Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Brendas v Genter [2018] NSWCA 8 Hearing dates: 8 February 2018 Date of orders: 08 February 2018 Decision date: 08 February 2018 Before: Basten JA; Payne JA; Sackville AJA Decision: (1) Appeal dismissed; (2) Appellants to pay the respondent's costs of the appeal as agreed or assessed. Catchwords: EVIDENCE – whether respondent had made admission as to appellants' right to immediate possession – probative value of admission made– whether inference should be drawn from respondent's failure to give evidence at trial PERSONAL PROPERTY – machinery owned by company in administration – machinery left with defendant – former director and guarantor of company's debts claims entitlement to machinery – whether basis of entitlement established Legislation Cited: Evidence Act 1995 (NSW), Pt 3.4 Cases Cited: Gollan v Nugent (1988) 166 CLR 18; [1988] HCA 59 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Kuhl v Zurich Financial Services Australia Limited (2011) 243 CLR 361; [2011] HCA 11 Lustre Hosiery Ltd v York (1935) 54 CLR 134; [1935] HCA 71 Mitchell v Cullingral Pty Ltd [2012] NSWCA 389 Nguyen v Cosmopolitan Homes [2008] NSWCA 246 Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; [1946] HCA 46 West v Government Insurance Office of New South Wales (1981) 148 CLR 62; [1981] HCA 38 Texts Cited: Australian Law Reform Commission, Evidence (Interim), Report No 26 (1985) vol 1 Category: Principal judgment Parties: Spiros Brendas (First Appellant) Beverly Brendas (Second Appellant) Craig Genter (Respondent) Representation: Counsel: M Cashion SC / D Raphael P Greenwood SC / G Babe Solicitors: Bevan & Co Lawyers (Appellants) Aulich Civil Law Pty Ltd (Respondent) File Number(s): 2017/220894 Decision under appeal Court or tribunal: District Court of New South Wales Jurisdiction: Civil Citation: [2017] NSWDC 167 Date of Decision: 04 July 2017 Before: Mahony SC DCJ File Number(s): 15/178999 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. THE COURT: The Court heard argument in this matter on 8 February 2018 and at the conclusion of the hearing made the following orders: 1. Appeal dismissed; 2. Appellants to pay the respondent's costs of the appeal as agreed or assessed; 3. Reasons reserved. 1. These are our reasons for making those orders. 2. The issues raised by this appeal are in a narrow compass. Essentially, determination of the appeal turns upon the effect of two short passages of oral evidence. Although the primary judge did not give close consideration to these passages of evidence (they not being at the forefront of the appellants' submissions at trial), his Honour's ultimate conclusion that the appellants had failed to prove an essential element of their claim was correct. The pleaded case 1. In the Second Amended Statement of Claim, the appellants, Spiros and Beverly Brendas, pleaded that: 1. a corporation, Kenoss Pty Ltd (Kenoss), was the owner of a Caterpillar 330B excavator and a Caterpillar 815B compactor ("the Caterpillar machines") with a combined value of $350,000, together with a hammer and bucket apparently used in the operation of the Caterpillar machines with values of $75,000 and $4,000 respectively; 2. in December 2013, Kenoss went into voluntary administration. Upon Kenoss entering into voluntary administration Messrs Adams and Landery of FTI Consulting were appointed receivers; 3. the receivers engaged GraysOnline Auctions ("Grays") as contractors to take possession, and arrange and manage storage, of all the assets of Kenoss, including the Caterpillar machines; 4. on or after January 2014, an agent of Grays entered into an agreement with the respondent, Craig Genter, for the storage of the Caterpillar machines at his property at 402 Royalla Drive, Royalla. The receivers had "full title and ownership" to the Caterpillar machines at that time; and 5. on or before 2 February 2015, the appellants and the receivers entered into an agreement whereby certain assets of Kenoss, including the Caterpillar machines, were transferred to the appellants. It was also asserted that the appellants obtained a right to immediate possession of the Caterpillar machines "by way of subrogation". 1. The respondent admitted that in about January 2015 he took possession of the Caterpillar machines from a Mr Ahmed Chehalta (who was not otherwise referred to in the evidence), who identified himself as a representative of a business trading as ACT Towing. The respondent did not admit any of the allegations contained in any of the relevant paragraphs of the Second Amended Statement of Claim. The evidence before the primary judge 1. The oral evidence before the primary judge consisted of oral evidence from the first appellant, Spiros Brendas, his daughter Ms Constantina Majstorovic, a Mr Paul Knowles, a Mr Peter Ronzano and a Mr Ian Scensor. The documentary evidence comprised some photographs of earthmoving equipment, a notice of the cancellation of an earthmoving equipment auction, and some typewritten notes of a conversation which occurred between Ms Majstorovic and the respondent on 5 March 2015. Other than the oral evidence of the first appellant and Ms Majstorovic it was not suggested by the appellants that any of the other evidence bore upon the question raised by this appeal. 2. The first appellant gave evidence that he was at one time a director of Kenoss and that Kenoss was associated in some way with the Brendas Family Trust. The first appellant stated that he controlled Kenoss, and that Kenoss, on an unidentified date but presumably in 2014, went into voluntary administration. There was some documentary evidence (contained in the notice of cancellation of an earthmoving equipment auction) that Kenoss was eventually subject to a deed of company arrangement. Prior to going into administration, Kenoss owned a Caterpillar 330B machine. 