Supreme Court New South Wales

• Medium Neutral Citation: Amir Ashrafinia v Mohammad Reza Ashrafinia; Parvaneh Karami Fakhrabadi v Mohammad Reza Ashrafinia [2013] NSWSC 1442
• Hearing dates: 25, 26, 27, 28, 29 June & 2, 3, 4, 5, 6, 9 & 10 July, 8 August 2012, 14 June 2013
• Decision date: 30 September 2013
• Jurisdiction: Equity Division
• Before: Slattery J

Decision

Plaintiff unsuccessful in the 2008 proceedings in establishing a joint venture for property development. In the 2011 proceedings the plaintiff establishes breaches of trust against Amir, Mohammad and Abbas and the Court will order removal of the Ashrafi Persian Trading Company Pty Ltd as Trustee of the Ashrafinia Family Investment Trust. Orders and directions made for further inquiries, for submissions as to costs, for securing payment to the Court expert, and for the appointment of a suitable new trustee.

• Catchwords: TRUSTS - discretionary family trust controlled by a corporate trustee - trust funds generated from a motel business run by the trustee - what are the assets of the trust - whether trust for the benefit of one of the brothers only or of the whole family - whether trust funds misapplied by family members who controlled the corporate trustee - several properties held by two brothers, directors of the trustee, in their own names were purchased and then refinanced through loans taken out by the trust - whether the brothers hold the properties on behalf of the trust - whether a food importing business run by a sister and its profits are held on constructive trust for the trust - funds paid from trust accounts to one brother and to companies controlled by him - whether some of these payments were remuneration for services rendered to the trust, loans from the trust or trust distributions - no contemporaneous trust accounts evidencing remuneration for services, loans or distributions.; TRUSTS - breach of trust - Barnes v Addy knowing receipt or knowing assistance claims against the directors of the corporate trustee and third parties - whether Barnes v Addy knowledge requirements satisfied.; CORPORATIONS - breach of directors' duties by the directors of the corporate -trustee - whether directors acted honestly and reasonably and should be excused from personal liability for breaches of duties under Corporations Act 2001 s 1318.; PROCEDURE - limitation period - whether limitation period in relation to the pleaded breaches of trust expired - when did the relevant limitation period start running - whether limitation period in relation to the claim for constructive trust over the food business expired or whether the doctrine of laches operates.; CONTRACTS - two brothers, directors of the corporate trustee, bought several properties as co-owners - whether the properties purchased with trust funds - whether the properties owned by the brothers beneficially or on behalf of the trust - whether the brothers entered into a joint venture agreement in relation to the properties - whether one of the brothers misapplied proceeds from the joint venture properties to his own benefit and should be required to refund the misapplied amounts.
• Legislation Cited: Conveyancing Act 1919 s 66G; Corporations Act 2001 (Cth) s 1318, s 1318(1); Limitation Act 1969 s 48; Uniform Civil Procedure Rules 2005 r 31.37
• Cases Cited: Barnes v Addy (1874) LR 9 Ch App 244; Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256; Bell Group Ltd v Westpac Banking Corporation (No. 9) [2008] WASC 239; Briginshaw v Briginshaw (1938) 60 CLR 336; Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd (2011) 277 ALR 189 [2011] NSWCA 109; Cain v Cain (2007) 13 BPR 24, 963; Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115; Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; Elders Trustee & Executor Co Ltd v Higgins (1963) 113 CLR 426; Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22 (2007) 230 CLR 89; Federal Commissioner of Taxation v Clark (1927) 40 CLR 246; Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156; Hall v Poolman (2007) 65 ACSR 123; [2007] NSWSC 1330; Investa Properties Ltd v Westpac Property Funds Management Ltd (2001) 187 ALR 462; Johnstone v Johnstone (1902) 2 SR (NSW) Eq 90; Jones v Stores [1999] 1 WLR 1739; Lindsay Petroleum Co v Farewell & Kemp (1874) LR 5 PC 221; McLean v Burns Philp Trustee Pty Ltd (1985) 2 NSWLR 623; Meredith v Davis (1933) SR (NSW) 334; National Trustees Co of Australasia Ltd v General Finance Co of Australasia Ltd [1905] AC 373; Hourigan v Trustees Executors and Agency Co Ltd (1934) 51 CLR 619; Orr v Ford (1989) 167 CLR 316; Salvation Army (South Australia Property Trust) v Graham Rundle [2008] NSWCA 347; Tempest v Lord Camoys (1882) 21 Ch D 571; Walker v Melham [2007] NSWSC 264; Walters v Scarborough [2011] NSWSC 1380; Warman International Ltd v Dwyer (1995) 182 CLR 544; Williams v Minister, Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497
• Texts Cited: Jacobs Law of Trusts in Australia, 7th edition, J.D. Heydon and M.J Leeming, Lexis Nexis, 2006; Scott on Trusts, 4th edition, Little Brown and Company Boston, 1987
• Category: Principal judgment
• Parties: First Plaintiff:- Amir Hossain Ashrafinia; First Defendant:- Mohammad Reza Ashrafinia; Second Defendant:- Ashrafi Persian Trading Company Pty Limited; First Plaintiff:- Parvaneh Karami Fakhrabadi First Defendant:- Mohammad Reza Ashrafinia; Second Defendant:- Amir Hossain Ashrafinia; Third Defendant:- Abbas Ashrafinia; Fourth Defendant:- Ashrafi Persian Trading Company Pty Limited
• Representation: Counsel: Mr D. Jenkins (for Mohammad Reza Ashrafinia); Mr M.Sneddon; T. Fishburn (for Amir Hossain Ashrafinia); Mr G. McGrath SC (for Parvaneh Karami Fakhrabadi); Mr D. Currie (for Azadeh Ashrafinia); Solicitors:
• File Number(s): 2008/281524; 2011/166674
• Publication restriction: No

Judgment

1 In these proceedings five members of the one family contest the beneficial ownership of three assets - a residential house in Marsfield, a commercial property in Darlinghurst and a food importing business. Their competing claims to these assets arise out of 20 years of intra-family disputes.

2 Abbas Ashrafinia ("Abbas") and Parvaneh Karami Fakrabadi ("Karami") were married in Iran in 1969 and were divorced there under Islamic law in 1998. Neither has sought divorce under the Family Law Act 1975 (Cth). They have five children, three of whom are parties to these proceedings - Mohammad Reza Ashrafinia ("Mohammad"), Amir Hossain Ashrafinia ("Amir") and Azadeh Ashrafinia ("Azadeh"). The other two - Leila and Mojtaba (Moji) did not give evidence. For convenience, and I hope with no disrespect to any of the parties, I will call them by their first names in this judgment, as they were described throughout the proceedings.

3 The Ashrafinia family successfully operated a motel business in leased premises in Roslyn Gardens Elizabeth Bay from the mid-1980s until February 2009. The family motel business was initially operated through Ashrafi Motels Pty Limited ("Motels"), which was controlled until the mid-1990s by both Abbas and Karami. In a March 1995 transaction, which is not in contest in the proceedings, Motels transferred the motel business to Ashrafi Persian Trading Company Pty Limited ("Trading"), a company said at different times to be controlled by Abbas, by Mohammad, or by Amir. The control of Trading and the beneficial ownership of its assets and income are issues in these proceedings. Trading is the trustee of the Ashrafinia Family Investment Trust ("the Trust"), a discretionary trust constituted by deed in August 1995.

4 There are two sets of proceedings before the Court: one commenced in 2008, ("the 2008 proceedings") and the other in 2011 ("the 2011 proceedings"). In these two proceedings Mr M. Sneddon and Ms T. Fishburn of counsel appear for Amir, Mr G. McGrath SC for Karami, Mr D. Jenkins for Mohammad, and Mr D. Currie for Azadeh.

The 2008 Proceedings

5 In the 2008 proceedings Amir as plaintiff sues his brother Mohammad and Trading, as trustee of the Trust. Amir alleges in the 2008 proceedings: that Mohammad and Amir made a joint venture agreement in about 1999 assuming they would continue to manage Trading's motel business; that Mohammad and Amir would acquire equally the freehold of the leased property on which the motel business was conducted and that over time they would redevelop this freehold either themselves or through a company they controlled; and, that together, using borrowed funds, they would also acquire other real estate for improvement and sale, to generate further joint venture funds, which in turn would assist in funding their acquisition and development of the freehold of the motel site.

6 The fundamentals of the property transactions in the 2008 proceedings are not in serious dispute. Two of those properties remained in Mohammad and Amir's hands at the time of trial. One is a residential property in Brunton Place Marsfield ("the Marsfield property"). Amir and Mohammad are the registered proprietors as joint tenants of the Marsfield property in which Karami now lives. The other is a residential and commercial property in Victoria Street Darlinghurst ("the Oporto property") that Amir and Mohammad hold as tenants-in-common. Yet a third alleged joint venture property, an apartment in Roslyn Gardens Elizabeth Bay, known in these proceedings as "Unit 17" was also purchased in Amir and Mohammad's names as joint tenants, but has since been sold.

7 Amir contends in the 2008 proceedings: that these various items of real estate are property of the joint venture formed through the common intention of himself and Mohammad; that Mohammad breached his fiduciary duty as a joint venturer with Amir by misapplying joint venture funds from the sale of joint venture properties, by encumbering the Marsfield and Oporto properties, and by diverting the sale and mortgage proceeds from dealings with these properties to Mohammad's own individual benefit; and, that Mohammad now holds his legal interests in the Marsfield and Oporto properties on trust for Amir or holds them charged with an obligation to refund the allegedly misapplied joint venture funds.

8 Mohammad says there was no joint venture agreement between himself and Amir. Moreover, Mohammad says that if there was a joint venture agreement as Amir alleges, that because Amir was also a director of Trading before during and after the alleged joint venture agreement, such a joint venture would have involved a deliberate scheme for Amir to misuse his position as a director of Trading to appropriate the Trust's assets and opportunities. Mohammad says that he and Amir are the legal and beneficial owners of the Marsfield property and of the formerly held Unit 17, and that they both hold the Oporto property on behalf of the Trust.

9 Karami is not a party to the 2008 proceedings. But her contention is that Amir's allegations in the 2008 proceedings falsely assume that Amir and Mohammad were dealing with their own money in the alleged joint venture. Karami says they were really dealing with property of the Trust, whatever their joint venture activities were. She says that Amir and Mohammad had no demonstrable sources of funds of their own between late 1999 and mid-2001 and their mutual dealings with the Marsfield and Oporto properties and Unit 17 were not on their own account but were dealings with Trust assets. Amir and Mohammad's 1999-2001 alleged use of Trust funds lies beyond the scope of the 2011 proceedings, which deal only with breaches of trust going back until 21 May 2005, six years before their commencement. Thus, Karami does not have a particular interest in the 2008 proceedings beyond contending that they are based on a misconception on Amir's part.

10 But in the 2008 proceedings there is a curious consensus between Mohammad and Karami about the assets of the Trust. Mother and eldest son are at issue about almost everything in the 2011 proceedings. But in the 2008 proceedings Karami accepts the correctness of Mohammad's position that the Oporto property was held on behalf of the Trust. Because at least one or other of Amir and Mohammad allege in the 2008 proceedings that these three properties are not properties of the Trust, it is necessary in these reasons to determine whether or not they are Trust properties.

11 After March 2012 Trading was not represented in either the 2008 or the 2011 proceedings. Notice was given to Trading of all the allegations in the 2008 and the 2011 proceedings before its representation ceased. No party sought orders to ensure Trading was represented at the hearing.

The 2011 Proceedings

12 There are two active contests in the 2011 proceedings. In the first contest, Karami seeks in her Statement of Claim to bring to account, Trading as trustee of the Trust, and Mohammad, Amir and Abbas as persons controlling Trading, for their alleged misapplication of what she claims are funds Trading held as trustee of the Trust. In the second 2011 proceedings contest, Mohammad seeks on his Cross Claim, to show that the food importing business Azadeh now conducts is also Trust property.

13 As originally conceived, the 2011 proceedings raised allegations of breach of trust, and other allegations apparently made on behalf of Motels, spanning a period of about 20 years from the late 1980s and founding various claims for equitable relief. All but one of these allegations and claims to relief has now been abandoned. Motels is no longer a plaintiff in the 2011 proceedings and was purportedly represented in them by lawyers on the record between August and October 2011. In an earlier judgment in the 2011 proceedings I found that Motels' lawyers had acted in the proceedings without proper authority, but not in circumstances that would warrant their paying other parties' costs of the proceedings: Amir Ashrafinia v Mohammad Reza Ashrafinia [2012] NSWSC 500.

14 In their original form the 2011 proceedings alleged that Abbas, Amir and Mohammad had appropriated the business of Motels either themselves, or through Trading, and misapplied the revenue generated by the motel business for their own benefit, and without Karami's knowledge. That was undoubtedly a complicated case. Not only did it risk a lengthy hearing but as a suit between husband and wife over what could be their matrimonial property, it risked raising a conflict of jurisdiction with the Family Court of Australia.

15 As indicated, in the end Karami did not press most of the causes of action and relief that she originally sought in the 2011 proceedings. Her amended pleading assumes that the motel business is an asset of the Trust, a matter which was ultimately not contested. Karami claims that she, Azadeh and the other discretionary objects of the Trust can bring Trading to account for its dealings with Trust assets and that Trading's directors, Amir and Mohammad, should account for their control of Trading in the management of the Trust's affairs, and that Abbas account for his alleged dealings with Trust assets.

16 Karami's general case in the 2011 proceedings is that between March 1996 and February 2009 Trading, Mohammad, Amir and Abbas used the Trust's cash flows generated by Trading from the motel business for their own purposes and intermingled those Trust funds with their own funds, to acquire properties and to pay for a variety of living expenses both for themselves and for her. And her case is that the motel business cash flow was the only financial resource available for Amir and Mohammad to acquire in their own names the Oporto property, the Marsfield property and the other investment property, Unit 17, and that is what they did by misapplying Trust funds.

17 Other properties, several apartments in Elizabeth Bay, were also bought and sold in Trading's name during the same period. These are collectively known in these reasons as the "Trading Apartments". Karami seeks an account in the 2011 proceedings of Trading's dealings with these Trading Apartments, whilst Trading was under Amir's and Mohammad's and then Mohammad's control. Mohammad and Amir both deny liability to the Trust in the 2011 proceedings. Karami founds a case on seven sample transactions that are alleged to demonstrate Amir and Mohammad's knowledge and involvement in breaches of trust and to warrant further inquiry against them and Abbas, and to demonstrate the need for Trading to be removed as trustee.

18 Mohammad defends himself in a number of ways from these allegations. First, he says that the Trust was set up for him as a vehicle to own and manage the motel business and accumulate wealth for his benefit and the benefit of his future family. Mohammad says that apart from paying the expenses of Amir and Azadeh while they were studying, the profits from the motel business were to be used at his discretion. But Mohammad has alternative defences that concede that the Trust was not just for his benefit.

19 Mohammad says that at all times he acted honestly and reasonably in his role as a director of Trading, and that if any breaches of trust are found, he should be excused from any personal liability. Amir fields a similar defence. Mohammad also notes that Limitation Act 1969 (NSW) bars any action for breach of trust prior to what he says is the applicable date 2 March 2006 - six years before the filing of Karami's Amended Statement of Claim in the 2011 proceedings.

20 On Mohammad's Cross Claim in the 2011 proceedings, he seeks to show that Azadeh converted Trust property to enable her to conduct a food importing business through her company, Parvaneh Pty Limited ("Parvaneh"). He claims that Azadeh and Parveneh hold the food importing business on constructive trust for the Trust and he seeks an account of its profit against both Azadeh and Parvaneh.

21 Azadeh answers Mohammad's cross-claim by saying that she established and developed Parveneh's food importing business with the active encouragement and consent of her parents, Abbas and Karami, and without misapplying any Trust property for her own benefit.

Procedural Background

22 These complex proceedings have had a difficult recent procedural history. In June 2011, the 2008 proceedings were due to be heard before Sackar J. But that trial was vacated when the 2011 proceedings were commenced. On 22 August 2011, Bergin CJ in Eq fixed this matter for trial before me on Monday, 5 March 2012. The hearing was vacated, as not all parties were ready to proceed on the then recently amended pleadings in the 2011 proceedings. Other procedural disputes arising out of the amended pleadings were resolved at this time, including the responsibility for the costs generated by Motels' involvement in the proceedings: Amir Ashrafinia v Mohammad Reza Ashrafinia [2012] NSWSC 500.

23 Directions were made in April 2012 to appoint a Court Expert, Mr Paul Russell of Forensic Advisory Services Pty Limited, to identify and report upon the cash flows associated with the various transactions in issue between the parties. Mr Russell executed this task and his report was used in evidence. The proceedings were then fixed before me for hearing for two weeks commencing 25 June 2012. Abbas, Karami, Amir, Azadeh and Mohammad were all cross-examined in a hearing that ultimately lasted 15 days, including a day reserved for speaking to the parties' various written submissions on 8 August 2012. The parties appeared again before the Court on 14 June 2013.

24 These reasons involve a detailed account of the parties' various property transactions. In both the 2008 and 2011 proceedings the parties closely debated the beneficial ownership of various assets. The parties maintain that the Marsfield and Oporto properties are assets of the Trust (as Karami contends), or part of a joint venture agreement (as Amir says), or owned beneficially by their respective registered proprietors (as Mohammad says in respect of the Marsfield property). Either Azadeh (as she says) or the Trust (as Mohammad says) hold a beneficial entitlement to the food importing business.

25 Any contention that these respective assets are Trust assets must be well established by evidence. To find a trust it must be clear what is trust property: Federal Commissioner of Taxation v Clark (1927) 40 CLR 246. Jacobs Law of Trusts in Australia, 7th edition, J.D. Heydon and M.J. Leeming, Lexis Nexis, 2006 [523]. A trust cannot be created where the subject matter is not definite or definitely ascertainable from facts existing at the time of the creation of the purported trust and until the trust property is ascertained no trust arises: Scott on Trusts, 4th edition, Little Brown and Company Boston, 1987 [76]. The analysis required to establish the beneficial ownership of these various properties is substantial.

Credibility Matters

26 This case required the Court to assess the credibility of five members of the Ashrafinia family, Abbas, Karami, Mohammad, Amir and Azadeh. That assessment was important to the proceedings, but not easy. In the course of evidence most family members directed adverse comments across the Courtroom against other family members. No one family member's testimony was wholly reliable. The Ashrafinia family has been torn apart by long-standing grievances and personality clashes, which by the time of the proceedings, had developed into entrenched warfare.

27 Family alliances have shifted over the years. By the time of the hearing Mohammad stood isolated from all other family members. But in past times he had been close to his father.

28 The bitterness of these disputes distorted the evidence of every family witness and obscured the Court's view of the family's history. It is therefore a useful approach in analysing the evidence in these proceedings to find some anchors of credibility in an unreliable sea of testimony.

29 This can be done. Family members may generally be ranked in the following order of credibility (from the most reliable down to the least reliable): Karami, Amir, Azadeh, Abbas and Mohammad. At the more dependable end of this spectrum the Court could accept most of Karami's evidence. Despite a bitter separation from Abbas and with some qualifications concerning her evidence about him, her narrative seemed to be consistent, restrained and the family account least infected with invective. Amir too generally gave a good account of events that was supported by the available objective materials. Although he was intensely bitter about Mohammad's past conduct towards him, Amir's account of Mohammad's conduct I have found to be largely correct.

30 Azadeh stands at a tipping point between reliability and distortion. Of all the witnesses her palpable distaste for Mohammad was the most florid. Parts of her evidence brimmed with amateur psychoanalysis of Mohammad's alleged personality flaws. Other parts expressed her profound repulsion for him. Anything Azadeh said about Mohammad the Court treated with caution. But parts of her evidence proved at times to be surprisingly accurate, especially with respect to the food business she conducted.

31 The Court had difficulty taking much that Mohammad or Abbas said at face value. Each of them generated a discomforting aura of mistrust. They both evoked the Court's suspicions, not its confidence. In the end the Court reached the view that no part of Mohammad or Abbas' evidence could be accepted unless it was corroborated by reliable objective materials, or by the oral evidence of other witnesses which the Court accepted.

32 These are only general conclusions. The Court's more detailed findings about these five family members are distributed throughout these reasons.

