Wehbe, W. v Caltex Oil Australia Pty Ltd

Re: W. WEHBE PTY. LTD.
And: CALTEX OIL (AUSTRALIA) PTY. LIMITED
Nos. G29 and G30 of 1987
Petroleum Retail Marketing Franchise Act

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart(1), Beaumont(1) and Gummow(1) JJ.

CATCHWORDS

Petroleum Retail Marketing Franchise Act - allegations that lessees engaged in receiving stolen distillate - circumstantial evidence - bases for drawing inferences - whether sufficient evidence to support inferences of trial Judge - standard of proof required - effect of alleged offenders not giving evidence.

Petroleum Retail Marketing Franchise Act 1980 (Cth): ss. 16, 25.

Crimes Act 1900 (NSW): ss. 7, 188, 360, 160A.

HEARING

SYDNEY

#DATE 12:5:1987

Counsel and Solicitors for Appellants: J.L. Glisson Q.C. with D.L. Warren instructed by Messrs Kasavias, Katralis Vosnakis & Co.

Counsel and Solicitors for Respondents: D.E. Horton Q.C. with D.E.J. Ryan instructed by Messrs Moore & Bevins

ORDER

The appeals, G 29 of 1987 and G 30 of 1987, be dismissed.

The appellants, W. Wehbe Pty. Ltd. and Mr. W. Wehbe, pay the costs of the respondent, Caltex Oil (Australia) Pty. Ltd. of the appeals.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

These are two appeal from judgment of a single Judge of this Court (Sheppard J.) which raise the question whether there is any, or any sufficient, evidence to support certain critical findings of fact made by his Honour. The learned trial Judge heard three proceedings together by consent (applications No. G357, G358 and G422 of 1986), each of which was an application made pursuant to sub-s. 16(4) of the Petroleum Retail Marketing Franchise Act 1980 ("the Act"). In each application an order was sought declaring that a notice served by the respondent, Caltex Oil (Australia) Pty. Limited ("the respondent"), pursuant to sub-s. 16(3) of the Act, had no effect. If the notices did have effect, the appellants' rights to continue in occupation of two service stations would be placed in jeopardy. In cross-claims brought in two of the three matters (Nos. G. 357 and G358 of 1986) the respondent sought orders which, if made, would give it possession of the two service stations. The essential allegations in the notices are that a company, W. Wehbe Pty. Limited (one of the appellants and the activities of which were said to be controlled by Mr. W.A. Wehbe, also an appellant) and Mr. Wehbe personally on a number of occasions knowingly participated in the receipt of stolen distillate. These were the primary issues at the trial.

Application No. G357 of 1986 concerned a service station conducted by the applicant W. Wehbe Pty. Limited ("the company") at 77 Hume Highway, Chullora, a Sydney suburb. The company is the lessee of those premises. The other two applications each concerned a service station situated at 563-567 Hume Highway, South Strathfield, another Sydney suburb. Mr Wehbe is the lessee of the service station at South Strathfield. The applicant in matter No. G 422 of 1986 was a Mr. G. Hatti who claimed to have an interest in the lease of the South Strathfield service station. Mr. Hatti has not appealed in his matter.
In his reasons for judgment the trial Judge set out fully and carefully his many findings of fact, following his review of the considerable body of evidence given at a lengthy trial, both by affidavit and orally, and a large number of exhibits. We are therefore relieved of the necessity to recite the findings of fact except where it is necessary to do so for the purposes of this appeal.
Before turning to those findings it is desirable to state the relevant sections of the Act.

"16.(1) A franchisor may terminate the franchise agreement in accordance with the succeeding provisions of this section, but not otherwise.

(2) A franchisor shall not terminate the franchise agreement except on one or more of the following grounds:

(a) . . .

(b) . . .

(c) the franchisee performs an act, omits to perform an act, or makes a statement, where the act or omission, or the making of the statement -

(i) constitutes an offence punishable by imprisonment or, in the case of a franchisee being a body corporate, by a fine of $500 or more; and

(ii) in the case of a franchisee being a natural person, tends to show that he is dishonest or is otherwise not of good character;

. . .

