CEO Customs v Afiouny & Anor

[2007] NSWSC 724

CITATION:	CEO Customs v Afiouny & Anor [2007] NSWSC 724
HEARING DATE(S):	27 June 2006
JUDGMENT DATE :	6 July 2007
JURISDICTION:	Common Law Division
JUDGMENT OF:	Studdert J
DECISION:	As against the first defendant, Abdul Wahid Afiouny: (1) The proceedings against the first defendant are dismissed. (2) I order that the plaintiff pay the first defendant's costs. As against the second defendant, Bilal Afiouny: (1) Bilal Afiouny is convicted of the offence charged against him under s233(1)(a) of the Customs Act. (2) Pursuant to s233AB(1)(a), I impose a penalty of $348,060 for that offence. (3) Bilal Afiouny is convicted of the offence charged under s234(1)(a) of the Customs Act. (4) Pursuant to s234(2)(a)(i), I impose a penalty of $1,397,940 for that offence. (5) Bilal Afiouny is convicted of the offence charged under s234(1)(d) of the Customs Act. (6) Pursuant to s234(2)(c), I impose a penalty of $1425 for that offence. (7) Pursuant to s263 of the Customs Act, I order that the second defendant pay the plaintiff's costs in the sum of $10,000. (8) As a consequence of the above orders, the second defendant is ordered to pay to the plaintiff an aggregate pecuniary penalty of $1,747,425 together with costs in the sum of $10,000.
LEGISLATION CITED:	Customs Act Crimes Act (Cth) Uniform Civil Procedure Act
CASES CITED:	CEO Customs v Afiouny & Anor [2007] NSWSC 497 Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Limited (2004) 216 CLR 161 L. Vogel & Son Pty Ltd v Anderson (1966) 120 CLR 157 Controller General of Customs v Wong & Rizoli Pty Ltd (1998) 103 A Crim R 491 Minister of State for Customs and Excise v H.F. Trading Co Pty Ltd (1973) 47 ALJR 198 Ohn v Walton (1995) 36 NSWLR 77 Bullock v London General Omnibus Co (1907) 1 KB 264 Sanderson v Blyth Theatre Co (1903) 2 KB 533 Gould v Vaggelas (1983-85) 157 CLR 215 Almeida v Universal Dye Works Pty Ltd & Ors [2001] NSWCA 156 Roads and Traffic Authority & Ors v Palmer [2005] NSWCA 140
PARTIES:	Chief Executive Officer of Customs (Plaintiff) Abdul Wahid Afiouny (1st Defendant) Bilal Afiouny (2nd Defendant)
FILE NUMBER(S):	SC 20077/02
COUNSEL:	P. Roberts SC (Plaintiff) G. Thomas (Defendants)
SOLICITORS:	Australian Government Solicitor (Plaintiff) Vosnakis & Associates (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

STUDDERT J

Friday 6 July 2007

20077/02 CHIEF EXECUTIVE OFFICER OF CUSTOMS v ABDUL WAHID AFIOUNY & ANOR

JUDGMENT

1 HIS HONOUR: On 17 May 2007 for reasons then published I found that the second defendant, Bilal Afiouny, had committed offences against s 233(1)(a) and s 234(1)(a) and s 234(1)(d) of the Customs Act: see CEO Customs v Afiouny & Anor [2007] NSWSC 497. On 27 June 2007 I heard submissions as to penalty, and it now my task to impose appropriate penalties on the second defendant.

2 At the outset it is necessary to address the relevant statutory provisions, as Mr Roberts did in his comprehensive and helpful written submissions. Section 237 of the Customs Act renders any attempt to commit an offence against the Act punishable as if the offence had been committed.

3 The offence of smuggling is an offence which contravenes s 233(1)(a) of the Customs Act, and the penalty provision for such an offence is to be found in s 233AB of the Act. This reads:

“(1) Where an offence is punishable as provided by this subsection, the penalty applicable to the offence is:
(a) where the Court can determine the amount of the duty that would have been payable on the smuggled goods to which the offence relates if those goods had been entered for home consumption on :
(i) where the date on which the offence was committed is known to the Court—that date; or
(ii) where that date is not known to the Court—the date on which the prosecution for the offence was instituted;
a penalty not exceeding 5 times the amount of that duty; or

(b) where the Court cannot determine the amount of that duty, a penalty not exceeding 1,000 penalty units.
(2) Where an offence is punishable as provided by this subsection, the penalty applicable to the offence is :
(a) where the Court can determine the value of the goods to which the offence relates, a penalty not exceeding:
(i) 3 times the value of those goods; or
(ii) 1,000 penalty units;
whichever is the greater; or
(b) where the Court cannot determine the value of those goods— a penalty not exceeding 1,000 penalty units.”

