Halge v George [2004] WASCA 141

Appeal - Error of fact - Failure to address all the evidence - Circular and inconsistent reasoning - Error of law - Duty to give reasons - Purposes underlying the duty to give reasons - Inadequate and unsatisfactory reasons given

Appeal - Powers and functions of appellate court - Obligation to give the decision that ought to have been given at first instance - Duty to observe limitations imposed on appellate court proceeding substantially on the record - Whether decision "glaringly improbable" or "contrary to compelling references" - No basis for substituting decision at first instance for appellate decision

Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1

Danagher v Racing Penalties Appeal Tribunal (1995) 13 WAR 531

Devries v Australian National Railways Commission (1993) 177 CLR 472

Garrett v Nicholson [1999] WASCA 32; (1999) 21 WAR 226

NRMA Insurance Ltd v Tatt (1989) 94 FLR 339

State Rail Authority of NSW v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3; (1999) 73 ALJR 306

Stojkovski v Fitzgerald [1989] WAR 328

Suvaal v Cessnock City Council [2003] HCA 41; (2003) 77 ALJR 1449

Tran v Claydon [2003] WASCA 318

Walsh v Law Society of NSW [1999] HCA 33; (1999) 198 CLR 73

Wing Luck Foods v Lay Choo Lim [1989] WAR 358

1 STEYTLER J: I have had the advantage of reading the judgment of Le Miere J. I agree with it and with his conclusion that the appeal should be allowed and a new trial ordered. There is nothing I wish to add.

2 MILLER J: I have had the opportunity of reading in draft the reasons for judgment of Le Miere J. I agree with those reasons and with the orders proposed by his Honour. There is nothing I wish to add.

3 LE MIERE J: The appellant was the plaintiff in a District Court action in which he claimed $210,804 being the unpaid balance of the purchase price of land sold by the appellant to the respondent. The respondent claimed to have paid the whole of the purchase price and counter-claimed for about $200,000 for damages for misrepresentation or deceit. The trial Judge found that the respondent had paid the whole of the purchase price and dismissed the appellant's claim. The trial Judge also dismissed the counterclaim. The appellant has appealed against the dismissal of his claim. There is no appeal against the dismissal of the counterclaim.

4 The appellant was the owner of land in Madras, India. In 1969 the appellant left India and came to Australia. The appellant left his brother-in-law and his family in occupation of the land on which a flat was erected.

5 In 1983 the appellant returned to India and visited the property. He discovered a large shed had been erected on the front of the property from which a car repair business was being carried on. He also discovered two other buildings had been erected on the property. These had been erected with his brother-in-law's consent but without the appellant's knowledge. The appellant attempted to have the tenants evicted through legal proceedings but was unsuccessful and the occupier of the car repair business, Mr P Narayanan, obtained an injunction to restrain the appellant from taking action (other than court action) to remove him. The appellant decided to sell the land.

6 In 1995 the appellant was introduced to the respondent who was a property developer in Madras. Both the appellant and the respondent resided in Perth. The respondent gave evidence that the plaintiff told him of the occupiers of the land but said they were mere trespassers who could easily be removed. The respondent says he relied upon that information and entered into a contract to purchase the land. The appellant gave evidence that at all times he advised the respondent of the true position including the fact that there had been court proceedings which had ended

favourably for Narayanan. The trial Judge did not accept the respondent's evidence on that point.

7 The trial Judge further found that whatever the appellant told the respondent about the occupiers of the land the respondent did not rely on it. The respondent went to India in 1995 to find out for himself. The occupiers of the property refused to speak to him. He attempted to obtain information from the Tamil Nadu Housing Board but they also would not give him information. The respondent had with him a letter from the appellant authorising him to deal with the property, but it was not in the proper form of a power of attorney and hence the difficulty he encountered. The respondent returned to Australia.

8 On 9 December 1995 the parties executed an agreement of sale. The respondent's solicitors in Madras prepared the agreement. The trial Judge found that the terms of the agreement of sale are consistent with the knowledge by the respondent of the occupiers and an acceptance by him that it was his responsibility to do whatever was necessary to have them removed from the land.

9 The agreement of sale provides that the appellant shall sell the land to the respondent for Rs 60.00 lakhs. (1 lakh equals 100,000 rupees. The February 1996 average exchange rate for Indian Rupees to Australian dollars was Rs 27.6482 equals $1).

10 The agreement provides that the appellant had been paid that day a sum of Rs 50,000. The agreement goes on to provide that the respondent shall pay the balance of the purchase price, Rupees fifty nine lakhs fifty thousand (Rs 59,50,000), within a period of 6 months from the date of the appellant getting the pucca sale deed from the Tamil Nadu Housing Board and obtaining a "no objection certificate" from the revenue authorities. A pucca sale deed is necessary before land can be transferred.

11 After the respondent signed the agreement of sale and got a power of attorney from the appellant, he returned to India. He found that evicting the occupiers from the land was a bit more complicated than he had thought. He asked the appellant to set out in detail the history of the property. The appellant prepared a handwritten document dated 21 February 1996. The learned trial Judge found that the handwritten statement told the respondent the true picture.

