U&D seeks to trace the payments made to Mr Gazi from the sale proceeds of the shopping centre which were paid to them. Alternatively, U&D seeks an “in personam” remedy against them.
85According to Professor Dal Pont, Equity in Trusts in Australia (6th edition) [39.20] 1220:
“[39.20] Equitable tracing rules require proof of a breach of fiduciary duty ..., a clear succession to the property contrary to the relationship giving rise to that duty, and that the property remains identifiable. ...
...
But where the continued existence of the property being traced is not established, equity “is as helpless as the common law itself”. [Citing Re Diplock [1948] Ch 465, 521] Equitable tracing presupposes “the continued existence of the money either as a separate fund or as part of a mixed fund or as latent in property acquired by means of such a fund”. Hence, where it is sought to trace in equity, it is necessary to determine whether the money or property sought to be traced has a continued existence, actual or notional, sufficient to enable equity to grant specific relief. If the property has been dissipated, the remedy ends (without prejudice to a personal claim against the defaulting trustee). For this reason, it is said that equitable tracing cannot be pursued through an overdrawn bank account – such an account is not an asset at all, but a liability ...” (1221−2)
86In the case of both siblings, the payments were made into their mortgage loan accounts, which were in debit.
87In Bishopsgate Investment Management Ltd (in liquidation) v Homan [1995] Ch 211, the liquidators of Bishopsgate, which was the trustee of various company pension funds relative to a public company group controlled by the late Mr Robert Maxwell, sought to trace the proceeds of money improperly taken from the pension funds into a bank account of Maxwell Communication Corporation plc. The Court of Appeal, Dillon, Leggatt and Henry LJJ, rejected this attempt. Dillon LJ said:
“On the unexpected death of Robert Maxwell on 5 November 1991 it was discovered that very large amounts of pension fund moneys of B.I.M. [Bishopsgate Investment Management Ltd] had been improperly paid, during his lifetime, directly or indirectly into various bank accounts of the private sector companies and of M.C.C. with National Westminster Bank. At the time of each wrongful payment of B.I.M.’s pension fund moneys into M.C.C.’s accounts those accounts were overdrawn, or later became overdrawn. It was also found that M.C.C. was hopelessly insolvent.” ([1995] Ch 211, 215)
88According to the headnote in the Law Reports:
“Equitable tracing cannot be pursued through an overdrawn and therefore non-existent fund, nor can misappropriated money be traced into an asset bought before the money was received by the purchaser.” ([1995] Ch 211)
89I take the word “overdrawn” to refer not merely to a debit balance in a classic overdraft account where a bank’s customer is authorised by the bank to draw cheques against the account calculated to bring the account into debit up to an approved limit; rather, it is a reference to any account which is in debit. When a payment is used to extinguish or reduce an outstanding account debit balance, the debit and credit annihilate one another either completely or pro tanto. The credit balance ceases to exist, and therefore cannot be the subject of the tracing process.
90The claim against the children based on tracing therefore fails.
91Alternatively, it was said, the siblings were liable to refund the money which they had received without consideration and as volunteers on an in personam basis: that is, the liability attached to them as individuals, rather than deriving from the continued existence of a piece of property being money paid away in breach of some equitable rule. Mr Sharify, on behalf of the plaintiff, relied on a decision of the New South Wales Court of Appeal (Allsop P, Campbell JA and Handley AJA) in Heperu Pty Ltd v Belle (2009) 76 NSWLR 230. In that case, a fraudster took cheques which the plaintiff company had given him to invest, and deposited them in accounts in his wife’s name controlled by him. Funds were withdrawn to make mortgage payments on properties in his wife’s name and in their joint names. The Court held that the wife as “an innocent volunteer” was under an equitable obligation “touching her conscience” to restore to the plaintiff the proceeds of the misappropriated funds that could be traced into her real estate at the date she received notice of the claim. According to Allsop P, with whom the other two judges concurred, the obligation on the wife, Ms Belle, attached to her to the extent “she retained the funds or their traceable products when she had notice of the claim”. ((2009) 76 NSWLR 230, 267-8 [163])
92In Closing Submissions (paragraph 110), Mr Sharify said:
“... in personam liability can be established by a recipient of fiduciary property who is ignorant of the origin of the property at the time of receipt but then obtains knowledge of the fiduciary nature of the property subsequently”.
93He continued (paragraphs 112-113):
“For the purposes of this proceeding, the plaintiff says it is safer for the court to find the date at which the relevant knowledge was acquired as being the date of the defence that was filed on behalf of the Gazi Defendants including the Children Parties in respect of which tracing claims were made. ...
The date of that defence is 7 February 2023 ...”
94Since the relevant funds disappeared as a separate fund upon their being paid into the mortgage accounts of the children which were in debit, or, to look at it another way, were spent by the children when their mortgage debt was paid down, these funds, having been paid away instanter, cannot be the subject of the in personam claim mounted here.