Ashrafinia Family Business 1996 to 2009 - Trading, the Trust, and disputed assets

33 But first it is necessary to set out a narrative of the Court's findings on disputed and undisputed questions in the proceedings before analysing the parties' particular contentions. The narrative in this section expresses the Court's findings on relevant disputed questions. With the multiple sub-contests that exist in these proceedings it is not possible within these reasons to decide all the contests of fact or refer to all the competing contentions of fact that the Court has rejected. But the material in this chronological narrative down to the heading "The 2008 proceedings - the alleged joint venture" are all findings and involve a rejection of any competing inconsistent versions of contested events in the evidence, whether mentioned or not.

34 The Court first considers the setting up of the family trust and the absorption of the family business into it and Amir and Mohammad's business in the acquisition and development of property. Later in these reasons, when dealing with the cross-claim, the Court will separately consider the relationship between Azadeh's food importing business and the Trust.

The Early Years before 1995

35 Seven years after the 1979 Iranian revolution, the Ashrafinia family emigrated from the Iranian city of Esfahan to Australia. All members of the family now live permanently in Australia other than Abbas, who lives in Iran to conduct business but who visits Australia regularly.

36 In 1995 Abbas decided to separate from the rest of the family in Australia, and to return to Iran. Since that time Abbas has conducted business in Iran. Abbas's family has little insight into the into his business interests there. Only Mohammad has any appreciation of the extent of Abbas' overseas business interests. And his father treated even Mohammad on a "need-to-know" basis about such matters.

37 Abbas acquired the motel business in Australia in about 1987. By May 1989 Motels (a company jointly controlled by Abbas and Karami) had a three-year lease (commencing in January 1989) over the motel freehold from its owner CCFM Pty Limited (CCFM). Dr Freyer, who took a role in assisting the family in aspects of their motel business had a substantial interest in CCFM. In October 1992 Motels took another three-year lease from CCFM, which expired in May 1995. Shortly after this lease expired Trading was incorporated and the Trust established for the Ashrafinia family. Trading took the next lease, a six-year lease, from 1 September 1995 to 31 August 2001. CCFM did not offer another lease to Trading after August 2001. Instead Trading held over on the motel freehold from August 2001, in an uncertain month-to-month arrangement, until March 2009, when it was evicted shortly after the 2008 proceedings commenced.

38 Abbas involved the whole family in running the motel business, which was very successful. At different times different family members took up occupation of the motel premises and assisted in operating the motel business. Amir says, and I accept, that he was working at the hotel from 1988 when he was aged 12 and that by year 10 of high school he was working casually a few nights a week and on weekends in the business. Mohammad worked there from an early age as well.

39 By 1990 Abbas and Karami's marriage appeared to have broken down. Abbas moved into the motel. In 1991 Amir moved into the motel with Abbas. In August 1992 Abbas loosened his involvement in the motel business and Karami, Azadeh, Leila, and Mojtaba moved into the motel business premises, to facilitate Karami taking over its day-to-day management. Between 1992 and 1995 Abbas made regular visits to Iran but retained involvement with the motel business when he was in Australia.

40 Karami and Azadeh each took an active role in the motel business whilst they lived there. Karami's management continued until 1995, when Mohammad and Amir took over.

41 Abbas and Karami attempted reconciliation in 1995 and returned to Iran together. But that was unsuccessful and they were later divorced there in 1998. From 1995 Abbas made Mohammad the managing director of Trading and of the motel business. Abbas really forced Mohammad into this position by threatening to close the business. Abbas instructed Mohammad that he was not to pay any money from the business to Karami, Azadeh or Leila. To his credit Mohammad disobeyed this perverse instruction. Mohammad and Amir were jointly involved in the management of the motel business from this time. Although, they were not each fully involved all the time and they each disputed the quality of the other's management.

42 As well as working in the motel business, each of the older children involved in these proceedings made their way into higher education in the 1990s. Mohammad completed his Higher School certificate in 1991 and commenced studies at University of New South Wales in 1992. In 1993 Mohammad moved to Tasmania to attend university. Amir commenced a Bachelor of Commerce degree at Macquarie University in the mid 1990's but completed his degree after a break between 2000 and 2003. But I accept that Amir's studies were directed towards better qualifying him to assist in running the family's motel business. Azadeh studied at the Australian National University from the mid-1990s.

43 Abbas prepared for his permanent change of residence back to Iran in 1995. In August 1995 he executed a general power of attorney in Mohammad's favour so Mohammad could manage his affairs in Australia whilst Abbas was in Iran. Abbas was the moving force behind the establishment of the Trust, giving instructions for it to be set up. Abbas wanted to involve other family members in the motel business through this structure. The family were still quite young at the time he went back to Iran: Mohammad was 24, Azadeh was 22, Amir was 19, Leah was 18 and Mojtaba was only 15. In theory the Trust structure was a sensible one. But in practice the Ashrafinia family were ill educated for the responsibilities of administering this Trust.

The Trust Deed - August 1995

44 There is consensus in the 2008 and 2011 proceedings about the establishment of the Trust. Trading was incorporated in August 1995 and became trustee of the Trust the same month. From August 1995 Trading held the motel business and its other assets, on the trust so established. Nor is it in dispute that Trading acquired the motel business from Motels at about this time; Motels having conducted the business since the early 1980s. That Trading treated the motel business as an asset of the Trust is well established by objective evidence. Mr Loewy, the Trusts' accountant, lodged tax returns for FY00 to FY04 signed by both Mohammad and Amir recording it as a Trust asset.

45 The deed establishing the Trust ("the Trust Deed") dated 10 August 1995 was made between Stephen Freeman, a solicitor to whom Dr Freyer had referred the Ashrafinia family for legal assistance about their business affairs. Abbas accepted Dr Freyer's advice to see Mr Freeman and set up the Trust. The Trust Deed was not varied after August 1995.

46 The Trust Deed contained the common features of a discretionary trust. The "appointor" of the Trust was defined as Mohammad Ali Khojasteh and Mr Hooshang Rahmani "or the survivor of them" (Trust Deed clause 1.1). Mr Khojasteh and Mr Rahmani were business associates of Abbas in 1995.

47 The Trust Deed identifies a range of "Eligible Beneficiaries" who are defined as "the Primary Beneficiaries "together with any spouse, present or future relative of a Primary Beneficiary, any company of which a Primary Beneficiary or relative of a primary beneficiary is a member or officer, the trustee of any trust in which a Eligible Beneficiary has a vested or contingent interest, or person the trustee nominates before the 80th anniversary of the Trust Deed to be an Eligible Beneficiary": Trust Deed clause 1.1. The "Primary Beneficiaries" are curiously defined to mean only Mohammad. But other Ashrafinia family members may become "Eligible Beneficiaries" as Mohammad's relatives. Thus Karami, Abbas, Amir, Azadeh, and the younger siblings, Leila and Moji, qualify under the Trust Deed as Eligible Beneficiaries.

48 The Trustee declared in the Trust Deed (cl. 2.1) it will hold the Trust Fund "upon the trust and with and subject to the powers and provisions" contained in the Trust Deed.

49 The Trustee has an uncontrolled discretion to distribute capital or income of the Trust Fund in such proportions as it choses for the advancement, maintenance, education and benefit of "Eligible Beneficiaries": Trust Deed cl. 3.1.

50 The default provisions of the Trust Deed favour Mohammad slightly. If the Trustee does not appoint the capital of the Trust Fund (under cl. 3.1) to an Eligible Beneficiary other than the Primary Beneficiaries, Mohammad, the default provision for the Trusts income is that it may be applied or accumulated under cl. 4.2. The default provision for unappointed capital is that it is paid to the Primary Beneficiaries, Mohammad: Trust Deed cl. 4.3.

51 The Trustee has broad powers of investment, in all "modes [of investment] as the Trustee may in its absolute discretion think fit": Trust Deed cl. 7.1. And it has general power to carry on "any business which the Trustee in its absolute discretion thinks fit: Trust Deed cl. 7.7. The Trustee also has power to do all such things as may seem to the Trustee "in its absolute discretion" to be "incidental or conducive to the furthering of the interest of the Beneficiaries...or any of them": Trust Deed cl. 7.42.

52 In addition to any powers conferred by statute the Trust Deed confers on the Trustee a number of other powers and duties relevant to the matters in issue in these proceedings. Net Income of the Trust Fund to which a beneficiary is absolutely entitled must be held separately in trust for such beneficiary (cl. 8); property a part of the Trust Fund may be held at the discretion of the Trustee in the name of a nominee (cl. 10); the Trustee shall keep accurate annual accounts of the Net Income (as defined) of the Trust Fund through a public accountant selected by the Trustee (cl. 11); the Trustee is not liable for mistakes or omissions made in good faith (cl. 14); the Trustee may exercise powers and discretions under the Trust Deed notwithstanding any conflict of interest (cl. 17); the Trustee may engage and remunerate professional solicitors and accountants at professional rates (cl. 18); when the Trustee is a corporation, its powers and discretion should be exercised by resolution of the company (cl. 19); and, the appointor for the time being under the Trust Deed has the power to remove a Trustee, or to appoint an additional Trustee (cl. 23).

53 The Trust Deed cl. 19 provides special background to the 2011 proceedings. Karami submits, and I accept, that each of the seven particular breaches of trust discussed later in these reasons shows that Trading has not complied with cl. 19. There is no evidence of any written resolutions of Trading authorising any of these transactions, and I infer that no meetings of Trading did take place to authorise them. These cl. 19 breaches are more fully detailed below.

54 The 2011 proceedings include a contest about whether Trading's transfer of certain funds to Iran was in breach of trust. The Trust Deed clause 24 provides a mechanism for the transfer of funds outside the State of New South Wales. These provisions (cl. 24.1, 24.2 and 24.3) codify for the operation of the Trust the circumstances in which funds may be transferred to another country: it must be "desirable to do so" to the satisfaction of the Trustee to "appoint a new Trustee" and transfer to such new Trustee the Trust Fund and Gross Income thereof (cl. 24.1); once appointed, the new Trustee and the Trust Fund are governed by the laws of the place to which the transfer occurred (cl. 24.2); and, the appointor under the Trust Deed has the power by giving notice in writing to appoint a Trustee for any part of the Trust Fund held in such foreign country. Read in context, cl. 24 permits a part or the whole of the Trust Fund to be transferred to another country, provided there is compliance with its formalities.

55 Whilst the Trust Deed was biased in Mohammad's favour, I do not accept Mohammad's contention that the Trust was set up solely for his and his children's benefit and that it was at Mohammad's absolute discretion that benefits could be provided to other family members. Nor do I accept that is what Mohammad believed or what Abbas told him. But Mohammad acknowledged his father was really in control of Trading from the earliest times as he said and "could do whatever he wanted" with it. I accept Karami's submissions that Mohammad's removal of assets from the Trust, in the circumstances found below to be breaches of trust, are inconsistent with a belief on Mohammad's part that he controlled the Trust to apply for the benefit of himself and his immediate family.

56 The pattern of Mohammad's conduct identified later in these reasons, is more consistent in my view with a longstanding belief on his part that the Trust was for the benefit of all family members, not just him and his immediate family. But he found it convenient to use its assets for his own benefit. The reasons for this conclusion are explained in relation to each of the seven breaches of trust analysed below. Moreover, Mohammad conceded in his Defence to Karami's Amended Statement of Claim in the 2011 proceedings that the Trust is a "family discretionary trust" with objects other than himself and his immediate family.

The Trust 1995-1999

57 The eldest son Mohammad and his father Abbas had a complex and at times difficult relationship. In 1997 Abbas persuaded Mohammad to return to Iran to assist Abbas in business there. In consequence, Mohammad employed a full-time live-in manager for the motel business. Amir continued to work as a duty manager to keep an eye on operations.

58 Karami leaving the motel premises and Mohammad's departure to Iran sharpened the issue of providing accommodation for her and the youngest family members, Leila and Moji. Karami discussed this with Mohammad on many occasions during this period.

59 But Mohammad did not stay in Iran long. Tensions with Abbas prompted Mohammad's return to Australia in 1998. Abbas dismissed the live-in manager at the motel and from 1998 Mohammad and Amir jointly conducted the motel business through Trading. Amir became an additional director of Trading from 1998.

60 After 1995 the operations of Trading were run through a number of bank accounts, which will be identified in more detail through the evidence of the court expert Mr Russell.

The Marsfield and Oporto properties and Unit 17 - 1999 to 2001

61 By December 1999 Amir and Mohammad had decided to branch out from the motel business and to conduct some property developments in their own names. Amir and Mohammad purchased three properties together between December 1999 and May 2001, committing themselves to mortgage obligations to fund their acquisitions:

(a) the Marsfield property, in December 1999;

(b) Unit 17 in a block of apartments in Roslyn Gardens, Elizabeth Bay, in February 2000; and

(c) adjoining commercial and residential strata title properties in Victoria Street, Darlinghurst, the Oporto property, in May 2001.

62 This group of three assets acquired in the eighteen months between December 1999 and May 2001 provided a platform for Mohammad, Amir and Trading's later dealings in real property. Amir's case is that he and Mohammad agreed to acquire these three properties together and to acquire and develop other properties in a joint property development venture. It is difficult to explain Mohammad and Amir's property acquisitions in their own names without some purchasing consensus between them. But in my view their consensus was unspecific and not the joint venture that Amir now alleges.

63 At this point the 2008 proceedings intersect with the 2011 proceedings. I accept Karami's case in the 2011 proceedings that the resources Amir and Mohammad used to fund their property purchase activity came from the Trust. For approximately a decade after they commenced their joint property developments in December 1999 Amir and Mohammad, and from 2007 Mohammad, met their obligations to the mortgagees of the Marsfield property, Unit 17 and the Oporto property, and refinanced the Oporto property using Trust assets and Trust revenues. Mr Russell's analysis shows that the Trust was the source of their funds for this activity.

64 But Mohammad and Amir purchased the Marsfield and Oporto properties in their own names, not in Trading's name. In my view they were well aware they were using Trust property to fund these purchases. And the purchase of the first of them, the Marsfield property, was consistent with Trust purposes: it was for Karami and the younger children to live in rent-free. Mohammad and Karami had been discussing such a purchase on and off between 1996 and 1998. Amir and Mohammad began to talk about the issue in 1999. Karami and Mohammad met in November 1999 at the Marsfield property to discuss its purchase and then contracts were exchanged. The purchase in Amir and Mohammad's names of property to serve Trust purposes can be explained as a defence against Abbas.

65 And Mohammad and Amir jointly decided to buy Unit 17 in January 2000, which purchase they completed on 15 February 2000. Then in January 2001 they looked at the Oporto property together and finally purchased it in May 2001. The Trust's funding of all these purchases is considered later in these reasons. But the looming expiry of the CCFM lease to Trading in August 2001 caused Amir and Mohammad to contemplate the possible purchase of the motel freehold at Elizabeth Bay (the motel freehold) from CCFM.

66 That coincided with CCFM offering Mohammad and Amir the opportunity of buying the motel freehold in early 2001. But they and Trading had insufficient capital to achieve that at the time. Dr Freyer, who spoke for CCFM, was prepared to wait. Amir and Mohammad wanted to buy. Dr Freyer did not take a hardheaded approach to his discussions with Amir and Mohammad. He clearly had a soft spot for the Ashrafinia family. He gave evidence and was a most impressive witness, whose evidence I entirely accept.

67 An agreement to acquire and develop properties to buy the motel freehold made commercial sense and would assist the Trust. Trading was holding over on a month-to-month basis on an expired lease over the motel freehold. Dr Freyer and his freehold co-owners in CCFM could give one month's notice to Trading to vacate the premises. This made for a precarious balance. CCFM declined to sign a long-term lease, wishing to keep open its option of selling the motel freehold with vacant possession, if the right opportunity came along. Trading faced a permanent low-level risk of eviction, should the right commercial opportunity present itself to Dr Freyer and his partners, a risk only modified by the somewhat avuncular relationship between Dr Freyer and the Ashrafinia family. Were it properly conducted, Mohammad and Amir's further property refinancing and development would have been an intelligent response to Trading's potentially unstable monthly tenancy at the motel freehold.

Amir and Mohammad refinancing and acquiring properties - May 2001 to July 2007

68 Both Mohammad's and Amir's evidence support the idea of a plan for more property development from about May 2001 to July 2007 to assist in acquiring the motel freehold. But within a few years their vague consensus and their competing ambitions drove them apart. Mohammad began to exclude Amir and six years later, in mid-2007, their relationship entirely broke down. Amir left the motel business and was no longer prepared to co-operate with Mohammad. But near the end of these six years between May 2001 and July 2007, Trading purchased a number of other properties, all in January 2007 - Unit 4, Elizabeth Bay Road ("Unit 4") Unit 5 Roslyn Gardens ("Unit 5") and Unit 8, Roslyn Gardens ("Unit 8"), (and referred to collectively in these reasons as "the Trading Apartments"). This section deals with events of this period.

69 From about 2002 Mohammad began to withdraw from day-to-day operations of the motel. He was suffering serious health problems. I accept Amir's evidence that Mohammad employed a number of managers to replace his services whilst he was absent. One of them during the 2003-2004 period was Ms Christina Sofroniou, with whom Amir effectively ran the day-to-day operations of motel until July 2004. After that Amir was in practical control of daily operations. But he was not in charge of Trading's bank accounts, which were being operated by Mohammad, partly at the behest of Abbas.

70 Amir began to develop suspicions about Mohammad's approach to their mutual dealings and his administration of the Trust's affairs. As early as 2003 he became concerned that Mohammad was diverting the rental income from the Oporto property to Mohammad's own purposes and not accounting for it to Amir or the Trust. When Amir questioned Mohammad about this rent, Mohammad indicated that he wanted "to take all ownership of" the Oporto property and "walk away from anything to do with the Trust". Although this was not pursued any further at the time between them, it indicates an early consciousness on Mohammad's part of the difference between his own interests and those of the Trust, which in my view he always held.

71 Mohammad's withdrawal from day-to-day motel operations allowed him to invest in a restaurant/bar, "La Cita", at the King Street Wharf in 2003. Although it is not the subject of specific allegations of breach of trust in these proceedings, I accept Amir's s evidence that the taking of security over, and the use of rent from, the Oporto property in part funded Mohammad's venture into La Cita. This restaurant/bar ran into financial difficulties in 2004.

72 But internally the relationship between Mohammad and Amir was becoming increasingly dysfunctional. I accept Amir's evidence that Mohammad had a strong sense of entitlement to do whatever he wished with the revenue from the motel business and with any properties that he and Amir jointly owned. Having observed Mohammad in the witness box I conclude: that he has a strongly developed sense of self interest; and that he usually dismissed Amir as an irritant when Amir tried to have a say in the disposition of motel funds. But Mohammad treated the Trust and the properties they owned by this time, 2003-2004, as able to be simply divided up between himself and Amir. I accept Mohammad's evidence that in late 2003 he said to Amir "Amir, I will keep the Oporto shop and you keep the house and the motel business" to which Amir agreed. But in my view they were both conscious at this time that these properties had been funded from Trust earnings. But the proposal was not put into effect, due in part to their poor relationship. This in turn was exacerbated by Mohammad's criticisms of Amir's management of the motel business while Mohammad was away. This reached the point by late 2005 that Mohammad was attempting to refinance their existing investment properties so that he can try to separate their financial affairs. But this objective seemed almost unattainable as the motel business in the Trust was their principle source of revenue.

73 Despite this the Trust's affairs were conducted with reasonable efficiency between Amir and Mohammad between 2000 and 2004. The Trust filed tax returns for the financial years FY00 to FY 04. But the deteriorating relationship between Amir and Mohammad from 2005 onwards is evidenced by the fact that the Trust's basic civil obligations were not thereafter fulfilled. Trading did not file tax returns for FY 05, FY 06, FY 07, FY 08, FY 09, FY 10 and FY 11. From FY05 Amir had no confidence he had the full picture from Mohammad about the Trust's affairs. By the end of FY07 they were in open conflict.

74 In 2006 Amir first became suspicious that Mohammad was transferring money out of the Trust's St George Bank Account 649 to Iran. He enquired and obtained from St George Bank the telegraphic transfer authorisations showing that between 9 May 2001 and 17 October 2006 $340,470 had been transferred from the Trust to Iran, much of it to an associate of Abbas, a Mr Noori. Amir's active enquiries in 2006 are entirely consistent with him not knowing anything about these transfers before then.