"In my opinion the [appellant] is an honest person. He now, because of age (aged 84 at trial), cannot remember many things but in 1995 he well knew of the true situation of the occupiers. In my opinion he always told the [respondent]."

13 The appellant and the respondent went to Madras in May 1996 to arrange for the pucca sale deed. The deed was obtained from the Tamil Nadu Housing Board and is dated 21 May 1996.

14 The respondent gave evidence to the following effect. He paid the balance of the purchase price to the appellant in cash at the respondent's house in Madras on 11 June 1996. His brother, Jayasingh Gyanakkan and his brother's son, Jayasingh Rajhumar, were present when the money was paid to the appellant. He obtained the cash from his brother. The respondent and his brothers owned property in Madras which had been developed. Mr Gyanakkan owns a large theatre. Within the theatre there is a safe into which is put, amongst other things, the proceeds of land sales awaiting distribution to the brothers, including the respondent. At the request of the respondent, Mr Gyanakkan arranged for the cash to be taken from the safe and delivered to the respondent's house.

15 Evidence was given by each of the respondent's brother and nephew that they had been present at the respondent's house in Madras when he delivered the cash to the appellant in payment of the balance of the purchase price.

16 The appellant gave evidence to the following effect. The respondent did not pay him the balance of the purchase price or any money in Madras on 11 June 1996. Between August 1997 and December 1998 the respondent paid to him various amounts in reduction of the outstanding purchase price. Those amounts were recorded in a small brown notebook that became exhibit 10. The respondent did not pay him any part of the outstanding purchase price except for the amounts recorded in the notebook.

17 The respondent produced a receipt for the payment of the purchase price. The receipt is on Indian Revenue Stamp paper. The revenue paper bears on its face markings to the effect that it was purchased in Madras on 29 May 1996. It is dated 11 June 1996. In its terms the receipt records that the appellant acknowledged receipt of the following amounts:

"(1) Rs 50,500 (Rupees fifty thousand five hundred) deposited in my account at Andhra Bank, Chetput, Madras.

(2) Rs 59,49,500 (Rupees 59 lakhs forty nine thousand five hundred) by way of cash."

18 The receipt goes on to acknowledge: "the above sum is in full and final settlement of the sale of the above said property and complete performance of the agreement of sale dated the 9th day of December 1995". At the foot of the document are two stamps. Over the stamps is what appears to be the signature of the appellant.

19 The respondent's evidence was that the receipt was prepared by the appellant on revenue paper purchased by the appellant or by someone on his behalf. The appellant denied that he had purchased the revenue paper or prepared the receipt on it. The appellant denied having signed the receipt.

20 The trial Judge said that revenue paper is purchased from revenue paper sellers. The purchaser has to identify himself and his name and the date are noted in pencil on the paper. Revenue paper sellers can be bribed to falsify the name or the date, but in the absence of evidence, such a finding should not be made. His Honour appears to have found that the revenue paper was purchased in Madras on the date it bears, 27 May 1996. His Honour found that the appellant could not have personally purchased the revenue paper. That would seem to be based upon the evidence of the appellant, supported by documentary evidence, that he stayed at the Rattan Tata officers' holiday home at Ootacamund, a hill station about 365 miles from Madras from 26 May to 8 June 1996. His Honour observed that the respondent, using the power of attorney he held from the appellant, could have obtained the revenue paper in the appellant's name, as it was a receipt for moneys to be paid by the appellant.

21 Part of the typing on the receipt is lighter than the other part. A forensic expert, Mr Houghton, gave the opinion that it had been typed on two different occasions. The typeface is from the same typewriter. The first part was typed using an old typewriter ribbon and the second part with a new one. The margin of the text in darker type does not line up precisely with the margin of the text in lighter type. The lighter type text recites that the appellant acknowledges receipt of the deposit, that is the payment of Rs 50,500. The darker type text acknowledges the receipt of the balance of the purchase price and that the above sum is in full and final settlement of the sale proceeds.

22 As I have said, the appellant gave evidence that the payments the respondent made to him or on his behalf between August 1997 and December 1998 in reduction of the outstanding purchase price were recorded in a small brown notebook. The entries in the notebook exhibit some variation in style. However, all of them were written by the respondent, contain a date, an amount and are signed or initialled by the respondent. Some of them have an additional note.

23 Except for the second entry and the last page of the notebook each entry in the notebook is on one side of a separate double page. The entries, omitting the amounts written in words and the signature or initials of the respondent are as follows:

Rs93,903.75 [this entry has a diagonal line through it]

The final page of the notebook is in the following form:

24 The appellant's evidence in relation to the payments recorded in the notebook is as follows. The appellant obtained the notebook. When the respondent made a payment to the appellant the respondent wrote it in the notebook and signed it as a record of the amounts paid on account of the outstanding purchase price. Except for the entries "Paid to Magic Carpet" and "Purchase of video camera" all of the entries record amounts of money paid by the respondent to the appellant. The Magic Carpet entry records that the respondent paid Magic Carpet Travel Company for an air ticket for the appellant to travel to India. The entry in relation to the video camera relates to the purchase by the respondent for the appellant of a video camera.