95In oral submissions, Mr Sharify contended that there was a distinction between a scenario where, on the one hand, a volunteer receiving misappropriated trust funds in good faith spent them to pay down a fixed loan, and, on the other hand, where the loan paid down included a “redraw” facility as was apparently the case here. As a matter of principle, it is difficult to see why this should make any difference. A volunteer recipient of misappropriated funds would be able to resist a claim for repayment if he or she spent the money to pay off a debt owing for goods sold and delivered. Would it make any difference if the seller of the goods had a running account with the buyer/volunteer? Surely not. Exercise of a right of “redraw” under a mortgage facility constitutes the taking out of a new loan not “unspending” the previous repayments. The claim against the siblings, therefore, fails both as being based on tracing and as being mounted in personam.
Allocation of cashless units
96As noted above [60], paragraph 16 of the plaintiff’s Statement of Claim asserted a duty on the defendant trustee company:
“D.To act impartially between the beneficiaries, including between present and future beneficiaries of the Unit Trust”.
97These defendants, including Meadow Heights, admitted the existence of such a duty. According to Professor Dal Pont:
“The duty of impartiality, broadly speaking, prohibits a trustee acting to favour one class of beneficiaries at the expense of another.” (Op cit, [22.120] 679)
98This duty arises typically relative to the respective rights and entitlements of life tenants of properties relative to those with an interest in the same property in remainder. According to the Professor, this duty “can be likened to that of company directors not to act sectionally or partially by favouring one section of shareholders over another”, citing Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285, 289, per Mason, Deane and Dawson JJ (op cit, ibid, footnote 115). In the Carlton Hotel case, an article of the company’s articles of association vested all the powers of the company’s board of directors in a governing director. The High Court by majority, Wilson and Brennan JJ dissenting, held that an allotment made by the governing director to his son to ensure that his former wife and daughter would not gain control of the company on the governing director’s death was for an impermissible purpose, and invalid. Mason, Deane and Dawson JJ said:
“... the directors of a company cannot ordinarily exercise a fiduciary power to allot shares for the purpose of defeating the voting power of existing shareholders by creating a new majority”. ((1987) 162 CLR 285, 289)
99In the present instance, the trustee Meadow Heights administered the trust funds such that, despite having a power to create different classes of units, it discriminated within the one and only class, which it might be supposed would rank pari passu, such that one (outsider) class was required to pay cash “upfront” for each of its $1 units and to contribute to the cost of stamp duty on the trust’s sole or principal asset, the shopping centre; while another (insider) class was permitted to receive its units without cash outlay, and, in the case of Mr Tercan, to be “cashed out” at more than three times the amount of his accrued but unpaid income distribution, or, in the case of the rest of the “insider” group, to receive payment of the full face-value of their “fully paid” units with no cash outlay at all. The logic of the Plaintiff’s case is that the accrued income in excess of $1m put against Mr Tercan’s units as a part payment for their face value ought not to have been allocated to him in the first place because he made no initial cash subscription. This was an egregious breach of duty by Meadow Heights.
100In his opening remarks, Mr Kohn, on behalf of the third defendant, and Mr Gazi and his wife in their evidence and oral presentation, contended that there was full disclosure to all unit holders, who therefore should be regarded as having given their informed consent to this arrangement. The evidence of the plaintiff’s witnesses summarised above is in the teeth of that contention. None of them recalled receiving any explanation as to the proposed issue of millions of “cashless” units which would rank pari passu with their units, for which dollar-for-dollar cash subscription was required. Nor was there an explanation that the “outsider” group was to meet the stamp duty liability from which the “insider” group was exempt. Mr Gazi and Ms Sener gave evidence in the most general terms to the effect that they made full explanation. They referred to lengthy consultations at Mr Gazi’s shop and discussions at a dinner attended by unit holders, though this seems to have been after settlement of the purchase and therefore after U&D and the other “outsider” unit holders had outlaid their money and therefore committed to the unequal regime. (T86, L18-22) Mr Deha Senbay said he did not remember attending this dinner. (T98, L14-16) Mr Gazi put it to Mr Okur “... we settled, and we went to dinner. You saw me and the director, you saw Mr Muhsin, director, as well?” Mr Okur said “No.” (T107, L22-24) Whilst Mr Gazi cross-examined the plaintiff’s witnesses along these lines, none of them agreed that they had received a comprehensive explanation of the situation and the relative rights of the “insider” and “outsider” units.
101Mr Gazi called Mr Fahri Karabulut, one of his friends of 20 years’ standing (T278, L16-17), who described how he had been approached by Mr Gazi to invest in the shopping centre but had been unable to raise the money. He described coming to Mr Gazi’s shop in 2009/2010. (Ibid, L18-19). Mr Karabulut said that Mr Gazi had explained “everything” to him. (Ibid, L27) I suggested the witness should describe specifically what had been explained to him, and he replied:
“You [Mr Gazi] were explaining to me how much profit was incoming. And that was a good profit, at that time it was about 10 per cent income, that was a good profit, I was happy to join, that’s why I said to even ask my missus for us to join together but at that time we couldn’t find the money.” (T478, L31 – T479, L6)
102Mr Gazi said:
“And also did I explain to you our company, like Meadow Heights, Mirage and my partner, Muhsin Terjan [sic]?”,
and Mr Karabulut replied:
“Yes, you did say to me, you explained everything, how much I pay, how much I get. ... I couldn’t get the money out, if I could get the money out I could do it, I couldn’t do it, I missed it.” (T279, L7-14)
103Mr Karabulut described no explanation of the intended issue of millions of “cashless” units to Messrs Gazi and Tercan. Nor the implications which this would have for the prospects of capital gain for those who subscribed cash “on the nail”. I conclude therefore that there was no full and proper explanation to the “outsider” group of unit holders.
