Daftar v Al-Khamisy (No 2)

[2014] NSWDC 343

District Court

New South Wales

Medium Neutral Citation:	Daftar v Al-Khamisy (No 2) [2014] NSWDC 343
Hearing dates:	2-5, 11-13, 16-19 June, 29-31 July 2014
Date of orders:	04 August 2014
Decision date:	04 August 2014
Jurisdiction:	Civil
Before:	P Taylor SC DCJ
Decision:	(1)   Judgment in favour of the defendant, Firaass Al-Khamisy, in respect of the claim by Khalid Daftar. (2)   Judgment in favour of the cross-claimant, Firaass Al-Khamisy, on his cross-claim against the cross-defendant, Khalid Daftar, in the sum of $307,863.75 inclusive of pre-judgment interest. (3)   Plaintiff to pay the defendant’s costs of the claim and the cross-claim. (4) Note that under r 36.16 of the Uniform Civil Procedure Rules 2005 the parties have 14 days to apply to amend these orders because a calculation error or other error or because different costs orders are sought. (5)   Note that the defendant, after judgment, makes an application that some of the costs are to be paid on an indemnity basis. (6)   List for mention in respect of costs, and any other amendment of orders sought, on Friday, 8 August 2014 at 10am before Judge P Taylor SC.
Catchwords:	SALE OF BUSINESS – ownership of goods sold – jewellery – gold - provision of cash repayments - loans – whether loans repaid – credit – use of interpreter – high degree of trust between parties
Category:	Principal judgment
Parties:	Khalid Daftar (plaintiff/cross-defendant) Firaass Sabah Ati Al-Khamisy (defendant/cross-claimant)
Representation:	Counsel: Mr R M Young (plaintiff/cross-defendant) Mr M Southwick (defendant/cross-claimant)     Solicitors: Consolidated Lawyers Pty Limited t/as Madison Marcus Law Firm (plaintiff/cross-defendant) Stojanovic Solicitors (defendant/cross-claimant)
File Number(s):	2012/395458
Publication restriction:	None

Judgment

(A) INTRODUCTION

1. Khalid Daftar and Firaass Sabah Ati Al‑Khamisy were close friends, jewellers and gold traders. However, they are in dispute as to the result of some gold dealings, the use of Mr Daftar's EFTPOS machine and whether certain loans made by Mr Daftar to Mr Al‑Khamisy have been repaid.

(B) BACKGROUND

2. Mr Daftar and Mr Al‑Khamisy were both engaged in the jewellery business; Mr Al-Khamisy since 2006 and Mr Daftar from an earlier time.  Mr Daftar assisted Mr Al‑Khamisy and there was a high degree of trust between them.  They were both born in Iraq and their families were friends.  Mr Daftar is also more proficient with the English language than Mr Al‑Khamisy.

3. The dealings between Mr Daftar and Mr Al‑Khamisy that resulted in the present proceedings arise from four events.  First, on 31 January 2011, Mr Daftar lent Mr Al‑Khamisy $120,000 for the purpose of purchasing a house.  On a page that contained a photocopy of an Arab Bank Australia bank cheque for that amount payable to Mr Al‑Khamisy, Mr Al‑Khamisy wrote:

"I, Firaass Sabah Ati Al-Khamisy confirm that I received from Khalid Daftar a sum of $120 000 One Hundred Twentey [thousand] Dollars for the purpose of purchasing property.

Also I confirm that I will refund the money to Mr Khalid Daftar within 8 months of this date."

4. There followed the signature of Mr Al‑Khamisy, together with his printed name of “FIRAASS” and the date, 31/1/2011.  Mr Daftar says this loan has never been repaid, nor have any payments been made.  Mr Al‑Khamisy says that he repaid the sum of $130,000 in several cash payments in October 2011, the additional $10,000 being said to have been requested by Mr Daftar and accepted by Mr Al‑Khamisy as covering the expenses and interest associated with the loan.

5. Secondly, Mr Al‑Khamisy said that on or about 31 December 2010, his EFTPOS facility was terminated, perhaps because of an illegal transaction by two customers.  He said he was unable to obtain from the bank another EFTPOS machine.  It is common ground that Mr Al‑Khamisy used Mr Daftar's EFTPOS machine from 1 April 2011 until late September 2011. Mr Al‑Khamisy says Mr Daftar provided the machine in early March 2011 and it was used from 9 March 2011 in respect of his or his company's sales.

6. Mr Daftar said the machine was not used by Mr Al‑Khamisy until about 1 April 2011 and was used in transactions involving the sale of Mr Daftar's stock.  The funds from sales using the EFTPOS machine were credited to Mr Daftar's bank account, although $50,000 from this account was paid by Mr Daftar to Mr Al‑Khamisy's builder. Mr Daftar said this payment was a further loan. Mr Al‑Khamisy asserted that it was provision by Mr Daftar of part of the EFTPOS funds to which he was entitled.

7. Thirdly, and at about the same time as the provision of the EFTPOS machine, Mr Daftar sold a jewellery business known as KI Jewellery - apparently owned by him and his nephew, Ziad Daftar, located in Liverpool - to Mr Al‑Khamisy.  The price was $100,000, comprising $70,000 for stock, $20,000 for goodwill and $10,000 for equipment.

8. The sale was recorded in a "Contract for the sale of business - 2004 edition" and contained a restraint on Mr Daftar from operating a jewellery business within 2 kilometres of the Liverpool business for two years.  There were no details of the $70,000 of trading stock, but Mr Al‑Khamisy signed a statutory declaration stating:

"I…FIRAASS SABAH ATI AL-KHAMISY of…[Auburn] NSW 2144 do solemnly and sincerely declare that:

I am the purchaser of Business located at 3/247 George St, Liverpool NSW 2170 From Mr Khalid Daftar. 

I confirm the purchase price is $100,000.00

I also confirm that I handed over to Mr Daftar a cheque for $100,000.00 

The cheque will be available on 1/8/2011...

Made and subscribed at Liverpool in New South Wales, on 30/03/2011".