25 The respondent's evidence in relation to the notebook entries was as follows. The transactions recorded in the notebook took place, but they record payments made by the appellant to the respondent. The appellant deceived the respondent in relation to the occupation of the land. The land was occupied by a number of people who had some sort of legal claim to occupy the land, contrary to representations made by the appellant to the respondent prior to the respondent purchasing the land. The respondent had had to pay money to the occupiers to obtain vacant possession of the land. The appellant agreed to pay him compensation. The amounts recorded in the notebook were payments by the appellant to the respondent in reduction of the amount owing by the appellant to the respondent under the agreement that the appellant should compensate the respondent for the money paid by the respondent to the occupiers of the land.

26 In relation to the video camera, the respondent said in evidence-in-chief that he had purchased a video camera for the appellant. In relation to the travel payments recorded in the book, the respondent said that he had purchased tickets from Magic Carpet for the appellant to travel to India.

27 In cross-examination the respondent was first taken to the first entry in the notebook relating to Rs 50,0000 and dated 28 August 1997. The respondent said that that was the deposit he had paid to the appellant. The respondent then corrected himself. He said that the Rs 50,000 recorded in the first entry in the notebook was money paid to him by the appellant and that the entry relating to the deposit paid by the respondent was the payment recorded on the last page of the notebook. Later in cross-examination the respondent confirmed that the entry on the last page of the notebook reading "1st payment 50,000" was the amount the respondent had paid the appellant as a deposit. The respondent conceded that the entry "air ticket 93,903.75" on the last page referred to the air ticket purchased by the respondent on behalf of the appellant. He said he could not remember why he had written it on the last page with the other payments there recorded. The respondent then said that the entry "1st payment 50,000" on the last page might be a reference to the payment made by the appellant to the respondent. The respondent said he could not remember why he had added up the amounts recorded on the last page. Later the respondent agreed that the entry of Rs 93,903.75 concerning the air ticket referred to a ticket purchased by the respondent for the appellant for their trip to India in May and June 1996. The respondent agreed that the entries dated 30 December 1998 referring to cash and a cheque paid recorded amounts paid by the respondent to the appellant. The respondent said that those were amounts loaned by him to the appellant, notwithstanding that at the time the appellant owed him money in relation to the compensation paid by the respondent to the occupiers of the land.

28 The trial Judge did not accept the respondent to be a truthful witness. His Honour rejected the respondent's evidence that the appellant did not tell him that there had been court proceedings brought by the occupier of the land, Narayanan, which had ended favourably for Narayanan. His Honour rejected the evidence of the respondent that he had relied upon what the appellant had told him about the occupiers of the land. I will return later to the issues concerning the authenticity of the receipt. However, I observe for now that his Honour appears at par 19 of his reasons to have rejected the respondent's evidence that the receipt was prepared by the appellant. His Honour found evidence of the respondent concerning his failure at one time to make any reference to the money he claimed in his evidence to have paid to the occupiers of the land to be not credible. His Honour referred to the failure of the respondent to give credit for the amounts he claimed in his evidence the appellant had paid to him by way of compensation as not the action of an honest man.

29 The trial Judge found that the appellant was an honest man but rejected his evidence that he had not been paid the balance of the purchase price in Madras on 11 June 1996 because his memory is such that his evidence cannot be relied on in many respects.

30 His Honour found that the balance of the purchase price was paid on 11 June 1996 because he accepted the evidence of the respondent's brother and nephew to that effect. His Honour said that he had no reason to reject their evidence and that the respondent's brother "in particular impressed me as a witness".

31 The trial Judge made no findings about the authenticity of the receipt or when and by whom the revenue paper was purchased or who prepared the receipt or which parts of the text were on the receipt when signed by the appellant if he signed the receipt. His Honour found it unnecessary to do so saying:

"Whatever the mystery of the receipt, it does not affect my finding based on the evidence of Mr Gyanakkan and Mr Jayasingh that on 11 June 1996 the defendant paid the balance of the purchase price to the plaintiff".

32 The trial Judge described the notebook and its contents as "a further mystery in this case" and found that it recorded payments made by the appellant to the respondent on the ground that if it had recorded payments by the respondent to the appellant, his Honour would have expected the entries to have been signed by the appellant as a receipt. In relation to the entries in the notebook concerning the airfare, video camera and the amounts paid in cash and a cheque on 8 and 30 December 1998, his Honour said:

"Their [sic] were payments made by the defendant to and on behalf of the plaintiff. They appear to have no relevance to this action."

33 Later in his reasons the learned trial Judge accepted that the notebook records two items purchased by the respondent for the appellant. His Honour said of them:

"They are not of the same character as the other payments and do not need to be considered."