104During Mr Gazi’s re-examination, I asked him how the unit trust investment was “sold” to unit holders, explaining the difference between a pure debt investment on the one hand, where the relevant debt and interest was repayable independent of the profitability of the enterprise which owed the debt, as distinct from an equity investment, which depended for its return upon the profitability of the relevant asset or enterprise. In the present instance, I noted that returns to unit trust holders would depend upon the level of rentals and vacancy rates in the shopping centre. (T267-8) I enquired whether the unit trust investment was offered as a debt security or as an equity investment. Mrs Sener, “chipping in”, said it was an equity investment. In the course of my explanation of the distinction between the two, I noted that equity investments carry with them the prospect and hope of capital gains. In this instance, the structuring of the unit trust, which was effectuated by Meadow Heights in its allocation of the cash-free units, created a regime where the underlying asset almost doubled in value over a period of just over a decade, but the capital gains thereby arising to unit holders were reserved almost exclusively for the “insiders” who received the cash-free units.
105I have already found that the “outsider” unit holders did not receive any explanation of this phenomenon, or that their equity in the shopping centre would be dwarfed by cash-free units allocated to the “insiders”. Mr Kohn, in his opening statement on behalf of the third defendant, contended that since the initial unit holders were all “insiders” and were agreeable to this arrangement, it had been the subject of unanimous consent and full disclosure.
106As previously noted, the unit trust certificates were all dated 21/02/2011 ([16] above). This is the year following the acquisition of the shopping centre by Meadow Heights. It may be inferred that the issue of these units and their bearing a date in February 2011 was the completion of a mere formality, with the substance of the subscription and allocation having taken place the previous year. Mr Sharify accordingly contended (Closing Submissions, paragraph 19) that U&D became a unit holder no later than 13 May 2010 when the purchase of the shopping centre was completed. He referred to an affidavit made by Mr Sener in the Supreme Court. (SCB 124, paragraph 36) Again, the way in which the unit trust certificates were issued implies that the creation of all of the units with which we are concerned in this proceeding occurred simultaneously, or at any rate in a manner such that the evidence does not indicate any basis for contending that the cash units were created or issued after the non-cash units. In these circumstances, I reject the contention that there was either a full disclosure to all equity holders at the time of the issue of the non-cash units or that there had been a full disclosure of the distinct features of the creation and issue of these non-cash units. According to Mr Sharify, once the “cashless” units were eliminated from the equation U&D was entitled to 8.7 per cent of the equity of the unit trust.
Knowing assistance
107U&D sought findings that the breach or breaches of trust which I have found Meadow Heights engaged in as trustee were knowingly assisted by Mr Gazi and Mr Muhsin as the trustees’ directors. Since the proceeding as regards Mr Muhsin has been settled, I put the allegations of knowing assistance against him to one side.
108Mr Gazi made no bones about his having been in control of the shopping centre and all its elements, and hence of the unit trust. In his closing statement, he said:
“... we bought this shopping centre 2010, so I work very hard, my wife help me, whole family, it’s ruined by that. They say just two years I work, I worked 12 years nonstop.” (T327, L26-29)
109He said:
“You know, burglary come, someone broken the window, 24/7, sometimes water, so I work more than 12 years, so I work for nothing is my understanding.” (T328, L20-22)
110Again, whilst Mr Gazi attributed the structuring of the unit trust to “the accountants”, viz Hume Taxation Services, it was implicit that it was he who implemented that structuring advice. (T163-4) In effect, what Meadow Heights did as trustee was done through the human agency of Mr Gazi. There can be no clearer example of knowing assistance.
111U&D claims relief against Mr Gazi, seeks relief against him as one who knowingly assisted in Meadow Heights’ breaches of trust under the principle laid down in Barnes v Addy (1874) LR 9 Ch App 244, 252, where Lord Selborne LC said that one who assisted a defaulting trustee “with knowledge in a dishonest and fraudulent design on the part of the trustees” was liable to those aggrieved as an accessory to the breach of trust. (Dal Pont op cit, [38.65]) Professor Dal Pont, in the paragraph already cited, noted that the most recent High Court authority on the subject, namely Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89, focused attention upon the knowledge of the alleged accessory, rather than any fraudulent intent on the accessory’s part.
112In the present instance, since Mr Gazi was a directing mind of Meadow Heights as one of its directors until 2018 with Mr Muhsin and continued to be a director, claiming, as I have already quoted, to have been the directing mind and the person running the entire enterprise, including the unit trust, his knowledge was plenary.
