Itaoui v Yamaha Motor Finance Australia Pty Ltd

PARTIES : Khaled Itaoui - Appellant Yamaha Motor Finance Australia Pty Ltd - Respondent

COUNSEL : Appellant - Mr CRC Newlands SC with Ms JP Muir, counsel Respondent - Mr AJ Bulley, counsel

SOLICITORS : Appellant - Joseph G Capogreco & Associates Respondent - Dibbs Barker

LOWER COURT JUDICIAL OFFICER : Magistrate Heilpern

LOWER COURT DATE OF DECISION : 16 April 2009

LOWER COURT MEDIUM NEUTRAL CITATION : Yamaha MFA Pty Ltd v Khaled Iataoui

• 15 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

12849/2009 KHALED ITAOUI v YAMAHA MOTOR FINANCE AUSTRALIA PTY LTD

JUDGMENT 1 HER HONOUR: Mr Khaled Itaoui appeals a decision given by Magistrate David Heilpern on 16 April 2009. His Honour dismissed the claim and gave judgment in favour of the respondent, Yamaha Motor Finance Australia Pty Ltd ('Yamaha'), on its cross claim. The appeal is brought under s 39 of the Local Court Act 2007 which limits the appeal to questions of law. An appeal on a question of fact may be brought with leave, but no such leave was here sought. 2 The proceedings below concerned the title to three motor bikes which Mr Itaoui claimed he had purchased for $46,000 cash from a dealer, P & G Safeguard Pty Ltd, trading as Macarthur Motorcycles in May 2008. Mr Itaoui had one of the bikes in his possession. The respondent had possession of the other two. All three bikes had been registered in Mr Itaoui's name, but it was common ground that the dealer had no title to the bikes, they having been in the dealer's possession only pursuant to a contract of bailment. It was also common ground that Mr Itaoui had no notice of Yamaha's title to the bikes; that the dealer had never made any payment to Yamaha for the bikes and that title to them had never passed from it to the dealer. 3 Mr Itaoui's case was, however, that he had purchased the bikes in good faith from the dealer, without notice of Yamaha's title and that accordingly, his purchase conferred good title upon him, both at common law, as an exception to the nemo dat quad non habit rule and under s 28(2) of the Sale of Goods Act 1923; s 5(1) of the Factors (Mercantile Agents) Act 1923 and s 9(1) of the Registration of Interest in Goods Act 1986. 4 Yamaha's case was that Mr Itaoui had not discharged the onus of establishing that he had purchased the bikes from the dealer, or that the purchase had been in good faith. The contest between the parties was essentially concerned with whether or not Mr Itaoui could show that he had been the victim of a fraudster who had disappeared with the $46,000 cash he had paid for three bikes in respect of which the dealer had no good title. 5 The Magistrate accepted Yamaha's case. At [66] of his judgment his Honour concluded that he was not satisfied that the financial transactions had taken place, or that Mr Itaoui had acted in good faith. 6 While it was acknowledged that on its face, these appeared to be findings of fact open to his Honour on the evidence, it was argued that a proper reading of his Honour's judgment showed that those findings were so infected with legal error, that the appeal would be upheld and the matter returned for rehearing. 7 Three such errors were identified. The first, the way in which the documentary evidence, particularly business records in the form of receipts acknowledging the payments the plaintiff claimed he had made, were dealt with, inconsistently with the requirements of the Evidence Act 1995. The second, the way inferences were drawn from the failure to call the witness to the transactions, a friend of Mr Itaoui named Mohammed, misapplying the rule in Jones v Dunkel (1959) 101 CLR 298. The third, a misapplication of the legal test of that good faith was established and without notice.

The decision below 8 His Honour's reasons for concluding that Mr Itaoui had not established that the claimed transactions had occurred or that good faith was established were shortly given:

"61. Indeed, on each of the factors that one would expect would be the hallmarks of a "good faith" bona fide transaction, the evidence was lacking. The money was, supposedly, partially withdrawn some months before and kept, proverbially at least, under the bed. The balance was the repayment of a loan to a person named "Monza". The defendant chose not to bring Mohammed, who accompanied him to Macarthur Motorcycles to corroborate his evidence. The failure to do so is extraordinary, as it would have been some corroborative evidence. No reason was given as to why he was not called, and no statement was sought or provided. It would have been reasonable and expected that he be called. It raises a classic textbook case of a Jones v Dunkel inference that his evidence would not have assisted the plaintiff's case. In a case such as this, that leaves the plaintiff with his evidence alone, and to that extent it has adverse consequences.