(3) The termination of a franchise agreement by the franchisor shall be effected by the franchisor serving on the franchisee notice in writing -

(a) informing the franchisee that the agreement is to be terminated on a specified date, being a date that, subject to sub-section (8), is not earlier than 30 days after the day on which the notice is served; and

(b) setting out full particulars of the ground or grounds, including a statement of the facts relating to each ground, upon which the termination is based.

(4) Where a franchisor serves notice on the franchisee under sub-section (3) terminating the agreement, the franchisee may apply to a court for an order declaring the notice to have had, or to have, no effect.

(5) Where an application is made under sub-section (4), the court may, by order, either -

(a) declare the notice referred to in that sub-section to have had, or to have, no effect; or

(b) declare that notice to have terminated, or to terminate, the agreement on the date specified in the notice or on such later date as is specified in the order,

and may, in either case, make such ancillary or consequential orders as it thinks fit, including orders directing the preparation and execution of documents.

(6) In any proceedings under sub-section (4), the court shall not declare the notice referred to in that sub-section to have terminated, or to terminate, the franchise agreement unless -

(a) a ground specified in the notice is established by the franchisor to the satisfaction of the court; and

(b) the court is satisfied that the termination of the agreement and any related agreement or agreements is just and equitable, having regard to all the circumstances.

25. In any proceedings under this Act in which a franchisor seeks to prove -

(a) the occurrence of an event of a kind referred to in paragraph 16(2)(c); or

(b) the occurrence of an event of a king referred to in paragraph 16(2)(d), where the occurrence of the event constitutes an offence,

the degree of proof required is the same as that required for the proof of a fact in issue in civil proceedings."