113As far as fraudulent intent is concerned, the effect of Mr Gazi’s evidence was to deny any impropriety whatsoever in what he and Meadow Heights had done. Despite this, I have found that the cash unit holders, including U&D and its two directors, being the brothers Senbay, by omission, in failing to disclose the status of the non-cash unit holders, including himself. Resistance to the provision of full documentation, lead me to infer that Mr Gazi was at pains to conceal the inequitable arrangements which he and Meadow Heights had made relative to the non-cash, as distinct from the cash, unit holders. It is proper to infer a dishonest intent from these matters. The non-disclosure to the cash unit holders of events such as the buying-out of Mr Muhsin and his units, and the lack of disclosure of the sale of the shopping centre except ex post facto, give further colour to the issue. I reject the proffered explanation that these matters occurred because of some concern for the “privacy” of the unit holders.
114As against Mr Gazi, U&D seek “an account of profits or a declaration of a constructive trust in respect of the $6,009,921 paid by [Meadow Heights] to Gazi in 2011-2022 in proportion to the Plaintiff’s unit holdings” (CB 38), an equitable compensation for distributions made by Meadow Heights to Mr Erdal Demir on 27 January 2022 (following the sale of the shopping centre), and to Mirage in the period 2019 to 2021. Mr Sharify did not elaborate upon the basis for the remedy or precisely how it would be applied in the present instance. According to the editors of Meagher, Gummow & Lehane’s Equity Doctrines and Remedies (4th ed) [5-245] 201:
“A fiduciary who profits from breach of duty is liable to account for the profit made within the scope and ambit of the duty (Warman International Ltd v Dwyer (1995) 182 CLR 544 at 559) or repay it as an equitable debt.”
115Later in the same paragraph (page 202), the learned editors state:
“A fiduciary in breach of duty must account for profits made by that fiduciary. A knowing participant in the fiduciary’s breach of duty must account for profits made by the participant. But is the participant also liable to account for the profits the fiduciary made? The question is a significant one where the fiduciary’s assets have been dissipated after the wrong but before judgment.”
116In the present instance, as I understand U&D’s case it is that the profit was made by the knowing participant, namely Mr Gazi, rather than the trustee, which simply made distribution. For the reasons that have led me to conclude that for the purposes of the rule in Barnes v Addy Mr Gazi should be regarded as having knowingly assisted Meadow Heights’ breaches of trust, he should for the purposes of the principle just stated, be regarded as a knowing participant. I take the two, at least in the present context, to be synonymous one with the other.
117The claims for relief quoted would appropriately be made in favour of all the non-cash unit holders if they were plaintiffs in the present proceeding. In this proceeding only U&D is plaintiff, and therefore U&D is entitled to an account of profits proportional only to its percentage entitlement to the trust property. According to Exhibit 1, which was tendered by Mr Gazi, describing the unit holders as “share holders”, U&D was entitled to 1.92 per cent of the trust’s equity. After 2018 and the “buyout” of Mr Muhsin Tercan, according to the defendants’ view U&D was entitled to 3.21 per cent of the equity, having received a pro rata reallocation of Mr Muhsin Tercan’s former units with the result that, according to the second page of Exhibit 1, U&D was the holder of some 416,637 units, representing 3.21 per cent of the equity. U&D’s case was that when the non-cash units were excluded from the calculation, U&D’s share of the equity increased to 8.7 per cent. (T300, L16-17)
118Mr Sharify conceded that an allowance ought to be made for Mr Gazi’s work in managing the centre; however, he noted that for all but the first two years the following persons – namely Harun Bultan, Arzu Tercan, and Dilara Sener – were employed as centre managers and paid approximately $75,000 per annum. These matters emerged in his cross-examination of Mr Gazi at T249-257. As noted above, Mr Gazi protested that these concessions scarcely did justice to his efforts in management. He was particularly critical of the first individual employed as a centre manager.
119Turning to the security provided by Mr Gazi, he said that it had a face value of $1,153,000. (Closing Submissions, paragraphs 90-91, CB 1021) For the purposes of National Australia Bank’s submission to its credit approval authority, Mr Gazi as guarantor of the borrowing was assessed by the bank as having gross assets of $2,100,000 and liabilities of $857,000, leaving net assets of $1,153,000. There may be grounds to debate whether this represents the most appropriate way of allocating value to Mr Gazi as providing guarantee security for Meadow Heights’ borrowing. I agree, however, with Mr Sharify, who said that guarantee security ought not be accorded the same value dollar-for-dollar as a cash subscription for units in a unit trust. I agree. Had the guarantors paid out the bank, they would have been entitled to a transfer of the bank’s security, and the guarantor’s outlays would have been payable by Meadow Heights.
120Mr Sharify, in his Closing Submissions (paragraph 93), said:
“It is submitted that a 30% allowance is a generous and maximum amount which the court should grant in this case.”
121Therefore, the account of profits, he said (paragraph 96), should, having been discounted by 30 per cent to reflect an appropriate allowance for Mr Gazi’s efforts and for his provision of security, would entitle U&D to $366,004.19 as to this portion of its relief claim. Despite Mr Sharify’s contention that 30 per cent should be seen as an absolute ceiling for Mr Gazi’s allowance, I believe it should be set at 35 per cent.