9. Mr Al‑Khamisy provided to Mr Daftar the post‑dated cheque for $100,000 dated 1 August 2011.  The cheque was not deposited until 27 January 2012 and was not met on presentation.  Mr Daftar does not sue on the cheque, but claims, "$100,000.00 being the purchase price of [Mr Daftar's] jewellery business at Liverpool which [Mr Al‑Khamisy] purchased and has refused to pay". Mr Al‑Khamisy says he has paid for the business by reason of certain cash payments he alleges he made and from the proceeds of the EFTPOS transactions.

10. Fourthly and finally, on 6 January 2012, Mr Al‑Khamisy and Mr Daftar left Sydney to travel to Dubai via Bangkok.  They took approximately 7.2 kilograms of "scrap gold" and 6 to 8 kilograms of pure gold.  Mr Daftar made the flight bookings and completed the Export Declarations in respect of the gold.  On arrival in Bangkok, the gold was placed in a locker and Mr Daftar kept the key.

11. Unbeknown to Mr Al‑Khamisy, Mr Daftar had arranged a separate flight to Dubai for himself early the next morning and a flight for Mr Al‑Khamisy later that next day.  Early the next morning, Mr Daftar collected the gold from the locker and caught his flight to Dubai.  He left a note for Mr Al‑Khamisy.

12. Ultimately, Mr Al‑Khamisy obtained possession from Mr Daftar of the 7.2 kilograms of scrap gold and, later in January 2011, 2 kilograms of the 6 kilograms of pure gold.  Mr Daftar says all the gold was his, and claims the value of 7.2 kilograms of scrap gold and 2 kilograms of pure gold.  Mr Al‑Khamisy claims the value of the other 4 kilograms of pure gold retained by Mr Daftar.

(C) ISSUES AND CREDIT GENERALLY

13. The parties accepted that the resolution of the dispute turned on three issues:

1. the ownership of the goods sold using Mr Daftar's EFTPOS machine;

2. the ownership of the gold taken to Thailand and Dubai;

3. whether the cash payments were made by Mr Al‑Khamisy.

14. The credit of Mr Daftar and Mr Al‑Khamisy are of some importance to the resolution of these issues.  Questions of credit are considered in respect of the particular issues identified above, however three comments might be made at the outset. 

15. First, both Mr Daftar and Mr Al‑Khamisy gave evidence through an interpreter, which diminished the value of observation as a means of assessing credit. Whatever value demeanour of a witness has as an indicator of the honesty and reliability of a witness, it is lessened whenever evidence is given through an interpreter, because of the difficulty in ascertaining whether non‑responsive answers or apparently evasive answers are due to challenges with the language and the translation or something more sinister. Generally I found the consistency of the account advanced, considered against the documentary record, to be the best guide as to whether the account of Mr Daftar or Mr Al‑Khamisy should be accepted on any particular matter.

16. Secondly, the challenge to Mr Al‑Khamisy's credit was not assisted by the extravagant claims of dishonesty on his part.  In respect of several documents, Mr Al‑Khamisy was cross‑examined to suggest that he had falsely created documents to assist his case in circumstances where there was no evidence or other basis to support the suggestion.  This included documents produced by companies in Australia and Dubai and various documents that appeared to have their origin with Mr Daftar.

17. Thirdly, Mr Al‑Khamisy readily conceded he had a poor memory, especially for dates.  He could not remember the dates of birth of any of his children.  However, in assessing honesty, I find submissions based on the unreliability of memory to be of little assistance.  Both parties submitted and I accept that, for the most part, this case was not one where a party could be honestly mistaken about his entitlement.

(D) THE EFTPOS TRANSACTIONS

18. The EFTPOS transactions can be considered in two tranches: those that occurred in March 2011 before the purchase of the business and those that occurred afterwards.  This is because there is no dispute that from April to September 2011, the transactions recorded by means of the EFTPOS machine occurred at the Auburn shop of Mr Al‑Khamisy.  Mr Al‑Khamisy says the same is true of the transactions that occurred in March 2011, but Mr Daftar says that he processed those transactions at Liverpool.

19. The receipts of these transactions refer to "MIRO JEWELLERY" and "SHOP 3, 247 GEORGE STREET, LIVERPOOL NSW 2170."  This is, unsurprisingly, of no consequence.  The receipts generated in April through to September 2011 contain the same details, although it is common ground that these transactions occurred at the Auburn shop of Mr Al‑Khamisy.  These details are the consequence of the EFTPOS machine being owned by Mr Daftar.

20. The receipts, both before and after 1 April 2011, were in the possession of Mr Al‑Khamisy.  He said that that was because they record his transactions at Auburn.  Mr Daftar says that Mr Al‑Khamisy obtained the pre-April receipts from the Liverpool shop after the purchase in late March.  Mr Daftar says that the receipts were left at the shop, although there is no detail of when or where the receipts were left and no corroboration of this account.

21. This account by Mr Daftar of how Mr Al-Khamisy came to possess the pre-April EFTPOS receipts was a possible explanation, although I did not find it convincing.  However, Mr Daftar’s account faced a larger hurdle.  Mr Al‑Khamisy tendered a receipt book, which contained the duplicates of some receipts provided to customers at his Auburn shop in the period of March and April 2011.  The receipt book was in chronological order and bore indicia of being a genuine record, such as comprising apparently random handwriting and pens. A number of these duplicate receipts matched the details on the smaller EFTPOS receipts, thus confirming that the matching EFTPOS transactions must have occurred at Auburn rather than as part of Mr Daftar's business at Liverpool. 

22. Mr Daftar submitted that the receipt book should be carefully scrutinised, because it did not cover all the EFTPOS receipts and was not confined only to the EFTPOS receipts. But the latter point is of no significance, since there was evidence, not disputed, that transactions were often conducted with cash or by trade, which would not require the use of the EFTPOS machine. And there was no suggestion that there was only one receipt book in use, thus removing any possible significance in the lack of complete coincidence between its entries and the EFTPOS machine. 