The lease of the Chullora premises is dated 4 December 1985 and is expressed to be between the respondent as lessor and the company as lessee. It is for a period of three years commencing on 1 October 1985 and terminating on 30 September 1988. In addition to the lease there is an agreement dated 4 December 1985 between the respondent and the company which provides for the sale to the company of certain quantities of Caltex petroleum products. The period of the agreement coincides with the period of the lease, namely, three years commencing on 1 October 1985. The agreement, like the lease, is a franchise agreement for the purposes of the Act.
The notice of termination upon which the respondent relied in respect of the Chullora premises is dated 23 July 1986. It referred to the lease and the other agreement which is referred to as a "supply contract". By the notice, in accordance with sub-s. 16(3) of the Act, the respondent gave notice that the lease and the supply contract were to be terminated on 29 August 1986 on which date the respondent required the company to vacate and give up possession of the premises. The notice contained nine grounds supporting the right of the respondent to terminate the lease and supply contract and to gain possession of the premises. We shall summarise the first ground. It asserted that the lease and supply contract were being terminated by the respondent upon the ground referred to in para. 16(2)(c) of the Act, namely, that the company performed an act which constituted an offence punishable, in the case of a franchisee being a body corporate, by a fine of $500 or more. It was said that the company received at the Chullora premises on 20 March 1986 6,700 litres of distillate, the property of the respondent, the company at the time of receipt of the distillate knowing that it was stolen, and that Mr. Wehbe was a director and shareholder of the company and was the person who controlled its activities. It was alleged that at or about 8.35 a.m. on 20 March 1986 a Caltex tanker cab registration FOW607, trailer licence CF7083, driven by John Harold Martin arrived at the premises; that at or about 8.50 a.m. Mr. Martin began discharging distillate from the tanker into underground storage premises; that at or about 8.55 a.m., whilst the disillate was being discharged into underground storage tanks, Mr. Wehbe arrived at the premises and conversed with Mr. Martin; that at or about 9.02 a.m. Mr. Wehbe left the premises; that at that time a person working at the premises climbed on top of the tanker and examined the measuring stick in the tanker; that at or about 9.12 a.m. Mr. Martin, having discharged the distillate into the underground storage tanks a quantity of 6,700 litres of distillate, drove the vehicle from the premises; and that the quantity of distillate which had been discharged comprised part of a quantity totalling 27,000 litres loaded by the respondent at its Banksmeadow terminal in New South Wales and invoiced for delivery by the respondent to the State Rail Authority, loco-running Yard, Enfield, New South Wales.
The second ground was to the same effect as the first but in respect of a different consignment of distillate. The quantity was again said to be 6,700 litres; the date of the alleged receipt was also alleged to be 20 March 1986; the time of the receipt was said to be between 10 a.m. and 11 a.m. rather than between 8.30 a.m. and 9.00 a.m. and the driver was also alleged to be Mr. Martin.
The third ground was in similar terms to the earlier two, but alleged receipt of stolen distillate by the company between 4.30 p.m. and 5.00 p.m. on 21 March 1986. The driver of the tanker was said to be Dennis Leslie Bedworth.
The fourth ground was in similar terms to the earlier ones but was related to an alleged receipt of stolen distillate which occurred, not at the Chullora service station, but at another Caltex service station at 110 Canterbury Road, Bankstown. The lessee of that service station was not the company but another company, M. & G. Wehbe Bros. Pty. Limited. The ground alleged receipt of stolen distillate by the company at the Bankstown service station between 10 a.m. and 11 a.m. on 9 May 1986. His Honour found there was no evidence to support that allegation and that it was not therefore open for the respondent to rely on that ground in relation to the Chullora service station because it was not shown that the company, which was the franchisee, was "implicated" in the receipt of stolen distillate at Bankstown. But his Honour held that there was evidence that Mr. Wehbe was implicated in the receipt of the stolen distillate at Bankstown. He held that, consequently, a ground in similar terms was available to the respondent in relation to the South Strathfield service station of which Mr. Wehbe is the franchisee.
The fifth ground alleged receipt of stolen distillate by the company between 9 a.m. and 9.20 a.m. on 3 June 1986 at the Chullora service station.
The remaining grounds were not based on primary facts different from those alleged in the earlier grounds. The alleged the commission by the company of different offences arising out of the same incidents as were relied upon in the earlier grounds.
The sixth ground alleged that the company conspired and agreed with Mr. Wehbe, Mr. Martin and Mr. Bedworth to commit the offence of cheating and defrauding the respondent and the State Rail Authority and solicited, encouraged or persuaded persons including Mr. Wehbe, Mr. Martin and Mr. Bedworth to cheat and defraud the respondent and the State Rail Authority.