34 The appellant's grounds of appeal omitting particulars are:

(1) The learned trial Judge erred in fact in finding that the exhibit 10 evidenced payments from the appellant to the respondent during 1997 and 1998, and in failing to find that the payments evidenced therein were payments from the respondent to the appellant towards the balance of the purchase price due to the appellant.

(2) Further and in the alternative, the learned trial Judge erred in fact in finding that some payments evidenced by exhibit 10 were not of the same character as other payments and had no relevance to the action.

(3) Further and in the alternative, the learned trial Judge erred in fact in relying on the evidence of the respondent's brother, Jayasingh Gyanakkan and the respondent's nephew, Jayasingh Rajhumar, in finding that the respondent had paid the balance of the purchase price to the appellant by way of cash in Madras, India, on 11 June 1996, and in failing to find that the appellant had not been paid.

(4) Further and in the alternative, the learned trial Judge erred in fact in finding that if the appellant had a genuine claim it might have been expected he would have taken legal action somewhat earlier, when in fact there was no, or no material, delay on the appellant's part, and the appellant was not cross-examined, nor did the respondent make any submissions, as to such alleged delay.

(5) Further and in the alternative, the learned trial Judge erred in law in that he failed to give adequate reasons for decision.

35 The appellant's case as elaborated by particulars and by oral submissions is that the trial Judge's finding that the respondent paid the balance of the purchase price to the appellant in Madras on 11 June 1996 was based on inadequate and inconsistent reasoning. The appellant says that the trial Judge failed to consider or have regard to important items of evidence. The appellant goes further and says that this court should substitute a finding that the respondent did not pay the balance of the purchase price for the trial Judge's finding that he did. The appellant submits that the evidence of and concerning the notebook establishes that the respondent paid instalments of the outstanding purchase price to the appellant between August 1997 and December 1998 and hence the evidence of the appellant that the respondent did not pay the balance of the purchase price to the appellant in Madras on 11 June 1996 must be accepted.

36 The respondent's case on appeal may be summarised as follows. The trial Judge accepted the evidence as to payment given by the brother and the nephew and found that the appellant had been paid. He said that he had no reason to reject their evidence and that the brother, in particular, impressed him as a witness. The appellant sought to rely on the notebook in which from time to time the respondent had entered various sums of money in rupees and signed them. The appellant's case was that the payments so recorded were on account of the purchase price. The learned trial Judge did not agree. His Honour said that if that were the case, the appellant would have been signed the entries as a receipt. The learned trial Judge's findings depend to a substantial degree on the credibility of the witnesses. His findings must stand even if the Full Court thinks that the probabilities of the case are against - even strongly against - those findings of fact. There is nothing to show that the trial Judge failed to use or has palpably misused his advantage. Nor is there anything that points decisively and not merely persuasively to error on the part of the trial Judge in acting on his impression of the witnesses.

37 In Mifsud v Campbell (1991) 21 NSWLR 725, at 728, Samuels JA, with whom Clarke JA and Hope AJA agreed, said:

"Similarly, in my opinion, it is an incident of judicial duty for the judge to consider all the evidence in the case. It is plainly unnecessary for a judge to refer to all the evidence led in the proceedings or to indicate which of it is accepted or rejected. The extent of the duty to record the evidence given and the findings made depend, as the duty to give reasons does, upon the circumstances of the individual case. Accordingly, a failure to refer to some of the evidence does not necessarily, whenever it occurs, indicate that the judge has failed to discharge the duty which rests upon him or her. However, for a judge to ignore evidence critical to an issue in a case and contrary to an assertion of fact made by one party and accepted by the judge - as the defendant's denial of having consumed alcohol - may promote a sense of grievance in the adversary and create a litigant who is not only 'disappointed' but 'disturbed' - to use the words which appear in the New Zealand case of Connell v Auckland City Council [1977] 1 NZLR 630 at 634. It tends to deny both the fact and the appearance of justice having been done. If it does, as in my opinion is the case here, then it will have worked a miscarriage of justice and have produced a mistrial and resulted in what I would take to be an error of law which is reviewable on appeal. Whether it is an error of law or an error of fact, it seems to me a failure by the Judge to do what the nature of the office requires.

In the present case, with all respect, I find it difficult to understand how it was that the judge simply failed to refer to those matters of evidence which I have mentioned. This is, of course, especially so, or perhaps necessarily so, where he evidently accepted the defendant's denial of having consumed alcohol on the day. It cannot plausibly be said that some kind of inference arises which shows that he must have considered, but rejected, or disregarded as immaterial, the evidence to which I have referred. In my view, a judgment establishes that he simply excluded it from consideration.

The result, in my view, is that the judgment in these respects is wholly unsatisfactory and it justifies the plaintiffs asserting a mistrial and seeking to have the matter tried again. A new trial is always an unfortunate circumstance but I cannot see what the alternative is here."