The failure to call "Monza" or even have a statement from him falls within the same category - it would have been reasonable and expected, and his absence leaves court with the only conclusion being that he could not have assisted the plaintiff. After all, when the issue is the "good faith" of a transaction, and the passing of money itself is in issue, then calling a key source of the money would have at least corroborated that aspect.

The plaintiff contends that given the documentary evidence, and other evidence of the plaintiff in chief and in cross-examination, that it was not necessary to call "Mohammed". It is contended that his evidence would only have been "cumulative" in nature. In my view, that is incorrect. He was a person who ought to have been called, and the inference applies. To a lesser extent, the same is true for "Monza".

The documentary evidence is totally reliant on the acceptability of the evidence of the plaintiff - in other words it provides some corroboration, but only to the extent that documents were provided to support some sort of arrangement.

The payment by Macarthur Motorcycles of an amount approximating the cash said to have been transferred by the defendant to Macarthur Motorcycles is of little significance - again, the onus is on the plaintiff to show that there was a transfer of the money as he described in good faith, and calculations of several payments does little to assist that onus. There is no evidence that $46000 was banked.

Was this arrangement "in good faith"? I am unable to come to that conclusion for the reasons listed above. The levels of suspicion are very high. This is more than just an unusual or peculiar arrangement. This is the plaintiff who does something for a living, attending at a motorcycle shop with someone and buying three motorcycles with cash he obtained from somewhere. He intended to do something with three motorcycles even though he did not have a motorcycle license. I am not satisfied that the financial transactions took place, and I am not satisfied that the plaintiff acted "good faith".

The plaintiff's actions in registering the motorcycles, and in contacting the police, could be interpreted, as submitted by the plaintiff, as supporting the plaintiff's genuine concerns. Alternately, they could be interpreted in other ways. However, the onus is on the plaintiff to satisfy me as to the good faith, and particularly given the lack of any significant corroboration, the plaintiff has failed to do so.

There is more than an "evidential onus" on the plaintiff as submitted by the plaintiff. The onus in the claim is to satisfy the court on the balance of probabilities that the transactions were in good faith.

Accordingly, in terms of the three legislative exceptions to the nemo dat rule relied upon by the plaintiff, he fails."

The documentary evidence 9 It is convenient initially to deal with the way in which his Honour dealt with the documents in question. They were admitted over Yamaha's objections, their authenticity being put in issue. His Honour said at [19]:

"An issue arose as to the admissibility and weight to be attributed to the receipt said to have been given by Macarthur Motorcycles to the plaintiff. I allowed that in as evidence, and indicated that it was a question of weight. It is incorrect to suggest that this means any hearsay evidence contained in the document carries weight as a business record. The plaintiff, to prove the authenticity of the document, called no evidence, nor evidenced that it was a business record within the meaning of the Evidence Act . In the end, the weight of the document rises or falls on the determination of factual and credit issues relating to the evidence of the plaintiff." 10 At [64] his Honour concluded that: "The documentary evidence is totally reliant on the acceptability of the evidence of the plaintiff - in other words it provides some corroboration, but only to the extent that documents were provided to support some sort of arrangement." 11 I accept that these observations carry with them some difficulty. Once admitted as business records in accordance with the provisions of s 69 of the Evidence Act, their authenticity was no longer in issue. If their authenticity was not established, they ought not to have been received. What weight they were to be given once admitted was a different matter, but that did not depend on any further consideration of authenticity. 12 Despite what appears to have been some misapprehension in that respect, his Honour's conclusion that the documents had to be given but little weight was undoubtedly open, given what they showed and the other relevant evidence which his Honour had to consider. 13 None of the documents were signed and one of the receipts indicated that payment had been made by EFTPOS. There was no evidence of such a payment having been made. The amount in question was never banked by the dealership and no payments were made to Yamaha in respect of the bikes. Mr Itaoui's evidence was that he had paid the dealer's representative, Mr Greg Avery, cash for all three bikes. The first, a road bike (registration number SKN 10) was purchased on 15 May 2008 for $21,000 and the other two, dirt bikes (SKN 2 and SKN 11) were purchased for $12,500 each on 17 May. On both occasions Mr Itaoui claimed that he was given a receipt and other documents in evidence. The transactions occurred in the presence of Mr Itaoui's friend Mohammed, but he was not called. 14 It was argued that while his Honour was entitled to deal with the documents on the basis of the weight to be given to them, he had erred in that assessment, failing to pay proper regard to the requirements of s 183 of the Evidence Act, which provides: 183 Inferences If a question arises about the application of a provision of this Act in relation to a document or thing, the court may: (a) examine the document or thing, and (b) draw any reasonable inferences from it as well as from other matters from which inferences may properly be drawn. Note. Section 182 of the Commonwealth Act gives section 183 of the Commonwealth Act a wider application in relation to Commonwealth records and certain Commonwealth documents.