23. No other submission was made to challenge the receipt book.

24. In my view, the receipt book of Mr Al‑Khamisy did more than establish that he and his employees carried out the transactions the subject of the EFTPOS receipts.  It also significantly damaged Mr Daftar's credit. Mr Daftar, of course, did not claim to have used Mr Al‑Khamisy's receipt book, so he could not have undertaken the transactions recorded in it, whether at Liverpool or anywhere else.  To suggest that he undertook the transactions was, in my view, evidence that was dishonest and knowingly false.

25. There were other matters that supported Mr Al‑Khamisy's account that the EFTPOS transactions concerned his goods. A third matter, apart from his possession of the receipts and his receipt book, was that he had no other EFTPOS machine.  Evidence of his applications to obtain an EFTPOS machine in early 2011 were not challenged, and there was no evidence that he was able to satisfy the conditions on the conditional approvals he then obtained, or that he obtained an EFTPOS machine other than Mr Daftar's until about November 2011.

26. Fourthly, Hayfa Zamel, estranged wife of Mr Al‑Khamisy, Mr Al-Khamisy’s employee, Mr Anhar Al Sa'be, and Mr Al‑Khamisy's brother, Alex Robinson, all gave evidence supporting Mr Al‑Khamisy's account of the lost EFTPOS machine and Mr Daftar's agreement to provide an EFTPOS machine in March 2011 to enable Mr Al‑Khamisy to use it for his business.  Mr Al Sa'be was not cross‑examined.

27. Fifthly, Mr Al‑Khamisy's tax records indicated sales in excess of $1 million for the financial year, indicating a capacity to generate the level of sales indicated by the EFTPOS receipts, which amounted to a little more than $160,000 in the six and a half months from 9 March to 21 September 2011. 

28. Mr Daftar's tax return, on the other hand, showed total sales in the 2011 financial year of $104,490, a sum less than the EFTPOS receipts for the period March to June 2011 inclusive.  Further, some of the sales of the $104,490 disclosed by Mr Daftar in his tax return must be inferred to have been derived from his business of KI Jewellery, which he sold to Mr Al‑Khamisy for $100,000 on 30 March 2011.

29. Sixthly, Mr Daftar, as I said, asserted that stock sold by Mr Al‑Khamisy after 30 March 2011 was his Miro Jewellery stock.  But Mr Daftar could give no direct evidence of what Mr Al‑Khamisy sold through the EFTPOS machine because he was not present at Auburn when those sales were conducted.

30. Further, there was no evidence of the Miro stock allegedly provided by Mr Daftar to Mr Al‑Khamisy on the sale of Mr Daftar's KI Jewellery business.  The highest the evidence reached was Mr Daftar’s account that there was stock in a separate cabinet in Liverpool.  But Mr Daftar, with the home loan to Mr Al-Khamisy and the sale of his business to Mr Al-Khamisy, had adopted a practice of having a written record of funds provided to Mr Al‑Khamisy. No list or other record of the stock existed nor any document recording an obligation on Mr Al‑Khamisy to sell Mr Daftar's stock.  The contract is silent on any such obligation.  Why any such Miro Jewellery stock needed to be sold from Auburn by Mr Al‑Khamisy rather than from the Liverpool shop and business that Mr Al‑Khamisy bought (or from the Miro Jewellery business said to have been retained by Mr Daftar) was not explained.

31. By the agreement Mr Daftar sold the KI Jewellery stock for $70,000 as part of the sale although Mr Al‑Khamisy disputed that he received any stock. Mr Daftar's tax return indicated a value of closing stock of $22,710 at 30 June 2011. This was not said ‑ on the tax return at least – to be the stock of Miro Jewellery. In any event, it does not explain the level of sales after that date through the EFTPOS machine.

32. Miro Jewellery was a business registered by Mr Daftar shortly before the EFTPOS machine was obtained by him and provided to Mr Al‑Khamisy in March 2011. The business was deregistered in September, shortly after the EFTPOS machine was returned.  Apart from the transactions occurring in the Auburn shop in March to September 2011, there was no evidence of any other transactions connected with Miro Jewellery. Mr Daftar's tax return does refer to Miro Jewellery but showed only expenses and no income in respect to that business. 

33. In these circumstances, I was not persuaded that there was any stock, whether KI jewellery or Miro jewellery, that properly belonged to Mr Daftar after the sale of the KI Jewellery business to Mr Al‑Khamisy.

34. There was also evidence, largely unexplained, that Mr Daftar arranged for his accountant to constitute a partnership between Mr Al‑Khamisy and Mr Daftar, as Mr Daftar was "concerned about complying with my obligations to pay GST" because of Mr Daftar's EFTPOS machine being at Mr Al‑Khamisy's Auburn shop. Unless Mr Al‑Khamisy had some interest in the sales through the EFTPOS machine, there would be no need for a "partnership". Further, the partnership return indicates that Mr Daftar received 10% of the income and Mr Al‑Khamisy received 90%, which might (but would not necessarily) be explained if Mr Daftar was to be compensated for paying the GST on sales with Mr Al‑Khamisy to receive the remainder.  Of course, GST would be paid on sales, not profit.  But there would be an input tax credit, or GST credit, on the purchases of the business.

35. Two Business Activity Statements submitted by Mr Daftar show a liability for GST on sales for the March quarter for 2011 in the sum of $2,172, which is outweighed by a GST credit on purchases.  Whether these amounts concern the period after 9 March is unexplained.  There was no Business Activity Statement for the June or the September quarter in evidence, and the December quarter Business Activity Statement disclosed no GST liability or credit.  Counsel for Mr Al‑Khamisy did make an equivocal concession about GST, although the extent or amount was not identified.  Furthermore, Mr Al‑Khamisy paid $2,000 in respect of GST at the request of Mr Daftar.

36. In the result, I was not satisfied that Mr Daftar paid any GST on the EFTPOS amounts received.  The Business Activity Statements do not indicate any payment and the partnership return indicates only a minimal amount payable to him of $491 in respect of a period where about $124,000 was received through the EFTPOS machine.  If Mr Daftar did pay any substantial amount in GST, he may be entitled to a credit.  Conversely, Mr Al‑Khamisy may be liable for GST on the amount received, as it represents his sales.  In these circumstances, I do not propose to make any reduction for GST.

