By , and -


  • A liberal construction is to be given to section 37A of the Conveyancing Act 1919 (NSW), under which alienations of property with intent to defraud creditors are voidable.
  • In a series of related decisions, the Courts adopted a broad approach in relation to what constitutes an alienation of property as well as the conduct from which inferences of the intent to defraud can be drawn, and rejected the argument that the Court must be satisfied that the alienated property had value.
  • The indemnity principle is satisfied, and therefore costs can prima facie be awarded, provided there is a contingent liability to pay fees at the time of making a costs order.

A series of related decisions delivered over eight years, which culminated in the High Court of Australia refusing leave on 15 November 2019 in El Ali v Royal & Ors; Zreika v Royal & Ors [2019] HCATrans 227, exemplifies the difficulties faced by creditors left with little choice but to bankrupt the debtor and litigate to recover dissipated assets. Although the creditors in the proceedings were almost entirely successful in each of the ten or more decisions, the litigation from commencement to end spanned a decade, with the Full Court of the Federal Court in Zreika v Royal (No 2) [2019] FCAFC 237 describing the course of the proceedings as akin to ‘trench warfare’.


The decisions arose from debt proceedings in Royal v El Ali [2011] NSWSC 602, in which the debtor (‘Mr El Ali’) was found liable to the creditors (‘the Royals’) in the sum of $1,099,456.74.

In and around late 2011, Mr El Ali transferred to colleagues and relatives shares in four of his companies for $1, in prima facie breach of the freezing orders obtained by the Royals in 2010 (see Royal v El Ali [2016] FCA 782 at [1]-[32]). At or around the same time, he also caused the transfer of real property held by two of the companies to some of those same colleagues and relatives for $1. In an affidavit of assets and liabilities affirmed in 2010, Mr El Ali deposed that the real properties had significant value. On 16 December 2011, the Royals obtained a sequestration order against Mr El Ali and had a registered trustee appointed to his bankrupt estate.

The principal decision

After further attempts to recover the judgment debt, in 2013 the Royals and the bankruptcy trustee commenced proceedings pursuant to s 37A of the Conveyancing Act 1919 (NSW) and, in the alternative, pursuant to s 121 of the Bankruptcy Act 1966 (Cth), in order to have the transfers of the dissipated shares and real properties declared voidable. The proceedings were commenced against Mr El Ali, his colleagues and relatives to whom the shares and properties had been transferred (Messrs Zreika, Nazloomian, Stojanovski and Mahmoud El Ali), the transferor companies and a third company relevant to a trust structure. The Royals and the bankruptcy trustee generally sought a finding that the transfers of shares and assets had been alienated with intent to defraud creditors.

The eight respondents variously relied upon four defences (Royal v El Ali [2016] FCA 782 at [40]-[41], [171]).

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