75 I accept Amir's evidence that he confronted Mohammad about these Iran transfers and said to him words to the following effect "What's going on here?" I accept that the only assistance that Amir received from Mohammad in response to his enquiry was "We are buying land in Iran. If anybody asks this is to pay for the motel." But I accept Amir's evidence that Mohammad did not give any details about the land, if any that had been or was being purchased in Iran with Trust funds and in whose name the land being purchased. Although I do accept that some of those funds transferred to Iran on account of the purchase of goods for the food business she was operating. I do not accept that Azadeh was sending money to Iran to hide it from the Government Insurance Office who had costs orders against her in legal proceedings.

76 Mohammad has never given a satisfactory account of what was done in Iran either with these funds or other funds subsequently transferred to that country. In my view Abbas maintained a strong personal influence over Mohammad, who did not resist Abbas's requests for the transfer of these funds. I am unconvinced by the evidence that Mohammad ever knew how the funds were applied once they found their way into the opaque world of Mr Noori or Abbas in Iran.

77 But despite Amir's growing doubts about the trustworthiness of his brother Mohammad, they both authorised Trading's acquisition of the Trading Apartments in January 2007 - Units 4, 5 8. The financial details of these acquisitions are dealt with later in relation to the breach of trust allegations in the 2011 proceedings. I accept Amir's evidence that he and Mohammad discussed renting out the Trading Apartments to earn income for the Trust. This in my view is one of the reasons why Amir went along with the idea of buying these Trading Apartments in 2007. Despite the ever-present risk that Abbas might still persuade Mohammad to divert more Trust property to Iran, in my view and with some sense of responsibility to the Trust, Amir not unwisely thought that if the Trust's cash were tied up in servicing mortgage obligations on clearly identifiable Australian real estate, it was far less likely to be misapplied in Iran by pressure from Abbas. Amir took what he thought was the best of the bad options on offer to him. Getting legal advice would have been a better one.

78 Amir and Mohammad were both living at the motel in January 2007. But soon after Trading purchased Units 4, 5 and 8, they decided to live in Units 4 and 5 themselves. Although this appear to defeat the financial logic of the purchase of the Trading Apartments, I accept Mohammad's evidence that Amir's occupation of Unit 5 would free up a room at the motel which would generate more income from the motel. I accept Amir's evidence that there was no discussion between them at this time about either of them paying rent or an occupation fee to the Trust. In March 2007 Mohammad moved into Unit 4 in Elizabeth Bay and Amir moved into Unit 5 in Roslyn Gardens. By mid 2007 Mohammad had moved out of Unit 4, which was then renovated using Trust funds, after which it was leased.

79 Finally, before January 2007 several restructurings of Amir and Mohammad's borrowings over the three properties in their names took place. One dispute remains from this 2001 to 2007 period: whether or not Amir participated in a refinancing with Bankwest in October 2005 of his and Mohammad's existing obligations to financial institutions over the Marsfield property, Unit 17 and the Oporto property. It is relevant to Amir's culpability for losses to the Trust arising out of this refinancing, which is Transaction 1 of the allegations of breach of trust in the 2011 proceedings.

80 The October 2005 Bankwest refinancing was the last refinancing before the acquisition of the Trading Apartments in January 2007. The dispute relates to whether the Amir signed certain Bankwest home loan contract and mortgage documents on 4 August 2005. Amir denied that he did, saying that he was in Thailand at the time. And Amir adduced evidence from a handwriting expert, Mr Storey, which showed convincingly in my view, that Amir did not sign his name on the questioned documents. Mr Storey's expert evidence gained considerable force from admissions by Mohammad that he had indeed signed many of the questioned signatures on the early August Bankwest documentation.

81 Mohammad's explanation for signing these Bankwest documents was an unusual one. He said that he thought that Bankwest already had his power of attorney from Amir and that in those circumstances he was permitted to sign in Amir's name without clearly indicating whether or not he was signing as an attorney. Mohammad gave very inadequate answers to explain why he did not use the initials "PP" or "PA" as Bankwest was expecting when a power of attorney was used, saying that he preferred to sign "his own way" without giving any indication of signing as an attorney.

82 On this issue I accept Mohammad's explanation for signing the Bankwest documents. I find that because Mohammad thought he was entitled to do so, he signed all the questioned Bankwest documents in Amir's name. Mohammad also adduced evidence from a Mr Richard Hancock that he had witnessed Amir's signature on the documents and that he remembered Amir signing them at a cafe in Kellett Street Kings Cross. But given Mohammad's admissions, although I found Mr Hancock to be generally quite a credible witness, I conclude he was mistaken.

83 Amir's case based on Mohammad using Amir's signature, was that Mohammad was concealing the Bankwest refinancing from Amir. But in my view Amir was well aware of the Bankwest refinancing. He conceded in cross examination that he had signed Bankwest refinance documents on 19 October 2005, after his return to Australia and, after the date of the mortgage documents the signatures on which he was challenging. I infer that Mohammad had told Amir of the Bankwest refinancing at some time between August and October 2005.

Sources of Amir's and Mohammad's funds - 1999 to 2007

84 A feature of the whole period 1999 to 2007 is that neither Mohammad nor Amir discussed a specific plan to acquire the motel freehold. Neither of them identified the acquisition and sale of particular properties as being earmarked to generate particular funds to acquire the motel freehold. Their plans remained vague and indefinite for several reasons: there was no formal joint venture between them of the kind Amir pleads; Dr Freyer and CCFM were not applying pressure to vacate the motel freehold; Amir and Mohammad were becoming suspicious of one another especially from 2005 and were content just to coast along.

85 How did Amir and Mohammad acquire Trust funds to buy the properties in their own names which they then used for further refinancing? Amir submits that the Court should find that the Trust distributed the funds in accordance with the Trust Deed to Amir and Mohammad, and that they used their own funds right from their first acquisition of the Marsfield property.

86 I do not accept Amir and Mohammad used distributions from the Trust to them as beneficiaries. This explanation does not fit the evidence at many levels. I did not find Amir's defence of this position to be persuasive. And Amir and Mohammad have made various allegation and counter-allegations of misuse of motel revenue and rent from the Oporto property for personal ends. The Court does not have to decide all of these disputes. But they often refer to credit card bills for services from external suppliers and are not obviously a source of funds for the acquisition of funds in their own names.

87 First, Mohammad's evidence on his receiving distributions was contradictory and unreliable. In his first affidavit Mohammad swore "Amir and I received distributions from the Trust in order to finance the balance of the acquisition of the Properties and to pay the mortgages on the Properties". But in answer to a question from the Court, Mohammad said about this same subject "neither Amir not I received distributions". Despite what Mohammad had said in his affidavit his answer to the Court was a moment of candour from Mohammad. And I accept this is what happened - he and Amir did not receive distributions from the Trust.

88 Neither Mohammad's nor Amir's case was much assisted by Mohammad's further rationalisations of what had happened. Mohammad attempted to explain away his earlier affidavit evidence by saying at the time he wrote his affidavit "I couldn't remember there were any distributions or not. Amir had told me that there were distributions and so I assumed that there were distributions when I wrote this affidavit. That's what I wrote". This evidence is highly improbable. Mohammad would not ordinarily rely on Amir for such important business information about whether the Trust had made distributions to them both. That is the kind of thing that Mohammad himself wanted to control. Mohammad transferred Trust funds to Iran without Amir's knowledge up until 2006. And Amir ultimately left the motel business because Mohammad unilaterally assumed control.

89 Secondly, there are no proper trust accounting records, which record any distributions from the Trust to beneficiaries in the 1999-2001 period. In the absence of Mohammad and Amir keeping proper records of Trust distributions, I am not prepared to infer that is what they did. Mohammad say that Trust records went missing from the motel in November 2007 and this is some explanation for the absence of such records. But no real effort seems to have been made to respond to this theft and replace the documents and I am not convinced that any documents went missing in the way that Mohammad says. Mohammad and Amir subsequently used what were undoubtedly Trust funds to refinance obligations over these properties and pay the mortgages for the properties they acquired in their own names. They both applied these Trust funds later for their own purposes, so I see no reason to infer that they were careful to ensure that the original funds were distributed to them as beneficiaries before being applied. Were they to have received the funds as beneficiaries, it could be expected that from that point on they would treat the funds entirely as their own and would raise and discharge mortgages without further assistance from the Trust. But they continually sought the Trust's financial assistance with respect to these properties.

90 Thirdly, there is no support in Mohammad's or Amir's tax returns for the conclusion they received money beneficially and dealt with it as property to which they were beneficially entitled.

91 Fourthly, the idea that Mohammad would make distributions to himself and Amir is inconsistent with Mohammad's own evidence: that he regarded himself as the sole object or beneficiary of the Trust; and, that he did not find out until 2011 that he was supposed to administer the Trust for the benefit of all family members. The idea that he would make distributions to Amir to acquire the Marsfield and Oporto properties does not sit well with his position on this. Although in my view, contrary to Mohammad's evidence, he was always aware the Trust was set up to benefit family members other than him.

From July 2007 until commencement of proceedings

92 Amir remained dissatisfied into early 2007 about Mohammad's lack of compelling explanation for the Iran funds transfers, about how Mohammad had applied the rent from the Oporto property, and other matters relating to the administration of the Trust.

93 But Mohammad had his own developing suspicions about Amir. In November 2004 I accept that when Amir was attempting to bring up to date the Australian Securities and Investments Commission (ASIC) records for Trading to remove Abbas' name that an administrative mistake was made and that ASIC's records were then incorrectly altered to show that Amir had 60% of the shares of Trading and Mohammad had 40%. Mohammad seemed to think that this was not an error and that Abbas had given control of trading to Amir behind his back.

94 Mohammad was determined to take control of Trading. So in May 2007 he initiated the steps that ultimately led to a complete rift between himself and Amir in July 2007 and to Amir commencing the 2008 proceedings. On 25 May 2007 Mohammad gave notice of a general meeting of Trading on 19 June 2007 to correct the ASIC records for Trading, to issue shares to give Mohammad control of the company, and to remove Amir as a director of the company. But Amir was overseas at the time and did not receive notice of this meeting.

95 Amir says, and I accept, that had he attended this June 2007 meeting, he was quite prepared to correct the error at ASIC about his shares but that he did not wish to cease being a director of the company. The general meeting took place in June 2007 and resulted in Trading's issued capital being adjusted so that of the 100 shares then issued Abbas held 6, Mohammad 51, and Amir 43. Amir was removed as a director and Mohammad made sole director and secretary of the company. Amir found out about these changes on his return to Australia on 24 June 2007.

96 Mohammad acted quickly on his new authority. Amir discovered on his return to Australia on 24 June 2007: that he was no longer a director of Trading; that his authority to operate the Trust's bank accounts had been cancelled; and that the locks to the office at the motel had been changed. Amir's removal by Mohammad from the management of Trading was complete. Amir responded by withdrawing from any operational involvement with Trading and by engaging lawyers to protect his interests. His interactions with Mohammad from this time were mostly formal, through legal representatives.

97 When Amir commenced the 2008 proceedings he first sought relief to challenge the validity of the 19 June 2007 general meeting of Trading and to restore him to its board. But such issues were soon sidelined. Trading's affairs and those of the Trust were paralysed by the wider issues between Mohammad and Amir litigated in the 2008 proceedings.

98 The parties liquidated all of Trading's and one of their jointly held properties before proceedings began. They sold Unit 17 in March 2006; and the intermingling of Trust and other funds in relation to Unit 17 is the subject of Transaction 4 in the 2011 proceedings.

99 Of the Trading Apartments, Mohammad sold Unit 8 in September 2008; and its proceeds of its sale are the subject of dispute in Transaction 5 the 2011 proceedings. Mohammad sold Unit 4 in June 2009; and the proceeds of its sale are the subject of dispute in Transaction 6 the 2011 proceedings.

100 Unit 5 was the last of the Trading Apartments to be sold, in July 2009. Amir had occupied Unit 5. On behalf of Trading Mohammad sent Amir text messages in September 2008 demanding that he vacate the unit by the end of that month. Mohammad repossessed Unit 5 in November 2008, further exacerbating their by then strong dislike for one another. Contracts for the sale of Unit 5 were exchanged in July 2009 and the sale transaction settled in August 2009.

101 Trading remained in occupation of the motel freehold until 28 February 2009. The owner gave notice in January 2009 and Trading ceased the business the Ashrafinia family had conducted there since 1987, vacating by the end of February 2009. Mohammad and Caitlin had unsuccessfully attempted to negotiate with Dr Freyer for the purchase of the motel freehold in June-July 2008. The motel freehold changed hands in September 2008 which led to rental increases of more than 200%. This was both the reason for Mohammad and Caitlin commencing negotiations and for the termination of Trading's occupation of the motel freehold in 2009.

102 At the commencement of proceedings only the Marsfield and Oporto properties remained in Amir and Mohammed's names and no properties were held in Trading's name.

103 Despite their other differences the parties efficiently co-operated in the appointment as a Court expert under Uniform Civil Procedure Rules r 31.37 of Mr Paul Russell of Forensic Advisory Services, to assist in analysis of the parties' extant accounting records. Mr Russell supplied a detailed report to the Court which was the subject of little contest and which was extensively quoted by the parties. Mr Russell's findings are referred to throughout these reasons.

104 Mr Russell's report refers to all the bank accounts, for which records were supplied to him. In order to protect the parties against identity theft these reasons do not set out the full account numbers, but only the last three digits. Mr Russell's examination generally showed for the period he examined that Trading's St George bank account 649 (Roslyn Gardens Serviced Apartments account) was the principal source of funds for another related account of Trading, St George account 537. From these two accounts associated with the operation of the motel business moneys generally flowed: (1) to Mohammad himself in CBA account 184 and 454; (2) to Mohammad's company, Holdings - St George account 871 - sometimes via Motels - St George account 901; or, (3) to another St George account 554 in the name of Trading, trading as "Chilli Blue Accommodation": Forensic Advisory Services Report 20 June 2012 paragraph 5.05. More detailed findings from Mr Russell's report and his supplementary report of 29 June 2012 are set out below. In section 12 of Mr Russell's report he concluded that the available records indicated that "the majority if not all" of the funds utilised in the acquisition, financing and maintenance of the properties the subject of these proceedings are likely to have originated from: (1) the operation of the motel business; (2) the refinancing of the subject properties; or (3) rental income derived from the subject properties. Specifically Mr Russell concludes based upon income tax returns provided to him, and I accept, that he could not see "any significant sources of income for either Mohammad or Amir such as would allow them to be included as sources of funds for the acquisition, financing and maintenance of the subject properties.

The 2008 proceedings - the alleged joint venture

105 Amir's, Mohammad's and Karami's allegations concerning the 2008 proceedings have already been explained in these reasons above under the heading "The 2008 proceedings". Their competing contentions must now be examined in more detail.

106 In summary, the common intention Amir says he and Mohammad formed in 2001 was one to acquire and redevelop the motel freehold by borrowing monies, acquiring other land as tenants in common and using borrowings and the sale proceeds of that other land to achieve the principal objective of acquiring the motel freehold.

107 Amir's case is that this 2001 common intention was formed, after the purchase of the Marsfield property (in 1999) and Unit 17 (in 2000), and more or less at about the same time as their acquisition of the Oporto property in 2001.

108 Amir's alleged 2001 common intention contemplated that existing assets such as the Marsfield property and Unit 17 would, augmented by other assets be refinanced over time to develop a geared but expanding property portfolio. Between 2001 and 2007, when Amir and Mohammad finally fell out, that is what occurred. Amir and Mohammad refinanced Unit 17 and the Marsfield property in May 2001 and January 2002. They used the proceeds of that refinancing to complete the purchase of the Oporto property. Then between 2003 and 2005 they refinanced the Oporto and Marsfield properties and Unit 17 with other financiers and then with Bankwest. Unit 17 was sold in 2006. The 2005 signing of the Bankwest refinancing documents was heavily disputed, and is the subject of the Court's more detailed findings.

109 Amir contends that the purchase of Unit 4, Unit 5 and Unit 8, the Trading apartments, in January 2007, was part of the joint venture founded on this 2001 common intention with Mohammad, although these thee units were purchased in the name of Trading. This alleged property joint venture began to contract from March 2008, when Unit 8 was sold, followed by Units 4 and 5 in July/August 2008.

110 Mohammad's case is that there was no 2001 common intention and no joint venture. As there is no documentary record of the 2001 common intention or a joint venture, the Court must objectively ascertain by examining Mohammad's and Amir's words and conduct whether a partnership of the kind alleged was present from about 2001: Walters v Scarborough [2011] NSWSC 1380 at [259] - [279]. Mohammad contends that neither Amir's oral evidence nor the objective documentary materials support the alleged 2001 common intention or indeed the operation of the joint venture as Amir alleges. Mohammad says that he holds the Marsfield property (as a joint tenant with Amir) and Unit 17 (as a tenant in common with Amir) legally and beneficially. But he says that there is no evidence of any joint venture between them, and that they hold the Oporto property for the Trust.

111 It is necessary in the 2008 proceedings, to determine: (a) whether a joint venture existed between Amir and Mohammad; and (b) what assets, if any, the joint venture owned.

(a) Did Mohammad and Amir form a joint venture?

112 There is much to be said for Mohammad's analysis of Amir's 2001 common intention case. Especially in the absence of clear documentary evidence showing a departure from Mohammad's and Amir's pre-existing practices in relation to Trust administration, the most probable explanation for their property dealings at that time was that they were a continuation of the Trust's existing activities.

113 The lack of documentary evidence supporting a wholly new joint venture between Mohammad and Amir is no accident. In my view they did not perceive that they were acting in their own interests at the time. They had few substantial sources of capital for the joint venture, other than through the application of funds of the Trust. And their first alleged joint venture activity, the acquisition of Marsfield property in 1999 was for Karami to live in: a purpose consistent with the objectives of the Trust. So was the purchase of Unit 17 in 2000, which was in part to provide accommodation for Ashrafinia family members.

114 In the result the Court concludes that there was no joint venture. But contrary to Mohammad's submission the Court also concludes that Mohammad and Amir did not own the Marsfield property and Unit 17 beneficially but they held these properties (along with the Oporto property) for the Trust.

115 Amir's evidence supporting the alleged 2001 common intention is insufficient to establish the claimed joint venture. Amir says that in 2001 he and Mohammad had a discussion whether they should "expand the motel business or pursue other business ventures" once Abbas was no longer involved in the motel business in Sydney. I accept Amir's evidence that Mohammad complained in this conversation that Abbas could come back to Australia, and Mohammad went on to say "however in the meantime, we need to separate ourselves from the motel business and move forward together as a partnership. The landlord wants to sell the motel and he wants us to buy it". I also accept that Amir said in response "I think it's a good idea. We have good experience in the accommodation business and I think we should first try to expand the business, save more funds and then try to buy the motel. We should ask for a new lease with an option to buy". This conversation took place about the same time as the acquisition of the Oporto property was being discussed.

116 The closest this conversation gets to proving an Amir-Mohammad joint venture separate from Trading is Mohammad's statement that "we need to separate ourselves from the motel business and move forward". But in my view all Mohammad was saying here to Amir was that the brothers generally needed to diversify their sources of business revenue so they would not be so reliant on motel and accommodation revenue. Equally Mohammad's reference to moving forward "together as a partnership" was no more than a declaration by Mohammad that the two brothers, who had not always got on very well, should now cooperate towards this common end. Mohammad was not indicating that they should form a new legal partnership separate from their then individual positions as directors of Trading. Rather, Mohammad was inviting Amir to team up with him defensively against Abbas, who by then had demonstrated an unnerving habit of arriving unannounced from Iran and then directing the transfer of Trust cash to Iran.

117 But this conversation was well after Mohammad and Amir had acquired both the Marsfield property and Unit 17. Amir explains those two earlier purchases through 1999 conversations with Mohammad. I accept Mohammad did have a conversation with Amir, as Amir says in early 1999, in which he complained that Abbas "wants to control me too much, whether it's in Iran or here in Sydney. He thinks I am incompetent and not working hard enough." I also accept that Mohammad went on to say to Amir in this conversation "And the reason why he [Abbas] isn't here is because he does not want to face our mother in divorce proceedings". I further accept that Amir confirmed [to Mohammad] in reply that he [Amir] thought, in relation to the Trust, Abbas was "still legally in control" so "doesn't he have the right to dictate what he wants?" I accept that in response to this Mohammad and Amir exchanged the following:

Mohammad: Well should we let him do that? We know the Olympic Games are going to bring a lot of money to the business and since Abbas has the majority shares in the company he may come back at any time and just take things off of our hands. I think we should start to pay ourselves a decent income from this Motel and use this money to start acquiring property in our own names. And we will buy mum a house as she deserves it. Abbas can't really do anything because if he comes back here to reclaim things, he will have to face mum in a divorce court.