122The next piece of relief sought against Mr Gazi by U&D is equitable compensation. According to Professor Dal Pont:
“[24.30] Where a breach of trust causes loss to the trust estate, the trustee is liable to restore the trust estate to the position it would have been in absent the breach. ...
...
... where the trust has been terminated and the fund distributed, the date of assessment is the date of final distribution of the trust estate.” (Op cit, [24.30] 726-7)
123Later in the same chapter the Professor said:
“[24.45] Where a trustee commits a breach of trust causing a loss to the trust estate, the beneficiaries have the right to have the trust fund properly administered and any misplaced assets restored to the trust. If, however, the same breach occurred in respect of a bare trust ..., the beneficiary is effectively the owner of the property and is not ordinarily entitled to restitution of the fund but instead to compensation payable directly to her or him measured by the amount of the loss attributable to the breach.” (Op cit, [24.45] 729)
124The learned author cites Target Holdings Ltd v Redferns (a firm) [1996] AC 421, 433-4, per Lord Browne-Wilkinson. In this instance, the trust had been terminated and wound up. Each beneficiary is therefore the absolute owner of the property or funds distributed to him, her or it, and therefore a proper plaintiff.
125The first item for which compensation is sought pertains to Mr Erdal Demir. Paragraph 111 of the defence by Mr Gazi and his associates admits distributing some $2,430,000 to Mr Demir inclusive of principal and interest, after first having paid out the mortgage loan owing to Westpac Banking Corporation and returning the capital contribution of each unit holder. (CB 61) His involvement appeared to derive, at least in part, from the “combination” of the Mirage Unit Trust referred to at [21] above. As noted in that paragraph, U&D makes no complaint about income distributions relative to this “combination”, whatever that process may be.
126I must say I am unable to understand the process that was purportedly undertaken. My attention was drawn to no evidence of those unit holders having made a cash contribution to the Meadow Heights Unit Trust, nor (if it matters) of their having provided any management services to the trustee. Whether those unit holders were involved in any way in providing security to Westpac Banking Corporation relative to the borrowing undertaken to facilitate Mr Muhsin Tercan’s exit from the trust does not appear. However, since this was a transaction for the benefit of one of the “insider” unit holders and not for the unit holders as a whole, the incongruity of what apparently happened would be in no way diminished even if these ex‑Mirage unit holders had provided guarantee security to Westpac. In the course of his closing submissions I asked Mr Sharify if I correctly characterised the plaintiff’s case relative to him:
“... your case is that there is just no legal concept of combining trusts the way this was done and that no money flowed from the Mirage trust to the Meadow Heights trust, and so this pay out to Demir was just indefensible.”
Mr Sharify said:
“Yes.” (T326, L27 – T327, L2)
127Mr Demir is not a party to the proceeding, and so there is no claim against him either by way of tracing or in personam. As far as the process of “combining” the Mirage Trust and the Meadow Heights Trust, I have found no distinct allegations as to this in the Statement of Claim. Rather, there is a reference in the prayer for relief without any preliminary explanation as to these matters. (CB 38) According to paragraph 46 of the Statement of Claim (CB 30), Meadow Heights “distributed $1,325,000 to Mirage”. The particulars to this paragraph state that the distribution to Mr Demir was $2 million, $1,325,000 of which “were attributable to Erdal Demir’s unit holdings in Mirage”. The admitted distribution to Erdal Demir is, as previously noted, $2,430,000. The amount for which compensation is sought being 8.7 per cent of that figure, Mr Gazi said of Mr Demir “He put almost $2 million”. (T333, L9) I asked him if this was a subscription to the Meadow Heights Unit Trust or the Mirage Unit Trust. He said he could provide documentation evidencing this subscription, and I gave him until close of business 3 November to provide that evidence.
128Mr Gazi sent an email on the afternoon of 3 November stating “please find unit certificate for Erdal Demir confirming transfer of units Erdal Demir”. The email covered a document headed “Meadow Heights Shopping Centre Group Unit Trust” showing Erdal Demir as having 833,360 units, that is approximately twice the number of units as U&D which, according to this calculation, held 416,637. Also attached was a unit transfer form, being a transfer for $675,000 from Murat Demiral to Mr Demir “in his own capacity and as trustee of the Erside Family Trust”. The document was signed 4 March 2020. These documents do not establish that Mr Demir, or his predecessor Mr Demiral, subscribed $2 million or any number of dollars to the Meadow Heights Unit Trust.
129Therefore, I conclude that the distribution to Mr Demir by Meadow Heights was also made against a “cashless” unit holder. It represented a further breach of Meadow Heights’ duty “to act impartially between the beneficiaries”. One group received its distribution based on cash subscriptions and the others were given distributions based on “cashless” units. Mr Gazi did not deny that the “combination” (whatever that means and however it was purportedly effected) of the two unit trusts had occurred. [21] Accordingly, U&D is entitled to recover its 8.7 per cent share of the misappropriation. As explained, Mr Gazi is liable as having knowingly assisted the breach of trust, in effect being the directing mind and in control of Meadow Heights.