15 The submission may not be accepted. His Honour said at [64] that the documentary evidence was 'totally' reliant on Mr Itaoui's evidence. That was clearly not so and not how his Honour dealt with the documents, given that he also said that he accepted that Mr Itaoui's evidence provided some corroboration of the documents, but only to the extent that they supported the existence of 'some sort of arrangement'. Given that Mr Itaoui's evidence was that the payments had both been made by cash, but one of these unsigned receipts indicated payment by EFTPOS, that the document and Mr Itaoui's evidence did not accord with each other was apparent. 16 His Honour concluded that the transaction did not occur. That conclusion was plainly open. He simply did not believe Mr Itaoui's evidence, for the reasons which he explained. His Honour noted at [35] that Yamaha had not pleaded dishonesty on Mr Itaoui's part, but as was accepted for Mr Itaoui, it was entitled to argue that his evidence was not credible and would not be believed and his Honour was entitled to reach that conclusion. 17 The result of the evidentiary contest was that his Honour accepted Yamaha's case. He did not believe Mr Itaoui's evidence that he had paid cash for the bikes, as he claimed. So far as the documents were concerned, that did not involve any error of law, given what s 183 of the Evidence Act provides. Having concluded that the documents were admissible as business records, his Honour was entitled to draw any reasonable inferences available from his examination of the documents and 'from other matters from which inferences may properly be drawn'. That included Mr Itaoui's evidence. The conclusion that the documents had to be given but little weight in the face of the other evidence which his Honour dealt with, was open. 18 Despite the difficulty with his Honour's observations, I am not satisfied that an error of law which infected the factual findings occurred as was argued.

Jones v Dunkel 19 Mr Itaoui's evidence was that the source of $20,000 of the cash he used to purchase the bikes was his friend Monza and that both purchases had been witnessed by his friend Mohammed. Neither had been referred to in prior correspondence with Yamaha, who had asked Mr Itaoui about the source of the cash he claimed he had used to pay for the bikes, when assessing his claim to ownership of the bikes. Nor were they referred to in his statement of evidence. Mr Itaoui first raised these friends in cross examination. If called, they could obviously have given relevant evidence, potentially corroborating Mr Itaoui's account of what occurred in a number of respects. 20 His Honour accepted Yamaha's submission that the failure to call Mohammed and Monza raised Jones v Dunkel inferences, namely that their evidence would not have assisted Mr Itaoui's case. No complaint was made in relation to that conclusion in relation to Monza, but it was said to have been a conclusion not available in relation to Mohammed. 21 From Mr Itaoui's evidence it would seem that if called, Mohammed could have given relevant evidence as to the purchases, the payment of cash and the provision of the receipts, amongst other matters. There was no evidence called about these matters from Mr Avery, or any other employee of the dealership. Yamaha had made attempts to call Mr Avery, but he could not be found. 22 Mr Itaoui claimed that he obtained possession of SKN 11 on 17 May and registered all three bikes in his name that day. A few days later he found the dealership locked up, contacted the police and later discovered that the other two bikes were in Yamaha's possession. It had obtained the bikes after they were recovered from another address to that of the dealership, which had been closed down without any notice being given to Yamaha by the dealership. 23 Mr Itaoui then sought to recover the bikes from Yamaha, who asked him to provide evidence of his purchase. He supplied the documents relied on in the proceedings below, but failed to provide any information as to the source of the cash he claimed he had used to pay for the bikes, as Yamaha requested of him. That matter was also not dealt with in his statement of evidence, nor were any of his bank records produced, as Yamaha had requested. It was only at the hearing that a Commonwealth Bank statement was provided, showing that Mr Itaoui had withdrawn $21,000 from his account about six months prior to the purchase of the bikes. His evidence was that he had paid for the bikes using that money, which he had kept at home in the meantime, other cash which he had also kept at home and $20,000 from his friend Monza. 24 In this case there were only three people identified as having been in a position to give evidence about the disputed transactions. They were Mr Itaoui, Mr Avery, who had been sought but not found and Mohammed, whose existence only came to light during Mr Itaoui's cross examination. There was no explanation as to why he was not called and no suggestion that he was not available. In my view, his Honour's approach that the consequence of a failure to call him, was to confirm him in the conclusion which he had reached, that Mr Itaoui's evidence was not plausible, was properly available. 25 While the principle in Jones v Dunkel does not require that all witnesses to some incident that is in dispute be called, in an appropriate case, it is a tool available to be used for reaching conclusions on disputed matters of fact. 26 Here, the result of a failure to call a witness who could have cast light on the disputed sale of the three bikes, was a conclusion that the evidence would not have assisted Mr Itaoui's case. Alternatively it allowed an unfavourable inference, already open on his evidence, to be drawn against Mr Itaoui with greater confidence. (See Manly Council v Byrne and Anor [2004] NSWCA 123 at [45] - [67] and Jovic v Lamont [2007] NSWCA 47 at [57]). 27 I am unable to agree that it was not necessary to have called Mohammed, because his evidence would merely have been cumulative. Nor would his evidence have involved any waste of time, because it was unnecessary (see Manly Council at [61]). To the contrary, as discussed in RPS v R [2000] HCA 3; (2000) 199 CLR 620 at [26], Mohammed's evidence would have assisted his Honour in resolving the question of whether Mr Itaoui's evidence that the transactions had occurred as he claimed, should be accepted. If Mohammed was present when the transactions occurred, as was Mr Itaoui's evidence, his evidence could have assisted to resolve the question of whether or not the transactions had occurred; if they did, how payment was in fact made and how it was that Mr Itaoui obtained possession of one of the bikes. 28 In my view the failure to call Mohammed was a proper matter for his Honour to take into account, in resolving questions lying at the very heart of Mr Itaoui's case (see Manly Council at [59]).