Amir: I absolutely agree that it's time mum received her dues from Abbas and she deserves to be in a house that is not rented.

118 Mohammad wanted to transfer Trust property into his and Amir's name to protect it from Abbas. I find that Mohammad's initial motive for transferring property out of the Trust was principally defensive. But Mohammad had mixed motives: mainly hoping to secure some advantage from paying himself and Amir "a decent income from this motel"; but "acquiring equity in our own names" principally for the purpose of keeping Trust money away from Abbas. Mohammad's idea of personal gain was a present but subsidiary motive.

119 These 2001 conversations were consistent with both Mohammad and Amir acting as directors of Trading. I accept that Amir believed that Abbas had created Trading for the benefit of the whole family and that one of the assets of the Trust was the motel business, as evidenced by the Trust's income tax returns that Amir co-signed between FY00 and FY04. Amir understood he was capable of benefiting through the distribution of Trust property in the future. I do not accept that Mohammad and Amir suddenly decided to distribute a substantial part of Trust income for their own benefit either in 1999 or in 2001. There are no documents recording Mohammad and Amir's making distributions to themselves between 1999-2001 to enable themselves to use their own funds to invest in such a joint venture. The better view is that at this time they were doing what they needed to place Trust assets safely in their own names to protect them from Abbas, and no more.

120 Amir did not apply funds to the acquisition of the Marsfield property, Unit 17 and the Oporto property as though he regarded them as part of the joint venture in which he and Mohammad had a shared interest. Amir personally did not: select the Marsfield property for purchase; contribute to the Marsfield property's purchase price; make instalment payments on the mortgage of the Marsfield property; contribute to the deposit to acquire Unit 17, or make its mortgage repayments; nor contribute to the deposit or mortgage repayments for the acquisition of the Oporto property. This conduct is not consistent with a belief on Amir's part that he was a beneficial owner of these properties with Mohammad.

121 When the alleged joint venture folded in 2007, Amir was strangely slow to assert its existence. He says that he and Mohammad "parted ways in 2007". But when Amir first brought the 2008 proceedings he did not allege the existence of a joint venture. He merely sought to challenge his removal as a director of Trading: a claim for relief still present in the Summons in the 2008 proceedings. The allegation of the 2001 common intention only first emerged in 2009. The late arrival of a joint venture allegation suggests that it was a later legal construct, rather than an idea which was clear to Amir in 1999 to 2001. Moreover, when making their first allegations against Mohammad in December 2007 Amir's lawyers did not allege a joint venture but referred to "three apartments" (probably Units 4, 5 and 8) that were Trust property, as was the position in Amir's first affidavit sworn 20 November 2008. A similar allegation was made in Amir's statement to the Consumer Trading and Tenancy Tribunal made on 25 May 2008 about Unit 5 as being purchased by the Trust.

122 But there are other internal inconsistencies in Amir's claim of a 2001 common intention founding a joint venture. It is unclear whether the alleged 2001 common intention preceded or post-dated the purchase of the Oporto property. Dr Freyer, whose evidence I accept, does not support a 2001 common intention. He can only recall the earliest discussions with Mohammad and Amir about the motel freehold being in 2003 and 2004. There is no evidence from either Amir or Mohammad about: how the joint venture profits and losses would be shared, or how Trading's motel business revenues would be applied to support the separate joint venture; and the parties did not agree to set up or establish any joint venture bank accounts separate from Trading's accounts.

(b) What, if any, were joint venture assets?

123 There was no joint venture. Therefore there were no joint venture assets. And there is no need to consider whether Mohammad has misapplied joint venture assets. But the contest in the 2008 proceedings about whether the Marsfield property, Unit 17 and the Oporto property were joint venture assets now takes a different form. Although Amir's joint venture case has failed it is still necessary to resolve the ownership of these three properties. In the 2008 proceedings and the 2011 proceedings Mohammad says that he owns the Marsfield property and Unit 17 legally and beneficially, as does Amir, whether or not there was a joint venture agreement between the two. And Amir denies that the Oporto property is Trust property. Thus the 2011 proceedings require a decision whether these three properties were actually held on behalf of the Trust. Although the 2011 proceedings raise this issue, the factual contest behind it substantially overlaps in time and content with the joint venture contest; so it is dealt with here.

124 The Court concludes in this section that the Marsfield and Oporto properties and Unit 17 were all Trust assets. Both the conversations at the time and the movement of funds support this conclusion. And Mr Russell's analysis shows that the probable source of funds for the acquisition and the discharge of the mortgage obligations for each of these properties was the revenue from the motel business.

125 Mohammad has advanced substantial evidence as to what he claims are his own contributions to the acquisition of properties such as Unit 17 and the Marsfield property. This judgment does not determine the validity of all of those claims. The method adopted in these reasons is to ascertain whether Trust funds have been used to purchase these properties. If that is established, as the Court here finds that it is, it is for a subsequent inquiry for Mohammad to establish the extent of his own contributions and whether any just allowances should be made to him for his management of Trust property: Warman International Ltd v Dwyer (1995) 182 CLR 544; [1995] HCA 18. The material of this kind that Mohammad advances will be more relevant to this next stage of inquiry.

126 The Marsfield property. The Marsfield property was purchased in December 1999 for $410,000 in Amir and Mohammad's names as tenants-in-common. They borrowed $307,000 for its purchase. The acquisition occurred just before the Sydney Olympic Games. Mohammad concedes, and I accept, that the balance of the purchase price of $103,000 was met by using advance accommodation bookings at the motel business for the Sydney Olympic Games.

127 There is no record that the $103,000 that Amir and Mohammad applied to purchase the Marsfield property was a distribution from the Trust. Nor is there any record of any loan of these funds from the Trust to Mohammad or Amir. I infer that Amir and Mohammad applied Trust funds, not their own funds, to the acquisition of the property. They did not document a distribution by formal resolution in conformity with Trust Deed clause 19. There is no indication that they were holding the Marsfield property as nominees of the Trust, in conformity with Trust Deed cl. 10, but I do not accept either Mohammad's or Amir's evidence that they acquired the Marsfield property beneficially themselves.

128 The Trust's cash (from St George account 649) was utilised to meet the mortgage payments for the Marsfield property. Mr Russell's findings about the mortgage payments for the Marsfield property, which I accept, are that some $128,686.80 was paid on account of mortgage instalments for that property between 23 January 2004 and 7 January 2008, the period for which statements were available for Mr Russell's analysis. The evidence is less clear for the period before and after these dates. But the pattern of Amir and Mohammad's payments between January 2004 and January 2008 is a strong indication of their long-standing finance habit with respect to this property. Due to this payment habit and the doubtful quality of their evidence, especially Mohammad's, I do not accept their uncorroborated oral evidence that they were responsible for making payments from their own resources for any part of the purchase price or for the mortgage payments or outgoings for this property.

129 If the parties request it the Court may direct an inquiry as to whether Amir or Mohammad can prove a financial contribution to this property. But that inquiry will be limited, as a result of these findings, to proving by vouchers, bank statements or other objective materials, their actual payments on account of the maintenance or acquisition of this property. The directions at the conclusion of these reasons provide for such an enquiry, if it is required.

130 The Marsfield property was refinanced four times. Amir participated in some of the refinancing. These refinancings are dealt with in transactions 1, 3 and 4 in the 2011 proceedings. Each of those refinancings followed a familiar pattern. Trust funds were used over time to reduce the mortgage obligations over the Marsfield property, which was then re-encumbered by subsequent refinancing, thereby utilising the additional equity the Trust provided to borrow in Amir and Mohammad's names.

131 Unit 17. Mohammad and Amir purchased Unit 17 in February 2000 and became its registered proprietors as joint tenants. Their decision to purchase as joint tenants indicates that it was purchased with some mutual domestic purpose in mind. Mohammad says the purchase price of Unit 17 was $296,000, of which Perpetual Trustees Victoria loaned $222,000 to himself and Amir. He and Amir had to find between themselves the unfunded differential of $74,000. Mohammad does not give a satisfactory account of the source of the unfunded $74,000 required to complete this purchase. I infer its source was Trust funds. The motel business was still receiving at this time substantial advance accommodation booking for the Sydney Olympics. Mohammad and Amir had already shown themselves ready to apply Trust funds received on account of Olympic bookings to the purchase of the Marsfield property. It is probable that they did the same to make up the purchase price of Unit 17. But Karami's case is that Unit 17 was acquired with a total borrowing of $369,000 from Perpetual Trustees Victoria. It appears that Amir and Mohammad applied a part (some $222,000) of this $369,000 to the purchase of Unit 17. And the balance was used for other purposes.

132 Unit 17 was refinanced on three occasions. The last of these refinancings was with Bankwest in November 2005, to support the much disputed loan advance of $352,000. The Court's findings elsewhere are that Mohammad and Amir were aware of this last refinancing.

133 The pattern of refinancing Unit 17 was similar to that for the Marsfield Property. Mr Russell has found that periodic mortgage instalments totalling $61,699.99 were paid from Trust funds from St George account 649, the motel business operating account. Trust funds were used to increase Amir and Mohammad's equity in the property which in turn was reduced for the benefit of Amir and Mohammad by the three refinancings. But as with the Marsfield Property, Mohammad and Amir's habit of making mortgage payments from account 649 fully accounts for all Unit 17 mortgage payments that Mr Russell can identify during the period. I infer that Mohammad and Amir followed the same payment habit for Unit 17 at other times.

134 Mohammad claims he made mortgage payments for Unit 17 from his own resources and from loan funds he organised. He identifies the alleged sources of such payments between January 2001 and October 2002. But I do not accept Mohammad's evidence as to this, except to the extent that it is supported by objective materials that unequivocally show that he sourced non-Trust funds for the payments.

135 The Oporto property. Amir and Mohammad purchased the Oporto property on 25 May 2001 and were at the time of trial its registered proprietors as tenants-in-common. At the time of trial there was little equity left in this property. Amir and Mohammad were in default to the mortgagee and were not making mortgage payments. It was expected that the property would be repossessed. At a short hearing after the trial on, 14 June 2013, the Court was told that indeed the Oporto property had been sold. But as the Oporto property was itself refinanced a number of times and thereby was a source of funds for Mohammad and Amir's benefit in subsequent transactions, in the 2011 proceedings, it is necessary to resolve the contest whether (as Mohammad and Karami say) the Oporto property was held for the Trust; or whether (as Amir says) he and Mohammad owned it legally and beneficially. On this issue I prefer Mohammad and Karami's case.

136 I accept that Mohammad negotiated the purchase of the Oporto property in Late January, early February 2001 and settled on a purchase price of $1,000,000 with the vendor for which a deposit on $97,500 was payable on 3 February 2001. I accept, as the objective material supports, that this deposit was paid by drawing a cheque in that sum on Trading's CBA account 115, which was then in credit some $27,824. Together with the deduction of transaction fees and other small adjusting items, CBA account 115 immediately went into debit of $69,605.89 at close of business on 2 February 2001. On 5 February 2001 after deduction of what the CBA described as an "overdrawing approval fee" of $20, some $97,500 was credited to CBA account 115 bringing it back to a credit balance of $28,142.86 at the close of business on 5 February.

137 These banking transactions are generally consistent with Mohammad's story as to how the deposit for the purchase of the Oporto property was funded. He says, and I accept, that after negotiating a price of $975,000 the vendors decided they would only sell for $1,000,000, which explains the odd lower deposit amount. Mohammad says, and I accept: that Trading paid a cheque of $97,500 as a deposit; and that Trading "did not have sufficient funds in its account at that time to meet that cheque when it would be presented" which was clearly correct. But Mohammad accounts for the re-crediting of account 115 on 5 February by his transferring "$97,500 from my personal savings account to [Trading's] account".

138 Trading's account 115 shows a credit of $97,500 on 5 February 2001 as a "Funds Transfer - Net Bank Credit". But I am not prepared to infer these funds came from Mohammad rather from than Trading's other resources in the absence of any Trust or other record clearly showing a transfer from Mohammad. There is no such record in the evidence.

139 Even if that could be demonstrated, in the absence of a resolution by Trading showing the nature of this credit I do not infer in Mohammad's favour that he was using Trading as his agent for the transmission of his own funds to the vendor of the Oporto property. In the absence of such records I do not infer that this transaction was for Mohammad's benefit rather than Trading's benefit, given the fiduciary position he was in with respect to Trading. If the funds came from Mohammad, the correct analysis of this transaction is that Mohammad made an advance to Trading which in turn used Trust funds to make a deposit on the acquisition of the Oporto property. Such an analysis of the transaction is consistent with the way that Trading subsequently funded the payment of the mortgages over the Oporto property, to which the Court now turns.

140 The Oporto property was refinanced in November 2005 with Bankwest and in January 2007 with Citibank. The refinancing with Citibank is dealt with later in these reasons - "Particular 3 - the January 2007 refinancing". A familiar mortgage repayment pattern emerges with the Oporto property: the Trust's funds, sourced from Trading's St George account 649 were used to pay off the mortgages over the Oporto property to Perpetual Trustees Victoria, to Bankwest, and to Citibank. Mr Russell's analysis shows that between 23 January 2004 and 7 January 2008 total repayments of at least $470,276.89 were made to these mortgagees of the Oporto property. Mortgage payments during that period are accounted for as being sourced, as to $214,839.63, from St George account 649, as to $54,536.78 from Mohammad's personal bank account, and as to $200,930.48 from Ashrafi Holdings Pty Ltd ("Holdings") bank account.

141 The mixture of the money of Mohammad and his company Holding's in these repayments to the Oporto property mortgagees does not greatly complicate matters. In the absence of any contemporaneous Trust records describing the character of these transactions, I do not infer that Mohammad made these payments to acquire an interest in the Oporto property. The Oporto property was Trust property from the beginning. As Mohammad did not keep appropriate records I am not prepared to infer in his favour, that the Trust was conceding any beneficial interest in the Oporto property to him in exchange for his advances to its mortgagees.

The 2011 proceedings - Mohammad's and Amir's wilful breaches of trust

142 In the 2011 proceedings Karami alleges seven wilful breaches of trust against Mohammad and Amir. Pursuant to the Court's directions to bring specificity into Karami's Statement of Claim, Karami alleged those seven breaches of trust in the form of particulars supplied before trial. Her case against Abbas in relation to these alleges breaches was not separately articulated, and may need to be the subject of further submissions in light of the Court's findings Her case was limited to those seven breaches, so it could be presented and answered within a reasonable period at trial.

(a) Particular 1 - the refinancing of the Oporto property

(b) Particular 2 - The invoices created by Mohammad

(c) Particular 3 - The January 2007 refinancing

(d) Particular 4 - The intermingling of trust moneys

(e) Particular 5 - The sale of Unit 8 in September 2008

(f) Particular 6 - The sale of Unit 4 in June 2009

(g) Particular 7 - The Iran money transfers

143 The timing of these events is important to Mohammad's limitation defence. Particulars of these alleged breaches of trust were provided pursuant to Court direction on 2 March 2012 in respect of particulars 1 - 6. Particular 7, the allegation in respect of the Iran money transfers, was supplied 6 days later on 8 March 2012. Mohammad pleads in his Limitation Act 1969 s 48 defence that he can only be liable for breaches of trust occurring within the last 6 years. Limitation Act 1969 s 48 provides as follows:

48 Breach of trust

An action on a cause of action in respect of a breach of trust is not maintainable if brought after the expiration of the only or later to expire of such of the following periods of limitation as are applicable:

(a) a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims, and

(b) the limitation period for the cause of action fixed by or under any provision of this Act other than this section.

144 The parties are at issue from when the limitation period should run. Mohammad's case is that it should be counted back from the date when the particulars were served in March 2012. Karami says that it should date back six years from the filing of her original Statement of Claim in June 2011. That issue is in part dependant of the content of the original Summons and the supporting evidence in the 2011 proceedings.

145 It is not possible merely to select a limitation period on either 2 or 8 March 2006 in these proceedings. The content of the original Summons and its supporting evidence show that the breach of trust allegations were then raised, at least in general terms, and should in my view date back to June 2005. The only allegations of breach of trust, which are statute barred, are particular 2 - claims founded on invoices submitted prior to June 2005 (but in my view there were no invoices in this category), and particular 7 - the allegations relating to payment made to Iran, prior to June 2005. These particulars do not constitute a substantial part of Karami's claim.

146 But in my view Mohammad's limitation defence is effective in relation to breaches of trust prior to June 2005. As Brereton J explained in Metropolitan Petar v Mitreski [2012] NSWSC 16 at [118] - [121], in the absence of any allegation of concealment of breach of trust, Limitation Act 1969 s 48 is a complete answer to an allegation of accidental and wilful breach of trust.

147 Karami's allegations against Mohammad and Amir in the 2011 proceedings are serious. Each one of the particulars of breach would amount to a wilful breach of trust involving the diversion of trust money for their personal benefit. The Court must be comfortably satisfied to the requisite standard that any charges of breach of trust have been made out: Briginshaw v Briginshaw (1938) 60 CLR 336.

148 The Court is comfortably satisfied that Mohammad consciously engaged in deceitful and improper conduct in this case. He took issue with all seven allegations of breach of trust. But Karami has made each of them out. As the Court's reasons in this section show, it is important in analysing Mohammad's conduct, not just to look at each particular separately but to look at the pattern of conduct which the particulars demonstrate as a whole on Mohammad's part. What can be seen from this higher level analysis is that in several different areas of trust activity Mohammad has taken deliberate steps either to benefit himself at the expense of the Trust, or at critical times not to explain to other family members, who were entitled to an explanation, what he was doing with Trust moneys. His long-standing failure to give an account of his management of Trust funds to other family members is not consistent with the conduct of an honest trustee. This has important implications for the defence that he raises that he has acted honestly and reasonably at all times.

149 Amir was involved too in most, but not all, of Mohammad's breaches of trust. He too took issue with the allegations and his conduct is analysed along with Mohammad's in respect of each breach.

Particular 1 - The refinancing of the Oporto property

150 Mohammad and Amir organised the refinancing of the Oporto property with Bankwest on 31 October 2005. Karami contends this refinancing transaction was a breach of trust. Amir and Mohammad have always held the Oporto property in their own names and claimed both legal and beneficial ownership of it. But Mohammad now says (with Karami) the Oporto property is property of the Trust. Amir nevertheless maintains his contention that it is his and Mohammad's property, and not Trust property.

151 For reasons discussed earlier, the Oporto property was property of the Trust, before its sale. Further inquiry may be necessary to ascertain whether Mohammad and Amir held a proportion of the Oporto property beneficially. But it is sufficient to assume for present analysis that Mohammad and Amir may have held some of that property beneficially.

152 Karami has made out her breach of trust case on this first transaction. By the October 2005 refinancing the Trust's funds were applied to pay out pre-existing personal indebtedness of Mohammad and Amir to Suncorp-Metway. Prior to 31 October 2005 Amir and Mohammad had borrowed funds from Suncorp-Metway Limited to finance the Oporto property. Suncorp-Metway secured its advances by a mortgage over the Oporto property. Part of Mohammad and Amir's obligations upon this mortgage were personal liabilities to Suncorp-Metway. On 31 October 2005 Trading, as trustee of the Trust, established three loan facilities with Bankwest, borrowing total funds of $1,263,000, from which Trading applied $946,099.04 to pay out the Suncorp-Metway mortgage over the Oporto property. Thus Trading had incurred a liability to fund the Trust as to this amount of $1,263,000. And Trust funds in the amount of $946,099.04 out of this fund raising were applied to pay out Mohammad and Amir's indebtedness over the Oporto property. This was a misapplication of trust funds in the amount of $946,099.04.

153 Mohammad and Amir held the Oporto property on constructive trust for the Trust, which was being legitimately refinanced by the application of trust funds, namely some part of the $946,099.04. But the onus is on Amir and Mohammad, who have mixed trust funds with their own funds, to establish the extent to which they have correctly applied Trust funds for Trust purposes. The Court will direct further inquiry as to this should it be necessary.

154 Mohammad concedes that of the $1,263,000 Trading acting as trustee of the Trust borrowed from Bankwest on 31 October 2005, a sum of $179,572.57 (in addition to the application of the $946,099.04) was applied for his own use. Mohammad seems to concede that the application of these funds was a breach of trust.