37. Mr Daftar also gave details of five cheques he paid from the EFTPOS funds on behalf of Mr Al‑Khamisy.  These cheques totalled a little over $9,200.  Mr Al‑Khamisy denied any payments were made on his behalf, other than the $50,000 paid to his builder.  The cheques were payable to the "Retail Tenancy Unit", "Office of State Revenue", "Prentice Jarvin Lawyers", "Elders" and "Shahla K Al‑Zuraidi".

38. None of these payees can be identified as necessarily being connected with Mr Al‑Khamisy or Mr Daftar, and the matter was not explored in cross‑examination nor is there any evidence of a connection, other than that the Office of State Revenue amount of $425 closely approximates the $415 stamp duty on the Sale of Business contract (especially if there was a duplicate contract stamped for $10).

39. I am prepared to allow the amount of $415 for stamp duty and also allow the other bank fees attributable to the account which I calculate to be $2,441.32 as credits to Mr Daftar in respect of the EFTPOS amounts received, inferring that the obligation to pay the stamp duty on the purchase of a business would ordinarily rest upon the purchaser principally, although no party identified a contractual term that obligated Mr Al‑Khamisy to do so.

18. Thus, I allow a deduction of $2,856.32 from the amount of $161,537.37, which I calculate to be the credit amounts on the EFTPOS account during the time it was operated by Mr Al‑Khamisy. My calculation is slightly lower than that proposed by Mr Al‑Khamisy, principally arising from a difference in the months of July and August 2011.  Accordingly, Mr Al‑Khamisy is entitled to a credit of $158,681.05 for the EFTPOS transactions.

19. Mr Al-Khamisy received a cheque for $50,000 from these funds to pay his builder.  The other cheques which total a little more than $9,200 are not allowed as a credit to Mr Daftar (apart from the Office of State Revenue cheque) because I am not persuaded that they were payments made for Mr Al-Khamisy’s benefit. My adverse view of Mr Daftar’s credit, based on the matters above, is a relevant factor on this issue.

20. I should mention that Mr Daftar did rely on other matters of credit against Mr Al‑Khamisy.  He submitted that Mr Al‑Khamisy had agreed that the EFTPOS machine was only at the Auburn shop from 1 April 2011 but a close reading of the transcript shows Mr Al‑Khamisy had agreed that the EFTPOS machine was at Auburn on 1 April 2011 but did not concede that it was not there earlier. A submission by Mr Daftar about a concession by Mr Al‑Khamisy that the EFTPOS transactions in March 2011 occurred at Liverpool was also not supported by a close reading of the transcript.

21. Mr Daftar’s submission that Mr Al‑Khamisy could not have been present when the EFTPOS machine was installed and first used as Mr Al-Khamisy testified because Mr Al-Khamisy arrived in Dubai that same day was also unconvincing for three reasons. First, the evidence indicated it was possible to catch an early morning flight from Sydney to Dubai, arriving the same day. Secondly, Mrs Zamel gave evidence that the machine was connected a few days earlier than when it was first used so the absence of Mr Al-Khamisy on the date of the machine’s first use would not be probative of whether he was present when it was installed. And thirdly, I do not regard Mr Al‑Khamisy's memory, mistaken or otherwise, about whether he was present when the EFTPOS machine was first connected at Auburn is especially probative in determining who owned the goods the subject of the EFTPOS transactions.

(E) THE GOLD

44. Mr Al‑Khamisy gave a detailed account of how he attempted to prepare his scrap gold for the trip to Dubai by melting it on 5 January 2012, the night before his travels and how his oven failed and he retained 2 kilograms in Sydney.  Mr Daftar said that this evidence must have been false because an "Export Declaration" dated 4 January 2012 recorded the gold weight at 15 kilograms, which he said meant that the weight must have already been determined.  I did not find this convincing.  The weight shown on the declaration appeared to be a declared weight of 15 kilograms rather than a measured weight.  Further, no party submitted that the weight of the gold was precisely 15 kilograms, so it could not have been a measured amount.

45. Mr Al‑Khamisy was not familiar with carrying gold to Dubai through Thailand.  This provides some explanation for why Mr Daftar provided the Export Declaration, arranged the flights, carried the gold and deposited it in a safe. 

46. Mr Daftar's purchase of different flights for him and Mr Al‑Khamisy from Bangkok to Dubai, I found to be odd. It was not suggested that flights were only available via Bangkok or that seats on the earlier flight were limited.  Even more odd was that Mr Daftar did not tell Mr Al‑Khamisy of his separate early morning flight.  On the balance of probabilities, I conclude that this was a deliberate decision by Mr Daftar to conceal from Mr Al‑Khamisy that he was flying separately.

47. Mr Daftar picked up all the gold from the locker prior to catching the early flight.  He was well aware that (whoever owned the gold) he had agreed that Mr Al‑Khamisy was going to have the use of all the gold. I conclude that despite this agreement (and perhaps Mr Al‑Khamisy's ownership of the gold) he arranged the flights and did not inform Mr Al‑Khamisy so he could take all the gold with him to Dubai.  Mr Daftar's failure to be frank with his travelling companion about the flights, in my view, was part of a plan to make off with the gold contrary to his arrangement with Mr Al‑Khamisy.  It also tends to suggest that the gold belonged to Mr Al‑Khamisy.

48. When Mr Al‑Khamisy rose the next morning, he unsuccessfully knocked on the door to Mr Daftar's room and in due course, was informed that Mr Daftar had departed.  A note was left for Mr Al‑Khamisy with Mr Al‑Khamisy's name written on it, in Mr Daftar's handwriting.  On it was a typed and handwritten message.  The note read:

"My dear Firaass

I was not able to let you know that I did not receive a ticket from Bangkok to Dubai on Thai Airlines as there was only one ticket when I purchased for you. 

I obtained a ticket to Dubai with Emirate Airlines and I should arrive before you and will wait for you at Juba Hotel and I shall deposit the gold with Ali Gadban. 

