SHAH v BULUMA PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P, MEAGHER JA and FITZGERALD AJA 20 October 1998, 25 November 1998 [1998] NSWCA 207 Evidence — appeal from credit based finding trial judge: Khafam Developments Pty Ltd v Zeaiter & Ors (NSWCA, unreported, 3 October 1996) followed — balance of probabilities. FACTS The appellant, the unsuccessful plaintiff alleged non payment by the respondent/defendant of diamonds supplied by the appellant to the respondent pursuant to an oral agreement to sell as evidenced by the alleged invoices of the appellant, which were never denied by the respondent. The respondent claimed the arrangement was for the diamonds on consignment, claiming payments by it to the appellant were roughly proportionate to a 10% agency fee. The trial judge found against both parties on credit and for the respondent on the balance of probabilities. The appellant appeals the finding on grounds that the evidence supports a finding on the balance of probabilities in its favour. HELD By Mason P It is rare for a credibility based-finding of a trial judge to be overturned and the principles are well known: Khafam Developments Pty Ltd v Zeaiter & Ors (Court of Appeal, unreported, 3 October 1996). The failure of the respondent to return the invoices and its failure to deny the amount claimed in them has evidentiary weight and the probabilities strongly favour the appellant. By Meagher JA Whilst not seeking to disturb his Honour's findings on credibility, it would seem that the documents render the plaintiff's story more probable than not. By Fitzgerald AJA In these circumstances, although the reasons for judgment of the primary judge are less than satisfactory to explain how he reached his conclusion, I am not persuaded that that conclusion was wrong or that the inadequacy of the reasons is such as to amount to error of law warranting a new trial. Mason P I have had the advantage of reading in draft form the judgments of Meagher JA and Fitzgerald AJA. I agree with the orders proposed by Meagher JA, and with his reasons. The essential dispute is whether the sale and delivery of a quantity of diamonds as evidenced by an invoice dated 19 August 1986 ("the third invoice') was an outright sale, as the appellants contend, or a sale on consignment, as the respondent contends. Delivery is not in dispute. According to the respondent, the arrangement evidenced by the third invoice was that the respondent was entrusted with the diamonds on a consignment basis without responsibility to sell and with the right to recover 10% of the sale price as commission. The respondent further claims to have paid 90% of the invoiced sum, consequent upon resale, thereby discharging its obligations in relation to the third invoice. It is common ground that there were three transactions and three invoices, as follows: 2 UNREPORTED JUDGMENTS 1. Invoice dated 15 July 1986 US 17,118.70 2. Invoice dated 14 August 1986 US 10,843.10 3. Invoice dated 19 August 1986 US 30,995.80 Total: US 58,957.60 It is also common ground that the following payments were made by the respondent to the appellant: 8 March 1987 US 12,282.27 10 June 1987 US 4,685.77 9 October 1987 US 5,000.00 18 December 1987 US 5,843.10 US 27,811.14 The appellants have appropriated these payments towards the first two transactions, leaving the third wholly unpaid. The respondent seeks to appropriate the payments entirely towards the third transaction. Since $27,811.14 represents almost 90% of $US30,995.80 ($US27,896.22), the respondent says that it has for practical purposes discharged its obligation relating to the third transaction, if one accepts its consignment sale case (which entitled it to retain 10% of the invoice value). What this means as regards obligations touching the first two invoices is largely unexplored. To my mind, it is critical that each of the three invoices (with their accompanying diamonds) were sent by the appellant and received by the respondent before any payments were made. The invoices were sent in July and August 1986. The respondent made its first payment, in March 1987, well after the expiry of the credit period stipulated in the third invoice. That payment was only made after four letters of demand had been sent to the registered office of the respondent, at least according to the evidence of the appellant's principal witness Mr Dinesh Shah. True it is that the principal of the respondent denied receipt of the letters. But the fact that none of them appear to have been returned unopened to the appellant carries some evidentiary weight. Throughout this period no letter passed from the respondent to the appellant denying the indebtedness asserted in the invoices. I have not overlooked the fact that it was the respondent's case, denied by the appellants, that the invoices were shams designed to deceive the customs authorities in India. But that discreditable purpose was not established to the satisfaction of the trial judge. The learned trial judge rejected the credibility of the principals of each party. He was unable to decide between the witnesses where the truth lay as to the nature of the third transaction. Ultimately, his Honour found that the appellant's claim failed "on the probabilities". In my view this conclusion overlooked the inference properly and firmly to be drawn from the fact that, subsequent to receipt of the third invoice, the respondent tendered sums which in total