3. The first appellant gave evidence that the administrator "took a lot of machines". This evidence was contrary to the pleaded case that it was the receiver who had taken possession of the Caterpillar machines. There was, however, documentary evidence that in 2014 FTI Consulting (the entity identified in the pleading as the employer of the receivers) was instructing Grays in the matter of Kenoss about the auction of, inter alia, a Caterpillar 330B excavator. 4. On 9 February 2015, the first appellant attended the property of the respondent with his daughter Ms Majstorovic and an employee of Grays, Mr Hawkes. The first of the critical conversations relied upon by the appellants in this Court was described by first appellant as follows: Q: Did you speak to Mr Genter? A: Yes Q: He call my name. He say "Hello, Spiros, how are you?", I say, "Good" Q: What did you tell Mr Genter? A: I say, "We coming here to get my machines" and he said to me "Anytime you want" Q: Did you get your machines? A: Well, we can't get the machines that day. They was 40 tonnes each. I talked to him. I say "Can I leave the machines here for a little while. Soon Caterpillar people come, check the machines and they'll take it". He say, "No problem, Spiros" 1. Ms Majstorovic gave evidence about a conversation she said took place in 2014 with the respondent, although she said "I can't remember the exact date". In oral address, Mr Cashion SC, who appeared with Mr Raphael for the appellants, submitted that the Court should conclude that the conversation was the same one as was described by the first appellant immediately above as taking place in February 2015. Ms Majstorovic attended at the respondent's premises with her father and Mr Hawkes of Grays. Her evidence was: A: So I asked, "How did the machines get here?" And he [Mr Genter] said, "My son is friends with Ahmed the tow truck driver and he asked if he could store them here". They – and then he said, "They have not been any problem being here because I have land". Then he said – sorry, then I said, "Can we please leave them here til we get a mechanic to look at them?" And he said, "Yes that is fine". He then said that his only issue would be that he wanted to make sure – "do not damage my driveway when you take the machines out", and I said "We won't damage your driveway when we take the machine out". 1. Ms Majstorovic also gave evidence, which was not the subject of an objection, that Mr Hawkes of Grays said to the respondent that he is there representing Grays and "We've come to collect the machinery which now can be returned to Mr Brendas." 2. Ms Majstorovic gave evidence that she telephoned the respondent on 5 March 2015. The record of the telephone conversation, which was exhibit G before the primary judge, includes the following: "Majstorovic: I'm trying to find one of our machines. We understand it has been moved from your property. Can you please tell me where it is? Genter: I don't know where it is. Majstorovic: What do you mean? Genter: A friend of mine has it but I don't know the address. I tried to tell Spiros today that I don't know the actual address, but I know where it is. He just started fucking yelling and carrying on. Majstorovic: Right. So how do I find out the address? Genter: My solicitor said Spiros can't have the machine. He's in liquidation. It's not his machine. Majstorovic: Really. You called a solicitor! OMG, your solicitor has got it wrong. What made you call a solicitor? Genter: Well, Spiros rang me up and was yelling and swearing at me and said "Where's my fucking machine?", so I called my solicitor and he investigated and called the liquidator and said "It's not Spiros' machine and don't give it to him. He has no authority to the machine. Majstorovic: Don't you remember the guy from Grays auction? He was handing the machine over to Spiros. I feel sorry you don't understand and you wouldn't, as you are not close to the situation, but I can tell you the machines belong to Spiros. Genter: Yeah, well unless my solicitor says so, I don't believe it. Majstorovic: Oh, your solicitor. What would he know about the Kenoss situation? Genter: He called the liquidator who said Spiros can't have the machines back and not to give it to him. …" 1. The photographic evidence depicted various of the Caterpillar machines. Those photographs depicted one of the Caterpillar machines on the property of a Mr Knowles who gave evidence that it may have been placed there by the respondent. 2. There was no evidence before the primary judge that: 1. the second appellant, Mrs Brendas, had any role or relationship with the Caterpillar machines; 2. Kenoss entered into any financing agreement with any particular financial institution or that there was a security interest giving that financier the right to appoint a receiver over Kenoss' property, including the Caterpillar machines; 3. receivers were appointed to hold Kenoss' property, including the Caterpillar machines, or that those receivers ever obtained title to any of the Caterpillar machines; 4. the receivers appointed Grays as their agents (there is evidence in the document advising about the cancellation of an earthmoving auction in relation to the matter of Kenoss said to have been listed for 26 October 2014. The notice lists one collection point for assets as being Shira Road, Royalla. The notice contains on the back a photograph