The seventh ground alleged that the company was an accessory before and after the fact to the felony committed either by Mr. Martin or Mr. Bedworth who were said to have stolen the distillate.
The eighth ground alleged that the company, with intent to obtain, for the benefit of itself and others, including Mr. Wehbe, Mr. Martin and Mr. Bedworth, quantities of distillate the property of the respondent, concurred in the making of a written statement, particulars of which were given and which were known to the company to be false or misleading in a material particular.
The ninth ground was not relied on at the hearing.
The service station at South Strathfield was originally leased to Mr. and Mrs. Salonitides and Mr. and Mrs. Tadros. The lease was dated 25 May 1984 and was for a period of three years from 29 April 1984 to 28 April 1987. On 20 May 1984 the lease was assigned with the consent of the respondent, to Mr. Wehbe. On 5 June 1984 supply agreement was entered into between the respondent and the Salonitides' and the Tadros'. The supply agreement was for the same period as the lease.
The seven grounds relied on in the notice relating to the South Strathfield service were identical with grounds 1 to 7 in the notice relied upon in relation to the Chullora service station except for changes in the form of the particulars to allow for the fact that Mr. Wehbe, rather than the company, is the lessee of the South Strathfield service station. In the application relating to the service station at South Strathfield the respondent was, as his Honour said, able to rely on the fourth ground relating to the delivery of distillate to the Bankstown service station on 9 May 1986.
His Honour noted that the respondent bore the onus of establishing that the grounds were made out: para. 16(6)(a) of the Act. His Honour made some observations on the standard of proof. He noted that, although the question was whether Mr. Wehbe and the company were parties to crimes, as the proceedings were civil proceedings the standard of proof of the acts constituting the criminal offences was that required for the proof of a fact in issue in civil proceedings. This plainly follows because of the provisions of s. 25 of the Act to that effect. His Honour observed that, although the onus of proof required was proof beyond a balance of probabilities, he must nevertheless bear in mind the seriousness of the allegations and referred to Briginshaw v. Briginshaw (1938) 60 CLR 336 particularly at pp 360-363 and Reifjek v. McElroy (1965) 112 CLR 517 at pp 521-2.
His Honour referred to the relevant provisions of the criminal law including ss. 188 and 7 of the Crimes Act 1900 (N.S.W.). Section 188 of the Crimes Act 1900 (N.S.W.) provides that whosoever receives any property the stealing of which amounts to a felony knowing that it has been stolen shall be guilty of a felony and shall be liable to penal servitude for ten years. Section 7 of the Crimes Act provides that where the felonious receipt of any property is expressed in any Act to be an offence every person shall be deemed to have such property in his possession within the meaning of the Crimes Act who (a) has any such property in his custody; or (b) knowingly has any such property in the custody of another person; or (c) knowingly has any such property in a place (whether belonging to him or occupied by himself or not) and whether such property is there had or placed for his own use, or the use of another. The trial Judge also noted other provisions of the Crimes Act, including s. 360A providing for the indictment of corporations for offences. It states that every provision of an Act (including the Crimes Act) including offences punishable upon indictment or upon summary convictions, may unless a contrary intention appears, be construed to be applied to bodies corporate as well as individuals. Section 360A(6) provides that where the penalty in respect of any offence is a term of imprisonment only the court before which the offence is tried may, if it thinks fit in the case of a body corporate, impose a pecuniary penalty not exceeding $2,000 where the term of imprisonment exceeds two years.
His Honour correctly held that if the company or Mr. Wehbe or both of them are shown to have received stolen property the provisions of para. 16(1)(c) of the Act will apply. This finding was not disputed.
Neither Mr. Martin nor Mr. Bedworth was called to give evidence although the respondent had made efforts to call them as witnesses in its case. They were alleged to be involved in the theft of the distillate, but the respondent was unable to effect subpoenas on either of them. The trial Judge found that the respondent had done its utmost to have those two men available to be examined.
Mr. Wehbe was not called as a witness. Charges laid against him for receiving stolen property had not been dealt with at the time his Honour heard the matters. In the week before the commencementof the hearing consideration was given by counsel for Mr. Wehbe and the company to the possibility of seeking an adjournment pending the outcome of the criminal proceedings; but after due consideration, counsel decided not to make any such application. His Honour said that, although there was no evidence of it, a reason why Mr. Wehbe was not called as a witness may have been the outstanding criminal charges against him. He said:-