38 In Fletcher Construction Australia Ltd v Lines Macfarlane & Marshall Pty Ltd (No 2) [2002] VSCA 189; (2002) 6 VR 1, Charles, Buchanan and Chernov JJA, at 31, set out the purposes underlying the judicial obligation to provide adequate reasons:

"First, a Court of Appeal must be in a position to determine whether the decision of the trial judge contains appealable error ... secondly, an adequate statement of the reasons 'provides the foundation for the acceptability of the decision by the parties and the public.' As Lord McMillan once said the main object of a reasoned judgment 'is not only to do but to seem to do justice'. Conversely, a failure to provide sufficient reasons or the provision of reasons which are riddled with error is likely to leave the losing party with a sense of injustice ... Thirdly, it furthers judicial accountability guarding 'against the birth of an unconsidered or impulsive decision'. Next, the provision of adequate reasons has an educative function in that it 'enables practitioners, legislators and members of the public to ascertain the basis upon which like cases will probably be decided in the future.'"

39 The nature and content of the judge's obligation to give reasons was further discussed by their Honours. One element of a statement of adequate reasons is that the judge should refer to relevant evidence. There is no need to refer to every piece of evidence, or to refer to the relevant evidence in detail. However, where certain evidence is important or critical to the proper determination of the matter and is not referred to by the trial Judge, an appellate court may infer that the trial Judge overlooked the evidence or failed to give consideration to it.

40 In this case, the appellant, having led extensive evidence, both in chief and by way of cross-examination of the respondent, concerning the payments recorded in the notebook, was entitled to have that evidence weighed by the Court and, if rejected, the grounds of its rejection expressed in reasoned terms. To have a strong body of evidence put aside without explanation is likely to give rise to a feeling of injustice in the mind of the most reasoned litigant.

41 The decision of the trial Judge was based on his acceptance of the evidence of the respondent's brother and nephew that they were present and observed the respondent pay to the appellant the balance of the purchase price at the respondent's house in Madras on 11 June 1996. His Honour did not place any reliance on the evidence of the respondent. To the contrary, it is clear his Honour found that the respondent was not a credible or reliable witness. The only other evidence relied on by the trial Judge for his finding that the respondent paid the purchase priced was his view that if the appellant had not been paid it might have been expected that he would have taken legal action earlier than he did.

42 Appeal ground 4 is that the learned trial Judge erred in fact in finding that if the appellant had a genuine claim it might have been expected that he would have taken legal action somewhat earlier. At par 36 of his reasons, his Honour said that the appellant had not taken any legal action until 6 years after the alleged breach. The appellant submits that his Honour's reasoning is circular. Delay of the order referred to by his Honour only existed if the appellant's version of events was incorrect. On the appellant's case, there was no relevant delay. He was paid various amounts on account of the outstanding purchase price up to December 1998. There were demands for payment made by him, or on his behalf, in July 1999 and August 2000. Proceedings were commenced in January 2002.

43 In my view, the appellant's submissions concerning appeal ground 4 are correct. That does not lead to the finding that the appellant's version of events is correct and hence that the respondent had not paid the balance of the purchase price. But it does mean that the trial Judge's finding that the respondent paid the purchase price stands wholly on his acceptance of the evidence of the respondent's brother and nephew.

44 His Honour accepted their evidence because "I have no reason to reject their evidence" and because the brother "in particular impressed me as a witness".

45 With respect to his Honour, there were reasons, open to his Honour, for rejecting the evidence of the respondent's brother and nephew.

46 First, they were close relatives, not impartial witnesses.

47 Secondly, the evidence of the appellant who the learned trial Judge found to be honest directly contradicted their evidence.

48 Thirdly, the truthfulness and reliability of the evidence of the respondent's brother and nephew is called into doubt by an affidavit sworn by the respondent on 21 January 2003 in support of an application to vacate the trial date then fixed for 30 and 31 January 2003. In his affidavit the respondent said:

"I ask that the trial dates of 30 and 31 January 2003 be vacated and new trial dates set that will allow my brother and Mr Jeyaraj to overcome their difficulties with travel to Australia and attend trial to present the evidence that is fundamental to my case."

49 Mr Jeyaraj was the respondent's driver. In his affidavit the respondent said that the evidence of his brother and Mr Jeyaraj would be fundamental to his case. The respondent swore:

"The [appellant] has disputed that I had the financial resources to pay the money that was paid. My brother, Mr Jayasingh Gnanakkan, ("my brother"), will need to attend the trial in this matter to present evidence relating to the source of the funds that were used by me to pay the purchase price of the property to the [appellant]. The money was the proceeds of sale of property owned jointly by myself and my brother. The money was also paid in cash and my brother can give evidence of the transaction that produced the cash to pay the [appellant]."

50 The respondent did not say that his brother had been present when he paid the balance of the purchase price to the appellant. The affidavit made no reference to the respondent's nephew. If the respondent's brother and nephew had been present at the respondent's house on 11 June 1996 and witnessed the respondent pay the money to the appellant then I would have expected the respondent to say so in his affidavit when he was explaining the importance of the evidence of his brother. Instead, the respondent said merely that his brother could give evidence of the source of the cash used to pay the appellant. The respondent's explanation for this apparent anomaly is unconvincing.