of a Caterpillar 330B excavator); 5. Grays entered into an agreement with the respondent for the storage of the Caterpillar machines at his property; 6. the appellants were the guarantors of any facility Kenoss entered into with any financial institution; 7. the appellants entered into any agreement with the receivers to obtain any interest in the Caterpillar machines or obtained any right by principles of subrogation to possession of the Caterpillar machines. Decision of the primary judge 1. The decision of the primary judge was admirably succinct. His Honour identified the critical issue as whether the plaintiffs had proved, as alleged in the Second Amended Statement of Claim, that the appellants and the receivers had entered into an agreement whereby certain assets of Kenoss, including the Caterpillar machines, were transferred to the appellants or whether the appellants by way of subrogation had a right to immediate possession of the machines prior to February 2015. 2. The primary judge then set out the written outline of submissions prepared by the appellants prior to the hearing which contained the following assertion: "6. The defendant now accepts the title to, and the property in, the plant vests in the plaintiffs". 1. The primary judge explained that this submission misapprehended the defence to the Second Amended Statement of Claim and misstated the respondent's position. The primary judge recorded that this misunderstanding may explain why the appellants "failed to adduce evidence of the agreement alleged to have taken place between them and the receivers on 2 February 2015". 2. The primary judge then set out the history of the interpleader proceedings at [53]-[56]. This may be passed over as the appellants in this Court no longer rely upon the interpleader proceedings as providing any basis to support their claim. 3. The primary judge concluded that (at [57]): "The plaintiffs adduced no evidence whatsoever of the loans referred to, namely by Bank West and the Rural Bank, or any evidence that either bank had released to the plaintiffs, whether pursuant to an asserted right of subrogation as guarantors, or pursuant to Consent Orders of the Supreme Court, any rights held over the property of Kenoss so that the right title and interest and property in the machinery, the subject of these proceedings, vested in the plaintiffs absolutely or otherwise". 1. The primary judge found that, in the absence of that evidence, and in the absence of any evidence of any agreement between the appellants and the receivers, the appellants had failed to establish their right, title or interest in the machines that were the property of Kenoss and that their claim must fail. The issue on appeal The appellants' case 1. The appellants' Amended Notice of Appeal contained three grounds as follows: 1. His Honour erred in overlooking or discarding material evidence; namely, the unchallenged and uncontradicted evidence that on two separate occasion [sic] and to two different people the respondent had acknowledged that the appellants were entitled to immediate possession of the machines. (These are the conversations recorded at [9]-[10] above.) 2. His Honour erred in holding that the appellants had failed to establish their right title and interest in the machines. 3. His Honour should have found that the appellants had established title to sue in both conversion and detinue, namely, an immediate right to possession of the machines, the bucket and the hammer. 1. As noted at the outset, no submission or ground of appeal addressed the possibility that the interpleader proceedings were relevant to the issues on the appeal. Those proceedings can thus be put to one side. 2. The appellants submitted that, perhaps distracted by the matters which lacked an evidentiary foundation, the primary judge overlooked or discarded two "brief but crucial pieces of oral evidence which were unchallenged and uncontradicted". These are the conversations set out at [9]-[10] above. 3. Thus, it was submitted, "the respondent had acknowledged that the machines were the appellants' machines, that the appellants were entitled to immediate possession of them and that they could remove them from his property". 4. It was submitted that the evidence contained in these two conversations established an immediate right to possession of the equipment in the appellants. The respondent's submissions 1. The respondent submitted that the "acknowledgements" relied upon by the appellants do not establish that the appellants had any right to immediate possession of the Caterpillar machines. It was submitted that the appellants had led no evidence to establish that the respondent had, at the time of the conversation, any knowledge about the rights to the machines and that any acquiescence by the respondent to assertions made by the first appellant or Ms Majstorovic is of no probative value. 2. The appellants pleaded transfer of ownership as arising from subrogation, presumably to the lender's rights. Those allegations were not admitted. The appellants' right to possession was in issue at all times. 3. The appellants led no evidence before the primary judge that they in fact acquired any interest in any equipment that was owned by Kenoss nor did they attempt to prove the circumstances enlivening any right of subrogation. In the absence of such evidence the appellants' reliance on the initial acquiescence by the respondent to unsupported assertions is of no probative value. 