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Supreme Court 14 July 2006

Chief Executive Officer of Customs v Abdul Wahid Afiouny & Anor

[2006] NSWSC 430

Fraud & dishonesty
CUSTOMS ACT PROSECUTIONS DEFENDANTS DID NOT APPEAR AT HEARING JUDGMENT ENTERED APPLICATION TO SET JUDGMENT ASIDE

Citation: Chief Executive Officer of Customs v Abdul Wahid Afiouny & Anor [2006] NSWSC 430
Court: Supreme Court of New South Wales, Common Law Division
Date: 14 July 2006
Judge(s): Buddin J

Background

The plaintiff, the Chief Executive Officer of Customs, brought proceedings against two defendants under the Customs Act 1901, alleging the smuggling of large quantities of cigarettes into Australia and the evasion of customs duty. The plaintiff also alleged the defendants made false or misleading statements by failing to declare the goods. Substantial monetary penalties were sought against each defendant.

When the matter came on for hearing, neither defendant appeared, and no legal representative appeared on their behalf. Judgment was entered against both defendants on 21 April 2005, requiring them to pay in excess of $4.5 million to the plaintiff.

Shortly after retaining new solicitors, the defendants filed a Notice of Motion seeking to have that judgment set aside. The motion was brought on the basis that the judgment had been given in their absence, and the defendants argued they had both an arguable defence on the merits and a satisfactory explanation for their failure to appear.

  • Whether the court should exercise its discretion under Part 36 Rule 16(2)(b) of the Uniform Civil Procedure Rules to set aside a judgment entered in the absence of a party
  • Whether the defendants had an arguable case on the merits capable of producing a different result if the matter proceeded to a fresh hearing
  • Whether the defendants had a satisfactory explanation for their failure to attend the hearing
  • What weight, if any, should be given to any delay in making the application and any prejudice to the plaintiff

Decision

Buddin J applied the test set out by Hodgson JA in Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331, which draws on the principles stated by Jordan CJ in Vacuum Oil Pty Co Ltd v Stockdale (1942). To obtain relief, an applicant must ordinarily demonstrate both an arguable case on the merits and a satisfactory explanation for the absence. Where there has been significant default on the defendant's part, the court may require a correspondingly clearer case of merits to be shown. Delay in bringing the application and prejudice to the other party are also relevant, though neither was significant here.

On the question of a satisfactory explanation, the evidence revealed a state of considerable confusion between the defendants and their former solicitors regarding fees, retainer arrangements, and whether the firm was still acting. The solicitor handling the matter acknowledged that there had been a "misunderstanding" of some kind explaining why counsel did not appear. Buddin J found it was at least a reasonable possibility that the defendants genuinely believed their legal representatives would appear on their behalf, and that this belief was reasonably founded given the circumstances.

The court concluded that both limbs of the test were satisfied. Buddin J was satisfied the defendants had an arguable case on the merits and an adequate explanation for their absence. Balancing the competing interests of the parties and the overall interests of justice, the judgment of 21 April 2005 was set aside. Costs of the motion were ordered to be costs in the cause, a result agreed by both parties.

Orders Made

  • The judgment entered on 21 April 2005 be set aside.
  • The matter be placed in the Registrar's next callover list.
  • The costs of the Motion be costs in the cause.

Key Takeaways

  • To set aside a judgment regularly entered in a party's absence, an applicant ordinarily bears the onus of demonstrating both an arguable case on the merits and a satisfactory explanation for the absence. The applicable principles were confirmed by reference to Magnate Projects and the earlier Vacuum Oil formulation.
  • Where the degree of default is more significant, the court may require a correspondingly clearer case of merits before it will intervene. The threshold is not a fixed one but responds to the circumstances of each case.
  • A reasonably held belief that a legal representative would attend a hearing can constitute a satisfactory explanation for a party's absence, particularly where the relationship between the client and the solicitor was affected by genuine confusion over fees and retainer arrangements.
  • Delay in bringing a set-aside application may be relevant if it works prejudice to the opposing party. The Supreme Court gave it no weight in this case, noting the application was filed promptly after the defendants engaged new solicitors and that the plaintiff identified no irremediable prejudice.
  • Costs of a successful set-aside motion need not necessarily be ordered in the applicant's favour immediately. Here, the court accepted the parties' agreed position that costs should be costs in the cause, preserving the question until final determination of the substantive proceedings.

Legislation and Cases Referenced

Legislation
- Customs Act 1901 (Cth)
- Supreme Court Rules (NSW), Part 40 Rule 9
- Uniform Civil Procedure Rules (NSW), Part 36 Rule 16(2)(b)

Cases
- Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Ltd [2005] NSWCA 331
- Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161
- Vacuum Oil Pty Co Ltd v Stockdale (1942) 42 SR(NSW) 239
- Evans v Bartlam [1937] AC 473
- Taylor v Taylor (1979) 143 CLR 1
- Allesch v Maunz (2000) 203 CLR 172