51 The learned trial Judge failed to advert to those considerations at all. It was open to his Honour to accept the evidence of the respondent's brother and nephew notwithstanding those matters. But I find it difficult to understand how his Honour could have said that there was no reason to reject their evidence.

52 Furthermore, the evidence of the appellant's brother and nephew is inconsistent with the respondent having subsequently made payments to the appellant in reduction of the balance of the purchase price. Accordingly, if the appellant's evidence concerning the transactions recorded in the notebook was true then there was every reason to doubt the evidence of the respondent's brother and nephew. The trial Judge dealt with that evidence by finding that the notebook recorded payments by the appellant to the respondent. For the reasons I give below the evidence of and concerning the notebook strongly suggests that the respondent did make payments in reduction of the outstanding purchase price between August 1997 and December 1998 and the trial Judge failed to give proper or meaningful consideration to that evidence

53 The learned trial Judge found that the appellant was an honest man but rejected his evidence that he had not been paid the balance of the purchase price in Madras on 11 June 1996 because his memory is such that his evidence cannot be relied on in many respects. However, the appellant's poor memory cannot explain his evidence concerning the entries in the notebook. The appellant gave evidence of the transactions recorded in the notebook and the circumstances in which the notebook came to be used and the entries made in it. If the appellant was an honest man, as his Honour found, then it is difficult to explain how he could have given positive evidence of the payments by the respondent on account of the purchase price if they had not been made. His Honour's finding that the notebook recorded payments by the appellant to the respondent is inconsistent with his Honour's finding that the appellant was an honest man.

54 His Honour's finding that the respondent paid the purchase price in full on 11 June 1996 cannot not stand with a finding that the notebook recorded payments by the respondent to the appellant on account of the outstanding purchase price.

55 His Honour's finding that the notebook recorded payments by the appellant to the respondent is inconsistent with two of his principal findings, is based on reasoning that is in part circular and fails to give any proper consideration to the evidence of and concerning the individual transactions recorded.

56 The finding is inconsistent with one of his Honour's principal findings, that is that the appellant is an honest man. His Honour did not deal with this inconsistency.

57 The finding is inconsistent with his Honour's findings concerning the respondent's counterclaim. The respondent claimed that the relevant entry in the notebook recorded payments by the appellant to the respondent in reduction of the amount owing by the appellant to the respondent under an agreement that the appellant should compensate the respondent for the money paid by the respondent to the occupiers of the land. The respondent's evidence was that the appellant has misled him in relation to the occupation of the land, that the respondent had paid various amounts of money to the occupiers of the land to get them to vacate the land and the appellant had agreed to compensate him for the amounts he had so paid. However, the trial Judge rejected the respondent's evidence that he had been misled by the appellant in relation to the occupation of the land and did not accept the evidence of the respondent that he had paid to the occupiers of the land the amounts he claimed. The trial Judge's finding that the relevant entries in the notebook recorded payments by the appellant to the respondent is on the face of it inconsistent with his Honour's findings that the applicant did not mislead the respondent and the respondent did not pay compensation to the occupiers of the land in the amounts the respondent claimed.

58 There are a number of features of the notebook, and the evidence in relation to it, that strongly suggest that the entries record payments by the respondent to the appellant.

59 The entry for 93,000 rupees is noted "air ticket". The respondent says it was a reimbursement by the appellant to the respondent for the air ticket purchased by the respondent for the appellant in 1996. It could not have been a reimbursement for the air ticket purchased by the respondent for the appellant in 1998 because that is the subject of a separate entry in relation to "Magic Carpet". But in his letter of 21 August 2000 to the appellant's solicitor the respondent said, in effect, that the appellant had not paid him for the air ticket in 1996. The respondent has offered no explanation for that discrepancy. If the appellant had not repaid the respondent for that airfare then the second entry in the notebook "Rs 93,903.75" and the second item on the last page "Air ticket 93,903.75" must record a payment by the respondent to the appellant as asserted by the appellant and denied by the respondent. That evidence is not negatived by the second entry having been later crossed out and replaced by a figure Rs 39,206.25. Indeed that is consistent with the total on the last page having been adjusted by reducing the total by that amount.

60 If, as it appears on the face of things, the entry records the amount paid by the respondent on behalf of the appellant for the air ticket in 1996, then it would appear to record an amount being credited in favour of the respondent as a payment by the respondent to the appellant. The other payments recorded on 28 August 1997 have been added with the air ticket item on the last page of the notebook to give the total of 4,24,403.75. That is, they appear to have been treated by the respondent as payments of the same character. The first item is "1st payment 50,000.00". The respondent accepted that that recorded the deposit paid by the respondent to the appellant in December 1995. That strongly suggests that the payments recorded on 28 August 1997 were all payments by the respondent to or on behalf of the appellant.

61 The entries in the notebook concerning the video camera and the air ticket through Magic Carpet were found by the learned trial Judge to record payments made by the respondent to or on behalf of the appellant. Their presence in the notebook suggests that the other payments recorded in the notebook also were payments made by the respondent to or on behalf of the appellant. His Honour's finding that those payments were not of the same character as the other payments is at best of little significance and at worst is circular. If his Honour considered they were of a different character because they recorded advances to the appellant by way of items purchased by the respondent for the appellant rather than money payments then the difference is of no significance. If his Honour considered they were of a different character because they recorded payments by the respondent rather than by the appellant then, of course, such a finding merely assumed that which his Honour had to decide.