155 I find that both the $946,099.04 and the $179,572.57 were applied in breach of trust. As with many of the other transactions considered subsequently, this refinancing transaction had the feature that it was not supported by any Trust resolutions, was not expressly explained or justified at the time as being for the benefit of the Trust and did not result in an investment which could be readily recovered by the Trust. To an extent Mohammad's concession that the Oporto property was Trust property alleviates the seriousness of the allegations of breach of trust against him.

156 But Mohammad knew at the time of the proceedings that the Oporto property was heavily mortgaged and likely to be repossessed. To concede that it was Trust property at the hearing did him little harm.

157 Mohammad's own evidence was that until his lawyers informed him that the Trust could not be treated as his own property, he regarded the Trust property as indistinguishable from property that he held beneficially. Until his lawyers recently informed him about the meaning of the trust instrument, in my view he had in fact treated the Oporto property as his own and did so in October 2005 when he arranged this refinancing. But he did always know Trust property had been used to fund the acquisition and conservation of the Oporto property, as in my view did Amir.

158 Mohammad's defence in relation to the amount of $179,572.57 is unpersuasive. Mohammad says that this amount was applied in three directions: discharging liabilities of the motel business, providing a loan to Mojtaba, a Trust object, and in making distributions to another beneficiary and Mohammad himself. But none of these explanations bears close examination.

159 There are no records of motel expenses that have been discharged. I am not prepared to infer on the basis of Mohammad's oral evidence alone, without documentary support, that any part of the $179,572.57 was applied to meeting such expenses.

160 And Mohammad says that the lack of formal resolutions and records to justify the trustees' exercise of its discretion to make distributions to himself is "not ideal" but does not in itself establish a breach of trust.

161 Mohammad's submission as to this is partly right. If Mohammad was making distributions to himself, the absence of records may not be sufficient on its own to infer a breach of trust in relation to his application of funds. The absence may merely demonstrate a breach of an obligation to keep proper records. But I do not accept Mohammad's and Amir's uncorroborated evidence that this was a distribution from the Trust. The facts are equally consistent with Mohammad misapplying Trust funds for his own benefit. And I am not prepared to infer, if there was a distribution from the Trust, that it was a result of proper exercise by Trading of its discretion as a trustee to make Trust distributions. That is an improbable scenario. Prior to 2012 Mohammad thought that he could use the Trust as his own. He is therefore unlikely to have directed Trading to use its trustee's discretion properly under the Trust Deed to make such distributions. One purpose of such distributions would be to keep his entitlements separate from the assets that were potentially distributable to other family members. And Amir was equally involved in this breach of trust.

Particular 2 - The invoices Mohammad created

162 Mohammed created and claimed that he rendered to Trading from 1 July 2005 to 1 July 2010 tax invoices totalling $906,900 for what the invoices describe as "Management/Consulting and Advisory Services". The services the subject of these invoices were said to have been provided between October 2004 and June 2010.

163 If these tax invoices were in respect of consulting services actually rendered pursuant to an agreement for provision of such services, negotiated by someone on behalf of the Trust and recorded in its books of account, and minuted in its business records, then there might be some proper basis to treat these as legitimate liabilities of the trust.

164 But the usual features of services actually rendered to the Trust in the ordinary course of business were absent here. In my view Mohammad created the tax invoices either at the one time, or within a short period of time, for the purposes of justifying after the event, the transferring of funds in excess of $600,000 from the Trust to the company he controlled Holdings. These tax invoices show many indicia of having been created at one time and not being related to any genuine service provided by Mohammad to the Trust. And I do not treat them as evidence of the market value of and any genuine calculation of the hours of any service actually rendered to the Trust. Mohammad probably did render some services to the Trust. But no genuine attempt has ever been made to quantify the amount (in hours or days) of those services or their proper market value. Amir was not involved in any of this activity.

165 There are many reasons for drawing this conclusion. First, Mohammad himself said that these invoices have been created for the purpose of their being "a defensive mechanism", in the event of potential winding up of Trading. That was correct. But the problem is that was all they were. I do not accept that Mohammad carefully maintained work diaries and founded his invoices upon them as a "defensive" strategy, over a five-year period between 1 July 2005 and 1 June 2010. To create invoices for a period of over five years purely for defensive purposes assumes a degree of careful planning towards Trading's potential insolvency that, in my view, was not in Mohammad's nature. Nor in my view is it a likely scenario. It is doubtful that Mohammad would have anticipated the potential insolvency of Trading constantly for the five-year period that he would have created those invoices over that whole time. It is far more likely in my view that he created the invoices all at once or within a short period of time, and well after those services were allegedly rendered.

166 Secondly, the tax invoices contain much internal evidence of their being created at the one time, and created without reference to diaries or other materials that showed actual hours of work that Mohammad performed. The figures in the invoices are rounded to standard daily amounts and standard daily and weekly hours. Over the whole five-year period there is little or no market-based increase in the amounts charged, which would be expected if the invoices were genuine. Invoices created and sent over time usually reflect increases in labour and materials costs and can be grounded on calculations out of actual diaries.

167 Thirdly, the invoices do not make any provision for the payment of GST. Were they genuine invoices issued in relation to a genuine business transaction between Holdings and the Trust, GST would have been included. I accept Mr Russell's evidence that he believes that GST would have been payable in respect of those services had they been provided by Holdings to the Trust. The invoices wrongly include a notation that the transaction is input taxed, thereby placing the Trust at risk of incurring both tax liabilities and penalties for non-compliance with applicable GST legislation. Nor had either Holdings or Mohammad made any provision for the income from these invoices in their own tax returns.

168 Fourthly, Mohammad's evidence that these invoices were a kind of "defensive mechanism" seems designed to give the impression that the invoices were not used to justify the payment of money from the Trust to Holdings or to Mohammad. But this is not correct. Mr Russell's analysis shows that Mohammad must have caused Trading to pay very substantial funds from Trading to Holdings, which the evidence shows were justified at the time as being in the nature of consultancy fees. I accept Mr Russell's evidence that between 2 July 2007 and 18 May 2009, the period that Mohammad was in sole de facto control of the motel business, after Amir's departure, that the total sum of $588,500 was transferred out of Trading's St George account 649 to either Holdings or Motels.

169 These sums paid out totalling $588,500 were described either as "Management/Consulting and Advisory Services" or some derivation of that description. And in the accounts of the two payees, Holdings and Motels, they were described as "Management Agreements" payments. Thus on both sides of the transaction the payments are classified as consultancy fees. There is no doubt that the entries for these payments were made contemporaneously in the banking records of these two payees. But they were made in my view at a time that Mohammad realised he would need to create invoices of this character.

170 Mr Russell also identified the payment of other amounts totalling at least $84,800, which in his opinion may have some relation to these invoices. Mr Russell's analysis was not able to determine with great precision whether these additional amounts were related to the tax invoices. In my view nothing in Mohammad's evidence makes this clear either. These sums, that Mr Russell had difficulty in classifying, show another problem with the invoices. Some of these amounts totalling $84,800 may well be related to the provision of invoiced management or consultancy services. But it is not possible to reconcile the invoices with any of these amounts or with any of the other individual payments, because the payments made for "Management/Consultancy Services" do not appear to be for the payment of particular invoices. Nor do they reconcile with particular invoiced amounts. Had the invoices been issued and paid progressively over time some degree of reconciliation between invoiced amounts and actual payment amounts would be likely. The fact that such reconciliation cannot be done is a strong indicator in my view that the invoices were all created at once, or within a short time.

171 Mohammad gives a number of answers to the challenge to the invoices. He says that many of the allegations about the tax invoices being in breach of trust are statute barred. But that is not correct. As the Court's reasoning shows elsewhere. Claims about invoices are only statute barred before June 2005. Most of the invoices were issued after that date. And Mohammad's case that there is no evidence that these invoices were produced to Trading for payment as they were a "defensive mechanism" has a curious twist. I accept this part of Mohammad's submission that the invoices were not in fact presented for payment. They were not part of any genuine chronological invoicing system for management fees. But the creation of invoices, even defensively, shows preparedness on Mohammad's part to construct artificial documents to protect his financial interest, whether or not he actually issued them to Trading. And advancing this explanation in the proceedings Mohammad admits in my view that the money received into Motels' and Holdings' accounts, described as "Management/Consulting and Advisory Services", cannot be contemporaneously justified from the Trust's records as distributions from the Trust to Mohammad.

172 The tax invoices are also inconsistent with an innocent omission to create proper accounts within Trading. I infer from the creation of tax invoices that bore no relationship to actual payments made, or to actual hours worked by Mohammad, or to actual services supplied by Motels or Holdings to Trading, that Mohammad well knew that he was not able to show what services he or those companies had provided in the relevant period to the Trust. If his mind was innocent and he had not deliberately applied trust moneys under colour of Management/Consulting fees when indeed they could not be so justified, he should have been able to reconstruct from diaries the precise work he did that can be reconciled through invoices with actual payments made. The course he took shows he could not do this. I infer he was conscious that the payment of these funds by Trading to these entities could not legitimately be justified as Management/Consulting fees.

173 The conclusion I therefore draw from the circumstances of the creation of the invoices is that Mohammad made payments in the amount of at least $588,500 between 2 July 2007 and 18 May 2009, which payments are not supported by any proper accounting records authorising their payment to Holdings and Motels, and which amounts Mohammad knew could not be justified as legitimate payments. Mohammad may well have rendered some services to the Trust during this period but it is up to him to justify what those services were. The Court has no reasonable basis on which to infer what the services were. Mohammad himself disclaims the use of the invoices as a base for calculating these services, because he says they were never rendered to the Trust.

174 The creation of the invoices was not itself a wilful breach of trust. But their creation supports the conclusion that the Court draws that the amounts of $588,500 and $84,800 paid from the Trust between 2 July 2007 and 18 May 2009 were payments in breach of Trust.

Particular 3 - The January 2007 refinancing

175 The Oporto property was refinanced again in January 2007. The first refinancing on 31 October 2005 is the subject of particular 1 above. Karami alleges that the January 2007 refinancing was a further breach of trust.

176 Amir and Mohammad initiated the January 2007 refinancing with Citibank, to pay out the Bankwest October 2005 mortgage security over the Oporto property. In the January 2007 transaction Trading as trustee of the Trust borrowed the total sum of $1,650,000 pursuant to two loan facilities it established with Citigroup Pty Ltd.

177 Of the total sum of $1,650,000 some $1,440,814.05 was applied to discharge Bankwest's mortgage security over the Oporto property. Part of both of the underlying facilities constituting the borrowing of $1,650,000 (respectively of $1,226,000 and $424,000) was applied to the Bankwest facility.

178 Mohammad gave the instructions for these transactions to Paffas Lawyers, who acted for the Trust. They in turn on 12 January 2007 instructed Heidtman and Co, acting for Citibank to pay the $1,440,814 to Bankwest. Amir was still actively involved in Trading's affairs for the January 2007 refinancing transaction. It occurred just before his final rift with Mohammad. He took part in executing of the various securities that support the transaction. The $1,650,000 facility was secured to Citibank by each of Trading, Mohammad and Amir giving guarantees, by Trading executing a first ranked fixed and floating charge over its assets, and by Mohammad and Amir giving a mortgage over the Oporto property, which still remained in their names. Despite that further refinancing using Trust assets, the evidence does not disclose Mohammad or Amir made any attempt to transfer the Oporto property into the Trust.

179 But in addition to this $1,650,000 refinancing of the Oporto property's Bankwest mortgage Mohammad and Amir used Trading's assets to secure two other loan transactions with Citigroup in January 2007: the first being a loan for $687,100, and the second being a loan for $548,000.

180 In the second January 2007 transaction, Trading borrowed $687,100 from Citigroup secured by Trading giving a mortgage over the Trust's Unit 5 and by Mohammad and Amir mortgaging the Marsfield property. Of the $687,100 that Citigroup advanced, Trading applied some $323,000 to discharge a personal loan in Mohammad's and Amir's names, which they had taken out in June 2005 secured over the Marsfield property. Like the first January 2007 transaction, this $687,100 loan transaction involved Mohammad and Amir mixing their own funds with Trust funds and applying or encumbering Trust assets for their own advantage.

181 The third January 2007 loan with Citigroup was in Mohammad and Amir's names but involved the use of Trust assets. Mohammad and Amir borrowed $548,000 from Citigroup, secured by a mortgage they gave over the Marsfield property, which was still in their names. Trading provided security to support this transaction through its guarantee, and it also gave a first ranking fixed and floating charge over its assets. Mohammad's and Amir's contentions that they own the Marsfield property legally and beneficially separately from the Trust, can be put to one side for the moment. Even if their contentions are correct, without justification they were using Trading's trust assets for their own private advantage to support the guarantee and under the fixed and floating charge to Citigroup. This too represents an intermingling of Trust's funds with Mohammad's and Amir's own funds. Again, it shows Mohammad and Amir turning the Trust's income and assets to account for their own benefit.

182 None of these three January 2007 transactions would be possible but for the fact that Trading was expected to continue to run the motel profitably. The earnings of the motel business, and Trading's trust assets base, were the reason Trading could apply for the refinancing. Moreover, Trading's earnings stream was in fact used to meet Trading's obligations to Citigroup under these various January 2007 mortgages.

183 Both Mohammad and Amir's defence of the January 2007 refinancing is spare and unpersuasive. The transactions were plainly for their financial benefit. Were it otherwise it may be expected that the use of the Trust's assets would be properly explained in the Trust's records or by some arms length arrangement between Amir and Mohammad on the one hand and the Trust on the other, for payment of some consideration to the Trust for the use of its assets in this way. No such arrangement was made.

184 This transaction involved in my view a simple misapplication of Trust funds on three occasions in January 2007 amounting to a very substantial total sum: $1,764,000 ($1,440,814.05 +$323,185.95). At the same time a further $548,000 of Trust assets were placed at risk by Trading's guarantees.

Particular 4 - Intermingling of Trust Unit 17 related funds

185 In the fourth transaction Karami alleges the intermingling of trust funds with other funds in relation to Unit 17, Roslyn Gardens. Mohammad conceded that there was intermingling of trust moneys with other funds in relation to Unit 17 but says: that he is not guilty of any conscious wrongdoing in relation to that intermingling; that he did not take the benefit of it; but that there was intermingling with moneys of various members of the Ashrafinia family. Assessing Mohammad's relevant state of mind requires more detailed analysis of the refinancing transaction concerning Unit 17.

186 Mohammad and Amir had originally purchased Unit 17 at Roslyn Gardens in their own names in 2000, partly using funds from Perpetual Trustees Victoria. Unit 17 was refinanced on three occasions, the last of which with Bankwest is of present relevance. On 23 May 2005 Trading, Mohammad and Amir borrowed $352,000 from Bankwest. That loan advance was applied to discharge Mohammad and Amir's existing personal indebtedness to Perpetual Trustees Victoria.

187 But in addition to the May 2005 borrowing transaction, the making of mortgage instalments led to further intermingling of funds. The trust paid all the mortgage instalments in satisfaction of the mortgages over Unit 17: both the Bankwest mortgage arranged in May 2005, and the Perpetual Trustees Victoria mortgage that the Bankwest mortgage discharged. Both Mohammad and Amir contend that they always owned Unit 17 legally and beneficially. Assuming the correctness of this position, that means that between approximately 2003 when the Perpetual Trustees Victoria mortgage was taken out over Unit 17, through until 2006 when Unit 17 was finally sold, Trust moneys were used to discharge Mohammad and Amir's personal indebtedness. Prior to May 2005 the periodic mortgage payments were not discharging any liability of the Trust but were entirely discharging Mohammad and Amir's liabilities to Perpetual Trustees Victoria. The periodic mortgage payments made after May 2005 were discharging what was at least nominally a liability of Trading. But the real issue with the Bankwest loan is whether Trading should have been incurring a liability at all to Bankwest for the apparent sole purpose of discharging Amir and Mohammad's liabilities.

188 Karami contends that: (1) Trading's mortgage payments between 2003 and 2005 to Perpetual Trustees Victoria; (2) the incurring of Trading's liability to Bankwest to discharge the Perpetual Trustees Victoria mortgage in May 2005; and (3) Trading's payments to discharge the Bankwest mortgage between May 2005 and April 2006, were all wilful breaches of trust. Only the last of these is within the limitation period.

189 Mohammad denies conscious wrongdoing in any of these transactions. He points to the results of the transactions, contending that not only he but also Azadeh and Amir benefited from these transactions and thus it is more likely that the intermingling was accidental rather than intentional conduct on his part. But there are problems with this explanation. There is no evidence that the making of Unit 17 mortgage payments or the refinancing in May 2005 involved Azadeh receiving funds, or that Azadeh benefited indirectly in any way from those transactions, or that indeed she was aware of them at the time.

190 Amir undoubtedly benefited from these transactions and I find that he was aware of them at the time. Mohammad orchestrated the transactions because they suited him. There is no evidence of him consulting with Amir about these transactions other than to procure Amir's signature on the documents for the Bankwest mortgage in May 2005. But Amir was in a general sense aware that Mohammad was taking care of the mortgage payments on Unit 17 and was aware of the purpose of those transactions.

191 Finally, Mohammad did not record any of the Unit 17 mortgage payments for the May 2005 refinancing in the records. If Mohammad thought he was undertaking a legitimate transaction in Trust affairs and for the benefit of the Trust, rather than for his own and Amir's benefit, it might be expected that he would record the transaction in a proper way among the Trust's records. Neither he nor Amir did that. I infer form the absence of the documents and the absence of an adequate explanation for their absence, that Mohammad and Amir were conscious that the transactions were not for the benefit of the trust.

Particular 5 - The sale of Unit 8 in September 2008

192 The fifth transaction concerns the alleged misapplication of trust funds arising from the sale of Unit 8 Roslyn Gardens in September 2008. Karami's contention is that when the Trust sold this property which it held in its name, approximately 50% of the proceeds of the sale, namely $140,000, were misapplied, being paid to Mohammad's wife Caitlin, rather than back to the Trust. Both Mohammad and Caitlin concede they received the proceeds of sale of Unit 8 and they concede that it was the Trust's property. But their explanation for the transaction is in contest. To understand Karami's contentions and Mohammad's answers about the proceeds of sale of Unit 8 more detail about the fifth transaction is required. Only Mohammad was involved in this transaction.

193 Mohammad gave instruction to Paffas Lawyers on behalf of Trading to act on the sale of Unit 8. He also gave instruction on behalf of Trading for the distribution of the proceeds of sale of the unit. Upon settlement Paffas Lawyers reported to Mohammad that the net proceeds of sale they have received on settlement were distributed as to $140,000 to Caitlin and as to $111,662.97 to Trading. There is no issue that these sums were received respectively by Caitlin and by the trust.

194 Although at the time of the fifth transaction Amir and Mohammad were directors of Trading, Amir says that Mohammad arranged for Trading to sell Unit 8 entirely on his own and without any authorisation from Amir. I accept Amir's account that he was not involved in the sale of Unit 8. Relations between himself and Mohammad at that stage were poor. It is highly unlikely, in my view, that Amir would have authorised the application of $140,000 from the sale of Unit 8 to Mohammad's wife if he had known about the transaction. There is no Trust resolution or other Trust record evidencing Amir's consent to the distribution of these funds to Caitlin. Nor is there any correspondence between Mohammad and Amir evidencing Amir's support for the transaction. And Mohammad and Caitlin's various explanations for the funds being transferred to her do not involve conversations with Amir.

195 This was a period when Mohammed had sole de facto control of the Trust, after Amir's September 2007 exit from involvement in managing the motels business. Trading could not act without the proper authorisation of its board. If Amir's contention is correct and Trading did not then have the required two directors, it was incapable of authorising the application of the proceeds of the sale of Unit 8 to Caitlin. As I have found elsewhere above Trading only had one active director at this time. None of its actions after September 2007, including this one, were authorised by valid resolution

196 Caitlin was not a beneficiary of the trust. Prima facie the payment of trust funds to her requires explanation. After conceding Caitlin received these moneys, Mohammad explains these payments a number of ways. His explanation changed over time. Initially Mohammad said that in November 2007, prior to the sale and settlement of Unit 8 in September 2008, Trading had borrowed $140,000 from Caitlin for the trust to on-lend to two other parties: $80,000 to Moji Pty Ltd and $60,000 to Mohammad. And Mohammad further says that at Trading's direction he subdivided the $60,000 he received personally and he advanced a further $23,000 to Moji Pty Ltd. Thus indirectly Moji Pty Ltd had received a $103,000 of these Unit 8 funds. That was the account Mohammad gave well before trial in May 2011.