4 The other offences proved were offences in contravention of s 234 of the Customs Act. So far as is relevant for the purposes of this matter, s 234 provides:

“(1) A person shall not:
(a) Evade payment of any duty which is payable;
…………..
(d) knowingly or recklessly:
(i) make a statement to an officer that is false or misleading in a material particular; or
………………..
(2) A person who contravenes subsection (1) is guilty of an offence punishable upon conviction:
(a) in the case of an offence against paragraph 1(a), by:
(i) where the Court can determine the amount of the duty on goods the payment of which would have been evaded by the commission of the offence if the goods had been entered for home consumption on:
(A) where the date on which the offence was committed is known to the Court – that date, or
(B) where that date is not known to the Court – the date on which the prosecution for the offence was instituted;
a penalty not exceeding 5 times the amount of that duty and not less than 2 times that amount; or
(ii) where the Court cannot determine the amount of that duty, a penalty not exceeding $50,000.
……………….
(c) subject to subsections (3) and (4), in the case of an offence against paragraph (1)(d), by a penalty not exceeding $5000; or
……………….
(3) Where a person is convicted of an offence against paragraph (1)(d) in relation to a statement made, or an omission from a statement made, in respect of the amount of duty payable on particular goods, a Court may, in relation to that offence, impose a penalty not exceeding the sum of $5000 and twice the amount of the duty payable on those goods.
……………….”

5 In my earlier judgment I remarked that whilst the offences charged and now proved were connected steps in a scheme of tax evasion, this did not preclude prosecutions on all three offences, and I cited the decision in L. Vogel & Son Pty Ltd v Anderson (1966) 120 CLR 157. In Vogel, Kitto J said (at 164):

“The Customs laws represent the judgment of Parliament upon an important aspect of the economic organisation of the community, and the object of the penal provisions is to make that judgment as effective as possible…”

6 It is to be observed that the penalty provisions set out above, and in particular the penalty provision for a contravention of s 234(1)(a), contemplate the imposition of very substantial penalties. This is indicative of the seriousness with which contravention of this statutory scheme is to be viewed.

7 Following the earlier ex parte hearing before Newman AJ, his Honour imposed a penalty on the second defendant of $1,747,425, that sum being 2.5 times the duty payable in respect of the cigarettes the subject of the charge. That penalty was imposed for the offence of smuggling, and in the earlier proceedings the prosecution did not seek findings of guilt other than on the smuggling charge. That is a matter which distinguishes the sentencing task which Newman AJ from the one with which I am now presented. I must, of course, heed the principle of totality which here applies: see Controller General of Customs v Wong& Rizoli Pty Ltd (1998) 103 A Crim R 491. It is also a relevant consideration that the offences, whilst separate offences, were substantially contemporaneous and connected: see Minister of State for Customs and Excise v H.F. Trading Co Pty Ltd (1973) 47 ALJR 198 per Gibbs J at 199.

8 The second defendant has given no evidence on sentence but, whatever his financial resources, it is important that the penalties imposed adequately address considerations of deterrence and denunciation. Moreover, whether or not the second defendant is able to pay the penalties now to be imposed, for the evasion offence I am bound to impose a penalty not less than two times the amount of the duty that has been determined.

9 Mr Roberts submitted that in the circumstances of this case, bearing in mind that I am bound to impose a penalty no less than two times the tax evaded for the second offence, it would be appropriate to impose penalties for the first and third offences resulting in aggregate penalties for the three offences amounting to two and a half times the duty that was payable for the cigarettes in the second shipment. This would result in the imposition of the same total penalty as that imposed earlier by Newman AJ.

10 Mr Thomas did not seek to argue that this would not be a proper approach in the circumstances of this case. It seems to me that such an approach would be entirely appropriate, and there is no circumstance arising either under s 16A or s 16C of the Commonwealth Crimes Act which would require the setting of some other penalties.

11 The unpaid duty on the second shipment of cigarettes was $698,970. I therefore impose a penalty for the offence against s 234(1)(a) of $1,397,940.

12 Mr Roberts submitted that it would be appropriate to impose a penalty of $1425 for the offence against s 234(1)(d). Absent any submission to the contrary, I accept that submission and, again, I consider that penalty appropriate in the circumstances of this case and having regard to the principle of totality.

13 This leaves the smuggling offence. Consistently with the submissions of counsel, I impose a penalty of $348,060 for this offence.