corresponded very closely to the amount claimed in the first invoice and exactly to the amount claimed in the second. The third and fourth payments total $10,843.10, which was the amount of the second invoice. The only conclusion I can draw is that these amounts were tendered in full payment of the first two URJ SHAH v BULUMA PTY LTD (Meagher JA) 3 invoices. The inherent admission strongly supports the appellants' case and strongly contradicts the respondent's case. It is rare for a credibility-based finding of a trial judge will be overturned on appeal. The principles are well known. In Khafam Developments Pty Ltd v Zeaiter & Ors (Court of Appeal, unreported, 3 October 1996) this Court overturned the findings of a trial judge that proceeded upon a preference of the evidence of the respondent's principal over the evidence of the appellant's principal. There were records of payments which strongly supported the appellant's case and contradicted that of the respondent. The leading judgment in Khafam Developments was delivered by Handley JA (with whom Sheller JA and Abadee AJA agreed). Referring to the facts, Handley JA said (at p11-p12): However these payments, Mr Zeaiter's statements when they were made, and the associated documentation, unless explained, strongly supported the appellant's case. As Jacobs J said in Voulis v Kozary (1975) 180 CLR 177 at 193: "Admissions so made must be given very great probative value. Their value cannot be simply displaced by an unfavourable view of the credibility in his evidence or parts thereof of the party who seeks to rely on them. That value may only be displaced by a convincing explanation of how they came to be made In my view this reasoning has application in the present case. Ihave not overlooked the slight discrepancies between the total of the first two payments and the amount claimed in the first invoice. And the respondent points to the fact that the total of the four payments corresponds roughly to 90% of the sum claimed in the disputed third invoice. However the probabilities firmly support the appellant. After all, the respondent's monetary discrepancies are greater, and the appropriation of the entirety of the four payments towards the third invoice offers no explanation for the first two invoices remaining entirely unpaid. The appellant's case finds vital corroboration in the evidence of Mr Mehta, who is the principal officer of the respondent. At AB 249 Mr Mehta was being asked why he had never sent any document to the appellant explaining that the four lots of payments he had tendered represented approximately 90% of the sum claimed in the third invoice. In this context the following exchange occurred: Q. But with none of those lots did you send a document, or a letter, or an account setting out what you were keeping out of the invoice amount, did you? A. When I sent last money in December 1987 that time second was fully paid. I didn't thought that this thing is going to be - I don't like this, because if this thing is going to be like that, I will keep everything - everything on record.... (emphasis added) The words emphasised amount to an admission on behalf of the respondent that the payments were referable to the first two invoices, at least in part, and that the fourth and last payment "fully paid" the second invoice. This answer cannot be reconciled with the explanation proffered by the respondent to explain the payments. Rather it corroborates the appellant's case to a significant degree. I agree with the orders proposed by Meagher JA. The interest is calculated at District Court rates from 17 November 1986 to 24 May 1996 (see Court of Appeal transcript p28-p29). Meagher JA This is an appeal from a decision of Stewart DCJ by a disappointed vendor. Dinesh & Co alleged that it had sold diamonds to Buluma Pty Ltd and had not been paid for them. 4 UNREPORTED JUDGMENTS It is unnecessary, and in the circumstances undesirable, to recount the evidence before his Honour, which lasted several days. That is because of his Honour's findings on credibility. Mary McCarthy once said of Lillian Helman that every word she wrote was a lie, including "and" and "the". His Honour's findings on the credibility of both the plaintiff and the defendant are hardly less coruscating. We know as a fact that the plaintiff, purporting to be a vendor, sent invoices to the defendant on three occasions: 15 July 1986, 14 August 1986 and 19 August 1986, for the amounts of $17,118.70, $10,843.10 and $30,995.80 (all figures are in US$). His Honour found that those invoices were sent, but was unable to say whether or not they reached the addressee. It was common ground that the following payments were made by the defendant to the plaintiff (these figures are in US$): 1. 8 March 1987 $12,282.27 2. 10 June 1987 $4,685.77 3. 9 October 1987 $5,000.00 4. 