197 But just before the trial Mohammad's evidence changed. In an affidavit filed in May 2012 Mohammad explained that in November 2007 Caitlin had drawn a cheque for $80,000 to Moji Pty Ltd which was intended at the time to be a loan to the Trust, which the Trust intended to on-lend to Moji Pty Ltd. Then Mohammad says that Caitlin lent another $100,000 to the Trust in mid 2008, out of which the Trust on lent another $90,000 to Moji Pty Ltd. Instead, Caitlin was paying the funds directly to Moji Pty Ltd. In his May 2012 affidavit Mohammed also proffered a different explanation for the $23,000 he had paid to Moji Pty Ltd. His 2012 explanation was that Moji Pty Ltd had previously borrowed this sum of $23,000 from the trust.

198 So in Mohammad's 2012 version, Caitlin is said to have lent $180,000 (not $140,000 as he previously asserted) to the Trust in November 2007 and in mid 2008.

199 Thus in relation to this transaction Mohammad has asked the Court to find that Caitlin had lent either $140,000 in November 2007 to on lend $80,000 to Moji (and at the same time an additional $23,000 was remitted to Moji via Mohammad), or that the trust borrowed $180,000 from Caitlin and remitted $90,000 to Moji Pty Ltd.

200 Mohammad's May 2012 version is supported by the evidence from his wife Caitlin. But her evidence, like his, is oral and is unsupported by the necessary documents to show that any loan advances had been made to the Trust in the first place, that were being repaid. But I do not accept their evidence. If the transaction was as they say, one would expect there to be documents evidencing Caitlin's loans to the trust. If the transaction was a regular one there is no reason why documents evidencing Caitlin's advances to the trust would not have been properly documented. These are all business records and would ordinarily be kept for accounting and taxation purposes. Moreover, if the transactions were as stated in May 2012 it could be expected that they would not have to be explained by the two quite different accounts of them that Mohammad gave, in one case a year out from the trial, and in the other case just before trial.

201 I do not accept either Mohammad's or Caitlin's account of their dealings with the sale proceeds of Unit 8 Roslyn Gardens as being payments in satisfaction of the Trust's existing obligations to Caitlin. This means that these payments to Mohammad and Caitlin were unauthorised applications of the Trust's funds and not in satisfaction of trust liabilities.

Particular 6 - The sale of Unit 4 in June 2009

202 The sixth transaction, the sale of Unit 4 Roslyn Gardens in June 2009 follows a similar pattern to the fifth transaction: the distribution to Mohammad of the proceeds of sale of a Trust property, whilst he was in control of Trading and without proper authorisation. It is not in contention that Mohammad received $59,678.44 from the net proceeds of sale of Unit 4. As with transaction five, the question is whether or not Mohammad received that sum in satisfaction of a liability of the Trust to Mohammad.

203 On 2 July 2009 Trading as trustee of the Trust settled its sale of Unit 4 for $370,000 and distributed the sum of $59,678.44 to Mohammad. Messrs Brown Wright Stein, the solicitors acting for Mohammad at the trial, also acted on this conveyancing truncation.

204 The Brown Wright Stein 3 July 2009 report on settlement records that Mohammad collected the balance of the sale proceeds of $59,678.44 by cheque from their office on 2 July.

205 Mohammad's explanation for this transaction is unpersuasive. It has many of the internal inconsistencies of transaction five. Amir had no involvement in this transaction. I am not prepared to accept Mohammad's evidence about it. Mohammad was uncertain as to the detail of this transaction: he initially said he had received not $59,678.44 but $88,989.69. There is indeed evidentiary support in the contemporaneous documents for him having received the larger sum. Moreover Mohammad could not readily reconcile either of these figures with moneys that the Trust owed Caitlin, other than in most general sense. And there are no internal Trust minutes or accounts that would support the application of these funds to satisfy any of the Trust's existing liabilities to Caitlin or to Mohammad.

206 In the sixth transaction I conclude that Mohammad misapplied $59,678.44 of the Trust's funds by paying this sum to himself without proper authorisation.

Particular 7 - The Iran money transfers

207 Between 2001 and 2007 but principally after November 2004, Mohammad regularly transferred funds from the trust overseas to Iran. The Court expert, Mr Russell, identified overseas transfers during this period totalling $439,350.18. Mr Russell found these transfers were taken out of the St George account operated by the motel business.

208 Karami contends that Trading did not authorise those Iran transfers and that they hazarded the Trust's property. Mohammad's case is that the funds were applied for the Trust's purposes in Iran and were so applied at the direction of Abbas.

209 The Iran transfers could not be defended as authorised transactions of the Trust. But Mohammad's attempts to defend them had two unfortunate consequences for his case. First, his defence, particularly his defence of these transaction under cross-examination, showed his lack of comprehension of his duties as director of a company such as Trading acting as a trustee. Secondly, his attitude to these transaction over such a long period assists the inference against him that other transactions occurring at the same time occurred with equal disregard for the separating out of his own interests from those of trust beneficiaries. As a result of my findings in this section an enquiry may be needed to give an account of dealing with the Trust's funds transmitted to Iran.

210 None of these transfers to Iran were authorised. There is no Trust record of the trust resolving to invest any of these monies in property in Iran or to explain the purpose of such an investment. This was compounded by Mohammad's inability to give any satisfactory explanation of the purpose or destination of any of these investments. His evidence was notable for his unsatisfactory account of the destination, use, and return of any of these funds. Although he did acknowledge the funds transferred were Trust funds and that he was responsible for their transfer to Iran.

211 To safeguard trust funds the Trust Deed creates a mechanism for the appointment in writing of a new trustee in any place outside Australia where trust funds are invested: Trust Deed cl 24. Mohammad did not ensure that a clause 24 trustee was appointed in Iran. There is no evidence that he made any efforts to appoint such a trustee, or that he was even conscious that he should ensure that a trustee was appointed in Iran responsible to Trading here in Australia.

212 Amir did not authorise any investments in Iran. He says, and I accept, that he first became aware of the transfer of funds to Iran only in 2006 and that all the transfers prior to that date had occurred without his authority. I accept that he was unaware of any of the earlier transfers. There is no email communication or other correspondence between Amir and Mohammad about the Iran transfers before they occurred. The absence of any record of the Trust recording a joint resolution of the directors of Trading, Amir and Mohammad, further supports the inference drawn here, that Mohammad was acting alone in the making of these funds transfers to Iran.

213 Such little evidence as there is from Mohammad about the destination of the funds in Iran suggests that they were invested in speculative property developments or land transactions that did not involve the giving of first mortgage security. Mohammad did not suggest that the Investments in Iran were trustee quality investments.

214 But Mohammad had really lost control of the money in Iran. Much of his evidence about it is to the effect that he was acting at Abbas' direction in transferring and applying the funds in Iran. Mohammad says that the majority of the transfers were made to Abbas in Iran or at his direction, for example for renovating the factory. This part of Mohammad's evidence I do accept. It was supported by Amir's account. Amir said that he understood, when he became aware of these transfers, that money was being sent over to Iran for Abbas. But Abbas had not been appointed a trustee in Iran of the Trust. Nor was Abbas informing Mohammad about what was happening to the moneys. Some of them were being applied to building an apartment complex in Esfahan. According to Mohammad, Abbas showed him the apartments in the Esfahan apartment development, where some of the funds were said to be invested. But after completion of the apartments Mohammad could not give a satisfactory account of him having control over any of the apartments, or their sale proceeds.

215 Some of the payments to Iran were not for investment purposes at all. A number of payments were made to Iran apparently for the purchase of furniture, blankets, towels and other equipment for the motel business. But much of this money seems to be retained by Abbas without him providing the promised goods. It can be accepted that whilst the motel business was trading within Trading actively that Trust funds may legitimately be used to acquire consumable items and accessories for the operation of that business. But to the extend that funds remitted to Iran were said to be on account of such purchases there are no invoices identifying the purchases, no supply contracts and no evidence that any such items were received for the business in exchange for funds so paid. At best, in my view, these purchases were an inadequate excuse for Abbas to retain the funds himself.

216 I infer that the Iran funds transfers were deliberate and wilful breaches of trust of which both Abbas and Mohammad were aware. I draw this conclusion for two general reasons. First, Mohammad's explanations of the Iran transfers are not credible, and in most cases are entirely unsupported by objective documentary evidence. To advance such explanations with so little support gives the Court no present confidence that Mohammad is being candid with the Court about any of these transactions.

Other Trust Assets - Chilli Blue Backpackers

217 Apart from the Marsfield property, Unit 17 and the Oporto property the parties contested whether the Chilli Blue Backpackers ("Chilli Blue") business and the food business Azadeh runs though Parvaneh were Trust assets. Mohammad's claim that the food business was a Trust asset is dealt in the next section of these reasons. This section deals with Karami's claim that the Chilli Blue Backpackers business is a Trust asset. Mohammad and Caitlin acquired the Chilli Blue Backpackers hostel business. The evidence is not clear whether they operate this business through a corporate entity. But there is sufficient objective evidence to warrant an imposition of an equitable charge over the business and the Property on the Trust's behalf to secure the repayment to the Trust of funds Mohammad advanced to the company.

218 Mr Russell has identified the transfer of Trust funds to Chilli Blue. His analysis shows that in the ten months between 18 December 2007 and 8 October 2008 several payments were made from the St George account 649 to Chilli Blue. Mohammad had sole control over St George account 649 during this period. And was responsible for these transfers which are described in St George account 649 in various ways that connect the payments to Chilli Blue for example: "assistance to Chilli Blue", "Chilli assist" or "Chilli assistance". The payments during this period total $36,500. Neither Mohammad nor Caitlin conceded that they held their interest in Chilli Blue on behalf of the Trust. Thus prima facie Mohammad has applied Trust assets for his own and Caitlin's benefit.

219 Trading did not pass resolutions to authorise these payments in accordance with Trust Deed cl. 19. There is no other record of nature of these transactions, which seem only to have been possible because of Mohammad's control over St George account 649.

220 But if relief is to be sought in respect of Chilli Blue any relevant corporate entity may need to be joined as a party to these proceedings. But in the meantime Mohammad may be restrained in relation to his dealings with the Chilli Blue business. But there is a potential for a wider enquiry in relation to Chilli Blue. Mohammad and Caitlin appear to have mixed its operating business with the affairs of Trading. Chilli Blue's business was operated out of Trading's bank account. There is a basis for further enquiry as to what recoveries are available to the Trust as result of that mingling. Moreover Mohammad's application of Trust funds to Chilli Blue between December 2007 and October 2008 is a basis to order a wider enquiry as to other assistance Chilli Blue may have received from the Trust outside that period, including giving of any financial assistance to Mohammad and Chilli Blue for the acquisition of the business.

Amir's defence to the 2011 proceedings

221 Karami's case against both Mohammad and Amir in the 2011 proceedings is that they knowingly received funds within the first limb of Barnes v Addy (1874) LR 9 Ch App 244 at 251-2, or knowingly assisted in a dishonest and or fraudulent design by trustees within a second limb of Barnes v Addy.

222 Amir's defence is that Karami's claims under both limbs of Barnes v Addy must fail because Amir did not act dishonestly. Amir calls in aid of this defence Karami's evidence under cross-examination from Amir's Counsel Mr Sneddon. Karami was present in Court throughout the whole of the proceedings. She gave firm character evidence in Amir's favour. When asked a series of "Dorothy Dix" questions, whether her son Amir in relation to his dealings with the motel and the Trust "was in any way but honest", she said in reply "Amir, this is his character. Amir is not able to say anything untruthfully". And she further agreed that in all her allegations in Court documents in the proceedings that she does "not assert that [Amir] acted otherwise than honestly". Moreover she agreed in cross-examination that she does not "make any complaint at all" in relation to Amir's conduct "so far as what he did with the business or the trust".

223 These statements are at odds with Karami's pleading. Mr McGrath SC did not withdraw Karami's Barnes v Addy claim against Amir. Amir's honesty remained in issue. The Court must determine the claims before it.

224 Karami's evidence was given through a mother's eyes. She was clearly of the view that Amir was not working an would not work against her interests. And she could not conceive that he would ever act dishonestly against her. In my view, despite this evidence for the reasons that follow, Amir satisfies the knowledge requirement for knowing assistance on the second limb of Barnes v Addy.

225 The Australian formulation of the knowledge requirement for knowing assistance may be clearly stated after the High Court's decision in Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22, (2007) 230 CLR 89 at [160]-[164] ("Say-Dee"). In Say-Dee the Court observed that the High Court's decision in Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 is authority that the knowledge required to satisfy the second limb of Barnes v Addy is: (1) actual knowledge; or (2) wilfully shutting ones eyes to the obvious, or (3) wilfully and recklessly failing to make such enquiries as an honest and reasonable man would make, or (4) knowledge of circumstances which would indicate the facts to an honest and reasonable man. Amir has knowledge within category (4) sufficient to satisfy the requirements of knowing assistance.

226 Amir's knowledge problem is that by about 2003 his relationship with Mohammad began to unravel, he and Mohammad used funds other than for trust purposes. One of the issues causing the rift between Mohammad and Amir was Amir's awareness that Mohammad was using the Trust's funds for Mohammad's own purposes. But Amir assisted Mohammad to deal with the funds in that way by cooperating in the signing of documents to refinance the Oporto property. Amir strongly suspected by no later than 2003 that Mohammad was acting in his own interests, not the Trust's interests but gave active assistance to Mohammad nevertheless. But as these reasons show above Amir too was aware that nay of those transactions were for his own benefit. But when Amir knew that Mohammad was not acting in the Trust's interests from 2003, he had the power to stop Mohammad. But instead he assisted him further to encumber Trust assets and put them beyond the reach of Trading. Karami's evidence of her general belief in Amir's honesty is no answer to this.

227 But should Amir's breaches of trust be excused under Corporations Act 2001 s 1318? Amir advances two main arguments on his Corporations Act 2001 s 1318 defence. First Amir points to the circumstances in which he was placed: that with the knowledge of Karami the motel business had been informally run through the Trust and that with Karami's knowledge properties were being acquired in Amir's and Mohammad's names. Amir cited the observations of Young CJ in Eq in Cain v Cain (2007) 13 BPR 24,963 at [14] about the more relaxed approach the Courts should take to conflicts of interest for trustees in informal family situations:

[14] Where there is a family situation or a partnership and the parties nominate a particular member of the family as a trustee, then the court does not strictly apply the fiduciary obligations to avoid conflict that might otherwise happen: see Vyse v Foster (1874) LR 7 HL 318 and Hordern v Hordern [1910] AC 645; 10 SR (NSW) 677. The parties, by choosing to present with a conflict, must be taken to have acknowledged that that was not to be a disqualifying factor.

228 But Cain v Cain is relevant to whether or not a person should be automatically disqualified from a fiduciary or trustee position by reason of conflict of interest. That is not necessary a defence to a case misuse of fiduciary position.

229 Amir's second argument that he is not guilty of any moral turpitude. Corporations Act 2001 s 1318(1) provides as follows:

(1) If, in any civil proceeding against a person to whom this section applies for negligence, default, breach of trust or breach of duty in a capacity as such a person, it appears to the court before which the proceedings are taken that the person is or may be liable in respect of the negligence, default or breach but that the person has acted honestly and that, having regard to all the circumstances of the case, including those connected with the person's appointment, the person ought fairly to be excused for the negligence, default or breach, the court may relieve the person either wholly or partly from liability on such terms as the court thinks fit.

230 The leading authorities have taken a view that "honestly" in this section means "without moral turpitude" or "without deceit and moral impropriety": Buzzle Operations Pty Ltd (in liq) v Apple Computer Australia Pty Ltd (2011) 277 ALR 189 [2011] NSWCA 109 at [254], Commonwealth Bank of Australia v Friedrich (1991) 5 ACSR 115; Hall v Poolman (2007) 65 ACSR 123; [2007] NSWSC 1330.

231 Amir's conduct during the whole period 1996-2009 was not without moral turpitude, nor without conscious impropriety. Amir consciously and deliberately assisted his brother's dishonesty and as a result he has liability under the second limb of Barnes v Addy. And he was also knowingly involved in many but not all of the transactions above To that extent his culpability is less than Mohammad's.

Mohammad' defence to the 2011 proceedings

232 Mohammad pleads in his defence to the 2011 proceedings that he has acted honestly and reasonably at all times as a director of Trading and should be excused under Corporations Act 2001 s 1318 for any breaches of duty as a director or breaches of trust.

233 Mohammad makes a number of points to support his being excused under Corporations Act 2001 s 1318, some of which have more merit than others.

234 First I will deal with Mohammad's more persuasive arguments. Much of Mohammad's evidence about his conduct as director of Trading showed confusion about what a trust was, about what his role was, and about separating out Trust assets from his personal assets. For example, when the Court asked him to explain a contradiction in his evidence as to how it could be that he could say that trust property was held by the trust for his [Mohammad's] benefit, whereas a duty of a trustee holding assets is to hold them in accordance with the trust deed and administer them for the benefit of the beneficiaries, he said:

Up until about a year or so ago when my solicitors explained to me that this trust was a family trust, including them, I was under the assumption that this was a family trust for my family, meaning any wife and kids and any children that I had. I did not see this trust as an Ashrafinia family trust, I saw this trust as a trust that I could work for, that I could make it prosper and that I could leave something behind for my kids if I ever got married and had kids.

235 Mohammad is effectively saying that until "a year or so ago", that is in mid-2011, he regarded the Trust as able to be administered entirely for his benefit whatever the trust deed might say. When confronted with the logical consequences of this statement, which were that if he believed that the Trust was actually his, then he could probably take it over completely - he gave a technical reason for not doing that:

I thought that I was not allowed. My name is written in the deed as the primary beneficiary and it was my belief that I could not be the trustee of my own trust. One of my friends had explained it to me that you can't be your own trustee and if that happens then there is no trust.

236 As far as it goes, this explains why he did not abolish the trust. But he had difficulty in explaining how he dealt with the interests of other discretionary objects of the trust. It was pointed out to him that the Trust Deed did "include beneficiaries other than you and your immediate family in the sense of your own spouse and dependents". But this did not trouble Mohammad. At no stage until June 2011 did Mohammad regard these other beneficiaries as separate interests to be taken account. He thought that in exercising the trust powers he was always entitled to prefer himself. He explained that in this way "I thought that when it said 'primary beneficiary' and then it had my name on it, I thought that meant that the trust is for me and it is up to me, I decide who gets whatever, if anyone wants to get it is up to me":

237 This evidence was accurate. Mohammad did think that "the trust is for me" and that he was the one who decides "who gets whatever...its up to me". I find that until June 2011 he thought that the Trust could be dealt with as his own property, without regard to the interests of other family members.

238 It would not be surprising given that attitude that Mohammad would in fact treat the Trust's property as if it were his own, and without regard to the interests of other Ashrafinia family members other than Mohammad's own immediate family. In my view that is exactly what he did.

239 Mohammad (or Amir for that matter) never sought specialist legal and accounting advice. A trustee who seeks professional advice and follows that advice will often be excused even if the advice is wrong: Investa Properties Ltd v Westpac Property Funds Management Ltd (2001) 187 ALR 462 at [41]. Mohammad did not have specialist professional qualifications himself. His actions should not be measured against a counsel of perfection or a standard that may be exhibited by a professional trustee: National Trustees Co of Australasia Ltd v General Finance Co of Australasia Ltd [1905] AC 373 and Elders Trustee & Executor Co Ltd v Higgins (1963) 113 CLR 426 at [452].

240 Mohammad is an intelligent man. He came across as someone not lacking in insight as to the need for professional advice. He was able to manage the motel finances, showing considerable evidence of his overall financial and administrative capacity. He valued the legal advice that he was receiving by the time the proceedings had commenced. His wife has a doctorate. He was not someone who did not know where to get good advice.

241 Why did he not seek advice until June 2011? Mohammad advances a number of reasons. He asks for his background and eduction to be taken into account, as it can: In re Turner [1897] 1 Ch 536.

242 Mohammad's early family life and eduction were disturbed by events in Iran. He was initially schooled in Iran at the time of the Iranian revolution. He could not speak English before the age of 15. His secondary schooling took place across three countries and was conducted in two languages, English and Spanish. He commenced but did not complete tertiary studies, partly due to his health problems. He was further disadvantaged by his parents' bitter marital disputes. I accept that he was not educated to take over the motel business. But he did so at his father's request at a time when he was not well prepared for the role. I accept that domestic family circumstances were unstable due to the separation of his parents, and violent behaviour within the family. The consequences of those trouble times were evident to the Court in hearing many years later.