Good faith 29 The nemo dat rule is described in BishopsGate Motor Finance Corporation Ltd v Transport Brakes Ltd [1949] 1 KB 322 at 336:

"In the development of our law, two principles have striven for mastery. The first is for the protection of property: no one can give a better title than he himself possesses. The second is for the protection of commercial transactions: the person who takes in good faith and for value without notice should get a good title. The first principle has held sway for a long time, but it has been modified by the common law itself and by statute so as to meet the needs of our own times. The modification here in question is one conferred by the common law itself.

It has always been held that a sale in market overt - according to the usage of the market - to one who takes in good faith and for value without notice confers a good title on the buyer."

30 It is unnecessary to set out the statutory provisions relied on. The plaintiff's argument was that his Honour fell into an error of law as to the meaning of a receipt of goods 'in good faith and without notice' of the actual title holder and that this error so infected the conclusions reached in relation to the question of whether the transactions had been established as a matter of fact, that the appeal had to be upheld. 31 I am unable to accept that submission.

32 In written submissions it was argued that while a legal and evidentiary burden fell on Mr Itaoui to establish his case, obliging him to adduce admissible evidence to prove his purchase of the bikes, having done so, a 'tactical burden' then fell on Yamaha. Yamaha was thus obliged to call evidence, or take the consequences. (See Cross on Evidence (7th ed (2004) at [7210]). 33 It was accepted that as his Honour found, 'good faith' meant honestly or genuinely, but that 'having regard to its purpose and history and by virtue of the conjunction "and", "good faith" could not be divorced from "without notice", without creating mischief. It followed that 'good faith' was relevant to whether or not the plaintiff had notice of Yamaha's interest and not whether the plaintiff was honest in a more general sense. 34 It was also accepted that upon the conclusion of Yamaha's case, notwithstanding its tactical burden, it was open to his Honour to conclude that Mr Itaoui had not made out his case as to the existence of the disputed transactions. The question of good faith and notice only arose for consideration if Mr Itaoui established that the claimed transactions had taken place. 35 Any lack of honesty on Mr Itaoui's part was in that context only relevant to the question of notice. His Honour having found at [48] and [57] that Mr Itaoui did not know of the agreement between Yamaha and the dealership and so had no notice or suspicion of Yamaha's interest in the bike, it followed that there was a finding of relevant 'good faith' in favour of Mr Itaoui and that his Honour had erred in later concluding to the contrary. 36 It was submitted for Yamaha that this argument had not been one advanced below. Nevertheless, it was common ground that if the existence of the claimed transactions was established, that the concept of good faith had to be approached in the way discussed by Clarke J in Associated Midland Corporation v Sanderson Motors Pty Ltd and Anor [1983] 3 NSWLR 395 at 401:

The proviso applies if the purchaser acts in good faith and without notice.