"In ordinary circumstances the failure of a party, without explanation, to go into the witness box enables a court the more readily to accept the case which is brought against him. In particular it enables it the more readily to draw inferences which are open on the face of the other party's evidence: Jones v. Dunkel (1959) 101 CLR 298. I see no reason why the ordinary rule should not apply in this case. Criminal proceedings or not, the evidence led in the Caltex case shows that Mr. Wehbe was a person who was likely to have had knowledge of the circumstances in which the various deliveries of fuel or distillate were made. His failure to give evidence does mean that inferences which are open on the face of the Caltex case may the more readily be drawn."

His Honour noted that in cases involving the alleged receipt of stolen property it is sometimes critical to consider any explanation which an accused person has offered for his possession or, alternatively, to take into account the fact that he has given no explanation for it. His Honour said that that was a matter which he put aside in the present case because there was no evidence that Mr. Wehbe was ever asked to explain how the distillate came into the company's possession.
In considering whether the respondent's case was established his Honour said that the determination of that question involved evidence which, it was conceded by counsel for the respondent, was entirely circumstantial. It may be that some of the evidence relied on by the respondent was direct rather than circumstantial but nothing turns on this for present purposes. We are prepared to assume that the case sought to be made was circumstantial.
After reviewing the evidence his Honour noted his conclusions with reference to each ground in the notices as follows.
Ground 1. As has been said, this was based on an allegation that the receipt by the company of 6,700 litres of distillate on 20 March 1986 was made by the company knowing that it was stolen. His Honour said that there was evidence that an identified Caltex tanker made a delivery of fuel of some kind on 20 March 1986. There was no record of any delivery of distillate to the service station on that day, nor was there any record of the identified tanker being required to go to the Chullora service station for any purpose at all. His Honour said that in his opinion the inference was open that the company received into its tanks a quantity of stolen fuel. He was satisfied that the inference should be drawn. He said that there was either no evidence or insufficient evidence to establish that the fuel was distillate. He said that if that was an essential allegation the ground would not have been established, but in his opinion that was not an essential allegation, the essential allegation being the receipt by the company of stolen fuel on the day in question. He therefore found the first ground established.

Ground 2. The trial Judge said that the considerations applicable to the second ground were similar to those relating to the first ground and found that it was established.
Ground 3. His Honour said that this ground was plainly established.
Ground 4. As in the case of the first two grounds this was a question whether the delivery to the Bankstown service station on 9 May 1986 was part of a consignment destined to the State Rail Authority. His Honour said that the evidence plainly established that stolen distillate was received at the Bankstown service station on 9 May 1986.
Ground 5. His Honour held that this ground, like the third, was plainly established.
He therefore held that the facts in support of the first five grounds on each of the notices were established. He held that because Mr. Wehbe was shown to be "the alter ego" of the company he was satisfied that the company knowingly received stolen distillate on each of the four occasions on which it was delivered to the Chullora service station. Accordingly grounds 1, 2, 3 and 5 were established in the case of the Chullora service station.
His Honour said that, since Mr. Wehbe himself did not receive the stolen distillate, he himself had not been shown to be guilty of receiving stolen goods, but the evidence plainly established that he was an accessory before the fact in each case. He said that this was the position not only in relation to the deliveries of distillate made to the Chullora service station but also in relation to the delivery made to the Bankstown service station on 9 May 1986. It followed that grounds 1 to 5 inclusive of the notice served in relation to the South Strathfield service station were also made out.
His Honour did not find it necessary to reach conclusions on the remaining grounds in each notice. The same primary facts were relied upon. Nothing would be added to the strength of the respondent's case if they were established. Also no detailed submissions were made in support of them.
His Honour therefore found grounds 1, 2, 3 and 5 of the notice served in relation to the Chullora service station and grounds 1 to 5 inclusive of the notice served in relation to the South Strathfield service station to be established. He found that, in relation to the grounds relied upon with respect to the South Strathfield service station, both sub-paras. (i) and (ii) of para. 16(2)(c) of the Act were applicable. The offences which he found proved were each punishable by imprisonment. He found also that the fact that they were committed tended to show that Mr. Wehbe was dishonest or otherwise not of good character.
As to the question whether, pursuant to para. 16(6)(b) of the Act, it was just and equitable having regard to all the circumstances that the lease be terminated, his Honour said that he was satisfied that it should be terminated in relation to both service stations. As to the Chullora service station he was satisfied that on four occasions the franchisee, namely the company, received stolen fuel into its tanks; no explanation for the criminal conduct was offered to the Court and no assurance was given that the conduct would not be repeated. His Honour said that even if that assurance had been given it would be wrong to compel a franchisor to retain in control of the service station of which it is a lessor, a lessee which engages in such conduct. His Honour held that in his opinion it was just and equitable that the franchise agreements, that is both the lease and supply contracts in relation not only to the Chullora service station but the South Strathfield service station, should be terminated.
His Honour made orders in proceeding G357 of 1986 declaring that the respondent had validly terminated the supply contract and lease, being the franchise agreements referred to in the notice of 23 July 1986 and that the termination was effective on 29 August 1986; that the respondent was entitled to possession of the Chullora premises and that the applicant deliver up to the respondent the possession of those premises. In proceeding G358 of 1986 his Honour made similar orders in relation to the South Strathfield premises. His Honour also dismissed the third application. There were other cross-claims involved in the proceedings which it is unnecessary for us to refer.
The primary submission of counsel for the appellants was that his Honour erred in concluding that there was evidence capable of supporting the inference which he drew that the appellants were or either of them was knowingly implicated in the receipt of stolen fuel or, alternatively, knew that the fuel said to be delivered on any of the nominated occasions was stolen.
It was common ground that the relevant matters pursued before the trial Judge were the allegations that the appellants received quantities of distillate, the property of the respondent, which were in fact stolen and that the appellants knew that they were in fact stolen at the time of receipt. It was also common ground that if any of these elements was not proved the notices could not be valid. Counsel for the respondent did not seek to support any of the complaints on the basis of similar fact evidence and, as we said earlier, it was conceded by the respondent that there was no direct evidence of any complaint and that the case was based entirely on circumstantial evidence.
In their notices of appeal, the company and Mr. Wehbe relied on a number of grounds of appeal. Some of these grounds were abandoned. The grounds of appeal that remain are as follows:

"1. His Honour erred in accepting more readily the

respondents case, and of drawing inferences adverse to that of the appellant because the appellant chose not to give evidence.

2. His Honour erred in law in concluding that there was evidence, direct or circumstantial capable of supporting the inference that the appellants or either of them were knowingly implicated in the receipt of stolen fuel or in the alternative knew that the fuel said to be delivered on any of the nominated occasions was stolen.

3. It was not open to the Trial Judge to draw inferences based on inferences.

4. It was not open to the Trial Judge on the evidence to make findings adverse to the appellants.

5. His Honour erred in finding as a fact that in grounds 1-4 diesel was delivered to the relevant service stations.

6. His Honour erred in holding that no record of an order for distillate was made relating to delivery on 3rd June, 1986.

7. His Honour erred in inferring and in finding as a fact that in relation to Ground 5 that the diesel was received by the appellants; or either of them knowing it to be stolen, on 3rd June, 1986.

. . .

9. His Honour erred in relation to ground 3, in finding that the respondents tanker was capable of discharging further fuel after discharging its load to the S.R.A.

. . .

12. His Honour erred in holding that in relation to each delivery the inference was open that Mr. Wehbe knew that the distillate was stolen.

13. His Honour erred in holding that in relation to

each delivery the inference was open that W.A. Wehbe Pty. Ltd. knew that the distillate was stolen."

Counsel for the appellants submitted that, since the case made against their clients was circumstantial, the respondent was required to show "circumstances raising a more probable inference in favour of what is alleged", so long as the "evidence gave rise to a reasonable and definite inference"; that the gravity of the issue and its consequences required cogent evidence to satisfy the standard of proof; that it followed that inferences, even if available, will not lightly be drawn in such circumstances; that inferences can never be drawn in the absence of a satisfactory factual foundation; that such inferences adverse to their clients as were available from their failure to call Mr. Wehbe could not be extended to supplying a want of evidence in the respondent's case so as to enable the trial Judge to draw further inferences; that the respondent called no evidence capable of proving or of supporting an inference that either of their clients "knew" the fuel received was stolen; so that the evidence of the circumstances called by the respondent was not sufficient to discharge the onus of proof.
Counsel for the appellants dealt first with ground 1 in the notice relating to the Chullora service station. It will be remembered that this ground was that on 20 March 1986 a quantity of 6,700 litres of distillate, the property of the respondent, was received at the Chullora station by the company knowing that it was stolen. The offence is alleged to have been committed between 8.30 a.m. and 9.30 a.m.. His Honour found that the evidence was capable of establishing the following:-

(a) that a delivery of fuel of some kind was made by a Caltex tanker between 8.30 a.m. and 9.30 a.m. on 20 March;

(b) a delivery of distillate to the State Rail Authority was purported to have been effected in whole or in part at an unspecified time on 20 March. The delivery if effected was effected in the same tanker and trailer as had unloaded fuel at the Chullora service station; and

(c) the respondent has no record of the vehicle making any delivery of fuel, distillate or petrol at any time on 20 March.

