Shawali Walizada, 52, was found guilty by a magistrate last year of committing an act of indecency on the female passenger after driving her and a friend home from a Civic nightclub.

The woman said she was drunk when she got into the taxi about 2am on January5 last year, and that Walizada touched her arm and said, ''You feel hot''.

She said he touched her arm several times during the journey, and that while she was finding money to pay the fare, he took her hand, kissed her cheek, then grabbed her right breast and squeezed it.

She told the court she was taken aback when Walizada kissed her, but did not say anything when he touched her breast.

Instead, she immediately told her mother, who was in the taxi behind her and arrived moments later, and called the taxi company and the police shortly afterwards.

In the hearing before magistrate Maria Doogan, Walizada gave evidence through an interpreter, saying he had kissed the passenger as a gesture of apology because he had been unable to take everyone she was with in his taxi.

He explained that this type of gesture was part of his culture, an explanation that Ms Doogan rejected.

The other passenger gave evidence that while he had seen Walizada kiss the woman, and thought it seemed inappropriate at the time, he did not see Walizada touch the woman's breast.

The court also heard that when Walizada was arrested and a police officer asked him whether he understood the accusation, he responded, ''I don't know the reason why I was arrested.''

Ms Doogan said the fact that he did not deny the allegations straight away, coupled with various inconsistencies in his evidence, meant she could find the offence proved.

But in an appeal judgment handed down yesterday, Chief Justice Terence Higgins said it was not possible to infer consciousness of guilt from Walizada's response to police when arrested.

''He was asked, not to confirm or deny the allegations, but whether he understood them. He said he did not,'' he said.

''That might have been because the language used was not understood or because he could think of no reason for such an allegation being made. In neither case is it logical or reasonable to infer a consciousness of guilt from that answer. It follows that the appeal must be upheld and the finding of guilt set aside.''

Chief Justice Higgins remitted the matter to the Magistrates Court for a rehearing.