243 Once Mohammad took over the trust the pressures on him were both domestic and business related. I accept that as the eldest son of an Iranian family with a father absent from Australia Mohammad was looked upon as the head of the family who had cultural responsibilities for providing for the family, particularly for his mother.

244 The task that Abbas has entrusted to Mohammad was unusually complex. And it created conflicts for Mohammad, which he was never satisfactorily able to resolve. Here was some of the conflicting influences upon him. First, Abbas had a powerful influence upon Mohammed, who would always defer to his father's wishes about the management of family's property. But Karami also looked to Mohammed to look after her. I accept also that Mohammad was told that he was to meet Leila and Mojtaba's university expenses from the mid-1980s. Mohammad's local balancing of the family's financial affairs was always under threat from Abbas, who returned regularly to Australia to withdraw money from Trading's bank accounts. In a real sense, particularly in the early years, in my view, Mohammad saw himself as a local agent for Abbas, running a family business to provide funds that Abbas could use, as well as provide for the rest of the family. In all this the niceties if what was and was not property of the Trust were barely recognised.

245 Abbas did use his influence over Mohammed. Abbas was able to treat Trading's profits as his own, withdrawing bank credit balances when he was in Australia. And he directed Mohammed to transfer funds to Iran at his discretion. But Abbas also had dominance over Mohammad's administration of the domestic side of the trust. For example when Abbas discovered that Mohammad was financially supporting Karami, Abbas reacted angrily: he adjusted the shares of Trading, reducing Mohammad's holding from 90% to 40% and increasing his own back to a position of control, from 10% to 60%. Mohammad seemed quite unable to resist Abbas' overruling him in this way.

246 Placing Mohammad in control suited Abbas. Mohammad's lack of complete professional training and his sense of responsibility as the eldest son meant that he was unlikely competent to challenge Abbas' influence. The deficiencies in Mohammad's education and business experience amplified Abbas' influence over him. Before Abbas asked Mohammad to take over the motel business Mohammad's actual business experience was limited to buying and selling audio and video equipment and motor vehicles; no more than small-scale marketing, as an employee. He had no real understanding of business administration. What Mohammad did pick up was self-taught. I accept his evidence that when his father left to go back to Iran he explained to Mohammad that the motel business "runs itself".

247 With this lack of business background I accept Mohammad's evidence that he had no real understanding of what a trust was. But it was even more difficult for him: he was never given copy of the Trust Deed. No one explained to him what the purpose of the trust was.

248 Another unfortunate accident of the family's history was that Mohammad had no connection with the lawyer who set up the trust. The family's internal trouble came to the attention of the owner of the motel property, Dr Freyer who took a benevolent interest in the family's welfare. Dr Freyer gave evidence to explain that he was the one who had suggested, when he became aware of Abbas' and Karami's divorce that setting up of a family trust may be the best way to make the family comfortable and stable in Australia, while Abbas conducted business in Australia and Iran. Dr Freyer suggested Abbas established a family trust and recommended a lawyer to become the settlor of the trust.

249 But Mohammad had no contact with this lawyer. I accept that Mohammed did not understand the need to seek legal advice from such a person. Mohammad was principally interested in carrying out his father's wishes. It was certainly not Abbas' wish that Mohammad obtain legal advice to arm himself in a way that would contradict Abbas' wishes. This dynamic in the family relationship, reinforced by Abbas' preparedness to diminish Mohammad's powers over the trust if he contradicted Abbas, accounts for Mohammed not seeking external legal advice, compounded as it was by his own lack of education and business experience.

250 But as time went by Mohammad's early disadvantages - his subservient relationship with his father and his poor education began to fade. He managed the motel business for 15 years. He began to seek external accounting advice for the business. Trading employed a bookkeeper internally from FY07, and about the same time it engaged accountants Clark and Jacobs, to complete trust accounts and tax returns. But by mid-2005, about 15 years after the creation of the Trust, Mohammed had extensive experience in administering the Trust and the motel business that it owned. Any judgment of his conduct in the period 2005-2008 is a judgment of a man in his early forties who had 15 years business experience, although in a narrow environment.

251 Mohammed and Amir worked in the motel business together. Mohammed advances this as a relevant factor in the Court's consideration as to whether Mohammed should be excused for his involvement in any breaches of trust. But Amir's position was always subsidiary. He was ultimately solely responsible for the management of the motel in the second half of 2004, and the principal day-to-day controller of the motel's business between 1996 and 2008. But Mohammad never let Amir get too close to the important Trust decision-making. Partly because of his sense of responsibility to his father, partly because of his place in the family, and partly because of his own personality, Mohammed wanted to keep control of the Trust and its business. There is no consistent evidence of him consulting Amir about any of the important decisions in relation to trust affairs, for example the transmission of the Trust funds back to Iran at Abbas' direction. In my view, Amir's role is not a basis for reducing Mohammad's responsibility for breaches of trust.

252 Finally, Mohammad has expressed contrition. If genuine, this is a fact the Court can take into account in deciding whether or not to excuse him: Investa Properties Ltd v Westpac Property Funds Management Ltd (2001) 187 ALR 462. Mohammad's outlook is certainly tinged with a sense of regret: that he allowed himself so long to be influenced by his father; that he had such little understanding of company and trust arrangements; and that he did not seek professional advice much earlier to comply with the trust deed. But the expressions of contrition are at odds with Mohammad's refusal even now to account to fellow family members. A truly contrite trustee will give disclosure and seek voluntarily to make amends. That is not how Mohammad conducted his case. For example he has resisted the provision of information about his use of money in Iran.

The 2011 Proceedings Cross-Claim - Azadeh and Parveneh's business

253 On 19 June 2012 Mohammad filed a Statement of Cross-Claim against Azadeh and Parvaneh. The cross-claim relates to the ownership of a food importing and merchandising business now carried on by Azadeh through Parvaneh and referred to throughout these reasons as "the food business".

254 Mohammad seeks orders: (1) that Azadeh and Parvaneh hold the food business and all profits arising from the food business on constructive trust for Trading the trustee of the Trust; (2) that Azadeh and Parvaneh account for all profits from the food business; (3) that Azadeh and Parvaneh pay Trading equitable compensation; and, (4) that the assets and profits of the food business be traced and charged with the payment of such moneys as the court orders. Azadeh and Parvaneh seek dismissal of the cross-claim.

255 The food business involves the importation, distribution and sale of foodstuffs from Iran, covering at the time of the trial some 76 products. Mohammad says that the Trust is the owner of the food business. But Azadeh says that she, through Parvaneh, is the owner of the food business.

256 Determination of the cross-claim requires a survey of a period commencing with the arrival of the Ashrafinia family in Australia and continuing until the time of the trial. The parties advance conflicting understandings of the events of that period. The narrative that follows in this section of the Court's reasons contains findings about the events as they relate to the food business between the arrival of the Ashrafinia family in Australia and the time of the trial. For convenience, this narrative about the food business is divided into six periods: the Arrival of the Ashrafinia Family in Australia, University and the Establishment of the Food Business, Issues Arising Following the Establishment of the Food Business, the Establishment of the Trust, the Movement of the Food Business from the Motel Premises and Azadeh's Establishment of Parvaneh.

The Arrival of the Ashrafinia Family in Australia

257 The Ashrafinia family arrived in Australia in 1986. How they developed their motel business from 1986 has been detailed earlier. Abbas soon looked for business opportunities in order to provide for his family. One of those opportunities involved the importation of Iranian foodstuffs, particularly pistachios ("the pistachio business").

258 Both Mohammad and Azadeh acknowledge that the family first became involved in the importation, distribution and sale of foodstuffs into Australia shortly after the family's arrival here, when Abbas commenced the pistachio business. Abbas said, and I accept, that in about 1987 he imported pistachios and sumac from Iran. Amir said, and I accept, that he remembered following the arrival of the family in Australia, Abbas purchased a large shipment of pistachios. He remembered the family opening them. Karami too deposed that following their arrival in Australia, Abbas operated a business importing pistachios and other foodstuffs from Iran and they worked long hours shelling pistachios for the purpose of sale. Azadeh acknowledged that Abbas imported foodstuffs, but she said she would not call that a "food business".

259 From this early point Mohammad and Azadeh's accounts conflict markedly. Mohammad say's Azadeh's food business developed from the pistachio business. But Azadeh says the pistachio business is entirely separate from the food business carried on by Azadeh through Parvaneh.

260 I prefer the history advanced by Azadeh that: the importation of pistachios and sumac by Abbas following the arrival of the Ashrafinia family in Australia did not found the food business Azadeh now carries on through Parvaneh. I reach this conclusion mainly because: (1) the early importation, distribution and sale of foodstuffs commencing with the importation of pistachios by Abbas in 1987 unlike the food business, was not on a commercial scale; and, (2) there is an absence of clear linkage between the pistachio business and the food business carried on by Azadeh through Parvaneh.

261 First, Abbas' pistachio business was not conducted on a commercial scale, like the food business. For example I accept Karami's evidence that she and the children assisted with shelling the pistachios for sale, which is more consistent with a non-commercial family business rather than one on a commercial scale. And I accept Karami's statement that "Around this time Abbas and I started to look for a business to purchase for the family to operate...". Abbas was seeking business opportunities on a genuinely commercial scale because the pistachios business was well below that.

262 Second, there is an absence of significant linkages between Abbas' pistachio business and the food business. Abbas himself said, and I accept that the main business of the Trust was the motel business and that he "only just once I imported Persian carpets and twice I imported Persian nougats" and that "I only imported nougats two or three times and also imported pistachios two or three times. That's all". Abbas here conveys the non-commercial character of the pistachio business and the lack of significant linkage between the pistachio business and either the food business or Trading.

263 Moreover, in 1995 Abbas and Karami made arrangements to return to Iran. At that time Abbas asked Mohammad to take over his business interests in Australia. But the business interests put into Mohammad's custody did not include any food business. Abbas said that Mohammad was not appointed managing director of a food business, and that he only asked Mohammad to collect money owed to Abbas. I accept Abbas on this, largely because Karami also says Mohammad was asked to manage Abbas' business interests in Australia when Abbas and Karami returned to Iran, but that those business interests did not include the sale of foodstuffs.

264 Azadeh's claim that the food business was separate from Trading and the Trust is confirmed by the tax returns Azadeh filed between 1999 and 2010: they support Azadeh's claim that the food business was Azadeh's. Mohammad did not provide tax returns supporting that conclusion that Trading or the Trust ever conducted any food business.

265 Abbas and Amir were at various times directors of Trading. Although Mohammad says that Trading carried on the food business, both Abbas and Amir say that at no time did Trading do so. I accept their evidence about the extent of Trading's business. Abbas said: "The main business of the trust was this Roslyn Gardens Motor Inn. There wasn't anything else, only just once I imported Persian carpets and twice I imported Persian nougats, the sweet". Amir said that apart from a car rental business, there were no other businesses involved in the Trust. Trading did not conduct the food business without Abbas and Amir's knowledge.

266 In summary, I do not view the pistachio business undertaken by Abbas following the arrival of the Ashrafinia family in Australia as the commencement of the food business.

Azadeh at University and the Commencement of the Food Business

267 The Ashrafinia family is a talented family of traders. Like her father and brother before her, Azadeh became involved in trading at University. I accept Azadeh's evidence that she commenced the food business in the mid-1990s, as a hobby under the name "Ashrafi", whilst undertaking her university studies in 1994. I accept that Azadeh then viewed this new business as something "alongside (her) full-time studies" ,"something on the side for a bit of pocket money and "a hobby". Each of Abbas Karami, Amir and Azadeh, support the conclusion that the food business grew from Azadeh's University hobby business which commenced in 1994.

268 Except between 1996 and 1998 in which period the food business was dormant when Azadeh focused on her journalism studies, she was the sole proprietor of the food business from 1994 until 27 May 2002. She managed it, made all the business decisions and dealt with its earnings.

269 Mohammad challenged this conclusion. He did so by attacking claimed inconsistencies in Azadeh's evidence about the commencement of the food business. He pointed out that Azadeh said the food business commenced in 1994 and also said that 1998 or 1999 was the "recommencement" of the food business. But these competing commencement dates must be viewed in the context of a developing business. I accept Azadeh's evidence that: although she commenced the food business in 1994 while studying at university, the food business was a hobby, at least until 1998 or 1999, when it was launched with a zero stock balance. A letter Azadeh wrote to IP Australia on 21 January 2003 long before these issues arose on the cross-claim corroborates her story. In that letter she notes "I am the owner of a small food company based in Sydney" and "...I first (formally) started my business in 1998" and "I distributed a select number of products as a part-time job whilst at university in 1994".

270 Mohammad also challenged Azadeh's version of her commencement and continuing ownership of the food business, on the basis that she presented inconsistent versions of the source of the money she had used to capitalise the business. These inconsistent versions were said to include that: (a) Azadeh had received and used an award to her of victim's compensation moneys; (b) Abbas had provided Azadeh with a line of credit; and (c) the Trust or Trading or Mohammad had provided her with a loan. Mohammad said that Trading conducted the food business and that Azadeh was merely a business agent of Trading

271 But Mohammad's attack based on the sources of the food business's capital is not effective. Azadeh says that the evidence shows she used some of the victims' compensation money that Mohammad returned to her, to pay for various items between 1999 and 2000, including a van, and a shipment of tea and yoghurt beverage. Azadeh says that Abbas did not provide her with a line of credit, rather that the foodstuffs were purchased from Abbas on credit. Azadeh denies that the Trust, Trading or Mohammad provided her with a loan as Mohammad alleges. Azadeh's evidence says that the money she received from Trading, which she thought was going to be a loan, was actually a part of the victims compensation money that Mohammad returned to her and which Mohammad had told Azadeh he was going to invest for her.

The Name of the Food Business - Ashrafi Trading

272 The parties contest two main issues following the establishment of the food business: the use of the trading name "Ashrafi", and various derivations of that name; and the use and ownership of the Ashrafi Logo. Each party claims early use of the trading name and logo inferring their ownership of the food business.

273 First, the parties contest the ownership of the trading name "Ashrafi", and various derivations of the trading name "Ashrafi". Abbas first used the trading name "Ashrafi" in Iran. His evidence, which I accept on this issue, supports Azadeh's claim that she, not Trading, used the name "Ashrafi" in the composite phrase "Ashrafi Food"

274 I find that Azadeh says that she first used the trading name "Ashrafi" in Australia in 1994 and that the name was not associated with the importation of nougat prior to 1997. Mohammad contests this and says that Abbas used the trading name when conducting the pistachio business, following the arrival of the Ashrafinia family in Australia.

275 Invoices dated 20 November 1995 show the importation of nougat by Ashrafi Persian Nougat by APT Co Pty Ltd. Azadeh claimed that those invoices were not authentic. There was no objective evidence undermining the authenticity of these invoices. But nor was there clear evidence that Trading is the owner of the trading name "Ashrafi".

276 I find that Azadeh used the trading name "Ashrafi" until October 1998, when she temporarily adopted the trading name "Persian Trading Company". In January / February 1999 Azadeh reverted to using the trading name "Ashrafi Food", after being advised by the Department of Fair Trading that the trading name "Persian Trading Company" was not sufficiently unique. Azadeh says that in her opinion the trading name "Persian Trading Company" is sufficiently distinct from "Ashrafi Persian Trading Company". Later, on 4 February 1999, Azadeh registered in New South Wales the trading name "Ashrafi Food". Azadeh later changed the trading name of the food business, again registering it on 7 February 2003 under the name "Pariya". Although she has for a long time and still uses the trading name "Ashrafi".

277 Azadeh use the trading name "Ashrafi" and "Ashrafi Food" from at least 1999. Her registration of the business name "Ashrafi Food" on 4 February 1999, and her use of the trading name "Ashrafi Food" in tax records dating from 1999 support this.

278 But, even if the trading name "Ashrafi" were owned and used by Abbas, Abbas acknowledged that he permitted Azadeh to use the trading name "Ashrafi Food" for her food business and that if he "had any problem or concern (he) would have made a complaint".

279 The evidence does not support Mohammad's case that the trading name "Ashrafi", and its various derivations were ever owned or used by Trading.

The Ashrafi Logo

280 The Ashrafi Logo, an ornate face mask accompanied by language characters, was designed by an artist at the request of Abbas, in Iran, in 1963 I accept Abbas' evidence that the Ashrafi Logo was synonymous with the trading name "Ashrafi". Azadeh says that the Ashrafi Logo was not property of Trading or the Trust. Mohammad says that it was Trading's property.

281 I accept Azadeh's evidence that at all times since 1994 she has used the Ashrafi Logo with the permission of Abbas Abbas said that he gave permission a little later. He says that he first became aware of Azadeh's use of the Ashrafi Logo in 2000 or 2001 and that while he has never given formal permission to Azadeh to use the Ashrafi Logo he has certainly not prohibited its use by Azadeh. I prefer Azadeh over Abbas on this issue.

282 Mohammad misled Azadeh about trademark registration of the Ashrafi Logo. In 1999, Azadeh intended to register the Ashrafi Logo as a trademark with IP Australia. Mohammad then indicated to Azadeh that he would investigate the registration of the Ashrafi Logo on her behalf. But instead of registering the Ashrafi Logo in Azadeh's name, he registered it in his own name. Mohammad sought to justify this on the ground that it was "cheaper" and "the company registrations was very expensive". But Mohammad provided no evidence that registration of the Ashrafi Logo in his name was any less expensive than registration in Azadeh's name. The fee at the time for registration of a trademark was a single fee, irrespective of whether a company or an individual registered the trademark.

283 I accept that Azadeh undertook a trademark search in 2002 and discovered that Mohammad had registered the trading name "Ashrafi", together with the Ashrafi Logo, in his own name, not Trading's name. Azadeh immediately lodged a complaint with IP Australia. In response IP Australia removed the trade mark from Mohammad's name and registered the trade mark in Azadeh's name. Azadeh's actions with IP Australia at the time are consistent with her version, which I accept, that Mohammad misled her about assisting her with the trademark registration of the Ashrafi logo

284 As with the use and ownership of the trading name "Ashrafi", there is no evidence that the Ashrafi logo was ever owned or used by Trading.

The Establishment of the Trust

285 The Trust was established while Azadeh was in Canberra studying journalism. Mohammad says that from the establishment of the Trust, the food business was trust property and that Trading carried on the food business, as the trustee of the Trust.

286 The trust was created by the Trust Deed on 10 August 1995. In the years following the establishment of the Trust, there were some links between the food business and Mohammad / Trading. But mutually supportive family relationships in the late 1990s best explain some sharing of assets and services between members of the Ashrafinia family, particularly Mohammad and Azadeh, as they pursued their respective business interests.

287 From 1998 Azadeh conducted the food business from the office at the motel premises. The parties advance competing accounts of Azadeh's use of the office in the motel premises. Mohammad says that Azadeh was employed by Trading while working from the office at the Motel premises. Azadeh says that she was conducting her own food business there.

288 Azadeh's version is better supported. Trading, does not have records of her as employee being paid remuneration. But Azadeh did not pay rent for the use of the office, nor was she charged or did she pay for the use of the printer, ink and paper, or other clerical resources in the office at the motel premises. Azadeh acknowledged that the food business received financial benefit from Trading in the form of the subsidies for the use of the office, and the facilities in the office, at the Motel premises for a 12-18 month period in 1998. But this was just an informal benefit conferred on Azadeh for a limited period, and did not include any agreement that Trading would have an interest in her food business.

289 But there was a close relationship between Trading and the food business in the late 1990s. In December 1998 and January 1999, letters were written to existing and potential customers of the food business using the letterhead of "Persian Trading Company" and Trading's ACN and invoices were said to have been issued to such customers in the name of "Persian Trading Company", using Trading's ACN.

290 There was no explanation of the use of the name Persian Trading Company by the food business. And Azadeh says that she used Trading's ACN when, in 1998, at an early stage of the development of the food business, she asked Mohammad: "What is an ACN?" and Mohammad is said to have replied: "Just use that number (Trading's ACN)". Mohammad denies this conversation, but I prefer Azadeh's evidence about it. Subsequently Azadeh used Trading's ACN until obtaining independent accounting advice in 2002. Thereafter she used her own ABN.

291 The existence of a close relationship between Trading and the food business does not require the conclusion that the food business was property of the Trust. Family relationships with some degree of give and take for Azadeh better explain the events of 1998-2002.

292 Until falling out between the members of the Ashrafinia family, Mohammad and Azadeh worked together to a limited extent providing mutual support, as they pursed their respective separate business interests.