4. The respondent relied upon West v Government Insurance Office of New South Wales (1981) 148 CLR 62; [1981] HCA 38 at 66; Kuhl v Zurich Financial Services Australia Limited (2011) 243 CLR 361; [2011] HCA 11 at [63]; Nguyen v Cosmopolitan Homes [2008] NSWCA 246 at [44]-[45]; and Mitchell v Cullingral Pty Ltd [2012] NSWCA 389 at [116] to reinforce the general proposition that no inference could be drawn from the acquiescence by the respondent to assertions made by the first appellant or Ms Majstorovic. Consideration 1. In their written submissions the appellants accepted that they had pleaded, and that the respondent did not admit, that the receivers had transferred the Caterpillar machines to them and that, at all relevant times, the appellants were the owners and entitled to immediate possession of the Caterpillar machines. That concession about the effect of the pleadings was correctly made. 2. The appellants correctly observed that the title to sue in both conversion and detinue is an immediate right to possession of the relevant property: Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204; [1946] HCA 46 at 229 (Dixon J) and 241 (Williams J); Gollan v Nugent (1988) 166 CLR 18; [1988] HCA 59 at 24-25 (Brennan J). 3. The critical issue is whether the appellants had an immediate right to possession of any relevant property. That could have been demonstrated in a number of ways including, for example, tendering documents proving an agreement between the receivers and the appellants transferring title to the machines or leading oral evidence establishing that the appellants had an interest in the machines. None of those things were done. The only evidence relied upon as establishing the appellants' immediate right to possession of any relevant property was the admission(s) contained in in the conversations at [9]-[10] above. 4. Whilst the evidence relied upon by the appellants was admissible as an admission, as personal knowledge or belief in the fact admitted is not required, it does not follow that it was probative of the relevant fact in issue, being whether the appellants had an immediate right to possession of any of the Caterpillar machines. 5. In Lustre Hosiery Ltd v York (1935) 54 CLR 134; [1935] HCA 71 the High Court per Rich, Dixon, Evatt and McTiernan JJ held that (at 138-139): "No doubt an admission made by a party as to the correctness of a fact is admissible in evidence notwithstanding that the party has no direct knowledge of the fact and must rely for his belief upon the statements of others, or upon inferences from circumstances which he knows, or which have been reported to him. But such an admission may indicate a state of mind varying from a firm belief based upon a thorough investigation of the existence or occurrence of the fact down to a wavering preference for one of two or more possible hypotheses none of which have been tested or determined. It is apparent that the admissibility of the evidence must be distinguished from its sufficiency to establish or support an affirmative conclusion in favour of the party who tenders it, when the burden of proof lies upon that party. It does not follow that, because such evidence is admissible, it is enough to prove the issue". 1. The High Court went on to conclude, following a discussion of earlier authority, that (at 143-144): "This course of authority seems consistent with the view that words or conduct amount to an admission receivable in evidence against the party if they disclose an intention to affirm or acknowledge the existence of a fact whatever be the party's source of information or belief. In determining whether he intends to affirm or acknowledge a state of facts the party's knowledge or source of information may be material. For if he states that another person has told him of it, and it appears that he has additional sources of information to the like effect, it may be right to understand him as implying a belief in what he repeats. Or, again, a person who fails to contradict a statement concerning matters within his own knowledge may be understood as acquiescing in the statement if the circumstances are such as to make it unlikely that he would allow an erroneous statement to pass unchallenged. But, although the meaning of his words or conduct may depend upon the state of his knowledge, once that meaning appears and an intention is disclosed to assert or acknowledge the state of facts, its admissibility in evidence as an admission is independent of the party's actual knowledge of the true facts. When admitted in evidence, however, its probative force must be determined by reference to the circumstances in which it is made and may depend altogether upon the party's source of knowledge". [italics added] 1. The position remains the same under the Evidence Act 1995 (NSW). The Australian Law Reform Commission in its report Evidence (Interim), Report No 26 (1985) vol 1 at 424 [755],explained: "Under existing law, admissions which are not based on personal knowledge are admissible if there is evidence of belief in the fact admitted. It is proposed to retain this approach. While the assumption that admissions are generally trustworthy is not so persuasive where the admission is not based on personal knowledge, such admissions will, when tendered in evidence, usually concern some matter of substantial importance to the declarant upon which he has informed himself, so that they possess greater reliability than hearsay in general. Further, if admissions were only admissible when based on first-hand observation, enormous evidentiary difficulties would follow since much of the 'knowledge' which a person accepts as factual might be traced to a hearsay basis. What matters is the probative value of the admission, and this will depend on a variety of factors, including the sources on which it is based. Nevertheless, its probative value is likely to be high, where he or she made it with the belief that it was true and with knowledge of or the opportunity to check the reliability of the informants. In these circumstances a rule of inadmissibility seems inappropriate." 