I know you are going to drive me dizzy with why and how, the result is that it is New Year and there are no tickets and making reservations is difficult and we should accept this. 

At one thirty, the driver will come to you and take you to the airport. 

At the airport, go to Thai Airlines and travel to Dubai as your airplane departs at four fifteen.

- Go to the hotel information and arrange for a taxi time with them to take you to the airport or with the gate workers 

- Take a (coupon) paper from the hotel information for breakfast...eat.

- You must arrive and stay at Juba Hotel in Dubai because I will leave you another letter in case I travel to Syria 

- The trust shall reach Ali Gadban.

…"

49. The note seeks to give a belated explanation as to why Mr Daftar left early.  I do not find it satisfactory, at least in that it fails to explain why Mr Al‑Khamisy was not informed of the different flights.  Mr Daftar's reference to "I shall deposit the gold with Ali Gadban" implies recognition that Mr Al‑Khamisy has an entitlement to know what happened to (and perhaps an entitlement in) the gold.

50. Mr Dafter asserted that there was a second page to this letter.  He purported to give evidence of what the second page stated. However, in a response to a Notice to Admit the Authenticity of Documents, Mr Daftar's solicitor admitted the one page letter’s authenticity and stated:

"Further, in my letters to you dated 2 October 2013 and 9 October 2013, I had indicated that there was an additional page in the Arabic language written by my client and provided to your client.  I had indicated that this was a second page to the document Annexure A.

I advise that I had misunderstood the instructions from my client.  I am instructed that there was no second page in Arabic handwriting attached to Annexure A...In relation to the misunderstanding of my instructions, that was due to me not clearly obtaining the instructions from my client and not a change of instructions from my client."

51. Thus, Mr Daftar recanted, twice, on the question of a second page. In those circumstances, in the absence of any suggestion of or explanation for a misunderstanding about the "misunderstanding", in the absence of the original or a copy of the alleged second page, in the absence of any explanation as to why the additional words were not written on the back of the page where Mr Al‑Khamisy's name was written, and in view of the inaccurate statement about the quantity of the gold, I could not give Mr Daftar's evidence about this second page of the document any weight.

52. When Mr Al‑Khamisy arrived in Dubai, he received another letter at the hotel. Such a letter was foreshadowed in the earlier letter.  In response to a Notice to Admit, Mr Daftar conceded that the handwriting on the letter was his, but denied the typing, and alleged that the typing was fraudulently written by Mr Al‑Khamisy.

53. However, a handwriting expert concluded that the typing was written before the handwriting and the typing was likely done on the same machine as the earlier typing, conceded by the plaintiff to be done by him.  The handwriting expert was not cross‑examined, nor was there any evidence of fraudulent typing by Mr Al‑Khamisy nor did Mr Daftar advance any reason as to why I should not accept the opinion of the handwriting expert.

54. In those circumstances, I accept the opinion of the handwriting expert and conclude that the note was written by or at the direction of Mr Daftar. Mr Daftar's counsel ultimately conceded that I should so conclude.  The note received by Mr Al‑Khamisy in Dubai reads:

"Firaass

Thank God for your safety. 

I left the gold with Ali Gadban and as the agreement in which you promised that you will help me, I took six kilos...May God give you health for this assistance of which thru it, I can stand on my own feet once more. (May God) give you health and happiness and keep you to your children.

I will return it to you in no more than 6 months and I will give a ratio of the profit.  One day for you and one day against you.

And don't forget my supporting you."

55. The information about where the gold was left, the promise of Mr Al‑Khamisy to help Mr Daftar, the reference to "I took six kilos", the reference to "this assistance", the reference to the assistance enabling Mr Daftar to "stand on my own feet once more", the reference to "I will return it to you in no more than 6 months" and the reminder of Mr Daftar's past support all support the conclusion that the gold belongs to Mr Al‑Khamisy and that Mr Daftar was in a difficult financial position and took the gold to help himself. It supports Mr Al‑Khamisy's account and is inconsistent with the account Mr Daftar gave of his reasons for the trip and the respective financial positions of the parties.

56. Mr Daftar claimed that his financial position was strong and Mr Al-Khamisy was in financial difficulty. But Mr Daftar's difficult financial position is indicated by his tax return. In addition, his account from the Arab Bank shows a balance declining from almost $2 million to less than $400,000 in February and March 2011.  A loan application in late September 2011 did not indicate any improvement.  Mr Daftar's evidence that he "lost some money at the stock exchange" and his admission to losing some money in Dubai provides some support for Mr Al‑Khamisy's evidence that Mr Daftar told him he lost all his money in the Dubai stock market.

57. In Dubai, on 7 January 2012, Mr Daftar deposited 7 kilograms of pure gold into his account.  He said he took the scrap gold, said to be in five bars, to the German Gold Center, collected a receipt and left for Syria.  But this gold was credited to Mr Al‑Khamisy's account at Al Ghadban Jewellery in Dubai on 9 January 2012.  Mr Al‑Khamisy says he picked up his scrap gold at Al Ghadban Jewellery that was left for him by Mr Daftar, had it melted down in the marketplace, took the resulting bars at the German Gold Center for testing and then deposited them with Al Ghadban Jewellery on 9 January 2012.

58. Mr Al‑Khamisy's account is consistent with the records.  It explains how the gold went from the German Gold Center to Al Ghadban Jewellery on 9 January 2012, which Mr Daftar's account does not explain.  Mr Daftar's account of not having the German Gold Center receipt because he left the receipt for the gold at Al Ghadban Jewellery is also difficult to accept.  Further, Mr Daftar's account of having 2 kilograms of his mother's gold, which he said he sold for US$9,000 when the market price was about US$120,000 and where he has no record or receipt, seems unbelievable.

59. Other than Mr Daftar's word, there was no other evidence to support the existence of the 2 kilograms of his mother's gold.  I am not persuaded that Mr Daftar carried any gold belonging to his mother and it seems the reference to 2 kilograms of his mother's gold was to support, in his mind, the 15 kilograms of gold that appeared on the Export Declaration form.