The Food Business moves from the Motel Premises

293 In 2000 Azadeh moved the headquarters of the food business away from the motel premises. From 1994 to 1998 Azadeh stored the food business stock at her home. From 1998 until 2000, Azadeh stored the stock in room 102, or room 107, of the motel premises. Then, whether because of a quarrel between Mohammad and Azadeh or the increased storage requirements of the food business or some other reason, she moved the stock to Alexandria. From 2000 to 2009 Azadeh operated the food business from a unit in Gardeners Road, Alexandria and stored additional stock in a Rosebery warehouse. Then from 2009 Azadeh operated the food an address in Princes Highway, St Peters.

294 Mohammad says that the first step in Azadeh's conversion of the food business occurred between 1999 and 2000 when Azadeh: transferred the stock of the food business from the Motel premises to the storage warehouse in Rosebery; and, removed food business documents, letterheads, stationary, receipts, invoices and computer from the office at the Motel premises. But the better view is that Azadeh felt that her business had outgrown existing informal storage arrangements at the motel.

Azadeh Establishes Parvaneh

295 On 27 May 2002 Azadeh established Parvaneh. From 27 May 2002, Azadeh operated the food business through Parvaneh. In March 2003, Parvaneh lodged an application for trademark with IP Australia for "Pariya".

296 Mohammad says Azadeh and Parvaneh provided no consideration to Trading for any transfer of the food business to Azadeh or Parvaneh and that any such transfer of the food business was not authorised by the directors of Trading. But as the earlier narrative indicates, there was no Trust food business for Azadeh to convert.

297 Mohammad says that since the establishment of Parvaneh on 27 May 2002, Azadeh and Parvaneh have used the trading name "Ashrafi" (and various derivations of the trading name "Ashrafi") and the Ashrafi Logo as well as having traded under the trading name "Pariya" without Trading's permission. But, again, as the narrative of the Ashrafinia family and the food business indicates, there is no evidence that the trading name "Ashrafi" or its various derivations or the trading name "Pariya" and the Ashrafi Logo are or were property of Trading or the Trust.

298 Finally, Mohammad says that Azadeh and Parvaneh have not accounted to Trading or the beneficiaries of the Trust for the profits realised from the food business. As a consequence, Mohammad says that Azadeh and Parvaneh hold the food business on constructive trust for the Trust. But this case fails. Neither Azadeh nor Parvaneh have any duty to account to Trading or beneficiaries of the Trust for profits realised from the food business. At no time was the food business property of Trading or the Trust.

Consequences of the Delay in Bringing the Proceedings

299 Azadeh says that even if the cross-claim were successful, that Mohammad delayed for too long the bringing of the cross-claim and that relief should be barred according to the equitable doctrine of laches and by the Limitation Act 1969 (NSW). It is not strictly necessary to consider these defences in light of the Court's principal conclusions on the Cross-Claim. But it is useful to do so in any event

300 The first question to be addressed in relation to delay is whether the equitable doctrine of laches operates as a discretionary bar to recovery, and if that bar does not operate, whether the cross-claim is bared according to the Limitation Act: Gerard Cassegrain & Co Pty Ltd v Cassegrain [2011] NSWSC 1156 at [208] per Barrett J; Williams v Minister, Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497 at 509-511 per Kirby P, Priestley and Powell JJA agreeing; see also: Limitation Act, s9.

Laches

301 Relief in equity will be denied to a plaintiff if that party has, by inaction or standing by, placed another party, the defendant or a third party, in a situation in which it would be inequitable and unreasonable to place that other party, if the remedy were afterwards to be asserted: Orr v Ford (1989) 167 CLR 316 at 341 per Deane J. The equitable defence of laches follows the maxim that the law assists those who are vigilant, not those who sleep on their rights: Bell Group Ltd v Westpac Banking Corporation (No. 9) [2008] WASC 239 at [9303] per Owen J. A defendant will be able to resist an equitable claim on the grounds of laches if they can demonstrate that the plaintiff, by delaying the institution of their case and with full knowledge of the material facts or circumstances has either, acquiesced in the defendant's conduct, or caused the defendant to alter their position in reasonable reliance on the plaintiff's acceptance of the status quo or otherwise permitted a situation to arise which it would be unjust to disturb: Lindsay Petroleum Co v Farewell & Kemp (1874) LR 5 PC 221. Mere delay, of itself, is not enough to constitute laches: Jones v Stores [1999] 1 WLR 1739.

302 There are two central questions: first, whether the plaintiff has been guilty of unreasonable delay in bringing proceedings; and, second, whether any such unreasonable delay makes it unreasonable, in the particular circumstances, for the relief to be granted because the plaintiff has either acquiesced in the defendant's conduct or caused the defendant or someone else to change their position in reasonable reliance on the plaintiff's acceptance of the status quo or otherwise permitted to arise a situation that it would be unjust to disturb": Gerard Cassegrain v Cassegrain at [211].

303 Among the circumstances relevant to determining whether there was unreasonable delay are the length of the delay, the nature of the acts done during the period of delay and that nature of the right to be enforced. But laches must be resolved as a matter of justice between the parties as is the case with any equitable doctrine: Orr v Ford at 340-341 per Deane J.

304 The 2011 proceedings, were commenced in May 2011, although the cross-claim was not filed until 19 June 2012. Thus, first, there is considerable delay between the alleged conversion of the food business and the bringing of the cross-claim. Taking the date of the incorporation of Parvaneh - 27 May 2002 - as the date of the alleged conversion of the food business, it took at least 10 years for the filing of the cross-claim to occur. Second, there is the additional delay between the commencement of the 2011 proceedings by Karami in May 2011 and the filing of the cross-claim by Mohammad on 19 June 2012. Especially in circumstances in which Azadeh filed an affidavit in the 2011 proceedings on 16 June 2011, it cannot be said that there has been insubstantial delay in the bringing of the action. In these proceedings, the 2011 proceedings, there was unreasonable delay in bringing the proceedings.

305 But delay itself is not sufficient ground on which to deny relief. However, "the conduct of the plaintiff may be such as to make it inequitable to order an account of profits. Thus a plaintiff may not stand by and permit the defendant to make profits and then claim entitlement to those profits": Warman International Ltd v Dwyer (1995) 182 CLR 544 at 559 per Mason CJ, Brennan, Deane, Dawson and Gaudron JJ. Azadeh says that the relief sought by Mohammad is unjust because Mohammad's failure to act, with knowledge of the material facts, constitutes acquiescence to Azadeh's conduct and that it would be unjust to alter the situation in which she has developed the food business. Azadeh says that any order, in particular an order to account for profits, against Azadeh and Parvaneh, is unjust because she and Parvaneh have spent profits and structured their financial affairs in such a way that means that any order, in particular an order to account for profits, is unfair and burdensome. Further, in the time period since the alleged conversion of the food business Azadeh, through Parvaneh, has worked to develop the food business to such an extent that it would be unfair for Mohammad to seek to benefit, at least without an account for Azadeh's work, from Azadeh's work.

306 Mohammad has long had knowledge of the material facts on which the cross-claim is based. This is not a requirement of knowledge of the legal conclusions to be drawn from the facts, but of the facts from which the right arises: Hourigan v Trustees Executors and Agency Co Ltd (1934) 51 CLR 619 at 651.

307 Between 1998 and 1999 Mohammad shared an office with Azadeh at the Motel and was in a position to observe first hand the food business activities in which Azadeh was engaged. And Mohammad was a director of Trading. In that capacity, he signed off on Trading's tax returns. If there was any conversion of the food business, the consequent discrepancies must have been evident to him in the Trading's tax returns.

308 If the food business was property of Trading and the Trust, and Azadeh and Parvaneh converted the food business, the relief sought by the cross-claim should, in any case, be refused.

Statute of Limitations

309 Azadeh also says that Mohammad is not entitled to any of the relief sought, because the proceedings were not commenced within the twelve-year statute of limitation period. The proceedings were commenced by way of Statement of Cross-Claim filed on 19 June 2012.

310 In Williams v Minister, Aboriginal Land Rights Act 1983 (1994) 35 NSWLR 497 at 509, Kirby P stated: "The structure of the Limitation Act 1969 (NSW) makes it clear that the ancient principles of Equity have been preserved". Kirby P said that the Limitation Act does not apply, in its own terms, to a cause of action for equitable relief. But equity follows the law. The Limitation Act may apply by analogy: Salvation Army (South Australia Property Trust) v Graham Rundle [2008] NSWCA 347 at [81]-[83] per McColl JA, Basten and Bell JJA agreeing. Because the relief which Mohammad seeks is wholly equitable relief, the Limitation Action has no direct application. It is therefore necessary to consider whether any provisions of the Limitation Act apply by analogy to the claims brought by Mohammad.

311 Counsel for Azadeh raised Limitations Act, s 16, which provides: An action on a cause of action founded on a deed is not maintainable if brought after the expiration of a limitation period of twelve years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims. And Limitations Act, s 23 provides: Sections 14, 16, 17, 18, 20 and 21 do not apply, except so far as they may be applied by analogy, to a cause of action for specific performance of a contract or for an injunction or for other equitable relief.

312 Azadeh says that because Trading, as the trustee of the Trust, created by a deed dated 10 August 1995, is moving the Court for orders against Azadeh and Parvaneh, the cross-claim is an action founded on a deed and as such that the limitation period provided by Limitation Act, s 16 is applicable.

313 But Mohammad says that the limitation defence does not bar the cross claim because the alleged conversion of the food business occurred either: at the time Azadeh relocated the operation and control of the food business from the motel premises in 2000; upon the incorporation of Parvaneh Pty Ltd on 27 May 2002; or, when Parvaneh Pty Ltd commenced operation of the food business on 1 July 2002. Mohammad says that whichever of these events constitutes the point at which Azadeh converted the food business is less than 12 years before the commencement of the proceedings, such that any limitation defence does not bar the cross claim.

314 Further, before applying the Limitation Act time limit by analogy, it is not simply a matter of finding sufficient similarity between the equitable claim and the claim that it is subject to the statutory time limit; the Court must be satisfied that in all the circumstances it is just to apply the statutory time limit: Salvation Army (South Australia Property Trust) v Graham Rundle [2008] NSWCA 347 at [86] per McColl JA Basten and Bell JJA agreeing.

315 In this case the application of the limitation period in Limitation Act, s 16 is not appropriate for the cause of action pleaded by Mohammad. In addition, even if Limitation Act, s16 were to be applied, the particular limitation period has not expired.

316 The defence of laches may arise before any limitation period expires: Walter v Melham [2007] NSWSC 264 per White J and Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256 at [18] per Gleeson CJ, Gummow, Hayne and Crennan JJ; see also Limitation Act, s 9.

317 The relief sought by Mohammad is not barred by the operation of the Limitation Act, however, since the defence of laches may arise before any statutory time limit potentially applicable by analogy expires, if I am wrong and the food business was property of Trading and the Trust and Azadeh and Parvaneh did convert the food business, the relief sought by the cross-claim is otherwise refused because of the equitable defence of laches.

Relief in the 2008 and 2011 proceedings

The 2008 proceedings

318 Amir's 2008 proceedings should be dismissed to the extent they deal with Amir's allegations of a property development joint venture. He has failed to make out any joint venture with Mohammad for the acquisition or development of properties as he alleged. Ordinarily costs would follow the event. But one or other party may seek a special costs order in the 2008 proceedings.

319 But there are some other residual issues in the 2008 proceedings that may or may not still have to be resolved in light of the Court's present findings. Amir sought relief in his Amended Summons to restore his position as a director of Trading and to reverse the effect of resolutions passed at general meetings of Trading in May and June 2007. The Court will replace Trading as the Trustee, so this other relief may no longer be necessary. Nor should Amir be able now to pursue the Conveyancing Act s 66G relief he sought over the Marsfield property: whether and when the Marsfield property is sold will be a matter for the new Trustee, subject to what the Court will order to ensure Mr Russell's fees are paid shortly.

320 There will have been a substantial overlap between the legal costs incurred in each of the 2008 and 2011 proceedings. And in the 2011 proceedings all the property said to be the subject of the joint venture in the 2008 proceedings has been found to belong to the Trust and some of it has been dealt with by Mohammad in breach of Trust without

321 Amir's knowledge. In these circumstances it may perhaps only be possible to make a blended costs order in both the 2008 and 2011 proceedings.

The 2011 proceedings

322 Mohammad's cross claim in the 2011 proceedings against Azadeh and Parveneh should be dismissed. He has failed to make out his contentions that the food business is a Trust asset. Costs would normally follow the event on the cross claim but some special costs order may be sought. If the parties cannot agree on the costs of this cross claim they can file submissions as to costs in accordance with the directions below.

323 A new trustee of the Trust must be appointed in place of Trading. The affairs of Trading are deadlocked. Mohammed consents to appointing a new trustee. But Azadeh and Karami seek their appointment in Trading's place. The Court concludes that the present trustee, Trading is incapable of carrying out its duties as trustee because of family deadlock. The only question is who should replace it.

324 The principles governing the appointment of a trustee in circumstances such as the present are clear. As a general rule the Court will not accede to a request to appoint the beneficiary as a trustee: Johnstone v Johnstone (1902) 2 SR (NSW) Eq 90.

325 Azadeh and Karami are not suitable for appointment as trustees. The Court is not confident that either of them would administer the trust impartially. I doubt they could ever set aside their antipathy towards Mohammad in their administration of the trust. Karami believes Mohammad has betrayed the whole family. Azadeh is convinced that Mohammad was responsible for an assault that she suffered and that he only deserves her condemnation. Her attitude is manifest one of in her descriptions of him as "the crazy cancer in our family which we are trying to get rid of".

326 In my view the only hope of suitable future administration of this trust is for the appointment of an independent trustee. This is in my view would be a suitable case for the appointment of the NSW Trustee and Guardian. But Karami does not want the NSW Trustee and Guardian appointed. She seeks to put forward evidence of other persons who are willing to take on that role. As the Trust's assets have been much depleted by litigation and by the actions of Abbas, Mohammad and Amir, it is useful briefly to explore whether it is possible to appoint some independent trustee or trustees, who are prepared to serve in that role at a lower costs to the Trust than the NSW Trustee and Guardian. So, I will allow a very short opportunity for that to occur. But it will not be long. The Trust must very soon either pay Mr Russell's fees or arrange for the Marsfield property to be sold. I will allow only 14 days for the parties to find another Trustee and during that same period to propose a mechanism for the payment of Mr Russell's fees.

327 The Court will declare on the basis of its findings that the Marsfield Property, Unit 17, and the Oporto property, are or were Trust properties. The Court will declare that the Chilli Blue backpackers business is charged in equity with the repayment of the moneys the Trust advanced to it between December 2007 and October 2008, together with any other monies found on inquiry to have been advanced to it. If it is useful to declare whether the Trading Apartments formerly owned by Trading, namely Units 4, 5 and 8 were Trust properties, the Court will declare that they are.

328 The evidence establishes that in breach of trust Abbas and Mohammad have transferred substantial amounts of Trust property to Iran. They have not yet accounted for these funds. In light of the Court findings, Karami should now identify precisely what relief within the jurisdiction of this Court she seeks. Although Abbas is often overseas and the Trust property he transferred is still in Iran, he is amenable to this Court's in personam jurisdiction. But Karami should identify what orders she now seeks against him to reveal what Trust funds are in Iran.

329 Karami may seek a wider account or inquiry in relation to the other Trust properties. The properties sold more recently, or still in the hands of the parties, would be the more obvious candidates for such an inquiry. But Mr Russell has already done much very useful work in this direction. The Court will not initiate an inquiry process, which merely duplicates what Mr Russell has already done. But to the extent that Mohammad and Amir wish to prove that they have any remaining beneficial interest in some part of these properties, or are entitled to just allowances for their work in relation to them, such an inquiry may perhaps offer them a limited opportunity to show that. As well such an inquiry may reveal what profits if any they have made with Trust property.

330 Karami's final submissions raise the possibility of the Court making an order for the general administration of the Trust. Such an order may be made where trustees cannot pull together, where an estate's administration gives rise to recurring difficulties, or doubt is thrown on the bona fides or discretion of one or more of the trustees: McLean v Burns Philp Trustee Pty [1985] 2 NSWLR 623. But the Court will not make such an order where the whole fund will be spent in costs or where there would not be likely to be any benefit to the beneficiaries: Meredith v Davis [1985] 2 NSWLR 623. Nor will the Court move in and distribute or wind up the Trust where the trustee has a discretion - the trustee will be permitted to exercise that discretion and the Court will not do that for the trustee: Tempest v Lord Camoys (1882) 21 Ch D 571. Both of these factors are present here and caution against making a general administration order in this case. But authority does support a general administration order being made where, as here, the affairs of the Trust are in great confusion, or there have been significant breaches of Trust: McLean, at p 636D.

331 The better and probably cheaper course here is to see if an independent trustee or trustees can be persuaded to act in this Trust. An administration order is likely to be far too expensive and cumbersome for what is left of this Trust estate, unless some of the beneficiaries can augment the estate by funding further action against the trustees, who have been found to be in default.

332 The Court will hear Karami or any Trustee on any other specific orders that any beneficiary seeks to secure any Trust property in the hands of a person dealing with Trust property in breach of fiduciary duty and who these reasons has found to be or have been in possession of Trust property. Liberty to apply is granted for this purpose.

333 Mr Russell has been waiting long enough to be paid. Unless a clear funding proposal for payment of his fees emerges within 14 days, the Court will re-list the proceedings to make orders for the sale or further mortgaging of trust property to enable the parties' obligations to him to be met, as soon as possible.

334 Costs should follow the event and Karami should have her costs of the 2011 proceedings, unless any defendant wishes to argue that a different costs order should be made. Questions of costs of the 2011 proceedings are complicated, as the Court has not found that all defendants were involved in all breaches of trust.

Conclusions and orders

335 In the result Amir has failed in the 2008 proceedings and orders will need to be made about the costs of those proceedings. In the 2011 proceedings Karami has been successful against Amir, Mohammad and Abbas, although not against all of them in respect of all breaches of trust. On the cross-claim in the 2011 proceedings the cross defendants Azadeh and Parveneh have been successful against Mohammad. Costs should follow the event on this cross claim unless some special costs order is sought. A new Trustee should be appointed to replace Trading as trustee of the Trust. That would be the NSW Trustee and Guardian unless some other Trustee can be found within the next 14 days. All parties must join within the next 14 days in arrangements to pay Mr Russell's fees, otherwise the Court will hear argument on 14 October as to why trustees for sale to the Marsfield property should not be appointed in order to satisfy his fees. The orders of the Court therefore will be:

(1) Dismiss the claims for relief in the 2008 proceedings of a property joint venture between Mohammad and Amir.

(2) Dismiss Mohammad's cross-claim against Azadeh and Parveneh in the 2011 proceedings.

(3) Direct the parties by 4.00pm on 10 October 2013 to bring in short minutes of order (to the extent that they can be agreed) to make any necessary declarations and to otherwise give effect to the Court's findings in both the 2008 and 2011 proceedings.

(4) In addition to direction (3), further direct the parties by 4.00pm on 11 October 2013 to file and serve any short minutes of proposed declarations, orders or directions (to the extent that such orders cannot be made the subject of agreement among the parties), which any party contends are necessary to give effect to the Court's findings in both the 2008 and 2011 proceedings.

(5) Direct the parties to make any application for the appointment of a trustee other than the NSW Trustee and Guardian returnable before the Court on 14 October 2013 at 9.30am.

(6) Direct the parties to exchange submissions as to costs in relation to the 2008 proceedings and the 2011 proceedings and the cross-claim in the 2011 proceedings by 4.00 pm on 10 October 2013.

(7) Any applications for an account from any defendant or for restraining orders against any defendant, arising out of the Court's findings in these reasons, together with any defendant's claim for relevant just allowances, may be made returnable before the Court at 9.30am on 14 October 2013.

(8) Grant liberty to apply on three days notice, to the parties to take action consequential upon these reasons, and to the Court expert Mr Russell in respect of the payment of his fees.

(9) Adjourn the proceedings for further directions to 9.30am on 14 October 2013.

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I certify that this and the preceding pages are a true copy of the reasons for judgment of Justice Slattery delivered on Associate..................................

Amendments

27 February 2014 - Deletion of the words "He is married to a medical practitioner" and replacing them with the words "His wife has a doctorate".
Amended paragraphs: 240

Decision last updated: 30 September 2013