14 In aggregate then, the penalties for the three offences total $1,747,425.

The plaintiff’s application for costs

15 The plaintiff seeks costs against the second defendant.

16 Section 263 of the Customs Act provides:

“In a Customs prosecution, whether commenced before or after the commencement of this section, a court may award costs against a party, and, where an amount of costs is awarded against a party other than the prosecutor, section 259 and any provision of a law of a State or Territory that, by virtue of an Act other than this Act, applies in relation to the recovery of pecuniary penalties under this Act apply in relation to the recovery of the amount of costs so awarded as if it were a pecuniary penalty adjudged to be paid by the party under this Act.”

17 Mr Roberts submitted that it would be appropriate to make an order for costs in favour of the plaintiff as against the second defendant since the proceedings against him were successful. I accept that submission.

18 Mr Roberts drew attention to the order made by Newman AJ on 30 March 2005. His Honour ordered that the second defendant pay the plaintiff’s costs in the amount of $40,000. That figure apparently included the costs of various interlocutory proceedings. I am not concerned with the amount that his Honour set but Mr Roberts invites me to quantify the costs to be paid so that the costs of assessment can be avoided.

19 The costs order sought by Mr Roberts is an order in the sum of $10,000 only. Mr Thomas opposed the making of an order for a specified amount of costs. He submitted that costs should be assessed in accordance with the usual procedure involving, if need be, the services of a costs assessor.

20 The sum here sought is to my mind so modest that I should accede to Mr Roberts’ application. The hearing occupied five days. It was proper that the plaintiff have senior counsel appearing in the matter and it was necessary that he be instructed at court.

21 I order that the second defendant pay the plaintiff’s costs of the proceedings against him in the sum of $10,000. Those costs may be recovered as a pecuniary penalty by reason of the operation of s 263 of the Customs Act.

The application by the first defendant for costs

22 Mr Thomas submitted that the plaintiff should be ordered to pay the first defendant’s costs of the proceedings against him since the plaintiff was unsuccessful as against the first defendant. Mr Roberts opposed an order for costs in favour of the first defendant and submitted that it would be inappropriate to make such an order having regard to the nature of the proceedings. Alternatively, Mr Roberts submitted that if the first defendant was to have an order for costs, that order should be made as against the second defendant since it was the conduct of the second defendant which pointed to the first defendant’s involvement in the commission of the offences alleged.

23 Whilst the standard of proof in these proceedings is the criminal standard of proof beyond reasonable doubt (see Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd & Ors (2004) 216 CLR 161), the proceedings were proceedings brought in the civil jurisdiction of the court as contemplated by s 247 of the Customs Act: The plaintiff proceeded by way of statement of claim and the proceedings are proceedings to which the Uniform Civil Procedure Act 2005 and the Rules under that Act are attracted. Part 42 r 42.1 of the UCP rules contemplates that costs will ordinarily follow the event “unless it appears to the court that some other order should be made as to the whole or any part of the costs.” Mr Thomas submitted that since the first defendant had incurred costs in resisting the unsuccessful prosecution the rule referred to should apply.

24 Mr Roberts submitted that that rule should not apply as these were proceedings brought against the first defendant which were in the nature of a prosecution and consequently costs should not be ordered against the plaintiff. Mr Roberts was invited to refer me to authority to support that proposition but I have been referred to no authority for the approach he submitted I should take.

25 The rule that the Crown or a government instrumentality ought not be ordered to pay costs has been displaced, as was recognised in Latoudis v Casey (1990) 170 CLR 534: see in particular the judgment of Mason CJ at 538. The court was there concerned with the liability of an informant to pay costs in summary proceedings for a number of criminal offences. The statute in question authorised the court to make an order for costs against the informant.

26 In his judgment Mason CJ said (at 544):

“Nevertheless, I am persuaded that, in ordinary circumstances, an order for costs should be made in favour of a successful defendant. However, there will be cases in which, when regard is had to the particular circumstances, it would not be just and reasonable to order costs against the prosecutor or to order payment of all the defendant’s costs. If, for example, the defendant, by his or her offence, brought the prosecution upon himself or herself, then it would not be just and reasonable to award costs against the prosecutor.”

27 Toohey J said (at 565):

“…it is enough to say that ordinarily it would be just and reasonable that the defendant against whom a prosecution has failed should not be out of pocket…”

28 Having instanced circumstances in which the defendant should not have his costs, his Honour went on:

“These illustrations are in no way exhaustive but what they point up is that a refusal of costs to a successful defendant will ordinarily be based upon the conduct of the defendant in relation to the proceedings brought against him or her.”