60. The receipt for the scrap gold records that it was deposited at Al Ghadban Jewellery in Dubai in the name of Heaven Jewellery.  This is, in my mind, evidence that it belonged to Mr Al‑Khamisy, either because it was left for him to deal with and deposit, as he asserts and which I accept, or as Mr Daftar asserts (but which I do not accept), that Mr Daftar deposited it in the name of Mr Al‑Khamisy's company, Heaven Jewellery.

61. Mr Daftar disputed the genuineness of the Al Ghadban Jewellery receipt possessed by Mr Al‑Khamisy.  The significance of this dispute is not directly relevant to the ownership of the gold, but only to whose account of what occurred in Dubai should be accepted, since both purportedly genuine receipts recognise the gold as being credited to Heaven Jewellery, Mr Al‑Khamisy's company.

62. However, Mr Al‑Khamisy also had a receipt for another 3 kilograms of gold, which he obtained from his brother in Dubai.  This is established both by the receipt and by the Heaven Jewellery Statement of Account with Al Ghadban Jewellery. Mr Daftar did not seriously contest this 3-kilogram deposit by Mr Al‑Khamisy, but asserted that Mr Al‑Khamisy brought it from Australia.  But that would make the Export Declaration false, as it did not include the additional 3 kilograms. And there was no explanation from Mr Daftar as to why these 3 kilograms were not left in the locker, or indeed wherever it was when Mr Al‑Khamisy and Mr Daftar were in Thailand.

63. The receipt for the 3 kilograms of gold is in a similar form to the receipt for the scrap gold, containing similar signatures in similar places.  It tends to confirm the genuineness of Mr Al‑Khamisy's receipt for the scrap gold.

64. Mr Daftar returned to Australia later in January 2012 with no receipts, either from Al Ghadban Jewellery or the German Gold Centre. In June 2013, Mr Daftar wrote asking for receipts.  When he was asked to produce the email request, a proper copy was not provided, but rather a made up email was provided, lacking crucial details.  The proper copy was said to have been deleted. 

65. There was also evidence of two letters; one typed which said:

"Dear Sir,

I, Khalid Daftar, On 7th January 2012, I bring 7,157.700 gm scrap bar it's come 5,511.429 gm pure gold from Australia to Dubai. This scrap bar Delivered for Deposit in Mr. Firas (Heaven Jewellery), Sydney, they have account with Al Ghadban Jewellery, Dubai. 

Thanking you."

There followed Mr Daftar's name and signature.  The second letter in handwriting read, "On 7 Jan 2012 I delivered 7157.7 scrap gold pure 5,511.429 to Al ghadban to deposit the amount of that gold above to heaven Jewellery in Sydney". I note that the words "I delivered" might be read as coming before the remaining words in the quote. There followed Mr Daftar's handwritten name and signature.

66. Both documents appeared to be signed by Mr Daftar.  Although Mr Daftar did not concede that he wrote these notes, his reply affidavit did not contest their genuineness and each signature bears a likeness to Mr Daftar's.  In the absence of any contesting evidence, I accept that Mr Daftar wrote them.  On the evidence before me, they seem likely to have been written in relation to the receipts Mr Daftar requested in June 2013.

67. Mr Daftar claimed that the receipt he received in about June 2013 is a genuine receipt.  Little turns on this. However, it is evident that the receipt produced by Mr Daftar is not an exact copy of the January 2012 receipt because it contains contact details of Al Ghadban Jewellery different from those that appear on all the January 2012 documents of Al Ghadban Jewellery. It has a slightly different phone number and address, and is, evidently, a later recreated document based on the receipts, using the then current stationery (as at the middle of 2013) of Al Ghadban Jewellery.

68. The inclusion of Heaven Jewellery's phone number, or Mr Daftar's name at the foot of the document, seem to me to be uncontroversial, Mr Daftar having left the scrap gold at Al Ghadban Jewellery for Mr Al‑Khamisy on Mr Al‑Khamisy's account. I cannot find that its inclusion was because of something inappropriately done by Mr Daftar.  However, I am not persuaded by it that the receipts produced in evidence by Mr Al‑Khamisy were other than genuine.

69. Mr Al‑Khamisy also submitted that Mr Daftar's account is unlikely because on that account, Mr Al‑Khamisy owed Mr Daftar $170,000 for the home loan ($120,000 plus the additional $50,000) and $100,000 for the business.  Mr Al-Khamisy submitted that it would be unlikely in those circumstances that Mr Daftar would lend a further 7 kilograms of his own scrap gold and subsequently, when they returned to Australia, give Mr Al‑Khamisy a further 2 kilograms of pure gold without any signed record or acknowledgement, given particularly Mr Daftar's practice of note keeping in respect of the earlier loans.

70. I accept that this submission has some force.  Mr Daftar's reasons for providing the scrap gold and the further 2 kilograms of pure gold are unconvincing, especially if Mr Daftar's account of Mr Al‑Khamisy remaining a substantial debtor is accepted.  If Mr Al‑Khamisy was not a substantial debtor, then Mr Daftar's account must be rejected as it states the contrary.

71. Mr Daftar submitted that Mr Al‑Khamisy's gold dealings with ABC Bullion to the end of 2010 did not explain the scrap gold or the pure gold belonging to him.  In truth, it need only explain the pure gold, as the scrap gold was not purchased from ABC Bullion, but resulted from trading in his jewellery business.  But in any event, Mr Daftar misunderstood ABC Bullion’s records, which recorded gold purchases far beyond 13 kilograms of pure gold in the period 2009 and 2010.  This can be contrasted with Mr Daftar, whose most recent purchase of gold was in 2008.

72. Mr Daftar applied for a housing loan in late September 2011.  His application did not claim to have any assets by way of gold holdings.  He did refer to his "business" being worth $600,000 but given that his KI Jewellery business had been sold to Mr Al‑Khamisy in March 2011, and his Miro Jewellery business had, by the time of the application, ceased to operate, it is difficult to give any credence to the suggestion that the worth of the business was a reference to the worth of his gold holdings.