130The next head of relief sought by U&D was equitable compensation “in respect of the $255,801 paid by [Meadow Heights] to Mirage in the period 2019-2021.” This appears to be a reference to the total of figures of income distribution for financial year 2019 of $91,673, 2020 of $59,088, and 2021, $105,040. These distributions are alleged in paragraph 26 of the Statement of Claim (CB 24-25, paragraph 26) to which the table from which I have quoted is subjoined. It is admitted in these defendants’ defence. (CB 47) Prior to trial, the plaintiff through its counsel was pressing for further discovery of bank records; in particular the records which would enable a tracking to be made of these distributions. I ordered that the defendants put on an affidavit explaining these matters.
131In apparent response to my order, Mr Gazi made a statutory declaration in substance denying receipt of any of the income distributions referred to in the table subjoined to paragraph 26 of the Statement of Claim. (T10, L26 – T11, L7) In evidence, Mr Gazi said under cross-examination that whilst he had paid tax on these receipts, he did not get a cent. (T193, L11-14) If we assume this denial also covers income said to have been distributed to Mirage, it remains implausible, first because of the initial admission, and secondly because Mr Gazi’s suggestion that his moneys were spent on shopping centre expenses makes no accounting or tax policy sense. Shopping centre expenses would be a deduction from assessable income for a unit trust shopping centre landlord, both in accordance with taxation and accounting principle. The profit allocated to unit holders would be struck only after the deduction of these expenses. If a unit trustee and its unit holders allocated income under the unit trust to a unit holder before paying for repairs and other expenses, the unit holder would be overtaxed. I reject the suggestion that this unit trust with the benefit of advice from a tax agent would have conducted its affairs in that way. (T193, L18-26) In any event, payments evidenced only by book entries are never the less treated as true payments. Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) CLR 471. Accordingly, I proceed on the basis that Mirage did receive the distributions as alleged. For the reasons already explained, it was a breach of trust on the part of Meadow Heights to treat Mirage as having fully paid units entitled to income distributions on the same footing as those who had actually subscribed cash for their units. Mirage subscribed no cash. Accordingly, Meadow Heights is responsible to make equitable compensation for U&D’s 8.7 per cent share of the $255,801 paid by it to Mirage in the period 2019 to 2021, and Mr Gazi is likewise responsible to give that compensation as having been knowingly concerned in the breach.
132I now turn to U&D’s claim against Mrs Sener. I turn first to the $200,000 payment made by Mr Gazi to her following his receipt of the distribution upon the sale of the shopping centre ([49]-[50]), which was described as a “dowry”. I need not stay to consider whether a payment made by way of a genuine dowry would be regarded as other than a voluntary transfer. As previously noted, Mr and Mrs Sener had been married for over 30 years. Describing the $200,000 payment as a “dowry” was a sham.
133The relief sought is “a declaration that the $200,000 given by Gazi to Saliha [his wife] on 15 February 2022 is held on constructive trust for the plaintiff in such proportion as this Court may declare.” This relief would be appropriate only if the $200,000 continued to exist as an identifiable fund, either in a single account or as a part of a mixed account, or could otherwise be traced into a piece of property, in which case that property would be the subject of the declared constructive trust. Mrs Sener said that all the distributions had been used to finance the conduct and settlement of the Supreme Court proceeding. (T281, L28-31) I did not understand her evidence to this effect to have been challenged. In any event, it seems to me to have an intrinsic plausibility. Since on this basis there is no $200,000 fund which could be the subject of a declared constructive trust, this relief must be refused.
134Additionally, as against Mrs Sener, the plaintiff sought declarations that what was described as the Greenvale property and a property at 2 Dargie Court, Dallas, should be declared to be held on constructive trust for U&D; alternatively, subject to an equitable charge. The “Greenvale property” is Mr and Mrs Sener’s matrimonial home, Mr Gazi’s share of which was gifted to Mrs Sener by transfer dated 22 February 2022. ([50] above) As regards this claim for relief, little is said relative to it in either the opening or closing submissions made by Mr Sharify. Paragraphs 50-52 of his Opening Submissions are headed “Tracing and Knowing Receipt against Gazi Family Parties”. He said:
“The tracing component of the claim is relatively uncontroversial. The Gazi Family Parties have each admitted having received trust funds from Gazi, and authority clearly states that trust property can be traced into a volunteer’s hands.” (Paragraph 50, Closing Submissions)
135He added at paragraph 52:
“Knowing receipt is also pleaded against the Gazi Family Parties ...”
136Paragraph 63 of the Statement of Claim states, inter alia, and with respect to this property:
“Greenvale property
c. On 7 October 2015, Gazi and Saliha purchased, partially with funds from the Trust Fund, 43 Helmsdale Present [sic, scil Crescent], Greenvale, Victoria (Greenvale Property).
d. From 7 October 2015 until present, Gazi repaid the mortgage on the Greenvale Property partially using funds from the Trust Fund.
e. On 22 February 2022, Gazi transferred his interest in the Greenvale Property to Saliha who became the sole registered proprietor of the Greenvale Property.”