18 December 1987 $5,843.00 It was common ground that the subject matter of all these invoices (ie low quality diamonds) did reach the defendant's hands. The plaintiff sued on the third invoice, alleging it was unpaid. It also alleged non payment of the first two invoices, but for tactical reasons did not sue on them, presumably appropriating all payments to the first two invoices. The defendant's case was that the first two packets of diamonds (referred to in the first two invoices) were not sales at all, but were to be held by it as agent for the plaintiff, to whom it ultimately handed them. As to the third parcel of diamonds (referred to in the third invoice of $30,995.80), the defendant says it was entitled to 10% of the proceeds of sale. It pointed to the fact that if one added up the amounts of the payments made by the defendants, they were approximately 10% less than the figure of $30,995.80. However, the defendant was quite unable to explain why it was that the aggregate of the third and fourth payments precisely equalled the amount of the second invoice, a circumstance it would be impossible to explain unless they related to a sale evidenced by that invoice. And if the second invoice reflected a sale, it is more likely than not that the plaintiff was, despite himself, telling the truth when he said that the third invoice effected a sale. Therefore, whilst not seeking in any way to disturb his Honour's findings on credibility, it would seem that the documents render the plaintiff's story more probable than not. I propose that the following orders should be made: 1. Appeal allowed; 2. Judgment below set aside; 3. In lieu thereof, order judgment be entered for the plaintiff effective from 12 July 1996 in the sum of US$30,995.80 together with interest pursuant to s83A of the District Court Act, being an agreed total in the sum of US$94,644.15. 4. Order the defendant to pay the plaintiff's costs in this Court and below, but to have a certificate under the Suitor's Fund Act in relation to its costs in this Court. URJ SHAH v BULUMA PTY LTD (Fitzgerald AJA) 5 Fitzgerald AJA The essential issue in this case is whether three consignments of diamonds sent from the appellants in India to the respondent in Australia were sold by the appellants to the respondent. The appellants claim that they have been paid for the first two consignments, but not for the third, an amount of US$30,995.80. The respondent contends that it did not purchase the diamonds from the appellants, that it returned the diamonds which were the subject of the first two consignments to the appellants, and that it sold the third consignment of diamonds as agent for the appellants, retained its agreed commission of 10%, and remitted US$27,801.04 to the appellants. It is common ground that the respondent has made the following payments to the appellants: 8 March 1987 US$ 12282.27 16 June 1987 US$ 4685.77 16 October 1987 US$ 5000.00 7 January 1988 US$ 5843.10 Total US$27,811.14 It is also common ground that each consignment from the appellants to the respondent was accompanied by an invoice. The details of the invoices are as follows: 15 July 1986 US$17118.70 14 August 1986 US$10843.10 19 August 1986 US$30995.80 The trial judge found that the appellants and the directors of the respondent who gave evidence were all unreliable witnesses. That unreliability extends to the invoices as evidence of sales, since the invoices were prepared by the appellants and were necessary for the appellants to gain a benefit under Indian law as exporters. Each party relied upon the figures referred to above to support its case, Thus, the first invoice was for $17,118.80 and the first two payments made by the respondent to the appellants totalled $16,968.0. The second invoice was for $10,843.10, and the remaining payments by the respondent exactly aggregated that amount. Conversely, 90% of $30,995.80 is $27,896.22, and the total of the amounts which the respondent paid the appellants is $27,811.14. The most compelling of the exercises described in the previous paragraph is the precise correspondence between the amount of the second invoice and the final two payments made by the respondent to the appellants. However, it might be suggested that it is equally significant that the earlier two payments by the respondent do not equal the amount of the first invoice. Overall, the correspondence of the amounts involved in each of the exercises is substantial, especially when the method of payment, involving currency exchanges and transfers through the appellants' Indian bank, is taken into consideration. The overriding consideration, in my opinion, is that the trial judge accepted the evidence of a number of independent witnesses called by the respondent, whose evidence, broadly stated, was that, after the diamonds had been received by the 6 UNREPORTED JUDGMENTS respondent, they were seen in the possession of the appellant Dinesh Atolal Shah, who was attempting to sell them. That circumstance was denied by the appellants and is inconsistent with their case. In these circumstances, although the reasons for judgment of the primary judge are less than satisfactory to explain how he reached his conclusion, I am not persuaded that that conclusion was wrong or that the inadequacy of the reasons is such as to amount to error of law warranting a new trial. I would dismiss the appeal, with costs. 1. Appeal allowed; 2. Judgment below set aside; 3. In lieu thereof, order judgment be entered for the plaintiff effective from 12 July 1996 in the sum of US$30,995.80 together with interest pursuant to s83A of the District Court Act, being an agreed total in the sum of US$94,644.15. 4. Order the defendant to pay the plaintiffs costs in this Court and below, but to have a certificate under the Suitor's Fund Act in relation to its costs in this Court. Counsel for the appellant: A W Street SC/M Evans Solicitors for the appellant: Blake Dawson Waldron Counsel for the respondent: C Evatt/M Rollinson Solicitors for the respondent: Ramrakha Jenkins