73. So far as it appeared to me on the evidence, the Miro Jewellery business seemed to be no more than a name to justify the EFTPOS machine obtained by Mr Daftar and provided for the use of Mr Al‑Khamisy.  No trading activities appeared in any documents in the evidence (apart from the EFTPOS receipts to which I have earlier referred) and the existence of Miro Jewellery seemed to be confined to the period Mr Al‑Khamisy used the EFTPOS machine.  Any such business, at least in Liverpool where Mr Daftar lived, would seem to have been contrary to his contractual obligations and the restraint clauses in the Sale of Business contract with Mr Al‑Khamisy.

74. There are other matters that do not assist to establish the genuineness of Mr Daftar's claim to the gold.  Mr Daftar wrote two letters of demand in May 2011.  Neither mentioned any outstanding gold owing to him.  It is noteworthy that the second letter of demand is dated after a letter from Mr Al‑Khamisy that demands return of the 4 kilograms of gold.  Even this did not prompt Mr Daftar to assert that he was in fact the owner of the gold.  Nor was Mr Daftar's gold claim referred to in the original Statement of Claim.  It was first raised in the Amended Statement of Claim, filed 30 July 2013. Whether there was significance in the coincidence of the timing of that claim and the receipt by Mr Daftar of copies of the Dubai receipts, (which in his view supported his claim) was not explored. 

75. Mr Daftar sought to explain the absence of an earlier reference to the gold claim on the basis that the gold was owed to him by Bright Jewellery Pty Ltd or Heaven Jewellery rather than by Mr Al‑Khamisy himself. If that is so, the proceedings are misconceived, because he has not sued those companies.  But in any event, I do not accept this as an explanation for not raising his claim to ownership of the gold especially when Mr Al‑Khamisy had already alleged that Mr Daftar had converted Mr Al‑Khamisy's gold to his own use.

66. Mr Daftar gives no explanation for the scrap gold either.  There is no suggestion he was trading in gold jewellery before the trip in January 2012.  As I said, he had sold his KI Jewellery business in March 2011 along with all of his stock, to Mr Al‑Khamisy.  Miro Jewellery had ceased operating.  Further, Mr Daftar's account is that of the 15 kilograms of gold 11 were imported from Dubai in 2008, two were from his mother and two he melted from pieces of gold in his jewellery business. That means that only 2 kilograms of gold were scrap since there is no suggestion that the "11 kilograms of gold bars...imported from Dubai in November 2008" were, in part, scrap gold.  But if 2 kilograms only of the gold were scrap, then this conflicts with the receipts of the German Gold Center and Al Ghadban Jewellery, which shows that the scrap gold of 77% purity comprised a total of almost 7.2 kilograms.

67. Mr Daftar's claim that he took the scrap gold to the German Gold Center also conflicts with his two signed letters, to which I earlier referred, and which I inferred might have been sent to Dubai in about June 2013 (after which Mr Al‑Khamisy was able to obtain copies of them).  Those letters say that the scrap gold was delivered to Al Ghadban Jewellery. Neither makes any mention of the German Gold Centre.

68. I note that those letters refer to the precise amount of pure gold in the scrap.  If Mr Al‑Khamisy's evidence is to be accepted, as I have, there is no explanation for how Mr Daftar would know the precise amount of pure gold until he received the receipts he obtained in 2013, unless perhaps he had accessed or been shown Mr Al‑Khamisy's Statement of Account with Al Ghadban Jewellery.  That may suggest that the letters occurred either after the receipts were received or after Al Ghadban Jewellery had informed Mr Daftar of the pure gold amount of the scrap gold.

69. In any event, for all the reasons I have indicated, I accept Mr Al‑Khamisy's claim to ownership of the gold.  Mr Daftar's claim relies on his word alone, is not supported by any documents and his account is shown to be inconsistent with his own repeated letters, letters that along with other documents he initially claimed to have been fraudulently created. By closing submissions he refrained from pressing this over‑reaching submission. 

70. The parties agree that the 4 kilograms of gold is worth $232,808.40 as of January 2012.  Mr Al‑Khamisy should be credited with this amount.

(F) THE CASH PAYMENTS

81. Mr Al‑Khamisy claimed that he made a number of cash payments to Mr Daftar in October and November 2011.  Those payments are supported, to some extent, by evidence from Mrs Zamel, his estranged wife, his brother, Mr Robinson, and Mr Al Sa'be, his employee.  As I noted earlier, Mr Al Sa'be was not cross‑examined.  Mr Daftar denied receiving any cash payments, other than $1,000 on 3 January 2012.

82. Mr Al‑Khamisy claimed to have recorded the payments in his "debt book". The debt book and the record of these payments were in evidence.  The dates of the payments were mostly recorded.  Most of the payments were in the period 12 October 2011 and in a one-week period, $130,000 was alleged to have been paid.

83. As the record was brief and contained no acknowledgement by Mr Daftar or indeed anyone, I viewed it with some caution.  Mr Al‑Khamisy claimed to have been present when Mr Daftar deposited the cash in amounts less than $10,000 into his bank accounts.  Statements of Mr Daftar's bank accounts were tendered, which showed approximately $100,000 in amounts of generally $9,700 or $9,800 being deposited on 10 October 2011 and the days following.  This provided some corroboration of Mr Al‑Khamisy's account.

84. Mr Daftar denied these payments, but made no reference in his affidavits to explain the deposits.  He claimed in oral evidence that these monies came from his nephew, Ziad Daftar.  Mr Ziad Daftar did not swear an affidavit and was not called to give evidence.  A statutory declaration of his was tendered.  It read:

"I, Ziad Daftar, of...Castlereagh Street, Liverpool...(occupation) jewellery in the State of New South Wales do solemnly and sincerely declare that give my Uncle Khalid Daftar a gift of non-refundable of $130,000 in purchasing a property and I make this solemn declaration conscientiously..."

85. The words "give my Uncle" to "purchasing a property" are in handwriting. Mr Daftar's home loan application was dated the same date, and I infer that the property referred to in that application is the same property referred to in the statutory declaration.