137I do not recall the evidence disclosing distinctly any use of misappropriated trust funds for the purchase of this property. Mr Gazi was cross-examined about his daughter’s property at 10 Journey Way, Greenvale, and another family property at 2 Saffron Street, Greenvale. (T258)
138The tenor of Mrs Sener’s evidence was that she was her husband’s partner in all his business dealings. As noted, she “chipped in” from time to time during his evidence without objection from plaintiff’s counsel, supplementing his recollections. For the purposes of the Barnes v Addy causes of action, Mrs Sener must be regarded as “knowing” in the relevant sense, independently of the specific evidence given at trial. The very relationship of husband and wife can be the basis for a finding of “knowing” receipt or assistance: GP Building Holdings Pty Ltd v Voitin [2022] VSCA 210. Any moneys, for instance, from the “dowry” payment in 2022 would presumably have been used to pay down the mortgage. The transfer instrument was lodged by Westpac Banking Corporation. I have already referred to the reasoning and authorities which deny any ability to trace through an overdrawn bank account. The evidence might justify an order seeking to avoid the transfer of Mr Gazi’s share to his wife as being made to defraud creditors: s172 of the Property Law Act 1958. No such application has been made. On the present state of the evidence, no declaration of constructive trust ought be made relative to the matrimonial home.
139As regards the property at 2 Dargie Court, Dallas, paragraph 63 of the Statement of Claim asserts:
“From September 2010 until present, Gazi repaid the mortgage on 2 Dargie Court Dallas Victoria, of which Saliha [Mrs Senna] is a registered proprietor, partially using funds from the Trust Fund.” (CB 35)
140According to Mr Gazi, 2 Dargie Court, Dallas, is “a commercial property”. (T174) He described this property as his shop. (T174, L4-7) Mr Gazi said that at the time these properties were being used as guarantee security for National Australia Bank’s loan to Meadow Heights, “2 Dargie was paid for”. (T174, L27) Mr Sharify took Mr Gazi to the National Australia Bank’s credit proposal (CB 1018), which showed this property as having a $315,000 mortgage liability as at the date of the credit proposal, viz February 2010.
141Once again there is a lack of distinct evidence which would permit tracing of the trust funds into these properties, and the further problem that, assuming that funds were otherwise traceable, they would have been “annihilated” by having been paid into an overdrawn mortgage account.
142There was a request for a similar declaration with respect to the property at 16 Dargie Court, Dallas. The same considerations would appear to attend this property, and no declaration ought to be made.
143There was also an application for a declaration with respect to what was described as the “Port Melbourne” property. This, according to Mrs Sener, was a property recently sold by the eighth defendant, Gazsal Investments Pty Ltd. (T258, L29 – T259, L1) She said as to the fate of the proceeds of sale, “We paid back the mortgage”. (T259, L18-19) She continued, “Because of the old lawsuit we refinanced everything ...”. (Ibid, L23-24) She said there was another proceeding arising out of the same issues as the present, in which Mr Recep Tercan was a plaintiff. (Ibid, L27-30) She said the proceeds of sale were paid into Mr Tercan’s solicitor’s trust account. (T160, L1-8) She said those funds should still be in the account, and amounted to approximately $200,000. (Ibid, L28-30)
144Paragraph 69 of the Statement of Claim asserts:
“In the period January 2021 until present Gazi gave Gazsal, for no consideration, funds which Gazi had received from the Trust Fund in breach of trust.
Particulars
a. Paragraph 29 is repeated.
b. On about January 2021, Gazsal was given funds by Gazi which were applied to purchase Unit 905G Dow Street, Port Melbourne, Victoria (Port Melbourne Property).
c. From 31 March 2021 until present, Gazi repaid the mortgage on the Port Melbourne Property, by partially using funds from the Trust Fund.
d. On 27 January 2022, Gazsal received $1,110,236 from Gazi which was used to repay the mortgage on the Port Melbourne Property.
e. Further particulars will be provided following discovery and the return of subpoenas.” (CB 37-38)
145Mr Gazi said that on 27 January 2022, some $1,110,236.59, being a distribution to him from Meadow Heights, was transferred to the mortgage account of the Port Melbourne property situated at 905 Dow Street, Port Melbourne. He said this was done to pay off the mortgage. (T233, L3-20)
146The attempt to trace is neatly established by the funds transfer, but it encounters the difficulty that the money was paid into an overdrawn account, which, as already noted, is not an asset. Moreover, the Port Melbourne property is no longer owned by the eighth defendant. Without suggesting that any declaration of trust with respect to the $200,000 fund held by Mr Recep Tercan’s solicitors should be made - no amendment to the prayer for relief was sought referring to such relief. In the circumstances, it would be inappropriate and pointless to make any declarations relative to a property which has already been sold off.
147I have already explained why no declarations of constructive trust ought to be made as against the residences of Mr Gazi’s son and daughter.
148The next heads of relief sought were as against Mr Gazi and the third defendant, Mr Muhsin:
“K.In proportion to the Plaintiff’s unit holdings, equitable compensation in respect of the $554,144 paid by the Trustee Company to Mirage for the period 2011-2018.