29 McHugh J said (at 567):

“The rationale of the order is that it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred. The order is not made to punish the unsuccessful party. Its function is compensatory.”

30 In Ohn v Walton (1995) 36 NSWLR 77 the Court of Appeal was concerned to address the question of costs where a complaint following an inquiry under the Medical Practitioners Act had not been established. Gleeson CJ had occasion to refer to Latoudis v Casey (at 79):

“The point of Latoudis v Casey is that the purpose of an order for costs is to indemnify or compensate the person in whose favour it is made, not to punish the person against whom it is made.
When legislation confers a power to order costs it is, in the absence of any contrary indication, to be understood as conferring a power to be exercised for that purpose.
Two things follow:
1. The usual rationale of making a costs order is that it is just and reasonable that the successful party should be reimbursed for costs incurred, in the absence of grounds connected with the charge or the conduct of the proceedings which make it unjust or unreasonable that there should be such reimbursement.
2. The test of whether an order for costs should be made against an unsuccessful plaintiff or complainant is not whether he or she has done anything to warrant punishment. It is whether, in the circumstances, the defendant or respondent should be compensated.”

31 The Customs Act contemplates that costs may be awarded against the plaintiff (see [16] above for the terms of the section). The section contemplates that a court “may award costs against a party”. It then goes on to provide the machinery for the recovery of a pecuniary penalty where the party against whom costs were ordered is not the prosecutor.

32 It does not seem to me that the first defendant is disqualified from having a costs order made in his favour simply because the prosecution considered that there were reasonable grounds for proceeding against him. Consistently with the authorities to which I have referred, a costs order is intended to reimburse the successful party and not to punish the unsuccessful party. Moreover, I discern nothing in the manner in which the first defendant conducted the defence of these proceedings such as ought to deprive him of the opportunity of a reasonable level of reimbursement for his costs in resisting the prosecution.

33 In my opinion, the first defendant is entitled to an order for costs.

34 Mr Roberts submitted that if I came to this conclusion, responsibility for the first defendant’s costs should be visited upon the second defendant. It was submitted that it was appropriate that there be an order in the nature of a Bullock order (see Bullock v London General Omnibus Co (1907) 1 KB 264) or a Sanderson order (Sanderson v Blyth Theatre Co (1903) 2 KB 533). It was argued that it was the conduct of the second defendant that prompted the plaintiff to pursue the first defendant as well as the second defendant because the circumstantial case against the first defendant depended upon the conduct of the second defendant.

35 What the plaintiff would be required to show in order to obtain a Bullock order is that the second defendant so conducted himself as to make it reasonable as between the plaintiff and the second defendant that he should pay the first defendant’s costs: see Gould v Vaggelas (1983-85) 157 CLR 215 and in particular the judgment of Gibbs CJ at 229-230; of Wilson J at 246-247 and of Brennan J at 260; see also Almeida v Universal Dye Works Pty Ltd & Ors [2001] NSWCA 156; and Roads and Traffic Authority & Ors v Palmer [2005] NSWCA 140.

36 The plaintiff brought a prosecution against the first defendant concerning both the first and the second shipments whilst the case against the second defendant was limited to the second shipment. The reason for this is not altogether clear, but I am not satisfied that the circumstances of this matter call for the making of an order which not only imposes the burden of the plaintiff’s costs upon the second defendant but the costs of the first defendant as well.

37 I consider that the first defendant should have his reasonable costs as against the plaintiff.

Formal orders

As against the first defendant, Abdul Wahid Afiouny

1. The proceedings against the first defendant are dismissed.

2. I order that the plaintiff pay the first defendant’s costs.

As against the second defendant, Bilal Afiouny

1. Bilal Afiouny is convicted of the offence charged against him under s 233(1)(a) of the Customs Act.

2. Pursuant to s 233AB(1)(a), I impose a penalty of $348,060 for that offence.

3. Bilal Afiouny is convicted of the offence charged under s 234(1)(a) of the Customs Act.

4. Pursuant to s 234(2)(a)(i), I impose a penalty of $1,397,940 for that offence.

5. Bilal Afiouny is convicted of the offence charged under s 234(1)(d) of the Customs Act.

6. Pursuant to s 234(2)(c), I impose a penalty of $1425 for that offence.

7. Pursuant to s 263 of the Customs Act , I order that the second defendant pay the plaintiff’s costs in the sum of $10,000.

8. As a consequence of the above orders, the second defendant is ordered to pay to the plaintiff an aggregate pecuniary penalty of $1,747,425 together with costs in the sum of $10,000.

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