1. The Evidence Act in "Part 3.4 Admissions" retained this approach and does not require personal knowledge as a condition of admissibility of an admission. What matters is the probative value of the admission. 2. In all of the circumstances of this case, the subjective belief of the respondent about whether the appellants had an immediate right to possession of certain property was not probative of that fact. There was no evidence from which it could be inferred that the respondent had been told by anybody or had any independent knowledge about any of the matters necessary to establish that the appellants had an immediate right to possession of the Caterpillar machines. Indeed, the evidence was that after the conversations referred to in [9]-[10], the respondent had spoken to his solicitor who had said "…Spiros [the first appellant] can't have the machine. He's in liquidation. It's not his machine" and that "I called my solicitor and he investigated and called the liquidator and said 'It's not Spiros' machine and don't give it to him. He has no authority to the machine'": see [12]. That evidence strongly suggests that the respondent, prior to communicating with his solicitor, had no relevant knowledge of the appellants' rights to possession of the Caterpillar machines. There was also evidence, given by Ms Majstorovic, that Kenoss was in liquidation. How that evidence was consistent with the appellants' theory concerning their asserted rights of subrogation was not explained. 3. In some ways, the evidence of Ms Majstorovic about what Mr Hawkes of Grays said in the first conversation (referred to at [11] above) is the closest to evidence probative of the critical issue. The difficulty confronting the appellants, however, is their failure to prove any relationship between Kenoss, the receivers of Kenoss, the appellants and Grays which might give that evidence probative force. Absent such evidence, the statement attributed to Mr Hawkes does not give the respondent's admission recorded at [9]-[10] any probative weight. 4. The failure of the respondent to give evidence does not, in the circumstances of this case, permit an inference to be drawn that the appellants had an immediate right to possession of the Caterpillar machines. As Heydon, Crennan and Bell JJ explained in Kuhl at [63], the rule in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 is that the unexplained failure by a party to call a witness may support an inference that the uncalled party would not have assisted the party's case. Whilst the failure to call a witness may also permit the court to draw, with greater confidence, an inference unfavourable to the party that failed to call the witness, the whole of the evidence here does not lead to any inference that the appellants had an immediate right to possession of the Caterpillar machines. The appellants' point is not improved by the repetition of the assertion that the right of immediate possession was "proved by the evidence of the acknowledgement made by the respondent". 5. The appellants in their oral submissions accepted that no submission was made at the trial that the two conversations now relied upon as determinative were relevant to any issue in the proceedings. The submission that this evidence was "determinative" was not made to his Honour, and no doubt for that reason his Honour referred to the evidence only briefly. The criticism of the primary judge for not dealing with this evidence as thoroughly as the appellants now submit he should have is unwarranted. 6. Having regard to all of the evidence, and determining the probative force of the admissions by reference to the circumstances in which those admissions were made, we have concluded that those admissions make no difference to the outcome of this case. The primary judge was correct to conclude that the appellants had failed to prove any right, title or interest in the Caterpillar machines including any immediate right to possession. The respondent's apparent belief that, at least for a short period of time in 2014 or early 2015, the first appellant then had a right to immediate possession of at least one of the Caterpillar machines was not, in context, at all probative of the critical fact in issue, that is, whether the appellants had at that time any immediate right to possession of the Caterpillar machines. 7. Finally, as Mr Cashion SC accepted in his oral submissions in reply, there is no basis in the evidence to conclude that the second appellant had any right, title or interest to the Caterpillar machines. The appellants' case was pleaded and conducted at all times before the primary judge on the basis that the appellants had an immediate right to possession to the Caterpillar machines. The concession that the second appellant had no right, title or interest to the Caterpillar machines is inconsistent with the only case conducted by the appellants before the primary judge. For this additional reason the appeal must fail. 8. The appeal should be dismissed. The foregoing comprise our reasons for the following orders made on 8 February: 1. Appeal dismissed; 2. Appellants to pay the respondent's costs of the appeal as agreed or assessed. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 09 February 2018