His Honour said that he was prepared to infer from the evidence that the quantity delivered on this occasion was of the order of 6,000 litres. He drew that inference from a calculation of the discharge rate which must have been obtained in the case of a later delivery on 3 June based on Detective Constable Crowley's evidence of the amount of distillate delivered that day in the period during which the tanker was discharging before the police intervened and ceased the flow of fuel and made certain arrests. His Honour held that there was an overwhelming balance of probabilities in favour of the view that the tankers were on each relevant occasion delivering fuel and he rejected a submission that the tankers may have been present because the drivers were on private errands of their own and that these were unconnected with the delivery of fuel at all. This evidence was apparently based on certain answers to questions of some of the respondents' witnesses in cross-examination about the habits and private pursuits of some of the drivers. His Honour described the submission based upon that as quite unrealistic. In each case a tanker was present at the relevant service station for an appreciable amount of time, hoses were seen to have been pulled from their housing on the tankers and on some occasions people were observed dipping either the tanks of the service station or the tankers themselves. These were his Honour's findings.
It was submitted on behalf of the appellants that there was no evidence from which his Honour could infer knowledge on the part of the company or Mr. Wehbe of the receipt of stolen fuel assuming that it was stolen. All the evidence established, so it was asserted, was that Mr. Wehbe was one of the two directors and shareholders of the company, the other being his wife and that he was the person who controlled the activities of the company; there was no evidence other than that the delivery was in the ordinary course of business; there was no evidence of subterfuge or, at any rate no evidence of knowledge by the company or Mr. Wehbe of any subterfuge on the part of the driver of the tanker who delivered the fuel. Counsel for the appellants argued that there is no doctrine of constructive notice in this area (see R. v. Raad (1983) 3 NSWLR 344 at p 345; Fallon (1981) 4 A Crim R 411; cf. The English and Scottish Mercantile Investment Company, Limited v. Brunton (1892) 2 QB 700 at pp 707-8). It was further submitted that the gravity of the issue was such that not even the civil onus was discharged in the present case (see In Re Dellow's Will Trusts (1964) 1 WLR 451 at pp 454-5). It was contended that his Honour did not even deal with the question of knowledge on the part of Mr. Wehbe. It was acknowledged by counsel for the appellants that his Honour found that Mr. Wehbe was "implicated" in the illicit receipt of the fuel, but it was suggested that this did not involve a finding of knowledge or a guilty mind on Mr. Wehbe's part.
We accept that the gravity of the allegations made by the respondent is a matter properly to be taken into account in deciding whether, on the civil onus, the respondent has made out its case. We also accept that this is an appeal which depends on inferences from uncontroverted facts so that the scope of the appeal is broader than in a case where a challenge is sought to be made to findings of primary fact (see Brunskill v. Sovereign Marine & General Insurance Co. Ltd. (1985) 59 ALJR 842 at p 844). Yet, when his Honour's reasons are read as a whole, it is plain that not only did he consider the question of Mr. Wehbe's state of mind but that he determined this issue adversely to the appellants. Moreover, in our opinion, his Honour was justified in drawing an inference that Mr. Wehbe actually knew that the fuel was stolen.
It will be remembered that, in relation to the first ground, there was evidence that at 8.55 a.m. Mr. Wehbe arrived and spoke to the driver, though the details of the conversation are unknown. Mr. Wehbe left at 9.02 a.m.. At 9.12 a.m. the driver disconnected the hoses and left. Fuel had passed through the hoses to the tanks. The company was entitled to possession of the tanks as lessee, so that the pumping of fuel from the tanker into the underground tanks had been for the enrichment of the company. There was no invoice, no order and no payment made to the respondent in respect of any delivery of fuel on that occasion and, in addition, there were no bulk shiplogs showing any intended deliveries by Caltex Fuel to the service station on that day. The records of the service station show no deliveries of fuel on 20 March. On that day an employee in the service station was seen to climb on top of the tanker and dip the tank.
In our view, in the absence of any attempt by the appellants to explain the circumstances of the receipt of the fuel by the company in the presence of Mr. Wehbe, its controller, a court is entitled, but not compelled, to infer that there is no innocent explanation. Jordan C.J. described the criminal law position in R. v. Petrie (1946) 47 SR 20 at p 21 as follows:

". . . where a person is tried upon a charge of having received stolen property knowing the same to have been stolen, and evidence is given that, shortly after the theft, the accused was found in possession of the stolen property, the proper direction to the jury is to the effect that, if they are convinced that this evidence is reliable, they may reasonably expect that, if the goods came into his possession innocently, he will explain how it happened, and, if he fails to do so, they are entitled to find him guilty of the offence charged."

(See also R. v. Cottrell (1983) 1 VR 143 at p 150; Cross on Evidence, 3rd Australian edition (D.M. Byrne Q.C., J.D. Heydon) at p 31; Gillies Criminal Law at pp 359-360; Williams and Weinberg Property Offences 2nd ed. at pp.357-360).

A distinction must, of course, be drawn between the requisite state of mind and the methods by which that state of mind may be established. The distinction is dicussed by Williams and Weinberg, op.cit., at p.358:

"If the circumstances under which the goods were received were such as would give rise to a suspicion on the part of a reasonable person that they were stolen, a jury might infer that the accused believed that they were stolen. This would be no more than the application of the ordinary principles of circumstantial evidence. A purchase of goods from an unlikely vendor for an unlikely price at an unlikely hour might perhaps not of itself be sufficient to enable the requisite inference to be drawn. It would not take very much more, however, to alter the position. Any subsequent conduct on the part of the accused, such as hiding the goods, or selling them in a surreptitious fashion, or failing to record their purchase (when it was customary to record all purchases) might tilt the balance in favour of an inference of guilt."

(See also Kenny's Outlines of Criminal Law, 18th ed., at p.357.)

In the present case, as has been said, no record was made of the acquisition of the fuel notwithstanding that it was the customary practice to do so.
It is true that, at the time of the proceedings before the trial Judge, the charges against Mr. Wehbe had not then been dealt with. But, as his Honour noted, although it was open to the appellants to seek an adjournment for this purpose, this course was not pursued. Given the absence of any attempt by the appellants to explain the circumstances of the receipt of the stolen goods by the company in the presence of Mr. Wehbe, his Honour was entitled to infer that, if called, Mr. Wehbe would not advance the appellant's case (see Jones v. Dunkel, supra. In all the circumstances, we think that his Honour was justified in inferring that, on the first occasion, Mr. Wehbe and thus the company knew that the fuel had been stolen.
Counsel for the appellants advanced similar arguments in respect of the other grounds. Here, the appellants are on stronger ground - Mr. Wehbe was not present at the time of receipt. Nonetheless, the fuel was recently received by the company, the "alter ego" of Mr. Wehbe, and no attempt was made by the appellants to explain the circumstances of its receipt. Again, we think that a court could legitimately infer that on each occasion Mr. Wehbe and thus the company knew that its receipt was illicit.
Other challenges to his Honour's findings were foreshadowed in the appellants' notices of appeal. They were faintly pressed, if at all, on the argument of the appeal. It will suffice to say that we are not persuaded that such points have any merit.
The appeals will be dismissed with costs.

[1987] FCA 225

12 MAY 1987