62 In any event his Honour's reason for finding that the other entries record payments by the appellant is inconsistent with his Honour's acceptance that the Magic Carpet and video camera entries record advances to or for the appellant. His Honour found that the notebook recorded payments made by the appellant to the respondent because they were signed by the respondent and if they had recorded payments by the respondent to the appellant "surely they would have been signed by the [appellant] as a receipt". Yet the respondent signed the Magic Carpet and video camera entries notwithstanding that they recorded payments or loans to the appellant

63 At trial the appellant's case rested heavily on the notebook. In those circumstances, the learned trial Judge was obliged to give careful consideration to the notebook and the evidence concerning the entries in the notebook.

64 In my opinion, his Honour failed to do so. His Honour's finding that the notebook recorded payments made by the appellant to the respondent is inconsistent with his Honour's finding that the appellant was an honest man. It is inconsistent with his Honour's finding that the notebook included entries signed by the respondent notwithstanding that they recorded payments or loans by the respondent to the appellant. It ignores the "Air ticket Rs 93,903.75" entries and the evidence of the appellant and the respondent concerning them. It ignores or fails to give any real consideration to the Magic Carpet and video camera entries. It ignores the entry on the last page which adds together payments including the Air ticket entry and the "1st payment 50,000" entry conceded by the respondent to be the payment by him of the deposit, notwithstanding his later resiling from that position. Further, it is inherently unlikely that the appellant would have made payments to the respondent to compensate him for the appellant having misled him in relation to the occupation of the land when, as his Honour found, the appellant had not so misled the respondent.

65 I find it difficult to understand how the trial Judge failed to deal with these matters of evidence and logic. In my opinion it is not sufficient for his Honour to ignore these matters because he found the respondent's brother and nephew to be impressive witnesses.

66 Gleeson CJ, Gummow and Kirby JJ in their joint judgment in Fox v Percy [2003] HCA 22; (2003) 77 ALJR 989, said at 995:

"... in recent years, judges have become more aware of scientific research that has cast doubt on the ability of judges (or anyone else) to tell truth from falsehood accurately on the basis of such appearances. Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events."

67 In my opinion, in the circumstances of this case the learned trial Judge was obliged to have regard to the evidence in the notebook that pointed to the balance of the purchase price being unpaid and to the evidence that cast doubt on the credibility and reliability of the evidence of the respondent's brother and nephew. His Honour failed to do so. His Honour's reasons for finding that the purchase price was paid in full are inadequate and unsatisfactory.

68 The result, in my view, is that the judgment in these respects is wholly unsatisfactory and it justifies the matter being tried again unless this Court is able to make the necessary findings of fact itself.

69 The appellant submits that the trial Judge should have found that the balance of the purchase price was unpaid and this court should substitute that finding for the finding of the trial Judge.

70 An appeal from a judgment of the District Court lies to the Supreme Court as of right and is heard by the Full Court. The appeal is by way of rehearing. The powers and functions of an appellate court were described by Gleeson CJ, Gummow and Kirby JJ in their joint judgment in Fox v Percy, (supra), at 993 - 995:

"[23] ... on the one hand, the appellate court is obliged to "give the judgment which in its opinion ought to have been given in the first instance". On the other, it must, of necessity, observe the "natural limitations" that exist in the case of any appellate court proceeding wholly or substantially on the record. These limitations include the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses' credibility and of the "feeling" of a case which an appellate court, reading the transcript, cannot always fully share ...

[24] Nevertheless, mistakes, including serious mistakes, can occur at trial in the comprehension, recollection and evaluation of evidence. ...

[25] Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. Appellate courts are not excused from the task of 'weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect' ...

[26] After Warren v Coombes, a series of cases was decided in which this Court reiterated its earlier statements concerning the need for appellate respect for the advantages of trial judges, and especially where their decisions might be affected by their impression about the credibility of witnesses whom the trial judge sees but the appellate court does not ...

[27] ... The cases mentioned remain the instruction of this Court to appellate decision-making throughout Australia. However, that instruction did not, and could not, derogate from the obligation of courts of appeal, in accordance with legislation such as the Supreme Court Act applicable in this case, to perform the appellate function as established by Parliament. Such courts must conduct the appeal by way of rehearing. If, making proper allowance for the advantages of the trial judge, they conclude that an error has been shown, they are authorised, and obliged, to discharge their appellate duties in accordance with the statute.

[28] ... However, the mere fact that a trial judge necessarily reached a conclusion favouring the witnesses of one party over those of another does not, and cannot, prevent the performance by a court of appeal of the functions imposed on it by statute. In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings.