86. But the home loan application suggests that the meaning of the statutory declaration is one of an intention to provide $130,000 in the future, since the loan application does not indicate any asset that is explained by provision of the $130,000 by the nephew.  There is no evidence that the amount was ever paid, how it was paid or why it would have been deposited in amounts not exceeding $10,000.  Mr Daftar's account gives no explanation of this.

87. In the absence of Ziad Daftar being called or providing an affidavit, and there being no explanation of his absence and no evidence, such as by a cheque or other document to evidence that he paid $130,000, I do not think I should give any real weight to the statutory declaration.  In any event, the deposits into Mr Daftar's account are left unexplained by him.

88. Mr Al‑Khamisy said some of the cash came from money transferred to him by his uncle some seven months earlier in March 2011.  Some of this evidence was unsatisfactory.  Mr Al‑Khamisy said he collected those funds, but subsequently admitted that he did not collect them but that his brother or another person did.  But he said the money was collected from Bresam Money Transfer and there are receipts to indicate the receipt of almost $100,000 in March 2011. 

89. Criticism was made of the three receipts being dated the same day and the stamp indicating the spelling of "BRESM" different from the business name "Bresam". However, there was no evidence to the contrary of the receipts and it would not seem a difficult thing to disprove them by subpoenaing documents from Bresam Money Transfer.  On balance, I am inclined to accept that Mr Al‑Khamisy did receive the cash via Bresam Money Transfer.  However, this is to my mind, of limited significance to the determination of the cash payments.  They were made seven months later.  Mr Al‑Khamisy's business, according to his tax return, shows sales exceeding $1 million per year.  There could be no challenge to his capacity, as is disclosed by his trading, to make the cash payments even without the Bresam transfers.

90. Without his nephew, Ziad Daftar, there is no explanation for how Mr Daftar could deposit about $100,000 in repeated cash deposits in a week in October 2011 save for the explanation given by Mr Al‑Khamisy.  That explanation is strengthened by my acceptance of Mr Al‑Khamisy's credit in respect of the gold and the EFTPOS transactions and my rejection as untruthful the evidence of Mr Daftar in respect to those matters.

91. Mr Al-Khamisy also asserted that one payment of cash was made to Mr Daftar's son.  Mr Daftar's son did not give evidence to reject that payment.  No explanation was given for his absence.  It seems a Jones v Dunkel inference is appropriate in respect of both the absence of Mr Daftar’s son, Waleed Daftar, and his nephew, Ziad Daftar.

92. Mr Daftar submitted that no such inference should be drawn in respect of Ziad Daftar because Mr Al‑Khamisy did speak to him by telephone.  The evidence of that telephone call denied rather than confirmed the payment of $130,000, although it did not confirm that Ziad Daftar was supportive of his uncle's position.  This evidence might support the inference that Ziad Daftar’s evidence could not assist Mr Daftar, an inference not dissimilar to a Jones v Dunkel inference.

93. Mr Daftar also referred to the evidence of Mr Robinson to the effect that a bag of cash was delivered in March 2011 to Mr Daftar's Liverpool shop. Mr Al‑Khamisy does not assert any payment was made in March 2011.  There is some strength in this submission. 

94. On the other hand, Mr Al Sa'be was not cross‑examined and he gave evidence that the housing loan in the sum of $130,000 was acknowledged by Mr Daftar to be fully repaid.  Mr Robinson's payment was part of that amount.

95. Further, Mr Daftar accepted that $30,000 was paid or deposited.  And Mr Daftar did not mention any absence of home loan payments when he wrote his first letter of demand on 14 May 2012.  In all these circumstances, I accept that the housing loan was repaid in full in cash in October 2011.

96. The matters of particular significance in my decision on this issue are my rejection of Mr Daftar as a witness of truth, the bank deposits and the evidence that Mr Daftar did return not an original but a very good copy of the loan agreement, which may signify to Mr Al Sa'be and Mr Al‑Khamisy that the loan had been repaid.  There is no other explanation offered as to how Mr Al‑Khamisy received that document.

97. Accordingly, I find that the home loan with interest and expenses of $130,000 was fully repaid by Mr Al‑Khamisy.  For the same reasons, I accept that the payments of $17,700 were made to Mr Daftar in November 2011; those payments were also recorded in the debt book and supported by evidence of other witnesses.

(G) CONCLUSION

98. Accordingly, Mr Al‑Khamisy received from Mr Daftar and owed to him $130,000 for the home loan plus interest and other expenses, $50,000 from the EFTPOS proceeds and $100,000 business purchase, totalling an amount owing by Mr Al‑Khamisy of $280,000.

99. Mr Al‑Khamisy is entitled to be credited with $130,000 cash payments discharging the home loan, $158,681 from the EFTPOS proceeds, $18,700 for the cash payments for the business and $232,808.40 for the gold, totalling the sum of $540,189.40.  The difference is $260,189.40 to which Mr Al‑Khamisy is entitled as a judgment sum.

100. Interest should run from 7 January 2012 to today, 4 August 2014, on the gold in the sum of $232,808.40. And on the residue amount of $27,381 I propose to award interest from 4 November 2011, which is partway through the period when the amount other than the gold went into a credit position in respect of Mr Al‑Khamisy.  These two amounts of interest are respectively $41,570.65 and $6,103.70.  Together with the principal amount, they total $307,863.75.

101. Accordingly, the orders of the Court are:

1. Judgment in favour of the defendant, Firaass Al-Khamisy, in respect of the claim by Khalid Daftar.

2. Judgment in favour of the cross-claimant, Firaass Al-Khamisy, on his cross-claim against the cross-defendant, Khalid Daftar, in the sum of $307,863.75 inclusive of pre-judgment interest.

3. Plaintiff to pay the defendant’s costs of the claim and the cross-claim.

4. Note that under r 36.16 of the Uniform Civil Procedure Rules 2005 the parties have 14 days to apply to amend these orders because a calculation error or other error or because different costs orders are sought.

5. Note that the defendant, after judgment, makes an application that some of the costs are to be paid on an indemnity basis.

6. List for mention in respect of costs, and any other amendment of orders sought, on Friday, 8 August 2014 at 10am before Judge P Taylor SC.

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Decision last updated: 08 July 2015