Good faith connotes "honesty" and whilst negligence of itself, would not establish an absence of good faith, lack of reasonable care may, when coupled with other facts and circumstances, lead to an inference that the purchaser was suspicious and refrained from inquiring because of a fear that he would become aware of irregularity.

The concept is, in this sense, and although an element separate from notice, tied in with it. This latter element will not be established unless the purchaser satisfies the court that he did not have actual notice of some want of authority: see Heap v Motorists' Advisory Agency Ltd (at 590, 591).

37 I do accept that his Honour's reasons, earlier set out, evidenced some confusion of the two questions which arose to be determined. They were firstly, whether the claimed transactions had taken place as claimed and secondly, if they had, whether Mr Itaoui had acquired the bikes in good faith and without notice of Yamaha's title. 38 There is no issue that his Honour considered the first question, namely 'whether a genuine transaction took place'. Mr Itaoui had to establish that the claimed transactions had occurred as he claimed, by the payment of cash. Once it was concluded that there were no such transactions proven to the requisite standard, the question of good faith and notice did not arise for determination. 39 His Honour's discussion of whether or not Mr Itaoui's evidence could be accepted, given the suspicions which his evidence raised, was certainly couched in the language of 'good faith', at various points. Nevertheless, there can be no question that his Honour firstly turned to consider whether the evidence showed that a genuine transaction had taken place, that is 'an honest transaction of money for goods' (at [60]). This his Honour also called a 'good faith transaction'. 40 His Honour considered that the existence of such a genuine transaction could be established by evidence being led as to matters such as why Mr Itaoui had bought three motorcycles worth $46,000 as he claimed; why payment was made in cash; that he had this much money; and where the cash had come from, given what Mr Itaoui did for a living. His Honour noted both that no evidence in chief was led as to such matters and that he found Mr Itaoui's evidence in cross examination about these issues evasive and unconvincing. His impression was that Mr Itaoui was 'making it up as he went along'. His Honour also took account of Mr Itaoui's failure to make any mention of Mohammed or Monza in his witness statement. His Honour concluded that Mr Itaoui was seeking to avoid telling the real story of the purported purchases. 41 His Honour took the view that Mr Itaoui's story that part of the money had been withdrawn from a bank account and 'kept, proverbially at least, under the bed' was not evidence which had the hallmarks of a bona fide transaction. The failure to call evidence from Monza was also considered, as was the absence of any explanation for that failure. The conclusion was that Monza's evidence, he being the source of part of the cash it was claimed had been passed to the dealer, would not have assisted Mr Itaoui to establish the claimed transaction. Nor would Mohammed's evidence have assisted Mr Itaoui's case. 42 His Honour considered that there was no evidence that the dealer had ever banked the $46,000 which Mr Itaoui claimed he had paid. He took the view that the documentary evidence provided some corroboration of Mr Itaoui's claims, but 'only to the extent that documents were provided to support some sort of transaction'. 43 I accept that when his Honour then considered whether the arrangement was 'in good faith', he did not adhere to the approach discussed in Associated Midland Corporation. His Honour had already noted that there was no suggestion that Mr Itaoui had notice of Yamaha's title to the bikes and had also concluded that the transactions which Mr Itaoui claimed he had entered with the dealer had not occurred. The further conclusion that the matters he had already dealt with also led to the conclusion that the arrangement was not one made in good faith, is perhaps best understood as his Honour expressing the view that if he had come to the conclusion that the transactions had occurred, they were not made in good faith. 44 That, however, is not a basis upon which this appeal may be upheld. The question of whether or not the claimed transactions had taken place was a question of fact, determined on the evidence against Mr Itaoui. Without a conclusion in his favour on that issue, questions of whether any transaction was made in good faith and without notice of Yamaha's title did not arise. 45 This appeal is limited to questions of law. I am not persuaded that his Honour's conclusions on the vital facts were infected by any error of law, as was argued for Mr Itaoui. It follows that the appeal must be dismissed.

Orders 46 The usual order would be to dismiss the appeal for the reasons given, with an order for costs in favour of Yamaha. If the parties need to address on the question of costs, they may approach. Otherwise they should file orders in agreed terms. **********

30/05/2013 - citation corrected [1883] changed to [1993] citation corrected also on coversheet - Paragraph(s) [36]

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