[29] That this is so is demonstrated in several recent decisions of this Court. In some, quite rare, cases, although the facts fall short of being "incontrovertible", an appellate conclusion may be reached that the decision at trial is "glaringly improbable" or "contrary to compelling inferences" in the case. In such circumstances, the appellate court is not relieved of its statutory functions by the fact that the trial judge has, expressly or implicitly, reached a conclusion influenced by an opinion concerning the credibility of witnesses. In such a case, making all due allowances for the advantages available to the trial judge, the appellate court must 'not shrink from giving effect to' its own conclusion. ...

[30] It is true, as McHugh J has pointed out, that for a very long time judges in appellate courts have given as a reason for appellate deference to the decision of a trial judge, the assessment of the appearance of witnesses as they give their testimony that is possible at trial and normally impossible in an appellate court. However, it is equally true that, for almost as long, other judges have cautioned against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses. Thus, in 1924 Atkin LJ observed in Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The "Palitana"):

'... I think that an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour.'"

71 The appellant submits that the learned trial Judge erred in fact in finding that the notebook evidenced payments from the appellant to the respondent. The appellant says that the learned trial Judge should have found that the notebook evidenced payments from the respondent to the appellant in reduction of the outstanding purchase price due to the appellant. The appellant further submits that the learned trial Judge erred in fact in finding that the respondent had paid the balance of the purchase price to the appellant by way of cash in Madras on 11 June 1996. The appellant submits that the learned trial Judge should have found that the appellant had not been so paid.

72 The entries in the notebook, taken together with the evidence of the appellant and the respondent, and other evidence concerning the entry "air ticket 93,903.75" strongly suggest that the notebook records payments made by the respondent to the appellant. However, in my opinion, there is no incontrovertible evidence that the transactions recorded in the notebook were payments by the respondent to the appellant. Nor is the trial Judge's finding that the entries record payments by the appellant to the respondent "glaringly improbable" or "contrary to compelling inferences" sufficient for this court to substitute a finding that the respondent did not pay the balance of the purchase price to the appellant for the finding of the trial Judge that he did.

73 An appeal court must have proper regard to the findings of a trial Judge. It is only in exceptional circumstances that an appeal court may set aside a finding of a trial Judge based upon the trial Judge's impression of witnesses. In this case, the findings of the learned trial Judge cannot stand for a number of reasons.

74 First, in accepting the evidence of the respondent's brother and nephew the learned trial Judge did so considering that there was no reason to reject their evidence. As I have set out, there were reasons open to his Honour to reject the evidence of the respondent's brother and nephew. In making his principal finding, the learned trial Judge has overlooked and ignored important pieces of evidence that he should have given consideration to.

75 Secondly, the learned trial Judge rejected the appellant's evidence that the notebook recorded payments made by the respondent to the appellant in reduction of the balance of the purchase price. That finding is inconsistent with his Honour's finding that the appellant was an honest man. The appellant's positive evidence concerning the payments made by the respondent and recorded in the notebook cannot be explained on the ground that the appellant has forgotten many things. His Honour's finding that the notebook recorded payments made by the respondent to the appellant is also inconsistent with his Honour's finding that the appellant did not mislead the respondent in relation to the occupation of the land. Thus, his Honour's critical findings are inconsistent.

76 Thirdly, the appellant's case at trial rested heavily on the notebook. An issue of central importance to the outcome of the trial is whether the entries in the notebook record payments by the respondent to the appellant or payments by the appellant to the respondent. The content of the entries in the notebook, together with the evidence of the appellant and the respondent concerning them, strongly suggest that the notebook records payments by the respondent to the appellant. The learned trial Judge failed to give any, or any proper, consideration to these important issues. His Honour described the notebook and its contents as "a further mystery in this case" and found that it recorded payments made by the appellant to the respondent on the ground that if it had recorded payments by the respondent to the appellant, his Honour would have expected the entries to have been signed by the appellant as a receipt. That reason was inconsistent with the fact that the respondent signed entries in the notebook admittedly recording payments or loans to the appellant.

78 This is not a case in which the Court should substitute its own findings of fact for those of the trial Judge. The finding that the respondent did not pay the balance of the purchase price to the appellant on 11 June 1996 is not the only finding open on the evidence. Further findings of primary fact must be made, that do not depend merely on a consideration of the documents. It is necessary for a judge who has seen and heard the evidence of the respondent's brother and nephew to scrutinise that evidence and evaluate it against the rest of the evidence. In those circumstances, regrettable as it is, there must be a new trial.

79 Therefore I would make orders to the following effect:

(1) the appeal be allowed;

(2) the decision of the learned trial Judge dismissing the appellant's claim be set aside;

(3) there be a retrial of the appellant's claim.

80 As the trial Judge dismissed the counterclaim of the respondent, and there was no appeal against that decision, the order dismissing the counterclaim should stand.

• The background facts
• Oral evidence
• The receipt
• The notebook
• The trial Judge's reasons
• Grounds of appeal
• The respondent's case on appeal
• Duty to give reasons
• Adequacy of reasons of Trial Judge
• Judge's findings concerning notebook

• Powers and functions of Full Court

• The appellant's submission
• Conclusion