L. In proportion to the Plaintiff’s unit holdings, equitable compensation in respect of the $4,495,530 and interest accrued, borrowed by the First Defendant to pay SLE Finance, which was repaid to Westpac from the sale of the proceeds of the Shopping Centre.” (CB 40)
149Since the claim against Mr Muhsin Tercan has been settled, there is no question of any relief relative to these paragraphs being given against him or his property. Focusing upon the claims as regards Mr Gazi, presumably – though the prayer does not make it clear – the contention is that Mr Gazi is liable with respect to the equitable compensation claim as being a knowing assistor. I have already explained why I adopt that view. As regards the $4,495,530 referred to in paragraph L, the case is even stronger, because the breach of trust there entailed was the loading upon the trustee of Mr Gazi’s debt raised to pay out Mr Muhsin Tercan and therefore upon the unit holders, including U&D. Compensation as at the appropriate percentage of 8.7 per cent should be awarded to U&D.
150Heads of relief M and N, which are said to be alternatives to paragraph L, state as follows:
“M.In proportion to the Plaintiff’s unit holdings, an account of profits in respect of the $4,382,203 comprising of the $3,340,000 which was paid by SLE Finance to Muhsin in August 2018 and the $1,042,203 paid by the Trustee Company to Muhsin for the period 2011-2018, or in the alternative, a constructive trust or equitable charge over any asset into which the $4,382,203 may be traced.
N. In proportion to the Plaintiff’s unit holdings, equitable compensation against Gazi in respect of the $1,155,530 which together with the $3,340,000 paid to Muhsin total the $4,495,530 Westpac Loan which was paid to SLE Finance by the Trustee Company in October 2019.” (CB 40)
151If the relief under paragraph L is granted, there would be no occasion to resort to this alternative.
152Alternatively to the claims based Barnes v Addy with which we have been dealing, Mr Sharify on behalf of U&D mounted an alternative claim based upon the proposition that Mr Gazi and Mr Muhsin were to be regarded as promoters, and liable as such. He dealt with these matters in paragraphs 36 to 41 of his Opening Submissions, placing primary reliance upon a decision of Finkelstein J in Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA 1628, where he said his Honour “found that a director of the trustee company to a unit trust, Mr Drapac, was a promoter ‘of the scheme constituted by the Unit Trust.’ ” He relied in particular upon paragraphs [30]-[33] of his Honour’s judgment. The issue before his Honour was one of disclosure. Mr Sharify said (Opening Submissions, paragraph 40) that:
“... there can be no question that the issue of the Disputed Unit Holdings and/or the intention to make the Payments was a matter which should have been disclosed by Gazi and Muhsin as it is clearly information which ‘would influence a prospective participant in the venture to decide whether or not to become an actual participant’.”
153He said consequently (ibid, paragraph 42):
“Muhsin and Gazi’s failure to disclose puts them in breach of the no-conflict and no profit rules and they are liable to the usual suite of equitable remedies.”
154As regards Mr Gazi, I am broadly in agreement with these propositions. Given that I have found liability based on Barnes v Addy, it is unnecessary for me to say more as to these matters. The same considerations which I have discussed relative to the “suite” of equitable remedies sought would appear to arise with respect to the alternative basis of liability.
155One final matter which needs to be considered is the basis of the settlement with Mr Muhsin Tercan. When initially announced, the terms were undisclosed. Mr Sharify stated in the course of his closing submissions that the settlement with Mr Muhsin Tercan was on the basis of a payment from him of $65,000 in full and final settlement of all claims. Needless to say, U&D may not recover more than 100 per cent of its loss. In one way or another, this $65,000 may need to be brought to account to avoid double compensation.
156During the trial, Mr Gazi said on a number of occasions that, at least until the sale of the shopping centre, neither the unit holders who were plaintiff in the Supreme Court nor the present plaintiff U&D, made any complaint as to the establishment or management of the unit trust. Implicitly, he suggested that the complaints now made were late and unjustified. The lateness of the complaints is obviously explained by the fact that it was only at the point of distribution of the sale proceeds that it became obvious to the plaintiff unit holder how Meadow Heights had failed in its duty of impartiality amongst unit holders.
Disposition
157I will direct the plaintiff to bring in a short minutes to give effect to these reasons.
158I have heard no submissions on the question of costs so I will reserve them.
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Certificate
I certify that these 50 pages are a true copy of the judgment of his Honour Judge Macnamara delivered on 11 November 2025.Dated: 11 November 2025
Jodie Daniel
Associate to His Honour Judge Macnamara
SCHEDULE OF PARTIES
BETWEEN CI-24-03515
| U&D Future Concepts Pty Ltd (ACN 143 126 685; ABN 53 280 604 022) as trustee of the U&D Future Concepts Trust | Plaintiff |
| and | |
| Meadow Heights Shopping Centre Group Pty Ltd | First defendant |
| Gazi Sener | Second defendant |
| Muhsin Tercan | Third defendant |
| Mirage Co. Pty Ltd (ACN 087 841 549; ABN 24 485 | Fourth defendant |
| Saliha Sener | Fifth defendant |
| Sadik Sener | Sixth defendant |
| Dilara Sener | Seventh defendant |
| Gazsal Investments Pty Ltd (ACN 647 435 630; | Eighth defendant |
| Sevinc Kaya | Ninth defendant |
| Enis Tabak | Tenth defendant |
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